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November 15, 1999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20429
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Telemonde, Inc.
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(Exact name of Registrant as Specified in its Charter)
Delaware 62-1795931
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
200 Madison Ave., Suite 520,
New York, New York 10016
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(Address of Principal Executive Offices) (Zip Code)
(212) 683-4999
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(Registrant's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name Of Each Exchange On Which
To Be So Registered Each Class Is To Be Registered
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NONE NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value Per Share
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(Title of Class)
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TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS.................................... 3
ITEM 1. BUSINESS............................................. 4
ITEM 2. FINANCIAL INFORMATION................................ 43
ITEM 3. PROPERTIES........................................... 58
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT................................ 59
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS..................... 61
ITEM 6. EXECUTIVE COMPENSATION............................... 66
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....... 67
ITEM 8. LEGAL PROCEEDINGS.................................... 70
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........ 70
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.............. 71
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE
REGISTERED........................................... 73
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS............ 75
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......... 77
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE............... 78
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.................... 78
SIGNATURES.................................................... 83
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FORWARD-LOOKING STATEMENTS
This registration statement includes "forward-looking statements" within the
meaning of the federal securities laws. Forward-looking statements are any
statements other than those relating to historical information or current
condition, including without limitation, statements regarding future margin
performance, customer retention capabilities, future revenues, strategy, and
pricing of services. Forward-looking statements can often be identified by the
use of forward-looking words such as "believes," "estimates," "expects,"
"intends," "may," "will," "should," or "anticipates." In addition, from time
to time, we or our representatives have made or may make forward-looking
statements, orally or in writing. Forward-looking statements also may be
included in various filings that we have made or may make with the Securities
and Exchange Commission, in press releases or in oral statements made by or with
the approval of one of our authorized executive officers.
The forward-looking statements referred to above involve predictions. We cannot
assure you that the future results will be achieved or that, if achieved, such
results will be indicative of the results in later periods. The inclusion of
forward-looking statements in this registration statements should not be
regarded as a representation by us or any other person that our objectives or
plans will be achieved or that our operating expectations will be realized.
Actual events or results may differ materially as a result of certain risks
which are more fully described in this registration statement in the BUSINESS
section under the caption "Risk Factors." Such risks include:
. Our ability to increase our capital base.
. The rate at which we add new customers and the prices those customers
pay for our bandwidth and other services.
. Our ability to obtain trans-Atlantic and other bandwidth capacity on
favorable terms.
. Customer payment terms where customers require a deferred payment plan
for their purchase or lease of our IRUs.
. The speed and extent to which we add networking and related services,
including but not limited to telehousing facilities and e-commerce
services, to our portfolio of products and services.
. The ability of our local relationships in emerging markets to support
our customers and meet our obligations.
. The completion of the planned expansion of our networks and
infrastructure.
. General economic, financial, competitive, legislative, regulatory, and
other factors that are beyond our control.
We undertake no obligation to publicly update or revise any forward-looking
statement. All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained in this registration
statement.
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ITEM 1. BUSINESS
You should read this description of our business together with our management's
discussion and analysis of financial condition and results of operations and the
financial statements and related notes appearing elsewhere in this registration
statement.
Overview
We are a facilities-based international communications company. We are creating
a global network infrastructure to interconnect the developed world markets with
regional hubs in the emerging markets. We offer managed bandwidth, voice, data
and Internet services over our voice and data switching infrastructure. Our
services are intended to enable emerging markets to have access to the
telecommunications facilities of the developed world. These services will
enable populations of developing countries to participate in the global
communications community through our regional hubs. Our target customers
include leading global telecommunications carriers, incumbent public telephone
operators (PTO's) in developing countries, Internet service providers (ISPs),
multimedia service providers (MSPs) and new entrants to the telecommunications
market. We seek to capitalize on the increasing demand for high quality
international communications services which is being driven by the globalization
of the world's economies, the worldwide trend toward telecommunications
deregulation, and growth of voice, video, data and Internet traffic.
As part of our strategy to provide a portfolio of bundled communications
services in selected emerging markets, we are prepared to enter into a joint
venture with a strategic local partner. The joint venture then partners with
the developing country's PTO. We combine the PTO's existing infrastructure,
where it has been built, and create our own, where it has not to deliver a
tailored set of voice, data and Internet products into emerging markets.
To execute our strategy we will use our infrastructure and services, including:
Point-to-point Bandwidth. We provide high capacity bandwidth to leading global
telecommunications carriers, new entrants to the developed telecommunications
markets and Internet carriers. This capacity is purchased in bulk, broken down
and then re-sold or leased. We are negotiating with our suppliers for the right
to expand our existing inventory of trans-Atlantic bandwidth to include, trans-
Pacific, Central and South American, North American and pan-European fiber
capacity. This expansion will allow us to provide our customers with a global
network at competitive prices. In addition, we plan to use surplus capacity to
create a global network for our own use.
Internet Capability. We intend to offer Internet service providers terrestrial
network platforms and high-speed Internet connectivity, based upon the supply of
fiber optic bandwidth and associated services. Our product offering will
include secure on-line card processing for e-commerce, as well as website design
development and hosting. We
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intend to market our internet solutions to businesses and to offer our clients
co-location and web hosting within our planned facilities.
Intelligent Network Platforms. We place our intelligent network platforms into
primarily monopolistic emerging markets through joint ventures and relationships
with the incumbent PTOs of developing countries. We have identified over 140
such countries. By targeting monopolistic markets we can use our intelligent
network solutions as a foundation from which we can enhance existing access
platforms. We create, in partnership with PTOs, incremental and new revenue
opportunities through route management services and the introduction of enhanced
services such as voice mail, fax mail, prepaid mobile calls and premium rate
services.
Managed Voice and Data Services. We intend to further develop and enhance our
existing switched voice and data services and route management services. These
services will generate more bandwidth sales across the network, lower the costs
per minute of our traffic and generate revenues from utilizing the competitive
international interconnect rates of developed markets.
Carrier Hotel Facilities. We currently lease space in and intend to acquire
completed facilities through which voice and data traffic physically passes
across networks, including carrier hotels and landing stations. We expect to
generate revenue streams from rentals in carrier hotels and the carrier hotel
will create a telecommunications community into which it's broader products and
services, such as web hosting, can be offered. We plan to develop physical
landing stations for new fiber optic systems in developing countries.
Competitive Strengths
Established presence as a carriers' carrier. We have entered into major supply
contracts for capacity on two trans-Atlantic fiber optic systems. During our
short history, we have signed sale contracts with customers totaling $52
million. As a result of these contracts and discussions with prospective
customers, we have established a market presence and created a market awareness
of Telemonde as a participant in the carrier's carrier market.
We are responsible for the delivery and maintenance of our customers' capacity.
Through our subsidiary, Telemonde Networks Limited (TNL), our technical staff
provide quality network services to our customers. The recent launch of
telemonde.net, S.A., has brought our bandwidth and network services to the
attention of European ISPs for high volume digital video, sound, software and
high speed Internet access.
Operations and presence in emerging markets. We have established operations or
a presence in the emerging markets of the Russian Federation, the Middle East,
and Africa. Our subsidiary, EquiTel Communications, Limited has obtained and
operates several route management contracts terminating in the Russian
Federation and South East Asia. Since February 1999, EquiTel has been
undertaking a trial for an intelligent networks system in Oman, and in August
1999 was authorized to proceed with a national roll-out in the Muscat region of
Oman.
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EquiTel has signed a joint-venture agreement with local partners in Bangladesh
and is in negotiations to place intelligent network services in Malaysia in
conjunction with local partners. In addition, EquiTel plans to establish a new
entity to market EquiTel's services in Asia, Africa and the Middle East and has
recruited Mr. Bert Cooper to lead the business.
Established intelligent networks platform. As discussed above, EquiTel has
developed and installed a national intelligent network system in Oman. Although
the Omani system currently supports pre-paid card services, the intelligent
networks system is capable of providing other intelligent network services,
including post-paid card services and enhanced services for voice mail, fax
mail, short message services, intelligent routing and single number services.
EquiTel has entered into an agreement which will result in the purchase of all
of the shares of ITS Europe S.L, a telecommunications reseller in Spain which
will utilize EquiTel's intelligent networks systems in Spain.
Experienced management team. Our executive officers have substantial industry
and management experience. Most of them have many years of experience in senior
management positions in leading international telecommunications businesses. In
addition, our executive officers are supported by industry-experienced
management in sales, operational and technical functions. As a result, we have
the skills and ability to support business growth and to effectively manage such
growth.
Strategic implementation is progressing. Part of our strategy is to create an
extensive international infrastructure, which will enable us to deliver a broad
range of voice, data and Internet products and services to our chosen markets.
As a result, we will be able to provide dedicated "turnkey" solutions to
customers in the United States and Western Europe, but, in particular, we will
use our infrastructure and services to enable emerging markets to access the
telecommunications and Internet services of the developed world.
We have made progress in implementing this strategy. Through the acquisition
and utilization of fiber-optic capacity, we are creating a network in the
developed markets of the United States and Western Europe. Through the
acquisition of EquiTel, we have developed and we are developing business in a
number of emerging markets. We are therefore well positioned for the further
implementation of our strategy. We intend to create retail telecommunications
companies in the emerging markets, in partnership with the incumbent PTO, to
offer high margin services to those markets. We also intend to develop Internet
services for commercial use in both the liberalized and emerging markets. In
the emerging markets, we will supply these services over our planned global
infrastructure; however, they will be marketed and supported through local
partnerships.
Industry and Market Opportunity
International Long Distance.
The international long distance telecommunications services industry consists of
all transmissions of voice and data that originate in one country and terminate
in another.
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The industry is undergoing a period of fundamental change that has
resulted, and is expected to continue to result, in significant growth in the
usage of international telecommunications services. According to Telegeography
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1999, a leading telecommunications industry source, in 1997 the international
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long distance industry accounted for $66 billion in revenues and 82 billion
minutes of use. This is an increase from $27 billion in revenues and 22 billion
minutes of use in 1988. Furthermore, the industry is projected to reach
approximately $80 billion in revenues and 159 billion minutes of use by the year
2001.
We believe that a number of trends in the international telecommunications
market will continue to drive growth in international traffic, including:
. globalization of the world's economies and the worldwide trend toward
deregulation and privatization of telecommunications markets;
. the growth of data and Internet traffic;
. declining prices and a wider choice of products and services driven by
greater competition resulting from privatization and deregulation;
. increased telephone accessibility resulting from technological
advances and greater investment in telecommunications infrastructure,
including deployment of wireless networks; and
. increased international business and leisure travel.
The different rates at which these trends have developed in regions of the world
have presented innovative telecommunications service providers with unique
opportunities in emerging markets.
International Switched Long Distance Services.
International switched long distance services are provided through switching and
transmission facilities that automatically route calls to circuits based upon a
predetermined set of routing criteria. An international long distance call
typically originates on a local exchange carrier's network and is transported to
the caller's domestic long distance carrier. The domestic long distance
provider picks up the call and carries the call to its own or another carrier's
international gateway switch, where an international long distance provider
picks it up and sends it directly or through one or more other long distance
providers to a corresponding gateway switch in the destination country. Once
the traffic reaches the destination country, it is routed to the party being
called through that country's domestic telephone network.
International long distance carriers are often categorized according to
ownership and use of transmission facilities and switches. No carrier
exclusively utilizes its own facilities for transmission of all of its long
distance traffic. Carriers vary from being primarily facilities-based, meaning
that they own and operate their own land-based and/or undersea cable, satellite-
based facilities and switches, to those that are purely resellers of another
carrier's transmission facilities. Only very large carriers have the
transmission facilities and operating agreements necessary to cover the over 200
countries to which major long
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distance providers generally offer service. A significantly larger group of long
distance providers own and operate their own switches but use a combination of
resale agreements with other long distance providers and leased and owned
facilities to transmit and terminate traffic, or rely solely on resale
agreements with other long distance providers.
Under accounting rate mechanisms, which have been the traditional model for
handling traffic between international carriers, traffic is exchanged under
bilateral carrier agreements, or operating agreements, between carriers in two
countries. Operating agreements generally are three to five years in length and
provide for the termination of traffic in, and return of traffic to, the
carriers' respective countries at a negotiated accounting rate, known as the
"total accounting rate." In addition, operating agreements provide for network
coordination and accounting and settlement procedures between the carriers. Both
carriers are responsible for costs and expenses related to operating their
respective halves of the end-to-end international connection.
Settlement costs, which typically equal one-half of the total accounting rate,
are the fees owed to another international carrier for transporting traffic on
its facilities. Settlement costs are reciprocal between each party to an
operating agreement at a negotiated rate. Additionally, the total accounting
rate is the same for all carriers transporting traffic into a particular
country, but varies from country to country. The term "settlement costs" arises
because carriers essentially pay each other on a net basis determined by the
difference between inbound and outbound traffic between them.
Under a typical operating agreement, each carrier owns or leases its portion of
the transmission facilities between two countries. A carrier gains ownership
rights in digital undersea fiber optic systems by: (1) purchasing direct
ownership in a particular system (usually prior to the time the system is placed
into service); (2) acquiring an Indefeasible Rights of Use, or IRU, in a
previously installed system; or (3) by leasing or otherwise obtaining capacity
from another long distance provider that has either direct ownership or IRUs in
a cable. In situations in which a long distance provider has sufficiently high
traffic volume, routing calls across cable that is directly owned by a carrier
or in which a carrier has an IRU is generally more cost-effective than the use
of short-term variable capacity arrangements with other long distance providers
or leased cable. Direct ownership and IRUs, however, require a carrier to make
an initial capital commitment based on anticipated usage.
In addition to using traditional operating agreements, an international long
distance provider may use transit arrangements, resale arrangements and
alternative transit/termination arrangements.
Transit Arrangements. Transit arrangements involve a long distance provider in
an intermediate country carrying the long distance traffic originating in a
second country to the destination third country. Transit arrangements require
agreement among all of the carriers of the countries involved in the
transmission and termination of the traffic, and are generally used for overflow
traffic or in cases in which a direct circuit is unavailable or not justified by
the volume of traffic.
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Resale Arrangements. Resale arrangements typically involve the wholesale
purchase and sale of transmission and termination services between two long
distance providers on a variable, per minute basis. A single international call
may pass through the facilities of multiple resellers before it reaches the
foreign facilities-based carrier that ultimately terminates the call. Resale
arrangements set per minute prices for different routes, which may be guaranteed
for a set period of time or may be subject to fluctuation following notice. The
international long distance resale market is continually changing as new long
distance resellers emerge and existing providers respond to changing costs and
competitive pressures.
Alternative Transit/Termination Arrangements. As the international long
distance market has become increasingly competitive, long distance providers
have developed alternative transit/termination arrangements in an effort to
decrease their costs of terminating international traffic. Some of the more
significant of these arrangements include international simple resale, or ISR,
re-origination, and ownership of transmission and switching facilities in
foreign countries, which enables a provider to terminate its traffic on its own
facilities. With ISR, a long distance provider completely bypasses the
accounting rates system by connecting an international leased private line to
the public switched telephone network of a foreign country or directly to the
premises of a customer or foreign partner. Although ISR is currently sanctioned
by regulatory authorities only on some routes, ISR services are increasing and
are expected to expand significantly as de-regulation continues in the
international telecommunications market. As with transit arrangements, re-
origination involves the use of an intermediate country to carry the long-
distance traffic originating in a second country to the destination third
country. However, the key difference between transit and re-origination
arrangements is that under a transit arrangement the operator in the destination
country has a direct relationship with the originating operator and is aware of
the transit arrangement, while with re-origination, the operator in the
destination country typically is not aware that the received traffic originated
in another country with another carrier. Re-origination of traffic takes
advantage of disparities in settlement rates between different countries by
allowing traffic to a destination country to be treated as if it originated in
another country which enjoys lower settlement rates with the destination
country, thereby resulting in a lower overall termination cost. In addition,
new market access agreements have made it possible for many international long
distance providers to establish their own switching facilities in certain
foreign countries, allowing them to directly terminate traffic, including
traffic which they have originated.
Internet and Data Services.
Internet connectivity and enhanced Internet and data services represent two of
the fastest growing segments of the telecommunications services market.
According to International Data Corporation (IDC), the number of Internet users
worldwide reached approximately 69 million in 1997 and is forecast to grow to
approximately 320 million by 2002.
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The popularity of the Internet with consumers has driven the rapid proliferation
of the Internet as a commercial medium. Businesses are increasingly:
. establishing websites and corporate intranets and extranets to expand
their customer reach and improve their communications efficiency;
. recognizing that the Internet can significantly enhance communications
among geographically distributed offices and employees as well as with
customers and suppliers; and
. utilizing the Internet for mission critical applications such as
sales, customer service and project coordination.
In addition, technology trends over the past decade have removed the distinction
between voice and data segments. Today, voice conversations are routinely
converted into digital signals and sent together with other data over high-speed
lines. In order to satisfy the high demand for low-cost communication, software
and hardware developers have developed technologies capable of allowing the
Internet to be utilized for voice communications. Several companies now offer
Internet telephony services which provide real-time voice conversations over the
Internet.
We believe that there is significant market opportunity for us to bundle point-
to-point bandwidth capacity sales co-location facilities and network management
as a way to satisfy the needs of our existing customers and to attract
additional carriers and Internet service providers seeking such services.
Bandwidth Capacity.
Bandwidth is the ability to transmit information, packaged as a stream of bits,
from one destination to another without losing or distorting the content of the
bits. Typically bandwidth is transmitted down systems of fiber optic lines
across oceans and land masses. Fiber optic systems use laser-generated light to
transmit bandwidth through fine strands of glass and are generally characterized
by large circuit capacity, good sound quality and resistance to external signal
interference. Recent advances in bandwidth technology called wave division
multiplexing allow us to "light" the fiber and increase the transmission speed
and capacity of the fiber optic lines. Wave division multiplexing and its next
generation variation, dense wave division multiplexing take information bits and
transmit them across increasing numbers of wavelengths or light streams,
multiplying the capacity of the fiber optic line by more than one hundred times.
We believe that the demand for bandwidth will continue to grow, primarily
because of the growth of the Internet and the increase in the size and number of
private networks. We expect that bandwidth demand will more than double in the
next two years, from approximately 1,000 Gbps in 1999 to 2,500 Gbps in 2001.
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Carrier Hotels.
The phenomenal growth of the Internet and the convergence of voice and data
communications have created a huge surge of demand for carrier hotel facilities.
Some service providers prefer to acquire their own properties and to fit them to
their own requirements. However, many, for speed and ease of inter-connection
between carriers and for economies of scale, prefer the concept of "hoteling" or
"telehousing." A carrier hotel facility is a building (or part of a building)
that has either been specifically designed and built, or been adapted for use by
telcos to meet their specific requirements.
These adaptations include:
. raised computer floors with large floor voids;
. minimum 2.7m floor-ceiling heights;
. pressure-tested sealed rooms;
. advanced air-conditioning systems with individual heat & humidity
control;
. dry-action sprinkler or gas fire suppression systems; diesel-engined
generators and uninterrupible power supplies with battery back-up to
provide a continuous power supply in cases of mains failure; and
. 24-hour, 7-days a week total physical security cover.
We have signed a lease agreement with Global Switch Limited, a "carrier hotel"
company specializing in telecommunications and internet co-location and service
management. Global Switch is a recognized leader in the co-location business,
providing high-quality, 24 hours a day, seven days a week staffed, carrier-
neutral facilities designed to house telecommunications, Internet, data
processing, data storage, and related equipment. Pursuant to the agreement, we
have leased, subject to certain conditions, 11,775 square feet in a London
carrier hotel and have agreed to lease space in carrier hotels in Amsterdam and
Paris.
Emerging Markets.
In many emerging markets, access to bandwidth to transport voice and data
traffic remains highly constrained and continues to represent a considerable
barrier to entry into these markets. Furthermore, the incumbent PTOs in these
markets have been slow to introduce new intelligent network services such as
voicemail, conference calling and prepaid and postpaid calling cards.
We believe that emerging markets are attractive because their telecommunications
rates are high and remain very profitable. While settlement costs are globally
decreasing, we believe that developing countries' local authorities will be slow
to liberalize their markets in order to protect the incumbent PTOs and to
continue to receive high margin revenues and much needed international
currencies. We believe that working in partnership with the incumbent PTOs in
emerging markets will allow us to provide end-to-end, facilities-based services
to and from these markets.
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In addition, as the world's economies continue to globalize, emerging markets
are increasingly focusing on the need to provide local businesses and end-users
with Internet connectivity as well as local Internet content. Through our
planned provision of point-to-point bandwidth and voice services in emerging
markets, we believe that we will be uniquely positioned to expand our service
offering to include enhanced Internet and data services.
Our Approach
The global telecommunications market can be divided into liberalized and
emerging markets. In the liberalized markets, competition is licensed and
regulated for infrastructure and services to the telecommunications market,
across all sectors: wire-line, wireless and data services. In the emerging
market, on the other hand, government sanctioned monopolies generally dominate.
Our approach to building a global communications company is to:
Operate in markets that retain high margins in voice retail and wholesale voice
services. Emerging markets continue to retain high margins in retail and
wholesale voice services. We can bring technology and infrastructure developed
and tested in the liberalized markets to the emerging markets. By working with
the incumbent PTO to provide enhanced services, we can capitalize on the higher
margins available in the monopolistic markets. In addition, our partnership
with the incumbent PTO will allow us to develop our local operations.
Therefore, we believe we will be well positioned to become a second operator in
certain of these markets when the markets become liberalized.
Create an international infrastructure capability upon which services can be
offered. This network infrastructure, which will include carrier hotel
facilities, will link with the regional hubs being created in emerging markets
to provide a seamless global infrastructure. A regional hub is a point of
telephony concentration in a geographically distant location. It is created
only for reasons of economy, in that it is cheaper to send or receive traffic
and purchase bandwidth into a single distant point for onward distribution than
it is to individually reach each of the final destinations.
Build Internet capabilities and services. Decreasing bandwidth prices in the
developed markets are allowing us to create a fiber optic network. Through
acquisitions and internal development, we are building the capability to address
our customers' Internet requirements, such as business to consumer and business
to business online electronic transactions, web site development and hosting and
bandwidth provisioning, all of which will be provided through our planned global
network.
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Our Strategy
Our strategy is to develop, build, and purchase international fiber optic
networks and international carrier hotels and switches. This will enable us to
deliver voice, data, and Internet products and services to our chosen markets.
Key elements of our strategy are to:
Continue to Build and Expand the Reach of Our Global Network. We currently have
access to trans-Atlantic bandwidth capacity. We are negotiating with our
capacity suppliers to enable us to offer routes in Europe, the Americas, the
Pacific Rim and the Far East in the near future. These negotiations, if
successful, will establish Telemonde as global network provider.
Provide Managed Voice and Data Services. We intend to further develop and
enhance our switched voice services, which we use to generate more bandwidth
sales across the network and lower the costs per minute of our traffic.
Pursue Early Entry Into Selected Emerging Markets. We seek early entry into
selected emerging markets worldwide where we can create significant demand for
voice, data and Internet services by introducing technology and infrastructure
already in use in the developed markets. We believe that there is, and will
continue to be for the foreseeable future, substantial growth of such services
in emerging markets. We believe that early entry into these markets will
provide us with competitive advantages as we develop sales channels, establish a
customer base, hire local personnel and establish a strong partnership with the
monopoly PTO prior to competitors entering these markets. Our objective is to
position ourselves as the second telecommunications operator when and if
liberalization occurs in these markets.
Develop a Global Network of Carrier Hotels. We plan to acquire, manage and
operate a global network of full-service carrier hotels which will provide
bandwidth-intensive Internet and telecommunications customers with state-of-the-
art conditioned and managed co-location services in a secure, carrier-neutral
environment. We believe that offering such carrier hotels services will enable
us to attract and retain customers as well as cross-sell our bandwidth product
and services. Our carrier neutral facilities will enable Internet service
providers, telecommunications providers, corporate data center providers, and
other bandwidth-intensive users to out-source operational accommodation,
technical expertise, and management services for servers, routers, switches and
transmission equipment from a single company.
Provide Enhanced Internet Services. Through our wholly-owned subsidiary,
telemonde.net, we are setting up peering agreements with other leading Internet
backbone service providers. Internet peering agreements are agreements between
two carriers for the exchange of Internet traffic between their networks and
onwards. We have also signed a letter of intent regarding our proposed
acquisition of Global Communications (Holdings) Limited, a UK-based Internet
applications services provider. Our combined product offering will include
secure on-line card processing for e-commerce as well as
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website design, development and hosting. We intend to market our Internet
solutions to businesses and offer our clients co-location and web hosting within
our planned facilities.
Expand the Capabilities of Our Network With the Development of Regional
Telecommunications Hubs. Through the planned geographic expansion of our
network and development of regional telecommunications hubs in emerging markets,
we expect to be able to increase our network traffic and thereby continue to
reduce transmission and operating costs. In addition, we intend to make focused
capital investments to deliver enhanced services and lower costs to our
customers. We will continue to invest in our network to provide a full range of
asynchronous transfer mode, frame relay and Internet protocol-based data and
voice communications over our existing network infrastructure.
Products and Services
Bandwidth Products and Services.
We are designing our network to enable us to offer customized products and
services to a wide range of customers with sophisticated voice and data
transmission requirements. We can provide capacity in varying amounts over all
or part of our network utilizing a variety of transmission technologies. We
believe that this range and flexibility will enable us to effectively market our
products to incumbent PTO's, alternative operators, Internet service providers,
resellers and other carriers comprising our target market. We intend to allow
our partner PTO's to access our network. This will allow them to reduce the
cost base of their core services and enhance our relationship with them.
Telecommunications operators and carriers seeking to acquire cross-border
bandwidth capacity have, until recently, acquired that capacity by leasing
international private leased circuits from incumbent PTO's. International
private leased circuits have traditionally been formed by combining half-
circuits from two incumbent PTO's between customer locations. Our existing
point-to-point products and planned global network are designed as an
alternative to these arrangements.
We are currently negotiating with our capacity suppliers to enter into new
agreements which would allow us to draw down capacity (1) on fiber optic systems
in Western Europe, including the United Kingdom, France, Belgium, the
Netherlands, Germany, Spain, Italy and Luxemburg; (2) on a continental United
States system; (3) on a trans-Pacific system which should be available during
the first quarter of 2000; and (4) on mid-Atlantic and South American systems
which should be available in late 2000. The enlarged international network will
consist of high-capacity broadband fiber optic cable capable of supporting high
quality voice, video, Internet protocol and data traffic and built using self-
healing technology.
We offer the following options:
Flexible Capacity Options. We offer customers flexible managed bandwidth
capacity options that include multiples in varying amounts ranging from 45 Mbps
(DS-3) to
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multiples of 155 Mbps (STM-1). We also offer the same customer different
bandwidth capacity over different geographic segments of our network.
Backhaul Capacity and Local Connectivity. Backhaul is capacity on terrestrial
fiber optic cables from cable system landing stations to metropolitan areas.
Since we offer customers end-to-end management of the circuit and termination at
local sites, we must provide backhaul capacity and local connectivity. Although
certain of our trans-Atlantic contracts provide associated backhaul capacity,
we are always in active negotiations to ensure that we have sufficient backhaul
and local connectivity to meet the needs of our customers. However, there can
be high and unexpected costs in providing local connections due to initial
installation costs, annual local tail rentals, lack of availability of fiber
between connection points, difficulty in obtaining permission to install fiber
and a small number of alternative suppliers.
Flexible Transmission Technologies. Our network can support a variety of
transmission technologies, including synchronous digital hierarchy (SONET),
asynchronous transfer mode and Internet protocol transmission technologies.
Flexible Customer Agreements. Our customers can obtain capacity on our network
either under lease or IRU terms. Our lease agreements are typically 12 to 36
months depending on the customers requirements. We offer our customers the
ability to upgrade and expand these agreements as their needs evolve and grow.
Support Services. In connection with our bandwidth products, we offer services
that provide us with an opportunity to develop customer loyalty and to
anticipate a customer's need. As part of our standard service package, we
provide 24-hour customer service and network management, and service level
agreements. In addition, we intend to develop a secure Internet website which
will allow customers to remotely monitor the performance of their network
configuration on our network. For an additional fee, we will also install,
configure, monitor and manage customer equipment beyond our network, thereby
providing a single point of contact for our customers.
Future Bandwidth Products and Services.
Burst Bandwidth. We plan to offer burst bandwidth capacity on demand, which
allows customers to significantly increase their capacity on our network for
short periods. In order to provide bandwidth capacity on demand, we plan to
provide cross-connects in globally strategic locations such as New York and
London. A cross-connect is a bridge between a customer and bandwidth, which we
control through software. This enables telecommunications traffic to be re-
routed from one ring to another instantaneously and without physical disruption.
The cross-connects will enable us to provide enhanced network management options
and improved network restoration and reconfiguration capabilities, to offer
instant connections and real-time or timed activation and deactivation of
bandwidth. As a result of the cross-connects, we will expand our bandwidth
leasing operations to include short term leases of bandwidth of a few days or
hours for peak hours or special events. Once a short term lease is terminated
the
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bandwidth will be automatically reallocated to another customer. We intend to
target customers that have underestimated their bandwidth needs or have
occasional, seasonal or hourly demand shifts.
Carrier Hotel, Interconnection, Co-Location and Internet Exchange Services. We
plan to develop, manage and operate a global network of full-service carrier
hotels providing bandwidth-intensive Internet and telecom customers with state-
of-the-art, air-conditioned and managed co-location services in a secure,
carrier-neutral environment. We have executed a lease agreement with Global
Switch Limited, a carrier hotel company specializing in telecommunications and
Internet co-location and service management. Pursuant to this agreement, we have
leased space in a London carrier hotel and have agreed to lease space in two
future carrier hotels in Paris and Amsterdam. We plan to expand our carrier
hotel services to include ownership and management of carrier hotel facilities.
We believe that offering such carrier hotels services will enable us to attract
and retain customers as well as cross-sell our bandwidth products and services.
For Internet service providers and most other carriers, other than incumbent
PTO's, finding convenient locations to connect to Internet backbones and other
networks, as well as finding local staff to monitor equipment, is difficult and
expensive. Through our facilities, we intend to offer dedicated, secure space
and external connectivity for networking equipment, including sufficient power
supplies, emergency backup, air conditioning, security, a trained staff and
space for customer's employees to monitor network performance.
Our carrier-neutral facilities will enable Internet service providers, telecom
providers, corporate data center providers, and other bandwidth-intensive users
to outsource operational accommodation, technical expertise, and management
services for servers, routers, switches and transmission equipment from a single
company. Our recently leased facility in London is scheduled to be fully
operational in the first quarter of 2000. We have also agreed to lease space in
Paris and Amsterdam facilities which are expected to be ready for service during
the fourth quarter of 2000. Similar facilities are currently being investigated
in Germany, Spain, Italy, Ireland, Brazil, and Oman.
Switched Voice Services.
We offer a broad array of communications services through our network and
interconnections with the networks of other carriers. Our decision to offer
certain services in a market is based on competitive factors and regulatory
restraints within the market. Below is a summary of services we offer:
International Route Management. Our international route management services
involve the development of operating agreements with the PTO's of our chosen
markets for the bi-directional delivery of international traffic. Our route
management activities effectively utilize unsold and available bandwidth and
provides us with access to competitive traffic termination in those markets.
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In addition to basic switch voice services, we provide enhanced route management
services such as:
. Development of routes for licensed international operators;
. Development of inbound settlement payment processes;
. Counter-balancing the impact of re-origination (the transfer of
international telephone traffic via a third party carrier); and
. Connection services that allow access between traditional operators
and new licensees in liberalized markets.
We currently have arrangements for route management into the Russian Federation,
the Middle East and South East Asia.
Intelligent Network Services. Our intelligent network services include complete
telephony card services with all the necessary surrounding services such as
marketing and distribution, tariff models and traffic management. The card
platform can also be used to provide enhanced services such as voice mail, fax
mail, prepaid mobile calls, premium rate services, short message services,
intelligent routing and single number services.
Intelligent network services are well developed in the liberalized markets but
have rarely been deployed in most emerging markets. Such services are
attractive to the incumbent PTO's in emerging markets because they offer
significant opportunities to increase their revenues and enhance their
profitability.
We often create a joint venture with strategic local partners in an emerging
market. The joint venture then works with the incumbent PTO to deliver our
intelligent network services into a particular market. For example, as part of
our joint venture in Oman, Desert Telecommunications Services LLC (Desertel), we
are providing in partnership with OmanTel, the Omani PTO, pre-paid calling cards
in Oman. The cards are currently being marketed and distributed in the Muscat
region and are useable on any telephone in Oman. We are establishing joint
ventures with local partners in South Africa, Malaysia and Bangladesh.
Advisory Services. We also provide advisory services to telecommunications
operators. We target our advisory services to incumbent PTO's in emerging
markets and provide them with the senior management expertise and experience we
have gained in developed markets. The scope of our advisory services is
flexible. However, we anticipate particular interest from customers for:
. Board level support in strategic and general business planning;
. Support for the development of international business; and
. Development of business plans and strategies in support of
privatization and fund raising.
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Internet and Data Service
We intend to provide our ISP customers with enhanced peering agreements with
leading United States based Internet backbone providers. Below is a summary of
services we offer:
Tailored infrastructure and connectivity solutions. We can analyze the
individual needs of ISPs and MSPs, for capacity and connectivity and ensure that
each of our customers has the best possible infrastructure and global
connectivity solution for its particular needs. This service uses our bandwidth
capabilities, combined with agreements with leading connectivity providers. As
part of this service, we offer comprehensive service level agreements, as well
as flexible payment terms to ensure that the ISP or MSP has the best overall
solution for its business.
On-line payment systems, website hosting and internet application development.
Through our proposed acquisition of Global Communications (Holdings) Limited,
we shall provide a full range of business Internet services. Global
Communications' Internet services include:
Secure on-line payment system. Global Communications' on-line card processing
service for e-commerce applications is a secure and multi-bank approved system
which can be easily integrated with trading websites, wherever they are
hosted.
Website hosting. Global Communications offers a comprehensive range of
services to provide businesses with all the relevant facilities required to
support a commercial website, including domain name registration, web space,
multimedia capabilities, a full range of access options from free phone to
premium rate and 24 hour support.
Website concept, design and development. Global Communications focuses on the
development of business websites. Global Communication's team of developers
create the solutions that allow their customers' Internet clients to pick
products, order and pay for goods or services on-line.
We intend to fully integrate these capabilities with our planned global network
of full-service carrier hotels to provide a global platform for commercial
websites.
Future Internet and Data Products and Services. We intend to provide voice over
Internet solutions to ISPs and MSPs for the provision of voice services. Recent
advances in technology and increased broadband capacity availability for data
transmission means that the Internet can easily be used to make telephone
connections as clearly and efficiently as with traditional telecommunications
carriers. The technology is moving so quickly that IDC estimates that 130
million minutes of global telephone airtime was carried over the Internet in
1998. Users are usually not aware that their call is being transmitted by
Internet protocol.
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We are also creating packaged Internet content and services for the markets
within which we operate. We also plan to offer a range of streaming multimedia
bandwidth solutions that allow the delivery of televised services on-line. ISPs
and MSPs worldwide need capacity and connectivity solutions to deliver Internet
services to their customers. Our solutions will include broadband technologies
such as cable modems and satellite services.
Network
Bandwidth. We have acquired capacity on an IRU basis on the Gemini system and
on Atlantic Crossing ("AC-1"). We take delivery of the AC-1 capacity in cable
stations at Brookhaven, New York, United States and at Whitesands, United
Kingdom. We take delivery of the Gemini capacity in cable stations at
Manasquan, New Jersey, United States and at Porthcurno, United Kingdom. We
carry the traffic inland on a backhaul network to Telehouse in London and 60
Hudson Street and 111 8th Avenue in New York.
We are currently negotiating an agreement which would allow us to down capacity
on: (1) fiber optic systems in Western Europe, including the United Kingdom,
France, Belgium, the Netherlands, Germany, Spain, Italy and Luxemburg; (2) a
continental United States system; (3) a trans-Pacific system which should be
available during the first quarter of 2000; and (4) mid-Atlantic and South
American capacity which should be available in late 2000.
Intelligent Network Platforms. In order to provide our route management
- - - - ------------------------------
services, we have acquired a central switch in London that interfaces with
multiple carriers. In addition, we have developed strategic relationships with
a small number of suppliers for both satellite links and international private
circuits. Our infrastructure provides flexibility and the necessary robustness
to enable us to operate in challenging regions of the world. The enhanced
operational platform increases our ability to handle international traffic
trading and improve our cost base.
Our intelligent networking infrastructure includes a multi-purpose, modular
technology platform with strong signaling capabilities to provide transit
switching facilities and high density voice compression. In addition, we
contract for an international private circuit with a small number of suppliers
and we work closely with the incumbent PTO in the markets we enter.
Network Operation Center and Services. We currently contract our network
operating services to an experienced third party supplier which provides us with
a 24 hours a day, 7 days a week network operating service and which remotely
monitors and configures our network. We are able to monitor our network end-to-
end, from customer premise to customer premise. By the end of the first quarter
of 2000, we intend to shift primary network operations to our London
headquarters, retaining our incumbent third party supplier operating center as a
back up and for purposes of disaster recovery. Our network operations center at
our headquarters will be the primary point of contact for our customers,
allowing them to speak directly with our trained staff.
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Management Information and Billing Systems. We have various management
information, network and customer billing systems to support the functions of
network and traffic management, customer service and customer billing. We use
third party systems or systems developed in-house to handle our billing
requirements. We bill our business customers directly in our principal
countries of operation.
We believe that, subject to modifications which are or may be necessary to make
our systems Year 2000 ready, our financial reporting and billing systems are
generally adequate to meet our needs in the near term. However, as we continue
to grow, we will need to invest capital to purchase additional hardware and
software, increase capacity and link our systems among different countries.
Future Network Enhancements. We intend to further enhance our network by
creating metropolitan area networks in both New York and London. This will
require the purchase of two dark fiber rings and related connectivity to
existing points-of-access. We will then be able to provide access to multiple
customers along the route of the two rings. Customers will be able to acquire
or lease bandwidth on an "as and when required" basis. This will create the
following advantages:
. a simplification in the number of systems by using the multiple access
rings and providing cost savings associated with reduced future
hardware equipment;
. it will allow us to interconnect multiple vendors, thus enabling us to
offer connectivity instantly between any party; and
. it will allow bandwidth to be activated and de-activated
instantaneously and on a pre-set timed basis, if required. As a result
we will be able to exploit new market opportunities such as offering
short term leases for connectivity for a few days or hours for special
events. When these periods end, the cross- connect arrangements will
allow us to terminate the bandwidth and enable it to be automatically
reallocated to another customer. In addition, we will program our
cross-connects to activate new bandwidth at set times and dates to
ensure that bandwidth intensive customers such as ISPs have large
amounts of continuous bandwidth of varying capacities, allowing them
to keep up with their fluctuating demands.
Customers
Our target customers include leading global telecommunications carriers,
incumbent PTO's in emerging markets, ISPs, MSPs and new entrants to the
telecommunications market. In 1998, we delivered installed bandwidth capacity
to three major customers who constituted more than 10% of our revenues for that
period. In the nine months ended September 30, 1999, one bandwidth customer has
constituted more than 10% of our revenues for that period. As of the date of
filing, we have customer orders totaling $19 million, which have not yet been
delivered to customers and have not yet contributed to revenue.
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EquiTel has customer contracts with seven customers for its route management
services for traffic to the Russian Federation, the Middle East and the Far
East. Although some revenue from these contracts will occur in the last quarter
of 1999, the major benefit of these contracts will come in 2000. EquiTel also
has conducted a card services trial for OmanTel in Oman, and has been authorized
to roll out its card services to the Muscat region of Oman. We expect to
receive authorization by the middle of 2000 for a full national roll out of the
service.
Sales and Marketing
We market our services through a variety of sales channels, as summarized below:
Direct Sales. We market our infrastructure services primarily through our
direct sales force. As of September 30, 1999, our direct sales force was
comprised of 5 full-time employees who focus on selling wholesale services to
other long-distance carriers and resellers. We also have 7 full-time employees
who concentrate on traffic services. Our existing sales force can leverage
their long-term industry relationships and those of our senior management in
securing sales. Our sales force is trained to serve the sophisticated needs of
our customers and is in charge of maintaining existing relationships and
anticipating customers' needs. We currently have sales offices in New York
City, London, and Geneva.
Media and Marketing. We use a variety of print and other media to increase our
name recognition and generate new customers. We have marketing programs that
include our participation in targeted industry conferences, trade shows and
seminars and targeted distributions and mailings of marketing materials.
Competition
The international communications industry is highly competitive and
significantly affected by regulatory changes, marketing and pricing decisions of
the larger industry participants and the introduction of new services made
possible by technological advances. We believe that long distance service
providers compete on the basis of price, customer service, product quality and
breadth of services offered. We believe that as the international
communications markets continue to deregulate, competition in these markets will
increase, similar to the competitive environment that has developed in the
United States following the AT&T divestiture in 1984.
Privatization and deregulation have had, and are expected to continue to have,
significant effects on competition in the industry. For example, as a result of
legislation enacted in the United States, regional Bell operating companies will
be allowed to enter the long distance market, AT&T, MCI/WorldCom and other long
distance carriers will be allowed to enter the local telephone services market,
and cable television companies and utilities
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will be allowed to enter both the local and long distance telecommunications
markets. In addition, competition has begun to increase in the European Union
communications markets in connection with the deregulation of the
telecommunications industry in most European Union countries, which began in
January 1998. This increase in competition could adversely affect net revenue
per minute and gross margin as a percentage of net revenue.
In the United States, which is the most competitive and among the most
deregulated telecommunications markets in the world, competition primarily is
based upon pricing, customer service, network quality, and the ability to
provide value-added services.
Our competitors in the United Kingdom are British Telecom, the dominant supplier
of telecommunications services in the United Kingdom, Cable & Wireless
Communications, Colt, Energis, GTS/Esprit and RSL Communications. We
compete in the United Kingdom and continental Europe, and expect to compete in
other European countries, by offering competitively-priced bundled and stand-
alone services, personalized customer service and value-added services.
The market for data services and Internet services is extremely competitive. We
anticipate that competition will continue to intensify. Our current and
prospective competitors offering these services include national, regional and
local Internet service providers, Web hosting companies, other long distance and
international long distance telecommunications companies, including AT&T,
MCI/World Com and Sprint, local exchange telecommunications companies, cable
television, direct broadcast satellite, wireless communications providers and
on-line service providers. Some of these competitors have a significantly
greater market presence and brand recognition than we do. Many of our
competitors also have greater financial, technological and marketing resources
than those available to us.
Government Regulation
We are subject to regulation as a telecommunications service provider in some
jurisdictions. In addition, we or a local partner may be required to have
licenses or approvals in those countries where we operate and where equipment is
installed.
United States Federal Regulations. Pursuant to the Communicatons Act of 1934,
as amended (the "Communications Act"), the FCC is required to regulate the
telecommunications industry in the United States. Under current FCC policy,
telecommunications carriers reselling the services of other carriers and not
owning their own transmission facilities are considered non-dominant and, as a
result, are subject to streamlined regulation. The degree of regulation varies
between domestic telecommunications services (services which originate and
terminate within the United States) and international telecommunications
services, (services which originate in the United States and terminate in a
foreign country or vice versa).
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Non-dominant providers of domestic services do not require prior authorization
from the FCC to provide service. However, non-dominant providers of
international services must obtain authorization from the FCC pursuant to
section 214 of the Communicatons Act. We plan to apply for an international
resale license under section 214 in the near future. Once we have obtained such
authorization we will be required to file a tariff with the FCC, setting forth
the terms and conditions under which we provide international services. The
regulatory requirements in force today impose a relatively minimal burden on us.
However, we cannot assure you that the current regulatory environment and the
present level of FCC regulation will continue.
United Kingdom Regulations. The Telecommunications Act 1984 (the "1984 Act")
provides a licensing and regulatory framework for telecommunications activities
in the United Kingdom. In 1998, the UK regulatory framework was modified to
bring it in line with EU requirements, in particular its provisions on
licensing, interconnection, voice telephony and leased lines.
The policy of the Department of Trade and Industry and Office of
Telecommunications, the UK Regulator (OFTEL), is to grant telecommunications
licenses to all operators who meet a transparent and pre-determined set of
criteria. The majority of UK licenses are either registered to offer
International Simple Voice Resale or hold an individual fixed PTO licence. TGA
(UK) Limited is registered to offer ISVR services, which permits it to buy
network capacity from any interconnecting UK operator to resell to its
customers. Telemonde has applied for and is awaiting grant of its fixed PTO
licence. This licence will permit Telemonde to offer a full range of fixed
voice and data services using its own facilities or through leasing or
interconnection of other operator facilities. Most operators who offer publicly
available telecommunications services and network bearer capabilities are
granted interconnection rights by OFTEL. Telemonde is also in the process of
applying for interconnection rights. An operator with interconnection rights is
entitled to negotiate interconnection with every other operator with
interconnection rights.
Swiss Regulations. In Switzerland, a new Telecommunications Act was adopted in
April 1997 and became effective on January 1, 1998. This new Act provides for
the liberalization of the Swiss telecommunications market and facilitates market
entry by various measures. These measures include, inter alia:
. Notice application procedure for resellers;
. Application for a procedures for operators wishing to be granted a licence
for the establishment and operation of the transmission facilities; and
. Providing rights of way, subject to authorization, over the public domain
to facilities based carriers.
A licence is required if the telecommunications service involves extensive
independent use of telecommunications installations for transmission. In the
absence of such
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extensive independent use a simple notification will be sufficient. Our current
operations in Switzerland do not require a license.
Other Government Regulations. Telecommunications acitivities are subject to
government regulation to varying degrees in every country throughout the world.
To illustrate, in Malaysia our partner has informed us that no license is
required for telecommunications acitivitites. However, in may countries where
we operate, equipment cannot be connected to the telephone network without
regulatory approval, and therefore installation and operation of our operating
platform or other equipment requires such approval. In most jurisdictions where
we conduct business, we rely on our local partner to obtain the requisite
authority. For instance, in Bangladesh our partner has informed us of the need
for a license and has applied for one on our behalf.
Risk Factors
Our business involves a significant number of material risks. The risks and
uncertainties described below are not the only ones we face. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial
may be or may become material and impair our business operations.
During our limited operating history we have experienced operating losses,
negative cash flow from operations and net losses.
We were organized in March 1998 and have a limited operating history. Our
financial information relates principally to a period in which we were obtaining
trans-Atlantic capacity and were establishing our business and market presence.
We have incurred operating losses and negative cash flow since our inception.
For the year ended December 31, 1998 and for nine months ended September 30
1999, Telemonde had operating losses of $10,328,000 and $6,391,000
respectively. Despite recognizing $35,188,000 in revenues, Telemonde incurred a
deficit on total shareholder equity of $17,446,000 for the period from March 10,
1998 (the date of inception) through September 30 1999. We expect to continue to
incur operating losses and negative cash flow in 1999 as we build our networks
and expand our services and customer base.
The continuation and magnitude of our operating losses and negative cash flows
in the future will be affected by a variety of factors, including:
. The ability to put in place working capital facilities and to increase
our capital base.
. The rate at which we add new customers and the prices those customers
pay for our bandwidth and internet services.
. The mix of our business, including, among other factors, the
proportion of IRUs compared to leases and short term rentals we sell
to our customers.
. The ability and cost to obtain transatlantic and other bandwidth
capacity; in particular the cost of bandwidth under the major supplier
agreements currently under re-negotiation.
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. Customer payment terms where customers require a deferred payment plan
for their purchase of our IRUs.
. The speed and extent to which we add networking and other related
services, including but not limited to our telehousing facilities, to
our portfolio of products and services.
. The ability to predict demand for our networking and other related
services, including but not limited to our telehousing facilities.
. The ability of our local relationships in emerging markets to support
our customers and meet our obligations.
. The completion of our planned networks and infrastructure and the
expansion of our networks generally, with completion being achieved by
currently expected completion dates.
. General economic, financial, competitive, legislative, regulatory,
licensing, and other factors that are beyond our control,
We have financed, and expect to continue to finance, our net losses, debt
service, capital expenditures and other cash needs through flexible supplier
payments, the issuance of debt and the proceeds from sales of shares of common
stock.
Our business requires significant amounts of capital and infrastructure
expenditures and our existing working capital facilities are insufficient to
meet our needs.
We expect to make expenditures of $65 million by the end of the first quarter of
2000 to build infrastructure and organize our bandwidth and switched services
businesses. This includes the purchase of bandwidth capacity for our own
networks, planned leasing and rental business, and our customers' requirements.
We hope to fund these expenditures from a short-term bridge financing, vendor
financing and from planned equity funding, as well as from proceeds of future
sales.
Beyond the initial amount, we will incur additional capital expenditures to
support our projected growth of the bandwidth business. In particular, we aim
to significantly grow our bandwidth leasing and rental business by purchasing
additional bandwidth capacity to be leased to our customers. We expect to meet
the cash requirements of our capital expenditures from:
. cash flow from fiber sales and operations;
. income from route management operations;
. income from our intelligent network services;
. additional equity and/or debt financing; and
. supplier financing, if available.
Our failure to accomplish any of the foregoing sources may significantly delay
or prevent capital expenditures. If we are unable to make our capital
expenditures as planned, our business may grow slower than expected with a
material adverse effect on our business, financial condition, results of
operations, and the value of our securities.
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We currently do not have the capital base or working capital facilities to meet
our current and projected commitments. If we fail to successfully obtain
necessary capital, or to obtain an insufficient amount of capital, we would
harm our prospects and could jeopardize our existence. We have benefited from
the willingness of suppliers to reschedule commitments and payments and may
continue to require and take advantage of such flexibility in the future.
However, this reliance on supplier flexibility for short term funding inevitably
leads to pressure from suppliers which weakens our commercial position. In
addition, it could result and has resulted in formal events of default, which
could endanger us, especially if this supplier flexibility ceased to be
available. It is for this reason that we plan to seek substantial external debt
and equity funding.
Telemonde has a significant level of indebtedness.
We have incurred a high level of debt. As of September 30, 1999, Telemonde and
EquiTel had a combined $122,854,000 in total liabilities, including:
. $79,162,000 to capacity suppliers relating to undrawn bandwidth;
. $15,001,000 of advances from third parties, which amount was
subsequently converted into equity on November 10, 1999.
. $5,815,058 owed to CCL under a Capacity Option Agreement.
. $1,000,000 in loans to EquiTel from Rhone Financial Indemnity Re
Limited.
The amount of our debt could have important consequences for our future,
including, among other things:
. cash from operations may be insufficient to meet the principal and
interest on our indebtedness as it becomes due;
. payments of principal and interest on borrowings may leave us with
insufficient cash resources for our operations; and
. restrictive debt covenants may impair our ability to obtain additional
financing.
We have been unable to generate sufficient cash flow to meet certain of our debt
service requirements, and have triggered events of default on those obligations.
We cannot assure you that we will be able to successfully renegotiate terms of
our agreements or refinance our indebtedness when required.
We are currently negotiating debt finance and are planning equity raising.
We are in discussions with investment bankers for the immediate provision of
short-term debt and equity financing. The amount of this financing, which is
required to meet our commitments, is significant.
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We cannot assure you that our current negotiations and discussions will be
successful. Failure to successfully complete our current negotiations and
discussions will not only impair our ability to develop our business and to take
advantage of opportunities but also may result in the termination of our
operations.
We have recently negotiated the main terms of our two supplier agreements, but
the new contracts are still to be finalized.
The existing agreements with our two major bandwidth suppliers were signed in
1998 and 1999. Since then, the market prices for bandwidth have fallen
significantly. This market decline has resulted in our being unable to draw
down and sell bandwidth capacity above costs.
We have recently re-negotiated the main terms of these agreements with our two
suppliers. Letters of Intent have been executed between the two suppliers and
ourselves. The terms in these agreements enable us to draw down future capacity
at prices which will enable us to grow and develop our business. They establish
new terms for drawing down capacity, for future payments for capacity, and waive
past events of default.
We cannot assure you that the two re-negotiated letters of intent will be
contractually closed. In the event that they are not closed, the existing
contracts will remain in force. We are currently behind with our payments based
upon the existing contracts and would therefore have to rely on the suppliers'
flexibility in rescheduling payment terms. The events of default under the
existing contracts could endanger our existence.
Our recently announced acquisition of Global Communication (Holdings) Limited is
not yet completed.
We recently announced that we have reached an agreement to acquire 100% of
Global Communications (Holdings) Limited, a UK based Internet applications
services provider. This agreement, which we have signed, contains a number of
conditions before completion of the acquisition may occur. In particular, the
acquisition is dependent upon the ability to raise substantial amounts of
capital in order to fund the acquisitions. We cannot assure you that this
agreement will be closed.
We do not expect to pay dividends for the foreseeable future.
The loan facility between Telemonde and Communications Collateral Limited
("CCL") restricts our ability to pay dividends on our common stock. Moreover, we
plan to retain all earnings for investment in our business and do not plan to
pay dividends at any time in the foreseeable future. See "Dividend Policy".
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We have not yet completed our transition from a development stage company to an
operating company.
We are still a development stage company. It is anticipated that our network
and operations center will be established by the end of the first half of 2000.
Although our senior management team has substantial industry knowledge and
experience, it has been built up in the course of 1999 and has only recently
been completed. EquiTel was only formed in late 1998, only recently signed
several major contracts and needs to be fully integrated into Telemonde.
The transition from a development stage company to an operating company places
significant demands on our management and operations. We are in the process of
expanding the management and operational capabilities necessary for this
transition. Our ability to manage this transition successfully will depend on,
among other things:
. expanding, training and managing our employee base, including
attracting, retaining and motivating highly skilled personnel;
. creating customer interface and operations, administrative and
maintenance systems;
. procuring terrestrial capacity to provide connectivity to inland
cities.
There can be no assurance that we will succeed in developing all or any of these
capabilities, and any failure to do so could have a material adverse effect on
our results of operations.
We currently rely on a relatively small number of major customers.
A relatively small number of customers currently account for a significant
amount of our total revenues. In our bandwidth business three customers
accounted for all of our revenues in 1998. Although we intend to expand our
customer base as our business grows and through acquisitions, this dependence on
a relatively small number of customers may continue for the foreseeable future.
Most of our arrangements with large customers do not provide any guarantees that
they will continue using our services at current levels. In addition, if (1) our
customers build their own facilities, (2) our competitors build additional
facilities, or (3) our customers are involved in further consolidations in the
telecommunications industry, we could experience a reduction in the use of our
services, which could have a material adverse effect on our business.
The domestic and international telecommunications industry is highly competitive
and we may not be able to compete effectively.
The telecommunications industry is highly competitive and is influenced
significantly by the marketing and pricing decisions of the larger industry
participants. The industry has relatively limited barriers to entry in the more
deregulated countries with numerous
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entities competing for the same customers. We believe that competition in all of
our markets is likely to increase, which could result in greater competition in
telecommunications services offered in these countries. This increase in
competition could adversely affect our net revenues.
At this stage of our development, many of our competitors are significantly
larger than we are, and many of our competitors have:
. substantially greater financial, technical, and marketing resources;
. larger networks;
. a greater ability to support the portfolio of services;
. stronger name recognition and customer loyalty; and
. long-standing relationships with our prospective customers.
We expect that competition in the international telecommunications market will
intensify in the future. We compete with other international "carriers'
carriers" and submarine cable owners with regard to bandwidth sales, leasing and
switch services. In addition to competition from companies offering similar
services, we may also become subject to competition from existing geosynchronous
satellites as well as low-earth orbit satellite systems that are currently under
construction. The telecommunications industry will continue to experience rapid
changes in technology. Our future success may depend on our ability to adapt to
these changes in the industry. A failure by us to adopt new technology, or our
choice of one technological innovation over another, may have an adverse impact
on our ability to compete or meet customer demands.
Operation of telecommunications networks involves significant risks.
Each of our systems will be subject to the risks inherent in a large-scale,
complex fiber optic telecommunications system. The operation, administration,
maintenance and repair of these systems require the co-ordination and
integration of sophisticated and highly specialized hardware and software
technologies and equipment located throughout the world. There can be no
assurance that our systems will function as expected or in a cost-effective
manner.
The submarine fiber optic cables are subject to additional risks. Outages can
occur at sea from anchor drag and fouling by fishing vessel gear over which we
have little or no control and for which repair times can be long. However, our
planned network will provide for transferability on both the Gemini and Global
Crossing cables. When our network is installed, any breaks in the cable loop
will not interfere with our system's ability to transmit traffic successfully
and give our engineers time to resolve the problem.
We are subject to additional risks due to our international operations.
We will derive substantial revenues from international operations and a key
element of our business strategy is to expand our operations in international
markets. Accordingly,
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our business is subject to certain risks inherent in international operations.
These risks include:
. unexpected changes in regulatory requirements, tariffs, customs,
duties and other trade barriers;
. difficulties in staffing and managing overseas operations;
. problems in collecting accounts receivable;
. political risks;
. fluctuations in currency exchange rates;
. foreign exchange controls which restrict or prohibit repatriation of
funds;
. technology export and import restrictions or prohibitions;
. delays from customs brokers or government agencies; and
. potentially adverse tax consequences resulting from operating in
multiple jurisdictions with different tax laws.
During our limited operating history we have not experienced any material
adverse effects with respect to our overseas operations arising from such
factors. However, problems associated with such risks could arise in the future.
Finally, managing operations in multiple jurisdictions will place further strain
on our ability to manage our overall growth.
In addition, EquiTel's targeted markets are in emerging markets, including
Africa, the Middle East, most of the Asia Pacific region, the Indian sub-
continent, Southern and Central America, and parts of Eastern Europe. Political
and social instability is widespread in many such areas and EquiTel is subject
to greater risks and potential losses due to unexpected changes in political
regimes.
We rely on local relationships in these emerging markets to support our
customers. Failure on the part of our local contacts to fulfill their
obligations may harm our reputation, business and operations. We, and in
particular our switched services business, utilize local persons to market our
services and provide local training and support. The quality of the local
training and support may be inconsistent and may not reach our "benchmark" of
quality service levels. In this event, customer relations, and possible future
business, may be jeopardized. In addition, our senior management may be
diverted to remedy the failure of our local relationships and this diversion may
impede other projects.
A portion of our net revenue and expenses is denominated, and is expected to
continue to be denominated, in currencies other than United States dollars.
Changes in exchange rates may have a significant effect on our results of
operations. Historically, we have not engaged in hedging transactions, and
currently do not contemplate engaging in hedging transactions, to mitigate
foreign exchange risk.
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Telemonde's operations are substantially dependent on key personnel.
Telemonde's success will depend to a significant degree upon the efforts of
senior management, particularly Adam Bishop, Kevin Maxwell, Harry Pomeroy, Nick
Topham and a group of employees with longstanding industry relationships and
technical knowledge. Competition for such personnel is intense and we may not be
able to attract, motivate and retain highly skilled qualified personnel. Loss of
services of one or more key personnel could adversely affect Telemonde's
business. We have, however, entered into employment agreements with Kevin
Maxwell, Adam Bishop, Harry Pomeroy and with other executive officers, as
detailed in "Item 5". We are in the process of procuring "key person" life
insurance policies covering Mr. Bishop, Mr. Maxwell and Mr. Pomeroy.
Certain of our officers and directors may have conflicts of interest with
Telemonde.
Certain of our directors and executive officers also serve as officers and
directors of other companies. Additionally, certain of our officers and
directors are active investors in the telecommunications industry. Although
these directors have fiduciary obligations to Telemonde under Delaware law,
service as a director or officer of Telemonde and as a director or officer of
another company could create conflicts of interest. A conflict of interest could
also exist with respect to allocation of time and attention of persons who are
directors or officers of both us and of another company. The pursuit of these
other business interests could distract these officers from pursuing
opportunities on our behalf. Such conflicts of interest could have a material
adverse effect on our financial condition. Telemonde has not adopted special
voting procedures to deal with such conflicts of interest and resolution of
these conflicts may be unfavorable to Telemonde.
Telemonde may be adversely affected if we do not successfully manage the
expansion of our bandwidth and switched services business and our expansion into
new markets and services.
In conjunction with our acquisition of EquiTel, we intend to expand our switch
services business at a rapid rate. We expect switched services to be a
significant source of growth and revenues in the future. In addition, we plan to
offer new telecommunications services, expand and interconnect its service in
its existing markets, and enter new markets. If we are not successful in
implementing these changes, our operating results will be negatively impacted.
Our ability to manage this expansion depends on many factors, including the
ability to:
. attract new customers and sell new services to existing customers;
. expand our network and available bandwidth design;
. acquire and install transmission and switching facilities;
. obtain any required governmental permits and rights-of-way;
. implement interconnection with local exchange carriers;
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. expand, train and manage our employee base;
. improve our financial, operating and information systems to
effectively manage our growth;
. acquire suitable telehouse facilities; and
. accurately predict and manage the cost and timing of our capital
expenditure programs.
Even if we are successful in completing the infrastructure to support our
expanded business, that business may not be profitable and may not generate
positive cash flow.
Our short-term success will depend substantially on our sales of bandwidth,
which prices may decline due to the availability of increased capacity.
Our short-term success will depend substantially on sales of bandwidth on our
network and on the prices of such bandwidth sales. We anticipate that the sale
of bandwidth and the associated maintenance revenues will account for the bulk
of our revenues through the end of 1999.
We cannot be certain that we will continue to be successful in selling capacity
on our networks. Our ability to continue to sell capacity will depend in large
part upon our sales and marketing capabilities. We have assembled an experienced
and dedicated sales and marketing staff and we depend upon the ability of such
employees to effectively market and sell capacity. However, we cannot be certain
that we will be able to effectively sell capacity on our network. If we are
unable to effectively sell capacity on our network, our operational results
could be negatively affected.
A number of companies have plans to construct new submarine and terrestrial
fiber optic systems. The additional capacity may create a glut in the market and
cause prices to drop dramatically which could have an adverse impact on our
revenues and operational results. Prices have fallen significantly in recent
months for trans-Atlantic bandwidth, and this trend may continue. In the
European terrestrial market, lead times are short and there is significant
competition from new or upgraded systems. Therefore, it is possible that there
will be significant over-capacity in the European market and that prices may
fall significantly in the short-term.
In particular, we have made, and will make in the future, commitments to
suppliers to obtain bandwidth capacity. Market price reductions reduce and can
eliminate the expected margin on bandwidth sales over the purchase price from
the supplier. In addition, we would need to seek price reductions from our
suppliers for future bandwidth capacity purchases in order to restore margins
and the outcome of such negotiations are inevitably uncertain. Therefore our
business, financial condition, and operation results could be materially and
adversely affected by market price declines, both in 1999 and in future years.
We intend to purchase additional capacity on other cable systems around the
world, but to date have yet entered into any written agreements or negotiations
with companies to purchase this capacity. Any glut in the market or reduction
in market price
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could also affect our ability to obtain and sell capacity or to swap a portion
of our existing capacity for new capacity on other cable systems at the expected
margins.
We have not yet obtained the licenses we need to offer all of our projected
products and services.
Many of our planned products and services require licenses, registrations, and
authorizations in the relevant jurisdictions in which we operate and plan to
operate. For example, the provision of networking, leasing, and route management
services require government licenses in many jurisdictions.
Although one of our subsidiaries TGA (UK) has a ISVR licence, we have applied to
the UK Department of Trade and Industry for a PTO licence (incorporating IFL and
ISVR licenses) to cover all Telemonde companies. The UK Department of the Trade
and Industry has indicated that we should receive this license by the end of
November 1999. We also intend to apply for a US international resale section 214
license before the end of 1999. These applications would cover EquiTel and
Telemonde. In addition, EquiTel sometimes needs to apply for local licenses in
overseas countries where it is providing route management and card services
contracts.
We can offer no assurance that our expectations concerning our ability to
operate in compliance with all applicable laws and regulations are correct, that
we will be able to obtain, maintain or renew the required licenses,
authorizations or registrations, or that they will be issued or renewed on terms
or with fees that are commercially practicable. In addition, other licenses,
authorizations or registrations may be required in the future. The loss of, or
failure to obtain, these licenses, authorizations or registrations or
substantial limitations upon the terms of these licenses, authorizations or
registrations could have a material adverse effect on our business, financial
condition or operating results.
We depend on local connections that may be difficult and expensive to obtain.
We offer customers end-to-end management of the circuit and termination at local
sites. Therefore, we must provide backhaul capacity and local connectivity.
However, there can be high and unexpected costs in providing local connections
due to initial installation costs, annual local tail rentals, lack of
availability of fiber between connection points, difficulty in obtaining
permission to install fiber and a small number of alternative suppliers. In
addition, local connection agreement may be subject to local regulation. We may
not be able to obtain backhaul and local connectivity at rates that are both
competitive and profitable.
Government regulations significantly affect our business and new laws could harm
our operations.
As a multinational telecommunications company, we are and will be subject to
varying degrees of regulation in each of the jurisdictions in which we provide
services. Local laws and regulations, and the interpretation of these laws and
regulations, differ
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significantly among each of the jurisdictions in which we operate and intend to
operate. We can offer no assurance that our interpretation of existing
applicable laws and regulations is correct. Moreover, we can offer no assurance
that future regulatory, judicial or legislative changes will not have a material
adverse effect on our business, financial condition or operating results or that
regulators or third parties will not raise material issues with regard to our
compliance or non-compliance with applicable regulations or that any changes in
applicable laws or regulations will not have a material adverse effect on our
business, financial condition or operating results.
The expected continued growth in the internet service provider market and the
use of the Internet may not materialize or may materialize in a manner we have
not anticipated.
The ISP market is new and rapidly evolving. Whether, and the manner in which,
the market for our products and services to ISPs will continue to grow is
uncertain. Any decline in the ISP market will adversely affect our business.
Our business would be damaged if Internet usage does not continue to grow.
Internet usage may be inhibited for a number of reasons, including:
. access costs;
. inadequate network infrastructure;
. security concerns;
. uncertainty of legal and regulatory issues concerning the use of the
Internet;
. inconsistent quality of service; and
. lack of availability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to support
the demands placed on it or the Internet's performance and reliability may
decline. Similarly, Web sites have experienced interruptions in their services
as a result of outages and other delays occurring throughout the Internet
network infrastructure. If these outages or delays occur frequently, use of the
Internet as a commercial or business medium could, in the future, grow more
slowly or decline. This could adversely affect our business.
We have recently begun offering terrestrial network platforms and high-speed
Internet connectivity, based upon the supply of fiber optic bandwidth between
New York, London and other European cities. We intend to expand our services
worldwide and we anticipate offering a full-range of global connectivity
solutions for European Internet and Multimedia Service Providers over our
existing global network infrastructure, as well as specialist and geographic
Internet packages for our customer base in emerging markets. We have limited
experience in the Internet business and cannot assure you that we will
successfully establish or expand the business. Currently, we only provide
capacity to one European ISP.
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The market for network platforms and value-added Internet services is extremely
competitive. Our primary competitors include other telecommunications
businesses that have a significant national or international presence. Many of
these carriers have substantially greater resources, capital and operational
experience than we do. We also expect we will experience increased competition
from traditional telecommunications carriers that expand into the market for
Internet services. In addition, we will require substantial additional capital
to make investments in our Internet operations, and we may not be able to obtain
that capital on favorable terms or at all.
If we do not respond effectively and on a timely basis to rapid technological
change, our business could suffer.
If we do not successfully use or develop new technologies, introduce new
services or enhance our existing services on a timely basis, or if new
technologies or enhancements used or developed by us do not gain market
acceptance, our business could be damaged. The telecommunications industry,
including the Internet, is characterized by rapidly changing technology,
industry standards, customer needs and competition, as well as by frequent new
product and service introductions. Our future success will depend, in part, on
our ability to accomplish all of the following in a timely and cost-effective
manner, all while continuing to develop our business model and rolling-out our
services:
. effectively use and integrate leading technologies;
. continue to develop our technical expertise;
. develop new products and services that meet changing needs of
telecommunications industry and ISPs;
. have the market accept our services;
. advertise and market our products and services; and
. influence and respond to emerging industry standards and other
changes.
We cannot assure you that we will successfully be able to use new technologies,
introduce new services or enhance our existing services on a timely basis, or
that new technologies or enhancements used by us will achieve market acceptance.
Our pursuit of necessary technological advances may require substantial time and
expense. In addition, we cannot assure you that, if required, we will
successfully adapt our network and services to alternate access devices and
conduits.
Increased competition in the pre-paid card business may force us to lower our
prices and in turn may negatively affect our operating results.
Our operations relating to the pre-paid card business face a number of risks,
which include:
. the increased entry into the market by pre-paid card vendors,
including vendors that are larger than us;
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. our reliance on independent distributors to place pre-paid cards in retail
outlets;
. our inability to create exclusive pre-paid phone card distribution
arrangements in certain markets;
. the availability of alternative telephony methods;
. the cost sensitive nature of consumer demand; and
. the lack of customer loyalty to any particular pre-paid card company.
Many of these risks may cause prices to drop throughout the pre-paid card
industry. Because we depend on informal relationships with independent
distributors to market and sell our products, increased competition and lower
prices could force us to further lower our prices to continue to sell pre-paid
cards to these distributors. We cannot guarantee that we will be able to
continue to provide competitively priced pre-paid cards to our distributors or
that lower prices in the pre-paid card marketplace will not have a negative
effect on the results of our operations.
Our pre-paid card business is dependent on a small number of distributors, and
we must retain our current distributors or recruit additional distributors in
order to remain successful.
We must distribute our pre-paid cards through wholesale distributors. As a
result, our success is largely dependent on our ability to recruit, maintain and
motivate a network of individual distributors. As part of our growth strategy
we would like to increase the retail distribution of our products and services
by expanding our distribution network in new markets. We cannot guarantee that
we will successfully recruit, maintain and motivate individual distributors or
prevent our distributors from marketing other pre-paid cards, and, if we are
unable to do this, it could have a negative effect on our business, financial
condition and result of operations.
We recruit a variety of types of distributors, including but not limited to:
. persons who currently distribute other types of products to retail
outlets; and
. individuals that we believe have the necessary sales and marketing
skills to promote our products.
We typically identify and recruit these distributors through existing
distributors, retail outlets, telemarketing and other promotional activities and
through direct inquiries from potential distributors.
We may not successfully integrate our recent acquisitions and we may not
successfully complete or integrate future acquisitions.
A key element of our business strategy is to acquire or make future investments
in complementary assets and businesses. A major portion of our future growth
will be as a result of such acquisitions. Acquisitions, including our recent
acquisitions of EquiTel
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and TGA, and imminent acquisitions of Global Communications and ITS Europe, and
strategic investments involve financial and operational risks. In order to
effect an acquisition we may incur indebtedness and will need to service that
indebtedness or we may need to issue additional equity, which will lead to
dilution. An acquisition may not provide the benefits originally anticipated
while we continue to incur operating expenses. There may be difficulty in
integrating the service offerings, distribution channels and networks gained
through acquisitions and strategic investments with our own. Although we attempt
to minimize the risk of unexpected liabilities and contingencies associated with
acquired businesses through planning, investigation and negotiation, such
unexpected liabilities nevertheless may accompany such strategic investments and
acquisitions. We cannot guarantee that we successfully will:
. identify attractive acquisition and strategic investment candidates;
. complete and finance additional acquisitions on favorable terms; or
. integrate the acquired businesses or assets into our own.
We cannot guarantee that the integration of our business with any acquired
business, including the business of EquiTel (including EquiTel's acquisition of
ITS Europe), TGA, Global Communications and the leased carrier hotel facilities,
will be accomplished smoothly or successfully, if at all. If we encounter
significant difficulties in the integration of the existing services or
technologies or the development of new technologies, resources could be diverted
from our development, and delays in our development could occur. Successful
integration of operations and technologies requires the dedication of management
and other personnel which may distract their attention from our day-to-day
business, the development or acquisition of new technologies, and the pursuit of
other business acquisition opportunities.
In a strategic investment where we acquire less than a majority interest in a
company, we may lack control over the operations and strategy of the business,
and we cannot guarantee that such lack of control will not interfere with the
integration of services and distribution channels of the business with our own.
For example, EquiTel currently holds 49% of the issued share capital of Desert
Telecommunications Services LLC. EquiTel has entered into a letter of intent to
acquire from 16% to 51% of Desert Telecommunications Services from our local
partner. EquiTel is responsible for the day-to-day operations of these
intelligent network services, but so long as our local partner maintains a
controlling interest in Desert Communications, he may be able to curtail our
management of Desert Telecommunications. We cannot assure you that EquiTel will
successfully consummate the acquisition of a controlling interest in Desert
Telecommunications.
We must ensure that our systems are Year 2000 ready.
The Year 2000 problem is the result of computer programs being written using two
digits, rather than four digits, to define the applicable year. Any of our
systems, elements or applications that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in improperly routed traffic,
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a major system failure or miscalculations in invoices. We have completed our
inventory assessment and have begun repairing or replacing the most critical
items that we have determined not to be Year 2000 ready. We expect that our
expenditures to complete our Year 2000 readiness program will be minimal.
If we do not achieve readiness prior to December 31, 1999, or if we fail to
identify and remedy all critical Year 2000 problems, our results of operations
or financial condition could be materially and adversely affected. We have
determined that non-ready network elements and systems may result in improperly
routed traffic and that non-ready, non-network systems may result in errors in
customer billing and accounting records. We may also be adversely affected by
general economic disruptions caused by the Year 2000 issue even in circumstances
where our systems and the systems of our customers are Year 2000 ready. We have
begun to develop appropriate contingency plans to mitigate, to the extent
possible, any significant Year 2000 non-readiness. If we are required to
implement our contingency plans, the cost of Year 2000 readiness may be greater
than referenced above and cannot guarantee that these plans will be adequate.
Where You Can Find More Information
Upon the effectiveness of this registration statement we will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and will file periodic reports, and other information relating to our business,
financial statements and other matters with the Securities and Exchange
Commission. Our SEC filings are available to the public over the Internet at
the SEC's web site at http://www.sec.gov. You may also read and copy any
document we file at the SEC's public reference room at 450 Fifth Street, N.W.
Washington, D.C. 20549 or at the SEC's regional offices at 7 World Trade Center,
New York, New York 10048 and Citicorp Center, 5-West Madison Street, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms and their copy charges.
Glossary Of Certain Telecommunications Terms
Asynchronous Transfer Mode (ATM) - A switching and transmission technology
that is one of a general class of packet technologies that relay traffic by way
of an address contained within the first five bits of a standard fifty-three
bit-long packet or cell. ATM-based packet transport was specifically developed
to allow switching and transmission of mixed voice, data and video at varying
rates. The ATM format can be used by many different information systems,
including LANs.
Backbone - The through-portions of a transmission network, as opposed to
spurs which branch off the through-portions.
Bandwidth - The range of frequencies that can be passed through a medium,
such as glass fibers, without distortion. The greater the bandwidth, the greater
the information-carrying capacity of such medium. For fiber optic transmission,
electronic transmitting devices determine the bandwidth, not the fibers
themselves. Bandwidth is measured in Hertz (analog) or Bits Per Second
(digital).
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Bit - A binary unit of information that can have either of two values, 0 or
1. Higher amounts of binary digit are:
. kilobit = 1,000 bits
. megabit = 1 million bits
. gigabit = 1 billion bits
. terabit - 1 trillion bits
Bps - Bits per second. This is the basic measuring unit of speed in a
digital transmission system. The number of bits that a transmission facility
can convey between a sending location and a receiving location in one second.
Capacity - The information-carrying ability of a telecommunications system,
as defined by its design (number of fibers, system length, and opto/electronic
equipment) and its deployed equipment (amount of opto/electronics in the
station) and measured in bits per second. Capacity is sold in discrete units,
usually system interface levels such as DS-3s and STM-1s, that in the aggregate
are the equivalent of total system capacity.
Carrier - A third party provider of communications services by wire, fiber
or radio. Types of carriers include:
. Common Carrier: A private company offering facilities or services
to the general public on a non-discriminatory basis and regulated
as to market entry, practices, and rates by various Federal and
State authorities.
. Private Carrier: Services provided for internal use and free of
most common carrier regulations to allow discrimination in service
provision or pricing.
Carrier Hotel - A building (or part of a building) that has either been
specifically designed and built or has been adapted, for use by
telecommunications companies to meet their specific requirements.
Dedicated - Refers to telecommunications lines dedicated to or reserved for
use by particular customers along predetermined routes.
Dense Wavelength Division Multiplexing (DWDM) - Similar technology to WDM,
except permitting a larger number of constituent spectrum colors to be signal
carrying, thus further expanding fiber optic cable capacity.
Digital - A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission/switching technologies employ a
sequence of discrete, distinct pulses to represent information, as opposed to
the continuously variable analog signal. The precise signal transitions preclude
any distortion such as graininess or snow in the
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case of video transmission, or static or other background distortion in the case
of audio transmission.
DS-3 - Data transmission rate of approximately 45 Mbps.
Gbps - Gigabit per second, which is a measurement of speed for digital
signal transmission expressed in billions of bits per second.
Hertz - The unit for measuring the frequency with which an electromagnetic
signal cycles through the zero-value state between lowest and highest states.
One Hz (Hertz) equals one cycle per second. kHz (kilohertz) stands for thousands
of Hertz; NUIZ (megahertz) stands for millions of Hertz.
Indefeasible Right of Use (IRU) - A measure of currency in the fiber optic
cable business. The owner of an IRU has the right to use the capacity for the
time and bandwidth to which the IRU applies. In telecommunications, an IRU is
the effective long term lease (temporary ownership) of the capacity of an
international cable.
Internet - Interconnected computer networks, originally known as the DARPA
network (Defense Advanced Research Projects Agency) connecting government and
academic sites. It currently links about 50 million people worldwide who use it
for everything from scientific research to simple electronic mail.
Internet Service Provider - A company that provides individuals and
companies with access to the Internet and to other related services such as
website access and hosting.
Internet Peering - An agreement between two carriers for the exchange of
Internet traffic between their networks and onwards, covering the physical
interconnect as well as the financial terms of the interconnect where
applicable.
Intranet - A private network that uses Internet software. An Intranet is a
private Internet reserved for use by people who have been given the authority
and passwords necessary to use that network IP Internet Protocol. A standard
which describes software that keeps track of Internet addresses, routes outgoing
messages and recognizes incoming messages.
Kbps - Kilobits per second, which is a measurement of speed for digital
signal transmission expressed in thousands of bits per second.
Local Loop or Tail - The local loop or tail is that portion of the local
telephone network that connects the customer's premises to the local exchange
provider's central office or switching center. This includes all the facilities
starting from the customer premise interface which connects to the inside wiring
and equipment at the customer premise to a terminating point within the
switching wire center.
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Mbps - Megabits per second, which is a measurement of speed for digital
signal transmission expressed in millions of bits per second.
Multimedia - The electronic conversation between two or more people or
groups of people in different places using two or more types of digitally
integrated communication for voice, sound, text, data, graphics, video, image or
presence at the same time. Applications include conferencing, presentations,
training, referencing, games, etc.
Multiplexing - An electronic or optical process that combines two or more
lower bandwidth transmissions into one higher bandwidth signal by splitting the
total available bandwidth into narrower bands (frequency division) or by
allotting a common wavelength to several transmitting sources one at a time in
sequence (time division).
Optical Fibers - Thin filaments of glass through which light beams are
transmitted. Enormous capacity, low-cost, low-power consumption, small space,
light-weight, insensitivity to electromagnetic interference characterize this
transport media.
Physical Point of Presence (POP) - A place where a telecommunications
carrier has a physical presence for access to its network.
PTO (Public Telephone Operator) - Originally a government owned national
provider of telecommunications services. In countries where deregulation has
occurred, the PTO may be privatised whereas in countries where deregulation has
not occurred, the PTO remains government owned.
STM (Synchronous Transfer Mode) - New term for traditional Time Division
Multiple switching to distinguish it from ATM.
STM-1 - The largest standard circuit unit of capacity, which consists of
155,500 Kbps(equal to 155 Mbps). Thus, each Gbps contains enough capacity for
6.4 STM- 1 circuits. While capacity is sold to the largest telecommunications
companies in minimum investment units equal to one STM-1 unit, most
telecommunications companies buy smaller units at a price higher than the
equivalent STM- 1 price.
STM-4 - Data transmission rate of approximately 622 Mbps.
STM-16 - Data transmission rate of approximately 2,488 Mbps.
Switch - A sophisticated computer that accepts instructions from a caller
in the form of a telephone number. Like an address on an envelope, the numbers
tell the switch where to route the call. The switch opens or closes circuits or
selects the paths or circuits to be used for transmission of information.
Switching is a process of interconnection circuits to form a transmission path
between users. Switches allow local
41
<PAGE>
telecommunications service providers to connect calls directly to their
destination, while providing advanced features and recording connection
information for future billing.
Synchronous Digital Hierarchy (SDH (SONET)) - SDH (SONET) is a set of
standards for optical communications transmission systems that define optical
rates and formats, signal characteristics, performance, management and
maintenance information to be embedded within the signals and the multiplexing
techniques to be employed in optical communications transmission systems. SDH
(SONET) facilitates transmission between dissimilar vendors' equipment and
benefits customers by minimizing the equipment necessary for telecommunications
applications. SDH (SONET) also improves the reliability of the Local Loop
connection, historically one of the weakest links in the transmission of
information.
TDM - Time Division Multiplexing) - A scheme in which numerous signals are
combined for transmission on a single communications line or channel.
Wavelength Division Multiplexing (WDM) - A multiplexing technique which
employs more than one light source and director operating at different
wavelengths and simultaneously transmits optical signals through the same fiber
while message integrity of each signal is preserved.
42
<PAGE>
ITEM 2. FINANCIAL INFORMATION
Selected Consolidated Financial Information and Other Operating Data
Selected historical consolidated financial data of Telemonde as of and for the
period from March 10, 1998 (date of inception) to December 31, 1998 is presented
below. This has been derived from Telemonde's audited financial statements
included in this registration statement, which were prepared in accordance with
US GAAP. The selected historical consolidated financial data of Telemonde
presented below as of and for the nine-month period ended September 30, 1999
have been derived from Telemonde's unaudited financial statements included in
this registration statement. The summary unaudited pro forma financial data
have been derived from our audited financial statements for the period from
March 10, 1998 to December 31, 1998, our unaudited financial data for the nine
months ended September 30, 1999 and unaudited results reported from EquiTel. The
data below should be read in conjunction with Telemonde's consolidated financial
statements, the notes thereto, and the discussion under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained
elsewhere in this registration statement.
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Period Nine Months Nine Months
Period from From March 10, ended Ended
March 10,1998 to 1998 to December September 30, September
December 31, 1998 31, 1998 (1) 1999 30, 1999 (2)
----------------- ---------------- ------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating Data
Operating Revenues $ 29,331 $ 29,331 $ 5,857 $ 5,954
Line Cost (32,510) (31,612) (5,315) (4,887)
Cost of Contract Cancellation (3) (6,094) (6,094) --
Dispute Settlement Costs -- -- -- (4,000)
Share of Losses of Joint Ventures -- -- -- (582)
Selling, General, and Administrative Expenses (1,055) (1,777) (6,821) (9,078)
Depreciation and Amortization -- (2,042) (112) (2,040)
-------- -------- -------- ----------
Operating Expenses (39,659) (41,525) (12,248) (20,587)
--------- --------- ---------- ----------
Operating Loss (10,328) (12,194) (6,391) (14,633)
========= ========= ========== ==========
Interest Income 247 247 580 582
Interest Expense (330) (330) (1,109) (1,121)
Amortization of financing costs -- -- (8,976) (8,976)
Loan Arrangement Fees (1,321) (1,321) (500) (500)
Other (Expense) Income (1,404) (1,404) (10,005) (10,015)
--------- --------- ---------- ----------
Net Loss $(11,732) (13,598) $(16,396) $ (24,648)
========= ========= ========== ==========
Other Financial Data
EBITDA (4) (10,328) (10,152) (6,279) (12,593)
Balance Sheet Data
Cash and Cash Equivalents 2,655 125 168
Bandwidth Inventory 77,515 87,880 87,880
Trade and Other Receivables 9,518 7,401 6,551
Investment in Joint Venture -- -- 1,038
Property and Equipment, Net -- 706 920
Goodwill -- 1,289 26,466
--------- ---------- ----------
Total Assets 89,688 97,401 123,023
--------- ---------- ----------
Total Liabilities (101,390) (114,847) (105,219)
========= ========== ==========
Stockholders Equity (Net Capital Deficiency) $(11,702) $(17,446) $17,804
========= ========== ==========
</TABLE>
43
<PAGE>
(1) Gives pro forma effect to (a) the acquisition of EquiTel and (b) a debt to
equity conversion of $16,250,000 as if they had occurred on March 10, 1998.
(2) Gives pro forma effect to (a) the acquisition of EquiTel and (b) a debt to
equity conversion of $16,250,000 as if they had occurred on March 10, 1998
(income statement data) and September 30, 1999 (balance sheet data).
(3) On April 16, 1999 Telemonde terminated a Capacity Purchase Agreement with
Gemini ("CPA"). Under the CPA, Telemonde was committed to drawing down
capacity over a three year period. Under the termination agreement, the
commitment, other than the capacity already drawn down, has been canceled.
All costs connected with the termination agreement have been expensed
within the operating statement to December 31, 1998 as the decision to
terminate the CPA was made in 1998.
(4) "EBITDA" is defined as net income before taxes, interest income,
depreciation and amortization. EBITDA is presented because it is a widely
accepted measure to provide information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation or
as a substitute for net income, cash flows from operations and income or
cash flow data prepared in accordance with generally accepted accounting
principles, or as a measure of a company's profitability or liquidity.
Additionally, Telemonde's calculation of EBITDA may differ from that
performed by other companies, and thus, the amounts disclosed for EBITDA
may not be directly comparable to those disclosed by other companies.
Unaudited Pro Forma Combined Financial Data
The unaudited pro forma combined financial information has been prepared in
accordance with generally accepted accounting principles in the United States
and gives effect to the following:
(a) The acquisition of all outstanding share capital of EquiTel Communications
Limited in November 1999. The combination will be accounted for under the
purchase method. Shares for the market value of $19 million will be issued
on completion.
Possible contingent consideration are listed below:
(i) An additional sum calculated by multiplying reported earnings before
interest and tax for the year ending December 31, 2000 by 6, subject
to a maximum of $30 million, payable in common stock on June 30, 2001.
(ii) A further additional sum calculated by multiplying reported earnings
before interest and tax for the year ending December 31, 2001 by 5,
subject to a maximum of $50 million, less the amount paid under (i)
above, payable in common stock on June 30, 2002.
Any additional consideration will result in additional goodwill.
(b) A debt to equity conversion of $16,250,000 on November 10, 1999.
The pro forma combined statements of income give effect to the acquisition as if
it had occurred on March 10, 1998 (date of inception of Telemonde Investments
Limited). The pro forma combined balance sheet gives effect to the acquisition
and the equity injection, as if they had occurred on September 30, 1999. The
pro forma combined financial information does not purport to represent what
Telemonde's results of operations would have been had the acquisitions been
consummated at the beginning of fiscal 1998 nor do they project Telemonde's
results for any future period.
44
<PAGE>
Telemonde, Inc.
Pro-Forma Unaudited Combined Statement of Income
Period from March 10, 1998 to December 31, 1998
<TABLE>
<CAPTION>
Telemonde
Investments EquiTel
Limited Communications Telemonde, Pro-Forma
(consolidated) Limited Inc. Adjustments(1) Combined
------------- ------- ---- ------------ --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Operating Revenues
Bandwidth Revenues $ 29,331 $ - $ - $ - $ 29,331
Other Revenues - 898 - (a) (898) -
-------- ---- ----- --------- --------
Operating Revenues 29,331 898 - (898) 29,331
Operating Expenses
Line Costs 32,510 - - (a) (898) 31,612
Cost of Contract Cancellation 6,094 - - - 6,094
Depreciation and Amortization - - - (b) 2,042 2,042
Selling, General and
Administrative Expenses 1,055 720 2 - 1,777
-------- ---- ----- --------- --------
Operating Expenses 39,659 720 2 1,144 41,525
-------- ---- ----- --------- --------
Operating Profit/(Loss) (10,328) 178 (2) (2,042) (12,194)
Other Income (Expense)
Interest Income 247 - - - 247
Interest Expense (330) - - - (330)
Loan Arrangement Fees (1,321) - - - (1,321)
-------- ---- ----- --------- --------
Other (Expense) Income (1,404) - - - (1,404)
-------- ---- ----- --------- --------
Net Profit/(Loss) $(11,732) $178 $ (2) $ (2,042) $(13,598)
======== ==== ===== ========= ========
</TABLE>
(1) The pro-forma unaudited combined statements of income for the period from
March 10, 1998 to December 31, 1998 gives effect to the following pro-forma
adjustments:
(a) Elimination of fees and commissions amounting to $898,000 payable by
Telemonde to EquiTel Communications Limited.
(b) Amortization of goodwill amounting to $2,042,000 attributable to the
acquisition of EquiTel Communications Limited.
45
<PAGE>
Telemonde, Inc.
Pro-Forma Unaudited Combined Statement of Income
for the nine months ended September 30, 1999
<TABLE>
<CAPTION>
Telemonde, EquiTel
Inc. Communications Pro-Forma
(consolidated) Limited Adjustments1 Combined
-------------- ------- ------------ --------
(Dollars in thousands)
Operating Revenues
<S> <C> <C> <C> <C> <C>
Bandwidth Revenues $ 5,857 $ - $ - $ 5,857
Other Revenues - 525 (a) (428) 97
------ ------ ----- ------
Operating Revenues 5,857 525 (428) 5,954
------- ------ ----- ------
Operating Expenses
Line Costs 5,315 - (a) (428) 4,887
Dispute Settlement Costs - 4,000 - 4,000
Share of Losses of Joint Ventures - 582 - 582
Provision for Doubtful Debts 924 - - 924
Depreciation and Amortization 112 31 (b) 1,897 2,040
Selling, General and
Administrative Expenses 5,897 2,257 - 8,154
------ ------ ------- ------
Operating Expenses 12,248 6,870 1,469 20,587
------ ------- ------- -------
Operating (Loss) (6,391) (6,345) (1,897) (14,633)
Other Income (Expense)
Interest Income 580 2 - 582
Amortization of financing costs (8,976) - - (8,976)
Interest Expense (1,109) (12) - (1,121)
Loan Arrangement Fees (500) (500)
------ ------ ------- ------
Other (Expense) Income (10,005) (10) (10,015)
------ ------ ------- ------
Net (Loss) $(16,396) $(6,355) $(1,897) $(24,648)
======= ====== ====== =======
</TABLE>
(1) The pro-forma unaudited combined statement of income for the nine months
ended September 30, 1999 gives effect to the following pro-forma
adjustments:
(a) Elimination of fees and commissions amounting to $428,000 payable by
Telemonde to EquiTel Communications Limited.
(b) Amortization of goodwill amounting to $1,897,000 attributable to the
acquisition of EquiTel Communications Limited.
46
<PAGE>
Telemonde, Inc.
Pro-Forma Unaudited Combined Balance Sheet
as of September 30, 1999
<TABLE>
<CAPTION>
Telemonde, EquiTel
Inc. Communications Pro-Forma
(consolidated) Limited Adjustments1 Combined
-------------- ------- ------------ --------
(Dollars in thousands)
Assets
<S> <C> <C> <C> <C> <C>
Cash and Cash Equivalents $ 125 $ 43 $ - $ 168
Trade Accounts Receivable 4,237 - - 4,237
Other Receivables 3,164 535 (e) (1,385) 2,314
Inventory 87,880 - - 87,880
Property, Plant & Equipment 706 214 - 920
Investment in Joint Venture - 1,038 - 1,038
Goodwill 1,289 - (a) 25,177 26,466
----- ----- ------ ------
Total Assets $ 97,401 $ 1,830 $ 23,792 $123,023
======== ======= ========== ========
Liabilities and Shareholders' Equity
Trade Accounts Payable 85,164 571 (b) (6,729) 79,006
Other Payables - 1,700 (e) (1,385) 315
Accrued Expenses 11,332 147 - 11,479
Deferred Income 1,139 - - 1,139
Other Loans 6,500 300 - 6,800
Shareholder Loans 10,712 5,289 (b) (9,521) 6,480
------ ------ ------- ------
Total Liabilities 114,847 8,007 (17,635) 105,219
------ ------ ------- ------
Stockholders' equity
Share Capital 59 - (c) 11 70
Retained Earnings (28,128) (6,177) (d) 6,177 (28,128)
Additional Paid in Capital 10,623 - (b,c) 35,239 45,862
------ ------- ------ ------
Total Shareholders' Funds (17,446) (6,177) 41,427 17,804
------ ------- ------ ------
Total Liabilities
and Stockholders' Funds $ 97,401 $ 1,830 $ 23,792 $123,023
======== ======= ========= ========
</TABLE>
47
<PAGE>
________
(1) The pro-forma unaudited combined balance sheet as of September 30, 1999
gives effect to the following pro-forma adjustments:
(a) Capitalization of goodwill amounting to $25,177,000 arising on the
acquisition of EquiTel Communications Limited. This represents the
purchase price (excluding any contingent consideration) of $19 million
plus the fair value of net liabilities acquired of $6,177,000. Goodwill
is being amortized over 10 years under the straight-line method.
(b) A debt to equity conversion of $16,250,000, resulting in the issue of
6,000,000 shares.
(c) Shares valued at $19 million issued as the non-contingent consideration
to acquire EquiTel Communications Limited, resulting in the issuance of
4,947,917 shares.
(d) The elimination of pre-acquisition retained earnings in EquiTel
Communications Limited amounting to $6,177,000.
(e) The elimination of intercompany balances
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations
You should read the following discussion and analysis together with Telemonde's
financial statements, including the notes, appearing elsewhere in this
registration statement.
Overview
We are a facilities-based international communications company. We are creating
a global network infrastructure to interconnect the developed world markets with
regional hubs in the emerging markets. We offer managed bandwidth, voice, data
and Internet services over our voice and data switching infrastructure. Our
services are intended to enable emerging markets to have access to the
telecommunications facilities of the developed world. These services will
enable populations of developing countries to participate in the global
communications community through our regional hubs. Our target customers
include leading global telecommunications carriers, incumbent public telephone
operators (PTO's) operators in developing countries, internet service providers
(ISPs), multimedia service providers and new entrants to the telecommunications
market. We seek to capitalize on the increasing demand for high quality
international communications services which is being driven by the globalization
of the world's economies, the worldwide trend toward telecommunications
deregulation, and the growth of voice, video, data and Internet traffic.
Corporate Structure
Telemonde, Inc. (formerly Pac-Rim Consulting, Inc) acquired Telemonde
Investments Limited ("TIL"), a British Virgin Islands company and the holding
company for the Telemonde business, on May 14, 1999. In exchange for all of the
issued and outstanding shares of TIL, Telemonde, Inc. issued 35,297,000
restricted shares of Telemonde, Inc.'s
48
<PAGE>
common stock. Pac-Rim Consulting, Inc. ("Pac-Rim") was a dormant shell company
with no operating history but was listed on the NASD Over-the-Counter Bulletin
Board.
The issuance of common stock by Pac-Rim will be accounted for as a reverse
purchase acquisition of Pac-Rim by TIL. Although Pac-Rim was the surviving
legal entity in the Reverse, TIL is considered to be the acquirer in the
transaction because:
. the sole shareholder of TIL prior to the acquisition became the majority
shareholder of Pac-Rim following the acquisition;
. Telemonde management became Pac-Rim management following the acquisition;
and
. Pac-Rim was simply a shell company rather than an operating business.
Following the acquisition by TIL, Pac-Rim Consulting, Inc.'s name was changed to
Telemonde, Inc. On November 9, 1999, Telemonde, Inc. became a Delaware
corporation by merging into a newly formed Delaware subsidiary.
The following chart illustrates our current corporate structure.
TELEMONDE, INC.
a Delaware corporation
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
telmonde.net, S.A. Telemonde TGA(UK) Limited Telecities Limited Equitel Telemonde Networks,
organized in Investments Limited, a United a United Kingdom Communications Limited, a United
Switzerland a British Virgin Kingdom company Limited, a United Kingdom company
Islands company company Kingdom company
Equitel Card Services
Telemonde International Bandwidth Limited,
Limited, a British Virgin Islands company a United Kingdom company
Teleroute Limited,
Telemonde Bandwidth (Bermuda) Limited, a a United Kingdom company
Bermuda company
Telesource Limited,
a United Kingdom company
Telemonde International Bandwidth Desert Telecommunications Services, LLC
(Bermuda) Limited, (49%), organized in Oman
a Bermuda company
</TABLE>
*All Companies are 100% owned unless otherwise indicated.
49
<PAGE>
Revenues
Operating revenues for the nine month period ended September 30, 1999 totaled
$5.9 million compared with $29.3 million for the period beginning March 10, 1998
and ended December 31, 1998. The principal reason for the decline in revenues
for the nine month period ended September 30, 1999 has been the rapid decline of
prices in the bandwidth capacity industry. In order to address this bandwidth
price compression, we have entered into negotiations with our suppliers to
obtain more flexible pricing and a geographic expansion of the fiber optic
bandwidth capacity we can make available to our customers. To further offset
future bandwidth capacity market fluctuations, we have diversified our revenue
streams through the acquisition of EquiTel and will further diversify our
revenue streams upon completion of our acquisitions of ITS Europe and Global
Communications. We believe that these businesses will contribute significant
revenues in 2000.
Results of Operations
For the nine months ended September 30, 1999 compared with the period from March
10, 1998 to December 31, 1998
Operating revenues decreased $ 23.4 million or 80% from $ 29.3 million for the
period ended December 31, 1998 to $ 5.9 million for the nine months ended
September 30, 1999. Sales of IRUs fell $ 25.4 million or 88 % from $ 28.9
million for the period ended December 31, 1998 to $ 3.5 million for the nine
months ended September 30, 1999. Backhaul and maintenance revenues increased $
1.8 million or 450% from $ 0.4 million in the period ended December 31, 1998 to
$ 2.2 million in the nine months ended September 30, 1999. The increase in
backhaul and maintenance revenues reflects the fact that the related sales
agreements came into effect part way through the period ended December 31, 1998.
Leasing revenues increased from nil in the period ended December 31, 1998 to $
0.2 million in the nine months ended September 30, 1999.
Line costs decreased $ 27.2 million or 84% from $ 32.5 million in the period
ended December 31, 1998 to $ 5.3 million in the nine months ended September 30,
1999. The decrease reflects an equivalent decrease in capacity sales.
Provision for doubtful debts increased from nil in the period ended December 31,
1998 to $ 0.9 million in the nine months ended September 30, 1999. The
provision relates to a 1999 capacity sale.
The cost of contract cancellation decreased from $ 6.1 million in the period
ended December 31, 1998 to nil in the nine months ended September 30, 1999. On
April 16, 1999, Telemonde terminated a Capacity Purchase Agreement with Gemini.
Under the terms of the Capacity Purchase Agreement Telemonde was committed to
drawing down capacity over a three year period. Under the termination
arrangement, the commitment, other than the capacity already drawn down, has
been cancelled. All costs connected
50
<PAGE>
with the termination arrangement have been expensed in the period ended December
31, 1998 as the decision to terminate the Capacity Purchase Agreement was made
in 1998.
Selling, general and administrative expenses increased $4.9 million or 445 %
from $1.1 million in the period ended December 31, 1998 to $6.0 million in the
nine months ended September 30, 1999. Staff costs increased from nil in the
period ended December 31, 1998 to $1.0 million in the nine months ended
September 30, 1999. The increase in staff costs reflects the fact that
Telemonde Networks Limited was incorporated on February 16, 1999 to perform the
sales and marketing functions previously undertaken outside the Company by
Telemonde Limited and to build infrastructure and staff. Legal fees increased
$1.2 million or 200% from $0.6 million in the period ended December 31, 1998 to
$1.8 million in the nine months ended September 30, 1999. The increase in legal
fees reflects an increase in corporate finance activity. Other selling, general
and administrative expenses increased $2.8 million or 700% from $0.4 million in
the period ended December 31, 1998 to $3.2 million in the nine months ended
September 30, 1999, primarily as a result of an increase in travel and
accommodation costs.
Interest income increased $0.4 million or 200% from $0.2 million in the period
ended December 31, 1998 to $0.6 million in the nine months ended September 30,
1999. The increase is attributable to an increase in income from sales interest
on capacity sold on deferred payment terms.
Amortization of financing costs increased from nil in the period ended December
31, 1998 to $9.0 million in the nine months ended September 30, 1999. The
increase is attributable to the warrants issued to Communications Collateral
Limited and Global Crossing in 1999. Generally accepted accounting principles
in the United States require that the fair value of the warrants is recorded as
an expense over the period of the related financing.
Interest expense increased $0.8 million or 236% from $0.3 million in the period
ended December 31, 1998 to $1.1 million in the nine months ended September 30,
1999 since average borrowings increased.
Loan arrangement fees decreased $0.8 million or 62% from $1.3 million in the
period ended December 31, 1998 to $0.5 million in the nine months ended
September 30, 1999. The decrease is attributable to a fall in the aggregate
value of bridging finance to date in 1999 compared with 1998.
Liquidity and Capital Resources
Telemonde's liquidity requirements arise from:
. purchases and maintenance of bandwidth capacity and network equipment;
. development of intelligent network platforms;
. acquisition and development of carrier hotels and landing stations;
. interest and principal payments on outstanding indebtedness;
51
<PAGE>
. net cash used in operating activities; and
. acquisitions of, and strategic investments in, businesses.
Telemonde has satisfied its liquidity requirements to date through operating
cash flows, vendor finance and equity subscriptions.
Net cash used in operating activities was $20.0 million in the nine months ended
September 30, 1999, compared to net cash provided by operating activities of
$2.6 million in the period from March 10, 1998 to December 31, 1998. The
increase in net cash used in operating activities was primarily due to a fall in
receipts under capacity sales agreements, an increase in payments under capacity
purchase agreements and an increase in general and administrative payments.
Net cash used in investing activities was $0.8 million in the nine months ended
September 30, 1999 compared to nil in the period from March 10, 1998 to December
31, 1998. Net cash used in investing activities in the nine months ended
September 30, 1999 comprises purchases of property, plant and equipment.
Net cash provided by financing activities was $18.2 million in the nine months
ended September 30, 1999 compared with $.03 million in the period from March 10,
1998 to December 31, 1998. Proceeds from shareholder loans increased from nil
in the period ended December 31, 1998 to $10.7 million in the nine months ended
September 30, 1999. Proceeds from the Communications Collateral Limited
Capacity Option Agreement increased from nil in the period ended December 31,
1998 to $6.5 million in the nine months ended September 30, 1999. In the period
from March 10, 1998, Telemonde repaid loans of $18.3 million which had been
drawn down in the period.
Telemonde's ability to meet its liquidity requirements is dependent on its
ability to generate cash inflows from operations and raise short term or
permanent finance. Since inception through September 30, 1999, Telemonde has had
negative cash flow from operating activities of $17.3 million and negative
EBITDA of $16.6 million. In addition, Telemonde incurred net losses of $11.7
million in the period ended December 31, 1998 and $16.4 million in the nine
months ended September 30, 1999. On a pro forma basis, after giving effect to
the acquisition of EquiTel, Telemonde would have had a net loss of $13.6 million
in the period ended December 31, 1998 and $24.6 million in the nine months ended
September 30, 1999. Telemonde expects to incur additional operating losses and
negative cash flow from operations as it expands its operations and upgrades its
network. There can be no assurance that revenue will grow in future periods or
that Telemonde will be able to achieve or sustain profitability or positive cash
flow from operations. If Telemonde cannot achieve and sustain operating
profitability or positive cash flow from operations or raise equity or debt
capital, it will be unable to meet its working capital and capital expenditure
requirements. The independent auditors have reported that the financial
statements for the period from March 10, 1998 to December 31, 1998 have been
prepared assuming that the Company will continue as a going concern. As
discussed in note 13 to the financial statements, the Company has incurred a net
loss of $11.7 million. At December 31, 1998, total liabilities exceeded total
assets by
52
<PAGE>
$11.7 million. These factors, and the others discussed in Note 13, raise
substantial doubt about the ability of the company to continue as a going
concern if it fails to raise additional debt and equity financing. The financial
statements do not include any adjustments relating to the recoverability of
recorded assets, or the amounts of liabilities, that might be necessary in the
event the Company fails to raise additional financing and cannot continue in
existence.
Due to its temporary lack of liquidity resulting from a decline in the
market for wholesale fiber optic bandwidth, Telemonde has defaulted under its
monetary obligation on a number of its material contracts. Telemonde is
therefore negotiating with its principal suppliers to amend its existing trans-
Atlantic capacity contracts to include capacity in the Pacific, Europe and South
America and to reschedule payment terms.
Gemini Capacity Purchase Agreement. On April 3, 1998, Telemonde, through its
now wholly owned subsidiary Telemonde International Bandwidth (Bermuda) Limited,
purchased IRUs relating to transatlantic capacity from Gemini Submarine Cable
System Limited. Specifically, Telemonde agreed to acquire up to a maximum of
STM-16. Due to a subsequent and rapid decline in the market for wholesale
telecommunications bandwidth, the capacity sale agreement was amended by three
letter agreements dated January 27, April 16, and April 22, 1999. These
amendments provided that an IRU for only one (1) STM-1 would be acquired, and a
second STM-1 would be leased for a lump sum payment plus monthly payments for a
three-month period ending July 16, 1999. Further negotiations between the
parties provided that the lump sum payment would fall due on October 7, 1999 in
the form of two promissory notes. As of the date of filing, Telemonde has paid
Gemini the full balance owing for the IRU relating to the first STM-1. However,
Telemonde has not fulfilled its obligations under two promissory notes in the
amount of $2.7 million. Although this default gives Gemini the right to
immediately terminate the IRUs, Gemini has not done so as of the date of this
filing. Furthermore, such a termination would not substantially effect
Telemonde's bandwidth sales contracts, as it only has one customer operating on
the Gemini network under this particular capacity purchase agreement, and this
customer is protected under the agreement with Gemini.
Current Obligations to Communications Collateral Limited. On April 15, 1999,
Telemonde, through its now wholly owned subsidiary Telemonde Investments
Limited, entered into a series of agreements with Communications Collateral
Limited, including, among others, agreements for: (1) the sale of an IRU for
bandwidth to CCL; (2) the grant of an option to CCL which, among other things,
required Telemonde to repurchase the bandwidth upon CCL's request; and (3) a $1
million loan by CCL to Telemonde due and repaid on August 12, 1999. In
connection with these principle agreements, other Telemonde subsidiaries (TIBL,
TIBBL, TBBL) guaranteed the obligations of TIL under those agreements, including
its obligation to pay back the loan and to repurchase the bandwidth in the event
that CCL exercised its option.
On August 14, 1999, CCL exercised its option to require Telemonde to repurchase
the capacity. As of filing, Telemonde has been unable to complete this
repurchase and is in
53
<PAGE>
default in the amount of approximately $4.4 million. As a result, CCL has the
right to foreclose on essentially all of the assets of TIL, including its
ownership interests in TIBBL, TIBL and TBBL, all of the assets in any of the
foregoing subsidiaries, including their rights under Telemonde's bandwidth sale
contracts; and any ownership interest the foregoing subsidiaries might have in
any other Telemonde entities until the default is cured. The amount of the
foreclosure, however, would not exceed the amount of the indebtedness.
Negotiations between the parties are ongoing and management intends to repay the
indebtedness as soon as possible.
MCI WorldCom Capacity Purchase Agreements. In December of 1998 and on March 31,
1999, Telemonde, through its now wholly owned subsidiary Telemonde International
Bandwidth Limited, entered into agreements for the purchase of four (4) units of
bandwidth capacity on the Gemini network. Specifically, Telemonde acquired the
IRU's in three (3) units of capacity under the December 1998 agreement, and
acquired the right for an additional unit of capacity under the March 1999
agreement. Under these agreements, Telemonde is also required to pay annual
maintenance charges. As of filing, Telemonde has paid the amounts due under
the March 1999 agreement. However, as a result of the liquidity problems
detailed above, Telemonde was unable to fulfill its obligations to draw down and
pay for the three (3) units of capacity under the December 1998 agreement.
Furthermore, Telemonde is delinquent on its annual maintenance charges under
both agreements, resulting in an overall default to MCI WorldCom in the amount
of approximately $28 million. In light of these circumstances, Telemonde is
currently negotiating with MCI WorldCom to restructure their existing
agreements.
Under a heads of terms with MCI Worldcom, Telemonde will swap existing trans-
Atlantic capacity available under the Capacity Agreements for capacity on the
Ulysses System which includes trans-Pacific, European and other capacity. The
outstanding default plus accrued interest will be paid off over a period lasting
until May 31, 2000. Telemonde has also agreed not to grant any security
interest on certain of its assets and not to increase existing amounts secured.
Atlantic Crossing Limited. Telemonde, through its now wholly-owned subsidiary
Telemonde Bandwidth (Bermuda) Limited, agreed to acquire an aggregate of 16 STM-
1(s) on Segment S-1 from Atlantic Crossing Limited, under a Capacity Purchase
Agreement dated June 10, 1998. Since the summer of 1999, we have not made any
payments under this agreement and are in default under the payment terms in the
amount of approximately $53 million, in addition to interest and outstanding
maintenance payments. Management is currently in negotiations with Global
Crossing, Atlantic Crossing's parent, to re-negotiate the terms of the contract.
Management hopes that as a result of these negotiations Telemonde will be able
to reschedule its payments acquire of rights in bandwidth across the entire
Global Crossing system rather than just trans-Atlantic capacity. This will
allow Telemonde to expand according to its overall business strategy.
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Recent Events and Transactions
EquiTel. Telemonde acquired EquiTel Communications Limited on November 8, 1999.
The maximum aggregate value of the consideration payable by Telemonde to the
shareholders of EquiTel is $69 million. The consideration is to be satisfied
as follows:
. the initial consideration of $19 million was satisfied by the issuance to the
EquiTel shareholders of restricted shares of common stock of Telemonde.
. on or before June 30, 2001 or within seven days thereafter, a sum not
exceeding $30 million will be paid to EquiTel shareholders in proportion to
their respective interests in EquiTel by the issue of restricted shares of
common stock of Telemonde, which amount will be based upon its earnings.
. on or before June 30, 2002 or within seven days thereafter, a sum not
exceeding $50 million, less the amount paid on June 30, 2001, will be paid to
EquiTel shareholders in proportion to their respective interests in EquiTel
by the issue of restricted shares of common stock of Telemonde, which amount
will be based upon its earnings.
ITS. Telemonde, through its subsidiary EquiTel, has entered into an agreement
to acquire ITS Europe. ITS Europe is currently owned by Carnival Enterprises
Limited and Volim Holdings BV, and Callaway Continental Limited will purchase
Carnival and the ITS shares held by Volim for $15 million. The purchase price
is payable in 3,529,411 shares of common stock of Telemonde which Callaway is
entitled to receive from an existing holder of Telemonde stock. Upon the
completion of the foregoing transactions, EquiTel will purchase all of the
outstanding shares of Callaway. Callaway will also transfer 400,000 shares of
common stock of Telemonde that it is entitled to receive from an existing holder
to Market Consultant Limited in exchange for $1 million in cash. The $1 million
received by Callaway Continental Limited will be lent to EquiTel, which will be
in turn lend those funds to ITS Europe.
Global Switch (London) Limited. On November 8, 1999, Telemonde Networks entered
into a lease and service agreement, subject to certain conditions, for space in
the London Switch Building and agreed to lease space in Paris and Amsterdam upon
completion of those carrier hotels. The London facility will house Telemonde's
London switching equipment.
Global Communications (Holding) Limited. On November 5, 1999, Telemonde and
Global signed a letter of intent for the purchase of the entire share capital of
Global Communications by Telemonde. Through this transaction, Telemonde will
acquire a full-service internet provider company.
TGA Limited. On August 13, 1999 Telemonde acquired 100% of the issued and
outstanding stock of TGA (UK) Limited. The former shareholders of TGA received
200,000 shares of common stock of Telemonde, Inc. as consideration for the TGA
stock.
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Quantitative and Qualitative Disclosures about Market Risk
Telemonde's primary market risk exposures relate to changes in foreign currency
rates. Telemonde is exposed to the risk of fluctuations in foreign currency
exchange rates due to the international nature and scope of its operations. In
the future, Telemonde expects to continue to derive a significant portion of
its net revenue and incur a significant portion of its operating costs outside
the United States, and changes in foreign currency exchange rates may have a
significant effect on Telemonde's results of operations. Telemonde
historically has not engaged in hedging transactions to mitigate foreign
exchange risk.
Year 2000 Compliance
General. We are reviewing our network elements, computer systems, software
applications and other business systems in order to determine if any of these
systems will not properly reflect or recognize the year 2000. Because many
computer and computer applications define dates by the last two digits of the
year, "00" could be interpreted to mean the year 1900, rather than the year
2000. This error could result in miscalculations or system failures. Year 2000
issues may also affect the systems and applications of our customers, vendors or
resellers.
Readiness Program. We expect to complete the repair, replacement, testing and
certification of substantially all non-ready network elements by the end of
1999. We are using internal sources to identify, correct or reprogram, and test
our systems for Year 2000 readiness.
Suppliers. We currently are and have been contacting third party suppliers of
major equipment, software, systems and services used by us to identify and, to
the extent possible, to resolve issues involving Year 2000 readiness. However,
we have limited or no control over the actions of these third party suppliers.
Consequently, while we expect that we will be able to resolve any significant
Year 2000 issues with regard to these systems and services, there can be no
assurance that these suppliers will resolve any or all Year 2000 issues before
the occurrence of a material disruption to our business or any of our customers.
Costs. We expect to incur minimal expenditures in 1999 to complete our Year
2000 readiness program. This estimate does not include the costs of systems,
software and equipment that are being replaced or upgraded in the normal course
of business. The costs of modifying our network elements, software and systems
for Year 2000 readiness are being funded from existing cash resources and are
being charged as expenses as incurred .
Risks. We believe that we will substantially complete the implementation of our
Year 2000 program prior to December 31, 1999. Consequently, we do not believe
that Year 2000 issues will have a material adverse effect on our business or
results of operations. However, if we do not achieve readiness prior to
December 31, 1999, if we fail to identify and remedy all critical Year 2000
problems or if major suppliers or customers
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experience material Year 2000 problems, our results of operations or financial
condition could be materially affected. We have determined that non-ready
network elements and systems may result in improperly routed traffic and that
non-ready, non-network systems may result in errors in customer billing and
accounting records. We may also be adversely affected by general economic
disruptions caused by the Year 2000 issue even in circumstances where our
systems of our customers are Year 2000 ready.
Contingency Plans. We are developing appropriate contingency plans to mitigate,
to the extent possible, any significant Year 2000 non-readiness. We expect to
complete our contingency plans by the end of 1999. If we are required to
implement our contingency plans, the cost of Year 2000 readiness may be greater
than the amount referenced above and there can be no assurance that these plans
will be adequate.
Adoption of new accounting standards
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No.
133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and how it is designated. For
example, gains or losses related to changes in the fair value of a derivative,
not designated as a hedging instrument, are recognized in earnings in the period
of the change, while certain types of hedges may be initially reported as a
component of other comprehensive income until the consummation of the underlying
transaction.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter. On that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged, but
it is permitted only as of the beginning of any fiscal quarter. SFAS No. 133 is
not to be applied retroactively to financial statements of prior periods. The
Company believes that the adoption of this standard will not have a material
effect on the Company's consolidated results of operations or financial
position. The FASB has delayed the effective date of SFAS No. 133 by one year
to years beginning after June 15, 2000 by the issuance of SFAS No. 137.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities". SOP 98-5 provides guidance on the financial reporting of start-up
costs and organization costs, and requires that such costs to be expensed as
incurred. SOP 98-5 applies to all nongovernmental entities and is generally
effective for fiscal years beginning after December 15, 1998. Earlier
application is encouraged in fiscal years for which annual financial statements
previously have not been issued. The adoption of SOP 98-5 is not
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expected to have a material impact on results of operations, financial position,
or cash flows of the Company as the Company's current policy is substantially in
accordance with SOP 98-5.
ITEM 3. PROPERTIES
Telemonde leases its offices at 200 Madison Avenue, Suite 520, New York, New
York 10016. In addition, Telemonde leases executive and administrative offices
at 40 Portman Square, London, England. Telemonde.net has offices at 16 Chemin
des Coquelicots, Geneva, Switzerland and Desert Telecommunications Services, LLC
has an office in Muscat, Oman.
Telemonde Networks Limited entered into a lease with Millennium Digital
Communications Corp. in March 1999 for space at 200 Madison Avenue in New York.
The term of the lease is 2 years with 6 months rent of $42,000 due on April 1,
1999 and 6 months rent of $42,000 due on October 1, 1999. As of filing,
Telemonde intends to move to new offices in New York and has failed to pay the
rent due in October.
Telemonde also leases space for equipment installed under customer contract or
for Telemonde's own network. These leases are normally on an annual basis.
Telemonde is currently leasing space in the following telehouses or "carrier
hotels":
New York City 8th Avenue
Hudson Street
London, England Aylesbury Street
Harbour Exchange, London Docklands
The Telehouse, Coriander Avenue, London Docklands
On November 8, 1999 Telemonde Networks Limited entered into a lease with Global
Switch (London) Limited for space at the London Switch Building, East India
Dock, London, England. The lease is conditioned upon Global Switch's termination
of a prior lease. However, management believe that this condition will be
fulfilled in the near future and Telemonde will then be able to use the space.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides you with certain information, as of November 10,
1999, regarding beneficial ownership of Telemonde's common stock by: (1) each of
our named executive officers and directors; (2) each person whom we believe
beneficially owns more than 5% of our outstanding voting stock; and (3) all
executive officers and directors as a group. In accordance with the rules
promulgated by the Securities and Exchange Commission, this ownership includes
shares currently owned as well as shares which the named person has the right to
acquire beneficial ownership of within 60 days, through the exercise of options,
warrants or other rights. Except as otherwise indicated, each stockholder
listed below has sole voting and investment power as to the shares owned by that
person.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address (1) Benefical Ownership(2) Percentage of Class(3)
- - - - -------------------- ---------------------- ----------------------
<S> <C> <C>
Kevin F.H. Maxwell (4).............................. 3,183,492 4.4%
Adam N. Bishop...................................... 989,583 1.4%
Andrew J. Hedges.................................... - -
Harry D. Pomeroy (5)................................ 989,583 1.4%
Nicholas Topham..................................... 682,812 *
Larry Trachtenberg (6).............................. 484,402 *
Count Gottfried A. von Bismarck..................... - -
Mark G. Hollo (7)................................... 946,429 1.3%
Miguel Tirado (8)................................... 71,429 *
Intelecom Limited................................... 29,260,000 40.0%
Lake Building, 1st Floor
Wickhams, Cay One
Roadtown, Tortola
British Virgin Islands
Communications Collateral Limited (9)............... 6,316,223 8%
The Tropic Isle Building
Road Rown, Tortola
British Virgin Islands
Directors and Named Executive Officers as a Group... 7,397,730 10.1%
(9 persons)
</TABLE>
- - - - ------------
*Less than 1% of Telemonde common stock.
(1) If no address is given the individual is an executive officer or director
of Telemonde whose business address is: 40 Portman Square, London,
England.
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(2) Shares of common stock that a person has the right to acquire within 60
days of November 10, 1999 will be deemed outstanding for computing the
percentage ownership of the person having the right to acquire such shares
but are not deemed outstanding for computing the percentage ownership of
any other person.
(3) Based upon 73,104,442 shares issued and outstanding on a fully diluted
basis, as of November 10, 1999.
(4) Includes 2,756,790 shares, which will represent interest of Mr. Maxwell and
his wife in Intelecom, Inc. Includes 426,702 shares held by Telecoworld
Limited in which Mr. Maxwell has a 33.4% ownership interest.
(5) All shares are held by Mr. Pomeroy's wife.
(6) All shares are held by Mr. Trachtenberg's wife.
(7) Includes 71,429 shares authorized for issuance to Mr. Hollo as compensation
for his membership on the Board of Directors, which number represents
$250,000 of shares at $3.50 per share. The compensation package provides
the shares will be issued at the closing sales price on the business day
prior to issuance and $3.50 represents the price per share as of November
11, 1999. The actual number of shares issued to Mr. Hollo may be different
than 71,429. Mr. Hollo's ownership also includes 875,000 shares
beneficially owned by Black Trust, beneficiaries of which are descendants
and other family members of Mr. Hollo. Mr Hollo is agent for Black Trust
through a Power of Attorney.
(8) Includes 71,429 shares authorized for issuance to Dr. Tirado as
compensation for his membership on the Board of Directors, which number
represents $250,000 of shares at $3.50 per share. The compensation package
provides the shares will be issued at the closing sales price on the
business day prior to issuance and $3.50 represents the price per share as
of November 11, 1999. The actual number of shares to be issued to Dr.
Tirado may be different than 71,429.
(9) Shares are issuable to Communications Collateral Limited under a warrant
pursuant to which CCL may subscribe for 7% of the issued share capital of
Telemonde and under a penalty provision in a registration rights agreement
with Telemonde, pursuant to which CCL is obligated within the next 60 days
to issue to CCL 1% of the issued share capital of Telemonde.
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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The following table and biographies sets forth in formation concerning the
directors and executive officers of Telemonde.
<TABLE>
<CAPTION>
Expiration of Term
Name Age Position as Director
- - - - ---- --- -------- -----------
<S> <C> <C> <C>
Kevin F.H. Maxwell(1) 40 Chairman and Director 2002
Adam N. Bishop 40 President, Chief Executive 2001
Officer, Treasurer and Director
Andrew J. Hedges 32 Executive Vice President and N/A
Chief Operating Officer
Harry D. Pomeroy 45 President of EquiTel N/A
Nicholas Topham 41 Chief Executive Officer of N/A
EquiTel
Larry S. Trachtenberg 46 Executive Vice President and N/A
Managing Director of EquiTel
Count Gottfried A. von 37 Vice President, Secretary and 2000
Bismarck Director
Mark G. Hollo(1)(2) 49 Director 2002
Miguel D. Tirado(1)(2) 56 Director 2001
</TABLE>
- - - - ---------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
Kevin F.H. Maxwell, 40, Chairman and Director
Mr. Maxwell, a co-founder of Telemonde, has served as the Chairman of the Board
and a director of Telemonde since its acquisition of Pac-Rim. Prior to joining
Telemonde in May 1999, Mr. Maxwell was a strategic business development
consultant for Westbourne Communications Limited for 6 years, through which he
was involved in the early development of Telemonde. Mr. Maxwell has an
extensive background in media and communications, including newspapers and on-
line publishing and software, in Europe and North America. Since 1993, he has
specialized in the telecommunications industry. Until 1991, Mr. Maxwell was
Deputy Chairman and Deputy Chief Executive Officer of Maxwell Communication
Corporation plc, and its subsidiary Macmillan, Inc. (the "Maxwell Group"), and a
director of Mirror Group Newspaper. The Maxwell Group, which was controlled by
Mr. Maxwell's late father, Robert Maxwell, collapsed in
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December 1991. In 1992, Mr. Maxwell was declared bankrupt as a result of the
civil litigation arising from the collapse of the Maxwell Group. In 1996, Mr.
Maxwell was acquitted of all criminal charges related to the collapse of the
Maxwell Group and in 1995, the bankruptcy was discharged.
Adam N. Bishop, 40, President, Chief Executive Officer, Treasurer and Director
Mr. Bishop, a co-founder of Telemonde and EquiTel, has served as the President,
Treasurer and a director of Telemonde since its acquisition of Pac-Rim. From
1996 until 1999, Mr. Bishop served as a consultant to various telecommunications
companies, including acting as chief executive officer of North American
Gateway, Ltd., a wholesale voice telephony carrier and division of North
American Gateway, Inc. At North American Gateway, Mr. Bishop established the
company's operations in Europe. From 1991 to 1996 Mr. Bishop was employed by
British Telecom, plc. where he was head of new business development in
international carrier services.
Andrew J. Hedges, 32, Executive Vice President and Chief Operating Officer
Prior to joining Telemonde in November 1999, Mr. Hedges was previously Managing
Director of First Telecom plc, the largest independent telecommunications
retailer in the United Kingdom. He is a winner of the UK's Whitbread Prize for
Marketing. He has gained substantial commercial operations, sales and marketing
and international telecommunications experiences in previous positions at, MFS
WorldCom, Gemini Submarine Cable and British Telecommunications plc.
Harry D. Pomeroy, 45, President of EquiTel
Mr. Pomeroy, a co-founder of Telemonde and EquiTel, was previously head of
Commercial Carrier Operations at WorldCom and before that Head of International
Carrier Marketing Operations at British Telecommunications. He is one of the
small number of experts with extensive experience and knowledge of the
traditional carrier marketplace, new telecom carriers, and the emerging
wholesale telecommunications marketplace.
Nicholas Topham, 41, Chief Executive Officer of EquiTel
Mr. Topham was previously a director of the Global Communications and
Entertainment Global Practice of Arthur Andersen. He specializes in
international wholesale communications and telecommunications strategic
development. He has 13 years experience with British Telecommunications, plc
where he was head of Business Development and Strategy for International
Wholesale.
Larrys. Trachtenberg, 46, Executive Vice-President and Managing Director of
EquiTel
Mr. Trachtenberg is a co-founder of EquiTel. Mr. Trachtenberg has extensive
management experience in the telecommunications, Internet, new media and
financial services industries. He had previously been a consultant to a number
of companies, including Telemonde, and prior to that held senior management
positions in communications and financial services businesses.
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In 1991, Mr. Trachtenberg was Managing Director of Maxwell Central & East
European Partners plc, a subsidiary of Robert Maxwell Group plc., a private
company. The Maxwell Group controlled by the late Mr. Robert Maxwell, collapsed
in December 1991. In 1996, Mr. Trachtenberg was acquitted of all criminal
charges related to the collapse of the Maxwell Group.
Count Gottfried A. von Bismarck, 37, Vice President, Secretary and Director
Count von Bismarck has served as Vice President, Secretary and director of
Telemonde since the acquisition of Pac-Rim. From May 1995 to August 1997 Count
von Bismarck served an advisor to the Croatian Minister of Privatization, where
he developed and implemented the Croatian Mass Privatization Program and
strategies for the privatization of public utilities (telecommunications) and
infrastructure projects. Prior to his work with the Croatian Minister, Count
von Bismarck worked for the German State Privatization Agency (Treuhandanstalt),
managing a portfolio of 28 large and medium sized companies in the electronics
communications sector.
Mark G. Hollo, 49, Director
Mr. Hollo became a Telemonde director in November 1999. Mr. Hollo has served as
a Managing Director of Investment Banking for Sands Brothers & Company, Ltd.
since 1992. Sands Brothers & Company, Ltd. is a member firm of the New York
Stock Exchange.
Pursuant to an engagement letter with Sands Brothers dated October 27, 1999, as
amended, Telemonde has agreed to use its best efforts to elect a designee of
Sands Brothers to the Telemonde Board for a period of three years. Mr. Hollo
has been appointed to the Board as such designee.
Miguel D. Tirado, Ph.D., 56, Director
Dr. Tirado became a Telemonde director in November 1999. Since 1986, Dr. Tirado
has been the Dean of Graduate Studies and Research, and a Professor of
Management Systems at California State University, Monterey Bay. He is a Senior
Fellow at the Institute for Defense Education and Analysis at the Naval Post
Graduate School in Monterey, California since 1996. He is formerly the European
Marketing Director for Pacific Telesis - a US based telecommunications company.
Dr. Tirado currently is Managing Director of Tirado and Associates, a management
consulting firm advising California's Silicon Valley clients.
Management Structure
The executive officers listed above, with the exception of Count von Bismarck,
are responsible for the control and oversight of all Telemonde operations,
including those conducted by Telemonde Networks, EquiTel, Telemonde Investments
Limited and telemonde.net. Telemonde intends to expand its executive officers
group by recruiting a Chief Financial Officer by the end of 1999.
Telemonde's executive officers are supported by a management team with extensive
experience in the telecommunications industry. Telemonde's key management
includes:
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Ray Pritchard, 34, President, telemonde.net
Mr. Pritchard joined Telemonde from Unisource Carrier Services where he was
Director of Products and Services as well as a Director of the European
Competitive Telecommunication Association. Since 1982, he has developed an
indepth background in international telecommunications by working at all levels
from technician to senior management. He has extensive knowledge of Internet
multimedia businesses. He was responsible for the market launch of interactive
multimedia with British Telecommunications plc and the development of Internet
carrier platforms for Unisource Carrier Services.
Susan Connabeer, 41, Legal Services Director, Telemonde Networks
Ms. Connabeer is responsible for the provision and coordination of legal
services for both Telemonde and EquiTel. She has considerable legal and
commercial experience within the global telecommunications industry, having
specialized in telecommunications outsourcing within the banking and financial
sector. Recently, she has worked for Warburg Dillon Read, MCI WorldCom and BT
Syncordia.
Andrew Hardy, 35, Business Development Director, Telemonde Networks
Mr. Hardy was previously Director of Broadband Sales at MCI WorldCom. Mr. Hardy
has accumulated 14 years of telecommunications industry experience in both
Europe and the Far East through his previous positions at MCI WorldCom and
Nortel.
Jason Peacock, 39, Technological and Operations Director, Telemonde Networks
Mr. Peacock has substantial international telecommunications experience from
previous positions with British Telecommunications. He specializes in voice
solutions and telephony service offerings.
Sara Vale, 33, Customer Service Director, Telemonde Networks
Ms. Vale is responsible for servicing international major accounts. For the past
10 years, Ms. Vale managed the customer service team responsible for strategic
accounts at MCI WorldCom and held several key posts at British
Telecommunications.
Neil Webzell, 35, Sales Director, Telemonde Networks
Mr. Webzell is a 15-year veteran in international communications sales with
Plessey, Mannesmann, GPT Pay Phone Systems. Since 1991, he has been with
British Telecommunications, most recently in their Carrier Service Division.
Ethelbert Cooper, 45, Vice President of International Operations, EquiTel
Mr. Cooper has extensive management and industrial experience throughout Africa.
For eighteen years, he was Chairman of a diversified project management and
trading group operating in Southern and Western Africa. He has worked for both
government and private industry.
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Mark Willard, 42, Director of Operations, EquiTel
Mr. Willard was formerly senior partner at CTI Consultancy. He has wide
experience in telecommunications, particularly satellite and transmission
engineering. He previously managed British Telecommunication's satellite
stations and developed their international corporate networks.
Board of Directors
Classified Board of Directors. Telemonde's Articles of Incorporation divide the
board into three classes, as nearly equal in number as possible. Directors
within each class are elected to serve three-year terms and approximately one-
third of the directors sit for election at each annual meeting of stockholders.
Count von Bismarck is in Class I and has been elected to serve as director until
the 2000 shareholder meeting. Mr. Bishop and Mr. Tirado are in Class II and
have been elected to serve as directors until the 2001 shareholder meeting. Mr.
Maxwell and Mr. Hollo are in Class III and have been elected to serve as
directors until the 2002 shareholder meeting.
Board Relationships. We are not aware of any family relationships between any
directors or executive officers of Telemonde. Mr. Bishop is a director of
Symposium Telecommunications, Inc. No other director of Telemonde serves as a
director of another United States public company.
Board Committees. The Board of Directors has appointed an Audit Committee and a
Compensation Committee.
Audit Committee. The Audit Committee was initially established in November of
- - - - ---------------
1999 and consists of Mr. Maxwell, Mr. Hollo and Mr. Tirado. The Audit Committee
has the authority and responsibility:
. to hire one or more independent public accountants to audit our books,
records and financial statements and to review our systems of accounting
(including our systems of internal control)
. to discuss with such independent public accountants the results of such audit
and review
. to conduct periodic independent reviews of the systems of accounting
(including systems of internal control), and
. to make reports periodically to the full board of directors with respect to
its findings.
Compensation Committee. The Compensation Committee was initially established in
- - - - ----------------------
November of 1999 and consists of Mr. Hollo and Mr. Tirado. The Compensation
Committee is responsible for fixing the compensation of our executive officers
and will decide other compensation matters including the operation of any stock
option plans, management bonus plans, and awards.
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ITEM 6. EXECUTIVE COMPENSATION
Executive and Board Compensation for 1998
Executive Officers. No compensation was paid or accrued to the founders or
executive officers of Telemonde and its consolidated subsidiaries from inception
to December 31, 1998.
Board of Directors. The directors of Telemonde from inception to December 31,
1998 were Mr. Michael Collins and Ms. Susan Williams. They received no
compensation in this period of time. Telemonde did, however, make payments
totaling $37,000 for directors and consulting services to companies controlled
by Mr. Collins.
Employment Agreements
Mr. Maxwell and Mr. Bishop have employment agreements with Telemonde, Inc. and
Telemonde Networks Limited respectively. In both cases, the term of the
agreement is until June 30, 2002. After this period, either side may terminate
their employment subject to six months notice. The agreements provide for a
basic salary of $396,000 per year for each and private health insurance for Mr.
Maxwell, Mr. Bishop, and their respective families. No provisions have been
made for bonus payments, stock options, or pension contributions in these
agreements.
At the time of the acquisition of EquiTel, we entered into employment agreements
with Mr. Pomeroy, Mr. Topham, and Mr. Trachtenberg in order to secure and retain
their services after the acquisition. The term of the agreements, which are
with EquiTel, is until June 30, 2002. The agreements provide for salaries of
$396,000, $363,000, and $305,250 per year, respectively. No provisions have been
made for bonus payments, stock options, or pension contributions in these
agreements.
Board Compensation
Non-employee directors, including Mr. Hollo and Mr. Tirado will receive $100,000
per year for their services. In addition, they have the right to receive common
stock worth $250,000 upon appointment to the board, and additional stock
distributions equal to $250,000 for each additional year they serve on the board
of directors. Other than reimbursements for reasonable expenses incurred,
directors do not receive any additional compensation for serving on board
committees. Employee directors do not receive any additional compensation for
acting as directors.
Telemonde has a consulting agreement with Count Gottfried von Bismarck under
which he is responsible for developing Telemonde's business relationships in
German speaking areas. The term of the agreement is one year and provides for a
fee of $120,000 per annum, payable in monthly installments. The agreement is
automatically renewed for additional three month terms, unless notice of
termination is given by Telemonde or Count von Bismarck 60 days before the
expiration of the current term.
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Compensation Committee Interlocks and Insider Participation
The compensation committee of the board was initially established in November of
1999 and consists of Mr. Hollo and Mr. Tirado. Neither Mr. Hollo nor Mr.
Tirado are or have ever been officers or employees of Telemonde. No executive
officer of Telemonde serves as a member of the board of directors or
compensation committee of another entity, which has one or more executive
officers that will serve as a member of the Telemonde board or the Telemonde
compensation committee.
Prior to the appointment of the compensation committee, executive compensation
was set by Telemonde's full board of directors. Although neither the full board
of directors nor the compensation committee has a specific compensation policy
which is used to establish executive compensation, they consider such factors
as:
. Telemonde's need to recruit, motivate and retain high quality executives
. market salary comparisons for experienced executives in the
telecommunications industry when making compensation decisions.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information Relating to EquiTel and its Acquisition
Introduction. Telemonde and EquiTel have had a close relationship since their
inception. Even before Telemonde's acquisition of EquiTel, their principals and
management over-lapped, they used shared premises and services and, in
circumstances where it was mutually beneficial, they made joint presentations to
potential customers. However, prior to the acquisition, the two businesses were
legally unrelated. Therefore, a significant part of the following discussion
relates to transactions between the two companies and their respective
management teams.
The EquiTel Acquisition. Mr. Maxwell and Mr. Bishop are executive officers and
directors of Telemonde, Inc. and were beneficial owners of EquiTel shares.
In view of Mr. Maxwell and Mr. Bishop's potential conflicts of interest
regarding the acquisition of EquiTel, Telemonde's negotiations with EquiTel were
conducted, and the terms of the acquisition were approved, by Count von
Bismarck. Count von Bismarck and the board of Telemonde, Inc. appointed
Gouldens, Solicitors, London, United Kingdom to advise on the legal and
contractual aspects of the acquisition, and appointed Brown, Shipley & Co,
Investment Bankers, London, United Kingdom to advise on the valuation of and
consideration in respect of EquiTel.
As a result of the EquiTel acquisition, Mr. Maxwell and Mr. Bishop are entitled
to receive shares of Telemonde, Inc. worth a maximum of $5,950,477 and
$14,420,000, respectively. In addition, Mr. Pomeroy, Mr. Topham and Mr.
Trachtenberg are all executive officers of Telemonde and of EquiTel and were
executive officers, directors and beneficial owners of EquiTel shares prior to
its acquisition by Telemonde. As a result of the acquisition, Mr. Pomeroy, Mr.
Topham and Mr. Trachtenberg are entitled to
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receive shares of Telemonde, Inc. worth a maximum of $14,420,000, $9,660,000,
$6,853,000 respectively. The number of shares to be issued shall be determined
by a set formula based upon the market price over a fixed number of trading days
of the Telemonde stock on issuance. The compensation to be paid to the EquiTel
shareholders will be decreased if EquiTel does not achieve certain specified
performance goals during 2000 and 2001.
EquiTel Relationships. EquiTel provided management and administrative services
for the shared offices with Telemonde, for which it was reimbursed by Telemonde,
Inc. for $428,000 as of September, 30 1999. Telemonde has paid EquiTel a total
of $898,000 for sales commissions earned by EquiTel during 1998.
Mr. Maxwell was a director of EquiTel from November 18, 1998 to May 24, 1999.
While Mr. Maxwell was director and beneficial owner of EquiTel, EquiTel engaged
Westbourne Communications Limited to provide certain consulting services. Mr.
Maxwell, through Westbourne, served as a consultant to EquiTel. Through April
30, 1999, EquiTel paid Westbourne a total of $138,600 of which $77,550 was
attributable to Mr. Maxwell's services.
During 1998, Adam Bishop and his wife were paid $122,513 for consulting services
provided to EquiTel. In addition, Harry Pomeroy has served as Chairman and
Director of EquiTel since its inception. Mr. Pomeroy received $90,338 as
compensation for such services in 1998.
At September 30, 1999, EquiTel had loans of $1,000,000 at 10% per annum from
Rhone Financial Indemnity Re Limited and of $750,000 at 10% per annum from
Telemonde Investments Ltd. The loans are unsecured and repayable when EquiTel's
resources permit. In addition, as of September, 30 1999, EquiTel owed Telemonde
$685,000 for the provision of short-term working capital.
Information Relating to Telemonde and its History
Promoters. A number of industry specialists organized Telemonde, including
Kevin Maxwell, Adam Bishop, Harry Pomeroy and Ray Dutton. Rhone Financial
Indemnity Re Ltd., an Irish company and the founding shareholder of Telemonde
Investments Ltd., agreed that under certain circumstances these parties and
other Telemonde employees and associates were to have a majority interest in
Telemonde Investments Ltd., to leave Rhone with an agreed minority interest.
Following the transfer by Rhone on September 30, 1999, of all its stock in
Telemonde to Intelecom Limited, a British Virgin Islands company, Mr. Maxwell
and his wife can subscribe for shares in Intelecom Limited, which would equate
to 2,756,790 shares of common stock in Telemonde Inc. As of the date of filing
neither Mr. Maxwell nor his wife has acquired this shareholding. It is our
intention to establish shortly an Employee Benefit Trust plan and to fulfil this
through the subscription of shares in Intelecom Limited, which would equate to
shares of common stock in Telemonde Inc. Mr. Bishop and Mr. Pomeroy, but not Mr.
Maxwell, will have an
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interest in this Employee Benefit Trust. Mr. Dutton ended his affiliation with
Telemonde on January 15, 1999 on terms agreed at the time, under which he would
not participate.
Telemonde, Ltd. Prior to January 1999, Telemonde, Ltd., a United Kingdom
company, was used to sell and market our bandwidth capacity. Telemonde Ltd. was
not a subsidiary of Telemonde but was an affiliate of Mr. Ray Dutton, one of the
founders of Telemonde. Under the terms of a Sales and Marketing Agreement dated
July 7, 1998, commissions were payable to Telemonde Ltd. based on 7% of sales
receipts. Telemonde paid sales commissions of $1,576,000 to Telemonde Ltd. in
1998. The sales and marketing relationship was terminated in January 1999 and
Ray Dutton is no longer associated with Telemonde. After Telemonde, Ltd. ended
its relationship with Telemonde, it changed its name to Iaxis Limited.
Telemonde Relationships. Prior to joining Telemonde as President in March 1999,
Mr. Bishop was a Consultant for North American Gateway. North American Gateway
signed two sales contracts with Telemonde in April and May 1998. Mr. Bishop
declared his interest at the time and took no part in the negotiation of or
decision on the Telemonde contracts.
Mr. Maxwell has been Chairman and a director of Telemonde, Inc. since May 1999.
Telemonde has engaged Westbourne Communications Limited to provide certain
consulting services. Mr. Maxwell, through Westbourne, served as a consultant to
Telemonde prior to his appointment as Chairman and director. Through April 30,
1999, Telemonde paid Westbourne a total of $ 452,450 of which $158,400 was
attributable to Mr. Maxwell's services.
Mr. Trachtenberg has been Executive Vice President and Managing Director of
EquiTel since October 1998. During 1998, through Hyperactive Productions, Mr.
Trachtenberg, provided consulting services to Telemonde. Telemonde paid
Hyperactive $141,526 for services rendered during 1998 of which $70,763 was
attributable to Mr. Trachtenberg's services.
Mr. Hollo is a director and shareholder of Telemonde and a Managing Director of
Sands Brothers & Co., Ltd. Prior to Mr. Hollo's appointment to Telemonde's
Board, Telemonde engaged Sands Brothers to provide financial and consulting
services. Pursuant to that agreement, Sands Brothers will receive a placement
fee equal to 10% of the total consideration raised in any financing facilitated
by Sands Brothers. Sands Brothers or its designee(s) will also have the right
to subscribe, at par value, for 1,750,000 shares of Telemonde common stock upon
the completion of the first tranche of financing. Sands Brothers will also have
the right to subscribe, at par value, for an additional 200,000 shares of common
stock for each $1,000,000 of financing facilitated by Sands Brothers and
accepted by Telemonde. Telemonde has also agreed to pay Sands Brothers a
transaction fee equal to five (5) percent of the consideration paid in any
completed acquisition or business transaction that was facilitated by Sands
Brothers. In addition to Mr. Hollo, trusts established for the benefit of the
families of certain affiliates of Sands Brothers own in the aggregate 875,000
shares of Telemonde common stock.
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Communications Collateral Limited. In April 1999, Telemonde, through its now
wholly owned subsidiary, Telemonde Investments Limited, entered into a series of
agreements with Communications Collateral Limited, including, among others,
agreements for:
. the sale of an IRU for bandwidth to CCL for $6.5 million;
. the grant of an option to CCL which, among other things, required
Telemonde to repurchase the bandwidth for $6.5 million upon CCL's
request;
. a $1 million loan by CCL to Telemonde due in August 1999;
. the issuance to CCL of 7% of the shares of Telemonde, Inc. immediately
following its reverse acquisition of Pac-Rim Consulting, Inc.;
. the issuance to CCL of a warrant for an additional 7% of the shares of
Telemonde, Inc, as calculated immediately prior to a Telemonde equity
offering that raises at least $10 million;
. the registration with the SEC of such shares issued and issuable to CCL
within six months of the Pac-Rim acquisition or the issuance of up to 6%
of the issued share capital of Telemonde on a continuing basis for one
year or until all shares granted pursuant to these agreements are
registered.
ITEM 8. LEGAL PROCEEDINGS
The Company is not presently subject to any legal claims or proceedings.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Dividend Policy
We have never declared or paid any dividends on our common stock and we do not
anticipate paying cash dividends on the common stock in the foreseeable future.
We do not expect to generate any net income in the foreseeable future but
anticipate that future earnings generated from operations, if any, will be
retained to finance the expansion and continued development of our business. Any
future dividends will be at the discretion of the board of directors and will
depend upon, among other things, our operations, capital requirements and
surplus, general financial condition, contractual restrictions and such other
factors as the board of directors may deem relevant.
Price Range of Common Stock
Our common stock is traded on the NASD Over-the-Counter Bulletin Board under the
symbol "TLMD." The following table provides the reported high and low sales
prices for our common stock on the NASD Over-the-Counter Bulletin Board for the
quarterly periods indicated. The prices reflect inter-dealer prices and do not
include retail markups, markdowns or commissions. The stock is not traded on
any foreign public trading markets.
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Fiscal 1999 High Low
---- ----
Fourth Quarter (October 1 to November 11).. 4.25 3.50
Third Quarter.............................. 7.63 3.19
Second Quarter (May 19(1) to June 30)...... 8.50 6.00
First Quarter.............................. N/A N/A
(1) Date we began trading as TLMD following our acquisition of Pac-Rim.
On November 11, 1999, the last reported sale price of our stock was $3.50.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
As of November 11, 1999 since its inception the following unregistered
securities were sold by Telemonde:
EquiTel. Telemonde acquired EquiTel Communications Limited on November 8, 1999
for an aggregate purchase price of $69 million. The initial consideration of
$19 million was satisfied by the issuance to the EquiTel shareholders of
restricted shares of common stock of Telemonde. The issuance of the shares to
EquiTel shareholders was exempt from registration pursuant to Section 4(2) of
the Securities Act.
CCL. In connection with the reverse acquisition of Pac-Rim Consulting, Inc., CCL
received 7% of the issued share capital of Telemonde. The issuance of the
shares was exempt from registration pursuant to Section 4 (2) of the Securities
Act. In connection with the CCL loan facility and capacity agreement, the
Company issued CCL a warrant for up to 7% of the Company's outstanding common
stock, as calculated immediately prior an equity raise of at least $10 million.
The issuance of the warrant was exempt from registration pursuant to Section
4(2) of the Securities Act. CCL has registration rights with regard to the
shares of common stock issued and issuable under the warrant. The Company is
under an obligation to register CCL's shares of common stock with the SEC by
November 11, 1999, which it was unable to do, or pay a penalty of up to 6% of
the issued share capital of Telemonde.
Atlantic Crossing Warrants. In connection with the Capacity Purchase Agreement
between Atlantic Crossing, Ltd. and TBBL, the Company issued Atlantic Crossing
a warrant for 1,100,000 shares of the Company's common stock. The issuance of
the warrant was exempt from registration pursuant to Section 4(2) of the
Securities Act. Atlantic Crossing has piggy-bank and demand registration rights
with regard to the common stock to be issued under the warrant.
TGA(UK) Limited Acquisition. The Company issued 200,000 shares of common stock
to the two shareholders of TGA(UK) Limited on August 13, 1999 in exchange for
all of the issued and outstanding stock of TGA. The offer and sale of the stock
was exempt from registration pursuant to Section 4(2) of the Securities Act.
The former shareholders of TGA are entitled to piggy-back registration rights.
Compensation. The Company issued 50,000 shares of common stock to an individual
as compensation for executive search services rendered to the Company. The
Company
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also issued 400,000 shares of common stock to Ethelbert Cooper in connection
with his employment as Vice President of International Operations of EquiTel.
Both of these offers and sales of the stock were exempt from registration
pursuant to Section 4(2) of the Securities Act.
Pac-Rim. Pursuant to the reverse acquisition, Pac-Rim issued 35,297,000 shares
of Pac-Rim's common stock to the sole shareholder of TIL in exchange for all of
the issued and outstanding shares of TIL. The sale of both the Pac-Rim and TIL
stock were exempt from registration pursuant to Section 4(2) of the Securities
Act.
Four private investors. On November 10, 1999 Telemonde issued 6,000,000 shares
of common stock to four private investors in exchange for the repayment of
$16.25 million previously loaned to subsidiaries of Telemonde and to EquiTel.
These shares were exempt from registration pursuant to Section 4(2) of the
Securities Act.
Sands Brothers & Co., Ltd. On October 15, 1999, the Company issued 1,750,000
shares of common stock at par value to designees of Sands Brothers & Co. The
offer and sale of these shares were exempt from registration pursuant to Section
4(2) of the Securities Act.
African Joint Venture. On November 10, 1999, under the terms to an Amendment to
a Share Purchase Agreement among Telemonde, Inc., EquiTel, African Ventures
Limited, a British Virgin Islands company, National Empowerment Trust Investment
Fund Limited, a South African public company, and Net Industrial Holdings
Limited, a South African company, the Company issued a total of 333,334 shares
of common stock to African Ventures Limited and National Empowerment Trust
Investment Fund as partial consideration in connection with EquiTel's purchase
20% of the issued share capital of NET Industrial Holdings Telecommunications
Limited, a South African company (NIHT) and EquiTel's joint venture with NIHT.
Chiltern Financing. In July 1998, as partial consideration for a $10.5 million
loan from Chiltern Group, PLC ("Chiltern") to TBBL, TIL issued 1,630 shares of
its common stock and an option to purchase shares equal to an additional 10% of
the outstanding common stock of TIL. These transactions were not subject to
registration under the Securities Act since TIL is a British Virgin Island
company and Chiltern is a United Kingdom company. In January 1999, the loan to
Chiltern was repaid, the option was terminated and the 1,630 shares were
redeemed by the Company.
Organization. Upon its organization in March 1998, TIL privately placed all of
its issued and outstanding stock, 28,000 shares, with Rhone for an initial
capital contribution of $ 165,000. The sale of the stock was not subject to
registration under the Securities Act since TIL is a British Virgin Islands
company and Rhone is an Ireland company.
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ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The following description of Telemonde's capital stock does not purport to be
complete. The rights of the holders of Telemonde's stock are set forth in
Telemonde's Certificate of Incorporation and Bylaws (copies of which are
exhibits to this registration statement), and in the applicable provisions of
the Delaware General Corporation Law ("DGCL"). This summary is qualified in its
entirety by reference to such exhibits and the DGCL.
General
Telemonde is authorized to issue 150,000,000 shares of capital stock. It
consists of 5,000,000 shares of preferred stock, $.01 par value per share, and
145,000,000 shares of common stock, $.001 par value per share. As of November
10, 1999, there were 73,104,442 shares of common stock issued and outstanding.
No shares of preferred stock are issued or outstanding. All issued and
outstanding shares of common stock are duly authorized, fully paid, and
nonassessable.
Common Stock
Dividends. When the board of directors of Telemonde declare dividends, each
share of common stock is entitled to receive dividends out of funds legally
available. Dividends may be paid in cash, property, or shares of Telemonde's
stock.
Liquidation Rights. In the case of the voluntary or involuntary liquidation,
dissolution or winding up of Telemonde, all holders of common stock are entitled
to share equally on a share-for-share basis in any assets available for
distribution to stockholders.
Voting Rights. Each outstanding share of common stock entitles the holder to one
vote on all matters. There is no cumulative voting.
Other. Holders of shares of common stock in Telemonde have no preference,
conversion, exchange, sinking fund, preemptive, or redemption rights.
Merger and Consolidations. Under the Delaware General Corporate Law (the
"DGCL"), the principal terms of a merger or consolidation generally require the
approval of stockholders of each of the corporations. Unless required in the
corporation's certificate of incorporation, the DGCL does not require the
approval of the stockholders of the surviving corporation. When a stockholder
vote is needed, a majority vote of the outstanding stock entitled to vote is
required to approve the merger or consolidation. If there are multiple classes
of stock are entitled to vote, a majority in each class is required to approve
the merger or consolidation. The holders of common stock may have appraisal
rights if Telemonde is a party to certain types of mergers or consolidations.
Such appraisal rights give stockholders a right to a judicial determination of
the "fair value" of their stock. The payment of which is in cash.
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Transfer Agent. The transfer agent and registrar for the common stock is First
Union National Bank, 230 South Tryon Street, 9th Floor, Charlotte, North
Carolina 28288-1179.
OTC Bulletin Board Trading. The common stock is traded on the NASD's OTC
Bulletin Board under the symbol "TLMD".
Preferred Stock
Telemonde's board of directors is authorized to provide for the issuance of
preferred stock in one or more series. They can also fix the designation,
preferences, powers and relative rights for such preferred stock. This includes
the dividend rate, conversion rights, voting rights, redemption price, and
liquidation preference. Any preferred stock issued in this way may be senior to
the common stock with respect to dividends or of amounts paid upon liquidation,
dissolution or winding up. Also, preferred stocks may have class or series
voting rights. Presently, there are no shares of preferred stock outstanding
and Telemonde has no present plans to issue any preferred stock.
Certain Certificate of Incorporation and Bylaw Provisions
Classified Board of Directors. The DGCL permits, but does not require, a
classified board of directors, with staggered terms. Directors of a Delaware
corporation are elected by a majority vote of the shares present in person or
represented by proxy. Telemonde's Certificate of Incorporation provides for a
board of directors with three classes. At each annual meeting, new directors are
voted into the class of directors whose term ends at such meeting. These new
directors will serve a three-year term starting on that date. Classification of
the Board of Directors may have the effect of delaying, deferring, or preventing
a change in control of Telemonde.
Action by Written Consent. The DGCL generally allows for stockholder action by
written consent. However, Telemonde's Certificate of Incorporation provides that
no action required to be taken or which may be taken at any annual or special
meeting of stockholders of Telemonde may be taken without a meeting. This
provision precludes action by written consent of the stockholders of Telemonde.
Shareholders Proposals. Telemonde Bylaws establish an advance notice procedure
for stockholder proposals to be brought before a meeting of stockholders. This
includes proposed nominations for election to the Board of Directors.
Stockholders at a meeting may only consider proposals or nominations: (1)
specified in the notice of meeting, (2) brought before the meeting by the
direction of the Board, or (3) brought before the meeting by a stockholder who
has given Telemonde timely written notice. Although these provisions do not give
the Board the power to approve or disapprove stockholder proposals, they may
have the effect of:
. preventing certain proposals from being presented at a meeting if the
proper procedures are not followed; or
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. discouraging a potential acquirer from conducting a proxy solicitation to
elect its own slate of directors or otherwise attempting to obtain
control of Telemonde.
Common Stock Warrants and Registration Rights
Atlantic Crossing. On August 25, 1999, we issued a warrant for up
to one million, one hundred thousand (1,100,000) shares of common stock issued
to Atlantic Crossing Ltd., a Bermuda company. The holder is entitled to
purchase the shares at any time prior to August 25, 2000. The exercise price is
$5.25 per share. The exercise price and the number of shares issuable upon
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events. Such events include, among other things, the
payment of a stock dividend, a merger or consolidation of rights, and the
issuance for consideration of rights, options or warrants (other than rights to
purchase common stock issued to stockholders generally) to acquire our common
stock. Pursuant to the warrant, Atlantic Crossing received demand and piggy-
back registration rights.
Communications Collateral Limited. Pursuant to a letter agreement dated April
13, 1999, and subsequent negotiations, Telemonde issued to CCL 7% of the shares
of Telemonde, Inc. and issued a warrant to CCL which entitles CCL to purchase
from Telemonde an additional 7% of the issued share capitol of Telemonde, Inc.
The warrant is exercisable until three years following the date that the Company
issues equity securities pursuant to an offering of at least $10 million. The
exercise price under the warrant is $5.25 or the 20 day average of the market
price if such price is lower than $5.25. Also, Telemonde must either register
for resale all of the shares issued to CCL (including those for which CCL
subscribes through exercise of its warrants) by November 11, 1999, which it was
unable to do, or issue to CCL additional shares on a continuing basis until the
shares are so registered, which amount may not exceed 6% of the issued share
capital of Telemonde.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Limitation of Liability. Pursuant to the DGCL and the Company's Certificate of
Incorporation, a director's liability to the Company or its stockholders for
monetary damages for breach of fiduciary duty has been eliminated except for:
. breach of the directors' duty of loyalty to the Company or its
stockholders,
. acts or omissions in bad faith, which involve intentional misconduct, or
a knowing violation of the law,
. unlawful dividends, redemptions, purchases of stock, or
. any transaction from which the director derived an improper personal
benefit.
In general, the liability of officers may not be eliminated or limited under
Delaware law.
Discretionary Indemnification. The DGCL provides that a corporation may
indemnify directors and officers as well as certain other employees and
individuals. These individuals may be indemnified against expenses, judgments,
fines and amounts paid in
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settlement in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative (except
for a derivative suit). This will occur if the individual acted:
. in good faith;
. in the manner in which he reasonably believed to be in the best interest
of the corporation; and
. with respect to any criminal action or proceeding, had no reasonable
cause to believe that his conduct was unlawful.
With respect to derivative suits, the DGCL provides that a corporation may
indemnify directors and officers as well as certain other employees and
individuals against expenses if he acted in good faith and in a manner which he
reasonably believed to be in the best interest of the corporation. However,
there will be no indemnification unless the court in which the action or suit
was brought or other court of competent jurisdiction determines that the person
is fairly and reasonably entitled to be indemnified.
A corporation may make a discretionary indemnification only when indemnification
is proper in the circumstance, unless it is ordered by a court or advanced prior
to the final disposition. What a "proper" circumstance is determined by the
stockholders, by a majority of the board of directors who are not party to the
action, or by independent legal counsel.
Mandatory Indemnification. Under the DGCL, to the extent that a director,
officer, employee or agent has been successful on the merits, or otherwise in
defense of any action, the corporation must indemnify him against expenses.
This includes attorneys' fees actually and reasonably incurred by him in
connection with his defense.
The DGCL expressly states that the indemnification provided by the DGCL is not
exclusive of any non-statutory indemnification rights existing under any bylaw,
agreement, vote of stockholders, or disinterested directors, or otherwise.
Telemonde's Certificate of Incorporation provides that, to the maximum extent
permitted by Delaware law, it shall indemnify against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by them. The
Company will also pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to:
. any individual who is a present or former director or officer of the
Company and who is made a party to the proceeding by reason of his
service in that capacity;
. any individual who, while a director of the Telemonde, served another
company, as a director, officer, partner or trustee at the request of the
Company, and is made a party to the proceeding by reason of his service
in that capacity.
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This will not happen if:
. the act or omission of the director or officer was material to the matter
giving rise to the proceeding and was in bad faith or was the result of
the active dishonesty; or
. the director or officer actually received improper personal benefit or
. in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the acts or omission was unlawful.
The Company may, with the approval of its board, indemnify and advance funds to
any person who served a predecessor of the Company in any of the above
capacities, or as employee or agent. Before Telemonde can advance funds, they
must get a written statement by or on behalf of the director or officer to repay
the amount paid if that person is not entitled to be indemnified by the Company
under Delaware law or any applicable contract.
Indemnification of Securities Act Liabilities. Under the Securities Act,
indemnification may be permitted to directors, officers and controlling persons
of the Company, unless the Company has been advised by the Securities and
Exchange Commission that such indemnification is against public policy. In
addition, indemnification may be limited by states' securities laws.
Directors and Officers Insurance. Telemonde has obtained directors and officers
liability insurance that provides world-wide coverage for Telemonde and all of
its subsidiaries. The insurance provides for coverage up to $20,000,000 per
event.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Audited Financial Statements
Report of Moore Stephens, Independent Chartered Accountants F-1
Consolidated Statement of Income for the period from
March 10, 1998 to December 31, 1998 F-2
Consolidated Balance Sheet as at December 31, 1998 F-3
Consolidated Statement of Cash Flows for the period from
March 10, 1998 to December 31, 1998 F-4
Notes to Consolidated Financial Statements as of and for the
the period ended December 31, 1998 F-5
Unaudited Interim Financial Statements
Unaudited Consolidated Statement of Income for the nine months
ended September 30, 1999 F-16
Unaudited Consolidated Balance Sheet as at September 30, 1999 F-17
Unaudited Consolidated Statement of Cash Flows for the nine months
ended September 30, 1999 F-18
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Notes to the Unaudited Consolidated Financial Statements as of and for
the nine months ended September 30, 1999 F-19
Pro forma unaudited financial information
Pro Forma Unaudited Combined Statement of Income for the period from
March 10, 1998 to December 31, 1998 F-24
Pro Forma Unaudited Combined Statement of Income for the nine months
ended September 30, 1999 F-25
Pro Forma Unaudited Combined Balance Sheet as at September 30, 1999 F-26
Notes to the Pro Forma Unaudited Financial Statements as of and for
the nine months ended September 30, 1999 F-27
EquiTel Communications Limited
Company Information F-30
Report of the Directors F-31
Report of Moore Stephens, Independent Chartered Accountants F-34
Profit and Loss Account for the period from 17 September 1998 to
30 April 1998 F-35
Balance Sheet as at 30 April 1998 F-36
Notes to the Financial Statements as of and for the period from
17 September 1998 to 30 April 1999 F-37
Financials on pages F-1 through F-47 included in Item 15.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL
DISCLOSURE.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements filed as part of this registration statement:
Audited Financial Statements
Report of Moore Stephens, Independent Chartered Accountants F-1
Consolidated Statement of Income for the period from
March 10, 1998 to December 31, 1998 F-2
Consolidated Balance Sheet as of December 31, 1998 F-3
Consolidated Statement of Cash Flows for the period from
March 10, 1998 to December 31, 1998 F-4
Notes to Consolidated Financial Statements as of and for the
period ended December 31, 1998 F-5
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Unaudited Interim Financial Statements
Unaudited Consolidated Statement of Income for the six months
ended June 30, 1999 F-16
Unaudited Consolidated Balance Sheet as of June 30, 1999 F-17
Unaudited Consolidated Statement of Cash Flows for the six months
ended June 30, 1999 F-18
Notes to the Unaudited Consolidated Financial Statements as of and
for the six months ended June 30, 1999 F-19
Pro Forma Unaudited Financial Information
Pro Forma Unaudited Combined Statement of Income for the period
from March 10, 1998 to December 31, 1998 F-24
Pro Forma Unaudited Combined Statement of Income for the six months
ended June 30, 1999 F-25
Pro Forma Unaudited Combined Balance Sheet as of June 30, 1999 F-26
Notes to the Pro Forma Unaudited Financial Statements as of and for
the six months ended June 30, 1999 F-27
EquiTel Communications Limited
Company Information F-30
Report of the Directors F-31
Report of Moore Stephens, Independent Chartered Accountants F-34
Profit and Loss Account for the period from September 17, 1998 to
April 30, 1998 F-35
Balance Sheet as of April 30, 1998 F-36
Notes to the Financial Statements as of and for the period from
September 17, 1998 to April 30, 1999 F-37
79
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Telemonde Investments Limited
We have audited the accompanying consolidated balance sheet of Telemonde
Investments Limited and subsidiaries as of December 31, 1998, and the related
consolidated statements of income, and cash flows for the period from inception
(March 10, 1998) to December 31, 1998. These consolidated 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement 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 consolidated financial position of
Telemonde Investments Limited and its subsidiaries as of December 31, 1998, and
the consolidated results of their operations and their cash flows for the period
from inception (March 10,1998) to December 31, 1998, in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 13 to the
financial statements, the Company has incurred a net loss of $11.7 million. At
December 31, 1998, total liabilities exceeded total assets by $11.7 million.
The Company has retained investment bankers to assist in raising finance to
include equity capital and issuing debt, however there can be no assurance that
the Company will be successful in raising debt or equity capital from
shareholders or external sources. These factors, and the others discussed in
Note 13, raise substantial doubt about the ability of the company to continue as
a going concern. The financial statements do not include any adjustments
relating to the recoverability of recorded assets, or the amounts of
liabilities, that might be necessary in the event the company cannot continue in
existence.
Moore Stephens November 11, 1999
Chartered Accountants
St. Paul's House
London EC4P 4BN /s/ Moore Stephens
F-1
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Consolidated Statement of Income
Period from March 10, 1998 (date of inception) to December 31, 1998
(dollars expressed in thousands, except per share data)
<TABLE>
<CAPTION>
Note 1998
---- ----
<S> <C> <C>
Operating revenues
Bandwidth revenues $ 29,331
---------
Operating revenues 29,331
---------
Operating expenses
Line costs 32,510
Cost of contract cancellation 11(e) 6,094
Selling, general & administrative expenses 1,055
---------
Operating expenses 39,659
---------
Operating loss (10,328)
---------
Other income (expense)
Interest income 247
Interest expense (330)
Loan arrangement fees (1,321)
---------
Other expense (1,404)
---------
Net loss $ (11,732)
=========
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Consolidated Balance Sheet
As at December 31, 1998
(dollars expressed in thousands)
<TABLE>
<CAPTION>
Note 1998
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents $ 2,655
Trade accounts receivable 9,518
Inventory 7 77,515
---------
Total assets $ 89,688
---------
Liabilities and shareholders' equity
Trade accounts payable 7 76,888
Accrued expenses 20,902
Deferred income 3,600
--------
Total liabilities 101,390
--------
Contingent liabilities and commitments 10 -
Minority interest -
Shareholders' equity (deficit)
Share capital 8 30
Retained earnings (deficit) (11,732)
--------
Total shareholders' deficit (11,702)
--------
Total liabilities and shareholders' equity (deficit) $ 89,688
========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Consolidated Statement of Cash Flows
Period from March 10, 1998 (date of inception) to December 31, 1998
(dollars expressed in thousands)
<TABLE>
<CAPTION>
1998
----
<S> <C>
Operating activities
Net Loss $(11,732)
Adjustments to reconcile net income to net
cash provided by operating activities:
(Increase) decrease in trade accounts
receivable (9,518)
(Increase) decrease in inventory (77,515)
Increase (decrease) in trade accounts payable 76,888
Increase (decrease) in accrued expenses 20,902
Increase (decrease) in deferred income 3,600
--------
Net cash provided by operating activities 2,625
--------
Financing activities
Proceeds from long term debt 18,340
Repayment of long-term debt (18,340)
Increase in share capital 30
--------
Net cash provided by (used in)
financing activities 30
--------
Net increase in cash and cash
equivalents and at end of year $ 2,655
========
Supplemental disclosure of cash flow information:
Interest paid $ 330
========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements
As of December 31, 1998
1. Description of business and organization
Telemonde Investments Limited was incorporated in the British Virgin
Islands on March 10, 1998. The Company, through its operating subsidiaries,
is a Bermuda based telecommunications carrier supplying fibre optic
bandwidth and added value services to the global telecommunications
industry.
During the period the Company operated in a single market, the supply of
fiber optics bandwidth and related maintenance services. Included within
bandwidth revenues is $28,932,000 relating to the sale of bandwidth and
$399,000 relating to maintenance income. All services relate to bandwidth on
fiber optic cables between the United States and Europe.
2. Accounting policies
(a) Basis of accounting
The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States.
The preparation of financial statements in accordance 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 period. Actual results could differ from those estimates.
Estimates are used when accounting for allowance for doubtful debts,
long term contracts, accrued line costs and contingencies.
The following are the significant accounting policies adopted by the
Company:
(b) Consolidation
The consolidated financial statements incorporate the assets and
liabilities of the Company and its wholly-owned or majority controlled
subsidiaries. All intercompany balances and transactions have been
eliminated upon consolidation. Minority interest in the results of
operations and share of gross assets is recognized unless the relevant
subsidiary has a net asset deficit and there is no binding obligation on
the minority to make good the deficit.
F-5
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
2. Accounting policies (continued)
(c) Revenues
Sales of capacity by the Company are effected through Capacity
Sale Agreements ("CSAs") pursuant to which the Company's customers
obtain an Indefeasible Right of Use ("IRU") for an amount of capacity.
Each IRU entitles the customer to the use of the related capacity over
the life of the cable network.
Revenues from CSAs are recognized in the period during which the
customer obtains the right to use the capacity and the segment of the
system related to the capacity purchased is ready for service.
Maintenance revenues due under the CSAs are recognized on a time
apportioned basis.
(d) Expenses
Costs of acquiring the IRUs under Capacity Purchase Agreements
("CPAs") are expensed in the period the sale of the IRU is recognized.
Related costs, including inland line costs and local network costs are
recorded at the present value of future payments required to be made by
the Company for such capacity, which may be a realistic estimate of an
amount to purchase the service over the life of the contract.
(e) Inventory - Bandwidth capacity available for drawdown.
Under CPAs the Company has acquired rights to drawdown IRUs at specified
dates. Undrawn capacity is initially recorded at cost and stated at the
lower of cost or market.
(f) Inventory - Bandwidth capacity drawndown
IRUs acquired and drawn under CPAs are recorded at the lower of
cost or market.
(g) Fair value of financial instruments
The carrying amounts for cash, cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximate their fair value.
F-6
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
2. Accounting policies (continued)
(h) Cash and cash equivalents
For the purposes of the consolidated statements of cash flows, demand
and time deposits with original maturities of three months or less are
considered equivalent to cash.
3. Adoption of new accounting standards
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. SFAS No.
133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those
instruments at fair value. The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and how it is
designated. For example, gains or losses related to changes in the fair
value of a derivative, not designated as a hedging instrument, are
recognized in earnings in the period of the change, while certain types of
hedges may be initially reported as a component of other comprehensive
income until the consummation of the underlying transaction.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. Initial application of SFAS No. 133 should be as of the
beginning of a fiscal quarter. On that date, hedging relationships must be
designated anew and documented pursuant to the provisions of SFAS No. 133.
Earlier application of all of the provisions of SFAS No. 133 is encouraged,
but it is permitted only as of the beginning of any fiscal quarter. SFAS No.
133 is not to be applied retroactively to financial statements of prior
periods. The Company believes that the adoption of this standard will not
have a material effect on the Company's consolidated results of operations
or financial position. The FASB has delayed the effective date of SFAS No.
133 by one year to years beginning after June 15, 2000 by the issuance of
SFAS no. 137.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities". SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs, and requires that such costs to be
expensed as incurred. SOP 98-5 applies to all non-governmental entities and
is generally effective for fiscal years beginning after December 15, 1998.
Earlier application is encouraged in fiscal years for which annual financial
statements previously have not been issued. The adoption of SOP 98-5 is not
expected to have a material impact on results of operations, financial
position, or cash flows of the Company as the Company's current policy is
substantially in accordance with SOP 98-5.
F-7
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
4. Bandwidth Income and Expenditure
The Company operates on a worldwide basis. The following are the
customers, together with their country of incorporation, that comprise 10%
or more of operating revenues:
<TABLE>
<CAPTION>
1998
----
<S> <C>
Carrier 1 (Switzerland) $ 10,318,000
North American Gateway Inc (Canada) $ 8,206,000
Unisource Carrier Services AG (Switzerland) $ 10,807,000
</TABLE>
The Company has entered into CPAs with two suppliers of trans-atlantic
bandwidth. All inventory and $23,672,000 of line costs is attributable to
these two suppliers.
The Company is exposed to concentrations of credit risk to the extent that
it has a limited number of customers, all of which operates in the
telecommunications sector. The Company performs on-going evaluations of its
customers' financial condition.
5. Taxation
The Company operates in jurisdictions where it does not have a taxable
presence. The Company has incurred operating losses which relate to non-
taxable jurisdictions. In the event that the Company has taxable earnings in
the future, operating losses incurred in 1998 would not expect to be applied
against future taxable earnings. Accordingly, no tax provisions or deferred
tax benefit was recorded in 1998.
6. Earnings per share
The presentation of earnings per share is not meaningful due to the
re-capitalization of the Company as set out in note 11 (f).
7. Inventory
Inventory consists of IRUs acquired under CPAs which have not been sold at
the balance sheet date. The Company may have drawndown the capacity or have
an obligation to do so by a set date. At December 31, 1998 inventory
consisted of the following:
F-8
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
7. Inventory (continued)
<TABLE>
<CAPTION>
Atlantic
Capacity
<S> <C>
IRU's committed to be drawndown within one year 55,440,000
IRU's committed to be drawndown within one
to two years 19,440,000
------------
Total undrawn bandwidth 74,880,000
Capacity drawndown $ 2,635,000
------------
$ 77,515,000
============
</TABLE>
All of the above drawn and undrawn bandwidth has been included within
inventory.
Included within trade accounts payable is $74,880,000 relating to undrawn
IRUs.
Under the CPAs the Company has the right to acquire additional IRUs on
favourable terms. These options are at the Company's instigation and will
be activated if favourable market conditions apply. The terms of the
options vary but generally at a capped price, are non-specific as to
quantity and the price is dependent on the quantity taken. No guarantee is
given that such capacity will be available.
Subsequent to the balance sheet date the market value of the Atlantic
capacity has declined, however the corporation reached agreement with its
principal suppliers to replace the old capacity with new capacity on higher
value networks in the Atlantic, Pacific, Europe and South America. The
carrying value of the new capacity is equivalent to the cost of the old
capacity.
8. Share capital
Share capital is as follows:
<TABLE>
<CAPTION>
1998
----
<S> <C>
Authorised:
50,000 ordinary shares of $1 each $ 50,000
=========
Issued
29,630 ordinary shares of $1 each $ 29,630
=========
</TABLE>
F-9
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
9. Changes in shareholders' equity
<TABLE>
<CAPTION>
Ordinary Retained
share earnings/
capital (deficit)
-------- ---------
<S> <C> <C>
Net (loss) - (11,732,000)
Share capital issued 29,630 -
--------- --------------
Balance at December 31, 1998 $ 29,630 $ (11,732,000)
========= ==============
</TABLE>
10. Contingent liabilities and commitments
(a) H.M. Customs & Excise in the United Kingdom are considering whether the
Company has a liability to register for Value Added Tax (`VAT') in the
United Kingdom (`UK'). If the Company has a liability to register it
will be required to charge VAT at 17 1/2% on sales to UK customers and
to non-UK customers where the supplies are used and enjoyed in the UK. A
further liability to register and account for VAT in other European
Union countries will arise if the supplies are used and enjoyed in those
countries unless the customer is registered for VAT in those countries
in which case he would account for VAT. This latter liability exists
whether or not the Company is ruled to have a UK establishment. The
maximum potential liability on 1998 revenues is approximately $5
million, less deduction for the recovery of VAT on operating expenses
and recoveries from customers.
The management are of the opinion that no liability exists and
accordingly no provision has been made.
(b) The Company makes provision for inland line costs and local network
costs based on the present value of future payments required to be made
by the Company for such capacity over the life of the network. Under the
terms of the CSA's, the Company is liable for such ongoing costs over
the life of the network which may be up to 25 years.
11. Subsequent events
(a) On January 15, 1999 the Company terminated its Sales and Marketing
agreement with Telemonde Limited (subsequently renamed Iaxis Limited).
The latter company is independently owned. Telemonde Networks Limited
was incorporated on February 16, 1999 to perform the sales and marketing
functions previously undertaken by Telemonde Limited.
F-10
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
11. Subsequent events (continued)
(b) On January 15, 1999 the Company granted a loan facility to Telemonde
Limited for $500,000. Interest rate is 10% and repayment is due when
the Company is refinanced. The loan was never drawndown and the
facility has subsequently been terminated.
(c) Under the terms of a CPA dated March 31, 1999, the Company acquired an
IRU in a transmission channel for US $13 million plus charges of US
$350,000 per annum. The Company granted an IRU over STM-1 of the
capacity to Communications Collateral Limited, although Communications
Collateral Limited has an option to require the Company to repurchase
the capacity. Communications Collateral Limited has granted the Company
a facility of US $1 million (of which $500,000 has been used to pay a
facility fee) and the Company has granted collateral over certain assets
to Communications Collateral Limited.
Communications Collateral Limited is entitled to purchase from the
Company's parent shares equal to 7% of the issued share capital of the
parent at the time of issuance. The exercise price is the lesser of (i)
$5.25 per share or (ii) if the price per share is below $5.25 for 20
consecutive trading days prior to an equity offering by the Company of
at least $10 million, the average of the per share price during such 20
day period. An associated Registration Rights Agreement, provides that
Communications Collateral Limited may participate as a selling
shareholder in the parent company's first underwritten public offering
of at least $10 million. In addition, Communications Collateral Limited
may have certain additional demand and piggyback registration rights.
It is anticipated that the financing costs associated with the issue of
warrants will amount to $6.6 million.
(d) Under the terms of a deed dated March 31, 1999, the Company agreed to
assign its rights under CSAs to the capacity supplier as security for
the performance of its obligations under the CPAs entered into on the
same day (note 11(c)).
(e) On April 16, 1999 the Company terminated a CPA. Under the CPA the
Company was committed to drawing down capacity over a three year period.
Under the termination agreement the commitment, other than the capacity
already drawndown, has been cancelled. All costs connected with the
termination agreement have been expensed within the operating statement
to December 31, 1998 as the decision to terminate the CPA was made in
1998.
(f) On May 14, 1999, the Company acquired Pac-Rim Consulting Inc, a Nevada
corporation ("Pac-Rim") in a stock purchase transaction. Pac-Rim was
publicly traded on the NASD's Over the Counter Bulletin Board. Pursuant
to the Stock Purchase Agreement, Pac-Rim issued 35,297,000 shares of
Pac-Rim's common stock to the sole shareholder of the Company, in
exchange for all of the issued and outstanding shares of the Company
(the "Reverse"). As a result of the Reverse, the company became a
wholly owned subsidiary of Pac-Rim. Following the Reverse, Pac-Rim
changed its name to Telemonde Inc.
F-11
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
11. Subsequent events (continued)
The Reverse will be accounted for as a reverse purchase acquisition of
Pac-Rim by the Company. Although Telemonde, Inc. (Pac-Rim was the
surviving legal entity in the Reverse, the Company is considered to be
the acquirer in the transaction because:
. the sole shareholder of the Company prior to the Reverse became the
majority shareholder of Pac-Rim following the Reverse;
. the management of Pac-Rim following the Reverse is substantially the
same as the management of the Company prior to the Reverse; and
. Pac-Rim was a new entity with limited transactions rather than an
operating business.
(g) On November 8, 1999, Telemonde Inc, acquired the entire issued share
capital of EquiTel Communications Limited, a telecommunications services
company incorporated in the United Kingdom. The combination will be
accounted for under the purchase method. Under the terms of the Share
Purchase Agreement, the consideration payable to the vendors will be
$19,000,000 satisfied by shares issued on completion. Goodwill of
approximately US $25.2 million will be amortized over 10 years under the
straight line method.
Possible contingent consideration is listed below:
(1) An additional sum calculated by multiplying reported earnings before
interest and tax for the year ending December 31, 2000 by 6, subject
to a maximum of $30,000,000, payable on June 30, 2001.
(2) A further additional sum calculated by multiplying reported earnings
before interest and tax for the year ending December 31, 2001 by 5,
subject to a maximum of $50,000,000 less the amount paid under (1)
above, payable on June 30, 2002.
The additional sums under (1) and (2) above are to be satisfied by
shares in Telemonde Inc. If any additional sums become payable,
goodwill and the related amortization charge will increase accordingly.
The vendors include Janet Pomeroy, Adam Bishop and Telcoworld Limited.
Kevin Maxwell is associated with Telcoworld Limited. Kevin Maxwell and
Adam Bishop are directors of Telemonde Inc. Kevin Maxwell was a
director of EquiTel Communications Limited and Harry Pomeroy is a
director of EquiTel Communications Limited.
F-12
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
11. Subsequent events (continued)
The operations of the acquired company will be included from the date of
acquisition onward.
On May 25, 1999 EquiTel Communications Limited entered into a share
purchase agreement to acquire a 20% equity interest in Net Industrial
Holdings Telecommunications Limited, a South African company established
to develop opportunities in the Sub-Sahara telecommunications sector.
The consideration will be cash of $2,000,000 and the equivalent of
$3,250,000 shares in Telemonde Inc.
(h) On November 9, 1999 the Company converted debt of $16.25 million into
equity of Telemonde Inc.
(i) On August 25, 1999 the Company's parent, Telemonde Inc., issued warrants
to a supplier of bandwidth capacity, which entitle the warrant holder to
purchase 1,100,000 shares of Telemonde Inc. common stock at a price of
$5.25 per share. The warrants expire on August 25, 2000.
(j) On November 5, 1999 Telemonde Inc. entered into a Heads of Agreement to
acquire a UK internet, e-commerce and telecommunications business for
(Pounds)100,000,000 ($ 165 million) to be satisfied by cash of (Pounds)
500,000 ($ 825,000), loan notes of (Pounds) 49.5 million ($ 81.7
million) and shares of (Pounds) 50 million ($ 82.5 million).
(k) On November 8, 1999 Telemonde Networks Limited entered into an agreement
to lease a telehouse facility at an annual cost of approximately
(Pounds)750,000 ($ 1.2 million).
12. Related party transactions
(a) Under the terms of a Sales and Marketing agreement with Telemonde
Limited dated July 7, 1998, the Company appointed Telemonde Limited as
exclusive sales and marketing agent. Commissions were payable based on
7% of sales receipts. As described in note 11(a) this agreement has
been terminated.
(b) On June 12, 1998 the Company entered into a loan agreement with Chiltern
Group Plc. The loan of $7,500,000 was repaid in December 1998 with
interest at 7% per annum. The loan was guaranteed by individuals
including Adam Bishop and Harry Pomeroy, directors of the Company's
parent and secured by a fixed and floating charge and a pledge over the
shares of a subsidiary. An arrangement fee of $500,000 was paid on the
date of drawdown. Under the terms of the loan agreement, 300 shares
representing 3% of the issued share capital of Telemonde International
Bandwidth (Bermuda) Limited, an operating subsidiary, were purchased by
Chiltern Group Plc for $1 per share. In the opinion of the directors
the fair value of the shares on the date of transfer was insignificant.
In consideration for $1, Chiltern Group Plc granted the Company the
right to repurchase the shares at the higher of $750,000 or fair value.
By subsequent agreement, the Company re-acquired the shares on July 30,
1999 (290 shares) and May 12, 1999 (10 shares). The consideration was
1,000 shares in the Company and $1 per share respectively.
F-13
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
12. Related party transactions (continued)
(c) On July 31, 1998 the Company entered into a second loan agreement with
Chiltern Group Plc. The loan of $10,500,000 was repaid in December 1998
with interest at 7% per annum. The loan was secured by a fixed and
floating charge and a pledge over the Company's shares. An agreement
fee of $500,000 was paid on the date of drawdown.
Under the terms of the loan agreement, 10 shares representing less than
1% of the issued share capital of Telemonde Bandwidth (Bermuda) Limited,
an operating subsidiary, were purchased by Chiltern Group Plc for $1 per
share. In the opinion of the directors the fair value of the shares on
the date of issue was insignificant. The call option granted to the
Company under 10(c) above was terminated. By subsequent agreement the
Company re-acquired the shares for $1 per share on May 12, 1999. Under
the terms of the loan agreement Chiltern Group Plc was allotted 630
shares in the Company for $1 per share and 1,000 shares in the Company
in exchange for 290 shares in Telemonde International Bandwidth
(Bermuda) Limited. In the opinion of the directors the fair value of
the shares at the date of allotment was insignificant. The shares were
transferred to Rhone Financial Indemnity Re Limited on February 10, 1999
at $1 per share.
In consideration of $1, the Company granted Chiltern Group Plc an option
to acquire shares representing 10% of the issued shares of the Company
prior to December 31, 1999 for $1,800,000. In the opinion of the
directors the fair value of the option at the date of grant was
insignificant. By subsequent agreement, the option was cancelled for
nil consideration.
(d) On October 9, 1998 the Company entered into a loan agreement with
Chiltern International Finance Limited. Under the terms of the loan
agreement, the loan of US $340,000 was repayable on November 30, 1998
with interest at the London Inter-Bank offered rate. The loan was
guaranteed by Rhone Financial Indemnity Re Limited, the Company's
shareholder. An arrangement fee of US $20,000 was paid on the date of
drawdown.
(e) During the period the Company made payments to Argonaut Limited and
Harley Consultants Limited amounting to $37,000 for directors and
consultancy services to the company. Mr. Michael Collins, a director of
the Company, is a director of both Argonaut Limited and Harley
Consultants Limited and has a controlling interest in Argonaut Limited.
(f) During the period payments amounting to $452,000 were made to Westbourne
Communications Limited for the services of an executive and a consultant
and as reimbursement for expenses paid by Westbourne Communications
Limited on behalf of the Company.
(g) During the year the Company made payments to Equitel Communications
Limited amounting to $898,000 for commissions earned on sales contracts.
As described in note 10(g) the directors and shareholders of EquiTel
Communications Limited include directors of Telemonde Inc.
F-14
<PAGE>
TELEMONDE INVESTMENTS LIMITED
Notes to Consolidated Financial Statements (Continued)
As of December 31, 1998
13. Liquidity
The consolidated financial statements have been prepared assuming the
Company will continue as a going concern. The company incurred a net loss of
$11.7 million which has resulted in a deficit of $11.7 million as at the
balance sheet date. Net cash provided by operating activities amounted to
$2.6 million. The Company's ability to fund its commitments to draw down
IRUs in 1999 and 2000 is dependent on its ability to sell capacity and raise
finance to cover working capital requirements. In the nine months ended
September 30, 1999 the Company has reported net losses of $16.4 million and
cash provided by financing activities of $18.2 million
The Company has also failed to meet its obligations to Communications
Collateral Limited which at November 10, 1999 amounted to $5.0 million. As a
result Communications Collateral Limited has a right to foreclose on
substantially all of the Company's assets, including inventory, up to the
value of $5.0 million.
The Company has retained investment bankers in Europe and the United States
to assist in raising finance to include equity capital and issuing debt.
There can be no assurance that the Company will be successful in raising
finance to cover working capital requirements and financial commitments.
F-15
<PAGE>
TELEMONDE INC
Unaudited Consolidated Statement of Income
For the nine months ended September 30, 1999
(Dollars expressed in thousands)
<TABLE>
<CAPTION>
9 months to
September 30,
1999
----
<S> <C>
Operating revenues
Bandwidth revenues 5,857
---------
Operating revenues $ 5,857
---------
Operating expenses
Line costs 5,315
Provision for doubtful debts 924
Selling, general & administrative expenses 6,009
---------
Operating expenses 12,248
---------
Operating loss (6,391)
---------
Other income (expense)
Interest income 580
Interest expense (1,109)
Amortization of financing costs (8,976)
Loan arrangement fees (500)
---------
Other (expense) income (10,005)
---------
Net loss $ (16,396)
=========
Net loss per share - basic and diluted
$ (0.37)
=========
</TABLE>
See accompanying notes to unaudited consolidated
financial statements
F-16
<PAGE>
TELEMONDE INC
Unaudited Consolidated Balance Sheet
As at September 30, 1999
(Dollars expressed in thousands)
<TABLE>
<CAPTION>
September 30,
-------------
1999
----
<S> <C>
Assets
Cash and cash equivalents 125
Trade accounts receivable, net of allowance
for doubtful debts of $924 4,237
Prepayments and other debtors 3,164
Inventory 87,880
Property, plant and equipment 706
Goodwill 1,289
--------
Total assets $ 97,401
--------
Liabilities and shareholders' equity
Trade accounts payable 85,164
Accrued expenses 11,332
Deferred income 1,139
Other loans 6,500
Shareholder loans 10,712
--------
Total liabilities 114,847
--------
Shareholders' equity
Share capital 59
Retained earnings (28,128)
Additional paid in capital 10,623
--------
Total shareholders' funds (17,446)
--------
Total liabilities and shareholders' funds $ 97,401
========
</TABLE>
See accompanying notes to unaudited consolidated
financial statements
F-17
<PAGE>
TELEMONDE INC
Unaudited Consolidated Statement of Cash Flows
For the nine months ended September 30, 1999
(Dollars expressed in thousands)
<TABLE>
<CAPTION>
9 months to
30 September
1999
------------
<S> <C>
Operating activities
Net Loss (16,396)
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for doubtful debts 924
Amortization of goodwill 11
Amortization of financing costs 8,976
Depreciation 101
Fees satisfied by issuance of stock 347
(Increase) decrease in trade accounts receivable 4,357
(Increase) decrease in prepayments and other debtors (3,164)
(Increase) decrease in inventory (10,365)
Increase (decrease) in trade accounts payable 7,276
Increase (decrease) in accrued expenses (9,570)
Increase (decrease) in deferred income (2,461)
------------
Net cash provided by (used in) operating activities (19,964)
------------
Investing activities
Purchase of property, plant and equipment (807)
------------
Net cash provided by (used in) investing activities (807)
------------
Financing activities
Proceeds from shareholders loans 10,712
Proceeds from other loans 7,500
Issue of shares 29
Proceeds from long term debt -
Repayment of long term debt -
------------
Net cash provided by (used in) financing activities 18,241
------------
Net (decrease)/increase in cash and cash equivalents (2,530)
Cash and cash equivalents at start of period 2,655
------------
Cash and cash equivalents at end of period 125
============
Supplemental disclosure of cash flow information:
Interest paid $ 10,585
============
</TABLE>
See accompanying notes to unaudited consolidated
financial statements
F-18
<PAGE>
TELEMONDE INC
Notes to Unaudited Consolidated Financial Statements
September 30, 1999
(Dollars expressed in thousands)
1. Interim accounting policy
In the opinion of management of Telemonde Inc (the "Corporation"), the
accompanying unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly in accordance with accounting principles generally accepted
in the US the financial position of the Corporation and the results of
operations and cash flows for the nine months ended September 30, 1999.
Although the Corporation believes that the disclosure in these financial
statements is adequate to make the information presented not misleading,
certain information and footnote information normally included in interim
financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission. Results of
operations for the nine months ended September 30, 1999 are not necessarily
indicative of what operating results may be for the full year. In addition,
these unaudited consolidated financial statements and notes thereto should
be read in conjunction with the audited consolidated financial statements
presented herein.
On May 14, 1999, Telemonde Investments Limited acquired Pac-Rim Consulting
Inc, a Nevada corporation ("Pac-Rim") in a stock purchase transaction. Pac-
Rim was publicly traded on the NASD's Over the Counter Bulletin Board.
Pursuant to the Stock Purchase Agreement, Pac-Rim issued 35,297,000 shares
of Pac-Rim's common stock to the sole shareholder of Telemonde Investments
Limited, in exchange for all of the issued and outstanding shares of
Telemonde Investments Limited (the "Reverse"). As a result of the Reverse,
Telemonde Investments Limited became a wholly owned subsidiary of Pac-Rim.
Following the Reverse, Pac-Rim changed its name to Telemonde Inc. The
Reverse has been accounted for as a reverse purchase acquisition in a manner
similar to the pooling of interests method of accounting. The financial
information presented for periods prior to May 14, 1999 is for Telemonde
Investments Limited.
2. Changes in shareholders' equity
<TABLE>
<CAPTION>
Ordinary Retained Additional
share earnings/ Paid-in
Capital (deficit) Capital
-------- -------- --------
<S> <C> <C> <C>
Balance at December 31, 1998 $ 30 (11,732) -
Net (loss) - (16,396) -
Shares issued 29 - 1,300
Amortization of financing costs - - 8,976
Fees satisfied by issuance of stock - - 347
--------- -------- --------
Balance at September 30, 1999 $ 59 (28,128) 10,623
========= ======== ========
</TABLE>
F-19
<PAGE>
TELEMONDE INC
Notes to Unaudited Consolidated Financial Statements
September 30, 1999
(Dollars expressed in thousands)
3. Financing
During the nine month period to September 30, 1999 the Corporation entered
into the following financing arrangements:
(a) The Corporation sold an Indefeasible Right of Use ("IRU") over STM-1
of capacity to Communications Collateral Limited, although
Communications Collateral Limited has an option to require the
Corporation to repurchase the capacity. Communications Collateral
Limited has granted the Company a facility of US $1 million (of which
$500,000 has been used to pay a facility fee) and the Corporation has
granted collateral over certain assets to Communications Collateral
Limited. In view of this option this IRU sale has been treated as a
financing transaction and shown within "other loans".
Communications Collateral Limited is entitled to purchase shares equal
to 7% of the issued share capital of the Corporation at the time of
issuance. The exercise price is the lesser of (i) $5.25 per share or
(ii) if the price per share is below $5.25 for 20 consecutive trading
days prior to an equity offering by the Company of at least $10
million, the average of the per share price during such 20 day period.
An associated Registration Rights Agreement, provides that
Communications Collateral Limited may participate as a selling
shareholder in the first underwritten public offering of at least $10
million. In addition, Communications Collateral Limited may have
certain additional demand and piggyback registration rights.
Using an option pricing model, this warrant has been valued at $6.6
million. This has been treated as additional paid in capital and is
being taken to the income statement over the period of the related
financing.
(b) On August 25, 1999 the corporation issued warrants to a bandwidth
capacity supplier which entitle the warrant holder to purchase
1,100,000 shares of common stock at a price of $5.25 per share. The
warrants expire on August 25, 2000.
F-20
<PAGE>
TELEMONDE INC
Notes to Unaudited Consolidated Financial Statements
September 30, 1999
(Dollars expressed in thousands)
4. Earnings per share
The calculation of basic earnings per share is as follows:
<TABLE>
<CAPTION>
9 months to
September 30,
1999
<S> <C>
Net income available to common
shareholders (16,396,000)
Average common shares issued and
outstanding 44,828,829
Basic and diluted earnings per share $ (0.37)
============
</TABLE>
No adjustment to earnings per share arises on the issue of warrants as the
effect is antidilutive.
On the date of the reverse transaction referred to in Note 1 above, the
Company issued 35,297,000 shares of common stock in exchange for the 35,297
shares of common stock in Telemonde Investments Limited. For the purposes
of calculating basic earnings per share the increase in nominal share
capital was deemed to take place at the beginning of the period.
5. Operating lease commitments
The Company entered into a property operating lease agreement with future
minimum lease payments as follows:
<TABLE>
<CAPTION>
Year ended
December 31,
<S> <C>
2000 $ 172
2001 172
2002 172
2003 172
2004 172
Thereafter 1,005
-------
Total minimum lease payments $ 1,865
=======
</TABLE>
F-21
<PAGE>
TELEMONDE INC
Notes to Unaudited Consolidated Financial Statements
September 30, 1999
(Dollars expressed in thousands)
6. Contingent liabilities
H.M. Customs & Excise in the United Kingdom are considering whether the
Corporation has a liability to register for Value Added Tax (`VAT') in the
United Kingdom (`UK'). If the Corporation has a liability to register it
will be required to charge VAT at 17 1/2% on sales to UK customers and to
non-UK customers where the supplies are used and enjoyed in the UK. A
further liability to register and account for VAT in other European Union
countries will arise if the supplies are used and enjoyed in those countries
unless the customer is registered for VAT in those countries in which case
he would account for VAT. This latter liability exists whether or not the
Corporation is ruled to have a UK establishment. The maximum potential
liability on 1999 revenues is approximately $900, less deduction for the
recovery of VAT on operating expenses and recoveries from customers.
The management are of the opinion that no liability exists and accordingly
no provision has been made.
7. Subsequent events
(a) On November 8, 1999 the Corporation acquired the entire issued share
capital of Equitel Communications Limited, a telecommunications services
company incorporated in the United Kingdom. The combination will be
accounted for under the purchase method. Under the terms of the Heads of
Agreement, the consideration payable to the vendors will be $19,000,000
issued on completion. Goodwill of approximately US$25.2 million will be
amortized over 10 years under the straight line method.
Possible contingent consideration is listed below:
(1) An additional sum calculated by multiplying reported earnings before
interest and tax for the year ending December 31, 2000 by 6, subject
to a maximum of $30,000,000, payable on June 30, 2001.
(2) A further additional sum calculated by multiplying reported earnings
before interest and tax for the year ending December 31, 2001 by 5,
subject to a maximum of $50,000,000 less the amount paid under (1)
above, payable on June 30, 2002.
The additional sums under (1) and (2) above are to be satisfied by
shares in Telemonde Inc.
F-22
<PAGE>
TELEMONDE INC
Notes to Unaudited Consolidated Financial Statements
September 30, 1999
(Dollars expressed in thousands)
7. Subsequent events (continued)
The vendors include Janet Pomeroy, Adam Bishop and Telcoworld Limited.
Kevin Maxwell is associated with Telcoworld Limited. Kevin Maxwell and
Adam Bishop are directors of Telemonde Inc. Kevin Maxwell was a
director of EquiTel Communications Limited and Harry Pomeroy is a
director of EquiTel Communications Limited.
The operations of the acquired company will be included from the date of
acquisition onward.
On May 25, 1999 EquiTel Communications Limited entered into a share
purchase agreement to acquire a 20% equity interest in net Industrial
Holdings Telecommunications Limited, a South African company established
to develop opportunities in the Sub-Sahara telecommunications sector.
The consideration will cash of $2,000,000 and the equivalent of
$3,250,000 shares in Telemonde Inc.
(b) On November 5, 1999 the Corporation entered into a Heads of Agreement to
acquire a U.K. internet, e-commerce and telecommunications business for
(Pounds)100 million ($165 million) to be satisfied by cash of
(Pounds)500,000 ($825,000), shares of (Pounds)50 million ($82.5 million)
and loan notes of (Pounds)49.5 million ($81.7 million).
(c) On November 8, 1999 Telemonde Networks Limited entered into an agreement
to lease a telehouse facility at an annual cost of approximately
(Pounds)750,000 ($1.2 million).
8. Liquidity
The consolidated financial statements have been prepared assuming the
Corporation will continue as a going concern. The Corporation incurred a net
loss of $16.4 million which has resulted in a deficit of $28.1 million as at
the balance sheet date. The Corporation's ability to fund its commitments to
draw down IRUs in 1999 and 2000 is dependent on its ability to sell capacity
and raise finance to cover working capital requirements.
The Company has failed to meet its obligations to Communications Collateral
Limited which at November 10, 1999 amounted to $5.0 million. As a result
Communications Collateral Limited has a right to foreclose on substantially
all of the Company's assets, including inventory, up to the value of $5.0
million.
The Company has retained investment bankers in Europe and the United States
to assist in raising finance to include equity capital and issuing debt.
There can be no assurance that the Company will be successful in raising
finance to cover working capital requirements and financial commitments.
F-23
<PAGE>
TELEMONDE INC
Pro-Forma Unaudited Combined Statement of Income
Period from March 10, 1998 to December 31, 1998
(Dollars expressed in thousands)
<TABLE>
<CAPTION>
Telemonde
Investments Equitel
Limited Communications Telemonde Adjustments Pro-Forma
(consolidated) Limited Inc. (Note 2) Combined
<S> <C> <C> <C> <C> <C>
Operating revenues
Bandwidth revenues $ 29,331 $ - $ - $ - $ 29,331
Other revenues - 898 - (a) (898) -
--------- --------- --------- --------- ---------
Operating revenues 29,331 898 - (898) 29,331
--------- --------- --------- --------- ---------
Operating expenses
Line costs 32,510 - - (a) (898) 31,612
Cost of contract cancellation 6,094 - - 6,094
Depreciation and amortisation - - (b) 2,042 2,042
Selling, general and
administrative expenses 1,055 720 2 - 1,777
--------- --------- --------- --------- ---------
Operating expenses 39,659 720 2 1,144 41,525
--------- --------- --------- --------- ---------
Operating profit/(loss) (10,328) 178 (2) (2,042) (12,194)
Other income (expense)
Interest income 247 - - - 247
Interest expense (330) - - - (330)
Loan arrangement fees (1,321) - - - (1,321)
--------- --------- --------- --------- ---------
Other (expense) income (1,404) - - (1,404)
--------- --------- --------- --------- ---------
Net profit/(loss) $ (11,732) $ 178 $ (2) $ (2,042) $ (13,598)
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited
consolidated pro forma financial statements
F-24
<PAGE>
TELEMONDE INC
Pro-Forma Unaudited Combined Statement of Income
for the nine months ended September 30, 1999
(Dollars expressed in thousands)
<TABLE>
<CAPTION>
Telemonde Equitel
Inc Communications Adjustments Pro-Forma
(consolidated) Limited (Note 3) Combined
<S> <C> <C> <C> <C>
Operating revenues
Bandwidth revenues $ 5,857 $ - $ - $ 5,857
Other revenues - 525 (a) (428) 97
--------- --------- --------- ---------
Operating revenues 5,857 525 (428) 5,954
--------- --------- --------- ---------
Operating expenses
Line costs 5,315 - (a) (428) 4,887
Dispute settlement costs - 4,000 - 4,000
Share of losses of joint ventures - 582 - 582
Provision for doubtful debts 924 - - 924
Depreciation and amortization 112 31 (b) 1,897 2,040
Selling, general and
administrative expenses 5,897 2,257 - 8,154
--------- --------- --------- ---------
Operating expenses 12,248 6,870 1,469 20,587
--------- --------- --------- ---------
Operating loss (6,391) (6,345) (1,897) (14,633)
Other income (expense)
Interest income 580 2 - 582
Amortization of financing costs (8,976) - - (8,976)
Interest expense (1,109) (12) - (1,121)
Loan arrangement fees (500) - - (500)
--------- --------- --------- ---------
Other (expense) income (10,005) (10) - (10,015)
--------- --------- --------- ---------
Net loss $ (16,396) $ (6,355) $ (1,897) $ (24,648)
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited
consolidated pro forma financial statements
F-25
<PAGE>
TELEMONDE INC
Pro-Forma Unaudited Combined Balance Sheet
as at September 30, 1999
(Dollars expressed in thousands)
<TABLE>
<CAPTION>
Telemonde Equitel
Inc Communications Adjustments Pro-Forma
(consolidated) Limited (Note 4) Combined
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 125 $ 43 $ - $ 168
Trade accounts receivable 4,237 - - 4,237
Other receivables 3,164 535 (e) (1,385) 2,314
Property, plant & equipment 706 214 - 920
Investment in joint venture - 1,038 - 1,038
Inventory 87,880 - - 87,880
Goodwill 1,289 - (a) 25,177 26,466
--------- --------- --------- ---------
Total assets $ 97,401 $ 1,830 $ 23,792 $ 123,023
========= ========= ========= =========
Liabilities and shareholders' equity
Trade accounts payable 85,164 571 (b) (6,729) 79,006
Other payables - 1,700 (e) (1,385) 315
Accrued expenses 11,332 147 - 11,479
Deferred income 1,139 - - 1,139
Other loans 6,500 300 - 6,800
Shareholder loans 10,712 5,289 (b) (9,521) 6,480
--------- --------- --------- ---------
Total liabilities $ 114,847 $ 8,007 $ (17,635) $ 105,219
--------- --------- --------- ---------
Stockholders' equity
Share capital 59 - (c) 11 70
Retained earnings (28,128) (6,177) (d) 6,177 (28,128)
Additional paid in capital 10,623 - (b,c) 35,239 45,862
--------- --------- --------- ---------
Total stockholders' funds (17,446) (6,177) 41,427 17,804
--------- --------- --------- ---------
Total liabilities
and stockholders' funds $ 97,401 $ 1,830 $ 23,792 $ 123,023
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited
consolidated pro forma financial statements
F-26
<PAGE>
TELEMONDE INC
Notes to Pro-Forma Unaudited Combined Financial Information
for the nine months ended September 30, 1999
1. Basis of Preparation
The unaudited pro forma combined financial information has been prepared in
accordance with generally accepted accounting principles in United States
and gives effect to the following:
(a) The acquisition of all outstanding share capital of EquiTel
Communications Limited in November 1999. The combination will be
accounted for under the purchase method. Shares for the market value
of $19 million will be issued on completion.
Possible contingent consideration is listed below:
(i) An additional sum calculated by multiplying reported earnings
before interest and tax for the year ending December 31, 2000 by
6, subject to a maximum of $30 million, payable in the Company's
common stock on June 30, 2001.
(ii) A further additional sum calculated by multiplying reported
earning before interest and tax for the year ending December 31,
2001 by 5, subject to a maximum of $50 million, less the amount
paid under (i) above, payable in the Company's common stock on
June 30, 2002.
Any additional consideration will result in additional goodwill.
(b) A debt to equity conversion of $16,250,000.
The pro forma combined statements of income give effect to the acquisition
as if it had occurred on March 10, 1998 (date of inception of Telemonde
Investments Limited). The pro forma combined balance sheet gives effect to
the acquisition and the equity injection, as if they had occurred on
September 30, 1999.
The pro forma combined financial information does not purport to represent
what the Corporation's results of operations would have been had the
acquisitions been consummated at the beginning of fiscal 1998 nor do they
project the Corporation's results for any future period.
F-27
<PAGE>
TELEMONDE INC
Notes to Pro-Forma Unaudited Combined Financial Information
for the nine months ended September 30, 1999
2. Pro-forma unaudited combined statement of income for the period from March
10, 1998 to December 31, 1998
The pro-forma unaudited combined statements of income for the period from
March 10, 1998 to December 31, 1998 gives effect to the following pro-forma
adjustments:
(a) Elimination of fees and commissions amounting to $898,000 payable by
the Corporation to EquiTel Communications Limited.
(b) Amortization of goodwill amounting to $2,042,000 attributable to the
acquisition of EquiTel Communications Limited.
3. Pro-forma unaudited combined statement of income for the period from January
1, 1999 to September 30, 1999.
The pro-forma unaudited combined statement of income for the nine months
ended September 30, 1999 gives effect to the following pro-forma
adjustments:
(a) Elimination of fees and commissions amounting to $428,000 payable by
the Corporation to EquiTel Communications Limited.
(b) Amortization of goodwill amounting to $1,897,000 attributable to the
acquisition of EquiTel Communications Limited.
4. Pro-forma unaudited combined balance sheet as of September 30, 1999.
The pro-forma unaudited combined balance sheet as of September 30, 1999
gives effect to the following pro-forma adjustments:
(a) Capitalization of goodwill amounting to $25,177,000 arising on the
acquisition of Equitel Communications Limited. This represents the
purchase price (excluding any contingent consideration) of $19 million
plus the fair value of net liabilities acquired of $6,177,000.
Goodwill is being amortized over 10 years under the straight-line
method.
F-28
<PAGE>
TELEMONDE INC
Notes to Pro-Forma Unaudited Combined Financial Information
for the nine months ended September 30, 1999
4. Pro-forma unaudited combined balance sheet as of September 30, 1999
(continued)
(b) A debt to equity conversion of $16,250,000, resulting in the issue of
6,000,000 shares.
(c) Shares valued at $19 million issued as the non-contingent
consideration to acquire Equitel Communications Limited, resulting in
the issue of 4,947,917 shares.
(d) The elimination of pre-acquisition retained earnings in Equitel
Communications Limited amounting to $6,177,000.
(e) The elimination of intercompany balances.
5. Contingent Liabilities
(a) H.M. Customs & Excise in the United Kingdom are considering whether
the Corporation has a liability to register for Value Added Tax
('VAT') in the United Kingdom ('UK'). If the Corporation has a
liability to register it will be required to charge VAT at 17 1/2% on
sales to UK customers and to non-UK customers where the supplies are
used and enjoyed in the UK. A further liability to register and
account for VAT in other European Union countries will arise if the
supplies are used and enjoyed in those countries unless the customer
is registered for VAT in those countries in which case he would
account for VAT. This latter liability exists whether or not the
company is ruled to have a UK establishment. The maximum potential
liability on 1998 and 1999 revenues is approximately $6 million, less
deduction for the recovery of VAT on operating expenses and recoveries
from customers.
The management are of the opinion that no liability exists and
accordingly no provision has been made.
(b) The Corporation makes provision for inland line costs and local
network costs based on the present value of future payments required
to be made by the Corporation for such capacity over the life of the
network. Under the terms of the CSA's, the company is liable for such
ongoing costs over the life of the network which may be up to 25
years.
F-29
<PAGE>
EquiTel Communications Limited
Company Information
Directors L. Trachtenberg
H. Pomeroy
N. Topham
M. Willard
Secretary S. Connabeer
Company Number 3633818
Registered Office 5th Floor, 7-10 Chandos Street, Cavendish
Square,
London W1M 9DR
Auditors Moore Stephens
St. Paul's House, Warwick Lane
London
EC4P 4BN
Business Address 40 Portman Square
London
W1H 9FH
F-30
<PAGE>
EquiTel Communications Limited
Directors' Report
for the period ended 30 April 1999
The directors present their report and financial statements for the period from
17 September 1998 to 30 April 1999.
Principal activities and review of the business
The company was incorporated on 17 September 1998. The principal activity of the
company is that of providing sales and marketing services in the
telecommunication industry.
Results and dividends
The results for the period are set out on page F-35.
The directors do not recommend payment of a dividend.
Year 2000
The Directors are continuing to review the risks associated with the Year 2000
problem, both with regard to internal use of computer systems and embedded chips
and in connection with relationships with third parties. They are satisfied that
the steps being taken will be completed in sufficient time to eliminate any
potential problems. The total costs of ensuring Year 2000 compliance have not
yet been quantified fully but are not expected to be significant.
Directors
The directors in office since incorporation were:
<TABLE>
<CAPTION>
Appointed Resigned
--------- --------
<S> <C> <C>
London Law Services Limited 17 September 1998 17 September 1998
Ian Hickson 17 September 1998 20 April 1999
Kevin Maxwell 18 November 1998 24 May 1999
Larry Trachtenberg 18 November 1998 -
Harry Pomeroy 17 September 1998 -
Nicholas Topham 24 May 1999 -
Mark Willard 22 July 1999 -
</TABLE>
F-31
<PAGE>
EquiTel Communications Limited
Directors' Report
for the period ended 30 April 1999
Directors' interests
The directors' interests in the shares of the company were as stated below:
<TABLE>
<CAPTION>
Ordinary shares of (Pounds)1 each
30 April 1999 17 September 1998
<S> <C> <C>
H. Pomeroy 2 -
L. Trachtenberg - -
</TABLE>
Mr. Pomeroy holds these shares as nominee for his wife.
Post balance Sheet Events
On 25 May 1999 the Company entered into a Share Purchase Agreement to acquire a
20% equity interest in Net Industrial Holdings Telecommunications Limited, a
South African company established to develop opportunities in the Sub-Sahara
telecommunications sector. The consideration will be cash of US $2,000,000 and
the equivalent of US $3,250,000 shares in Telemonde Inc. On the same day the
Company entered into a Joint Venture Agreement with Net Industrial Holdings
Telecommunications Limited to establish a new company ("Newco") to develop
telecommunications business in Africa. Newco will be jointly owned by the
Company and Net Industrial Holdings Telecommunications Limited. The initial
capital of Newco will be US $50,000 and both venturers have agreed to provide an
additional facility of US $100,000.
On 2 July 1999 the Company entered into a Memorandum of Understanding with Gain
Communications Inc and Gain Communications Bangladesh Limited to establish a new
company ("New Bangladesh Company") to carry on telecommunications activities in
Bangladesh. The Company will invest up to US $1 million in New Bangladesh
Company and take an equity stake of 50%.
The Company is in the process of acquiring the entire issued share capital of
Callaway Continental Limited, a company incorporated in the British Virgin
Islands with a telecommunications subsidiary in Spain. The terms of the
acquisition are to be agreed.
F-32
<PAGE>
EquiTel Communications Limited
Directors' Report
for the period ended 30 April 1999 (continued)
Liquidity
The financial statements have been prepared assuming the Company will continue
as a going concern. The Company incurred a net loss of (Pounds)2,826,718 which
has resulted in a deficit of this amount as at the balance sheet date. The
Company's ability to fund its commitments in note 21 and to meet its liabilities
as they fall due is dependent on its ability to generate positive cash flows
from operations and to raise finance to cover working capital requirements.
Subsequent to the balance sheet date the Company has received additional
shareholder advances of (Pounds)2,500,000, however the Company has reported
unaudited net losses of (Pounds)900,000 in the five months ended 30th September
1999.
Directors' responsibilities
Company law requires the directors to prepare financial statements for each
financial period which give a true and fair view of the state of affairs of the
company and of the profit or loss of the company for that period. In preparing
those financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply with the
Companies Act 1985. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
By order of the Board
/s/ S. Connabeer
S. Connabeer
Secretary
F-33
<PAGE>
EquiTel Communications Limited
Auditors' Report
to the shareholders of EquiTel Communications Limited
We have audited the financial statements on pages F-35 to F-47 which have been
prepared under the historical cost convention in accordance with Accounting
Standards in the United Kingdom and the accounting policies set out on pages
F-37 to F-38.
Respective responsibilities of directors and auditors
As described on page F-33 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the company's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Fundamental Uncertainty
In forming our opinion, we have considered the adequacy of the disclosures made
in the financial statements concerning the need for finance to meet liabilities
as they fall due. The financial statements have been prepared on a going concern
basis, the validity of which depends on future funding being available. The
financial statements do not include any adjustments that would result from a
failure to obtain additional funding. Details of the circumstances relating to
this fundamental uncertainty are described in note 22. Our opinion is not
qualified in this respect.
Opinion
In our opinion the financial statements give a true and fair view of the state
of the company's affairs as at 30 April 1999 and of its loss for the period then
ended and have been properly prepared in accordance with the Companies Act 1985.
Generally accepted accounting principles in the United Kingdom vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would not have resulted in any material adjustments to net income for the
period ended 30 April 1999 or shareholders' equity at 30 April 1999.
/s/ Moore Stephens MOORE STEPHENS
11 November 1999
Chartered Accountants
Registered Auditor
St. Paul's House
London
EC4P 4BN
F-34
<PAGE>
EquiTel Communications Limited
Profit and Loss Account
for the period from 17 September 1998 to 30 April 1999
<TABLE>
<CAPTION>
Notes
<S> <C> <C>
Turnover 2 804,199
Net operating expenses 3 (3,575,945)
----------
Operating loss 4 (2,771,746)
Other interest receivable & similar income 5 672
Amounts written off investments 6 (55,532)
Interest payable and similar charges 7 (112)
----------
Loss on ordinary activities before taxation (2,826,718)
Tax on loss on ordinary activities 8 -
----------
Loss on ordinary activities after taxation 14 (Pounds) (2,826,718)
==========
</TABLE>
The profit and loss account has been prepared on the basis that all operations
are continuing operations.
There are no recognised gains and losses other than those passing through the
profit and loss account.
F-35
<PAGE>
EquiTel Communications Limited
<TABLE>
<CAPTION>
Balance Sheet
as at 30 April 1999
1999
Notes (Pounds) (Pounds)
<S> <C> <C> <C>
Fixed assets
Tangible assets 9 89,484
Investments 10 62,650
----------
152,134
Current assets
Debtors 11 393,979
Cash at bank and in hand 18,136
----------
412,115
Creditors: amounts falling
due within one year 12 (2,754,603)
----------
Net current liabilities (2,342,488)
----------
Total assets less current liabilities (2,190,354)
Creditors: amounts falling due after
more than one year 12 (636,364)
----------
(Pounds) (2,826,718)
==========
Capital and reserves
Called up share capital 13 -
Profit and loss account 14 (2,826,718)
----------
Shareholders' deficit - equity interests 15 (pounds) (2,826,718)
==========
</TABLE>
The financial statements were approved by the Board on 4 November 1999
/s/ Larry Trachtenberg
Larry Trachtenberg
Director
F-36
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
1. Accounting policies
1.1 Accounting convention
The financial statements are prepared in accordance with Accounting
Standards in the United Kingdom and under the historical cost convention.
The company has taken advantage of the exemption in Financial Reporting
Standard No.1 from the requirement to produce a cashflow statement on the
grounds that it is a small company.
The financial statements have been prepared on the going concern basis
which assumes that the company will continue in operation for the
foreseeable future. The ability of the company to continue as a going
concern is dependent upon the ability of the company to generate operating
cash flows or raise working capital from shareholders or external sources.
1.2 Compliance with accounting standards
The accounts have been prepared in accordance with applicable accounting
standards.
1.3 Turnover
Turnover represents amounts receivable for goods and services net of VAT
and trade discounts.
1.4 Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less depreciation. Depreciation is
provided at rates calculated to write off the cost less estimated residual
value of each asset over its expected useful life, as follows:
Plant and machinery 33 1/3% reducing balance
Fixtures, fittings & equipment 25% reducing balance
1.5 Leasing
Rentals payable under operating leases are charged against income on a
straight line basis over the lease term.
1.6 Investments
Fixed asset investments are stated at cost less provision for diminution in
value.
F-37
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
1.7 Deferred taxation
Deferred taxation is provided at appropriate rates on all timing
differences using the liability method only to the extent that, in the
opinion of the directors, there is a reasonable probability that a
liability or asset will crystallise in the foreseeable future.
1.8 Foreign exchange
Transactions denominated in foreign currencies are translated into Pounds
Sterling at rates of exchange prevailing on the date of transaction.
Liabilities and current assets denominated in foreign currencies are re-
converted into Sterling at rates prevailing on the balance sheet date. The
results, assets and liabilities of the company's interest in Desert
Telecommunication Services LLC have been converted into Sterling using the
closing rate method.
Exchange differences are dealt with in the profit and loss account except
for gains and losses arising on the reconversion of the company's net
investment in Desert Telecommunication Services LLC, which are dealt with
in profit and loss account reserves.
2. Turnover
The total turnover of the company for the period has been derived from its
principal activity wholly undertaken in the United Kingdom.
3. Net operating expenses
<TABLE>
<CAPTION>
1999
(Pounds)
<S> <C>
Administrative expenses 987,721
Exceptional item (Note 4) 2,424,242
Provision against amounts owed by
participating interests 197,097
Other operating income (33,115)
---------
(Pounds) 3,575,945
---------
</TABLE>
F-38
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
4. Operating loss
<TABLE>
<CAPTION>
1999
(Pounds)
<S> <C>
Operating loss is stated after charging;
Provision against amount owed by
participating interests 197,097
Depreciation of tangible assets 2,466
Operating lease rentals 62,728
Auditors' remuneration 10,000
Exceptional item 2,424,242
=========
</TABLE>
The exceptional item relates wholly to the cost of resolving a dispute with
the former employer (and associated companies) of certain former employees
of the Company.
5. Other interest receivable and similar income
1999
(Pounds)
Bank interest 672
=======
6. Amounts written off investments
1999
(Pounds)
Amounts written off fixed asset investments:
- permanent diminution in value 55,532
=======
7. Interest payable
1999
(Pounds)
On bank loans and overdrafts 112
=======
F-39
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
8. Taxation
The company is not liable to corporation tax due to its net loss in the
current period.
9. Tangible fixed assets
<TABLE>
<CAPTION>
Plant and Fixtures, Total
machinery fittings &
equipment
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Cost
Additions 96,101 17,500 113,601
Disposals (16,900) (4,751) (21,651)
------- ------ -------
At 30 April 1999 79,201 12,749 91,950
------- ------ -------
Depreciation
Charge for the period and
at 30 April 1999 2,200 266 2,466
------- ------ -------
Net book value
At 30 April 1999 (Pounds) 77,001 (Pounds) 12,483 (Pounds) 89,484
======= ====== =======
</TABLE>
10. Fixed asset investments
Shares in
participating
interests
(Pounds)
Cost
Additions and at 30 April 1999 118,182
-------
Provisions for diminution in value
Charge for the period and at 30 April 1999 55,532
-------
Net book value
At 30 April 1999 (Pounds) 62,650
=======
F-40
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
10. Fixed asset investments (continued)
Holdings of more than 20%
The company holds more than 20% of the share capital of the following
companies:
<TABLE>
<CAPTION>
Company Country of registration Shares held
or incorporation Class
%
<S> <C> <C>
Desert Telecommunication Services LLC Oman Ordinary
49
EquiTel Card Services Limited United Kingdom Ordinary
100
Teleroute Limited United Kingdom Ordinary
100
Telesource Limited United Kingdom Ordinary
100
====
</TABLE>
The United Kingdom companies are dormant. The balance sheet of Desert
Telecommunication Services LLC as at 30 April 1999 is summarised as:
<TABLE>
<CAPTION>
US $ (Pounds)
<S> <C> <C>
Fixed assets
Plant and equipment 339,845 205,967
Current assets
Accounts receivable 9,961 6,037
Advances and prepayments 19,223 11,650
Bank balances and cash 127,064 77,008
--------- --------
156,248 94,695
--------- --------
Current liabilities
Accounts payable and accruals 176,544 106,996
Amounts due to shareholders and
companies related to shareholders 338,427 205,107
--------- --------
514,971 312,103
--------- --------
Net current liabilities (358,723) (217,408)
--------- --------
Net liabilities (18,878) (11,441)
========= ========
Capital and reserves
Share capital 388,601 241,188
Accumulated losses (407,479) (252,629)
--------- --------
(18,878) (11,441)
========= ========
</TABLE>
F-41
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
10. Fixed asset investments (continued)
The income statement of Desert Telecommunication Services LLC for the
period from 1 March 1999 to 30 April 1999 is summarised as:-
US $ (Pounds)
Turnover 212,958 129,065
Cost of sales (182,622) (110,680)
-------- --------
Gross profit 30,336 18,385
Net operating expenses (437,815) (265,342)
-------- --------
Loss for the period (407,479) (246,957)
-------- --------
The company's share of losses reported by Desert Telecommunication Services
LLC amounts to (Pounds)123,479 however full provision has been made for
100% of reported loses on grounds of uncertainty. The company entered into
commercial contracts operated through the joint venture as prime
contractor.
11. Debtors
1999
(Pounds)
Trade debtors 68,476
Amounts owed by related undertakings 43,649
Amounts owed by participating interests -
Other debtors 261,054
Prepayments and accrued income 20,800
--------
393,979
========
F-42
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
11. Debtors (continued)
Amounts falling due after more than one year and included in debtors above
are:
1999
(Pounds)
Other debtors 131,788
========
This represents a rent deposit which will be repaid to the Company in
February 2004. Other debtors includes expense advances of (Pounds)6,095
made to Larry Trachtenberg, which have subsequently been cleared.
12. Creditors
<TABLE>
<CAPTION>
Amounts falling
Amounts falling due after more than
due within one year one year
(Pounds) (Pounds)
<S> <C> <C>
Trade creditors 298,438 -
Amounts owed to related undertakings 8,621 636,364
Taxes and social security costs 72,358 -
Other creditors 2,012,285 -
Other loans 158,657 -
Accruals and deferred income 204,244 -
----------- ----------
2,754,603 636,364
=========== ==========
Amounts due to related undertakings comprise:
Telemonde Networks Limited 8,621
Shareholder and related parties 636,364
--------
(Pounds) 644,985
--------
</TABLE>
Kevin Maxwell and Ian Hickson were directors of Telemonde Networks Limited.
The shareholder and related party loans are unsecured and repayable when
the resources of the company permit. Interest is payable at 10 per cent per
annum.
F-43
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
13. Share capital
1999
(Pounds)
Authorised
10,000 Ordinary shares of (Pounds)1 each 10,000
========
Allotted, not yet called up
2 Ordinary shares of (Pounds)1 each -
========
14. Statement of movements on profit and loss account
Profit and
loss account
(Pounds)
Retained loss for the period (2,826,718)
==========
15. Reconciliation of movements in shareholders' funds
1999
(Pounds)
Loss for the financial period (2,826,718)
Proceeds from issue of shares -
----------
Net depletion in shareholders' funds (2,826,718)
==========
16. Contingent liability
The company has indemnified British Telecommunications Plc ("BT") against
all claims or legal proceedings brought or threatened against BT arising
from the provision of a satellite circuit between Oman and the United
Kingdom.
F-44
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
17. Financial commitments
At 30 April 1999 the company had annual commitments under non-cancelable
operating leases as follows:
<TABLE>
<CAPTION>
Land and Other
buildings
(Pounds) (Pounds)
<S> <C> <C>
Expiry date:
Within one year 3,000 -
Between two and five years 175,718 354,216
-------- -------
178,718 354,216
======== =======
</TABLE>
18. Directors' emoluments
1999
(Pounds)
Emoluments for qualifying services 133,250
=======
19. Employees
Number of employees
The average monthly number of employees (including directors) during the
period was:
<TABLE>
<CAPTION>
1999
Number
<S> <C>
Management and administration 11
=======
Employment costs
(Pounds)
Wages 178,128
Social security costs 21,072
-------
199,200
=======
</TABLE>
F-45
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
20. Related party transactions
Turnover amounting to (Pounds)804,199 is attributable to operating
subsidiaries of Telemonde Inc. Kevin Maxwell is a director of Telemonde
Inc. At 30 April 1999 the amount due from the operating subsidiaries was
(Pounds)320,000.
Kevin Maxwell was a consultant retained by Westbourne Communications
Limited, a company which provided consultancy services amounting to
(Pounds)84,000 and recharged accommodation costs of (Pounds)178,448. At 30
April 1999, the amount due to Westbourne Communications Limited was
(Pounds)68,413.
21. Post Balance Sheet Events
On 25 May 1999 the Company entered into a Share Purchase Agreement to
acquire a 20% equity interest in Net Industrial Holdings Telecommunications
Limited, a South African company established to develop opportunities in
the Sub-Sahara telecommunications sector. The consideration was cash of US
$2,000,000 and the equivalent of US $3,250,000 shares in Telemonde Inc. On
the same day the Company entered into a Joint Venture Agreement with Net
Industrial Holdings Telecommunications Limited to establish a new company
("Newco") to develop telecommunications business in Africa. Newco will be
jointly owned by the Company and Net Industrial Holdings Telecommunications
Limited. The initial capital of Newco will be US $50,000 and both venturers
have agreed to provide an additional facility of US $100,000.
On 2 July 1999 the Company entered into a Memorandum of Understanding with
Gain Communications Inc and Gain Communications Bangladesh Limited to
establish a new company ("New Bangladesh Company") to carry on
telecommunications activities in Bangladesh. The Company will invest up to
US $1 million in New Bangladesh Company and take an equity state of 50%.
The Company is in the process of acquiring the entire issued share capital
of Callaway Continental Limited, a company incorporated in the British
Virgin Islands with a telecommunications subsidiary in Spain. The terms of
the acquisition are to be agreed.
It is further anticipated that operations will commence in Russia through a
joint venture.
F-46
<PAGE>
EquiTel Communications Limited
Notes to the financial statements
for the period from 17 September 1998 to 30 April 1999
22. Liquidity
The financial statements have been prepared assuming the Company will
continue as a going concern. The Company incurred a net loss of
(Pounds)2,826,718 which has resulted in a deficit of this amount as at the
balance sheet date. The Company's ability to fund its commitments in note
21 and to meet its liabilities as they fall due is dependent on its ability
to generate positive cash flows from operations and to raise finance to
cover working capital requirements. Subsequent to the balance sheet date
the Company has received additional shareholder advances of
(Pounds)2,500,000. However the Company has reported unaudited net losses of
(Pounds)900,000 in the five months ended 30th September 1999.
There can be no assurance that the Company will be successful in generating
positive cash flows from operations or in raising finance to cover working
capital requirements and financial commitments.
F-47
<PAGE>
(b) Exhibits
Exhibit No. Description
- - - - ----------- -----------
2.1 Stock Purchase Agreement among Pac-Rim Consulting, Inc., Thomas
Gelfand, Telemonde Investments Limited, and Rhone Financial
Indemnity Re Limited, dated as of May 14, 1999.
2.2 Agreement Relating to the Sale and Purchase of Shares in the
Capital of EquiTel Communications Limited among (1) Telcoworld
Limited and Others, (2) Telemonde, Inc., and (3) Harry Pomeroy
and Larry Trachtenberg, dated November 8, 1999.
2.3 Agreement and Plan of Merger of Telemonde, Inc., a Nevada
corporation, into Telemonde, Inc., a Delaware corporation, dated
October 29, 1999.
2.4 Share Purchase Agreement for the Sale and Purchase of all the
issued share capital of TGA (UK) Limited, between the
shareholders of TGA (UK) and Telemonde, Inc., dated August 9,
1999.
2.5(a) Share Purchase Agreement for the sale and purchase of all the
issued capital shares of Carnival Enterprises Limited and 10% of
the issued share capital of ITS Europe, S.L. among (1) Market
Consultant Limited, (2) Volim Holding B.V., (3) Callaway
Continental Limited and (4) EquiTel Communications, dated
October 22, 1999.
2.5(b) Share Purchase Agreement for the sale and purchase of 400,000
shares of common stock of Telemonde, Inc. between Market
Consultant Limited and Callaway Continental Limited, dated
October 22, 1999.
3.1(a) Certificate of Incorporation of Telemonde, Inc., filed June 29,
1999.
3.1(b) Certificate of Merger between Telemonde, Inc., a Nevada
corporation, and Telemonde, a Delaware corporation.
3.2 By-Laws of Telemonde, Inc.
4.1 Form of Common Stock Certificate.
4.2 Registration Rights Agreement between Telemonde, Inc. and
Communications Collateral Limited, dated September 1, 1999.
4.3 Registration Rights Agreement between Telemonde, Inc. and
Atlantic Crossing, Ltd., dated August 25, 1999.
10.1 Warrant from Telemonde, Inc. to Communications Collateral
Limited, dated September 1, 1999.
10.2 Warrant from Telemonde, Inc. to Atlantic Crossing, Ltd., dated
August 25, 1999.
80
<PAGE>
10.3 Consulting Agreement between Telemonde, Inc. and Gottfried von
Bismarck, dated November 2, 1999 and effective as of July 1,
1999.
10.4 Form of Employment Agreement between Executive Officers and
Telemonde.
10.4(a) Schedule of Employees covered by Form of Employment Agreement.
10.5 Capacity Sales Agreement between Gemini Submarine Cable System
Limited and Telemonde International Bandwidth (Bermuda) Limited,
April 3, 1998.
10.5(a) Promissory Note from Telemonde, Inc. to Gemini Submarine Cable
System Limited, dated August 27, 1999 for $1,300,000.
10.5(b) Promissory Note from Telemonde, Inc. to Gemini Submarine Cable
System Limited, dated August 27, 1999 for $1,400,000.
10.6 Capacity Purchase Agreement between Atlantic Crossing Ltd. and
Telemonde Bandwidth (Bermuda) Limited, dated June 10, 1998.
10.7 Transmission Capacity Agreement among MCI Worldcom Global
Networks U.S., Inc., and MFS Cableco (Bermuda) Limited, and,
EquiTel Bandwidth Limited, dated December 1998.
10.8 Transmission Capacity Agreement among MCI WorldCom Global
Networks U.S., Inc., and MCI Worldcom Global Networks Limited,
and Telemonde International Bandwidth Limited, dated March 31,
1999.
10.9 Transmission Capacity Agreement between Telemonde International
Bandwidth Limited and Communications Collateral Limited and
Capacity Option Agreement between Telemonde Investments Limited
and Communications Collateral Limited, both dated April 15,
1999.
10.10 Composite Guarantee and Debenture, among (1) Telemonde
Investments Limited, (2) Telemonde International Bandwidth
(Bermuda) Limited, Telemonde
81
<PAGE>
Bandwidth (Bermuda) Limited, Telemonde International Bandwidth
Limited, and (3) Communications Collateral Limited, dated April
12, 1999.
10.11 Loan Facility Agreement between Telemonde Investments Limited
and Communications Collateral Limited, dated April 15, 1999.
21 Subsidiaries of Registrant.
27 Financial Data Schedule.
99.1 Heads of Agreement between Telemonde, Inc. and the shareholders
of Global Communications Holdings (Limited) and Telemonde, Inc.,
dated November 5, 1999.
99.2 Agreement relating to a Lease and Services Agreement between
Global Switch (London) Limited and Telemonde Networks Limited,
dated November 8, 1999.
99.3 Term Sheet for the purchase of 16% to 51% of DeserTel, dated
November 8, 1999.
82
<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, thereunto duly authorized in the City of New York, State of New
York, on November 15, 1999
TELEMONDE, INC.
By: /s/ Adam Bishop
----------------------
Adam Bishop, President
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
hereby constitutes and appoints Adam Bishop and Larry Trachtenberg, and each of
them severally, his true and lawful attorney-in-fact and agent, with full power
of substitution and re-substitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendment to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming that all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
This registration statement has been signed by the following persons in the
capacity and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
------------ ------- ------
<S> <C> <C>
/s/ Kevin Maxwell Chairman and Director November 15, 1999
- - - - ------------------
Kevin Maxwell
/s/ Adam Bishop President, Chief Executive November 15, 1999
- - - - ----------------
AdamBishop Officer, Treasurer and Director
/s/ Gottfried von Bismarck Director and Secretary November 15, 1999
- - - - ----------------------------
Count Gottfried von Bismarck
/s/ Miguel D. Tirado Director November 15, 1999
- - - - ---------------------
Miguel D. Tirado
/s/ Mark Hollo Director November 15, 1999
- - - - ---------------
Mark Hollo
</TABLE>
83
<PAGE>
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of May 14, 1999,
is by and among Pac-Rim Consulting, Inc., a Nevada corporation ("Pac-Rim"),
Thomas Gelfand, a principal of Pac-Rim (the "Pac-Rim Principal"), Telemonde
Investments Limited, an International Business Company incorporated under the
laws of the British Virgin Islands ("Telemonde"), and Rhone Financial Indemnity
Re Limited, an Irish Company and the sole registered member of Telemonde (the
"Telemonde Member").
WITNESSETH:
WHEREAS, Pac-Rim desires to issue, and Telemonde desires to purchase,
shares of common stock of Pac-Rim;
WHEREAS, the Telemonde Member owns all of the issued and outstanding
registered ordinary shares of Telemonde and desire to sell to Pac-Rim, and Pac-
Rim desires to purchase, all of the registered shares of Telemonde.
NOW, THEREFORE, in consideration of the promises, the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
I. TRANSFER OF SHARES
1.1 Transfer of Shares; Closing. In accordance with the terms and
---------------------------
conditions set forth herein, on the Closing Date (as hereinafter defined), the
Telemonde Member shall transfer, convey, assign and deliver, and Pac-Rim shall
purchase, all of the issued and outstanding ordinary shares (the
<PAGE>
"Telemonde Shares") of Telemonde, $1 par value per share (the "Telemonde
Stock"), free and clear of any and all liens, claims and encumbrances
whatsoever.
1.2 Consideration; Exchange of Certificates. As of the Closing Date (as
---------------------------------------
hereinafter defined) and subject to the provisions of Sections 6 and 7, in
exchange for certificates representing the Telemonde Shares, the Telemonde
Member will receive from Pac-Rim an aggregate consideration of 35,297,000
restricted shares (the "Pac-Rim Shares") of Pac-Rim common stock, $.001 par
value per share. The Pac-Rim Shares shall rank pari passu with the issued and
---- -----
outstanding shares of Pac-Rim Common Stock (as defined herein).
1.3 The Closing. The closing of the transactions contemplated by this
-----------
Agreement (the "Closing"), upon the satisfaction of all of the conditions set
forth in Sections 6 and 7 hereof, or the waiver thereof, shall occur May 14,
1999 (the "Closing Date").
1.4 Deliveries at Closing. At the Closing, the Telemonde Member shall
---------------------
deliver to Pac-Rim the various certificates, including without limitation stock
certificates representing the Telemonde Shares, together with accompanying stock
transfer powers or instruments of assignment, duly endorsed in blank. At the
Closing, Pac-Rim shall deliver to Telemonde and the Telemonde Member the various
certificates, including without limitation stock certificates representing Pac-
Rim Shares.
II. REPRESENTATIONS AND WARRANTIES OF TELEMONDE
AND THE TELEMONDE MEMBER
Telemonde and the Telemonde Member, jointly and severally, hereby represent
and warrant to Pac-Rim and the Pac-Rim Principal as follows:
2
<PAGE>
2.1 Organization. Telemonde is a corporation duly organized, validly
------------
existing and in good standing under the laws of the British Virgin Islands.
Telemonde and the Telemonde Member have the power and authority to enter into
and perform the purchase of the Pac-Rim Shares, the sale of Telemonde Stock, and
to consummate the transactions contemplated by this Agreement.
2.2 Authority. Telemonde and the Telemonde Member have full power and
---------
authority to enter into this Agreement and to consummate the transactions
provided for herein, and the execution and delivery of this Agreement, and the
other documents and instruments specified herein, and the consummation of the
transactions provided for herein by Telemonde and the Telemonde Member have been
duly and validly authorized by all necessary action on the part of Telemonde and
the Telemonde Member and are in compliance with applicable law. This Agreement
constitutes the valid and binding agreement on the part of Telemonde and the
Telemonde Member, enforceable against them in accordance with its terms.
2.3 Absence of Violations or Conflicts. The execution and delivery of
----------------------------------
this Agreement and the consummation by Telemonde and the Telemonde Member of the
transactions contemplated herein (a) will not constitute a violation of, be in
conflict with, constitute a default under or result in the creation or
imposition of any security interest, lien or other encumbrance or adverse claim
upon any of Telemonde's assets under (i) any contract, agreement, commitment or
understanding to which Telemonde or the Telemonde Member is a party, to which
either of them is subject or by which either of them is bound, (ii) any
applicable judgment, decree or order of any court or governmental agency or
(iii) any applicable statute, law, rule, regulation, release or other official
pronouncement and (b) will not create, or cause the acceleration of the maturity
of, any debt, obligation or liability of Telemonde or the Telemonde Member.
3
<PAGE>
2.4 Capital Stock. The authorized capital stock of Telemonde consists of
-------------
50,000 ordinary shares, par value U. S. $1.00 per share, of which as of May 14,
1999, 35,297 ordinary shares of Telemonde were duly authorized and validly
issued and outstanding, fully paid and nonassessable, and no shares of Telemonde
Common Stock were held in the treasury of Telemonde. Except as set forth on
Schedule 2.4, the Telemonde Member is and will be on the Closing Date the record
and beneficial owner and holder of the Telemonde Shares, free and clear of any
charge, claim, equitable interest, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any restriction on
use, voting, transfer, receipt of income, or exercise of any other attribute of
ownership. Other than the Telemonde Shares, no shares of Telemonde Stock have
been issued, and Telemonde has no commitments to issue or sell any shares of
Telemonde Stock or any other securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire
from Telemonde, any shares of Telemonde Stock, and no securities or obligations
evidencing such rights are outstanding.
III. REPRESENTATIONS AND WARRANTIES
OF PAC-RIM AND THE PAC-RIM PRINCIPAL
Pac-Rim and the Pac-Rim Principal, jointly and severally, hereby represent
and warrant to Telemonde and the Telemonde Member as follows:
3.1 Organization and Standing; Subsidiaries. Pac-Rim is a corporation
---------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Nevada and has full corporate power to carry on its business as it is
now being conducted and to own or hold under lease the assets it now owns or
holds under lease and to issue the Pac-Rim Shares, and to consummate the
transactions contemplated by this Agreement. Pac-Rim does not own any
subsidiaries.
4
<PAGE>
3.2 Capitalization of Pac-Rim. Pac-Rim's entire authorized capital stock
-------------------------
consists of 100,000,000 shares of Pac-Rim common stock $.001 par value per
share, of which 24,000,000 shares are issued and outstanding (the "Pac-Rim
Common Stock"), and no shares of Pac-Rim common stock, $.001 par value per share
are held in the treasury of Pac-Rim. All the issued and outstanding shares of
Pac-Rim Common Stock have been duly authorized and are validly issued and are
fully paid and non-assessable, free of any preemptive rights, and are owned by
those shareholders in those amounts indicated under their respective names on
Exhibit A attached hereto. Each of the Pac-Rim shareholders has good and
- - - - ---------
marketable title to Pac-Rim Common Stock owned by him or it, free of any liens,
restrictions or encumbrances of any kind. Pac-Rim is not a party to or bound by
any options, calls, contracts or commitments of any character relating to any
issued or unissued stock or any other equity security issued or to be issued by
Pac-Rim. None of the shares of Pac-Rim Common Stock was issued in violation of
the Securities Act of 1933, as amended (the "1933 Act"), or any regulation or
rule promulgated thereunder, or any other federal or state law relating to the
sale and issuance of securities. All of the shares of Pac-Rim Common Stock were
issued pursuant to Rule 504 of the 1933 Act, and are thus freely tradeable
securities. Except as set forth in Schedule 3.2, none of the shares of Pac-Rim
Common Stock are "restricted securities" within the meaning of Rule 144 of the
1933 Act. As of the Closing, the Pac-Rim Shares will be duly and validly
authorized and issued, fully paid and nonassessable, and free of any preemptive
rights. The sale and issuance of Pac-Rim Shares will not violate the 1933 Act or
any regulation or rule promulgated thereunder, or any other federal or state law
relating to the sale and issuance of the Pac-Rim Shares. The Pac-Rim Common
Stock is not subject to the provisions of Nevada Revised Statute 78.378 through
78.3793 (the Acquisition of Controlling Interest Statute).
5
<PAGE>
3.3 Financial Statements. Pac-Rim has delivered to Telemonde copies of
--------------------
Pac-Rim's audited financial statements for the fiscal year 1998. These
financial statements are true and complete in all respects, have been prepared
in accordance with generally accepted accounting principles consistently
followed throughout the period covered by such statements (except as may be
stated in the explanatory notes to such statements), and present fairly the
financial position and results of operations of Pac-Rim at the dates of such
statements and for the periods covered thereby.
3.4 No Undisclosed Liabilities. Except as and to the extent reflected or
--------------------------
reserved against in the consolidated balance sheets included within Pac-Rim's
consolidated financial statements referred to in Section 3.3 of this Agreement,
at the date of such statements, Pac-Rim had no liabilities or obligations
(whether accrued, absolute or contingent), of the character which, under
generally accepted accounting principles, should be shown, disclosed or
indicated in a consolidated balance sheet of Pac-Rim or explanatory notes or
information supplementary thereto, including, without limitation, any
liabilities resulting from failure to comply with any law or any federal, state
or local tax liabilities due or to become due whether (a) incurred in respect of
or measured by income for any period prior to the close of business on such
dates, or (b) arising out of transactions entered into, or any state of facts
existing, prior thereto.
3.5 Absence of Certain Changes, Events or Conditions. Since November 16,
------------------------------------------------
1998, there has not been any change in Pac-Rim's consolidated financial
position, results of operations, assets, liabilities, net worth or business,
other than changes in the ordinary course of business which have not been
materially adverse. Since November 16, 1998, Pac-Rim has not experienced any
event or condition of any character (whether or not covered by insurance) which
has adversely
6
<PAGE>
affected or will or might so affect its respective properties, businesses,
financial positions, results of operations, or net worth.
3.6 Title to Leasehold. The leases and other agreements or instruments
------------------
under which Pac-Rim holds, leases or is entitled to the use of any real
property or personal property, are set forth in Schedule 3.6, and are in full
------------
force and effect, and all rentals, royalties or other payments payable
thereunder prior to the date hereof have been duly paid. All "buy-out" prices
under operating or capital leases are shown on Schedule 3.6, regardless as to
------------
whether the lessee has any obligation to purchase such property. True and
correct copies of such leases and agreements, together with all amendments, are
attached to this Agreement as part of Schedule 3.6. No default or event of
------------
default exists, and no event which, with notice or lapse of time or both, would
constitute a default, has occurred and is continuing, under the terms or
provisions, express or implied, of any of such lease, agreement or other
instrument or under the terms or provisions of any agreement to which any of
such properties is subject, nor has Pac-Rim received notice of any claim of such
default (whether material or not), nor, has Pac-Rim failed to comply in any
respect with any provision or condition of any such lease, agreement or other
instrument. Pac-Rim has not received a notice of violation of any applicable
law, ordinance, regulation, order or requirement relating to its operations or
its owned or leased properties.
3.7 Title to Assets. Pac-Rim owns and has good, marketable and insurable
---------------
title to all of its assets, none of which are subject to any mortgage, pledge,
lien, security interest or other encumbrance.
3.8 Litigation. Except as described on Schedule 3.8 , there is no claim,
---------- ------------
controversy, legal action, mediation, arbitration, non-insured workers'
compensation claim, litigation, proceeding
7
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or governmental investigation pending or, threatened or in prospect, against or
relating to Pac-Rim, its respective properties or business, or the transactions
contemplated by this Agreement. All litigation and claims identified on Schedule
--------
3.8 are covered by Pac-Rim's insurance and are being defended by and at the cost
- - - - ---
of Pac-Rim's insurance carrier. Except as disclosed on Schedule 3.8, Pac-Rim is
------------
not subject to or bound by any order of any court, regulatory commission, board
or administrative body entered in any proceeding to which it is a party or of
which Pac-Rim has knowledge.
3.9 Intangible Property. Except as described on Schedule 3.9, Pac-Rim
------------------- ------------
owns all of the rights in and to all trademarks, service marks, trade names,
logos, processes, systems, inventions, writings, or methods, whether or not
patentable or copyrightable, which are set forth on Schedule 3.9, free of any
------------
obligations to any third parties, free from any security interest or other lien
or encumbrance, and free of the rightful claims of any third party by way of
infringement. Pac-Rim has no knowledge of any facts which negatively impacts
the ability of Telemonde from obtaining copyrights or trademarks on all
otherwise copyrightable material or the ability of Telemonde to obtain worldwide
trademark rights in its products. The conduct of the business of Pac-Rim as now
conducted does not and will not conflict with patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, copyrights or trade dress of others in any way likely to
affect adversely the business, assets or condition, financial or otherwise, of
Pac-Rim. Except as described on Schedule 3.9, no other person or entity has
------------
heretofore used or now uses any trademark, trade name or other intangible
property owned by or licensed to Pac-Rim, except as duly licensed by Pac-Rim
under an agreement disclosed in Schedule 3.9. No
------------
8
<PAGE>
material infringement of any proprietary right owned by, or licensed by or to,
Pac-Rim known to Pac-Rim.
3.10 [Open]
3.11 Government and Other Consents. No consent, authorization or approval
-----------------------------
of, or exemption by, or filing with any governmental, public or self-regulating
body or authority is required by Pac-Rim, the Pac-Rim Principal or any
shareholder of Pac-Rim for consummation of this Agreement or any of the
instruments or agreements herein referred to, or the taking of any action herein
contemplated.
3.12 Compliance. Pac-Rim has all governmental licenses, permits, approvals
----------
and other authorizations, and have made all filings and registrations, which are
necessary in order to enable them to conduct its business in all respects. Pac-
Rim heretofore has delivered to Telemonde Schedule 3.12 which fairly and
-------------
accurately summarizes or lists all material licenses, permits, approvals,
authorizations and regulatory matters relating to the business of Pac-Rim. Pac-
Rim has complied with, and is in compliance with, all laws, regulations and
ordinances which are applicable to its business.
3.13 Labor Relations. Pac-Rim has been and is in compliance with all
---------------
federal and state laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and have not engaged in, and are
not engaging in, any unfair labor practice. There is no collective bargaining
agreement which is binding on Pac-Rim, and Pac-Rim has not experienced, and is
not experiencing, any material labor stoppage, concerted activity or other labor
difficulty; and Pac-Rim has no employment or consulting agreements.
9
<PAGE>
3.14 No Conflict with Other Documents. Except as described in Schedule
-------------------------------- --------
3.14, neither the execution and delivery of this Agreement nor the carrying out
- - - - ----
of the transactions contemplated hereby will result in any violation,
termination or modification of, or be in conflict with, Pac-Rim's charter or
organizational documents or bylaws, any terms of any contract or other
instrument to which Pac-Rim or is a party, or any judgment, decree or order
applicable to Pac-Rim or result in the creation of any lien, charge or
encumbrance upon any of the properties or assets of Pac-Rim.
3.15 Company Authority. The execution, delivery and performance of this
-----------------
Agreement by Pac-Rim and by the Pac-Rim Principal have been duly authorized and
approved by the Board of Directors and shareholders of Pac-Rim and this
Agreement is a valid, legally binding and enforceable obligation of Pac-Rim and
the Pac-Rim Principal. This Agreement, the issuance of the Pac-Rim Common
Stock, the purchase of the Telemonde Common Stock and the other transactions
contemplated hereunder have been approved by the Board of Directors and
shareholders of Pac-Rim, and all corporate authorizations required for
consummation of the transactions contemplated by this Agreement have been
received and continue to be in full force and effect. Upon satisfaction of all
conditions contained herein, this Agreement will result in the valid, legally
binding and enforceable obligation of Pac-Rim and the Pac-Rim Principal.
3.16 Contracts. Except as shown on Schedule 3.16, Pac-Rim is not a party
--------- -------------
to or subject to: (a) any employment contract with any officer, consultant,
director or employee; (b) any plan or contract or arrangement providing for
bonuses, pensions, options, deferred compensation, retirement payments, profit
sharing, or the like; (c) any contract or agreement with any labor union; (d)
any lease of real or personal property; (e) any agreement for the purchase, sale
or other disposition of any materials, equipment, supplies or inventory; (f) any
instrument creating a lien or evidencing or
10
<PAGE>
related to indebtedness for borrowed money; (g) any franchise, manufacturer's
representative, distributorship or similar agreement; (h) any contract
containing covenants not to enter into or consummate the transactions
contemplated hereby or which will be terminated or modified by the carrying out
of such transactions; or (i) any other contract or agreement not of the type
covered by any of the other specific items of this section. Each of the
contracts, instruments, and other documents described on Schedule 3.16 is valid
-------------
and in full force and effect, and a true and complete copy thereof heretofore
has been delivered to Telemonde. Pac-Rim is not in default, or alleged to be in
default, in any respect under any of the contracts, instruments, obligations or
other documents to which it is a party or by which it is bound. Except as shown
on Schedule 3.16, the issuance of Pac-Rim Common Stock and the transactions
-------------
contemplated by this Agreement will not cause a default under, or provide any
right of termination with respect to, any contract, instrument, obligation or
other document to which Pac-Rim is a party or by which Pac-Rim is bound. No
party with whom Pac-Rim has an agreement is in default thereunder in any
respect.
3.17 Tax Matters. The provisions made for taxes on the balance sheet of
-----------
Pac-Rim contained in the 1998 financial statements referred to in Section 3.3 of
this Agreement are sufficient for the payment of all unpaid federal, state,
county, local and other taxes of Pac-Rim, whether or not disputed. The federal
income tax returns of Pac-Rim has been audited by the Internal Revenue Service
(or are no longer subject to audit) for all open years to and including 1998.
There are no proposed additional taxes, interest or penalties with respect to
any year examined or not yet examined. Pac-Rim has provided to Telemonde true
and complete copies of the federal and state income tax returns of Pac-Rim for
the year ended 1998, together with true and complete copies as filed of all
reports of any taxing authority relating to examinations thereof which have been
delivered
11
<PAGE>
to Pac-Rim. Each such tax return was prepared in accordance with applicable law
and properly reflect the liability for taxes of Pac-Rim to the jurisdiction to
which such return is made for the period covered thereby. Pac-Rim has not
entered into any agreements extending the statute of limitations with respect to
any federal or state taxes.
3.18 Title to Real and Personal Properties; Absence of Liens and
-----------------------------------------------------------
Encumbrances, Etc. Pac-Rim has good, marketable and insurable title to all its
- - - - ------------------
properties and assets, real and personal (including those properties and assets
reflected in the consolidated balance sheets contained in the 1998 financial
statements referred to in Section 3.3 of this Agreement except as sold or
otherwise disposed of in the ordinary course of business since the date
thereof), in each case free and clear of all liens and encumbrances, except
those reflected in such financial statements or in the notes to such financial
statements, the lien of current taxes not yet due and payable and such
imperfections of title, easements and encumbrances, if any, as are not
substantial in character, amount or extent, and do not detract from the value,
or interfere with the present or anticipated business use, of the properties
subject thereto or affected thereby, or impair business operations. Pac-Rim is
not in violation of any laws, judgment, order, decree, regulation or rule of any
court or governmental authority applicable to any of them; and the business
operations of Pac-Rim are in compliance with all applicable building codes,
environmental, zoning and land use laws, and other local, state and federal
licensing and permitting requirements. Pac-Rim has not received any notice of
violation of any applicable zoning laws, orders, regulations, or requirements
relating to its operations or its properties which has not been complied with,
nor any proposed changes in any such laws, orders or regulations which might
have an adverse effect on its business. There is no threatened or impending
condemnation of any of the assets of Pac-Rim or any other properties of Pac-Rim
by any governmental authority.
12
<PAGE>
3.19 Condition of Facilities. The structures and equipment comprising the
-----------------------
business of Pac-Rim and owned, operated or leased by Pac-Rim are presently
adequate for the operations for which they are being used; such facilities,
structures and equipment are structurally sound and in good repair and operating
condition, normal wear and tear excepted; and Pac-Rim is not in violation of any
applicable building, zoning, antipollution, environmental, health, safety,
manufacturing or other laws, ordinance or regulation in respect of such
facilities, structures or equipment, and Pac-Rim has not received any notice
alleging such a violation. There are no pending or contemplated eminent domain
proceeding affecting such facilities, structures or equipment or any part
thereof and Pac-Rim has not received notice of any such eminent domain
proceeding. Pac-Rim has not received notice of any pending or contemplated
proceedings or public improvements which could or might result in the levy of
any special tax or assessment against facilities, structures or equipment. There
are no outstanding requirements or recommendations by fire underwriters, rating
boards or insurance companies requiring or recommending any repairs or work to
be done with reference to such facilities, structures or equipment.
3.20 Environmental Matters. During the period of time that Pac-Rim or any
---------------------
entity controlled or affiliated with Pac-Rim has owned or controlled the
business operations, and the properties on which the business operations of Pac-
Rim are conducted has not been used prior to the Closing Date for the disposal
of any toxic or hazardous waste, material or substance as the terms "hazardous
waste," "hazardous substance," hazardous material" or "toxic substance" are
defined in the Comprehensive Environmental Response, Compensation and Liability
Act, the Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, any applicable state law or any other applicable environmental law
or rules and regulations promulgated thereunder nor has
13
<PAGE>
any "release" of such substances occurred on or about any premises of Pac-Rim in
violation of, or requiring "remedial action" under such laws, rules and
regulations, as those terms are defined therein.
3.21 Pension and Employee Benefit Plans. There are no plans in effect for
----------------------------------
pension, profit sharing, deferred compensation, severance pay, bonuses, stock
options, stock purchases, or any other form of retirement or deferred benefit,
or for any health, accident or other welfare plan, in which any employee of Pac-
Rim is entitled to participate.
3.22 Insurance. Schedule 3.22 summarizes the insurance currently carried
--------- -------------
by Pac-Rim in respect of its respective properties and operations, as well as
the assets of Pac-Rim, including, without limitation, information as to limits
of coverage, deductibles, annual premium requirements and expiration dates with
respect to product liability, general liability, umbrella liability, contractual
liability, employers' liability, automobile liability, workers' compensation,
property and casualty, business interruption and other insurance carried by Pac-
Rim. All such insurance continues to be in full force and effect, and Pac-Rim
is in compliance with all requirements and provisions thereof. Except as set
forth on Schedule 3.22, none of the insurance carried by Pac-Rim is subject to
-------------
any retroactive rate or audit adjustments, or co-insurance arrangements. True
and correct copies of all insurance policies relating to such coverage have been
provided by Pac-Rim to Telemonde. There is no reason to believe that any such
insurance coverage will not be renewed upon the expiration thereof at premiums
substantially equivalent to those currently being paid by Pac-Rim. The
insurance coverages heretofore and currently carried by Pac-Rim were and are
consistent with types and amounts of coverages customarily carried by similarly
situated companies.
14
<PAGE>
3.23 No Pending Transactions. Except for the transactions contemplated by
-----------------------
this Agreement, Pac-Rim is not a party to or bound by or the subject of any
agreement, undertaking or commitment (i) to merge or consolidate with, or
acquire all or substantially all of the property and assets of, any other
corporation or person, or (ii) to sell, lease or exchange all or substantially
all of its property and assets to any other corporation or person, or (iii) to
sell, transfer or issue any Pac-Rim Common Stock.
3.24 Disclosure. No representation or warranty made by Pac-Rim or the Pac-
----------
Rim Principal in this Agreement and no statement contained in a certificate,
schedule, list or other instrument or document specified in or delivered
pursuant to this Agreement, whether heretofore furnished to Telemonde or
hereafter required to be furnished to Telemonde, contains or will contain any
untrue statement of a fact or omits or will omit to state any fact necessary to
make the statements contained herein or therein not misleading. All information
relating to the historical and prospective financial position, results of
operations, assets and business of Pac-Rim which is or would be material to the
issuance of Pac-Rim Common Stock to Telemonde has been provided by Pac-Rim to
Telemonde.
3.25 Transactions with Affiliates. Except as disclosed on Schedule 3.25,
---------------------------- -------------
Pac-Rim is not a party to any transaction with any (i) current or former officer
or director of Pac-Rim, or (ii) any parent, spouse, child, brother, sister or
other family relation of any such officer or director or (iii) any corporation
or partnership of which any such officer or director or any such family relation
is an officer, director, partner or greater than 10% shareholder (based on
percentage ownership of voting stock) or (iv) any "affiliate" or "associate" of
any such persons or entities (as such terms are defined in the rules and
regulations promulgated under the 1933 Act), including, without limitation, any
15
<PAGE>
transaction involving a contract, agreement or other arrangement providing for
the employment of, furnishing of materials, products or services by, rental of
real or personal property from, or otherwise requiring payments to, any such
person or entity.
3.26 SEC Documents. Except for forms filed pursuant to Rule 15c2-11, there
-------------
have been no filings with the Securities and Exchange Commission (the "SEC")
that were required to be filed with the SEC by the Securities Exchange Act of
1934, as amended (the "1934 Act").
3.27 OTC Bulletin Board. The Pac-Rim Common Stock is posted on the OTC
------------------
Bulletin Board, and trading of the Pac-Rim Common Stock has not been suspended
or terminated since the commencement of the posting of Pac-Rim Common Stock on
the OTC Bulletin Board. The OTC Bulletin Board Market Makers for the Pac-Rim
Common Stock are Pacific Cortez Securities, Incorporated, C.M. Blair, W.O.
Foster & Co., Inc., EBI Securities Corporation, William V. Frankel & Co.,
Incorporated, Hill, Thompson, Magid & Co., Inc., M.H. Meyerson & Co., Inc.,
Sharpe Capital, Inc. and Wien Securities Corp.
3.28 Registration Rights. No corporation, general or limited partnership,
-------------------
limited liability company, joint venture, trust, association, natural person or
entity of any kind has any right to require the registration of any shares of
Pac-Rim Common Stock or any other securities of Pac-Rim.
3.29 Directors and Officers. No director or officer of Pac-Rim has (a)
----------------------
filed a registration statement with the SEC which is the subject of any pending
proceeding or examination under the 1933 Act or is the subject of any refusal
order or stop order thereunder five years prior to the date of this Agreement;
(b) been convicted within five years prior to the date of this Agreement of any
felony or misdemeanor in connection with the purchase or sale of any security or
involving the making of any false filing with the SEC; (c) been subject to any
order, judgment or decree of any
16
<PAGE>
court of competent jurisdiction temporarily or preliminary restraining or
enjoining, or been subject to any order, judgment or decree of any court of
competent jurisdiction, entered within five years prior to the date of this
Agreement, permanently restraining or enjoining such person from engaging in or
continuing any conduct or practice in connection with the purchase or sale of
any security or involving the making of any false filing with the SEC; (d) been
convicted within ten years prior to the date of this Agreement of any felony or
misdemeanor in connection with the purchase or sale of any security, involving
the making of a false filing with the SEC or arising out of the conduct of the
business of an underwriter, broker, dealer, municipal securities dealer or
investment advisor; (e) been subject to any order, judgment or decree of any
court of competent jurisdiction temporarily or preliminarily enjoining or
restraining or been subject to any order, judgment or decree of any court of
competent jurisdiction entered within five years of the date of this Agreement,
permanently enjoining or restraining such person from engaging in or continuing
any conduct or practice in connection with the purchase or sale of any security,
involving the making of a false filing with the SEC or arising out of the
conduct of the business of any underwriter, broker, dealer, municipal securities
dealer or investment advisor; or (f) been suspended or expelled from membership
in, or suspended or barred from association with a member of an exchange
registered as a National Securities Exchange pursuant to Section 6 of the 1934
Act, an association registration as a National Securities Association under
Section 15A of the 1934 Act or Canadian securities exchange or association for
any act or omission to act constituting conduct inconsistent with just and
equitable principles of trade.
17
<PAGE>
IV. COVENANTS OF TELEMONDE
AND THE TELEMONDE MEMBER
Telemonde and the Telemonde Member covenant that, except as otherwise
consented to in writing by Pac-Rim and the Pac-Rim Principal after the date of
this Agreement:
4.1 Consents. Telemonde and the Telemonde Member will take all necessary
--------
corporate or other action and use their best efforts to obtain all consents and
approvals required for consummation of the transactions contemplated by this
Agreement.
4.2 Cause Conditions to be Satisfied. Telemonde and the Telemonde Member
--------------------------------
will use their best efforts to cause all of the conditions described in Article
VII of this Agreement to be satisfied (to the extent such matters reasonably are
within its control).
V. COVENANTS OF PAC-RIM AND THE PAC-RIM
PRINCIPAL
Pac-Rim and the Pac-Rim Principal covenant to Telemonde and the Telemonde
Member that, except as otherwise consented to in writing by Telemonde and the
Telemonde Member after the date of this Agreement:
5.1 Conduct of Business. Except as otherwise provided in this Agreement,
-------------------
after the date of this Agreement and on or prior to the Closing Date, with
respect to Pac-Rim (a) its business will be conducted only in the ordinary
course; (b) it will not enter into, adopt or amend any employee pension, profit-
sharing, retirement, insurance, incentive compensation, severance or similar
plan, agreement or arrangement, enter into or amend any employment contracts, or
increase the salaries or compensation of its executive officers or, other than
ordinary increases in salaries in accordance with past practices, of other
employees; (c) it shall not incur any liability for borrowed money, encumber any
of its assets or enter into any agreement relating to the incurrence of
additional debt
18
<PAGE>
(other than short term unsecured bank credit in the ordinary course of
operations in accordance with past practices), except in accordance with Section
6.12 of this Agreement; (d) it will use its best efforts to preserve its
business organization intact, to keep available the service of its officers and
employees and to preserve the goodwill of suppliers, customers and others doing
business with it; (e) it will not acquire or agree to acquire by merging or
consolidating with, purchasing substantially all of the assets of, or otherwise,
any business or any corporation, partnership, association or other business
organization or division thereof; (f) it will not enter into or amend any
contract or agreement with any labor union or any lease of real estate or
personal property; (g) it will not enter into any agreement for the purchase,
sale or other disposition, or purchase, sell or dispose of, any equipment,
supplies, inventory, investments or other assets (other than sales of inventory
and purchases of materials and supplies in the ordinary course of business and
in accordance with past practices); (h) it will not compromise or write off any
material account receivable other than by collection of the full recorded amount
thereof; (i) no change shall be made in its charter documents or bylaws; (j) no
change shall be made in the number of shares or terms of its authorized, issued
or outstanding capital stock, nor shall it enter into or grant any options,
calls, contracts or commitments of any character relating to any issued or
unissued capital stock; and (k) no dividend or other distribution or payment
shall be declared or paid in respect of its capital stock.
5.2 Consents. Pac-Rim and the Pac-Rim Principal agree to take all
--------
necessary corporate or other action and to use their best efforts to complete
all filings and obtain all governmental and other consents, permits licenses and
approvals required for consummation of the transactions contemplated by this
Agreement.
19
<PAGE>
5.3 Notice of Litigation. Pac-Rim will provide written notice to
--------------------
Telemonde of any litigation, proceeding or governmental investigation which
arises or is threatened or in prospect, after the date of this Agreement and
prior to the Closing, against or relating to Pac-Rim, its respective assets,
properties or businesses, or the transactions contemplated by this Agreement,
setting forth in such notice the facts and circumstances currently available to
Pac-Rim with respect to such litigation, proceeding or investigation.
5.4 Corporate Transactions. Pac-Rim will not seek, and the Pac-Rim
----------------------
Principal will cause Pac-Rim not to seek, the affiliation of Pac-Rim with any
entity other than Telemonde and neither will negotiate or entertain any offer
with respect to the issuance of Pac-Rim Common Stock or the sale of part or all
of the Pac-Rim Common Stock or substantially all of Pac-Rim's assets. Pac-Rim
will not authorize or permit any officer, director or employee of Pac-Rim to, or
any investment banker, attorney, accountant or other representative retained by
Pac-Rim to, solicit or encourage (including by way of furnishing information)
any inquiries or the making of any proposal that is reasonably expected may lead
to the acquisition of part or all of the Pac-Rim Common Stock or substantially
all of its assets by any person other than Telemonde. Pac-Rim promptly will
advise Telemonde orally, followed by written confirmation, of any such inquiries
or proposals.
5.5 Cause Conditions to be Satisfied. Pac-Rim will use its best efforts
--------------------------------
to cause all of the conditions described in Article VI of this Agreement to be
satisfied (to the extent such matters reasonably are within their control).
20
<PAGE>
VI. CONDITIONS TO TELEMONDE AND THE
TELEMONDE MEMBER'S OBLIGATIONS
Unless waived by Telemonde and the Telemonde Member in writing in their
sole discretion, all obligations of Telemonde and the Telemonde Member under
this Agreement are subject to the fulfillment, prior to or at the Closing, of
each of the following conditions by Pac-Rim and the Pac-Rim Principal:
6.1 Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of Pac-Rim and the Pac-Rim Principal contained in Section 3 of this
Agreement shall be true at and as of the Closing Date, shall be deemed made
again at and as of such date and be true as so made again; Pac-Rim and the Pac-
Rim Principal shall have performed all obligations and complied with all
covenants required by this Agreement to be performed or complied with by them
prior to the Closing; and Telemonde shall have received from Pac-Rim and the
Pac-Rim Principal a certificate or certificates in such reasonable detail as
Telemonde may reasonably request, signed by the Chairman of the Board or
President of Pac-Rim and by the Pac-Rim Principal and dated the date of Closing,
to the foregoing effect.
6.2 Opinion of Counsel. Pac-Rim and the Pac-Rim Principal shall have
------------------
delivered to Telemonde and the Telemonde Member a favorable opinion of its
counsel, Michael J. Morrison, dated the Closing Date, in form and substance
satisfactory to Telemonde and its counsel.
6.3 Approvals of Governmental Authorities. All consents and approvals
-------------------------------------
necessary or advisable in the opinion of Telemonde's counsel to consummate the
transactions contemplated by this Agreement shall have been received and shall
not contain any provision which, in the judgment of Telemonde, is unduly
burdensome.
21
<PAGE>
6.4 No Adverse Proceedings or Events. No suit, action or other proceeding
--------------------------------
against Pac-Rim or Telemonde, or their respective officers or directors, or any
shareholders of Pac-Rim or Telemonde, shall be threatened or pending before any
court or governmental agency in which it will be, or it is, sought to restrain
or prohibit any of the transactions contemplated by this Agreement or to obtain
damages or other relief in connection with this Agreement or the transactions
contemplated hereby.
6.5 Consents and Actions; Contracts. All requisite consents of any third
-------------------------------
parties and other actions which Pac-Rim has covenanted to use its best efforts
to obtain and take shall have been obtained and completed. All contracts and
agreements of Pac-Rim relating to its assets and business, including, without
limitation, all contracts and agreements listed on Schedule 6.5, shall be in
------------
full force and effect and shall not be affected by the consummation of the
transactions contemplated hereby. Pac-Rim shall also have been removed and
discharged from all guaranties, contracts, agreements and commitments relating
to any matter other than the assets and the business specifically and not by way
of limitation the lease with respect to the corporate offices of Pac-Rim shall
have been terminated.
6.6 No Adverse Change. No adverse change in the financial condition,
-----------------
results of operations, assets, liabilities, business or prospects (including any
change resulting from governmental regulations or the loss of any permits,
licenses or franchises) of the business of Pac-Rim shall have occurred between
the date hereof and the Closing Date.
6.7 No Prohibition. No federal, state or local governmental unit, agency,
--------------
body or authority with competent jurisdiction over the subject matter shall have
given official written notice of its intention to institute proceedings to
prohibit the transactions contemplated by this Agreement.
22
<PAGE>
6.8 All Approvals. Telemonde shall have obtained all federal, city,
-------------
county and state approvals, licenses and permits required for the operation of
the facilities included in the assets by Telemonde and no such approval shall
have been conditioned upon any structural changes being made to the business or
assets of Pac-Rim or shall have required the expenditure of more than $1,000.
6.9 All Transfers of Intellectual Property. Pac-Rim shall have executed
--------------------------------------
and delivered to Telemonde any and all necessary documents transferring all
intellectual property of Pac-Rim to Telemonde, including without limitation, all
trade names, trade marks, logos and copyrighted materials by Telemonde.
6.10 Resignations. The officers and directors of Pac-Rim, excluding the
------------
Pac-Rim Principal, shall have resigned effective as of the Closing Date. The
Pac-Rim Principal shall resign as an officer and director immediately following
the Closing Date.
6.11 Releases. Pac-Rim, the Pac-Rim Principal and each present and former
--------
officer and director of Pac-Rim shall have executed releases concerning any
claim against Pac-Rim, including any claims for indemnification, contribution or
otherwise arising with respect to this Agreement, the representations,
warranties and agreements contained herein and the transactions contemplated
hereby.
6.12 Other Evidence. Telemonde shall have received from Pac-Rim such
--------------
further certificates and documents evidencing due action in accordance with this
Agreement, including certified copies of proceedings of the board of directors
and shareholders of Pac-Rim, as Telemonde reasonably shall request.
23
<PAGE>
6.13 Loan Agreement. Pac-Rim shall have executed the Loan Agreement by and
--------------
between Pac-Rim and Caixa de Credito Agricola Mutuo de Oeiras, C.R.I., Lisbon,
Portugal.
VII. CONDITIONS TO PAC-RIM AND THE PAC-RIM
PRINCIPAL'S OBLIGATIONS
Unless waived by Pac-Rim and the Pac-Rim Principal in writing in their sole
discretion, all obligations of Pac-Rim and the Pac-Rim Principal under this
Agreement are subject to the fulfillment by Telemonde and the Telemonde Member,
prior to or at the Closing, of each of the following conditions:
7.1 Representations, Warranties and Covenants. The representations and
-----------------------------------------
warranties of Telemonde and the Telemonde Member contained in Section 2 of this
Agreement shall be true at and as of the Closing Date, shall be deemed made
again at and as of such date and be true as so made again; Telemonde and the
Telemonde Member shall have performed all obligations and complied with all
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing; and Pac-Rim and the Pac-Rim Principal shall have
received from Telemonde and the Telemonde Member a certificate or certificates
in such reasonable detail as Pac-Rim may reasonably request, signed by the
President or a Vice President of Telemonde and by the Telemonde Member and dated
the Closing Date, to the foregoing effect.
7.2 No Adverse Proceedings or Events. No suit, action or other proceeding
--------------------------------
against Pac-Rim or Telemonde, or its officers or directors, shall have been
instituted and resulted in entry of a court order (which has not subsequently
been dismissed, terminated or vacated) enjoining, either temporarily or
permanently, the consummation of the transactions contemplated by this
Agreement.
24
<PAGE>
7.3 Consents and Actions. All requisite consents of any third parties and
--------------------
other actions which Telemonde and the Telemonde Member have covenanted to use
their best efforts to obtain and take under this Agreement shall have been
obtained and completed.
7.4 Other Evidence. Pac-Rim and the Pac-Rim Principal shall have received
--------------
from Telemonde and the Telemonde Member such further certificates and documents
evidencing due action in accordance with this Agreement, including certified
copies of proceedings of the board of directors of Telemonde, as Pac-Rim and the
Pac-Rim Principal reasonably shall request.
VIII. INDEMNIFICATION
8.1 Survival. The parties agree that the representations and warranties
--------
contained in this Agreement shall survive the Closing and continue to be
binding, regardless of any investigation made at any time by the parties.
8.2 Indemnification of Telemonde and the Telemonde Member. Pac-Rim and
-----------------------------------------------------
the Pac-Rim Principal, jointly and severally, hereby agree to indemnify and hold
harmless Telemonde and the Telemonde Member, and each officer, director,
employee or agent of Telemonde, their respective controlling persons, and their
respective estates, successors, and assigns (each an "Indemnified Party"), from
and against any and all claims, losses, damages, liabilities and expenses
(including, without limitation, settlement costs and any legal or other expenses
for investigating or defending any actions or threatened actions) (the "Losses")
reasonably incurred by such Indemnified Party as a result of:
(a) the untruth, inaccuracy or breach of any representation or
warranty made by Pac-Rim or the Pac-Rim Principal pursuant to Article III of
this Agreement;
25
<PAGE>
(b) the nonfulfillment or breach of any covenant, agreement or
obligation of Pac-Rim or the Pac-Rim Principal contained in this Agreement;
(c) any and all amounts of federal, state, and/or local income,
franchise, property, and/or sales and use taxes that my be assessed against
Telemonde with respect to any taxable period(s) ending on or before the date of
this Agreement for which adequate provisions therefor have not been made through
the Closing Date, as reflected on Pac-Rim's books of account and in Pac-Rim
financial statements as of the Closing Date; and the amount(s) of any interest
and/or penalties that may be assessed with respect to said tax assessments;
(d) any matter disclosed on any Schedule; and
(e) any claim or demand by any person asserting any interest in any
share of Pac-Rim Common Stock or seeking dissenters' or appraisal rights or any
other claim in respect to the issuance of Pac-Rim Common Stock.
IX. MISCELLANEOUS
9.1 Brokers and Advisors. Telemonde and Pac-Rim represent and warrant to
--------------------
each other that the transactions contemplated by this Agreement have been
negotiated directly between them and their respective counsel, without the
intervention of any person as a result of any action by them in such a manner as
to give rise to a valid claim against any party hereto for a brokerage
commission, finder's fee, counseling or advisory fee, or like payment, and each
agrees to indemnify the opposite party against any such liability arising from
or through it.
9.2 Expenses. Telemonde shall pay all of its expenses relating to this
--------
Agreement and the transactions contemplated hereby, including fees and
disbursements of its counsel, accountants, investment bankers, and financial
advisors, whether or not the transactions hereunder are
26
<PAGE>
consummated; provided, however, that expenses of Pac-Rim and the Pac-Rim
Principal, including but not limited to attorneys' fee, shall not exceed
$25,000.
9.3 Good Faith; Further Assurances; Further Cooperation. The parties to
---------------------------------------------------
this Agreement shall in good faith undertake to perform their obligations under
this Agreement, to satisfy all conditions and to cause the transactions
contemplated by this Agreement to be carried out promptly in accordance with the
terms of this Agreement. Upon the execution of this Agreement and thereafter,
each party shall do such things as may be reasonably requested by the party
hereto in order more effectively consummate or document the transaction
contemplated by this Agreement.
9.4 Notices. All notices, communications and deliveries under this Agreement
-------
shall be made in writing, signed by the party making the same, shall specify the
Section of this Agreement pursuant to which it is given, and shall be deemed
given on the date delivered if delivered in person or on the third business day
after mailed if mailed certified mail (with postage prepaid), return receipt
requested, as follows:
To Telemonde: Telemonde Investments Limited
P. O. Box 71
Craigmuir Chambers
Road Town
Tortola, British Virgin Islands
Attn: Michael Collins
Facsimile: (441) 292-4069
27
<PAGE>
With a copy to: J. Porter Durham, Jr., Esquire
Baker, Donelson, Bearman & Caldwell
801 Pennsylvania Avenue, NW
Suite 800
Washington, DC 20004
Facsimile: (202) 508-3402
To the Telemonde
Member: Rhone Financial Indemnity Re Limited
1 Rue du Bugnon
1299 Crans
Vaud Switzerland
Attn: Neal Collier
Facsimile: 00 44 22 776 7963
With a copy to: Gouldens
22 Tudor Street
London, England
EC4Y 0JJ
Attn: Richard Beresford
Facsimile: 011-44-171-583-3051
To Pac-Rim: Pac-Rim Consulting, Inc.
#206-455 Granville Street
Vancouver, British Columbia
Canada V6C 1T1
Attn: Thomas Gelfand
Facsimile: (604) 681-8445
With a copy to: Michael J. Morrison, Esquire
1495 Ridgeview Drive
Suite 220
Reno, Nevada 89509
Facsimile: (775) 827-6311
To the Pac-Rim
Principal: Thomas Gelfand
#2065-455 Granville Street
Vancouver, British Columbia
Canada V6C 1T1
Facsimile: (604) 681-8445
With a copy to: Michael J. Morrison, Esquire
28
<PAGE>
1495 Ridgeview Drive
Suite 220
Reno, Nevada 89509
Facsimile: (775) 827-6311
or to such other representative or to such other address as the parties hereto
may furnish to the other parties in writing. If notice is given pursuant to this
section of a permitted successor or assign of a party of this Agreement, then
notice shall be given as set forth above to such successor or assign of such
party. All such notices, requests, or communications shall be mailed postage
prepaid, certified mail, return receipt requested or delivered personally or by
facsimile copy, and shall be sufficient and effective when delivered to or
received at the address so specified. Any party may change the address at which
it is to receive notice by like written notice to the other.
9.5 Assignment. This Agreement shall be binding upon and shall inure to
----------
the benefit of the parties hereto, and their respective legal representatives,
heirs, successors and permitted assigns. Telemonde shall have the absolute right
to assign its rights and obligations hereunder to an entity owned or controlled
by Telemonde without the prior consent of Pac-Rim or the Pac-Rim Shareholder.
9.6 Captions; Definitions. The titles or caption of articles, sections
---------------------
and subsections contained in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof. The parties
agree to all definitions in this Agreement and in the other introductory
language to this Agreement.
9.7 Controlling Law; Jurisdiction; Amendment; Waiver; Remedies Cumulative;
----------------------------------------------------------------------
Attorneys' Fees.
- - - - ---------------
29
<PAGE>
(a) This Agreement shall be construed and enforced in accordance with
the laws of the State of Nevada, without regard to its conflicts of laws rules.
This Agreement may not be altered or amended except in writing signed by
Telemonde, the Telemonde Member, Pac-Rim and the Pac-Rim Principal. The failure
of any party hereto at any time to require performance of any provisions hereof
shall in no manner affect the right to enforce the same. No waiver by any party
hereto of any condition, or of the breach of any term, provision, warranty,
representation, agreement or covenant contained in this Agreement, whether by
conduct or otherwise, in any one 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 of the breach of any other terms, provision, warranty,
representation, agreement or covenant herein contained.
(b) Any action or proceeding against any party hereto relating in any
way to this Agreement or the obligations or any party arising from the
transactions contemplated herein or other documents delivered pursuant hereto
shall be brought and enforced only in the federal and state courts of the State
of New York and the parties irrevocably submit to the jurisdiction of each such
court in respect to any such action or proceeding.
(c) The parties hereto each irrevocably waive, to the fullest extent
permitted by applicable law, any objection that any of them may now or hereafter
have to the laying of venue of any such action or proceeding in the federal and
state courts of the State of New York and any claim that such action or
proceeding brought in any such court has been brought in an inconvenient forum.
(d) If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any provisions of this Agreement, the
successful or prevailing party or parties shall be entitled to
30
<PAGE>
recover reasonable attorneys' fees, court costs and all expenses even if not
taxable as court costs (including, without limitation, all such fees, costs and
expenses incident to appeals), incurred in that action or proceeding, in
addition to any other relief to which such party or parties may be entitled.
9.8 Representations and Warranties. The respective representations and
------------------------------
warranties of each party hereto shall not be deemed to be waived or otherwise
affected by any investigation made by any other parties hereto.
9.9 Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties hereto with respect to the transactions contemplated and
supersedes all prior agreements, understandings, letter of intent and
negotiations, both written and oral, among the parties with respect thereto.
9.10 Counterparts. This Agreement may be executed by each party upon a
------------
separate copy, and in such case one counterpart of this Agreement shall consist
of enough of such copies to reflect the signatures of all of the parties of this
Agreement. This Agreement shall become effective when one or more counterparts
have been signed by each of the parties to this Agreement and delivered to each
of the other parties to this Agreement. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Agreement or the terms of this Agreement to
produce or account for more than one of such counterparts.
[THE REMAINDER OF THIS PAGE HAS INTENTIONALLY BEEN LEFT BLANK]
31
<PAGE>
IN WITNESS WHEREOF, Telemonde, Pac-Rim, the Telemonde Member, and the Pac-
Rim Principal have caused this Agreement to be duly executed and their
respective seals to be hereunto affixed as of the date first above written.
ATTEST: TELEMONDE INVESTMENTS LIMITED
<TABLE>
<S> <C> <C>
By: /s/ B. Mathias /s/ S. Williams
Title: Director Director
</TABLE>
[Corporate Seal]
ATTEST: PAC-RIM CONSULTING, INC.
By: /s/ Thomas Gelfand
Title:________________________
[Corporate Seal]
ATTEST: RHONE FINANCIAL INDEMNITY RE
LIMITED
By: /s/ Neil Collier
32
<PAGE>
Title:_________________________
[Corporate Seal]
ATTEST:
By: /s/ Thomas Gelfand
------------------------------
Thomas Gelfand
33
<PAGE>
Exhibit 2.2
DATED NOVEMBER 8, 1999
----------------------
(1) TELCOWORLD LIMITED
and OTHERS
(2) TELEMONDE INC.
(3) HARRY POMEROY and
LARRY TRACHTENBERG
----------
AGREEMENT
relating to the sale and purchase
of shares in the capital of
Equitel Communications Limited
----------
Gouldens
22 Tudor Street
London, EC4Y OJJ
<PAGE>
INDEX
PARTIES
RECITALS
CLAUSES
1. Interpretation
2. Conditions Precedent
3. Agreement to Sell and Purchase
4. Consideration and Earn-Out
5. Satisfaction of Consideration and Earn-Out
6. Completion
7. Rescission
8. Accounting Matters
9. Warranties
10. Limitations on Liability
11. Protections for Goodwill
12. Tax Affairs
13. Pensions
14. Warranties and Undertakings by Purchaser
15. Set Off
16. Further Assurance
17. Survival of Agreement
18. Costs
19. Successors and Assigns
20. Announcements
21. Notices and Representatives
22. General
SCHEDULES
1. Vendors
2. The Company
3. Properties
4. Warranties
AGREED DRAFT DOCUMENTS
Tax Deed
Powers of Attorney
Resignations
Confirmations of No Claim
Service Agreements x 4
<PAGE>
AGREEMENT
DATED 1999
PARTIES
(1) THE SEVERAL PERSONS whose names and addresses are set out in Schedule 1
("the Vendors").
(2) TELEMONDE INC., a company incorporated with limited liability in the
State of Nevada, United States of America whose office is at 200 Madison
Avenue, Suite 520, New York, NY 10016 ("the Purchaser" which expression
shall include its successors and assigns).
(3) HARRY POMEROY of 60A Priory Road London N8 7EX ("Mr Pomeroy") and LARRY
TRACHTENBERG of 37 Crediton Hill London NW6 lHS ("Mr Trachtenberg")
RECITALS
(A) Equitel Communications Limited ("the Company") is a private company
further particulars of which are set out in Schedule 2.
(B) The Vendors have agreed to sell to the Purchaser the entire issued share
capital of the Company ("the Shares") on the terms and conditions
hereinafter contained.
OPERATIVE PROVISIONS
1 Interpretation
1.1 In this Agreement where the context so admits:-
1.1.1 references to the "Accounts" are references to the audited
accounts for the period ending 30 April 1999 of the Company and
the notes thereto and references to the "Accounting Date" are
references to 30 April 1999;
1.1.2 the expression "business day" shall mean a day (not being a
Saturday) on which banks generally are open for business in
London and New York;
1.1.3 the expression "Consideration Shares" means restricted shares of
common stock in the capital of the Purchaser with a par value of
US$0.001 per share fully paid;
1.1.4 the expression "Group" means the Company and its subsidiaries at
the date hereof;
<PAGE>
2
1.1.5 the expression "Interim Period" means the period commencing on
exchange of this Agreement and ending on the earlier of
Completion and the lapse or termination of this Agreement;
1.1.6 the expression "Pomeroy Loan" means the interest free loan made
by Janet Pomeroy and others to the Company of US$1,000,000
outstanding at today's date.
1.1.7 references to "the Purchaser" and "the Company" shall include
their respective successors in title and assigns and references
to "the Purchaser's Group" are references to the Purchaser and
any holding company from time to time of the Purchaser and any
subsidiary from time to time of the Purchaser or any such
holding company other than the Company;
1.1.8 references to "the Purchaser's Solicitors" are references to
Gouldens of 22 Tudor Street, London, EC4Y OJJ;
1.1.9 references to "the Service Agreements" are to the service
agreements between the Company and each of Mr Pomeroy, Mr
Trachtenberg, Mr Topham and Mr Willard in the agreed form;
1.10 references to the "Tax Deed" are to the Tax Deed in agreed form
to be entered into pursuant to this Agreement and the expression
"tax" or "taxation" shall have the meaning set out in the Tax
Deed;
1.1.11 references to Mr Topham" are references to Nick Topham of 38
Southdown Road Harpenden Herts AL5 1PG;
1.1.12 references to "US$" or "United States dollars" or "$" or
"dollar" are to the lawful currency of the United States of
America at the date hereof;
1.1.13 references to "the Vendors' Representative" are references to
Larry Trachtenberg or such other person with an address in the
United Kingdom as the Vendors or the Vendors' Solicitors shall
notify to the Purchaser by not less than ten business days prior
written notice with express reference to this Agreement;
1.1.14 references to "the Vendors' Solicitors" are references to Lass
Salt Garvin of 35 Piccadilly, London, W1V OLP;
1.1.15 references to "Mr Willard" are references to Mark Willard of 2b
Longdown Road Fleet Hampshire GU13 9UZ; and
1.1.16 words and expressions defined in particular Clauses or Schedules
shall bear the same meaning throughout.
1.2 References in this Agreement to "the Taxes Act", "the TCGA" and "the
Companies Act" are respectively references to the Income and Corporation
Taxes Act 1988, the
<PAGE>
3
Taxation of Chargeable Gains Act 1992 and the Companies Act 1985 (as
amended by the Companies Act 1989).
1.3 The ejusdem generis rule of construction shall not apply to this
Agreement and general words shall not be given a restrictive meaning by
reason of their being preceded or followed by words indicating a
particular class or examples of acts matters or things.
1.4 Words importing the singular shall include the plural and vice versa and
words importing any gender shall include all other genders and
references to persons shall include corporations and unincorporated
associations.
1.5 References in this Agreement to any "agreed draft document" or any
document "in agreed form" or "in agreed terms" are references to the
document described in the form of the draft agreed between the parties
and initialled by both the Purchaser's Solicitors and the Vendors'
Solicitors for identification purposes.
1.6 References in this Agreement to statutory provisions shall be construed
as references to those provisions as respectively amended consolidated
extended or re-enacted from time to time and shall include the
corresponding provisions of any earlier legislation (whether repealed or
not) and any orders regulations instruments or other subordinate
legislation made from time to time under the statute concerned.
1.7 References to this Agreement shall include the Schedules hereto which
shall form part hereof and shall have the same force and effect as if
expressly set out in the body of this Agreement.
1.8 References in this Agreement to "an associate" or to "a connected
person" in relation to another, are references to a person who is an
associate of the other or connected with the other within the meaning of
Section 417 or Section 839 of the Taxes Act as appropriate.
1.9 The Clause headings in this Agreement are for convenience only and shall
not affect the interpretation hereof.
2 Conditions Precedent
2.1 This Agreement is conditional upon the Vendors having received a
satisfactory clearance from the Inland Revenue under Section 138 of the
Taxation of Chargeable Gains Act 1992 and Section 707 of the Income and
Corporation Taxes Act 1988 in relation to the sale and purchase of the
Shares hereunder on or before midnight (GMT) 60 days from today's date.
2.2 The Vendors shall use all reasonable endeavours to procure that the
condition precedent contained in Clause 2.1. is satisfied as soon as
possible and in any event not later than the latest time provided in
Clause 2.1.
<PAGE>
4
2.3 The Vendors shall keep the Purchaser fully informed of all progress and
developments with regard to satisfaction of the said condition precedent
and in any event shall forthwith notify the Purchaser in writing as soon
as it becomes aware that the same has been satisfied or has become
incapable of satisfaction and produce to the other Purchaser such
documentation as it shall reasonably require to evidence any such
satisfaction.
2.4 If by the latest time prescribed by Clause 2.1 the said condition
precedent shall not have been satisfied or waived in writing by the
Vendors, this Agreement shall have no further force and effect and none
of the parties shall have any liability in respect of this Agreement,
except as regards any antecedent breach, save that this Clause and
Clauses 18 (Costs), 20 (Announcements), 21 (Notices and Representatives)
and 22 (General) shall continue in full force and effect.
2.5 During the Interim Period the Vendors shall procure that (except with
the prior written consent of the Purchaser):-
2.5.1 the Company will so far as it is able (in reasonable
consultation with the Purchaser) carry on business in the normal
course and with a view to profit and not do anything outside the
normal course of its day to day trading;
2.5.2 the Company shall not grant any options charges or securities
over its undertaking or assets or dispose of any material part
thereof and shall not take any action which would result or
would reasonably be considered likely to result in any material
breach of the Warranties (material breach as defined in Clause
7.3) if the Warranties were to have been repeated at Completion
with reference to the facts and circumstances appertaining at
Completion.
2.6 During the Interim Period the Vendors shall also provide the Purchaser,
its accountants, solicitors and all other persons authorised by it
promptly after request such facilities and information regarding the
business assets liabilities affairs and records of the Company as the
Purchaser may reasonably from time to time require including without
limitation for the purposes of satisfaction of the conditions precedent
referred to in Clause 2.1 or preparation of any circular or prospectus
or supplementary prospectus to be sent by the Purchaser to its
shareholders or any filing to be made with any regulatory authority in
the United Kingdom or the United States of America or any announcement
to be made by or on behalf of the Purchaser in connection herewith.
3 Agreement to Sell and Purchase
3.1 The Vendors hereby agree to sell or procure the sale of the Shares to
the Purchaser with full title guarantee together with the benefit of all
rights and profits attaching thereto including all rights to dividends
and other distributions declared made or paid thereon on before or after
the date hereof and the Purchaser hereby agrees to purchase the same on
and subject to the terms of this Agreement.
<PAGE>
5
3.2 Nothing in this Agreement shall oblige the Purchaser to buy any of the
Shares unless the sale and purchase of all of the Shares is completed
simultaneously in accordance with the terms hereof.
3.3 Each of the Vendors hereby irrevocably waives all rights of pre-emption
over the Shares or any of them to which he is or may be entitled in
relation to the sale and purchase of the same hereunder.
4 Consideration and Earn-Out
4.1 Subject to the provisions of this Agreement, the maximum aggregate value
of the consideration payable by the Purchaser to the Vendors will be
US$69,000,000 ("the Consideration")
4.2 The Consideration will be satisfied as follows:
4.2.1 on Completion by the sum of US$19,000,000 ("the Initial
Consideration") to be satisfied as set out in clause 5.1;
4.2.2 on or before 30th June 2001 or, if later, within 7 business days
of determination thereof by an additional sum calculated in
accordance with clause 4.3 and satisfied as set out in clause
5.2 not exceeding US$30,000,000 ("the First Earn-Out") payable
to the Vendors in proportion to their respective shareholdings
in the Company as set out in column (2) of Schedule 1 depending
upon the earnings of the Company before interest and tax
("EBIT") for the period of twelve months ending 31st December
2000; and
4.2.3 on or before the 30th June 2002 or, if later, within 7 business
days of determination thereof by a further additional sum
calculated in accordance with clause 4.3 below, not exceeding
US$50,000,000 less the amount paid to the Vendors under clause
4.2.2 for the period of 12 months ending 31st December 2001
("the Second Earn-Out") payable to the Vendors in proportion to
their respective shareholdings in the Company as set out in
column (2) of Schedule 1 depending on the EBIT for the period of
twelve months ending the 31st December 2001.
4.3 The First Earn-Out and the Second Earn-Out shall be calculated by
multiplying the EBIT for the periods of twelve months of the Company
ending 31st December 2000 and 31st December 2001 respectively by a
multiplier of 6 in the first such period and 5 in the case of the second
such period. If the EBIT for the period of twelve months ending 31st
December 2000 is negative the amount by which it is negative shall be
deducted from the EBIT for the period of twelve months ending 31st
December 2001 before the multiplier is applied. The EBIT for each of
these periods shall be calculated in accordance with clause 8.
<PAGE>
6
5 Satisfaction of Initial Consideration, the First Earn-Out & the Second
Earn-Out
5.1 The initial Consideration will be satisfied at Completion by the issue
to the Vendors of Consideration Shares. The number of Consideration
Shares shall be calculated by dividing the amount of the Initial
Consideration by the average of the closing sale price per Consideration
Share as determined by reference to the exchange or inter-dealer
quotation system on which the Consideration Shares trade on each of the
10 dealing days prior to the date of this Agreement.
5.2 Each of the First Earn-Out and the Second Earn-Out will be satisfied by
the issue to the Vendors of Consideration Shares. The number of
Consideration Shares shall be calculated by dividing the amount of the
First Earn-Out or the Second Earn-Out, as the case may be, by the
average of the closing sale price per Consideration Share as determined
by reference to the exchange or inter-dealer quotation system on which
the Consideration Shares trade on each of the 10 dealing days ending on
31st December 2000 in respect of the First Earn-Out and 31st December
2001 in respect of the Second Earn-Out.
5.3 5.3.1 The Purchaser shall deliver certificates to the Vendors in the
proportion to which the Vendors are entitled to them
representing the Consideration Shares for the First Earn-Out as
soon as reasonably practical following 3Oth June 2001, or if
later, the date of determination of the First Earn-Out and for
the Second Earn-Out, as soon as reasonably practical following
the 30th June 2002 or if later, the date of determination of the
Second Earn-Out.
5.3.2 Each Vendor represents and warrants for himself that such Vendor
is acquiring the Consideration Shares for investment for the
Vendor's own account, with the intent of holding the
Consideration Shares for investment, without the present intent
of participating directly or indirectly in a distribution of the
Consideration Shares, and without the participation of any other
person in any part of the purchase.
5.3.3 The Vendors understand that the representations and warranties
contained herein are to be relied upon by the Purchaser as a
basis for the exemption of the issuance of the Consideration
Shares from the registration requirements of the Securities Act
of 1933, as amended (the "Act"), and the exemptions from
registration contained in applicable United States state
securities laws. The Vendors acknowledge that the issuance of
the Consideration Shares will not be registered under the Act or
under any United States state securities laws, and that the
Consideration Shares must be held by the Vendors until (and that
the Purchaser shall have no obligation to recognise any sale,
assignment or other transfer thereof to any person unless) they
are subsequently registered under the Act and under applicable
United States state securities laws, or unless exemptions from
the registration requirements of the Act and such laws are
available and approved by counsel satisfactory to the Purchaser.
<PAGE>
7
5.3.4 The Vendors understand that the Purchaser is not obligated to
register the Consideration Shares under the Act or under any
United States state securities laws. Each of the Vendors further
understands that the Purchaser is not obligated to take any
action, except as may be required by law, necessary to make Rule
144 under the Act or any other method available for re-sales of
the Consideration Shares by the Vendors.
5.4 5.4.1 The Vendors acknowledge that the Purchaser has not prepared, and
that it has not been requested by the Vendors to prepare, a
comprehensive written prospectus or disclosure statement in
connection with the issuance of the Consideration Shares to the
Vendors covering the business, operations, management, financial
condition or prospects of the Purchasers of the nature that
otherwise might be required if the sale of the Consideration
Shares to the Vendors were required to be registered under the
Act. Each of the Vendors further acknowledges that the
Purchaser, prior to the date hereof, has furnished the Vendors
the opportunity to ask questions of and receive answers from the
Purchaser concerning the financial and business affairs of the
Purchaser and has afforded the Vendors the opportunity to verify
the accuracy of all information provided or made available to
the Vendors by the Purchaser.
5.4.2 The Vendors hereby agree that the following may legend may be
placed upon the certificate or certificated issued to the
Vendors to evidence the Consideration Shares:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933 or
comparable state statutes and may not be transferred,
nor will any assignee or endorsed hereof be recognised
as an owner hereof by the issuer for any purpose, unless
a registration statement with respect to such shares
shall then be in effect or unless the availability or an
exemption from registration with respect to any proposed
transfer or disposition of such shares shall be
established to the satisfaction of counsel for the
issuer.
5.5 The Vendors agree that prior to the expiration of a period of one year
from that date that the relevant Consideration Shares are issued to the
Vendors, the Vendors will not sell, transfer, assign or otherwise
dispose of all or any part of the relevant Consideration Shares,
provided that the Vendors may pledge or otherwise charge the relevant
Consideration Shares for the purpose of raising personal loans.
6 Completion
6.1 Completion of the sale and purchase of the Shares ("Completion") shall
take place at the offices of the Purchaser's Solicitors on the first
Business Day after the day upon which this Agreement shall become
unconditional for the purposes of clause 2 or at such other place and
time as shall be agreed ("the Completion Date").
<PAGE>
8
6.2 On Completion the Vendors shall:
6.2.1 deliver to the Purchaser:
6.2.1.1 duly executed transfers of the Shares in favour of the
Purchaser or the Purchaser's nominee(s) together with
the share certificates therefor or an indemnity in a
form acceptable to the Purchaser in the case of any
missing share certificates;
6.2.1.2 the Certificate(s) of Incorporation, the Common Seal (if
any), Minute Book, Register of Members (duly written up
to date), and all other statutory records and other
documents and papers of the Company;
6.2.1.3 confirmations in agreed form duly executed by each of
the Vendors to the effect that (except as expressly
therein mentioned) he has no claim on any account
whatsoever against the Company and that it is not in any
way indebted to him;
6.2.1.4 a statement showing the balances on all bank accounts of
the Company at the latest practicable date prior to
Completion together with a list of all sums received and
cheques drawn in excess of (pound)250 for any one item
since the date of the relevant statement;
6.2.1.5 the Tax Deed duly executed by or on behalf of each of
the Covenantors therein mentioned;
6.2.1.6 the Service Agreements duly executed by each of Mr
Pomeroy, Mr Topham, Mr Trachtenberg and Mr Willard.
6.2.2 procure that there is repaid to the Company all amounts owing to
it by any of the Vendors and/or by any of its directors
shareholders or any connected persons or associates of them or
any of them and that all guarantees or indemnities given by or
binding on the Company in respect of liabilities or obligations
(whether actual or contingent) of any of the Vendors or any such
directors shareholders or connected persons or associates are
fully and effectually released without cost to the Company; and
6.2.3 procure that a meeting of the Board of Directors of the Company
shall be held at which:
6.2.3.1 the transfers of the Shares shall be approved for
registration subject only to their being duly stamped;
6.2.3.2 such persons as the Purchaser shall nominate shall be
appointed Directors and Secretary;
<PAGE>
9
6.2.3.3 the Service Agreements shall be approved by the Company
and duly executed by the Company; and
6.2.3.4 such other business to implement the terms of this
Agreement shall be attended to as the Purchaser shall
reasonably require.
6.3 Subject to due perfomance of all of the matters referred to in Clause
6.2, the Purchaser shall thereupon deliver to the Vendors' Solicitors:
6.3.1 certificates for the Consideration Shares in proportion to the
respective shareholding in the company as set out in column (2)
of Schedule 1;
6.3.2 a counterpart of the Tax Deed duly executed by the Purchaser;
and
6.3.3 the Service Agreements duly executed by the Company.
7 Rescission
7.1 If on the Completion Date either the Purchaser or any of the Vendors are
unable to comply in any material respects with their respective
obligations under Clause 6 the non defaulting party may (a) defer
Completion to a date not more than 28 days following the Completion Date
(and the provisions of this Clause 6 shall apply to Completion as so
deferred) or (b) proceed to Completion so far as practicable but without
prejudice to its rights hereunder or otherwise or (c) by notice in
writing to the defaulting party rescind this Agreement.
7.2 If the Purchaser shall before Completion become aware of any matter
which would constitute a material breach (as defined in clause 7.3
below) of any of the warranties contained in this Agreement the
Purchaser may at any time before Completion by giving notice in writing
to the Vendors rescind this Agreement.
7.3 For the purposes of Clause 7.2 "material breach" shall mean a breach
which if this Agreement had been completed the Purchaser would in the
opinion of a member of the Commercial Bar in London of not less than 10
years standing be able to bring a valid claim under the Warranties for
not less than US$1 million and that in his reasonable opinion such claim
would be likely to succeed in all material respects.
7.4 If this Agreement is rescinded pursuant to this Clause 7, it shall have
no further force and effect and none of the parties shall have any
liability in respect thereof, except as regards any antecedent breach,
and except also that the provisions of Clauses 18 (Costs), 20
(Announcements), 21 (Notices and Representatives) and 22 (General) shall
continue in full force and effect.
8 Accounting Matters
8.1 The accounts of the Company for the period 1st May to the 31st December
1999 will be prepared by the Company and audited by the auditors of the
Company. Such accounts
<PAGE>
10
will be prepared in accordance with normal accounting policies and
principles in a form generally accepted and applicable in the United
Kingdom, and will be prepared and audited by not later than the 31st
March 2000.
8.2 Accounts for the Company for the period of twelve months ending on 31st
December 2000 ("the First Earn-Out Accounts") will be prepared by the
Company and audited by the auditors of the Company in a manner
consistent with the accounts for the Company for the financial period
ending 31st December 1999 not later than 31st March 2001. The Company's
auditors will certify the amount of EBIT and the calculation of the
First Earn-Out on the basis of the First Earn-Out Accounts which
certificate will be deemed to be accepted by all parties unless notice
in writing is served on the Purchaser by the Vendors within 31 days of
the auditors' certificate and calculation of the First Earn-Out being
received by the Vendors in which case the matter will be dealt with
under clause 8.4.
8.3 Accounts for the Company for the period of twelve months ending 31st
December 2001 ("the Second Earn-Out Accounts") will be prepared by the
Company and audited by the auditors of the Company in a manner
consistent with the First Earn-Out Accounts not later than 31st March
2002. The Company's auditors will certify the amount of EBIT and the
calculation of the amount of the Second Earn-Out calculated on the basis
of the Second Earn-Out Accounts which certificate will be deemed to be
accepted by all parties unless notice in writing is served on the
Purchaser by the Vendors within 31 days of the auditors' certificate and
calculation of the Second Earn-Out being received by the Vendors in
which case the matter will be dealt with under clause 8.4.
8.4 The auditors of the Company for the purpose of auditing the First
Earn-Out Accounts and the Second Earn-Out Accounts shall be the auditors
of the Company from time to time. The Vendors shall be entitled to
appoint their own firm of accountants to review the audit, the
certification of the EBIT and the calculation of the Earn-Out and if
notice in writing of any dispute as regards the same is served by the
Vendors in accordance with clause 8.2 or clause 8.3 and such dispute is
not resolved within 14 days of such notice then either the Purchaser or
the Vendors' Representative may refer such dispute for resolution to an
Independent Accountant who shall be instructed to report whether the
said certification and calculation of the EBIT for the relevant period
and the First or Second Earn-Out, as the case may be, have been prepared
in accordance with the provisions of this Agreement (and if not, to make
such adjustments thereto as he shall consider appropriate to comply
therewith) and to calculate the relevant EBIT and the First or Second
Earn-Out as appropriate acting as an expert and not as arbitrator and
whose decision shall be final and binding on all parties save in the
case of manifest error.
8.5 The First Earn-Out Accounts and the Second Earn-Out Accounts shall not
include any unusual or onerous overheads, management charges or expenses
imposed upon the Company by the Purchaser or any other company in the
Purchaser's Group to the extent that they have not been calculated on a
normal arms length commercial basis in a fair and reasonable manner or
in the case of any jointly used overhead apportioned in such a manner.
<PAGE>
11
8.6 For the purposes of this clause 8 the Independent Accountant shall be
such independent chartered accountant qualified as such for not less
than 10 years and engaged in private practice as is appointed jointly by
the Vendors' Representative and the Purchaser or (in default) by the
President for the time being of the Institute of Chartered Accountants
in England and Wales on the application of either the Vendors'
Representative or the Purchaser.
9 Warranties
9.1 The Vendors warrant to the Purchaser in the terms of Schedule 4 at the
date hereof ("the Warranties").
9.2 The Warranties are given subject only to those matters fairly disclosed
in the letter of even date from the Vendors' Solicitors to the
Purchaser's Solicitors disclosing exceptions to the same ("the
Disclosure Letter"). No information of which the Purchaser has actual or
constructive knowledge shall prejudice any claim under the Warranties
nor operate to reduce any amount recoverable thereunder.
9.3 Each of the Vendors shall as soon as reasonably practicable disclose to
the Purchaser in writing any matter or thing which may arise or become
known to him after the date hereof (prior to Completion) which is or
could be a material breach of any of the Warranties or of their
obligations under Clause 2.5.2..
9.4 The Purchaser may take action for any breach of the Warranties before or
after Completion notwithstanding that such breach was known to or
discoverable by the Purchaser before Completion.
9.5 Each of the Warranties is given independently from and shall, subject to
clause 9.2, not be limited by reference to any of the others of them or
anything else contained in this Agreement save in respect of the
warranty limitations contained in clause 10.
9.6 Each of the Vendors hereby irrevocably waives any right or claim which
he may have against the Company in respect of any misrepresentation
inaccuracy or omission in or from any information or advice given by it
or any of its officers or employees to the Vendors or the Vendors'
Solicitors or any of them to enable him to give any of the Warranties or
to prepare the Disclosure Letter or to assume any of the obligations
assumed or to be assumed by him under or pursuant to this Agreement.
10 Limitations on Liability
10.1 The liability of the Vendors under or in respect of the Warranties
and/or the indemnities on their part contained in Clause 2 of the Tax
Deed ("the Indemnities") shall be limited as follows:
10.1.1 no claim under the Warranties or the Indemnities ("a relevant
claim") may be made unless written notice of the claim concerned
has been given to the Vendors before the seventh anniversary of
Completion in the case of any claim
<PAGE>
12
under the Indemnities and before the second anniversary of
Completion in any other case;
10.1.2 no claim under the Warranties may be made unless and until the
aggregate amount of all relevant claims exceeds US$350,000
although (subject to paragraph (D) of this Clause) once such
limit is exceeded the full amount of all such claims and any
other claims shall be recoverable;
10.1.3 no claim under the Warranties may be made in respect of an
individual breach unless it exceeds US$3,000; and
10.1.4 the maximum aggregate liability of all the Vendors under the
Warranties and the Indemnities shall not exceed an amount equal
to the total of the Consideration actually received by the
Vendors on or prior to the date on which any claim thereunder is
finally determined or agreed provided that if following such
determination or agreement further consideration is received
then such aggregate liability shall be increased by the further
amount so received.
10.2 No relevant claim may be made:
10.2.1 under the Indemnities or Warranties if the claim has previously
been satisfied in full pursuant to any other provision of this
Agreement or any agreement entered into pursuant hereto;
10.2.2 under the Indemnities or such of the Warranties as relate to
taxation ("Tax Warranties") if it would not have arisen but for
some voluntary act or transaction carried out or effected after
Completion (otherwise than as a consequence of any act or
omission on or before Completion of any of the Vendors or the
Company or any shareholder or officer thereof or any associate
or connected person of all or any of the foregoing) by or on
behalf of the Purchaser or the Company (not being an act or
transaction in the ordinary course of its business) provided
that the Purchaser or the Company were aware or ought reasonably
to have been aware from matters fairly disclosed in the
Disclosure Letter or from investigations carried out after
Completion by the Purchaser into matters arising before
Completion, at the time of such act or transaction that such
claim would arise therefrom;
10.2.3 under the Indemnities or Warranties to the extent that the
Company has previously received indemnity against any loss or
damage suffered by it arising out of the breach or claim under
the terms of any insurance policy of the Company in force at the
date hereof;
10.2.4 under the Warranties or Indemnities to the extent that specific
provision or specific reserve for the liability to which it
relates was made in the Accounts or in respect of any matter
fairly disclosed by way of a note to the Accounts;
<PAGE>
13
10.2.5 under the Warranties or Indemnities if the matter giving rise to
the same is solely attributable to or consequent upon any change
of accounting policy of the Company on or after Completion,
except where effected in order to conform to generally accepted
accounting principles and policies in the United Kingdom not
previously adopted by the Company;
10.2.6 under the Warranties or Indemnities if it arises or is increased
by reason only of any legislation not in force at the date of
Completion which takes effect retrospectively to the period
before Completion or any increase after Completion in the rate
of taxation with retrospective effect to before Completion;
10.2.7 under the Tax Warranties or the Indemnities to the extent that
the loss arises only by reason of the transfer, winding-up or
cessation of the business of the Company after completion unless
such action was caused by the insolvency of the Company
resulting from a breach of warranty.
10.3 The Purchaser shall be entitled to claim both under the Warranties and
under the Indemnities by reference to the same subject matter. Any
payment in respect of a breach of Warranty shall to such extent satisfy
and discharge any claim made by the Purchaser under the Indemnities in
respect of the same subject matter and vice versa.
10.4 The provisions of Clauses 3 to 6 (inclusive) of the Tax Deed shall apply
mutatis mutandis to any claims under the Tax Warranties.
10.5 Where the Purchaser or the Company is legally entitled to recover from
some other person (not being the other of them or another member of the
Purchaser's Group or any employee or officer thereof or any Vendor or
under any insurance policy effected after Completion) any sum in respect
of any matter the subject of a claim under the Warranties (other than
the Tax Warranties as to which Clause 5 of the Tax Deed shall apply)
which the Vendors shall have previously satisfied on terms reasonably
satisfactory to the Purchaser or the Company (as appropriate) shall
(subject first to being indemnified and secured to its or their
reasonable satisfaction against all reasonable costs and expenses which
it or they may reasonably incur thereby) take all reasonable steps to
enforce such recovery (keeping the Vendors' Representative informed of
the progress of any action taken) and account to the Vendors originally
satisfying the claim for any amounts they recover, in accordance with
Clause 10.6 below.
10.6 If the liability or loss or damage the subject of a claim under the
Warranties (other than the Tax Warranties as to which Clause 5 of the
Tax Deed shall apply) has been made good in full (including all
reasonable costs and expenses reasonably incurred) and the Purchaser or
the Company or any other member of the Purchaser's Group subsequently
recovers or receives from a third party (not being the other of them or
any other member of the Purchaser's Group or a Vendor) a sum which is
directly referable to the subject matter of such claim, the Purchaser or
the Company or any other member of the Purchaser's Group (as appropriate
having regard to which of them is the recipient) shall as soon as
reasonably practicable following receipt of such sum pay to the
Vendors' Solicitors on behalf of the Vendors originally satisfying the
claim the net amount
<PAGE>
14
received after deducting any reasonable costs and expenses reasonably
incurred by the Purchaser or the Company in recovering such sum from the
third party (including without limitation any taxation payable by reason
of the receipt thereof) but not in any event exceeding the amount
originally paid to it in respect of the claim concerned.
10.7 Except in the case of a fraudulent misrepresentation, no party shall in
relation to the sale hereunder of the Shares or this Agreement be liable
in respect of any representations warranties or similar assurances which
are not contained and expressly given or assumed by them in this
Agreement.
10.8 Any amount paid by the Vendors to the Purchaser in satisfaction of any
relevant claim shall be treated as a reduction by that amount in the
Consideration for the Shares.
10.9 Nothing contained in this Agreement or the Tax Deed or otherwise shall
limit the liability of any party thereunder for fraudulent
misrepresentation and the limitations in this clause 10 shall not apply
to limit the liability of any of the Vendors in respect of any breach of
Warranty or any claim under the Indemnities to the extent that such
breach or claim arises by reason of any fraud or wilful concealment on
the part of such Vendor of facts known to such Vendor which constitutes
a breach of Warranty by such Vendor.
10.10 The limitations in this clause 10 shall not apply to any relevant claim
arising by reason of transactions effected between and/or loan benefits
and/or other transactions made or deemed for tax purposes to have been
made or provided on or before Completion by or to the Company to all or
any of the Vendors or any director, shareholder associate or connected
person of any or all of the foregoing.
10.11 The liability of each Vendor in respect of any claim under the
Warranties and under the Tax Deed shall be limited from time to time in
aggregate to the actual payments received by that Vendor in respect of
the consideration provided that if following the determination or
agreement of liability for any such claim further consideration is
received then such aggregate liability shall be increased the further
amount so received.
10.12 Where a breach of any of the Warranties shall be in respect of a matter
where the Company shall be insured against any loss or damage arising
therefrom, the Purchaser shall not make any claim (as distinct from
notice of claim) against the Vendors for breach of any such Warranty
without first allowing the Company to make a claim against its insurers
for compensation for the loss or damage suffered and any claim against
the Vendors shall be limited (in addition to the limitation on the
Vendors' liability elsewhere in this Agreement) to the amount by which
the loss or damage suffered by the Purchaser as a result of such breach
shall exceed the compensation paid by such insurers to the Company.
10.13 In the event that the Purchaser becomes aware of any matter which may
involve the Vendors in any liability for breach of any of the Warranties
the Purchaser shall within 14 days of such date notify the Vendors
giving details of such matter as are at the time or subsequently become
available to the Purchaser and the Company shall not settle or
compromise any claim by a third party relating to such matter in excess
of US$5,000
<PAGE>
15
without the prior written consent of the Vendors such consent not to be
unreasonably withheld.
10.14 The benefit of the Warranties and the Tax Deed may not be assigned in
whole or in part by the Purchaser other than to another member of the
Purchaser's Group for the time being.
10.15 As between the Vendors, they hereby agree that any liability arising on
them under this Agreement shall be shared in proportion to their
respective interests as specified in Column 2 of Schedule 1 and they
shall accept liability and indemnify each other accordingly.
11 Protections for Goodwill
11.1 The Vendors and Mr Pomeroy and Mr Trachtenberg hereby undertake to and
with the Purchaser for itself and separately as trustee for and on
behalf of the Company, that none of them will at any time hereafter,
save in the proper performance of his duties as an employee or officer
of the Purchaser's Group or the Company:
11.1.1 take away make use of or disclose to any person firm or company
(save insofar as necessary to comply with any statutory
obligation or order of any Court or statutory tribunal of
competent jurisdiction) any confidential information or trade
secrets in his possession and which in any way relates to the
business or other affairs of the Group or to any manufacturer
supplier customer client agent or any other person who has or
who has had dealings with the Group; and/or
11.1.2 make use of the name "Equitel" or any other corporate or
business name which is identical or similar to or is likely to
be confused with the corporate name or any business name of the
Group or which might suggest a connection with the same.
11.2 For the purposes of protecting the goodwill of the Group and the value
of the Shares the Vendors hereby undertake to and covenant with the
Purchaser (separately for itself and as trustee for each member of the
Group and for each purchaser, assignee and shareholder from time to time
below mentioned) that (except in the proper performance of his duties as
an employee or officer of the Company or any member of the Purchaser's
Group) none of them will, whether for his own account or jointly with or
as manager agent officer employee consultant shareholder or otherwise on
behalf of any other person firm or corporation, and whether directly or
indirectly during the Relevant Period:
11.2.1 be engaged concerned or interested in or associated within the
Relevant Territory with any business which is the same as or in
direct or indirect competition with any Relevant Business;
and/or
11.2.2 within the Relevant Territory carry on or be engaged concerned
or interested in the sale of goods or provision of services, of
a kind supplied by the Group in connection with its Relevant
Business, to any person firm or company which has
<PAGE>
16
at any time within the period of twelve months preceding the
Relevant Date been a customer of or in the habit of dealing with
the Group for such goods or Services; and/or
11.2.3 endeavour to procure the supply of goods or services from any
person firm or company which during the twelve months preceding
the Relevant Date has been a supplier of goods or services in
connection with any Relevant Business to the Group where such
supply may have an adverse effect on or cause loss to the Group;
and/or
11.2.4 solicit, interfere with or endeavour to entice away from the
Group any person, firm or company who to his knowledge is now or
has during the twelve months preceding the Relevant Date been a
client, customer, correspondent, agent of or in the habit of
dealing with the Group nor enter into a partnership or any
association whether directly or indirectly with any such person;
and/or
11.2.5 solicit interfere with or endeavour to entice away from the
Group or offer to employ or engage under a contract for services
or enter into partnership with any person who on or during the
twelve months preceding the Relevant Date is or was an officer
or employee of or full time consultant to the Group; and/or
11.2.6 knowingly do or say anything which is or is calculated to be
prejudicial to the interests of the Group or its business or
which results or may result in the discontinuance of any
contract or arrangement of benefit to the Group;
PROVIDED THAT nothing in this Clause 11.2 shall prohibit any Vendor from
holding directly or indirectly (for investment purposes only) not more
than 5% of the shares of a public company listed or dealt in on a
recognised investment exchange (as defined in the Financial Services Act
1986) provided that the Vendors shall between tern not hold more than
10% of the shares of any such company unless otherwise agreed by the
Purchaser in writing and provided further that Clauses 11.2.1, 11.2.2,
11.2.3, 11.2.4 and 11.2.6 shall not apply to Mr Joshua Mailman, one of
the Vendors.
11.3 Each Vendor undertakes for no additional consideration to execute and
deliver and do such documents deeds and things as the Purchaser may
reasonably require after Completion to vest in the Group, or such other
member of the Purchaser's Group as the Purchaser shall direct, ownership
and title and all rights of such Vendor in respect of all inventions and
intellectual property owned by or vested in him and which relate to
products of the Group or any manufacturing process used or intended at
Completion to be used by the Group in its business.
11.4 For the purposes of this Clause:
11.4.1 the expression "Relevant Business" shall mean:
11.4.1.1 the development of international telephony routes on a
low volume, high value basis acting as a carrier's
carrier and the
<PAGE>
17
provision of associated value added services such as
pre-paid calling cards, pre-paid mobile telephone
services and intelligent networking.
11.4.1.2 any other business carried on by the Company on or at
any time during the period of twelve months ending on
the Relevant Date;
11.4.2 the expression "the Relevant Period" shall mean 2 years from the
Relevant Date.
11.4.3 the expression "the Relevant Date" means the date of this
Agreement.
11.4.4 the expression "the Relevant Territory" means (i) the United
Kingdom (ii) Europe (iii) Africa (iv) Asia (v) Australia (vi)
North America (vii) South America and (viii) any other
territory in which during the period of one year ended on the
Relevant Date the Company has undertaken any material business.
11.5 Each of the undertakings and covenants contained in the separate
paragraphs of Clauses 11.1 and 11.2 is and shall be a separate
undertaking and covenant by each Vendor.
11.6 It is hereby agreed and declared that the benefit of the covenants and
undertakings given in this Clause shall be assignable by the Purchaser
to and become enforceable by any purchaser or assignee or other holder
for the time being of the majority of the Shares or any purchaser or
assignee of all or any part of any Relevant Business.
12 Tax Affairs
12.1 If so requested by the Purchaser, the Vendors shall at the expense of
the Company, in consultation with the Purchaser's accountants (whose
costs shall be borne by the Purchaser) and otherwise in accordance with
this Clause, prepare all documentation and deal with all matters
(including correspondence) relating to the tax returns and affairs of
the Company for all accounting and fiscal periods ending on or prior to
Completion ("Relevant Accounting Periods") to the extent that the same
have not been prepared and agreed with the Inland Revenue or other
appropriate fiscal authority prior to Completion.
12.2 Insofar as within its power, the Purchaser shall procure that the
Company shall following Completion:
12.2.1 afford the Vendors and their duly authorised agents access to
its books, accounts and records and personnel and such other
assistance as may from time to time be reasonably required to
prepare and submit the said returns and/or in connection with
their dealings in relation thereto contemplated by this Clause;
and
<PAGE>
18
12.2.2 complete and execute such documentation and render such
assistance to the Vendors and their duly authorised agents as
may from time to time be reasonably required in connection with
or for the purposes of the foregoing.
12.3 For the purposes of and in connection with the foregoing:
12.3.1 the Vendors and their agents shall keep the Purchaser fully and
promptly informed of all matters arising of their dealings with
the tax returns and affairs of the Company under this Clause and
in any event they shall provide for approval by the Purchaser
(or its agents) prior to submission to the Inland Revenue,
drafts of correspondence with the inland Revenue (including tax
computations) in relation to the Company for all of the Relevant
Accounting Period, and shall promptly provide the Purchaser with
any correspondence received from the Inland Revenue and any
other written information relevant to the tax affairs of the
Company for the periods in question, including advice from
professional advisers, and notes of meetings or discussions with
the authorities in question;
12.3.2 the Vendors shall procure that no agreement, settlement or
compromise of any tax or returns or affairs of the Group in
respect of any Relevant Accounting Periods or otherwise is
agreed with the relevant taxation authorities without the prior
written consent of the Purchaser, which shall not be
unreasonably withheld or delayed except that it shall be
regarded as reasonable for the Purchaser to withold its consent
to an agreement settlement or compromise which in its reasonable
opinion could be adverse or prejudicial to the taxation
liabilities or treatment of the Group or in respect of a tax
liability of the Group for which the Purchaser has no effective
indemnity under this indemnity.
PROVIDED ALWAYS THAT nothing done or permitted by the Company or the
Purchaser pursuant to this Clause shall in any way restrict or reduce
any rights any of them may have under the Warranties and/or Tax Deed.
13 Pensions
13.1 Each Vendor hereby confirms to the Purchaser (for itself and separately
on behalf of the Group and each trustee below mentioned) that such
Vendor irrevocably waives their rights at today's date (for himself and
his spouse and dependants) all claims or rights he or they or any of
them may have against the Group and/or the trustees of any pension or
retirement benefit scheme operated at the date of this Agreement or
formerly (if any) operated by the Group by reason of any failure by the
Group or the trustees of any such scheme or any of them to comply with
its or their obligations, before Completion, in respect of such pension
and retirement benefits scheme(s) including (without limitation) in
relation to the funding thereof and making of contributions thereto
and/or the investment of assets thereof.
<PAGE>
19
14 Warranties and Undertakings by Purchaser
14.1 The Purchaser warrants to each of the Vendors that:
14.1.1 It has and will have at the relevant times sufficient authorised
but unissued share capital to enable it to allot and issue
shares in itself to be allotted and issued by it under this
Agreement.
14.1.2 It will have sufficient cash funds or arrangements in place at
Completion to meet its obligations in full under Clauses 14.3.2
and 17.1 of this Agreement without recourse to raising funds on
any relevant stock exchange.
14.1.3 it does not require any consent or approval by its shareholders
or any relevant stock exchange or any other body to enter into
this Agreement or to allot and issue shares in itself fully paid
under it
14.1.4 The Board of Directors of the Purchaser has approved this
Agreement and authorised the signatories to execute and exchange
this Agreement with the Vendors.
14.2 The Purchaser undertakes to the Vendors and each of them that the
Purchaser will deliver as directed by the Vendors to the vendors of the
whole of the issued share capital of Callaway Continental Limited ("the
Callaway Shares") at completion of the acquisition by the Company of the
Callaway Shares 3,929,411 restricted shares of common stock in the
capital of the Purchaser with a par value of US$0.001 per share fully
paid to enable the Company to acquire the Callaway Shares on production
of evidence reasonably satisfactory to the Purchaser that its Europe
S.L. is a wholly owned subsidiary of Callaway Continental Limited.
14.3 The Purchaser undertakes to the Vendors and each of them that the
Purchaser will provide to the Company an interest free loan facility on
demand of US$3,000,000 repayable at the Purchaser's election after 31st
December 2001 upon the following terms:
14.3.1 no amount may be drawn by the Company after 31st December 2000
without the written consent of the Purchaser;
14.3.2 the Purchaser shall not be obliged to advance to the Company
more than US$1,000,000 before 15 December 1999.
14.4 The Purchaser acknowledges and agrees with the Vendors and each of them
that if there is a material breach of the undertaking contained in
clause 14.3 the foreseeable loss to the Vendors and each of them flowing
from that breach will include without limitation the reduced ability to
the Company to earn profits and the subsequent reduction of the amounts
of the First and Second Earn-Outs.
14.5 If the Purchaser shall commit a breach of the undertaking contained in
clause 14.3 in a material respect and fails to remedy such breach within
a reasonable period then any of
<PAGE>
20
the Vendors may prior to the 1st December 2000 serve written notice to
that effect on the Purchaser whereupon:
14.5.1 the Purchaser shall forthwith release the relevant Vendor and if
that relevant Vendor is Janet Pomeroy and/or Ingrid
Henningson, the Purchaser shall procure forthwith the release
by the Company of Mr Pomeroy and/or Mr Trachtenberg (the spouse
of Ingrid Henningson) as the case may be from any obligation
under relevant Service Agreements upon receipt of the
appropriate release by the relevant Vendor or Mr Pomeroy and/or
Mr Trachtenberg of the Company's obligations under such Service
Agreement;
14.5.2 the Purchaser shall forthwith release the relevant Vendor and if
that relevant Vendor is Janet Pomeroy and/or Ingrid
Henningson, Mr Pomeroy and/or Mr Trachtenberg as the case may
be from the Restrictive Covenants contained in clause 11.2 of
this Agreement; and
14.5.3 the relevant Vendor shall release the Purchaser from any
obligation to the relevant Vendor in respect of the First
Earn-Out and Second Earn-Out.
14.6 The Purchaser undertakes and covenants with the Vendors and in
particular Janet Pomeroy to repay the Pomeroy Loan not later than 31st
December 2001 and if it fails to do so will pay interest on the Pomeroy
Loan at the rate of 4% above the base lending rate of Lloyds TSB Bank
plc from time to time from that date until repaid in full.
15. Set Off
15.1 If at any time prior to the date on which any Consideration Shares to be
issued in respect of the First or Second Earn-Out or any part thereof
are due to be issued the Purchaser has made any valid claim under this
Agreement or the Tax Deed (a "Claim") and the Claim has not at that date
been paid or satisfied by the Vendors in accordance with the terms of
this Agreement or the Tax Deed (as appropriate) then:
15.1.1 if the Claim has been finally decided the Purchaser shall be
entitled to reduce the number of the Consideration Shares to be
so issued by a number of Consideration Shares calculated by
dividing the amount of the Claim by the price used to calculate
the number of Consideration Shares for the First or Second
Earn-Out as the case may be ("the Price")
15.2.2 if the amount of the Claim has not been finally decided the
Purchaser shall on the due date for the issue of the
Consideration Shares, issue to joint nominees, one of whom has
been nominated by the Purchaser and one of whom has been
nominated by the Vendors' Representative) a number of the
Consideration Shares calculated by dividing the amount of the
Claim, which a barrister of at least 10 years standing nominated
jointly by the Purchaser and the Vendors' Representative (or
failing such appointment within 28 days, then by the Purchaser
alone) as being the amount which in the reasonable opinion of
the barrister is the bona fide amount of the Claim, by the
Price.
<PAGE>
21
15.2 When any Claim in respect of which any Consideration Shares have been
issued to the nominees has been finally decided the nominees shall sell
such number of the Consideration Shares (if any) as are required to
satisfy the Claim pro tanto and shall transfer the balance of the
Consideration Shares (if any) to the Vendors.
15.3 Unless the Purchaser has commenced legal proceedings in respect of any
Claim before the first anniversary of the date on which the Claim is
notified to the Vendors or if later prior to the date ("the next payment
date") on which the next issue of Consideration Shares becomes due it
shall not be entitled to continue to exercise its rights under Clause
15.1.1 in respect of such Claim and if pursuant to that Clause
Consideration Shares have been issued to the nominees in respect of the
Claim those Consideration Shares shall be released to the Vendors within
five business days of such anniversary or (if later) next issue date, as
appropriate.
15.4 For the purposes of this Clause 15 only, a Claim shall be deemed to be
"finally decided" if either:
15.4.1 it has been so determined by a court of competent jurisdiction
from which there is no appeal or from whose judgment the Vendors
or the Purchaser (as the case may be) do or does not appeal
within any applicable time limit; or
15.4.2 the Vendors and the Purchaser shall so agree in writing.
15.5 For the purposes of this Agreement neither the value of the
Consideration Shares issued to the nominees nor the other provisions of
this Clause shall be regarded as imposing any limit on the amount of any
proper claims under this Agreement or the Tax Deed.
15.6 The provisions of this Clause 15 shall be without prejudice to any other
rights the Purchaser may have in respect of the claim(s) concerned
provided that the Purchaser shall not be entitled to recover more than
once in respect of the same subject matter under this Agreement and the
Tax Deed
16 Further Assurance
16.1 Each of the Vendors hereby agrees at his own cost to do any such further
reasonable acts documents and things as the Purchaser may reasonably
require to vest the beneficial ownership of the Shares in the Purchaser
free from all charges liens and other adverse interests and to vest the
benefit of this Agreement in the Purchaser.
16.2 Each Vendor hereby irrevocably and unconditionally appoints the
Purchaser with effect on and from Completion as his Attorney with full
powers of substitution in his name and for him and on his behalf (and to
the complete exclusion of any rights he may have in such regard)
lawfully to exercise all voting and other rights and receive all the
benefits and entitlements which may now or at any time hereafter attach
to his Shares or any of the Shares registered in his name (whether alone
or jointly with any other person) and to transfer and deal with such
shares, rights, benefits and entitlements and execute such
<PAGE>
22
documents under hand or as a deed and do such acts and things in
connection with the foregoing or as are required for the purposes above
described in this Clause as the Purchaser shall from time to time think
fit in all respects as if the Purchaser were the absolute legal and
beneficial owner thereof.
16.3 The powers of attorney granted in this Clause are given by way of
security for the due performance by each Vendor of his obligations
thereby contemplated.
17 Survival of Agreement
This Agreement (and in particular but without limitation the warranties
of the Vendors hereunder) shall insofar as the terms thereof remain to
be performed or are capable of subsisting remain in full force and
effect after and notwithstanding Completion.
18 Costs
18.1 Unless the Purchaser shall lawfully exercise any right of recission of
the Agreement, the Purchaser will be responsible for and will pay on
Completion (or if the Agreement does not complete on its lapsing) all
reasonable costs and expenses (plus disbursements and VAT) properly
incurred by the Vendors in relation to this transaction with effect from
the 1st April 1999, whether or not this matter proceeds to completion
limited (pound)100,000 plus disbursements and VAT.
18.2 If either party shall lawfully exercise any right of rescission of this
Agreement the other party shall pay and indemnify that party against all
expenses and costs incurred in investigating the affairs of the Company
and in the preparation of this Agreement and in arranging or seeking to
arrange finance to purchase the Shares and for the Company.
19 Successors and Assigns
This Agreement shall not be assignable by any of the Vendors but shall
be binding upon and enure for the benefit of each party's successors and
on each Vendor's personal representatives.
20 Announcements
Save in respect of statutory returns or matters or announcements
required to be disclosed or publicly made by law or any recognised
investment exchange (as defined in the Financial Services Act 1986) or
other governmental or regulatory authority, none of the parties hereto
shall make any press statement or other public announcement in
connection with this Agreement without the prior written approval of the
text of such statement or announcement (in the case of any Vendor) by
the Purchaser or (in the case of the Purchaser) by the Vendors'
Representative or by the Vendors' Solicitors.
21 Notices and Representatives
21.1 Without prejudice to any other method available for the giving of
notice, any notice or other communication desired to be given or made
hereunder or under the Tax Deed may
<PAGE>
23
be given or made by personally delivering the same or by sending the
same by first class post (airmail if sent to or from abroad) or legible
facsimile in the case of the Purchaser to its registered office for the
time being and in the case of any other party to his address shown
herein (or as subsequently notified in writing by or on behalf of such
party to the Purchaser or the Purchaser's Solicitors) and if sent by
post aforesaid shall be deemed to have been received on the second
business day after the posting of the same (or on third business day if
sent to or from abroad) and if personally delivered or sent by legible
facsimile shall be deemed to have been received on despatch if delivered
or sent on a business day or (if not so delivered or sent) on the first
business day thereafter.
21.2 For the purposes of this Agreement and/or the Tax Deed any proceedings
arising in connection therewith service by the Purchaser of notice or
proceedings on the Vendors' Solicitors shall be deemed to be sufficient
and proper notice to or service on all of the Vendors.
21.3 For the purposes of this Agreement and/or the Tax Deed any proceedings
arising in connection therewith service by the Vendor of notice or
proceedings on the Purchaser's Solicitors shall be deemed to be
sufficient and proper notice to or service on the Purchasers.
21.4 Delivery of any document or payment required to be made to the Vendors
or any of them hereunder may be made to the Vendors' Solicitors whose
receipt for such delivery or payment shall be an absolute discharge of
the party making the same who shall not be concerned as to the
application thereof.
21.5 Delivery of any document or payment required to be made to the Purchaser
hereunder may be made to the Purchaser's Solicitors whose receipt for
such delivery or payment shall be an absolute discharge of the party
making the same who shall not be concerned as to the application
thereof.
22 General
22.1 This Agreement together with all documents in agreed form represents the
entire agreement between the parties and it may only be varied by
written document signed by all the parties.
22.2 The obligations and liabilities of the Vendors assumed or undertaken
under or pursuant to this Agreement are joint and several subject to the
provisions of Clause 10.11 and save for the representation and warranty
contained in Clause 5.3.2 where the obligations and liabilities are
those of the relevant Vendor alone.
22.3 The obligations and liabilities of any party hereto shall not be
prejudiced released or affected by any time or forbearance or indulgence
release or compromise given or granted by any person to whom such
obligations and liabilities are owed or by any other person to such
party or any other party so obliged or liable nor by any other matter or
circumstance which (but for this provision) would operate to prejudice
release or affect
<PAGE>
24
any such obligations except an express written release by all the
parties to whom the relevant obligations and liabilities are owed or
due.
22.4 If any party fails to pay by the due time any sum due hereunder or under
any agreement or deed entered into pursuant hereto, such sum shall for
so long as it remains outstanding bear interest calculated on a daily
basis from the date it was due until the date it is paid (both dates
inclusive) at a rate (as well after as before judgment or demand) equal
to three percent above the base rate for the time being of Barclays Bank
PLC and such interest shall be payable on demand.
22.5 Any party may take action for any breach or nonfulfillment of any
warranties undertakings agreements and representations on behalf of any
other party or parties before or after Completion notwithstanding that
such breach or nonfulfillment was known to or discoverable by such
party before Completion and notwithstanding that such party shall delay
or otherwise fail to exercise its rights hereunder or generally in such
regard.
22.6 The rights and remedies reserved to the Vendors and/or the Purchaser
herein or under any provision of this Agreement or in any document to be
executed pursuant hereto shall be in addition and without prejudice to
any other rights or remedies available to the Vendors or the Purchaser
(as the case may be) whether under this Agreement or any such document
by statute common law or otherwise.
22.7 Where any covenant undertaking agreement representation warranty or
indemnity is given herein or stated to be for the benefit of the Company
the same shall be directly enforceable by the Company or by the
Purchaser on its behalf as if it were named as a party hereto and had
duly executed this Agreement.
22.8 Each of the agreements undertakings covenants warranties indemnities and
other obligations of the parties entered into pursuant hereto (including
without limitation under Clause 11) is considered reasonable by the
parties but if any provision or part thereof shall be held void or
unenforceable or in conflict with the law of any state or jurisdiction
any provision or part so held void or unenforceable or in conflict as
aforesaid shall be severed from this Agreement or other document in
which it is contained or otherwise modified to become valid and
enforceable insofar as it relates to that state or jurisdiction only and
the enforceability and validity of any other parts or provisions of this
Agreement and such document shall not be affected by such severance or
modification.
22.9 The Purchaser hereby expressly acknowledges and confirms that it has not
been induced to enter into this Agreement nor has it relied on any
warranty statement fact or other thing other than the Warranties and the
Purchaser hereby expressly excludes all and any liability or claims
arising from or trough a misrepresentation howsoever caused by the
Company or the Vendors or any of them or their agents and the parties to
this Agreement expressly hereby expressly agree that any liability
arising under this Agreement is restricted to any competent claim
brought under the Warranties in accordance with the terms of this
Agreement
<PAGE>
25
22.10 This Agreement shall be governed by and construed in accordance with
English Law and the parties hereby irrevocably submit themselves to the
non-exclusive jurisdiction of the English Courts.
IN WITNESS whereof this Agreement has been duly executed and delivered as a deed
by parties the day and year first before written.
<PAGE>
26
SCHEDULE I
(Particulars of the Vendors)
(1) (2)
Number of
Name and Address Shares held
---------------- -----------
1. Janet Pomeroy 2,000
60A Priory Road
London N8 7EX
2. Adam Bishop 2,000
44 Kenilworth Road
London W5 3UH
3. Telcoworld Limited 2,582
16 St John Street
London
EC1M 4AY
4. Nicholas Topharn 1,380
38 Southdown Road
Harpenden
Herts AL5 lPG
5. Ingrid Henningson 979
37 Crediton Hill
London NW6 lHS
6. Mark Willard 859
2b Longdown Road
Fleet
Hampshire GU13 9UZ
7. Joshua Mailman 200
c/o Serious Business Corporation
150 East Street
14th Floor
New York NY 10155
USA
------
TOTALS 10,000
======
<PAGE>
27
SCHEDULE 2
Part I
(The Company)
1. Date of Incorporation : 17 September 1998
2. Registered Number : 3633818
3. Authorised Share Capital : (pound)10,000 divided into 10,000
ordinary shares of(pound)1 each
4. Issued Share Capital : 10,000 ordinary shares all fully paid
or credited as fully paid
5. Directors : Harry Pomeroy (Chairman)
Larry Trachtenberg
Nick Topharn
Mark Willard
6. Secretary : Susan Connabeer
7. Registered Office : 5th Floor, 7-10 Chandos Street
Cavendish Square, London W1M 9DE
8. Accounting Reference Date : 31st December
<PAGE>
28
Part 2
(The Subsidiary Companies)
Telesource Limited (Company No. 3633814)
Teleroute Limited (Company No. 3633810)
Equitel Card Services Limited (Company No. 3633806)
<PAGE>
29
SCHEDULE 3
(The Properties)
<TABLE>
<CAPTION>
Description of Owner/Occupier Description Permitted Current Rental
Premises -------------- of tenure Use --------------
- - - - -------------- Title --------
Number, etc.
------------
<S> <C> <C> <C> <C>
Fourth Floor Equitel Leasehold Offices - Until 16 April 1999
and Parking Communications for a term, Class B1 a peppercorn.
Space Limited commencing From 17th April
39/40 Portman 24th March 1999 until the
Square 1999 and expiration of the
London W1 expiring 22nd term (pound)175,718
March 2004
Parking Space Equitel Licence for Parking (pound)3,000 per annum
Communications one year then Space
Limited determinable
Parking Space Equitel Licence for (pound)3,000 per annum
Communications one year then Parking
Limited determinable Space
</TABLE>
<PAGE>
30
SCHEDULE 4
(Warranties)
1 INTERPRETATION
1.1 Where any of the following paragraphs of this Schedule or any provision
or disclosure made or referred to in the Disclosure Letter is qualified
by the expression "to the best of the knowledge, information and belief
of the Vendors" or "so far as the Vendors are aware" or any similar
expression, that paragraph shall be deemed to include an additional
warranty to the effect that the statement has been made after such
reasonable enquiry as would be appropriate in the circumstances.
1.2 References to "the Company" shall be deemed to include references to the
Subsidiaries and each of the warranties set out in this Schedule shall
be deemed given in respect of both the Company and the Subsidiaries.
2 DISCLOSED INFORMATION
2.1 All information contained or referred to in the Disclosure Letter and in
the Schedules to this Agreement and supplied by the Vendors' solicitors
to the Purchaser's solicitors ("Disclosed Information") was (save to the
extent already corrected or updated in the Disclosure Letter) when given
and is now so far as the Vendors are aware accurate in all material
respects.
2.2 So far as the Vendors are aware there is nothing omitted from the
Disclosure Letter which would make any of the statements set out therein
materially inaccurate.
3 ACCOUNTS
3.1 The Accounts a copy of which is annexed to the Disclosure Letter have
been prepared in accordance with generally accepted accounting practice
and principles reflect in all material respects the assets and
liabilities of the Company (whether actual or contingent or otherwise)
and the state of the affairs of the Company at such date and its results
for the period since the date of its incorporation.
3.2 All proper and necessary books of account and records have been fully
and accurately kept and completed by the Company, and the same contain
full and correct information relating to all transactions to which the
Company has been a party in accordance with law and generally accepted
accounting practice and principles and all such books and records are in
the possession or control of the Company.
4 POSITION SINCE ACCOUNTING DATE
4.1 Since the Accounting Date (i) there has been no adverse change in the
financial or trading position or prospects of the Company (ii) the
business of the Company has been carried on in the normal course (iii)
the Company has not declared or paid any dividends or
<PAGE>
31
effected any distribution (for tax purposes or otherwise) of or in
respect of its assets or share capital (iv) the Company has not acquired
or disposed of any business or material assets other than in the
ordinary course of day to day trading and (v) the Company has not made
or agreed to make any loan or payment or entered into any transaction or
assumed or incurred any liabilities (including contingent liabilities)
except in the ordinary course of day to day trading and for full value
and in the case of capital commitments such commitments do not exceed
(pound)10,000 in aggregate.
4.2 No order has been made or petition presented or resolution passed for
the winding-up or other dissolution of the Company and no receiver or
manager or administrator has been appointed over any of its assets and
there are no grounds on which any such appointment may be made.
5 TAXATION
5.1 The Company has within the requisite time limits duly made all returns,
given all notices, and supplied all other information required to be
supplied to the Inland Revenue HM Commissioners of Custom and Excise
and/or any other competent fiscal authority in any part of the world and
all such information returns and notices were when given or supplied and
are now accurate in all material respects and made on a proper basis and
are not, so far as the Vendors are aware, likely to be the subject of
any dispute with any of the relevant authorities concerned.
5.2 The Disclosure Letter gives full details of all matters relating to
taxation in respect of which the Company (either alone or jointly with
any other person) has or on the basis of law and practice presently
operative has an outstanding entitlement:-
5.2.1 to make any claim (including a supplementary claim) for any
Relief (as defined in the Tax Deed);
5.2.2 to make any election for one type of Relief, or one basis,
system or method of taxation as opposed to another;
5.2.3 to make any appeal (including a further appeal) against any
assessment to taxation; or
5.2.4 to make any application for the postponement of taxation.
5.3 The Company has duly deducted withheld paid and accounted for all tax
due to have been deducted withheld paid or accounted for by it before
the date of this Agreement and is not and has not at any time since the
Accounting Date been liable to pay interest on any unpaid taxation.
5.4 Since the Accounting Date the Company has not made and the Company is
not subject to any present or future liability to make or provide any
payment or consideration which could be disallowed as a deduction in
computing the profits of the Company or as a charge on the Company's
income for taxation purposes.
<PAGE>
32
5.5 The book value of each of the capital or fixed assets of the Company in
or adopted for the purposes of the Accounts does not exceed the amount
(if any) deductible under Section 38 TCGA and is such that on a disposal
or deemed disposal of such assets or any of the same at that value no
balancing charge or chargeable gain will arise accrue or crystallise.
5.6 The Company has never reduced its share capital or repurchased repaid or
redeemed any share capital nor capitalised any profits reserves or share
premium account in the form of or in paying up any amounts unpaid on any
shares debentures or other securities nor agreed or resolved to do any
of the foregoing.
5.7 The Company is a registered and taxable person for the purposes of value
added tax and (i) has complied with all the requirements of the value
added tax legislation and all applicable regulations; (ii) is not in
arrears with any payment or returns thereunder and is not liable to any
abnormal or non-routine payment for value added tax purposes; (iii) has
maintained complete correct and up to date value added tax records
invoices and other necessary documents; (iv) has not been required by HM
Commissioners of Customs and Excise to give any security; and (v) is not
and has never been or agreed to be an agent manager or factor for the
purposes of Section 47 or 48 of the Value Added Tax Act 1994.
5.8 The Company is not bound and has not agreed to become bound by any
lease, tenancy or licence in the case of which under its terms or by
statute that Company is or could become liable to pay an amount in
respect of value added tax chargeable as a result of the making of an
election to waive exemption under Schedule 10 to the Value Added Tax Act
1994.
5.9 The Company is not under any liability to taxation, contingent or
otherwise, in respect of any other company which at any time has been a
member of the same group or consortium as the Company or an associated
company of the Company for taxation purposes or in respect of any
transaction effected with or asset or benefit received from or given by
the Company to any such other company.
5.10 The Company is not under any liability to taxation or additional
taxation, contingent or otherwise, under any of the provisions of Part
XI of the Taxes Act (close companies) or any failure by the Company to
distribute sufficient of its profits in any accounting year or period.
5.11 The Company has not entered into or been a party to any scheme or
arrangement designed partly or wholly for the purposes of avoiding or
deferring taxation, and no scheme or transaction of any nature has been
carried out by or proposed in relation to the Company which has given
rise or could give rise to a charge to taxation under Part XVII of the
Taxes Act.
5.12 All of the documents relating to or necessary to prove the title of the
Company to its assets (including, without limitation, any leasehold or
freehold property) have been properly stamped.
5.13 The Company has only ever been tax resident in the United Kingdom.
<PAGE>
33
5.14 No event has occurred which could give rise to a claim under the Tax
Deed if it were now in force.
6 ASSETS
6.1 The Company was at the Accounting Date and (subject only to sales of
current assets in the ordinary course of its day to day trading) now is
the owner of and has good and marketable title to all of the assets
included in the Accounts and all assets (including plant and equipment
furniture and motor vehicles) now owned or used by it or in its
possession.
6.2 All debts owing to the Company at Completion will realise their full
face value within four months of their due date and no amount included
in the Accounts as owing to the Company at the Accounting Date has
realised an amount less than the value for which it was included in the
Accounts or is now regarded as irrecoverable in whole or in part.
7 MORTGAGES AND CHARGES
The Company has not created nor has it agreed to create and nor is there
subsisting any mortgage debenture lien charge or other similar
encumbrance or security interest over all or any of its property assets
undertaking goodwill reserves or share capital, whether present or
future.
8 GUARANTEES
The Company is not and has not agreed to become bound by any guarantee
bond, warranty, or indemnity or suretyship or similar commitment and
there is not now outstanding any such guarantee bond, warranty indemnity
suretyship or similar commitment given for the accommodation of or in
respect of any obligation or liability of the Company.
9 BORROWING ARRANGEMENTS
9.1 The Disclosure Letter contains full particulars of and there are annexed
thereto true copies of all material documents (including facility
letters bank mandates and any documents executed by the Company to
secure its borrowing obligations) in relation to all borrowings of the
Company and all arrangements in the nature of borrowing or loan
facilities including without limitation factoring or invoice discounting
arrangements.
9.2 The Company is not in breach of the terms of any of its borrowing
obligations and in particular of any document governing the terms of or
securing such borrowings and no event has occurred which will or might
give any person the right to call for the immediate or early repayment
of any of its borrowings or to terminate any loan facilities placed at
its disposal or which is likely to cause a demand for the immediate
repayment of any of its borrowings which are repayable on demand.
9.3 There is no indebtedness of the Company exceeding (pound)10,000 in
aggregate which is overdue for payment or discharge by more than three
months and (assuming continuance
<PAGE>
34
of its existing bank and other financial facilities disclosed in the
Disclosure Letter) the Company has sufficient working capital for the
purposes of carrying on its business in its present form for the period
of twelve months after Completion.
10 MATERIAL COMMITMENTS AND AGREEMENTS
10.1 The Company is not party to nor liable in respect of and none of the
assets of or used by the Company is affected by:
10.1.1 any bill of sale pledge or hypothecation or any hiring or
leasing agreement hire purchase agreement credit or conditional
sale agreement or agreement for payment on deferred terms or any
other similar agreement;
10.1.2 any contract covenant commitment or arrangement (i) of an
onerous or unusual nature or which is likely to be unprofitable
or (ii) which is not terminable by the Company without
compensation by three months notice or less or which is unlikely
to be fully performed within three months from the date hereof
or (iii) made otherwise than in the ordinary and usual course of
the business of the Company as now carried on or (iv) in respect
of which any party thereto has not performed and complied in all
material respects with its obligations;
10.1.3 any partnership joint venture consortium trade association or
society or any agreement or arrangement relating thereto;
10.1.4 any selling purchasing manufacturing licensing franchising
agency distribution or other similar agreement or arrangement
relating to the sale of goods or services by or to the Company;
10.1.5 any contract covenant commitment or arrangement which in any way
restricts the freedom of the Company to carry on its business or
any part thereof in any part of the world in such a manner as it
thinks fit;
10.1.6 any contact covenant commitment or arrangement which is or is
liable to be terminated or altered by another party as a result
of any change in the control management or shareholders of the
Company; or
10.1.7 particulars of all contracts to which the Company is a party and
which relate to the acquisition or disposal or licensing of
telecommunication capacity are contained in the Disclosure
Letter.
10.2 No person is authorised to act as agent or attorney for the Company or
to bind the Company otherwise than its Directors acting as a Board.
11 PROPERTIES
11.1 Save for the properties referred to in Schedule 3 ("the Properties") the
Company does not use own or occupy or have any interest in any freehold
leasehold or other real
<PAGE>
35
property and the Company is under no liability (actual contingent or
otherwise) in respect of the Properties or any such property or interest
which it has used owned or occupied or had any interest in prior to the
date hereof.
11.2 The particulars of each of the Properties shown in Schedule 3 are true
and correct, copies of all material documents relating to the Properties
have been supplied to the Purchaser's Solicitors prior to the date
hereof and the written replies of the Vendors' Solicitors to the written
enquiries of the Purchaser's Solicitors relating to the Properties are
true complete and accurate in all respects.
11.3 The Company has good and marketable title to each of the Properties and
is the beneficial and legal owner in exclusive possession of the estate
or interest in each Property specified in Schedule 3 free from any
mortgage, charge, lien, debenture, lease, underlease, tenancy adverse
right, condition, privilege, easement, overriding claim, option, right
of pre-emption, covenant, restriction, acceptance, reservation or
interest claim and any matters or things registered or capable of
registration in any Registry and the Company is in a position without
incurring any liabilities thereby to sell each property as Beneficial
Owner with a full title guarantee for the purposes of the Law of
Property (Miscellaneous Provisions) Act 1994.
11.4 The Company is entitled, without restriction and without breaching the
terms of any lease or other rights of occupation or the provisions of
any legislation to use each of the Properties for the purpose specified
in Schedule 3 and every other use for which it presently uses the same
or any part thereof.
11.5 No notices orders proposals applications requests or schedules of
dilapidations affecting or relating to any of the Properties have been
served or made by any authority or other person or by the Company and,
so far as the Vendors are aware, there are no circumstances which are
likely to result in any being served or made.
11.6 In the case of any Property occupied by the Company under a lease
tenancy licence or similar right, the Company has fully complied in all
material respects with all its obligations in respect of such occupation
and no notice has been received to terminate the right of the Company to
continue the same and, so far as the Vendors are aware, there are no
circumstances which could result in such right of occupation being
determined otherwise than by the Company.
11.7 All persons occupying the Properties or any part thereof under any lease
tenancy licence or similar right from the Company have fully complied
with all their obligations in respect of such occupation.
12 ENVIRONMENTAL AND HEALTH MATTERS
12.1 The Company has complied in all material respects with its obligations
under all statutes and/or regulations and/or orders or other provisions
of law and/or codes of practice (including without limitation the laws
of tort which protect or relate to the protection of
<PAGE>
36
the environment and/or the health and well being of individuals and/or
other living creatures.
12.2 None of the products sold or otherwise supplied by or through the
Company have at any time infringed, at the time of their supply or (if
later) installation by the Company, any statutes, regulations, order or
other provisions of law referred to in Warranty (12)(a) above.
13 BUSINESS OF THE COMPANY
13.1 The Company does not carry on any business other than the business
described in the Disclosure Letter with specific reference to this
Warranty.
13.2 The Company has at all material times held and continues to hold all
licences covenants and permissions required for the carrying on of its
business both in the United Kingdom and abroad and is not in material
breach of the terms or conditions of such licences covenants and
permissions; there are no pending or threatened proceedings which might
in any way adversely affect such licences covenants or permissions; and
the Vendors are not aware of any circumstances whereby any of the same
is likely to be suspended cancelled revoked or not renewed in the
ordinary course.
13.3 All goods and services manufactured and/or supplied and/or promoted by
the Company whether for sale or distribution or otherwise comply in all
material respects with all applicable legislation in the territories in
which they are promoted or sold or distributed and no such goods are in
any way unsaleable or defective so as to give a right of action against
the Company which is likely to have a material adverse effect on the
Company or its business.
13.4 None of the business practices of the Company is or has been the subject
of or susceptible to or affected by any investigation, reference, report
or order made by and the Company has not received any process notice or
communication (formal or informal) from any governmental legislative
regulatory consumer protection or like authority of any jurisdiction or
competence.
14 LITIGATION
The Company is not engaged in any litigation arbitration prosecution or
other legal proceedings (whether as plaintiff defendant or third party)
and there are no such proceedings pending or threatened or any
proceedings in respect of which the Company is or might be liable to
indemnify or compensate any other person concerned therein and to the
best of the knowledge information and belief of the Vendors there are no
claims facts event or other circumstances which are likely to give rise
to any such proceedings.
15 BREACHES OF OBLIGATIONS
Neither the Company nor any person for whom it is vicariously
responsible has committed any breach of or failed to perform or observe
any provision of its
<PAGE>
37
Memorandum or Articles of Association or of any legislation in any part
of the world or any covenant or agreement or the terms or conditions of
any consent or licence or any judgment or order of a Court or other
competent tribunal or authority by which the Company is bound or to
which it is a party or which affects any of the assets owned or used by
it.
16 INSURANCE
16.1 The Company is and at all material times has been fully covered by valid
insurances against all normal risks having regard to the type of
business carried on and assets owned or used by it.
16.2 The policies of insurance to which the Company is a party are valid and
enforceable and true copies of the same are attached to the Disclosure
Letter all premiums due have been paid; there are no outstanding claims
or circumstances likely to give rise to a claim thereunder; and nothing
has been done or omitted to be done which has made or could make any
such policy void or voidable or whereby the renewal of any such policy
might be affected or the premiums due in respect thereof are likely to
be increased.
17 EMPLOYEES ETC
17.1 The Disclosure Letter details the names and full particulars of all
officers employees consultants and agents of the Company and their
respective ages, length of service with or engagement by the Company and
their terms of employment or engagement including (without limitation)
their notice periods and emoluments, including bonuses, profit sharing
arrangements and benefits in kind, commissions, fees, remuneration,
periods of notice, usual dates and terms of review of salary, fees and
other benefits.
17.2 No present officer employee consultant or agent of the Company has given
or received notice terminating his employment or engagement or is
entitled (without giving proper notice) to terminate his employment or
engagement with the Company.
17.3 The Company is not party to any agreement or arrangement (save in the
case of any contract of employment to the extent fairly disclosed in the
Disclosure Letter) imposing an obligation on it to increase the rates of
remuneration of or to make any bonus or incentive payments or any
benefits in kind or any payments under a profit sharing scheme to or on
behalf of any of its former present or fixture officers employees
consultants or agents, whether now or at any future date.
17.4 There is not in existence any share incentive scheme share option scheme
or profit sharing scheme for all or any of the Company's officers or
employees and no proposals for any such scheme or arrangement are under
consideration by the Company.
18 PENSIONS
18.1 There has been and is no arrangement to which the Company contributes or
may become liable to contribute under which benefits of any kind are
payable to or in respect of any
<PAGE>
38
employee or director of the Company (or to any spouse or dependant of
any of them) on retirement on death or in the event of disability or
sickness or in other similar circumstances (including permanent health
insurance and medical insurance).
19 INTELLECTUAL PROPERTY RIGHTS
19.1 The business of the Company has at all material times been carried on
without infringing any intellectual property right of any third party.
19.2 Particulars of all intellectual property rights used and/or owned by the
Company are set out in the Disclosure Letter and all of the same are
duly registered (where possible) and valid and enforceable and free from
any licence, sub-licence or royalty obligations and, so far as the
Vendors are aware, no third party is infringing or has at any time
infringed the same.
19.3 The Company has not disclosed or permitted to be disclosed or undertaken
or arranged to disclose to any person any of its know how secrets
confidential information technical processes or lists of customers or
suppliers.
19.4 The Company uses no name other than its corporate name for any purpose.
19.5 References herein to "intellectual property" and "intellectual property
rights" shall include patents, patent applications, trade marks,
registered designs, design rights, copyrights, moral fights, business
names, trade marks, service marks, computer software programs and
systems, know how, confidential information and other industrial or
commercial intellectual property rights whether registered or applied
for or not.
20 ASSOCIATES AND CONNECTED PERSONS
20.1 None of the Vendors nor any director or shareholder of the Company nor
any connected person or associate of any of them has any interest,
direct or indirect, in any agreement or arrangement to which the Company
is a party or in any business which has a close trading relationship
with that of the Company or which is or is likely to become competitive
with the business of the Company.
20.2 Save for remuneration and expenses properly due to its directors in the
ordinary course, there are no amounts owing by or to the Company to or
by any of the Vendors or any shareholder or director of the Company or
any connected person or associate of any of them respectively and the
Company is not under any liability (contingent or otherwise) in respect
of any guarantee suretyship indemnity or like obligation given by or
binding on the Company in respect of any liabilities or obligations of
any of the Vendors such shareholders directors or connected persons or
associates.
<PAGE>
39
21 THE COMPANY
21.1 The Company is a private company limited by shares and the information
set out in Schedule 2 is correct.
21.2 The Shares have been issued in proper legal form and are fully paid or
credited as fully paid and the Vendors are between them the legal and
beneficial owners of the Shares and have full power right and authority
to sell all of the Shares hereunder to the Purchaser, free from all
claims liens encumbrances and equities.
21.3 There is not now any debenture or loan capital or any agreement to
create or issue any debenture or loan or share capital of the Company or
any option to subscribe for or acquire or any agreement to put under
option any debenture or loan or share capital of the Company and no
person has the right (whether pursuant to conversion or otherwise) to
call for the issue of any debenture or share or loan capital of the
Company under any agreement or other arrangement presently in force.
21.4 Save as disclosed herein, the Company does not have and has never had
any nor been a subsidiary and nor has it ever been the legal or
beneficial owner of any share or loan capital of any company.
21.5 The register of members of the Company is correct and properly written
up to date and there has been no notice of any proceedings to correct or
rectify any such register.
21.6 Since the date of the incorporation of the Company neither the Company
nor any class of its members has passed any Resolution.
21.7 A copy of the Memorandum and Articles of Association of the Company is
attached to the Disclosure Letter, is true and complete and has embodied
therein or annexed thereto a copy of every such Resolution or Agreement
as is referred to in Section 380 (2) of the Companies Act.
22 GENERAL
22.1 Each Vendor has requisite powers to enter into and perform this
Agreement and the obligations to be assumed or performed by him pursuant
thereto and the execution and delivery and completion of this Agreement:
22.1.1 does not and will not cause the Company or the Vendors or any of
them to be in breach of any of the terms and provisions of any
agreement or arrangement or order or injunction of any Court or
competent tribunal;
22.1.2 does not and will not relieve any person of or entitle any
person to terminate any contractual or other obligation to the
Company; and
22.1.3 will not so far as the Vendors are aware result in any customer
or supplier of the Company ceasing to deal or substantially
reducing the existing level of his
<PAGE>
40
dealings with the Company or terminate or result in the
termination of any present or future benefit or privilege
enjoyed by the Company.
22.2 No person is entitled to receive from the Company any finders fee
brokerage or commission in connection with the sale of Shares under this
Agreement and no representation has been made to any of the Vendors or
any other person in connection with this Agreement or the Disclosure
Letter or otherwise for which the Company might be liable.
EXECUTED
as her deed by the said ) /s/ Michael H. Garvin
JANET POMEROY ) Duly Authorized Attorney
in the presence of:- ) for and on behalf of Janet Pomeroy
/s/ David Cran )
Trainee Soliciter
Gouldens
Tudar St., London
EXECUTED ) /s/ Michael H. Garvin
as his deed by the said ) Duly Authorized Attorney
ADAM BISHOP ) for and on behalf of Adam Bishop
in the presence of:- )
/s/ David Cran
(as above)
EXECUTED as a Deed )
by two duly authorised officers )
for and on behalf of )
TELCOWORLD LIMITED )
/s/ Ray Harris
-------------------------------------
Director
/s/ P. Norris
-------------------------------------
Director/Secretary
EXECUTED )
as his deed by the said )
NICHOLAS TOPHAM ) /s/ N. Tophum
in the presence of:- )
/s/ David Pollacchi
Soliciter
35 Piccadilly, London
<PAGE>
41
EXECUTED )
as her deed by the said ) /s/ Michael H. Garvin
INGRID HENNINGSSON ) duly authorized attorney
in the presence of:- ) for and on behalf of Ingrid Henningsson
/s/ David Cran
(as above)
EXECUTED )
as his deed by the said ) /s/ Michael H. Garvin
MARK WILLARD ) duly authorized attorney
in the presence of:- ) for and on behalf of Mark Willard
/s/ David Cran
(as above)
EXECUTED )
as his deed by the said ) /s/ Michael H. Garvin
JOSHUA MAILMAN ) duly authorized attorney
in the presence of:- ) for and on behalf of Joshua Mailman
/s/ David Cran
(as above)
EXECUTED as a Deed )
by two duly authorised officers )
for and on behalf of )
TELEMONDE INC. )
/s/ Adam Bishop
--------------------------------------
Director
/s/ Gottfried von Bismarck
-------------------------------------
Director/Secretary
EXECUTED )
as his deed by the said ) /s/ Michael H. Garvin
HARRY POMEROY ) duly authorized attorney
in the presence of:- ) for and on behalf of Harry Pomeroy
/s/ David Cran
(as above)
EXECUTED )
as his deed by the said ) /s/ Michael H. Garvin
LARRY TRACHTENBERG ) duly authorized attorney
in the presence of:- ) for and on behalf of Larry Trachtenberg
/s/ David Cran
(as above)
<PAGE>
EXHIBIT 2.3
AGREEMENT AND PLAN OF MERGER
OF
TELEMONDE, INC.
(a Nevada corporation)
INTO
TELEMONDE, INC.
(a Delaware corporation)
THIS AGREEMENT AND PLAN OF MERGER is adopted by Telemonde, Inc., a Nevada
corporation (the "Merging Corporation"), by unanimous written consent of its
Board of Directors on June 30, 1999, and by Telemonde, Inc., a Delaware
corporation (the "Surviving Corporation")., by unanimous written consent of its
Board of Directors on June 30, 1999.
1. Merger. Merging Corporation and Surviving Corporation, shall,
-------
pursuant to the provisions of the laws of the General Corporation Law of the
State of Delaware and the provisions of the General Corporation Law of the State
of Nevada, be merged with and into a single corporation, to wit, Surviving
Corporation, which shall be the surviving corporation when the merger becomes
effective and which shall continue to exist as said surviving corporation under
its present name pursuant to the provisions of the General Corporation Law of
the State of Delaware. The separate existence of Merging Corporation shall cease
when the merger becomes effective in accordance with the laws of Nevada.
2. Articles of Incorporation. The Articles of Incorporation of Surviving
--------------------------
Corporation when the merger becomes effective shall be the Articles of
Incorporation of said Surviving Corporation and will continue in full force and
effect until thereafter changed, altered or amended as provided therein or by
the General Corporation Law of the State of Delaware.
3. Bylaws. The bylaws of Surviving Corporation when the merger becomes
-------
effective shall be the bylaws of said Surviving Corporation and will continue in
full force and effect until changed, altered, or amended as therein provided and
in the manner prescribed by the provisions of the General Corporation Law of the
State of Delaware.
4. Directors and Officers. The directors and officers in office of
-----------------------
Surviving Corporation when the merger becomes effective shall be the members of
the first Board of Directors and the first officers of Surviving Corporation,
all of whom shall hold their directorships and offices until the election and
qualification of their respective successors or until their tenure is otherwise
terminated in accordance with the Articles of Incorporation or the bylaws of
Surviving Corporation.
5. Manner and Basis of Conversion. Each issued and outstanding share of
-------------------------------
common stock, $.001 par value per share, of Merging Corporation when the merger
takes effect shall automatically and without any action on the part of the
Surviving Corporation or the holder thereof become and be converted into the
right to receive one (1) share of common stock, $.001 par value
<PAGE>
per share, of the Surviving Corporation. The one share of Surviving Corporation
issued and outstanding immediately prior to the merger taking effect shall be
canceled when the merger takes effect.
6. Authorization of Merger. The merger of Merging Corporation with and
------------------------
into Surviving Corporation and this Agreement and Plan of Merger shall be
authorized in the manner prescribed by the laws of the General Corporation Law
of the State of Nevada and in the manner prescribed by the General Corporation
Law of the State of Delaware.
7. Effectuation of Merger. In the event that the merger of Merging
-----------------------
Corporation with and into Surviving Corporation shall have been duly authorized
in compliance with the General Corporation Law of the State of Nevada and in the
manner prescribed by the provisions of the General Corporation Law of the State
of Delaware, Merging Corporation and Surviving Corporation hereby stipulate that
they will cause to be executed and filed and/or recorded any document or
documents prescribed by the laws of the State of Delaware and of the State of
Nevada, and that they will cause to be performed all necessary acts therein and
elsewhere to effectuate the merger. Notwithstanding anything herein to the
contrary, the Boards of Director of the Merging Corporation and the Surviving
Corporation may abandon the Merger by resolution prior to filing and/or
recording of such documents with the appropriate authorities.
8. Authorization of All Necessary Acts. The Board of Directors and the
------------------------------------
proper officers of Merging Corporation and of Surviving Corporation,
respectively, are hereby authorized, empowered, and directed to do any and all
acts and things, and to make, execute, deliver, file, and/or record any and all
instruments, papers, and documents which shall be or become necessary, proper,
or convenient to carry out or put into effect any of the provisions of this
Agreement and Plan of Merger or of the merger herein provided for.
9. Effective Date. The effective date of this merger shall be upon the
---------------
filing of the latter of the Articles of Merger with the State of Nevada or the
Certificate of Merger with the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be duly executed as of this 29th day of October, 1999.
TELEMONDE, INC.,
a Delaware corporation
ATTEST: /s/ Adam Bishop
---------------------------
G. von Bismarck By: Adam Bishop
- - - - ------------------------- Its: President
Secretary
TELEMONDE, INC.,
a Nevada corporation
ATTEST: /s/ Adam Bishop
---------------------------
G. von Bismarck By: Adam Bishop
- - - - ------------------------- Its: President
Secretary
<PAGE>
EXHIBIT 2.4
PRIVATE AND CONFIDENTIAL
Dated 9th August 1999
-------------------------
(1) THE PERSONS WHOSE NAMES AND
ADDRESSES ARE SHOWN IN
COLUMN 1 OF SCHEDULE 1
AND
(2) TELEMONDE, INC.
------------------------------
SHARE PURCHASE AGREEMENT
FOR THE SALE AND PURCHASE OF
ALL THE ISSUED SHARE CAPITAL OF
TGA (UK) LIMITED
------------------------------
Bird & Bird
90 Fetter Lane
London EC4A 1JP
Tel: 0171 415 6000
Fax: 0171 415 6111
ref: JCS/DJC/Telmo.002
<PAGE>
CONTENTS
Heading Page
1. DEFINITIONS AND INTERPRETATION.......................................... 2
2. SALE OF THE SHARES...................................................... 5
3. CONSIDERATION........................................................... 5
4. COMPLETION.............................................................. 6
5. REPRESENTATIONS AND WARRANTIES.......................................... 8
6. EMPLOYMENT OF SPECIFIED PARTIES......................................... 9
7. EXISTING AGREEMENTS..................................................... 9
8. PENDING AGREEMENTS......................................................10
9. PURCHASE FOR INVESTMENT PURPOSES........................................11
10. LACK OF DISCLOSURE STATEMENT............................................12
11. LEGEND ON CERTIFICATES..................................................12
12. TRANSFER AGENT..........................................................12
13. CONFIDENTIALITY.........................................................12
14. ANNOUNCEMENTS...........................................................13
15. NOTICES AND RECEIPTS....................................................13
16. RESOLUTIONS AND WAIVERS.................................................13
17. GENERAL.................................................................14
18. WHOLE AGREEMENT.........................................................14
19. RESPONSIBILITY FOR BROKER'S COMMISSION..................................15
20. GOVERNING LAW...........................................................15
SCHEDULE 1
The Sellers, their shareholdings and consideration...........................16
<PAGE>
SCHEDULE 2
Part 1
Particulars of the Company..........................................17
SCHEDULE 3
The Warranties......................................................18
<PAGE>
THIS AGREEMENT is made on the 9th day of August 1999
BETWEEN
(1) The persons whose names and addresses are shown in column 1 of Schedule 1
(each a "Seller" and together the "Sellers"); and
(2) TELEMONDE, INC. a company incorporated in the United States of America
under the laws of the State of Delaware whose principal place of business
is 200 Madison Avenue, Suite 502, New York, New York, USA (the
"Purchaser").
RECITALS
(A) TGA (UK) Limited (the "Company") (certain particulars of which are set out
in Part 1 of Schedule 2) is a private company limited by shares
incorporated in England and Wales on 7 October 1998 under the Companies
Act 1985 having an authorised capital of (pound)17,000 divided into 17,000
ordinary shares of (pound)1.00 each, of which 16,500 have been issued
fully paid or credited as fully paid (the "Shares").
(B) The Sellers are the registered holders and the beneficial owners of the
number of shares in the Company set opposite their respective names in
column 2 of Schedule 1 and such shares together comprise all the issued
and allotted shares in the capital of the Company.
(C) The Sellers wish to sell and, in reliance upon, inter alia, the
representations, warranties, undertakings set out in this Agreement, the
Purchaser is willing to purchase all the issued share capital of the
Company on the terms set out in this Agreement.
OPERATIVE PROVISIONS
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and the Schedules
"Accounts" means all or any one of the unaudited balance sheet of the
Company as at the Accounts Date and the unaudited profit and loss account
of the Company for the financial period ended on the Accounts Date;
"Accounts Date" means 23 June 1999;
"Agreed Form" means terms contained in a form which has been agreed and
initialed by or on behalf of the Sellers and the Purchaser for the purpose
of identification immediately prior to the signing of this Agreement;
"Completion" means completion of the sale and purchase of the Shares in
accordance with Clause 4;
1
<PAGE>
"Completion Date" means the date of this Agreement;
"Consideration Shares" means the 200,000 shares of common stock, USD $0.001 par
value per share, of Telemonde, Inc. to be allotted to the Sellers upon
Completion (subject to the retention provisions contained in this Agreement);
"Cougar" means Cougar International Holdings, Inc. of N-4805, St. Andrews Court,
Frederick Street Steps, Nassau, Bahamas;
"Disclosure Letter" means the letter from the Sellers to the Purchaser of the
same date of this Agreement and which has been delivered to the Purchaser prior
to the signing of this Agreement in the Agreed Form;
"holding company" has the meaning given to it in Section 736 and 736A of the
Companies Act 1985;
"Insolvency Act" means the Insolvency Act 1886;
"Intellectual Property Rights" means all and any patents, trademarks, service
marks, trade names, registered designs, unregistered design rights, copyrights
and rights in confidential information, and all and any other intellectual
property rights, whether registered or unregistered, and including all
applications and rights to apply for any of the same;
"Intellectual Property Rights Agreement" means the agreement in the Agreed Form
between Cougar and the Purchaser in which Cougar assigns all its Intellectual
Property Rights to the Purchaser;
"Parties" means the parties to this Agreement;
"Purchaser's Solicitors" means Bird & Bird, 90 Fetter Lane, London EC4A 1JP;
"Service Agreements" means service agreements in the Agreed Form between the
Company and each of Sean Murray and Jonathan Parker-Bray;
"subsidiary" is defined as in Section 736 and 736A of the Companies Act 1985;
"tax" means all taxes on gross or net income, profits or gains, distributions,
receipts, sales, use, occupation, franchise, value added, and personal property,
and all contributions, levies, imposts, duties, charges or withholdings of any
nature whatsoever chargeable by any tax authority, together with all fines,
penalties, charges, surcharges and interest relating to any of the foregoing or
to any late or incorrect return in respect of any of them;
"Taxes Act of 1988" means the Income and Corporation Taxes Act 1988;
"taxation warranties" means each and every warranty contained in Section D of
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Schedule 3:
"Warranties" means all and any of the representations, warranties and
undertakings referred to in Clauses 5, 7 and 8 and Schedule 3.
"Year 2000 Compliant" means in respect of any computer software, product or
service (including any consultancy service) that neither the performance
nor the functionality of that computer software, product or service or
anything affected by or produced in accordance with that computer software,
product or service will be adversely affected by the advent of the year
2000 or any other year, or by the advent of 9 September 1999 or 29 February
2000. In particular and without limitation:
(i) no valid value for current date will cause any interruption of
any performance;
(ii) all manipulations of date related data will produce the correct
results for all valid date values;
(iii) if the valid date elements in any interfaces and data storage
permit specifying the century, they will specify the correct
century to eliminate date ambiguity; and
(iv) where any valid date element is represented without a century,
the correct century shall be unambiguous for all manipulations
involving that element.
1.2 References in this Agreement to any statutory provisions shall be construed
as references to those provisions as respectively amended, consolidated or
re-enacted (whether before or after the date of this Agreement) from time
to time and shall include any provisions of which they are consolidations
or re-enactments (whether with or without amendment).
1.3 Where any statement is qualified by the expression "so far as the Sellers
are aware" or "to the best of the Sellers' knowledge information and
belief" or any similar expression that statement shall be deemed to
include an additional statement that it has been made after due and careful
enquiry.
1.4 The Schedules form part of this Agreement and shall have the same force and
effect as if set out in the body of this Agreement and any reference to
this Agreement shall include the Schedules.
1.5 In this Agreement:-
(a) the masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa;
(b) references to persons shall include bodies corporate, unincorporated
associations and partnerships;
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(c) any headings or side notes or, in the case of any legislation
specifically referred to, the inclusion in parentheses of the title to
the relevant Part, Section, Schedule or paragraph contained in such
legislation are for the sake of convenience only and shall not affect
the construction of this Agreement; and
(d) references to any party include a reference to the estate, personal
representative, successor, or permitted assigns of that party; and
(e) a person shall be deemed to be connected with another if that person
is connected with another within the meaning of section 839 of the
Taxes Act 1988.
1.6 Except where the contrary is stated, any reference in this Agreement to a
Clause or Schedule is to a Clause or Schedule of this Agreement, and any
reference within a Clause or Schedule to a sub-clause, paragraph or other
sub-division is a reference to such sub-clause, paragraph or other sub-
division so numbered or lettered in that Clause or Schedule.
2. SALE OF THE SHARES
2.1 Each of the Sellers shall sell with full title guarantee those of the
Shares set out opposite his name in Schedule 1 and the Purchaser relying on
the representations, warranties and undertakings of and indemnities by the
Sellers set out in this Agreement shall purchase the Shares on the terms of
this Agreement free from all claims, liens charges encumbrances and
equities and together with all rights attaching or accruing to them.
2.2 Each of the Sellers convenants with the Purchaser as follows:
(a) that he has the right to sell and transfer the full legal and
beneficial interest in the Shares set out opposite his name in
Schedule 1 to the Purchaser on the terms set out in this Agreement;
and
(b) that on, or after, Completion he will, at his own cost and expense,
execute and do (or procure to be executed and done by any necessary
party) all such deeds, documents, acts and things as the Purchaser may
from time to time require in order to vest any of the Shares set
opposite his name in Schedule 1 in the Purchaser, or its assignee, as
otherwise as may be necessary to give full effect to this Agreement.
2.3 Each of the Sellers hereby waives any rights of pre-emption conferred upon
him by the Articles of Association of the Company or in any other way in
respect of the Shares.
2.4 The Purchaser shall not be obliged to complete the purchase of any of the
Shares unless the purchase of all the Shares is completed simultaneously in
accordance with this Agreement.
3. CONSIDERATION
3.1 The consideration for the sale of the Shares shall be a) (pounds)1 payable
in cash upon
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Completion and b) the allotment (procured by the Purchaser), by the
Purchaser to the Sellers of the Consideration Shares in accordance with the
provisions contained within this Agreement.
3.2 The Sellers shall be entitled to the Consideration Shares in the
proportions shown in column 3 of Schedule 1.
3.3 170,000 of the Consideration Shares shall be allotted (or transferred, as
the case may require) to the Sellers as soon as reasonably possible
following the Completion Date provided that an executed copy of this
Agreement is produced to the Purchaser's US lawyers. The balance of 30,000
Consideration Shares (the "Deferred Consideration") shall be allotted (or
transferred, as the case may require) to the Sellers on the date which is 8
weeks after Completion and shall be held until such time as they are
allotted (or transferred, as the case may require) to the Sellers, as
security for the Sellers' liabilities under the Warranties, indemnities and
other obligations of the Sellers contained in this Agreement.
3.4 In the event of a claim for breach of Warranty, indemnity or other
provision of this Agreement by the Purchaser, the Deferred Consideration
shall cease to become due to the Sellers until such time as the relevant
claim has been settled or finally determined. The Purchaser shall be
entitled to set-off all amounts due to the Purchaser for any breach (plus
its legal costs properly and reasonably incurred) against the Deferred
Consideration due to the Sellers following such settlement or final
determination. Such set-off shall be calculated on the basis of the open-
market value of the Deferred Shares at the relevant date of set-off.
3.5 The Sellers shall be entitled to the Deferred Consideration Shares, if any,
in the proportions shown in column 3 of Schedule 1.
3.6 In event the Purchaser shall (a) declare a dividend or other
distribution on its shares of common stock in shares of any class or series
of capital stock, (b) subdivide its outstanding shares of common stock, (c)
combine its outstanding shares of common stock into a smaller number of
shares of common stock or (d) issue any shares of its capital stock in a
reclassification of the shares of common stock, then the number of Deferred
Consideration Shares, as calculated immediately prior to the record date
for such dividend or distribution or the effective date of such
subdivision, combination or reclassification, shall be adjusted so that the
persons entitled to receive the Deferred Consideration Shares will be
entitled to receive the number of Deferred Consideration Shares that such
person would have owned or have been entitled to receive after the
happening of any of the events described above had the Deferred
Consideration Shares been issued immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant
to this Section 3.6 shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
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4. COMPLETION
4.1 Completion shall take place immediately after the signing and exchanging
of this Agreement, at the offices of the Purchaser's Solicitors when:
(a) the Sellers shall deliver or cause to be delivered to the Purchaser:
(i) transfers of the Shares duly completed in favour of the
Purchaser or as it may direct;
(ii) the share certificates representing the Shares (or an express
indemnity in a form satisfactory to the Purchaser in the case
of any found to be missing);
(iii) all the Statutory and Minute Books of the Company, Certificate
of Incorporation and the Certificate of Incorporation on
Change of Name;
(iv) a letter from the Bankers to the Company and dated with the
date of Completion, confirming that the existing fixed and
floating charges created by the Company in favour of such
Bankers have not crystallized and confirming that such Bankers
do not have any claim over any of the assets of the Company;
(v) a letter of instruction to the Bankers to the Company and
written confirmation from such Bankers that it will not allow
any further debits from the bank account of the Company until
the authorised signatories of that bank account have been
replaced pursuant to the instructions of the Purchaser;
(vi) the resignation of the auditors of the Company in accordance
with section 394 of the Companies Act 1985, confirming that
there are no circumstances connected with their resignation
which should be brought to the notice of the members or
creditors of the Company and that there are no fees due to
them;
(vii) a letter from Upkar Sahota of Flat 4, 18 Conway Street, London
W 1 P 5HP acknowledging that any Intellectual Property Rights
that he developed during his employment by Cougar are the
property of Cougar; and
(viii) the Intellectual Property Rights Agreement, duly executed by
Cougar.
(b) the Sellers shall procure that all indebtedness due from any of the
Sellers or any person connected with them to the Company shall be
satisfied in full;
(c) all indebtedness due from the Company to any of the Sellers (full
particulars of which are contained in the Disclosure Letter) shall be
satisfied in full without payment of interest;
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(d) the Sellers shall cause a meeting of the Board of the Company to be
held at which the Board shall:
(i) appoint such persons as the Purchaser may nominate as
Directors and Secretary of the Company;
(ii) vote in favour of the registration of the Purchaser and/or its
nominees as members of the Company subject only to the
production of duly stamped and completed transfers in favour
of the Purchaser and/or its nominees in respect of the Shares;
(iii) appoint Moore Stephens, St. Paul's House, Warwick Lane,
London, EC4P 4BN as auditors; and
(iv) alter the accounting reference date of the Company to 1st
January;
(e) the parties shall join in procuring that all existing bank mandates in
force for the Company shall be altered (in such manner as the
Purchaser shall at Completion require) so as, inter alia, to reflect
the resignations and appointments referred to above; and
(f) the Purchaser shall not be obliged to complete this Agreement unless
the Sellers comply fully with the requirements of paragraphs (a), (b),
(d), and (e) of this Clause.
4.2 Upon completion of all the matters referred to in sub-clause 4.1 the
Purchaser shall procure the allotment (or transfer, as the case may be) of
the Consideration Shares (less the Deferred Consideration Shares) to the
Sellers.
4.3 If for any reason the provisions of Clause 4.1 are not fully complied with
the Purchaser may elect (in addition and without prejudice to all other
rights or remedies available to it) to rescind this Agreement or fix a new
date for Completion.
5. REPRESENTATIONS AND WARRANTIES
5.1 The Sellers hereby jointly and severally represent, warrant and undertake
to the Purchaser (contracting for itself and for any successor in title
either of the Purchaser or to the Shares or to a part or all of the
business of the Company) that:
(a) except as fully and fairly disclosed to the Purchaser in the
Disclosure Letter, each of the statements set out in Schedule 3 is
true and accurate;
(b) all information relating to the Company or their respective assets or
affairs which would be material to a purchaser for value of the
Shares, undertakings or assets of the Company is contained in this
Agreement and the Disclosure Letter; and
(c) all information contained or referred to in the Disclosure Letter is
true and
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accurate and fairly presented and nothing has been omitted from the
Disclosure Letter which renders any of that information incomplete or
misleading.
5.2 Each of the Warranties set out in the several paragraphs of Schedule 3 is
separate and independent and except as expressly provided to the contrary
in this Agreement is not limited:
(a) by reference to any other paragraphs of Schedule 3; or
(b) by anything in this Agreement; or
(c) by anything in the Disclosure Letter which is not expressly referenced
to the Warranty concerned;
and none of the Warranties shall be treated as qualified by any actual or
constructive knowledge on the part of the Purchaser or any of its agents.
5.3 Each of the Sellers agrees with the Purchaser (as trustee for the Company
and its employees) to waive any rights or claims which it or he may have in
respect of any misrepresentation, inaccuracy or omission in or from any
information or advice supplied or given by the Company or its employees in
connection with the giving of the Warranties and the preparation of the
Disclosure Letter.
5.4 Without prejudice to any other remedy available to the Purchaser or its
ability to claim damages on any basis which is available to it by reason of
any breach of the Warranties:
(a) the Sellers undertake with the Purchaser (for itself and as trustee
for the Company) that they will, at the direction of the Purchaser,
pay to the Purchaser or the Company or (in the case of liability to
another person which has not been discharged) the person to whom the
liability has been incurred, the aggregate of:
(i) the amount by which the value of any asset of any of the
Company (computed on the basis that full provision is made for
the facts and circumstances in relation to which such breach
arose) is less than the value of such assets (computed on the
assumption that the facts and circumstances were such as to
involve no such breach); and
(ii) the amount by which any liability of the Company (computed on
the basis that full provision is made for the facts and
circumstances in relation to which such breach arose), is
greater than such liability (computed on the assumption that
the facts and circumstances were such as to involve no such
breach);
(b) damages for breach of the Taxation Warranties and Warranties relating
to Intellectual Property Rights shall be calculated on a full
indemnity basis in respect of the loss to the Company, or to the
Purchaser, arising from such breach (determined at the option of the
Purchaser).
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5.5 Any payment made by the Sellers for any breach of this Agreement shall be
deemed to be a reduction in the consideration of this Agreement.
6. EMPLOYMENT OF SPECIFIED PARTIES
The Seller shall indemnify and keep the Purchaser fully indemnified against
all liabilities, costs, expenses, losses and damages in respect of claims
brought against the Purchaser by previous or current employers of Jonathan
Parker-Bray, Sean Murray and Upkar Sahota of Flat 4, 18 Conway Street,
London W1P 5HP in relation to the employment of those parties by the
Purchaser.
7. EXISTING AGREEMENTS
The Sellers warrant and represent that the agreements listed below are the
only agreements to which the Company is a party:
(a) Licence and Service Agreement with Highpoint Telecom Europe Plc dated
15th March 1999;
(b) Wholesale and Master Services Agreement with Worldcom International
Limited dated 25th March 1999;
(c) Long Distances Services Interconnection Agreement with Serruijs
Communication Services B.V.;
(d) Letter of Understanding from the Company to Serruijs Communication
Services B.V.;
(e) Heads of terms for the acquisition of the Company by Telemonde
Switched Services Limited;
(f) Offer and Purchase with Excel Switching dated 25th March 1999 faxed to
the Company on 1st April 1999;
(g) Letter from the Company to Excel Switching Corporation entitled
Written Assurance for License Exception TSR;
(h) Offer and Purchase order with Excel Switching dated 25th March 1999
faxed to the Company 7th April 1999;
(i) Non-disclosure agreement with Nokia UK Limited dated 17th March 1999;
and
(j) Sale Agreement from Square One Technology Limited dated 18th April
1999.
8. PENDING AGREEMENTS
8.1 The Sellers shall procure that the Company (or such company as the
Purchaser may reasonably direct) will execute the agreements below each
containing the terms and
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conditions acceptable to (and with the written approval of) the Purchaser
within three weeks of the Completion Date:
(a) Interconnection Agreement with Primus Telecommunications Limited;
(b) Interconnection Agreement with Teleglobe Communications Limited,
Teleglobe International (UK) Limited or Teleglobe UK Limited;
(c) Interconnection Agreement with IDT (UK) Limited;
(d) Interconnection Agreement with Telewest Communications Limited or
Telewest Networks Limited;
(e) Interconnection Agreement with I-Key Limited;
(f) Co-Location Agreement with I-Key Limited in respect of the racks and
rack space provided by the Company to I-Key Limited at Telehouse,
London E14;
(g) Co-Location Agreement with Worldcom International Limited which shall
include a right by the Company to offer the space provided under such
Agreement to other operators;
(h) Switch Partition Agreement with European Gateway Inc. Limited or
European (Wholesale) Limited; and
(i) Contract of Employment in respect of the employment of Upkar Sahota of
Flat 4, 18 Conway Street, London W1P 5HP.
8.2 The Sellers warrant that Sean Murray and Jonathan-Parker Bray shall execute
the Service Agreements within 7 days of the Completion Date.
9. PURCHASE FOR INVESTMENT PURPOSES
Sellers are acquiring the Consideration Shares for investment for their own
account, with the intent of holding the Consideration Shares for
investment, without the present intent of participating directly or
indirectly in a distribution of the Consideration Shares, and without the
participation of any other person in any part of the purchase. The Sellers
understand that the representations and warranties contained herein are to
be relied upon by the Purchaser as a basis for the exemption of the
issuance of the Consideration Shares from the registration requirements of
the United States Securities Act of 1933, as amended (the "Securities
Act"), and the exemptions from registration contained in applicable United
States' securities laws. Sellers acknowledge that the issuance of the
Consideration Shares will not be registered under the Securities Act or
under any United States' state securities laws, and that the Consideration
Shares must be held by the Sellers until (and that the Purchaser shall have
no obligation to recognize any sale, assignment or other transfer thereof
to any person unless) they are subsequently registered under the Securities
Act and under applicable United States' state securities laws, or unless
exemptions from the registration requirements of the Securities Act and
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such laws are available and approved by counsel satisfactory to the
Purchaser. The Sellers understand that the Purchaser is not obligated to
register the Consideration Shares under the Securities Act or under any
United States' state securities laws. The Sellers further understand that
the Purchaser is not obligated to take any action, except as may be
required by law, necessary to make Rule 144 under the Securities Act or any
other method available for resales of the Consideration Shares by the
Sellers.
10. LACK OF DISCLOSURE STATEMENT
The Sellers acknowledge that the Purchaser has not prepared, and that it
has not been requested by the Sellers to prepare, a comprehensive written
prospectus or disclosure statement in connection with the issuance of the
Consideration Shares to the Sellers, covering the business, operations,
management, financial condition or prospects of the Purchaser of the nature
that otherwise might be required if the sale of the Consideration Shares to
the Sellers were required to be registered under the Securities Act. The
Sellers further acknowledge that the Purchaser, prior to the date hereof,
has furnished the Sellers the opportunity to ask questions of and receive
answers from the Purchaser concerning the financial and business affairs of
the Purchaser and has afforded the Sellers the opportunity to verify the
accuracy of all information provided or made available to the Sellers by
the Purchaser.
11. LEGEND ON CERTIFICATES
The Sellers hereby acknowledge that the following legend may be placed upon
the certificates issued to the Sellers to evidence the Consideration
Shares:
"The shares evidenced by this certificate have not been registered under
the Securities Act of 1933 or comparable state statues and may not be
transferred, not will any assignee or endorsee hereof be recognised as an
owner hereof by the issuer for any purpose, unless a registration statement
with respect to such shares shall then be in effect or unless the
availability of an exemption from registration with respect to any proposed
transfer or disposition of such shares shall be established to the
satisfaction of counsel for the issuer."
12. TRANSFER AGENT
The Sellers hereby acknowledge that the transfer agent for the Purchaser,
whether or not a corporate employee, shall be instructed not to transfer
the ownership of the certificate evidencing the Consideration Shares on the
stock transfer books of the Purchaser unless in the prior written opinion
of counsel, reasonably accepted to the Purchaser, such transfer is in
compliance with the above requirements and applicable provisions of law.
13. CONFIDENTIALITY
Each of the Sellers hereby jointly and severally undertakes to the
Purchaser, for itself and as trustee for the Company that he will:
13.1 not at any time after the date of this Agreement divulge or communicate to
any person
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other than to officers or employees of the Company whose province it is to
know the same or on the instructions of the Board of Directors of the
Company any confidential information concerning the business, accounts,
finance or contractual arrangements or other dealings transactions or
affairs of the Company which may come to his knowledge; and
13.2 use his reasonable endeavours to prevent publication or disclosure of any
confidential information concerning such matters;
13.3 provided that such undertakings shall cease to have effect in relation to
any confidential information which comes into the public domain otherwise
than through the fault of any of the Sellers.
14. ANNOUNCEMENTS
None of the Sellers shall make or permit any person connected with any of
them to make any announcement concerning the sale and purchase of the
Shares or any ancillary matter after Completion except as required by law
or other applicable regulation or the London Stock Exchange or with the
written approval of the Purchaser, such approval not to be unreasonably
withheld or delayed.
15. NOTICES AND RECEIPTS
15.1 Any notice or other document to be served under this Agreement may be
delivered or sent by registered post or facsimile process to the party to
be served at his address appearing in this Agreement or at such other
address as he may have notified to the other parties in accordance with
this clause.
15.2 Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
(b) if posted, at 10.00 am on the second business day after it was put
into the post; or
(c) if sent by facsimile process, at the expiration of 2 hours after the
time of despatch, if despatched before 3.00 pm on any business day,
and in any other case at 10.00 am on the business day following the
date of despatch.
15.3 In proving service of a notice or document it shall be sufficient to prove
that delivery was made or that the envelope containing the notice or
document was properly addressed and posted as a prepaid registered post
letter or that the facsimile message was properly addressed and despatched
as the case may be.
15.4 The receipt of the Sellers' Solicitors for any sum or document to be paid
or delivered to a Seller will discharge the Purchaser's obligation to pay
or deliver it to that Seller.
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16. RESOLUTIONS AND WAIVERS
16.1 In relation to the Company, the Sellers shall procure the convening of all
meetings, the giving of all waivers and consents and the passing of all
resolutions as are necessary under the Companies Act 1985, its Articles
of Association or any agreement or obligations affecting it to give effect
to this Agreement.
16.2 For so long after Completion as it remains the registered holder of any of
the Shares, each of the Sellers will hold them and any distributions,
property and rights deriving from them in trust for the Purchaser and will
deal with the Shares and any distributions, property and rights deriving
from them as the Purchaser directs and will on request by the Purchaser
execute an instrument of proxy or other document which enables the
Purchaser or is representative to attend and vote at any meeting of the
Company.
17. GENERAL
17.1 Each of the obligations, warranties and undertakings set out in this
Agreement which is not fully performed at Completion will continue in force
after Completion.
17.2 If the Shares are sold or transferred after Completion, the benefit of each
of the obligations, warranties and undertakings undertaken or given by the
Sellers may be assigned to the purchaser or transferee of the Shares who
may enforce them as if he had been named in this Agreement as the
Purchaser.
17.3 Subject to sub-clause 17.2, none of the rights or obligations under this
Agreement may be assigned or transferred without the prior written consent
of all the parties.
17.4 Where any obligation, representation, warranty or undertaking in this
Agreement is expressed to be made, undertaken or given by the Sellers, they
shall be jointly and severally responsible in respect of it.
17.5 The Purchaser may release or compromise in whole or in part the liability
of any of the Sellers under this Agreement or grant any time or other
indulgence without affecting the liability of any other of the Sellers.
17.6 Time is of the essence in relation to this Agreement.
17.7 Each party shall pay the costs and expenses incurred by him or it in
connection with the entering into and completion of this Agreement.
17.8 This Agreement may be executed in any number of counterparts, all of which,
taken together shall constitute one and the same Agreement and any party
may enter into this Agreement by executing a counterpart.
18. WHOLE AGREEMENT
18.1 This Agreement and the documents referred to in it contain the whole
agreement between the parties relating to the transactions contemplated by
this Agreement and supersede all
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previous agreements, arrangements and understandings between the Parties
relating to these transactions.
18.2 Each of the Parties acknowledges that in agreeing to enter into this
Agreement he or it has not relied on any representation, warranty or other
assurance except those set out in this Agreement and waives all rights and
remedies, which, but for this Clause might be available to it in respect of
such representation, warranty or other assurance provided that nothing in
this Clause shall limit or exclude any liability for fraudulent
misrepresentation.
19. RESPONSIBILITY FOR BROKER'S COMMISSION
Each of the Parties represents to the others that all negotiations leading
to this Agreement have been carried on by it directly with the others
without the intervention of any other person and any claim for brokerage
commission or similar claim relating to this Agreement shall be the
responsibility of the Party incurring the same, provided that any such
claim incurred by the Company shall be the joint and several responsibility
of the Sellers.
20. GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with
English law. Each of the Sellers submits to the non-exclusive jurisdiction
of the English courts for all purposes relating to this Agreement.
IN WITNESS of which this Agreement has been executed by the Parties or their
duly authorised representatives on the date which appears first on page 1.
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SCHEDULE 1
The Sellers, their shareholdings and consideration
- - - - --------------------------------------------------------------------------------
Seller Shareholding Share Consideration Deferred
Consideration
- - - - --------------------------------------------------------------------------------
Jonathan Parker-Bray 8,249 85,000 14,999
27 Netley Firs Road
Hedge End
Hampshire
SO30 4AY
- - - - --------------------------------------------------------------------------------
Sean Murray 8,250 85,000 15,000
10 Forest Oak Drive
New Milton
Hampshire
BH2 5NT
- - - - --------------------------------------------------------------------------------
Cougar International 1 0 1
Holdings Inc.,
St Andrews Court
Frederick Street Steps
P.O. Box 4805
Bahamas.
- - - - --------------------------------------------------------------------------------
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SCHEDULE 2
Part 1
Particulars of the Company
(1) Company Number: 3646127
(2) Share Capital: (i) Authorised:-17,000
(ii) Issued:-16,500
(3) Registered Holders: Jonathan Parker-Bray - 8,249
Sean Murray - 8,250
Cougar International Holdings Inc. - 1
(4) Registered Office: 122-126 High Road, London NW6 4HY
(5) Directors: Jonathan Parker-Bray
Sean Murray
(6) Secretary: Sarah Chadborne of Winchester & Accounting
Services Limited, 1 Leylands Park, Colden Common,
Winchester S021 1TH
(7) Auditors: None appointed
(8) Accounting reference date: 31/10/99
CHARGES OF THE COMPANY
A fixed and floating charge in the form of a debenture from Barclay's Bank
Plc.
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SCHEDULE 3
The Warranties
A. General
B. Accounts/Financial
C. Business
D. Tax
E. Intellectual Property etc
F. Directors/Employees etc
A. GENERAL
A.1 The Recitals and the Schedules
The information relating to the Sellers and the Company contained in the
Recitals and Schedules to this Agreement is true and accurate.
Sellers' authority and capacity
A.1.1 The Sellers each have the requisite power and authority to enter
into and perform this Agreement and such entry and performance will
not breach violate, infringe or otherwise affect the rights of any
other person.
A.1.2 This Agreement will, when executed, constitute binding obligations
on each Seller.
A.1.3 The execution and delivery of and the performance by each Seller of
its obligations under this Agreement will not:
(a) constitute a default under any instrument or arrangement
binding or otherwise to which any Seller is a party; or
(b) result in a breach of any order judgment or decree of any
court or governmental agency to which any Seller is a party or
by which any Seller is bound; or
(c) relieve any other party to a contract with the Company of its
obligations or enable that party to vary or terminate its
rights or obligations under that contract; or
(d) result in the creation or imposition of any lien, charge or
encumbrance of any nature on any of the property or assets of
the Company.
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A.2 Memorandum and Articles of Association
The copies of the Memorandum and Articles of Association of the Company
delivered by the Sellers to the Purchaser is true complete and accurate in all
respects and has embodied in it or annexed to it true, accurate and complete
copies of all resolutions agreements and consents required by law to be so
embodied or annexed.
A.3 Compliance with Companies Acts
A.3.1 The Company and its officers (in their capacities as such) have
complied with the provisions of the Companies Act 1985 and in
particular (without prejudice to the generality of the foregoing)
all documents required to be filed with the Registrar of Companies
in respect of the Company have been duly filed.
A.3.2 The Statutory Books and Minute Books of the Company have been
properly written up and contain a true accurate and complete
record of the matters which should be dealt with in such books and
no notice or allegation that any of them is incorrect or should be
rectified has been received.
A.3.3 All returns and particulars, resolutions and other documents which
the Company is required by law to file with or deliver to the
Registrar of Companies have been correctly made up and duly filed
or delivered.
A.4 Sellers' interests
None of the Sellers nor any person connected with any of them has any
interest, directly or indirectly:
A.4.1 in any business which has a close trading relationship with is or
is likely to be competitive with the business of the Company; or
A.4.2 in any asset which within the two years preceding the date of this
Agreement has been acquired or disposed of by or leased to the
Company.
A.5 Ownership of the Shares
A.5.1 The Shares constitute the whole of the issued and allotted share
capital of the Company.
A.5.2 No person is entitled, or has claimed to be entitled, to require
the Company to issue any share or loan capital either now or at
any future date whether contingently or not.
A.5.3 There is no option, right of pre-emption, right to acquire,
mortgage, charge, pledge, lien or other form of security or
encumbrance on, over or affecting any of the Shares nor is there
any commitment to give or create any of the
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foregoing and no person has claimed to be entitled to any of the
foregoing.
A.5.4 The Sellers are entitled to sell and procure the transfer of the
full legal and beneficial ownership in the Shares to the Purchaser
on the terms set out in this Agreement.
A.6 Subsidiaries, associations and branches
The Company:
A.6.1 does not hold or beneficially own nor has it agreed to acquire any
securities of any other corporation (whether incorporated in the
United Kingdom or elsewhere);
A.6.2 is not and has not agreed to become a member of any partnership or
other unincorporated association, joint venture or consortium (other
than recognised trade associations);
A.6.3 has not outside the United Kingdom any branch or any permanent
establishment.
A.7 Ownership of assets
A.7.1 The Company owns all the assets necessary to enable it to continue
to run its business in the manner and on the scale in which it has
been conducted in the year preceding the date of this Agreement.
A.7.2 Particulars of all fixed assets acquired or agreed to be acquired by
the Company since the date of incorporation are set out in the
Disclosure Letter.
A.7.3 Except for current assets offered for sale or sold in the ordinary
course of trading, the Company has not since the Accounts Date
disposed of any of the assets included in the Accounts or any assets
acquired or agreed to be acquired since the Accounts Date.
A.7.4 None of the property, assets, undertaking, goodwill or uncalled
capital of any of the Company is subject to any encumbrance
(including, without limitation, any debenture, mortgage, charge,
lien, deposit by way of security, bill of sale, lease, hire-
purchase, credit-sale or other agreement for payment on deferred
terms, option or right of pre-emption) or any agreement or
commitment to give or create any of the foregoing.
A.8 Vulnerable transactions
A.8.1 The Company has not been party to a transaction pursuant to or as a
result of which an asset owned, purportedly owned or otherwise held
by it is liable to be transferred or re-transferred to another
person or which gives or may give rise to a right of compensation or
other payment in favour of another person
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in the event of the insolvency of any person.
A.8.2 No transaction at an undervalue (within the meaning of section 423
of the Insolvency Act 1986) (a) relating to any of the Shares or
(b) to which the Company has been a party, has been effected prior
to the date of this Agreement.
A.9 Compliance with statutes
The Company has not, nor has its officers, agents or employees (during the
course of their duties), done or omitted to do anything which is a
contravention of any statute, order, regulation or the like giving rise to
any fine, penalty or other liability on the part of the Company.
A.10 Licences and Consents
The Company has all licences (including statutory licences) and consents
necessary to own and operate its assets and to carry on its business as it
does at present and none of the Sellers is aware of anything that might
prejudice the continuation or renewal of any of those licences or consents.
A.11 Insider contracts
A.11.1 The Company is not a party to any contract or arrangement in which
any of the Sellers or any person connected with any of them is
interested, directly or indirectly, nor has there been any such
contract or arrangement at any time since incorporation.
A.11.2 The Company is not a party to, nor have its profits or financial
position been affected by, any contract or arrangement which is
not of an entirely arm's length nature.
A.11.3 None of the Sellers nor any person connected with any of them is a
party to any outstanding agreement or arrangement for the provison
of finance, goods, services or other facilities to or by the
Company or in any way relating to the Company or its affairs.
A.12 Litigation
A.12.1 The Company is not engaged in any litigation or arbitration
proceedings and there are no such proceedings pending or
threatened by the Company.
A.12.2 The Sellers do not know of anything which is likely to give rise
to any litigation or arbitration proceedings by or against the
Company.
A.12.3 The Company is not the subject of any investigation or inquiry by
any governmental, administrative or regulatory body.
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A.13 Insolvency
A.13.1 No receiver or administrative receiver has been appointed in
respect of the Company or in respect of the whole or any part of
the assets or undertaking of the Company.
A.13.2 No administration order has been made and no petition has been
presented for such an order in respect of the Company.
A.13.3 No meeting has been convened at which a resolution will be
proposed nor has any resolution been passed nor has any petition
been presented or order made for the winding up of the Company.
A.13.4 The Company has not stopped or suspended payment of its debts,
become unable to pay its debts (within the meaning of Section 123
of the Insolvency Act) or otherwise become insolvent.
A.13.5 No unsatisfied judgment, order or award is outstanding against the
Company and no written demand under Section 123(1)(a) of the
Insolvency Act has been made against the Company and no distress
or execution has been levied on, or other process commenced
against, any asset of the Company.
A.13.6 No voluntary arrangement has been proposed under Section 1 of the
Insolvency Act in respect of the Company.
A.13.7 No circumstances have arisen which entitle any person to take any
action, appoint any person, commence proceedings or obtain any
order of the type mentioned above.
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B. ACCOUNTS/FINANCIAL
B.1 Accounts
B.1.1 The Accounts:
(a) correctly state the assets of the Company and give a true and
fair view of the state of affairs of the Company as the
Accounts Date and of the profit or loss of the Company for the
period ended on the Accounts Date.
B.1.2 Without prejudice to the generality of the Warranty contained in
paragraph B.1.1, the Accounts:
(a) are complete and accurate in all respects;
(b) are not affected by and do not include any unusual or
non-recurring items;
(c) contain either adequate provision to cover, or full
particulars in notes of, all the liabilities and other
financial commitments (whether ascertained or contingent and
whether or not quantified or disputed) of the Company as at
the Accounts Date;
(d) make proper and adequate provision for:
(i) all bad and doubtful debts;
(ii) all amounts required to be deducted from any payments
made to any person whether under the Pay As You Earn
regulations legislation relating to National
Insurance Contributions relating to Statutory Sick
Pay or any other legislation whatsoever; and
(iii) all and any losses on contracts comprising
work-in-progress.
B.1.3 Any redundant or obsolete stock existing at the Accounts Date was
wholly written off and any slow-moving stock included in the
Accounts was properly written down in accordance with recognized
accounting principles and the value attributed to the remaining
stock did not exceed the lower of acquisition cost or net
realisable value at the Accounts Date.
B.1.4 No stock included in the Accounts was acquired otherwise than by
way of a transaction which was entirely at arm's length.
B.1.5 The debts included in the Accounts have realised or will realise,
in the ordinary course of collection, their nominal amounts plus
any accrued
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interest less any provision for bad and doubtful debts included in
the Accounts.
B.1.6 No debt owing to the Company at the date of this Agreement (other
than debts included in the Accounts) will not in the ordinary
course of collection realise its nominal amount plus any accrued
interest.
B.1.7 There is no material difference between the accounting and
taxation treatment of any item in the Accounts and of any asset
acquired since incorporation.
B.1.8 The Company is the owner free from encumbrances or other third
party rights in the nature of security or title retention of all
its undertaking and assets which are included or which ought to
have been included in the Accounts and all such assets are in its
possession or under its control.
B.2 Accounting Records
All proper and necessary accounting and other books and records (including
all invoices and other records required for value added tax purposes) of
the Company relating to its financial and trading position have been fully
properly and accurately written up on a proper and consistent basis.
B.3 Position since the Accounts Date
Since the Accounts Date:
B.3.1 the Company's financial positions has not adversely altered to a
material extent;
B.3.2 the business of the Company has been carried on in the ordinary
and usual course and there has not been any material change in the
nature of the assets and liabilities shown in the Accounts;
B.3.3 there has not been any adverse change in the value of the net
assets;
B.3.4 there has been no deterioration in the turnover, financial or
trading position or prospects of the Company;
B.3.5 no directors fees have been paid and no resolution (whether by the
Board of Directors or by General Meeting) that such fees be paid
has been proposed or passed by the Company;
B.3.6 the Company has not disbursed any cash except in the ordinary
course of its business and all amounts received by the Company
have been deposited with that Company's bankers and appear in the
appropriate books of account;
B.3.7 no dividends or other distributions have been declared, paid or
made on or
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by the Company;
B.3.8 the Company has not entered into any capital transaction as
vendor, purchaser, lessor or lessee or otherwise undertaken any
material commitment on its capital account.
B.4 Borrowings etc
B.4.1 The Company has not received notice (whether formal or informal)
from any person who is currently, or who has at any time been a
lender to it requiring repayment of any indebtedness or intimating
the enforcement by any such lender of any security which it may
hold over any assets of the Company and the Sellers are not aware
of any circumstances likely to give rise to any such notice being
given or which would enable any such notice to be given.
B.4.2 The total amount borrowed by the Company from its bankers does not
exceed its overdraft facilities as set out in the Disclosure
Letter.
B.4.3 The Company has not lent any money which has not been repaid to it
or acquired the benefit of any debt (present or future) save for
debts in respect of the sale of trading stock in the normal course
of trading.
B.4.4 The Company has not outstanding any loan capital or any money
borrowed (other than under the overdraft facilities disclosed
pursuant to the above), including money raised by factoring.
B.4.5 The Company has not outstanding any liability (whether present or
future) in respect of any guarantee or indemnity.
B.4.6 The Company has paid each of its creditors on or before the
relevant due date for payment and has not made any agreement to
postpone or delay any payment of its debts and "paid" in this
context means that either cash has been paid or a cheque has been
given or despatched to the relevant creditor and has not been
cancelled by the Company.
B.5 Plant and equipment
Of the plant, machinery, fixtures, fittings, equipment, vehicles,
furniture, materials and other assets (not being current assets) acquired
by the Company since incorporation and included in the Accounts:
B.5.1 none has been sold or disposed of at a figure lower than book
value or an open market arm's length value whichever is the
higher;
B.5.2 none has been or has been agreed to be let on hire or hire
purchase or sold on deferred terms; and
B.5.3 none was acquired at a price in excess of market value at the time
of
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acquisition.
B.6 Government grants
The Company is not subject to any arrangement for receipt or repayment of
any grant, subsidy or financial assistance from any government department
or other body.
B.7 Loans
The Company has not lent any money which has not been repaid to it or owns
the benefit of any debt (whether present or future) other than debts
accrued to it in the ordinary course of its business.
B.8 Bank accounts
The statement of the Company's bank accounts and of the credit or debit
balances on them attached to the Disclosure Letter is correct and the
Company has not any other bank or deposit account (whether in credit or
overdrawn) not included in the statement and since the date of that
statement there has not been any payment out of any of the accounts except
for routine payments and the balance on the accounts is not substantially
different from the balances shown on the statement.
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C. BUSINESS
C.1 Suppliers and customers
The Sellers have no reason to believe that any supplier customer or person
who has had dealings with the Company has ceased or will cease dealing with
the Company or may substantially reduce its dealings with the Company after
Completion or as a result of the acquisition by the Purchaser of the
Shares.
C.2 Trading contracts and outstanding offers
C.2.1 The Company has observed and performed all the terms and
conditions on its part to be observed and performed under its
trading contracts.
C.2.2 The Company will not be required after the date of this Agreement
to undertake any work or supply any goods or services except on
normal commercial terms under a contract entered into on or before
the date of this Agreement.
C.2.3 No offer, tender or the like which is capable of being converted
into an obligation of the Company by an acceptance or other act of
some other person is outstanding, except in the ordinary course of
its business.
C.3 Defective products and installation
C.3.1 The Company has not manufactured or sold products which are or
have or will become in any material respect dangerous, faulty or
defective or which do not comply in any material respect with any
warranty or representation expressly or impliedly made by it.
C.3.2 The Company has not accepted any obligation to service, repair or
maintain any system or product installed, serviced or repaired by
it or by any third party other than on arm's length terms and for
full consideration.
C.4 Material contracts
The Company is not a party to any contract, arrangement, or obligation
which, whether by reason of its nature, term, scope, price or otherwise, is
or is likely to be of material importance to its business, profits or
assets, or which:
C.4.1 is not in the ordinary course of its business; or
C.4.2 is incapable of performance in accordance with its terms within
six months of the date on which it was entered into or undertaken;
or
C.4.3 is expected to result in a loss to the Company on completion of
performance; or
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C.4.4 is of an onerous nature or cannot be fulfilled or performed by the
Company on time and without undue or unusual expenditure of money
and effort.
C.4.5 requires an aggregate consideration payable by the Company in
excess of (pounds)50,000; or
C.4.6 involves payment by the Company by reference to fluctuations in
the Index of Retail Prices or any other index; or
C.4.7 requires payment of any sum by the Company in any currency other
than sterling; or
C.4.8 is for the provision of management or similar services to the
Company and which is not terminable by it on less than three
months' notice without compensation.
C.5 Agencies, etc.
The Company is not a party to:
C.5.1 any agency, distributorship, marketing, purchasing, manufacturing
or licensing agreement or arrangement; or
C.5.2 any agreement or arrangement which restricts its freedom to carry
on the whole or any part of its business in any part of the world
in such manner as it thinks fit.
C.6 Anti-competitive arrangements
C.6.1 The Company is not now, or has during the past six years been, a
party to any agreement, arrangement, concerted practice or course
of conduct which:
(a) is subject to registration under the Restrictive Trade
Practices Acts 1976 and 1977;
(b) contravenes the provisions of the Resale Prices Act 1976 or
any secondary legislation or adopted under the Fair Trading
Act 1973;
(c) infringes Article 81 or 82 of the Treaty establishing the
European Economic Community or any other anti-trust or similar
legislation in any jurisdiction in which that Company carries
on business or has assets or sales; or
(d) is void or unenforceable (whether in whole or in part) or may
render the Company liable to proceedings under any such
legislation as is referred to in paragraphs (a) to (c) above.
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C.6.2 The Company has not given any undertaking and no order has been
made against or in relation to the Company pursuant to any anti-
trust or similar legislation in any jurisdiction in which the
Company carries on business or has assets or sales.
C.7 Plant in working order
All machinery and plant of the Company, including its fixed plant and
machinery, and all vehicles and office equipment owned or used by it:
C.7.1 is in satisfactory working order;
C.7.2 has been properly serviced and maintained;
C.7.3 complies with all relevant safety, pollution and health
legislation;
C.7.4 is not surplus to the Company's requirements; and
C.7.5 is in the possession of the Company.
C.8 Insurance
C.8.1 All the assets and undertaking of the Company of an insurable
nature and have at all material times been insured in amounts
representing their full replacement or reinstatement value against
fire and other risks normally insured against by persons carrying
on the same classes of business as those carried on by the Company
and the Company is now and has at all material times been
adequately covered against accident, damage, injury, third party
loss, loss of profits and other risks normally covered by
insurance.
C.8.2 The list of current policies of insurance of the Company attached
to the Disclosure Letter is true and complete and no premium due
to be paid and payable in respect of any policy is outstanding.
C.8.3 There are no circumstances which would or might entitle the
Company to make a claim under any policy of insurance or which
under the terms of any policy of insurance would or might be
required to be notified to the insurers and there are no claims
under any policy of insurance which have not been admitted by the
insurers.
C.8.4 No liability in respect of any claim made or pending against the
Company will exceed in amount the limit of insurance cover in
force for the benefit of the Company against such a claim and
there is no insurance policy under which the Company may be
required to bear any excess provision out of its own funds.
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C.9 No powers of attorney
The Company has not granted any power of attorney or similar authority
which remains in force.
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D. TAXATION
D.1 General/Compliance
D.1.1 The Company has not been involved in any transaction which has
given or may give rise to a liability to tax on the Company (or
would have given or might give rise to such a liability but for
the availability of any relief, allowance, deduction or credit)
other than tax in respect of normal trading income or receipts of
the Company arising from transactions entered into in the ordinary
course of business.
D.1.2 No payment has been made by the Company which will not be
deductible for the purposes of corporation tax (or any
corresponding tax on profits in any relevant foreign
jurisdiction), either in computing the profits of the Company or
in computing the corporation tax or corresponding tax chargeable
on the Company.
D.1.3 All sums payable under any obligation incurred by the Company
prior to Completion and which will continue to bind the Company
after Completion have been and will continue to be deductible for
the purposes of corporation tax (or any corresponding tax on
profits in any relevant foreign jurisdiction), either in computing
profits of the Company or in computing the corporation tax or
corresponding tax chargeable on the Company.
D.1.4 The Company has duly made all returns, given all notices and
supplied all other information required to be supplied to all
relevant tax authorities; all such information was supplied within
the time limits required by law and remains complete and accurate
in all material respects and all such returns and notices were and
remain complete and accurate in all material respects and were
made on the proper basis and do not, and, to the best of the
knowledge, information and belief of the Sellers, are not likely
to, reveal any transactions which may be the subject of any
dispute or investigation with any tax authority and is not and has
not in the last six years been the subject of any investigation by
any tax authority and there are no facts which are likely to cause
such an investigation to be instituted.
D.1.5 No transaction in respect of which any consent or clearance was
required or sought from any tax authority has been entered into or
carried out by the Company without such consent or clearance
having first been properly obtained and all information supplied
to any tax or other appropriate authority in connection with any
such consent or clearance fully and accurately disclosed all facts
and circumstances material to the giving of such consent or
clearance and any transaction for which such consent or clearance
was obtained has been carried out only in accordance with the
terms of such consent or clearance and the application on which
the consent or clearance was based and at a time when such consent
or clearance was valid and effective. No facts or circumstances
have arisen since any such consent or clearance was obtained which
would cause the consent or clearance to
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become invalid or ineffective.
D.1.6 No tax authority has operated or agreed to operate any special
arrangement (being an arrangement which is not based on relevant
legislation or any published practice) in relation to the affairs
of the Company.
D.1.7 The Company has duly paid all amounts under deduction of tax where
required to do so by law.
D.1.8 All National Insurance contributions and sums payable to the
Inland Revenue under the P.A.Y.E system and any amounts of a
corresponding nature payable to any foreign tax authority due and
payable by the Company up to the date of this Agreement have been
paid and the Company has made all such deductions and retentions
as should have been made under sections 203 to 203L Taxes Act 1988
and all regulations made thereunder or under any comparable laws
or regulations of any relevant foreign jurisdiction.
D.1.9 The Company is not a party to any loan relationship (within the
meaning of section 81 Finance Act 1996) which has an unallowable
purpose (within the meaning of paragraph 13 of Schedule 9 to that
Act) and the Company applies an authorised accounting method
within section 85 of that Act in relation to its treatment in the
Accounts of all loan relationships to which the Company is a
party.
D.2 Employees
D.2.1 The Company has not adopted nor does it operate nor is it part of
any scheme approved, or for which approval has been or is to be
sought, under section 202 Taxes Act 1988 (Charities: Payroll
Deduction Scheme) or Chapter III Part V Taxes Act 1988 (Profit
Related Pay).
D.2.2 No officer or employee of the Company participates in any scheme
approved under Schedule 9 ICTA 1988 (approved share option and
profit sharing schemes) or is a beneficiary or potential
beneficiary of a qualifying employee share ownership trust as
defined in Schedule 5 Finance Act 1989 (employee share ownership
trusts).
D.2.3 The Company has not remunerated any director or employee other
than in cash paid to that director or employee and there are no
arrangements to pay any director or employee other than in cash
payable to that director or employee.
D.2.4 The Company has properly operated the P.A.Y.E system and has
deducted tax and national insurance contributions in accordance
with section 203A(1)(c) Taxes Act 1988 from all payments made or
treated as made to directors on all directors loan accounts and
accounted to the Inland Revenue for all tax and national insurance
contributions so deducted.
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D.3 Capital gains
D.3.1 The Company is not a member of a group of companies as
defined in section 170 Taxation of Chargeable Gains Act 1992.
D.3.2 The Company has not since its incorporation disposed of any
asset otherwise than in the ordinary course of its trade.
D.3.3 If the Company disposed of each of its assets (except trading
stock and work-in-progress) for a consideration equal to the book
value of that asset as shown in or adopted for the purposes of the
Accounts to a person not connected with it and by way of bargain
at arm's length, no liability to tax would arise by reference to
any actual or deemed gain and the Company has not acquired any
such asset otherwise than by way of bargain at arm's length from
an unconnected person.
D.4 Capital expenditure
D.4.1
(a) All capital expenditure, other than expenditure on land and
buildings which is not capable of qualifying for industrial
building allowance, incurred by the Company or which may be
incurred by it under any continuing obligation has qualified
or will qualify for capital allowances.
(b) All such allowances made to the Company and set out in the
Disclosure Letter and any allowances which may be made on
expenditure to be incurred under a subsisting commitment have
been made or will be made in taxing its trade or business.
(c) The Company has not, since incorporation, done or omitted to
do, or agreed to do, or permitted to be done, any act as a
result of which there may be made a balancing charge or any
disposal value brought into account or any deemed trading
receipt under or by virtue of any provision of the Capital
Allowances Act 1990, or a withdrawal of first year allowances
or recovery of excess relief under any such provision.
D.4.2 The Company has not incurred any expenditure on the provision of
machinery or plant for leasing (the meaning of which is, for this
purpose, as extended by section 50 Capital Allowances Act 1990).
D.4.3 The Company is not in dispute with any person as to any
entitlement to capital allowances under section 51 Capital
Allowances Act 1990 and at the date of this Agreement as far as
the Warrantors are aware there are no circumstances which might
give rise to such a dispute.
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D.4.4 The Company has not made any election under section 37 Capital
Allowances Act 1990 nor is taken to have made such an election
under sub-section (8)(c) thereof (election for assets to be
treated as short life assets).
D.4.5 None of the assets of the Company is or may be a long-life asset
within the meaning of Chapter 4A or Part II Capital Allowances Act
1990.
D.5 Close companies
D.5.1 The Company is not, nor has it at any time been, a close company
for tax purposes as defined in section 414 Taxes Act 1988.
D.5.2 The Company is not, nor has it at any time been, a close
investment-holding company as defined in section 13A Taxes Act
1988.
D.5.3 The Company has not made any transfers of value within section 94
Inheritance Tax Act 1984.
D.5.4 The Company has not, since incorporation, done anything so as to
give rise to an assessment under section 419 (as extended by
section 422) Taxes Act 1988 (loan to participators and
associates).
D.5.5 Neither the shares of the Company, nor any property owned by the
Company are subject to an outstanding Inland Revenue charge (as
defined in section 237 Inheritance Tax Act 1984).
D.5.6 No circumstances exist such that a power of sale could be
exercised in relation to any shares, securities or other assets of
the Company pursuant to section 212 Inheritance Tax Act 2984
(contingent liability of transferee for unpaid capital transfer
tax or inheritance tax).
D.6 Distributions etc.
D.6.1 The Company has not since its incorporation:
(a) made any distribution or deemed distribution within the
meanings of sections 209, 210 or 418 Taxes Act 1988
(distributions and deemed distributions);
(b) repaid, redeemed or purchased or agreed to repay, redeem or
purchase any of its share capital, or capitalised or agreed to
capitalise in the form of redeemable shares or debentures, any
profits or reserves of any class or description.
D.6.2 The Company has not issued any share capital which is of a
relevant class as defined in section 249(2) Taxes Act 1988 nor
does the Company own any such share capital (shares carrying the
right to bonus share capital).
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D.6.3 The Company has not issued any security (as defined in section
254(1) Taxes Act 1988) outstanding on Completion in circumstances
such that any interest or other payment payable in respect of it
may be treated as a distribution under section 209 Taxes Act 1988.
D.7 Transfer pricing
The Company is not liable to have its profits for tax purposes adjusted by
reason of any provision of tax law concerning the adjustment of profits of
associated enterprises including, without limitation, sections 770 and 770A
Taxes Act 1988 (sales etc. at an undervalue of overvalue) and it is not in
dispute with any tax authority in relation to the application of such provision.
D.8 Value added tax
D.8.1
(a) For the purposes of this paragraph D8 the expression "VAT
legislation" shall include the Value Added Tax Act 1994 and
any other applicable legislation in relation to value added
tax and all regulations, orders, notices, provisions and
conditions made or issued thereunder including the terms of
any agreement reached with the Commissioners of Customs and
Excise or any concession referred to in the Disclosure Letter.
(b) The Company:
(i) is registered for the purposes of value added tax and
has been so registered at all times that it has been
required to be registered by VAT legislation;
(ii) has complied fully with and observed in all material
respects the terms of VAT legislation; and
(iii) has maintained and obtained at all times complete,
correct and up-to-date records, invoices and other
documents (as the case may be) appropriate or
requisite for the purposes of VAT legislation and
has preserved such records, invoices and other
documents in such form and for such periods as are
required by VAT legislation;
(iv) and the Company is not nor has it ever been treated
as a member of a group for the purposes of VAT
legislation, nor has it applied for such treatment.
(c) The Company:
(i) is not in arrears with any payments or returns or
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notifications under VAT legislation or liable to any
abnormal or non-routine payment or any forfeiture or
penalty or interest or surcharge or to the operation
of any penal, interest or surcharge provisions
contained therein;
(ii) has not been required by HM Commissioners of Customs
and Excise to give security under VAT legislation;
(iii) has not made exempt supplies such that it is not able
to obtain credit for all input tax paid or suffered
by it;
(iv) has not received a surcharge liability notice under
section 19 Finance Act 1985 (default surcharge) or a
penalty liability notice under section 14A Finance
Act 1985 (serious misdeclaration resulting in
understatements or overclaims).
(d) The Company does not hold any interest in any buildings or
land in respect of which it or any other person has made an
election to waive the exemption to value added tax in
accordance with the provisions of paragraph 2 Schedule 10
Value Added Tax 1994, nor is the Company contractually
committed (contingently or otherwise) to receive any supply in
respect of which such an election has been made.
D.8.2 None of the assets of the Company owned at the date hereof is a
capital item the input tax on which would be subject to adjustment
in accordance with the provisions of Part XV of the Value Added
Tax Regulations 1995.
D.9 Stamp duty
All documents in the possession or under the control of the Company or to the
production of which the Company is entitled which establish or are necessary to
establish the title of the Company to any asset have been duly stamped and any
applicable stamp duties or charges in respect of such documents have been duly
accounted for and paid, and no such documents which are outside the United
Kingdom would attract stamp duty if they were brought into the United Kingdom.
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<PAGE>
E. INTELLECTUAL PROPERTY ETC
E.1 Secret or confidential information or property
The Company has not at any time (save in the ordinary course of business or to
its professional advisers) disclosed to any person other than the Purchaser.
E.1.1 any of its secret or confidential information or property
(including, without limitation, financial and technical
information, designs, drawings, plans, statistics, documents,
files, records and papers); or
E.1.2 any other information relating to its business or affairs the
disclosure of which might or could cause loss or damage to or
adversely affect the Company; or
E.1.3 any secret or confidential information relating to its
manufacturers, suppliers, customers, clients and agents or to any
other person who has or has had any dealings with it.
E.2 Intellectual property rights
E.2.1 The Company does not:
(a) own, use, infringe or require to use any letters patent,
trade mark, service mark, registered design, registrable
business name, copyright or similar Intellectual Property
Right; or
(b) employ or require to employ in relation to goods or articles
manufactured or proposed to be manufactured by it any knowhow,
which either infringes or is likely to infringe any
Intellectual Property Right of a third party or which has
been disclosed to it by a third party under licence or
similar arrangements.
E.2.2 Full details of all registered Intellectual Property Rights
(including applications to register the same) and all commercially
significant unregistered Intellectual Property Rights owned or
used by the Company are set out in the Disclosure Letter.
E.2.3 The Company is the owner of and the sole legal and beneficial owner
of or applicant for such Intellectual Property Right and all the
Intellectual Property Rights referred to in paragraph E.2.2 above
are owned solely by the Company free of all encumbrances.
E.2.4 Full details are set out in the Disclosure Letter of all licence and
other agreements relating to Intellectual Property Rights to which
the Company is a party (whether as licensor or licensee) or which
relate to any Intellectual Property Right owned by the Company.
The Company is not in breach of any such agreement and, so far as
the Sellers and the Company is aware, no
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third party is in breach of any such agreement.
E.2.5 All the Intellectual Property Rights described in paragraph E.2.3
above and all agreements disclosed in relation to paragraph E.2.4
above are valid and subsisting and nothing has been done or omitted
to be done by the Company, and the Sellers and the Company are
unaware of any act or omission of any third party, which would
jeopardise the validity or subsistence of any of such Intellectual
Property Rights or such agreements.
E.2.6 The Company owns or has licensed to it all Intellectual Property
Rights it requires to carry on its business as such business has
been carried on during the year prior to the date of this Agreement
and such rights and the Company's ability to use such rights will
not be affected by the acquisition of Company by the Purchaser.
E.2.7 Neither the Sellers nor the Company are aware of any unauthorised
use by any person of any Intellectual Property Rights or
confidential information of the Company.
E.3 Computer know-how and marketing information
E.3.1 For the purposes of paragraphs E.3.2, E.3.3 and E.3.4 below:
(a) "Computer Know-How" means all information (including that
comprised in or derived from data, discs, tapes, manuals,
source codes, flow-charts and specifications) relating to the
use or programming of any computer which is not intended by the
persons in possession of the information for use by
unauthorised persons and any computer software in whatever form
held; and
(b) "Marketing Information" means all information relating to the
marketing of any products or services (including customer names
and lists, sales targets, sales statistics, market share
statistics, marketing surveys and reports, marketing research
and any advertising or other promotional materials).
E.3.2 All Computer Know-How and Marketing Information used by the Company
is owned by or is the subject of a valid grant of rights to the
Company and is not subject to any restriction which materially and
adversely affects the Company's ability to use it for the purposes
of its business.
E.3.3 The Company has not disclosed nor is obliged to disclose any
Computer Know-How or Marketing Information of a confidential
nature to any person other than its employees.
E.3.4 The Company is not in breach of any agreement under which any
Computer Know-How or Marketing Information was or is to be made
available to it.
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E.4 Data and records
E.4.1 All the records and systems (including but not limited to computer
systems), data and information of the Company are recorded, stored,
maintained or operated or otherwise held by the Company and are not
wholly or partly dependent on any facilities or means (including any
electronic, mechanical or photographic process, computerised or
otherwise) which are not under the exclusive ownership and control
of the Company.
E.4.2 The Company has not disclosed to any third party any such records,
control or other systems, data and information as is referred to
in subparagraph E.4.1 above.
E.4.3 The Company has complied with all relevant requirements of the Data
Protection Act 1984, including the following:
(a) the data protection principles established in that Act;
(b) requests from data subjects for access to data held by it; and
(c) the requirements relating to the registration of data users.
E.4.4 The Company has not received a notice or allegation from either the
data protection registrar or a data subject alleging non-compliance
with the data protection principles or prohibiting the transfer of
data to a place outside the United Kingdom.
E.4.5 No individual has claimed or will have the right to claim
compensation from the Company under that Act for loss or
unauthorised disclosure of data prior to Completion.
E.5 Business names
The Company does not carry on business under a name other than its own
corporate name.
E.6 Year 2000
E.6.1 All computers software, products and services supplied by the
Company are Year 2000 Compliant.
E.6.2 All computer software used by the Company is Year 2000 compliant.
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<PAGE>
F. EMPLOYEES
F.1 Particulars of employees
F.1.1 The persons whose names are set out in the Disclosure Letter are all
the employees of the Company and the particulars of their employment
set out in the Disclosure Letter are accurate and complete. No
person who was formerly employed by the Company has a right to
return to work.
F.1.2 The terms and conditions of employment of all employees of the
Company are in accordance with the standard terms and conditions
supplied to the Purchaser.
F.1.3 All subsisting contracts of employment to which the Company is a
party are terminable by it on three months' notice or less without
compensation (other than compensation in accordance with the
Employment Rights Act 1996).
F.1.4 No employee of the Company has been given notice of termination of
his employment (or had his employment terminated without notice)
since the Accounts Date and no employee of the Company has left its
employment of his own accord since that date or indicated his
intention of doing so.
F.1.5 Full particulars are contained in the Disclosure Letter of any
outstanding offer of employment made to any person by the Company
and there is no person who has accepted an offer of employment made
by the Company but whose employment has not yet started.
F.1.6 Full particulars are contained in the Disclosure Letter of any
agreement for the provision of consultancy services or the
services of personnel to the Company and of the terms applicable
to the secondment to the Company of any person.
F.2 Salary costs
F.2.1 Full particulars of the remuneration or the emoluments or pension
benefits of any employee of the Company is set out in the
Disclosure Letter.
F.3 Compensation and other sums due to employees
F.3.1 The Company does not have any liability to pay compensation for loss
of office or employment to any present or former officer or employee
or to make any payment under the provisions of the Employment Rights
Act 1996, the Sex Discrimination Acts 1975 and 1986, the Race
Relations Act 1976, the Disability Discrimination Act 1995, the
Equal Pay Act 1970 and/or Article 119 of the Treaty of Rome and no
such sums have been paid.
F.3.2 Except in respect of normal accruals of remuneration or emoluments
of
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employment, no sum is payable to or for the benefit of any employee
or director of the Company.
F.3.3 The Company does not have an obligation to make any payment on
redundancy in excess of the statutory redundancy payment and the
Company has not operated any discretionary practice of making any
such excess payments.
F.4 No bonus schemes
There is no scheme or arrangement in operation by or in relation to the
Company under which any employee or other person is entitled to a
commission or remuneration of any other sort calculated by reference to the
whole or part of the turnover, profits or sales of the Company.
F.5 Labour relations
F.5.1 There is not and since incorporation there has not been any
industrial action affecting the Company and to the best of the
knowledge, information and belief of the Sellers there are no facts
or circumstances which might give rise to such industrial action.
F.5.2 The Company is not a party to any collective agreement or trade
dispute (within the meaning of the Trade Union and Labour Relations
(Consolidations) Act 1992) or any dismissal procedures agreement
(within the meaning of the Employment Rights Act 1996) or any
proceedings before any court or tribunal under or by virtue of the
provisions of the said Act of 1992 and to the best of the knowledge,
information and belief of the Sellers there are no facts or
circumstances which might give rise to the Company becoming a party
to any such agreement or becoming involved in any such dispute or
proceedings.
F.5.3 The Company has in all material respects complied with their
obligations to their employees and former employees and any
relevant trade union. No claim has been made or threatened against
the Company or against any person whom the Company or the Sellers is
or may be liable to compensate or indemnify and no inquiry or
investigation has been made or threatened by the Commission for
Racial Equality, the Equal Opportunities Commission or any health
and safety enforcement body, in respect of any act, event, omission
or other matter arising out of or in connection with:
(a) any application for employment by any person;
(b) the employment or termination of employment of any person;
(c) any retirement/death/disability benefit or any other benefit of
whatever type;
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and, after making due and careful inquiries, the Seller is not
aware of any circumstance which may give rise to any such claim or
investigation.
F.6 Loans to employees
The Company has not made any loan or advance to any of its present
or future officers or employees which is outstanding.
F.7 No Pension Schemes
The Company has not paid, provided or contributed towards, and the Company
is not under any obligation or commitment (whether or not legally
enforceable) to pay, provide or contribute towards, any
retirement/death/disability benefit for or in respect of any present or
past employee (or any spouse, child or dependent of any of them) of the
Company.
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SIGNED by JONATHAN PARKER-BRAY /s/ Jonathan Parker-Bray
in the presence of: ------------------------
/s/ Miss Emma Louise Williams
- - - - ------------------------------
SIGNED by SEAN MURRAY
in the presence of:
- - - - ------------------------------
SIGNED by Jonathan Parker-Bray the duly /s/ Jonathan Parker-Bray
duly authorized representative of ------------------------
COUGAR INTERNATIONAL HOLDINGS
INC. in the presence of:
/s/ Miss Emma Louise Williams
- - - - -----------------------------
SIGNED by Kevin Maxwell the duly /s/ Kevin Maxwell
duly authorized representative of ------------------------
TELEMONDE INC.
in the presence of:
/s/
- - - - -----------------------------
42
<PAGE>
EXHIBIT 2.5(a)
PRIVATE AND CONFIDENTIAL
Dated 22 October 1999
_____________________________
(1) MARKET CONSULTANT LIMITED
(2) VOLIM HOLDING BV
(3) CALLAWAY CONTINENTAL LIMITED
AND
(4) EQUITEL COMMUNICATIONS LIMITED
------------------------------
SHARE PURCHASE AGREEMENT
FOR THE SALE AND PURCHASE OF
ALL THE ISSUED SHARE CAPITAL OF
CARNIVAL ENTERPRISES LIMITED
AND 10% OF THE ISSUED SHARE
CAPITAL OF ITS EUROPE SL
------------------------------
Bird & Bird
90 Fetter Lane
London EC4A 1JP
Tel: 0171 415 6000
Fax: 0171 415 6111
DJC/ CXB/Telmo.004
<PAGE>
CONTENTS
Heading Page
1. DEFINITIONS AND INTERPRETATION............................................2
2. SALE OF SHARES............................................................5
3. CONSIDERATION.............................................................5
4. CLAWBACK OF CONSIDERATION.................................................6
5. CONDITIONS TO COMPLETION..................................................7
6. CONDUCT OF BUSINESS PENDING COMPLETION....................................8
7. RECISSION.................................................................9
8. COMPLETION...............................................................10
9. UNDERTAKINGS OF THE SELLER...............................................12
10. WARRANTIES BY THE SELLER.................................................14
11. WARRANTIES BY VOLIM......................................................15
12. WARRANTIES BY THE PURCHASER..............................................16
13. TAX INDEMNITY............................................................17
14. CONFIDENTIALITY..........................................................17
15. ANNOUNCEMENTS............................................................20
16. NOTICES AND RECEIPTS.....................................................20
17. RESOLUTIONS AND WAIVERS..................................................21
18. GENERAL..................................................................21
19. WHOLE AGREEMENT..........................................................22
20. RESPONSIBILITY FOR BROKER'S COMMISSION...................................22
21. GUARANTEE BY EQUITEL.....................................................23
22. GOVERNING LAW............................................................23
SCHEDULE 1
Part 1
Particulars of Carnival.....................................................24
Part 2
Particulars of the Company..................................................24
Part 3
Particulars of the Subsidiary...............................................25
SCHEDULE 2
The Warranties..............................................................26
SCHEDULE 3
Limitations relating to the Seller's Warranties.............................46
<PAGE>
THIS AGREEMENT is made on the 22nd day of October 1999
BETWEEN
(1) MARKET CONSULTANT LIMITED, a company incorporated in Gibraltar under
registration number 70633, the registered office of which is at Suite 2B,
Mansion House, 143 Main Street, Gibraltar (the "Seller");
(2) VOLIM HOLDINGS BV, a company incorporated in Holland under registration
number H137233, the registered office of which is at Dorpsstraat 1, 3611,
AD, Oud Zuilen, Netherlands ("Volim"); and
(3) CALLAWAY CONTINENTAL LIMITED, a company incorporated in the British Virgin
Islands, the registered office of which is at the offices of Overseas
Management Company Trust Limited, PO Box 3152, Road Town, British Virgin
Islands (the "Purchaser")
(4) EQUITEL COMMUNICATIONS LIMITED, a company incorporated in England and Wales
under registration number 03633818, the registered office of which is at
5th Floor, 7-10 Chandos Street, Cavendish Square, London W1M 9DE, (the
"Equitel").
RECITALS
(A) Carnival Enterprises Limited ("Carnival"), short particulars of which are
set out in Part 1 of Schedule 1, is a private company limited by shares
incorporated in Gibraltar on 5 March 1999 having an authorised capital of
(Pounds)100 divided into 100 shares of (Pounds)1.00 each, all of which are
issued and beneficially owned by the Seller (the "Carnival Shares").
(B) ITS Europe SL (the "Company"), short particulars of which are set out in
Part 2 of Schedule 1, is a stock limited liability company ("Sociedad de
Responsabilidad Limitada") incorporated in Spain on 23 January 1995 having
an authorised capital of Pta. 64,5000,000 divided into 6,450 participations
of Pta. 10,000 each, totally subscribed and paid up (the "Participations").
(C) Carnival is the registered holder and the beneficial owner of 5,805
participations in the Company (the "Carnival Participations"). Volim is
the registered holder and the beneficial owner of 645 participations in the
Company (the "Volim Participations"), and such shares, together with the
Carnival Participations comprise all the subscribed and paid up
participations in the capital of the Company.
(D) The Company owns the legal and beneficial interest in 6,000 participations
of Pta. 1,000 each, numbered 1 to 6,000 inc. which are fully subscribed and
paid up in P-Tel S.L., short particulars of which are set out in Part 3 of
Schedule 1, a company registered at the Mercantile Registry of Malaga, Book
1249, Volume 2336, Sheet MA-36547, Folio 23 and following (the
"Subsidiary").
(E) In accordance with the terms and conditions of this Agreement;
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(a) the Seller wishes to sell the Carnival Shares;
(b) Volim wishes to sell the Volim Participations,
and the Purchaser wishes to purchase the same in reliance on the
representations, warranties and undertakings contained in this Agreement.
(F) Equitel has agreed to guarantee certain obligations of the Purchaser under
this Agreement.
OPERATIVE PROVISIONS
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and the Schedules
"Accounts" means all or any one of the unaudited balance sheet of the
Company as at the Accounts Date and the unaudited profit and loss account
of the Company for the financial period ended on the Accounts Date;
"Accounts Date" means 31st December 1998;
"Agreed Form" means terms contained in a form which has been agreed and
initialed by or on behalf of the Seller and the Purchaser for the purpose
of identification prior to Completion;
"Business Day" means any day (excluding Saturdays) upon which banks in
London are open for normal banking business;
"Completion" means completion of the sale and purchase of the Carnival
Shares and the Volim Participations in accordance with Clause 8;
"Completion Date" means the date upon which Completion takes place;
"Consideration Stock" has the meaning given to it in Clause 3.1;
"Deed of Priority" means the deed in the Agreed Form governing the priority
in which repayment of the Term Loan and the Equitel Term Loan will be made;
"Deposit Agreement" means the letter in the Agreed Form under which Denton
Fox & Gibbons of Regal House, Queensway, PO Box 246, Gibraltar will hold
the certificates for the Consideration Stock;
"Disclosure Letter" means the letter from the Seller to the Purchaser of
the same date of this Agreement and which has been delivered to the
Purchaser prior to the signing of this Agreement;
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<PAGE>
"$ or Dollars" means the lawful currency from time to time of the United
States of America;
"Equitel Term Loan" means the agreement for the provision of a term loan of
$1,000,000 to be entered into by Equitel, as lender, and the Company as
borrower, on Completion in the Agreed Form;
"Intellectual Property Rights" means all and any patents, trademarks,
service marks, trade names, registered designs, unregistered design rights,
copyrights and rights in confidential information, and all and any other
intellectual property rights, whether registered or unregistered, and
including all applications and rights to apply for any of the same;
"Parties" means the Parties to this Agreement;
"Pta." means Spanish Pesetas;
"P-TEL, SL[] means P-TEL, of Avda Severo Ochoa No 28, Edificio Marina,
Marbella 3A, Marbella (Malaga) Spain;
"Purchaser's Legal Opinions" means the legal opinions by (a) a BVI Counsel
reasonably acceptable to the Seller in respect of the Purchaser and (b) by
Baker, Donelson, Bearman & Calawell in respect of Telemonde, each in the
Agreed Form;
"Purchaser's Solicitors" means Bird & Bird, 90 Fetter Lane, London EC4A
1JP;
"Seller's Legal Opinions" means legal opinions by Denton Fox & Gibbons in
respect of the Seller and Carnival in the Agreed Form;
"Seller's Solicitors" means Browne Jacobson of 44 Castle Gate, Nottingham
NG1 7BJ;
"Seller's Warranties" means the warranties and undertakings of the Seller
contained in Clause 10 and in Schedule 2;
"Service Agreement" means the service agreement in the Agreed Form;
"Side Letter" means the side letter in the Agreed Form referred to in
clause 3.3;
"Telemonde" means Telemonde Inc, a company incorporated in Nevada and whose
principal office is located at 200 Maddison Avenue, Suite 520, New York,
USA;
"Telemonde Common Stock" means shares of the Common Stock of Telemonde,
$0.001 par value per share;
"Term Loan Agreement" means the agreement for the provision of a term loan
of up to $2,000,000 to be entered into by the Seller, as lender, and the
Company, as borrower, on Completion in the Agreed Form;
3
<PAGE>
"Warrant Agreement" means the agreement in the Agreed Form between
Telemonde and the Seller under which Telemonde will grant the Seller an
option to acquire 1,000,000 shares of Telemonde Stock at $6.50 per share of
Telemonde Common Stock;
"Year 2000 Compliant" means in respect of any computer hardware or software
that neither the performance nor the functionality of that computer
software or hardware will be adversely affected by the advent of the year
2000 or any other year, or by the advent of 29 February 2000. In particular
and without limitation:
(a) no valid value for current date will cause any interruption of any
performance;
(b) all manipulations of date related data will produce the correct results for
all valid date values;
(c) if the valid date elements in any interfaces and data storage permit
specifying the century, they will specify the correct century to eliminate
date ambiguity; and
(d) where any valid date element is represented without a century, the correct
century shall be unambiguous for all manipulations involving that element.
1.2 References in this Agreement to any statutory provisions shall be construed
as references to those provisions as respectively amended, consolidated or re-
enacted (whether before or after the date of this Agreement) from time to time
and shall include any provisions of which they are consolidations or re-
enactments (whether with or without amendment).
1.3 The Schedules form part of this Agreement and shall have the same force and
effect as if set out in the body of this Agreement and any reference to this
Agreement shall include the Schedules.
1.4 In this Agreement:-
(a) the masculine gender shall include the feminine and neuter and the singular
number shall include the plural and vice versa;
(b) references to persons shall include bodies corporate, unincorporated
associations and partnerships;
(c) any headings or side notes or, in the case of any legislation specifically
referred to, the inclusion in parentheses of the title to the relevant
Part, Section, Schedule or paragraph contained in such legislation are for
the sake of convenience only and shall not affect the construction of this
Agreement; and
(d) references to any party include a reference to the estate, personal
representative, successor, or permitted assigns of that party.
1.5 Except where the contrary is stated, any reference in this Agreement to a
Clause or Schedule is to a Clause or Schedule of this Agreement, and any
reference within a Clause or Schedule to a sub-clause, paragraph or other sub-
division is a reference to such
4
<PAGE>
sub-clause, paragraph or other sub-division so numbered or lettered in that
Clause or Schedule.
1.6 Where any reference is made in any of the Seller's Warranties to "so far as
the Seller is aware" or any similar statement, the Seller shall be deemed to be
aware of, or to have knowledge of, all matters of which the Sole Administrator
of the Company is aware of or has knowledge of and the awareness and knowledge
of the Seller shall be construed accordingly.
2. SALE OF SHARES
2.1 The Seller shall sell the Carnival Shares and Volim shall sell the Volim
Participations and the Purchaser, relying on the representations, warranties,
undertakings and indemnities set out in this Agreement shall purchase the
Carnival Shares and the Volim Participations on the terms of this Agreement free
from all claims, liens charges encumbrances and equities and together with all
rights attaching or accruing to them.
2.2 The Seller covenants with the Purchaser as follows:
(a) that it has the right to sell and transfer the full legal and beneficial
interest in the Carnival Shares to the Purchaser on the terms set out in
this Agreement; and
(b) that on and following Completion, it shall at its own cost execute such
further documents and do all such acts and things as the Purchaser may
reasonably require in order to effectively vest all of the Carnival Shares
in the Purchaser and otherwise to give full effect to the terms of this
Agreement.
2.3 Volim covenants with the Purchaser as follows:
(a) that it has the right to sell and transfer the full legal and beneficial
interest in the Volim Participations to the Purchaser on the terms set out
in this Agreement; and
(b) that on Completion it will appear before a Spanish Notary Public in order
to grant a public deed of sale and purchase of the Volim Participations in
order to vest all the Volim Participations in the Purchaser or its
assignee, or otherwise as may be necessary to complete this transaction, as
well as execute and do all such deeds, documents, acts and things as the
Purchaser may reasonably require in order to give full effect to this
Agreement.
2.4 The Purchaser shall not be obliged to complete the purchase of any of the
Carnival Shares and the Volim Participations unless the purchase of all the
Carnival Shares and the Volim Participations is completed simultaneously in
accordance with this Agreement.
3. CONSIDERATION
3.1 The consideration for the sale of the Carnival Shares and the Volim
Participations shall be $15,000,000 which shall be satisfied by the transfer by
the Purchaser of 3,529,411
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issued and outstanding shares of Telemonde Common Stock (the "Consideration
Stock") in accordance with the provisions contained within this Agreement.
3.2 The Seller and Volim shall be entitled to the Consideration Stock in the
following proportions:
(a) to the Seller in consideration for the Carnival Shares, 3,176,470 shares of
the Consideration Stock; and
(b) to Volim in consideration for the Volim Participations, 352,941 shares of
the Consideration Stock.
3.3 Market may direct that up to 670,588 of the shares comprised in the
Consideration Stock be transferred to Leonardis Geeris ("Mr Geeris"), provided
that prior to such transfer Mr Geeris covenants with the Purchaser to observe
the undertakings contained in Clause 9 hereof and, agrees to make any such
shares transferred to him the subject of the Deposit Agreement and enters into
the Side Letter.
4. CLAWBACK OF CONSIDERATION
4.1 If at any time prior to the third anniversary of the Completion Date, the
Service Agreement shall be terminated by reason of:
(a) the lawful termination by the Company either (i) as a result of the
deliberate, culpable, persistent and material failure (as defined below) by
the employee to perform his duties under the Service Agreement or (ii) by
reason of a breach by the employee of Clause 15 of the Service Agreement
which termination has not been held to be unlawful by a court of competent
jurisdiction and, notwithstanding such failure or breach, the Company gave
the employee 30 days written notice of the existence of such failure or
breach giving rise to the right of summary dismissal and after such 30 days
such failure or breach is still in existence; or
(b) by resignation of the employee, other than in circumstances amounting to
constructive dismissal,
then the Purchaser shall be entitled to exercise its rights under Clause
4.2. For the purpose of this clause and notwithstanding anything in the
Service Agreement to the contrary "deliberate, culpable, persistent and
material failure to perform" shall not include:
(i) the employee failing to attend to this duties by reason of his or his
wife's or children's permanent or long-term incapacity or illness or
disabling injury;
(ii) the death of the employee;
(iii) the Service Agreement being frustrated for any reason outside the
control of the employee;
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(iv) the employee being convicted of a road traffic offence where he is not
sentenced to imprisonment;
(v) the employee's bankruptcy;
(vi) the employee being disqualified from holding office as a director or
sole administrator;
(vii) the employee becoming of unsound mind or a patient under any relevant
mental health statutes;
(viii) the employee being incompetent in the normal performance of his duties.
4.2 If the Service Agreement is terminated for the reasons set out in
paragraphs (a) and (b) of Clause 4.1 above before the first anniversary of
Completion the Seller shall transfer to the Purchaser, or as it shall direct,
for no consideration, such number of Consideration Stock as is equal in value to
$7,500,000 as determined by reference to the average bid price for Telemonde
Common Stock on the date of termination provided always that the Seller's
liability hereunder shall be limited to transferring all the Consideration Stock
received by it pursuant to Clause 3.2. Any transfer to be made under this
clause shall be made on the date which is three months after termination of the
Service Contract (or such earlier date as the Seller shall agree) unless the
Seller shall dispute whether the circumstances in which the Service Agreement
was terminated falls within paragraphs (a) and (b) of Clause 4.1 in which case
the transfer shall be made forthwith upon the dispute being resolved in
accordance with Clause 4.3.
4.3 In the event there is any dispute as to whether the circumstances outlined
in Clause 4.1 (a) and (b) existed and legal proceedings have been commenced
within 3 months of termination for a declaration or other order that the
termination of employment by the Company was unlawful or that the resignation by
the employee was in circumstances other than circumstances amounting to
constructive dismissal, the Seller shall not be obliged to transfer any
Consideration Stock until such time as such proceedings have been finally
determined by a court of competent jurisdiction from which there is no appeal.
For these purposes the parties agree that the Spanish courts shall have
exclusive jurisdiction in respect of any such dispute and the dispute shall be
governed by Spanish law.
5. CONDITIONS TO COMPLETION
5.1 The obligations of the parties to complete the purchase of the Carnival
Shares and the Volim Participations are conditional on:
(a) the following documents being in the Agreed Form:
(i) the Deed of Priority;
(ii) the Deposit Agreement;
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(iii) the Equitel Term Loan;
(iv) the Purchaser's Legal Opinion;
(v) the Seller's Legal Opinion;
(vi) the Service Agreement;
(vii) the Side Letter;
(viii) the Term Loan Agreement; and
(ix) the Warrant Agreement.
(b) the delivery to the Purchaser of the Seller's Legal Opinion dated as of the
date of Completion;
(c) the delivery to the Seller of the Purchaser's Legal Opinion, dated as of
the date of Completion;
(d) the consent of the Financial and Development Secretary of Gibraltar to the
transfer of the Carnival Shares pursuant to the Agreement;
(e) the Purchaser becoming beneficially entitled to the Consideration Stock and
the obtaining by the Purchaser of all necessary consents, authorities and
permissions for the transfer of the Consideration Stock to the Purchaser;
5.2 The Seller and Volim may waive any of the conditions set out in Clauses
5.1(c), (e). The Purchaser may waive any of the conditions set out in Clause(s)
5.1 (b).
5.3 The parties shall use their respective reasonable endeavors to provide
satisfaction of the conditions set out in sub-clause 5.1 (a). The Seller will
use its reasonable endeavours to procure satisfaction of the conditions set out
in sub-Clauses 5.1(b) and (d). The Purchaser shall use its reasonable
endeavours to procure this satisfaction of the condition set out in Sub-Clause
5.1(c).
5.4 If any of the Conditions set out in sub-Clause 5.1 shall not have been
fully satisfied, or if permitted expressly waived as permitted by Clause 5.2 by
12.00 am on 31 December 1999 then this Agreement shall lapse and be deemed to be
of no effect without any of the parties being liable to any other party in any
way whatsoever except for breaches of Clauses 14 (Confidentiality) and 15
(Announcements).
6. CONDUCT OF BUSINESS PENDING COMPLETION
6.1 The Seller hereby covenants with the Purchaser that prior to Completion and
without the prior written consent of the Purchaser:
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(a) none of the Company or the Subsidiary shall in any way depart from the
ordinary course of its respective day to day business as presently carried
on;
(b) the Company shall not dispose of or grant any option or right of pre-
emption in respect of any part of its assets except in the ordinary course
of trading;
(c) the Company shall not borrow any money or make any loan other than in the
ordinary course of business;
(d) the Company shall not grant, issue or redeem any mortgage, charge,
debenture or other security or give any guarantee or indemnity;
(e) the Company shall not make any changes to the terms and conditions of
employment of any of its directors or senior employees other than in the
ordinary course of business;
(f) neither Carnival nor the Company shall create, issue, purchase or redeem
any class of share or loan capital;
(g) the Seller shall not dispose of any interest in, or pledge, charge or
otherwise encumber, the Carnival Shares or any of them ;
(h) Carnival shall not enter into any transaction of any kind or to acquire any
asset or incur any liability;
(i) neither Carnival nor the Company shall convene any meeting of their members
or otherwise pass or adopt any members resolution of any kind,
and, where the consent of the Purchaser is so obtained to any matter
referred to in sub-clauses (a) to (i) where, the Seller shall not thereby
be in breach of this Agreement, including any of the warranties.
Volim hereby covenants with the Purchaser that prior to Completion it will
not dispose of any interest in or pledge, charge or otherwise encumber the
Volim Participations or any of them.
7. RECISSION
7.1 Without prejudice to any other rights and remedies available at any time to
the Purchaser, the Purchaser shall be entitled to treat the Seller and Volim as
having repudiated this Agreement:
(a) if there is a material breach of Clause 6 or any other obligation to be
performed on the part of the Seller or Volim prior to Completion and any
such breach, where capable of remedy, is not remedied to the Purchaser's
reasonable satisfaction; or
(b) if circumstances exist which would, if the Seller's Warranties and the
Warranties by Volim contained in Clause 11 were to be repeated as at
Completion, constitute
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a breach of any such warranties where the maximum liability of the Seller
or Volim would exceed (Pounds)20,000; or
(c) if anything occurs prior to Completion which has a material adverse effect
on the business of the Company; or
(d) if any litigation or arbitration proceedings are instituted or threatened
by or against the Company claiming damages of more than (Pounds)20,000;
the Purchaser shall be entitled to rescind this Agreement.
7.2 If the Purchaser elects to rescind this Agreement pursuant to Clause 7.1,
(a) the Seller shall indemnify the Purchaser against all costs, charges and
expenses incurred by and in connection with the rescission of this Agreement.
7.3 Without prejudice to any other rights and remedies available at any time to
the Seller and Volim the Seller and Volim shall be entitled to treat the
Purchaser as having repudiated the Agreement:
(a) if the price of the Telemonde Common Stock (as dealt with on the relative
recognised stock exchange or on the NASD OTC Bulletin Board) falls below
$3.00 per share;
(b) if there is a material breach of any obligation to be performed on behalf
of the Purchaser prior to Completion and any such breach, where capable of
remedy, is not remedied to the reasonable satisfaction of the Seller and
Volim;
(c) if circumstances exist which would, if the Purchaser's warranties (set out
in clause 12 hereof) were to be repeated as at Completion, constitute a
breach of such warranties;
(d) if anything occurs prior to Completion which has a material adverse effect
on the business of the Purchaser, Telemonde Inc or Equitel;
and the Seller and Volim shall be entitled to rescind this Agreement.
7.4 If the Seller and Volim elect to rescind this Agreement pursuant to clause
7.3(b) the Purchaser and the Guarantor shall indemnify the Seller and Volim
against all costs, charges and expenses incurred by and in connection with the
rescission of this Agreement
8. COMPLETION
8.1 Completion shall occur as soon as reasonably practicable following the
satisfaction of the conditions in Clause 5 on such date as the parties shall
agree, but in any event, not later than on the tenth business day after
satisfaction or waiver of all of the conditions contained in Clause 5
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8.2 Upon Completion:
(a) the Seller shall deliver, or cause to be delivered to the Purchaser:
(i) transfers of the Carnival Shares duly completed in favour of the
Purchaser, or as it may direct;
(ii) the share certificates representing the Carnival Shares (or an express
indemnity in a form satisfactory to the Purchaser in the case of any found
to be missing);
(iii) the statutory registers and minute books of Carnival together with its
Company Seal and Certificate of Incorporation;
(iv) letters of resignation (expressed to be with effect from Completion) from
each of the Directors and Secretary of Carnival;
(b) the Seller shall procure that a meeting of the Directors of Carnival shall
be held at which the transfer of the Carnival Shares to the Purchaser or
its nominee shall be approved and the resignations referred to in sub-
Clause (a)(iv) above shall be accepted and such persons as the Purchaser
shall nominate shall be appointed as Directors and Secretary of Carnival;
(c) documents of title in respect of 5,805 Participations in the capital of the
Company registered in the name of Carnival;
(d) Volim and the Purchaser shall appear at the offices of a Notary Public
appointed by the Seller and the Purchaser located in Spain and shall grant
a public deed of sale and purchase of the Volim Participations in favour of
the Purchaser in the Agreed Form;
(e) the Seller shall procure the delivery to the Purchaser of:
(i) the Stockholders' Registry Book and Minute Books of the Company together
with the Public Deed of Incorporation and its Seal and any other Public
Deeds containing amendments to the By Laws, if any;
(ii) all necessary forms to be submitted before the Spanish Foreign Exchange
Authorities in order to declare the sale by Volim non-resident in Spain;
(iii) each of the following agreements, all duly executed by each of the
parties to them:
(1) the Service Agreement;
(2) the Term Loan Agreement;
(3) the Warrant Agreement; and
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(4) the Deposit Agreement.
(iv) the Deed of Priority duly executed by the Seller; and
(v) the Seller's Legal Opinion, dated as of Completion.
(f) the Company shall draw down and Equitel shall advance the full amount of
the Term Loan and the Equitel Term Loan respectively to the Company in
immediately available funds.
8.3 The Seller and Volim shall procure that all indebtedness due from either of
them or any person connected with them to the Company shall be satisfied in
full.
8.4 Upon completion of all the matters referred to in sub-clause 8.1 to 8.3
inclusive, the Purchaser shall:
(a) transfer the Consideration Stock free from all claims, liens, charges,
encumbrances and equities and together with all rights attaching or
accruing to them to the Seller and to Volim who rely on the
representations, warranties and undertaking on the part of the Purchaser
set out in Clause 9;
(b) deliver the Purchaser's Legal Opinion dated as of Completion;
(c) deliver the Equitel Term Loan Agreement, executed by Equitel;
(d) deliver the Deed of Priority in the Agreed Form executed by the Purchaser.
8.5 The parties shall not be obliged to complete this Agreement unless all of
the provisions of Clauses 8.1 to 8.4 are complied with fully.
8.6 If for any reason the provisions of Clauses 8.1 to 8.4 inclusive are not
fully complied with the party not in default may elect (in addition and without
prejudice to all other rights or remedies available to it) to rescind this
Agreement or fix a new date for Completion.
9. UNDERTAKINGS OF THE SELLER
9.1 As security for its obligations under Clause 4 and under Clause 10, the
Seller undertakes to the Purchaser that, subject to US Securities Laws, until
the earlier of (1) 3 months after the third anniversary of Completion and (2)
the mutual termination of the Service Agreement and (3) the unlawful termination
by the Company of the Service Agreement, or if on that date there remains
outstanding any claims by the Purchaser for breach of the Seller's Warranties or
any claim by the Purchaser under Clause 4.2 or under any other provision of this
Agreement, until the date on which all such claims are finally resolved, it
will:
(a) not engage in any trade or commercial activities of any kind save for the
holding of the Consideration Stock;
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(b) not pledge, charge, encumber or otherwise deal in, assign or transfer any
of the Consideration Stock or purport to do any of these things;
(c) not commence any winding up or other dissolution proceedings;
(d) not change its corporate status or domicile without the Purchaser's
consent, such consent not to be unreasonably withheld or delayed;
(e) deposit the certificates representing the Consideration Stock pursuant to
the terms of the Deposit Agreement.
9.2 The restrictions placed upon the Consideration Stock in Clause 9.1 are
without prejudice to any requirement of US Securities Law, subject to the
following:
(a) after 31st December 2000 the provisions of Sub-Clauses 9.1(b) and (e) will
only apply to such number of Shares of the Consideration Stock as is equal
in value to the value of:
(i) any outstanding claims by the Purchaser for breach of the Sellers
warranties;
(ii) the amount of Consideration Stock which the Purchaser may be required to
transfer pursuant to clause 4.2.
such share value to be determined by reference to the average bid
price (or nearest equivalent thereto) of the Telemonde Common Stock on
the date preceding the date of any proposed transfer or the next
business day thereafter;
(b) the provisions of Sub-Clauses (b) and (e) shall not:
(i) prohibit the Seller from:
(1) selling such number of Consideration Stock as is required to raise funds to
satisfy any claims of the Purchaser for breach of the Seller's Warranties
or of any other provision of this Agreement or pursuant to Clause 4.2; or
(2) transferring or surrendering the Consideration Stock to the Purchaser (or
as the Purchaser shall direct) in settlement of such claims; or
(ii) prohibit a sale of the Consideration Stock by the Seller in the event a
takeover offer is made for Telemonde Inc or a sale which is made with the
prior written consent of the Purchaser (such consent not to be reasonably
withheld or delayed) provided that in each case the proceeds of such sale
are deposited in a bank account in Gibraltar subject to an undertaking in a
form reasonably acceptable to the Purchaser (from the Seller or other
persons acceptable to the Purchaser), not to pledge, charge, encumber,
transfer, use or deal with the proceeds thereof until after the date when
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transfer of the equivalent proportion of the Consideration Stock would
otherwise be permitted under clauses 9.1 and 9.2, and it is agreed by the
Seller that where any such sale of Consideration Stock is made, any rights
which the Purchaser may have under this agreement to call for the Seller to
transfer of the Consideration Stock to it, whether under clause 4.2 or
otherwise, shall to the extent that the Seller holds insufficient
Consideration Stock to satisfy the rights of the Purchaser apply mutatis
mutandis to the equivalent amount of the cash proceeds from any such sale,
9.3 The Seller and the Purchaser agree to cooperate with each other in giving
all necessary written instructions pursuant to the Deposit Agreement as may be
required to give effect to the terms of this Agreement.
9.4 The Purchaser agrees that it shall not unreasonably withhold its consent to
a request by the Seller that its liabilities and obligations under this
Agreement be novated in favour of another company or person provided that such
company or person shall be a transferee of all the Consideration Stock then held
by the Seller and enters into such covenants and agreements to assume the
liabilities of the Seller to the Purchaser as the Purchaser may reasonably
require to ensure that its rights against such company or person are no less
than its rights against the Seller.
10. WARRANTIES BY THE SELLER
10.1 The Seller hereby warrants and undertakes to the Purchaser that:
(a) except as fairly disclosed to the Purchaser in the Disclosure Letter, each
of the statements set out in Schedule 2 is true and accurate it being
acknowledged and agreed that documents written in the Spanish language and
disclosed are fairly disclosed; and
(b) each of the Seller's Warranties set out in the several paragraphs of
Schedule 2 is separate and independent and except as expressly provided to
the contrary in this Agreement is not limited by reference to any other
paragraphs of Schedule 2.
10.2 The Seller agrees with the Purchaser (as trustee for the Company and its
employees) to waive any rights or claims which it or he may have in respect of
any misrepresentation, inaccuracy or omission in or from any information or
advice supplied or given by the Company or its employees in connection with the
giving of the Seller's Warranties and the preparation of the Disclosure Letter.
10.3 The provisions of Schedule 3 shall apply to any claims against the Seller
for breach of the Seller's Warranties. Save that, the limitations in relation
to the Seller's Warranties contained in paragraphs A1, A2 (excluding A2.3(c)),
A3, A5, A6, A7 of Schedule 2, Schedule 3 shall not apply and nothing in the
Disclosure Letter shall limit the scope of those warranties or the rights of the
Purchaser in respect of them.
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10.4 Any payment or transfer of Consideration Stock made by the Seller for any
breach of this Agreement shall be deemed to be a reduction in the consideration
received by the Seller.
11. WARRANTIES BY VOLIM
11.1 Volim hereby warrants and undertakes to the Purchaser that each of the
following statements is true and accurate:
(a) Volim has the requisite power and authority to enter into and perform this
Agreement and such entry and performance will not breach, violate, infringe
or otherwise affect the rights of any other person;
(b) this Agreement will, when executed, constitute binding obligations of
Volim;
(c) the execution, delivery and performance by Volim of its obligations under
this Agreement will not:
(i) constitute a default under any instrument or arrangement binding or
otherwise to which Volim is a party;
(ii) result in a breach of any order, judgement or decree of any court or
government agency to which Volim is a party or by which Volim is bound;
(d) the Volim Participations constitute all of the interests in the share
capital of the Company in which Volim has any interest of any kind;
(e) there is no option, right of pre-emption, right to acquire, mortgage
charge, pledge, lien or other form of security or encumbrance on, over or
affecting any of the Volim Participations nor is there any commitment by
Volim to give or create any of the foregoing and no person has claimed to
be entitled to any of the foregoing; and
(f) Volim is entitled to sell and procure the transfer of the full legal and
beneficial ownership in the Volim Participations to the Purchaser or its
nominee on the terms set out in this Agreement.
11.2 Each of the statements in Clause 11.1 is separate and independent and is
not limited by reference to any other statement and none of the Volim Warranties
shall be treated as qualified by any actual or constructive knowledge on the
part of the Purchaser or any of its agents.
11.3 The maximum aggregate liability of Volim in respect of all claims under
this Agreement shall not in any event exceed the lower of US $1.5 million and
the aggregate middle market price on NASDAQ (or the NASD OTC Bulletin Board (as
the case may be)) of the Consideration Shares transferred to Volim pursuant to
Clause 5 on the date the claims agreed or finally adjudicated.
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11.4 Volim shall be entitled to satisfy any claim by transferring or
surrendering (as the case may be) any of the Consideration Stock to the
Purchaser (as Volim elects in its/their absolute discretion) and the parties
agree that such shares shall have a value for the purposes of settlement of the
claim of $US4.25 per share or, if higher, the average NASDAQ (or the NASD OTC
Bulletin Board (as the case may be)) mid-market price of Telemonde Common Stock
on the five dealing days immediately preceding the date on which the transfer or
surrender takes place.
11.5 Any payment made by Volim for any breach of this Agreement shall be deemed
to be a reduction in the consideration received by Volim.
12. WARRANTIES BY THE PURCHASER
12.1 The Purchaser hereby warrants and undertakes to the Seller and Volim that
each of the following statements is true and accurate:
(a) so far as Purchaser is aware the information provided by or on behalf of
the Purchaser in reply to the Seller's due diligence list is true and
accurate in all material respects;
(b) the Consideration Stock is duly authorised, validly issued, fully paid, and
non-assessable and ranks pari passu with all other issued Telemonde Common
Stock;
(c) the details of the outstanding Telemonde Stock and of the options to
acquire Telemonde Stock in the Agreed Form is true and accurate;
(d) there is not, nor is there any agreement or arrangement to create, any
mortgage, charge, lien, pledge, option, right of pre-emption, right to
acquire or other form of security or encumbrance affecting any of the
Consideration Stock and no claim has been made by any person to be entitled
to any of the foregoing;
(e) so far as the Purchaser is aware, upon filing a registration statement on
Form S1 with the Securities and Exchange Commission, Telemonde will have
complied in all material respects with all regulations, rules and
requirements relating to NASD OTC Bulletin Board companies (including any
of the same contained in the US Securities Act 1933) and, subject to such
filing being made, the Purchaser knows of no reason why permission or
consent for dealings in the Telemonde Stock on the NASD OTC Bulletin Board
may be withdrawn, varied or cancelled;
(f) the Consideration Stock will represent 5.2% of the issued common stock of
Telemonde on the date of this Agreement;
(g) on Completion the Seller will have transferred to itself good and
unencumbered title to the Consideration Stock which (subject to the
restrictions on transfer imposed by the US Securities Laws) are freely
transferable without the consent or permission of the Purchaser, Telemonde
or any other third party;
(h) the Purchaser has the necessary power and authority to enter into and
perform this Agreement and sell and transfer or procure the transfer of the
Consideration Stock
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and this Agreement constitutes valid and binding obligations of the
Purchaser in accordance with its terms;
(i) neither the Purchaser or any of its subsidiaries is insolvent within the
meanings of Section 123 of the Insolvency Act 1986;
(j) the Purchaser is not aware of any information concerning Telemonde which is
not in the public domain and which the Purchaser reasonably considers
would, if it became public, have a materially adverse effect on the price
at which Telemonde Stock is currently being bought and sold on the NASD OTC
Bulletin Board.
For the purposes of these Warranties the knowledge of the Purchaser shall be
given on the basis of having made due and careful enquiry of Mr Kevin Maxwell
and Mr Larry Trachtenberg.
12.2 The liability of the Purchaser in respect of the Warranties contained in
Clause 12.1(a), (e) and (j) shall in the absence of fraud or dishonesty on the
part of the Purchaser:
(a) terminate on 31st December 2000;
(b) not exceed $15,000,000.
12.3 The Purchaser hereby undertakes to the Seller (for itself and as agents of
the Company to procure that, without the prior consent of the lender under the
Term Loan Agreement:
(a) the Company will not either directly or indirectly expend the proceeds of
the Term Loan or the Equitel Term Loan (the "Proceeds") on setting up
businesses or trading outside of Spain;
(b) the Company will not either directly or indirectly make the Proceeds or the
benefit thereof available to any third party (including companies in its
group) whether by way of loan, credit, gift, deposit, cash collateral or
otherwise; and
(c) the Proceeds will be used exclusively by the Company in its business.
12.4 The Purchaser hereby covenants to the Seller and Volim to indemnify and
keep indemnified on demand, the Seller and Volim from any stamp duty or other
transfer or similar transfer tax duty or levy payable by them in respect of the
transfer to them of the Consideration Stock, including any related fine,
penalty, surcharge or interest imposed by any tax authority in respect of late
payment of such tax duty or levy or the like.
13. TAX INDEMNITY
13.1 Subject to Clause 13.2, the Seller covenants to pay to the Purchaser an
amount equal to:
13.1.1 the amount of Carnival's or the Company's liability and 60% of the
amount of the Subsidiary's liability to make a payment of any form
of taxation, levy, duty, charge contribution or impost in the
nature of taxation (including any related fine, penalty, surcharge
or interest) imposed by a tax authority ("Tax"):
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(a) which arises in consequence of an event, action, transaction or omission
(an "Event") occurring on or before Completion whether or not the Tax is
chargeable against or attributable to another person;
(b) arising in consequence of an Event occurring:
(i) at any time and for which any of Carnival, the Company or the Subsidiary is
liable solely as a result of having at any time before Completion been a
member of a group for Tax purposes; or
(ii) at any time and for which any of Carnival, the Company or the Subsidiary is
liable solely as a result of having at any time before Completion been
controlled by any person;
13.1.2 any Tax which would have been repaid but for the loss, reduction,
set-off or cancellation of a right to repayment of Tax in
consequence of an Event occurring on or before Completion.
13.2 Clause 13.1 does not apply to a liability to the extent that:
(a) provision or reserve in respect of the liability was made disclosed or
noted in the Accounts;
(b) such liability arises or is increased as a consequence of any voluntary act
or omission of the Purchaser or a member of the Purchaser's group of
companies for taxation purposes (the "Purchaser's Group) or their agents
after Completion otherwise than in the ordinary course of business of any
such company;
(c) the liability arises as a result only of a provision or reserve for the
liability made in the Accounts being insufficient in consequence of an
increase in Tax rates or change in any law or the change or withdrawal of
published practice or extra statutory concession of a taxation authority
announced after the date of this Agreement with retrospective effect; and
(d) it relates to any fine penalty or surcharge or interest arising by reason
of any failure on the part of the Purchaser or the Purchaser's Group in
keeping, maintaining or submitting any account records form return or
computation after Completion provided that any such failure on the part of
the Purchaser or the Purchaser's Group does not arise from any act or
omission on the part of the Seller;
(e) such liability was paid or discharged on or before Completion and such
payment or discharge is reflected in the Accounts;
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(f) such liability results directly from transactions undertaken in the
ordinary course of the business since the Accounts Date;
(g) such liability arises or is increased as a result of:
(i) any change in accounting or taxation policy or practice of
Carnival, the Company or the Subsidiary introduced after
Completion, other than a change in accounting or taxation
policy or practice required to bring policy or practice
into line with generally accepted policy or practice in
Spain as at Completion;
(ii) any change after Completion of the date to which Carnival,
the Company or the Subsidiary makes up its accounts;
(iii) the cessation or winding up after Completion of a trade or
a major change in the nature or conduct of a trade carried
on by Carnival, the Company or the Subsidiary;
(iv) such a liability would not have arisen but for the failure
or omission by any Group Company after Completion to make
any claim, election, surrender, revocation or disclaimer
or give any notice or consent or do any other thing the
making, giving or doing of which was taken into account in
computing any provision or reserve for taxation in the
Accounts;
(h) written notice of the claim specifying in reasonable detail the basis of
the claim and so far as reasonably practicable an estimate of the amount
involved shall not have been given to the Seller by or on behalf of the
Purchaser on or before the fourth anniversary of the date hereof;
(i) the total aggregate liability of the Seller in respect of all claims the
Purchaser is entitled to make under this Agreement has not exceeded in
aggregate $175,000 (provided that once such aggregate amount has been
exceeded the Seller shall be liable for the whole amount of the claim and
not simply the excess);
(j) the maximum aggregate liability of the Seller in respect of all claims
under this Agreement shall have reached the threshold provided for in
clause 2 of Schedule 3 of this Agreement.
13.3 Where any currency conversion is required to calculate any liabilities
under the warranties, the Tax Indemnity or otherwise under this Agreement the
currency conversion shall be effected for this purpose at the exchange rates
applicable on the date of Completion.
13.4 The Seller shall be entitled to satisfy any claim arising pursuant to this
clause 13 by transferring or surrendering or selling (as the case may be) any of
the Consideration Stock
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to the Purchaser or Telemonde Inc or the transferor from whom it receives the
stock as the Seller may elect on the terms provided for in clause 3 of Schedule
3 to this Agreement.
13.5 The Purchaser shall not be entitled to recover any sum in respect of any
claim for breach of any of the tax warranties in respect of any claim under this
clause 13 or otherwise obtain reimbursement or restitution more than once in
respect of the same loss or damage.
14. CONFIDENTIALITY
14.1 The Seller and Volim each hereby undertake to the Purchaser, for itself
and as trustee for the Company that it will:
(a) not at any time after the date of this Agreement divulge or communicate to
any person other than to officers or employees of the Company whose
province it is to know the same, on the instructions of the Board of
Directors of the Company, any confidential information concerning the
business, accounts, finance or contractual arrangements or other dealings
transactions or affairs of the Company which may come to its knowledge; and
(b) use its reasonable endeavours to prevent publication or disclosure of any
confidential information concerning such matters;
provided that such undertakings shall cease to have effect in relation to any
confidential information which comes into the public domain otherwise than
through the fault of any of the Sellers or Volim.
15. ANNOUNCEMENTS
Neither the Seller nor Volim nor the Purchaser shall make or permit any
person connected with any of them to make any announcement concerning the
sale and purchase of the Carnival Shares or the Volim Participations or any
ancillary matter after Completion except as required by law or other
applicable regulation or with the written approval of the other party, such
approval not to be unreasonably withheld or delayed and for these purposes
announcements by Telemonde Inc or other companies in its or the Purchaser's
Group shall be deemed to be announcements of the Purchaser.
16. NOTICES AND RECEIPTS
16.1 Any notice or other document to be served under this Agreement may be
delivered or sent by registered post or facsimile process to the party to be
served at his address appearing in this Agreement or at such other address as he
may have notified to the other Parties in accordance with this clause.
16.2 Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
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(b) if posted, at 10.00 am on the second business day after it was put into the
post; or
(c) if sent by facsimile process, at the expiration of 2 hours after the time
of despatch, if despatched before 3.00 pm on any business day, and in any
other case at 10.00 am on the business day following the date of despatch.
16.3 In proving service of a notice or document it shall be sufficient to prove
that delivery was made or that the envelope containing the notice or document
was properly addressed and posted as a prepaid registered post letter or that
the facsimile message was properly addressed and despatched as the case may be.
17. RESOLUTIONS AND WAIVERS
17.1 In relation to the Company, the Seller shall procure the convening of all
meetings, the giving of all waivers and consents and the passing of all
resolutions as are necessary under the Limited Liability Companies Act, its
Articles of Association or any agreement or obligations affecting it to give
effect to this Agreement.
17.2 For so long after Completion as the Seller remains the registered holder
of any of the Carnival Shares or, in the case of Volim, it remains the
registered holder of any of the Volim Participations, each of the Sellers and
Volim will hold them and any distributions, property and rights deriving from
them in trust for the Purchaser and will deal with the Participations and any
distributions, property and rights deriving from them as the Purchaser directs
and will on request by the Purchaser execute an instrument of proxy or other
document which enables the Purchaser or its representative to attend and vote at
any meeting of the Company.
17.3 In relation to Telemonde Inc, the Purchaser shall procure the convening of
all meetings, the giving of all waivers and consents and the passing of all
resolutions as are necessary to transfer the Consideration Stock to the Seller
and Volim free of any mortgage, charge, lien, pledge or other encumbrance and to
register the Seller and Volim as the registered owners of the Consideration
Stock in the register of members of Telemonde Inc and as are generally necessary
to give effect to this Agreement and the Warrant Agreement.
17.4 For so long after Completion the Purchaser remains the registered holders
of any of the Consideration Stock the Purchaser shall hold the Consideration
Stock and any distributions, property and rights deriving from them in trust for
the Seller and Volim (in the proportions set out in Clause 3.2 hereof) and will
deal with the Consideration Stock and any distributions, property and rights
deriving from them as the Seller and Volim direct and will on request by the
Seller and Volim execute any instrument of proxy or other document which enables
the Seller and Volim or their representatives to attend and vote at any meeting
of Telemonde.
18. GENERAL
18.1 Each of the obligations, warranties and undertakings set out in this
Agreement which is not fully performed at Completion will continue in force
after Completion.
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18.2 If the Carnival Shares or any of the Participations or the Consideration
Stock are sold or transferred after Completion, the benefit of each of the
obligations, warranties and undertakings undertaken or given by the Seller and
Volim and the Purchaser (as the case may be) may be assigned to the purchaser or
transferee who may enforce them as if he had been named in this Agreement as the
Purchaser or the Seller or Volim (as the case may be). The Purchaser may also
assign its rights under this agreement to any holding company or subsidiary of
the Purchaser or to any company which is a subsidiary of any such holding
company, provided that if the assignee ceases to be such a holding company or
subsidiary, the assignment shall lapse if not reassigned to the Purchaser or
another assignee permitted by this clause.
18.3 Subject to sub-clause 18.2, none of the rights or obligations under this
Agreement may be assigned or transferred without the prior written consent of
all the Parties.
18.4 The Purchaser may release or compromise in whole or in part the liability
of the Seller or Volim under this Agreement or grant any time or other
indulgence without affecting the liability of the other.
18.5 Time is of the essence in relation to this Agreement.
18.6 Each party shall pay the costs and expenses incurred by him or it in
connection with the entering into and completion of this Agreement.
18.7 This Agreement may be executed in any number of counterparts, all of
which, taken together shall constitute one and the same Agreement and any party
may enter into this Agreement by executing a counterpart.
19. WHOLE AGREEMENT
19.1 This Agreement and the documents referred to in it contain the whole
agreement between the Parties relating to the transactions contemplated by this
Agreement and supersede all previous agreements, arrangements and understandings
between the Parties relating to these transactions.
19.2 Each of the Parties acknowledges that in agreeing to enter into this
Agreement he or it has not relied on any representation, warranty or other
assurance except those set out in this Agreement and waives all rights and
remedies, which, but for this Clause might be available to it in respect of such
representation, warranty or other assurance provided that nothing in this Clause
shall limit or exclude any liability for fraudulent misrepresentation.
20. RESPONSIBILITY FOR BROKER'S COMMISSION
Each of the Parties represents to the others that all negotiations leading
to this Agreement have been carried on by it directly with the others
without the intervention of any other person and any claim for brokerage
commission or similar claim relating to this Agreement shall be the
responsibility of the Party incurring the same, provided that any such
claim incurred by the Company shall be the joint and several responsibility
of the Sellers.
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21. GUARANTEE BY EQUITEL
21.1 Equitel as primary obligor unconditionally and irrevocably undertakes with
the Seller that it will pay to the Seller or Volim any amount which the
Purchaser is liable to pay under the provisions of this Agreement and will
itself duly and punctually perform, or procure that the Purchaser shall duly and
punctually perform, all of its respective obligations arising under this
Agreement.
21.2 The obligation of Equitel under this Clause shall not be affected by any
matter or thing which but for this provision might operate to affect or
prejudice such obligation, including without limitation:
(a) any time or indulgence granted to or composition with the Purchaser;
(b) the taking, variation, renewal or release of, or neglect to perfect or
enforce this Agreement of any rights, guarantees, remedies or securities
from or against the Purchaser; or
(c) any unenforceability, invalidity, legal limitations, disability or other
circumstances relating to the Purchaser, so that the obligation of Equitel
under this Clause shall be construed as if there were no such
unenforceability or invalidity.
22. GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with
English law. Each of the Seller and Volim submits to the non-exclusive
jurisdiction of the English Courts for all purposes relating to this
Agreement (save where otherwise expressly provided herein) and each of the
Seller and Volim hereby appoint Browne Jacobson of Aldwych House, 81
Aldwych, London as their agent for service. The Purchaser submits to the
non exclusive jurisdiction of the English Courts for all purposes of this
Agreement (save where expressly provided herein) and hereby irrevocably
appoint the Purchaser's Solicitors or their agents for service.
23. For the avoidance of doubt, and notwithstanding any other provisions of
this Agreement, the maximum aggregate liability of the Seller in respect of all
claims under this Agreement (which for the avoidance of doubt includes claims
under clause 4 (clawback of consideration), clause 10 and clause 13 (tax
indemnity)) shall not in any event exceed the lower of US $15,000,000 and the
aggregate middle market price on NASDAQ or NASD OTC Bulletin Board (as the case
may be) for the Consideration Stock, transferred to the Seller pursuant to
clause 5 on the date the claims are finally agreed or adjudicated.
IN WITNESS of which this Agreement has been executed by the Parties or their
duly authorised representatives on the date which appears first on page 1.
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SCHEDULE 1
Part 1
Particulars of Carnival
(1) Company Number: 68148
(2) Share Capital: (Pounds)100
(3) Registered Holders: the Seller
(4) Registered Office: Suite 4, 4 Giro's Passage, Gibraltar
(5) Director(s): Stuart Rodrigues
(6) Secretary: Gibro Secretaries Ltd
(7) Incorporation Date: 5th March 1999
(8) Tax Code: 1st January to 31st December
Part 2
Particulars of the Company
(1) Company Numbers: Book 552 Volume 1639
Page MA-19713 Folio 29
(2) Share Capital: Pta. 64,500,000 represented by 6,450 participations
each with a nominal value of Pta. 10,000 and
numbered from 1 to 6,450 inclusive
(i) Authorised:- Pta. 64,500,000
(ii) Issued:- Pta. 64,500,000
<TABLE>
<S> <C>
(3) Registered Holders: Carnival Limited - 5,805 (numbers 1 to 49 and 696 to 6,450 inc.
representing 90% of the stock capital of
the Company)
Volim Holding BV - 645 (numbers 51 to 695 inc. representing 10% of the stock capital of the
Company)
(4) Registered Office: Avda Severo Ochoa No 28 Edificio Marina Marbella
</TABLE>
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3A, Marbella (Malaga) Spain
(5) Director: Yves Horoit
(6) Secretary: N/A
(7) Corporate Year: 1st Jan to 31st Dec each year
(8) Tax code: B-29707585
Part 3
Particulars of the Subsidiary
(1) Company Number: Book 1249 Volume 2336
Page MA36547 Folio 23
Pta. 1,000,000 represented by 1,000 participations each with a nominal value of
Pta. 1,000 and numbered from 1 to 1,000 inclusive
(2) Share Capital: (i) Authorised:- Pta. 1,000,000
(ii) Issued:- Pta. 1,000,000
(3) Registered Holders: 1 to 6000 : the Company
6001 to 10,000: to follow
(4) Registered Office: Avda Severo Ochoa No 28 Edificio Marina Marbella
3A, Marbella (Malaga) Spain
(5) Director: Yves Horoit
(6) Secretary: N/A
(7) Corporate Year: 1st Jan to 31st Dec each year
(8) Tax code: B920 48768
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SCHEDULE 2
The Warranties
A. General
B. Accounts/Financial
C. Business
D. Tax
E. Intellectual Property etc
F. Directors/Employees etc
A. GENERAL
A.1 The Recitals and the Schedules
The information relating to the Seller and Carnival, the Company and the
Subsidiary contained in the Recitals and Schedules to this Agreement is
true and accurate.
A.2 Sellers' authority and capacity
A.2.1 The Seller has the requisite power and authority to enter into and
perform this Agreement and such entry and performance will not breach, violate,
infringe or otherwise affect the rights of any other person.
A.2.2 This Agreement will, when executed, constitute binding obligations on the
Seller.
A.2.3 The execution and delivery of and the performance by the Seller of its
obligations under this Agreement will not:
(a) constitute a default under any instrument or arrangement binding or
otherwise to which the Seller is a party; or
(b) result in a breach of any order judgment or decree of any court or
governmental agency to which the Seller is a party or by which the Seller
is bound; or
(c) relieve any other party to a contract with the Company of its obligations
or enable that party to vary or terminate its rights or obligations under
that contract; or
(d) result in the creation or imposition of any lien, charge or encumbrance of
any nature on any of the property or assets of the Company or Carnival.
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A.3 By-laws
The copies of the By-laws of Carnival and the Company delivered by the Seller to
the Purchaser are true complete and accurate in all respects and has embodied in
it or annexed to it true, accurate and complete copies of all resolutions
agreements and consents required by law to be so embodied or annexed.
A.4 Compliance with Companies Acts
A.4.1 So far as the Seller is aware the Company and its officers (in their
capacities as such) have complied in all material respects with the provisions
of the Limited Liability Companies Act and in particular (without prejudice to
the generality of the foregoing) the Company has deposited its annual accounts
with the Commercial Registry in due form and all other documents required to be
filed with the Registrar of Companies in respect of the Company have been filed.
A.4.2 The Statutory Books and Minute Books of the Company have been
properly written up and contain a true and accurate record of the matters which
should be dealt with in such books and no notice or allegation that any of them
is incorrect or should be rectified has been received. The Company keeps its
books of commerce and corporate books up to date in all material respects
pursuant to existing legislation and in accordance with Generally Accepted
Spanish Accounting Principles.
A.4.3 The Company has not received notice that, and is not otherwise
aware that, any returns and particulars, resolutions and other documents which
the Company is required by law to file with or deliver to the Registrar of
Companies have not been correctly made up and duly filed or delivered.
A.5 Sellers' interests
The Seller nor any person connected with it has any interest, directly or
indirectly:
A.5.1 in any business which has a close trading relationship with, or is
competitive with the business of the Company; or
A.5.2 in any material asset which within the two years preceding the date of
this Agreement has been acquired or disposed of by or leased to the Company.
A.6 Carnival
A.6.1 The details relating to Carnival set out in Schedule 1 are true and
accurate.
A.6.2 Carnival has, since the date of its incorporation, undertaken no
commercial or trading activity of any kind and has not entered into any
transactions save for the acquisition of the Carnival Participations.
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A.6.3 Save for the Carnival Participations, Carnival has not assets and does
not have any liabilities.
A.6.4 The Carnival Shares constitute the whole of the issued and allotted share
capital of Carnival.
A.6.5 No person is entitled, or has claimed to be entitled, to require Carnival
to issue any share or loan capital either now or at any future date, whether
contingently or not.
A.6.6 There is no option, right of pre-emption, right to acquire, mortgage,
charge, pledge, lien or other form of security or encumbrance, over or affecting
any of the Carnival Shares nor is there any commitment to give or create any of
the foregoing and no person has claimed to be entitled to any of the foregoing.
A.6.7 The Seller is entitled to sell and procure the transfer of the full legal
and beneficial ownership in the Carnival Shares on the terms set out in this
Agreement.
A.7 Ownership of the Participations
A.7.1 The Participations constitute the whole of the issued and allotted share
capital of the Company. Details of the ownership of the Participations set out
in Schedule 1 are true and accurate.
A.7.2 No person is entitled, or has claimed to be entitled, to require the
Company to issue any share or loan capital either now or at any future date
whether contingently or not.
A.7.3 There is no option, right of pre-emption, right to acquire, mortgage,
charge, pledge, lien or other form of security or encumbrance on, over or
affecting any of the Carnival Participations nor is there any commitment to give
or create any of the foregoing and no person has claimed to be entitled to any
of the foregoing.
A.7.4 Carnival is entitled to sell and procure the transfer of the full legal
and beneficial ownership in the Carnival Participations free of any charges,
liens or encumbrances.
A.8 Subsidiaries, Associations and Branches
A.8.1 The Company:
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(a) save in respect of its interest in the Subsidiary, does not hold or
beneficially own, nor has it agreed to acquire, any securities of any other
corporation (whether incorporated in Spain or elsewhere);
(b) is not and has not agreed to become a member of any partnership or other
unincorporated association, joint venture or consortium (other than
recognised trade associations);
(c) has not outside Spain any branch or any permanent establishment.
A.8.2 The 9,999 participations in the Subsidiary held by the Company and others
(as disclosed in the Disclosure Letter), together with 1 participation held by
Haberton Limited together constitute the whole of the issued and allotted share
capital of the Subsidiary. All of the participations of the Subsidiary owned by
the Company are fully paid.
A.8.3 No person is entitled, or has claimed to be entitled, to require the
Subsidiary to issue any share or loan capital either now or at any future date
whether contingently or not.
A.8.4 There is no option, right of pre-emption, right to acquire, mortgage,
charge, pledge, lien or other form of security or encumbrance on, over or
affecting any of the shares in the Subsidiary nor is there any commitment to
give or create any of the foregoing and no person has claimed to be entitled to
any of the foregoing.
A.8.5 The Subsidiary has not given any guarantee or indemnity of any type or,
save in the ordinary course of business, contracted to make any payments.
A.8.6 Neither the Subsidiary nor any of its agents or any other person for
whose acts or defaults the Subsidiary is liable whether vicariously or otherwise
is engaged in any litigation, arbitration, prosecution or other legal
proceedings or in any proceeding or hearing before any statutory or governmental
body, department, board or agency in each case concerning the Subsidiary and no
such proceeding or hearing is pending or threatened.
A.9 Ownership of Assets
A.9.1 Except for current assets offered for sale or sold in the ordinary course
of trading, the Company has not since the Accounts Date disposed of any of the
assets included in the Accounts or any assets acquired or agreed to be acquired
since the Accounts Date with an aggregate value in excess of $15,000.
A.9.2 None of the property, assets, undertaking, goodwill or uncalled capital
of any of the Company is subject to any encumbrance (including, without
limitation,
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any debenture, mortgage, charge, lien, deposit by way of security, bill of sale,
lease, hire-purchase, credit-sale or other agreement for payment on deferred
terms, option or right of pre-emption) or any agreement or commitment to give or
create any of the foregoing.
A.10 Vulnerable Transactions
A.10.1 The Company has not been party to a transaction pursuant to or as a
result of which an asset owned, purportedly owned or otherwise held by it is
liable to be transferred or re-transferred to another person or which gives or
may give rise to a right of compensation or other payment in favour of another
person in the event of the insolvency of any person.
A.10.2 The Company is not and has not been party to any agreement or
transaction outside, or exceptional to, the ordinary course of its business.
A.11 Compliance with Statutes
The Company has not, nor has its officers, agents or employees (during the
course of their duties), done or omitted to do anything which is a
contravention of any statute, order, regulation or the like giving rise to
any material fine, penalty or other liability on the part of the Company.
A.12 Licences and Consents
The Company is not aware that it does not have any licences (including
statutory licences) and consents necessary to own and operate its assets
and to carry on its business as it does at present and the Seller is not
aware of anything that might prejudice the continuation or renewal of any
of those licences or consents.
A.13 Insider Contracts
A.13.1 The Company is not a party to any contract or arrangement in which the
Seller or Volim or any person connected with any of them is interested, directly
or indirectly.
A.13.2 The Company is not a party to, nor during the last two years have its
profits or financial position been affected by, any contract or arrangement
which is not of an entirely arm's length nature.
A.13.3 The Sellers nor Volim nor any person connected with any of them is a
party to any outstanding agreement or arrangement for the provision of finance,
goods, services or other facilities to or by the Company or the Subsidiary or in
any way relating to the Company or the Subsidiary or the affairs of either of
them.
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A.14 Litigation
A.14.1 Save for debt collections not exceeding $10,000 in aggregate, the
Company is not engaged in any litigation or arbitration proceedings and there
are no such proceedings pending or threatened by the Company.
A.14.2 The Seller does not know of anything which is likely to give rise to any
litigation or arbitration proceedings by or against the Company exceeding a
value of $10,000.
A.14.3 So far as the Seller is aware the Company is not the subject of any
investigation or inquiry by any governmental, administrative or regulatory body.
A.15 Insolvency
A.15.1 No receiver or administrative receiver has been appointed in respect of
the Company or in respect of the whole or any part of the assets or undertaking
of the Company.
A.15.2 No administration order has been made and no petition has been presented
for such an order in respect of the Company.
A.15.3 No meeting has been convened at which a resolution will be proposed nor
has any resolution been passed nor has any petition been presented or order made
for the winding up of the Company.
A.15.4 The Company has not stopped or suspended payment of its debts, become
unable to pay its debts or otherwise become insolvent.
A.15.5 No unsatisfied judgment, order or award is outstanding against the
Company and no written demand has been made against the Company and no distress
or execution has been levied on, or other process commenced against, any asset
of the Company.
A.15.6 The Company is not in a voluntary arrangement or other agreement or
composition with its creditors and is not, and has not, been the subject of any
application, arrangement or proceedings requesting the administrative
receivership (Suspension de pagos) of the Company, has not presented and no
third party has presented a writ requesting the bankruptcy (Quiebra) of the
Company, and the Company has not passed any resolution resolving the wind up and
liquidation and neither is it in a situation whereby the applicable Corporate
Legislation would force it to do so.
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B. ACCOUNTS/FINANCIAL
B.1 Accounts
B.1.1 The Accounts correctly describe the assets of the Company and give a true
and fair view of the state of affairs of the Company as the Accounts Date and of
the profit or loss of the Company for the period ended on the Accounts Date.
B.1.2 Any redundant or obsolete stock existing at the Accounts Date was
properly written down in accordance with recognized accounting principles and
the value attributed to the remaining stock did not exceed the lower of
acquisition cost or net realisable value at the Accounts Date.
B.1.3 No stock included in the Accounts was acquired otherwise than by way of a
transaction which was entirely at arm's length.
B.1.4 The Company is the owner free from encumbrances or other third party
rights in the nature of security or title retention of all its undertaking and
assets which are included in the Accounts and all such assets are in its
possession or under its control.
B.2 Accounting Records
The books and records (including all invoices and other records required
for value added tax purposes) of the Company relating to its financial and
trading position have been kept on a proper and consistent basis.
B.3 Position since the Accounts Date
Since the Accounts Date:
B.3.1 the business of the Company has been carried on in the ordinary and usual
course;
B.3.2 no directors fees have been paid and no resolution (whether by the Board
of Directors or by General Meeting) that such fees be paid has been proposed or
passed by the Company;
B.3.3 the Company has not disbursed any cash except in the ordinary course of
its business and all amounts received by the Company have been deposited with
that Company's bankers and appear in the appropriate books of account;
B.3.4 no dividends or other distributions have been declared, paid or made on
or by the Company;
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B.3.5 the Company has not entered into any capital transaction as vendor,
purchaser, lessor or lessee or otherwise undertaken any material commitment on
its capital account which has an individual value in excess of $5,000 or (when
aggregated with other such commitments) an aggregate value in excess of $20,000.
B.4 Borrowings etc
B.4.1 The Company has not received notice (whether formal or informal) from any
person who is currently, or who has at any time been a lender to it requiring
repayment of any indebtedness or intimating the enforcement by any such lender
of any security which it may hold over any assets of the Company and without
making any enquiry the Sellers are not aware of any circumstances likely to give
rise to any such notice being given or which would enable any such notice to be
given.
B.4.2 The total amount borrowed by the Company from its bankers does not exceed
its overdraft facilities as set out in the Disclosure Letter.
B.4.3 The Company has not lent any money which has not been repaid to it or
acquired the benefit of any debt (present or future) save for debts in respect
of the sale of trading stock in the normal course of trading.
B.4.4 The Company has not outstanding any loan capital or any money borrowed
(other than under the overdraft facilities disclosed pursuant to the above),
including money raised by factoring.
B.4.5 The Company has not outstanding any liability (whether present or future)
in respect of any guarantee or indemnity of the obligations of any third party.
B.4.6 The Company has paid each of its creditors in a reasonable time and has
not made any agreement to postpone or delay any payment of its debts and "paid"
in this context means that either cash has been paid or a cheque has been given
or despatched to the relevant creditor and has not been cancelled by the
Company.
B.5 Plant and Equipment
Of the plant, machinery, fixtures, fittings, equipment, vehicles,
furniture, materials and other assets (not being current assets) acquired
by the Company since incorporation and included in the Accounts, none with
a book value in excess of $1,000:
B.5.1 has been sold or disposed of at a figure lower than book value or an open
market arm's length value whichever is the higher;
B.5.2 has been or has been agreed to be let on hire or hire purchase or sold on
deferred terms; and
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B.5.3 was acquired at a price in excess of market value at the time of
acquisition.
B.6 Government grants
The Company is not subject to any arrangement for receipt or repayment of
any grant, subsidy or financial assistance from any government department
or other body.
B.7 Loans
The Company has not lent any money which has not been repaid to it or owns
the benefit of any debt (whether present or future) other than debts
accrued to it in the ordinary course of its business.
B.8 Bank Accounts
So far as the Seller is aware the statement of the Company's bank accounts
and of the credit or debit balances on them attached to the Disclosure
Letter is correct as at its date and the Company has not any other bank or
deposit account (whether in credit or overdrawn) not included in the
statement and since the date of that statement there has not been any
payment out of any of the accounts except for routine payments and the
balance on the accounts is not substantially different from the balances
shown on the statement.
B.9 Guarantees etc
The Company has not given any guarantee, indemnity or like commitment in
respect of the obligations of any other person.
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C. BUSINESS
C.1 Suppliers and customers
The Seller without having made enquiry knows of no reason which is not
known to the Purchaser why any supplier customer or person who has had
dealings with the Company has ceased or will cease dealing with the Company
or may substantially reduce its dealings with the Company after Completion
or as a result of the acquisition by the Purchaser of the Carnival Shares
or the Volim Participations.
C.2 Trading Contracts and Outstanding Offers
C.2.1 So far as the Seller is aware the Company has observed and performed in
all material respects all the terms and conditions on its part to be observed
and performed under its trading contracts.
C.2.2 The Company will not be required after the date of this Agreement to
undertake any work or supply any goods or services except on normal commercial
terms under a contract entered into on or before the date of this Agreement.
C.2.3 No offer, tender or the like which is capable of being converted into any
material adverse obligation of the Company by an acceptance or other act of some
other person is outstanding, except in the ordinary course of its business.
C.3 Defective Products and Installation
C.3.1 The Company has not received notice that it has manufactured or sold
products which are or have or will become in any material respect dangerous,
faulty or defective or which do not comply in any material respect with any
warranty or representation expressly or impliedly made by it.
C.3.2 Save for obligations implied by law, the Company has not accepted any
express obligation to service, repair or maintain any system or product
installed, serviced or repaired by it or by any third party other than on arm's
length terms and for fair consideration.
C.4 Material Contracts
C.4.1 In relation to the agreements listed in paragraph C4.2 or attached
to the Disclosure Letter:
(a) such agreements are the only agreements for the distribution or provision
of telecommunication services to which the Company is a party;
(b) the Purchaser has been provided with complete and accurate copies of all
such agreements;
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(c) all such agreements are valid and enforceable obligations of the parties to
them
(d) no party to any such agreement is in material breach of that agreement.
C.4.2 The agreements referred to in paragraph C4.1 are :
(1) Distribution Agreement with Calderon y Cuevas, SC dated 10 May 1999;
(2) Distribution Agreement with Canca Escalona, SL dated 10 May 1999;
(3) Distribution Agreement with Jose Maria Sanchez Gonzalez, owner of the
store EL OFERTON dated 11 May 1999;
(4) Distribution Agreement with SKYT SL, owner of the store BAZAR dated 20
May 1999;
(5) Distribution Agreement with Papeleria el Delfin dated 17 May 1999;
(6) Distribution Agreement with Iglesia Santa Maria de la Encarnacion
Mayor dated 10 May 1999;
(7) Distribution Agreement with SKYT SL, owner of the store BAZAR del
Legionario dated 10 May 1999;
(8) Distribution Agreement with Jose Luis Contreras Lopez, concessioner of
Meson del Soldado and the Cafeteria de Mandos dated 10 May 1999;
(9) Distribution Agreement with Austrina SL owner of several coffee shops
at military locations throughout Spain dated 27 April 1999;
(10) Distribution Agreement with Star Med SL dated 28 June 1999;
(11) Distribution Agreement with Mr Rachid El Mezedeguy owner of Bar Raco
D[]en Paco dated 22 June 1999;
(12) Distribution Agreement with Breno 2000 SL dated 27 April 1999;
(13) Distribution Agreement with Maria Teresa Jimenez Diufain owner of
Expendiduria de Tabaco dated 30 April 1999;
(14) Distribution Agreement with Disco London Underground dated 18 May
1999;
(15) Distribution Agreement with Geronimo Martin Ventura dated 25 May 1999;
(16) Distribution Agreement with Asociacion Unificada Malaguena de
Autonomos del Taxi (AUMAT) dated 27 January 1999;
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(17) Distribution Agreement with Asociacion de Radio Taxi de Fuengirola
dated 30 April 1999;
(18) Distribution Agreement with Airport Parking SL dated 11 May 1999;
(19) Distribution Agreement with Asociacion de Trabajadores Autonomos del
Taxi de las Palmas (ATAT) dated 24 March 1999;
(20) Distribution Agreement with Union de Trabajadores Autonomos del Taxi
from Tenerife (UTAT) dated 27 March 1999;
(21) Distribution Agreement with Asociacion Sindical de Empresarios
Taxistas de la Bahia de San Antonio (Ibiza) dated 1 June 1999;
(22) Distribution Agreement with Sindicat del Taxi de Catalunya (STAC)
dated 21 April 1999;
(23) Distribution Agreement with Cripton Telecommunications SL dated 18
June 1999;
(24) Distribution Agreement with Compania de Llamadas Internacionales SL
dated 21 July 1999;
(25) Service Agreement with Globatel SL dated 26 April 1999;
(26) Publicity Agreement with Laurent Fuchs dated 8 April 1999;
(27) Publicity Agreement with Merlin, Ideas en Accion SL dated 1 June 1999;
(28) Publicity Agreement with Radio Solymar dated 1 February 1999;
(29) Service Agreement with Messenger Communications Network BV dated 24
October 1998;
(30) Collaboration Agreement with RSL Communications Spain SA dated 18
March 1998; and
(31) Agency Agreement with RSL Communications Spain SA dated 18 March 1998.
C.4.3 The Company is not a party to any contract, arrangement, or obligation
which, whether by reason of its nature, term, scope, price or otherwise, is or
is likely to be of material importance to its business, profits or assets, and
which:
(a) is not in the ordinary course of its business; or
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<PAGE>
(b) is incapable of performance in accordance with its terms within six months
of the date on which it was entered into or undertaken; or
(c) is expected to result in a loss to the Company on completion of
performance; or
(d) is of an unduly onerous nature or cannot be fulfilled or performed by the
Company on time and without undue or unusual expenditure of money and
effort.
(e) involves the supply of goods the aggregate sales value of which will
represent in excess of 10 per cent of the turnover expected by the Sellers
for the current financial year; or
(f) is for the provision of management or similar services to the Company and
which is not terminable by it on less than three months' notice without
compensation.
C.5 Agencies, etc.
The Company is not a party to:
C.5.1 any agency, distributorship, marketing, purchasing, manufacturing or
licensing agreement or arrangement; or
C.5.2 any agreement or arrangement which restricts its freedom to carry on the
whole or any part of its business in any part of the world in such manner as it
thinks fit.
C.6 Anti-competitive Arrangements
C.6.1 The Company is not a party to or directly or indirectly concerned in any
agreement or arrangement relating to the business (whether or not legally
binding) or in the pursuit of any course of conduct which is:
(a) registrable under or prohibited by or capable of giving rise to an
investigation by the Service for the Defense of Competition (Servicio de
Defensa de la Competencia) or the Directorate General IV of the European
Commission pursuant to any one or more provisions of the Treaty of Rome
1957; The Unfair Trade Act 3/1991, The Act for the Defense of Competition
Act 16/1989,
(b) prohibited as incompatible with the European Union legislation (and in
particular with Articles 85 or 86 of the Treaty of Rome) or with any other
anti-trust legislation.
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C.7 Plant in Working Order
All machinery and plant of the Company, including its fixed plant and
machinery, and all vehicles and office equipment owned or used by it is in
the possession of the Company.
C.8 Insurance
C.8.1 The list of current policies of insurance of the Company attached to the
Disclosure Letter is true and complete and no premium due to be paid and payable
in respect of any policy is outstanding.
C.8.2 Details of all claims made by the Company under any policy of insurance
and of all currently outstanding claims are set out in the Disclosure Letter.
There are no other circumstances which would or might entitle the Company to
make a claim under any policy of insurance.
C.9 No powers of attorney
Neither the Company nor Carnival has granted any power of attorney or
similar authority which remains in force.
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D. TAXATION
For the purposes of the following Tax Warranties, "Companies" shall mean
Carnival, the Company and the Subsidiary and "Company" shall mean any one of
them.
D.1 General
D.1.1 All necessary information, notices, accounts, statements, reports,
computations and returns (including but not limited to withholding tax,
retentions and advanced corporate tax - pagos fraccionados, VAT, statement of
transactions with third parties) which ought to have been made or given have
been filed in due time and form by each Company to the relevant tax or excise
authority and all information, notices, computations and returns submitted to
the relevant authority are true and accurate and are not the subject of any
material dispute nor are likely to become the subject of any material dispute
with such authorities.
D.1.2 All tax of any nature whatsoever (including "paratax" obligations such as
fees or dues of the Chamber of Commerce) for which any Company is liable to
account has been duly paid (insofar as such tax ought to have been paid) and
without prejudice to the generality of the foregoing each Company has made all
such deductions and retentions as it was obliged or entitled to make and all
such payments as should have been made.
D.1.3 No Company is currently undergoing any tax inspection by any tax or
excise authority, and neither the Seller nor any Company is aware of any such
investigation audit or visit is planned.
D.1.4 All amounts properly due for payment to the relevant authorities in
respect of value added tax on goods sold or services rendered prior to
Completion, wage tax to be withheld prior to Completion and social security
contributions (both the employers' and employees' part) due in respect of
employees of each Company have been duly withheld and paid.
D.1.5 The Company has not revalued the assets in the Balance Sheet.
D.1.6 The Companies are duly registered for the purposes of value added tax and
have complied fully with all regulations and formalities regarding value added
tax.
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E. INTELLECTUAL PROPERTY ETC
E.1 Secret or Confidential Information
The Company has not knowingly at any time (save in the ordinary course of
business or to its professional advisers) disclosed to any person other than the
Purchaser:
E.1.1 any of its secret or confidential information or property (including,
without limitation, financial and technical information, designs, drawings,
plans, statistics, documents, files, records and papers); or
E.1.2 any other information relating to its business or affairs the disclosure
of which might or could cause material loss or damage to or materially adversely
affect the Company; or
E.1.3 any secret or confidential information relating to its manufacturers,
suppliers, customers, clients and agents or to any other person who has or has
had any dealings with it.
E.2 Intellectual Property Rights
E.2.1 So far as the Seller is aware the Company:
(a) is not infringing any patent, trade mark, service mark, registered design,
registrable business name, copyright or similar Intellectual Property Right
of any third party in Spain; or
(b) does not employ in relation to any of the goods or services manufactured or
provided by it any know-how, which infringes any Intellectual Property
Right of a third party or which has been disclosed to it by a third party
under licence or similar arrangements.
E.2.2 The Company does not own any registered Intellectual Property Rights.
E.2.3 Full details are set out in the Disclosure Letter of all licence and
other agreements relating to Intellectual Property Rights to which the Company
is a party (whether as licensor or licensee) which are commercially significant.
The Company is not in breach of any such agreement and, so far as the Seller is
aware, no third party is in breach of any such agreement.
E.2.4 All agreements disclosed in relation to paragraph E.2.4 above are valid
and subsisting and nothing has been done or omitted to be done by the Company,
and the Seller is unaware of any act or omission of any third party, which would
jeopardise the subsistence of any of such Intellectual Property Rights or such
agreements.
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E.2.5 So far as the Seller is aware the Company owns or has licensed to it all
Intellectual Property Rights it requires to carry on its business as such
business has been carried on during the year prior to the date of this Agreement
and such rights and the Company's ability to use such rights will not be
affected by the acquisition of Company by the Purchaser.
E.2.6 Neither the Seller nor the Company are aware of any unauthorised use by
any person of any Intellectual Property Rights or confidential information of
the Company.
E.3 Computer Know-how and Marketing Information
E.3.1 For the purposes of paragraphs E.3.2, E.3.3 and E.3.4 below:
(a) "Computer Know-How" means all information (including that comprised in or
derived from data, discs, tapes, manuals, source codes, flow-charts and
specifications) relating to the use or programming of any computer which is
not intended by the persons in possession of the information for use by
unauthorised persons and any computer software in whatever form held; and
(b) "Marketing Information" means all information of material significance to
the Company and relating to the marketing of any products or services
(including customer names and lists, sales targets, sales statistics,
market share statistics, marketing surveys and reports, marketing research
and any advertising or other promotional materials).
E.3.2 All Computer Know-How and Marketing Information used by the Company is
owned by or is the subject of a valid grant of rights to the Company and is not
subject to any unusual restriction which materially and adversely affects the
Company's ability to use it for the purposes of its business.
E.3.3 The Company has not disclosed nor is obliged to disclose any Computer
Know-How or Marketing Information of a confidential nature owned by the Company
to any person other than its employees.
E.3.4 The Company is not in breach of any agreement under which any Computer
Know-How or Marketing Information was or is to be made available to it.
E.4 Data and Records
E.4.1 All the records and systems (including but not limited to computer
systems), data and information of the Company regularly in use by the Company
are recorded, stored, maintained or operated or otherwise held by the Company
and are not wholly or partly dependent on any facilities or means (including any
electronic, mechanical or photographic process, computerised or
42
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otherwise) which are not under the exclusive ownership or licence to and control
of the Company.
E.4.2 So far as the Seller is aware the Company has complied with all relevant
statutory requirements concerning the maintenance and use of third party data
in its possession .
E.5 Business Names
The Company does not carry on business under a name other that its own
corporate name.
E.6 Year 2000
So far as the Seller is aware all computer hardware (to include, without
limitation, all switches, billing systems etc.) and software used by the
Company is Year 2000 compliant.
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F. EMPLOYEES
F.1 Particulars of employees
F.1.1 The persons whose names are set out in the list attached to the
Disclosure Letter are all the employees of the Company and the material
particulars of their employment set out in that list are accurate and complete.
No person who was formerly employed by the Company has a right to return to
work.
F.1.2 The terms and conditions of employment of all employees of the Company do
not deviate in any material respect from the standard terms and conditions
supplied to the Purchaser.
F.1.3 All subsisting contracts of employment to which the Company is a party
are terminable by it on three months' notice or less without compensation.
F.1.4 No employee of the Company earning in excess of $20,000 has been given
notice of termination of his employment (or had his employment terminated
without notice) since the Accounts Date and no such employee of the Company has
left its employment of his own accord since that date.
F.1.5 Full particulars are contained in the Disclosure Letter of any
outstanding offer of employment made to any person at a salary in excess of
$10,000 by the Company and there is no person at or above that salary level who
has accepted an offer of employment made by the Company but whose employment has
not yet started.
F.1.6 Full particulars are contained in the Disclosure Letter of any agreement
for the provision of consultancy services or the services of personnel to the
Company and of the terms applicable to the secondment to the Company of any
person.
F.2 Salary Costs
F.2.1 True and accurate particulars of the material remuneration or the
material emoluments or pension benefits of any employee of any of the Company is
set out in the Disclosure Letter.
F.3 Compensation and other Sums Due to Employees
F.3.1 The Company does not have any liability to pay compensation for loss of
office or employment to any present or former officer or employee or to make any
payment.
F.3.2 Except in respect of normal accruals of remuneration or emoluments or
benefits of employment, no sum is payable to or for the benefit of any employee
or director of the Company.
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F.3.3 The Company does not have an obligation to make any payment on redundancy
in excess of the statutory redundancy payment and the Company has not operated
any discretionary practice of making any such excess payments.
F.4 No Bonus Schemes
There is no scheme or arrangement in operation by or in relation to the
Company under which any employee or other person is entitled to a
commission or remuneration of any other sort calculated by reference to the
whole or part of the turnover, profits or sales of the Company.
F.5 Labour Relations
There is not and since incorporation there has not been any industrial
action affecting the Company and to the best of the knowledge, information
and belief of the Sellers there are no facts or circumstances which might
give rise to such industrial action.
F.6 Loans to Employees
The Company has not made any loan or advance in excess of $500 in aggregate
to any of its present or future officers or employees which is outstanding.
F.7 No Pension Schemes
The Company has not paid, provided or contributed towards, and the Company
is not under any obligation or commitment (whether or not legally
enforceable) to pay, provide or contribute towards, any
retirement/death/disability benefit for or in respect of any present or
past employee (or any spouse, child or dependant of any of them) of the
Company other than as required by law.
45
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SCHEDULE 3
Limitations relating to the Seller's Warranties
1. Aggregate de minimis
No liability of the Seller shall arise under the Seller's Warranties unless
the total amount of liability in respect of all claims which Purchaser is
entitled to make exceeds in aggregate $175,000, in which case the Seller
shall (subject to the other provisions hereof) be liable for the whole
amount of the claim and not simply the excess.
2. Maximum liability
The maximum aggregate liability of the Seller in respect of all claims
under this Agreement shall not in any event exceed the lower of US
$15,000,000 and the aggregate middle market price on NASDAQ or NASD OTC
Bulletin Board (as the case may be) of the Consideration Stock transferred
to the Seller pursuant to Clause 5 on the date the claims agreed or finally
adjudicated.
3. Satisfaction of claim
The Seller shall be entitled to satisfy any claim by transferring or
surrendering or selling (as the case may be) any of the Consideration Stock
to the Purchaser (as the Seller elects in its absolute discretion) and the
parties agree that such shares shall have a value for the purposes of
settlement of the claim of $US4.25 per share or, if higher, the average
NASDAQ or NASD OTC Bulletin Board (as the case may be) mid-market price on
the five dealing days immediately preceding the date on which the transfer
or surrender takes place. For the avoidance of doubt, the Purchaser shall
accept and agree to such sale, transfer or surrender at the above value if
the Seller so requires.
4. Time for claims
4.1 Subject to clause 4.2, all liability of the Seller under the Seller's
Warranties shall terminate on 31 December 2000; and
4.2 all liability of the Seller under those of the Seller's Warranties in
Section D of Schedule 2, relating to Taxation shall terminate on the
fourth anniversary of the date hereof,
unless notice in writing of the claim thereunder (giving full details of
the nature, extent and value of such claim) shall have been given to the
Seller prior to such date and (unless the Seller has agreed the amount of
such claim in writing) proceedings in respect of any such claim have been
issued and served on the Seller no later than 12 months after the date of
such notice, failing which such claims shall be wholly barred and
unenforceable.
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5. Procedure for claims
Upon the Purchaser becoming aware that matters have arisen which will or
are likely to give rise to a claim for breach of any of the Seller's
Warranties, the Purchaser will, as soon as reasonably practical, notify the
Seller in writing of the potential claim.
6. Defence to claims
Subject to being indemnified and secured by the Seller to the reasonable
satisfaction of the Purchaser, the Purchaser shall procure that the Company
and the Subsidiary promptly and diligently takes all such actions as the
Seller may reasonably request to avoid dispute, resist, compromise, defend
or appeal any claims against the Company or the Subsidiary and shall not
make any admission of liability, agreement or compromise in respect of such
claim or otherwise settle such claims without the prior written consent of
the Seller which shall not be unreasonably withheld or delayed.
7. Reimbursement of amounts recovered
The Purchaser shall give credit for, or forthwith reimburse to the Seller
an amount equal to any sum paid in respect of any claim under this
Agreement which is subsequently recovered by or paid to the Purchaser or
any company in its group or the Company by any third party, less any costs
and expenses reasonably incurred by the Purchaser in connection therewith.
8. Further limitations
The Seller shall not be liable for any breach of the Seller's Warranties to
the extent that:
8.1 such liability arises or is increased as a result of increases in
rates of Taxation made after Completion;
8.2 such liability would not have arisen or is increased but for something
voluntarily done or omitted to be done by the Purchaser, the Company
or the Subsidiary or their agents after Completion otherwise than in
the ordinary and proper course of the business of the Company as
carried on at Completion;
8.3 such liability arises or is increased as a result of the passing of or
any change in law or regulation (whether retrospectively or not) or in
the interpretation or administration, by the Inland Revenue (or
equivalent in Spain) or by any other monetary fiscal or regulatory
authority (whether or not having the force of law) or by the
withdrawal after completion of any published concession or general
practice previously made by any Taxation Authority or by the
withdrawal of any relief or allowance available at the date hereof;
8.4 the subject matter giving rise to the claim is disclosed or noted in
the Accounts;
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8.5 the liability arises as a result of any change in the accounting
reference date or in the accounting principles practices of bases of
the Company or the Subsidiary introduced or having effect after
Completion;
8.6 the claim arises in respect of a liability for Taxation which would
not have arisen but for the winding up or cessation after the date
hereof of any business or trade carried on by the Purchaser or the
Company or the Subsidiary;
8.7 any amount by which any Taxation which the Company or the Purchaser or
the Subsidiary is or may be liable for (whether actually paid or
payable or not) is reduced or extinguished as a consequence of the
matter giving rise to the claim.
8.8 the claim is for Taxation arising in the ordinary course of business
of the Company or the Subsidiary after 31st December 1998.
9. Mitigation
Nothing herein shall in any way diminish the Purchaser's or the Company's
or the Subsidiary's duty to mitigate its loss and the Purchaser shall use
all reasonable endeavours to mitigate its loss.
10. General Provisions
10.1 The provisions of this Schedule shall apply notwithstanding any other
provision of this Agreement or its schedules to the contrary, will not
cease to have effect in consequence of any rescission or termination
by the Purchaser of any provisions of this Agreement.
10.2 The Purchaser shall not be entitled to reimbursement more than once
in respect of any one claim including for this purpose a claim under
the tax indemnity in clause 13 of this Agreement.
10.3 The Seller's Warranties shall remain in full force and effect after
Completion but the Purchaser shall have no right to rescind or
terminate this Agreement after the date hereof for breach of any of
the Seller's Warranties and the Purchaser's sole remedy in respect of
any claim under the Seller's Warranties shall be against the Seller in
damages, subject to the limitations contained in this Schedule.
10.4 None of the provisions contained in this Schedule shall exclude or
limit liability on the part of the Seller arising as a result of any
fraud or dishonesty on the part of the Seller.
10.5 In assessing damages or compensation payable by the Seller the value
of the Company shall not be taken as exceeding the amount of US
$15,000,000.
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/s/ Jeus Nunea
SIGNED by [ Jeus Nunea ] )
the duly authorised representative of )
MARKET CONSULTANT LIMITED )
in the presence of: )
/s/ L.L.M. Vehmeyer
SIGNED by [ L.L.M. Vehmeyer ] )
the duly authorised representative of )
VOLIM HOLDINGS B.V. )
in the presence of: )
/s/ N. Topham
SIGNED by [ N. Topham ] )
the duly authorised representative of )
EQUITEL COMMUNICATIONS LIMITED )
in the presence of: )
/s/ C. Barrett
C. Barrett
Solicitor, 90 Fetter Lane
London
/s/ N. Topham
SIGNED by [ N. Topham ] )
the duly authorised representative of )
CALLAWAY CONTINENTAL LIMITED )
in the presence of: )
/s/ C. Barrett
C. Barrett
Solicitor, 90 Fetter Lane
London
49
<PAGE>
Exhibit 2.5b
PRIVATE AND CONFIDENTIAL
Dated 22 October 1999
________________________
(1) MARKET CONSULTANT LIMITED
AND
(2) CALLAWAY CONTINENTAL LIMITED
--------------------------------
SHARE PURCHASE AGREEMENT
FOR THE SALE AND PURCHASE OF
400,000 SHARES OF COMMON STOCK
OF TELEMONDE INC.
--------------------------------
Bird & Bird
90 Fetter Lane
London EC4A 1JP
Tel: 0171 415 6000
Fax: 0171 415 6111
DJC/ CXB/Telmo.004
<PAGE>
THIS AGREEMENT is made on the 22 day of October, 1999
BETWEEN
(1) MARKET CONSULTANT LIMITED, a company incorporated in Gibraltar under
registration number 70633, the registered office of which is at Suite 2B,
Mansion House, 143 Main Street, Gibraltar ("MCL");
(2) CALLAWAY CONTINENTAL LIMITED, a company incorporated in the British Virgin
Islands, the registered office of which is at the offices of Overseas
Management Company Trust Limited, P.O. Box 3152, Road Town, Tortola,
British Virgin Islands ("CCL").
RECITAL
CCL has agreed to transfer 400,000 shares of Telemonde Common Stock to MCL in
consideration of a payment of $1,000,000 which shall be applied in the manner
described in this Agreement.
OPERATIVE PROVISIONS
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and the Schedules
"Agreed Form" means terms contained in a form which has been agreed and
initialed by or on behalf of CCL and MCL for the purpose of identification
prior to Completion;
"business day" means any day (excluding Saturdays) upon which banks in
London are open for normal banking business;
"Completion" means completion of the sale and purchase of the Transfer
Stock in accordance with Clause 5;
"Completion Date" means the date upon which Completion takes place;
"$ or Dollars" means the lawful currency from time to time of the United
States of America;
"Equitel" means Equitel Communications Limited of 5th Floor 7 - 10 Chandos
Street, Cavendish Square, London W1M 9DE;
"Equitel Term Loan" means the agreement for the provision of a term loan of
$1,000,000 to be entered into by Equitel, as lender, and the ITS
International as borrower,
on Completion in the Agreed Form;
"Parties" means the parties to this Agreement;
2
<PAGE>
"Telemonde" means Telemonde Inc, a company incorporated in Nevada and whose
principal office is located at 200 Maddison Avenue, Suite 520, New York,
USA;
"Telemonde Common Stock" means shares of the Common Stock of Telemonde of
$0.001 each;
"Transfer Stock" means 400,000 shares of Telemonde Common Stock to be
transferred by CCL to MCL on Completion pursuant to this Agreement;
1.2 References in this Agreement to any statutory provisions shall be construed
as references to those provisions as respectively amended, consolidated or
re-enacted (whether before or after the date of this Agreement) from time
to time and shall include any provisions of which they are consolidations
or re-enactments (whether with or without amendment).
1.3 In this Agreement:-
(a) the masculine gender shall include the feminine and neuter and the singular
number shall include the plural and vice versa;
(b) references to persons shall include bodies corporate, unincorporated
associations and partnerships;
(c) any headings or side notes or, in the case of any legislation specifically
referred to, the inclusion in parentheses of the title to the relevant
Part, Section, Schedule or paragraph contained in such legislation are for
the sake of convenience only and shall not affect the construction of this
Agreement; and
(d) references to any party include a reference to the estate, personal
representative, successor, or permitted assigns of that party.
1.4 Except where the contrary is stated, any reference in this Agreement to a
Clause is to a Clause of this Agreement, and any reference within a Clause
to a sub-clause, paragraph or other sub-division is a reference to such
sub-clause, paragraph or other sub-division so numbered or lettered in that
Clause.
2. SALE OF SHARES
2.1 CCL shall sell the Transfer Stock and MCL, relying on the representations,
warranties, undertakings and indemnities set out in this Agreement shall
purchase the Transfer Stock on the terms of this Agreement free from all
claims, liens charges encumbrances and equities and together with all
rights attaching or accruing to them.
2.2 CCL covenants with MCL as follows:
(a) that it has the right to sell and transfer the full legal and
beneficial interest in the Transfer Stock to MCL on the terms set out
in this Agreement; and
(b) that on and following Completion, it shall at its own cost execute
such further documents and do all such acts and things as MCL may
reasonably require in
3
<PAGE>
order to effectively vest all of the Transfer Stock in MCL and
otherwise to give full effect to the terms of this Agreement.
2.3 MCL shall not be obliged to complete the purchase of any of the Transfer
unless the purchase of all the Transfer Stock is completed simultaneously
in accordance with this Agreement.
3. CONSIDERATION
3.1 The consideration for the sale of the Transfer Stock shall be $1,000,000
which shall be paid in cash in full in immediately available funds on
Completion in accordance with clause 5 (the "Consideration.
4. CONDITIONS TO COMPLETION
4.1 The obligations of the parties to complete the purchase of the Transfer
Stock are conditional on the agreement of the same date as this Agreement
between, inter alia the Parties, relating to the purchase of all of the
issued share capital of Carnival Enterprises Limited and certain
participations in the capital of ITS Europe SA ( the "ITS Agreement") being
completed in accordance with its terms.
4.2 If any of the Conditions set out in sub-Clause 4.1 shall not have been
fully satisfied, by 12.00am on 31 December 1999 then this Agreement shall
lapse and be deemed to be of no effect without any of the parties being
liable to any other party in any way whatsoever.
5. COMPLETION
5.1 Completion shall occur simultaneously with Completion of the ITS
5.2 Upon Completion CCL and MCL shall take, or procure to be taken, the
following actions in relation to the transfer of the Transfer Stock:
(a) CCL shall transfer the Transfer Stock to MCL free from all claims,
liens, charges, encumbrances and equities and together with all rights
attaching or accruing to them and MCL shall accept such transfer in
reliance on the representations, warranties and undertakings of CCL
set out in Clause 6;
(b) MCL shall pay the sum of $1,000,000 to CCL, being the Consideration,
as CCL shall direct in accordance with the following provisions of
this clause;
(c) CCL shall issue to MCL a written receipt in the Agreed Form in respect
of the Consideration acknowledging receipt of the same and requiring
that it be paid in accordance with written instructions issued by
Equitel;
(d) CCL shall deliver to MCL evidence in writing of an agreement between
CCL and Equitel that the Consideration shall be lent from Completion
by CCL to Equitel;
(e) ITS Europe SA shall draw down the full amount of the Equitel Term Loan
and Equitel shall issue a written direction to CCL that the
Consideration shall be paid
4
<PAGE>
by CCL to ITS Europe SA in satisfaction of the obligations of Equitel
to advance the Equitel Term Loan.
5.3 The parties shall not be obliged to complete this Agreement unless all of
the provisions of Clauses 5.2 and all actions to performed on Completion of
the ITS Agreement are complied with fully.
6. WARRANTIES BY CCL
6.1 CCL hereby warrants and undertakes to MCL that each of the following
statements is true and accurate:
(a) the Transfer Stock is duly authorised, validly issued, fully paid, and
non-assessable and ranks pari passu with all other issued Telemonde
Common Stock;
(b) there is not, nor is there any agreement or arrangement to create, any
mortgage, charge, lien, pledge, option, right of pre-emption, right to
acquire or other form of security or encumbrance affecting any of the
Transfer Stock and no claim has been made by any person to be entitled
to any of the foregoing;
(c) on Completion MCL will have transferred to itself good and
unencumbered title to the Transfer Stock which (subject to the
restrictions on transfer imposed by the US Securities Act 1993) are
freely transferable without the consent or permission of CCL,
Telemonde or any other third party;
(d) CCL has the necessary power and authority to enter into and perform
this Agreement and sell and transfer or procure the transfer of the
Transfer Stock and this Agreement constitutes valid and binding
obligations of CCL in accordance with its terms;
(e) neither CCL or any of its subsidiaries is insolvent within the
meanings of Section 123 of the Insolvency Act 1986;
6.2 The liability of CCL in respect of the Warranties contained in Clause 6.1
shall in the absence of fraud or dishonesty on the part of MCL:
(a) terminate on 31st December 2000;
(b) not exceed $1,000,000.
7. NOTICES AND RECEIPTS
7.1 Any notice or other document to be served under this Agreement may be
delivered or sent by registered post or facsimile process to the party to
be served at his address appearing in this Agreement or at such other
address as he may have notified to the other Parties in accordance with
this clause.
5
<PAGE>
7.2 Any notice or document shall be deemed to have been served:
(a) if delivered, at the time of delivery; or
(b) if posted, at 10.00 am on the second business day after it was put
into the post; or
(c) if sent by facsimile process, at the expiration of 2 hours after the
time of despatch, if despatched before 3.00 pm on any business day,
and in any other case at 10.00 am on the business day following the
date of despatch.
7.3 In proving service of a notice or document it shall be sufficient to prove
that delivery was made or that the envelope containing the notice or
document was properly addressed and posted as a prepaid registered post
letter or that the facsimile message was properly addressed and despatched
as the case may be.
8. RESOLUTIONS AND WAIVERS
8.1 For so long after Completion as CCL remains the registered holder of any of
the Transfer Stock CCL will hold them and any distributions, property and
rights deriving from them in trust for MCL and will deal with them and any
distributions, property and rights deriving from them as MCL directs and
will on request by MCL execute an instrument of proxy or other document
which enables MCL or its representative to attend and vote at any meeting
of Telemonde.
8.2 In relation to Telemonde Inc, CCL shall procure the convening of all
meetings, the giving of all waivers and consents and the passing of all
resolutions as are necessary to transfer the Transfer Stock to MCL free of
any mortgage, charge, lien, pledge or other encumbrance and to register MCL
as the registered owners of the Transfer Stock in the register of members
of Telemonde Inc and as are generally necessary to give effect to this
Agreement.
9. GENERAL
9.1 Each of the obligations, warranties and undertakings set out in this
Agreement which is not fully performed at Completion will continue in force
after Completion.
9.2 None of the rights or obligations under this Agreement may be assigned or
transferred without the prior written consent of all the Parties.
9.3 Time is of the essence in relation to this Agreement.
9.4 Each party shall pay the costs and expenses incurred by him or it in
connection with the entering into and completion of this Agreement.
9.5 This Agreement may be executed in any number of counterparts, all of which,
taken together shall constitute one and the same Agreement and any party
may enter into this Agreement by executing a counterpart.
6
<PAGE>
10. WHOLE AGREEMENT
10.1 This Agreement and the documents referred to in it contain the whole
agreement between the Parties relating to the transactions contemplated by
this Agreement and supersede all previous agreements, arrangements and
understandings between the Parties relating to these transactions.
10.2 Each of the Parties acknowledges that in agreeing to enter into this
Agreement he or it has not relied on any representation, warranty or other
assurance except those set out in this Agreement and waives all rights and
remedies, which, but for this Clause might be available to it in respect
of such representation, warranty or other assurance provided that nothing
in this Clause shall limit or exclude any liability for fraudulent
misrepresentation.
11. GOVERNING LAW
This Agreement is governed by and shall be construed in accordance with
English law. MCL submits to the non-exclusive jurisdiction of the English
Courts for all purposes relating to this Agreement and CCL hereby appoint
Browne Jacobson of Aldwych House, 81 Aldwych, London as its agent for
service. CCL submits to the non exclusive jurisdiction of the English
Courts for all purposes of this Agreement and hereby irrevocably appoint
Bird & Bird of 90 Fetter Lane London EC 4A 1JP their agents for service.
IN WITNESS of which this Agreement has been executed by the Parties or their
duly authorised representatives on the date which appears first on page 1.
7
<PAGE>
SIGNED by /s/ Jeus Nunea )
the duly authorised representative of )
MARKET CONSULTANT LIMITED )
in the presence of: )
SIGNED by /s/ N. Topham )
the duly authorised representative of )
CALLAWAY CONTINENTAL LIMITED )
in the presence of: )
/s/ C. Barrett
Solicitor
90 Felter Lane
London
8
<PAGE>
Exhibit 3.1(a)
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "TELEMONDE, INC.", FILED IN THIS OFFICE ON THE TWENTY-NINTH DAY
OF JUNE, A.D. 1999, AT 1 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
(SEAL APPEARS HERE] /s/ Edward J. Freel
--------------------------
Edward J. Freel, Secretary
of State
3063052 8100 AUTHENTICATION: 9838565
991265147 DATE: 06-30-99
<PAGE>
CERTIFICATE OF INCORPORATION
OF
TELEMONDE, INC.
FIRST: The name of the Corporation is
Telemonde, Inc.
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 150,000,000 shares, of which
145,000,000 shares shall be designated as common stock, $.001 par value per
share, and 5,000,000 shares shall be designated preferred stock, $.01 par value
per share ("Preferred Stock").
Subject to the limitations and in the manner provided by law, shares of
Preferred Stock may be issued from time to time in series, and the Board of
Directors of the Corporation is hereby authorized to establish and designate
series of Preferred Stock, to fix the number of shares constituting each series,
and to fix the designations and the relative rights, preferences and limitations
of the shares of each series and the variations in the relative rights,
preferences and limitations as between series, and to increase and to decrease
the number of shares constituting each series. Subject to the limitations and in
the manner provided by law, the authority of the Board of Directors of the
Corporation with respect to each series shall include without limitation the
authority to determine the following:
(a) The designation of such series;
(b) The number of shares initially constituting such series;
(c) The increase, and the decrease to a number not less than the number of
the outstanding shares of such series, of the number of shares constituting such
series theretofore fixed;
(d) The rate or rates and the times at which dividends on the shares of
such series shall be paid, the form in which such dividends shall be paid or
payable (which may include additional shares of capital stock of the Company)
and whether or not such dividends shall be cumulative and, if such dividends
shall be cumulative, the date or dates from and after which they shall
accumulate;
<PAGE>
provided, however, that, if the stated dividends are not paid in full, the
shares of all series of Preferred Stock ranking pari passu shall share ratably
---- -----
in the payment of dividends, including accumulations, if any, in accordance with
the sums which would be payable on such shares if all dividends were declared
and paid in full;
(e) Whether or not the shares of such series shall be redeemable and, if
such shares shall be redeemable, the terms and conditions of such redemption,
including but not limited to the date or dates upon or after which such shares
shall be redeemable and the amount per share which shall be payable upon such
redemption, which amount may vary under different conditions and at different
redemption dates;
(f) The amount payable on the shares of such series in the event of a
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series;
(g) Whether or not the shares of such series shall have voting rights, in
addition to the voting rights provided by law and, if such shares shall have
such voting rights, the terms and conditions thereof, including but not limited
to the right of the holders of such shares to vote as a separate class either
alone or with the holders of shares of one or more other series of Preferred
Stock and the right to have more than one vote per share;
(h) Whether or not a sinking fund shall be provided for the redemption of
the shares of such series and, if such a sinking fund shall be provided, the
terms and conditions thereof;
(i) Whether or not a purchase fund shall be provided for the shares of such
series, and, if such a purchase fund shall be provided, the terms and conditions
thereof;
(j) Whether or not the shares of such series shall have conversion or
exchange privileges, and, if such shares shall have conversion or exchange
privileges, the terms and conditions of conversion or exchange, including but
not limited to any provision for the adjustment of the conversion rate or the
conversion price and whether conversion or exchange can be affected solely by
the Corporation or the holder; and
(k) Any other relative rights, preferences and limitations.
FIFTH: The name and mailing address of the incorporator is J. Porter
Durham, Jr., 1800 Republic Centre, 633 Chestnut Street, Chattanooga, Tennessee
37450-1800.
SIXTH: Election of directors need not be by written ballot.
SEVENTH: In furtherance of, and not in limitation of the powers
conferred by statute, the Board of Directors is authorized to adopt, amend, or
repeal bylaws of the Corporation by a majority vote at any regular or special
meeting of the Board or by written consent. The stockholders of the Corporation
may not adopt, amend or repeal any bylaw unless such action is
2
<PAGE>
approved by the affirmative vote of the holders of not less than two-thirds of
the voting power of all of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, considered
for purposes of this Article SEVENTH as a single class.
EIGHTH: The directors (other than any director elected solely by
holders of one or more classes or series of Preferred Stock) shall be
classified, with respect to the terms for which they severally hold office, into
three classes, as nearly equal in number as possible, one class to hold office
initially for a term expiring at the next succeeding annual meeting of
stockholders, another class to hold office initially for a term expiring at the
second succeeding annual meeting of stockholders and another class to hold
office initially for a term expiring at the third succeeding annual meeting of
stockholders, with the members of each class to hold office until their
successors are duly elected and qualify. Thereafter, at each annual meeting of
the stockholders, the successors to the class of directors whose term expires at
such meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election and until their successors are duly elected and qualify.
NINTH: No director of the Corporation shall be personally liable to
the Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. If the Delaware General Corporation Law
is amended after the filing of this Certificate of Incorporation to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Any repeal or modification of this section
NINTH by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
TENTH: To the maximum extent permitted by Delaware law in effect from
time to time, the Corporation shall indemnify and, without requiring a
preliminary determination of the ultimate entitlement to indemnification, shall
pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former director or officer
of the Corporation and who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Corporation and at the request of the Corporation, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity, against
judgements, penalties, fines, settlements and reasonable expenses actually
incurred by them, unless it is established that (i) the act or omission of the
director or officer was material to the matter giving rise to the proceeding and
(A) was committed in bad faith or (B) was the result of active and deliberate
dishonesty, (ii) the director or officer actually received an improper personal
benefit, or (iii) in the case of any criminal proceeding, the director or
officer had reasonable cause
3
<PAGE>
to believe that the act or omission was unlawful. The Corporation may, with the
approval of its Board of Directors, provide such indemnification and advance for
expenses to a person who served a predecessor of the Corporation in any of the
capacities described in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation.
The Corporation shall, as a condition to advancing expenses to a director
or officer, obtain a written undertaking by him or on his behalf to repay the
amount paid or reimbursed by the Corporation if it shall ultimately be
determined that such persons are not entitled to be indemnified by the
Corporation under Delaware law or any applicable contract.
Neither the amendment nor repeal of this Article TENTH, nor the adoption or
amendment of any other provision of the Bylaws of the Corporation inconsistent
with this Article TENTH, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
Any amendment to this Article TENTH shall be valid only if approved by the
unanimous vote of all of the members of the Board of Directors and by the
affirmative vote of two-thirds of all of the votes entitled to be cast on the
matter by stockholders.
ELEVENTH: No action required to be taken or which may be taken at any
annual or special meeting of stockholders of the Corporation may be taken
without a meeting.
IN WITNESS WHEREOF, I have made, signed and sealed this Certificate of
Incorporation this 29th day of June, 1999.
/s/ J. Porter Durham, Jr.
---------------------------------
J. Porter Durham, Jr.
Incorporator
4
<PAGE>
Exhibit 3.1(b)
CERTIFICATE OF MERGER
of
TELEMONDE INC.,
a Nevada corporation
into
TELEMONDE, INC.,
a Delaware corporation
Pursuant to Section 252 of the General
Corporation Law of the State of Delaware
Telemonde, Inc. (the "Company"), a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "DGCL" ), hereby
certifies that:
FIRST: The name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
Telemonde, Inc. Delaware
Telemonde, Inc. Nevada
SECOND: An Agreement and Plan of Merger dated as of October 28, 1999, by
and between Telemonde, Inc., a Nevada corporation ("TI"), and the Company (the
"Merger Agreement"), was approved, adopted, certified, executed and acknowledged
by each of the constituent corporations in accordance with the requirements of
Section 252(c) of the DGCL and by Telemonde, Inc., a Nevada corporation ("TI"),
in accordance with the laws of the State of Nevada.
THIRD : The Company shall be the surviving corporation of the merger and
shall at the effective time of the merger be named Telemonde, Inc. (sometimes
hereinafter referred to as the "Surviving Corporation").
FOURTH: The certificate of incorporation of the Company (the
"Certificate") shall be the certificate of incorporation of the Surviving
Corporation.
FIFTH: The executed Merger Agreement is on file at the offices of the
Surviving Corporation at 200 Madison Avenue, New York, New York 10016.
SIXTH: A copy of the Merger Agreement will be furnished by the Surviving
Corporation, on request and without cost, to any stockholder of TI or the
Company.
SEVENTH: The authorized capital stock of TI is 100,000,000 shares of
Common Stock, par value $0.001 per share.
<PAGE>
IN WITNESS WHEREOF, Telemonde, Inc., as the Surviving Corporation, has
caused this Certificate of Merger to be signed under penalties of perjury by
Adam Bishop, its President, on the 14 day of November 1999.
TELEMONDE, INC.,
a Delaware corporation
/s/ Adam Bishop
-------------------------------
By: Adam Bishop
----------------------------
Title: President
-------------------------
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
TELEMONDE, INC.
ARTICLE I - OFFICES
-------------------
Section 1. Registered Office. The registered office of Telemonde,
-----------------
Inc., a Delaware corporation (the "Corporation"), shall be located at 1209
Orange Street, in the City of Wilmington, in the County of New Castle, in the
State of Delaware. The name of its registered agent at that address is The
Corporation Trust Company.
Section 2. Other Offices. The Corporation may also have offices and
-------------
places of business at such other places, within or without the State of
Delaware, as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
-------------------------------------
Section 1. Time and Place. All meetings of stockholders shall be
--------------
held at such time and place, whether within or without the State of Delaware, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 2. Annual Meeting. An annual meeting of stockholders shall
--------------
be held on such date, not less than 60 nor more than 120 days after the end of
the Corporation's last preceding fiscal year, as the Board of Directors shall
prescribe; provided, that if in any such year, the annual meeting shall not have
been held within such period, then it shall be held on the third Thursday of the
fifth month after the end of the Corporation's last preceding fiscal year, or if
such day be a legal holiday, on the next business day following. At each annual
meeting, the stockholders shall elect a Board of Directors and transact such
other business as may properly come before the meeting.
Section 3. Special Meetings. Special meetings of the stockholders,
----------------
for any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Board of Directors, the
Chairman of the Board, or the President. Special meetings of stockholders shall
also be called by the Secretary upon the written request of the holders of
shares entitled to cast not less than twenty-five percent (25%) of all the votes
entitled to be cast at such meeting. The Secretary shall inform such
stockholders of the reasonably estimated costs of preparing and mailing notice
of the meeting and, upon payment to the Corporation by the stockholders of such
costs, the Secretary shall give notice to each stockholder entitled to notice of
the meeting. The business permitted to be conducted at any special meeting of
stockholders is limited to the purpose or purposes specified by such order.
<PAGE>
Section 4. Notice of Meetings. Written notice of each meeting of
------------------
stockholders, stating the place, date and hour of the meeting, and in the case
of a special meeting, specifying the purpose or purposes for which the meeting
is called, and by or at whose direction such notice is being issued, shall be
given in the manner prescribed by Article VI of these By-laws to each
stockholder entitled to vote thereat, not less than 10 nor more than 60 days
prior to the meeting, unless a different period is prescribed by law.
Section 5. Nominations and Proposals by Stockholders.
-----------------------------------------
(a) Annual Meetings of Stockholders.
-------------------------------
(1) Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the stockholders may
be made at an annual meeting of stockholders (i) pursuant to the Corporation's
notice of meeting, (ii) by or at the direction of the Board of Directors or
(iii) by any stockholder of the Corporation who was a stockholder of record both
at the time of giving of notice provided for in this Section 5(a) and at the
time of the annual meeting, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section 5(a).
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a) (1) of this Section 5, the stockholder must have given timely notice thereof
in writing to the secretary of the Corporation and such other business must
otherwise be a proper matter for action by stockholders. To be timely, a
stockholder's notice shall be delivered to the secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
30 days or delayed by more than 60 days from such anniversary date or if the
Corporation has not previously held an annual meeting, notice by the stockholder
to be timely must be so delivered not earlier than the close of business on the
90th day prior to such annual meeting and not later than the close of business
on the later of the 60th day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made by the Corporation. In no event shall the public announcement of a
postponement or adjournment of an annual meeting to a later date or time
commence a new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (ii) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting
2
<PAGE>
and any material interest in such business of such stockholder and of the
beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (y) the number of shares of each class of capital stock of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a) (2) of this Section 5 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement by the Corporation naming all of the nominees for director
or specifying the size of the increased Board of Directors at least 70 days
prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 5 (a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth day
following the date on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving notice
provided for in this Section 5 (b) and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 5 (b). In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice containing the information
required by paragraph (a) (2) of this Section 5 shall be delivered to the
secretary at the principal executive offices of the Corporation not earlier than
the close of business on the 90th day prior to such special meeting and not
later than the close of business on the later of the 60th day prior to such
special meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of a postponement or adjournment of a special meeting to a
later date or time commence a new time period for the giving of a stockholder's
notice as described above.
(c) General.
-------
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be
3
<PAGE>
conducted at a meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this Section 5. The
chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made or
proposed, as the case may be, in accordance with the procedures set forth in
this Section 5 and, if any proposed nomination or business is not in compliance
with this Section 5, to declare that such nomination or proposal shall be
disregarded.
(2) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15 (d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 5,
a stockholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations promulgated thereunder
with respect to the matters set forth in this Section 5. Nothing in this Section
5 shall be deemed to affect any right of a stockholder to request inclusion of a
proposal in, nor the right of the Corporation to omit a proposal from, the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 6. Quorum. Except as otherwise provided by law or the
------
Certificate of Incorporation, the holders of a majority of the shares of the
Corporation issued and outstanding and entitled to vote thereat, present in
person or represented by proxy, shall be necessary to and shall constitute a
quorum for the transaction of business at all meetings of the stockholders. A
quorum which is present to organize a meeting shall not be broken by the
subsequent withdrawal of one or more stockholders. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat present in person or represented by proxy
shall have power to adjourn the meeting from time to time, without notice other
than an announcement at the meeting of the place, date and hour of the adjourned
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted at the meeting which might have been transacted at the meeting as
originally noticed; provided, that if any meeting if so adjourned for more than
30 days, or if after any such adjournment, a new record date is fixed for the
adjourned meeting, a notice of the adjournment shall be given to each
stockholder entitled to vote thereat.
Section 7. Vote Required. At any meeting of stockholders at which a
-------------
quorum is present, all elections of directors shall be determined by a plurality
vote and all other matters shall be determined by the vote of the holders of a
majority of the shares present in person or represented at such meeting and
entitled to vote, unless the matter is one which by express provision of
statute, the Certificate of Incorporation or these By-Laws a different vote is
required, in which case such express provision shall govern and control the
determination of such matter.
4
<PAGE>
Section 8. Voting. At any meeting of the stockholders every
------
stockholder having the right to vote shall be entitled to vote in person or by
proxy. Except as otherwise provided by law or the Certificate of Incorporation,
each stockholder of record shall be entitled to one vote for every share of
stock standing in his name on the books of the Corporation as of the record date
for determining the stockholders entitled to notice of and to vote at such
meeting.
Section 9. Proxies. Every proxy must be executed in writing by the
-------
stockholder or his duly authorized attorney-in-fact. No proxy shall be valid
after the expiration of three years from the date thereof, unless a longer
period is provided for in the proxy. Every proxy shall be revocable at the
pleasure of the person executing it, or his legal representatives or assigns,
except in those cases where an irrevocable proxy permitted by law has been
given.
Section 10. List of Stockholders. A list of stockholders entitled to
--------------------
vote at any meeting of stockholders shall be compiled and made available for
examination by any stockholder at least ten days before such meeting. The list
shall be in alphabetical order and show the address of each stockholder and the
number of shares registered in his name.
Section 11. Inspectors. Any meeting of stockholders, the chairman of
----------
the meeting may appoint one or more person as inspectors for such meeting. Such
inspectors shall ascertain and report the number of shares represented at the
meeting based upon their determination of the validity and effect of proxies,
count all votes, report the results and perform such other acts as are proper to
conduct the election and voting with impartiality and fairness to all the
stockholders.
Each report of an inspector shall be in writing and signed by him or
by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
----- -----
ARTICLE III - DIRECTORS
-----------------------
Section 1. Board of Directors. The business and affairs of the
------------------
Corporation shall be managed by or under the direction of its Board of
Directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things on its behalf as are not, by statute or by the
Certificate of Incorporation or by these By-laws, directed or required to be
exercised or done by the stockholders.
Section 2. Number; Election and Tenure. The number of directors
---------------------------
constituting the whole Board of Directors shall be not less than one nor more
than 15 as may from time to time be determined by resolution of the whole Board
of Directors hereinafter provided. Subject to the provisions of the Certificate
of Incorporation, the number of directors shall initially be fixed at three.
The directors by resolution shall have power from time to time, when the
stockholders as such are
5
<PAGE>
not assembled in a meeting, to increase or decrease their own number, within the
maximum and minimum limits above specified from the number previously
determined, provided that no such decrease would terminate or shorten the term
of office of any director then in office. If the number of directors be at any
time increased by action of the Board of Directors, the additional directors may
be elected by a majority of the directors in office at the time of the increase
or if not so elected prior to the next meeting of stockholders convened for the
election of directors they shall be elected by the shareholders. Directors shall
be elected at the annual meeting of the stockholders by a plurality of the votes
cast in the election and except as provided in Section 3 of this Article III,
each director shall be elected to serve until the expiration of the term for
which he was elected and thereafter until his successor has been duly elected
and has qualified. Unless otherwise provided in the Certificate of
Incorporation, the directors need not be stockholders and need not be residents
of the State of Delaware.
Section 3. Resignation and Removal. Any director may resign at any
-----------------------
time by written notice to the Corporation. Subject to the rights of the holders
of any one or more classes or series of Preferred Stock issued by the
Corporation, any director, or the entire Board, may be removed from office at
any time, but only for cause and only by the affirmative vote of the holders of
not less than a majority of the voting power of all of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, considered for purposes of this sentence as a single class.
Section 4. Vacancies. Any vacancy occurring in the Board of
---------
Directors by reason of the death, resignation, retirement, disqualification or
removal from office of any director with or without cause or an increase in the
number of directorships, or otherwise, may be filled by a majority of all of the
directors then in office, although less than a quorum. Each director elected to
fill a vacancy shall serve until the expiration of the term of his predecessor
or, if there is no predecessor, until the next succeeding annual meeting of
stockholders and thereafter until his successor shall be duly elected and
qualified, unless sooner displaced from office by resignation, removal or
otherwise. If in the event of any such vacancy, the directors remaining in
office shall be unable, by majority vote, to fill such vacancy within 30 days of
the occurrence thereof, the Chairman of the Board, President or Secretary shall
call a special meeting of the stockholders at which such vacancy may be filled.
Section 5. Interested Directors. To the extent and under the
--------------------
circumstances permitted by law of the State of Delaware, no contract or other
transaction between the Corporation and one or more of its directors, or between
the Corporation and any other corporation, firm, association or other entity in
which one or more of its directors are directors or officers, or are financially
interested, shall be either void or voidable for this reason alone, or by reason
that such director or directors are present at the meeting of the Board, or of a
committee thereof, which authorizes such contract or transaction, or that his or
their votes are counted for such purpose. Except as otherwise provided by
statute, common or interested directors may be counted in determining the
presence of
6
<PAGE>
a quorum or at a meeting of the Board, or of a committee, which authorizes any
such contract or transaction.
Section 6. Compensation. The Board of Directors may from time to
------------
time fix the compensation of directors for their services in that capacity. The
compensation of a director may consist of an annual fee or a fee for attendance
at each regular or special meeting of the Board of which such director is a
member or a combination of fees of both types; provided, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. The
Board may also provide for the reimbursement to any director of expenses
incurred in attending any meeting of the Board or any committee of the Board of
which he is a member.
ARTICLE IV - MEETINGS OF THE BOARD
----------------------------------
Section 1. Time and Place. The Board of Directors of the Corporation
--------------
may hold meetings, both regular and special, at such time and place, within or
without the State of Delaware, as shall be determined in accordance with these
By-laws.
Section 2. Annual Meeting. The annual meeting of the Board of
--------------
Directors shall be held for the election of officers and any other business as
soon as practicable after the adjournment of the annual meeting of stockholders,
and no notice of such meeting to the newly elected directors (other than these
By-Laws) shall be necessary in order to constitute the meeting, provided a
quorum shall be present.
Section 3. Regular Meetings. Regular meetings of the Board of
----------------
Directors may be held without notice at such time and at such place as shall
from time to time be determined in advance by the Board.
Section 4. Special Meetings. Special meetings of the Board of
----------------
Directors may be called by the President, and, at the request of any director,
shall be called by the President or the Secretary. Notice of each special
meeting of directors stating the time and place, and, if deemed appropriate by
the person or persons by whom or at whose request the meeting is being called,
the purpose or purposes thereof, shall be given to each director, in the manner
provided in Article VI of these By-Laws, at least 48 hours before such meeting.
The time and place of any special meeting of directors may also be fixed by a
duly executed waiver of notice thereof.
Section 5. Quorum. At all meetings of the Board of Directors or of
------
any committee of the Board a majority of the whole Board then in office or a
majority of the whole membership of the committee shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the vote
of a majority of the directors or members of the committee present at the time
of the vote if a quorum is present shall be the act of the Board of Directors or
such committee, except as may be otherwise specifically provided by law, or by
the Certificate of Incorporation or these By-
7
<PAGE>
Laws. If a quorum shall not be present at any meeting of the Board of Directors
or any committee of the Board the members of the Board or any committee of the
Board present thereat may adjourn the meeting from time to time, until a quorum
shall be present.
Section 6. Participation in Meetings by Telephone. Any one or more
--------------------------------------
members of the Board of Directors or of any committee of the Board may
participate in a meeting of the Board or committee by means of conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
Section 7. Consents. Whenever by any provision of law or of the
--------
Certificate of Incorporation the vote of the Board of Directors or any committee
thereof at any meeting thereof is required or permitted to be taken in
connection with any corporate action, the meeting and the vote of the Board of
Directors or such committee may be dispensed with, if all of the members of the
Board of Directors or such committee who would have been entitled to vote upon
the action if such meeting were held, shall consent in writing to such corporate
action being taken.
ARTICLE V - COMMITTEES OF THE BOARD
-----------------------------------
Section 1. Designation. The Board of Directors, by resolution
-----------
adopted by a majority of the whole Board, may designate from among its members
one or more committees each consisting of one or more directors and having such
title as the Board may consider to be properly descriptive of its function, each
of which, to the extent provided in such resolution, shall have all the
authority of the Board in the management of the business and affairs of the
Corporation. However, no such committee shall have power or authority in
reference to:
(a) amending the Certificate of Incorporation;
(b) adopting an agreement of merger or consolidation;
(c) recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets;
(d) recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution;
(e) amending these By-Laws;
and, unless expressly so provided by resolution of the Board, no such
committee shall have power or authority in reference to:
(f) declaring a dividend;
8
<PAGE>
(g) authorizing the issuance of stock of the Corporation of any class; or
(h) adopting a certificate of ownership and merger.
A majority of any such committee shall constitute a quorum and may determine its
action, and fix the time and place of its meetings unless the Board of Directors
shall otherwise provide. The Board may designate one or more directors as
alternate members of any such committee who may replace any absent member or
members of any meeting of such committee.
Section 2. Tenure; Reports. Each such committee shall serve at the
---------------
pleasure of the Board. It shall keep minutes of its meetings and report the
same to the Board, and it shall observe such other procedures with respect to
its meetings as are prescribed in these By-Laws or, to the extent not prescribed
herein, as may be prescribed by the Board in the resolution appointing such
committee.
ARTICLE VI - NOTICES
--------------------
Section 1. Form; Delivery. Notices to directors and stockholders
--------------
shall be in writing and may be delivered personally or by mail. Notice by mail
shall be deemed to be given at the time when deposited in the post office or a
letter box, in a post-paid sealed wrapper, and addressed to directors or
stockholders at their respective addresses appearing on the books or stock
transfer records of the Corporation, unless any such director or stockholder
shall have filed with the Secretary of the Corporation a written request that
notices intended for him be mailed or delivered to some other address designated
in such request. Notice to directors may also be given by telegram or by
leaving the notice at the residence or usual place of business of a director.
Section 2. Waiver of Notice. Whenever a notice is required to be
----------------
given by statute, the Certificate of Incorporation or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
such notice. Attendance of a person at a meeting of stockholders, directors or
any committee of directors, as the case may be, shall constitute a waiver of
notice of such meeting, except where the person is attending for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular meeting of
stockholders, directors or committee of directors need be specified in any
written waiver of notice.
ARTICLE VII - OFFICERS
----------------------
9
<PAGE>
Section 1. Executive Officers. The executive officers of the
------------------
Corporation shall be a President and a Secretary. The Corporation may also have
a Chairman of the Board, Treasurer and one or more Vice Presidents, in which
case the Chairman of the Board, the Treasurer and each Vice President shall also
be an executive officer. Two or more offices, except those of President and
Vice President and those of President and Secretary, may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument in
more than one capacity. The executive officers of the Corporation shall be
elected annually by the Board of Directors at its first meeting following the
meeting of stockholders at which the Board was elected.
Section 2. Other Officers and Agents. The Board of Directors may
-------------------------
also elect or may delegate to the President authority to appoint and remove, and
to fix the duties, compensation and terms of office of one or more Assistant
Vice Presidents, Assistant Treasurers and Assistant Secretaries, and such other
officers and agents as the Board may at any time or from time to time determine
to be advisable.
Section 3. Tenure; Resignation; Removal; Vacancies. Each officer of
---------------------------------------
the Corporation shall hold office until his successor is elected or appointed or
until his earlier displacement from office by resignation, removal or otherwise;
provided, that if the term of office of any officer elected or appointed
pursuant to Section 2 of this Article shall have been fixed by the Board of
Directors or by the President acting under authority delegated to him by the
Board of Directors, he shall cease to hold such office no later than the date of
expiration of such term, regardless of whether any other person shall have been
elected or appointed to succeed him. Any officer may resign by written notice
to the Corporation and may be removed for cause or without cause by the Board of
Directors or by the President acting under authority delegated to him by the
Board of Directors pursuant to Section 2 of this Article; provided, that any
such removal shall be without prejudice to the rights, if any, of the officer so
removed under any employment contract or other agreement with the Corporation.
If the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors or by the President acting under authority
delegated to him by the Board of Directors pursuant to Section 2 of this
Article.
Section 4. Compensation. The compensation of all officers of the
------------
Corporation shall be fixed by the Board of Directors or by the President acting
under authority delegated to him by the Board of Directors pursuant to Section 2
of this Article.
Section 5. Authority and Duties. All officers as between themselves
--------------------
and the Corporation, shall have such authority and perform such duties in the
management of the Corporation as may be provided in these By-Laws, or, to the
extent not provided, as may be prescribed by the Board of Directors or by the
President acting under authority delegated to him by the Board of Directors
pursuant to Section 2 of this Article.
Section 6. The Chairman of the Board. The Chairman of the Board, if
-------------------------
any, shall be the chief executive officer of the Corporation, in which capacity
he shall preside at all meetings of
10
<PAGE>
the stockholders and directors; he shall have general and active management and
control of the overall business and affairs of the Corporation subject to the
control of the Board. He shall see that all orders and resolutions of the Board
are carried into effect and, in connection therewith, shall be authorized to
delegate to the President and other executive officers such of his powers and
duties as he may deem advisable. He shall also have such other powers and duties
as may be assigned from time to time by the Board.
Section 7. The President. The President shall be the chief operating
-------------
officer of the Corporation, or if there be no Chairman of the Board, the chief
executive officer of the Corporation. He shall have general and active
management and control over the daily operations of the Corporation, including
the right to hire and discharge employees other than elective officers, subject
however to the control of the Board and the Chairman. In the absence or
disability of the Chairman, he shall preside at all meetings of the stockholders
and Board. He shall perform such other duties as the Board or Chairman may from
time to time prescribe.
Section 8. The Vice-Presidents. The Vice-Presidents, in order of
-------------------
their seniority or in any other order determined by the Board of Directors
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall severally assist the President in
the management of the business of the Corporation and the implementation of
resolutions of the Board, and in the performance of such other duties as the
President may from time to time prescribe. The duties of any assistant vice
presidents shall be as set by the President.
Section 9. The Secretary. The Secretary shall attend all meetings of
-------------
the Board and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose and shall
perform like duties for any committees of the Board when required. He shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors, Chairman of the Board or
President, under whose supervision he shall act. He shall keep in safe custody
the certificate books and stockholder records and such other books and records
as the Board may direct and shall perform all other duties incident to the
office of Secretary.
Section 10. The Assistant Secretaries. The Assistant Secretaries, if
-------------------------
any, in order of their seniority or in any other order determined by the Board
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform such other duties as the
Board of Directors or the Secretary may from time to time prescribe.
Section 11. The Treasurer. The Treasurer shall have the care and
-------------
custody of the corporate funds, and other valuable effects, including
securities, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all monies
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the Board,
taking proper vouchers for such disbursements,
11
<PAGE>
and shall render to the Chairman of the Board, President and directors, at the
regular meetings of the Board, or whenever they may require it, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond for such term, in such sum and with such surety or sureties
as shall be satisfactory to the Board for the faithful performance of the duties
of his office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
Section 12. The Assistant Treasurers. The Assistant Treasurers if
------------------------
any, in the order of their seniority or in any other order determined by the
Board, shall in the absence or disability of the Treasurer, perform the duties
and exercise the power of the Treasurer and shall perform such other duties as
the Board of Directors or the Treasurer shall prescribe.
ARTICLE VIII - STOCK CERTIFICATES
---------------------------------
Section 1. Form and Signature of Stock Certificates. The
----------------------------------------
certificates for stock of the Corporation shall be in such form as shall be
determined by the Board of Directors, and shall be numbered consecutively and
entered in the books of the Corporation as they are issued. Each certificate
shall exhibit the registered holder's name and number and class of shares of
stock, and shall be signed by the President or Vice President and the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary. Where any
such certificate is countersigned by a transfer agent or registered by a
registrar, the signature of any such officer may be a facsimile signature. In
case any one or more of the officers who have signed, or whose facsimile
signature or signatures were placed on any such certificate shall cease to be
such officer or officers of the Corporation, whether because of death,
resignation or otherwise, before such certificate is issued and delivered, it
may nevertheless be issued and delivered by the Corporation with the same effect
as if such officer or officers had continued in office.
Section 2. Lost Certificates. The Board of Directors may direct that
-----------------
a new stock certificate or certificates be issued in place of any certificate or
certificates theretofore issued by the Corporation which have been mutilated or
which are alleged to have been lost, stolen or destroyed, upon presentation of
each such mutilated certificate or upon the making of an affidavit of that fact
by the person claiming the certificate to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 3. Registration of Transfer. Upon surrender to the
------------------------
Corporation or any transfer agent of the Corporation of a certificate for stock
duly endorsed or accompanied by proper
12
<PAGE>
evidence of succession, assignment or authority to transfer, the Corporation
shall issue or cause its transfer agent to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
Section 4. Registered Stockholders. Except as otherwise provided by
-----------------------
law, the Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of stock to receive dividends or
other distributions, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of stock, and shall
not be bound to recognize any equitable or legal claim to or interest in such
stock on the part of any other person.
Section 5. Record Date. For the purpose of determining the
-----------
stockholders entitled to notice of, or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or to receive notice that any such corporate action was taken
without a meeting or for the purpose of determining the stockholders entitled to
receive payment of any dividend or the allotment of any rights, or to exercise
any rights in respect of any conversion or exchange of stock or for the purpose
of any other lawful action affecting the interests of stockholders, the Board of
Directors may fix, in advance, a date as the record date for any such
determination of stockholders. Such date shall be not be more than 60 nor less
than 10 days before the date of any such meeting nor more than 60 days before
any such other actions. If no record date is fixed, (1) the record date for
determining the stockholders entitled to notice of or to vote at a meeting shall
be at the close of business on the day next preceding the date on which notice
is given, or, if no notice is given, on the day next preceding the day on which
the meeting is held; (2) the record date for determining the stockholders
entitled to express written consent to the taking of any corporate action
without a meeting, when no prior action by the Board of Directors is necessary,
shall be the day on which the first written consent is expressed; and (3) the
record date for determining stockholders for any purpose other than those
specified in (1) and (2) shall be the close of business on the day on which the
resolution of the Board of Directors relating thereto is adopted.
ARTICLE IX - INDEMNIFICATION
----------------------------
To the maximum extent permitted by Delaware law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to, (a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the Corporation
and at the request of the Corporation, serves or has served another corporation,
real estate investment trust, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner or trustee
of such corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or other enterprise and who is made a party to the
proceeding by reason of his service in that capacity. The Corporation may, with
the approval of its Board of Directors, provide such indemnification and
13
<PAGE>
advance for expenses to a person who served a predecessor of the Corporation in
any of the capacities described in (a) or (b) above and to any employee or agent
of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article IX, nor the adoption
or amendment of any other provision of these By-laws or Certificate of
Incorporation of the Corporation inconsistent with this Article IX, shall apply
to or affect in any respect the applicability of the preceding paragraph with
respect to any act or failure to act which occurred prior to such amendment,
repeal or adoption.
ARTICLE X - GENERAL PROVISIONS
------------------------------
Section 1. Dividends and Distributions. Subject to all applicable
---------------------------
requirements of law and to any applicable provisions of the Certificate of
Incorporation, these By-Laws and any indenture or other agreement to which the
Corporation is a party or by which it is bound, the Board of Directors may
declare to be payable, in cash, in other property or in shares of the
Corporation's stock of any class or series, such dividends and distributions
upon or in respect of outstanding stock of the Corporation of any class or
series as the Board may at any time or from time to time deem to be advisable.
Before declaring any such dividend or distribution, the Board of Directors may
cause to be set aside, out of any funds or other property or assets of the
Corporation legally available for the payment of dividends or distributions,
such sum or sums as the Board, in the absolute discretion of its members, may
consider to be proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board may deem conducive to the
interest of the Corporation, and the Board may modify or abolish any such
reserve in the manner in which it was created.
Section 2. Checks, Notes, etc. All checks or other orders for
-------------------
payment of money and notes or other instrument evidencing indebtedness or
obligations of the Corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from time to time
designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed and may from time to time be changed by resolution of the Board of
Directors.
Section 4. Seal. The Corporation shall not have a seal.
----
Section 5. Securities of other Corporations; Acting as General
---------------------------------------------------
Partner. Unless otherwise ordered by the Board of Directors, the Chairman of
- - - - -------
the Board or President shall have full power and authority on behalf of the
Corporation: (i) to attend and to act and to vote, or to execute proxies to
vote, at any meetings of stockholders of any corporation in which the
Corporation may hold stock, and at any such meeting shall possess and may
exercise, in person or by proxy, any and all rights, powers and privileges
incident to the ownership of such stock; and (ii) to exercise all rights
14
<PAGE>
of the general partner in any partnership of which the Corporation shall be a
general partner. The Board of Directors may, by resolution, from time to time,
confer like powers upon any other person or persons.
Section 6. Power to Amend. These By-Laws may be amended or repealed,
--------------
and new by-laws may be adopted, by vote of the stockholders entitled at the time
to vote for the election of directors or by resolution adopted by a majority of
the whole Board of Directors at any regular or special meeting; provided,
however, that any by-law or amendment to the by-laws so adopted by the Board of
Directors may be amended or repealed, and any by-law so repealed by the Board
may be reinstated, by vote of the stockholders entitled at the time to vote for
the election of directors, in which case the Board shall not thereafter take
action with respect to the by-laws which is inconsistent with the action so
taken by such stockholders; and provided further, that the Board of Directors
shall not have power to amend or repeal any existing by-law, or to adopt any new
by-law containing provisions inconsistent with any existing by-law, which by its
terms may be amended or repealed only by the stockholders.
/s/ Gottfried von Bismarck
----------------------------------------
Gottfried von Bismarck
Vice President and Secretary
15
<PAGE>
EXHIBIT 4.1
TELEMONDE INC
COMMON STOCK COMMON STOCK
NUMBER SHARES
------ ------
INCORPORATED UNDER SEE REVERSE FOR CERTAIN
THE LAWS OF DELAWARE DEFINITIONS AND RESTRICTIONS
CUSIP 87943G 10 1
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $.001 OF
================================TELEMONDE, INC.================================
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
TELEMONDE, INC.
CORPORATE
SEAL
1998
NEVADA
/s/ /s/
--------------------- ---------------------
Secretary Chairman of the Board
COUNTERSIGNED AND REGISTERED
FIRST UNION NATIONAL BANK
(Charlotte, North Carolina)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
TELEMONDE INC
COMMON STOCK COMMON STOCK
NUMBER SHARES
------ ------
INCORPORATED UNDER SEE REVERSE FOR CERTAIN
THE LAWS OF NEVADA DEFINITIONS AND RESTRICTIONS
CUSIP 87943G 10 1
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $.001 OF
================================TELEMONDE, INC.================================
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated
TELEMONDE, INC.
CORPORATE
SEAL
1998
NEVADA
/s/ /s/
--------------------- ---------------------
Secretary Chairman of the Board
COUNTERSIGNED AND REGISTERED
FIRST UNION NATIONAL BANK
(Charlotte, North Carolina)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement ("Agreement") is made and entered into
as of September 1, 1999, by and between Telemonde, Inc., a Nevada corporation
(the "Company") (as successor to Telemonde Investments Limited ("TIL")), and
Communications Collateral Limited, a British Virgin Islands company (the
"Purchaser").
This Agreement is made pursuant to Paragraph 8 of the Letter Agreement (the
"Letter Agreement") dated as of April 15, 1999 between Rhone Financial Indemnity
Re Limited, as sole member of TIL, and the Purchaser. In order to induce the
Purchaser to enter into that certain Facility Agreement, dated April 15, 1999,
by and between TIL and the Purchaser (the "Facility Agreement"), the Company has
agreed to provide the registration and other rights set forth in this Agreement
for the shares of Common Stock of the Company issuable under the Warrant (as
defined herein) and all other shares of Common Stock currently held by or
issuable under the terms of this Agreement to the Purchaser.
The parties hereby agree as follows:
ARTICLE 1.
Section 1.01 Definitions. Capitalized terms used and not otherwise
-----------
defined herein have the meanings set forth in the Warrant made by the Company in
favor of the Purchaser (the "Warrant"). The terms set forth below are used
herein as so defined:
"Affiliates" means the original investors in the Purchaser and their
Affiliates, as such term is defined in the Exchange Act.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means shares of common stock of the Company, $.001 par value
per share.
"Effectiveness Date" means November 11, 1999 or any extension thereof made
in accordance with Section 2.01(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means the record holder of any Registrable Security or any right
to receive a Registrable Security under the Warrant.
<PAGE>
"IPO" means the consummation of an underwritten public offering of Common
Stock pursuant to an effective registration statement filed under the Securities
Act (other than any registration statement relating to warrants, options or
shares of capital stock of the Company granted or to be granted or sold
primarily to employees, directors, or officers of the Company, as a registration
statement filed pursuant to Rule 145 under the Securities Act or any successor
rule or a registration statement relating to employee benefit plans or interests
therein) and the listing of such Common Stock on a national securities exchange
or the quotation of prices therefor on NASDAQ (NMS) or on NASDAQ (SMALLCAP).
"Issued Share Capital" means (i) all shares of issued and outstanding
capital stock of the Company and (ii) all shares of capital stock of the Company
issuable upon the exercise of any right to subscribe for or convert any debt or
other instrument into or to exercise any option or warrant for such shares of
capital stock.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other
governmental entity.
"Registrable Securities" means (i) the shares of Common Stock and all other
securities receivable upon exercise of the Warrant, (ii) 4,170,000 shares of
Common Stock transferred to the Purchaser as part of the transactions entered
into by the Company pursuant to the terms of a Stock Purchase Agreement, dated
May 14, 1999, among the Company and certain other parties, and (iii) the shares
of Common Stock issuable to the Purchaser pursuant to Section 2.01(b) hereof,
until such time as such securities cease to be Registrable Securities pursuant
to Section 1.03 hereof.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement.
Section 1.02 Stock Splits, Dividends, Recapitalizations, etc. Any shares
------------------------------------------------
or other securities resulting from any stock split, stock dividend,
reclassification of the Common Stock of the Company, merger, consolidation or
reorganization of the Company which may be received by the Holder of a Warrant
upon exercise of such Warrant shall also be deemed to be Registrable Securities.
Section 1.03 Registrable Securities. Any Registrable Security will cease
----------------------
to be a Registrable Security when (i) a registration statement covering such
Registrable Security has been declared effective by the Commission and such
Registrable Security has been issued, sold or disposed of pursuant to such
effective registration statement or (ii) such Registrable Security is disposed
of pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (iii) such Registrable Security is held by the Company or any
of its subsidiaries.
ARTICLE II
2
<PAGE>
Section 2.01 Registration in Connection with the IPO. (a) If at any time
---------------------------------------
or from time to time, the Company shall determine to register any of its
securities in connection with an IPO, the Company shall:
(i) promptly give to each Holder written notice thereof,
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), the Registrable Securities, as so
specified in a written request or requests received within twenty (20) days
after receipt of such written notice from the Company by any Holder, and
(iii) to the extent there is an over-allotment option in connection
with the IPO, promptly give to each Holder written notice of such over-allotment
and include in such over-allotment option (and any related qualification under
blue sky laws or other compliance) only Registrable Securities and no other
securities of the Company, as so specified in a written request or requests
received within ten (10) days after receipt of such written notice from the
Company by any Holder.
(b) In the event that a registration involving an IPO, the Company shall so
advise the Holder of the IPO in accordance with the written notice procedures
given pursuant to (a) above. The right of Holder to registration pursuant to
this Section 2.01 shall be conditioned upon such Holder's participation in the
underwriting arrangements required by this Section 2.01 and the inclusion of
such Holder's Registrable Securities in the underwriting, to the extent
requested, to the extent provided herein.
All Holders proposing to distribute their securities through such
underwriting shall together with the Company and the other holders distributing
their securities through such underwriting shall (together with the Company and
the other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company (or by the holders who have
demanded such registration). In connection with such underwriting agreement,
the Company shall negotiate in good faith with such underwriter to include a
provision in the underwriter's agreement in customary form to waive any lock-up
provisions relating to the Registrable Securities if market conditions so
warrant. The term of any lock-up provision relating to the Registrable
Securities shall not exeed the lesser of (a) 180 days after the closing date of
the IPO and (b) the lock up restriction applicable to any other director,
officer or shareholder of the Company. Notwithstanding any other provision of
this Section 2.01, if the managing underwriter determines that marketing factors
require a limitation of the number of shares to be underwritten, the managing
underwriter, with the Company's permission, may reduce the Registrable
Securities to be included in such underwriting (but not the registration), pro
rata among the Holders; provided, however, that, other than the Registrable
-------- -------
Securities registered connection with the over-allotment option, the Company's
shares shall be given priority, and, provided further, that in no event shall
-------- -------
the underwriter reduce the
3
<PAGE>
number of Registrable Securities to be included in the underwriting below 20% of
the total number of securities offered in connection with the IPO; and provided
--------
further that no securities of other holders of the Company's securities may be
- - - - -------
included in the underwriting if any Registrable Securities are excluded by the
underwriter from the offering. Any Registrable Security excluded from the
underwriting by reason of the underwriter's marketing limitation shall
nevertheless be included in such registration. To facilitate the allocation of
shares in accordance with the above provisions, the Company or the underwriters
may round the number of shares allocated to Holder to the nearest 100 shares.
If the Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the managing
underwriter. The Registrable Securities so withdrawn shall also be withdrawn
from registration. Such withdrawn Registrable Securities shall not be
transferred in a public distribution prior to 180 days after the effective date
of such registration, and the Effectiveness Date shall be extended for 180 days.
The Purchaser shall be entitled to an additional one-half of one percent
(.5%) of the Issued Share Capital (exclusive of shares issued hereunder) as of
the end of each thirty day period following the Effectiveness Date that the
Registrable Securities have not been registered for resale with the Commission
pursuant to an effective registration statement filed under the Securities Act
or during which the effectiveness of a registration has lapsed in violation of
Section 2.04(g) hereof (the "Non- Registration Penalty"); provided, however,
-------- -------
that if the Company has filed an IPO registration statement prior to or on the
Effectiveness Date, the Purchaser shall defer the Non-Registration Penalty for
90 days following the Effectiveness Date (the "Deferred Date"); provided,
--------
further, that (i) if the IPO registration statement has not been declared
- - - - -------
effective by the Effective Date, the Purchaser shall be entitled to an
additional one-half of one percent of the Issued Share Capital (as calculated on
the Effective Date), which shall become part of the Registrable Securities, and
(ii) if the IPO registration statement has not been declared effective by the
Deferred Date, the Purchaser shall be entitled to an additional 1 1/2% of the
Issued Share Capital (as calculated on the Deferred Date) and an additional one-
half of one percent (.5%) of the Issued Share Capital (as calculated as of the
beginning of each month) for each month that the Registrable Securities have not
been registered following the Deferred Date, which in each case shall become
part of the Registrable Securities. Notwithstanding anything herein to the
contrary, in no event shall the Purchaser receive in excess of six percent of
the Issued Share Capital outstanding as of November 11, 2000.
Section 2.02 Demand Registration. (a) Any time after the expiration of
-------------------
lock-up agreements signed by the Company's directors or executive officers in
connection with the IPO or 180 days after the closing date of the IPO, whichever
occurs first, the Purchaser may request the Company to register under the
Securities Act all of the Securities held by the Purchaser for sale in the
manner specified in such notice.
(b) Promptly, and in any event within 10 days, following receipt of any
notice under this Section 2.02, the Company shall immediately notify the
Purchaser of the receipt of notice under this Section 2.02 and shall use its
best efforts to register under the Securities Act, for public sale in
4
<PAGE>
accordance with the method of disposition specified in such notice from the
Purchaser, the Registrable Securities specified in the Purchaser's notice (and
in any notices received from other Holders no later than the 10th Business Day
after receipt of the notice sent by the Company) (such other Holders and the
Purchaser are hereinafter referred to as the "Requesting Holders"). If such
method of disposition shall be an underwritten public offering, the Company may
designate the managing underwriter of such offering, subject to the approval of
Requesting Holders holding a majority of the Registrable Securities to be
registered. Except as specified in the following sentence, the Company shall be
obligated to register Registrable Securities pursuant to this Section 2.02 on
one occasion only. A request pursuant to this Section 2.02 shall be counted only
when (i) all the Registrable Securities requested to be included in any such
registration have been so included, (ii) the corresponding registration
statement has become effective under the Securities Act, and (iii) the public
offering has been consummated and the Registrable Securities have been sold on
the terms and conditions specified therein. Notwithstanding anything to the
contrary contained herein, the Company may delay the filing or effectiveness of
a registration statement for up to 45 days after receipt of a request hereunder
if (i) at the time of such request the Company is engaged in a firm commitment
underwritten public offering of shares of its capital stock in which Holders may
include Registrable Securities or (ii) the Board of Directors of the Company
determines in its reasonable judgment and in good faith that the filing of such
a registration statement or the making of any required disclosure in connection
therewith would have a material adverse effect on the Company or substantially
interfere with a significant transaction in which the Company is then engaged.
(c) The Company shall be entitled to include in any registration statement
filed pursuant to this Section 2.02, for sale in accordance with the method of
disposition specified by the Requesting Holders, securities of the Company
entitled generally to vote in the election of directors (or any securities
convertible into or exchangeable for or exercisable for the purchase of
securities so entitled generally to vote in the election of directors).
Section 2.03 Piggy-Back Registration. If the Company proposes to
-----------------------
register any securities under the Securities Act for sale to the public (other
than in an IPO), whether for its own account or for the account of other
security holders or both (except with respect to registration statements on
Forms S-4 or S-8 for purposes permissible under such forms as of the date
hereof, or any successor forms for comparable purposes that may be adopted by
the Commission), each such time it will give written notice to all Holders of
its intention to do so (but in any event no less than 15 Business Days before
the anticipated filing date). Upon the written request of any such Holder,
received by the Company no later than the 10th Business Day after receipt by
such Holder of the notice sent by the Company, to register, on the same terms
and conditions as the shares of securities otherwise being sold pursuant to such
registration, any of its Registrable Securities (which request shall state the
intended method of disposition thereof), the Company will use its best efforts
to cause the Registrable Securities as to which registration shall have been so
requested to be included in the securities to be covered by the registration
statement proposed to be filed by the Company on the same terms and conditions
as any similar securities included therein, all to the extent requisite to
permit the sale or other disposition by each Holder (in accordance with its
written request) of such Registrable Securities so registered; provided,
however, that the Company may at any time prior to
5
<PAGE>
the effectiveness of any such registration statement, in its sole discretion and
without the consent of any Holder, abandon the proposed offering. The number of
Registrable Securities to be included in such a registration may be reduced or
eliminated if and to the extent the managing underwriter shall render to the
Company its opinion that such inclusion would jeopardize the successful
marketing of the securities (including the Registrable Securities) proposed to
be sold therein; provided, however, that such number of shares of Registrable
Securities shall not be reduced unless the shares to be included in such
underwriting for the account of any Person are also reduced on a pro rata basis.
Within 10 Business Days after receipt by each Person proposing to sell
Registrable Securities pursuant to the registered offering of the opinion of
such managing underwriter, all such Selling Holders may allocate among
themselves the number of shares of such Registrable Securities which such
opinion states may be distributed without adversely affecting the distribution
of the securities covered by the registration statement (or if such registered
holders are unable to agree among themselves with respect to such allocation,
such allocation shall be in proportion to the respective numbers of shares
specified in their respective written requests). Notwithstanding anything to the
contrary contained in this Section 2.03, in the event that there is a firm
underwriting commitment offer of securities of the Company pursuant to a
registration statement covering Registrable Securities and a Person does not
elect to sell its Registrable Securities to the underwriters of the Company=s
securities in connection with such offering, such Person shall not offer for
sale, sell, grant any option for the sale of, or otherwise dispose of, directly
or indirectly, any shares of Common Stock, or any securities convertible into or
exchangeable into or exercisable for any shares of Common Stock during the
period of distribution of the Company's securities by such underwriters, which
shall be specified in writing by the underwriters and shall not exceed 60 days
following the date of effectiveness under the Securities Act of the registration
statement relating thereto.
Section 2.04 Registration Procedures. If and whenever the Company is
-----------------------
required pursuant to this Agreement to effect the registration of any of the
Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file as promptly as possible with the Commission a
registration statement in accordance with this Article II with respect to
such securities (which filing made pursuant to Section 2.02 shall be made
within 30 days after the receipt by the Company of a notice requesting such
registration) and use its best efforts to cause such registration statement
to become and remain effective for the period of the distribution
contemplated thereby (as determined below);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified below and as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement in
accordance with the sellers' intended method of disposition set forth in
such registration statement for such period;
6
<PAGE>
(c) furnish to each Selling Holder and to each underwriter such
number of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus and each document
incorporated by reference therein prior to the filing with the Commission)
as such Persons may reasonably request in order to review such
documentation and to facilitate the public sale or other disposition of the
Registrable Securities covered by such registration statement;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or
blue sky laws of such jurisdictions as the Selling Holders or, in the case
of an underwritten public offering, the managing underwriter, shall
reasonably request;
(e) immediately notify each Selling Holder and each underwriter, at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(f) furnish at the request of a Selling Holder, (i) on the date that
Registrable Securities are delivered to the underwriters for sale pursuant
to such registration statement (or on the effective date in the case of an
offering that is not underwritten), an opinion of counsel for the Company
dated as of such date and addressed to the underwriters, if any, and to the
Selling Holders, stating that such registration statement has become
effective under the Securities Act and that (A) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (B) the registration
statement, the related prospectus, and each amendment or supplement
thereof, comply as to form in all material respects with the requirements
of the Securities Act and the applicable rules and regulations thereunder
of the Commission (except that such counsel need express no opinion as to
the financial statements or any engineering report contained or
incorporated therein) and (C) to such other effects as may reasonably be
requested by counsel for the underwriters or by any such Selling Holder or
its counsel, and (ii) on the effective date of the registration statement
and on the date that Registrable Securities are delivered to the
underwriters for sale pursuant to such registration statement, a letter
dated such dates from the independent accountants retained by the Company,
addressed to the underwriters, if any, and to the Selling Holders, stating
that they are independent public accounts within the meaning of the
Securities Act and that, in the opinion of such accountings, the financial
statements of the Company and the schedules thereto that are included or
incorporated by reference in the registration statement or the prospectus,
or any amendment or supplement thereof, comply as to form in all material
respects with the applicable requirements of the Securities Act and the
published rules and regulations
7
<PAGE>
promulgated thereunder, and such letter shall additionally address such
other financial matters (including information as to the period ending no
more than five business days prior to the date of such letter) included in
the registration statement in respect to which such letter is being given
as the underwriters or any Selling Holder may reasonably request;
(g) use its best efforts to keep effective and maintain a
registration, qualification, approval or listing on a national securities
exchange or the quotation of prices thereof on NASDAQ (NMS) or NASDAQ
(SMALLCAP) obtained to cover the Registrable Securities as may be necessary
for the Selling Holders to dispose thereof, which, for the avoidance of
doubt, shall be until the earlier of the sale of such Registerable
Securities or until the expiration of the Warrant, and shall from time to
time amend or supplement any prospectus used in connection therewith to the
extent necessary in order to comply with applicable law;
(h) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the Selling Holders to consummate the disposition of
such Registrable Securities; and
(i) enter into customary agreements (including, if requested, an
underwriting agreement in the customary form) and take such other actions
as are reasonably requested by the Selling Holders or the underwriters, if
any, in order to expedite or facilitate the disposition of such Registrable
Securities.
The period of distribution of Registrable Securities in a firm commitment
underwritten public offering shall be deemed to extend until each underwriter
has completed the distribution of all securities purchased by it, and the period
of distribution of Registrable Securities in any other registration shall be
deemed to extend until the earlier of the sale of all Registerable Securities
covered thereby or the fulfillment of the Company's obligations under subsection
(g) of this Section 2.04.
In connection with each registration hereunder, each Selling Holder will
furnish promptly to the Company in writing such information with respect to
itself and the proposed distribution by it as shall be reasonably necessary in
order to ensure compliance with federal and applicable state securities laws.
In connection with each registration hereunder with respect to an
underwritten public offering, each Selling Holder agrees to enter into a written
agreement with the managing underwriter or underwriters selected in the manner
herein provided in such form and containing such provisions as are customary in
the securities business for such an arrangement between underwriters and
companies of the Company's size and investment stature, provided that such
agreement shall not contain any such provision applicable to the Selling Holders
that is inconsistent with the provisions hereof; and further provided, that the
time and place of the closing under said agreement shall be as mutually agreed
upon among the Company, the Selling Holders and such managing underwriter.
8
<PAGE>
Section 2.05 Expenses. (a) All expenses incident to the Company's
--------
performance or compliance with this Agreement, including without limitation, all
registration and filing fees, blue sky fees and expenses, printing expenses,
listing fees, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs
of insurance and reasonable out-of-pocket expenses of the Selling Holders, but
excluding any Selling Expenses (as defined below), are herein called
"Registration Expenses." All underwriting, discounts and selling commissions
attributable to the sale of the Registrable Securities are herein called
"Selling Expenses."
(b) The Company will pay all Registration Expenses with each
registration statement filed pursuant to this Agreement, whether or not the
registration becomes effective, and the Selling Holders shall pay Selling
Expenses in connection with any Registrable Securities registered pursuant to
this Agreement.
Section 2.06 Indemnification. (a) In the event of a registration of any
---------------
Registrable Securities under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless each Selling Holder thereunder and each
underwriter of Registrable Securities thereunder and each Person, if any, who
controls such Selling Holder or underwriter within the meaning of the Securities
Act and the Exchange Act, against any losses, claims, damages or liabilities
(including reasonable attorneys' fees) ("Losses"), joint or several, to which
such Selling Holder or underwriter or controlling Person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such Losses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such Selling Holder,
each such underwriter and each such controlling Person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss or actions; provided, however, that the Company will not
be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by such Selling Holder, such underwriter or such
controlling Person in writing specifically for use in such registration
statement or prospectus.
(b) Each Selling Holder agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and each Person, if any,
who controls the Company within the meaning of the Securities Act or of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Selling Holder, but only with respect to information with respect to such
Selling Holder furnished in writing by or on behalf of such Selling Holder
expressly
9
<PAGE>
for inclusion in any registration statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 2.06. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 2.06 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, (i) if the indemnifying party has failed to assume the defense
and employ counsel or (ii) if the defendants in any such action include both the
indemnified party and the indemnifying party and counsel to the indemnified
party shall have concluded that there may be reasonable defenses available to
the indemnified party that are different from or additional to those available
to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, then the indemnified party shall have the right to select a separate
counsel and to assume such legal defense and otherwise to participate in the
defense of such action, with the expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) If the indemnification provided for in this Section 2.06 is
available to the Company or the Selling Holders or is insufficient to hold them
harmless in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then each such indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities and
expenses as between the Company on the one hand and each Selling Holder on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company on the one hand and of each Selling Holder on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and each Selling Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statements of a material fact or the omission or
alleged omission to state a material fact has ben made by, or relates to,
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who is not guilty of such fraudulent misrepresentation.
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<PAGE>
Section 2.07 Senior Registration Rights. The Company shall not grant or
--------------------------
permit to exist any registration rights to any other person which registration
rights are senior to the registration rights of any Holder of Registrable
Securities ("Senior Registration Rights"), unless either (i) the Company shall
first obtain the written consent of the Holders of a majority of the Registrable
Securities or (ii) each Holder of Registrable Securities is also granted Senior
Registration Rights.
ARTICLE III
MISCELLANEOUS
Section 3.01 Communications. All notices and other communications
--------------
provided for or permitted hereunder shall be made in writing by registered or
certified first-class mail, return receipt requested, telex, telegram, telecopy,
courier service or personal delivery:
(i) if to a Holder of Registrable Securities, at the most current
address given by such Holder of the Company in accordance with the
provisions of this Section 3.01, which address initially is, with respect
to the Purchaser, the address set forth in the Facility Agreement, and
(ii) if to the Company, initially at its address set forth in the
Warrant and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 3.01.
All such notices and communications shall be deemed to have been duly given
at the time delivered by hand, if personally delivered; four days after mailed
by certified mail, return receipt requested, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next Business Day
if timely delivered to an air courier guaranteeing overnight delivery.
Section 3.02 Counterparts. This Agreement may be executed in any number
------------
of counterparts and by different parties hereto in separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.
Section 3.03 Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 3.04 Governing Law. The laws of the State of New York shall
-------------
govern this Agreement without regard to principles of conflict of laws.
Section 3.05 Severability of Provisions. Any provision of this Agreement
--------------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting or impairing the validity or enforceability of such provision in any
other jurisdiction.
11
<PAGE>
Section 3.06 Attorneys' Fees. In any action or proceeding brought to
---------------
enforce any provision of this Agreement, the successful party shall be entitled
to recover reasonable attorneys' fees in addition to its costs and expenses and
any other available remedy.
Section 3.07 Amendment. This Agreement may be amended only by means of a
---------
written amendment signed by the Company and by the Holders of a majority of the
Registrable Securities.
Section 3.08 Registrable Securities Held by the Company or Its
-------------------------------------------------
Affiliates. In determining whether the Holders of the required amount of
- - - - ----------
Registrable Securities have concurred in any direction, amendment, supplement,
waiver or consent, Registrable Securities owned by the Company or its Affiliates
shall be disregarded.
Section 3.09 Assignment. The rights of the Holder under this Agreement
----------
shall be assignable only to Affiliates. Any prohibited assignment or attempted
assignment shall be void.
Section 3.10 Arbitration.
-----------
(a) Binding Arbitration. On the request of either Company or
-------------------
Purchaser (whether made before or after the institution of any legal
proceeding), any action, dispute, claim or controversy of any kind now existing
or hereafter arising between any of the parties hereto in any way arising out
of, pertaining to or in connection with this Agreement (a "Dispute") shall be
resolved by binding arbitration in accordance with the terms hereof. Either
Company or Purchaser may, by summary proceedings, bring an action in court to
compel arbitration of any Dispute.
(b) Governing Rules. Any arbitration shall be administered by the
---------------
American Arbitration Association (the "AAA") in accordance with the terms of
this Section, the Commercial Arbitration Rules of the AAA, and, to the maximum
extent applicable, the Federal Arbitration Act. Judgment on any award rendered
by an arbitrator may be entered in any court having jurisdiction.
(c) Arbitrators. Arbitration hereunder shall be before a three-person
-----------
panel of neutral arbitrators, consisting of one person from each of the
following categories: (1) an attorney who has practiced in the area of
commercial law for at least 10 years or a retired judge at the United States
District Court or an appellate court level; (2) a person with at least 10 years
experience in capital financing or investment banking; and (3) a person with at
least 10 years experience in the telecommunications industry. The AAA shall
submit a list of persons meeting the criteria outlined above for each category
of arbitrator, and the parties shall select one person from each category in the
manner established by the AAA. If the parties cannot agree on an arbitrator
within 30 days after the request for an arbitration, then any party may request
the AAA to select an arbitrator. The arbitrators may engage engineers,
accountants or other consultants that the arbitrator deems necessary to render a
conclusion in the arbitration proceeding.
12
<PAGE>
(d) Conduct of Arbitration. To the maximum extent practicable, an
----------------------
arbitration proceeding hereunder shall be concluded within 180 days of the
filing of the Dispute with the AAA. Arbitration proceedings shall be conducted
in New York, New York. Arbitrators shall be empowered to impose sanctions and
to take such other actions as the arbitrators deem necessary to the same extent
a judge could impose sanctions or take such other actions pursuant to the
Federal Rules of Civil Procedure and applicable law. At the conclusion of any
arbitration proceeding, the arbitrator shall make specific written findings of
fact and conclusions of law. The arbitrators shall have the power to award
recovery of all costs and fees to the prevailing party. The Company and
Purchaser each agrees to keep all Disputes and arbitration proceedings strictly
confidential except for disclosure of information required by applicable law.
(e) Costs of Arbitration. All fees of the arbitrators and any
--------------------
engineer, accountant or other consultant engaged by the arbitrators, shall be
paid by the Company and Purchaser equally unless otherwise awarded by the
arbitrators.
Section 3.11 Facsimiles. This Agreement may be executed by a facsimile
----------
signature, which shall have the same force and effect as a manually executed
signature.
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
TELEMONDE, INC.
ATTEST:
By: /s/ Adam Bishop
Secretary
Title: President
COMMUNICATIONS COLLATERAL LIMITED
ATTEST:
By: /s/ Thomas Huser
Title: Attorney in Fact
14
<PAGE>
Exhibit 4.3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement ("Agreement") is made and entered into
as of August 25th, 1999, by and between Telemonde, Inc., a Nevada corporation
(the "Company"), and Atlantic Crossing Ltd., a Bermuda company ("Atlantic
Crossing").
This Agreement is made pursuant to a Warrant to be entered into between
Atlantic Crossing and the Company (the "Warrant"), pursuant to which Atlantic
Crossing has the right to purchase one million one hundred thousand (1,100,000)
shares (as adjusted) of common stock of the Company, $.001 par value per share.
The Company has agreed to provide the registration and other rights set forth in
this Agreement for the shares of Common Stock of the Company issuable to
Atlantic Crossing under the Warrant.
The parties hereby agree as follows:
ARTICLE 1.
Section 1.01 Definitions. Capitalized terms used and not otherwise
-----------
defined herein have the meanings set forth in the Agreement. The terms set
forth below are used herein as so defined:
"Business Day" means each day in which banking institutions in New York are
not required or authorized by law or executive order to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means shares of common stock of the Company, $.001 par value
per share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means the record holder of any Registrable Security.
"IPO" shall mean the consummation of an underwritten public offering of
Common Stock pursuant to an effective registration statement filed under the
Securities Act (other than any registration statement relating to warrants,
options or shares of Common Stock granted or to be granted or sold primarily to
employees, directors, or officers of the Company, as a registration statement
filed pursuant to Rule 145 under the Securities Act or any successor rule or a
registration statement relating to employee benefit plans or interests therein)
and the listing of such Common Stock on a national securities exchange or the
quotation of prices therefor on NASDAQ (NMS) or on NASDAQ (SMALLCAP).
<PAGE>
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other
governmental entity.
"Registrable Securities" means the shares of Common Stock receivable upon
issuance under the Warrant until such time as such securities cease to be
Registrable Securities pursuant to Section 1.03 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement.
Section 1.02 Stock Splits, Dividends, Recapitalizations, etc. Any shares
------------------------------------------------
or other securities resulting from any stock split, stock dividend,
reclassification of the Common Stock of the Company, merger, consolidation or
reorganization of the Company which may be received by the Holder shall also be
deemed to be Registrable Securities.
Section 1.03 Registrable Securities. Any Registrable Security will cease
----------------------
to be a Registrable Security when (i) a registration statement covering such
Registrable Security has been declared effective by the Commission and such
Registrable Security has been issued, sold or disposed of pursuant to such
effective registration statement or (ii) such Registrable Security becomes
eligible for disposable pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act or (iii) such Registrable Security is held by
the Company or any of its subsidiaries.
ARTICLE II
Section 2.01 Demand Registration. (a) Any time after the expiration of
-------------------
any lock-up agreements signed by the Company's directors or executive officers
in connection with the IPO or 180 days after the closing date of the IPO,
whichever occurs first, the Purchaser may request the Company to register under
the Securities Act all of the Registrable Securities held by the Purchaser for
sale in the manner specified in such notice.
(b) Promptly, and in any event within 10 days, following receipt of any
notice under this Section 2.01, the Company shall immediately notify the
Purchaser of the receipt of notice under this Section 2.01 and shall use its
best efforts to register under the Securities Act, for public sale in accordance
with the method of disposition specified in such notice from the Purchaser, the
Registrable Securities specified in the Purchaser's notice (and in any notices
received from other Holders no later than the 10th Business Day after receipt of
the notice sent by the Company) (such other Holders and the Purchaser are
hereinafter referred to as the "Requesting Holders"). If such method of
disposition shall be an underwritten public offering, the Company may designate
the managing underwriter of such offering. Except as specified in the following
sentence, the Company
2
<PAGE>
shall be obligated to register Registrable Securities pursuant to this Section
2.01 on one occasion only. A request pursuant to this Section 2.01 shall be
counted only when (i) all the Registrable Securities requested to be included in
any such registration have been so included, (ii) the corresponding registration
statement has become effective under the Securities Act, and (iii) the public
offering has been consummated and the Registrable Securities have been sold on
the terms and conditions specified therein. Notwithstanding anything to the
contrary contained herein, the Company may delay the filing or effectiveness of
a registration statement for up to 45 days after receipt of a request hereunder
if (i) at the time of such request the Company is engaged in a firm commitment
underwritten public offering of shares of its Common Stock and Holders are
permitted to include all of the Registrable Securities or (ii) the Board of
Directors of the Company determines in its reasonable judgment and in good faith
that the filing of such a registration statement or the making of any required
disclosure in connection therewith would have a material adverse effect on the
Company or substantially interfere with a significant transaction in which the
Company is then engaged. The Company will promptly give the Holders written
notice of such determination and an approximation of the period of the
anticipated delay. The Company shall provide written notice to the Holders of
the end of each delay period. The Company shall not be entitled to initiate a
delay period unless it shall concurrently prohibit sales by such other security
holders under registration statements covering securities held by such other
security holders and have in place a policy that prohibits sales of securities
of the Company by senior executive officers during such period.
(c) The Company shall be entitled to include in any registration statement
filed pursuant to this Section 2.01, for sale in accordance with the method of
disposition specified by the Requesting Holders, securities of the Company
entitled generally to vote in the election of directors (or any securities
convertible into or exchangeable for or exercisable for the purchase of
securities so entitled generally to vote in the election of directors). If,
however, such registration is an underwritten registration and the managing
underwriters participating in such offering conclude that the total amount of
Common Stock requested by the Holders and the Company desiring to participate in
such registration to be included in such registration exceeds the amount which
can be sold in (or during the time of) such offering without delaying or
jeopardizing the success of the offering (including the price per share of the
securities to be sold) then the amount of Common Stock to be offered for the
account of the Company shall be reduced to zero, if necessary.
Section 2.02 Piggy-Back Registration. If the Company proposes to
-----------------------
register any securities under the Securities Act for sale to the public (other
than in an IPO), whether for its own account or for the account of other
security holders or both (except with respect to registration statements on
Forms S-4 or S-8 for purposes permissible under such forms as of the date
hereof, or any successor forms for comparable purposes that may be adopted by
the Commission), each such time it will give written notice to all Holders of
its intention to do so (but in any event no less than 15 Business Days before
the anticipated filing date). Upon the written request of any such Holder,
received by the Company no later than the 10th Business Day after receipt by
such Holder of the notice sent by the Company, to register, on the same terms
and conditions as the shares of securities otherwise being sold pursuant to such
registration, any of its Registrable Securities (which request shall state the
intended method of disposition thereof), the Company will use its best efforts
to cause the
3
<PAGE>
Registrable Securities as to which registration shall have been so requested to
be included in the securities to be covered by the registration statement
proposed to be filed by the Company on the same terms and conditions as any
similar securities included therein, all to the extent requisite to permit the
sale or other disposition by each Holder (in accordance with its written
request) of such Registrable Securities so registered; provided, however, that
the Company may at any time prior to the effectiveness of any such registration
statement, in its sole discretion and without the consent of any Holder, abandon
the proposed offering in its entirety. The number of Registrable Securities to
be included in such a registration may be reduced or eliminated if and to the
extent the managing underwriter shall render to the Company its opinion that
such inclusion would jeopardize the successful marketing of the securities
(including the Registrable Securities) proposed to be sold therein. Within 10
Business Days after receipt by each Person proposing to sell Registrable
Securities pursuant to the registered offering of the opinion of such managing
underwriter, all such Selling Holders may allocate among themselves the number
of shares of such Registrable Securities which such opinion states may be
distributed without adversely affecting the distribution of the securities
covered by the registration statement (or if such Selling Holders are unable to
agree among themselves with respect to such allocation, such allocation shall be
in proportion to the respective numbers of shares specified in their respective
written requests). Notwithstanding anything to the contrary contained in this
Section 2.02, in the event that there is a firm underwriting commitment offer of
securities of the Company pursuant to a registration statement covering
Registrable Securities and a Holder or any other Person does not elect to sell
its Registrable Securities to the underwriters of the Company's securities in
connection with such offering, such Holder or any other Person shall not offer
for sale, sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any shares of Common Stock, or any securities
convertible into or exchangeable into or exercisable for any shares of Common
Stock during the period of distribution of the Company's securities by such
underwriters, which shall be specified in writing by the underwriters and shall
not exceed 60 days following the date of effectiveness under the Securities Act
of the registration statement relating thereto.
Section 2.03 Shelf Registration. If the Company files a "Shelf"
------------------
registration, for an offer to be made on a continuous basis pursuant to Rule 415
of the Securities Act (other than an IPO), whether or not for sale for its own
account, it shall give prompt written notice to all Holders of its intention to
do so and Holders shall have the right to be included in such Self Registration
on the same terms and conditions as are applicable to Piggy-Back Registrations
under Section 2.02.
Section 2.04 Registration Procedures. If and whenever the Company,
-----------------------
pursuant to Section 2.01, becomes obligated to effect the registration of any of
the Registrable Securities under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file as promptly as possible with the Commission a
registration statement in accordance with this Article II with respect to
such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (as determined below);
4
<PAGE>
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the period specified below and as may be necessary
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement in
accordance with the sellers' intended method of disposition set forth in
such registration statement for such period;
(c) furnish to each Selling Holder and to each underwriter such number
of copies of the registration statement and the prospectus included therein
(including each preliminary prospectus and each document incorporated by
reference therein prior to the filing with the Commission) as such Persons
may reasonably request in order to review such documentation and to
facilitate the public sale or other disposition of the Registrable
Securities covered by such registration statement;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or
blue sky laws of such jurisdictions as the Selling Holders or, in the case
of an underwritten public offering, the managing underwriter, shall
reasonably request;
(e) immediately notify each Selling Holder and each underwriter, at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(f) furnish at the request of a Selling Holder, (i) on the date that
Registrable Securities are delivered to the underwriters for sale pursuant
to such registration statement (or on the effective date in the case of an
offering that is not underwritten), an opinion of counsel for the Company
dated as of such date and addressed to the underwriters, if any, and to the
Selling Holders, stating that such registration statement has become
effective under the Securities Act and that (A) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (B) the registration
statement, the related prospectus, and each amendment or supplement
thereof, comply as to form in all material respects with the requirements
of the Securities Act and the applicable rules and regulations thereunder
of the Commission (except that such counsel need express no opinion as to
the financial statements or any engineering report contained or
incorporated therein) and (C) to such other effects as may reasonably be
requested by counsel for the underwriters or by any such Selling Holder or
its counsel, and (ii) on the effective date of the registration statement
and on the date that Registrable Securities are delivered to the
underwriters for sale pursuant to such registration statement, a letter
dated
5
<PAGE>
such dates from the independent accountants retained by the Company,
addressed to the underwriters, if any, and to the Selling Holders, stating
that they are independent public accounts within the meaning of the
Securities Act and that, in the opinion of such accountings, the financial
statements of the Company and the schedules thereto that are included or
incorporated by reference in the registration statement or the prospectus,
or any amendment or supplement thereof, comply as to form in all material
respects with the applicable requirements of the Securities Act and the
published rules and regulations promulgated thereunder, and such letter
shall additionally address such other financial matters (including
information as to the period ending no more than five business days prior
to the date of such letter) included in the registration statement in
respect to which such letter is being given as the underwriters or any
Selling Holder may reasonably request;
(g) use its best efforts to keep effective and maintain a
registration, qualification, approval or listing obtained to cover the
Registrable Securities as may be necessary for the Selling Holders to
dispose thereof and shall from time to time amend or supplement any
prospectus used in connection therewith to the extent necessary in order to
comply with applicable law;
(h) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
the Company to enable the Selling Holders to consummate the disposition of
such Registrable Securities; and
(i) enter into customary agreements (including, if requested, an
underwriting agreement in the customary form) and take such other actions
as are reasonably requested by the Selling Holders or the underwriters, if
any, in order to expedite or facilitate the disposition of such Registrable
Securities.
The period of distribution of Registrable Securities in a firm commitment
underwritten public offering shall be deemed to extend until each underwriter
has completed the distribution of all securities purchased by it, and the period
of distribution of Registrable Securities in any other registration shall be
deemed to extend until the earlier of the sale of all Registrable Securities
covered thereby or the fulfillment of the Company's obligations under subsection
(g) of this Section 2.04;
In connection with each registration hereunder, each Selling Holder will
furnish promptly to the Company in writing such information with respect to
itself and the proposed distribution by it as shall be reasonably necessary in
order to ensure compliance with federal and applicable state securities laws.
In connection with each registration hereunder with respect to an
underwritten public offering, each Selling Holder agrees to enter into a written
agreement with the managing underwriter or underwriters selected in the manner
herein provided in such form and containing such provisions
6
<PAGE>
as are customary in the securities business for such an arrangement between
underwriters and companies of the Company's size and investment stature,
provided that such agreement shall not contain any such provision applicable to
the Selling Holders that is inconsistent with the provisions hereof; and further
provided, that the time and place of the closing under said agreement shall be
as mutually agreed upon among the Company, the Selling Holders and such managing
underwriter.
Section 2.05 Expenses. (a) All expenses incident to the Company's
--------
performance or compliance with this Agreement, including without limitation, all
registration and filing fees, blue sky fees and expenses, printing expenses,
listing fees, fees and disbursements of counsel and independent public
accountants for the Company, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, and costs
of insurance and reasonable out-of-pocket expenses of the Selling Holders, but
excluding any Selling Expenses (as defined below), are herein called
"Registration Expenses." All underwriting discounts and selling commissions
attributable to the sale of the Registrable Securities are herein called
"Selling Expenses."
(b) The Company will pay all Registration Expenses with each
registration statement filed pursuant to this Agreement, whether or not the
registration becomes effective, and the Selling Holders shall pay Selling
Expenses in connection with any Registrable Securities registered and sold
pursuant to this Agreement.
Section 2.06 Indemnification. (a) In the event of a registration of any
---------------
Registrable Securities under the Securities Act pursuant to this Agreement, the
Company will indemnify and hold harmless each Selling Holder thereunder and each
underwriter of Registrable Securities thereunder and each Person, if any, who
controls such Selling Holder or underwriter within the meaning of the Securities
Act and the Exchange Act, against any losses, claims, damages or liabilities
(including reasonable attorneys' fees) ("Losses"), joint or several, to which
such Selling Holder or underwriter or controlling Person may become subject
under the Securities Act, the Exchange Act or otherwise, insofar as such Losses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act pursuant to this Agreement, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such Selling Holder,
each such underwriter and each such controlling Person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Loss or actions; provided, however, that the Company will not
be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in conformity
with information furnished by such Selling Holder, such underwriter or such
controlling Person in writing specifically for use in such registration
statement or prospectus.
7
<PAGE>
(b) Each Selling Holder agrees to indemnify and hold harmless the
Company, its directors, officers, employees and agents and each Person, if any,
who controls the Company within the meaning of the Securities Act or of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Selling Holder, but only with respect to information with respect to such
Selling Holder furnished in writing by or on behalf of such Selling Holder
expressly for inclusion in any registration statement or prospectus relating to
the Registrable Securities, or any amendment or supplement thereto.
(c) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 2.06. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 2.06 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, (i) if the indemnifying party has failed to assume the defense
and employ counsel or (ii) if the defendants in any such action include both the
indemnified party and the indemnifying party and counsel to the indemnified
party shall have concluded that there may be reasonable defenses available to
the indemnified party that are different from or additional to those available
to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, then the indemnified party shall have the right to select a separate
counsel and to assume such legal defense and otherwise to participate in the
defense of such action, with the expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
(d) If the indemnification provided for in this Section 2.06 is not
available to the Company or the Selling Holders or is insufficient to hold them
harmless in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then each such indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities and
expenses as between the Company on the one hand and each Selling Holder on the
other, in such proportion as is appropriate to reflect the relative fault of the
Company on the one hand and of each Selling Holder on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company on the one hand and each Selling Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statements of a material fact or the omission or
alleged omission to state a material fact has ben made by, or relates to,
information supplied by such party,
8
<PAGE>
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who is not
guilty of such fraudulent misrepresentation.
ARTICLE III
MISCELLANEOUS
Section 3.01 Communications. All notices and other communications
--------------
provided for or permitted hereunder shall be made in writing by registered or
certified first-class mail, return receipt requested, telex, telegram, telecopy,
courier service or personal delivery:
(i) if to a Holder of Registrable Securities, at the most current
address given by such Holder of the Company in accordance with the
provisions of this Section 3.01, which address initially is, with
respect to Atlantic Crossing, the address set forth in the Warrant,
and
(ii) if to the Company, initially at its address set forth in the
Share Agreement and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 3.01.
All such notices and communications shall be deemed to have been duly given
at the time delivered by hand, if personally delivered; four days after mailed
by certified mail, return receipt requested, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next Business Day
if timely delivered to an air courier guaranteeing overnight delivery.
Section 3.02 Successor and Assigns. This Agreement shall inure to the
---------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities.
Section 3.03 Counterparts. This Agreement may be executed in any number
------------
of counterparts and by different parties hereto in separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same Agreement.
Section 3.04 Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
Section 3.05 Governing Law. The laws of the State of New York shall
-------------
govern this Agreement without regard to principles of conflict of laws.
9
<PAGE>
Section 3.06 Severability of Provisions. Any provision of this Agreement
--------------------------
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting or impairing the validity or enforceability of such provision in any
other jurisdiction.
Section 3.07 Attorneys' Fees. In any action or proceeding brought to
---------------
enforce any provision of this Agreement, the successful party shall be entitled
to recover reasonable attorneys' fees in addition to its costs and expenses and
any other available remedy.
Section 3.08 Amendment. This Agreement may be amended only by means of a
---------
written amendment signed by the Company and by the Holders of a majority of the
Registrable Securities.
Section 3.09 Registrable Securities Held by the Company or Its
-------------------------------------------------
Affiliates. In determining whether the Holders of the required amount of
Registrable Securities have concurred in any direction, amendment, supplement,
waiver or consent, Registrable Securities owned by the Company or its affiliates
(as such term is defined in the rules promulgated under the Securities Act)
shall be disregarded.
Section 3.10 Assignment. The rights of the Holder under this Agreement
----------
shall not be assigned to any party. Any assignment or attempted assignment
shall be void.
Section 3.11 Facsimiles. This Agreement may be executed by a facsimile
----------
signature, which shall have the same force and effect as a manually executed
signature
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
TELEMONDE, INC.
/s/ Adam Bishop
By: Adam Bishop
Title: President
ATLANTIC CROSSING, LTD.
/s/ Clint Walker
------------------------------------------
By: Clint Walker
Title: Vice President
10
<PAGE>
EXHIBIT 10.1
[EXECUTION COPY]
This Warrant and the securities to be issued upon exercise hereof have not
been registered under the Securities Act of 1933 (the "Securities Act"), or the
securities laws of any state. Neither this Warrant nor any interest herein may
be offered, sold, transferred, pledged, hypothecated or otherwise disposed of
except as expressly provided for herein. Neither the securities issuable upon
exercise hereof nor any interest therein may be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of except pursuant to (i) an
effective registration statement under the Securities Act and any applicable
state securities laws or (ii) an exemption from the registration requirements of
the Securities Act and any applicable state securities laws, such exemption to
be evidenced by such documentation as the Company may reasonably request.
TELEMONDE, INC.
WARRANT
Dated: September 1, 1999
No: 2
THIS IS TO CERTIFY THAT, for value received, Communications Collateral
Limited (the "Holder"), pursuant to Section 2.2 hereof, is entitled to purchase
from Telemonde, Inc., a Nevada corporation (the "Company"), during the Exercise
Period up to 4,526,231 shares (each a "Share" and collectively, the "Shares") of
common stock, $.001 par value per share, of the Company (the "Common Stock"),
which number represents seven percent of the Issued Share Capital of the Company
immediately prior to the Subsequent Financing, at the Exercise Price per Share,
subject to adjustment and upon the terms and conditions as hereinafter provided.
Certain terms used in this Warrant are defined in Article IV.
This Warrant is being issued in connection with the Letter Agreement.
ARTICLE I
EXERCISE OF WARRANT
1.1 Method of Exercise. To exercise this Warrant in whole or in
------------------
part, the Holder shall deliver to the Company, at the offices of the Warrant
Agent, (a) this Warrant, (b) a written notice, in substantially the form of the
Subscription Notice attached hereto as Exhibit A (the "Subscription Notice"), of
---------
such Holder's election to exercise this Warrant, which notice shall specify the
number of Shares to be purchased (in lots of not less than 1,000 Shares), the
denominations of the Share certificate or certificates desired and the name or
names in which such certificates are to be registered and (c) payment of the
<PAGE>
Exercise Price with respect to such Shares. Such payment shall be made in
immediately available funds or by certified check.
The Company shall as promptly as practicable and in any event within
five Business Days after receipt of the Subscription Notice, execute and deliver
or cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate number of Shares to which
the Holder is entitled. The Share certificate or certificates so delivered shall
be in such denominations as may be specified in such notice or, if such notice
shall not specify denominations, in denominations of 1,000 Shares each, and
shall be issued in the name of the Holder or such other name or names as shall
be designated in such notice. Such certificate or certificates shall be deemed
to have been issued, and the Holder or any other person so designated to be
named therein shall be deemed for all purposes to have become holders of record
of such Shares, as of the date the aforementioned notice is received by the
Company. If this Warrant shall have been exercised only in part, unless this
Warrant shall have expired, the Company shall, at the time of delivery of the
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights to purchase the remaining Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant, or, at the
request of the Holder, appropriate notation may be made on this Warrant which
shall then be returned to the Holder. The Company shall pay all expenses, taxes
and other charges payable in connection with the preparation, issuance and
delivery of Share certificates and new Warrants, except that, if Share
certificates shall be registered in a name or names other than the name of the
Holder, funds sufficient to pay all transfer taxes payable as a result of such
transfer shall be paid by the Holder at the time of delivering the
aforementioned notice of exercise or promptly upon receipt of a written request
of the Company for payment. The Company shall not be required to pay any tax or
taxes that may be payable with respect to any transfer of this Warrant.
1.2 Shares to be Fully Paid and Nonassessable; Reservation and
----------------------------------------------------------
Listing. All Shares issued upon the exercise of this Warrant shall be validly
- - - - -------
issued, fully paid and nonassessable and the Company shall at all times reserve
and keep available out of its authorized Shares, solely for the purpose of
issuance upon the exercise of this Warrant, such number of Shares as shall be
issuable upon the exercise hereof. If the Shares are then listed on any
national securities exchange (as such term is used in the Exchange Act) or
quoted on Nasdaq, the Company shall cause the Shares issuable upon exercise of
this Warrant to be duly listed or quoted thereon, as the case may be.
1.3 No Fractional Shares to be Issued. The Company shall not be
---------------------------------
required to issue fractions of Shares upon exercise of this Warrant. If any
fraction of a Share would, but for this Section, be issuable upon any exercise
of this Warrant, in lieu of such factional Share the Company shall pay to the
Holder in cash, an amount equal to the same fraction of the Market Price per
Share of outstanding Shares at the close of business on the Business Day
immediately prior to the date of such exercise.
2
<PAGE>
1.4 Maintenance of Percentage of Shares to be Issued. To the extent
------------------------------------------------
there is an increase or decrease in the Issued Share Capital prior to the
Subsequent Financing, the Shares issuable under this Warrant will be increased
or decreased accordingly such that the Shares will represent seven percent of
the Issued Share Capital of the Company immediately prior to the Subsequent
Financing.
1.5 Share Legend. Each certificate for Shares issued upon exercise
------------
of this Warrant, unless at the time of exercise such Shares are registered under
the Securities Act, shall bear the following legend:
This security has not been registered under the Securities Act of
1933 (the "Securities Act"), or the securities laws of any state and
may not be offered, sold, transferred, pledged, hypothecated or
otherwise disposed of except pursuant to (i) an effective registration
statement under the Securities Act and any applicable state securities
laws or (ii) an exemption from the registration requirements of the
Securities Act and any applicable state securities laws, such
exemption to be evidenced by such documentation as the issuer may
reasonably request.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless the holder of such
certificate shall have delivered to the Company an opinion of counsel, in
writing and addressed to the Company (which counsel and opinion shall be
reasonably acceptable to the Company), that the securities represented thereby
need no longer be subject to restrictions on resale under the Securities Act or
any state securities laws.
1.6 Cashless Exercise. Notwithstanding any provisions herein to the
-----------------
contrary, if the Market Price per Share is greater than the Exercise Price (as
of the date of calculation as set forth below), in lieu of exercising this
Warrant for cash, the Holder may elect to receive shares equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
the properly endorsed Subscription Notice and notice of such election in which
event the Company may issue to the Holder a number of shares of Common Stock
equal to the result of calculating the following quotient:
Y(A-B)
------
A
Y = the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
3
<PAGE>
A = the Market Price per Share (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
The date of calculation pursuant to this Section 1.6 shall be the Business
Day immediately preceding the date of the Subscription Notice.
Notwithstanding any provisions herein to the contrary, in the event the
Warrant is exercised in connection with the Company's initial public offering of
Common Stock, A, above, will equal the per share offering price to the public of
the Company's initial public offering. Further, notwithstanding the foregoing,
the Company may decline to accept Holder's election for cashless exercise at the
time of presentation of this Warrant and Subscription Notice.
ARTICLE II
WARRANT AGENT; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agent. Until such time, if any, as an independent agent
-------------
shall be appointed by the Company to perform services with respect to this
Warrant described herein (the "Warrant Agent"), the Company shall perform the
obligations of the Warrant Agent provided herein at its principal office address
or such other address in the United States as the Company shall specify by prior
written notice to the Holder.
2.2 No Transfer. Except as provided herein, the Holder of this
-----------
Warrant, by its acceptance hereof, covenants and agrees that this Warrant and
any interest herein may be sold, transferred, pledged or hypothecated only to
Affiliates. Neither the Shares issuable upon exercise hereof nor any interest
therein may be offered, sold, transferred, pledged, hypothecated or otherwise
disposed of, except pursuant to (i) an effective registration statement under
the Securities Act and any applicable state securities laws or (ii) an exemption
from the registration requirements of the Securities Act and any applicable
state securities laws, such exemption to be evidenced by such documentation as
the Company may reasonably request, including an opinion of counsel, in writing
and addressed to the Company (which counsel and opinion shall be reasonably
satisfactory to the Company), that such transfer is not in violation of the
Securities Act and any applicable state laws. The Company shall treat the Holder
as the holder and owner hereof for all purposes (and shall not be affected by
any notice to the contrary).
2.3 Division or Combination of Warrants. This Warrant may be divided
-----------------------------------
(in lots exercisable for not less than 1,000 Shares) or combined with other
Warrants upon surrender hereof. The Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
4
<PAGE>
2.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt
------------------------------------------------
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company, at the Holder's expense, will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new warrant of like tenor
and representing the right to purchase the same aggregate number of Shares.
ARTICLE III
ADJUSTMENT PROVISIONS
3.1 Adjustments Generally. The Exercise Price and the number of
---------------------
Shares (or other securities or property) issuable upon exercise of this Warrant
shall be subject to adjustment from time to time upon the occurrence of certain
events, as provided in this Article III.
3.2 Stock Dividends; Stock Splits; Reverse Stock Splits;
----------------------------------------------------
Reclassifications. If the Company, at any time this Warrant is outstanding, (a)
- - - - -----------------
declares a dividend or other distribution on its Shares in shares of any class
or series of capital stock, (b) subdivides its outstanding Shares, (c) combines
its outstanding Shares into a smaller number of Shares or (d) issues any shares
of its capital stock in a reclassification of the Shares, the number of Shares
purchasable upon exercise of this Warrant immediately prior to the record date
for such dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted so that the Holder shall
thereafter be entitled to receive for this Warrant the kind and number of Shares
that the Holder would have owned or have been entitled to receive after the
happening of any of the events described above, had this Warrant been fully
exercised immediately prior to the happening of such event or any record date
with respect thereto. An adjustment made pursuant to this Section 3.2 shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for such event.
3.3 Adjustments for the Issuances of Equity at less than the Exercise
-----------------------------------------------------------------
Price then in Effect.
- - - - --------------------
(a) If the Company, at any time this Warrant is outstanding, (i) fixes
a record date for the distribution of any rights, options or warrants entitling
the holders thereof to subscribe for or purchase Shares (or Convertible
Securities), whether or not immediately exercisable, or (ii) issues additional
Shares, and the price per share at which the Shares are issued or are issuable
upon exercise (such price at which the Shares are issuable upon exercise to be
determined by dividing (x) the total amount receivable by the Company in
consideration of the issuance of such rights, options, warrants or Convertible
Securities, if any, plus the total consideration payable to the Company upon
exercise, conversion or exchange thereof, by (y) the total number of Shares
covered by such rights, options, warrants or Convertible Securities) is lower
than the Exercise Price per Share at the record date for such issuance, the
number of Shares the Holder would be entitled to subscribe for or purchase upon
exercise of this Warrant
5
<PAGE>
immediately prior to the record date shall be adjusted by multiplying the number
of Shares theretofore purchasable upon exercise of this Warrant by a fraction,
the numerator of which shall be the number of Shares outstanding immediately
prior to the issuance of such rights, options, warrants, Convertible Securities
or Shares plus the number of additional Shares offered for subscription or
purchase or issuable upon conversion or exchange, and the denominator of which
shall be the number of Shares outstanding immediately prior to the issuance of
such rights, options warrants, Convertible Securities or Shares plus the number
of Shares which the aggregate offering price of the total number of Shares or
Convertible Shares so offered would purchase at such Exercise Price. Such
adjustment shall be made whenever such rights, options, warrants, Convertible
Securities or Shares are issued, and shall become effective on the distribution
date, retroactive to the record date for the determination of shareholders
entitled to receive such rights, options, warrants, Convertible Securities or
Shares. Notwithstanding anything herein to the contrary, any Shares issued or
issuable pursuant to this Section 3.3(a) shall be in addition to the seven
percent of the Issued Share Capital to which the Purchaser is entitled under
this Warrant.
(b) If rights, options or warrants distributed pursuant to Section
3.3(a) (i) are deemed to be transferred with the Shares, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Shares,
in each case until the occurrence of a specified event or events ("Trigger
Event"), such rights, options or warrants shall be deemed not to have been
distributed for purposes of this Article III (and no adjustments under this
Article III will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights, options and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) shall be made as
provided in this Article III.
3.4 Expiration of Rights; Options and Conversion Privileges. Upon
-------------------------------------------------------
the expiration of any rights, options or warrants, the issuance of which caused
an adjustment pursuant to this Article III, if any thereof shall not have been
exercised, the Exercise Price and the number of Shares purchasable upon the
exercise of this Warrant shall, upon such expiration, be readjusted and shall
thereafter, upon any fixture exercise, be such as they would have been had they
been originally adjusted (or had the original adjustment not been required, as
the case may be) as if (a) the only Shares so issued were the Shares, if any,
actually issued or sold upon the exercise of such rights, options, warrants or
conversion or exchange rights and (b) such Shares, if any, were issued or sold
for the consideration actually received by the Company upon such exercise plus
the consideration, if any, actually received by the Company for issuance, sale
or grant of all such rights, options, warrants or conversion or exchange rights
whether or not exercised; provided, further, that no such readjustment shall
have the effect of increasing the Exercise Price by an amount, or decreasing the
number of shares purchasable upon exercise of this Warrant by a number, in
excess of the amount or number of the adjustment initially made in respect to
the issuance, sale or grant of such rights, options, warrants or conversion or
exchange rights.
6
<PAGE>
3.5 Merger or Consolidation.
-----------------------
(a) Subject to the provisions of Section 3.5(b), in case of the
consolidation of the Company with, or merger of the Company with or into, or
sale of all or substantially all of the properties and assets of the Company to
any person and in connection therewith consideration is payable to holders of
Shares (or other securities or property purchasable upon exercise of this
Warrant) in exchange therefor, this Warrant shall remain subject to the terms
and conditions set forth herein and this Warrant shall, after such
consolidation, merger or sale, entitle the Holder to receive upon exercise the
number of shares of capital stock or other securities or property (including
cash) of the Company, or of such person resulting from such consolidation or
surviving such merger or to which such sale shall be made, as the case may be,
that would have been distributable or payable on account of the Shares (or other
securities or properties purchasable upon exercise of Warrants) if such Holder's
Warrants had been exercised immediately prior to such merger, consolidation or
sale (or, if applicable, the record date therefor), and in any such case the
provisions of this Warrant with respect to the rights and interests thereafter
of the Holder of this Warrant shall be appropriately adjusted by the Board of
Directors of the Company in good faith so as to be applicable, as nearly as may
be reasonably be, to any shares of stock or other securities or any property
thereafter deliverable on the exercise of this Warrant.
(b) Notwithstanding the foregoing, (i) if the Company merges or
consolidates with or into, or sells all or substantially all of its property and
assets to, another person and consideration is payable to holders of Shares in
exchange for their Shares in connection with such merger, consolidation or sale
which consists solely of cash or (ii) in the event of the dissolution,
liquidation or winding up of the Company, then the Holder shall be entitled to
receive distributions on the date of such event on an equal basis with holders
of Shares (or other securities issuable upon exercise of this Warrant) as if
this Warrant had been exercised immediately prior to such event, less the
aggregate Exercise Price. Upon receipt of such payment, if any, the right of the
Holder shall terminate and cease and this Warrant shall expire.
3.6 Adjustment Rules.
----------------
(a) Any adjustments pursuant to this Article III shall be made
successively whenever an event referred to herein shall occur.
(b) No adjustment shall be made pursuant to this Article III in
respect of the issuance from time to time of Shares solely as a result of the
exercise of this Warrant.
(c) If the Company shall set a record date to determine the holders of
Shares for purposes of an action specified in this Article III and shall abandon
such action prior to effecting such action, then no adjustment shall be made
pursuant to this Article III in respect of such action.
7
<PAGE>
(d) If the aggregate number of Shares issuable upon the exercise of
this Warrant shall be adjusted pursuant to this Article III, the Exercise Price
per Share shall be appropriately adjusted.
(e) If the occurrence of one event with respect to the Company could
result in two or more adjustments pursuant to this Article III, then the Board
of Directors of the Company shall, in its sole discretion, determine which such
adjustment shall result from such event.
3.7 Notice of Adjustment. As promptly as practicable after any
--------------------
action is taken (or sooner if the Company determines to take any action) which
requires an adjustment or readjustment pursuant to this Article III, the Company
shall give notice to the Holder of such event, and, if determinable, the
required adjustment and the computation thereof. If the required adjustment is
not determinable at the time of such notice, the Company shall give notice to
the Holder of such adjustment and computation promptly after such adjustment
becomes determinable.
3.8 No Adjustment. The Company hereby represents and warrants that
-------------
there has been no event that would cause an adjustment to this Warrant pursuant
to this Article III from May 14, 1999 until the date hereof.
ARTICLE IV
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Affiliates" means the original investors of the Holder and their
----------
Affiliates, as such term is defined in the Exchange Act.
"Business Day" means each day in which banking institutions in New
------------
York are not required or authorized by law or executive order to close.
"Company" shall have the meaning set forth in the first paragraph of
-------
this Warrant.
"Convertible Securities" means any securities which are convertible
----------------------
into or exercisable or exchangeable for Shares (whether or not immediately
exercisable, convertible or exchangeable).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
"Exercise Period" means any Business Day until three years from the
---------------
date of the Subsequent Financing.
8
<PAGE>
"Exercise Price" shall mean the lesser of (i) $5.25 per Share or (ii)
--------------
in the event the closing sales price of a share of Common Stock is below $5.25
for any 20 consecutive trading days between the date of the issuance of this
Warrant and the date of an underwritten initial public offering, then the
average of closing sales price per Share during such 20 day period.
"Expiration Date" means the Business Day immediately following the
---------------
last Business Day of the Exercise Period.
"Holder" shall have the meaning set forth in the first paragraph of
------
this Warrant.
"Issued Share Capital" means (1) all shares of issued and outstanding
--------------------
capital stock of the Company, (2) all shares of capital stock of the Company
issuable upon the exercise of any right to subscribe for or convert any debt or
other instrument into or to exercise any option or warrant for such shares of
capital stock, and (3) the shares issuable upon the exercise of the this
Warrant.
"Letter Agreement" means the Letter Agreement, dated as of April 15,
----------------
1999, between Rhone Financial Indemnity Re Limited, as sole member of the
predecessor of the Company, and the Holder.
"Market Price per Share" means, with respect to the Shares, on any
----------------------
particular date (a) the closing bid price per share of the Common Stock on such
date on either the Nasdaq National Market or the Nasdaq Small Cap Market or
other national securities exchange on which the Common Stock has been listed or
if there is no such price on such date, then the closing bid price on such
national securities exchange or market on the date nearest preceding such date,
or (b) if the Common Stock is not listed on the Nasdaq National Market, the
Nasdaq Small Cap Market or any national securities exchange or market, the
closing bid for a share of Common Stock in the over-the-counter market, as
reported by the Nasdaq Small Cap Market at the close of business on such date,
or (c) if the Common Stock is not quoted on the Nasdaq Small Cap Market, the
closing bid price for a share of Common Stock in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its sections of reporting prices), then the average of
the "Pink Sheet" quotes for the relevant conversion period as determined by the
Holder, or (e) if the Common Stock is no longer publicly traded, the fair market
value of a share of Common Stock as determined by a nationally recognized
independent appraiser (an "Appraiser") selected in good faith by the Holder;
provided, however, that the Company, after receipt of the determination by such
- - - - -------- -------
Appraiser, shall have the right to select an additional Appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such Appraiser. "Trading Day" means (a) a day on which the Common Stock
is traded on the Nasdaq Small Cap Market or principal national securities
exchange or market on which the Common Stock has been listed, or (b) if the
Common Stock is not listed on the Nasdaq Small Cap Market or any stock exchange
or market, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the Nasdaq Small Cap Market, or (c) if the Common Stock
is not quoted on the Nasdaq Small Cap
9
<PAGE>
Market, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).
"Nasdaq" means The Nasdaq Stock Market.
------
"Securities Act" means the Securities Act of 1933.
--------------
"Shares" shall have the meaning set form in the first paragraph of
------
this Warrant and shall refer, as the context requires, to all shares of Common
Stock issued by the Company.
"Subsequent Financing" means the date on which the Company issues
--------------------
equity securities pursuant to an offering of at least $10,000,000.
"Warrant Agent" shall have the meaning set forth in Section 2.1.
-------------
ARTICLE V
MISCELLANEOUS
5.1 Expiration. This Warrant shall expire and be of no further force
----------
and effect on the Expiration Date.
5.2 Notices. All notices, consents, waivers, and other
-------
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
In the case of the Holder:
Communications Collateral Limited
P O Box 438
The Tropic Isle Building
Road Town
Tortola
British Virgin Islands
Attn: Susan Demers
Facsimile No.: (284) 494-2704
10
<PAGE>
copy to: Peter Fitzpatrick, Esquire
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104-0053
Facsimile No.: (212) 541-1371
In case of the Company:
Telemonde, Inc.
200 Madison Avenue
New York, New York 10016
Facsimile No.: (212) 683-6966
copy to: J. Porter Durham, Jr., Esquire
Baker, Donelson, Bearman & Caldwell
801 Pennsylvania Avenue
Suite 800
Washington, D.C. 20004
Facsimile No.: (202) 508-3402
5.3 Waivers; Amendments. No failure or delay of the Holder in
-------------------
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of such right or power, or any abandonment
or discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Holder.
5.4 GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE
-------------
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE
OF LAW PRINCIPLES.
5.5 Survival of Agreements. All covenants and agreements made by the
----------------------
parties herein shall be considered to have been relied upon by each party and
shall survive the issuance and delivery of this Warrant, and shall continue in
full force and effect so long as this Warrant is outstanding.
5.6 Covenants to Bind Successor and Assigns. All covenants,
---------------------------------------
stipulations, promises and agreements in this Warrant contained by or on behalf
of the Company shall bind its successors and assigns, whether so expressed or
not.
11
<PAGE>
5.7 Withholding. The Company shall be entitled to withhold any
-----------
amounts required to be withheld under applicable law from any amounts to be paid
to the Holder hereunder.
5.8 Severability. In case any one or more of the provisions
------------
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
5.9 Section Headings. The section headings used herein are for
----------------
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
5.10 No Rights as Stockholder. This Warrant shall not entitle the
------------------------
Holder to any rights as a stockholder of the Company and no dividends shall be
payable or accrue in respect of this Warrant or the interest represented hereby
or the Shares underlying this Warrant exercisable hereunder unless and until and
only to the extent this Warrant shall be exercised.
5.11 No Requirement to Exercise. Nothing contained in this Warrant
--------------------------
shall be construed as requiring the Holder to exercise this Warrant.
5.12 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
5.13 Facsimiles. This Warrant may be executed by a facsimile
----------
signature, which shall have the same force and effect as a manually executed
signature.
5.14 Registration Rights Agreement. The Holder hereof shall benefit
-----------------------------
from the registration rights granted under the Registration Rights Agreement in
accordance with the terms thereof.
12
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first above written.
TELEMONDE, INC.
By: /s/ Adam Bishop
------------------------------------
Name: Adam Bishop
-------------------------------
Title: President
------------------------------
Acknowledged and Agreed:
COMMUNICATIONS COLLATERAL LIMITED
By: /s/ Thomas Huser
----------------------------------
Name: Thomas Huser
-----------------------------
Title: Attorney-in-Fact
----------------------------
13
<PAGE>
Exhibit A
---------
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To: Telemonde, Inc.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Warrant for, and to purchase thereunder,
___________ Shares, as provided for therein, and tenders herewith payment of the
Exercise Price in immediately available funds.
Please issue a certificate or certificates for such Shares in the
following name or names and denominations:
If said number of Shares shall not be all the Shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such Shares less any fraction of a
Share paid in cash.
Dated:
[THE HOLDER]
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
14
<PAGE>
Exhibit 10.2
This Warrant and the securities to be issued upon exercise hereof have not
been registered under the Securities' Act of 1933 (the "Securities Act"), or the
securities laws of any state. Neither this Warrant nor any, interest herein may
be offered, sold, transferred, pledged, hypothecated or otherwise disposed of
except as expressly provided for herein. Neither the securities issuable upon
exercise hereof nor any interest therein may be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of except pursuant to (i) an
effective registration statement under the Securities Act and any applicable
state securities laws or (ii) an exemption from the registration requirements of
the Securities Act and any applicable state securities laws, such exemption to
be evidenced by such documentation as the Company may reasonably request.
TELEMONDE, INC.
WARRANT
Dated: August 25, 1999
No: 1
THIS IS TO CERTIFY THAT, for value received, Atlantic Crossing Ltd., a
Bermuda Company ("Holder"), pursuant to Section 2.2 hereof, is entitled to
purchase from Telemonde, Inc., a Nevada corporation (the "Company"), prior to
5:00 p.m., New York City time on the first anniversary of the date hereof (the
"Expiration Date"), at the offices of the Warrant Agent (as hereinafter
defined), up to one million one hundred thousand (1,100,000) shares of common
stock, $.001 par value per share (each a "Share" and collectively, the
"Shares"), of the Company at an exercise price of $5.25 per Share (subject to
adjustment pursuant to Article III, the "Exercise Price"), subject to adjustment
and upon the terms and conditions as hereinafter provided. Certain terms used
in this Warrant are defined in Article IV.
ARTICLE I
EXERCISE OF WARRANT
1.1 Method of Exercise. To exercise this Warrant in whole or in part, the
------------------
Holder shall deliver to the Company, at the offices of the Warrant Agent, (a)
this Warrant, (b) a written notice, in substantially the form of the
Subscription Notice attached hereto as Exhibit A, of such Holder's election to
---------
exercise this Warrant, which notice shall specify the number of Shares to be
purchased (in lots of not less than 1,000 Shares), the denominations of the
Share certificate or certificates desired and the name or names in which such
certificates are to be registered and (c) payment of the Exercise Price with
respect to such Shares. Such payment shall be made in immediately available
funds or by certified check.
The Company shall as promptly as practicable and in any event within
five Business Days after receipt of the Subscription Notice, execute and deliver
or cause to be executed and delivered, in accordance with such notice, a
certificate or certificates representing the aggregate
<PAGE>
number of Shares to which the Holder is entitled. The Share certificate or
certificates so delivered shall be in such denominations as may be specified in
such notice or, if such notice shall not specify denominations, in denominations
of 1,000 Shares each, and shall be issued in the name of the Holder or such
other name or names as shall be designated in such notice. Such certificate or
certificates shall be deemed to have been issued, and the Holder or any other
person so designated to be named therein shall be deemed for all purposes to
have become holders of record of such Shares, as of the date the aforementioned
notice is received by the Company. If this Warrant shall have been exercised
only in part, unless this Warrant shall have expired, the Company shall, at the
time of delivery of the certificate or certificates, deliver to the Holder a new
Warrant evidencing the rights to purchase the remaining Shares called for by
this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant which shall then be returned to the Holder. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, issuance and delivery of Share certificates and new Warrants,
except that, if Share certificates shall be registered in a name or names other
than the name of the Holder, funds sufficient to pay all transfer taxes payable
as a result of such transfer shall be paid by the Holder at the time of
delivering the aforementioned notice of exercise or promptly upon receipt of a
written request of the Company for payment. The Company shall not be required to
pay any tax or taxes that may be payable with respect to any transfer of this
Warrant.
1.2 Shares to be Fully Paid and Nonassessable; Reservation and Listing.
------------------------------------------------------------------
All Shares issued upon the exercise of this Warrant shall be validly issued,
fully paid and nonassessable and the Company shall at all times reserve and keep
available out of its authorized Shares, solely for the purpose of issuance upon
the exercise of this Warrant, such number of Shares as shall be issuable upon
the exercise hereof. If the Shares are then listed on any national securities
exchange (as such term is used in the Exchange Act) or quoted on NASDAQ, the
Company shall cause the Shares issuable upon exercise of this Warrant to be duly
listed or quoted thereon, as the case may be.
1.3 No Fractional Shares to be Issued. The Company shall not be required
---------------------------------
to issue fractions of Shares upon exercise of this Warrant. If any fraction of
a Share would, but for this Section, be issuable upon any exercise of this
Warrant, in lieu of such factional Share the Company shall pay to the Holder in
cash, an amount equal to the same fraction of the Market Price per Share of
outstanding Shares at the close of business on the Business Day immediately
prior to the date of such exercise.
1.4 Share Legend. Each certificate for Shares issued upon exercise of
------------
this Warrant, unless at the time of exercise such Shares are registered under
the Securities Act, shall bear the following legend:
2
<PAGE>
This security has not been registered under the Securities Act of 1933
(the "Securities Act"), or the securities laws of any state and may
not be offered, sold, transferred, pledged, hypothecated or otherwise
disposed of except pursuant to (i) an effective registration statement
under the Securities Act and any applicable state securities laws or
(ii) an exemption from the registration requirements of the Securities
Act and any applicable state securities laws, such exemption to be
evidenced by such documentation as the issuer may reasonably request.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act) shall also bear such legend unless the holder of such
certificate shall have delivered to the Company an opinion of counsel, in
writing and addressed to the Company (which counsel and opinion shall be
reasonably acceptable to the Company), that the securities represented thereby
need no longer be subject to restrictions on resale under the Securities Act or
any state securities laws.
ARTICLE II
WARRANT AGENT; TRANSFER, EXCHANGE
AND REPLACEMENT OF WARRANTS
2.1 Warrant Agent. Until such time, if any, as an independent agent shall
-------------
be appointed by the Company to perform services with respect to this Warrant
described herein (the "Warrant Agent"), the Company shall perform the
obligations of the Warrant Agent provided herein at its principal office address
or such other address in the United States as the Company shall specify by prior
written notice to the Holder.
2.2 No Transfer. Except as provided herein, the Holder of this Warrant,
-----------
by its acceptance hereof, covenants and agrees that neither this Warrant nor any
interest herein may be sold, transferred, pledged or hypothecated, other than a
transfer to an Affiliate of the Holder. Neither the Shares issuable upon
exercise hereof nor any interest therein may be offered, sold, transferred,
pledged, hypothecated or otherwise disposed of, except pursuant to (i) an
effective registration statement under the Securities Act and any applicable
state securities laws or (ii) an exemption from the registration requirements of
the Securities Act and any applicable state securities laws, such exemption to
be evidenced by such documentation as the Company may reasonably request,
including an opinion of counsel, in writing and addressed to the Company (which
counsel and opinion shall be reasonably satisfactory to the Company), that such
transfer is not in violation of the Securities Act and any applicable state
laws. The Company shall treat the Holder as the holder and owner hereof for all
purposes (and shall not be affected by any notice to the contrary).
3
<PAGE>
2.3 Division or Combination of Warrants. This Warrant may be divided (in
-----------------------------------
lots exercisable for not less than 1,000 Shares) or combined with other Warrants
upon surrender hereof. The Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
2.4 Loss, Theft, Destruction of Warrant Certificates. Upon receipt of
------------------------------------------------
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Company,
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company, at the Holder's expense, will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Warrant, a new warrant of like tenor
and representing the right to purchase the same aggregate number of Shares.
ARTICLE III
ADJUSTMENT PROVISIONS
3.1 Adjustments Generally. The Exercise Price and the number of Shares
---------------------
(or other securities or property) issuable upon exercise of this Warrant shall
be subject to adjustment from time to time upon the occurrence of certain
events, as provided in this Article III.
3.2 Stock Dividends; Stock Splits; Reverse Stock Splits;
----------------------------------------------------
Reclassifications. In case the Company shall, at any time or from time to time
prior to the Issue Date, (a) declare a dividend or other distribution on its
Shares in shares of any class or series of capital stock, (b) subdivide its
outstanding Shares, (c) combine its outstanding Shares into a smaller number of
Shares or (d) issue any shares of its capital stock in a reclassification of the
Shares, the number of Shares purchasable upon exercise of this Warrant
immediately prior to the record date for such dividend or distribution or the
effective date of such subdivision, combination or reclassification shall be
adjusted so that the Holder shall thereafter be entitled to receive for this
Warrant the kind and number of Shares that the Holder would have owned or have
been entitled to receive after the happening of any of the events described
above, had this Warrant been fully exercised immediately prior to the happening
of such event or any record date with respect thereto. An adjustment made
pursuant to this Section 3.2 shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event.
3.3 Rights, Options and Warrants.
----------------------------
4
<PAGE>
(a) If the Company fixes a record date for the distribution of any
rights, options or warrants to all holders of its Shares entitling such holders
to subscribe for or purchase Shares (or Convertible Securities), whether or not
immediately exercisable, and the price per share at which Shares are issuable
upon exercise (such price to be determined by dividing (x) the total amount
receivable by the Company in consideration of the issuance of such rights,
options, warrants or Convertible Securities, if any, plus the total
consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the total number of Shares covered by such rights, options,
warrants or Convertible Securities) is lower than the Market Price per Share at
the record date for such issuance, the number of Shares the Holder would be
entitled to subscribe for or purchase upon exercise of this Warrant immediately
prior to the record date shall be adjusted by multiplying the number of Shares
theretofore purchasable upon exercise of this Warrant by a fraction, the
numerator of which shall be the number of Shares outstanding immediately prior
to the issuance of such rights, options, warrants or Convertible Securities plus
the number of additional Shares offered for subscription or purchase or issuable
upon conversion or exchange, and the denominator of which shall be the number of
Shares outstanding immediately poor to the issuance of such rights, options
warrants or Convertible Securities plus the number of Shares which the aggregate
offering price of the total number of Shares so offered would purchase at such
Market Price. Such adjustment shall be made whenever such rights, options,
warrants or Convertible Securities are issued, and shall become effective on the
distribution date, retroactive to the record date for the determination of
shareholders entitled to receive such rights, options, warrants or Convertible
Securities.
(b) If rights, options or warrants distributed pursuant to Section
3.3(a) (i) are deemed to be transferred with the Shares, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Shares,
in each case until the occurrence of a specified event or events ("Trigger
Event"), such rights, options or warrants shall be deemed not to have been
distributed for purposes of this Article III (and no adjustments under this
Article III will be required) until the occurrence of the earliest Trigger
Event, whereupon such rights, options and warrants shall be deemed to have been
distributed and an appropriate adjustment (if any is required) shall be made as
provided in this Article III.
5
<PAGE>
3.4 Expiration of Rights; Options and Conversion Privileges. Upon the
-------------------------------------------------------
expiration of any rights, options or warrants, the issuance of which caused an
adjustment pursuant to this Article III, if any thereof shall not have been
exercised, the Exercise Price and the number of Shares purchasable upon the
exercise of this Warrant shall, upon such expiration, be readjusted and shall
thereafter, upon any fixture exercise, be such as they would have been had they
been originally adjusted (or had the original adjustment not been required, as
the case may be) as if (a) the only Shares so issued were the Shares, if any,
actually issued or sold upon the exercise of such rights, options, warrants or
conversion or exchange rights and (b) such Shares, if any, were issued or sold
for the consideration actually received by the Company upon such exercise plus
the consideration, if any, actually received by the Company for issuance, sale
or grant of all such rights, options, warrants or conversion or exchange rights
whether or not exercised; provided, further, that no such readjustment shall
have the effect of increasing the Exercise Price by an amount, or decreasing the
number of shares purchasable upon exercise of this Warrant by a number, in
excess of the amount or number of the adjustment initially made in respect to
the issuance, sale or grant of such rights, options, warrants or conversion or
exchange rights.
3.5 Merger or Consolidation.
-----------------------
(a) Subject to the provisions of Section 3.5(b), in case of the
consolidation of the Company with, or merger of the Company with or into, or
often sale of all or substantially all of the properties and assets of the
Company to, any person, and in connection therewith consideration is payable to
holders of Shares (or other securities or property purchasable upon exercise of
this Warrant) in exchange therefor, this Warrant shall remain subject to the
terms and conditions set forth herein and this Warrant shall, after such
consolidation, merger or sale, entitle the Holder to receive upon exercise the
number of shares of capital stock or other securities or property (including
cash) of the Company, or of such Person resulting from such consolidation or
surviving such merger or to which such sale shall be made, as the case may be,
that would have been distributable or payable on account of the Shares (or other
securities or properties purchasable upon exercise of Warrants) if such Holder's
Warrants had been exercised immediately prior to such merger, consolidation or
sale (or, if applicable, the record date therefor), and in any such case the
provisions of this Warrant with respect to the rights and interests thereafter
of the Holder of this Warrant shall be appropriately adjusted by the Board of
Directors of the Company or the surviving entity in good faith so as to be
applicable, as nearly as may be reasonably be, to any shares of stock or other
securities or any property thereafter deliverable on the exercise of this
Warrant.
6
<PAGE>
(b) Notwithstanding the foregoing, (i) if the Company merges or
consolidates with or into, or sells all or substantially all of its property and
assets to, another person and consideration is payable to holders of Shares in
exchange for their Shares in connection with such merger, consolidation or sale
which consists solely of cash or (ii) in the event of the dissolution,
liquidation or winding up of the Company, then the Holder shall be entitled to
receive distributions on the date of such event on an equal basis with holders
of Shares (or other securities issuable upon exercise of this Warrant) as if
this Warrant had been exercised immediately prior to such event, less the
aggregate Exercise Price. Upon receipt of such payment, if any, the right of the
Holder shall terminate and cease and this Warrant shall expire.
3.6 Adjustment Rules.
----------------
(a) Any adjustments pursuant to this Article III shall be made
successively whenever an event referred to herein shall occur.
(b) No adjustment shall be made pursuant to this Article III in
respect of the issuance from time to time of Shares solely as a result of the
exercise of this Warrant.
(c) If the Company shall set a record date to determine the holders of
Shares for purposes of an action specified in this Article III and shall abandon
such action prior to effecting such action, then no adjustment shall be made
pursuant to this Article III in respect of such action.
(d) If the aggregate number of Shares issuable upon the exercise of
this Warrant shall be adjusted pursuant to this Article III, the Exercise Price
per Share shall be appropriately adjusted.
(e) If the occurrence of one event with respect to the Company could
result in two or more adjustments pursuant to this Article III, then the Board
of Directors of the Company shall, in its sole discretion, determine which such
adjustment shall result from such event.
3.7 Notice of Adjustment. As promptly as practicable after any action is
--------------------
taken (or sooner, if the Company determines to take any action) which requires
an adjustment or readjustment pursuant to this Article III, the Company shall
give notice to the Holder of such event, and, if determinable, the required
adjustment and the computation thereof. If the required adjustment is not
determinable at
7
<PAGE>
the time of such notice, the Company shall give notice to the Holder of such
adjustment and computation promptly after such adjustment becomes determinable.
ARTICLE IV
DEFINITIONS
The following terms, as used in this Warrant, have the following
respective meanings:
"Affiliate" means, with respect to any Person, any entity which
---------
directly or indirectly controls, is controlled by, or is under common control
with, such Person or any subsidiary of such Person or any Person who is a
director, officer or partner of such Person or any subsidiary of such Person.
For purposes of this definition, "control" means the possession, directly or
indirectly, of the power to (a) vote fifty percent (50%) or more of the
securities having ordinary voting power for the election of directors of such
Person, or (b) direct or cause the direction of management and policies of a
business, whether through the ownership of voting securities, by contract or
otherwise.
"Business Day" means each day in which banking institutions in New
------------
York are not required or authorized by law or executive order to close.
"Company" shall have the meaning set forth in the first paragraph of
-------
this Warrant.
"Convertible Securities" means any securities which are convertible
----------------------
into or exercisable or exchangeable for Shares (whether or not immediately
exercisable, convertible or exchangeable).
"Exchange Act" means the Securities Exchange Act of 1934.
------------
"Exercise Price" shall have the meaning set forth in the first
--------------
paragraph of this Warrant.
"Expiration Date" shall have the meaning set forth in the first
---------------
paragraph of this Warrant.
"Holder" shall have the meaning set forth in the first paragraph of
------
this Warrant.
"Issue Date" means the Business Day on which the Holder exercises its
----------
rights under this Agreement to subscribe for the Shares.
8
<PAGE>
"Market Price" means, with respect to Shares, the average of the daily
------------
closing prices for the Shares on the ten consecutive trading days before the day
in question. The closing price for each day shall be the last reported sales
price regular way or, in case no such reported sale takes place on such date,
the average of the reported closing bid and asked prices regular way, in either
case on the New York Stock Exchange ("NYSE"), or if the Shares are not listed or
admitted to trading on the NYSE, on the principal securities exchange on which
the Shares are listed or admitted to trading or NASDAQ or, if not listed or
admitted to trading on any securities exchange or NASDAQ, the closing sale price
of the Shares, or in case no reported sale takes place, the average of the
closing bid and asked prices, on any inter-dealer quotation system or any
comparable system, or if the Shares are not so quoted, the parties hereto agree
for the purposes of this Warrant that the current Market Price shall be as
determined in good faith by the Board of Directors of the Company.
"NASDAQ" means The NASDAQ Stock Market.
------
"Person" shall mean an individual, corporation, partnership,
------
association, trust or unincorporated organization,
"Securities Act" means The Securities Act of 1933.
--------------
"Shares" shall have the meaning set form in the first paragraph of
------
this Warrant.
"Warrant Agent" shall have the meaning set forth in Section 2.1.
-------------
ARTICLE V
MISCELLANEOUS
5.1 Expiration. This Warrant shall expire and be of no further force and
----------
effect on the Expiration Date.
5.2 Notices. All notices, consents, waivers, and other communications
-------
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in
9
<PAGE>
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
In the case of the Holder:
Atlantic Crossing Ltd.
Wessex House
45 Reid Street
Hamilton HM12
Bermuda
Facsimile No.: (441) 296 8606
Attention: General Counsel
In the case of the Company:
Telemonde, Inc.
200 Madison Avenue
Suite 502
New York, New York 10016
Facsimile No.: (212) 683 3737
copy to: J. Porter Durham, Jr., Esquire
Baker, Donelson, Bearman & Caldwell
801 Pennsylvania Avenue
Suite 800
Washington, D.C. 20004
Facsimile No.: (202) 508-3402
5.3 Waivers; Amendments. No failure or delay of the Holder in exercising
-------------------
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Company and the Holder.
10
<PAGE>
5.4 GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
-------------
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW
PRINCIPLES.
5.5 Survival of Agreements. All covenants and agreements made by the
----------------------
parties herein shall be considered to have been relied upon by each party and
shall survive the issuance and delivery of this Warrant, and shall continue in
full force and effect so long as this Warrant is outstanding.
5.6 Covenants to Bind Successor and Assigns. All covenants, stipulations,
---------------------------------------
promises and agreements in this Warrant contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
5.7 Withholding. The Company shall be entitled to withhold any amounts
-----------
required to be withheld under applicable law from any amounts to be paid to the
Holder hereunder.
5.8 Severability. In case any one or more of the provisions contained in
------------
this Warrant shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
5.9 Section Headings. The section headings used herein are for
----------------
convenience of reference only, are not part of this Warrant and are not to
affect the construction of or be taken into consideration in interpreting this
Warrant.
5.10 No Rights as Stockholder. This Warrant shall not entitle the Holder
------------------------
to any rights as a stockholder of the Company and no dividends shall be payable
or accrue in respect of this Warrant or the interest represented hereby or the
Shares underlying this Warrant exercisable hereunder unless and until and only
to the extent this Warrant shall be exercised.
5.11 No Requirement to Exercise. Nothing contained in this Warrant shall
--------------------------
be construed as requiring the Holder to exercise this Warrant.
5.12 Facsimiles. This Agreement may be executed by a facsimile signature,
----------
which shall have the same force and effect as a manually executed signature.
11
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant as of the
date first above written.
TELEMONDE, INC.
By: /s/ Adam Bishop
Name: Adam Bishop
Title: President
Acknowledged and Agreed:
ATLANTIC CROSSING, LTD.
By: /s/ Clint Walker
- - - - --------------------------------
Name: Clint Walker
Title: Vice President
12
<PAGE>
Exhibit A
---------
SUBSCRIPTION NOTICE
(To be executed upon exercise of Warrant)
To: Telemonde, Inc.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Warrant for, and to purchase thereunder,
___________ Shares, as provided for therein, and tenders herewith payment of the
Exercise Price in immediately available funds.
Please issue a certificate or certificates for such Shares in the
following name or names and denominations:
If said number of Shares shall not be all the Shares issuable upon
exercise of the attached Warrant, a new Warrant is to be issued in the name of
the undersigned for the balance remaining of such Shares less any fraction of a
Share paid in cash.
Dated:
[THE HOLDER]
By:
Name:
Title:
13
<PAGE>
EXHIBIT 10.3
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into as of the
2nd day of November, 1999, and shall be effective as of the 1st of July,
1999 by and between TELEMONDE, INC., a Nevada corporation (the "Company") and
GOTTFRIED VON BISMARCK (the "Consultant").
WHEREAS, the Company is a facilities-based supplier of networking services
in the global telecommunications industry; and
WHEREAS, the Consultant is currently a director and officer of the Company
and has substantial knowledge about the operations of the Company, as well as
expertise in the global telecommunications industry; and
WHEREAS, the Company desires to utilize the experience and expertise of the
Consultant, and the Consultant desires to provide such services on the terms and
conditions set forth herein; and
WHEREAS, the Consultant will participate in the use and development of
confidential and proprietary information about the Company, its customers and
suppliers, and the methods used by the Company in competition with other
companies in the global telecommunications industry, as to which the Company
desires to fully protect it rights and privileges.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and obligations set forth herein and for other good and valuable consideration,
the receipt and legal sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. Duties of the Consultant.
(a) During the Consultation Period (as hereinafter defined) the
Consultant agrees to provide such advice, counsel, assistance and services
as are reasonably requested by the Company. Such duties shall include
without limitation: (1) responsibility for developing the Company's
business relationships and sales in the German speaking areas; and (2)
acting as the Company's lead officer for a possible initial public offering
on the Deutsche Neuwe Market. The Consultant shall report directly to Adam
Bishop on a regular basis.
(b) The "Consultation Period" shall mean the period commencing on the
date hereof and terminating on the first anniversary date of this
Agreement; provided, however, that the Consultation Period shall
automatically be extended for successive periods of three months
thereafter, unless either the Company or the Consultant shall give sixty
(60) days' prior written notice to the other that it or he wishes to
terminate this Agreement upon the expiration of its then current term.
(c) During the Consultation Period, the Consultant shall be required
to devote such of his time and efforts to the business of the Company as
reasonably required by it, it being understood however that the Consultant
is not expected to devote his full time and efforts to the affairs of the
Company.
<PAGE>
(d) The Consultant shall be an employee of the Company. The Company
shall provide the Consultant with a reasonable work area at the Company and
with such support services as shall be reasonably necessary for him to
fulfill his duties hereunder. The Consultant shall be entitled to receive
all of the benefits generally available to employees of the Company.
2. Compensation to the Consultant. In consideration for the services of
the Consultant, the Company agrees to pay the Consultant a consulting fee of one
hundred twenty thousand U. S. dollars (U. S. $120,000) per annum, payable in
equal monthly installments of ten thousand U. S. dollars (U. S. $10,000) on the
first day of each month during the Consultation Period. The Consultant shall
also be reimbursed by the Company, upon the presentation of invoices, receipts
or other evidence acceptable to the Company, for reasonable expenses incurred
while performing tasks which he specifically has been asked to perform by the
Company.
3. Competition; Confidential Information. The Consultant and the Company
recognize that due to the nature of his relationship with the Company, the
Consultant has had and will have access to, and has acquired and will acquire,
and has assisted and will assist in developing, confidential and proprietary
information relating to the business and operations of the Company, including,
without limiting the generality of the foregoing, information with respect to
the present and prospective accounts, products, systems, clients, customers,
agents, and sales and marketing methods of the Company. The Consultant
acknowledges that such information has been and will be of central importance to
the Company's business and that disclosure of it to or its use by others could
cause substantial loss to the Company. The Consultant and the Company also
recognize that an important part of the Consultant's duties will be to maintain
and develop goodwill for the Company through his personal contact with the
Company's clients, and that there is a danger that this goodwill, a proprietary
asset of the Company, may follow the Consultant if and when his relationship
with the Company is terminated. The Consultant accordingly agrees as follows:
(a) During the Consultation Period and for a period of twelve months
following the Consultation Period, he will not directly or indirectly, in
any capacity (as an individual for his own account, or as a partner or
joint venturer, or broker, or as an officer, director or shareholder of a
corporation) engage in the telecommunications business other than for the
Company.
(b) For a period of twelve months following the Consultation Period,
the Consultant will not call upon, directly or indirectly, in any capacity
(as an individual for his own account, or as a partner or joint venturer,
or broker, or as an employee, agent or salesperson for any other person,
corporation, partnership or association) to solicit any telecommunications
business from any of the customers of the Company nor shall he during the
Consultation Period and for a period of twelve months following the
Consultation Period in any manner interfere with or divert such customers
or render assistance in any way to any competitor of the Company in order
to interfere with or divert, solicit or service any customers of the
Company.
2
<PAGE>
4. Nondisclosure of Confidential Information. Consultant agrees that
during and after the Consultation Period he will not disclose any confidential
information obtained by him as a result of his association with the Company
including, but not limited to, Company accounts and methods or plans used by
Company to carry on its business, all of which Consultant acknowledges to be
confidential and to which Company has a proprietary interest.
5. Survival. The covenants and warranties of the Consultant made herein
shall survive the termination of this Agreement.
6. Entire Agreement. This Agreement is intended by the parties to and
does constitute the entire agreement of the parties with respect to the
transactions contemplated by this Agreement. This Agreement supersedes any and
all prior understandings, written or oral, between the parties, and this
Agreement may be amended, modified, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the
amendment, modification, waiver, discharge or termination is sought.
7. Enforcement. Immediate and irreparable injuries or damages will
result to the Company in the event of a breach of the covenants herein made and,
therefore, in the event of the breach of said covenants, the Company shall be
entitled, in addition to any other remedy or damages otherwise available, to an
injunction to restrict the violation hereof by the Consultant, his partners,
agents, servants, employers, and all persons acting for or with him; it is
agreed that if the scope of any restriction herein expressed is too broad to
permit enforcement of such restriction to its full extent, then the Consultant
agrees and consents to the enforcement of such restriction to the maximum extent
permitted by law.
8. Damages. In the event Consultant engages in conduct which is
prohibited under this Agreement, the Company shall be entitled to liquidated
damages in an amount equal to the greater of (a) fifty percent (50%) of the
Consultant's compensation from the Company for the last-completed calendar year,
plus attorneys' fees, court costs, and any other costs reasonably incurred by
the Company in exercising its rights hereunder or (b) seventy-five percent (75%)
of the revenues realized by the Consultant as a result of the Consultant's
breach which shall continue to be due and payable until expiration of the
twenty-four (24) month period following cessation of such breach,
notwithstanding the stated terms of this Agreement. Further, it is expressly
understood that said liquidated damages are due regardless of whether the
relationship between the parties has been terminated prior to such breach.
9. Attorneys' Fees. Should any action be brought by the Company to
enforce this Agreement or for the breach of any of the terms, conditions or
covenants in this Agreement, the Company shall be entitled, if it shall prevail,
to recover reasonable attorney's fees to be fixed by the Court, together with
costs of suit therein incurred.
10. Notices. Any notice to be given to the Company hereunder shall be
deemed sufficient if addressed to the Company in writing, mailed by certified
mail, return receipt requested, to its office at Telemonde, Inc., 200 Madison
Avenue, Suite 502, New York, New York 10016, or such other address as the
Company may hereinafter designate in writing. Any notice to be given to the
Consultant hereunder shall be deemed sufficient if addressed to him in writing,
mailed by certified mail, return receipt requested, to him at
___________________________________
3
<PAGE>
_________________________________ or such other address as the Consultant may
hereinafter designate in writing.
11. Waiver. Failure by the parties to insist in any one or more instances
upon the performance of any of the terms and conditions of this Agreement shall
not be construed as a waiver or relinquishment of any right granted hereunder,
or the future performance of any such term, covenant, condition or obligation of
either party with respect hereto, and all terms and conditions of this Agreement
shall continue in full force and effect.
12. Construction. This Agreement is entered into and shall be construed
and governed in accordance with the laws of the State of New York.
13. Invalid Provisions. The invalidity or any particular provision of
this Agreement shall not affect the other provisions hereof, and the Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
14. Assignment. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns, but nothing herein, express or implied, is intended to or shall confer
any rights, remedies or benefits upon any person other than the parties hereto
and their successors and permitted assigns. This Agreement may not be assigned
by either party without the written consent of the other.
15. Captions. All headings contained in this Agreement are for
convenience of reference only and shall not be interpreted to expand or limit
any provision hereof.
IN WITNESS WHEREOF, the Consultant and the Company have caused this
Agreement to be duly executed as of the date first above written.
TELEMONDE, INC.
/s/ Adam Bishop
By:_______________________________________
Its: President
/s/ Gottfried Von Bismarck
------------------------------------------
GOTTFRIED VON BISMARCK
4
<PAGE>
EXHIBIT 10.4
DATED 1999
- - - - ----------------------------------------------------
TELEMONDE NETWORKS LIMITED (1)
EQUITEL COMMUNICATIONS LIMITED OR
TELEMONDE, INC. (2)
SERVICE AGREEMENT
for
<PAGE>
THIS AGREEMENT is made this day of 1999
- - - - --------------
BETWEEN:-
- - - - -------
(1) TELEMONDE NETWORKS LIMITED (Registered in England No. 3714188) whose
--------------------------
registered office is at 7-10 Chandos Street Cavendish Square London W1M 9DE
("the Company"); and
(2) ("the Executive")
NOW IT IS HEREBY AGREED as follows:-
- - - - ------------------------
1 Interpretation
--------------
1.1 The headings and marginal headings to the clauses are for
convenience only and have no legal effect.
1.2 Any reference in this Agreement to any Act or delegated legislation
includes any statutory modification or re-enactment of it or the provision
referred to.
1.3 In this Agreement 'the Board' means the Board of Directors of the
Company.
1.4 In this Agreement "Group Company" means any company which is a holding
company of the Company or a subsidiary undertaking of the Company or of any such
holding company (as such expressions are defined in section 736 Companies Act
1985).
2 Appointment and Duration
------------------------
2.1 The Company appoints the Executive and the Executive agrees to act
in the capacity set out in the schedule. The Executive accepts that the Company
may at its discretion require him to perform other duties or tasks not within
the scope of his normal duties and the Executive agrees to perform those duties
or undertake those tasks as if they were specifically required under this
Agreement.
2.2 The appointment shall commence or be deemed to have commenced on the
date set out in the schedule and shall continue (subject to earlier termination
as provided in this Agreement) for the period stipulated in the schedule and
from then and afterwards until terminated by either party giving to the other
in writing not less than the period of notice specified in the schedule such
notice expiring on or at any time after the end of the initial period if any.
2.3 The Executive warrants that by virtue of entering into this Agreement
or any other agreements or arrangements made or to be made between the Company
and him he will not be in breach of any express or implied terms of any
contract with or of any other obligation to any third party binding upon him.
2.4 The Company may from time to time appoint any other person or persons
to act jointly with the Executive in his appointment.
<PAGE>
3 Duties of the Executive
-----------------------
3.1 The Executive shall at all times during the period of this
Agreement:-
3.1.1 devote such time, attention and ability to the duties of his
appointment as agreed with the Board;
3.1.2 work such hours as are necessary for the proper performance of his
duties. For the purposes of the Working Time Regulations 1998 the parties
acknowledge that the Executive has autonomous decision-taking powers within the
meaning of regulation 20 of the said Regulations;
3.1.3 faithfully and diligently perform those duties and exercise such
powers consistent with them which are from time to time assigned to or vested in
him;
3.1.4 obey all lawful and reasonable directions of the Board;
3.1.5 use his best endeavours to promote the interests of the Company
and its Group Companies;
3.1.6 keep the Board promptly and fully informed (in writing if so
requested) of his conduct of the business or affairs of the Company and provide
such explanations as the Board may require;
3.1.7 not at any time make any untrue or misleading statement relating
to the Company.
4 Place of Work
-------------
4.1 The Executive shall perform his duties at the Company's principal
place of business or such other place of business as specified in the schedule
and/or such other place of business of the Company as the Company requires
whether inside or outside the United Kingdom but the Company shall not without
his prior consent require him to go to or reside anywhere outside the United
Kingdom except for occasional visits in the ordinary course of his duties.
5 Pay
---
5.1 During his appointment the Company shall pay to the Executive:
5.1.1 a basic salary at the rate per year as set out in the schedule which
shall accrue day-to-day and be payable by equal monthly instalments in arrears
on or about the 28th day of each month. The salary shall be deemed to include
any fees receivable by the Executive as a director of the Company or of any
other company or unincorporated body in which he holds office as nominee or
representative of the Company; and
5.1.2 a bonus as the Board shall in its reasonable determination decide
payable in respect of each financial period of the Company beginning on or after
1st January 2000 or later (subject to any payment on account) within 21 days
after the adoption of the accounts for that financial period at the Annual
General Meeting.
<PAGE>
5.2 The Executive's basic salary shall be reviewed by the Board within one
month of the date set out in the schedule in each year and the rate of basic
salary shall be increased by the Company with effect from the date set out in
the schedule in each year by such amount (if any) as the Board shall in its
absolute discretion determine with no obligation to increase.
5.3 Notwithstanding the provisions of sub-clause 5.2 the Company shall not
be required to increase the Executive's salary if and to the extent only that
the increased payment would be unlawful under the provisions of any legislation
then in force during his appointment or if the increased payment would not be an
allowable cost for the purpose of increasing prices under the provisions of any
legislation controlling prices or price increases.
6 Pension
-------
6.1 There is no pension scheme applicable to the Executive's employment
under this Agreement.
7 Health Insurance
-----------------
7.1 The Executive shall be entitled when such scheme is set up to
participate in it at the Company's expense for himself, his spouse and dependant
children in the Company's private medical expenses insurance scheme, subject
always to the rules of such schemes.
7.2 The Company shall provide the Executive with Permanent Health
Insurance and Incapacity Benefit Insurance of a nature commensurate with his
compensation at any time within 60 days of the signing of this agreement.
7.3 The Company shall provide the Executive with Death in Service Benefit
payable to the family of the Executive equal to twice the level of compensation
being received, such levels to be reassessed on an annual basis on the
anniversary of this contract.
7.4 The Company shall have no liability or responsibility with respect to
clauses 7.1, 7.2 and 7.3 if underwriters refuse to underwrite the required
insurance policies.
8 Car
---
8.1 The Executive shall not be entitled to a car or any motor vehicle
expenses under this Agreement.
9 Expenses
--------
9.1 The Company shall reimburse to the Executive on a monthly basis all
travelling, hotel, entertainment and other expenses reasonably incurred by him
in the proper performance of his duties subject to his compliance with the
Company's then current guidelines, if any, relating to expenses and the
production of such vouchers or other evidence of actual payment of the expenses
as the Company may reasonably require.
9.2 Where the Company issues a company sponsored credit or charge card to
the Executive he shall use such card only for expenses reimbursable under clause
9.1
<PAGE>
above, and shall return it to the Company on demand and immediately on the
termination of his employment.
10 Holiday
-------
10.1 In addition to public holidays the Executive is entitled to such
number of working days paid holiday in each year as set out the schedule to be
taken at such time or times as are agreed with the Board. The Executive shall
not without the consent of the Board carry forward any unused part of his
holiday entitlement to a subsequent year.
10.2 For the year during which his appointment commences or terminates, the
Executive is entitled to 2 working days holiday for each complete month of his
employment by the Company during that year. On the termination of his
appointment for whatever reason, the Executive shall either be entitled to pay
in lieu of outstanding holiday entitlement or be required to repay to the
Company any salary received for holiday taken in excess of his actual
entitlement. The basis for payment and repayment shall be 1/253 of the
Executive's annual basic salary for each day.
10.3 The Company reserves the right, at its absolute discretion, to require
the Executive to take any outstanding holiday during any notice period or to
make payment in lieu thereof.
11 Incapacity
----------
11.1 If the Executive shall be prevented by illness (including mental
disorder) injury or other incapacity from properly performing his duties
hereunder he shall report this fact forthwith to the Company Secretary's office
and if the Executive is so prevented for seven or more consecutive days he shall
provide a medical practitioner's statement on the eighth day and weekly
thereafter so that the whole period of incapacity is certified by such
statements. Immediately following his return to work after a period of absence
due to incapacity the Executive shall complete a Self-Certification form
available from the Company Secretary's office detailing the reason for his
absence.
11.2 If the Executive shall be absent from his duties hereunder due to
illness (including mental disorder) accident or other incapacity duly certified
in accordance with the provisions of sub-clause 11.1 he shall be paid his full
remuneration hereunder (including bonus and commission) for up to the number of
days absence specified in the schedule in any period of 12 consecutive months
and thereafter such remuneration, if any, as the Board shall determine from time
to time provided that such remuneration shall be inclusive of any Statutory Sick
Pay to which the Executive is entitled under the provisions of the Social
Security and Housing Benefits Act 1982 and any social Security Sickness Benefit
or other benefits recoverable by the Executive (whether or not recovered) may be
deducted there from.
11.3 For Statutory Sick Pay purposes the Executive's qualifying days
shall be his normal working days.
11.4 At any time during the period of his appointment, the Executive shall
at the request and expense of the Company permit himself to be examined by a
registered medical practitioner to be selected by the Company and shall
authorise such medical practitioner to disclose to and discuss with the
Company's medical adviser the results
<PAGE>
of such examination and any matters which arise from it in order that the
Company's medical adviser can notify the Company of any matters which, in his
opinion, might hinder or prevent the Executive (if during a period of
incapacity) from returning to work for any period or (in other circumstances)
from properly performing any duties of his appointment at any time.
12 Obligations during Employment
-----------------------------
12.1 The Executive shall promptly disclose to the Company all copyright
works or designs originated, conceived, written or made by him alone or with
others (except only those works originated, conceived, written or made by him
wholly outside his normal working hours which are wholly unconnected with his
appointment) and shall hold them in trust for the Company until such rights
shall be fully and absolutely vested in the Company.
12.2 The Executive hereby assigns to the Company by way of future
assignment all copyright, design right and other proprietary rights (if any)
for the full terms thereof throughout the World in respect of all copyright
works and designs originated, conceived, written or made by the Executive
(except only those works or designs originated, written or made by the Executive
wholly outside his normal working hours which are wholly unconnected with his
appointment) during the period of his appointment by the Company.
12.3 The Executive hereby irrevocably and unconditionally waives in favour
of the Company any and all moral rights conferred on him by Chapter IV of Part I
of the Copyright Designs and Patents Act 1988 for any work in which copyright or
design right is vested in the Company whether by clause 12.2 or otherwise.
12.4 The Executive shall, at the request and expense of the Company, do all
things necessary or desirable to substantiate the rights of the Company under
clauses 12.2 and 12.3.
13 Termination of Agreement
------------------------
13.1 Automatic Termination
---------------------
This agreement shall automatically terminate:
13.1.1 on the death of the Executive; or
13.1.2 on the Executive reaching his 65th birthday; or
13.1.3 if he resigns his office; or
13.1.4 if the office of director of the Company held by the Executive is
vacated pursuant to the Company's Articles of Association save if the vacation
shall be caused by illness (including mental disorder) or injury; or
13.1.5 if the Executive becomes prohibited by law from being a director.
<PAGE>
13.2 Suspension
----------
In order to investigate a complaint against the Executive of misconduct the
Company is entitled to suspend the Executive on full pay for so long as may be
necessary to carry out a proper investigation and hold a disciplinary hearing.
13.3 Immediate Dismissal
-------------------
The Company may by notice terminate this Agreement with immediate
effect if the Executive:-
13.3.1 commits any act of gross misconduct or repeats or continues (after
written warning) any other material breach of any of his obligations to the
Company whether under this Agreement or otherwise); or
13.3.2 is guilty of any conduct which in the reasonable opinion of the
Board brings the Company or any Group Company into serious disrepute; or
13.3.3 is convicted of any criminal offence punishable with six months or
more imprisonment (excluding any minor offence under road traffic legislation in
the United Kingdom or elsewhere for which he his not sentenced to any term of
imprisonment whether immediate or suspended); or
13.3.4 commits any act of dishonesty relating to the Company, any of its or
their employees or otherwise; or
13.3.5 becomes bankrupt or makes any arrangement or composition with his
creditors generally; or
13.3.6 becomes of unsound mind or a patient for the purpose of any statute
relating to mental health; or
13.3.7 the Executive is convicted of any serious offence under the Criminal
Justice Act 1993 or under any other present or future statutory enactment or
regulation relating to insider dealing.
13.4 Dismissal on Short Notice
-------------------------
The Company may terminate this Agreement as follows notwithstanding clause 11.2
by not less than 3 months' prior notice given at any time while the Executive is
incapacitated by ill-health or accident from performing his duties under this
agreement and has been so incapacitated for a period or periods aggregating six
months in the preceding 12 months PROVIDED THAT the Company shall withdraw any
such notice if during the currency of the notice the Executive returns to full
time duties and provides a medical practitioner's certificate satisfactory to
the Board to the effect that he has fully recovered his health and that no
recurrence of his illness or incapacity can reasonably be anticipated.
<PAGE>
13.5 Effect of Dismissal
-------------------
The lawful termination of the Executive's employment hereunder for whatsoever
reason shall not affect those terms of this Agreement which are expressed to
have effect after such termination and shall be without prejudice to any accrued
rights or remedies of the parties.
13.6 On the termination of the Executive's employment, or at any other
time in accordance with instructions given to him by the Board, the Executive
will immediately return to the Company all equipment, correspondence, records,
specifications, software, models, notes, reports and other documents and any
copies thereof and any other property belonging to the Company (including but
not limited to the Company car keys, credit cards, keys and passes) which are in
the Executive's possession or under his control.
13.7 Pay in Lieu
-----------
On either party serving notice for any reason to terminate this Agreement or at
any time thereafter during the currency of such notice the Company shall be
entitled to pay to the Executive his basic salary (at the rate then payable
under clause 5) for the unexpired portion of the duration of his appointment or
entitlement to notice as may be the case.
13.8 After notice of termination has been given by either party or if the
Executive seeks to resign without notice or by giving shorter notice than is
required in the schedule, provided that the Company continues to pay the
Executive his basic salary, and to provide all contractual benefits until his
employment terminates in accordance with the terms of this Agreement, the
Company has absolute discretion for all of the notice period to:
13.8.1 exclude the Executive from such of the premises of the Company
and/or Group Company as the Board may direct;
13.8.2 instruct him not to communicate with suppliers, customers, employees,
agents or representatives of the Company or Group Company.
13.9 Should the Company exercise its discretion in accordance with Clause
13.8, the Restricted Period (as defined in Clause 16.1.2) shall be reduced by
that amount of the notice period in respect of which the Company has exercised
its discretion pursuant to the provisions of Clause 13.8.
13.10 Miscellaneous
-------------
On the termination of this Agreement for whatever reason, the Executive shall at
the request of the Company resign (without prejudice to any claims which the
Executive may have against any company arising out of this Agreement or its
termination) from all and any offices which he may hold as a director of the
Company and from all other appointments or offices which he holds as nominee or
representative of the Company and if he should fail to do so within seven days
the Company is hereby irrevocably authorised to appoint some person in his name
and on his behalf to sign any documents or do any things necessary or requisite
to effect such resignation(s).
<PAGE>
14 Confidential Information
------------------------
14.1 The Executive shall not, either during the continuance of his
employment (except so far as may be necessary in the performance of his duties)
or after its termination without the prior consent in writing of the Chairman of
the Board or except as required by law, disclose to any person or entity or use
except for the benefit of the Company or any Group Company, and use his best
endeavours to prevent the disclosure of any confidential information concerning
the business, finances, transactions or affairs of any Group Company or those of
its customers, agents clients or suppliers which has or may come to his
knowledge during the course of his employment with the Company.
14.2 For the purpose of this clause "confidential information" shall mean
all information, including but not limited to, information which relates to
business plans, pricing policies, rebates and discounts, customer details,
contracts, forecasts, budgets, accounts and surveys, which is identified or
treated by the Company as confidential or which by reason of its character or
the circumstances or manner of its disclosure is evidently of such a nature.
14.3 The restrictions contained in this Clause shall cease to apply to
information which may become available to the public generally other than
through the default of the Executive.
15 Other Business Interests
------------------------
The Executive shall not during the continuance of his employment with the
Company without the prior consent in writing of the Chairman of the Board accept
any other employment or be concerned or interested directly or indirectly in any
other business. Nothing in this clause shall prevent the Executive from holding
or being beneficially interested in shares or securities quoted on any
recognised investment exchange provided that he neither holds nor is
beneficially interested in more than 5% of the shares or securities in any
entity and provided further that such entity is not a competitor of the Company,
when the Executive is specifically prohibited from any interest whatsoever in
such a competitor.
16 Post Termination Covenants
--------------------------
16.1 For the purpose of this clause:-
16.1.1 All references to "the Company" shall be construed to mean the
Company and any Group Company with which the Executive has been actively
concerned during the course of his employment hereunder;
16.1.2 The "Restricted Period" shall mean the period as specified in the
schedule starting from the date of the termination of the Executive's
employment;
16.1.3 The "Restricted Business" shall mean a business involving the
sale or supply of goods or services which are the same as or substantially
similar to any goods or services supplied by the Company, being goods or
services with which the Executive has been concerned or involved to any material
extent at any time during the period of 12 months preceding the termination of
his
<PAGE>
employment hereunder and/or which the Company shall have decided to supply in
the immediate or foreseeable future and in the discussions for which the
Executive had been involved or in relation to which the Executive has
confidential information.
16.2 Except with the prior written consent of the Chairman of the Board,
the Executive shall not during the Restricted Period be engaged or interested in
or concerned with (in any capacity whatsoever and whether on his own account or
in conjunction with any other party) any person, firm, company or other entity
carrying on the Restricted Business in a radius of 50 miles from any factory or
other place of business of the Company at which either the Executive has worked
or in the business of which the Executive has been involved to a significant
degree during the 12 months prior to termination. Nothing in this clause shall
prevent the Executive from holding or being beneficially interested in shares or
securities quoted on any recognised investment exchange provided that he neither
holds nor is beneficially interested in more than 5% of the shares or securities
in any entity and provided further that such entity is not a competitor of the
Company.
16.3 Except with the prior written consent of the Chairman of the Board,
the Executive shall not, in competition to the Company during the Restricted
Period (in any capacity whatsoever and whether on his own account or in
conjunction with any other party) canvass or solicit or accept orders or
facilitate the canvassing, solicitation or acceptance of orders in respect of
Restricted Business from any person, firm, company or other entity who or which
at the date of termination of the Executive's employment hereunder is or at any
time during the period of 12 months prior thereto was a customer or client of
the Company and with whom he had material dealings at any time during the period
of 12 months prior to the termination of his employment hereunder.
16.4 Except with the prior written consent of the Chairman of the Board,
the Executive shall not, during the Restricted Period (in any capacity
whatsoever and whether on his own account or in conjunction with any other
party) employ or endeavour to entice away from the Company any person who at the
date of termination of the Executive's employment hereunder was employed or
engaged under a contract for services (in either case in a managerial,
technical, or sales position or any other staff position) by the Company and the
Executive shall not discourage any such restricted person from continuing to be
employed by the Company or supplying services to it.
16.5 The Executive hereby acknowledges and agrees that the covenants
contained in this clause are separate, severable and enforceable and that,
having obtained professional advice, the restrictions contained in such
covenants are fair and reasonable in the context of this Agreement. The parties
acknowledge, however, that such restrictions are liable to be rendered invalid
by changing circumstances or other unforeseen reasons and accordingly if any one
or more of the restrictions contained in this clause shall either individually
or together be adjudged, for whatever reason, to go beyond that which is
reasonable in all the circumstances for the protection of the legitimate
interests of the Company but would be adjudged reasonable if any particular
restriction or restrictions were deleted or limited in any matter (including,
without prejudice to the generality of the foregoing, any reduction in duration
or geographical area), the said restrictions shall apply with such deletions or
limitations.
<PAGE>
16.6 If at any time after today's date for whatever reason the Company
shall consider it to be in its best interests, it shall be entitled, at its
discretion, by notice in writing to the Executive, to delete or limit in any
manner any of the restrictions contained in this clause 16 and in such event
such restrictions shall apply with such deletions or limitations as if they had
been agreed at the date of this agreement.
16.7 The Executive hereby acknowledges and agrees that upon the termination
of his employment hereunder he shall be obliged to draw the provisions of this
clause 16 to the attention of any third party who may at any time either before
or after the date of termination of such employment offer employment to him.
17 Share Transfers
---------------
17.1 If the Executive shall be a Bad Leaver (as defined in clause 17.2
below) all rights which the Executive has under any share options or share
option schemes in respect of any shares or other interests in the Company or any
Group Company shall, with effect from the date notice of termination of
employment is served on or by the Executive under clause 2.2 or the date of
termination of employment if later, be cancelled without claim for compensation
by either party and any option exercised but not completed shall at the date of
such notice be deemed to be cancelled by mutual agreement unless both the
Company and the Executive otherwise agree.
17.2 For the purposes of this clause 17 the Executive is a Bad Leaver if
his employment is terminated:-
17.2.1 by the Company in circumstances where that termination is fair
(within the meaning of Section 98 of the Employment Rights Act 1998) other than
by reason of redundancy; or
17.2.2 by the Executive during the Initial Period other than by mutual
agreement between the Executive and the Company.
17.3 For the purposes of this clause 17 "the Company" shall include any
Group Company to whom the Executive has agreed in writing to transfer his
employment
18 Miscellaneous
-------------
18.1 Statutory Particulars
---------------------
The further particulars of terms of employment not contained in the body of this
Agreement which must be given to the Executive in compliance with Part 1 of the
Employment Rights Act 1996 are given in schedule 1.
18.2 Prior Agreements
----------------
This Agreement sets out the entire agreement and understanding of the parties
and is in substitution for any previous contracts of employment or for services
between the Company or any of its Group Companies and the Executive (which shall
be deemed to have been terminated by mutual consent).
<PAGE>
18.3 Proper Law
----------
The validity construction and performance of this Agreement shall be governed by
English law.
18.4 Acceptance of Jurisdiction
--------------------------
All disputes claims or proceedings between the parties relating to the validity
construction or performance of this agreement shall be subject to the non-
exclusive jurisdiction of the High Court of Justice in England and Wales ('the
High Court') to which the parties irrevocably submit.
18.5 Notices
-------
Any notice to be given by a party under this Agreement must be in writing and
must be given by delivery at or sending post or other faster postal service, in
to the last known postal address or relevant telecommunications number of the
other party. To prove the giving of a notice it shall be sufficient to show it
was despatched. A notice shall have effect from the sooner of its actual or
deemed receipt by the addressee.
IN WITNESS whereof the hands of the parties or their duly authorised
- - - - ----------
representatives the day and year first above written
<PAGE>
No Contracting-Out Certificate pursuant to the provisions of the Social Security
Pensions Act 1975 is held by the Company in respect of the Executive's
employment.
The Executive is subject to the Company's Disciplinary Rules and Disciplinary
Procedures copies of which have been given to the Executive.
If the Executive has any grievance relating to his employment (other than one
relating to a disciplinary decision) he should refer such grievance to the
Board.
AS WITNESS this agreement is executed and delivered by the parties or their duly
- - - - ----------
authorised representatives the day and year first above written:
Signed by a duly authorised representative of
TELEMONDE NETWORKS LIMITED
- - - - --------------------------
in the presence of:.............................................................
Signature..............................
Name...................................
Address................................
.......................................
Occupation.............................
Signed by in
----------
the presence of.................................................................
Signature..............................
Name...................................
Address................................
.......................................
Occupation.............................
<PAGE>
Exhibit 10.4(a)
SCHEDULE OF EMPLOYEES
COVERED BY FORM OF EMPLOYMENT AGREEMENT
<TABLE>
<CAPTION>
Name Company Title Salary
- - - - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Harry Pomeroy EquiTel Chairman (Pounds)240,000
Communications
Limited
- - - - ----------------------------------------------------------------------------
Nicholas Topham EquiTel CEO (Pounds)220,000
Communications
Limited
- - - - ----------------------------------------------------------------------------
Larry Trachtenberg EquiTel Managing Director (Pounds)185,000
Communications and Executive Vice-
Limited President
- - - - ----------------------------------------------------------------------------
Adam Bishop Telemonde President and (Pounds)240,000
Networks Managing Director
Limited
- - - - ----------------------------------------------------------------------------
Kevin Maxwell Telemonde, Inc. Chairman (Pounds)240,000
- - - - ----------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 10.5
DATED 3rd April 1998
- - - - --------------------------------------------------------------------------------
GEMINI SUBMARINE CABLE SYSTEM LIMITED
- and -
TELEMONDE INTERNATIONAL BANDWIDTH (BERMUDA) LIMITED
- - - - --------------------------------------------------------------------------------
CAPACITY SALES AGREEMENT
- - - - --------------------------------------------------------------------------------
Taylor Joynson Garrett
Carrnelite
50 Victoria Embankment
Blackfriars
London EC4YODX
Ref: EPM/SIS
<PAGE>
THIS AGREEMENT is made 3rd April 1998
BETWEEN
(1) GEMINI SUBMARINE CABLE SYSTEM LIMITED, a company existing under the laws
of Bermuda and having its principal office at Clarendon House, Church
Street, Hamilton, HMCX 12, Bermuda (hereinafter called "Gemini"), and
(2) TELEMONDE INTERNATIONAL BANDWIDTH (BERMUDA) LIMITED a company incorporated
in Bermuda with its principal place of business at Argonaut House, 5 Park
Road, Hamilton, (hereinafter called "Carrier User").
INTRODUCTION
(A) Gemini has designed, and is in the process of constructing or arranging
for the construction of, a fibre optic submarine and terrestrial cable
network capable of providing telecommunications services from London,
England to New York, New York, which network will consist of the Backhaul
and the Gemini System, as hereafter defined (the "Gemini Network"). The
Gemini Network will be operated and managed by Gemini.
(B) Carrier User desires to purchase from Gemini, and Gemini is willing to
sell to Carrier User, an IRU (as hereinafter defined) in the amount of
capacity on all or a portion of the Gemini Network as described in
Schedule 1.
(C) Gemini and Carrier User (hereinafter referred to as the Parties, and each
as a Party) desire to enter into this Agreement to set forth the terms and
conditions under which the Capacity (as hereinafter defined) will be sold
to Carrier User.
AGREED TERMS
Now therefore, the Parties hereto, in consideration of the mutual covenants
herein expressed and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, covenant and agree with each other
as follows:
<PAGE>
1. Definitions
Unless otherwise defined in this Agreement, the following capitalised
terms used in this Agreement shall have the applicable meaning set forth
below. Words and phrases defined in the text shall have the same meaning
wherever else found in this Agreement.
"Affiliate" means an entity that is, in respect of any one entity, any
other entity that controls, is controlled by, or is under common control
with that entity, control being defined as direct or indirect ownership of
more than fifty percent (50%) in value of the outstanding voting stock, or
other form of interest in the capital of, or of a partnership or other
interest in, an entity;
"Agreement" means this agreement together with the Schedules hereto;
"Associate" means an entity or person that is, with respect to any one
entity or person, any other entity or person that has a direct or indirect
interest of at least 25% in such entity;
"Backhaul" means, collectively, the US Backhaul and the UK Backhaul as
such terms are defined in the C&MA;
"Capacity" means the amount of the capacity purchased by Carrier User on
all or a portion of the Gemini Network as described in Schedule 1;
"Carrier User's Network Control Centre" means such place as Carrier User
may notify to Gemini from time to time;
"C&MA" means the Construction, Operation and Maintenance Arrangement for
the Gemini System of even date attached hereto as Schedule 3 as amended
from time to time in accordance with the provisions set out in the C&MA;
"DS-3" means a 44.736 Mbit/sec both way digital line section passing
between two System Interface Points, together with the interconnection
interfaces pertaining thereto in accordance with ITU-TS recommendations;
- 2 -
<PAGE>
"E-1" means a 2.048 Mblt/sec both way digital line section passing between
two System Interface Points, together with the interconnection interfaces
pertaining thereto, in accordance with ITU-TS recommendations;
"Founding Parties" means MFS Cableco (Bermuda) Ltd., and Cable and
Wireless PLC;
"Gemini Market Price" means, as of the date of determination, the most
recent price at which Gemini has sold or is willing to sell a unit of
capacity on the Gemini Network equivalent to the Capacity to a person not
Affiliated with Gemini or the Founding Parties, on terms and conditions
consistent with this Agreement;
"Gemini System" has the meaning set forth in the C&MA;
"Granting Date" means the date upon which the grant by Gemini to Carrier
User of an IRU in the Capacity shall become effective in accordance with
Clause 2.2;
"IRU" means the "indefeasible right of use" of a unit of capacity on all
or a portion of the Gemini Network for the System Lifetime;
"LIBOR Rate" means the arithmetic mean of the offered rates of leading
banks for London Interbank deposits expressed as a rate per annum, for
deposits in US Dollars for three months as displayed on the LIBOR page of
the Reuters Monitor Money Rate Services at or about 11.00 am on the date
on which the LIBOR Rate is to be determined;
"Market Price Differential" means, as of the date of determination, the
amount by which the Purchase Price hereunder exceeds the Gemini Market
Price;
"Network Ready for Customer Service Date" or "RFCS Date" means 28 February
1998 being the date from which the first portion of the Gemini Network
(i.e., the southern submarine cable route linking Perthcurno, United
Kingdom to Manasquan, New Jersey, together with associated backhaul
systems linking Perthcurno and London, England and
- 3 -
<PAGE>
Manasquan, New Jersey and New York, New York in the United States) was
ready for the provision of commercial services from London, England to New
York, New York;
"Network Ready for Service Date" or "RFS Date" means the date on which the
complete Gemini Network (including all associated backhaul systems) is
ready for the provision of commercial service from London, England to New
York, New York, as certified by Gemini, which is projected to be the 31
October 1998.
"O&M Costs" means all and any costs and expenses reasonably incurred by or
on behalf of Gemini in connection with the operation, maintenance and
repair of the Gemini System as set forth in Schedule 1 and as described in
more detail in the C&MA;
"Purchase Price" means the price of the IRU for the Capacity, as defined
in Clause 3;
"Restoration Charges" means the charges payable by Carrier User to Gemini
in respect of the restoration of the Capacity on another cable system as
specified in Schedule 1;
"STM-1" means a 155.220 Mblt/sec both way digital line section passing
between two System Interface Points together with the interconnection
interfaces pertaining thereto, in accordance with ITU-TS recommendations;
"System Interface Points" has the meaning set forth in the C&MA; and
"System Lifetime" means the lifetime of the Gemini Network from the RFCS
Date until the Gemini System is retired in accordance with the C&MA.
For the avoidance of doubt operative terms set out in Schedules to this
Agreement shall have the same force and effect as if they were set out in
the body hereof save that in the event of an inconsistency between a term
in the body hereof and a Schedule, that in the body hereof shall prevail.
2. Grant of IRU
- 4 -
<PAGE>
2.1.1 Gemini grants to Carrier User the right to call off Capacity up to a
maximum of STM16 subject to and in accordance with the terms of this
Agreement.
2.1.2 Gemini grants to Carrier User with effect from the Granting Date in
respect of each unit of STM1 and in consideration for the payment by
Carrier User to Gemini of the Purchase Price (or the relevant proportion
thereof) and the O&M Costs an IRU in the Capacity, subject to the terms
and conditions set forth in this Agreement.
2.2 Subject to Schedule 1 Carrier User may by 30 days written notice to Gemini
request the activation of the Capacity in respect of each unit of STM1 and
Gemini shall use all reasonable endeavours to make that Capacity available
to Carrier User with effect from the expiry of the notice. The Carrier
User shall call off the Capacity in accordance with Schedule 1. Providing
in all cases that Carrier User shall have made payment to Gemini of
amounts falling due on or prior to such date, the date of activation in
accordance with this Clause 2.2 shall be the Granting Date.
2.3 Gemini will notify the Carrier User as soon as reasonably practicable of
any changes in the scheduled RFS Date. Gemini does not warrant or gurantee
that the RFS Date will occur at all or on the scheduled date. Neither
Gemini nor the Founding Parties will be liable to Carrier User for any
costs or damages, if any, if and when the RFS Date does not occur or is
delayed for any reason. Notwithstanding the foregoing if the RFS Date does
not occur by 31 December 1998, Carrier User may elect to terminate this
Agreement. If Carrier User elects to terminate this Agreement, this
Agreement will be null and void, and neither Party shall have any
liability to the other hereunder except that Gemini shall return to
Carrier User any portion of the Purchase Price paid by Carrier User to
Gemini.
2.4 The Capacity called off shall be made available to Gemini (or to its
subsidiaries or agents), at such times as shall be mutually agreed by
Carrier User and Gemini, to permit Gemini to conduct such necessary tests,
adjustments and work as may be required for such Capacity to be maintained
in efficient working order.
2.5 In the event that Gemini shall require access to the Capacity for the
purpose of conducting tests, adjustments or work in accordance with Clause
2.4, it shall, so far as reasonably
- 5 -
<PAGE>
practicable, deliver to Carrier User not less than 5 business days'
written notice of such tests, adjustments or work (the "Scheduled Work").
In the event that the delivery by Gemini to Carrier User of such notice is
not reasonably practicable, Gemini shall contact Carrier User's Network
Control Centre (and/or such other places as Carrier User may designate
from time to time) by telephone immediately prior to the commencement of
any such tests, adjustments or work. All such tests, adjustments and work
shall be performed at such times and in such manner as shall minimise any
interruption in or interference with the Capacity. Gemini shall use all
reasonable endeavours to ensure that such restoration facilities shall be
available to Gemini as shall minimise any interruption to the Capacity
during the conduct of any such tests, adjustments or work.
2.6 The communications capability of any of the Capacity may be optimised by
Carrier User by the use of equipment which will more efficiently use such
Capacity, provided that the use and operation of such equipment by Carrier
User or any person or entity claiming through or under Carrier User shall
not be such as to (i) cause any interruption of, or interference to, the
use of any other capacity on the Gemini Network, (ii) prevent use of
similar equipment by other owners or operators of the Gemini Network,
(iii) impair privacy of any communications over such facilities, (iv)
cause damage to any plant or equipment; or (v) create hazards to
employees, Affiliates or Associates of Gemini, Carrier User, or any other
user, owner or operator of the Gemini Network or the public; and provided,
further, that Carrier User shall indemnify Gemini and the Founding Parties
in connection with the use of any such equipment by Carrier User or any
person or entity claiming through or under Carrier User in accordance with
the provisions of Clause 7. Such equipment, if used, shall not constitute
a part of the Gemini Network. In addition, Carrier User shall bear the
reasonable cost of any additional protective apparatus properly required
to be installed because of the use of such facilities by Carrier User, any
lessees of Carrier User, or any customer or customers of Carrier User or
of any such lessee.
2.7 Carrier User shall, in any agreements with third parties for the sale of
any interests in the Capacity, include in such agreements provisions
substantially in the form of those contained in Clause 2.6.
- 6 -
<PAGE>
2.8 Gemini shall in all agreements between Gemini and any purchaser from
Gemini of capacity on the Gemini Network include in such agreements
provisions substantially in the form of those contained in Clause 2.6.
3. Payment for IRU; Payment Procedures
3.1 In consideration for the grant to Carrier User of an IRU of the Capacity,
Carrier User shall pay to Gemini the amounts stated in Schedule 1
(collectively, the "Purchase Price") on the respective dates set forth in
such Schedule. Payment shall be made by Carrier User in an amount that is
equal to the full amount stated in Schedule 1 without reduction for any
deduction or withholding for or on account of any tax, duty or other
charge of whatever nature imposed by any taxing authority.
Notwithstanding the foregoing, if at any time during the period commencing
on the date hereof and expiring on 28th of February 1999, the Purchase
Price payable hereunder shall exceed the Gemini Market Price for
equivalent Capacity, Gemini shall promptly notify Carrier User of such
event, and the Purchase Price shall be reduced automatically to the Gemini
Market Price for equivalent Capacity. The Market Price Differential shall
be credited first against any then unpaid balance of the Purchase Price,
then Gemini shall pay to Carrier User the amount of such excess within
thirty (30) days. Gemini shall promptly refund to Carrier User the amount
by which the Purchase Price (to the extent paid to Gemini hereunder)
exceeds the Gemini Market Price for equivalent Capacity.
3.2 The Purchase Price specified in Clause 3.1 shall be due and payable
according to the terms set out in this Clause 3 and Schedule 1, and any
O&M Costs payable by Carrier User to Gemini hereunder shall be paid within
30 days following the date on which Gemini has delivered an invoice to
Carrier User or otherwise in accordance with Clause 4 below for such
amounts as shall be due hereunder. All payments made by Carrier User under
this Clause 3 shall be made without any deduction or withholding for or on
account of any tax, duty or other charges of whatever nature imposed by
any taxing or governmental authority (collectively, Taxes). If Carrier
User is required by law to make any deduction or withholding from any
payment due hereunder to Gemini then, notwithstanding anything to the
contrary contained in this Agreement, the gross amount payable by Carrier
User to
- 7 -
<PAGE>
Gemini will be increased so that, after any such deduction or withholding
for Taxes, the net amount received by Gemini will not be less than Gemini
would have received had no such deduction or withholding been required.
3.3 Gemini shall render any invoices under this Agreement in U.S. dollars, and
Carrier User shall pay the amounts due in U.S. dollars. Carrier User shall
make said payments to Gemini in immediately available funds. For the
avoidance of doubt, Gemini shall not be obliged to activate any Capacity
unless or until all payments in respect thereof have been made.
3.4 Except in respect of invoices in respect of part of the Purchase Price
(which shall be payable in accordance with Schedule 1) invoices shall be
deemed to have been accepted by Carrier User if Carrier User does not
present a written objection to Gemini on or before the date when payment
is due, otherwise any objection shall be made within 14 days of receipt of
the invoice. If such objection is made, Carrier User shall pay the
undisputed portion of such invoice in accordance with Clause 3.2 and the
Parties shall make all reasonable efforts to resolve such dispute
promptly.
3.5 In the event that the Parties shall fail, within 30 days of service of a
written objection in accordance with Clause 3.4, to resolve any dispute,
either Party shall be entitled to refer the matter to an independent
expert for resolution. The identity of any independent expert appointed
in accordance with this Cause 3.5 shall be agreed between the Parties or,
in the event of a failure to agree, shall be appointed by the President of
the International Accounting Standards Bureau. Any person appointed in
accordance with this Clause 3.5 shall act as expert and not as arbitrator.
3.6 The Parties shall, within 10 days of the appointment of an expert in
accordance with Clause 3.6, deliver to the expert such documents, data and
other information as he may require to enable him to reach a decision.
3.7 The expert shall be required to deliver a reasoned decision within 60 days
of his appointment in accordance with Clause 3.5. In the absence of
manifest error such decision shall be final and binding upon the Parties.
The costs of, and expenses occasioned by, any
- 8 -
<PAGE>
expert appointed in accordance with this Cause 3 shall be borne in the
proportions determined by such expert.
3.8 Amounts invoiced and not paid when due shall (unless the subject of a
written objection notified by Carrier User to Gemini in accordance with
Clause 3.4) include extended payment charges from the day following the
day on which payment was due and until paid. Overpaid amounts, refunded to
Carrier User pursuant to this Agreement, shall incur extended payment
charges from the day following the day when the overpayment was made until
the day when the refund is made. In the event any sums are withheld in
accordance with Clause 3.4, following resolution of the relevant dispute
either in accordance with Clauses 3.4 or 3.5 (as the case may be), the sum
then payable shall include extended payment charges from the day following
the day on which payment was due in accordance with the relevant invoice
and until paid. For the purposes of this Agreement, such extended payment
charges shall be computed in accordance with the following:
(a) any invoice rendered under this Agreement which is not paid when due
shall accrue interest at the annual rate of three (3) percentage
points greater than the applicable LIBOR Rate in effect on the first
business day of the month in which the payment is due, from the day
following the date payment of any such invoice was due or the
overpayment was made, until such invoice is paid in full.
(b) in the event that applicable law does not allow the imposition of
such financial charges at the rate established in accordance with
this Clause, financial charges shall be at the highest rate
permitted by applicable law, which in no event shall be higher than
the rate computed in accordance with this Clause.
(c) any overpayment shall accrue interest at the rate of three (3)
percentage points greater than the applicable LIBOR Rate in effect
on the first business day of the month in which the overpayment was
made.
3.9 In the case of invoices containing costs invoiced on a preliminary billing
basis, appropriate adjustments will be made in subsequent invoices
promptly after the actual costs involved are determined or, in the event
that no subsequent invoices are to be rendered against
- 9 -
<PAGE>
which credits or deductions may be applied, Gemini shall pay to Carrier
User or Carrier User shall pay to Gemini, as applicable, the amount of any
such credit.
4. Obligation to Pay O&M Costs
4.1 Gemini will furnish to Carrier User and maintain (or cause to be furnished
to Carrier User and maintained) the Capacity in accordance with Schedule 1
and in accordance with the terms of the C&MA.
4.2 Gemini shall ensure that restoration arrangements are put in place with
other cable systems in accordance with the terms of the C&MA. Subject to
Clause 4.3, in the event that the Capacity and any in-system restoration
shall become unavailable during the System Lifetime, Gemini shall as soon
as practicable take all reasonable steps to arrange restoration of the
Capacity or so much of it as it is practicable and reasonable so to do on
another cable system and Carrier User shall pay the Restoration Charges
therefor.
4.3 In the event that Carrier User shall by 30 days written notice to Gemini
confirm to Gemini that in the circumstances specified in Clause 4.2 it
shall not require restoration of the Capacity, Gemini shall not be obliged
to restore the Capacity and Carrier User shall not be liable for payment
of any Restoration Charges accruing from the date of expiry of the notice
aforesaid.
4.4 Subject to Clause 3.4, Carrier User shall pay to Gemini the O&M Costs as
set out in Schedule 1 in accordance with Schedule 1 and Clause 3 hereof.
4.5 Gemini shall keep and maintain for a period of five years from the date
thereof such records and accounts of Gemini's costs and expenses included
in the O&M Costs as may be appropriate to support the billing of any such
costs by Gemini to Carrier User. Carrier User shall have the right to
review during normal business hours, upon reasonable prior written notice
of not less than ten (10) business days, any such books, records,
vouchers, accounts and costs, subject to Gemini's right to recover from
Carrier User the reasonable costs incurred in complying with such review.
- 10 -
<PAGE>
5. Warranties
5.1 Carrier User Warranties
Carrier User hereby warrants to Gemini as follows:
(a) Carrier User is a limited liability company, duly organised and
validly existing under the laws of its state or jurisdiction of
organisation, is qualified to do business in all jurisdictions
(domestic and foreign) in which such qualification is required by
applicable law, and has the requisite authority to execute this
Agreement and to perform its obligations hereunder;
(b) this Agreement constitutes a valid and binding obligation of Carrier
User, enforceable against Carrier User in accordance with its terms;
(c) there are no pending, or, to Carrier User's knowledge, any
threatened claims, actions, suits, audits, investigations or
proceedings by or against Carrier User which could have a material
adverse effect on Carrier User's ability to perform its obligations
under this Agreement;
(d) Carrier User has obtained and shall use commercially reasonable
efforts to maintain in good standing, all such consents, approvals,
licenses, permits and other approvals, both governmental and
private, as may be necessary to permit Carrier User to perform its
obligations under this Agreement and to acquire and use the
Capacity;
(e) Carrier User shall perform its obligations under this Agreement and
use the Capacity in a manner consistent with applicable law, and
shall not use, or knowingly permit the use of the Capacity, for any
illegal purpose or in any other unlawful manner;
(f) Carrier User shall not create or permit to exist, any liens,
encumbrances or charges to be placed upon the Capacity or Carrier
User's rights under this Agreement other
- 11 -
<PAGE>
than liens, encumbrances or charges of financial institutions or
others against Carrier User's assets generally in connection with
financing arrangements by Carrier User; and
(g) Carrier User shall use the Capacity and shall cause all other
persons using the Capacity to use such Capacity in such a manner so
as not to cause any interruption of, or interference to, the Gemini
Network, or the use of any other capacity on the Gemini Network.
(h) (i) Carrier User represents and warrants that no employee of any
Cable & Wireless PLC group company or any WorldCom Inc. group
company is directly or indirectly interested in any Carrier User
group company;
(ii) Carrier User further represents and warrants that the ultimate
shareholders of the group of companies of which Carrier User is a
member are as detailed in the attached schedule and that the persons
ultimately and beneficially interested in such shareholders are also
as detailed in the attached schedule;
(iii) In consideration of Gemini completing this Agreement, Carrier
User undertakes to Gemini (as trustee for itself and Cable &
Wireless PLC and WorldCom Inc.) that it will not knowingly permit
any employee of any Cable & Wireless PLC group company or WorldCom
Inc. group company (whilst they remain an employee thereof) to be
directly or indirectly interested in any Carrier User group company;
and
(iv) Without prejudice to the generality of the preceding paragraph,
Carrier User further undertakes that if and until such time as Mr
Harry Pomeroy shall cease to be an employee of any WorldCom Inc.
group company, that he shall not be directly or indirectly
interested in any Carrier User group company.
For the purposes hereof:
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<PAGE>
"Cable & Wireless group company" means Cable & Wireless PLC, its
subsidiaries and subsidiary undertakings;
"WorldCom Inc. group company" means WorldCom, its subsidiaries and
subsidiary undertakings;
"Carrier User group company" means Carrier User, its subsidiaries
and subsidiary undertakings and any holding company of Carrier User
and all other subsidiaries and subsidiary undertakings of such
holding company;
- 13 -
<PAGE>
"subsidiary" and "subsidiary undertaking" shall have the meanings
given to such terms by the Companies Act 1985 (as amended).
5.2 Gemini Warranties
Gemini hereby warrants to Carrier User as follows:
(a) Gemini is a company duly organised and validly existing under the
laws of Bermuda, is qualified to do business in all jurisdictions
where such qualification is required by applicable law, and Gemini
has the requisite authority to execute this Agreement and to perform
its obligations hereunder;
(b) this Agreement constitutes a valid and binding obligation of Gemini,
enforceable against Gemini in accordance with its terms;
(c) there are no pending, or, to Gemini's knowledge, threatened claims,
actions, suits, audits, investigations or proceedings by or against
Gemini which could have a material adverse affect on Gemini's
ability to perform its obligations under this Agreement.
(d) Gemini has obtained or procured and shall use commercially
reasonable efforts to maintain or procure are maintained in good
standing, all necessary consents, approvals, licences, permits and
other approvals, both governmental and private, as are necessary to
permit Gemini to perform its obligations under this Agreement and to
provide and maintain the Gemini Network;
(e) Gemini shall perform its obligations under this Agreement and
provide the Capacity in accordance with Schedule 1;
(f) Gemini shall perform or ensure that the construction, maintenance
and operation services as set out in this Agreement and the C&MA are
performed:
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<PAGE>
(i) with all reasonable skill and care and in accordance with
recognised standards of a competent provider of maintenance
services in a manner consistent with applicable law; and
(ii) are carried out at all times by appropriately qualified
personnel.
Gemini shall not use, or if and to the extent that Gemini has an
enforceable contractual right against any other carrier user,
knowingly permit the Gemini Network to be used by any other carrier
user for any illegal purpose or in any unlawful manner; and
(g) Gemini shall indemnify and hold harmless Carrier User in respect of
all and any losses and damages costs and expenses (including
reasonable legal costs and expenses) arising out of any claims or
proceedings (whether successful or not) against Carrier User,
regarding patents, copyright or any other intellectual property
rights owned by any third party, resulting from Carrier User's use
of the Capacity in accordance with the terms of this Agreement,
providing that Gemini shall have sole conduct of such claims or
proceedings. In the event that the use by Carrier User of the
Capacity in accordance with the terms of this Agreement shall
infringe the patents, copyrights or other intellectual rights of any
third party, Gemini shall obtain or procure by whatever means it
shall deem appropriate at its own cost and expense the right for
Carrier User to use the Capacity in accordance with the terms of
this Agreement.
6. Default
6.1.1 Carrier User Default
Upon the occurrence of any of the following events, and subject to Clause
6.1.2 Gemini shall be entitled: (i) upon ten (10) business days (being any
day which is not a Saturday or a Sunday or a public holiday in the country
where the notice is to be served) written notice to Carrier User to
terminate this Agreement and to reclaim the IRU granted hereunder, and
save as set out below shall be relieved of any liability arising to
Carrier User out of such termination and reclamation; and (ii) shall be
entitled to pursue any and all rights and legal
- 15 -
<PAGE>
and equitable remedies (including its rights and remedies to enforce
Carrier User's obligations under this Agreement):
(a) subject to the provisions of Schedule 1, if Carrier User fails to
make any payment when due under this Agreement, fails to perform any
of its material obligations under this Agreement, or is otherwise in
breach of and material representation, warranty, covenant or other
obligation under this Agreement, which event remains uncured for a
period of sixty (60) days following receipt by Carrier User of
written notice of any such breach or failure (which notice Gemini
agrees to send also to the sub IRU holder to whom Carrier User has
granted rights in respect of the Capacity and whose details Carrier
User has previously provided to Gemini); or
(b) in the event that: (i) an effective resolution or petition is passed
or presented for the dissolution or winding up Carrier User, except
for the purposes of bona fide amalgamation, merger or restructuring;
(ii) a receiver or administrative receiver is appointed over the
whole or any part of the undertaking property or assets of Carrier
User; and/or (iii) Carrier User becomes insolvent or makes any
special arrangements, composition or any special assignment for the
benefit of its creditors.
Without prejudice to the rights of Gemini pursuant to this Clause,
following the issue of a notice of termination by Gemini, in
accordance with this Clause Gemini agrees:
(a) to provide to such banks or financial institutions as notified
to Gemini by Carrier User from time to time and prior to
termination of this Agreement (the "Banks") a copy of the said
notice at the time it is served; and
(b) insofar as is reasonably practicable, to consult with the
Banks in relation to the proposed termination.
6.1.2 In the event that Gemini shall become entitled to terminate this Agreement
in accordance with Clause 6.1.1 (save in relation to a breach by Carrier
User of its obligations arising under paragraph 1.2 of Schedule 1 (as
qualified by paragraph 1.4 of Schedule 1)) on the occurrence of the first
breach or default giving rise to a right of termination, Gemini's right to
terminate this Agreement will be limited to the one or more STM1 units to
which such breach or default relates. Subject as aforesaid, this
Agreement will continue in full force and effect provided that Carrier
User shall cease to be entitled to draw down any further STM1 Units in
accordance with Schedule 1 and the Purchase Price in relation to these
remaining STM1 Units then held by Carrier User shall be retrospectively
adjusted upwards in accordance with Gemini's pricing tariff then in force
in relation to the Capacity for which Carrier User then holds on IRU, to
take account of the fact that the Purchase Price was based upon volume
discounts based upon an STM16. On the occurrence of a second breach or
default giving rise to a right to terminate, the preceding paragraph will
apply in all respects. On the occurrence of a third breach or default
giving rise a right to terminate, Gemini shall be entitled to terminate
this Agreement in its entirety.
- 16 -
<PAGE>
6.2.1 Gemini Default
Upon the occurrence of any of the following events, Carrier User (i) shall
be entitled, upon ten (10) business days (as defined in Clause 6.1)
written notice to Gemini to terminate this Agreement and shall be relieved
of any liability arising to Gemini out of such termination; and (ii) shall
be entitled to pursue any and all rights and legal aid equitable remedies
(including its rights and remedies to enforce Gemini's obligations under
this Agreement). In the event that Carrier User shall terminate this
Agreement, Gemini shall be entitled forthwith to reclaim the IRU granted
hereunder and Gemini shall make payment to Carrier User of a proportion of
the Purchase Price pro rated over the System Lifetime.
(a) If Gemini falls to perform any of its material obligations under
this Agreement, or is otherwise in breach of any material
representation, warranty, covenant or other obligation under this
Agreement, which event remains uncured for a period of thirty (30)
days following receipt by Gemini of written notice of any such
breach or failure; or
(b) in the event that: (i) an effective resolution or petition is passed
or presented for the dissolution or winding up of Gemini, except for
the purposes of bona fide amalgamation, merger or restructuring;
(ii) a receiver or administrative receiver is
- 17 -
<PAGE>
appointed over the whole or any part of the undertaking property or
assets of Gemini; and/or (iii) Gemini becomes insolvent or makes any
special arrangements, composition or any special assignment for the
benefit of its creditors.
6.3 In the event that any regulatory or governmental authority directs or
threatens to direct either Party to terminate this licence or in the
opinion of experienced regulatory counsel in the relevant jurisdiction any
necessary licence is likely to be revoked or expire and not immediately be
replaced the parties shall (with time being of the essence) forthwith
negotiate in good faith any necessary amendments to the Agreement or as to
what other action is necessary to avoid the direction or revocation or
have it or its threat reversed. If the continued operation of the Gemini
Network is solely as a result of the act or omission of Carrier User
jeopardised, then it shall be deemed to be an event giving rise to Gemini
having the right to terminate pursuant to clause 6.1.1 above.
7. Limitation of Liability
7.1 Neither Party's liability:
(a) for death or personal injury resulting from the negligence of either
Party; or
(b) in relation to any other liability which may not by applicable law
be excluded or limited;
is excluded or limited.
7.2 Gemini shall not be liable to the Carrier User for any loss or damage
caused by or arising out of any temporary or permanent failure or
disruption of the Gemini Network or any facilities associated therewith or
for any interruption of service (without prejudice, in each ease, to any
respective rights or liabilities of the parties under any other agreements
relating to the Gemini Network), except as expressly provided in this
Agreement save for loss or damage arising from the negligence or
recklessness of Gemini or otherwise its breach of the terms hereof.
7.3 In no event shall either Party or their respective Affiliates be liable to
the other, or any person or entity claiming through either Party, nor
shall either Party or any of its Affiliates be liable to the other, the
Founding Parties or their respective Affiliates in contract, tort
- 18 -
<PAGE>
(including negligence) or otherwise arising under or in connection with
this Agreement for any indirect or consequential loss or damage howsoever
arising, which term shall include, but not be limited to, loss of
business, anticipated savings or profits.
7.4 Subject to Clauses 7.3 and 7.5, each Party (the "First Party") shall
indemnify and hold harmless and defend the other Party and each of their
respective officers, directors, employees, representatives and agents from
and against all claims, demands, actions, suits, proceedings, writs,
judgements, orders and decrees brought, made or rendered against them or
any of them and all damages, losses and expenses suffered or incurred by
them or any of them howsoever arising out of or related to the breach by
the First Party of any of the terms of this Agreement.
7.5 The First Party shall notify the other Party forthwith of any claim,
demand, action, suit, proceeding, writ, judgement, order or decree falling
within the scope of Clause 7.3 and shall permit the other Party sole
conduct of the same and shall provide reasonable assistance in relation
thereto, subject to the payment by the other Party of the First Party's
reasonable costs and expenses.
8. Force Majeure
Neither Party (the "affected party"), the Founding Parties nor their
respective Affiliates, shall be liable to the other Party for the failure
to perform any obligation hereunder, or any loss or damage which may be
suffered by the other Party or any person or entity claiming through or
under the other Party for, due to any cause beyond the affected Party's
reasonable control, including without limitation, any acts of God,
inclement weather, failure or shortage of power supplies, unavailability
of materials, flood, drought, lightening or fire, strike (not affecting
the affected party's employees), lockout, trade dispute or labour
disturbance, the act or omission of government, highways, authorities,
other telecommunications operators, administrations or other competent
authority, military operations, riot.
- 19 -
<PAGE>
9. Assignment
9.1 Neither Party shall assign any or all of us rights or obligations arising
under this Agreement or otherwise with respect to the Gemini Network
without the prior written consent of the other in each instance.
Notwithstanding the foregoing:
(a) Carrier User may assign its rights and obligations arising under
this Agreement or otherwise with respect to the Gemini Network to an
Affiliate or Associate of Carrier User, or to a successor to all, or
a substantial part of the business of Carrier User, provided that,
should such Affiliate or Associate cease to be an Affiliate or
Associate of Carrier User, Carrier User will procure that its rights
and obligations, arising under this Agreement are reassigned to
Carrier User or an Affiliate or Associate thereof.
(b) Carrier User may grant rights in some or all of the Capacity to such
licensed or otherwise legally qualified entities as Carrier User
deems appropriate provided that notwithstanding any such grant
pursuant to this Clause (b), Carrier User shall remain fully and
completely liable for the performance of all of the obligations of
the Carrier User and any grantee of Carrier User hereunder, and
Gemini shall have no obligation to recognise or in any manner deal
with any grantee of Carrier User. For the avoidance of doubt,
notwithstanding any grant permitted hereunder, any and all notices,
invoices, bills and correspondence to be delivered by Gemini
hereunder shall be delivered only to Carrier User and Carrier User
shall ensure and, be responsible for, the grantee's compliance with
all of the obligations, representations and warranties of Carrier
User under this Agreement. Any attempted assignments by Carrier User
not in accordance with this Clause 9 shall be void.
9.2 Upon the assignment by either Party of its rights and obligations under
this Agreement in accordance with this Clause 9, the assignor shall
forthwith:
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<PAGE>
(a) notify the other Party; and
(b) procure that the assignee shall enter into an agreement with the
remaining Party on the terms of this Agreement.
9.3 Notwithstanding clause 9.1(b) above, in the event Carrier User grants
rights in all or a portion of the Capacity pursuant to Clause 9.1, for
purposes of administering the network operation centre of the Gemini
Network (the NOC), Carrier User may notify Gemini of grants of whole or
half circuits of Capacity at the STM-1 level. Subject to the provisions of
Clause 9.1, upon Gemini's confirmation of such granting of Capacity by the
Carrier User at the STM-1 level, Gemini will recognise the grantee
described in such notice as the holder of certain stated capacity on the
Gemini Network solely for purposes of administering the NOC. Gemini will
use its reasonable efforts to deliver such confirmation to Carrier User
with thirty (30) days of Gemini's receipt of Carrier User's notice.
Carrier User's notification shall include the following information: (a)
the name and address of the assignee; (b) the interest in the Capacity
transferred; (c) the name, address, telephone number, facsimile number and
e-mail address of the person (including appropriate escalation parties and
procedures) authorised on behalf of the assignee to interact with the NOC;
(d) a certification by Carrier User that, notwithstanding such grant,
Carrier User shall be fully liable for the performance of all of the
obligations of Carrier User under this Agreement; and (e) such other
information as Gemini may reasonably request.
10. Relationship of Parties
The relationship of the Parties hereto shall not be that of partners or
joint venturers and shall be limited to the express provisions of this
Agreement. Nothing herein contained shall be deemed to constitute a
partnership between them or to merge their assets or their fiscal or other
liabilities or undertakings, nor shall it allow a Party to act as an agent
of the other Party.
- 21 -
<PAGE>
11. Severability
If any of the provisions of this Agreement is found by an appropriate
arbitral, Judicial or regulatory authority to be void or unenforceable,
such provision shall be deemed to be deleted from this Agreement and the
remaining provisions shall continue in full force and effect and will be
valid and enforceable to the full extent permitted by law.
12. Headings; References
Headings are inserted for convenience only and shall not affect the
interpretation of this Agreement. References to recitals, clauses and
attachments are to recitals and clauses of and Schedules to this
Agreement. Unless the context otherwise requires, words importing the
singular number shall include the plural and vice versa. Unless the
context otherwise requires, references to a person include an individual,
firm, body, corporation, unincorporated association and government or
governmental, semi-governmental or local authority or agency.
13. Entire Agreement
This Agreement, including the Schedules hereto and for the avoidance of
doubt the C&MA and any other documents of even date which the parties
agree shall be included, constitutes the entire agreement between the
Parties with respect to the grant of and payment for the IRU, and
supersedes all prior agreements, understandings or proposals, whether oral
or written, with respect to the grant of and payment for the IRU.
14. Arbitration
In the event that any dispute or difference whatsoever shall arise from
the performance or as to the meaning of this Agreement or as to any matter
or item of whatsoever nature howsoever arising out of or in connection
with this Agreement, such dispute or difference shall be submitted to
arbitration in accordance with the terms and conditions set out in
Schedule 2 attached hereto save that nothing in this Clause 14 shall be
deemed to preclude or limit the right of either Party to seek injunctive
or other equitable relief.
- 22 -
<PAGE>
15. Increase or Decrease in Design Capacity
15.1 In consideration of the entry into this Agreement by the Carrier User,
Gemini agrees to grant to the Carrier User a right of first refusal to
purchase additional capacity on the Gemini Network before such additional
capacity of STM16 ceases to be available for sale to Carrier User in the
following terms: Gemini will provide the Carrier User with written notice
prior to the date on which the last or final STM16 on the Gemini Network
(the "Notice") becomes available for first sale. The Carrier User shall be
entitled to request such additional capacity by giving 30 days written
notice to Gemini within 30 days of receiving the Notice. Gemini shall give
notice to Carrier User as soon as it is aware that the necessary capacity
in the Gemini system may cease to be available.
In the event that the Carrier User should fail to exercise its rights to
purchase additional capacity then Gemini shall have no remedy for failure
by the Carrier User to do so. In the absence of mutual agreement to the
contrary the terms for the purchase of the further capacity as an IRU
shall be the terms of this Agreement suitably amended (except in relation
to the Purchase Price in relation to which the provisions of Clause 15.2
shall apply).
15.2 For the avoidance of doubt, if Carrier User purchases an IRU in a further
STM1 unit or units and agrees that the purchase shall otherwise be
pursuant to the terms of this Agreement the additional purchase price for
each additional STM1 of Capacity shall be the Gemini Market Price for the
marginal units of capacity (which shall mean for the avoidance of doubt,
that account will be taken of the aggregate number of STM1 Units
previously acquired by Carrier User pursuant to this Agreement).
Notwithstanding the foregoing, this Clause 15.2 will not apply in the
event that Gemini exercises all or any of its rights in accordance with
Clause 6.1.2.
15.3 Gemini shall have authority to increase, at its own cost and expense, the
initial design capacity of the Gemini Network. Gemini may afford Carrier
User the opportunity to acquire such additional capacity in accordance
with terms and conditions as may be proposed by Gemini from time to time.
- 23 -
<PAGE>
15.4 Subject to clause 15.5, in the event that the capacity that the Gemini
Network is capable of providing at the RFS Date is less than the aggregate
amount of capacity purchased by all Carrier Users by reason of a failure
in whole or in part of the "wave division multiplex" technology or other
technology upon which the capacity of the Gemini Network is predicated,
the available capacity shall be assigned to Carrier Users in proportion to
their respective shares of the purchased capacity in an equitable manner
as determined by the Management Committee (as defined in the C&MA). In
case of such capacity reduction, Gemini will recompute the pro rata
allocation of and make appropriate adjustments to the O&M Costs payable by
each Carrier User.
15.5 Gemini shall not sell or offer for sale such capacity in the Gemini
Network as may reasonably be anticipated to result directly (and not
wholly or partially as a result of system degradation or other external
factors) in a reduction in the Capacity.
16. Export Control
The Parties acknowledge that to the extent any products, software or
technical information provided under this Agreement are, or may be subject
to any applicable export laws and regulations, the Parties agree that they
will not use, distribute, transfer or transmit the products, software or
technical information (even if incorporated into other products) except in
compliance with such export laws and regulations (or licenses or orders
issued pursuant thereto). If requested by either Party, the other Party
agrees to sign all necessary export-related documents as may be required
to comply therewith.
17. Continuation of Obligations
17.1 Each Party's further rights and obligations under this agreement shall
cease immediately on termination of this agreement but termination shall
not affect:
(a) a Party's rights and obligations accrued as at termination; and
(b) any provision of this agreement expressed to survive its termination
- 24 -
<PAGE>
18. Governing Law
This Agreement shall be construed and governed in accordance with English
law.
19. Waiver of Immunity
The Parties acknowledge that this Agreement is commercial in nature, and
the Parties expressly and irrevocably waive any claim or right which they
may have to immunity (whether sovereign immunity or otherwise) for
themselves or with respect to any of their assets in connection with an
arbitration, arbitral award or together proceeding to enforce this
Agreement, including, without limitation, immunity, from service of
process, immunity of any of their assets from pre or post judgement
attachment or execution and immunity from the jurisdiction of any court or
arbitral tribunal.
20. Successors and Assigns
This Agreement and all the provisions hereof shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors
and assigns.
21. Waiver
The waiver by any Party, in whole or in part, of a breach of or a default
under any of the provisions of the Agreement, or the failure, in whole or
in part, of any Party, upon one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege
hereunder shall not thereafter be construed as a waiver of any subsequent
breach or default of a similar nature or as a waiver or any such
provision, right or privilege hereunder.
22. Counterparts
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<PAGE>
This Agreement may be executed in counterparts, each of which when
executed and delivered shall be deemed an original. Such counterparts
shall together (as well as separately) constitute one and the same
instrument.
23. Notices
Each notice, demand, certification or other communication given or made
under this Agreement shall be in writing and shall be delivered by hand or
sent by registered mail or facsimile transmission to the address of the
Party as shown below:
If to Carrier User:
Registered office of Telemonde International Bandwidth (Bermuda)
Limited
Argonaut House
5 Park Road
Hamilton
Bermuda
with a copy to
Telemonde Limited
2nd Floor
54 Grosvenor Street
London W1X OEU
Attention: Ray Durton
If to Gemini:
Gemini Submarine Cable System Limited
Clarendon House
Church Street
Hamilton, HM 12
Bermuda
Attention: Managing Director with a copy to:
Gemini Submarine Cable System (UK) Limited
10 Fleet Place
London EC4M 7RB
Attention: Managing Director
Fax: + 44 171 570 6500
or such other address as such Party may notify in writing to the other.
Any such notice, demand or other communication shall be deemed to have
been received, if delivered by
- 26 -
<PAGE>
hand, at the time of delivery or, if posted, at the expiration of seven
(7) days after the envelope containing the same shall have been deposited
in the post maintained for such purpose, postage prepaid, or, if sent by
facsimile, at the date of transmission if receipt is followed by postal
notice.
24. Amendments
This Agreement and any of its provisions may be altered or added to only
by another agreement in writing signed by a duly authorised person on
behalf of each of the Parties.
25. Performance of Agreement
No license under patents is granted by Gemini or shall be implied or arise
by estoppel in Carrier User's favour with respect to any apparatus, system
or method used by Carrier User in connection with the use of the Capacity.
26. Registration
If there is a provision of this Agreement, which causes or would cause
this Agreement to be subject to registration under the Restrictive Trade
Practices Act 1976 (as amended), then that provision shall not take
effect until the date after particulars of this Agreement have been
furnished to the Director General of Fair Trading pursuant to section 24
of the Restrictive Trade Practices Act 1976 (as amended).
27. Confidentiality
The terms and provisions of this Agreement are confidential in nature and
shall not be disclosed by Carrier User, or furnished by Carrier User, to
any other person or entity without Gemini's prior written consent in each
instance except:
(a) to any officer or employee or contract staff who may reasonably need
to know it provided that such information is disclosed on the basis
that it is confidential; and
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<PAGE>
(b) as required to be disclosed by law or regulation or to professional
advisers of the Party concerned.
In addition, Gemini may disclose to Carrier User the amount of capacity acquired
and activated by other purchasers of capacity in the Gemini Network and Carrier
User shall keep such information confidential in accordance with the provisions
of this Clause and shall limit its dissemination to only those of its employees
with a need to know the information in connection with the verification of O&M
Costs charges to Carrier User.
IN WITNESS whereof, the duly authorised signatories of the Parties have signed
this Agreement on the date first set herein.
ACKNOWLEDGED and ACCEPTED )
by GEMINI SUBMARINE CABLE )
SYSTEM LIMITED for and on behalf of ) /s/ [ILLEGIBLE]
-------------------------------
[Director][Officer duly authorised to sign]
Dated 3rd April 1998
-------------------------------------
ACKNOWLEDGED and ACCEPTED )
by TELEMONDE INTERNATIONAL )
BANDWIDTH (BERMUDA) LIMITED )
for and on behalf of ) /s/ S. Williams
-------------------------------
[Director][Officer duly authorised to sign]
Dated 3rd April 1998
-------------------------------------
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<PAGE>
Exhibit 10.5(a)
PROMISSORY NOTE
$1,300,000.00 27-8, 1999
FOR VALUE RECEIVED, the undersigned, Telemonde, Inc. ("Maker") promises to
pay to Gemini Submarine Cable Systems Limited ("Holder"), at the address of
Clarendon House, Church Street, Hamilton HM 12, Bermuda or at such other place
as the Holder may from time to time designate in writing, in lawful money of the
United States of America, the principal sum of ONE MILLION THREE HUNDRED
THOUSAND DOLLARS ($1,300,000).
The maturity date of this Note is September 30, 1999, at which time the
entire principal amount thereof, together with all other sums hereunder shall be
due and payable in full, if not sooner paid.
The Maker may repay of this Note in whole or in part at any time or from
time to time without penalty or premium.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of New York.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective heirs, successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
IN WITNESS WHEREOF, this Note is executed as of the date first above
written.
TELEMONDE, INC.
By: /s/ Adam Bishop
---------------------------------
Title: PRESIDENT
------------------------------
<PAGE>
Exhibit 10.5(b)
PROMISSORY NOTE
$1,400,000.00 27-8, 1999
FOR VALUE RECEIVED, the undersigned, Telemonde, Inc. ("Maker") promises to
pay to Gemini Submarine Cable Systems Limited ("Holder"), at the address of
Clarendon House, Church Street, Hamilton HM 12, Bermuda or at such other place
as the Holder may from time to time designate in writing, in lawful money of the
United States of America, the principal sum of ONE MILLION FOUR HUNDRED
THOUSAND DOLLARS ($1,400,000).
The maturity date of this Note is September 15, 1999, at which time the
entire principal amount thereof, together with all other sums hereunder shall be
due and payable in full, if not sooner paid.
The Maker may repay of this Note in whole or in part at any time or from
time to time without penalty or premium.
This Note is intended as a contract under and shall be construed and
enforceable in accordance with the laws of the State of New York.
As used herein, the terms "Maker" and "Holder" shall be deemed to include
their respective heirs, successors, legal representatives and assigns, whether
by voluntary action of the parties or by operation of law.
IN WITNESS WHEREOF, this Note is executed as of the date first above
written.
TELEMONDE, INC.
By: /s/ Adam Bishop
---------------------------------
Title: PRESIDENT
------------------------------
<PAGE>
EXHIBIT 10.6
ATLANTIC CROSSING/AC-1
SUBMARINE CABLE SYSTEM
CAPACITY PURCHASE AGREEMENT
THIS AGREEMENT (as amended, supplemented or otherwise modified from time
to time, this "Agreement"), made and entered into this 10th day of June, 1998,
between ATLANTIC CROSSING LTD., a company organized and existing under the laws
of Bermuda and having its principal office in Bermuda (the "Grantor"), and
TELEMONDE BANDWIDTH (BERMUDA) LTD, a company in the process of incorporation
under the laws of Bermuda and whose registered office shall be at Argonaut
House, 5 Park Road, Hamilton HM09, Bermuda (the "Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Grantor, (formerly known as Global Telesystems Ltd.), its
subsidiaries, SSI Atlantic Crossing LLC and AT&T Submarine Systems, Inc., now
known as Tyco Submarine Systems Ltd. (together with its successors and assigns,
"TSSL") have entered into the Project Development and Construction Contract,
dated March 18, 1997 (as amended, supplemented or otherwise modified from time
to time, the "Supply Contract"), pursuant to which TSSL has agreed to design,
manufacture, construct, install and deliver a fiber optic cable system
connecting (a) the United States to the United Kingdom, (b) the United Kingdom
to the Netherlands, (c) the Netherlands to Germany and (d) Germany to the United
States (the "System");
WHEREAS, the Grantor, its subsidiaries, SSI Atlantic Crossing LLC and TSSL
have also entered into the Operations, Administration and Maintenance Agreement,
dated as of March 25, 1997 (as amended, supplemented or otherwise modified from
time to time, the "OA&M Agreement"), pursuant to which TSSL has agreed, in
accordance with the terms thereof, to operate, administer and maintain the
System;
WHEREAS, the Purchaser desires to acquire rights with respect to the
Purchased Capacity (as defined herein) on an indefeasible right of use basis
("IRU") and such Purchased Capacity represents capacity on the System between
the System Interface (as defined herein) of the applicable cable stations;
WHEREAS, the Purchased Capacity is comprised of: (a) S Capacity (as defined
herein), which will be conveyed by the Grantor to the Purchaser pursuant to this
Agreement; and (b) to the extent necessary to allow the Purchaser to use its IRU
in the applicable S Capacity, T Capacity (as defined herein), which will be
conveyed by subsidiaries of the Grantor to the Purchaser pursuant to the
Indefeasible Right of Use Agreement, attached hereto as Annex A; and
WHEREAS, in order to obtain inland connection services in the United States
and the United Kingdom for the purpose of extending the Purchased Capacity
inland to a location in New York City and London (the "Inland Capacity"), the
Purchaser has the option of entering into separate agreements (the "Inland
Capacity Agreements") with subsidiaries or affiliates of the
<PAGE>
Grantor located in the United States and the United Kingdom (the "Inland
Affiliates");
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants contained herein, covenant and agree with each other as follows:
1. DEFINITIONS. Terms defined in the preamble, in the recitals and Annex B
-----------
hereto shall have their respective meanings when used herein and the
following terms shall have the following meanings:
"Access Connection" as defined in Annex B to this Agreement.
-----------------
"Adjusted Pro Rata Share" as defined in Annex B to this Agreement.
-----------------------
"Advisory Committee" as defined in Paragraph 5 of Annex B to this
------------------
Agreement.
"Business Day" means a day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City or Bermuda are authorized or
required to close.
"Dollars" or "S" means United States dollars.
------- -
"European Segment" means Segment S-3a, S-3b and/or S-3c.
----------------
"Force Majeure" means any event or circumstance or combination of events
-------------
or circumstances that is beyond the reasonable control of the party
sought to be held liable, including, but not limited to: delay in
obtaining or failure to obtain any permit or governmental
authorization; acts of God or of the public enemy; acts or failure to
act of any governmental authority; war or warlike operations; civil war
or commotion, mobilizations or military call-up and acts of similar
nature, revolution, rebellions, sabotage, and insurrections or riots;
drought, fires, floods, lightning, epidemics, quarantine restrictions;
strikes, and other labor actions; freight embargoes; unworkable
weather; trawler or anchor damage; damage caused by other marine
activity such as fishing, marine research and marine development;
failure or shortage of power supplies and general unavailability of any
raw materials or components; acts of omissions of transporters or the
acts or failure to act of the Purchaser (in the case Grantor is sought
to be held liable), of Grantor (if the Purchaser is sought to be held
liable), or of other respective representatives or agents thereof.
"Grantor's Account" means the bank account of the Grantor maintained
-----------------
with Deutsche Bank AG, New York Branch, at 31 West 52nd Street, New
York, New York 10019 (account number 10-533026-0016) or such other
account as the Grantor may designate to the Purchaser in writing. Wire
instructions for the above referenced account are as follows:
<PAGE>
Account Name: Atlantic Crossing Ltd.
Account Number: 10-533026-0016
Bank Name: Deutsche Bank AG, New York Branch
ABA No.: 026-003-780
Reference: Atlantic Crossing Attn: Lydia Zaininger
"Initial Committed Capacity" means the Purchased Capacity described in
--------------------------
Section 2(b) hereof.
"Maintenance Costs" as defined in Section 4(a) of this Agreement.
-----------------
"Minimum Capacity Unit" or "MCU" means the minimum capacity to be
--------------------- ---
purchased by the Purchaser in the System. A STM-1 is designated as the
MCU for purposes of this Agreement.
"Operator" means TSSL and its successors and assigns as operator under
--------
the OA&M Agreement or any successor operator of the System appointed by
Grantor.
"Payment Date" means, with respect to the IRU granted in respect of any
------------
Purchased Capacity, the date on which the Purchaser pays the Grantor
(for the benefit of the Grantor and the benefit of the Subsidiary
Grantors), in immediately available Dollars, the amount required to be
paid by the Purchaser for such Purchased Capacity in accordance with
Section 3(b) of this Agreement.
"Payment Due Date" shall have the meaning set forth in Schedule III to
----------------
this Agreement.
"Presale Purchaser" means any purchaser who acquires an IRU in capacity
-----------------
on a Transatlantic Segment from the Grantor which was contracted for
prior to the earlier of (x) the RFS Date for the entire System and (y)
November 30, 1998.
"Purchased Capacity" means the S Capacity set forth on Schedule I
------------------
hereto, together with to the extent necessary to allow the Purchaser to
use its IRU in the applicable S Capacity, the applicable T Capacity.
"Purchase Price" means, with respect to the IRU granted in respect of
--------------
any Purchased Capacity, the amount payable by the Purchaser to the
Grantor (for the benefit of the Grantor and the benefit of the
Subsidiary Grantors) in respect of such Purchased Capacity and set
forth under the heading "Purchase Price" on Schedule I to this
Agreement.
"Residual Capacity" means the Segment S-1 Residual Capacity, the Segment
-----------------
S-2 Residual Capacity, the Segment S-3a Residual Capacity, the Segment
S-3b Residual Capacity, the Segment S-3c Residual Capacity and the
Segment S-4
<PAGE>
Residual Capacity.
"RES Date" means, with respect to any Segment, the date on which such
--------
Segment will be available for service, which shall be the date on which
the Grantor certifies that (i) such Segment has achieved the standard
described in Attachment 4 to Annex B hereto, (ii) such Segment has been
accepted by Grantor as ready for commercial service under the Supply
Contract and (iii) the independent engineer engaged by Grantor's senior
lenders has concurred with such acceptance. The RFS Date for Segment S-
1 (and the related T Segments) was May 22, 1998. The anticipated RFS
Date for Segment S-2 is November 30, 1998. The anticipated RFS Date for
Segment S-3a, Segment S-3b, Segment S-3c, Segment S-4 and the entire
System is February 22, 1999. The foregoing dates are merely estimates
as of the date hereof and shall not be deemed to be representations,
covenants or conditions to obligations, provided that the Grantor shall
notify the Purchaser in writing as soon as reasonably practicable if in
its good faith judgment the Grantor determines that a Segment will not
be available for service on the anticipated RFS Date.
"Right of Use Agreement" means the Indefeasible Right of Use Agreement,
----------------------
dated as of the date hereof, made by GT Landing Corp., GT U.K. Ltd.,
Global Telesystems GmbH and GT Netherlands B.V. in favor of purchasers
of capacity on the System (including the Purchaser) and attached as
Annex A to this Agreement, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with
Paragraph 9 thereof.
"S Capacity" means capacity on the System available on any S
----------
Segment.
"S Segments" the collective reference to Segment S-1, S-2 and S-3a,
----------
S-3b, S-3c and S-4, as necessary.
"Segment S-1" as defined in Annex B to this Agreement.
-----------
"Segment S-1 Residual Capacity" as defined in Annex B to this Agreement.
-----------------------------
"Segment S-2" as defined in Annex B to this Agreement.
-----------
"Segment S-2 Residual Capacity" as defined in Annex B to this
-----------------------------
Agreement.
"Segment S-3a" as defined in Annex B to this Agreement.
------------
"Segment S-3a Residual Capacity" as defined in Annex B to this
------------------------------
Agreement.
"Segment S-3b" as defined in Annex B to this Agreement.
------------
"Segment S-3b Residual Capacity" as defined in Annex B to this
------------------------------
Agreement.
<PAGE>
"Segment S-3c" as defined in Annex B to this Agreement.
------------
"Segment S-3c Residual Capacity" as defined in Annex B to this
------------------------------
Agreement.
"Segment S-4" as defined in Annex B to this Agreement.
-----------
"Segment S-4 Residual Capacity" as defined in Annex B to this Agreement.
-----------------------------
"Segment T-1" as defined in Annex B to this Agreement.
-----------
"Segment T-2" as defined in Annex B to this Agreement
-----------
"Segment T-3" as defined in Annex B to this Agreement
-----------
"Segment T-4" as defined in Annex B to this Agreement
-----------
"Segments" the collective reference to the S Segments and the T
--------
Segments.
"Stub Period" as defined in Section 4(a) hereof.
-----------
"Subsidiary Grantors" the collective reference to GT Landing Corp., GT
-------------------
U.K. Ltd., Global Telesystems GmbII and GT Netherlands B.V. each a
wholly-owned subsidiary of the Grantor.
"Supplier" means TSSL and its successors and assigns as contractor under
--------
the Supply Contract or any successor contractor of the System appointed
by Grantor.
"T Capacity" means capacity on the System available on any T Segment.
----------
"T Segments" the collective reference to Segment T-1, T-2, T-3 and T-4.
----------
"Transatlantic Segment" means Segment S-1, S-2 or S-4.
---------------------
"Total Purchase Price" means the aggregate amount payable by the
--------------------
Purchaser to the Grantor (for the benefit of the Grantor and the benefit
of the Subsidiary Grantors) for the IRU of the Purchased Capacity as set
forth on the bottom of Schedule 1 to this Agreement opposite the phrase
"Total Purchase Price".
2. IRU FOR PURCHASED CAPACITY.
--------------------------
(a) Purchase and Grant of IRU. The Purchaser hereby irrevocably agrees to
-------------------------
purchase, for the Purchase Price and on the Payment Due Dates set forth
in Schedule III to this Agreement, an aggregate of sixteen (16) MCUs on
Segment S-1, (the "Initial Committed Capacity"). Effective on the
Payment Date, the Grantor, together with
<PAGE>
the applicable Subsidiary Grantors pursuant to the Right of Use
Agreement, grants to the Purchaser, for the term of this Agreement, an
IRU in the Purchased Capacity for which payment has been made in
accordance with Schedule III to this Agreement. Each purchase and grant
of the IRU in the Purchased Capacity takes place in Bermuda.
(b) Annex B. Certain rights and obligations with respect to the IRU of the
-------
Purchased Capacity are described in Annex B hereto, which is
incorporated herein by reference.
(c) Residual Capacity. If the Purchaser is a Presale Purchaser, then,
-----------------
effective on the date which is 12-1/2 years after the RFS Date for the
entire System, the Grantor, together with the applicable Subsidiary
Grantors pursuant to the Right of Use Agreement, grants to the
Purchaser, at no additional charge and for the term of this Agreement,
an IRU in (i) the Purchaser's Adjusted Pro Rata Share of the Segment S-1
Residual Capacity, (ii) the Purchaser's Adjusted Pro Rata Share of the
Segment S-2 Residual Capacity, (iii) the Purchaser's Adjusted Pro Rata
Share of the Segment S-3a Residual Capacity, (iv) the Purchaser's
Adjusted Pro Rata Share of Segment S-3b Residual Capacity, (v) the
Purchaser's Adjusted Pro Rata Share of Segment S-3c Residual Capacity
and (vi) the Purchaser's Adjusted Pro Rata Share of Segment S-4 Residual
Capacity. The Grantor shall promptly notify the Purchaser of the amount
of capacity in which the Purchaser obtained an IRU pursuant to this
Section 2(c). If the Purchaser acquires an IRU in any Residual Capacity,
the terms contained herein binding on the Purchaser with respect to
Purchased Capacity shall be binding on the Purchaser with respect to
such Residual Capacity. The Purchaser's Adjusted Pro Rata Share in any S
Segment shall be allocated in half MCUs, and the Grantor shall be
permitted to round down to the nearest whole MCU.
(d) Presale Upgrade Rights. In addition, if the Grantor and the Subsidiary
----------------------
Grantors determine to increase the Initial Design Capacity of the System
after the date which 12-1/2 years after the RFS Date for the entire
System, the Grantor shall deliver to the Purchaser (only if the
Purchaser is a Presale Purchaser) notice of the proposed increase. If
the Purchaser is a Presale Purchaser, the Purchaser will have the right
to receive a portion of such increased capacity, on terms to be provided
at that time.
(e) Additional Purchases. The Purchaser will have the right to elect to
--------------------
purchase additional MCUs of Purchased Capacity on Segment S-1 (the
"Optional Purchased Capacity") at any time, so long as and only to the
---------------------------
extent that at such time uncommitted capacity remains available in the
Segment S-1. The purchase price for the Optional Purchased Capacity
shall be the lesser of (i) $4,000,000 per MCU and (ii) the lowest
prevailing AC-1 list price per MCU on Segment S-1. The purchase price
for the Optional Purchased Capacity, in respect of an election on or
before the RFS Date for Segment S-1 ("Pre RFS Election"), shall be due
<PAGE>
and payable on the RFS Date for Segment S-1, or, in respect of an
election after the RFS Date for Segment S-1 ("Post RFS Election"),
immediately as set out below in this Section 2(c). The Purchaser may
elect to exercise such right by (1) delivering written notice to
Grantor, which notice shall set forth the number of MCUs to which such
election shall apply and (2) either, in respect of a Pre RFS Election,
making an initial payment to the Grantor's Account of 10% of the
applicable purchase price of such Optional Purchased Capacity in order
to increase the "Initial Payment" pursuant to Section 3(a) below, or in
respect of a Post RFS Election, immediately paying to the Grantor's
Account the applicable purchase price of such Optional Purchased
Capacity. Upon receipt of such written election notice and payment, to
the extent that such Optional Purchased Capacity remains uncommitted at
that time, the Purchaser shall be irrevocably obligated to purchase such
additional MCU(s) of Purchased Capacity on Segment S-1 on the RFS Date,
in respect of Pre RFS Election, or immediately in respect of a Post RFS
Election, as applicable. The 10% initial payment to be made pursuant to
this Section 2(c) in respect of a Pre RFS Election, if and when paid to
Grantor, shall be non-refundable (except as provided in Section 21 of
this Agreement) and shall be credited toward the payment of the purchase
price pursuant to this Section 2(c). Payment of the purchase price in
respect of a Post RFS Election made under this Section 2(f) shall be
non-refundable. A revised Schedule I will be prepared with respect to
such Optional Purchased Capacity.
(f) Option for Segments S-3a and S-3c. The Grantor hereby grants to the
---------------------------------
Purchaser the option to purchase Purchased Capacity on Segment S-3a or
Segment S-3c (the "Optional European Capacity") at any time, so long as
--------------------------
and only to the extent that at such time uncommitted capacity remains
available in the subject Segment. The purchase price for such MCUs of
Purchased Capacity on Segment S-3a or Segment S-3c shall be as follows:
(i) if the Purchaser purchases such MCUs on a "matched" basis (the total
number of MCUs of Purchased Capacity on Segment S-3a and/or Segment S-
3c matches or is less than the number of MCUs of Purchased Capacity on
Segment S-1 Purchaser has committed to purchase hereunder), then the
Purchaser shall pay $500,000 per MCU or (ii) if the Purchaser
purchases such MCUs on an "unmatched" basis (the total number of MCUs of
Purchased Capacity on Segment S-3a and/or Segment S-3c exceeds the
number of MCUs of Purchased Capacity on Segment S-1 Purchaser has
committed to purchase hereunder), then the Purchaser shall pay
$1,000,000 per unmatched MCU. The purchase price per MCU of such
Optional European Capacity, in respect of an election on or before the
RFS Date for the relevant European Segment ("Pre RFS Election"), shall
be due and payable on the RFS Date for such European Segment, or, in
respect of an election after the RFS Date for such European Segment
("Post RFS Election"), immediately as set forth below in this Section
2(f). The Purchaser may elect to exercise such right by (1) delivering a
written election notice to Grantor, which notice shall set forth the
number of MCUs and the Segment(s) to which such election shall apply and
(2) either, in respect of a Pre RFS Election, making an initial payment
to the
<PAGE>
Grantor's Account of $50,000 for each MCU to be purchased on a "matched"
basis and $100,000 for each MCU to be purchased on an "unmatched" basis
under this Section 2(f) in order to increase the Initial Payment
pursuant to Section 3(a) below, or, in respect of a Post RFS Election,
immediately paying to the Grantor's Account the applicable purchase
price of such Optional European Capacity. Upon receipt of such written
election notice and payment, to the extent that such Optional European
Capacity remains uncommitted at that time, the Purchaser shall be
irrevocably obligated to purchase the elected number of MCU(s) on
Segment S-3a and/or Segment S-3c on the RFS Date for such Segment(s), in
respect of a Pre RFS Election, or immediately in respect of a Post RFS
Election, as applicable. The $50,000 or $100,000 initial payment(s) to
be made pursuant to this Section 2(f) in respect of a Pre RFS Election,
upon payment to Grantor, shall be non-refundable (except as provided in
Section 21 of this Agreement) and shall be credited toward the payment
of the purchase price pursuant to this Section 2(f). Payment of the
purchase price in respect of a Post RFS Election made under this Section
2(f) shall be non-refundable. A revised Schedule I will be prepared with
respect to such Optional European Capacity.
(g) Inland Capacity. The Grantor, on behalf of the Inland Affiliates hereby
---------------
grants to the Purchaser the option of entering into Inland Capacity
Agreements at any time, so long as and only to the extent that at such
time uncommitted capacity remains available, to purchase inland
connection services in the United States between the cable station in
Brookhaven, New York, United States and New York City, New York, United
States ("US Backhaul") and to purchase inland connection services in the
United Kingdom between the cable station in Whitesands, United Kingdom
and London, United Kingdom ("UK Backhaul"). If the Purchaser exercises
such option, then the Purchaser and the Inland Affiliates shall
negotiate and enter into Inland Capacity Agreements, in form and
substance reasonably satisfactory to the Inland Affiliates and the
Purchaser. The purchase price per MCU of capacity on US Backhaul shall
be $750,000. The purchase price per MCU of capacity on UK Backhaul shall
be $2,250,000.
(h) Notification of Remaining Capacity. After the RFS Date for the entire
----------------------------------
System Grantor will set aside eight (8) MCUs on Segment S-1 which shall
be available for purchase by the Purchaser, so long as and only to the
extent that at such time uncommitted capacity remains available. Grantor
shall promptly notify the Purchaser in writing, after the RFS Date for
the entire System, if it anticipates capacity constraints on the System
("Capacity Constraint Notice"). A capacity constraint shall be deemed to
exist when the Grantor reasonably believes, based on pending purchases
of capacity, that there are thirty-two (32) or fewer MCUs of capacity
remaining unsold on Segment S-1. The Purchaser shall have the option to
purchase the eight (8) MCUs by delivering to Grantor, by or upon a date
which is sixty (60) days after receipt of the Capacity Constraint
Notice, a notice of Purchaser's election to purchase additional
capacity, which notice shall set forth the number of MCUs to be
purchased and payment therefor. The purchase price
<PAGE>
for the additional capacity to be purchased pursuant to this Section
2(h) shall be the lesser of (i) $4,000,000 per MCU and (ii) the lowest
prevailing AC-1 list price per MCU on Segment S-1. Upon delivery of such
election notice and payment therefor, the Purchaser shall be irrevocably
obligated to purchase such additional capacity for such purchase price.
A revised Schedule I will be prepared with respect to such additional
capacity.
3. PAYMENT FOR CAPACITY.
--------------------
(a) Initial Payment. Upon the execution and delivery of this Agreement, the
---------------
Purchaser shall make an initial payment to the Grantor's Account (for
the benefit of the Grantor and the benefit of the Subsidiary Grantors),
in immediately available Dollars, in an amount equal to 15% of the Total
Purchase Price (the "Initial Payment"). The Initial Payment in respect
of the Initial Committed Capacity shall be $9,720,000. The Initial
Payment shall be non-refundable (except as provided in Section 21 of
this Agreement) and shall be credited toward the payment of the Total
Purchase Price. The Initial Payment in respect of the Initial Committed
Capacity shall be credited toward the payment of the Total Purchase
Price due on 1 July 1998.
(b) Payment of Purchase Price. In exchange for the IRU interest granted
-------------------------
pursuant to this Agreement and the Right of Use Agreement in any
Purchased Capacity, the Purchaser shall, on or before the Payment Due
Date, pay to the Grantor's Account (for the benefit of the Grantor and
the benefit of the Subsidiary Grantors), in immediately available
Dollars, an amount equal to the Purchase Price; provided, however, the
aggregate payments made by the Purchaser under paragraphs (a) and (b) of
this Section 3 shall not exceed the Total Purchase Price. Each payment
made under this Section 3(b) shall be non-refundable.
(c) Additional Service Payment. The Purchaser shall be required to make, at
--------------------------
the request of the Grantor, additional payments in respect of the right
of use granted under this Agreement, or the Right of Use Agreement, for
access connection rearrangement requested by the Purchaser as set forth
in Schedule II to this Agreement and such other reasonable costs in
respect of additional services or equipment to be provided hereunder or
in connection herewith.
(d) Taxes. All payments made by the Purchaser under this Section 3 shall be
-----
made without any deduction or withholding for or on account of any tax,
duty or other charges of whatever nature imposed by any taxing or
governmental authority (collectively "Taxes"). If the Purchaser is or
was required by law to make any deduction or withholding from any
payment due hereunder to the Grantor (for the benefit of the Grantor and
the benefit of the Subsidiary Grantors), then, notwithstanding anything
to the contrary contained in this Agreement, the gross amount payable by
the Purchaser to the Grantor (for the benefit of the Grantor and
<PAGE>
the benefit of the Subsidiary Grantors) will be increased so that, after
any such deduction or withholding for Taxes, the net amount received by
the Grantor (for the benefit of the Grantor and the benefit of the
Subsidiary Grantors) will not be less than the Grantor (for the benefit
of the Grantor and the benefit of the Subsidiary Grantors) would have
received had no such deduction or withholding been required.
4. OPERATION AND MAINTENANCE OF SYSTEM.
-----------------------------------
(a) Maintenance Payments. The Purchaser shall pay to the Grantor (for the
--------------------
benefit of the Grantor and the benefit of the Subsidiary Grantors), in
immediately available Dollars, amounts ("Maintenance Costs") which are
based on its allocated share of the costs for operating, maintaining and
repairing the System in accordance with Paragraph 8 of Annex B. For the
avoidance of doubt, MCUs of Initial Committed Capacity in respect of
which the Purchaser has not been granted the IRU (payment has not been
made) will not be included when calculating the Maintenance Costs per
STM-1 and the Purchaser's allocable share of the Maintenance Costs.
Maintenance Costs shall be payable quarterly in advance on each January
1, April 1, July 1 and October 1, commencing with the first January 1
after the applicable RFS Date, except that on the applicable RFS Date
the Purchaser shall make a proportional payment for the period (the
"Stub Period") from the applicable RFS Date to the first such January 1
quarterly payment date. Each payment made by the Purchaser under this
Section shall be subject to the provisions of Section 2(d) of this
Agreement and shall be non-refundable.
(b) Maintenance. (i) The Grantor shall use all commercially reasonable
-----------
efforts to cause the System to be operated and maintained in efficient
working order and in accordance with the Performance Requirements set
forth in Annex C. The Grantor represents that the OA&M Agreement is in
full force and effect and that it requires and at all times shall
require TSSL to provide routine, preventive and corrective maintenance
for the System in accordance with performance standards that at least
meet prudent industry standards. Grantor will use all commercially
reasonable efforts to cause TSSL to perform its obligations under the
OA&M Agreement and the Supply Contract.
(ii) The Grantor together with the Subsidiary Grantors will have sole
responsibility for negotiating, executing and administering
contracts and all other aspects related to the construction,
operation, maintenance and repair of the System.
(iii) Should any condition exist in any Segment that may impair the
integrity of the System, the Grantor shall initiate and coordinate
planned maintenance (or shall cause such action to occur), on such
relevant Segment which may include the deactivation of such
Segment. The Grantor shall, to the extent
<PAGE>
reasonably practicable, advise the Purchaser in writing at least
sixty (60) days (or such shorter period as may be necessary;
provided that, if such period is less than five (5) days, such
-------------
shorter period as may be agreed), prior to initiating a planned
maintenance operation, of the timing, scope and costs of such
planned maintenance operation.
(iv) In the event of disruption of service due to Force Majeure or other
emergency, or for any other reason including for the avoidance of
doubt any negligent, reckless or wilful act on the part of the
Grantor, Subsidiary Grantor or TSSL, the Grantor shall cause
service to be restored as quickly as possible, and the Grantor
shall promptly take such measures as are reasonably necessary to
obtain such objective.
5. INVOICES; DEFAULT INTEREST.
--------------------------
(a) Invoices. The Grantor (and/or the Subsidiary Grantors) or its authorized
--------
agent (which may include the Operator), shall render invoices under this
Agreement in Dollars, and the Purchaser shall pay such amount in
Dollars. The Purchaser shall make all payments by means of a wire
transfer to Grantor's Account (for the benefit of the Grantor and the
Subsidiary Grantors). Any payments required to be made pursuant to this
Agreement shall, save for the Initial Payment which shall be made in
accordance with the provisions of Section 3(a), be made on the later of
(i) the date when due or (ii) five (5) business days after an invoice is
received from Grantor by Purchaser.
(b) Default Interest. Any invoice rendered under this Agreement which is not
----------------
paid when due, shall accrue interest at the annual rate of three percent
(3%) above the rate for U.S. dollar LIBOR for one month as quoted in The
---
Wall Street Journal on the first business day of the month in which such
-------------------
payment is due. Such interest shall accrue from the day following the
date payment was due until it is paid in full. In the event that
applicable law does not allow the imposition of "default interest" at
the rate established in accordance with this Section 5(b), such "default
interest" shall be at the highest rate permitted by applicable law. For
purposes of this Section, "paid" shall mean that funds are available for
immediate use by the Grantor.
6. DEFAULT.
-------
(a) If the Purchaser fails to make any payment required by this Agreement on
the date that it is due, or if the Purchaser is otherwise in breach of
this Agreement, and such payment default continues unremedied for a
period of at least five (5) days or such other breach continues for a
period of at least thirty (30) days, the Grantor, or its authorized
agent, may notify the Purchaser in writing of such payment default or
other breach and if full payment is not received or such other breach is
not fully
<PAGE>
remedied within fifteen (15) days of such notification, the Grantor:
(i) may suspend all service provided to Purchaser hereunder and under
the Right of Use Agreement (including suspending Purchaser's right to
use the Purchased Capacity), until such payment default or other breach
has been cured (including payment of default interest, if any) and (ii)
shall be entitled to pursue any and all rights and legal and equitable
remedies (including its rights and remedies to enforce the Purchaser's
obligations under this Agreement); provided, however, if such breach
results in an interruption or significant interference with the ability
of other purchasers of IRU's in the System to make use of the capacity
of the System they have purchased, the Grantor may take the actions
specified in clauses (i) and (ii) with three (3) days after giving
Purchaser written notice of such breach (and specifying that such breach
has caused or is causing such interruption or interference) if such
breach continues unremedied.
(b) If the Grantor is in breach of this Agreement and such breach continues
for a period of at least thirty (30) days, the Purchaser may notify the
Grantor in writing of such breach and if such breach is not fully
remedied within fifteen (15) days of such notification, the Purchaser
shall, for so long as such breach continues, be entitled to pursue any
and all rights and legal and equitable remedies, including its rights
and remedies to enforce Grantor's obligations under this Agreement;
provided, however, if such breach results in an interruption or
significant interference with the ability of the Purchaser to make use
of the Purchased Capacity that Purchaser has placed into service (it
being understood that scheduled and emergency maintenance or restoration
procedures shall not be deemed a breach of this Agreement), the
Purchaser may pursue any and all rights and legal and equitable
remedies, including its rights and remedies to enforce Grantor's
obligations under this Agreement, in accordance with the dispute
resolution provisions of this Agreement, within three (3) days after
giving Grantor written notice of such breach (and specifying that such
breach has caused or is causing such interruption or interference) if
such breach continues unremedied.
7. USE OF CAPACITY.
---------------
(a) The operation of the Purchased Capacity and any equipment associated
therewith shall be such as not to interrupt, interfere with, or impair
service over any of the facilities comprising the System, or impair
privacy of any communications over such facilities, cause damage to
plant or create hazards to employees, affiliates or connecting companies
of the Grantor, any Subsidiary Grantor, the Purchaser, or any other
user, owner or operator of the System or the public. The Purchaser shall
bear the cost of any additional protective apparatus reasonably required
to be installed because of the use of such facilities by the Purchaser,
any lessees or permitted transferees of the Purchaser, or any customer
or customers of the Purchaser or of any such lessee or transferee. The
Grantor will use all reasonable efforts to cause all other purchasers of
capacity in the System to undertake
<PAGE>
obligations substantially in the same form as those of the Purchaser set
forth in this Section, and the Purchaser shall cause all permitted users
of the IRU in the Purchased Capacity to undertake comparable
obligations.
(b) The Purchased Capacity granted to the Purchaser shall be made available
to the Grantor (or its subsidiaries, its agents or the Operator), at
such times agreeable to the Purchaser and the Grantor, to permit the
Grantor and the Subsidiary Grantors to conduct such tests and
adjustments as may be necessary for such capacity to be maintained in
efficient working order.
8. DURATION OF AGREEMENT.
---------------------
(a) This Agreement shall become effective on the day and year set forth in
the preamble hereto and shall continue in operation until the twenty-
fifth (25th) anniversary of the RFS Date for the System.
(b) The termination of this Agreement (whether under this Section or
otherwise) shall not affect the rights and liabilities of the parties
hereto arising prior to such termination.
(c) Upon the termination of this Agreement, so long as Purchaser is not in
default hereunder, the Purchaser may elect to extend its rights in the
System, for so long as the System exists or has not been retired, by
giving written notice to Grantor and paying to Grantor one (1) Dollar.
Such election to extend shall not affect or delay the termination of the
Grantor's obligations under this Agreement. Upon such election to extend
and payment, the Purchaser, together with all other purchasers of
capacity on the System that also elect to so extend, shall become the
sole owners of the System. The ownership interests of the Purchaser and
such other purchasers shall be in proportion to the amount of capacity
covered by IRU's previously granted to the Purchaser and such other
purchasers. The Grantor shall execute and deliver such documentation as
may be reasonably required to effect such transfer of ownership. Without
limitation to the generality of the foregoing provisions, Grantor shall
have no obligation to operate or maintain the System during such
extension.
(d) The parties hereto shall discuss with each other and the other
purchasers of capacity on the System establishing a procedure for the
early retirement of the System if such retirement appears to be
commercially appropriate.
<PAGE>
9. APPROVALS; LICENSES.
-------------------
The performance of this Agreement by each party hereto is contingent upon
the obtaining and continuance of such approvals, consents, governmental
authorizations, licenses and permits as may be required or reasonably deemed
necessary by such party for performance by such party hereunder and as may
be satisfactory to it. The parties shall use (and in the case of the
Grantor, shall cause the Subsidiary Grantors to use) reasonable efforts to
obtain and continue, and to have continued, such approvals, consents,
licenses and permits. In the event that any regulatory or governmental
authority directs either party to terminate this Agreement or if in any
relevant jurisdiction any necessary license is likely to be revoked or
expire and not immediately be replaced the parties shall (with time being of
the essence) forthwith negotiate in good faith any necessary amendments to
this Agreement or as to what other action is necessary to avoid termination
of this Agreement. No license under patents is granted by the Grantor or any
of the Subsidiary Grantors or shall be implied or arise by estoppel in the
Purchaser's favor with respect to any apparatus, system or method used by
the Purchaser in connection with the use of the capacity granted to it
hereunder or under the Right of Use Agreement.
10. DISCLAIMER.
----------
(a) The Grantor and the Subsidiary Grantors have entered into the Supply
Contract to obtain plant, equipment and services necessary to allow the
Purchased Capacity to be placed into operation on the applicable
scheduled RFS Date. Neither the Grantor, any Subsidiary Grantor or any
of their respective affiliates warrants or guarantees that the RFS Date
for any Segment or the System will occur and the Grantor, the Subsidiary
Grantors and their respective affiliates will otherwise have no
obligation under this Agreement or the Right of Use Agreement or
otherwise unless and until the applicable RFS Date occurs. THE PURCHASER
ACKNOWLEDGES AND AGREES THAT THE GRANTOR AND THE SUBSIDIARY GRANTORS ARE
NOT LIABLE FOR THE SUPPLIER'S FAILURE TO PERFORM. UNLESS SPECIFICALLY
SET FORTH IN THIS AGREEMENT, ANY OTHER WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING BUT NOT LIMITED TO, THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE SPECIFICALLY DISCLAIMED.
(b) In order to make it more convenient for the Purchaser to connect the
Purchased Capacity to inland networks, the Grantor and the Subsidiary
Grantors have permitted certain Inland Carriers to collocate at the
cable stations located at each T Segment. Neither the Grantor, any
Subsidiary Grantor or any of their respective affiliates warrants or
guarantees any agreement between the Purchaser and any Inland Carrier
and neither the Grantor, any Subsidiary Grantor or any of their
respective affiliates shall have any liability to the Purchaser for any
failure of any Inland Carrier to perform the terms and conditions of any
such agreement
<PAGE>
11. LIMITATIONS OF LIABILITY.
------------------------
(a) Except as otherwise provided in this Agreement or in the Right of Use
Agreement, in no event shall the Purchaser, the Grantor or any
Subsidiary Grantor be liable to the other for consequential, incidental,
indirect or special damages, including, but not limited to, loss of
revenue, loss of business opportunity, or the costs associated with the
use of external restoration facilities, including, without limitation,
for any loss or damages sustained by reason of any failure in or
breakdown of the System or the facilities associated with the System,
the failure of any Inland Carrier to perform the terms and conditions of
any agreement to which it and the Purchaser are parties or for any
interruption of service, whatever the cause and however long it shall
last.
(b) Neither the Grantor nor any Subsidiary Grantor shall be liable to the
Purchaser for any loss or damage which may be suffered by the Purchaser
by reason of any circumstances beyond the control of the Grantor and the
Subsidiary Grantors and having an adverse effect on the provision of
any part of the System in which the Purchaser is entitled to capacity or
has any other right or interest under this Agreement or under the Right
of Use Agreement.
(c) (i) Neither the Grantor nor any Subsidiary Grantor shall be liable to
the Purchaser for any loss or damage which may be suffered by the
Purchaser as a result of, related to, or in connection with, the
Purchaser's compliance or non-compliance with any applicable state,
federal, foreign governmental, international (foreign or domestic) or
other law related to the transfer of the IRU in, or the use of, the
Purchased Capacity.
(ii) The Purchaser shall not be liable to the Grantor or any Subsidiary
Grantor for any loss or damage which may be suffered by Grantor as a
result of, related to, or in connection with, Grantor's non-compliance
with any applicable state, federal, foreign governmental, international
(foreign or domestic) or other law related to the transfer by Grantor of
the IRU to the Purchaser in, or Grantor's operation, ownership or use
of, the System.
12. SETTLEMENT OF DISPUTES.
----------------------
(a) The parties hereto shall endeavor to settle amicably by mutual
discussions any disputes, differences, or claims whatsoever related to
this Agreement.
(b) Failing such amicable settlement, any controversy, claim or dispute
arising under or relating to this Agreement, including the existence,
validity, interpretation, performance, termination or breach thereof,
shall finally be settled by arbitration in accordance with the
International Arbitration Rules of the American Arbitration Association
("AAA"). There shall be three (3) arbitrators, the first of which shall
be appointed by the claimant in its notice of arbitration, the second of
which shall
<PAGE>
be appointed by the respondent within thirty (30) days of the
appointment of the first arbitrator and the third of which shall be
jointly appointed by the party-appointed arbitrators within thirty (30)
days thereafter. The language of the Arbitration shall be English. The
Arbitrator will not have authority to award punitive damages to either
party. Each party shall bear its own expenses, but the parties shall
share equally the expenses of the Arbitration Tribunal and the AAA.
This Agreement shall be enforceable, and any arbitration award shall be
final, and judgment thereon may be entered in any court of competent
jurisdiction. The arbitration shall be held in New York, New York, USA.
13. INCREASE OF INITIAL DESIGN CAPACITY.
-----------------------------------
The Grantor and the Subsidiary Grantors shall have authority to increase, at
their own cost and expense, the Initial Design Capacity of the System.
14. GOVERNING LAW.
-------------
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
15. WAIVER OF IMMUNITY.
------------------
The parties hereto acknowledge that this Agreement is commercial in nature,
and each party hereto expressly and irrevocably waives any claim or right
which it may have to immunity (whether sovereign immunity, act of state or
otherwise) for itself or with respect to any of its assets in connection
with an arbitration, arbitral award or other proceeding to enforce this
Agreement, including, without limitation, immunity from service of process,
immunity of any of its assets from pre or post-judgment attachment or
execution and immunity from the jurisdiction of any court or arbitral
tribunal.
16. EXPORT CONTROL.
--------------
The parties hereto acknowledge that to the extent any products, software or
technical information provided under this Agreement or the Right of Use
Agreement are or may be subject to any applicable export laws and
regulations, the parties hereto agree that they will not use, distribute,
transfer or transmit the products, software or technical information (even
if incorporated into other products) except in compliance with such export
laws and regulations (or licenses or orders issued pursuant thereto). If
requested by either party hereto the other party agrees to sign all
necessary export-related documents as may be required to comply therewith.
<PAGE>
17. REPRESENTATIONS; INDEMNITY.
--------------------------
(a) The Grantor hereby represents and warrants to Purchaser that (i) Grantor
is a company duly organized and validly existing under the laws of
Bermuda; (ii) the execution, delivery and performance of this Agreement
by Grantor has been duly authorized by all necessary corporate action on
the part of Grantor and this Agreement is a valid, binding and
enforceable obligation of Grantor enforceable in accordance with its
terms and (iii) the execution, delivery and performance of this
Agreement by Grantor does not violate, conflict with or constitute a
breach of, the organizational documents or any order, decree or judgment
of any court, tribunal or governmental authority binding on Grantor.
(b) Purchaser hereby represents and warrants to Grantor that (i) Purchaser
is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization; (ii) the execution,
delivery and performance of this Agreement by Purchaser has been duly
authorized by all necessary corporate action on the part of Purchaser
and this Agreement is a valid, binding and enforceable obligation of
Purchaser enforceable in accordance with its terms; and (iii) the
execution, delivery and performance of this Agreement by Purchaser does
not violate, conflict with or constitute a breach of, the
organizational documents or any order, decree or judgment of any court,
tribunal or governmental authority binding on Purchaser.
(c) Each Party hereby represents and warrants to the other party that it has
obtained all approvals, consents, governmental authorizations, licenses
and permits as may be required to enter into this Agreement, and grant
or require, as the case may be, the IRU in the Purchased Capacity.
(d) The foregoing representations and warranties shall survive the execution
and delivery of this Agreement.
(e) Subject to Section 11, the Purchaser agrees to indemnify and hold
harmless the Grantor and the Subsidiary Grantors and their respective
officers, directors, employees, agents and representatives from and
against any loss, damage, expense or cost arising out of or in
connection with: (i) any breach or violation by the Purchaser of
applicable law or governmental regulation and (ii) any claims of
whatever nature by third parties with respect to the services provided
by the Purchaser.
(f) Subject to Section 11, the Grantor agrees to indemnify and hold harmless
the Purchaser and its officers, directors, employees, agents and
representatives from and against any loss, damage, expense or cost
arising out of or in connection with (i) any breach or violation by the
Grantor or any Subsidiary Grantor of applicable law or governmental
regulation, and (ii) any claims of whatever nature by third parties with
respect to the services provided by the Grantor or any Subsidiary
<PAGE>
Grantor.
(g) The Grantor hereby represents and warrants that it shall perform its
obligations under this Agreement and shall provide the Purchased
Capacity in accordance with the terms of this Agreement.
(h) The Purchaser hereby represents and warrants that it shall perform its
obligations under this Agreement and shall cause the Subsidiary Grantors
to perform their obligations under the Right of Use Agreement in
accordance with the terms thereof.
(i) The Grantor hereby represents and warrants that it shall use all
commercially reasonable efforts to ensure that the operation,
administration and maintenance of the System as set out in Paragraph 8
of Annex B to this Agreement are provided with all reasonable skill and
care in accordance with recognized standards of a competent provider of
maintenance services in a manner consistent with applicable law.
(j) The Grantor or the Subsidiary Grantors shall not use or knowingly permit
the System to be used by any other purchaser for any illegal purpose or
any unlawful manner; and
(k) The Grantor shall indemnify and hold the Purchaser harmless in respect
of all and any losses and damages, costs and expenses (including
reasonable legal costs and expenses) arising out of any claims or
proceedings (whether successful or not) against the Purchaser regarding
patents copyright or any other intellectual property rights provided
under this Agreement or the Right Of Use Agreement which are owned by
any third party resulting from Purchaser's use of the Purchased Capacity
in accordance with the terms of this Agreement and the Right of Use
Agreement. In the event that the use by the Purchaser of the Purchased
Capacity in accordance with the terms of this Agreement and the Right of
Use Agreement shall infringe the patents, copyrights or other
intellectual property rights provided under this Agreement or the Right
of Use Agreement which are owned by any third party, the Grantor shall
obtain or procure by whatever means it shall deem appropriate at its own
cost and expense the right for the Purchaser to use the Purchased
Capacity in accordance with the terms of this Agreement and the Right of
Use Agreement.
18. RELATIONSHIP OF THE PARTIES.
---------------------------
This Agreement shall not form a joint venture or partnership or similar
business arrangement between the parties hereto and the Subsidiary Grantors,
and nothing contained herein or in the Right of Use Agreement shall be
deemed to constitute a partnership or joint venture or similar business
arrangement.
<PAGE>
19. NO THIRD PARTY BENEFICIARIES.
----------------------------
This Agreement does not provide and is not intended to provide third parties
(including, but not limited to, customers of the Purchaser, any permitted
transferee of the Purchased Capacity or any other permitted user of the
Purchased Capacity) with any remedy, claim, liability, reimbursement, cause
of action, or any other right, except for the Subsidiary Grantors.
Furthermore, the Purchaser acknowledges that, except as set forth in the
Right of Use Agreement, it is not a third party beneficiary of any agreement
entered into by the Grantor or the Subsidiary Grantors including, but not
limited to, the Supply Contract and the OA&M Agreement.
20. ASSIGNMENT.
----------
(a) This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto, the Subsidiary Grantors
and their respective successors and permitted assigns; provided that,
--------
except for the collateral assignment of the Grantor's and/or any
Subsidiary Grantor's and/or the Purchaser's rights under this Agreement
to one or more of the Grantor's lenders, or the Purchaser's lenders and
except as provided in paragraphs (b) and (c) of this Section, neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned, transferred or otherwise disposed of or delegated by
either party hereto without the prior written consent of the other
party.
(b) The Grantor and the Subsidiary Grantors shall be permitted to assign,
transfer or otherwise dispose of any or all of their rights hereunder
and under the Right of Use Agreement and delegate any or all of their
obligations hereunder and under the Right of Use Agreement to any
present or future affiliated company of the Grantor or to an entity
controlled by, under the same control as, or controlling, the Grantor.
The Grantor shall give the Purchaser notice of any such assignment,
transfer or other disposition or any such delegation.
(c) The Purchaser shall solely be responsible for complying with all of the
terms binding on the "Purchaser" hereunder and shall not be permitted to
assign, transfer or otherwise dispose of any or all of its rights
hereunder or under the Right of Use Agreement or delegate any or all of
its obligations hereunder or under the Right of Use Agreement to any
person or entity except the Purchaser may transfer its rights (but not
------
its obligations) to use any Purchased Capacity to a Carrier Party,
subject to paragraph (d) of this Section, in accordance with Paragraph 6
of Annex B to this Agreement, provided that simultaneously with
--------
transferring such rights to such Carrier Party, such Carrier Party
executes a document acknowledging:
(i) that it has acquired from the Purchaser rights to use Purchased
Capacity which were conveyed to the Purchaser under or in connection
with a capacity purchase agreement with the Grantor (the "CPA);
<PAGE>
(ii) that the Purchaser has an ongoing obligation under the CPA to make
certain payments to the Grantor (including, without limitation, in
respect of operation, administration and maintenance expenses) and
otherwise comply with the terms thereof, and that the failure of
the Purchaser to make any such payments when due or the occurrence
of any other breach by the Purchaser of the terms of the CPA could
result in the suspension of the Purchaser's right to the Purchased
Capacity in accordance with the terms of the CPA; and
(iii) that such Carrier Party is not a third party beneficiary of the
CPA or the Right of Use Agreement.
(d) The Purchaser may only transfer to a single assignee, whether pursuant
to one or more transfers, its rights (but not its obligations) to use in
the aggregate one (1) or more MCUs of Purchased Capacity on terms and
conditions which are mutually agreed between the Grantor and the
Purchaser.
Any transfer by the Purchaser of its obligations or its rights to use any
Purchased Capacity which is in violation of this Section shall be void and
of no force and effect.
21. CONDITION TO PURCHASER'S OBLIGATIONS.
------------------------------------
The Purchaser's obligation to pay for an IRU (i) with respect to any
Purchased Capacity on Segment S-1 shall terminate if the RFS Date for the
Purchased Capacity on Segment S-1 has not occurred by October 15, 1998 or
(ii) with respect to any other Purchased Capacity shall terminate if the RFS
Date for such Purchased Capacity has not occurred by June 30, 1999. In any
such event, the Grantor shall refund all amounts of Purchase Price paid by
the Purchaser with respect to such Purchased Capacity as to which
Purchaser's obligation has terminated within thirty (30) days after the
applicable date.
22. NOTICES.
-------
Each notice, demand, certification or other communication given or made
under this Agreement shall be in writing and shall be delivered by hand or
sent by registered mail or by facsimile transmission to the address of the
respective party as shown below (or such other address as may be designated
in writing to the other party hereto in accordance with the terms of this
Section):
If to the Purchaser: Telemonde Bandwidth (Bermuda) Ltd.
Argonaut House
5 Park Road
Hamilton HM09, Bermuda
Attn: Company Secretary
Fax No.:
<PAGE>
With a copy to: Telemonde Ltd
54 Grosvenor Street
London W1X 0EU
United Kingdom
Attn: Company Secretary
Fax No. 011 44 171 493 3524
If to the Grantor: Atlantic Crossing Ltd.
Wessex House
45 Reid Street
Hamilton HM12, Bermuda
Attn: President
Fax No.: 441-296-8606
Any change to the name, address and facsimile numbers may be made at any
time by giving fifteen (15) days prior written notice in accordance with
this Section. Any such notice, demand or other communication shall be deemed
to have been received, if delivered by hand, at the time of delivery or, if
posted, at the expiration of seven (7) days after the envelope containing
the same shall have been deposited in the post maintained for such purpose,
postage prepaid, or, if sent by facsimile, at the date of transmission if
confirmed receipt is followed by postal notice.
23. SEVERABILITY.
------------
If any provision of this Agreement is found by an arbitral, judicial or
regulatory authority having jurisdiction to be void or unenforceable, such
provision shall be deemed to be deleted from this Agreement and the
remaining provisions shall continue in full force and effect.
24. HEADINGS.
--------
The Section headings of this Agreement are for convenience of reference only
and are not intended to restrict, affect or influence the interpretation or
construction of provisions of such Section.
25. COUNTERPARTS.
------------
This Agreement may be executed in counterparts, each of which when executed
and delivered shall be deemed an original. Such counterparts shall together
(as well as separately) constitute one and the same instrument.
<PAGE>
26. ENTIRE AGREEMENT.
----------------
This Agreement together with the Schedules, Annexes and Attachments hereto
supersedes all prior or written understandings between the parties hereto
and constitutes the entire agreement with respect to the subject matter
herein. This Agreement shall not be modified or amended except by a writing
signed by authorized representatives of the parties hereto.
27. PUBLICITY AND CONFIDENTIALITY.
-----------------------------
(a) The provisions of this Agreement and any non-public information, written
or oral, with respect to this Agreement ("Confidential Information")
will be kept confidential and shall not be disclosed, in whole or in
part, to any person other than affiliates, officers, directors,
employees, agents, professional advisors, financial institutions and
lenders or representatives of a party (collectively, "Representatives")
who need to know such Confidential Information for the purpose of
negotiating, executing and implementing this Agreement. Each party
agrees to inform each of its Representatives of the non-public nature of
the Confidential Information and to direct such persons to treat such
Confidential Information in accordance with the terms of this Section
27. Nothing herein shall prevent a party from disclosing Confidential
Information (i) upon the order of any court or administrative agency,
(ii) upon the request or demand of, or pursuant to any regulation of,
any regulatory agency or authority, (iii) to the extent reasonably
required in connection with the exercise of any remedy hereunder
provided that the parties shall co-operate in relation to the disclosure
--------
of the Confidential Information in such circumstance, (iv) to a party's
legal counsel or independent auditors, (v) to prospective lenders to the
Grantor, and (vi) to any actual or proposed assignee, transferee or
lessee of all or part of its rights hereunder provided that such actual
or proposed assignee agrees in writing to be bound by the provisions of
this Section 27.
(b) The foregoing shall not restrict either party from publicly announcing
that it has entered into this Agreement with the parties hereto, but
without including any details contained in this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date first written above.
ATLANTIC CROSSING LTD.
By: /s/ K. Eugene Shutter
--------------------------
Name: K. Eugene Shutter
Title: President
TELEMONDE BANDWIDTH
(BERMUDA) LTD.
By: /s/ Susan Williams
--------------------------
Name: Susan Williams
Title: Director
<PAGE>
EXHIBIT 10.7
DATED 1998
--------------------------
MCI WORLDCOM GLOBAL NETWORKS U.S. INC
and
MFS CABLECO (BERMUDA) LIMITED
and
EQUITEL BANDWIDTH LIMITED
-------------------------------------------------
TRANSMISSION CAPACITY AGREEMENT
-------------------------------------------------
<PAGE>
INDEX
1. Interpretation 1
2. Provision of Capacity 4
3. Acceptance Testing 5
4. Performance Levels 6
5. Payment 6
6. Use of Capacity 7
7. Warranties 7
8. Liability 8
9. Term and Termination 9
10. Force Majeure 10
11. Confidentiality 10
12. Assignment and Subcontracting 11
13. Publicity 11
14. Severability 11
15. Variation 11
16. Partnership 12
17. Waiver 12
18. Notices 12
19. Entire Agreement 12
20. Governing Law 12
21. Counterparts 13
SCHEDULE 1 - Technical Specifications 14
SCHEDULE 2 - Operations and Maintenance Procedures 16
SCHEDULE 3 - Charges 20
SCHEDULE 4 - Performance Levels 21
<PAGE>
TRANSMISSION CAPACITY AGREEMENT
THIS AGREEMENT is made the day of 1998
BETWEEN:
(1) MCI WORLDCOM GLOBAL NETWORKS U.S., INC, whose registered office at 9 East
Lookerman Street, Dover, Kent, Delaware 19901 USA; and
MFS CABLECO (BERMUDA) LIMITED whose registered office is at Clarendon
House, 2 Church Street, Hamilton, Bermuda, (together with MCI WorldCom
Global Networks U.S., Inc, jointly and severally referred to herein as
"MCI-WorldCom"); and
(2) EQUITEL BANDWIDTH LIMITED, whose registered office is at Craigmuir
Chambers, Road Town, Tortola, British Virgin Islands (the "Customer").
WHEREAS
(A) MCI-WorldCom owns or has an interest in international telecommunications
facilities across Europe and the USA.
(B) The Customer wishes to acquire from MCI-WorldCom transmission capacity
over such facilities between the Sites, as defined herein.
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
1.1. The words and phrases used in this Agreement shall, unless otherwise
expressly provided, have the meanings ascribed to them below:
"Acceptance Certificate" means an acceptance certificate in the form
provided by MCI-WorldCom to the Customer from time to time;
"Acceptance Tests" means the tests set out in the Test Specification, to
be conducted by MCI-WorldCom in accordance with Clause 3;
"Act" means the Telecommunications Act 1984 (as amended or substituted
from time to time);
"Activation Request Form" means an activation request form in the form
provided by MCI-WorldCom to the Customer from time to time;
"Additional Unit" means, in relation to the Capacity, the fourth Unit of
Capacity as described in Schedule 1;
"Agreement" means this Agreement together with the Schedules hereto;
-1-
<PAGE>
"Annual Charge" means, in relation to each Unit of Capacity, the amount
specified in Schedule 3, payable to MCI-WorldCom in accordance with Clause
5, and "Annual Charges" shall be construed accordingly;
"Associated Company" means, in relation to a party, and subsidiary and
holding company of such party and any subsidiary of such holding company
(the terms "holding company" and "subsidiary" being as defined in sections
736 and 736A Companies Act 1985);
"Business Days" means any days excluding Saturdays and Sundays on which
commercial banks are open for business in the country where the relevant
notice is to be delivered or when the relevant activity is to be
performed;
"Cable Lifetime" means the lifetime of the Gemini fibre optic submarine
and terrestrial cable system as set forth in the C&MA;
"Capacity" means the point to point transmission capacity provided between
the Sites, as detailed in Schedule 1;
C&MA" means the construction, operation and maintenance agreement for the
Gemini fibre optic submarine and terrestrial cable system, as amended from
time to time by Gemini Submarine Cable System Limited in accordance with
the terms thereof;
"Charges" means, together, the Purchase Price, the Option Price and the
Annual Charges;
"Confidential Information" means all information (whether written, oral or
in electronic format) designated as such by the disclosing party,
together with all such other information which relates to the business,
affairs, customers, products, developments, trade secrets, know-how and
personnel of the disclosing party which may reasonably be regarded as the
confidential information of the disclosing party;
"Customer Network" means the telecommunications infrastructure owned and
operated by the Customer (or by any Associated Company thereof) under an
applicable regulatory authority;
"Demarcation Point" means that point at which MCI-WorldCom Network is
connected to the Customer Network for the purpose of the provision of
capacity hereunder as specified in Schedule 1;
"Emergency Works" has the meaning ascribed thereto in the Act;
"EquiTel Customer" means a third party with whom the Customer has entered
into an agreement for the grant of rights to a Unit of Capacity provided
hereunder and whose details have been provided to MCI-WorldCom in writing
in accordance with Clause 4.1, and "EquiTel Customers" shall be construed
accordingly;
"Fault" means a material defect, fault or impairment in the Capacity duly
notified to MCI-WorldCom in accordance with Schedule 2;
-2-
<PAGE>
"Force Majeure" means any cause beyond a party's reasonable control
affecting the performance by that party of its obligations hereunder
including (to the extent that such events are beyond the affected party's
reasonable control), but not limited to, acts of God, insurrection or
civil disorder, war or military operations, national or local emergency,
acts or omissions of Government, regulatory or highway authority,
industrial disputes of any kind (not involving that party's employees),
fibre cuts, fire, flood, lightning, explosion, subsidence, inclement
weather and acts or omissions of persons or bodies (other than an EquiTel
Customer) beyond the reasonable control of the affected party;
"IRU" means the "indefeasible right of use" in a Unit of Capacity for the
Cable Lifetime;
"LIBOR Rate" means the arithmetic mean of the offered rates of leading
banks for London Interbank deposits expressed as a rate per annum, for
deposits in US Dollars for six months as displayed on the LIBOR page of
the Reuters Monitor Money Rate service at or about 11:00am on the date on
which the LIBOR Rate is to be determined:
"MCI-WorldCom Network" means the Service Equipment and any other
infrastructure used by MCI-WorldCom to provide the Capacity;
"Operations and Maintenance Procedures" means those procedures set out in
Schedule 2;
"Option Price" means the amount payable by the customer to MCI-WorldCom in
respect of the provision to the Customer of the Additional Unit of
Capacity, as such amount is specified in Schedule 3;
"Project Manager" means the representatives nominated by each of the
Parties in accordance with Clause 2.3;
"Purchase Price" means the amount payable by the Customer to MCI-WorldCom
in respect of the provision to the Customer of the Capacity (other than
the Additional Unit), as such amount is specified in Schedule 3;
"RFS Date" means, in respect of each Unit of Capacity, the date upon which
the Acceptance Tests shall have been successfully completed in respect of
such Unit of Capacity as evidenced by the signature by each of the parties
of an Acceptance Certificate in relation thereto, whether actual or deemed
in accordance with Clause 3.9;
"Scheduled Maintenance" means the planned works to be conducted by or on
behalf of MCI-WorldCom in order to maintain or repair the Capacity as
notified to the Customer and affected EquiTel Customers in accordance with
Schedule 2 or otherwise agreed between the parties;
"Service Equipment" means the multiplex or other equipment provided by
MCI-WorldCom and installed at a Site to enable the Customer to receive the
Capacity;
-3-
<PAGE>
"Site" means:
(a) for all Units of Capacity other than the Additional Unit, each of 60
Hudson Street, New York, USA, and the Porthcurno cable station,
Cornwall, England; and
(b) for the Additional Unit, each of 60 Hudson Street, New York, USA, and
MCI-WorldCom, Aylesbury Street (UK2), London, England, and
"Sites" shall be construed accordingly;
"Target Date" means that date with effect from which the Customer has
requested that the Capacity be activated, in accordance with Clause 2.5;
"Technical Specification" means the technical specification set out in
Schedule 1 hereto;
"Test Specification" means the test specification set out in Schedule 4
hereto;
"Unit" means, in relation to the Capacity, a transmission channel
comprising a VC-4 container interfaced at STM-1 level, and "Units" shall
be construed accordingly.
1.2. References in this Agreement to "MCI-WorldCom", "the Customer" and
"EquiTel Customers" shall include their respective employees, agents,
successors (whether by operation of law or otherwise) and permitted
assigns.
1.3. The headings are included in this Agreement for ease of reference only and
shall not affect the interpretation or construction of this Agreement.
1.4. References in this Agreement to Clauses and Schedules shall be deemed to
be references to the Clauses of and Schedules to this Agreement.
2. Provision of Capacity.
2.1. With effect from the date of signature of this Agreement and throughout
the term of this Agreement, MCI-WorldCom shall, subject to the Customer
complying with all its obligations and undertakings under this Agreement,
reserve the Capacity (other than the Additional Unit) exclusively for the
Customer.
2.2. In consideration for the obligations and undertakings of the Customer set
out in this Agreement and with effect from the RFS Date in respect of each
Unit of Capacity, MCI-WorldCom shall grant the Customer an IRU in such
Capacity between the Sites and shall make such Capacity available to the
Customer from the applicable RFS Date during the term of this Agreement.
2.3. Each party shall, as soon as reasonably practicable following execution
of this Agreement, nominate a Project Manager who shall be that party's
representative for all operational matters. Each party shall notify the
other party and keep the other party notified of any change in the
identity of such Project Manager.
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2.4. The Customer shall be entitled;
2.4.1. in the case of all Units other than the Additional Unit, at any
time following the execution of this Agreement; and
2.4.2. in the case of the Additional Unit, before 30 June 1999,
by delivery to MCI-WorldCom of a duly completed Activation Request Form,
to request the activation of any or all Units of Capacity between the
Sites, provided that the Customer has entered into a prior agreement with
a third party end user for the grant of an IRU in such Unit of Capacity to
such third party in accordance with Clause 12.4.
2.5. Any Activation Request Form delivered by the Customer to MCI-WorldCom in
accordance with Clause 2.4 shall specify, in respect of each Unit of
Capacity, the identity of the third party end user of such Unit and the
date on which the Customer requires activation of such Unit of Capacity;
2.5.1. in respect of all Units other than the Additional Unit, being a
date no later than 30 June 1999; and
2.5.2. in respect of the Additional Unit, being a date no later than 31
July 1999 or such other date as may be agreed between the parties.
Provided that such date is not less than 30 Business Days' following the
date of delivery of such Activation Request Form to MCI-WorldCom, such
date shall be the Target Date for such Unit of Capacity. If the Customer
has failed to notify MCI-WorldCom in respect of any Unit of Capacity
(other then the Additional Unit) in accordance with this Clause 2.5, the
Target Date for that Unit of Capacity shall be 30 June 1999. If the
Customer has failed to notify MCI-WorldCom in respect of the Additional
Unit prior to 30 June 1999, the Customer's right to call for that
Additional Unit shall expire. MCI-WorldCom acknowledges that if no
Activation Request Form is delivered to it by the Customer in respect of
the Additional Unit prior to 30 June 1999, the Customer shall be under no
obligation to pay the Option Price.
2.6. MCI-WorldCom shall use its reasonable endeavors to ensure that the RFS
Date for each Unit of Capacity occurs on or prior to the applicable Target
Date.
2.7. MCI-WorldCom shall liaise with the Project Manger appointed by the
Customer in accordance with Clause 2.3 and shall notify such Project
Manager not less than bi-monthly of any delays which it reasonably
believes are likely to occur in a RFS Date.
2.8. In the event that MCI-WorldCom shall fail, within a period of eight weeks
following the applicable Target Date in respect of each Unit of Capacity,
to activate such Unit of Capacity (or in the event that MCI-WorldCom shall
notify the Customer, in accordance the Clause 2.7, that the applicable
RFS Date is likely to occur following the expiry of such eight week
period) the Customer shall be entitled to notify MCI-WorldCom in writing,
such notice to take effect immediately on receipt, that it no longer
requires delivery of such Unit of Capacity, in which case MCI-WorldCom
shall following the date of service of such notice refund to the Customer
any percentage of
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the Purchase Price already paid by it in relation to such Unit of Capacity
and, save in respect of any liability arising up to the date of such
notice, neither party shall have any further obligations in relation to
the provision of such Unit of Capacity.
2.9. The Customer acknowledges that MCI-WorldCom may from time to time revise
or vary any aspect of the Capacity save that the Capacity and each Unit
shall notwithstanding such variation remain compliant with the terms of
this Agreement, including, without limitation, the Technical
Specification.
3. Acceptance Testing
3.1. MCI-WorldCom shall, following the delivery to it of a notice in
accordance with Clause 2.4, install the Service Equipment at the Sites.
3.2. Following the installation by MCI-WorldCom of the Service Equipment it
shall perform the Acceptance Tests in relation to the Service Equipment
and the relevant Unit of Capacity in accordance with the Test
Specification.
3.3. MCI-WorldCom shall notify the Customer (through the Project Manager
appointed in accordance with Clause 2.3) of its intention to conduct
Acceptance Tests.
3.4. MCI-WorldCom shall notify the Customer of the successful completion of
the Acceptance Tests by delivery to the Customer of and Acceptance
Certificate duly signed on behalf of MCI-WorldCom and shall provide to the
Customer a copy of the results of such Acceptance tests.
3.5. The Customer shall be entitled upon delivery to it of an Acceptance
Certificate in accordance with Clause 3.4 to perform such testing of the
Capacity as it may require to demonstrate compliance of the Capacity with
the Technical Specification.
3.6. The Customer shall, within a five day period following the date of the
receipt of the Acceptance Certificate in accordance with Clause 3.4
either:
3.6.1. confirm to MCI-WorldCom its acceptance of the Capacity by its
counter-signature of such Acceptance Certificate, and such date
shall be the RFS Date (such confirmation not to be unreasonably
withheld); or
3.6.2. notify MCI-WorldCom of those aspects of the Capacity which it
does not believe to be compliant with the Technical Specification
and provide to MCI-WorldCom together with such notice the results
of the testing conducted by it evidencing such non-compliance.
3.7. In the event that the Customer shall notify MCI-WorldCom in accordance
with Clause 3.6.2, MCI-WorldCom shall perform such works as shall be
required to remedy such defects as are notified to it. Upon the completion
of such works the provisions of Clauses 3.2-3.9 shall apply.
3.8. In the event that any defects notified to MCI-WorldCom in accordance with
Clause 3.6.2 shall be attributable to the equipment of the Customer or
otherwise to the act or omission of the Customer, MCI-WorldCom shall be
entitled to invoice the Customer
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for any costs reasonably incurred in investigating and remedying such
defects in accordance with Clause 3.7, such invoice being payable in
accordance with Clause 5.6 and the date of signature by MCI-WorldCom of
the Acceptance Certificate shall be the RFS Date.
3.9. In the event that the Customer shall fail within the timescales set out
in Clause 3.6 to deliver a notice to MCI-WorldCom, it shall be deemed to
have accepted such Capacity and to have counter-signed the Acceptance
Certificate on the date of signature of such Acceptance Certificate by
MCI-WorldCom. The date of signature of such Acceptance Certificate by
MCI-WorldCom shall be the RFS Date.
4. Operations and Maintenance Procedures
4.1. The Customer shall promptly notify MCI-WorldCom in writing of the details
of any third party with whom with the Customer has entered into an
agreement for the grant of rights to any Unit of Capacity provided
hereunder. Such details are to include:
4.1.1. identification of the relevant Unit of Capacity;
4.1.2. the address, telephone number and fax number of the third party's
local network operations centre or equivalent; and
4.1.3. the name, title, address, telephone number and fax number of the
appropriate contact person at that network operations centre or
equivalent.
MCI-WorldCom shall have no obligation to comply with the Operations and
Maintenance Procedures in respect of the performance of Scheduled
Maintenance and Emergency Works and the reporting and rectification of
Faults in respect of such third party unless and until MCI-WorldCom
has received written notification of the third party details in
accordance with this Clause 4.1.
4.2. Subject to Clause 4.1, the parties shall comply, and the Customer shall
procure the compliance of the EquiTel Customers, with the Operations and
Maintenance Procedures in respect of the performance of Scheduled
Maintenance and Emergency Works and the reporting and rectification of
Faults.
4.3. MCI-WorldCom shall furnish the Capacity and shall cause the Capacity to be
maintained in accordance with the terms of the C&MA.
5. Payment
5.1. In consideration for the obligations and undertakings of MCI-WorldCom set
out in this Agreement, the Customer shall pay the Charges in accordance
with the provisions of this Clause 5.
5.2. MCI-WorldCom shall be entitled to invoice the Customer for the Purchase
Price on or after the date of signature hereof.
5.3. MCI-WorldCom shall be entitled to invoice the Customer for the Option
Price on or after the RFS Date for the Additional Unit.
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5.4. MCI-WorldCom shall be entitled to invoice the Customer for the Annual
Charges annually in advance on or about 1 January of each year. Liability
for payment of the Annual Charge due in respect of each Unit of Capacity
shall commence on the relevant RFS Date. The Annual charges for the
partial year commencing on the RFS Date shall be pro-rated. MCI-WorldCom
shall be entitled to invoice the Customer for such pro-rated amount on the
RFS Date for each Unit of Capacity.
5.5. The Annual Charges shall be increased, on a compound basis, by 3.5 per
cent on 1 January 2000 and annually thereafter.
5.6. The Customer shall make payment for all Charges or other amounts duly
invoiced to it in accordance with this Clause 5 within thirty (30) days of
the date of delivery to it of an invoice.
5.7. The Customer acknowledges that the Charges are exclusive of VAT (or such
other similar taxes as may be levied from time to time) which shall be
invoiced to and payable by the Customer in accordance with this Clause 5.
5.8. MCI-WorldCom shall be entitled to charge and receive interest on any sums
other than the Purchase Price which are overdue at the rate of 3% above
the LIBOR Rate until the date of payment in full, whether before or after
any judgment. Such interest shall be calculated and shall accrue on a
daily basis.
5.9. Subject to Clause 5.10, MCI-WorldCom shall be entitled to charge and
receive interest on:
5.9.1. that portion of the Purchase Price applicable to two Units of
Capacity, if such amount has not been paid in full on or by the
earlier of:
(a) 30 June 1990; or
(b) a date three Business Days after the later of: (i) the date
on which the customer receives payment from any third party
to whom it has granted rights to such Unit of Capacity of the
purchase price in full for such Unit, and (ii) the RFS Date;
and
5.9.2. that portion of the Purchase Price applicable to the third Unit
of Capacity, if such amount has not been paid in full on or by the
earlier of:
(a) 31 July 1999; or
(b) a date three Business Days after the later of: (i) the date
on which the Customer receives payment from any third party
to whom it has granted rights to such Unit of Capacity of the
purchase price in full for such Unit, and (ii) the RFS Date,
at the rate of 3% above the LIBOR Rate, calculated from the invoice due
date of the Purchase Price until the date of payment in full, whether
before or after any judgment. Such interest shall be calculated and shall
accrue on a daily basis.
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5.10. In the event that the Customer shall, by notice to MCI-WorldCom, request
activation of a Unit of Capacity on or prior to a Target Date being a date
prior to 30 June 1999 and the RFS Date in respect of such Unit of Capacity
is delayed beyond that date due to MCI-WorldCom'd default, then,
notwithstanding the provisions of Clause 5.9, MCI-WorldCom shall only be
entitled to charge and receive interest on the portion of the Purchase
Price relating to such Unit of Capacity from the later of the date
specified in Clause 5.9 in respect of such Unit of Capacity and the RFS
Date. Such interest shall be at the rate of 3% above the LIBOR Rate,
calculated from the invoice due date of the Purchase Price until the
date of payment in full, whether before or after any judgment, and shall
be calculated and shall accrue on a daily basis.
6. Use of Capacity
6.1. The Customer shall provide to MCI-WorldCom such information as
MCI-WorldCom may reasonably require to enable it to perform its
obligations under this Agreement.
6.2. The Customer acknowledges that where the provision by MCI-WorldCom of the
Capacity shall require the modification of any equipment of the Customer
or EquiTel Customer, MCI-WorldCom shall not be liable for the performance
of any works entailed in effecting such modification and such works shall
be the sole responsibility of and shall be performed at the sole expense
of the Customer or relevant EquiTel Customer.
7. Warranties
7.1. MCI-WorldCom represents to, warrants and covenants with the Customer as
follows:
7.1.1. MCI-WorldCom is duly organised and validly existing under the laws
of its State or jurisdiction of organisation, and has the
requisite authority to execute this Agreement and to perform its
obligations hereunder;
7.1.2. This Agreement constitutes a valid and binding obligation of
MCI-WorldCom, enforceable against MCI-WorldCom in accordance with
its terms;
7.1.3. MCI-WorldCom has obtained, and shall use commercially reasonable
efforts to maintain in good standing, all such consents,
approvals, licenses, permits and other approvals, both
governmental and private, as may be necessary (as at the date of
performance) to permit MCI-WorldCom to perform its obligations
under this Agreement; and
7.1.4. MCI-WorldCom shall perform its obligations under this Agreement in
a manner consistent with applicable law.
7.2. Save as expressly provided herein, no warranties, conditions,
representations or agreements are expressed or implied by MCI-WorldCom in
relation to the Capacity. Notwithstanding anything of the contrary in this
Agreement, MCI-WorldCom does not warrant or represent the Capacity will be
fault-free and any implied warranties and conditions of any nature are
hereby expressly excluded.
7.3. The Customer represents to warrants and covenants with MCI-WorldCom as
follows:
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7.3.1. The Customer is a limited liability company, duly organised and
validly existing under the laws of its State or jurisdiction of
organisation, is qualified to do business in all jurisdictions
(domestic and foreign) in which such qualification is required by
applicable law, and has the requisite authority to execute this
Agreement and to perform its obligations hereunder;
7.3.2. This Agreement constitutes a valid and binding obligation of the
Customer, enforceable against the Customer in accordance with its
terms;
7.3.3. There are no pending and, to the Customer's knowledge, no
threatened claims, actions, suits, audits, investigations or
proceedings by or against the Customer which could have an adverse
effect on the Customer's ability to perform its obligations under
this Agreement;
7.3.4. The Customer has obtained, and shall use commercially reasonable
efforts to maintain in good standing, and shall ensure that all
third parties with whom it has entered into an agreement for the
purchase or use of part or all of the Capacity have so obtained
and so maintain, all such consents, approvals, licenses, permits
and other approvals, both governmental and private, as may be
necessary (as at the date of performance) to permit the Customer
to perform its obligations under this Agreement and to permit the
Customer and such third parties to acquire and use the Capacity;
7.3.5. The Customer shall not create or permit to exist, any liens,
encumbrances or charges to be placed upon the Capacity or the
Customer's rights under this Agreement other than liens,
encumbrances or charges of financial institutions or others
against the Customer's assets generally in connection with
financing arrangements by the Customer;
7.3.6. The Customer shall perform its obligations under this Agreement
and use the Capacity in a manner consistent with applicable law,
and shall not use the Capacity, or permit the Capacity to be used,
for any illegal purpose or in any other unlawful manner; and
7.3.7. The Customer shall use the Capacity and shall cause all other
persons using the Capacity to use such Capacity in such a manner
so as not to cause any interruption of, or interference to, the
MCI-WorldCom Network or the use of any other capacity on the
MCI-WorldCom Network.
8. Liability
8.1. Subject to Clause 8.3 and save in respect of any amounts due and owing in
accordance with Clause 5 and save in respect of any liability arising out
of a party's wilful act or omissions, but notwithstanding anything else in
this Agreement, each party's liability to the other in contract, tort
(including negligence or breach of statutory duty) or otherwise arising in
connection with this Agreement shall be limited to:
8.1.1. one million pounds ((pound sign)1,000,000) per event or series of
connected events, and
8.1.2. two million pounds ((pound sign)2,000,000) in any twelve (12)
month period.
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8.2. Subject to Clause 8.3 but notwithstanding anything else in this Agreement,
neither party shall in any event be liable to the other in contract, tort
(including negligence or breach of statutory duty) or otherwise for
indirect or consequential losses under of arising in connection with this
Agreement including, but not limited to, loss of business, revenues,
anticipated savings or profit.
8.3. Nothing in this Agreement shall be deemed to limit either party's
liability in respect of death or personal injury caused by or arising from
that party's negligence or of fraud.
8.4. Should any limitation or provision contained in this Clause 8 be held to
be invalid under any applicable statute or rule of law, it shall to that
extent be deemed omitted.
9. Term, Termination and Suspension
9.1. This Agreement shall come into effect on the date hereof and shall,
subject to earlier termination in accordance with this Clause 9 or Clause
10.5, continue in effect for the Cable Lifetime.
9.2. Either party may terminate this Agreement by service on the other party
of notice in writing, having effect forthwith, if the other party shall
become insolvent or have an administrator or administrative receiver
appointed over a substantial part of its assets or go into liquidation
(whether compulsory or voluntary) otherwise than for the purpose of
amalgamation or reconstruction or shall make any agreement with its
creditors or have any form of execution or distress levied upon a
substantial part of its assets or cease to carry on business, PROVIDED
THAT, if the Customer has paid the Purchase Price or Option Price, as
applicable, to MCI-WorldCom in full in respect of any Unit of Capacity in
accordance with this Agreement and MCI-WorldCom is the terminating party
under this Clause 9.2, then:
9.2.1. MCI-WorldCom shall give the customer seven (7) days notice in
writing of termination under this Clause 9.2;
9.2.2. the Customer shall be entitled to assign and transfer its rights
and obligations under this Agreement in respect of such Unit if
Capacity to the relevant EquiTel Customer (if any), provided that
during such notice period:
(a) the Customer gives MCI-WorldCom written notice of such
assignment; and
(b) such EquiTel Customer enters into an agreement with
MCI-WorldCom to MCI-WorldCom's reasonable satisfaction
whereby such EquiTel Customer agrees to be bound by the terms
of this Agreement; and
9.2.3 the rights of each EquiTel Customer to any Unit of Capacity validly
assigned by the Customer to that EquiTel Customer in accordance
with Clause 9.2.2 shall be unaffected by and survive termination
of this Agreement.
9.3. Either party may terminate this Agreement by service on the other party of
not less than thirty (30) days notice in writing specifying a material
breach by the other party
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of a material obligation (other than an obligation to pay the Charges) and
requiring that the breach is remedied, providing that the breach is not
remedied during such period.
9.4. In the event that MCI-WorldCom has not received payment in full of the
Annual Charge in respect of a Unit of Capacity on the applicable due date,
MCI-WorldCom shall be entitled to suspend service across such Unit of
Capacity on giving seven (7) Business Days' notice in writing to the
Customer. MCI-WorldCom shall restore service across such Unit of Capacity
only on receipt0t by MCI-WorldCom of payment by the Customer of that
annual Charge, together with a restoration fee of 25% of such annual
Charge. In the event that the overdue Annual Charge and restoration fee
are not paid on or by 1 January of the year following the date of the
notice of suspension of service, MCI-WorldCom shall be entitled to revoke
the IRU granted in respect of such Unit of Capacity, with immediate
effect.
9.5. Subject to Clause 9.6, MCI-WorldCom shall be entitled to revoke the IRU
granted in respect of a Unit of Capacity on giving seven (7) seven
Business Days' notice in writing to the Customer:
9.5.1. in respect of each of the first two Units of Capacity activated
by MCI-WorldCom, in the event that MCI-WorldCom has not received
that portion of the Purchase Price applicable to such Unit of
Capacity on or by the earlier of:
(a) 30 June 1999; or
(b) a date three Business Days after the later of: (i) the date
on which the Customer receives payment from any third party
to whom it has granted rights to such Unit of Capacity of the
purchase price in full for such Unit, and (ii) the RFS Date;
9.5.2. in respect of the third Unit of Capacity activated by
MCI-WorldCom, in the event that MCI-WorldCom has not received the
Purchase Price in full on or by the earlier of:
(a) 31 July 1999; or
(b) a date three Business Days after the later of: (i) the date
on which the Customer receives payment from any third party
to whom it has granted rights to such Unit of Capacity of the
purchase price in full for such Unit, and (ii) the RFS Date;
and
9.5.3. in respect of the Additional Unit of Capacity, in the event that
MCI-WorldCom has not received the Option Price in full within
thirty (30) days of the applicable due date (as determined in
accordance with Clause 5.6), and
the Customer shall within thirty (30) days of such notice of revocation
pay MCI-WorldCom a cancellation fee of 20% of the portion of the Purchase
Price applicable to each Unit of Capacity (other than the Additional Unit)
to which such revocation notice applies. The Customer acknowledges that
the obligation to pay any cancellation fee in accordance with this Clause
9.5 is a material obligation for the purposes of Clause 9.3.
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9.6. In the event that the Customer shall, be notice to MCI-WorldCom, request
activation of a Unit of Capacity (other than the Additional Unit) on or
prior to a Target Date being a date prior to 30 June 1999 and the RFS Date
in respect of such Unit of Capacity is delayed beyond that date due to
MCI-WorldCom's default, then, notwithstanding Clauses 9.5.1 and 9.5.2,
MCI-WorldCom shall only be entitled to serve notice of revocation on the
customer in accordance with Clause 9.5 on or after the later of the date
specified in Clause 9.5 in respect of such Unit of Capacity and the RFS
Date.
9.7. Clauses 7, 8, this Clause 9.7 and Clauses 11, 13 and 20 shall continue in
full force and effect notwithstanding termination of this Agreement.
9.8. Termination of this Agreement shall not operate as a waiver of any breach
by a party of any of the provisions hereof and shall be without prejudice
to any rightful remedies of either party which may arise as a consequence
of such breach or which may have accrued hereunder up to the date of such
termination.
10. Force Majeure
10.1. Subject to Clauses 10.2, 10.3 and 10.4, any delay or failure to perform an
obligation under this Agreement by a party (the "affected party") shall
not constitute a breach of this Agreement to the extent that it is caused
by an event of Force Majeure.
10.2. The affected party shall promptly notify the other party in writing of the
estimated extent and duration of the inability to perform its
obligations.
10.3. Upon the cessation of the event of Force Majeure, the affected party shall
promptly notify the other party in writing of such cessation.
10.4. The affected party shall use all reasonable endeavors to mitigate the
effect of each event of Force Majeure.
10.5. If, following three months from the date of notification under Clause
10.2, the event of Force Majeure persists, the unaffected party may
forthwith terminate this Agreement by service of notice in writing on the
affected party.
11. Confidentiality
11.1 Subject to Clauses 11.2 and 11.3, in respect of Confidential Information
disclosed to it by the other party, each party shall:
11.1.1. only use such Confidential Information for the purposes of this
Agreement;
11.1.2. only disclose such confidential Information to a third party
with the prior written consent of the other party; and
11.1.3. ensure that any third party, to which Confidential Information is
disclosed under Clause 11.1.2, executes a confidentiality
undertaking on the terms of this Clause 11.
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11.2. The provisions of Clause 11.1 shall not apply to any Confidential
Information which:
11.2.1. is in or comes into the public domain other than by default of
the recipient party;
11.2.2. is or has already been independently generated by the recipient
party;
11.2.3. is in the possession of or is known by the recipient party prior
to its receipt from the disclosing party; or
11.2.4. is properly disclosed pursuant to and in accordance with a
relevant statutory or regulatory obligation or (with the prior
consent of either party, such consent not to be unreasonably
withheld) to obtain or maintain any listing on a stock exchange.
11.3. Either party may disclose the Confidential Information provided to it to
any Associated Company and to its professional advisors if and to the
extent that such disclosure is required in the performance of its
obligations hereunder.
12. Assignment and Subcontracting
12.1. Subject to Clause 9.2, this Agreement is personal to the parties hereto
and neither party shall, without the prior consent in writing of the other
(such consent not to be unreasonably withheld or delayed), assign, charge
or otherwise deal with the whole or any part of this Agreement or its
rights or obligations hereunder other than to or in favour of any
Associated Company of such party.
12.2. In the event of an assignment under Clause 12.1, the assignor shall
ensure that:
12.2.1. not less than fourteen (14) days' prior notice in writing of such
assignment is given to the other party; and
12.2.2. the assignee shall enter into an agreement with the other party
whereby the assignee shall agree to be bound by the terms of this
Agreement and, if required by the other party, the assignor shall
guarantee the performance of this Agreement by the assignee.
12.3. Either party may delegate the performance of its obligations hereunder to
any Associated Company. Such party shall, notwithstanding such delegation,
remain liable to the other party for the acts and omissions of such
Associated Company as if they were its own acts and omissions.
12.4. MCI-WorldCom agrees that the Customer shall be entitled to grant rights to
one or more Units of Capacity to other licensed or legally qualified third
party end users, provided that:
12.4.1. such grant is conditional on the Customer making available to
MCI-WorldCom the terms and conditions of such grant (other than
price), such terms and conditions to reflect underlying terms and
conditions of this Agreement to MCI-WorldCom's reasonable
satisfaction;
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12.4.2. such third parties shall meet with MCI-WorldCom's prior
reasonable approval; and
12.4.3. MCI-WorldCom receives the benefit of the representations,
warranties and covenants in Clause 7.3 from that third party in
relation to itself.
Notwithstanding any grant by the Customer of the Capacity to a third
party, the Customer shall remain liable for the performance of its
obligations hereunder.
12.5. In the event that the Customer grants rights to one or more Units of
Capacity pursuant to Clause 12.4, for the purposes of administering the
network operation centre of the Gemini cable network (the "NOC"), the
Customer shall notify MCI-WorldCom of such grant and shall provide MCI-
WorldCom with the following information: (a) the name and address of the
grantee or assignee; (b) the interest in the Capacity transferred; (c) the
name, address, telephone number, facsimile number and e-mail address of
the person (including appropriate escalation parties and procedures)
authorised on behalf of the grantee or assignee to interact with the NOC;
(d) a certification by the Customer that, notwithstanding such grant, the
Customer shall be fully liable for the performance of all its obligations
under this Agreement; and (e) any other information as MCI-WorldCom may
reasonably request.
13. Publicity
Neither party shall without the prior approval in writing of the other
(such approval not to be unreasonably withheld) directly or indirectly
make any release or statement to the press, radio, television or other
media in any way connected with this Agreement.
14. Severability
14.1. The invalidity or unenforceability for any reason of any part of this
Agreement shall not prejudice or affect the validity or enforceability of
the remainder of this Agreement.
14.2. If further lawful performance of this Agreement or any part of it shall be
made impossible by the final judgement or final order of any court of
competent jurisdiction, commission or government agency or similar
authority having jurisdiction over either party, the parties shall
forthwith use their reasonable endeavours to agree amendments to this
Agreement so as to comply with such judgement or order.
15. Variation
No variation, modification or addition to or cancellation of any provision
of this Agreement shall be effective unless agreed in writing by a duly
authorised representative of MCI-WorldCom and of the Customer.
16. Partnership
Nothing herein shall be deemed to constitute a partnership or joint
venture between the parties or to constitute one party the agent of the
other for any purpose whatsoever.
17. Waiver
Failure by either party at any time to enforce any of the provisions of
this Agreement shall neither be construed as a waiver of any rights or
remedies hereunder nor in any way affect the validity of this Agreement or
any part of it. No waiver shall be
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effective unless given in writing and no waiver of a breach of this
Agreement shall constitute a waiver of any antecedent or subsequent
breach.
18. Notices
18.1. Any notice required or authorised by this Agreement shall be in writing
sent by prepaid registered post or facsimile transmission (immediately
confirmed by post) and shall be deemed to have been received forty-eight
(48) hours after such posting or transmission. Any such notices shall be
addressed as follows:
to MCI-WorldCom: to the Customer:
---------------- ----------------
WorldCom International Limited EquiTel Bandwidth Limited
14 Grays Inn Road 1, Rue du Bugnon
London WC1X 8HN PO Box 53
Attention: General Counsel 1299 Crans
Fax: 0171 750 3993 Vaud
Copy to: Account Manager (EquiTel) Switzerland
Attention: Neal Collier
Copy to: WorldCentre MCI-WorldCom Fax: 0041 22 776 7963
Daniel Goedkoop Straat 729
1096 BD Copy to: Ian Hickson
Amsterdam Director, Legal Services
The Netherlands Fax: 0171 493 3524
Fax: 0031 20 711 7117
18.2. Either party may amend its address and facsimile number specified in
Clause 18.1 by notice to the other party.
19. Entire Agreement
This Agreement constitutes the entire understanding between the parties
relating to the Capacity and supersedes all previous agreements,
understandings or commitments between the parties or representations or
warranties made by either party whether oral or written with respect to
the Capacity. Each party warrants to the other that it has not relied on
any such agreement, understanding, commitment, representation or warranty
(whether oral or in writing) in entering into this Agreement.
20. Governing Law
20.1. This Agreement shall be governed and construed in accordance with English
law.
20.2. The parties hereby submit to the non-exclusive jurisdiction of the English
Courts.
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<PAGE>
21. Counterparts
This Agreement may be executed in counterparts and shall, if signed by an
authorised signatory of each of the parties hereto, be deemed to have been
duly executed.
AS WITNESS the hands of the duly authorised representatives of the parties at
the date first above written
} for and on behalf of
[illegible]
} MCI WorldCom Global Networks U.S., Inc.
} for and on behalf of
[illegible]
} MFS CableCo (Bermuda) Limited
/s/ M. Collier } for and on behalf of
M. Collier
FOR EATON TRUST LTD } EquiTel Bandwidth Limited
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<PAGE>
EXHIBIT 10.8
DATED 31 March 1999
MCI WORLDCOM GLOBAL NETWORKS U.S. INC
and
MCI WORLDCOM GLOBAL NETWORKS LIMITED
and
TELEMONDE INTERNATIONAL BANDWIDTH LIMITED
-------------------------------------------------
TRANSMISSION CAPACITY AGREEMENT
-------------------------------------------------
CLIFFORD CHANCE
<PAGE>
Table of Contents
1. Interpretation .................................................. 1
2. Provision of Capacity............................................ 4
3. Acceptance Testing............................................... 6
4. Operations and Maintenance Procedures............................ 7
5. Payment.......................................................... 7
6. Use of Capacity.................................................. 9
7. Warranties....................................................... 10
8. Liability........................................................ 11
9. Term, Termination and Suspension................................. 12
10. Force Majeure.................................................... l5
11. Confidentiality.................................................. 15
12. Assignment and Subcontracting.................................... 16
13. Publicity........................................................ 17
14. Severability..................................................... 17
15. Variation........................................................ 18
16. Partnership...................................................... 18
17. Waiver........................................................... 18
18. Notices.......................................................... 18
19 Entire Agreement................................................. 19
20. No Exclusive Remedy.............................................. 19
21. Governing Law.................................................... 19
22. Counterparts..................................................... 19
SCHEDULE 1 Technical Specifications................................... 21
<PAGE>
SCHEDULE 2 Operations and Maintenance Procedures..................... 23
SCHEDULE 3 Charges................................................... 28
SCHEDULE 4 Acceptance Test Specification............................. 29
<PAGE>
TRANSMISSION CAPACITY AGREEMENT
THIS AGREEMENT is made the day of 1998
BETWEEN:
(1) MCI WORLDCOM GLOBAL NETWORKS U.S., INC. whose registered office is
at 9 East Lookerman Street, Dover, Kent, Delaware 19901 USA; and
(2) MCI WORLDCOM GLOBAL NETWORKS LIMITED whose registered office is at
Clarendon House, 2 Church Street, Hamilton, Bermuda (together with
MCI WorldCom Global Networks U.S., Inc., referred to herein as "MCI
WorldCom"); and
(3) TELEMONDE INTERNATIONAL BANDWIDTH LIMITED, whose registered
office is at Craigmuir Chambers, Road Town, Tortola, British Virgin
Islands ("Telemonde").
WHEREAS:
(A) MCI WorldCom owns or has an interest in international
telecommunications facilities across Europe and the USA.
(B) Telemonde wishes to acquire from MCI WorldCom transmission capacity
over such facilities between the Sites, as defined herein.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 The words and phrases used in this Agreement shall, unless otherwise
expressly provided, have the meanings ascribed to them below:
"Acceptance Certificate" means an acceptance certificate in the form
provided by MCI WorldCom to Telemonde from time to time;
"Acceptance Tests" means the tests set out in the Test Specification,
to be conducted by MCI WorldCom in accordance with Clause 3;
"Act" means the Telecommunications Act 1984 (as amended or
substituted from time to time);
"Activation Request Form" means an activation request form in the
form provided by MCI WorldCom to Telemonde from time to time;
"Agreement" means this Agreement together with the Schedules hereto:
"Annual Charge" means, in relation to each Unit of Capacity, the
amount specified in Schedule 3 and payable to MCI WorldCom in
accordance with Clause 5, and "Annual Charges" shall be construed
accordingly;
<PAGE>
"Associated Company" means, in relation to a party, any subsidiary
or holding company of such party and any subsidiary of such holding
company (the terms "holding company" and "subsidiary" being as defined
in sections 736 and 736A Companies Act 1985);
"Business Days" means any days excluding Saturdays and Sundays on
which commercial banks are open for business in the country where the
relevant notice is to be delivered or where the relevant activity
is to be performed;
"Cable Lifetime" means the lifetime of the Gemini fibre optic
submarine and terrestrial cable system as set forth in the C&MA;
"Capacity" means the point to point transmission capacity provided
between the Sites, as detailed in Schedule 1;
"C&MA" means the construction, operation and maintenance agreement
for the Gemini fibre optic submarine and terrestrial cable system,
as amended from time to time by Gemini Submarine Cable System Limited
in accordance with the terms thereof;
"Charges" means, together, the Purchase Price and the Annual Charges;
"Confidential Information" means all confidential information
(whether written, oral or in electronic format) designated as such by
the disclosing party, together with all such other information which
relates to the operations, business, affairs, customers, services,
products, developments, plans, intentions, trade secrets, know-how and
personnel of the disclosing party which may reasonably be regarded as
the confidential information of the disclosing party;
"Demarcation Point" means that point at which MCI WorldCom Network is
connected to Telemonde Network for the purpose of the provision of
Capacity hereunder as specified in Schedule 1;
"Emergency Works" has the meaning ascribed thereto in the Act;
"Fault" means a material defect, fault or impairment in the Capacity
duly notified to MCI WorldCom in accordance with Schedule 2;
"Force Majeure" means any event beyond a party's reasonable control
affecting the performance by that party of its obligations hereunder
including (to the extent that such events are beyond the affected
party's reasonable control), but not limited to, acts of God,
insurrection or civil disorder, malicious damage, accident,
breakdown, war or military operations, national or local emergency,
acts or omissions of Government regulatory or highway authority,
industrial disputes of any kind, fibre cuts, fire, flood, lightning,
explosion, subsidence, inclement weather and acts or omissions of
persons or bodies (other than a Telemonde Customer) beyond the
reasonable control of the affected party;
"IRU" means the "indefeasible right of use" in a Unit of Capacity
for the Cable Lifetime;
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"LIBOR Rate" means the arithmetic mean of the offered rates of
leading banks for London Interbank deposits expressed as a rate per
annum, for deposits in US Dollars for six months as displayed on
the LIBOR page of the Reuters Monitor Money Rate service at or about
11:00am on the date on which the LIBOR Rate is to be determined;
"London Site" means an On-Net Location in London;
"MCI WorldCom Network" means the Service Equipment and any other
infrastructure used by MCI WorldCom to provide the Capacity;
"New York Site" means one of 60 Hudson Street, New York, USA and 111
8th Avenue, New York, USA;
"On-Net Location" means any site having a direct connection to the
MCI WorldCom Network via an MCI WorldCom point of presence;
"Operations and Maintenance Procedures" means those procedures set
out in Schedule 2;
"Project Manager" means the representatives nominated by each of the
Parties in accordance with Clause 2.3 from time to time;
"Purchase Price" means the amount specified in Schedule 3 and payable
to MCI WorldCom for the Capacity in accordance with Clause 5;
"RFS Date" means, in respect of each Unit of Capacity, the date upon
which the Acceptance Tests shall have been successfully completed in
respect of such Unit of Capacity as evidenced by the signature by
each of the parties of an Acceptance Certificate in relation thereto,
whether actual or deemed in accordance with Clause 3.9;
"Scheduled Maintenance" means the planned works to be conducted by
or on behalf of MCI WorldCom in order to maintain or repair the
Capacity as notified to Telemonde and affected Telemonde Customers
in accordance with Schedule 2 or otherwise agreed between the
parties;
"Service Equipment" means the multiplex or other equipment provided
by MCI WorldCom and installed at a Site to enable Telemonde to
receive the Capacity;
"Site" means a New York Site or London Site, as specified in the
Activation Request Form, and "Sites" shall be construed accordingly;
"Target Date" means that date with effect from which Telemonde has
requested or the parties have agreed that the Capacity be activated,
` in accordance with Clause 2.5 or Clause 2.7.1;
"Technical Specification" means the technical specifications set
out in Schedule 1 hereto;
"Telemonde Customer" means a third party with whom Telemonde has
entered into an end user capacity supply agreement for the grant of
rights to a Unit of Capacity in
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<PAGE>
accordance with Clause 12.4, and "Telemonde Customers" shall be
construed accordingly;
"Telemonde Equipment" means any equipment owned or used by
Telemonde (other than Service Equipment) that is installed at a
Site and which is used by Telemonde to access the Capacity;
"Telemonde Network" means the telecommunications infrastructure
owned and operated by Telemonde (or by any Associated Company
thereof) under an applicable regularity authority;
"Test Specification" means the test specification set out in
Schedule 4 hereto;
"Unit" means, in relation to the Capacity, a transmission channel
comprising a VC-4 container interfaced at STM-1 level, and "Units"
shall be construed accordingly.
1.2 References in this Agreement to "MCI WorldCom", and "Telemonde",
"Telemonde Customers" and "Communications Collateral Limited" shall
include their respective successors (whether by operation of law or
otherwise) and permitted assigns.
1.3 The headings are included in this Agreement for ease of reference only
and shall not affect the interpretation or construction of this
Agreement.
1.4 References in this Agreement to Clauses and Schedules shall be deemed
to be references to the clauses of and schedules to this Agreement.
2. PROVISION OF CAPACITY
2.1 With effect from the date of signature of this Agreement and
throughout the term of this Agreement, MCI WorldCom shall, subject to
Telemonde complying with all its obligations and undertakings under
this Agreement, reserve the Capacity exclusively for Telemonde.
2.2 In consideration for the obligations and undertakings of Telemonde set
out in this Agreement and with effect from the RFS Date in respect of
each Unit of Capacity, MCI WorldCom shall:
2.2.1 grant Telemonde an IRU in the Capacity between the specified
New York Site and MCI WorldCom, Aylesbury Street (UK2),
London, England; and
2.2.2 lease Telemonde the Capacity between MCI WorldCom, Aylesbury
Street (UK2), London, England and the specified London Site,
and
shall make such Capacity available to Telemonde from the applicable
RFS Date for the term of this Agreement.
2.3 Each party shall, as soon as reasonably practicable following
execution of this Agreement, nominate a Project Manager who shall be
that party's representative for all operational matters. Each party
shall notify the other party and keep the other party notified of any
change in the identity of such Project Manager.
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<PAGE>
2.4 Telemonde shall be entitled at any time following the execution of
this Agreement by delivery to MCI WorldCom of an Activation Request
Form duly completed in accordance with Clause 2.5 to request the
activation of up to two Units of Capacity between the Sites.
2.5 Each Activation Request Form delivered by Telemonde to MCI WorldCom
shall specify, in respect of each Unit of Capacity:
2.5.1 which New York Site is to be used;
2.5.2 the exact location of the London Site; and
2.5.3 the date on which Telemonde requires activation of such Unit
of Capacity (being a date not less than 30 Business Days'
following the date of delivery of such Activation Request
Form to MCI WorldCom), which date shall be the Target Date for
such Unit of Capacity.
2.6 Telemonde acknowledges that MCI WorldCom may have insufficient
capacity available to it within the MCI Network to provide the
Capacity to each On-Net Location. Where there is insufficient capacity
within the MCI WorldCom Network to permit the provision of the
Capacity to any Site specified by Telemonde in its Activation Request
Form by the proposed Target Date, MCI WorldCom shall notify Telemonde
within 12 Business Days following receipt of such Activation Request
Form and shall confirm to Telemonde the date on which MCI WorldCom
reasonably anticipates being able to make the Capacity available.
2.7 In the event that MCI WorldCom delivers to Telemonde a notice in
accordance with Clause 2.6, Telemonde shall by written notice to MCI
WorldCom either:
2.7.1 conform its requirements as set out in the Activation Request
form, in which case the parties shall use reasonable endeavors
to agree a revised Target Date; or
2.7.2 revise its requirements by delivery to MCI WorldCom of a
revised Activation Request Form and the provisions of Clauses
2.4 to 2.11 shall apply.
2.8 MCI WorldCom shall use its reasonable endeavors to ensure that the RFS
Date for each Unit of Capacity occurs on or prior to the applicable
Target Date.
2.9 MCI WorldCom shall liaise with the Project Manager appointed by
Telemonde in accordance with Clause 2.3 and shall notify such Project
Manager not less than bi-monthly of any delays which it reasonably
believes are likely to occur in a RFS Date.
2.10 In the event that the RFS Date does not occur within a period of eight
weeks following the applicable Target Date in respect to each Unit of
Capacity (or in the event that MCI WorldCom shall notify Telemonde, in
accordance with Clause 2.9, that the applicable RFS Date is likely to
occur following the expiry of such eight week period), Telemonde shall
be entitled to notify MCI WorldCom in writing, such notice to take
effect immediately on receipt, that it no longer requires delivery of
such Unit of
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<PAGE>
Capacity, in which case MCI WorldCom shall following the date of
service of such notice refund to Telemonde any portion of the Purchase
Price already paid by it in relation to such Unit of Capacity and,
save in respect of any liability arising up to the date of such
notice, neither party shall have any further obligations in relation
to the provision of such Unit of Capacity.
2.11 Telemonde acknowledges that MCI WorldCom may from time to time revise
or vary any aspect of the Capacity save that the Capacity and each
Unit shall notwithstanding such variation remain compliant with the
terms of this Agreement, including, without limitation, the Technical
Specification.
3. ACCEPTANCE TESTING
3.1 MCI WorldCom shall, following the delivery to it of a notice in
accordance with Clause 2.4, install the Service Equipment at the
Sites.
3.2 Following the installation by MCI WorldCom of the Service Equipment
MCI WorldCom shall perform the Acceptance Tests in relation to the
Service Equipment and the relevant Unit of Capacity in accordance with
the Test Specification.
3.3 MCI WorldCom shall notify Telemonde (through the Project Manager
appointed in accordance with Clause 2.3) of its intention to conduct
Acceptance Tests.
3.4 MCI WorldCom shall notify Telemonde of the successful completion of
Acceptance Tests by delivery to Telemonde of an Acceptance Certificate
duly signed on behalf of MCI WorldCom and shall provide to Telemonde a
copy of the results of such Acceptance Tests.
3.5 Telemonde shall be entitled upon delivery to it of an Acceptance
Certificate in accordance with Clause 3.4 to perform such testing of
the Capacity as it may require to demonstrate compliance of the
Capacity with the Technical Specification.
3.6 Telemonde shall, within a five day period following the date of the
receipt of the Acceptance Certificate in accordance with Clause 3.4
either:
3.6.1 confirm to MCI WorldCom its acceptance of the Capacity by its
counter-signature of such Acceptance Certificate, in which
case such date shall be the RFS Date (such confirmation not to
be unreasonably withheld); or
3.6.2 notify MCI WorldCom of those aspects of the Capacity which it
does not believe to be compliant with the Technical
Specification and provide to MCI WorldCom together with such
notice the results of the testing conducted by it evidencing
such non-compliance.
3.7 In the event that Telemonde shall notify MCI WorldCom in accordance
with Clause 3.6.2, MCI WorldCom shall perform such works as MCI
WorldCom reasonably deems to be required to remedy the defects
notified to MCI WorldCom. Upon the completion of such works the
provisions of Clauses 3.2 to 3.9 shall apply.
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<PAGE>
3.8 In the event that any defects notified to MCI WorldCom in accordance
with Clause 3.6.2 shall be attributable to the equipment of Telemonde
or otherwise to an act or omission of Telemonde or its agents, MCI
WorldCom shall be entitled to invoice Telemonde for any costs
reasonably incurred in investigating and remedying such defects in
accordance with Clause 3.7, such invoice being payable in accordance
with Clause 5.5, in which case the date of signature by MCI WorldCom
of the Acceptance Certificate shall in this case by the RFS Date.
3.9 In the event that Telemonde shall fail within the timescales set out
in Clauses 3.6 to deliver a notice to MCI WorldCom, it shall be deemed
to have accepted such Capacity and to have counter-signed the
Acceptance Certificate on the date of signature of such Acceptance
Certificate by MCI WorldCom and the date of signature of such
Acceptance Certificate by MCI WorldCom shall be the RFS Date.
4. OPERATIONS AND MAINTENANCE PROCEDURES
4.1 The parties shall comply, and Telemonde shall procure the compliance
of the Telemonde Customers, with the Operations and Maintenance
Procedures in respect of the performance of Scheduled Maintenance and
Emergency Works and the reporting and rectification of Faults. MCI
WorldCom shall have no obligation to comply with Operations and
Maintenance Procedures in respect of any Telemonde Customer in respect
of whom Telemonde has not provided MCI WorldCom with the information
set out in Clause 12.5.
4.2 MCI WorldCom shall furnish the Capacity and shall cause the Capacity
to be maintained in accordance with the terms of the C&MA.
5. PAYMENT
5.1 In consideration for the obligations and undertakings of MCI WorldCom
set out in this Agreement, Telemonde shall pay the Charges in
accordance with the provisions of this Clause 5.
5.2 MCI WorldCom shall be entitled to invoice Telemonde for the Purchase
Price on or after the date of signature hereof.
5.3 MCI WorldCom shall be entitled to invoice Telemonde for the Annual
Charges annually in advance on or about 1 January of each year.
Liability for payment of the Annual Charge due in respect of each Unit
of Capacity shall commence on the earlier of the relevant RFS Date
and 30 June 1999. The Annual Charges for the partial year commencing
on the relevant RFS Date or 30 June 1999 shall be pro-rated and MCI
WorldCom shall be entitled to invoice Telemonde for such pro-rated
amount for each Unit of Capacity on or after the earlier of those two
dates.
5.4 Telemonde shall pay or shall procure payment to MCI WorldCom of US$
6,500,000 (being the portion of the Purchase Price applicable to the
first Unit activated) by no later than 10 a.m. on 12 April 1999 into a
bank account designated by MCI
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<PAGE>
WorldCom. Telemonde acknowledges that the obligation to pay this
amount in accordance with this Clause 5.4 is a material obligation
for the purposes of Clause 9.3.
5.5 Telemonde shall make payment for all Charges or other amounts duly
invoiced to it in accordance with this Clause 5 (other than the
portion of the Purchase Price applicable to the first Unit) within
thirty (30) days of the date of delivery to it of an invoice.
5.6 Telemonde acknowledges that the Charges are exclusive of VAT (or such
other similar taxes as may be levied from time to time) which shall be
invoiced to and payable by Telemonde in accordance with this Clause 5
where applicable.
5.7 On receiving any payment of or towards the purchase price for the
second Unit of Capacity from a Telemonde Customer under an end user
capacity supply agreement, Telemonde shall immediately pay such amount
(up to the Purchase Price owing in respect of such Unit) into a bank
account controlled and operated jointly by MCI WorldCom and Telemonde,
in accordance with the Designated Account Agreement dated
31 March 1999.
5.8 Subject to Clause 5.10, MCI WorldCom shall be entitled to charge and
receive interest on any sums (other than the portion of the Purchase
Price applicable to the second Unit) which are overdue at the rate of
3% above the LIBOR Rate until the date of payment in full, whether
before or after any judgment. Such interest shall be calculated and
shall accrue on a daily basis.
5.9 Subject to Clause 5.10, MCI WorldCom shall be entitled to charge and
receive interest on any portion of the Purchase Price applicable to
the second Unit of Capacity, if such amount has not been paid to MCI
WorldCom in full on or by the earlier of:
5.9.1 30 June 1999; and
5.9.2 a date three Business Days after the earlier of: (1) the date
on which Telemonde receives payment of the purchase price in
full for such Unit from the relevant Telemonde Customer, and
(ii) the RFS Date plus 30 days,
at the rate of 3% above the LIBOR Rate, calculated from the earlier
of the dates specified in this Clause 5.9 until the date of payment
to MCI WorldCom in full, whether before or after any judgment. Such
interest shall be calculated and shall accrue on a daily basis.
5.10 In the event that Telemonde shall, by notice to MCI WorldCom, request
activation of a Unit of Capacity on or prior to a Target date being a
date prior to 30 June 1999 and the RFS Date in respect of such Unit of
Capacity is delayed beyond that date due to MCI WorldCom's default,
then, notwithstanding the provisions of Clauses 5.8 and 5.9, MCI
WorldCom shall only be entitled to charge and receive interest on
the portion of the Annual Charge and Purchase Price relating to such
Unit of Capacity from the later of the dates specified in Clauses 5.8
and 5.9 in respect of such Unit of Capacity and the RFS Date. Such
interest shall be at the rate of 3% above LIBOR Rate, calculated from
the later of the dates specified in this Clause 5.10 until the date
of payment in
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<PAGE>
full, whether before or after any judgment, and shall be calculated
and shall accrue on a daily basis.
6. USE OF CAPACITY
6.1 Telemonde shall grant or shall procure the grant to MCI WorldCom of
such rights of access to each Site and shall provide to MCI WorldCom
such facilities and information as MCI WorldCom may reasonably
require to enable it to perform its obligations and exercise its
rights under this Agreement.
6.2 Telemonde acknowledges that, where the provision by MCI WorldCom of
the Capacity shall require the modification of any equipment of
Telemonde or Telemonde Customer, MCI WorldCom shall not be liable
for the performance of any works entailed in effecting such
modification and such works shall be the sole responsibility of and
shall be performed at the sole expense of Telemonde or relevant
Telemonde Customer.
6.3 Telemonde warrants and undertakes that it shall, and where a London
Site is a third party site, shall procure that a third party shall:
6.3.1 house the Service Equipment in accordance with MCI WorldCom's
reasonable instructions as may be given from time to time;
6.3.2 not move, modify, relocate or in any way interfere with the
Service Equipment;
6.3.3 not cause the Service Equipment to be repaired, serviced or
otherwise attended to otherwise than by an authorised
representative of MCI WorldCom;
6.3.4 not let, sell or transfer any Service Equipment nor create or
allow any mortgage, charge, lien, pledge or other encumbrance
or security interest whatsoever to be placed on the Service
Equipment;
6.3.5 not use the Service Equipment except in accordance with such
reasonable instructions as MCI WorldCom may from time to time
give;
6.3.6 permit MCI WorldCom to inspect or test the Service Equipment at
all reasonable times;
6.3.7 upon termination of this Agreement, permit MCI WorldCom access
to each Site to facilitate the removal of the Service
Equipment.
6.3.8 not, through its use of any Telemonde Equipment or otherwise,
cause any interruption of, or interference to, the MCI WorldCom
Network, prevent the use of similar equipment by other owners,
operators or users of the MCI WorldCom Network, impair privacy
of any communications over the MCI WorldCom Network or cause
damage to any plant or equipment or create hazards to any user,
owner or operator of the MCI WorldCom Network.
6.4 Telemonde may, at its option, by notice in writing, request access to
any Unit of Capacity at the Porthcurno cable station or other access
point. MCI WorldCom shall,
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<PAGE>
on delivery of such notice, discuss with Telemonde in good faith the
technical and commercial feasibility of such access. Telemonde
acknowledges that the provision of such access shall in all cases be
subject to payment by Telemonde of MCI WorldCom's and any third party's
reasonable costs in providing such access.
6.5 If MCI WorldCom and Telemonde agree to provide access to the Porthcurno
cable station in accordance with Clause 6.4, MCI WorldCom shall, on
Telemonde's request, use reasonable endeavors to facilitate the onward
connection of that Unit on to the Flag cable system through the
interconnection at the Porthcurno cable station facility. Telemonde
acknowledges that MCI WorldCom does not represent or warrant that onward
connection will be possible, available or permitted.
7 WARRANTIES
7.1 MCI WorldCom represents to, warrants and covenants with Telemonde as
follows:
7.1.1 MCI WorldCom is duly organised and validly existing under the laws
of its State or jurisdiction of organisation, and has the
requisite authority to execute this Agreement and to perform its
obligations hereunder;
7.1.2 This Agreement constitutes a valid and binding obligation of MCI
WorldCom, enforceable against MCI WorldCom in accordance with its
terms;
7.1.3 MCI WorldCom has obtained, and shall use commercially reasonable
efforts to maintain in good standing, all such consents,
approvals, licences, permits and other approvals, both
governmental and private, as may be necessary (as at the date of
performance) to permit MCI WorldCom to perform its obligations
under this Agreement; and
7.1.4 MCI WorldCom shall perform its obligations under this Agreement in
a manner consistent with applicable law.
7.2 Save as expressly provided herein, no warranties, conditions,
representations or agreements are expressed or implied by MCI WorldCom in
relation to the Capacity. Notwithstanding anything to the contrary in this
Agreement, MCI WorldCom does not warrant or present that the Capacity
will be fault-free and any implied warranties and conditions of any nature
are hereby expressly excluded.
7.3 Telemonde represents to, warrants and covenants with MCI WorldCom as
follows:
7.3.1 Telemonde is a limited liability company, duly organised and
validly existing under the laws of its State or jurisdiction of
organisation, is qualified to do business in all jurisdiction
(domestic and foreign) in which such qualification is required
by applicable law, and has the requisite authority to execute this
Agreement and to perform its obligations hereunder;
7.3.2 This Agreement constitutes a valid and binding obligation of
Telemonde, enforceable against Telemonde in accordance with its
terms;
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7.3.3 There are no pending and, to Telemonde's knowledge, no threatened
claims, actions, suits, audits, investigations or proceedings by
or against Telemonde which could have an adverse effect on
Telemonde's ability to perform its obligations under this
Agreement.
7.3.4 Telemonde has obtained, and shall use commercially reasonable
efforts to maintain in good standing, and shall ensure that all
third parties with whom it has entered into an agreement for the
purchase or use of part or all of the Capacity have so obtained
and so maintain, all such consents, approvals, licenses, permits
and other approvals, both governmental and private, as may be
necessary (as at the date of performance) to permit Telemonde to
perform its obligations under this Agreement and to permit
Telemonde and such third parties to acquire and use the Capacity;
7.3.5 Telemonde shall not create or permit to exist, any liens,
encumbrances or charges to be placed upon the Capacity or
Telemonde's rights under this Agreement other than liens,
encumbrances or charges of financial institutions or others
against Telemonde's assets generally in connection with financing
arrangements by Telemonde;
7.3.6 Telemonde shall perform its obligations under this Agreement and
use the Capacity in a manner consistent with applicable law, and
shall not use the Capacity, or permit the Capacity to be used, for
any illegal purpose or in any other unlawful manner; and
7.3.7 Telemonde shall use the Capacity and shall cause all other persons
using the Capacity to use such Capacity in such a manner so as not
to cause any interruption of, or interference to, the MCI WorldCom
Network or the use of any other capacity on the MCI worldCom
Network.
8. LIABILITY
8.1 Subject to Clause 8.3 and save in respect of any amounts due and owing in
accordance with Clause 5 and save in respect of any liability arising out
of a party's wilful default, but notwithstanding anything else in this
Agreement, each party's liability to the other in contract, tort
(including negligence or breach of statutory duty) or otherwise arising in
connection with this Agreement shall be limited to:
8.1.1 one million pounds ((pound sign)1,000,000) per event or series of
connected events; and
8.1.2 two million pounds ((pound sign)2,000,000 in any twelve (12) month
period.
8.2 Subject to Clause 8.3 but notwithstanding anything else in this Agreement,
neither party shall in any event be liable to the other in contract, tort
(including negligence or breach of statutory duty) or otherwise for
indirect or consequential losses under or arising in connection with this
Agreement including, but not limited to, loss of business, revenues,
anticipated savings or profit.
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<PAGE>
8.3 Nothing in this Agreement shall be deemed to limit either party's
liability in respect of death or personal injury caused by or arising from
that party's negligence or of fraud.
8.4 Should any limitations or provision contained in this Clause 8 be held to
be invalid under any applicable statute or rule of law, it shall to that
extent be deemed omitted.
9. TERM, TERMINATION AND SUSPENSION
9.1 This Agreement shall come into effect on the date hereof and shall,
subject to earlier termination in accordance with this Clause 9 or Clause
10.5, continue in effect for the Cable Lifetime.
9.2 Either party may terminate this Agreement by service on the other party of
notice in writing, having effect forthwith, if the other party shall
become insolvent or have an administrator, receiver or administrative
receiver appointed over a substantial part of its assets or go into
liquidation (whether compulsory or voluntary) otherwise than for the
purposes of amalgamation or reconstruction or be subject to an order for
dissolution by a court of competent jurisdiction or shall make any
compromise or arrangement with its creditors or make an application a
court of competent jurisdiction for protection from creditors or have any
form of execution or distress levied upon, or an encumbrancer take
possession of or sell, a substantial part of its assets or cease to carry
on business, or if, an equivalent event occurs in relation to that party
in any jurisdiction, PROVIDED THAT, if Telemonde has paid the Purchase
Price to MCI WorldCom in full in respect of any Unit of Capacity in
accordance with this Agreement and MCI WorldCom is the terminating party
under this Clause 9.2, then:
9.2.1 MCI WorldCom shall give Telemonde and Communications Collateral
Limited seven (7) days' notice in writing of termination under
this Clause 9.2;
9.2.2 during such notice period, the relevant Telemonde Customer may, at
its option, enter into an agreement in a form reasonably approved
by MCI WorldCom or, in the case of Communications Collateral
Limited, the form of the transmission capacity resale agreement
entered into between Communications Collateral Limited and
Telemonde (as approved by MCI WorldCom); and
9.2.3 the rights of a Telemonde Customer to any Unit of Capacity under
any agreement entered into under clause 9.2.2 shall be unaffected
by and survive termination of this Agreement.
9.3 Either party may terminate this Agreement by service on the other party of
not less than thirty (30) days' notice in writing specifying a material
breach by the other party of a material obligation (excluding an
obligation to pay the charges other than the portion of the Purchase Price
applicable to the first Unit) and requiring that the breach is remedied,
such notice only taking effect where that breach is not remedied during
such period, PROVIDED THAT, if:
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9.3.1 the Purchase Price has been paid to MCI WorldCom in full in
respect of the first Unit of Capacity in accordance with
Clause 5.4;
9.3.2 MCI WorldCom is the terminating party under this
Clause 9.3; and
9.3.3 neither Communications Collateral Limited nor any of its end
customers nor any person with an interest in or right to all
or part of the Capacity obtained through Communications
Collateral Limited has caused or contributed to such breach.
then:
9.3.4 MCI WorldCom shall give Telemonde and Communications Collateral
Limited seven (7) days' notice in writing of termination under
this Clause 9.3;
9.3.5 during such notice period, Communications Collateral Limited
may, at its option, enter into an agreement with MCI WorldCom
in the form of the transmission capacity resale agreement
entered into between Communications Collateral Limited and
Telemonde (as approved by MCI WorldCom), and Communications
Collateral Limited warrants and undertakes that immediately
upon entry into that agreement it shall not be in breach of
its terms;
9.3.6 the rights of Communications Collateral Limited to the first
Unit of Capacity under an agreement entered into under Clause
9.3.5 shall be unaffected by and survive termination of this
Agreement; and
9.3.7 MCI WorldCom acknowledges that Communications Collateral
Limited is not required to remedy the breach giving rise to
termination of this Agreement by MCI WorldCom under this
Clause 9.3.
9.4 In the event that MCI WorldCom has not received payment in full of the
Annual Charge in respect of a Unit of Capacity on the applicable due
date, MCI WorldCom shall be entitled to suspend service across such
Unit of Capacity on giving seven (7) Business Days' notice in writing
to Telemonde. MCI WorldCom shall restore service across such Unit of
Capacity only on receipt by MCI WorldCom of payment by Telemonde of
that Annual Charge, together with a restoration fee of 25% of such
Annual Charge. In the event that the overdue Annual Charge and
restoration fee are not paid on or by 1 January of the year following
the date of the notice of suspension of service, MCI WorldCom shall be
entitled to revoke the IRU and lease granted in respect of such Unit
of Capacity, with immediate effect. Notwithstanding any other
provision of this Agreement, MCI WorldCom acknowledges that it has no
revocation rights in respect of the first Unit of Capacity during the
term of the Agreement other than as set out in this Clause 9.4.
9.5 Subject to Clause 9.6, MCI WorldCom shall be entitled to revoke the
IRU and lease granted in respect of the second Unit of Capacity
activated on giving seven (7) Business Days' notice in writing to
Telemonde in the event that MCI WorldCom has not received the
Purchase Price on or by the earlier of:
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9.5.1 30 June 1999; and
9.5.2 a date three Business Days after the earlier of: (i) the date on
which Telemonde receives payment of the purchase price in full
for such Unit from the relevant Telemonde Customer, and (ii) the
RFS Date plus 30 days.
9.6 Clauses 7, 8, this Clause 9.6 and Clauses 11, 13 and 21 shall continue in
full force and effect notwithstanding termination of this Agreement.
9.7 Termination of this Agreement shall not operate as a waiver of any breach
by a party of any of the provisions hereof and shall be without prejudice
to any rightful remedies of either party which may arise as a consequence
of such breach or which may have accrued hereunder up to the date of such
termination.
10. FORCE MAJEURE
10.1 Subject to compliance with Clauses 10.2, 10.3 and 10.4, any delay or
failure to perform an obligation under this Agreement by a party (the
"affected party") shall not constitute a breach of this Agreement to the
extent that it is caused by an event of Force Majeure.
10.2 The affected party shall promptly notify the other party in writing of
the estimated extent and duration of the affected party's inability to
perform its obligations.
10.3 Upon the cessation of the event of Force Majeure, the affected party
shall promptly notify the other party in writing of such cessation.
10.4 The affected party shall use all reasonable endeavours to mitigate the
effect of each event of Force Majeure.
10.5 If, following three months from the date of notification under
Clause 10.2, the event of Force Majeure persists, the unaffected party
may forthwith terminate this Agreement by service of notice in writing on
the affected party.
11. CONFIDENTIALITY
11.1 Subject to Clauses 11.2 and 11.3, in respect of Confidential Information,
each party shall:
11.1.1 use such Confidential Information only for the purposes of this
Agreement;
11.1.2 disclose such Confidential Information to a third party only with
the prior written consent of the other party or in accordance
with Clause 11.3; and
11.1.3 ensure that any third party to whom Confidential Information is
disclosed under Clause 11.1.2 or 11.3 executes a confidentiality
undertaking on the terms of this Clause 11.
11.2 The provisions of Clause 11.1 shall not apply to any Confidential
Information which:
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11.2.1 is in or comes into the public domain other than by default of
the recipient party;
11.2.2 is or has already been independently generated by the recipient
party;
11.2.3 is in the possession of or is known by the recipient party prior
to its receipt from the disclosing party; or
11.2.4 is properly disclosed pursuant to and in accordance with a
relevant statutory or regulatory obligation or (with the prior
consent of either party, such consent not to be unreasonably
withheld) to obtain or maintain any listing on a stock exchange.
11.3 Either party may disclose the Confidential Information provided to it to
any Associated Company and to its professional advisors if and to the
extent that such disclosure is required in the performance of its
obligations hereunder.
12. ASSIGNMENT AND SUBCONTRACTING
12.1 This Agreement is personal to the parties hereto and neither party shall,
without the prior consent in writing of the other (such consent not to be
unreasonably withheld or delayed), assign, charge or otherwise deal with
the whole or any part of this Agreement or its rights or obligations
hereunder other than to or in favour of any Associated Company of such
party.
12.2 In the event of an assignment under clause 12.1, the assignor shall
ensure that:
12.2.1 not less than fourteen (14) days' prior notice in writing of such
assignment is given to the other party;
12.2.2 the assignee shall enter into an agreement with the other party
whereby the assignee shall agree to be bound by the terms of this
Agreement and, if required by the other party, the assignor shall
guarantee the performance of this Agreement by the assignee; and
12.2.3 In case of an assignment to an Associated Company, the assignor
shall procure that all parts, rights and obligations of this
Agreement that have been assigned are immediately reassigned to
the assignor if that assignee ceases to be an Associated Company.
12.3 Either party may delegate the performance of its obligations hereunder to
any Associated Company. Such party shall, notwithstanding such
delegation, remain liable to the other party for the acts and omissions
of such Associated Company as if they were its own acts and omissions.
12.4 MCI WorldCom agrees that Telemonde shall be entitled to grant rights to
one or more Units of Capacity to third party end users, provided that the
following conditions are met to MCI WorldCom's reasonable satisfaction:
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<PAGE>
12.4.1 the terms and conditions of such grant (other than price and the
payment terms for the purchase price) do not materially deviate from
the end user capacity supply agreement approved by MCI WorldCom;
12.4.2 Telemonde shall have notified MCI WorldCom of the identity of the
end user prior to execution of the relevant end user capacity supply
agreement;
12.4.3 MCI WorldCom must have approved the financial standing of the end
user (such approval not to be unduly delayed nor unreasonably
withheld). MCI WorldCom shall only refuse approval of an end user on
the basis of objective documentary evidence that indicates that the
end user would be unable or is unlikely to meet its payment
obligations under the relevant end user capacity supply agreement on
an ongoing basis;
12.4.4 MCI WorldCom must receive the benefit of the representations,
warranties and covenants in Clauses 6.3 and 7.3 from the end user in
relation to itself;
12.4.5 Telemonde must have executed a deed of assignment by which it
assigns to MCI WorldCom by way of security all present and future
rights to receive payment from the end user under the end user
capacity supply agreement; and
12.4.6 Telemonde must have delivered to the end user a notice of the
assignment referred to in Clause 12.4.5 in the form annexed to the
deed of assignment.
Any grant of rights to a Unit of Capacity other than in accordance with
this Clause 12.4 shall be of no effect. Notwithstanding any grant by
Telemonde of the Capacity to a third party, Telemonde shall remain liable
for the performance of its obligations hereunder. Telemonde acknowledges
that the Deed of Assignment dated 31 March 1999 and the Designated Account
Agreement 31 March 1999 apply both to this Agreement and to any contractual
arrangements made with Telemonde Customers.
12.5 In the event that Telemonde grants rights to one or more Units of Capacity
pursuant to Clause 12.4, for the purposes of administering the network
operation centre of the Gemini cable network (the "NOC"), Telemonde shall
notify MCI WorldCom of such grant and shall provide MCI WorldCom with the
following information: (a) the name and address of the Telemonde Customer;
(b) the interest in the Capacity transferred; (c) the name, address,
telephone number, facsimile number and e-mail address of the person
(including appropriate escalation parties and procedures) authorised on
behalf of the Telemonde Customer to interact with the NOC and (if
different) the contact name, address, telephone number and fax number of
the Telemonde Customer's local network operations centre or equivalent; (d)
a certification by Telemonde that, notwithstanding such grant, Telemonde
shall be fully liable for the performance of all its obligations under this
Agreement; and (e) any other information as MCI WorldCom may reasonably
request.
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13. PUBLICITY
Neither party shall without the prior approval in writing of the other
(such approval not to be unreasonably withheld) directly or indirectly make
any release or statement to the press, radio, television or other media in
any way connected with this Agreement.
14. SEVERABILITY
14.1 The invalidity or unenforceability for any reason of any part of this
Agreement shall not prejudice or affect the validity or enforceability of
the remainder of this Agreement.
14.2 If further lawful performance of this Agreement or any part of it shall be
made impossible by the final judgement or final order of any court of
competent jurisdiction, commission or government agency or similar
authority having jurisdiction over either party, the parties shall
forthwith use their reasonable endeavours to agree amendments to this
Agreement so as to comply with such judgement or order.
15. VARIATION
No variation, modification or addition to or deletion of any provision of
this Agreement shall be effective unless agreed in writing by a duly
authorised representative of MCI WorldCom and of Telemonde.
16. PARTNERSHIP
Nothing herein shall be deemed to constitute a partnership or joint venture
between the parties or to constitute one party the agent of the other for
any purpose whatsoever.
17. WAIVER
Failure by either party at any time to enforce any of the provisions of
this Agreement shall neither be construed as a waiver of any rights or
remedies hereunder nor in any way affect the validity of this Agreement or
any part of it. No waiver shall be effective unless given in writing and no
waiver of a breach of this Agreement shall constitute a waiver or any
antecedent or subsequent breach. No single or partial exercise of a right
or remedy provided by this Agreement or by law prevents further exercise of
the right or remedy or the exercise of another right or remedy.
18. NOTICES
18.1 Any notice required or authorised by this Agreement shall be in writing
sent by prepaid registered post or facsimile transmission (immediately
confirmed by post) and shall be deemed to have been received forty-eight
(48) hours after such posting or transmission. Any such notices shall be
addressed as follows:
To MCI WorldCom: To Telemonde:
C/- MCI WorldCom Limited Telemonde International Bandwidth Limited
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14 Grays Inn Road Argonaut House
London WC1X 8HN 5 Park Road
Hamilton HM 09
Bermuda
Attention: General Counsel Attention: M.B. Collins
Fax: 0171 750 3993 Fax: + 1 441 292 4069/6260
Copy to: Account Manager Copy to: Ian Hickson
(Telemonde) Director, Legal Services
Copy to: WorldCentre MCI WorldCom
Daniel Goedkoop Straat 729
1096 BD
Amsterdam
the Netherlands
Fax: + 31 20 711 7117 Fax: 0171 486 9300
18.2 Telemonde shall notify MCI WorldCom promptly following the date of this
Agreement of the contact name, address and facsimile number for
Communications Collateral Limited.
18.3 Either party may amend its address and facsimile number specified in
Clause 18.1 or the address and facsimile number notified in Clause 18.2 by
notice to the other party.
19. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the parties
relating to the Capacity and supersedes all previous agreements,
understandings or commitments between the parties or representations or
warranties made by either party whether oral or written with respect to the
Capacity. Each party warrants to the other that it has not relied on any
such agreement, understanding, commitment, representation or warranty
(whether oral or in writing) in entering into this Agreement.
20. NO EXCLUSIVE REMEDY
Except where this Agreement expressly provides otherwise, the rights and
remedies contained in this Agreement are cumulative and not exclusive of
rights and remedies provided by law.
21. GOVERNING LAW
21.1 This Agreement shall be governed and construed in accordance with English
law.
21.2 The parties hereby submit to the non-exclusive jurisdiction of the English
courts.
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22. COUNTERPARTS
This Agreement may be executed in counterparts and shall, if signed by an
authorised signatory of each of the parties hereto, be deemed to have been
duly executed.
AS WITNESS the hands of the duly authorised representatives of the parties at
the date first above written
for and on behalf of )
MCI WORLDCOM GLOBAL NETWORKS U.S., INC. )
illegible
- - - - -----------------------------------------
for and on behalf of )
MCI WORLDCOM GLOBAL NETWORKS LIMITED )
illegible
- - - - -----------------------------------------
for and on behalf of )
TELEMONDE INTERNATIONAL BANDWIDTH LIMITED ) /s/ S. Williams
S. Williams
Director
- - - - ------------------------------------------
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EXHIBIT 10.9
DATED 15 APRIL 1999
TELEMONDE INTERNATIONAL BANDWIDTH LIMITED
and
COMMUNICATIONS COLLATERAL LIMITED
---------------------------------
TRANSMISSION CAPACITY AGREEMENT
---------------------------------
STD(151)
Gouldens
22 Tudor Street
London EC4Y 0JJ
<PAGE>
TRANSMISSION CAPACITY AGREEMENT
THIS AGREEMENT is made the 15th day of April 1999
BETWEEN:
(1) TELEMONDE INTERNATIONAL BANDWIDTH LIMITED, whose registered office is at
Lake Building, 1st Floor, Wickham's Cay 1, PO Box 3152, Road Town, Tortola,
British Virgin Islands ("Telemonde").
(2) COMMUNICATIONS COLLATERAL LIMITED, whose registered office is at PO Box
438, Road Town, Tortola, British Virgin Islands ("CCL")
WHEREAS:
(A) Telemonde has an interest in international telecommunications facilities on
the Gemini network acquired from MCI WorldCom pursuant to the MCI WorldCom
Agreement.
(B) CCL wishes to acquire from Telemonde transmission capacity over such
facilities between the Sites, as defined herein.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 The words and phrases used in this Agreement shall, unless otherwise
expressly provided, have the meaning ascribed to them below:
"Act" means the Telecommunications Act 1984 (as amended or substituted from
time to time);
"Agreement" means this Agreement together with the Schedule hereto;
"Annual Charge" means, in relation to the Unit of Capacity, the amount
specified in Schedule 1 and payable to Telemonde in accordance with Clause
4, and "Annual Charges" shall be construed accordingly;
"Associated Company" means in relation to a party, any subsidiary or
holding company of such party and any subsidiary of such holding company
(as such terms are defined in sections 736 and 736A Companies Act 1985);
"Business Days" means any days excluding Saturdays and Sundays on which
commercial banks are open for business in the country where the relevant
notice is to be delivered or where the relevant activity is to be
performed;
"Cable Lifetime" means the lifetime of the Gemini fibre optic submarine and
terrestrial cable system as set forth in the C&MA;
<PAGE>
"Capacity" means the point to point transmission capacity provided between the
Sites and termed the first Unit as such term is defined in the MCI WorldCom
Agreement;
"C&MA" means the construction, operation and maintenance agreement for the
Gemini fibre optic submarine and terrestrial cable system, as amended from time
to time by Gemini Submarine Cable System Limited in accordance with the terms
thereof;
"CCL Equipment" means any equipment owned or used by CCL that is installed at a
Site and which is used by CCL to access the Capacity;
"Charges" means, together, the Purchase Price and the Annual Charges;
"Confidential Information" means all confidential information (whether written,
oral or in electronic format) designated as such by the disclosing party,
together with all such other information which relates to the operations,
business affairs, customers, services, products, developments, plans,
intentions, trade secrets, know-how and personnel of the disclosing party which
may reasonably be regarded as the confidential information of the disclosing
party;
"Emergency Works" has the meaning ascribed thereto in the Act;
"Fault" means a material defect, fault or impairment in the Capacity duly
notified to MCI WorldCom in accordance with Schedule 2 of the MCI WorldCom
Agreement;
"Force Majeure" means any event beyond a party's reasonable control affecting
the performance by that party of its obligations hereunder including (to the
extent that such events are beyond the affected party's reasonable control), but
not limited to, acts of God, insurrection or civil disorder, malicious damage,
accident, breakdown, war or military operations, national or local emergency,
acts or omissions of Government, regulatory or highway authority, industrial
disputes of any kind, fibre cuts, fire, flood, lightning, explosion, subsidence,
inclement weather and acts or omissions of persons or bodies (other than a CCL
Customer) beyond the reasonable control of the affected party;
"IRU" means the "indefeasible right of use" in the Unit of Capacity for the
Cable Lifetime;
"LIBOR Rate" means the arithmetic mean of the offered rates of leading banks for
London Interbank deposits expressed as a rate per annum, for deposits in US
Dollars for six months as displayed on the LIBOR page of the Reuters Monitor
Money Rate service at or about 11:00 a.m. on the date on which the LIBOR Rate is
to be determined;
"MCI WorldCom" means both of MCI WorldCom Global Networks U.S. Inc and MCI
WorldCom Global Networks Limited;
"MCI WorldCom Agreement" means the agreement dated 31 March 1999 made between
(1) MCI WorldCom Global Networks U.S. Inc (2) MCI WorldCom Global Networks
Limited (3) Telemonde
"MCI WorldCom Network" means the Service Equipment and any other infrastructure
used by MCI WorldCom to provide the Capacity to Telemonde;
<PAGE>
"Operations and Maintenance Procedures" means those procedures set out in
Schedule 2 of the MCI WorldCom Agreement;
"Purchase Price" means the amount specified in Schedule 1 and payable to
Telemonde for the Capacity in accordance with Clause 4;
"Ready Date" means the date from which the Capacity is made available by
MCI WorldCom to Telemonde for use;
"Scheduled Maintenance" means the planned works to be conducted by or on
behalf of MCI WorldCom in order to maintain or repair the Capacity as
notified to Telemonde and CCL;
"Service Equipment" means the multiplex or other equipment provided by MCI
WorldCom and/or Telemonde installed at a Site to enable CCL to receive the
Capacity;
"Site" means each of 60 Hudson Street, New York, USA and Telehouse, London
"Unit" means, in relation to the Capacity, a transmission channel
comprising a VC-4 container interfaced at STM-1 level.
1.2 References in this Agreement to "Telemonde" and "CCL" shall include their
respective employees, agents, successors (whether by operation of law or
otherwise) and permitted assigns.
1.3 The headings are included in this Agreement for ease of reference only and
shall not affect the interpretation or construction of this Agreement.
1.4 References in this Agreement to Clauses and Schedules shall be deemed to be
references to the clauses of and schedules to this Agreement.
2. PROVISION OF CAPACITY
2.1 With effect from the date of signature of this Agreement and throughout the
term of this Agreement, Telemonde shall, subject to CCL complying with its
obligations and undertakings under this Agreement, reserve the Capacity
exclusively for CCL.
2.2 In consideration for the obligations and undertakings of CCL set out in
this Agreement and with effect from the Ready Date Telemonde shall grant
CCL an IRU in the Capacity between the specified Sites and shall make such
Capacity available to Telemonde from the Ready Date for the term of this
Agreement. Telemonde shall deliver the Activation Request Form (as defined
in the MCI WorldCom Agreement) to MCI WorldCom on or by the date of this
Agreement requesting that the Capacity be activated.
2.3 In the event that the Ready Date does not occur within a period of twelve
weeks following the date of this Agreement CCL shall be entitled to notify
Telemonde in writing, such notice to take effect immediately on receipt,
that it no longer requires delivery of the Unit of Capacity, in which case
Telemonde shall following the date of service of such notice refund to
Telemonde the Purchase Price already paid by it in relation to the Unit of
Capacity and, save in respect of any liability arising up to the date of
such notice, neither party shall have any further obligations in relation
to the provision of the Unit of Capacity.
<PAGE>
2.4 CCL acknowledges that Telemonde may from time to time revise or vary
any aspect of the Capacity save that the Capacity shall
notwithstanding such variation remain compliant with the terms of this
Agreement.
3. OPERATIONS AND MAINTENANCE PROCEDURES
3.1 The parties shall comply with the Operations and Maintenance
Procedures in respect of the performance of Scheduled Maintenance and
Emergency Works and the reporting and rectification of Faults.
4. PAYMENT
4.1 In consideration for the obligations and undertakings of Telemonde set
out in this Agreement, CCL shall pay the Charges in accordance with
the provisions of this Clause 4.
4.2 Telemonde shall be entitled to invoice CCL for the Annual Charges on
or after the date of signature hereof, provided that Telemonde will be
responsible for the Annual Charges for the period from the date of
this Agreement to 31 December 1999.
4.3 Telemonde shall be entitled to invoice CCL for the Annual Charges
annually in advance on or about 1 January of each year. Liability for
payment of the Annual Charge due in respect of the Unit of Capacity
shall commence on signature hereof. The Annual Charges for the partial
year commencing on the date hereof shall be pro-rated.
4.4 CCL shall pay or shall procure payment to Telemonde of US$ 6,500,000
immediately following execution hereof into a bank account designated
by Telemonde. CCL acknowledges that the obligation to pay this amount
in accordance with this Clause 4.4 is a material obligation for the
purposes of Clause 8.3.
4.5 CCL shall make payment for all Charges or other amounts duly invoiced
to it in accordance with this Clause 4 (other than the sum set out in
Clause 4.4) within thirty (30) days of the date of delivery to it of
an invoice.
4.6 CCL acknowledges that the Charges are exclusive of VAT (or such other
similar taxes as may be levied from time to time) which shall be
invoiced to and payable by CCL in accordance with this Clause 4 where
applicable.
4.7 Telemonde shall be entitled to charge and receive interest on any sums
which are overdue at the rate of 3% above the LIBOR Rate until the
date of payment in full, whether before or after any judgment. Such
interest shall be calculated and shall accrue on a daily basis.
5. USE OF CAPACITY
5.1 CCL shall grant or shall procure the grant to Telemonde of such rights
of access and shall provide to Telemonde such facilities and
information as Telemonde may reasonably require to enable it to
perform its obligations and exercise its rights under this Agreement.
5.2 CCL acknowledges that, where the provision by Telemonde of the
Capacity shall require the modification of any equipment of CCL,
Telemonde shall not be liable for the performance of any works
entailed in effecting such modification and such works shall be the
sole responsibility of and shall be performed at the sole expense CCL.
<PAGE>
5.3 CCL warrants and undertakes that it shall, and where a Site is a third
party site (other than an MCI WorldCom site), shall procure that the
third party shall:
5.3.1 house the Service Equipment in accordance with MCI Worldcom's
reasonable instructions as may be given from time to time;
5.3.2. not move, modify, relocate or in any way interfere with the Service
Equipment;
5.3.3. not cause the Service Equipment to be repaired, serviced or
otherwise attended to otherwise than by an authorised representative
of MCI WorldCom;
5.3.4 not let, sell or transfer any Service Equipment nor create or allow any
mortgage, charge, lien, pledge or other encumbrance or security interest
whatsoever to be placed on the Service Equipment;
5.3.5 not use the Service Equipment except in accordance with such
reasonable instructions as Telemonde may from time to time give;
5.3.6 permit MCI WorldCom to inspect or test the Service Equipment at all
reasonable times;
5.3.7 upon termination of this Agreement, permit MCI WorldCom access to
each Site to facilitate the removal of the Service Equipment;
5.3.8 not, through its use of any CCL Equipment or otherwise, cause any
interruption of, or interference to, the MCI WorldCom Network,
prevent the use of similar equipment by other owners, operators or
users of the MCI WorldCom Network, impair privacy of any
communications over the MCI WorldCom Network or cause damage to any
plant or equipment or create hazards to any user, owner or operator
of the MCI WorldCom Network.
6. WARRANTIES AND UNDERTAKINGS
6.1 Telemonde represents to, warrants and covenants with CCL as follows:
6.1.1 Telemonde is duly organised and validly existing under the laws of
its State or jurisdiction of organisation, and has the requisite
power and authority to execute this Agreement and to perform its
obligations hereunder;
6.1.2 This Agreement constitutes a valid and binding obligation of
Telemonde, enforceable against Telemonde in accordance with its
terms;
6.1.3 Telemonde has obtained, and shall use commercially reasonable
efforts to maintain in good standing, all such consents, approvals,
licences, permits and other approvals, both governmental and
private, as may be necessary (as at the date of performance) to
permit Telemonde to perform its obligations under this Agreement;
and
6.1.4 Telemonde shall perform its obligations under this Agreement in a manner
consistent with applicable law.
6.1.5 Telemonde shall perform in a timely manner its obligations under the MCI
WorldCom Agreement.
<PAGE>
6.2 Save as expressly provided herein, no warranties, conditions,
representations or agreements are expressed or implied by Telemonde in
relation to the Capacity. Notwithstanding anything to the contrary in
this Agreement, Telemonde does not warrant or represent that the
Capacity will be fault-free and any implied warranties and conditions
of any nature are hereby expressly excluded.
6.3 CCL represents to, warrants and covenants with Telemonde as follows:
6.3.1 CCL is a limited liability company, duly organised and validly
existing under the laws of its State or jurisdiction of
organisation, is qualified to do business in all jurisdictions
(domestic and foreign) in which such qualification is required by
applicable law, and has the requisite authority to execute this
Agreement and to perform its obligations hereunder;
6.3.2 This Agreement constitutes a valid and binding obligation of CCL,
enforceable against CCL in accordance with its terms;
6.3.3 There are no pending and, to CCL's knowledge, no threatened claims,
actions, suits, audits, investigations or proceedings by or against
CCL which could have an adverse effect on CCL's ability to perform
its obligations under this Agreement;
6.3.4 CCL has obtained, and shall use commercially reasonable efforts to
maintain in good standing, and shall ensure that all third parties
with whom it has entered into an agreement for the purchase or use
of part or all of the Capacity have so obtained and so maintain,
all such consents, approvals, licenses, permits and other
approvals, both governmental and private, as may be necessary (as
at the date of performance) to permit CCL to perform its
obligations under this Agreement and to permit CCL and such third
parties to acquire and use the Capacity;
6.3.5 CCL shall not create or permit to exist, any liens, encumbrances or
charges to be placed upon the Capacity or CCL's rights under this
Agreement other than liens, encumbrances or charges of financial
institutions or others against CCL's assets generally in connection
with financing arrangements by CCL;
6.3.6 CCL shall perform its obligations under this Agreement and use the
Capacity in a manner consistent with applicable law, and shall not
use the Capacity, or permit the Capacity to be used, for any
illegal purpose or in any other unlawful manner; and
6.3.7 CCL shall use the Capacity and shall cause all other persons using
the Capacity to use such Capacity in such a manner so as not to
cause any interruption of, or interference to, the MCI WorldCom
Network or the use of any other capacity on the MCI WorldCom
Network.
6.4 Telemonde undertakes to CCL in the following terms:
6.4.1 the Capacity is free of any lien in favour of any third party;
<PAGE>
6.4.2 to notify CCL immediately upon the receipt by Telemonde of a
notice from MCI WorldCom served pursuant to the terms of sub-
clause 9.2.1 and/or 9.3 of the MCI WorldCom Agreement.
6.4.3 to pay any and all sums received from CCL in relation to the
Annual Charge to MCI WorldCom within 5 Business Days of receipt
thereof.
7. LIABILITY
7.1 Subject to Clause 7.3 and save in respect of any amounts due and owing in
accordance with Clause 4 and save in respect of any liability arising out
of a party's wilful default, but notwithstanding anything else in this
Agreement, each party's liability to the other in contract, tort
(including negligence or breach of statutory duty) or otherwise arising
in connection with this Agreement shall be limited to:
7.1.1 one million pounds ((Pounds)1,000,000) per event or series of
connected events; and
7.1.2 two million pounds ((Pounds)2,000,000) in any twelve (12) month
period.
7.2 Subject to Clause 7.3 but notwithstanding anything else in this
Agreement, neither party shall in any event be liable to the other in
contract, tort (including negligence or breach of statutory duty) or
otherwise for indirect or consequential losses under or arising in
connection with this Agreement including, but not limited to, loss of
business, revenues, anticipated savings or profit.
7.3 Nothing in this Agreement shall be deemed to limit either party's
liability in respect of death or personal injury caused by or arising
from that party's negligence or of fraud.
7.4 Should any limitation or provision contained in this Clause 7 be held to
be invalid under any applicable statute or rule of law, it shall to
that extent be deemed omitted.
<PAGE>
8. TERM, TERMINATION AND SUSPENSION
8.1 This Agreement shall come into effect on the date hereof and shall,
subject to earlier termination in accordance with this Clause 8 or Clause
9.5, continue in effect for the Cable Lifetime.
8.2 Either party may terminate this Agreement by service on the other party of
notice in writing, having effect forthwith, if the other party shall
become insolvent or have an administrator, receiver or administrative
receiver appointed over a substantial part of its assets or go into
liquidation (whether compulsory or voluntary) otherwise than for the
purposes of amalgamation or reconstruction or be subject to an order for
dissolution by a court of competent jurisdiction or shall make any
compromise or arrangement with its creditors or make an application a
court of competent jurisdiction for protection from creditors or have any
form of execution or distress levied upon, or an encumbrancer take
possession of or sell, a substantial part of its assets or cease to carry
on business, or if, an equivalent event occurs in relation to that party
in any jurisdiction, PROVIDED THAT, if CCL has paid the Purchase Price to
Telemonde in full in respect of the Unit of Capacity in accordance with
this Agreement and Telemonde is the terminating party under this Clause
8.2, then:
8.2.1 Telemonde shall give CCL seven (7) days' notice in writing of
termination under this Clause 8.2;
8.2.2 CCL shall be entitled to assign and transfer its rights and
obligations under this Agreement in respect of the Unit of
Capacity to a customer, provided that during such notice period:
(a) CCL gives Telemonde written notice of such assignment;
and
(b) such customer enters into an agreement with Telemonde
to Telemonde's reasonable satisfaction whereby such customer
agrees to be bound by the terms of this Agreement; and
8.2.3 the rights of each customer to the Unit of Capacity validly
assigned by CCL to that customer in accordance with Clause 8.2.2
shall be unaffected by and survive termination of this Agreement.
8.3 Either party may terminate this Agreement by service on the other party of
not less than thirty (30) days' notice in writing specifying a material
breach by the other party of a material obligation and requiring that the
breach is remedied, such notice only taking effect where that breach is
not remedied during such period.
8.4 In the event that Telemonde has not received payment in full of the
Annual Charge in respect of the Unit of Capacity on the applicable due
date, Telemonde shall be entitled to suspend service across the Unit of
Capacity on giving seven (7) Business Days' notice in writing to CCL.
Telemonde shall restore service across the Unit of Capacity only on
receipt by Telemonde of payment by CCL of that Annual Charge, together
<PAGE>
with a restoration fee of 25% of such Annual Charge. In the event that
the overdue Annual Charge and restoration fee are not paid on or by 1
January of the year following the date of this notice of suspension of
service, Telemonde shall be entitled to revoke the IRU and lease
granted in respect of the Unit of Capacity, with immediate effect.
Telemonde acknowledges that it has no revocation rights in respect of
the Capacity other than as set out in this Clause 8.4.
8.5 Clauses 6, 7, this Clause 8.5 and Clauses 10, 12 and 20 shall continue
in full force and effect notwithstanding termination of this Agreement.
8.6 Termination of this Agreement shall not operate as a waiver of any
breach by a party of any of the provisions hereof and shall be without
prejudice to any rightful remedies of either party which may arise as
a consequence of such breach or which may have accrued hereunder up to
the date of such termination.
9. FORCE MAJEURE
9.1 Subject to compliance with Clauses 9.2, 9.3 and 9.4, any delay or
failure to perform an obligation under this Agreement by a party (the
"affected party") shall not constitute a breach of this Agreement to
the extent that it is caused by an event of Force Majeure.
9.2 The affected party shall promptly notify the other party in writing of
the estimated extent and duration of the affected party's inability to
perform its obligations.
9.3 Upon the cessation of the event of Force Majeure, the affected party
shall promptly notify the other party in writing of such cessation.
9.4 The affected party shall use all reasonable endeavours to mitigate the
effect of each event of Force Majeure.
9.5 If, following three months from the date of notification under Clause
9.2, the event of Force Majeure persists, the unaffected party may
forthwith terminate this Agreement by service of notice in writing on
the affected party.
10. CONFIDENTIALITY
10.1 Subject to Clauses 10.2 and 10.3, in respect of Confidential
Information, each party shall:
10.1.1 use such Confidential Information only for the purposes of
this Agreement;
10.1.2 disclose such Confidential Information to a third party only
with the prior written consent of the other party or in
accordance with Clause 10.3; and
10.1.3 ensure that any third party to whom Confidential Information
is disclosed under Clause 10.1.2 or 10.3 executes a
confidentiality undertaking on the terms of this Clause 10.
10.2 The provisions of Clause 10.1 shall not apply to any Confidential
Information which:
10.2.1 is in or comes into the public domain other than by default of
the recipient party;
<PAGE>
10.2.2 is or has already been independently generated by the recipient
party;
10.2.3 is in the possession of or is known by the recipient party prior to its
receipt from the disclosing party; or
10.2.4 is properly disclosed pursuant to and in accordance with a relevant
statutory or regulatory obligation or (with the prior consent of either
party, such consent not to be unreasonably withheld) to obtain or
maintain any listing on a stock exchange.
10.3 Either party may disclose the Confidential Information provided to it to
any Associated Company and to its professional advisors if and to the
extent that such disclosure is required in the performance of its
obligations hereunder.
11. ASSIGNMENT AND SUBCONTRACTING
11.1 Subject to Clause 8.2, this Agreement is personal to the parties hereto
and neither party shall, without the prior consent in writing of the
other (such consent not to be unreasonably withheld or delayed), assign,
charge or otherwise deal with the whole or any part of this Agreement or
its rights or obligations hereunder other than to or in favour of any
Associated Company of such party.
11.2 In the event of an assignment under clause 11.1, the assignor shall
ensure that:
11.2.1 not less than fourteen (14) days' prior notice in writing of such
assignment is given to the other party;
11.2.2 the assignee shall enter into an agreement with the other party whereby
the assignee shall agree to be bound by the terms of this Agreement and,
if required by the other party, the assignor shall guarantee the
performance of this Agreement by the assignee; and
11.2.3 in case of an assignment to an Associated Company, the assignor
shall procure that all parts, rights and obligations of this
Agreement that have been assigned are immediately reassigned to
the assignor if that assignee ceases to be an Associated Company.
11.2.4 it notifies the assignee that this Agreement is the subject of an
assignment by way of security by Telemonde in favour of MCI
WorldCom.
11.3 Either party may delegate the performance of its obligations hereunder to
any Associated Company. Such party shall, notwithstanding such
delegation, remain liable to the other party for the acts and omissions
of such Associated Company as if they were its own acts and omissions.
11.4 Telemonde agrees that CCL shall be entitled to grant rights to the Unit
of Capacity to a third party end user, provided that Telemonde receives
the benefit of the representations, warranties and covenants in Clause
6.3 from the end user in relation to itself.
Any grant of rights to the Unit of Capacity other than in accordance with
this Clause 11.4 shall be of no effect. Notwithstanding any grant by CCL
of the Capacity to a third party, CCL shall remain liable for the
performance of its obligations hereunder.
<PAGE>
11.5 In the event that CCL grants rights to the Unit of Capacity pursuant to
Clause 11.4. for the purposes of administering the network operation
centre of the Gemini cable network (the "NOC"), CCL shall notify Telemonde
of such grant and shall provide Telemonde with the following information:
(a) the name and address of the Customer; (b) the interest in the Capacity
transferred; (c) the name, address, telephone number, facsimile number and
e-mail address of the person (including appropriate escalation parties and
procedures) authorised on behalf of the Customer to interact with the NOC
and (if different) the contact name, address, telephone number and fax
number of the Customer's local network operations centre or equivalent;
(d) a certification by CCL that, notwithstanding such grant, CCL shall be
fully liable for the performance of all its obligations under this
Agreement; and (e) any other information as Telemonde may reasonably
request.
12. PUBLICITY
Neither party shall without the prior approval in writing of the other
(such approval not to be unreasonably withheld) directly or indirectly
make any release or statement to the press, radio, television or other
media in any way connected with this Agreement.
13. SEVERABILITY
13.1 The invalidity or unenforceability for any reason of any part of this
Agreement shall not prejudice or affect the validity or enforceability of
the remainder of this Agreement.
13.2 If further lawful performance of this Agreement or any part of it shall be
made impossible by the final judgement or final order of any court of
competent jurisdiction, commission or government agency or similar
authority having jurisdiction over either party, the parties shall
forthwith use their reasonable endeavours to agree amendments to this
Agreement so as to comply with such judgement or order.
14. VARIATION
No variation, modification or addition to or deletion of any provision of
this Agreement shall be effective unless agreed in writing by a duly
authorised representative of CCL and of Telemonde.
15. PARTNERSHIP
Nothing herein shall be deemed to constitute a partnership or joint
venture between the parties or to constitute one party the agent of the
other for any purpose whatsoever.
16. WAIVER
Failure by either party at any time to enforce any of the provisions of
this Agreement shall neither be construed as a waiver of any rights or
remedies hereunder nor in any way affect the validity of this Agreement or
any part of it. No waiver shall be
<PAGE>
effective unless given in writing and no waiver of a breach of this
Agreement shall constitute a waiver of any antecedent or subsequent
breach. No single or partial exercise of a right or remedy provided by
this Agreement or by law prevents further exercise of the right or remedy
or the exercise of another right or remedy.
17. NOTICES
17.1 Any notice required or authorised by this Agreement shall be in writing
sent by prepaid registered post or facsimile transmission (immediately
confirmed by post) and shall be deemed to have been received forty-eight
(48) hours after such posting or transmission. Any such notices shall be
addressed as follows:
To CCL:
Attn: Susan Demers
Communications Collateral Limited, PO Box 438, The Tropical Isle Building,
Road Town, Tortola, BVI
TEL: 284 494 2616
FAX: 284 494 2704
Copy to:- Peter Fitzpatrick
Robinson Silverman Pearce Aronsohn and Berman LLP, 1290 Avenue of the
Americas, New York, New York 10104-0053
TEL: 212 541 2170
FAX: 212 541 1371
To Telemonde:
Attn: Michael Collins
Telemonde Investments Limited, Argonaut House, 5 Park Road, Hamilton
Bermuda
FAX: 001 441 292 4069
17.2 Either party may amend its address and facsimile number specified in
Clause 17.1 by notice to the other party.
18. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between the parties
relating to the Capacity and supersedes all previous agreements,
understandings or commitments between the parties or representations or
warranties made by either party whether oral or written with respect to
the Capacity. Each party warrants to the other that it has not relied on
any such agreement, understanding, commitment, representation or warranty
(whether oral or in writing) in entering into this Agreement.
19. NO EXCLUSIVE REMEDY
<PAGE>
Except where this Agreement expressly provides otherwise, the rights and
remedies contained in this Agreement are cumulative and not exclusive of
rights or remedies provided by law.
20. GOVERNING LAW
20.1 This Agreement shall be governed and construed in accordance with
English law.
20.2 The parties hereby submit to the non-exclusive jurisdiction of the
English courts.
21. COUNTERPARTS
This Agreement may be executed in counterparts and shall, if signed by an
authorised signatory of each of the parties hereto, be deemed to have been
duly executed.
<PAGE>
SCHEDULE I
Charges
Annual Charge: The Annual Charges shall be US$ 350,000 per annum.
Purchase Price: The Purchase Price shall be US$ 6,500,000 such sum shall be
inclusive of the Annual Charge for the year to 31 December
1999.
<PAGE>
AS WITNESS the hands of the duly authorised representatives of the parties at
the date first above written
for and on behalf of )
COMMUNICATIONS COLLATERAL LIMITED )
________________________________________
for and on behalf of )
TELEMONDE INTERNATIONAL BANDWIDTH LIMITED )
/s/ M. Collins
<PAGE>
DATED 15TH APRIL 1999
(1) TELEMONDE INVESTMENTS LIMITED
and
(2) COMMUNICATIONS COLLATERAL LIMITED
---------------------------------------
CAPACITY OPTION AGREEMENT
in relation to an IRU in Capacity on the Gemini System
---------------------------------------
STD(147) 12.04.99
<PAGE>
STD(147) 12.04.99
THIS AGREEMENT is made on 15th April 1999
BETWEEN:
(1) TELEMONDE INVESTMENTS LIMITED (a company registered in the British Virgin
Islands under Company No 270776) whose registered office is at Cragmuir
Chambers, Road Town, Tortola, BVI ("Telemonde")
(2) COMMUNICATIONS COLLATERAL LIMITED (a company registered in the British
Virgin Islands) whose registered office is at PO Box 438, Road Town,
Tortola, British Virgin Islands (the "Capacity Buyer")
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
------------------------------
1.1 In this agreement, unless the context requires otherwise:
"Capacity Agreement" means the Capacity Agreement of even date hereto made
between (1) TIBL and (2) the Capacity Buyer in the agreed form;
"Completion" means the performance by Telemonde and the Capacity Buyer of
the obligations assumed by them respectively under clauses 3.2, 3.3 and
3.4;
"Encumbrance" means any charge, lien, pledge, mortgage, lien, equity,
third party right, option, right of pre-emption or any other encumbrance,
priority or security interest whatsoever (whether now known about or not);
"Exercise Date" means the date of service of an Option Notice;
"First Option Period" means the period commencing on the date hereof and
expiring 120 days later;
"Options" means the options exercisable or exercised pursuant to clause
2.2 or 2.3;
"Option Notice" means a notice of exercise of the Option;
"Option Price" means the sum of US$6,500,000 (six million five hundred
thousand US dollars);
"Prescribed Rate" means a rate equal to 10 per cent per annum;
"Second Option Period" means the period commencing on the day following
the expiry of the First Option Period and expiring on the date on which
the Capacity
<PAGE>
Buyer leases sells or charges or otherwise encumbers the Capacity or
enters into any agreement to do any of the foregoing;
"TIBL" means Telemonde International Bandwidth Limited;
"Transfer Terms" means on the terms that the Capacity shall be sold and
purchased free from any Encumbrance and that the consideration for the
Capacity shall be the Option Price.
1.2 In this agreement, unless the context requires otherwise:
1.2.1 words and phrases defined in the Capacity Agreement shall have the
same meaning;
1.2.2 reference to a clause or sub-clause is to a clause or sub-clause of
this agreement.
1.3 The headings in this agreement are for ease of reference only and shall
not affect its construction or interpretation.
2. PUT AND CALL OPTION
-------------------
2.1 In consideration of the undertakings and agreements contained in this
agreement, Telemonde and the Capacity Buyer have agreed to grant each
other the Options.
2.2 The Capacity Buyer hereby grants Telemonde the right, exercisable at any
time during the First Option Period by service of an Option Notice on the
Capacity Buyer, to require the Capacity Buyer to sell the Capacity to
Telemonde on the Transfer Terms.
2.3 Telemonde hereby grants to the Capacity Buyer the right, exercisable
(i) at any time during the Second Option Period; or
(ii) following the occurrence and during the continuance of an Event
of Default under the Facility Agreement of even date herewith
between (1) Telemonde and (2) the Capacity Buyer or of a
default under the Capacity Agreement or the Letter Agreement
of even date hereto made between (1) Rhone Financial Indemnity
Re Limited and (2) the Capacity Buyer; or
(iii) at any time following the withdrawal of the Capacity from TIBL
by MCI WorldCom; or
(iv) in circumstances where CCL serves a valid notice on TIBL in
accordance with the provisions of clause 2.3 of the Capacity
Agreement
by service of an Option Notice on Telemonde, to require Telemonde to purchase
from the Capacity Buyer the Capacity on the Transfer Terms.
<PAGE>
2.4 An Option shall be exercisable only in respect of all (and not some only)
of the Capacity. On the exercise of an Option, the Capacity Buyer will
become bound to sell and the Telemonde will become bound to purchase the
Capacity on the Transfer Terms.
2.5 An Option Notice, once given, may not be withdrawn, except with the
written consent of the recipient.
2.6 The Option in Clause 2.2 shall lapse if not exercised during the First
Option Period.
2.7 If an Option is exercised, then the remaining provisions of this clause 2
and clauses 3 and 4 will apply.
3. COMPLETION
3.1 Completion of the sale and purchase of the Capacity shall take place at
the usual place of business from time to time of Telemonde (or at such
other place as may be agreed) at 12 noon on the fourteenth day after the
Exercise Date, provided that, if such day is not a business day, then
Completion shall take place at 12 noon on the first business day after
that.
3.2 On Completion, Telemonde shall procure that the Capacity Agreement is
rescinded so as to ensure that CCL has no further obligations thereunder
(save in respect of any antecedent breach of the terms thereof).
3.3 On Completion, the Capacity Buyer shall do such things and execute such
documents as shall be necessary or as Telemonde may reasonably request to
give effect to the sale of the Capacity on the Transfer Terms.
3.4 Subject to the Capacity Buyer complying with its obligations under
clauses 3.2 and 3.3, Telemonde shall, on Completion, pay the Option Price
to the Capacity Buyer together with a sum representing interest
calculated on a daily basis at the Prescribed Rate upon the Option Price
for the First Option Period plus the number of days it takes for
Completion in cleared funds for value that day.
3.5 If any of the provisions of clauses 3.2 or 3.3 are not complied with on
the date fixed for Completion, the party not in default may (without
prejudice to his other rights and remedies):
3.5.1 defer Completion to a date not more than 28 days after such date
(and so that the provisions of this clause 3.5 shall apply to
Completion as so deferred);
3.5.2 proceed to Completion so far as practicable (without prejudice to
his rights under this agreement).
<PAGE>
4. UNDERTAKINGS
------------
4.1 Telemonde undertakes to the Capacity Buyer that it will not prior to
Completion and except in the ordinary course of business incur any
borrowings in addition to those entered into at the date hereof.
4.2 The Capacity Buyer undertakes that it will not during the First Option
Period or following the exercise of its Option sell or lease the Capacity
to any third party or charge or otherwise encumber the Capacity.
5. DURATION OF OBLIGATIONS
-----------------------
5.1 The Capacity Buyer shall cease to be a party to this agreement on the
completion of the sale of the Capacity to Telemonde.
6. NOTICES
-------
Any notice required or permitted to be given under this agreement shall,
be in writing and shall where the recipient is a corporation or company be
sent to its registered office from time to time. Any such notice shall be
delivered personally or sent in a pre-paid letter by the recorded delivery
service or by facsimile to the facsimile number of the other party as
notified from time to time and shall be deemed to have been served if by
personal delivery, when delivered (if delivered before 5.00pm on Monday to
Friday (bank holidays excepted), failing which it shall be deemed to be
served at 9.00am on the next business day) and if by recorded delivery, 48
hours after posting and if by facsimile 9.00am on the business day
following its despatch (such despatch to be proved by the production of a
facsimile acknowledgement).
7. GENERAL
-------
7.1 This agreement may not be assigned in whole or in part but is binding upon
and shall enure for the benefit of the parties' personal representatives
and other successors.
7.2 This agreement supersedes any previous agreement relating to the subject
matter of this agreement between the parties in relation to the matters
dealt with and represents (together with any documents referred to in this
agreement) the entire agreement between the parties in relation to such
matters, and no variation shall be effective unless made in writing.
7.3 This agreement shall be governed by and construed in accordance with
English law and the parties hereby submit to the exclusive jurisdiction of
the English courts.
7.4 The failure by any of the parties at any time to require performance by
any other party or to claim a breach of any term of this agreement shall
not be deemed to be a waiver of any right under this agreement.
<PAGE>
7.5 In the event that any party does not receive on the due date any sum due
under this agreement, the party in default shall pay to the other party on
demand interest on such sum from and including the due date therefor to the date
of actual payment (as well after as before judgment) at the rate of 12.5 per
cent. per annum
IN WITNESS of which the parties have executed this agreement as follows:
<PAGE>
SIGNED by M. B. Collins )
for and on )
behalf of TELEMONDE )
INVESTMENTS LIMITED )
in the presence of: ) /s/ S. Williams
SIGNED by )
for and on behalf of )
COMMUNICATIONS )
COLLATERAL LIMITED ) /s/ Thomas Huser
in the presence of: ) Attorney in Fact
<PAGE>
EXHIBIT 10.10
DATED 15th April 1999
(1) TELEMONDE INVESTMENTS LIMITED
(2) TELEMONDE INTERNATIONAL BANDWIDTH
(BERMUDA) LIMITED,
TELEMONDE BANDWIDTH (BERMUDA) LIMITED
and
TELEMONDE INTERNATIONAL BANDWIDTH LIMITED
(3) COMMUNICATIONS COLLATERAL LIMITED
COMPOSITE GUARANTEE
AND DEBENTURE
MBT(1266)/tba/l2 April 1999
Gouldens
22 Tudor Street
London EC4Y OJJ
Tel: 0171 583 7777
Fax: 0171 583 3051
<PAGE>
MBT(1266)/08.04.99
THIS COMPOSITE GUARANTEE AND DEBENTURE is dated 15th April 1999
and made BETWEEN:
(1) TELEMONDE INVESTMENTS LIMITED a private a company limited by shares
incorporated in the British Virgin Islands with registered number 270776
whose registered office is at Cragmuir Chambers, Road Town, Tortola, BVI
(the "Parent Company");
(2) the companies whose names, registered numbers and registered offices are
set out in Schedule 1 (collectively the "Charging Subsidiaries"); and
(3) COMMUNICATIONS COLLATERAL LIMITED of P0 Box 438, Road Town, Tortola BVI
("the Lender").
Witnesses as follows:-
1. Definitions and Interpretation
1.1 In this Composite Guarantee and Debenture (hereinafter referred to as
"this Debenture") unless the context otherwise requires:
"Financial Indebtedness"
means in relation to any person, (a) monies borrowed or raised by such
person and fees and expenses payable in relation to such monies borrowed
or raised by such person, (b) any liability of such person under any
debenture, bond, note or other security, (c) any liability of such person
under acceptance credit facilities, financial leases, deferred purchase
consideration arrangements or any other agreement or instrument having the
commercial effect of a borrowing or raising of money by such person, (d)
any liability of such person under interest rate and/or currency swap
arrangements, interest rate caps, collars or floors, futures, options and
other arrangements similar to any of the foregoing and (e) any guarantee,
indemnity or other assurance against financial loss given by such person
in respect of any of the foregoing excluding trade debts arising in the
ordinary course of business and judgment debts not relating to the matters
referred to above.
"Charging Group"
means the Parent Company and the Charging Subsidiaries and reference to
the Charging Group includes a reference to any one or more of the members
of the Charging Group severally.
"Company"
means the members of the Charging Group and includes any one or more of
them.
<PAGE>
"Debts"
means all present and future book and other debts and other moneys due
owing payable or incurred to any Company including, without limitation,
any amounts from time to time standing to the credit of any bank or other
accounts of any Company and with the benefit of any guarantees indemnities
or other assurances against financial loss affecting any of the same and
the benefit of any present or future insurance policies and all proceeds
thereof and all things in action which may give rise to any debt revenue
or claim and any other rights relating thereto including, without
limitation, reservation of proprietary rights of trading and unpaid
vendor's liens and associated rights.
"Default Rate"
means the rate specified in clause 4.2 of the Facility Agreement
"Encumbrance"
means any mortgage, charge (whether fixed or floating), pledge, lien
hypothecation, assignment, security interest, title retention or other
encumbrance or security agreement or arrangement of any kind.
"Event of Default"
means each and every event of default howsoever described in the Facility
Agreement.
"Facility Agreement"
means an agreement of even date between (1) the Parent Company and (2) the
Lender.
"Group"
means the Parent Company and its Subsidiaries and the Subsidiaries of that
holding company.
"Guarantor"
means any Company insofar only as it covenants in this Debenture to pay or
discharge the moneys obligations or liabilities due owing or incurred by
any other Company to the Lender and "Guarantors" and "Guarantee" shall be
construed accordingly and the latter expression shall extend to every
separate and independent stipulation or agreement contained in Schedule 2.
"Intellectual Property"
means all patents (including applications improvements prolongations
extensions and rights to apply therefor) designs (whether registered or
unregistered) copyrights design rights trade marks and service marks
(whether registered or unregistered) utility models trade and business
names knowhow formulae inventions confidential information trade secrets
and computer software programs and systems (including the benefit of any
licences or consents relating to any of the above) and all fees royalties
or other rights derived therefrom or incidental thereto in any part of the
world.
"LPA"
<PAGE>
means the law of Property Act 1925 (as amended).
"Permitted Security Interest"
shall have the meaning ascribed thereto in the Facility Agreement.
"Receiver"
means any receiver or receiver and manager or administrative receiver
appointed by the Agent over all or any of the Security Assets pursuant to
this Debenture whether alone or jointly with any other person and includes
any substitute for any of them appointed from time to time.
"Secured Liabilities"
means all moneys obligations and liabilities whatsoever whether for
principal interest or otherwise in whatever currency which may now or at
any time in the future be due owing or incurred by any of the Companies to
the Lender under the terms of the Facility Agreement the Capacity Option
Agreement and any other Security Document whether present or future actual
or contingent and whether alone severally or jointly as principal
guarantor surety or otherwise and in whatever name or style and whether on
any current or other account or in any other manner whatsoever and
obligations arising under that certain Letter Agreement between Rhone
Financial Indemnity Re Limited, certain of its affiliates and Lender dated
of even date herewith.
"Security Assets"
means all the undertaking and the assets rights and property of any
Company which are the subject of any security created or purported to be
created by this Debenture and includes any part of or any interest in
them.
"Securities"
means the Shares and all stocks shares bonds and securities of any kind
whatsoever whether marketable or otherwise and all other interests
(including but not limited to loan capital) both present and future held
by any Company in any person (including any subsidiary of such Company)
and includes all allotments rights benefits and advantages whatsoever at
any time accruing, offered or arising in respect of or incidental to the
same and all money or property offered at any time by way of dividend
conversion redemption bonus preference option or otherwise in respect
thereof Provided always that the TNL Shares shall not be included in this
definition.
"Shares"
means the shares which are described in Schedule 3.
"Subsidiary"
means:
(a) a subsidiary within the meaning of Section 736 of the Companies Act
1985;
<PAGE>
(b) unless the context otherwise requires, a subsidiary undertaking
within the meaning of Sections 258-260 of the Companies Act 1985 as
substituted by Sections 21 and 22 of the Companies Act 1989
provided always that TNL shall not be a subsidiary for the purpose of this
definition.
"TNL"
means Telemonde Networks Limited a private company limited by shares
incorporated under the laws of England with No 3714 188 whose registered
office is at 17-19 Maddox Street, London WlR ODN.
"the TNL Shares"
means any shares in the capital of TNL.
1.2 All terms defined in the Facility Agreement which are used in this Debenture
shall bear the same meaning as in the Facility Agreement unless the context
requires otherwise and in the event of any conflict between the meaning of any
term as defined in the Facility Agreement and any term as defined in this
Debenture the definition in this Debenture shall prevail.
1.3 References to Clauses paragraphs and Schedules are to the Clauses and
paragraphs of and Schedules to this Debenture.
1.4 Clause headings are inserted for ease of reference only and are not to
affect the interpretation of this Debenture.
1.5 Except to the extent the context otherwise requires any reference in this
document to "this Debenture" and any other document referred to in it includes
any document expressed to be supplemental to or collateral with, or which is
entered into pursuant to or in accordance with the provisions of this Debenture
or, as the case may be, that other document and shall be deemed to include any
instruments amending varying supplementing novating or replacing the terms of
any such documents from time to time.
1.6 References to a person include firms companies corporations associations
states and administrative and governmental and other entities whether or not a
separate legal entity.
1.7 References to any person are construed to include references to that
person's successors transferees and assigns whether direct or indirect.
1.8 References to any statutory provisions are to be construed as references to
that statutory provision as amended supplemented reenacted or replaced from time
to time (whether before or after the date of this Debenture) and are to include
any orders regulations instruments or other subordinated legislation made under
or deriving validity from that statutory provision.
<PAGE>
1.9 The words "other" and "otherwise" are not to be construed ejusdem generis
with any foregoing words where a wider construction is possible.
1.10 The words "including" and "in particular" are to be construed as being by
way of illustration or emphasis only and are not to be construed as nor shall
take effect as, limiting the generality of any foregoing words.
1.11 The covenants agreements obligations and liabilities of the Companies
herein contained or implied on their part are joint and several.
2. Covenant to Pay
2.1 Each Company jointly and severally:-
(a) irrevocably and unconditionally covenants with the Lender that it
will on demand pay perform and discharge when due the Secured
Liabilities due owing or incurred by it to the Lender; and
(b) irrevocably and unconditionally covenants and guarantees to the
Lender as primary obligor and not merely as surety that it will on
demand pay perform and discharge when due all the Secured
Liabilities due owing or incurred by any other Company to the
Lender.
2.2 The Guarantees contained in Clause 2.1(b) are given subject to and with the
benefit of the provisions set out in Schedule 2 by each Guarantor jointly and
severally with every other Guarantor.
2.3 Each Company jointly and severally covenants with the Lender to pay interest
to the date of payment or discharge (notwithstanding any demand or any judgement
obtained by the Lender or the liquidation or administration of or any
arrangement or composition with creditors by any Company) at the rate or rates
applicable under the agreements or arrangements giving rise to the relevant
Secured Liabilities or, if no such rate or rates are specified, at the Default
Rate, upon such days and upon such terms are set out in the Facility Agreement
as the Lender may from time to time determine.
2.4 All sums payable by any Company under this Debenture shall be paid to the
Lender without any set-off counterclaim withholding or deduction whatsoever
unless required by law in which event the Company concerned will supply the
Lender promptly with evidence satisfactory to the Lender that the Company has
accounted to the relevant authority for the sum withheld or deducted.
3. Charge
3.1 Each Company as beneficial owner and as a continuing security for the
payment and discharge of the Secured Liabilities charges in favour of the Lender
by way of fixed charge:-
<PAGE>
(i) all right title estate and other interests of each Company in any
real property now or hereafter owned by the Company;
(ii) all the right, title and interest of the Company to and in all plant
and machinery now or at any time hereafter vested in or held by or
on behalf of the Company and all related spare parts fuels equipment
and tools but excluding any plant and machinery for the time being
forming part of the Company's stock in trade or work in progress;
(iii) all rights in Intellectual Property or similar rights now or
hereafter belonging to the Company;
(iv) all present and future goodwill and uncalled capital for the time
being of the Company;
(v) all the present and future right title and interest of the Company
in the Securities;
(vi) all bills of exchange promissory notes and negotiable instruments of
any description now or at any time hereafter beneficially owned by
the Company;
(vii) all the right title and interest of the Company to and in the Debts
and the benefit of all rights contracts securities and guarantees of
any nature whatsoever now or at any time enjoyed or held by the
Company;
(viii) any deposits, margins, commissions or other rights of the Company
to any commodities and any contract or option relating thereto
(whether present or future) and any guarantee or security relating
thereto;
(ix) all loan capital indebtedness or liabilities both present and future
on any account or in any manner owing to the Company from any
company which now is or may in the future become a member of the
Group.
3.2 Each Company as beneficial owner and as a continuing security for the
payment and discharge of the Secured Liabilities charges in favour of the Lender
by way of floating charge all the undertaking and all the assets rights and
income of the Company both present and future not otherwise effectively charged
under Clause 3.1 above (other than the TNL Shares which are hereby specifically
excluded from the charges created by this Debenture).
3.3 The charges created by Clause 3.1 shall constitute first fixed charges. The
charge created by Clause 3.2 shall be a first floating charge unless and until
it is converted into a fixed charge pursuant to Clause 5 or by operation of law.
<PAGE>
4. Restrictions on Dealing
4.1 Each Company represents warrants and undertakes to the Lender that save with
the prior written consent of the Lender it:-
(a) is and will be the sole beneficial owner of all its Security Assets
free from Encumbrances and will not and will procure that none of
its Subsidiaries will create or attempt to create or permit to arise
or subsist any Encumbrance on any of its assets other than Permitted
Security Interests;
(b) has not and none of its Subsidiaries have sold or agreed to sell or
otherwise disposed of or agreed to dispose of and will not ,and will
procure that none of its Subsidiaries will, at any time during the
subsistence of this Debenture sell assign part with transfer lease
license or otherwise dispose of the benefit of all or any of its
right title and interest in and to its assets or any material part
of them (save for sales of its stock in trade at not less than
market value and the use of cash in the purchase and acquisition of
rights, goods or services, in either case in the ordinary course of
its trading business and until such time as the floating charge
created by the Company pursuant to Clause 3.2 has been converted
into a fixed charge pursuant to Clause 5 or by operation of law) and
will not agree to or grant any option in respect of any of the
foregoing.
5. Conversion of Floating Charge
5.1 The Lender may at any time by notice in writing to the Company concerned
after an Event of Default has occurred convert any floating charge referred to
in Clause 3.2 into a fixed charge as regards any of the Security Assets
specified in the notice which the Lender shall consider to be in danger of being
seized or sold under any form of distress attachment execution diligence or
other process levied or threatened or to be otherwise in jeopardy.
5.2 The floating charge created by this Debenture shall automatically and
without notice be converted into fixed charges in respect of any Security Assets
subject to it:-
(a) which shall become subject to an Encumbrance other than a Permitted
Security Interests or to a disposition contrary to the provisions of
Clause 4; or
(b) if and when any person levies or notifies any Company that it
intends to levy any distress execution sequestration or other
process against those Security Assets; or
(c) if and when the Company to which those Security Assets belong shall
cease to carry on business or to be a going concern; or
(d) if any of the Secured Liabilities become due and outstanding prior
to their stated maturity.
<PAGE>
6. Representations Warranties and Covenants by the Charging Group
6.1 Each Company hereby represents and warrants to the Lender that except as
disclosed by the Borrower in writing on or prior to the date hereof:
(a) it has, or had at the time of their execution, full power and
authority (a) to execute and deliver the Security Documents to which
it is a party and (b) to comply with the provisions of, and perform
all its obligations under, the Security Documents to which it is a
party;
(b) this Debenture will constitute its legal valid binding and
enforceable obligations and is security over the Security Assets and
every part thereof is effective in accordance with its terms;
(c) it has taken all necessary action to authorise the execution and
delivery of the Security Documents to which it is a party, and such
Security Documents constitute its legal, valid and binding
obligations enforceable against it in accordance with their
respective terms, except as such enforcement may be limited by
general equitable principles or by any relevant bankruptcy,
insolvency, administration or similar laws affecting creditors'
rights generally;
(d) the entry into and performance by it of the Security Documents and
the transactions contemplated thereby to which it is a party do not
violate in any respect (i) any law or (ii) its constitutional
documents, or (iii) any agreement, contract or other undertaking to
which it is a party or which is binding on it or any of its assets;
(e) all consents, licences, approvals and authorisations required in
connection with the entry into, performance, validity and
enforceability of the Security Documents and the performance of the
transactions contemplated thereby have been obtained and are in full
force and effect and will remain so during the subsistence of the
security constituted by this Debenture;
(f) except as set out in the legal opinions provided to the Lender at
the request of the Borrower on or prior to draw down of the Advance
it is not necessary for the legality, validity, enforceability or
admissibility in evidence of any of the Security Documents that the
Security Documents or any document relating hereto be registered,
filed, recorded or enrolled with any court or authority in any
relevant jurisdiction or that any stamp, registration or similar
Taxes be paid on or in relation to the Security Documents;
(g) the aggregate of TNL's assets less the aggregate of TNL's
liabilities does not and will not at any time when (i) the security
created by this Debenture subsists and (ii) TNL is not a party
hereto or to a guarantee and debenture in substantially similar
form granted in favour of the Lender, exceed (pound)50,000.
<PAGE>
6.2 Save with the prior written consent of the Lender each Company hereby
covenants with the Lender;
(a) to permit the Lender and or its representatives or agents free
access at all reasonable times to inspect and take copies and
extracts from the books accounts and records of the Company and such
other documents as the Lender may require and furnish the Lender
with all information and facilities which it may require;
(b) to grant the Lender or its solicitors on request all such reasonable
facilities to enable it or them to carry out at such investigation
of title to any Security Assets and enquiries into matters in
connection therewith as would be carried out by a prudent mortgagee;
(c) forthwith upon the execution of this Debenture to deposit with the
Lender all certificates or documents of title in respect of the
Securities vested in it together with a duly executed instrument of
transfer or an assignment (as appropriate) thereof in blank and it
is agreed that the Lender shall at any time be entitled to have all
or any of the Securities registered in its name or in the name of
such nominees as it may select provided that for so long as no Event
of Default has occurred the Lender will:-
(i) hold all dividends interest and other moneys paid on and
received by it in respect of any Securities for the account of
the Company to which those Securities belong and will pay such
dividends interest and other moneys to the Company concerned
upon request; and
(ii) exercise all voting and other rights and powers attached to
any Securities as the Company to which those Securities belong
may from time to time in writing reasonably direct provided
that the Lender shall be under no obligation to comply with
any such direction where compliance would in the Lender's
reasonable opinion be prejudicial to the security hereby
created;
(d) subject always to the provisions of sub-clause 6.2(c), until the
security created by this Debenture shall have been discharged to
deliver or pay to the Lender or procure that there are delivered or
paid to the Lender all stocks shares securities rights moneys or
other property accruing offered or issued at any time by way of
bonus redemption exchange purchaser substitution conversion
preference option or otherwise in respect of any Securities or the
certificates or other documents of title to or representing the same
together with an executed instrument of transfer or an assignment in
blank and the Lender is hereby authorised to arrange at any time and
from time to time for any of the
<PAGE>
Securities to be registered in the name of the Lender or such
nominees or agents as the Lender may select;
(e) to conduct and carry on its business and procure that its
Subsidiaries conduct and carry on their businesses in a proper and
efficient manner and keep or cause to be kept proper books of
account relating to such business.
6.3 None of the covenants in this Clause 6 shall be construed as limiting any
powers exercisable by any Receiver appointed by the Agent under this Debenture
being an agent of any of the Companies.
7. Enforcement
7.1 If any Event of Default shall occur and be continuing then:-
(a) the Lender shall cease to be under any further commitment to any
Company and the Lender may at any time thereafter (notwithstanding
any conflicting agreement or arrangement) declare the Secured
Liabilities (or such of them as the Lender may specify) to be
immediately due and payable or payable forthwith on demand; and
(b) the security hereby constituted shall become immediately enforceable
and the power of sale and other powers conferred by Section 101 of
the LPA as varied or extended by this Debenture shall become
immediately exercisable without the restrictions contained in the
LPA as to the giving of notice or otherwise.
7.2 The Secured Liabilities shall be deemed for the purposes of all powers
implied by statute to have become due and payable within the meaning of Section
101 of the LPA immediately on the execution of this Debenture and Section 103 of
the LPA (restricting the power of sale) Section 109 of the LPA (restricting the
power to appoint a receiver) and Section 93 of the LPA (restricting the right of
consolidation) shall not apply to this Debenture.
8. Protection of Third Parties
8.1 No purchaser mortgagee or other person dealing with a Receiver or the Lender
shall be concerned to enquire whether the Secured Liabilities have become
payable or whether any power which he or it is purporting to exercise has become
exercisable or whether any money is due under this Debenture or as to the
application of any money paid raised or borrowed or as to the propriety or
regularity of any sale by or other dealing with such Receiver or the Lender. All
the protection to purchasers contained in Sections 104 and 107 of the LPA shall
apply to any person purchasing from or dealing with a Receiver or the Lender as
if the Secured Liabilities had become due and the statutory powers of sale and
of appointing a Receiver in relation to the Security Assets had arisen on the
date of this Debenture.
<PAGE>
9. Appointment of Receiver
9.1 At any time after the security constituted by this Debenture has become
enforceable or if any Company so requests in writing at any time the Lender may
without further notice to the Company concerned appoint by writing under hand of
a duly authorised officer or under seal any one or more persons qualified to act
as a receiver or receiver and manager or administrative receiver (as the case
may require) under the Insolvency Act 1986 either singly jointly severally or
jointly and severally to be a Receiver of all or any part of the Security Assets
of that Company and either at the time of appointment or any time thereafter may
fix his or their remuneration and except as otherwise required by statute may
remove any such Receiver and appoint another or others in his or their place.
9.2 Any Receiver of all or any part of the Security Assets of a Company whether
appointed solely or jointly shall have the powers granted by the LPA to any
receiver appointed under it and all the powers of an administrative receiver
under the Insolvency Act 1986 and in addition shall have power to do the
following:-
(a) enter upon take possession of collect and get in those Security
Assets or any part of them in respect of which he may be appointed
and to collect and get in all rents and other income whether accrued
before or after the date of his appointment and for those purposes
to make such demands and bring such proceedings as may seem
expedient and to take possession of those Security Assets;
(b) comply with and perform all or any of the acts matters omissions or
things covenanted to be done or omitted by the Company under this
Debenture;
(c) carry on manage develop reconstruct amalgamate or diversify the
business of the Company or any part thereof in such manner as he
shall in his discretion think fit (including without prejudice to
the generality of the foregoing to purchase supplies and materials);
(d) sell by public auction or private contract or let all or any part of
those Security Assets and to let on hire lease surrender and accept
surrenders of leases and tenancies, grant rights licences options or
easements or exchange all or any part of, and otherwise deal with or
dispose of and exercise all rights powers and discretions incidental
to the ownership of, any of those Security Assets in the name of and
on behalf of the Company or otherwise or concur in doing any of the
foregoing in such manner and generally on such terms and conditions
and for such consideration (whether in cash debentures or other
obligations shares stocks securities or other valuable consideration
and whether payable by a lump sum or by instalments) as he may think
fit and carry out any such sale by conveying by deed or transferring
in the name and on behalf of the Company or otherwise, and so that
plant machinery and other fixtures and fittings may be severed and
sold separately from the premises containing them,
<PAGE>
and the Receiver may apportion any rent and the performance of any
obligations;
(e) repair decorate furnish maintain alter improve renew or add to those
Security Assets or any part of them as he shall think fit and effect
maintain renew or increase indemnity insurance and other insurances
and obtain bonds;
(f) appoint or dismiss managers agents officers employees servants
builders or workmen and employ professional advisers and others at
such salaries or for such remuneration as he may think fit;
(g) perform repudiate rescind vary or enter into any arrangement or
compromise any contracts or agreements which he may consider
expedient;
(h) settle arrange compromise and submit to arbitration any accounts
claims questions or disputes whatsoever which may arise in
connection with the business of the Company or any of those Security
Assets or in any way relating to the security constituted by this
Debenture and bring prosecute defend enforce compromise submit to
and discontinue any actions suits arbitrations or proceedings
whatsoever whether civil or criminal;
(i) enter into complete disclaim abandon or disregard determine or
rectify all or any of the outstanding contracts or arrangements of
the Company and allow time for payment of any debts either with or
without security;
(j) make calls upon the shareholders of the Company in respect of any
capital of the Company which may be uncalled;
(k) use the name of the Company in the exercise of all or any of the
powers conferred by this Debenture;
(l) exercise, or permit the Company or any nominee of the Company to
exercise, any powers or rights incidental to the ownership of those
Security Assets or any part of them in such manner as he may think
fit;
(m) form a Subsidiary or Subsidiaries of the Company and transfer lease
or licence to any such Subsidiary or any other person all or any
part of those Security Assets on such terms and conditions and for
such consideration as he may think fit;
(n) in the exercise of any of the powers authorities and discretions
conferred on it in this Debenture or for any other purpose to raise
and borrow money either unsecured or secured and either in priority
to, pari passu with or subsequent to the security constituted by
this Debenture or otherwise and generally on such terms and
conditions as he may think fit;
<PAGE>
(o) give valid receipts for all moneys and execute all discharges
assurances and things which may be proper or desirable for realising
those Security Assets or any part of them; and
(p) execute and do all such other acts things and deeds as he may
consider necessary or desirable for realising or preserving those
Security Assets or any part of them or incidental or conducive to
any of the matters powers or authorities conferred on a Receiver
under or by virtue of this Debenture or otherwise and exercise in
relation to those Security Assets or any part of them all such
powers authorities and things as he would be capable of exercising
if he were the absolute beneficial owner of them.
9.3 Any Receiver appointed under this Debenture whether acting solely or jointly
shall be deemed to be the agent of the Company concerned and to be in the same
position as a receiver appointed under the LPA and such Company shall be solely
responsible for his acts omissions defaults losses and misconduct and for his
remuneration and the Agent shall not be in any way liable or responsible either
to the Company or to any other person whatsoever for any of them.
9.4 If more than one Receiver is appointed of some or all of the Security Assets
of a Company each such Receiver shall be entitled to exercise individually all
of the powers given to a Receiver under this Debenture in relation to any of the
Security Assets in respect of which he has been appointed unless the Agent shall
state otherwise in the document appointing him.
10. Application of Proceeds
10.1 Any moneys received by the Lender or any Receiver pursuant to this
Debenture or under the powers conferred by this Debenture shall after the
occurrence of an Event of Default, and after the payment of any claims having
priority to the security created by this Debenture, be applied in the following
order but without prejudice to the right of the Lender to recover any shortfall
from any Company or Guarantor:-
(a) where applicable, in payment of all costs charges and expenses of
and incidental to the appointment of the Receiver and the exercise
of all or any of the powers aforesaid and of all other outgoings
properly payable by the Receiver;
(b) where applicable, in payment of the Receiver's remuneration at such
rate as may be agreed with the Lender;
(c) in or towards payment of the Secured Liabilities in such order as
the Lender in its absolute discretion thinks fit;
(d) in payment of the surplus (if any) to the person or persons entitled
to it.
<PAGE>
10.2 All moneys received by any Company by virtue of any insurance on the
Security Assets, whether or not effected pursuant to this Debenture and whether
the event by virtue of which such moneys became payable occurred before on or
after the date of this Debenture, shall be deemed part of the Security Assets
and (subject to any rights of third parties arising under any statute for the
time being relating to the application of insurance moneys) shall unless the
Lender shall confirm otherwise in writing be paid to the Lender and any moneys
so paid to the Lender or otherwise received by the Lender by virtue of any such
insurance shall be applied at the discretion of the Lender either in reduction
of the Secured Liabilities or in or towards making good the loss or damage in
respect of which they became payable and any moneys received by any Company by
virtue of any insurance on the Security Assets shall be held on trust for
payment to the Lender in accordance with this Clause 10.2.
10.3 The Lender or any Receiver may credit any moneys to a suspense account for
so long and in such manner as the Lender or any Receiver may from time to time
determine and the Receiver may retain the same for such period as the Receiver
and the Lender consider expedient.
11. Lender's Powers
11.1 At any time after an Event of Default (or if requested by any Company in
relation to the Security Assets of that Company) the Lender may without further
notice and without first appointing a Receiver exercise all or any of the powers
conferred on mortgagees by the LPA as varied or extended by this Debenture and
all the powers authorities and discretions conferred expressly or by implication
on any Receiver in this Debenture or conferred by statute or common law.
12. Entry into Possession
12.1 If the Lender or any Receiver shall enter into possession of the Security
Assets or any part of them it or he may from time to time and at any time go out
of such possession. Neither the Lender nor any Receiver shall in any
circumstances be liable to account to any Company for anything except its or his
actual receipts or be liable to any Company for any loss or damage arising from
any realisation of the Security Assets or any part of them or from any act
default or omission in relation to the Security Assets or any part of them
unless such loss or damage shall be caused by its or his own fraud recklessness
wilful default or gross negligence.
13. Discharge of Security
13.1 The security constituted by this Debenture shall be continuing and shall
not be considered as satisfied or discharged by any intermediate payment or
settlement of the whole or any part of the Secured Liabilities and shall be
binding until all the Secured Liabilities have been discharged in full to the
satisfaction of the Lender and the Lender has ceased to have any obligation
whether actual or contingent to make any credit or accommodation available to
any Company under the Facility Agreement or otherwise.
<PAGE>
14. Power of Attorney
14.1 Each Company by way of security irrevocably appoints the Lender and any
Receiver and every delegate or sub-delegate referred to in Clause 17 and each of
them jointly and also severally to be the attorney of the Company (with full
powers of substitution and delegation) for the Company and in its name or
otherwise and on its behalf and as its act and deed to sign seal execute deliver
perfect and do all deeds instruments notices documents acts and things which the
Company may or ought to do under the covenants and provisions contained in this
Debenture (including without limitation to make demand upon or to give any
notice or receipt to any person owing money to the Company and to execute and
deliver any charges legal mortgages assignments or other security) and generally
in its name and on its behalf to exercise all or any of the powers authorities
and discretions conferred by or pursuant to this Debenture or by the LPA on the
Lender or any Receiver or which may be required or which the Lender or any
Receiver shall deem fit for carrying any sale or lease charge mortgage or
dealing by the Lender or by any Receiver into effect or for giving to the Lender
or any Receiver the full benefit of this Debenture and generally to use the name
of the Company and to execute and deliver and otherwise perfect any deed
assurance agreement instrument or act which it or he may deem proper in the
exercise of all or any of the powers, authorities or discretions conferred on
the Lender or any Receiver pursuant to this Debenture.
14.2 Each Company hereby ratifies and confirms and agrees to ratify and confirm
anything such attorney shall lawfully and properly do or purport to do by virtue
of Clause 14.1 and all money expended by any such attorney shall be deemed to be
expenses incurred by the Lender under this Debenture.
15. Further Assurances
15.1 Each Company shall immediately notify the Lender of any contract conveyance
transfer assignment or other disposition for the acquisition by the Company or
any nominee on its behalf of any Securities and shall if the Lender so requires
enter into such security instruments as the Lender shall deem necessary to
perfect the Lender's security interest therein.
15.2 Each Company agrees that upon demand by the Lender from time to time it
shall execute and deliver a formal assignment of all or any part of the Security
Assets not now in existence and of any leases now or hereafter to come into
existence and that pending any such assignment the Company shall hold the same
upon trust for the Lender and subject to the provisions of this Debenture.
15.3 Without prejudice to anything else contained in this Debenture each Company
shall at any time at the request of the Lender but at the cost of the Company
promptly sign seal execute deliver and do all deeds instruments notices
documents acts and things in such form as the Lender may from time to time
require for perfecting or protecting the security over the Security Assets or
any part of them or for facilitating their realisation and the exercise of all
powers authorities and discretions vested in the Lender or any Receiver.
<PAGE>
16. Avoidance of Payments
16.1 No assurance security or payment which may be avoided or adjusted under any
enactment relating to bankruptcy or under Part VI of the Insolvency Act 1986 or
similar legislation binding on any Company in a jurisdiction other than England
and Wales and no release settlement or discharge given or made by the Lender on
the faith of any such assurance security or payment shall prejudice or affect
the right of the Lender to recover from any Company (including the right to
recover any moneys which it may have been compelled by due process of law to
refund under the provisions of the Insolvency Act 1986 and any costs payable by
it pursuant to or otherwise incurred in connection with such process) or to
enforce the security created by or pursuant to this Debenture to the full extent
of the Secured Liabilities.
17. Delegation
17.1 The Lender may at any time and from time to time delegate by power of
attorney or in any other manner to any person or persons all or any of the
powers authorities and discretions which are for the time being exercisable by
the Lender under this Debenture in relation to the Security Assets or any part
of them. Any such delegation may be made upon such terms (including power to
sub-delegate) and subject to such regulations as the Lender may think fit. The
Lender shall not be in any way liable or responsible to any Company for any loss
or damage arising from any act default omission or misconduct on the part of any
such delegate or sub-delegate.
18. Custody
18.1 The Lender shall be entitled to provide for the safe custody by third
parties of all certificates and documents of title relating to the Security
Assets and shall not be responsible for any loss or damage occurring to or in
respect thereof.
19. Costs
19.1 The Companies shall, on demand, pay to the Lender the amount of all
reasonable costs and expenses (including legal and out-of-pocket expenses and
any Value Added Tax on such costs and expenses) which it incurs in connection
with:-
(a) the preparation negotiation execution delivery and enforcement of
this Debenture;
(b) any stamping or registration of this Debenture;
(c) any actual or proposed amendment of or waiver or consent under or in
connection with this Debenture;
(d) any discharge or release of this Debenture;
<PAGE>
(e) the preservation or exercise (or attempted preservation or exercise)
of any rights under or in connection with and the enforcement (or
attempted enforcement) of this Debenture;
(f) dealing with or obtaining advice about any other matter or question
arising out of or in connection with this Debenture.
together with interest at the Default Rate thereon from the earlier of the date
of demand and the date of payment by the Lender until the date of payment by the
Charging Group whether before or after judgment.
20. Indemnity
20.1 The Lender and every Receiver attorney manager agent or other person
appointed by the Lender under this Debenture and their respective employees
shall be entitled to be indemnified on a full indemnity basis out of the
Security Assets in respect of all liabilities and expenses properly incurred or
suffered by any of them in or as a result of the exercise or purported exercise
of any of the powers authorities or discretions vested in them under this
Debenture and against all actions proceedings losses costs claims and demands
suffered or incurred by the Lender in respect of any matter or thing done or
omitted in any way relating to the Security Assets and the Lender and any such
Receiver may retain and pay all sums in respect of the same out of any moneys
received under the powers conferred by this Debenture.
21. Communications
21.1 Except as otherwise provided for in this Agreement, all notices or other
communications under or in respect of this Agreement to any party hereto shall
be given or made by being delivered to such party addressed to it at the address
stated below (or at such other address as such party may hereafter specify for
such purpose to the others by notice in writing):
(a) in the case of the Parent Company or the Charging Subsidiary or any
of them:
Telemonde Investments Limited
Argonaut House
5 Park Road
Hamilton
Bermuda
Attn: Michael Collins
Facsimile No: 001 441 292 4069
(b) in the case of the Lender:
Communications Collateral Limited
P0 Box 438
<PAGE>
The Tropic Isle Building
Road Town
Tortola
British Virgin Islands
Attn: Susan Demers
Tel: 284 494 2616
Facsimile No: 284 494 2704
copy to: Peter Fitzpatrick
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York
10104-0053
Telephone No: 212 541 2170
Facsimile No: 212 541 1371
A written notice includes a notice by facsimile. Any notice, request,
demand or other communication to be given or made hereunder shall be
deemed to have been delivered, in the case of any notice, request, demand
or other communication given or made by personal delivery or facsimile
when despatched or delivered unless despatched or delivered outside normal
business hours when it shall be deemed to have been delivered on the next
Business Day following the date on which it was despatched or, in the case
of any notice, request, demand or other communication given or made by
letter, five Business Days after having been posted by airmail provided
that each notice, request, demand or other communication given or made by
facsimile shall, without prejudice to the validity or effectiveness of the
same, be confirmed by airmail.
21.2 Any notice, demand or other communication to be made to the Parent Company
or the Charging Subsidiaries pursuant to the terms of this Agreement shall be
sufficiently made if given to the Parent Company, and the Charging Subsidiaries
hereby irrevocably and unconditionally appoint the Parent Company as their agent
for the receipt of any such notice, demand or communication.
22. Transfers
22.1 No party hereto may assign or transfer any of its obligations under this
Debenture or enter into any transaction which would result in any of those
obligations passing to another person, provided that Lender may assign its
rights and obligations hereunder to the extent a default has occurred hereunder
or under any other Security Document.
<PAGE>
23. Miscellaneous
23.1 No delay or omission on the part of the Lender in exercising any right or
remedy under this Debenture shall impair that right or remedy or operate as or
be taken to be a waiver of it nor shall any single partial or defective exercise
of any such right or remedy preclude any other or further exercise under this
Debenture of that or any other right or remedy.
23.2 The rights of the Lender under this Debenture are cumulative and not
exclusive of any rights provided by law and may be exercised from time to time
and as often as the Lender deems expedient.
23.3 Any waiver by the Lender of any terms of this Debenture or any consent or
approval given by the Lender under it shall only be effective if given in
writing and then only for the purpose and upon the terms and conditions if any
on which it is given.
23.4 The security constituted by this Debenture shall be in addition to and
shall not be prejudiced determined or affected by nor operate so as in any way
to determine prejudice affect or merge in any Encumbrance which the Lender may
now or at any time in the future hold for or in respect of the Secured
Liabilities or any of them and the security constituted and remedies conferred
by this Debenture shall not be prejudiced by time or indulgence granted to any
other person or any abstention by the Lender in perfecting or enforcing any
remedies securities guarantees or rights it may now or in the future have from
or against the Parent Company or any other person or any waiver release
variation act omission forbearance unenforceability indulgence or invalidity of
any such remedy security guarantee or right.
23.5 If at any time any one or more of the provisions of this Debenture is or
becomes illegal invalid or unenforceable in any respect under any law of any
jurisdiction neither the legality validity or enforceability of the remaining
provisions of this Debenture nor the legality validity or enforceability of such
provision under the law of any other jurisdiction shall be in any way affected
or impaired as a result.
23.6 Any certificate or determination of the Lender as to any matter provided
for in this Debenture shall in the absence of manifest error be conclusive and
binding on the Companies.
23.7 This Debenture may be executed in any number of counterparts in which case
this Debenture will be as effective as if all signatures on the counterparts
were on a single copy of this Debenture.
24. Law and Jurisdiction
24.1 This Debenture is governed by and shall be construed in accordance with
English law.
24.2 The parties to this Debenture irrevocably agree for the exclusive benefit
of the Lender that the courts of England shall have jurisdiction to hear and
determine any suit action or proceeding and to settle any dispute which may
arise out of or in connection with this Debenture and for such purposes
irrevocably submit to the jurisdiction of such courts.
<PAGE>
24.3 Nothing contained in this Clause shall limit the right of the Lender to
take proceedings against any Company in any other court of competent
jurisdiction nor shall the taking of any such proceedings in one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction
whether concurrently or not (unless precluded by applicable law).
24.4 Each Company irrevocably waives any objection which it may have now or in
the future to the courts of England being nominated for the purpose of this
Clause on the ground of venue or otherwise and agrees not to claim that any such
court is not a convenient or appropriate forum.
IN WITNESS whereof each Company has executed this Debenture as a Deed and the
Lender has executed this Debenture the day and year first before written.
<PAGE>
SCHEDULE 1
(Charging Subsidiaries)
1. Telemonde Bandwidth (Bermuda) Limited a company incorporated under the
laws of Bermuda with No. 25085 and having its principal office at Argonaut
House, 5 Park Road, Hamilton, Bermuda.
2. Telemonde International Bandwidth (Bermuda) Limited a company incorporated
under the laws of Bermuda with No. EC 24606 and having its principal
office at Argonaut House, 5 Park Road, Hamilton, Bermuda.
3. Telemonde International Bandwidth Limited a company incorporated under the
laws of the British Virgin Islands with No. 303706 whose registered office
is at The Lake Building, 1st Floor, Wickhams Cay 1, Road Town, Tortola,
British Virgin Islands.
<PAGE>
SCHEDULE 2
(Guarantee provisions pursuant to Clause 2)
1. This Guarantee is a continuing security and shall remain in full force and
effect until all the Secured Liabilities have been finally paid discharged
or satisfied in full notwithstanding the liquidation administration or
other incapacity or any change in the constitution of any Company or the
Guarantor or in the name and style thereof or any intermediate settlement
of account or other matter whatsoever. Notwithstanding determination as to
the Guarantee of any other Guarantor, this Guarantee is to remain a
continuing security as to the Guarantor.
2. This Guarantee is in addition to and shall not merge with or otherwise
prejudice or affect or be prejudiced or affected by any other right remedy
guarantee indemnity or security and may be enforced without first having
recourse to the same or any bill note mortgage charge pledge or lien now
or hereafter held by or available to the Lender in respect of any of the
Secured Liabilities.
3. If any purported obligation or liability of any Company to the Lender
which if valid would have been the subject of this Guarantee is not or
ceases to be valid or enforceable against that Company on any ground
whatsoever whether or not known to the Lender, including but not limited
to any defect in or want of powers of the relevant Company or irregular
exercise thereof or lack of authority by any person purporting to act on
behalf of such Company or any legal or other limitation (whether under the
Limitation Acts or otherwise) disability incapacity or any change in the
constitution of or any amalgamation reconstruction liquidation or
administration of such Company, the Guarantor shall nevertheless be
jointly and severally liable with every other Guarantor to the Lender in
respect of that purported obligation or liability as if the same were
fully valid and enforceable and the Guarantor was the principal debtor in
respect thereof. The Guarantor agrees to keep the Lender indemnified on a
full indemnity basis against all actions proceedings losses costs claims
and demands arising from any failure of any Company to carry out any such
purported obligation or liability.
4. The liability of the Guarantor shall not be affected nor shall this
Guarantee be discharged or diminished by reason of:-
(a) any present or future bill note guarantee indemnity Encumbrance or
other right or remedy held by or available to the Lender being or
becoming wholly or in part void voidable or unenforceable on any
ground whatsoever or by the Lender from time to time dealing with
exchanging varying realising releasing or failing to perfect or
enforce any of the same; or
(b) the Lender compounding with discharging releasing or varying the
liability of or granting any time indulgence or concession to any
Company or other Guarantor or any other person or renewing
determining varying or increasing
<PAGE>
any bill promissory note or other negotiable instrument
accommodation facility or transaction in any manner whatsoever or
concurring in accepting or varying any compromise arrangement or
settlement or omitting to claim or enforce payment from any Company
or any other person; or
(c) any act or omission which would not have discharged or affected the
liability of the Guarantor had it been principal debtor instead of
guarantor or anything done or omitted which but for this provision
might operate to exonerate the Guarantor.
5. The Guarantor (jointly and severally with each of the other Guarantors)
warrants to the Lender that none of them have taken or received and
undertake that none of them will take or receive the benefit of any
security from any Company or any other person extending to liabilities
under this Guarantee. If any such security is taken or the Guarantor
receives the benefit of the same the Guarantor declares that such security
and all moneys at any time received in respect of it shall be held on
trust for the Lender and the Lender as a continuing security for the
liabilities of the Guarantor under this Guarantee.
6. The Guarantor agrees to pay interest to the Lender (to the extent that
such interest is not paid by the Parent Company) from the date of demand
until payment on the amount of all the Secured Liabilities (as well after
as before any demand or judgment or the liquidation administration or
other incapacity of any Company) at the Default Rate upon such days and
upon such terms as may be agreed by the parties to the Facility Agreement.
<PAGE>
SCHEDULE 3
(Shares)
1. 11,990 shares of US$1.00 each in the share capital of TIBBL which are
registered in the name of the Parent Company
Registered Shareholders:-
Telemonde Investments Limited 11990
12,000
2. 12,000 shares of US$1.00 each in the share capital of TBBL which are
registered in the name of the Parent Company
3. 10 shares of $100 each in the share capital of Telemonde International
Bandwidth Limited (being the company referred to in paragraph 3 of
Schedule 1) which are registered in the name of the Parent Company.
<PAGE>
EXECUTED as a DEED )
by TELEMONDE )
INVESTMENTS LIMITED )
acting by )
/s/ M. Collins
---------------------------
Director [SEAL]
/s/ S. Williams
---------------------------
Director/Secretary
EXECUTED as a DEED )
by TELEMONDE )
INTERNATIONAL BANDWIDTH )
(BERMUDA) LIMITED )
acting by )
/s/ M. Collins
---------------------------
Director [SEAL]
/s/ S. Williams
---------------------------
Director/Secretary
EXECUTED for and on behalf of )
TELEMONDE INTERNATIONAL )
BANDWIDTH LIMITED )
acting by )
/s/ M. Collins
---------------------------
Director [SEAL]
/s/ S. Williams
---------------------------
Director/Secretary
<PAGE>
EXECUTED as a DEED )
by TELEMONDE BANDWIDTH )
(BERMUDA) LIMITED )
acting by )
/s/ M. Collins
---------------------------
Director [SEAL]
/s/ S. Williams
---------------------------
Director/Secretary
EXECUTED for and on behalf )
of COMMUNICATIONS COLLATERAL )
LIMITED by )
<PAGE>
Director
Director/Secretary
EXECUTED for and on behalf )
of COMMUNICATIONS COLLATERAL )
LIMITED by )
/s/ Thomas Huser, Attorney in Fact
<PAGE>
EXHIBIT 10.11
DATED 15TH APRIL 1999
---------------------
(1) TELEMONDE INVESTMENTS LIMITED
-and-
(2) COMMUNICATIONS COLLATERAL LIMITED
FACILITY AGREEMENT
MBT(1265)/13 April 1999
Gouldens
22 Tudor Street
London EC4Y 0JJ
Tel: 0171 583 7777
Fax: 0171 583 3051
<PAGE>
TABLE OF CONTENTS
-----------------
Clause
- - - - ------
1. Definitions and Interpretation
2. Facility
3. Drawdown
4. Interest
5. Repayment and Prepayment
6. Conditions Precedent
7. Representations and Warranties
8. Undertakings
9. Events of Default
10. Fees and Expenses
11. Payments and Calculations
12. Taxation
13. Communications
14. Assignments
15. Miscellaneous
16. Law and Jurisdiction
Schedule 1 Drawdown Notice
Schedule 2 Conditions Precedent
Schedule 3 The Debentures and Guarantees
Schedule 4 The Relevant Subsidiaries
<PAGE>
MBT(1265) 13.04.99
FACILITY AGREEMENT made on the 15th day of April 1999
BETWEEN:
(1) TELEMONDE INVESTMENTS LIMITED a private company limited by shares
incorporated in the British Virgin Islands with registered number 270776
whose registered office is at Cragmuir Chambers, Road Town, Tortola, BVI
("Borrower"); and
(2) COMMUNICATIONS COLLATERAL LIMITED a company limited by Shares
incorporated in the British Virgin Islands whose registered office is at
PO Box 438, Road Town, Tortola BVI ("Lender")
1. Definitions and Interpretation
------------------------------
1.1 In this Agreement, unless there is something in the subject or context
inconsistent therewith, the following expressions shall have the
following meanings:
"Advance" means the principal amount of each borrowing by the Borrower
under the Facility.
"Business Day" means a day (other than a Saturday) on which banks and
financial markets in London are open for business.
"Commitment" means the commitment of the Lender to provide and maintain
the Facility on the terms and conditions of this Agreement.
"Commitment Period" means the period commencing on the Effective Date
and ending on 90 days thereafter.
"Debentures" means the documents referred to in Schedule 3.
"Dollars" and "$" means the lawful currency for the time being of the
United States of America.
"Drawdown Date" means, in relation to any Advance, the date on which the
Advance is made.
"Drawdown Notice" means a notice in the form set out in Schedule 1.
"Effective Date" means the date on which the conditions precedent
contained in clause 6 hereof are met or unconditionally waived by the
Lender.
<PAGE>
"Encumbrance" means any mortgage, charge (whether fixed or floating),
pledge, lien hypothecation, assignment, security interest, title
retention or other encumbrance or security agreement or arrangement of
any kind.
"Event of Default" means any one of the events listed in clause 9.1.
"Facility" means the term facility made available by the Lender to the
Borrower and referred to in clause 2.1.
"Financial Indebtedness" means, in relation to any person, (a) monies
borrowed or raised by such person and fees and expenses payable in
relation to such monies borrowed or raised by such person, (b) any
liability of such person under any debenture, bond, note or other
security, (c) any liability of such person under acceptance credit
facilities, financial leases, deferred purchase consideration
arrangements or any other agreement or instrument having the commercial
effect of a borrowing or raising of money by such person, (d) any
liability of such person under interest rate and/or currency swap
arrangements, interest rate caps, collars or floors, futures, options
and other arrangements similar to any of the foregoing and (e) any
guarantee, indemnity or other assurance against financial loss given by
such person in respect of any of the foregoing, excluding trade debts
arising in the ordinary course of business and judgment debts not
relating to the matters referred to above.
"MCI Worldcom Supply Agreement" means the Transmission Capacity
Agreement of even date hereto made between (1) MCI Worldcom Global
Networks US Inc (2) MCI Worldcom Global Networks Limited and (3)
Telemonde International Bandwidth Limited.
"Group" mens the Borrower, and any subsidiaries of the Borrower.
"Indebtedness" means, in relation to any person, any obligation
(whether present or future, actual or contingent, secured or
unsecured), as principal or surety or otherwise for the payment or
repayment of money.
"Interest" means in relation to each period interest at the rate of 10%
per cent per annum.
"Loan" means the aggregate principal amount of the Advance for the time
being advanced and outstanding under this Agreement.
"Permitted Security Interest" means
(a) any Security Interest constituting a lien or set-off arising
solely by operation of law (but not as a result of legal
proceedings) or any Security Interest providing for the
retention of title of goods pending payment for such goods
contained in any contract for the sale of goods entered into in
the ordinary course of business of the persons creating the
same; and
<PAGE>
(b) any banker's lien or right of set-off arising by operation
of law (or, in the case of a right of set-off, pursuant to the
relevant bank's standard accounts opening documentation) in the
ordinary course of commercial banking transactions;
(c) any Encumbrance existing at the date hereof which is
disclosed in writing by the Borrower to the Lender on or prior
to the date hereof;
(d) any Encumbrance created by the Borrower on an asset acquired
by the Borrower after the date of this Agreement securing
indebtedness incurred solely to finance the purchase of such
asset and which does not exceed and is not capable of exceeding
the purchase price of such asset;
(e) any Encumbrance created by or pursuant to any Security
Document;
(f) any Encumbrance created pursuant to arrangements to be
entered into with MCI Worldcom Global Networks U.S. Inc.
("Worldcom") over the proceeds of any contract entered into for
the re-sale of any asset acquired from Worldcom and which does
not secure indebtedness in excess of the purchase price of such
asset.
"Relevant Subsidiaries" means the companies which are listed in Schedule
4.
"Repayment Date" means the date falling one hundred and twenty (120)
days after the Drawdown Date of the first Advance under this Agreement.
"Security Documents" means (a) the Debentures (b) (where the context so
permits) this Agreement, (c) the Letter Agreement between (1) Rhone
Financial Indemnity Re Limited (2) the Borrower and its affiliates and
(3) the Lender of even date herewith (d) the Capacity Option Agreement
between (1) the Borrower and (2) the Lender of even date herewith ("the
Capacity Option Agreement") (e) the Capacity Agreement between (1)
Telemonde International Bandwidth Limited and (2) the Lender of even
date herewith ("the Capacity Agreement") and/or (f) any other agreement
or document that may be executed at any time by the Borrower or any
other person as security for all or any part of the Loan, interest
thereon and any other moneys payable to the Lender under or in
connection with this Agreement and/or any of the documents referred to
in this definition.
"Security Interest: means a mortgage, charge (whether fixed or
floating), pledge, lien, hypothecation, encumbrance, assignment, trust
arrangement, title retention or other security interest or other
arrangement of any kind having the effect of conferring security.
"Subsidiary" means a subsidiary within the meaning of Section 736 of the
Companies Act 1985 or a subsidiary undertaking within the meaning of
Section 258-260 of the
<PAGE>
Companies Act 1985 as substituted by Section 21 and 22 of the Companies
Act 1989 and "Subsidiaries" shall be construed accordingly.
"Taxes" includes all present and future income, corporation and value-
added taxes, capital and all stamp and other taxes and levies, imposts,
deductions, duties, charges and withholdings whatsoever together with
interest thereon and penalties with respect thereto, if any, and
charges, fees and other amounts made or in respect thereof in each case
levied or charged in any jurisdiction in the world (and references to
"taxation" shall be construed accordingly).
"TIBBL" means Telemonde International Bandwidth (Bermuda) Limited a
company incorporated under the laws of Bermuda with No. EC 24606 and
having its principal office at Argonaut House, 5 Park Road, Hamilton,
Bermuda.
1.2 In this Agreement, references to periods of "months" shall mean a period
beginning in one calendar month and ending in the relevant calendar
month on the day numerically corresponding to the day of the calendar
month in which such period started, provided that (a) if such period
started on the last Business Day in a calendar month, or if there is no
such numerically corresponding day, such period shall end on the last
Business Day in the relevant calendar month, and (b) if such numerically
corresponding day is not a Business Day, such period shall end on the
next following Business Day in the same calendar month, or if there is
no such Business Day, such period shall end on the preceding Business
Day (and "month" and "monthly" shall be construed accordingly).
1.3 In this Agreement:
(i) clause headings are inserted for convenience only and shall
not affect the construction of this Agreement and unless
otherwise specified, all references to clauses and Appendices
are to clauses of and Appendices to, this Agreement;
(ii) unless the context otherwise requires, words denoting the
singular number shall include the plural and vice versa;
(iii) references to persons include bodies corporate and
unincorporate;
(iv) references to assets include property, rights and assets of
every description;
(v) references to any document are to be construed as references
to such document as amended or supplemented from time to time;
(vi) references to any enactment include re-enactments,
amendments and extensions thereof.
(vii) references to any documents in "the agreed form" shall be
to the document in the form signed by or on behalf of the parties
hereto.
<PAGE>
2. Facility
--------
2.1 Subject to the terms of this Agreement, and in reliance (inter alia) on the
representations and warranties set out in clause 7.1, the Lender agrees to
make available to the Borrower a term facility of ONE MILLION US DOLLARS
($1,000,000).
2.2 The proceeds of an Advance drawn under the Facility shall be applied as
follows:
(i) in paying a facility fee to the Lender in the sum of $500,000 (such
sum to be deducted by the Lender at source and the obligation to pay
such fee being conditional on drawdown of the Facility); and
(ii) in discharging the reasonable legal fees relating to the preparation,
negotiating, signing implementation and enforcement of this Agreement
and the other Security Documents incurred by the Group or the Lender;
and
(iii) in meeting the working capital requirements of the Group.
3. Drawdown
--------
3.1 Subject to clause 2.2(i) above the Facility will be drawn down by the
Borrower in one advance in the principal amount of ONE MILLION US DOLLARS
($1,000,000) on the Effective Date or on such other Business Day as the
Lender may agree with the Borrower provided that the Lender shall have
received a duly completed and executed Drawdown Notice relating to the
Advance prior to the Drawdown Date. Subject as otherwise provided in this
Agreement the Drawdown Notice shall be irrevocable and the Borrower should
be obliged to borrow accordingly.
The Borrower shall draw down on the Facility in its entire amount and
deliver the Drawdown Notice within two (2) Business Days of its receipt of
written notice from the Lender that all conditions precedent contemplated
by Clause 6 hereof have been complied with or waived.
3.2 Subject as otherwise provided in this Agreement, the Advance shall be made
available on the Drawdown Date therefor by the Lender crediting the amount
of the Advance to such bank account of the Borrower as it shall specify to
the Lender for this purpose in the relevant Drawdown Notice.
3.3 Any part of the Facility which shall not have been drawn down or cancelled
by the close of business on the last Business Day of the Commitment Period
shall at that time be automatically cancelled and the Commitment shall at
that time be reduced to zero.
<PAGE>
3.4 Within 10 Business days of the date hereof, the Borrower shall itself enter
into and shall procure that the Relevant Subsidiaries enter into the
Additional Security Documents and the issuance of legal opinions referred
to in part II of Schedule 1 hereto. The Lender agrees to use its best
endeavours to agree the form and content of the Additional Security
Documents with the Borrower within the time contemplated by this Clause
3.4.
4. Interest
--------
4.1 The Lender shall be entitled to and the Borrower shall pay to the Lender
Interest on the Advance accruing from and including the Drawdown Date up to
and including the Repayment Date and such Interest shall be payable, save
as otherwise agreed between the Borrower and the Lender from time to time,
ninety (90)days after the Drawdown Date and on the Repayment Date.
4.2 In the event that the Lender does not receive on the due date any sum due
under this Agreement, the Borrower shall pay to the Lender on demand
interest on such sum from and including the date therefor to the date of
actual payment (as well after as before judgment) at the rate of 12.5% per
cent per annum.
5. Repayment and Prepayment
------------------------
5.1 On the Repayment Date the Borrower shall repay to the Lender the amount of
the Advance outstanding at such date, if any, together with all sums then
outstanding or payable hereunder pursuant to or in connection with the
Facility.
5.2 The Borrower may prepay the whole or any part of the Advance provided that:
(i) the Lender shall have received from the Borrower not less than 15
(fifteen) Business Days prior notice (which shall be irrevocable) of
its intention to make such prepayment and specifying the amount and
the date of such prepayment; and
(ii) the amount of any partial prepayment shall not be less than ONE
HUNDRED THOUSAND DOLLARS ($100,000).
5.3 Each repayment or prepayment under this clause 5 shall be made together
with the accrued Interest on the amount prepaid, and all other sums payable
thereon under the terms of this Agreement.
5.4 At or prior to the date of any payment under this clause 5, the Borrower
shall furnish evidence satisfactory to the Lender that any consents and
authorisations which are required in relation to such payment have been
obtained and are in full force and effect.
<PAGE>
6. Conditions Precedent
--------------------
The obligations of the Lender to advance the Advance are subject to the
conditions that at the Drawdown Date;
(a) no Event of Default has occurred and is continuing or would result
from the making of the Advance;
(b) the representations and warranties in clause 7.1 and in the Security
Documents are true and accurate as of each such date, as if made on
each such date with reference to the facts then subsisting; and
(c) all of the documents referred to in Part I and Schedule 2 have been
delivered to the Lender in form and content satisfactory to the Lender
or such delivery has been unconditionally waived by the Lender.
7. Representations and Warranties
------------------------------
7.1 The Borrower hereby represents and warrants to the Lender that except as
disclosed by the Borrower in writing on or prior to the date hereof.
(i) it is a body corporate duly organised and validly existing under the
laws of the British Virgin Islands;
(ii) it has, or had at the time of their execution, full power and authority
(a) to execute and deliver this Agreement and the other Security
Documents to which it is a party (b) to borrow under the Security
Documents and (c) to comply with the provisions of, and perform all its
obligations under, the Security Documents to which it is a party;
(iii) is has taken all necessary action to authorise the borrowing of the
Advance and the execution and delivery of the Security Documents to
which it is a party, and such Security Documents constitute its legal,
valid and binding obligations enforceable against it in accordance with
their respective terms, except as such enforcement may be limited by
general equitable principles or by any relevant bankruptcy, insolvency,
administration or similar laws affecting creditors' rights generally;
(iv) the entry into and performance by it of the Advance and Security
Documents and the transactions contemplated thereby to which it is a
party do not violate in any respect (a) any law or (b) its
constitutional documents, or (c) any agreement, contract or other
undertaking to which it is a party or which is binding on it or any of
its assets;
(v) all consents, licences, approvals and authorisations required in
connection with the entry into, performance, validity and
enforceability of the Security
<PAGE>
Documents and the performance of the transactions contemplated thereby
have been obtained and are in full force and effect;
(vi) it is not necessary for the legality, validity, enforceability priority or
admissibility in evidence of any of the Security Documents that the
Security Documents or any document relating hereto be registered, filed,
recorded or enrolled with any court or authority in any relevant
jurisdiction or that any stamp, registration or similar Taxes be paid on
or in relation to the Security Documents;
(vii) no action, suit, proceeding, litigation or dispute against it or any of
the Relevant Subsidiaries is currently taking place, or to its knowledge,
pending or threatened nor is there subsisting any judgment or award given
against it or any of the Relevant Subsidiaries before any court, board of
arbitration or other body which, in either case, would be likely to result
in any material adverse change in the business or condition (financial or
otherwise) of it and/or the Relevant Subsidiaries so as to affect its
ability to observe or perform its respective obligations under this
Agreement or any Security Document;
(viii)neither it nor any of the Relevant Subsidiaries is in default under any
agreement by which it is bound so as to affect its ability to observe or
perform its respective obligations under this Agreement or any Security
Document and no Event of Default has occurred and is continuing nor will
such a default or Event of Default result from the entry by it into the
Security Documents to which it is a party, the drawing down of the Advance
(or any part thereof) or the performance by it of any of its obligations
under this Agreement or the other Security Documents to which it is a
party;
(ix) its obligations under this Agreement or the other Security Documents rank
at least pari passu in all respects with all its present and future
unsecured obligations (apart from obligations mandatorily preferred by law
and not by contract);
(x) neither it nor any Relevant Subsidiary is in default in the payment of any
due and payable Taxes or in default in the payment of any due and payable
Taxes or in the filing registration or recording of any document or under
any legal or statutory obligation of requirement which default might have
a material adverse effect on its respective business, assets or financial
condition so as to affect its ability to observe or perform its respective
obligations under this Agreement or any Security Document;
(xi) neither it nor any Relevant Subsidiary is (nor would with the giving of
notice or lapse of time or any certificate or the making or any
determination or any combination thereof be) in breach of or in default
under any agreement relating to Financial Indebtedness to which it or such
company is a party or by which it or such company is bound which might
have a material adverse effect on its
<PAGE>
respective business, assets or financial condition or its ability to
observe or perform its respective obligations under this Agreement or
any Security Document;
(xii) there exists no Encumbrance other than the Security Documents or
Permitted Security Interests over the whole or any part of the
present or future undertaking assets rights or revenues (including
uncalled capital) of itself or any other member of the Group and no
obligation to create any such Encumbrance other than under the
Security Documents and/or the Permitted Security Interests;
(xiii)it has obtained all consents necessary or appropriate for the
execution delivery and performance of this Agreement and the other
Security Documents and the use of the Facility (and the same are in
full force and effect);
(xiv) neither it nor any Relevant Subsidiary has any Indebtedness to any
bank;
(xv) Each of the parties thereto has taken all necessary action to
authorise the execution and delivery of the MCI Worldcom Supply
Agreement and such agreement constitutes it legal, valid and binding
obligations enforceable against it in accordance with their
respective terms, except as such enforcement may be limited by
general equitable principles or by any relevant bankruptcy,
insolvency, administration or similar laws affecting creditors'
rights generally.
7.2 The representations and warranties set out in clause 7.1 shall survive the
execution of the Agreement and the making of the Advance.
8 Undertakings
------------
8.1 The Borrower undertakes that, so long as any part of the Commitment is in
force or any amount remains outstanding or payable under this Agreement or
the other Security Documents;
(i) it will notify the Lender of any Event of Default forthwith upon
becoming aware thereof;
(ii) it will obtain and promptly renew from time to time, and will promptly
furnish certified copies to the Lender on demand of, all such
authorisations, approvals, consents and licences as may be required
under any applicable law or regulation to enable them to perform their
respective obligations under the Security Documents or required for
the validity or enforceability of this Agreement and the other
Security Documents and shall comply with the terms of the same;
<PAGE>
(iii) it will ensure and will procure that the Relevant Susidiaries will
ensure that their obligations under the Security Documents rank and
will rank at least pari passu in all respects with all other of
their present and future unsecured obligations (apart from the
Permitted Security interests obligations mandatorily preferred by
law and not by contract);
(iv) neither it shall nor any Relevant Subsidiary shall incur any
Indebtedness by way or borrowing other than pursuant to the Security
Documents in excess of $100,000 save with the consent of the Lender
(such consent not to be unreasonably withheld);
(v) it shall not without the consent of the Lender declare or pay
any dividends or redeem any part of its share capital;
(vi) neither it nor any Relevant Subsidiary shall enter into any
transaction on terms which are decided on any other than arm's
length basis except in so far as a counterparty to such transactions
is the Borrower or a Relevant Subsidiary;
(vii) Telemonde International Bandwidth Limited shall perform its
material obligations pursuant to the Worldcom Supply Agreement in so
for as they relate to capacity which is the subject matter of the
Capacity Agreement.
8.2 The Borrower undertakes that, so long as any part of the Commitment is in
force or any amount remains outstanding or payable under the Security
Documents it will not, and will procure that none of its Relevant
Subsidiaries will, without the prior written consent of the Lender,
create, assume or permit to exist any Security Interest other than a
Permitted Security Interest or any Security Document upon any of its
assets (whether now owned or hereafter acquired);
8.3 The Borrower hereby undertakes and warrants to the Lender that Rhone
Financial Indemnity Re Limited is the legal owner of its entire issued
share capital at the date of this agreement.
9. Events of Default
-----------------
9.1 Each of the following events shall constitute an Event of Default
(whether such event shall occur or come about voluntarily or involuntarily
or by operation of law or regulation or pursuant to, or in compliance
with, any judgment, decree or order of any court or other authority):
(i) the Borrower or any Relevant Subsidiary fails to pay when due any
sum payable pursuant to this Agreement (or any agreement entered into
in connection with this Agreement) or the other Security Documents (or
any of them) within five Business Days; or
<PAGE>
(ii) a Borrower or any Relevant Subsidiary materially adversely
defaults under, or in the due and punctual observance and performance
of, any other provision of this Agreement or the other Security
Documents (or any of them) which (if such default is, in the opinion of
the Lender, capable of remedy) is not remedied within ten Business
Days after written notice from the Lender requesting action to remedy
the same or the Borrower or any Relevant Subsidiary materially defaults
under, or in the due and punctual observance and performance of, any
other provision of this Agreement or the other Security Documents (or
any of them) which is not, in the reasonable opinion of the Lender,
capable of remedy; or
(iii) any representation or warranty made by the Borrower or any
Relevant Subsidiary pursuant to this Agreement or the other Security
Documents (or any of them) or in any notice, certificate, instrument or
statement contemplated hereby and thereby or made or delivered pursuant
hereto or thereto is, or proves to be, untrue or incorrect in any
material respect when made or deemed to be repeated and, where the
relevant representation or warranty is rendered untrue or incorrect due
to intervening circumstances it is not remedied within ten Business
Days after written notice from the Lender requesting action to remedy
the same; or
(iv) any Financial Indebtedness of the Borrower and the Relevant
Subsidiaries exceeding One Hundred Thousand United States Dollars
($100,000) in the case of each such company, is not paid when due
where not disputed on substantial and bona fide grounds (or within any
applicable grace periods in the original agreement therefor) or becomes
prematurely payable or capable of being declared prematurely payable as
a consequence of a default with respect thereto ("a Payment Default");
or
(v) (a) a petition is presented or an order is made or a resolution is
passed for the winding-up (other than for the purpose of a solvent
amalgamation or reconstruction) or dissolution of a member of the Group
other than a frivolous or vexatious petition or a petition which is
disputed by the member of the Group on grounds which are substantial
and bona fide or (b) a member of the Group becomes insolvent or is
deemed unable to pay its debts within the meaning of Section 123 of the
Insolvency Act 1986 or a member of the Group becomes unable to pay its
debts as they fall due, or (c) a member of the Group stops or
threatens to stop making payments generally or declares or threatens to
declare a moratorium or suspension of payments with respect to all or
any part of its debts or enters into any composition or other
arrangement with its creditors generally (or any class of them), or (d)
any preparatory or other steps are taken by any person to appoint an
administrative or other receiver or similar official of a member of the
Group or any of its assets, or (e) any meeting of a member of the Group
is convened or any other preparatory or other steps are taken for the
purpose of considering an application for an administration order in
relation to a member of the Group or such an
<PAGE>
administration order is made by a court, or (f) any of the foregoing
events occurs in any applicable jurisdiction (except that in the
interpretation of this clause 9.1(v) the words "it is proved to the
satisfaction of the Court that" in sub-section (1)(e) and sub-section
(2) of Section 123 of the Insolvency Act 1986 shall be deemed to be
deleted); or
(vi) a Security Interest over any material assets of a member of the
Group in relation to the assets of the Group taken as a whole becomes
enforceable or an encumbrancer takes possession of the whole or, in the
reasonable opinion of the Lender, any material part of the assets of a
member of the Group in relation to the assets of the Group taken as a
whole or a distress, execution or other process is levied or enforced
upon or sued out against the whole, or in the reasonable opinion of the
Lender, a material part of the assets of a member of the Group in
relation to the assets of the Group taken as a whole; or
(vii) any authorisation, approval, consent, licence, exemption, filing
or registration or other requirement necessary to enable the Borrower
or a Relevant Subsidiary to comply with any of its obligations or
undertakings contained in this Agreement or any of the Security
Documents is modified, revoked or withheld or does not remain in full
force and effect which in each such case materially adversely affects
the ability of the Borrower to perform its obligations under this
Agreement and/or the other Security Documents provided that, if such
modification, revocation or withholding is, in the reasonable opinion
of the Lender, capable of remedy, it is not remedied within ten
Business Days after written notice from the Lender requesting that the
same be remedied; or
(viii) any event occurs which renders it unlawful or impossible for
(a) the Borrower or a Relevant Subsidiary to perform or observe, or to
procure the performance or observance of, its obligations or
undertakings contained in this Agreement or any of the other Security
Documents, or (b) the Lender to exercise any of the rights and remedies
conferred on the Lender under this Agreement; or
(ix) the security provided by any of the Security Documents ceases to
constitute the legal, valid and binding obligations of any of the
parties thereto (except the Lender); or
(x) there occurs any material default other than a failure to pay any
sum under the Capacity Agreement or the Capacity Option Agreement, and
which is not remedied within 21 days of written notice requiring such
remedy from the Lender; or
(xi) one person or more than one person acting in concert (within the
meaning of The City Code on Takeovers and Mergers), not having such
<PAGE>
control at the date of this Agreement, obtain(s) control (as defined in
section 840 of the Income and Corporation Taxes Act 1988) of the
Borrower;
(xii) the MCI Worldcom Supply Agreement is lawfully terminated by
reason of a breach thereof by Telemonde International Bandwidth
Limited;
(xiii) any breach by the Borrower of its obligations in Clause 3.4
hereof;
(xiv) any breach by Rhone Financial Indemnity Re Limited of its
obligations under that certain letter Agreement with the Lender dated
of even date herewith.
9.2 At any time after the occurrence of an Event of Default the Lender may
so long as the same is continuing:
(i) by notice to the Borrower, terminate the obligations of the Lender
under this Agreement, whereupon the same shall be so terminated; and/or
(ii) by notice to the Borrower, declare the Loan, accrued interest
thereon and all other amounts payable under this Agreement either
immediately due and payable or payable on demand, whereupon the Loan,
accrued interest thereon and all other amounts payable under this
Agreement shall become and remain immediately due and payable or (as
the case may be) payable on demand being made by the Lender; and/or
(iii) take any other action, exercise any other right or pursue any
other remedy conferred upon the Lender by this Agreement or by any
applicable law or regulation or otherwise as a consequence of such
Event of Default; and/or
(iv) declare that all or any part of the sums referred to in paragraph
(ii) above be payable on first written demand by the Lender, whereupon
the same shall become payable on such demand and at any time after any
such declaration the Lender may, by written notice to the Borrower call
for repayment of all or any of the amounts referred to in paragraph
(ii) above on such date as it may specify in any such notice (whereupon
the same shall become due and payable on such date together with
accrued interest thereon and any other sums then owed by the Borrowers
hereunder) or as otherwise specified therein or withdraw its
declaration with effect from such date as it may specify in such
notice.
<PAGE>
10. Fees and Expenses
-----------------
10.1 The Borrower shall pay to the Lender all reasonable costs, fees and
expenses (including, but not limited to, legal fees and expenses)
reasonably incurred by the Lender in connection with the preparation of
this Agreement and the other Security Documents or in connection with
the preserving or enforcing of, or attempting to preserve or enforce, or
administering or maintaining any of the Lender's rights hereunder or
under any of the Security Documents and any other documents referred to
therein ("the Fees"). The Lender shall promptly on request produce to
the Borrower appropriate evidence in support of the level of the Fees
for which the Borrower is to be responsible.
10.2 The Borrower shall pay to the Lender on demand all reasonable costs,
fees and expenses (including, but not limited to, legal fees and
expenses) reasonably incurred by the Lender in connection with:
(i) any variation of, or amendment or supplement to, any of the
terms of this Agreement or any of the other Security Documents
or any other document referred to therein; and/or
(ii) any consent or waiver required from the Lender in relation
to this Agreement or any of the other Security Documents or any
other document referred to therein;
and in each case, regardless of whether the same is actually
implemented, completed or granted, as the case may be.
10.3 The Borrower shall pay promptly all stamp, documentary and other like
duties and Taxes to which any of the Security Documents may be subject
or give rise to and shall indemnify the Lender on demand against any and
all liabilities with respect to or resulting from any delay or omission
on the part of such Borrower to pay any such duties or Taxes.
11. Payment and Calculations
------------------------
11.1 All payments to be made by the Borrower or any Relevant Subsidiary to
the Lender under this Agreement or any of the other Security Documents
shall be made to the Lender on the due date in cleared Dollar funds to
such account of the Lender as the Lender shall from time to time notify
to the Borrower. Payment shall be deemed to have been validly made at
such time as cleared funds shall have been received by the Lender in
such account.
11.2 If any sum payable by the Borrower or a Relevant Subsidiary under this
Agreement or any of the other Security Documents shall become due on a
day which is not a Business Day, the due date therefor shall be extended
to the next succeeding Business Day, unless such Business Day falls in
the next calendar month, in which event such
<PAGE>
due date shall be the immediately preceding Business Day, and interest
shall be payable on each date during any such extension at the rate
payable on the original due date.
11.3 The Lender will maintain an account showing the amounts from time to
time lent by the Lender under this Agreement and all other sums owing to
the Lender under this Agreement or any of the other Security Documents
and all payments in respect thereof made by the Borrrower from time to
time. Such account, in the absence of manifest error, shall be prima
facie evidence as to any amounts from time to time owing by the Borrower
under this Agreement or any of the other Security Documents.
11.4 All payments of interest and any other payments hereunder of an annual
or periodic nature shall accrue from day-to-day and shall be calculated
on the basis of the actual number of days elapsed and a 365 day year.
12. Taxation
--------
12.1 All payments to be made by or on behalf of the Borrower or a Relevant
Subsidiary to the Lender pursuant to this Agreement or any of the other
Security Documents shall be made (a) without set-off, counterclaim or
condition whatsoever and (b) free and clear of, and without withholding
or deduction for or on account of, any present or future Taxes, unless
the Borrower is required by law or regulation to make any such payment
subject to withholding or deduction of any Taxes.
12.2 Not later than 30 days after each deduction or withholding of any such
Taxes, the Borrower or the Relevant Subsidiary shall forward to the
Lender evidence satisfactory to the Lender that such Taxes have been
remitted to the appropriate taxation authority.
13. Communications
--------------
13.1 Except as otherwise provided for in this Agreement, all notices or other
communications under or in respect of this Agreement to any party hereto
shall be given or made by being delivered to such party addressed to it
at the address stated below (or at such other address as such party may
hereafter specify for such purpose to the other by notice in writing):
(a) in the case of the Borrower:
Telemonde Investments Limited
Argonaut House
5 Park Road
Hamilton
Bermuda
<PAGE>
Attn: Michael Collins
Facsimile No: 001 441 292 4069
(b) in the case of the Lender:
Communications Collateral Limited
PO Box 438
The Tropic Isle Building
Road Town
Tortola
British Virgin Islands
Attn: Susan Demers
Telephone No: 284 494 2616
Facsimile No: 284 494 2704
copy to: Peter Fitzpatrick
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York
10104-0053
Telephone No: 212 541 2170
Facsimile No: 212 541 1371
A written notice includes a notice by facsimile. Any notice, request,
demand or other communication to be given or made hereunder shall be
deemed to have been delivered, in the case of any notice, request,
demand or other communication given or made by personal delivery or
facsimile when despatched or delivered unless despatched or delivered
outside normal business hours when it shall be deemed to have been
delivered on the next Business Day following the date on which it was
despatched or, in the case of any notice, request, demand or other
communication given or made by letter, five Business Days after having
been posted by first class registered mail provided that each notice,
request, demand or other communication given or made by facsimile shall,
without prejudice to the validity or effectiveness of the same, be
confirmed by registered letter.
14. Assignments
-----------
14.1 This Agreement shall be binding upon and inure to the benefit of the
Lender and the Borrower and their respective successors and permitted
assigns.
14.2 The Borrower and the Lender may not assign or transfer all or any part
of their respective rights and/or obligations under this Agreement
without the prior written consent of the other party, save that the
Lender may assign its rights hereunder in the
<PAGE>
event that there is a material default by the Borrower under the terms
of this Agreement or any other Security Document.
15. Miscellaneous
-------------
15.1 Time shall be of the essence in this Agreement. No delay or omission on
the part of a party in exercising any right, power or remedy under this
Agreement shall impair such right, power or remedy or be construed as a
waiver thereof nor shall any single or partial exercise of any such
right, power or remedy preclude any further exercise thereof or the
exercise of any other right, power or remedy. The rights, powers and
remedies herein provided are cumulative and not exclusive of any rights,
powers, and remedies provided by law and may be exercised from time to
time and as often as a party may deem expedient.
15.2 Any waiver by a party of any provision of this Agreement, or any consent
or approval given by a party hereunder, shall only be effective if given
in writing and then only for the purposes and upon the terms for which
it is given.
15.3 If at any time any one or more of the provisions of this Agreement is or
becomes invalid, illegal or unenforceable in any respect under any law
or regulation, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be in any way affected
or impaired thereby.
15.4 This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which, when
executed and delivered, shall constitute an original, but all the
counterparts shall together constitute but one and the same instrument.
16. Law and Jurisdiction
--------------------
16.1 This Agreement shall be governed by, and construed in accordance with,
English Law.
16.2 The parties to this Deed hereby submit to the non-exclusive jurisdiction
of the English courts.
IN WITNESS whereof the parties hereto have entered into this Agreement the date
above written.
<PAGE>
SCHEDULE 1
----------
Drawdown Notice
---------------
To: Communications Collateral Limited
For the attention of:
Date 1999
Dear Sirs,
Facility Agreement Dated 1999
-------------------------------
We wish to draw an Advance under the above Facility Agreement as follows:
(a) Drawdown Date: 1999
(b) Amount: 1,000,000
(c) Bank accounts to which proceeds are to be paid:
MCI World Com
Bank - Chase Manhattan Bank, London
Account Name - MFS International Inc.
Account Number - 15128457
Swiftcode - CHASGB2L
Telemonde Investments Limited
[account details for $]
We confirm that:
(a) the matters represented by us and set out in Clause 7 of the Facility
Agreement are true and accurate on the date of this notice as if made on
such date; and
(b) no Event of Default as defined in the Facility Agreement, has occurred and
is continuing or would result from the drawing of the proposed Advance.
(c) $500,000 of the Advance shall be retained by you as the facility fee
referred to in clause 2.2(i) of the Facility Agreement and following the
drawdown and retention of the facility fee we will owe to you a principal
amount of $1,000,000 on this Advance.
Yours faithfully,
for and on behalf of
Telemonde Investments Limited
<PAGE>
Authorised Signatory
<PAGE>
SCHEDULE 2
----------
Part I
------
Conditions Precedent
--------------------
In this Schedule, 'certified' means certified by a Director or another duly
authorised officer of the Borrower as being a true complete and up-to-date copy
as at a date no earlier than the date of this Agreement.
(1) A certified copy of the Memorandum and Articles of Association (or
equivalent documents) of the Borrower and the Relevant Subsidiaries and
the register of members of the Relevant Subsidiaries.
(2) A certified copy of resolutions of the Boards of Directors of the
Borrower and the Relevant Subsidiaries approving this Agreement and any
Security Document required to be delivered under this Agreement to which
it is expressed to be a party, authorising the person(s) executing the
same to do so and authorising a person or persons to sign Drawdown
Notices and all notices or other communications to be given or made by
or on behalf of the Borrower under this Agreement or any Security
Document.
(3) The Debentures duly executed by all parties thereto.
(4) Certificates for 100% of the issued share capital of TIBL together with
stock transfer forms in respect thereof duly executed in blank by the
registered holder thereof.
(5) Certificates for 99.92% of the issued share capital of both TIBBL and
Telemonde Bandwidth (Bermuda) Limited ("TBBL") together with stock
transfer forms in respect thereof duly executed in blank by the
registered holder thereof.
(6) Resignations signed by each of the directors of TIBBL TIBL and TBBL in
the form agreed by the Lender and the Borrower.
(7) Legal opinions in the agreed form from BVI, Bermuda, and English
lawyers.
(8) The Lender has raised total capital in the amount of at least
$7,000,000.
Part II
-------
Conditions Subsequent
---------------------
(1) The Security Documents under BVI and Bermuda Law in a form reasonably
satisfactory to both the Lender and the Borrower ("the Additional
Security Documents").
(2) Legal opinions in the agreed form from BVI and Bermuda Lawyers in
respect to the Additional Security Documents.
<PAGE>
SCHEDULE 3
----------
The Debentures and the Guarantees
---------------------------------
Composite Guarantee and Debentures incorporating guarantees by the Relevant
Subsidiaries of the obligations of the Borrower under this agreement.
<PAGE>
SCHEDULE 4
----------
The Relevant Subsidiaries
-------------------------
1. Telemonde Bandwidth (Bermuda) Limited a company incorporated under the
laws of Bermuda with No. 25085 and having its principal office at
Argonaut House, 5 Park Road, Hamilton, Bermuda ("TBBL").
2. TIBBL
3. Telemonde International Bandwidth Limited ("TIBL") a company
incorporated under the laws of the British Virgin Islands with No.
303706 whose registered office is at The Lake Building, 1st Floor,
Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.
<PAGE>
THE BORROWER
- - - - ------------
Illegible signature
- - - - ---------------------------
Director
for and on behalf of
TELEMONDE INVESTMENTS LIMITED
THE LENDER
- - - - ----------
- - - - ---------------------------
for and on behalf of
COMMUNICATIONS COLLATERAL LIMITED
<PAGE>
THE BORROWER
- - - - ------------
/s/ M. Collins
- - - - ---------------------
Director
for and on behalf of
TELEMONDE INVESTMENTS LIMITED
THE LENDER
- - - - ----------
/s/ Thomas Huser
- - - - ----------------------
for and on behalf of
COMMUNICATIONS COLLATERAL LIMITED
<PAGE>
STRICTLY PRIVATE AND CONFIDENTIAL
---------------------------------
HEADS OF AGREEMENT
(non legally binding save as provided)
between the parties
TELEMONDE INC
and
KEVIN SWAYNE, WILLIAM ROBERT THOMSON AND BARRY TREVOR PEAK
----------------------------------------------------------
- - - - --------------------------------------------------------------------------------
These Heads of Agreement ("Heads") set out the outline terms for the proposed
acquisition by Telemonde, Inc. ("Telemonde") of the entire issued share and loan
capital of Newco Ltd ("Newco"), formed to acquire Global Communications
(Holdings) Limited ("Global") from its shareholders Kevin Swayne, William Robert
Thompson and Barry Trevor Peak (together "the Vendors").
The Vendors agree to sell to Telemonde all existing interests in the entire
issued share and loan capital of Newco pursuant to a definitive agreement
currently under negotiation ("Share Purchase Agreement"). It is presently
assumed that exchange of the Share Purchase Agreement will take place as soon as
possible.
Save for paragraphs 5.1, 7, 8 and 9, these Heads are not legally binding and
the transactions contemplated by them remain strictly subject to contract.
1. Introduction
1.1 Telemonde will acquire the entire issued share and loan capital of Newco
for the consideration specified below.
2. Consideration
-------------
2.1 The maximum aggregate value of the consideration payable by Telemonde to
the Vendors will be One Hundred Million Pounds Sterling
([Pounds]100,000,000) (the "Consideration").
2.2 The Consideration will be satisfied as follows:
2.2.1 On completion of the Share Purchase Agreement ("Completion") by
the sum of Five Hundred Thousand Pounds Sterling
([Pounds]500,000) in cash; and
2.2.2 On Completion of the Share Purchase Agreement, satisfaction of
Ninety Nine Million Five Hundred Thousand Pounds Sterling
([Pounds]99,500,000) of Newco Loan Notes then held by the
Vendors as follows:
2.2.2.1 Fifty Million Pounds Sterling ([Pounds]50,000,000) of
Preferred Shares in Telemonde, Inc., the strike price
for which shall be the average price over the twenty
(20) trading days prior to the date of these Heads,
carrying such registration rights as agreed by the
parties, including that a percentage to be agreed of the
Vendors Restricted shares will be registered on
Telemonde Inc's first filing after the date hereof but
no later than 12 months from Completion; and
<PAGE>
2.2.1.2 Forty-Nine Million Five Hundred Thousand Pounds
Sterling ([Pounds]49,500,000) in Loan Notes ("Loan
Notes") of Telemonde Inc., bearing interest at LIBOR
payable on normal UK quarter days in arrears,
redeemable for cash subsequent to Completion and in
accordance with a schedule to be finalized by Sands
Brothers, Telemonde Inc's investment bankers, but not
be less (in the case of the initial raise) than 26.6%
of the value of the funds raised, and in any event to
be redeemed within 12 months of Completion.
3. Funding
-------
3.1 Subject to separate agreements, loans in the aggregate sum of Three
Million Five Hundred Thousand Pounds ([Pounds]3,500,000) will be made to
Global, as follows;
3.1.1 One Million Five Hundred Thousand Pounds ([Pounds]1,500,000) upon
Completion, Five Hundred Thousand Pounds ([Pounds]500,000) of the
proceeds of which will be used to repay two other certain Loans to
Global, each of Two Hundred and Fifty Thousand Pounds Sterling
([Pounds]250,000) dated 09 August 1999 and 05 November 1999
respectively; and
3.1.2 Two Million Pounds Sterling ([Pounds]2,000,000) as later agreed
between the parties.
4. People
------
4.1 Upon Completion, each of the Vendors will enter into Directors Service
Agreements with Newco in a form to be agreed between the Vendors and
Purchaser.
4.2 Two positions on the Board of Telemonde will be made available to the
Vendors following Completion.
4.3 Following the acquisition of Newco, a share option pool with a value of
not less than Three Million Dollars (US$3,000,000) is to be made
available to Global employees pursuant to the terms of a share option
scheme to be agreed.
5. NetJ.com Corp
--------------
5.1 The Company previously known as Professional Recovery Systems Limited,
("PRS") a Nevada corporation, and now known as NetBanx.com Corp is to
immediately change its name to NetJ.com Corp.
5.2 A total of Two Million (2,000,000) shares of NetJ.com Corp, at US$1 per
share (ten cents (10cents) of which shall be payable at time of grant
and ninety cents (90cents) which shall be subsequently payable as
agreed), is to be made available to the Vendors (either directly or
through options on terms to be agreed), such shares to be pari passu
with other initial founder investors of NetJ.com Corporation.
5.3 At least one of the Vendors is to be offered a place on the Board of
NetJ.
6. Share Purchase Agreement
------------------------
6.1 The Share Purchase Agreement will be in a form appropriate for the
transaction and contains such provisions (including without limitation
as to warranties tax indemnity and such restrictive covenants) as a
prudent Purchaser would reasonably require with such warranty
limitations as a Vendor would reasonably require.
6.2 The parties intend to exchange documents before the 20th December 1999.
<PAGE>
6.3 Should any material default occur in the satisfaction of the Loan Notes,
security in favour of the Vendors over the entire issued share capital
of Newco will operate so as to enable the Vendors to compel transfer of
stated shares back to Vendors or their order on the payment of nominal
consideration. The exact mechanism is to be settled but as a condition
precedent to which will be material default (including without
limitation the failure to pay interest or redeem the Loan Notes within
30 days of the due date) under any of the Loan Notes, referred in
section 2.2.2.2 above.
6.4 Except in the instance of fraud on the part of the Vendors, Telemonde
will have no recourse to Thirty Million Pounds ([Pounds]30,000,000) of
the total Consideration paid in the event of a warranty or indemnity
claim against the Vendors.
6.5 The remaining Seventy Million Pounds ([Pounds]70,000,000) of the total
Consideration will be held in escrow as follows:
6.5.1 Seven Million Five Hundred Thousand Pounds ([Pounds]7,500,000)
to be held in escrow on terms and for a period to be agreed
against any potential tax liabilities of Newco, Global,
Telemonde or any group company of Telemonde, Inc; and
6.5.2 Sixty Two Million Five Hundred Thousand Pounds
([Pounds]62,500,000 of the Consideration to be held in escrow
such that the escrowed shares are to be released to the Vendors
as follows:
6.5.1.1 Seventy per cent (70%) at the end of the initial 21
month warranty period; and
6.5.1.2 Thirty percent (30%) on staggered, agreed releases up
until the end of the tax warranty period.
In all instances once shares are released from escrow, such
shares will be free of any further claims (save in the event of
fraud) pursuant to the warranties, indemnities or under any
other provision of the Share Purchase Agreement.
6.6 To ensure that the security over the Newco shares is adequate,
sufficient protections are to be incorporated in the Sale and Purchase
documentation to ensure that no transactions outside of the ordinary
course of business occur within Global prior to full settlement of the
loan stock, without the Vendors' consent.
6.7 Save for the tax indemnity, the general warranty period in the Share
Purchase Agreement is to be limited to 21 months.
6.8 Once monies are received from the redemption of Twenty Nine Million Five
Hundred Thousand Pounds Sterling ([Pounds]29,500,000) of Loan Notes in
Telemonde then no further recourse will be made to that cash save in the
event of fraud) pursuant to any warranties or indemnities or other
provisions contained within the Agreement.
6.9 All warranty claims exclude consequential losses.
6.10 [Pounds]10,000 de minimus and [Pounds]1,000,000 threshold levels for
warranties are to be included in the Share Purchase Agreement.
6.11 The period of the restrictive covenants in the Share Purchase Agreement
are to be 5 years from Completion. Those contained in any Service
Agreement are to be limited to 2 years from the termination of the
Service Agreement for whatever reason. The Service Agreements are to run
for a 3 year period from Completion terminable on 12 months' notice from
either side expiring on or after termination of that 3 year period.
<PAGE>
6.12 European Tendering Exchange Network Limited is to be removed from the
Newco Group prior to Completion
7 Costs
-----
7.1 Telemonde is to be responsible for Stamp Duty. Vendors agree to defer or
defray such cost in any reasonable proposed method.
7.2 Each party will bear its own costs in connection with these Heads and
the Share Purchase Agreement.
8 Information Due Diligence
-------------------------
8.1 The Vendor and their advisers and Telemonde and its advisers will
provide to each other all reasonable assistance and documentation
necessary to enable them to continue and complete their due diligence,
including the degree of disclosure necessary to complete an SEC filing.
8.2 Up until 20 December 1999, the Vendors will ensure that Telemonde is
kept reasonably informed about all material activities and developments
of Newco, any material contract or arrangement which is one (illegible)
outside the normal course of business or otherwise prejudicial to the
interests of Newco or Telemonde in any material respect or any
transaction with the Vendors (including without limitation the payment
of any dividend or the making of any distribution).
9 Confidentiality
---------------
9.1 The Vendors and Telemonde acknowledge that the existence of these Heads
and the discussions between the parties relating to the proposed
transaction and the information received by each party as part of their
due diligence process must be kept absolutely confidential. Accordingly,
neither Telemonde or the Vendors will disclose to any third party (other
than their respective professional advisers who reasonably need to know
the same) or otherwise make any announcements as to the existence of
these Heads or the nature or the extent of negotiations between them
with regard to the transactions contemplated under these Heads without
the prior written consent of the other of them or except as may be
required by law or by a court of competent jurisdiction or by a
competent authority.
/s/ Kevin Swayne 5th Nov. 1999
- - - - ---------------------------------- ---------------
Kevin Swayne Date
/s/ W. R. Thompson 5th Nov 1999
- - - - ---------------------------------- ---------------
William Robert Thompson Date
/s/ Barry Trevor Peak, by his attorney
(Illegible) 5th Nov 1999
- - - - ---------------------------------- ---------------
Barry Trevor Peak Date
/s/ Kevin Maxwell 5th Nov 1999
- - - - ---------------------------------- ---------------
Signed on behalf of Telemonde, Inc Date
Kevin Maxwell
<PAGE>
Exhibit 99.2
Dated 8th November 1999
Global Switch (London) Limited
Telemonde Networks Limited
AGREEMENT
relating to Lease and Services Agreements for The Paris Switch Building, 7-9 Rue
Petit, Clichy, France and The Amsterdam Switch Building, Johan Huizingalaan 759,
Amsterdam, Netherlands
SIGNED by SIMON NICHOLAS HOPE COOPER
/s/ [ILLEGIBLE]
on behalf of Global Switch (London) Limited
SIGNED by
/s/ [ILLEGIBLE]
on behalf of Telemonde Networks Limited
4
<PAGE>
THIS AGREEMENT is made on 8th November 1999
BETWEEN
GLOBAL SWITCH (LONDON) LIMITED (company registration number 3698210) whose
registered office is at Peel Place, 50-53 Carver Street, Birmingham B1 3AS
("Global Switch") and
TELEMONDE NETWORKS LIMITED (company registration number 3714188) whose
registered office is at 7-10 Chandos Street, London W1M 9DE ("Telemonde")
The parties agree as follows:
1 Introduction
This agreement is made on the same day as a separate Commitment Agreement
("the London Commitment Agreement") made between the same parties and by
which they have agreed to enter into a lease and services agreement ("the
London Lease and Services Agreement") of 11,775 square feet (or
thereabouts) in a building known as London Switch, East India Dock House,
East India Dock, London El4 9YY
2 Global Switch's Obligations
Global Switch will:
2.1 Procure that Global Switch (Paris) SARL negotiates with Telemonde as soon
as reasonably practicable a Commitment Agreement ("the Paris Commitment
Agreement") for 10,000 square feet or thereabouts within the building known
as Paris Switch, 7-9 Rue Petit, Clichy, France although the parties both
accept that exchange of the Paris Commitment Agreement will necessarily be
subject to the following:
(a) both Telemonde and Global Switch (Paris) SARL negotiating in a
reasonable manner the terms of the Paris Commitment Agreement; and
(b) the specification for Paris Switch being equivalent to that attached
to the London Commitment Agreement; and
(c) the forms of the Paris Commitment Agreement and the lease and services
agreement annexed to it being equivalent in content to the London
Commitment Agreement and the London Lease and Services Agreement
except in so far as changes are necessary in order to accommodate the
requirements of the local jurisdiction and practice
2.2 Procure that Global Switch Amsterdam BV negotiates with Telemonde as soon
as reasonably practicable a Commitment Agreement ("the Amsterdam Commitment
Agreement") for 10,000 square feet or thereabouts within the building known
as Amsterdam Switch, Johan Huizingalaan 759, Amsterdam,
<PAGE>
Netherlands although the parties both accept that exchange of the Amsterdam
Commitment Agreement will necessarily be subject to the following:
(a) completion of the purchase of Amsterdam Switch pursuant to a contract
dated 18 August 1999 made between Automotive Safety Products BV (the
vendor) and Estata Beheer BV (the purchaser) which is procuring that
Global Switch Amsterdam BV Purchase in its place
(b) both Telemonde and Global Switch (Paris) SARL negotiating in a
reasonable period the terms of the Amsterdam Commitment Agreement; and
(c) the specification for Amsterdam Switch being equivalent to that
attached to the London Commitment Agreement; and
(d) the forms of the Amsterdam Commitment Agreement and the lease and
services agreement annexed to it being equivalent in content to the
London Commitment Agreement and the London Lease and Services
Agreement except in so far as changes are necessary in order to
accommodate the requirements of the local jurisdiction and practice
2.3 Procure that Global Switch (Paris) SARL and Global Switch Amsterdam BV act
reasonably in negotiating the documentation required to give effect to
clauses 2.1 and 2.2
3 Telemonde's obligations
3.1 Telemonde shall act reasonably and speedily in negotiating the
documentation required for exchange of the two Commitment Agreements
referred to in clauses 2.1 and 2.2
3.2 If Telemonde requires either or both of the two Commitment Agreements
referred to in clauses 2.1 and 2.2 to be entered into by another company or
corporate body (whether incorporated in France, the Netherlands or
elsewhere) on its behalf or in its place, Telemonde will procure that such
companies or corporate bodies be incorporated speedily and effectively and
Telemonde will in addition stand as guarantor for the obligations on the
part of any replacement company or corporate body in those Commitment
Agreements
4 Disputes
4.1 Any dispute between the parties to this agreement or in the negotiation of
either of the two Commitment Agreements referred to in clauses 2.1 and 2.2
may be referred by either party for determination by an independent
commercial property solicitor or an independent chartered surveyor
(whichever shall be appropriate in the circumstances) acting as an expert
and not as an arbitrator and appointed in accordance with clause 4.2
4.2 The expert ("the Expert") appointed under this clause 4 shall be appointed
either by agreement between the parties (which shall include Global Switch
<PAGE>
(Paris) SARL or Global Switch Amsterdam BV, which Global Switch shall
procure) or (in default of agreement within one week after service of the
referring party's notice) on the application of either party by the
President for the time being of the Royal Institution of Chartered
Surveyors (who may refer and delegate the appointment to the President for
the time being of the Law Society of England and Wales, if he considers it
to be more appropriate that the Expert be a commercial property solicitor)
or someone duly authorised on his behalf
4.3 The following shall apply to the conduct of determination by the Expert:
(a) the Expert shall offer the parties a reasonable opportunity to make
written representations and to comment (once only) in writing on any
representations made by the others and the Expert shall have such
regard to any such representations or comments as he considers
appropriate
(b) the fees and expenses of the Expert including the cost of his
appointment will be borne by the parties in such proportion as he may
direct or in default of any such direction shall be borne equally by
the parties and if in the latter event either party pays more than
half the Expert's fees and expenses then it shall be entitled to
recover such excess from the other in the absence of any contrary
direction from the Expert
(c) the Expert shall within 28 days of the referral of the dispute give to
each of the parties a notice stating the results of his determination
and the reasons for it and that determination shall be final and
binding on the parties
5 Proper Law
This Agreement and any disputes arising out of or in relation to it shall
be governed by and construed in accordance with English law and the parties
agree to submit to the exclusive jurisdiction of the English Courts. If an
address for service is required and the addressee shall be incorporated or
registered outside England and Wales, then its address for the purpose of
proceedings brought in the English Courts shall be the address of whichever
shall be appropriate of the address for Global Switch or for Telemonde
<PAGE>
COMMITMENT AGREEMENT PARTICULARS
for the London Switch Building, East India Dock, London E14
- - - - --------------------------------------------------------------------------------
1. Date 8th November 1999
- - - - --------------------------------------------------------------------------------
2. The Customer Name: Telemonde Networks Limited
Company Number: 3714188
Registered Office: 7-10 Chandos Street, London,
WlM 9DE
- - - - --------------------------------------------------------------------------------
3. The Target Date The date determined in accordance with clause 1.5
- - - - --------------------------------------------------------------------------------
SIGNED by SIMON NICHOLAS HOPE COOPER
on behalf of Global Switch (London) Limited [ILLEGIBLE]
SIGNED by
on behalf of the Customer [ILLEGIBLE]
1
<PAGE>
THIS COMMITMENT AGREEMENT is made on the date stated in the Particulars between
GLOBAL SWITCH (LONDON) LIMITED (Company No 3698210) whose registered office is
at Peel Place, 50-53 Carver Street, Birmingham B1 3AS ("London Switch") and THE
CUSTOMER whose details are set out in the Particulars.
1 Definitions and interpretation
In this Agreement:
1.1 "the Building" means The London Switch Building, East India Dock, London
E14.
1.2 "Completion Date" means the date falling 5 Working Days after completion of
the Works (whether agreed by the Customer as being complete; deemed to be
complete; or determined to be complete).
1.3 "Particulars" means the Commitment Agreement Particulars comprising the
front sheet to this Agreement.
1.4 "Lease and Services Agreement" means the agreement in the form of the
attached document.
1.5 "Target Date" means the date falling 14 weeks after the later of
(a) the date of this Agreement becoming unconditional and
(b) the date on which the Customer agrees the detailed design of that part
of the Works comprised in the specification for "Occupier Location"
attached to this Agreement provided that if the detailed design has
not been agreed within 2 weeks of the date of this Agreement,
otherwise than through London Switch's delay or unreasonable failure
to agree the design, London Switch shall be at liberty to proceed with
the design and fitting out of the Location (as that term is defined in
the Lease and Services Agreement) without further reference to the
Customer.
1.6 "Working Day" means any day on which clearing banks in the City of London
are (or would be but for a strike, lock out or other stoppage affecting
such banks generally) open for normal business.
1.7 Words importing one gender include any other gender.
1.8 Words importing the singular include the plural and vice versa.
1.9 Where any party comprises more than one person the obligations and
liabilities of that party under this Agreement are joint and several
obligations of those persons.
1.10 The clause headings do not form part of this Agreement and are not to be
taken into account in its construction or interpretation.
2 Conditionality
2.1 This agreement is conditional upon the termination of an agreement made on
17 February 1999 between London Switch (then called London Switch Limited)
and USA Global Link (UK) Limited (the "Existing Agreement")
2.2 London Switch shall use its reasonable endeavours to terminate the Existing
Agreement as soon as practicable after 28 December 1999
2.3 As soon as the Existing Agreement has been terminated London Switch shall
notify the Customer and if the Existing Agreement has not been terminated
by 31 March 2000 this Agreement shall automatically cease and determine
3 Works
3.1 In this clause:
(a) "Works" means the works of alterations installations and additions to
the Building described in the attached specification with such
modifications only as may from time to time be notified in writing by
London Switch to the Customer, but not so as to affect significantly
the services to be provided under the Lease and Services Agreement.
(b) "Completion Notice" means a notice in writing given by London Switch
to the Customer that the Works have been completed.
2
<PAGE>
3.2 London Switch shall use its reasonable endeavours to obtain all necessary
building regulations approvals and other consents required for the Works
and subject to their being obtained and remaining valid and unrevoked
London Switch shall in a good and workmanlike manner carry out the Works as
soon as reasonably practicable and shall aim to complete them by the Target
Date.
3.3 London Switch may substitute materials and may vary or alter the
specification for the Works (even if the effect of doing so affects the
services to be provided under the Lease and Services Agreement) if it is
required so as to comply with any public authority or statutory regulations
or requirements.
3.4 When the Works are completed London Switch shall serve a Completion Notice
and the Customer may inspect the Works to satisfy itself that they have
been completed. The precise area of "the Location" under the Lease and
Services Agreement will be measured and will be deemed accepted by the
parties so long as it falls within a tolerance of 2% either way of the area
specified in the Lease and Services Agreement Particulars.
3.5 Within five Working Days after receipt of the Completion Notice (time being
of the essence) the Customer may serve on London Switch a notice in writing
("a Counter Notice") stating that it does not accept that the Works have
been completed. Any Counter Notice must specify in what respect the
Customer is not satisfied with the Works. If no Counter Notice is served
within that five Working Days period the Customer will be deemed to have
accepted completion of the Works.
3.6 If a Counter Notice is served in accordance with and within the period
specified in clause 2.5 London Switch may either:
(a) accept the Counter Notice and carry out the additional works specified
by its as necessary to complete the Works in which case the above
procedure will be repeated as often as is necessary until the Customer
has accepted the Works; or
(b) within five Working Days after receipt of the Counter Notice by notice
in writing to the Customer require the matter to be determined by an
independent chartered surveyor ("the Expert") acting as an expert and
not as an arbitrator and in that event:
(i) the Expert will be appointed either by agreement between the
parties or (in default of agreement within five Working Days
after service of London Switch's notice) on the application of
either party by the President for the time being of the Royal
Institution of Chartered Surveyors or his duly authorized deputy
or any person authorized by him to make appointments;
(ii) the Expert shall offer the parties a reasonable opportunity to
make written representations and to comment (once only) in
writing on the representations made by others and the Expert
shall have such regard (if any) to any such representations or
comments as he considers appropriate;
(iii) the fees and expenses of the Expert including the cost of his
appointment will be borne by the parties in such proportion as he
may direct or in default of any such direction shall be borne
equally by the parties and if either party pays the whole of the
Expert's fees and expenses it shall be entitled to recover one
half from the other;
(iv) the Expert shall give to each of the parties a notice in writing
stating the results of his determination and that determination
shall be final and binding on the parties.
3.7 If the Words have not been completed by the Target Date then the Customer
shall be entitled to a postponement of the start of its payment of the
"Rent" under the Lease and Services Agreement of a period equivalent to the
period from the Target Date up until the date on which the Works are
completed.
3.8 If the Works have not been completed within six months of the Target Date
then at any time thereafter either party may serve notice on the other to
terminate this Agreement and invoke the provisions of clause 8.
4 Completion
4.1 Subject as provided in clause 2.8 and in the following provisions of this
Agreement London Switch and the Customer shall complete the Lease and
Services Agreement on the Completion Date at such place as London Switch
require.
4.2 Between now and the Completion Date London Switch shall be entitled to
designate "the Location" under the Lease and Services Agreement to another
part of the Building so long as the area (and layout) of the designated
part shall be equivalent (and no less convenient in any material respect)
to that of "the Location" as now designated.
3
<PAGE>
4.3 The Rent Commencement Date (as defined in the Lease and Services Agreement)
shall be the date 6 months after this Agreement shall have become
unconditional.
5 Title
The Customer shall assume the right of London Switch to grant the Lease and
Services Agreement and shall not require any evidence of or raise any
objection requisition or enquiry in respect of London Switch's title to the
Building.
6 No assignment
The Customer shall not assign underlet charge or otherwise deal with the
benefit of this Agreement in whole or in part and London Switch shall not
be obliged to (but may) complete the Lease and Services Agreement with any
person other than the Customer.
7 No possession
The Customer shall not be entitled to occupation of any part of the
Building until the Lease and Services Agreement is completed.
8 Insolvency of Customer
If at any time before completion of the Lease and Services Agreement the
Customer is the subject of a petition presented or an order made or a
resolution passed or analogous proceedings taken for the appointment of an
administrator of or winding up such company (except for the purpose of and
followed within one month by an amalgamation or reconstruction which does
not involve or arise out of insolvency or give rise to a reduction in
capital) or if a receiver is appointed to the whole or any part of its
undertaking assets property or revenues or if the Customer stops payment or
agrees to declare a moratorium or becomes or is deemed to be insolvent or
unable to pay its debts within the meaning of Section 123 of the Insolvency
Act 1986 then London Switch may at any time before completion of the Lease
and Services Agreement by notice in writing served on the Customer
immediately invoke the provisions of clause 9.
9 Termination
Wherever under the provisions of this Agreement notice is served invoking
the provisions of this clause then notwithstanding anything to the contrary
contained or implied elsewhere in this Agreement this Agreement will
(without prejudice to any pre-existing right of action of any party in
respect of any breach by any other party of its obligations under this
Agreement) immediately terminate and cease to have effect and the parties
will be released from any further liability under this Agreement.
10 Non-mergers, etc.
To the extent that they remain to be observed and performed all the
provisions of this Agreement shall continue in full force and effect
notwithstanding the completion of the Lease and Services Agreement.
11 Value Added Tax
Whenever under the terms of this Agreement either party is required to pay
any sums it shall in every such case in addition pay any Value Added Tax
applicable to such payment.
12 Proper Law
This Agreement and any disputes arising out of or in relation to this
Agreement shall be governed by and construed in accordance with English
law. The parties agree to submit to the exclusive jurisdiction of the
English Court. If the Customer shall be incorporated or registered outside
England and Wales its address stated in the Particulars shall be its
address for the purpose of proceedings brought in the English Courts.
AS WITNESS their agreement of the provisions set out in this Agreement the
parties have signed the Particulars on the date set out in the Particulars.
<PAGE>
[AGREED DRAFT: 8 NOV 99: MLD/VFC]
LEASE AND SERVICES AGREEMENT PARTICULARS
for the London Switch Building, East India Dock, London E14
<TABLE>
<CAPTION>
- - - - --------------------------------------------------------------------------------------------------
<S> <C>
1. Date
- - - - --------------------------------------------------------------------------------------------------
2. The Customer Name: Telemoode Networks Limited
Company Number: 3714188
Registered Office: 7-10 Chandos Street,
London, W1M9DE
- - - - --------------------------------------------------------------------------------------------------
3. The area comprised in the Location 11,775 square feet
- - - - --------------------------------------------------------------------------------------------------
4. The Term From (and including) the Commencement
Date up until 2015
- - - - --------------------------------------------------------------------------------------------------
5. The Commencement Date
- - - - --------------------------------------------------------------------------------------------------
6. The Rent (pound)771,250
- - - - --------------------------------------------------------------------------------------------------
7. The Rent Commencement Date [6 months from when the
Commitment Agreement
becomes unconditional] 2000
- - - - --------------------------------------------------------------------------------------------------
8. The number of car parking spaces 10 spaces
- - - - --------------------------------------------------------------------------------------------------
</TABLE>
Executed as its deed by
Global Switch (London) Limited
acting by:
Director
Director/Secretary
Executed as its deed by
the Customer acting by:
Director
Director/Secretary
1
<PAGE>
SERVICES LIST
for the London Switch Building, East India Dock, London E14
1 Provision of access for visiting public telecommunications carrier staff
for the installation and testing of lines.
2 Provision of access for visiting maintenance staff from any authorised
maintenance organisation.
3 Provision of access for visiting Customer staff.
4 Liaising with the Customer over equipment installations by suppliers or
public telecommunications carriers, or maintenance visits by any authorised
maintainer.
5 (Between the hours of 09.00 and 17.00 Monday to Friday excluding Public and
Bank holidays) ordering on behalf of the Customer communications circuits
from public telecommunications carriers on instruction from and as
authorised by the Customer.
6 Save to the extent that such maintenance is the Customer's responsibility
under Clause 5.1, the maintenance and repair of the Building.
7 In relation to the Common Areas:
(a) the cleaning of the Common Areas and the exterior of the Building
(b) the provision of appropriate lighting when required
(c) the provision of appropriate heating when required
(d) the reasonable provision of air-conditioning
(e) the reasonable provision of hot and cold water
(f) the provision and operation of such fire prevention fire fighting and
fire alarm equipment and signs as may be required by any fire
authority, or as required by London Switch's insurers
(g) the provision of refuse bins and the operation of a refuse collection
service for the Building
(h) the provision and operation of a security patrol and/or security
observation system and/or other security equipment for the Building
(i) the maintenance of the grounds of the Building
2
<PAGE>
(j) the provision of any other services which the Landlord from time to
time reasonably considers appropriate having regard to the principles
of good estate management
8 Insuring the Building in its full reinstatement value and insuring against
the public liability of London Switch in respect of claims in connection
with or in any way arising out of the use by the Customer of the Location.
3
<PAGE>
THESE TERMS AND CONDITIONS are agreed on the date stated in the Particulars
between GLOBAL SWITCH (LONDON) LIMITED (Company No. 3698210) whose registered
office is at Peel Place, 50-53 Carver Street, Birmingham B1 3AS ("London
Switch") and THE CUSTOMER whose details are set out in the Particulars.
1 Definitions and Interpretation
1.2 In this Lease:
"Building" means The London Switch Building, East India Dock, London E14;
"Commencement Date" means the date set out in the Particulars on which this
Lease will commence and from which date London Switch will commence the
provision of the Services;
"Common Areas" means all parts of the Building from time to time provided
for the common use of more than one of the occupiers of the Building and
their visitors including without limitation any of the following which fall
within this definition: vehicular and pedestrian accesses passages
stairways circulation areas lifts escalators loading bays fire escapes
toilet facilities storage areas refuse collection and disposal areas and
parking areas;
"Equipment" means the telecommunications equipment from time to time
installed in the Location by the Customer;
"Force Majeure" means any event outside the reasonable control of a party
affecting its ability to perform any of its obligations (other than
payment) under this Lease;
"Location" means such part of the Building comprising the square footage
stated in the Particulars and shown for identification purposes edged red
on the attached plan (the "Area") and extending from the upper side of the
floor slab immediately below the Area to the underside of the floor or roof
slab immediately above the Area excluding:
(a) the walls bounding the Area and
(b) the load-bearing walls and pillars within the Area and
(c) all structural floor slabs within the Area and
(d) all Service Media within the Area which do not serve the Area
exclusively
but including
(a) the plaster and other finishes on the inner sides of the walls
bounding the Area and on all faces of all load-bearing walls and
pillars wholly within the Area and
(b) all ceilings and other finishes applied to the floor or roof slab
immediately above the Area and to any floor slab within the Area and
all floors floor screeds and other finishes applied to the floor slab
immediately below the Area and to any floor slab within the Area and
(c) all doors windows and roof lights of the Area together with the frames
glass and furniture of them and
(d) the whole of all non-load-bearing walls or partitions wholly within
the Area and
(e) all Service Media within the Area and which serve the Area exclusively
and
(f) all London Switch's fixtures and fittings from time to time in the
Area;
"Particulars" means the Lease and Services Agreement Particulars comprising
the front sheet to this Lease;
"Rent" means the annual rent stated in the Particulars payable in respect
of the grant of this Lease to the Customer and the provision of the
Services by London Switch;
"Services" means the services to be provided by London Switch pursuant to
this Lease as described in the Services List, together with any additional
services to be provided by London Switch to the Customer in accordance with
Clause 6.1;
"Services List" means the list of Services attached to this Lease;
"Service Media" means sewers drains pipes wires cables conduits and other
conducting media;
"Term" means the term of this Lease as stated in the Particulars;
1.3 The Particulars form part of this Lease but the headings to clauses are
inserted for convenience only and shall not affect the interpretation or
construction of this Lease.
1.4 Words importing the singular shall include the plural and vice versa. Words
importing a gender include every gender and references to persons include
an individual, company, corporation, firm or partnership.
4
<PAGE>
1.5 All sums payable hereunder are exclusive of VAT or any other applicable tax
or duty payable upon such sums which shall be added if appropriate at the
rate prevailing at the relevant tax point.
1.6 The words and phrases "other", "including" and "in particular" shall not
limit the generality of any preceding words or be construed as being
limited to the same class as any preceding words where a wider construction
is possible.
2 Demise
With effect from the Commencement Date London Switch hereby demises to the
Customer the Location, the Customer paying throughout the Term the Rent and
observing the obligations on its part in this Lease, together with:
2.1 the right to retain the Equipment in the Location for the duration of the
Term; and
2.2 the right to use the number of car parking spaces stated in the Particulars
on London Switch's land adjacent to the Building in the place or places
which London Switch will from time to time designate; and
2.3 the right to pass and repass at all times over the Common Areas
but excepting and reserving to London Switch the right on reasonable prior
notice to enter the Location at all reasonable times for the purpose of
laying and thereafter maintaining the Service Media situated in the voids
within the Location, London Switch causing no damage or destruction to the
Location and no interruption to the Customer's business carried on at the
Location, together with the right to free passage and running of services
or supplies to and from the remainder of the Building through such Service
Media; and
London Switch reserves the right to refuse to admit to the Building or
remove from the Building any employees and subcontractors of the Customer
whose admission or presence is or would be in the reasonable opinion of
London Switch detrimental to the commercial interest of London Switch
3 Inspection
London Switch may enter the Location at any time with or without workmen to
take a plan of and to view the state and condition of the Location and if
any defects disrepair or unauthorised alterations are found for which the
Customer is liable the Customer will within three months after written
notice (or immediately in case of emergency) repair and make good the
Location to London Switch's satisfaction and in case of default London
Switch its agents or contractors may enter the Location to carry out all
necessary works and the Customer shall repay the costs of those works to
London Switch on demand.
4 Fees and payment terms
4.1 The Customer undertakes to pay London Switch the Rent, such fee to be
payable in four equal instalments quarterly in advance on 1st January, 1st
April, 1st July and 1st October in each year of the Term, provided that the
first instalment shall comprise an appropriate proportion of the Rent
calculated with effect from the Rent Commencement Date until the end of the
then current quarter.
4.2 The Rent shall upon each anniversary of the Commencement Date increase by
4%.
4.3 If any sum due under this Lease is not paid on the due date then (without
prejudice to London Switch's other rights and remedies) London Switch
reserves the right to charge interest on such sum on a daily basis (after
as well as before judgement) from the due date to the date of payment at
the rate of 3% above the base rate from time to time of Lloyds Bank plc (or
of such other bank as London Switch may nominate from time to time.
5 Customer's obligations
The Customer shall be responsible for the consequences of any use of the
Equipment and agrees with London Switch:
5.1 To maintain the internal fabric and finishes on the internal facing walls
and the floor and ceiling of the Location including all doors and windows
(if any) within the Location and not to make any alteration or addition
(whether structural or non-structural) whatsoever in or on the Location
provided that the Customer may erect or dismantle demountable partitioning
inside the Location.
5.2 To maintain the Equipment in good working order unless any maintenance is
London Switch's responsibility under the Services and not to replace or
make any modification alteration or addition to the Equipment which results
in material increases to the floor loading heat output power consumption or
environmental conditions of the Equipment and/or the Location
5
<PAGE>
5.3 Not to use the Location except for the retention and use of the Equipment
in the Location nor to cause any injury, damage or nuisance to or,
interference with any person or property including (without limitation) the
Building and/or any equipment owned by third parties which may from time to
time be located in the Building.
5.4 To indemnify London Switch in respect of any injury or damage or, in the
case of equipment, interference as set out in Clause 5.3 caused directly or
indirectly to any person or property by the Equipment or by the Customer,
its employees, agents and sub-contractors irrespective of how such injury
or damage arises, provided that the Customer shall have no liability under
this Clause 5.4 to the extent that any injury or damage is caused by the
negligence of London Switch, its employees, agents or sub-contractors
carrying out the Services.
5.5 That, if any interference occurs between the Equipment and the equipment of
a third party and causes a dispute, that dispute shall be resolved by
London Switch in such manner as London Switch reasonably directs and the
Customer agrees to comply with London Switch's directions.
5.6 To indemnify London Switch against all costs, claims, demands, losses,
damages, expenses and liabilities of whatsoever nature (including without
limitation reasonable legal fees) suffered or incurred (directly or
indirectly) by London Switch in connection with any claim that the use or
possession of the Equipment or any computer programs used in connection
with the Equipment infringes the intellectual property rights (including
without limitation any patent, copyright, design right, registered design,
trade mark or service mark) of any third party.
5.7 Subject to Clause 9.4, at the end of the Term or on the earlier termination
of this Lease, to remove the Equipment from the Location and on demand to
pay any and all reasonable costs incurred by London Switch arising directly
or indirectly from the disconnection and removal of the Equipment.
5.8 To be responsible for the payment directly to the relevant carriers or
suppliers of all fees and charges payable in relation to the ordering
and/or installation of communications circuits from public
telecommunications carriers.
5.9 To be responsible for the payment of all fees and charges levied for or in
connection with the provision of an electrical supply to the Location which
supply shall be separately metered for the Location but the Customer's
responsibility under this Clause 5.9 shall (for the avoidance of doubt)
exclude the supply of electricity to the Common Areas the cost of which
shall be included within the Rent.
5.10 To observe such rules and regulations governing the Building and its use
and in particular method statements on cable management as London Switch
may make and notify to the Customer.
5.11 To comply with the requirements of any statutes or other legislation
applicable to the Location or its use and also with London Switch's health
& safety instructions issued from time to time relating to the Location or
its use including those relating to the disposal of rubbish and hazardous
material and ensure that the Location is kept tidy and safe at all times.
5.12 To pay the rates due in respect of the Location unless that is included as
one of the Services.
6 Provision of Services
6.1 Subject to the other provisions of this Lease and the Customer paying the
Service Fee London Switch hereby agrees with the Customer to provide the
Services to the Customer in accordance with this Clause 6, together with
such other additional services requested by the Customer which London
Switch agrees (at an additional cost to the Customer) in writing to
provide.
6.2 London Switch warrants and undertakes to the Customer that it shall perform
the Services with reasonable care and skill but London Switch does not
warrant or undertake that the Services will cause the Equipment to operate
without fault or interruption save that in carrying out the Services or any
other works to the Building London Switch will use its reasonable
endeavours not to interfere with the Equipment.
6.3 Subject to Clause 6.2, all other conditions, warranties, terms and
undertakings (whether express or implied, statutory or otherwise) relating
to the delivery, performance, quality, occurrence or reliability of the
Equipment or the Services are hereby excluded to the fullest extent
permitted by law.
7 Limitation of liability
7.1 Save as provided by statute the following provisions set out the entire
liability of London Switch (including any liability for the acts and
omissions of its employees, agents and sub-contractors) to the Customer
whether arising as a result of any breach of its contractual obligations
under this Lease or as a result of any false representation or statement or
tortious act or omission (including negligence) or otherwise howsoever. Any
breach, false representation or statement, act or omission falling within
this Clause 7.1 shall for the purpose of this Clause 7 be known as an
"Event of Default".
7.2 London Switch accepts liability to the Customer in respect of damage to the
tangible property of the Customer resulting from the negligence of London
Switch or its employees, agents or sub-contractors.
6
<PAGE>
7.3 The entire liability of London Switch in respect of any Event of Default
shall be limited to dmages of:
(a) (pounds)250,000 in the case of and Event of Default falling within
clause 7.2; and
(b) in the case of any other Event of Default, an amount equal to the Rent
current at the date of the occurrence of the Event or Default in
question,
7.4 London Switch shall not be liable to the Customer in respect of any Event
of Default for loss of profits, contracts or goodwill or any type of
special, indirect, consequential or economic loss (including loss or
damamge suffered by the Customer as a result of of an action brought by a
third party) even if such loss was reasonably forseeable or London Switch
had been advised of the possibility of the Customer incurring such loss.
8 Insurance
The Equipment shall at all times be at the Customer's entire risk and the
Customer shall be responsible for insuring the Equipment against all risks
(including without limitation, consequential loss and loss of profits
cover) as may be appropriate, taking into account the provisions of Clause
7.
9 Duration and termination
9.1 This Lease shall automatically terminate on the expiry of the Term (or if
earlier) by operation of this Clause 9.
9.2 London Switch may immediately terminate this Lease without payment of
compensation or other damages caused to the Customer solely by such
termination by giving notice in writing to the Customer if any one or more
of the following events happens:
(a) the Customer commits a material breach of any of its obligations under
this Lease which is incapable of remedy;
(b) the Customer fails to remedy, where it is capable of remedy, any
breach of its obligations under this Lease (save as to payment) within
a period of 30 days after having been required in writing to remedy or
desist from such breach;
(c) if any sum payable under this Lease is not paid within seven days of
its due date for payment in accordance with this Lease;
(d) the Customer is deemed to be unable to pay its debts within the
meaning of Section 123 of the Insolvency Act 1986, or calls a meeting
for the purpose of passing a resolution to wind it up, or such a
resolution is passed, or a resolution is passed by the directors of
the Customer to seek a winding up or administration order, or the
Customer presents, or has presented, a petition for a winding up
order, or presents, or has presented, a petition to appoint an
administrator, or has an administrative receiver, or receiver
appointed over all or any part of its business, undertaking, property
or assets.
9.3 Termination of this Lease shall be without prejudice to the other rights
and remedies of either party both under this Lease and at law.
9.4 Forthwith upon the termination of this Lease or the expiry of the Term, any
right to use the Equipment in the Location (or elsewhere in the Building)
shall automatically cease and the Customer shall make arrangements (at the
Customer's own cost) to remove the Equipment from the Building at a time to
be agreed with London Switch.
10 Confidentiality
10.1 Each party shall keep and procure to be kept secret and confidential all
information belonging to the other party disclosed or obtained as a result
of the relationship of the parties under this Lease and shall not use nor
disclose the same save for the purposes of the proper performance of this
Lease or with the prior written consent of the other party.
10.2 Neither party shall disclose the contents of this Lease to any third party
without the other party's prior written consent.
10.3 As part of its security procedures London Switch reserves the right to
refuse any person entry to the Building or the Location or access to the
Equipment including any employee in respect of whom the Customer has failed
to request rights of access from London Switch as well as any third party
telecommunications carrier or maintenance representative in respect of whom
the Customer has failed to give London Switch prior notice (with the name
of such person seeking entry or access and the date and time for which
entry or access to the Equipment is required). London Switch will not be
responsible for the consequences of any such refusal or failure or delay by
the Customer in notifying it of its access requirements.
7
<PAGE>
11 Force Majeure
11.1 If either party is affected by Force Majeure it shall immediately notify
the other party in writing of the matters constituting the Force Majeure
and shall keep that party fully informed of their continuance and of any
relevant change of circumstances whilst such Force Majeure continues.
11.2 The party affected by Force Majeure shall take all reasonable steps
available to it to minimise the effects of Force Majeure on the performance
of its obligations under this Lease.
12 Assignment and Sub-Contractors
12.1 Save as provided in this Clause 12, the Customer shall not be entitled to
assign, transfer, underlet or otherwise dispose of or deal with this Lease
in whole or in part or any of its rights under it.
12.2 London Switch shall not unreasonably withhold consent to an assignment of
this Lease as a whole where:
(a) the prosepective assignee has covenanted with London Switch that from
the date of assignment of this Lease to it for the remainder of the
Term it will pay the Rent reserved by and other charges payable under
this Lease and will observe and perform all the covenants and
obligations on the part of the Customer contained in this Lease such
covenant to be prepared by London Switch and completed at the cost of
the Customer; and
(b) if London Switch so requires the prospective assignee (unless it is a
company the whole of whose issued share capital is listed on a
recognised stock exchange in the United Kingdom) will provide a
guarantor or guarantors approved by London Switch (such approval not
to be unreasonably withheld or delayed) who will enter into a covenant
(if more than one jointly and severally) with London Switch in a form
to be prepared by London Switch.
12.3 London Switch shall not unreasonably withhold consent to an assignment of
the whole of this Lease but the parties have agreed that for the purposes
of Section 19(1)(A) Landlord and Tenant Act 1927 that London Switch may
withhold that consent unless the following conditions are satisfied;
(a) The Customer and any former tenant who by virtue of there having been
an "excluded assignment" (as defined in Section 11 Landlord and Tenant
(Covenants) Act 1995) has not been released from the Customer's
covenants of this Lease joins into and executes such licence to assign
as the Customer and covenants with London Switch as provided in it;
(b) Any sum due from the Customer to London Switch under this Lease is
paid and any other material breach of the Customer's covenants in this
Lease is remedied.
12.4 London Switch shall not unreasonably withhold or delay consent to an
underletting of the whole or part of the Location where:
(a) the prospective underlessee has covenanted with London Switch not to
underlet any further and otherwise to observe and perform all the
covenants and obligations on the part of the Customer contained in
this Lease (except for the covenant to pay Rent) so far as they apply
to the part being underlet such covenant to be prepared by London
Switch and completed at the cost of the Customer; and
(b) the proposed underlease is not granted at a premium nor at a rent less
(when calculated per square foot of the part being underlet) than the
then passing Rent (when calcuated per square foot of the Location as a
whole); and
(c) both the part of the Location being underlet and the remainder of the
Location are capable of separate occupation and beneficial use; and
(d) the total number of underlettings is no more than four at any time;
and
(e) the underlease shall be execluded from the operation of sections 24-28
Landlord and Tenant Act 1954.
12.5 London Switch shall be entitled to assign this Lease and shall also be
entitled to engage sub-contractors to carry out all or any of the Services,
but London Switch shall remain liable to the Customer under the terms of
this Lease for the provision of any Services by its sub-contractors.
13 General
13.1 This Lease contains the entire agreement and understanding between the
parties in relation to its subject-matter.
13.2 If at any time any part of this Lease (including any one or more of the
clauses of this Lease or any sub-clause or paragraph or any part of one or
more of these clauses) is held to be or becomes void or otherwise
unenforceable for any reason under any
8
<PAGE>
applicable law, the same shall be deemed omitted from this Lease and the
validity and/or enforceability of the remaining provisions of this Lease
shall not in any way be affected or impaired as a result of that omission.
14 Proper Law and Jurisdiction
14.1 This Lease and any disputes arising out of or in relation to this Lease
shall be governed by and construed in accordance with English law. The
parties agree to submit to the exclusive jurisdiction of the English
Courts. If the Customer shall be incorporated or registered outside England
and Wales its address stated in the Particulars shall be its address for
service for the purpose of proceedings brought in the English Courts.
15 Additional Terms and Conditions
15.1 If the Customer shall have paid the Rent in accordance with this Lease and
shall have complied with all of its obligations in this Lease then the
Customer may on not less than 3 months' prior notice in writing to London
Switch terminate this Agreement on the date which falls 6 months after [the
date when the Commitment Agreement has become unconditional] 2000.
15.2 London Switch may or not less than 3 months' prior notice in writing to the
Customer terminate this Agreement on the date which falls 6 months after
[the date when the Commitment Agreement has become unconditional] 2000.
AS WITNESS their acceptance of the terms and conditions set out in this Lease
the parties have signed the Particulars on the date set out in the Particulars.
9
<PAGE>
Exhibit 99.3
TERM SHEET FOR THE PURCHASE
OF 16% TO 51% OF DESERTEL
Purchaser: Telemonde, Inc. or EquiTel Communications Limited
Seller: Sheikh Ahmed Farid
Assets to be Purchased: A minimum of 16% and a maximum of 51% of the
issued and outstanding share capital of Desert
Telecommunications Services LLC (DeserTel) of PO
Box 954, Al Khuwair, PC133, Sultanate of Oman
Purchase Price: Using the Brown Shipley valuation of EquiTel of
$64 million as the minimum basis, Seller may
appoint an independent evaluator to determine the
value of EquiTel. the Purchaser must consent to
the independent evaluator chosen by the Seller,
which consent shall not unreasonably be withheld.
In the event Purchaser and Seller disagree with
the evaluation determined by the independent
evaluator, the parties agree to choose a mutually
acceptable arbitrator who will determine the final
valuation of EquiTel. The decision made by the
arbitrator shall be final and binding upon the
parties.
Additional Purchase Price: An additional sum of $5 million shall be paid to
the Seller for the control premium of DeserTel;
provided however, that the $5 million may be
increased or decreased based upon the
determination of the independent evaluator. In the
event Purchaser and Seller disagree with the
evaluation of the control premium determined by
the independent evaluator, the parties also agree
to submit to the arbitrator the amount of the
control premium, who will determine the final
figure. The decision made by the arbitrator shall
be final binding upon the parties.
Consideration The Purchase Price and the Additional Purchase
Price of $5 million (or such other amount
determined by the independent evaluator or
arbitrator, as the case may be) shall be payable
in restricted shares of common stock of Telemonde,
Inc.
<PAGE>
Agreed to and accepted this 8th day of November, 1999.
/s/ Kevin Maxwell
-----------------------------
Telemonde, Inc.
By: Kevin Maxwell
-------------------------
Its: CHAIRMAN
-------------------------
/s/ Sheikh Ahmed Farid
-----------------------------
Sheikh Ahmed Farid
<PAGE>
EXHIBIT 21
List of Subsidiaries
Registrant: Telemonde, Inc., a Delaware corporation
Wholly-owned subsidiaries of Telemonde, Inc.:
Telemonde Investments Limited, a British Virgin Islands company
EquiTel Communications Limited, a United Kingdom company
telemonde.net, S.A., organized in Switzerland
TGA (UK) Limited, a United Kingdom company
Telemonde Networks Limited, a United Kingdom company
Telecities Limited, a United Kingdom company
Wholly-owned subsidiaries of Telemonde Investments Limited:
Telemonde International Bandwidth Limited, a British Virgin Islands
company
Telemonde Bandwidth (Bermuda) Limited, a Bermuda company
Telemonde International Bandwidth (Bermuda) Limited, a Bermuda company
Subsidiaries of EquiTel Communications, Limited:
EquiTel Card Services Limited (100%), a United Kingdom company
Teleroute Limited (100%), a United Kingdom company
Telesource Limited (100%), a United Kingdom company
Desert Telecommunications Services LLC (49%), organized in Oman
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<PERIOD-START> MAR-10-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
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