PORTIONS OF THIS EXHIBIT HAVE BEEN DELETED PURSUANT TO A REQUEST
FOR CONFIDENTIAL TREATMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER RULE 406 OF THE SECURITIES ACT OF 1933 AND THE
FREEDOM OF INFORMATION ACT.
DATED February 8, 1995
BLUE XXXXX ENTERPRISES, LIMITED
AND
STARTEC, INC.
AND
RAM XXXXXXX, solely for the purposes
of Clause 6
_______________________
AGREEMENT
for
MANAGEMENT PARTICIPATION
________________________
DEACONS
in association with
XXXXXX & XXXXX
AND
SLY & WEIGALL
26
Solicitors & Notaries
Xxxxxxxxxx Xxxxx
0xx-0xx Xxxxxx
Xxxx Xxxx
INDEX
Page
Parties
Recitals 1
Clauses 1
1. Interpretation 2
2. Statement of Purpose 3
3. Management Participation 3
4. Termination 8
5. Startec's Warranties 8
6. Mukunda's Warranties 9
7. General 9
8. Notices 10
9. Governing Law and Dispute Resolution 11
Schedule 12
THIS AGREEMENT FOR MANAGEMENT PARTICIPATION is made on
1995
PARTIES
(1) BLUE XXXXX ENTERPRISES LIMITED, a company incorporated in
the British Virgin Islands whose address for service and
facsimile number are c/- Consec Services Limited at 000
Xxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx and (852)
2730 4379 respectively ("Blue Xxxxx"); and
(2) STARTEC, INC., a company incorporated in the State of
Maryland whose address for service and facsimile number are
00000 Xxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx 00000
27
(U.S.A.) c/o Ram Xxxxxxx, President and 000-000-0000
respectively ("Startec"); and
(3) RAM XXXXXXX solely for the purposes of Clause 6, whose
address for service and facsimile number are c/o Startec,
Inc., 00000 Xxxxx Xxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxx
00000 (U.S.A.) and 000-000-0000 respectively ("Xxxxxxx").
RECITALS
(A) Startec is in the business of providing telecommunications
services to end users and telecommunications operators, and
Xxxxxxx is the majority shareholder in Startec holding 75%
of its enlarged share capital.
(B) Pursuant to a Subscription Agreement executed on the same
date as this Agreement, Blue Xxxxx subscribed for 807,124
comprising 15% of the enlarged share capital of Startec in
consideration of US$750,000.
(C) Blue Xxxxx wants to participate in the management of the
telecommunications services conducted by Startec and
Startec, and Xxxxxxx agree to allow Blue Carol's
participation in that management on the terms and conditions
set out in this Agreement.
NOW THEREFORE, in consideration of the premises, to induce
Blue Xxxxx to enter into the Subscription Agreement and purchase
a certain number of Shares of Startec, and for Ten Dollars
($10.00) in hand paid by Blue Xxxxx to Startec, the mutual
covenants and conditions herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:-
AGREEMENT
1. INTERPRETATION
1.1 In this Agreement (including the Recitals), the following
expressions have the following meaning unless the context
otherwise requires:-
"Affiliate"
in relation to any company or other legal entity, a company
which controls or is a Subsidiary of or is under the same
control as the first-mentioned company;
"Business"
the business of providing telecommunications services to end
users and international telecommunications operators which
is conducted by Startec;
28
"Commencement Date"
the date of execution of this Agreement;
"Deed of Confidentiality"
the deed of confidentiality between Startec and Blue Xxxxx
executed on the same date as this Agreement;
"Directors"
the Board of Directors of Startec or any of its Subsidiary,
as the case may be;
"Executive Committee"
the committee appointed by Startec which is more
particularly described in Clauses 3.1(a) and (b);
"FCC"
the Federal Communications Commission of the United States
of America;
"Net Asset Value"
the net asset value of Startec as shown in its most recent
unaudited quarterly consolidated account for the period
immediately preceding any of the events or transactions,
that may arise throughout the terms of this Agreement, as
contemplated in Section 3 hereof.
"Subscription Agreement"
the subscription agreement between Blue Xxxxx, Startec and
Xxxxxxx executed on the same date as this Agreement, as
amended from time to time;
"Subsidiary"
in relation to any company, a company which is controlled by
that company; and
1.2 References in this Agreement to:-
(a) the singular include the plural and to the plural include
the singular;
(b) a Party is to a party to this Agreement, and includes the
Party's executors, administrators, successors and permitted
assigns;
(c) Clauses, Recitals and Schedules are to clauses or
sub-clauses of and recitals and schedules to this Agreement;
(d) any Act, Regulation or other statutory provision includes
reference to such Act, Regulation or provisions as modified,
verified or enacted; and
(e) the word "including" and similar words do not imply any
limitation.
29
1.3 Recitals to this Agreement form part of this Agreement.
1.4 Headings are for ease of reference only and do not form part
of this Agreement.
2. STATEMENT OF PURPOSE
2.1 In consideration of Blue Xxxxx entering into and performing
its obligations under the Subscription Agreement, Startec will
allow Blue Xxxxx to participate in the management of the
Business, in accordance with Clause 3.
3. MANAGEMENT PARTICIPATION
3.1 Startec will allow Blue Xxxxx to participate in the
management of the Business as follows:-
(a) Startec will appoint a 3-man committee to act as the
Executive Committee of Startec, responsible for recommending
to the Directors any action concerning issues relating to
the following:
(i) long term debt;
(ii) any increase in the issued or authorized share
capital in Startec;
(iii) the discontinuance of any existing business or the
establishment of any new place of business;
(iv) the introduction of a new line of business or the
substantial expansion, discontinuance or
substantial reduction of the Business;
(v) the appointment and remuneration of executive
staff; and
(vi) amendments to the Articles or By-laws of Startec;
(b) Startec may increase the number of members of the Executive
Committee provided that the total number of members is, at
all times, a multiple of three;
(c) Blue Xxxxx xxx:-
(i) for so long as it holds at least [CT REQUESTED] of
the issued share capital in Startec, nominate one
Director and/or one of each three members of the
Executive Committee and Xxxxxxx shall vote his
shares in favor of the election or removal of such
Director upon the request of Blue Xxxxx;
30
(ii) second a manager to Startec to participate in the
day-to-day management and operations of Startec,
and to, without limitation if Blue Xxxxx so
requires, sit on and participate in the Executive
Committee as Blue Carol's representative pursuant
to Clause 3.1(c)(i);
(d) Startec will not undertake the following actions without the
prior consent of Blue Xxxxx:-
(i) the discontinuance of any existing business or the
substantial expansion, establishment of a place of
business outside the United States of America
which requires notice or disclosure to the FCC;
(ii) the introduction of a new line of business or the
discontinuance or substantial reduction of the
business which requires notice or disclosure to
the FCC;
(iii) the borrowing of any money or incurring of any
debt or commitment or the making of any loan or
advance to a value in excess of [CT REQUESTED] of
its Net Asset Value;
(iv) the creating, incurring or suffering to exist of
any mortgage, pledge, lien, charge, security
interest, claim or encumbrance on or with respect
to, or lease of, any of its property or assets to
a value in excess of [CT REQUESTED] of its Net
Asset Value;
(v) the creation or assumption of any guarantee of or
indemnity for third party obligations outside its
ordinary course of business;
(vi) any acquisition or disposition of any material
assets to, or any acquisition or consolidation or
merger with, any other entity, or the sale or
other disposition of all or substantially all of
its assets;
(vii) the acquisition of Shares in any company, the
incorporation of any Subsidiary or the formation
of any joint venture enterprise or the dissolution
of any such Subsidiary or joint venture
enterprise;
(viii) any increase in the issued or authorized share
capital of Startec;
(ix) any reduction in the percentage of Startec's
31
beneficial ownership of Shares in any other
company, either through the disposal of Shares in
that company or by election not to participate in
any share transfer or subscription offer;
(x) any change to the Articles or By-laws of Startec
to the extent that such changes do not relate to
routine management procedures and policies;
(xi) the initiation of any litigation or arbitration
capable of having a material adverse effect on
Startec's financial capabilities;
(xii) the remuneration of Directors in excess of [CT
REQUESTED] per Board meeting;
(xiii) the employment of any member of staff whose total
remuneration exceeds [CT REQUESTED], or any
material change in the remuneration or other terms
of employment of such staff;
(xiv) the declaration of dividends payable on Startec
shares;
(xv) the retaining of any services in consideration of
an amount in excess of [CT REQUESTED] of its Net
Asset Value;
(xvi) any decision or action containing the activities
of any Subsidiary of Startec or any other company
in relation to which Startec has a right of
approval over such activities;
(xvii) any decision to dissolve or wind Startec up or to
file for bankruptcy;
(xviii) subject to Clause 3 of the Subscription Agreement,
any decision or action capable of diluting Blue
Carol's ownership interest in Startec to [CT
REQUESTED] or less including, but not limited to,
any decision or action to issue options in
relation to Startec's shares;
(e) after expiration of the provisions set forth in section
3.1(d) above, and for so long as Blue Xxxxx holds at least
[CT REQUESTED] of the issued share capital in Startec,
Startec will not undertake the following actions without the
prior consent of Blue Xxxxx;
(i) the borrowing of any funds or the incurring of any
debt, commitment or the making of any loan or
advance to a value in excess of [CT REQUESTED];
32
(ii) the creating, incurring or suffering to exist of
any mortgage, pledge, lien, charge, security
interest, claim or encumbrance on or with respect
to, or lease of, any of its property or assets
having a value in excess of [CT REQUESTED] of its
Net Asset Value;
(iii) any acquisition or disposal of any material
assets, or any acquisition of or consolidation or
merger with, any other entity, or the sale or
other disposition of assets having a value in
excess of [CT REQUESTED] of its Net Asset Value;
(iv) any reduction in the percentage of Startec's
beneficial ownership of shares in any other
company, either through the disposal of shares in
that company or by election not to participate in
any share transfer or subscription offer;
(v) any increase in the issued or authorized share
capital of Startec;
(vi) any change to the Articles or By-laws of Startec
to the extent that such change does not relate to
routine management procedures or policies;
(vii) the retaining of any services for an amount in
excess of [CT REQUESTED] of its Net Asset Value;
or
(viii) the employment of any member of the executive
staff of Startec whose total annual remuneration
exceeds [CT REQUESTED];
(ix) any decision to dissolve or wind Startec up, or to
file for bankruptcy;
(x) subject to Clause 3 of the Subscription Agreement,
any decision or action capable of diluting Blue
Carol's ownership interest in Startec to [CT
REQUESTED] or less including, but not limited to,
any decision or action to issue options in
relation to Startec's Shares;
(f) Startec will promptly notify Blue Xxxxx of any decision
by it to undertake any of the actions referred to in
Clauses 3.1(a) and (e), and Blue Xxxxx will be deemed
to have given its prior consent to such action unless
it notifies Startec otherwise within [CT REQUESTED] of
its receipt of notice of the proposed action from
Startec; Blue Xxxxx will not unreasonably withhold its
consent to any such proposed action;
33
(g) Startec will cause all of its Subsidiaries to allow
Blue Xxxxx to participate in the management of their
respective businesses in the manner contemplated in
relation to Startec in Clauses 3.1 (a), (b), (c), (d),
(e) and (f);
(h) the Parties acknowledge that Blue Carol's rights of
prior consent set out in this Agreement do not entitle
Blue Xxxxx to determine Startec's or its Subsidiaries'
methods of routine operation or to dominate their
corporate affairs;
(i) Startec and/or any of its Subsidiaries will amend their
By-laws to reflect the rights of Blue Xxxxx to
participate in their management in the manner set out
in the Schedule, and Blue Xxxxx xxx require such
further amendments to Startec's and/or any of its
Subsidiaries' Articles or By-laws as it may, from time
to time, require in order to secure for itself the
rights to participate in the management of Startec
which are contemplated in this Clause 3;
(j) Startec will not negotiate with nor enter into any
arrangement involving its provision of services to
telephone operators in [CT REQUESTED] or any other
country or territory specified by Blue Xxxxx from time
to time, without Blue Carol's prior written approval;
and
(k) the provisions of this Clause 3 shall expire upon the
earlier of (i) a bona fide public offering of the
shares in Startec pursuant to an effective registration
under the Securities Act of 1933, as amended, (ii) the
sale or other transfer of [CT REQUESTED] or more of the
stock ownership of Blue Xxxxx (whether directly or by
issuance of additional shares by Blue Xxxxx).
3 l.2 Startec may require Blue Xxxxx or any of its Affiliates
to appoint trainees nominated by Startec on a short-term basis
(3-6 months), on terms relating to training conditions to be
agreed between the Parties.
3.3 Blue Xxxxx xxx require Startec to appoint trainees
nominated by Blue Xxxxx on a short term basis (3-6 months), on
terms relating to training conditions to be agreed between the
Parties.
4. TERMINATION
4.1 Either Party may terminate this Agreement immediately by
notice in writing to the other Party if:-
34
(a) the other Party commits a material breach or default of
any of the provisions of this Agreement which, if it is
capable of remedy, has not been remedied within [CT
REQUESTED] days of the Party's receipt of notice
requiring the breach or default to be remedied;
(b) the other Party goes into liquidation, has entered into
any composition with its creditors or any class
thereof, has execution levied against for an
established debt or has a receiver or manager appointed
in respect of the whole or part of its undertaking.
4.2 Blue Xxxxx xxx terminate this Agreement immediately, by
notice in writing to Startec on termination of:-
(a) the Subscription Agreement; and/or
(b) the Deed of Confidentiality
for any reason.
4.3 Termination of this Agreement for any reason will be without
prejudice to any right either Party may have accrued against the
other prior to the termination.
5. STARTEC'S WARRANTIES
5.1 Startec warrants to Blue Xxxxx that:-
(a) it will comply in all respects with the terms of the
Subscription Agreement, as amended from time to time;
(b) it will comply in all respects with the terms of the
Deed of Confidentiality, as amended from time to time;
(c) Startec is a corporation duly organized, validly
existing and in good standing under the laws of the
State of Maryland;
(d) Startec has the full right, power, and authority to
enter into and perform its obligations under this
Agreement without any further sanction or consent of
its shareholders and all necessary authorizations,
approvals, consents and licenses relating to the same
have been unconditionally obtained and are in full
force and effect, and this Agreement is a legal, valid
and binding agreement of Startec, enforceable in
accordance with its terms; and
(e) compliance by Startec with, this Agreement will not
result in the breach of and will comply with all
relevant provisions of all applicable laws, rules and
35
regulations, and all agreements and obligations to
which Startec or any Shareholder is a party or by which
any of them or any of their respective property is
bound.
5.1 Startec indemnifies each of Blue Xxxxx and its Affiliates,
their respective partners, employees, agents, contractors and
assigns and will keep each of them indemnified from and against
all loss and expenses incurred by them, or any of them, directly
or indirectly as a result of Startec's failure to meet its
obligations under this Agreement or under the Subscription
Agreement and/or the Deed of Confidentiality.
6.1 MUKUNDA'S WARRANTIES
6.1 Xxxxxxx warrants to Blue Xxxxx that he will exercise his
voting rights as a shareholder, and, subject to Maryland law as a
director, and such influence as he may have over the Directors to
procure Startec's performance under the Agreement and, in
particular, to:
(a) procure the appointment of the Executive Committee as
soon as is practicable after completion of Blue Carol's
subscription for shares in Startec under the
Subscription Agreement;
(b) procure the appointment and removal of the individuals
referred to in Clause 3.1 as and when required by Blue
Xxxxx; and
(c) procure the amendment of the Articles and By-laws of
Startec and/or any of its Subsidiaries in accordance
with Clause 3.1(i) as and when required by Blue Xxxxx
in writing.
6.2 Xxxxxxx will be jointly and severally liable with Startec
for any loss Blue Xxxxx xxx sustain as a result of Startec's
failure to perform its obligations under this Agreement.
7. GENERAL
7.1 This Agreement contains the entire agreement between the
Parties and supersedes any prior understanding and/or agreement
between them relating to the subject matter of the agreement.
7.2 Should any provision of this Agreement be declared void or
unenforceable by any competent authority or court this will not
affect the other provisions of this Agreement which are capable
of severance, which will continue unaffected.
7.3 Any variation to this Agreement will be binding only if it
is recorded in writing and signed by all of the Parties.
36
7.4 Nothing in this Agreement will be taken to constitute a
partnership between the Parties nor the appointment of one of the
Parties as agent for any other.
7.5 The failure by any Party at any time or times to require
performance by any other Party of any provision of this Agreement
will in no way affect the right of that Party to require
performance of that or any other provision, and the waiver by a
Party of any breach of this Agreement will not be construed as a
waiver of any continuing or succeeding breach of that provision,
a waiver of the provision itself or a waiver of any other right
under this Agreement.
7.6 Each Party will bear its own costs of and incidental to the
preparation and completion of this Agreement.
7.7 This Agreement may be executed in one or more counterparts,
each of which will be deemed an original, and these counterparts
will constitute one and the same instrument.
7.8 Except as is specifically provided in this Agreement, none
of the Parties may assign or transfer any of its rights or
obligations under this Agreement without the prior consent of the
other Parties.
8. NOTICES
8.1 All notices delivered under this Agreement shall be in
writing in English and shall be communicated to the address
and/or to the facsimile number of the Party specified at the
beginning of this Agreement, or to such other address and/or
facsimile number as the relevant Party shall have notified to the
other Parties in accordance with the terms of this Clause 8.1.
8.2 Any such notice shall be served either personally or by
sending it by overnight mail, courier or facsimile. In the case
of notice served personally during normal business hours, it
shall be deemed to have been given when delivered, if sent by
overnight mail or courier 7 days after posting, or, if sent by
facsimile, upon the sender's receipt of electronic and telephonic
confirmation of the successful transmission of the notice to the
recipient.
9. Governing LAW AND DISPUTE RESOLUTION
9.1 This Agreement shall be governed and construed in accordance
with the laws of the State of Maryland.
9.2 Any dispute, controversy or claim arising out of or relating
to this Agreement, or the breach, termination, or invalidity
thereof, shall be settled by arbitration in accordance with the
Rules of Arbitration of the International Chamber of Commerce as
37
at present in force. The arbitration shall be held in London in
England, and heard by a single arbitrator appointed in accordance
with the said Rules.
SCHEDULE
Amended By-laws of Startec
(Clause 4.1(a)).
AS WITNESS THIS Agreement has executed on the day and year
first above written.
SIGNED by
for and on behalf of )
BLUE XXXXX ENTERPRISES LIMITED )
in the presence of- )
Signed by Ram Xxxxxxx, President )
for and on behalf of )
STARTEC, INC. )
in the presence of Xxxxxxx Xxx )
Signed by Ram Xxxxxxx, President )
RAM XXXXXXX, solely for the purposes )
of Clause 6 )
in the presence of:- )
Xxxxxxx Xxx
00000 Xxxxx Xxxx Xxxxx
Xxxxxxxx, XX 00000
000-000-0000
AMENDMENT TO AGREEMENT FOR MANAGEMENT PARTICIPATION
APPROVED AND AGREED TO
ON OR ABOUT JUNE 16, 1997
STARTEC COOPERATION AND SHAREHOLDERS' AGREEMENT
2 STATEMENT OF PURPOSE
38
2.1 In consideration of Blue Xxxxx entering into and
performing its obligations under the Subscription
Agreement, Startec will allow Blue Xxxxx to participate
in the Management of the Business, in accordance with
Clause 3. The parties recognize that control of
Startec is held by Ram Xxxxxxx through his ownership of
a majority of Startec's voting stock and the parties do
not intend by this agreement to transfer control of
Startec to Blue Xxxxx or any other person. The parties
further recognize and acknowledge that control of
Startec may not be transferred from Ram Xxxxxxx to any
other person without the prior approval of the Federal
Communications Commission. Further, the parties hereto
recognize and acknowledge that Blue Carol's
participation in the management of Startec's business
must be in compliance at all times with the rules and
policies of the Federal Communications Commission
("FCC") and any provision of Clause 3 of this Agreement
which is found by the FCC to be in violation of those
rules and policies will be void and no longer have any
force or effect and will be deemed to have been deleted
from this Agreement.
3 MANAGEMENT PARTICIPATION
3.1 Startec will allow Blue Xxxxx to participate in the
management of the Business as follows:
(A) Blue Xxxxx xxx second a manager to Startec to
participate in the day to day management and
operations of Startec, under the supervision and
direction of Startec's officers;
(B) After the date of this Agreement, Startec will not
undertake the following actions without the prior
consent of Blue Xxxxx;
(i) the discontinuance or substantial
reduction of the Business which requires
notice or disclosure to the FCC, if such
discontinuance or reduction would result
in a greater than [CT REQUESTED] reduction
in Startec's revenues;
(ii) the introduction of a new line of business
not involving the provision of
telecommunications services or other
services related hereto;
(iii) advancing a loan, if the amount thereof
exceeds [CT REQUESTED] of Startec's Total
Asset Value; for purposes of this Clause
39
3, "Total Asset Value" shall mean the
total amount of Startec's current and
other assets as shown on its most recent,
regularly prepared consolidated balance
sheet, prepared in accordance with
Generally Accepted Accounting Principles,
unless such loan is in the ordinary course
of business;
(iv) the creation or assumption of any
guarantee of or indemnify for third party
obligations outside its ordinary course of
business;
(v) any consolidation or merger with, any
other entity, or the sale or other
disposition of all or substantially all of
Startec's assets;
(vi) any change to the Articles or By-laws of
Startec to the extent that such changes do
not relate to routine management
procedures and policies;
(vii) The remuneration of Directors in excess of
[CT REQUESTED] per Board meeting;
(viii) the declaration of dividends payable on
Startec shares;
(ix) any decision to voluntarily dissolve or
wind-up Startec or to file for bankruptcy;
(x) subject to Clause 3 of the Subscription
Agreement, any decision or action capable
of diluting Blue Carol's ownership
interest in Startec to less than [CT
REQUESTED] unless such dilution is pro-rata
effecting all stock holders.
(C) Startec will promptly notify Blue Xxxxx of any
decision by it to undertake any of the actions
referred to in Clauses 3.1(B) and Blue Xxxxx will
be deemed to have given its prior consent to such
action unless it notifies Startec otherwise within
[CT REQUESTED] of its receipt of notice of the
proposed action from Startec; Blue Xxxxx will not
unreasonably withhold its consent to such proposed
action;
(D) Startec will cause all of its Subsidiaries to
allow Blue Carol's representative to participate
40
in the management of their respective businesses
in the manner contemplated in relation to Startec
all Clauses of 3;
(E) the Parties acknowledge that Blue Carol's rights
of prior consent set out in this Agreement do not
and are not intended to entitle Blue Xxxxx to
direct Startec's or its Subsidiaries' regular
business operations or to control their corporate
affairs;
(F) the provisions of this Clause 3 shall expire upon
the earlier of (i) a bona fide public offering of
the shares in Startec pursuant to an effective
registration under the Securities Act of 1933, as
amended or (ii) the sale or other transfer of [CT
REQUESTED] or more of the stock ownership of Blue
Xxxxx or its beneficial owner (whether directly or
by issuance of additional shares by Blue Xxxxx).
