Exhibit 10.50
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the
10 day of March, 1995 (the "Effective Date"), by and between INTERNATIONAL
TELECOMMUNICATIONS GROUP, LTD. (the "Company"), and INTERNATIONAL
TELECOMMUNICATIONS CORPORATION ("ITC" or, the "Subsidiary"), each a Delaware
corporation with offices at 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and RSL
COMMUNICATIONS, INC., a Delaware corporation (the "Investor") with offices at
000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000.
W I T N E S S E T H:
WHEREAS, the Investor has loaned to ITC, a 94%-owned subsidiary of
the Company, the sum of $1,000,000 (the "Loan") and as material consideration
for the Loan, the Company gave to the Investor a promissory note (the "Note");
and
WHEREAS, the Company desires to sell and the Investor desires to
purchase 66,667 shares of Convertible Preferred Stock of the Company at a
Purchase Price of $45.00 per share, subject to adjustment pursuant to Section
9.11 of this Agreement.
NOW, THEREFORE, in consideration for the agreements contained
herein, intending to be legally bound, the Company and the Investor hereby agree
as follows:
ARTICLE I
Purchase and Sale of Convertible Preferred Stock
Section 1.1 Authorization. The Company has or will have, prior to
Closing, authorized the sale and issuance of up to sixty-six thousand six
hundred sixty-seven (66,667) shares of its Series A Convertible Preferred Stock
(the "Convertible Preferred Stock"), having the rights, privileges, preferences
and restrictions as stated in the Amended and Restated Certificate of
Incorporation of the Company (the "Restated Certificate") set forth in Exhibit A
to this Agreement. (The Convertible Preferred Stock being sold and purchased
hereunder is sometimes referred to herein as the "Shares".)
Section 1.2 Sale and Issuance of Preferred Stock. Subject to the
terms and conditions set forth in this Agreement, the Investor agrees to
purchase at the Closing (as defined below), and the Company agrees to sell and
issue to the Investor at the Closing, sixty-six thousand six hundred sixty-seven
(66,667) shares of its Convertible Preferred Stock at a price per share of
$45.00, payable in cash, for a purchase price to the Investor of Three Million
Dollars ($3,000,000) (the "Purchase Price"), subject to increase, to a maximum
of $4,750,000 as provided in Section 9.11 of this Agreement. At Closing, the
Company and/or ITC shall pay to the Investor all amounts due on the Note,
including accrued interest up to the date of the Closing, from the proceeds of
the sale by the Company of the Convertible Preferred Stock to the Investor, in
full satisfaction of the Loan and Investor shall release its related security
interest and terminate the Promissory Note Conversion Agreement, dated December
1, 1994 and the related Security Agreement, dated December 1, 1994. The
Convertible Preferred Stock shall be convertible at any time (and if converted
prior to May 1, 1995, shall nevertheless be subject to Section 9.11 of this
Agreement) at the holder's option, into the Company's common stock, initially on
a one-for-one basis, representing initially 25% of the outstanding securities of
the Company (including all options which may be granted or exercised), on a
fully diluted basis. The Convertible Preferred Stock shall automatically convert
into the Company's Common Stock in the event of a Qualified IPO (as defined
below). The Convertible Preferred Stock shall have all the rights, privileges,
preferences and restrictions as stated in the Restated Certificate set forth in
Exhibit A attached hereto.
Section 1.3 Required Use of Proceeds. The Company shall utilize all
the proceeds of the Purchase Price as provided in Schedule 1.3 attached hereto.
ARTICLE II
Closing; Delivery
Section 2.1 The Closing. The purchase and sale of the Shares shall
take place at the offices of Rosenman & Colin, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, at 10:00 A.M., on March 10, 1995 or as soon as practicable
thereafter, or at such other place and at such other time or date as the Company
and the Investor shall agree upon (which place, time and date are designated as
the "Closing").
Section 2.2 Deliveries. At the Closing, the Company shall deliver to
the Investor a certificate or certificates representing the Convertible
Preferred Stock being purchased by the Investor, registered in its name, in
exchange for delivery to the Company by the Investor of the Purchase Price by
check made payable to the order of the Company or wire transfer to an account or
accounts previously designated in writing by the Company at least two days prior
to the Closing.
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ARTICLE III
Representations and Warranties of the Company
Except as set forth in the Schedules attached hereto, which describe
the nature of the exception in reasonable detail and which specifically refer to
the Section of this Agreement to which such exception applies (the "Schedules"),
the Company, notwithstanding the Investor's own audit or investigation, hereby
represents and warrants to the Investor as follows:
Section 3.1 Organization, Good Standing and Qualification. Each of
the Company and the Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and each has all
requisite corporate power and authority to own and operate its respective
properties and assets and to carry on its respective businesses as now
conducted. Each of the Company's other affiliates listed in Schedule 3.1 (the
"Other Affiliates") is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its respective organization and each has
all requisite power and authority to own and operate its respective properties
and assets and to carry on its respective businesses as now conducted. Each of
the Company, the Subsidiary and the Other Affiliates (collectively, the
"Entities") is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure to so qualify would have a material
adverse effect on its respective business, properties or financial condition.
Each of Intelco Caribe, Ltd., INTACS, Ltd., Intelco Jordan and Xxxxxxx
International Ltd. is a corporation or a partnership that has no assets,
conducts no business and is currently inactive.
Section 3.2 Capitalization and Voting Rights. The authorized capital
of the Company consists of:
(a) Preferred Stock. There are authorized 66,667 shares of
Preferred Stock (the "Preferred Stock"), all of which have been designated as
Series A Convertible Preferred Stock and have the designation, rights and
privileges as set forth in Exhibit A to this Agreement. No other shares of
Preferred Stock are authorized, issued or outstanding. The Restated Certificate
has been duly adopted and filed with the Secretary of State of the State of
Delaware. The shares of Series A Convertible Preferred Stock have been duly
authorized, and upon receipt by the Company of the Purchase Price at the Closing
will be validly issued and delivered, fully paid and nonassessable, and free
from restrictions on transfer except as set forth in this Agreement and each of
the other agreements referred to herein, or attached as Exhibits hereto, to be
entered into at or prior to the Closing (the "Other Agreements").
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(b) Common Stock. There are authorized one million (1,000,000)
shares of common stock, (the "Common Stock"), of the Company, par value $0.01
per share, of which 200,000 shares of Common Stock have been duly authorized,
validly issued and are outstanding. There are authorized three thousand (3,000)
shares of common stock, of ITC, no par value, of which 2,880 shares of common
stock have been duly authorized, validly issued and are outstanding. The
outstanding shares of common stock of both the Company and the Subsidiary are
fully paid, nonassessable and have been issued in compliance with all state and
federal securities laws except for matters addressed in Section 7.13 of this
Agreement. The Common Stock issuable upon conversion of the Convertible
Preferred Stock (the "Conversion Stock") has been duly and validly authorized
and reserved for issuance and, upon issuance in accordance with the terms of the
Restated Certificate, will be duly and validly issued, fully paid and
non-assessable and will be free of restrictions on transfer, other than
restrictions on transfer set forth in this Agreement and the Other Agreements.
(c) Except for (i) the conversion privileges of the
Convertible Preferred Stock, (ii) the rights provided in this Agreement and
(iii) except as provided in Schedule 3.2(c) attached hereto, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights, except that Incom (UK), Ltd., Xxxxxxx X. Xxxxxx and Xxxxxxx Xxxxxxx have
preemptive rights pursuant to an agreement with the Company) or agreements for
the purchase or acquisition from any of the Entities of any shares of its
respective capital stock. Except as provided in this Agreement, none of the
Entities is a party or subject to, any agreement or understanding, and to the
best knowledge of the Company, there is no agreement or understanding, between
any persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any of the Entities' voting securities or
securities convertible into such voting securities.
Section 3.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association or other business entity or have any subsidiaries and at the time of
the Closing will not be, a participant in any joint venture, partnership or
similar arrangement, except as specified in Schedule 3.3 attached hereto.
Schedule 3.3 includes a listing of the ownership, both as to type and
percentage, directly and indirectly owned by the Company in any of the other
Entities and sets forth the names and ownership of any of the shareholders of
the other Entities.
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Section 3.4 Authorization.
(a) Each of the Company and the Subsidiary has all corporate
and other requisite authority to execute, deliver, carry out and perform its
obligations under the terms of this Agreement and the Other Agreements to which
it is a party and all of the transactions contemplated hereunder and thereunder,
including, without limitation, the sale and issuance of the Convertible
Preferred Stock to the Investor.
(b) This Agreement and the Other Agreements, when executed and
delivered by the Company and/or the Subsidiary, will constitute valid and
binding obligations of the Company and/or the Subsidiary, enforceable in
accordance with their respective terms, except as (a) the enforceability thereof
may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or
similar laws affecting the enforcement of creditors' or secured parties' rights
or debtors' obligations generally, and (b) the availability of specific
performance or other equitable remedies may be limited by equitable principles
of general applicability (whether in a court of law or in equity).
Section 3.5 Governmental and Other Consents. No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental authority
or any other third party is required on the part of the Company or the
Subsidiary in connection with the Company's and the Subsidiary's valid
execution, delivery and performance of this Agreement or the Other Agreements,
or the offer, sale or issuance of the Convertible Preferred Stock or the
Conversion Stock by the Company to the Investor; provided, however, that prior
approval by the FCC may be required to enable the Investor to exercise certain
of its rights granted under this Agreement and the Other Agreements which may
give rise to a "transfer of control."
Section 3.6 Litigation; Compliance with Law. Except as provided on
Schedule 3.6 attached hereto, there are no actions, suits, proceedings or
investigations pending (a) against any of the Entities or against the assets,
properties or business of any of the Entities which could have a material
adverse effect on the business, properties, assets or financial condition of any
such Entity, including, without limitation, any action, suit, proceeding or
investigation pending or, to the knowledge of the Company, threatened in which
it is sought to restrain, prohibit, invalidate or put aside, in whole or in
part, the transactions contemplated hereby or by any of the Other Agreements,
(b) which questions the validity of this Agreement or any of the Other
Agreements or of any action taken or to be taken by any of the Entities pursuant
to or in connection with the provisions of this Agreement or any of the Other
Agreements and the transactions
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contemplated hereby or thereby or (c) which would otherwise prevent or
materially hinder the consummation of this Agreement or any of the Other
Agreements. None of the Entities is a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality that would reasonably be expected to have a material adverse
effect on the respective Entities' business, assets, properties or financial
condition. There is no action, suit, proceeding or investigation by any of the
Entities currently pending or, to the knowledge of the Company, threatened or
that such Entity currently intends to initiate, which, if determined adversely
to such Entity, could reasonably be expected to have a material adverse effect
on the business, assets, properties or financial condition of any such Entity.
"Material" for this purpose shall be a $150,000 claim in any one lawsuit.
"Pending" for this purpose shall mean an action, suit, proceeding or
investigation as to which the Entity shall have knowledge or received notice,
whether in proper form or not. Except as set forth on Schedule 3.6, none of the
Entities is in material violation of any applicable statute, law or regulation
relating to its or their business operations and no material expenditures will
be required in order to comply with any such existing statute, law or
regulation.
Section 3.7 Registration Rights. The Company is not a party to any
agreement or commitment which obligates the Company to register under the
Securities Act of 1933, as amended (the "Securities Act") any of its presently
outstanding securities or any of its securities which may hereafter be issued
other than pursuant to the Registration Rights Agreement attached hereto as
Exhibit D.
Section 3.8 Contracts; Certain Actions.
(a) Contracts. Except as set forth in Schedule 3.8(a) attached
hereto (which Schedule shall include all operating, carrier and service
agreements and like agreements), neither the Company nor the Subsidiary is a
party to any contract, agreement, lease, commitment or instrument, proposed or
otherwise, written or oral, absolute or contingent, other than (i) contracts
that were entered into in the ordinary course of business and that do not
involve more than $100,000, (ii) sales contracts entered into in the ordinary
course of business and (iii) contracts terminable at will by the Company or the
Subsidiary, respectively, with no more than ninety (90) days' notice without
cost or liability to the Company or the Subsidiary, respectively, and that do
not involve any employment or consulting arrangement and are not material to the
conduct of the Company's or the Subsidiary's respective business. For the
purpose of this Subsection, employment and consulting contracts, contracts with
labor unions, license agreements and any other
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agreements relating to the acquisition or disposition of the Company's
technology (other than standard end-user license agreements) shall not be
considered to be contracts entered into in the ordinary course of business.
Except as set forth on Schedule 3.8(a), all material contracts of the Company
and the Subsidiary, respectively, set forth on Schedule 3.8(a) attached hereto,
are valid and binding as to the Company or the Subsidiary respectively, and are
in full force and effect and shall remain in full force and effect upon and
after giving effect to consummation of the transactions contemplated herein,
except as (a) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, fraudulent conveyance or similar laws affecting the
enforcement of creditors' or secured parties' rights or debtors' obligations
generally, and (b) the availability of specific performance or other equitable
remedies may be limited by equitable principles of general applicability
(whether in a court of law or in equity).
(b) Certain Actions. Except as set forth in Schedule 3.8(b)
attached hereto, neither the Company nor the Subsidiary has, since January 1,
1995 (i) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
any indebtedness for money borrowed or any other liabilities individually in
excess of $50,000 or, in the case of indebtedness and/or liabilities
individually less than $50,000, in excess of $100,000 in the aggregate, (iii)
made any loans or advances to any person, other than advances for business or
travel expenses in aggregate of $5,000 or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights other than in the ordinary course of
business.
Section 3.9 Patents, Trademarks. There are no pending or, to the
knowledge of the Company, threatened claims against any of the Entities alleging
that the conduct of any of the Entities or their respective businesses,
infringes or conflicts with the rights of others under patents, trademarks,
service marks, copyrights and trade secrets, where any such infringement or
conflict could be reasonably expected to have a material adverse effect on the
business, assets, properties, prospects or financial condition of any of the
Entities, respectively. "Pending" for this purpose shall mean an action, suit,
proceeding or investigation as to which the Entity shall have knowledge or
received notice, whether in proper form or not. To the Company's knowledge, the
businesses of the Entities do not and will not infringe or conflict with the
rights of others, including rights under patents, trademarks, service marks,
copyrights and trade secrets where any such infringement or conflict could be
reasonably expected to have a material adverse effect on the business, assets,
properties, prospects or financial condition of such Entity and each of the
Entities owns or has rights to use
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all the patents, copyrights, trademarks, trade names, service marks, licenses
and rights with respect to the foregoing necessary for the operation of its or
their businesses. The Company is not aware of any infringement by a third party,
of any of the Entities' patents, licenses, trademarks, service marks, trade
names, copyrights, trade secrets or other proprietary rights where any such
infringement or conflict could be reasonably expected to have a material adverse
effect on the business, assets, properties, prospects or financial condition of
such Entity. Schedule 3.9 contains a complete list of all registered patents,
trademarks, trade names, service marks, licenses (excluding the Federal
Communications Commission ("FCC") licenses listed on Schedule 3.12), operating
agreements, other proprietary information and copyright registrations (and
applications pending for such proprietary rights) of the Entities.
Section 3.10 Compliance with Other Instruments. Except as set forth
on Schedules 3.8(a) and 3.10 attached hereto, neither the Company nor the
Subsidiary is in violation or default of any provisions of its respective
Certificate of Incorporation, as currently in effect and as in effect
immediately prior to and after the filing of the Restated Certificate or its
respective Bylaws, or in material violation or material default of any
instrument, judgment, order, writ, decree or oral or written contract or other
agreement to which it or the Other Affiliates is a party or by which it or the
Other Affiliates is bound (including, without limitation, any contract set forth
in the Schedules) or of any provision of federal, state or local statute, rule
or regulation applicable to the Entities where such violation or default could
have a material adverse effect on its respective business, assets, properties or
financial condition of such Entity. The execution, delivery and performance of
this Agreement and the Other Agreements, and the consummation of the
transactions contemplated hereby, will not result in any such violation or be in
conflict with the Restated Certificate, the Company's or the Subsidiary's Bylaws
or any such provision, or be in conflict with any instrument, judgment, order,
writ, decree, contract or other agreement and will not be an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Entities.
Section 3.11 Licenses and Permits. Except as set forth on Schedule
3.11 attached hereto, the Entities have all franchises, permits, licenses and
any similar authority necessary or legally required for the conduct of their
respective businesses as now being conducted by them. Except as set forth on
Schedule 3.11, the Entities are not in default in any material respect under any
of such franchises, permits, licenses or other similar authority.
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Section 3.12 Communications Licenses and Regulations. All of the
material certificates, licenses, permits, franchises and other authorizations
(collectively, the "Communications Licenses") issued to the Entities by the
communications regulatory authorities of any federal, state, local or foreign
government, including, but not limited to, the FCC and state public utility
commissions or like agencies (collectively, the "Regulatory Authorities"), are
listed in Schedule 3.12 attached hereto. The Company represents and warrants
that (i) each and every Communications License is in full force and effect
except as set forth on Schedule 3.12 attached hereto; (ii) the Communications
Licenses constitute all of the material certificates, licenses, permits,
franchises and authorizations necessary or legally required for the conduct of
the Entities' respective businesses as now being conducted by them; (iii) except
as set forth in Schedule 3.12 attached hereto, the Entities comply in all
material respects with any and all applicable federal, state, municipal or
foreign statutes, rules, regulations, policies, orders or ordinances
(collectively, the "Communications Laws") governing or relating to the
Communications Licenses; (iv) all necessary applications for renewal or
extension of any Communications License have been timely filed under the
relevant Communications Laws; (v) no allegations, complaints, charges,
investigations, renewal or revocation hearings, or other proceedings have been
initiated or, to the knowledge of the Company, threatened, nor has any
Regulatory Authority proposed, announced, issued or adopted any amendment,
modification or change to any Communications Law or Communications License, that
could have a materially adverse effect on the Entities' ability to continue to
hold and/or renew or extend any of the Communications Licenses; (vi) the
Entities hold no Communications Licenses issued by the FCC that would subject
any of the Entities to the foreign ownership restrictions established by Section
310(b) of the Communications Act of 1934, as amended, 47 U.S.C. Section 310(b),
and the FCC policies, rules, and regulations promulgated with respect thereto;
and (vii) the Entities have not entered into any agreement or relationship that
would cause one or more of them to be treated as an international "dominant
carrier" under the FCC policies, rules and regulations, with the possible
exception of International Telecommunications Europe, Ltd., which the FCC may
determine to be a dominant carrier.
Section 3.13 International Operating Agreements. All international
operating agreements, international service agreements or other contracts
involving, or intended to facilitate, the carriage of international
telecommunications traffic (the "Operating Agreements") among one or more of the
Entities and a carrier or other telecommunications entity headquartered outside
of the United States (the "Foreign Correspondent"), whether said Foreign
Correspondent is publicly or privately owned or an agency
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or instrumentality of a foreign government, are listed in Schedule 3.13. The
Company represents and warrants that (i) the Operating Agreements listed in
Schedule 3.13 represent all of the international operating agreements,
international service agreements and like contracts necessary or legally
required for the conduct of the Entities' respective businesses as such
businesses are now being conducted by them; (ii) each and every Operating
Agreement is in full force and effect; (iii) no Entity or, to the best of the
Company's knowledge and belief after reasonable inquiry, no Foreign
Correspondent is in material breach or default under any of the Operating
Agreements, nor has any allegation, charge or notice of breach or default been
served on any Entity by a Foreign Correspondent or on a Foreign Correspondent by
an Entity; (iv) each Operating Agreement complies in all material respects with
the applicable Communications Laws of the relevant Regulatory Authorities,
including, but not limited to, the FCC's international settlements policies,
rules, and regulations, and no allegation, complaint, charge, investigation or
other proceeding has been initiated or, to the knowledge of the Company,
threatened, by any Regulatory Authority or third party regarding the activities
of an Entity or, to the best of the Company's knowledge and belief after
reasonable inquiry, a Foreign Correspondent under an Operating Agreement; and
(v) no Regulatory Authority has proposed, announced, issued or adopted any
amendment, modification or change to any Communications Law that could have a
material adverse effect on the Entities' enjoyment of any of their rights under
an Operating Agreement.
Section 3.14 Corporate Documents. The Certificate of Incorporation
of the Company and of the Subsidiary and the Bylaws of the Company and of the
Subsidiary are in the form provided to the Investor or its counsel prior to the
execution of this Agreement.
Section 3.15 Title to Property and Assets; Inventories. (a) Each of
the Entities owns its material properties and assets free and clear of all
liens, charges and encumbrances, except such encumbrances and liens which arise
in the ordinary course of business and do not materially impair the respective
Entity's ownership or use of such property or assets and except for liens listed
on Schedule 3.15 attached hereto. With respect to any material property and
assets such Entity leases, such leases are valid and binding and enforceable in
accordance with their terms and such Entity is in compliance in all material
respects with such leases and, to the best of such Entity's knowledge, holds a
valid leasehold interest free and clear of any liens, claims or encumbrances.
(b) All inventories reflected on the most recent balance sheet
included in the Financial Statements (as defined in Section 3.18 hereof) are
current and readily merchantable, con-
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taining no amount of obsolete or damaged goods which have not been written down
or reserved in conformity with GAAP (as defined in Section 3.18 hereof). Such
inventories are accounted for at the lower of cost or market and with costs
determined on a first-in, first-out basis in accordance with GAAP.
Section 3.16 Employees and Labor. The Entities do not have any
Employee Benefit Plans, except for employee health benefit plans, as defined in
the Employee Retirement Income Security Act of 1974, as amended. The Entities
have no agreement or arrangement with any labor union, and no labor union has
requested or, to the best knowledge of the Company, has sought to represent any
of the employees, representatives or agents of the Entities. There is no strike
or other labor dispute involving the Entities pending, or to the best knowledge
of the Company threatened, which could reasonably be expected to have a material
adverse effect on the assets, properties, prospects, financial condition,
operating results, or business of the Entities. Attached hereto on Schedule 3.16
is a list of all the names of the current directors, officers and employees of
the Company and the Subsidiary.
Section 3.17 Insurance. The Entities have in full force and effect
(i) insurance on their respective assets and activities of a type customarily
insured, covering property damage and loss of income by fire or other casualty,
customarily used by businesses similar to the Company and the Subsidiary and
(ii) adequate insurance protection against all liabilities, claims and risks
against which it is customary for companies similarly situated as the Entities
to insure.
Section 3.18 Financial Statements. The Company has delivered to the
Investor the Subsidiary's balance sheet, statement of income and cash flows
including notes thereto at April 30, 1994 and for the fiscal year then ended
prepared by Delloitte Touche, LLP, and Intelco Europe's unaudited balance sheet
and statement of income at April 30, 1994, and for the fiscal year then ended,
and the Subsidiary's unaudited balance sheet at December 31, 1994, and pursuant
to Section 7.19 will, within 5 business days of the Closing, deliver to Investor
its unaudited statement of income for the eight (8) month period ended December
31, 1994, (together the "Financial Statements"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles in the
United States of America in effect from time to time ("GAAP") consistently
applied throughout the periods involved and with each other (except that all
Financial Statements do not contain all footnotes required by GAAP) and fairly
present the financial condition of the Company and its subsidiaries as of such
dates and the results of operations of the Company and its subsidiaries for such
periods and are reasonable representations of the Company's cash flow,
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results of operations and financial condition for their respective periods and
dates. Since December 31, 1994, there has not been (a) any material adverse
change to the financial condition of the company or the Subsidiary from that set
forth in the Financial Statements, (b) any damage, destruction or loss, whether
or not covered by insurance, which has materially adversely affected the
business or assets of the Company or the Subsidiary or (c) any event or
condition of any character whatsoever the occurrence of which materially
adversely affected, or threatens to materially adversely affect, the business,
assets, financial condition or results of operations of the Company or the
Subsidiary. Except as disclosed in the Financial Statements, none of the
Entities is a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation. The Company, on a consolidated basis, maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with GAAP.
Section 3.19 Undisclosed Liabilities. None of the Entities is
subject to any liabilities of any nature, whether absolute, contingent or
otherwise (whether or not required to be accrued or disclosed under SFAS No. 5)
which have had or can reasonably be expected to have a material adverse
financial effect on the respective Entity, except to the extent set forth or
provided for in the Company's consolidated Financial Statements. All debts,
liabilities and obligations incurred by the Entities, after the date of the
Financial Statements, were incurred in the ordinary course of business and are
usual and normal in amount.
Section 3.20 Tax Returns. (a) Except as set forth in Schedule 3.20,
all the Entities have timely filed all federal, state, local and material
foreign tax returns and reports and excise tax returns as required by law. These
returns and reports are true and correct in all material respects and reflect
all material liability for taxes of any nature whatsoever (including, without
limitation, all federal, state, local and material foreign income taxes,
estimated taxes, excise taxes, sales taxes, use taxes, transfer taxes,
communications taxes, gross receipts taxes, franchise taxes, employment and
payroll related taxes, property taxes and import duties, whether or not measured
in whole or in part by net income), together with any related material penalties
and material interest (any of the foregoing being referred to herein as a
"Tax"), for the periods covered thereby. The Entities have paid all their
respective Taxes and other assessments due, except those contested in good faith
and listed on Schedule 3.20. Except as set forth on Schedule 3.20, none of the
Entities has made any elections under the Internal Revenue Code of 1986, as
amended (the "IRC"), that would have a material adverse effect on the business,
properties or financial condition of the Company or the Subsidiary and that are
not
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disclosed in the Financial Statements provided to the Investor. Except as set
forth on Schedule 3.20, neither the Company nor the Subsidiary has ever had a
tax deficiency proposed or assessed against it by any federal, state or local
government tax authority and has not executed any waiver of any statute of
limitations on the assessment or collection of any Tax or governmental charge.
The Company and the Subsidiary have withheld or collected from each payment made
to each of its employees, the amount of all necessary Taxes and required
withholdings, and has paid the same to the proper Tax receiving officers or
authorized depositories. For purposes of this Section 3.20(a) only, "material"
shall mean amounts in excess of an aggregate of $50,000.
(b) Neither the Company nor the Subsidiary is currently being
audited by any taxing authority with respect to the returns and reports
described in subparagraph (a) above and there are no claims or assessments
pending against the Company or the Subsidiary, including without limitation, any
potential assessment of fines, penalties and interest for the failure to
properly file any excise tax returns. True and correct copies of any closing
agreements with respect to the Company or the Subsidiary which were entered into
with the Internal Revenue Service or any other taxing authority have heretofore
been furnished to the Investor.
Section 3.21 Returns and Complaints; Accounts Receivable. (a)
Neither the Company nor the Subsidiary has received any customer complaints
concerning alleged defects in its products (or the design thereof) or services
that, if true, would materially adversely affect the operations or financial
condition of the Company or the Subsidiary.
(b) All accounts receivable (other than those, if any, owing from
Investor or its affiliates) reflected in the most recent consolidated Financial
Statements and on the books of the Company and the Subsidiary at the close of
business at the Closing represented and will represent receivables (i) which
arose from bona fide transactions in the ordinary course of business, (ii) which
represent credit extended in a manner consistent with trade and credit practices
of the Company and the Subsidiary, (iii) which have an aggregate amount of
$544,877 which are greater than 90 days overdue and (iv) are fully collectable
at face value or were and are properly reserved against on the Financial
Statements in accordance and in conformity with GAAP.
Section 3.22 Transactions with Affiliates. Except for regular salary
payments, bonuses and fringe benefits under an individual's compensation package
with the Company or the Subsidiary, none of the officers, employees, directors
or other
13
affiliates of the Entities, or members of their families, is a party to any
material agreements, understandings, indebtedness or proposed transactions with
the Entities. Neither the Company nor the Subsidiary has guaranteed or assumed
any material obligations of the Company's officers, directors or employees.
Schedule 3.22 sets forth all salary, dividend, bonuses, perquisites and other
compensations in excess of $5,000, or distributions paid or made, or proposed to
be paid or made in the next three months, by the Entities to any officer of any
such Entity.
Section 3.23 Disclosure. The books and records of the Company and
the Subsidiary to which the Investor has been given access and to which it will
be given access at or prior to the Closing, are the true books and records of
the Company and the Subsidiary and truly and accurately reflect the underlying
facts and transactions which they purport to represent in all material respects.
Neither this Agreement nor the Other Agreements nor any other written statements
or certificates made or delivered in connection herewith, in each case taken
together with all such documents, nor any information that the Company or the
Subsidiary have provided the Investor, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.
Section 3.24 Brokerage. None of the Entities has dealt with, or incurred
liability for a fee to, any finder, broker, investment banker or financial
advisor in connection with any of the transactions contemplated by this
Agreement or the Other Agreements or the negotiations looking toward the
consummation of such transactions. The Company agrees to indemnify and hold
harmless the Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company, the Subsidiary or
any of its officers, employees or representatives is responsible.
Section 3.25 Other Agreements of Officers and Key Employees. No
employees whose participation in any aspect of the Company's business is deemed
by the Company to be of critical importance to the Company or the Subsidiary,
(the "Key Employees", such Key Employees being listed in Schedule 3.25) are
parties to, bound by, or subject to any agreement, contract, commitment or
restriction, including without limitation any nondisclosure or non-competition
agreements or legal restrictions on the use by such person of trade secrets or
proprietary information of others, which adversely affects, or which in the
future may (so far as the Company or the Subsidiary can now foresee) adversely
affect the business or operations of the Company or the Subsidiary or the right
of any such person to participate in the affairs of the Company or the
Subsidiary.
14
ARTICLE IV
Representations and Warranties of the Investor
The Investor hereby represents and warrants to the Company that:
Section 4.1 Investment Intent. The Shares to be purchased by the
Investor and the Conversion Stock into which the Shares are convertible, are
being acquired by the Investor solely for its own account, for investment
purposes only, and with no present intention of distributing, selling or
otherwise disposing of such Shares or Conversion Stock. The Investor understands
that the Shares and the Conversion Stock have not been registered under the
Securities Act by reason of a specific exemption from the registration
provisions of the Securities Act, the availability of which depends upon, among
other things, the bona fide nature of the Investor's investment intent and
accuracy of the Investor's representations, as expressed herein.
Section 4.2 Restricted Securities. The Investor understands that the
Shares it is purchasing and any Conversion Stock subsequently issued to the
Investor are or will be "restricted securities" under the federal securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances. The Investor understands that there is no
public market for the Shares (and the Conversion Stock) and that there may never
be a public market for such securities, and that even if a market develops for
such securities the Investor may never be able to sell or dispose of the Shares
or the Conversion Stock and may thus have to bear the risk of its investment in
such stock for a substantial period of time, or forever.
Section 4.3 Authorization. All corporate action on the part of the
Investor and its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance by the Investor of this
Agreement and the Other Agreements, the purchase of the Shares and the
performance of all of the Investor's obligations hereunder has been taken or
will be taken prior to the Closing.
Section 4.4 Organization and Standing. The Investor is a corporation
which is duly organized, validly existing and in good standing under the laws of
the State of Delaware. The Investor has all requisite legal and corporate power
to execute and deliver this Agreement and the Other Agreements, to purchase the
Shares hereunder and to carry out and perform its obligations under the terms of
this Agreement and the Other Agreements.
15
Section 4.5 Legend. It is understood that upon original issuance,
the certificates evidencing the Shares and the Conversion Stock shall bear the
following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
Section 4.6 Brokerage. The Investor has not dealt with, or incurred
liability for a fee to, any finder, broker, investment banker or financial
advisor in connection with any of the transactions contemplated by this
Agreement or the negotiations looking toward the consummation of such
transactions. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees or
representatives is responsible.
Section 4.7 Risks. Investor has evaluated and understands the risks
and terms of investing in the Company, and has received all the information it
has requested in writing from the Company and the Subsidiary.
ARTICLE V
Conditions to Investor Obligations at Closing
The obligations of the Investor to purchase and pay for the Shares
which it has agreed to purchase at the Closing and the other obligations of the
Investor under this Agreement are subject to the fulfillment at or prior to the
Closing of the following conditions, any of which may be waived in writing in
whole or in part by the Investor:
Section 5.1 Representations and Warranties. On the date of the
Closing, the representations and warranties of the Company and the other
Entities contained in Article III shall be true and correct in all material
respects with the same force and effect as though such representations and
warranties had been made at and as of the time of Closing, except to the extent
that any changes therein are specifically contemplated by this Agreement. The
Company and the Subsidiary shall deliver to the Investor at the Closing,
certificates of their respective Presidents to such effect.
16
Section 5.2 Issuance of Convertible Preferred Stock. The Company
shall have duly issued and delivered to the Investor a certificate for the
Convertible Preferred Stock being purchased by it pursuant to Section 1.2 of
this Agreement.
Section 5.3 No Material Adverse Changes. There have been no material
adverse changes in the assets, business or financial condition of any of the
Entities.
Section 5.4 Financial Projections. The Company's Financial
Statements and are in form and substance satisfactory to the Investor.
Section 5.5 Amendment to Employment Agreement. There has been,
effective as of the Closing, an amendment to the employment agreement between
the Company and Xxxxxxx X. Xxxxxx ("Xxxxxx"), as set forth on Exhibit B attached
to this Agreement.
Section 5.6 Amendment to Shareholders' Agreements. An agreement as
set forth in Exhibit C attached hereto (the "Amendment to Shareholders'
Agreement") amending and restating the International Telecommunications Group,
Ltd. Shareholders' Agreement dated as of September 1, 1994 (the Shareholders'
Agreement") by and between Xxxxxxx X. Xxxxxx, Xxxxxxx Xxxxxxx, Incom (UK), Ltd.,
the Company and the Investor, has been entered into.
Section 5.7 Performance. The Company and the Subsidiary shall have
performed and complied in all material respects with all agreements, obligations
and conditions contained in this Agreement that are required to be performed or
complied with by them on or before the Closing. The Company and the Subsidiary
shall deliver to the Investor at the Closing a certificate of their respective
Presidents to such effect.
Section 5.8 Qualifications; Legal Investment. All authorizations,
approvals, or permits, if any, of any governmental authority or regulatory body
of the United States or of any state or any other third party that are required
in connection with the lawful sale and issuance of the Shares pursuant to this
Agreement shall have been duly obtained and shall be effective on and as of the
Closing. No injunction or other order enjoining the sale of the Shares or the
proposed issuance of the Conversion Stock shall have been issued and no
proceedings for such purpose shall be pending or threatened by the Securities
and Exchange Commission (the "SEC") or any commissioner of corporations or
similar officer of any state having jurisdiction over this transaction. At the
time of the Closing, the sale and issuance of the Shares and the proposed
issuance of the Conversion Stock shall be legally permitted by all laws and
regulations to which the Company and the Investor are subject.
17
Section 5.9 Restated Certificate. The Company shall have adopted and
filed with the Secretary of State of Delaware the Restated Certificate as set
forth in Exhibit A to this Agreement.
Section 5.10 Registration Rights Agreement. The Company and the
Investor shall have entered into a registration rights agreement as set forth in
Exhibit D to this Agreement, pursuant to which the Company has granted
registration rights with respect to the Shares and Conversion Stock to the
Investor.
Section 5.11 Payment of Loan. The Company and/or the Subsidiary
shall have prepaid the principal amount of the Loan in the amount of $1,000,000
plus any accrued interest up to the date of the Closing, out of the proceeds of
the sale of the Shares to the Investor.
Section 5.12 Indemnity Agreements. The Company and Xxxxxx shall have
entered into an indemnity agreement as set forth in Exhibit E to this Agreement,
providing that Xxxxxx and the Company will jointly and severally indemnify the
Investor against any loss resulting from misstatements or omissions of material
facts in this Agreement and from losses to the Company or the Subsidiary
resulting from a breach by the Subsidiary of its covenant contained in the last
sentence of Section 5.17 of this Agreement; provided, however, that the
indemnity shall (a) not exceed an amount equal to the aggregate Purchase Price
plus accrued but unpaid dividends to the date of the indemnity payment, (b) not
include any incidental or consequential damages and (c) expire on the earlier of
(i) the date of the closing of the Company's Qualified IPO (as defined in such
agreement) or (ii) the date all the Convertible Preferred Stock is either
converted or redeemed pursuant to the Restated Certificate of the Company.
Section 5.13 [specifically omitted]
Section 5.14 Opinion of Counsel. The Investor shall have received
from the firm of Xxxxxxxx, Xxxxx & Xxxxxxxx, P.L.C., counsel to the Company and
the Subsidiary, a written opinion as set forth in Exhibit F attached to this
Agreement and otherwise in form and substance acceptable to the Investor.
Section 5.15 Closing Documents. The Company and the Subsidiary shall
have delivered to the Investor, unless waived in writing by the Investor:
(a) copies, certified by the Presidents or Secretaries of the
Company and the Subsidiary, of the resolutions duly adopted by the shareholders
of the Company and the Subsidiary authorizing the adoption of the Restated
Certificate of the Company and the Restated Certificate of Incorporation of the
18
Subsidiary, and the authorization and issuance of the Shares and the execution,
delivery and performance of this Agreement and the Other Agreements;
(b) a facsimile copy, certified by the President or Secretary
of the Company, of the Company's Restated Certificate of Incorporation and the
Subsidiary's Restated Certificate of Incorporation as amended through the date
of the Closing, and a copy, certified by the President or Secretary of the
Company and the Subsidiary, of its respective Bylaws as amended through the date
of the Closing; and
(c) such other documents relating to the transactions
contemplated by this Agreement as the Investor or the Investor's counsel may
reasonably request.
Section 5.16 Estoppel from MCI and other Lenders. The Company and
the Subsidiary shall have received and delivered to the Investor, for the
benefit and reliance of the Investor, an executed copy of a letter from MCI or
from the accounting firm of Deloitte & Touche LLP stating that ITC is current
and not in default in its arrangement to pay approximately $54,000 per month
pursuant to the terms of a 2 year promissory note in favor of MCI.
Section 5.17 Spin Off of Intelco Russia Corporation and
Intelco-Ukraine Ltd.. The Company shall have divested itself and/or its
subsidiaries of any ownership interests in Intelco Russia Corporation ("Intelco
Russia") and Intelco-Ukraine Ltd. ("Intelco Ukraine"), which ownership interests
shall be transferred to the stockholders of the Company (the "New Owners"), and
shall have received from the New Owners indemnification agreements, in form
satisfactory to the Investor, jointly and severally indemnifying the Company
against any and all claims, expenses or liabilities imposed on the Company as a
result of its ownership interest in such entities prior to their divestiture by
the Company. If ITC or the Company shall provide services to Intelco Russia or
Intelco Ukraine, such services shall be provided on a basis no less favorable to
ITC or the Company than is obtainable from an independent third party. Schedule
5.17 shall set forth the nature, cost and pricing of services proposed to be
rendered by ITC or the Company to Intelco Russia or Intelco Ukraine. The Company
and the Subsidiary covenant and agree with Investor that, should any receivable
from Intelco Russia or Intelco Ukraine be more than 90 days past due, ITC or the
Company shall suspend the provision of services to Intelco Russia or Intelco
Ukraine, respectively, until all receivables from Intelco Russia or Intelco
Ukraine, respectively, are paid in full. In addition, the Company agrees that it
will not engage in any business activity with EEST-Russia, unless
19
prior approval of the Executive Finance Committee of the Board of Directors of
the Company has been obtained.
Section 5.18 Expenses. The Company shall reimburse the Investor for
all fees and expenses relating to the transactions contemplated herein incurred
by Investor, as provided in Section 9.1 of this Agreement.
Section 5.19 Excise Tax. The Company and the Subsidiary shall have
filed all required excise tax returns and shall have paid all excise taxes due
to taxing authorities, and shall have presented to Investor evidence
satisfactory to it of such filings and payments.
Section 5.20 Amendment of By-Laws of the Company. (i) Article XIII,
Section 3 of the Company's By-Laws shall have been amended and restated as
follows:
The President, any Executive Vice President or any Vice President,
and the Secretary, the Treasurer, any Assistant Secretary or any
Assistant Treasurer, or any other officer designated by the Board of
Directors, but only in accordance with specific direction from the
Board of Directors, may vote and/or sign on behalf of the
Corporation proxies to vote or written consents upon shares of stock
of other companies standing in the name of the Corporation.
(ii) Article V, Section 1 of the Company's By-Laws entitled Executive Committees
shall have been amended to allow for committees to be established pursuant to
the Restated Certificate attached hereto as Exhibit A.
Section 5.21 Restated Certificate of Subsidiary. The Subsidiary
shall have adopted and filed with the Secretary of State of Delaware a Restated
Certificate of Incorporation which shall amend Article Seventh of the
Subsidiary's Certificate of Incorporation giving the shareholders of the
Subsidiary alone the power and the right to amend the By-laws of the Subsidiary.
Section 5.22 Amendment of By-laws of Subsidiary. The Investor shall
have received evidence satisfactory to it that the By-laws of the Subsidiary
have been amended to require the approval and consent of the shareholders of the
Subsidiary on Subsidiary matters analogous to those requiring the vote of 33
1/3% of the holders of the Preferred Stock of the Company.
20
ARTICLE VI
Conditions of the Company's Obligations at Closing
The obligations of the Company under this Agreement are subject to
the fulfillment at or prior to the Closing of the following conditions, any of
which may be waived in writing in whole or in part by the Company:
Section 6.1 Representations and Warranties. On the date of the
Closing, the representations and warranties of the Investor contained in Article
IV shall be true and correct in all material respects with the same force and
effect as though such representations and warranties had been made at and as of
the time of Closing, except to the extent that any changes therein are
specifically contemplated by this Agreement. The Investor shall deliver to the
Company at the Closing a certificate of its President and Chief Financial
Officer to such effect.
Section 6.2 Performance. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied in all material respects
with by such Investor on or before the Closing, including payment to the Company
of the Purchase Price set forth in Section 1.2 of this Agreement. The Investor
shall deliver to the Company at the Closing a certificate of its President and
Chief Financial Officer to such effect.
Section 6.3 Release of Security Interest. Upon payment of the Loan
at Closing, Investor shall release its security interest in connection with the
Loan and terminate the related Promissory Note Conversion Agreement, dated
December 1, and the Security Agreement, dated December 1, 1994.
ARTICLE VII
Covenants of the Company
Section 7.1 Delivery of Financial Statements and Other Information.
The Company shall prepare and deliver to the Investor:
(a) Annual Financial Statements. Within ninety days (90) days
after the end of each fiscal year of the Company, an audit report including
consolidated financial statements prepared in accordance with GAAP, certified by
an independent public accounting firm of nationally or regionally recognized
standing selected by the Company, and a copy of such independent public
accounting firm's "management letter" to the Company. Such report shall be
accompanied by a statement from the Company's independent auditors regarding
compliance by the
21
Company with the terms of this Agreement, the Preferred Stock, the Shareholders'
Agreement and the Amendment to Shareholders' Agreement.
(b) Quarterly Reports. Within forty-five (45) days after the
end of each quarter, an unaudited consolidated income statement, statement of
cash flows and balance sheet of the Company for and as of the end of such
quarter, and with year-to-date figures, comparison to budget and variances. Each
quarterly report shall include an analysis prepared by the Company of the
figures set forth therein. Each quarterly report shall be accompanied by a brief
written report of the Company's President discussing operations, problems and
achievements during the subject quarter and discussing Company goals for the
ensuing quarter or quarters, as considered appropriate by the President.
(c) Monthly Reports. Within thirty (30) days after the close
of each month, an unaudited consolidated income statement, statement of cash
flows and balance sheet of the Company for and as of the end of such month.
(d) Annual Budget. Not later than (30) days prior to the
beginning of each fiscal year, a proposed annual budget and business plan of the
Company and the Subsidiary for such fiscal year approved by the Board of
Directors of the Company and the Subsidiary, including a projected consolidated
income statement, statement of cash flows and balance sheet, a brief written
description of the Company's and the Subsidiary's strategy to achieve the
budgeted figures for such fiscal year by the Presidents of the Company and the
Subsidiary, respectively, reports of adverse developments, copies of management
letters, communications with stockholders or directors and press releases.
(e) Board Materials. All written information including, but
without limitation, reports of adverse developments, copies of management
letters, communication with stockholders or directors and press releases,
provided to the Board of Directors of the Company and a written summary of all
material which is presented orally to the Board of Directors if a representative
of the Investor is not present at the Board of Directors meeting in which such
information is provided or presented to the Board of Directors.
Section 7.2 Inspection. The Company and/or the Subsidiary shall
permit the Investor to visit and inspect its respective properties, to examine
its respective books of account and records and to discuss the Company's or the
Subsidiary's affairs, finances and accounts with its officers, all at such
reasonable times and for such duration so as not to interfere with the Company's
or the Subsidiary's respective normal operations as may be requested by the
Investor; provided, however,
22
that with respect to any requested audit separate from that required by Section
7.1(a), such right shall be exercised at Investor's expense as to each Entity
and shall be available not more than once per year.
Section 7.3 Termination of Information and Inspection Covenants.
Except as otherwise provided herein, the covenants set forth in Section 7.1,
Section 7.2 and Section 7.6 of this Agreement shall terminate and be of no
further force or effect upon the earliest to occur of (i) the date on which the
sale of securities for an aggregate offering price to the public of not less
than $25,000,000 and a price per share (excluding underwriters' commissions and
expenses) of not less than 250% of the conversion price per share of the
Preferred Stock then in effect, pursuant to a registration statement filed by
the Company under the Securities Act in connection with the firm commitment
underwritten offering of its securities to the general public (the "Qualified
IPO") is consummated and (ii) the date the Investor's interest in the Company
equals 10% or less of the company's fully diluted equity.
Section 7.4 Proprietary Information. All executive officers of the
Company who join the Company after the date hereof shall execute a Proprietary
Information and Inventions Agreement in the form attached as Exhibit A-l to this
Agreement.
Section 7.5 Conduct of Business for Remainder of Fiscal Year. Prior
to May 1, 1995, except as otherwise consented to or approved by the Investor in
writing and except as otherwise agreed herein, none of the Entities shall sell,
lease or dispose of any of its respective assets or properties other than in the
ordinary course of business and shall not take any action which shall cause it
not to, in any material respect:
(a) operate its business in the ordinary course and use its
best efforts to (i) preserve its present business organization intact,
(ii) keep available the services of the present officers of the Entities,
(iii) preserve its present relationships with, and goodwill of, employees
and independent contractors (except to the extent of voluntary
terminations of employment), customers and suppliers of such Entity and
(iv) maintain in force all insurance policies with respect to the Company
or its assets or properties;
(b) maintain its books, accounts and records in the usual and
ordinary manner, and reflect income, expenses, assets and liabilities in a
manner consistent with its past practices;
(c) use its diligent efforts to conduct its affairs such
that all representations and warranties set
23
forth herein with respect to the Company will be true and correct at April
30, 1995 as if made at and as of April 30, 1995; and
(d) maintain all assets and properties of the Entities in
customary repair, order and condition, reasonable wear and tear excepted.
Section 7.6 Securities. Neither the Company nor any of the other
Entities shall issue any new securities with an aggregate fair market value in
excess of $500,000 without the consent of holders of 33 1/3% of the Convertible
Preferred Stock.
Section 7.7 Modification of Indebtedness. Without the consent of
holders of 33 1/3% of the Convertible Preferred Stock, neither the Company nor
the Subsidiary shall enter into any new loan arrangement calling for borrowing
in excess of $250,000 or modify any agreement as a result of which the terms of
the payment of any of its existing material indebtedness are amended, waived,
modified or refinanced or to increase the repayment obligations thereunder, or
so as to contain terms materially adverse to the Company or the Subsidiary as
compared to the terms in existence on the date hereof, provided that, this
Section 7.7 shall not survive if the Investor's interest in the Company equals
10% or less of the Company's fully diluted equity.
Section 7.8 Insurance. The Company shall maintain (i) insurance on
its assets and activities of a type customarily insured, covering property
damage and loss of income by fire or other casualty, in amounts reasonably
calculated to allow the Company to replace any of its material properties that
might be damaged or destroyed and (ii) adequate insurance protection against all
liabilities, claims and risks against which it is customary for companies
similarly situated as the Company to insure. In addition, the Company shall
obtain within 10 business days of the date of Closing (i) directors' and
officers' liability insurance in reasonable amounts (initially at least
$1,000,000) from established and reputable insurers and (ii) "Key Man" life
insurance on the life of Xxxxxx, payable to the Company, in the amount of at
least $2.5 million.
Section 7.9 Additional Investment. If the Closing of the
transactions contemplated herein takes place, the Company shall promptly
thereafter initiate and conduct in good faith, negotiations whereby the Company
shall increase the Subsidiary's authorized number of shares and offer 576 shares
of the Common Stock of ITC to Bezeq, The Israel Telecommunication Corp. Ltd., a
corporation organized under the laws of the State of Israel ("Bezeq"), for an
aggregate purchase price of $2,400,000, or such lesser number of shares at the
sole option of Bezeq, at a price of $4,166.67 per share of ITC's common stock;
provided, however,
24
that the Company shall not be required to keep such an offer open pursuant to
this Section 7.9 after April 30, 1995 and provided, further, that such purchase
price and amount shall be subject to adjustment in the same manner as is
provided in Section 9.11 with respect to the Investor's purchase of equity
securities of the Company.
Section 7.10 Proprietary Rights. The Entities shall prior to May 1,
1995, take all reasonable steps necessary or appropriate to safeguard and
maintain their respective material proprietary rights in each of the foregoing
trademarks, service marks, patents and other proprietary rights.
Section 7.11 Taxes. Each of the Entities shall, within 30 days
following the Closing, file all respective federal, state, local and material
foreign tax returns and reports required to be filed by law and which have not
been so filed, including without limitation, those as set forth in Schedule 3.20
of this Agreement. Each of the Entities shall take all steps necessary to timely
file all subsequent federal, state, local and material foreign tax returns and
reports as required by law.
Section 7.12 Transfer of Control Application. The Company shall,
within five business days after Closing, have caused ITC to file with the FCC a
request for approval of a transfer of control of ITC to the shareholders of the
Company ("Transfer of Control Application"). Prior to such filing, the Company's
FCC counsel shall consult closely with the Investor's FCC counsel regarding the
form and content of the Transfer of Control Application. The Company shall
diligently pursue FCC approval of the Transfer of Control Application and file
appropriate amendments to any pending FCC applications in which the Company is a
controlling party.
Section 7.13 Blue Sky Filings. The Entities shall, within 30 days
following the Closing, complete all required "Blue Sky" filings that have not
been completed as of such date.
Section 7.14 Filing of International and Intrastate Traffic Reports.
Investor shall, within 30 days following the Closing, have received evidence
satisfactory to it that all international traffic reports that are required to
be filed with the FCC have been filed and within 5 business days following the
Closing, have received evidence satisfactory to it that the Subsidiary has filed
an application with the Public Service Commission in the State of New York
("PSC") for authority to provide intrastate service. Within 90 days of receipt
of such authority, the Subsidiary shall file all necessary tariffs with the PSC.
25
Section 7.15 Removal of Liens. Investor shall, within 60 days
following the Closing, have received evidence satisfactory to it that the
Company has either had all the liens referred to in Schedule 3.16 attached
hereto removed or, that despite its utilization of its best efforts to secure
such removal, one or more such liens have not been removed.
Section 7.16 PTAT Consent to Assignment. ITC shall, within 10 days
following the FCC grant of the application of International Telecommunications
Europe, Ltd. ("Intelco Europe") for authority to provide service on the PTAT
Submarine Cable, have obtained the consent of Private Transatlantic
Telecommunications System, Inc., and/or Private Transatlantic Telecommunications
System (N.J.) Inc. (individually or collectively, "PTAT"), to the assignment
from the Subsidiary to Intelco Europe, of the following agreements between PTAT
and ITC: PTAT-l Submarine System Indefeasible Right of Use Agreement, dated as
of May 12, 1994; PTAT-l U.S.A. Backhaul Indefeasible Right of Use Agreement,
dated as of May 12, 1994; and PTAT Restoration Agreement, dated as of May 12,
1994. The Company shall provide the Investor with a copy, certified by the
Company to be true and correct, of each of the foregoing consents.
Section 7.17 Mercury Consent to Assignment. The Subsidiary shall
have obtained the consent of Mercury Communications Limited ("Mercury") to the
assignment from the Subsidiary to Intelco Europe of the following agreement
between Mercury and the Subsidiary: International Telecommunication Services
Agreement, dated as of May 10, 1994. The Company shall provide the Investor with
a copy, certified by the Company to be true and correct, of the foregoing
consent.
Section 7.18 Carrier's Group, Inc. Litigation. On or before June 1,
1995, the Company shall either (i) have obtained a written release from the
Carriers Group, Inc., signed by an authorized officer, with respect to any and
all claims that it had or has against the Company or the Subsidiary or (ii) the
Investor shall have received evidence satisfactory to it that the Company or the
Subsidiary is in full compliance with any and all agreements it has with the
Carriers Group, Inc.
Section 7.19 Unaudited Statement of Income. The Company will, within
5 business days of the Closing, deliver to Investor its unaudited statement of
income for the eight (8) month period ended December 31, 1994.
Section 7.20 Tariffs. Within ten (10) days after Closing, the
Subsidiary shall file a tariff transmittal with the Federal Communications
Commission setting forth new rates for international telecommunications
services. This transmittal, and all transmittals of the Subsidiary from the date
of Closing
26
through April 30, 1995, shall be approved by the Executive Finance Committee.
ARTICLE VIII
Confidentiality
Section 8.1 Key Employees. Each Key Employee will, prior to May 1,
1995, have executed an agreement (a copy of which has previously been
furnished), in which such employee agrees, among other things, (a) that for one
year after termination of his employment under any circumstances he will not
divulge, disclose, or communicate to any person, firm, or corporation any
information pertaining to the business of the Company and/or the Subsidiary, (b)
that for one year after termination of his employment under certain
circumstances he will not compete, in any location where the Company or the
Subsidiary shall have done business during the term of such employee's
employment, in the development, marketing, or service of equipment, products or
services similar to those which the Company of the Subsidiary designs, markets
or services during the period of the employee's employment, and that during such
one-year period he will not call upon any customer of the Company for the
purpose of soliciting or selling such equipment, products, or services (c) to do
all acts which are necessary to provide the Company or the Subsidiary with the
sole benefit of, exclusive ownership of, and all patents for any inventions or
improvements in things used or produced by the Company or the Subsidiary which
such employee may have made or discovered while employed by the Company and (d)
to spend 100% of his working time in fulfilling his duties and responsibilities
to the Company or the Subsidiary and in pursuing, on behalf of the Company, any
opportunities of which he may become aware which are related to the business of
the Company or the Subsidiary.
Section 8.2 Parties. The Entities and the Investor, respectively,
will keep confidential all information and documents obtained from the other and
in the event the Closing does not occur will promptly return such documents and
will not use such information for its own advantage, except to the extent that
(a) the information must be disclosed by law, (b) the information becomes
publicly available by reason other than disclosure by the party subject to the
confidentiality obligation, (c) the information is independently developed, (d)
the information is obtained from another source not obligated to keep such
information confidential or (e) the information is already publicly known or
known to the receiving party when disclosed.
27
ARTICLE IX
Miscellaneous
Section 9.1 Expenses. All fees and expenses relating to the
transactions contemplated herein incurred by the Investor, including, without
limitation, the negotiation and consummation of this Agreement and any related
agreements, those of the independent accounting firm of Deloitte & Touche, LLP
(or any other independent auditors for this purpose), any consultants engaged by
the Investor and of counsel to the Investor, any legal fees and expenses in
connection therewith, shall be reimbursed to Investor by the Company at Closing
upon presentation of satisfactory documentation reflecting such costs and the
Investor's payment thereof; provided, however, that the Company will not be
required to reimburse the Investor for aggregate costs and expenses exceeding
eighty-five thousand dollars ($85,000).
Section 9.2 Survival of Representations, Warranties and Covenants.
The representations, warranties, covenants and agreements of the Company and the
Investor contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing unless otherwise
provided in this Agreement, and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investor or the
Company. Investor's completion to its satisfaction of a customary due diligence
investigation shall in no way prevent the Investor from relying on the
representations and warranties contained herein.
Section 9.3 Publicity. None of the Entities or the Investor shall
release any information to any third party with respect to the terms of this
Agreement or the transactions contemplated hereby without the prior written
consent of the other party, other than as may be required by applicable law or
court order. Each party agrees to consult the other party as to the form and
content of all subsequent public announcements relating to this Agreement or the
transactions contemplated hereby.
Section 9.4 Successors and Assigns. Except as otherwise expressly
provided herein, this Agreement may not be assigned by any party hereto without
the consent of the other party hereto; provided, however, that the Investor may
assign its rights and obligations hereunder to a wholly-owned subsidiary of the
Investor. Except as otherwise expressly provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and permitted assigns of the parties (including any
transferee of any shares of Convertible Preferred Stock or of the Conversion
Stock). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective
28
successors and permitted assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
Section 9.5 Governing Law. The validity, interpretation and effect
of this Agreement shall be governed by the laws of the State of New York
applicable to contracts entered into and to be performed entirely within such
state. The Company hereby consents to the nonexclusive jurisdiction of all
courts in said State.
Section 9.6 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 9.7 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 9.8 Notices. (i) Any notice required or permitted to be
given under the terms and provisions of this Agreement, or by any law or
governmental regulation, shall be in writing and, deemed duly given if mailed by
registered mail, postage prepaid, addressed as follows:
(a) Any notice to the Investor shall be addressed to such
party at its address hereinabove set forth,
with a copy to:
Rosenman & Colin
000 Xxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxxxx X. Xxxx, Esq.
(b) Any Notice to the Company shall be addressed to such
party at its address hereinabove set forth,
with a copy to
Xxxxxxxx, Xxxxx & Xxxxxxxx, P.L.C.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
29
(ii) By giving the other party at least ten (10) days' prior
written notice, any party may, by notice given as above provided, designate a
different address or addresses for notices.
Section 9.9 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the shares of Convertible Preferred Stock purchased pursuant to
this Agreement (treated as if converted at the conversion rate then in effect).
Any amendment or waiver effected in accordance with this Section shall be
binding upon each holder of any securities purchased under this Agreement at the
time outstanding (including securities into which such securities are
convertible), each future holder of all such securities and the Company. The
Company shall not amend its Certificate of Incorporation or its By-Laws so as to
alter, amend or change any terms of the Convertible Preferred Stock or the
Conversion Shares, including the preferences or rights thereof, unless 33.33% of
the holders of the Convertible Preferred Stock and Conversion Shares shall first
approve such amendment in writing.
Section 9.10 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision or
provisions shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision or provisions were so
excluded and shall be enforceable in accordance with its terms.
Section 9.11 Additional Agreements; Valuation Formula. The parties
hereto further agree as follows:
(a) "New Company Valuation" shall be determined by a calculation
utilizing allowable revenue and prepaid calling cards. The allowable
revenue and prepaid calling card amounts for the purpose of such
calculation shall be determined as follows:
(i) Allowable revenues are those of the Company for the months of
February, March and April, 1995 multiplied by four (4) to
annualize; and,
(ii) As to prepaid calling cards, the greater of (A) 20% of the
contract value for the initial one year period provided in
prepaid calling card contracts submitted and approved by the
Company and signed by the other party thereto prior to April
30, 1995; or, (B) cash received by the Company from
30
May 1, 1994 to April 30, 1995 from these contracts.
The calculation of these two amounts form the basis for application
of the valuation formula, which is:
1.27 x (amount calculated in (i) + (ii)) = New Company
Valuation
The following shall be applied in calculating the above:
a. The revenue in (i) above will be determined in accordance
with GAAP;
b. Allowable revenue for purposes of (i) above shall exclude
revenues attributable to contracts which are covered by (ii),
above;
c. Prepaid calling card contracts will be counted only if they
are submitted from GTE International, GTE CODETEL, or are from
mutually agreed - upon creditworthy customers;
d. Reductions in allowable revenue for the period specified in
(i) above are permitted for credit memos and "uncollectible
receivables" to the extent they relate to revenues earned in
such period;
e. The revenue period will be audited under normal audit tests
that Delloite Touche, LLP conducts to insure correct audited
revenues;
f. Payment of additional monies for the shares, if required,
should be paid after Prior Notice and submission to Investor
of the audited revenue calculations with a completion date
estimated at 45 days after April 30, 1995;
g. Such payment will not be held awaiting final audited
financial statements which may not be available until July 30,
1995;
h. "Uncollectible receivables" shall be those receivables of
the Company generated in the February 1, 1995 through April
30, 1995 period as to which Delloite Touche, LLP, in
performing its normal audit checks, determines are
uncollectable.
(b) If the New Company Valuation is less than $12,000,000,
then at the option of the Company, the Company may, after presentation to
Investor of such audited information, and the details of the determination of
New Company Valuation, on 10 business days advance written notice (the "Prior
Notice"), require the Investor to purchase a number of shares of a new series of
convertible preferred stock of the Company, at a purchase price per share
determined as follows:
31
New Company Valuation
-------------------------------
No. shares of capital stock of Company outstanding
provided, that the Company may not require Investor to purchase in excess of
$1,750,000 aggregate value of such convertible preferred stock at a purchase
price per share as determined above. The terms of such new series of convertible
preferred stock shall be identical to those of the Convertible Preferred Stock
except that its initial conversion price per share shall be the purchase price
per share for such new shares. It is understood and agreed that pursuant to the
anti-dilution provisions of the Convertible Preferred Stock, its Conversion
Price will be adjusted if new shares of convertible preferred stock are issued
to Investor pursuant to this Section 9.11(b).
(c) If the New Company Valuation is more than $12,000,000, then at the
option of the Company, the Company may, on Prior Notice, require that the
Investor pay additional consideration for the 66,667 shares of Convertible
Preferred Stock purchased pursuant to this Agreement, with such additional
consideration to be the amount in excess of $45 per share determined as follows:
New Company Valuation
-------------------------------
No. shares of capital stock of Company outstanding
provided, however, that the total additional consideration to be paid by
Investor pursuant to this formula shall not exceed $1.75 million. For example,
if the New Company Valuation is $14,000,000 then such amount divided by 266,667
(the number of shares of capital stock outstanding after issuance of 66,667
shares of Convertible Preferred Stock) is $52.50. Thus, Investor may be required
to pay an additional $7.50 per share on each of the 66,667 shares of Convertible
Preferred Stock previously purchased. Since this amount is less than $1.75
million, the full additional amount may be required to be paid to the Company at
its option.
(d) As a condition precedent to Investor's obligations under this Section
9.11, the Company and the Subsidiary shall deliver a certificate of its
respective Presidents certifying that the Company and the Subsidiary have
complied in all material respects with all agreements, obligations, covenants
and conditions contained in this Agreement that are or were required to be
performed or complied with by each of them prior to the date of such
certificate.
Section 9.12 Entire Agreement. This Agreement, the Exhibits hereto,
the Other Agreements and the other documents required to be delivered pursuant
hereto, constitute the entire understanding and agreement between the parties
with regard to
32
the specific subject matter hereof and no party shall be liable or bound by any
representation, warranty, covenant or agreement except as specifically set forth
herein. Any previous agreement (whether written, oral or implied) among the
parties relative to the specific subject matter hereof is superseded by this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
INTERNATIONAL TELECOMMUNICATIONS GROUP, LTD.
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Name: Char1es X. Xxxxxx
Title:
INTERNATIONAL TELECOMMUNICATIONS CORPORATION
By /s/ Xxxxxxx X. Xxxxxx
------------------------------------------
Name:
Title:
RSL COMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxxx
------------------------------------------
Name:
Title:
33
SCHEDULE 1.3
USE OF PROCEEDS
ITEM AMOUNT
---- ------
Equipment $ 680,000
Leasehold Improvement $ 325,000
Letters of Credit/Deposit $ 750,000
Vendor Debt $ 800,000
Network and Network Installation $ 400,000
Labor $ 795,000
Payment of RSL Loan $1,000,000
TOTAL $4,750,000
SCHEDULE 3.1
OTHER AFFILIATES
Affliate Company Ownership
-------- -----------------
International Telecommunications Europe, Ltd. 50% Common Stock
ITG also holds a 50% common stock interest in Intelco Russia Corporation,
and a 47.5% common stock interest in Intelco-Ukraine, Ltd. These two
subsidiaries are excluded from the definition of "Affiliates" and "Subsidiaries"
since they will be spun off from ITG on or prior to Closing pursuant to Section
5.19 of the Stock Purchase Agreement.
Also excluded from the definition of Affiliate are Intelco Caribe, Ltd.
and INTACS, Ltd., two Delaware corporations incorporated by Xxxxxxx X. Xxxxxx
in which there are currently no shareholders.
By Memorandum of Understanding as of July 1, 1993, ITG and Braticom Corp.
agreed to participate in a joint venture to be called Xxxxxxx International,
Ltd. ITG has never been issued shares in this company.
By agreement executed April 12, 1993, as revised August 25, ITG, Xxxxxx X.
Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxxx X. Xx-Xxxxxxxx formed Intelco Jordan, a
partnership.
Neither Xxxxxxx International, Intelco Jordan, Intelco Caribe nor INTACS
is currently doing business.
SCHEDULE 3.2(C)
OPTIONS
By resolution adopted March 6, 1995, the Subsidiary has approved a Stock
Option Agreement to give Xxxxxxx Xxxxx, an employee of the Company, an option to
acquire 1% of the Subsidiary's outstanding common stock (30 shares).
The shareholders of ITG and ITC have certain rights set forth in their
respective Shareholders Agreements.
SCHEDULE 3.3
SUBSIDIARIES
Subsidiary Company Ownership
---------- -----------------
International Telecommunications Corporation 94% Common Stock
International Telecommunications Europe, Ltd. 50% Common Stock
The remaining shareholders of International Telecommunications
Corporation are Xxxxxx X. Xxxxxxxxxx, Xxxxxx X. Xxxxxxxxxx, Xxxxxx Xxxxxxxxxx
and Xxxxxxx Xxxxxx. The remaining shareholder of International
Telecommunications Europe, Ltd. is Incom, Ltd., an Israeli corporation.
ITG also holds a 50% common stock interest in Intelco Russia Corporation,
and a 47.5% common stock interest in Intelco-Ukraine, Ltd. These two
subsidiaries are excluded from the definition of "Affiliates" and "Subsidiaries"
since they will be spun off from ITG on or prior to Closing pursuant to Section
5.19 of the Stock Purchase Agreement.
Also excluded from the definition of Affiliate are Intelco Caribe, Ltd.
and INTACS, Ltd., two Delaware corporations incorporated by Xxxxxxx X. Xxxxxx
in which there are currently no shareholders.
The Company is also signatory to a Partnership Agreement, dated April 12,
1993 as revised August 25, 1994, with Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx and
Xxxxx X. Xx-Xxxxxxxx. The Agreement forms an Entity, Intelco Jordan, to supply
telecommunications services in Jordan. Pursuant to the Agreement, profits in the
partnership will be divided as follows: ITG - 61%; Xxxxxx - 13%; Xxxxxx - 13%;
Al-Mahasneh - 13%. This partnership is excluded from the definition of Affiliate
and Entity.
By Memorandum of Understanding as of July 1, 1993, ITG and Braticom Corp.
agreed to participate in a joint venture to be called Xxxxxxx International,
Ltd. ITG has never been issued shares in this company.
Neither Xxxxxxx International, Intelco Jordan, Intelco Caribe nor INTACS
is currently doing business.
SCHEDULE 3.6
LITIGATION
Pending Litigation
IDB Communications Group, Inc. v. ITC, Supreme Court, Kings County, New
York, Index 1999 of 1994. Breach of contract action for telecommunications
services rendered; claim of $1,364,266.58
US Sprint, Inc. v. ITC, Supreme Court, New York County, New York, Index
122087 of 1994. Breach of contract action for telecommunications services
rendered, claim of $227,537.22
Threatened Litigation
The Carrier Group, Inc. has threatened to xxx ITC for breach of
contract for telecommunications services in the amount of $1,824,046.12.
Regulatory Compliance
See Schedules 3.12 and 3.13.
SCHEDULE 3.8(a)
CONTRACTS
I. Operating Agreements
International Telecommunications Corporation has International
Telecommunications Services Agreements between International Telecommunications
Corporation ("ITC") and (1) Euronet Digital Communications (1992), Ltd.; (2)
Datacom, S.A.; (3) Chilesat, S.A.; (4) International Communication Management
Services; (5) MIG International; (6) Fonetel Global Communications A.B.; (7)
Russian Satellite Communications Company; (8) Jordan Telecommunications
Corporation; (9) Mercury Communications Limited; and (10) Compania Dominicana De
Telefonos, C. for A.
II. Employment Contract
Employment Agreement between ITG and Xxxxxxx X. Xxxxxx
III. Carrier Contracts
A. EconoPhone, Inc.
1. Global Hub Tariff, executed by ITC and EconoPhone, Inc.
2. Service Agreement Addendum No.1, dated September 28, 1992,
ITC and EconoPhone, Inc.
3. Service Agreement Addendum No.2, dated May 15, 1993, ITC
and EconoPhone, Inc.
4. Assignment Agreement (for one PTAT IRU circuit), dated June
27, 1994, ITC and EconoPhone, Inc.
B. Melbourne International Communications, Ltd.
1. Global Hub Tariff, five year term, executed by Xxxxxxx Xxxxxx,
General Manager of MICL (October 20, 1994) and Xxxxxxx Xxxxx,
ITC (October 31, 1994)
2. Addendum No.1, executed by Xxxxx, October 31, 1994 and
Tormos, October 20, 1994 - Initial 3 year term
3. Switched Service Agreement, executed December 17,1993 by
Xxxxx X. Xxxxxxxx, Director of Operations, and December 21,
1993, Xxxxx-six
2
month term.
C. Dominican Communications, Inc.
1. Global Hub Tariff, 3 year term, executed by Xxxxxx, November 11,
1994 and Xxxxx Xxxxx, COO of DCI, October 27, 1994
2. Addendum No.1 to Service Agreement - 3 year term
D. Open Networks Global Services
1. Global Hub Tariff 3 year term, signed December 9, 1993, Xxxxxx,
November 23, 1993 by Xxxxxx X. Xxxxx, President of ONGS
2. Addendum No.1 to Service Agreement, dated November 3, 1993,
signed November 23, 1993 by Xxxxx, December 9, 1993 by Xxxxxx, 3
year term
3. Support Services Agreement, dated October 26, 1993, executed
November 23, 1993 by Xxxxx, December 9, 1993 by Xxxxxx - 3 year
term
E. Interactive Telephone Company
1. Global Hub Tariff, executed July 1, 1993 by Xxxxxx and Xxxxxx
Xxxxxxxx, CEO of Interactive, 5 year term
2. Addendum No.1, signed by Xxxxxx and Xxxxxxxx July 1, 1993 - 3
year term
3. Support Services Agreement, 3 year term, signed July 1, 1993 by
Xxxxxx and Xxxxxxxx
F. Telecommunity
1. Global Hub Tariff, 5 year term, signed July 25, 1994 by Xxxxxx and
July 20, 1994 by Xxxxxxxx X. Xxxxx, President of Telecommunity
a. Termination Rates as of February 1, 1995, executed January
25, 1995 by Xxxxxxx Xxxxx and Xxxxx
G. Datacom
1. Global Hub Tariff, 5 year term, executed July 15, 1992 by
Xxxxxx, July 13, 1992 by Xxxxxx Xxxxxx, President of Datacom
3
2. Service Agreement Addendum No.1, signed by Xxxxxx and Xxxxxxxx
July 10, 1992
3. Confidentiality Agreement dated July 13, 1992
H. Communications Telesystems International
1. Global Hub Tariff, month to month, signed January 20, 1995
by Xxxxxx X. Xxxxx, CTI, and February 2, 1995 by Xxxxx
2. Addendum to Service Agreement, executed by Soren and Xxxxx,
January 20, 1995, month to month
IV. Prepaid Card Contracts
A. Prepaid Card Distributor Agreement, dated January 5, 1995,
between ITC and Viaggiando, executed by Xxxxxx and Xxxxxxx Xxxxx,
Managing Director of Viagginado, one year term
B. Prepaid Card Distributor Agreement, dated January 5, 1995,
between ITC and CIT Tours Corporation, executed by Xxxxxx and
Xxxxxx Xxxxx, President of CIT Tours, 2 year term
V. Agent Agreements
A. Master Agent Sales Agreement, dated July 2, 1992, between ITC and
Three V Enterprises, signed by Rebetti and Three V. Enterprises,
Inc., by President, 3 year term
B. Master Agent Sales Agreement, dated December 24,1992 between ITC
and Xxxxxxxx X. Xxxxx of Consortium Communications Services,
Inc., signed by Xxxxx, effective until cancelled by either party
C. Confidentiality Agreement between ITC and Xxxxx, Inc., signed
February 5, 1991
D. Partnership Agreement for Intelco Jordan executed April 12, 1993,
as revised August 25, 1994, executed by ITG, Xxxxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxx, and Xxxxx X. Xx-Xxxxxxxx
E. Representative Agent Agreement, dated November 8, 1993, between
ITC and Xxxx X. Abu-Odeh (Jordan)
4
F. Representative Agent Agreement, dated April 12, 1993, between ITC
and Xxxxxx Xxxxxx (Xxxxxx)
VI. Vendor Contracts
A. PTAT-1 Submarine System Indefeasible Right of Use Agreement between
Private Transatlantic Telecommunications System, Inc. and ITC and
First Amendment thereto, dated May 12, 1994 -- 33 month payment
schedule for $669,144
B. PTAT-l U.S.A. Backhaul Indefeasible Right of Use Agreement
between Private Trans-Atlantic Telecommunications System (N.J.)
Inc. and ITC, with First Amendment thereto -- 33 month payment
schedule for $185,873
C. PTAT Restoration Agreement between ITC and Private Transatlantic
System, Inc.
D. Digital Satellite Service Agreement, dated April 1, 1993 between
ITC and Crescomm Transmission Services, Inc.
E. Contract between The Carriers Group, Inc. and ITC, executed
December 29, 1993 by Xxxxxxx Xxxxx and April 15, 1994 by Xxxxx
Xxxxx. The Subsidiary has terminated this Contract and The
Carriers Group has threatened action against ITC. ITC may be in
breach of this Contract, and/or the Contract may not be in force
due to the failure of The Carriers Group to have a tariff on file
in its own name at the FCC for the covered telecommunications
services.
F. GTE Spacenet Corp, March 11, 1994, payment schedule, total principal
$89,871.93 executed by Rebetti April 6, 1994 and by Spacenet April
27, 1994. CP has advised that payment schedule is based on oral
agreement and that no underlying note exists.
VII. Lease Agreements
A. Lease Agreement, dated August 28, 1991 between Telecommunications
Finance Group and ITC for Used DCO-CS and Peripheral Equipment --
Missing, but referenced in Certificate of Delivery and Acceptance.
1. Certificate of Delivery and Acceptance, May 2, 1992 --
$270,395
2. Certificate of Delivery and Acceptance, July 2,1992 --
$272,232.74
5
3. Certificate of Delivery and Acceptance, February 2, 1993 --
$437,067.19
4. Assignment of Purchase Order, August 27, 1991
5. Assignment of Purchase Order, February 2, 1993 (TFG assumes
ITC rights and liabilities)
B. Lease Agreement, dated November 30, 1992, between TFG (Lessor)
and ITC, 60 month term--no schedule of what is being leased
1. Certificate of Delivery and Acceptance, same date, for Siemens
Switch - $324,414.00
2. Software License Agreement, same date, between TFG and ITC
C. Lease Payment Schedule for TFG, dated February 2, 1995, total
$1,217,249.88
D. Term Lease Master Agreement between ITC and IBM Credit
Corporation (Not signed by IBM), with Supplement
E. Lease Agreement for 00 Xxxxxx Xxxxxx, made as of January 25, 1991
between Xxxxxx Telegraph Associates (landlord) and Vocall
Communications Corp. (tenant), with (a) Amendment to Lease, dated
March 19, 1991, between Xxxxxx and Vocall; (b) Second Amendment to
Lease, dated March 28, 1991, between Xxxxxx and Vocall; (c) Third
Amendment to Lease, dated April 30, 1991, between Xxxxxx and
Vocall; (e) Guaranty, dated January 25, 1991 between Hdson and
Tele-pro Communications Corp. (Guarantor); (f) Assignment of
Lease, executed August 31, 1992 by Vocall and ITC; and (g)
Landlord's Consent, dated September __, 1992, executed by all
parties.
VIII. Miscellaneous (including loans)
A. Option Agreement between ITG and RSL Communications, Inc., dated
December 1, 1994
B. Secured Term Promissory Note and Agreement, December 1,1994, with
RSL Communications
C. Promissory Note Conversion Agreement, dated December 1, 1994,
between ITG, ITC and RSL Communications
D. Security Agreement, dated December 1, 1994, between ITC and RSL
Communications
6
E. See Schedule 3.16 on loans and liens.
IX. Options
A. By resolution adopted March 6, 1995, the Subsidiary has approved a
Stock Option Agreement giving Xxxxxxx Xxxxx, an employee of the
Company, an option to acquire 1% of the Subsidiary's outstanding
common stock (30 shares).
X. AT&T
Agreement by and between ITC and AT&T Corp., dated May 9, 1994,
executed by Xxxxxxx Xxxxxx and T. Alec Edge, Sales Director.
SCHEDULE 3.8(b)
CERTAIN ACTIONS
See Schedule 3.15 on loans and liens.
Accounts payable greater than $50,000:
AT&T
Fonorola
ITG
MCI
PSI Sprint
By a Digital Satellite Service Agreement dated September 15,1993, by and
between ITC and Xxxxxxx International Ltd. ITC agreed to pay all space segment
costs and needed terrestrial interconnections to earth station facilities in
connection with the provision of the U.S. ground segment of a T-1 1.544 Mbps
duplex circuit between Israel and the US via INTELSAT satellite facilities.
Xxxxxxx International was responsible for the provision of satellite
transmission and reception from the INTELSAT satellite, using existing satellite
antennae and radio frequency ground communications equipment, COMSAT and
INTELSAT approved facilities; match orders to COMSAT and other obligations. ITC
has terminated this Agreement due to failure by Xxxxxxx International to fulfil
its obligations.
SCHEDULE 3.9
PATENTS, TRADEMARKS
FCC Authorizations and Operating Agreements
See Schedules 3.12 and 3.13.
Except for the licenses referred to in the AT&T Agreement listed on Schedule
3.8(a), the Entities have no registered patents, trademarks, trade names,
service marks or licenses other than those set forth above.
SCHEDULE 3.10
COMPLIANCE
See Schedules 3.12 and 3.13.
SCHEDULE 3.11
LICENSES AND PERMITS
See Schedules 3.12 and 3.13.
SCHEDULE 3.12
COMMUNICATONS LICENSES
International Telecommunications Corporation
1. FCC Order and Authorization, File No. I-T-C-93-332, released December
29, 1993
2. FCC Order, Authorization and Certificate, File No. I-T-C-92-072, released
April 10, 1992.
3. FCC Order and Authorization, File No. ITC-92-105, released June 25, 1992
4. FCC Order, Authorization and Certificate, File No. I-T-C-92-112
5. FCC Order, Authorization and Certificate, File No. I-T-C-92-175
6. New York State Public Service Commission Order Issuing Certificate of
Public Convenience and Necessity, Case No. 92-C-0503.
Regulatory Compliance
To date, ITC has not filed annual international traffic reports as
required by Section 43.61 of the FCC's rules. The Company has determined that
its New York State Certificate of Public Convenience and Necessity has expired
and that its provision of intrastate service without such certification is
unlawful.
SCHEDULE 3.13
INTERNATIONAL OPERATING AGREEMENTS
Operating Agreements
International Telecommunications Corporation has International
Telecommunications Services Agreements between International Telecommunications
Corporation ("ITC") and (1) Euronet Digital Communications (1992), Ltd.; (2)
Datacom, S.A.; (3) Chilesat, S.A.; (4) International Communication Management
Services; (5) MIG International; (6) Fonetel Global Communications A.B.; (7)
Russian Satellite Communications Company; (8) Jordan Telecommunications
Corporation; (9) Mercury Communications Limited; and (10) Compania Dominicana
De Telefonos, C. for A.
Regulatory Compliance
To date, ITC has not filed annual international traffic reports as
required by Section 43.61 of the FCC's rules.
SCHEDULE 3.15
TITLE TO PROPERTY AND ASSETS
Loans and Liens
I. MCI
A. Promissory Note, dated July 1, 1994, between ITC and MCI
Telecommunications Corporation, for $967,023.67 principal
B. Security and Financing Agreement, dated July 1, 1994 between ITC
and MCI Telecommunications Corporation -- Not signed by MCI
C. True-Up and Confidentiality Agreement, dated June 28, 1994,
between ITC and MCI Telecommunications Corporation -- Not signed
by MCI
D. Promissory Note, dated June 29, 1993, for payment of $622,552,0O
plus interest by August 15, 1994
E. Payment Agreement, dated June 29, 1993 between ITC and MCI
II. GTE Spacenet
A. GTE Spacenet Corp, March 11, 1994, payment schedule, total principal
$89,871.93, executed by Rebetti April 6, 1994 and by Spacenet April
27, 1994. CP has advised that there is no written underlying note.
III. RSL Communications
A. Secured Term Promissory Note and Agreement; Promissory Note
Conversion Agreement, and Security Agreement, all dated December
1, 1994
IV. GTE Hawaiian, start date August 1, 1994, balance: $82,237.10. CP has
advised that payment is pursuant to oral agreement; no written
agreement exists.
V. Equipment Lease Agreements: See Schedule 3.9(a).
VI. WorldCom Lien - June 1, 1990
VII. New York State Lien, 1992 - ITC
VIII. Xxxxx Financial Corp. - August 7, 1992
2
IX. Telecommunications Finance Group - October 9, 1991, October 16, 1991,
February 24, 1992, February 1, 1993, February 17, 1993, February 24, 1993,
February 1, 1994, February 18, 1994
X. The ABL Corp. - September 28, 1990
XI. GE Capital Corp - October 2, 1992
XII. Datacom Leasing Corp. - May 13, 1993
The liens which the Company shall undertake to remove pursuant to Section
7.15 of the Stock Purchase Agreement are: the New York State lien; and the liens
of RSL Communications, Datacom Leasing Corp., Xxxxx Financial Corp.; ABL Corp.;
and GE Capital Corp.
SCHEDULE 3.16
EMPLOYEES AND LABOR
Officers and Directors of International Telecommunications Group. Ltd.
Name Office Address
---- ------ -------
Xxxxxxx X. Xxxxxx President 000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxx Vice President 00 Xxxxx Xxxxx Xxxx
Xxxxxxxxx Xxxx Xxxxxxxxxx, XX 00000
Director
Xxxxxxx X. Xxxxx Secretary 0 Xxxxx Xxxx
Xxxxxxxxx, XX 00000-0000
Xxxx Xxxxxxx Asst. Secretary Xxxxxxxx, Xxxxx & Xxxxxxxx, PLC
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxx Director 00000 Xxxxxxxx Xxxxx
Xxxx Xxxxx Xxxxxxx, XX 00000
Xxxxx Xxxxxxxx Director Mishol Xx Xxxxx 00, Xxxxx X
Xxxxxxxxx, Xxxxxx
Xxx Lior Director Ha Xxxxxxxx Xx. 00, Xxx-Xxxxxxx
Xxxxxxxxx, Xxxxxx
Xxxxxx X. Xxxxxxxxxx Director 000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxxxx Director 000 Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Xxxxx X. Xxxxxxxx Director 0000 Xxxxxxx Xxxxx, XX
Xxxx Xxx, XX 00000
Officers and Directors of International Telecommunications Corporation
Name Office Address
---- ------ -------
Xxxxxxx X. Xxxxxx President 000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxx Vice President 00 Xxxxx Xxxxx Xxxx
Xxxxxxxxx Xxxx Xxxxxxxxxx, XX 00000
Secretary
Director
Xxxx Xxxxxxx Asst. Secretary Xxxxxxxx, Xxxxx & Xxxxxxxx, PLC
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
Officers and Directors of International Telecommunications Europe, Ltd.
Name Office Address
---- ------ -------
Xxxxxxx X. Xxxxxx President 000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxxx Treasurer 00 Xxxxx Xxxxx Xxxx
Xxxxxxxx Xxxx Xxxxxxxxxx, XX 00000
Xxxx Xxxxxxx Asst. Secretary Xxxxxxxx, Xxxxx & Xxxxxxxx, PLC
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, XX 00000
Xxxxxx X. Xxxxxxxx Director 00000 Xxxxxxxx Xxxxx
Xxxx Xxxxx Xxxxxxx, XX 00000
Xxxxx Xxxxxxxx Director Mishol Xx Xxxxx 16, Ramot B
Vice President Jerusalem, Israel
Xxx Lior Director Ha Xxxxxxxx Xx. 00, Xxx-Xxxxxxx
Secretary Jerusalem, Israel
Xxxxxxx Xxxxxx Director Xxx Building
President 5 Kiryat Mada Street
Industrial Park
Har Hotzvim Jerusalem
Israel
Employees of ITC
Xxxxxxx Xxxxxxxxx
Xxxxxxxx X. Xxxxxxxx
Xxxxx Xxxxxxxxx
Xxxxxx Xxxxxx
Xxxxxxx Xxxxxxx
Xxxxx X. Xxxxxxx, III
Xxxxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx Xxxxxxxxx
Xxxxxxx X. Xxxxx
Xxxxxx X. Xxxxxx
Xxxxxx Xxxxxx
Xxxxx Xxxxxxxxx
Xxxxxxxxx Xxxxxx
Nikitas Mendoros
Xxxxx Xxxxx
Xxxxx Xxxx
Xxxxxx X. Xxxxxx
Xxxxx Xxxxx, Xx.
Xxxxxxxxx Xxxxx
Emp1oyees of ITG
Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxx
Xxxxxxxxx Xxxxxxxxx
SCHEDULE 3.20
TAX RETURNS
ITG, ITC and Intelco Europe have not filed Federal, state and local income
tax returns for April 30, 1994.
SCHEDULE 3.22
TRANSACTIONS WITH AFFILIATES
Salaries, Dividends, Bonuses, Material Perquisites of Employees
The sales representative positions of the ITC are composed of salary and
bonus. This bonus is based on a percentage of budget and/or a percentage of
revenue. Anyone that has revenue budget is paid a bonus.
Director of Business Development, Xx. Xxxx Xxxxxx, is paid a base
salary plus a bonus based on the number of international operating
agreements. Xx. Xxxxxx'x base salary is $65,000 and operating agreements are
compensated on two bases: "A" and "B" countries. "A" countries receive a
$10,000 bonus, and "B" countries receive a $5,000 bonus.
In addition, since Xx. Xxxxxx was promoted from a sales position, he will
be compensated based on his sales performance in his previous job, for all
accounts that he has transferred over to the Sales Department, under the
standard sales compensation program for his position.
Director of Switched Services, Xxx. Xxxxxx Xxxxx, is paid a base salary
plus a bonus. The bonus is paid annually and quarterly. The base salary is
$65,000 per year with a $10,000 per quarter bonus based on certain achievements.
If all of the objectives are met, and the accounts receivable on those customers
and are 85 percent current and 15 percent 30 days, with an average of 12
percent, Xxx. Xxxxx would be paid a bonus equal to 50 percent of her
compensation. This plan ends May 1995.
Vice President, Finance, Xx. Xxxxxxx Xxxxxxx, is paid a base salary, and
as a founder of the Company with Xx. Xxxxxxx Xxxxxx, he receives certain bonus
compensation. In the past, this bonus compensation related to commissions that
Xx. Xxxxxx received in relationship to Prepaid Calling Cards. Xx. Xxxxxx would
typically allocate 10 percent of the commission he would be paid to Xx. Xxxxxxx.
Any Director, or individual who brings business into the Company or
Subsidiary under the product of Prepaid Calling Cards, that has a 50 percent
gross profit margin, is paid a bonus of 25 percent of the gross profit. All
directors, affiliates and agents are encouraged to bring this type of business
to the Company and Subsidiary.
Bonuses may be maintained on the books for select individuals as a loan
during the first year and thereafter may have a multi-year schedule to payroll
based on employment and tax conditions.
SCHEDULE 3.25
KEY EMPLOYEES
Xxxxxxx X. Xxxxxx
SCHEDULE 5.17
SPIN OFF OF INTELCO RUSSIA AND INTELCO UKRAINE
ITC will provide telecommunications services to Intelco Russia and Intelco
Ukraine pursuant to the terms of its filed FCC tariffs.
