U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
MARK ONE
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-18654
AMERICONNECT, INC.
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
6750 WEST 93RD STREET, SUITE 110, OVERLAND PARK, KS 66212
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
48-1056927
(I.R.S. EMPLOYER IDENTIFICATION NO.)
(913) 341-8888
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
--------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE
ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE
ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE.
---------------------
CHECK WHETHER THE ISSUER (1) FILED ALL REPORTS REQUIRED TO BE
FILED BY SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST
12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE ISSUER WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ___
CHECK IF THERE IS NO DISCLOSURE OF DELINQUENT FILERS IN RESPONSE
TO ITEM 405 OF REGULATION S-B CONTAINED IN THIS FORM, AND NO
DISCLOSURE WILL BE CONTAINED, TO THE BEST OF ISSUER'S KNOWLEDGE,
IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY
REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY AMENDMENT TO
THIS FORM 10-KSB. [X]
ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR WERE
$17,099,635.
TO THE BEST OF THE COMPANY'S KNOWLEDGE, THE AGGREGATE MARKET
VALUE OF THE COMMON STOCK HELD BY NON-AFFILIATES OF THE ISSUER IS
APPROXIMATELY $6,767,961, BASED UPON AN AVERAGE BID AND ASKED
PRICE OF $1.34 AT MARCH 28, 1996, BASED ON INFORMATION OBTAINED
FROM THE NASDAQ BULLETIN BOARD, WHICH IS A QUOTATION SERVICE.
THE AGGREGATE MARKET VALUE OF THE ISSUER'S CLASS A COMMON STOCK,
NO SHARES OF WHICH WERE HELD BY NON-AFFILIATES AT DECEMBER 31,
1995, IS NOT READILY ASCERTAINABLE.
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON EQUITY AT MARCH 28, 1996, WAS AS FOLLOWS: 6,324,717
SHARES OF COMMON STOCK AND 592,033 SHARES OF CLASS A COMMON
STOCK.
DOCUMENTS INCORPORATED BY REFERENCE: PORTIONS OF THE ISSUER'S
DEFINITIVE PROXY STATEMENT FOR THE 1996 ANNUAL MEETING OF
STOCKHOLDERS, TO BE FILED WITH THE COMMISSION ON OR BEFORE APRIL
29,1996, ARE INCORPORATED BY REFERENCE INTO PART III OF THIS
ANNUAL REPORT ON FORM 10-KSB.
TRANSITIONAL SMALL DISCLOSURE FORMAT: YES NO X
<PAGE>
FORM 10-KSB
ANNUAL REPORT
YEAR ENDED DECEMBER 31, 1995
Item No. Topic Page
PART I
Item 1. Description of Business. . . . . . . . . . . . . . . 1
Item 2. Description of Property. . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of Security Holders. 5
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . 6
Item 6. Management's Discussion and Analysis or Plan of
Operation . . . . . . . . . . . . . . . . . . . . . 7
Item 7. Financial Statements . . . . . . . . . . . . . . . .12
Item 8. Changes In and Disagreements With
Accountants on Accounting and Financial Disclosure .28
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With
Section 16(a) of the Exchange Act . . . . . . . . .29
Item 10. Executive Compensation . . . . . . . . . . . . . . .29
Item 11. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . .29
Item 12. Certain Relationships and Related Transactions . . .29
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . .29
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL OVERVIEW
AmeriConnect, Inc., a Delaware corporation, which was
organized under the name Amerifax, Inc. ("Amerifax") in Delaware
on June 28, 1988 ("AmeriConnect"), together with its wholly owned
subsidiary, AmeriConnect, Inc. of New Hampshire, a New Hampshire
corporation ("ANH" and, together with AmeriConnect, the
"Company"), provides long distance telecommunications services to
individuals and small to medium-sized businesses. On June 7,
1994, Amerifax changed its name to AmeriConnect, Inc. ANH was
formed on June 28, 1993 and started doing business in New
Hampshire in July 1993.
The Company is a switchless reseller of long distance
telecommunications services and, as such, does not own or lease
any telephone equipment or participate in the call completion
process. Instead, the Company places its customers on the long
distance networks of facilities-based, interexchange carriers,
which provide the actual call transmission services. Currently,
the Company utilizes the services of Sprint Communications, L.P.
("Sprint") and WilTel, Inc. ("WilTel"). These interexchange
carriers bill the Company at contractual rates for the combined
usage of the Company's customers utilizing such carriers'
respective networks. The Company then bills its customers
individually at rates established by the Company. The Company is
responsible for payments to its carriers without regard to
whether payment is made by the Company's customers.
The Company's corporate headquarters are located at
6750 W. 93rd St., Suite 110, Overland Park, Kansas 66212, and its
telephone number is (913) 341-8888.
RECENT DEVELOPMENTS - POSSIBLE MERGER
On January 15, 1996, the Company and Phoenix Network, Inc.
("Phoenix"), a San Francisco, California-based long distance
reseller and provider of value-added telecommunications services,
signed a letter of intent to merge the two companies in a stock-
for-stock transaction. The parties currently are negotiating a
definitive merger agreement. In connection with the proposed
merger, Phoenix expects to issue approximately 4 million new
shares of common stock in exchange for all of the outstanding
shares of the Company. It is currently anticipated that the
closing will take place on or about August 15, 1996, pending the
obtaining of all necessary regulatory approvals and approval of
the shareholders of both companies. There can be no assurance
that the ongoing negotiations between the Company and Phoenix
will in fact result in the execution of a definitive merger
agreement or that the terms of any such agreement will be as
described above.
SERVICES AND PRICING
The Company provides to its customers a wide variety of
long distance telecommunications services, including both
switched and dedicated "WATS" services, "800" services, calling
card services, account codes and international calling, as well
as other specialized services designed for customers with more
sophisticated telecommunications needs.
The Company's customers are able to obtain, through the
Company, substantially all of the basic services offered by the
Company's underlying interexchange carriers to such carriers'
direct sale customers, but at rates generally lower than those
available directly from the carrier. Individually, the Company's
customers do not have sufficient long distance usage to qualify
for the discount rates made available by major carriers to large
users of long distance services. By combining all of its
customers' traffic under the Company's accounts with the
carriers, the Company can take advantage of volume discounts
offered by such carriers and, in turn, can pass along a portion
of such savings to its customers.
The Company's customers provide the Company with
information regarding their telephone numbers and locations,
which the Company processes and forwards to one of its
interexchange carriers. The carrier makes the appropriate
arrangements with the local telephone company so that the
customer's long distance traffic is routed to that carrier. The
carrier then sends the Company, on a periodic basis, information
regarding the long distance traffic of all the Company's
customers who are serviced by such carrier. The Company is
obligated to pay the carrier for such traffic at contractual
rates without regard to whether payment is made by the Company's
customers. The Company processes the information and
<PAGE>
provides its customers with monthly invoices for such customers'
long distance calls at rates established by the Company. The
customers are obligated to pay the Company directly.
The Company offers its customers a pricing option of
one flat rate per minute (any time and without restrictions) on
interstate long distance calls to points almost anywhere in the
United States. In general, the Company believes the weighted
average of the rates charged by the Company's long distance
competitors to typical small to medium-sized business customers
is higher than the Company's flat rate pricing option. The flat
rate pricing concept is also available for the in-bound "800" and
calling card services offered by the Company. While the Company
also offers price structures for its various services that are
more typical of the industry (i.e., based upon time of use,
distance and total volume), most of its customers select the flat
rate products. The Company believes this is due to the fact that
these products are easier for customers to understand than
traditional volume- and time-variable products. In response to
the marketing efforts of the major interexchange carriers, the
Company offers customers twelve month and twenty-four month
Guaranteed Rate Plans ("GRPs"), assuring customers of consistent
rates over the selected period.
VENDORS
The Company provides long distance telecommunications
services to its customers primarily through the Sprint network,
an all-digital, all-fiber optic transmission system, pursuant to
a Carrier Transport Switched Services Agreement, dated July 28,
1995, between Sprint and the Company (as amended, the "Sprint
Agreement"). The Company also provides long distance
telecommunications services to its customers using the WilTel
network, pursuant to a Telecommunications Services Agreement,
dated June 27, 1994, between WilTel and the Company (as amended,
the "WilTel Agreement"). Pursuant to the Sprint Agreement and
the WilTel Agreement, the Company receives discounts on long
distance services from Sprint and WilTel based upon the total
volume of services purchased by the Company. Both agreements
contain minimum usage requirements that the Company must meet in
order to avoid shortfall penalties.
The Company neither owns nor leases any switching or
transmission facilities used in the actual call completion
process, and, as a consequence, the Company is entirely dependent
on the facilities-based carriers providing these services for the
Company's customers.
MARKETING
The Company targets small to medium-sized businesses
which are active users of long distance services. These
businesses generally are not large enough to take advantage of
the volume discounts offered by major interexchange carriers to
their large customers. The Company provides what it believes to
be superior billing and customer service at lower prices than
major interexchange carriers. To differentiate itself from the
major interexchange carriers, the Company offers a package of
value-added billing summary reports. These reports may include
summaries identifying usage by telephone number, traffic type,
time of day and day of month, as well as frequently called
numbers and international calls. The Company also places a
strong emphasis on customer relations. All new customers receive
a welcome letter, most receive an activation call, and larger
customers receive periodic customer support calls to measure
their satisfaction with the Company and its services and to sell
additional services.
The Company markets its services primarily through non-
employee sales agents which are supported by area sales directors
("ASDs") who are employees of the Company. Each ASD is
responsible for assisting existing sales agents and recruiting
new sales agents within his or her geographic region. The
Company believes the utilization of non-employee sales agents to
be the most cost effective method of sales because sales agents
generally are compensated only by commissions tied directly to
sales. Sales by sales agents now represent approximately
seventy-two percent (72%) of the Company's monthly revenue and
this percentage is expected to increase during 1996. Sales by
one agent now represent approximately nineteen percent (19%) of
the Company's monthly revenue. During 1995, the Company utilized
approximately 81 non-employee sales agents throughout the United
States. At December 31, 1995, the Company employed 4 ASDs and
now employs 3 ASDs.
The Company also markets its services through its own
direct sales force, which sales personnel are compensated on a
salary plus commission basis. In December 1995, the Company
hired a new sales manager and two new sales persons, all of whom
were concentrating their sales efforts in the Kansas City
<PAGE>
metropolitan area. During the first three months of 1996, the
Company hired an additional four new sales persons to concentrate
on sales in the Kansas City metropolitan area. For the year
ended December 31, 1995, thirty-four percent (34%) of the
Company's revenues were from the Kansas City metropolitan area.
While the Company does not advertise through the mass-
media, it indirectly benefits from advertising by the major
interexchange carriers. Through their advertising, the Company's
primary market is made aware of choices in long distance
suppliers. In addition, the Telecommunications Resellers
Association ("TRA"), of which the Company has been a member since
its inception, promotes resellers such as the Company. TRA's
public relations campaign has included major stories in
periodicals such as Inc. Magazine, Smart Money and Entrepreneur
as well as regular coverage in Communications Daily, Network
World and Phone +.
CUSTOMERS
As of December 31, 1995, the Company had 7,085
customers subscribing to its long distance telecommunications
services. This represents a decrease of 849 customers or
approximately 11% from the number of customers at December 31,
1994. During 1995, the Company billed its customers an average
of approximately $190 for long distance usage, compared to
average per customer billings of approximately $150 during 1994.
The Company believes the decrease in the number of customers and
the increase in the amount of the average customer bill are
primarily attributable to the loss of certain residential
customers associated with a particular agent. See "Legal
Proceedings" and "Management's Discussion and Analysis or Plan of
Operation - General." During 1995, no single customer accounted
for more than 2% of the Company's gross revenues.
COMPETITION
The long distance telecommunications industry is highly
competitive and subject to rapid technological and regulatory
change. The Company's competitors include the three major
facilities-based, interexchange carriers (American Telephone and
Telegraph Company ("AT&T"), MCI Telecommunications Corporation
("MCI") and Sprint), other large carriers (e.g., Frontier
Communications, Inc. ("Frontier") and WorldCom Communications,
Inc. ("WorldCom")) and several hundred smaller carriers. As a
result of the newly enacted Telecommunications Act of 1996 (the
"Telecommunications Act"), the regional bell operating companies
(the "RBOCs") are now authorized to provide inter-LATA ("local
access and transport area") long distance telephone services
outside their own regions, and, under certain circumstances, to
provide inter-LATA long distance telephone services within their
own regions. The Telecommunications Act also removes the
prohibition on providing long distance services previously
imposed on the GTE telephone operating companies (the "GTOCs").
The three major carriers, the RBOCs, the GTOCs and many of the
other carriers have resources significantly greater than those
available to the Company, as well as longer operating histories
and larger customer bases. From time to time any of these
entities may be able to provide a range of services comparable to
or more extensive than those provided by the Company at rates
competitive with the Company's rate structure. In addition, new
companies may be formed which utilize the same volume-discount
pricing available to the Company, because the Company does not
have proprietary contractual arrangements in that regard. Most
prospective customers of the Company are already receiving
service directly from at least one long distance carrier, and the
Company must convince prospective customers to alter these
relationships to generate new business. As a result of the
foregoing, there can be no assurance that the Company will be
competitive.
Furthermore, the Company is in direct competition with
the facilities-based carriers for the right to service the end
user. The Company believes, given the highly competitive nature
of the industry, that the carriers view switchless resellers as
an alternative marketing channel giving the carrier incremental
minutes of traffic with no marketing cost and minimal support
costs.
On February 8, 1996, the Telecommunications Act was
signed into law. This legislation permits the RBOCs to provide
inter-LATA long distance services under certain circumstances and
subject to certain restrictions. In particular, the new
legislation permits each of the RBOCs to provide inter-LATA
service outside its own region. Additionally, an RBOC may offer
in-region inter-LATA service if federal and state regulators
determine (i) that the RBOC has opened its local loop network to
competitors and (ii) that the RBOC faces competition from a
facilities-based provider offering local exchange service to
businesses and residents in that state. In order for the RBOC to
offer this in-region long distance service, the Federal
Communications Commission (the "FCC") also must determine that
such entry is in the "public interest." Many of the RBOCs and
the GTOCs have already announced their intention to enter the
business of reselling long distance services and, as a result,
the Company will face significant additional competition.
However, entry into this business will involve compliance by
these companies with certain regulatory requirements. See " -
Regulation."
<PAGE>
In addition, certain regulatory proceedings affecting
the Company and its competitors may affect the Company's
competitive position. For a more detailed discussion of the
regulatory proceedings affecting the Company, see " -
Regulation."
REGULATION
The FCC retains general regulatory jurisdiction over
the provision of telecommunications services by all common
carriers, but does not currently regulate the long distance
telephone rates or profit levels of non-dominant common carriers
such as the Company. The FCC imposes certification and tariff
filing requirements for international service and tariff filing
requirements for domestic interstate service for all common
carriers. The FCC, however, has recently proposed "mandatory de-
tariffing" of services offered by non-dominant long distance
carriers such as the Company, pursuant to authority granted in
the Telecommunications Act. This mandatory de-tariffing would
relieve all domestic long distance companies, including the
Company, from the requirement of filing tariffs.
Utilizing authority granted in the Telecommunications
Act, the FCC has also recently proposed regulations to govern the
entry of the RBOCs into the interstate long distance service
markets. The FCC has proposed that, so long as these long
distance services are offered by affiliates of the RBOCs that are
structurally separate from the RBOCs, these interexchange
services would be classified as "non-dominant" (like the services
provided by the Company). Services classified as dominant are
subject to increased regulation of rates, earnings and operations
by the FCC. In a separate rulemaking proceeding, the FCC has
also recently proposed elimination of the structural separation
requirement for the long distance services offered by independent
local exchange carriers and RBOCs outside their regions.
The proposals described above remain under
consideration by the FCC. Many of the existing long distance
carriers and long distance resellers have urged the FCC to
classify the RBOCs' long distance service units as dominant,
allowing the FCC greater oversight of their rates, earnings and
operations. These companies have also urged the FCC to adopt
stricter structural separation requirements. The RBOCs,
conversely, contend that the structural separation requirements
are unnecessary and constitute a violation of the
Telecommunications Act.
In the fall of 1995, the FCC granted AT&T non-dominant
status in the domestic interexchange service market. As a
result, the FCC no longer directly regulates the rates, earnings
and operations of AT&T, a carrier with which the Company competes
and from which the Company may lease transmission services.
The Company's intrastate long distance services
generally are subject to the jurisdiction of utility regulatory
authorities in the states in which the Company operates. The
state regulatory authorities regulate access charge arrangements
between the local telephone companies and all long distance
carriers for intrastate long distance services. Most state
regulatory authorities also regulate entry and competition within
the intrastate long distance market by requiring all carriers to
obtain and maintain certificates of public convenience and
necessity. Some state regulatory authorities also require
carriers to file tariffs which set forth their rates and
conditions of service. Regulation by the state regulatory
authorities differs significantly from state to state. The
Company believes it is in substantial compliance with the
applicable state regulatory provisions. The Company historically
has not experienced significant problems in its dealings with
state regulatory authorities.
There is a current trend toward less regulation of
intrastate long distance telecommunications services in certain
states in which the Company operates. Resale long distance
carriers historically have been subject to a lesser degree of
regulation than facilities-based carriers and mixed-mode
carriers. Deregulation, however, may result in a more comparable
degree of regulation among all carriers, particularly with regard
to rates.
The Company has filed and continues to file, as the
case may be, for the relevant approvals from federal and state
regulatory agencies to provide access to international and
intrastate long distance services. As of December 31, 1995, the
Company was authorized to provide intrastate service in 36 states
and was awaiting approval to provide intrastate service in four
additional states. The Company continues to prepare applications
consistent with state filing requirements on a priority basis
relative to the Company's potential customer additions. Although
management believes approval of such applications will be
granted, there can be no assurance that the Company will obtain
all necessary remaining approvals to conduct its business as
proposed.
<PAGE>
PATENTS, TRADEMARKS AND LICENSES
On February 13, 1995, the Company filed two
applications for federal registration of "AmeriConnect" as a
service mark, one of which was for the name only and one of which
was for the name with a design. On July 6, 1995, the U.S. Patent
and Trademark Office informed the Company that both of its
service mark applications had been refused because the service
marks too closely resembled other registered service marks. On
January 11, 1996, the Company filed amendments to the two service
mark applications appealing the refusals. On April 9, 1996, the
U.S. Patent and Trademark Office passed the two service marks to
publication in the official gazette. Barring opposition by any
party that feels it would be damaged by the service marks, the
service marks will be registered exclusively to the Company.
However, there is no assurance that the registrations will not be
opposed, perhaps successfully, by other parties. In that event,
the efforts of the Company and the funds expended to develop
recognition of the AmeriConnect name, and to register such name,
would have no value.
EMPLOYEES
At March 28, 1996, the Company had 36 full-time
employees and no part-time employees.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases office space at 6750 W. 93rd St.,
Suite 110, Overland Park, Kansas, under a lease calling for
payments of $2,653 per month from September 1, 1993, through
August 31, 1998. An amendment to that lease, dated on February
1, 1994, which provides for additional office space, calls for
payments of $2,243 per month from February 1, 1994 through August
31, 1998. A second amendment to the lease, dated November 23,
1994, which also provides for additional office space, calls for
payments of $2,362 per month from January 1, 1995 through
December 31, 1999. Consequently, the Company's total rental
expense equals $7,258 per month. Rental expense for the years
ended December 31, 1995 and 1994, was $87,967 and $56,358,
respectively.
The Company leases office space in McLean, Virginia
under a lease providing for payments of $3,643 per month from
June 1, 1991 through May 31, 1996. The leased property is no
longer used by the Company, and the Company has obtained a
sublease for this space. (See Notes 5 and 9 to the Company's
Financial Statements.) In 1995, rental income from the sublease
of $30,744 was netted against rental payments of $46,792 and the
difference, $16,048, was charged against accrued office closing
costs.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved in certain disputes
that have arisen in the ordinary course of business, including an
action in the District Court of Johnson County, Kansas filed by
the Company on July 20, 1995 against Overlooked Opinions, Inc.
("Overlooked") and a related entity, Lyrihn Communications, Inc.
("Lyrihn"). The Company's claims arose out of the alleged breach
by Overlooked of an agency agreement between the Company and
Overlooked for the sale of long distance services to residential
customers and out of the alleged breach by Overlooked of certain
loan agreements between the Company and Overlooked. Overlooked
and Lyrihn have filed a counterclaim alleging breach of the
agency agreement by the Company. The Company is seeking
$356,669.63 plus interest and attorneys' fees in damages.
Overlooked and Lyrihn are seeking an unspecified amount of
damages in their counterclaim. The Company is currently
negotiating a mutual release of all claims with Overlooked and
Lyrihn and does not expect to incur any additional liability as a
result of this litigation. In the event a mutual release is not
executed, the Company intends to vigorously prosecute these
actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders
during the fourth quarter of the fiscal year ended December 31,
1995.
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
General
High and low bid prices for the Company's Common Stock,
par value $.01 per share (the "Common Stock"), for each
quarterly period during 1994 and 1995 were:
<TABLE>
COMMON STOCK
<CAPTION>
Quarter Ended High Low
<S> <C> <C>
March 31, 1994 15/16 1/4
June 30, 1994 1 1/8 1/8
September 30, 1994 1 3/16
December 31, 1994 1 1/4 3/16
March 31, 1995 9/16 3/8
June 30, 1995 7/16 5/16
September 30, 1995 3/8 1/4
December 31, 1995 1/2 3/8
</TABLE>
In connection with the Company's initial public
offering, the Company issued Units, each of which consisted of
five shares of Common Stock and five Redeemable Class A Warrants.
The Redeemable Class A Warrants expired unexercised on May 29,
1994.
The Common Stock is not listed on an exchange. Price
information for the Common Stock was obtained from the NASDAQ
bulletin board which is a quotation service. These quotations
could include inter-dealer prices and may not include retail
mark-up, mark-down or commission and may not represent actual
transactions.
There has never been an established public trading
market for the Company's Class A Common Stock, par value $.00001
per share (the "Class A Common Stock").
At March 27, 1996, there were 60 holders of record of
Common Stock and 2 holders of record of Class A Common Stock.
The Company has declared no cash dividends since its
inception in 1988, and it is the Board's intent not to pay
dividends for the foreseeable future. Rather, all available
funds will be used for working capital purposes. In addition,
the Company's credit facility prohibits the paying of dividends
at this time.
RECENT SALES OF UNREGISTERED SECURITIES
On April 8, 1993, the Company issued 300,000 shares of
Common Stock to Mr. Robert R. Kaemmer as a commitment fee for a
revolving credit agreement, dated November 10, 1992, pursuant to
which Mr. Kaemmer agreed to lend up to $300,000 to the Company.
These shares were not registered under the Securities Act of 1933
(as amended, the "Securities Act") in reliance upon the exemption
from registration provided in Section 4(2)of the Securities Act
(the "Section 4(2) Exemption").
<PAGE>
On April 27, 1994, Mr. Robert R. Kaemmer purchased
900,000 shares of Common Stock. Mr. Kaemmer was granted the
right to purchase such stock at a purchase price of $0.33 per
share on November 10, 1992, in connection with the execution of
the revolving credit agreement described above. These shares
were not registered under the Securities Act in reliance upon the
Section 4(2) Exemption.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THIS
REPORT ON FORM 10-KSB CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS
COULD DIFFER MATERIALLY. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED IN THE SECTION ENTITLED "FACTORS THAT MAY AFFECT FUTURE
RESULTS OF OPERATIONS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN
THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.
GENERAL
The Company's financial condition and results of
operations deteriorated substantially during 1995, primarily as a
result of the following factors.
Competition. Competition in the long distance
telecommunications industry increased significantly during 1995.
Major long distance companies like AT&T and Sprint began to
market directly to the Company's primary market - small to
medium-sized businesses. Other existing competitors began
aggressively reducing rates to maintain and build customer base
and expand minute volume. In addition, new competitors emerged
targeting the Company's primary market. Many of these
competitors sought to build volume quickly and, in order to
accomplish this goal, sold their long distance services at rates
that, in the Company's opinion, do not reflect the full costs of
doing business. Accordingly, while the Company reduced its rates
and undertook efforts to maintain and build its customer base (as
described below), the Company was unable to match the rates
and/or services offered by many of its competitors, thereby
increasing the number of customers lost to competitors. While
the Company continued to acquire new customers, lost business
partially offset new business. As a consequence of this
competitive rate pressure, while the total minutes billed
increased approximately 8% from 1994 to 1995, the average revenue
per minute dropped approximately 9%.
Direct Operating Costs. The negative effect of the
competitive rate pressure on the Company's financial condition
was exacerbated by its inability to achieve direct operating cost
reductions from its major underlying carrier. Throughout 1995,
the Company attempted to negotiate a new contract with such
carrier which would reduce the rates paid by the Company. The
Company was unable to obtain a new contract until September 1995.
While the new contract reduces the Company's costs at certain
increased volume targets, which would result in significant cost
reductions for the Company, to date the Company has been unable
to achieve the volume targets necessary to realize the reduced
carrier pricing.
Company's Response. In the absence of a new carrier
contract, the Company sought to increase its volume by offering
services at rates that were competitive in the market, but that
significantly reduced the Company's margins. The Company hired
Area Sales Directors and other personnel to support its sales
agent program, increased commissions to sales agents to maintain
its relationship with key agents, and promoted aggressive
marketing campaigns designed to increase sales. While the
Company believed these actions to be necessary to respond to the
competitive environment, they had the effect of increasing
selling, general and administrative expenses, thereby further
reducing the Company's margins. These actions continue to result
in increased expenses and to negatively impact the Company's
margins.
Write-Offs. Throughout 1995 and previous years, the
Company had recorded credits due from one of its carriers which
the Company believed at the time should be applied to reduce
usage costs. During the year ended December 31, 1995,
approximately $283,000 of these previously recorded credits were
determined to be uncollectible and were written off. This write-
off inflated direct operating costs and reduced overall margins
for the year ended December 31, 1995.
In 1994, the Company signed an agreement with an agent
representing more than 25,000 residential customers. In order to
facilitate the movement of these customers, the Company loaned
$141,000 to the agent as an advance against future commissions
and paid certain start-up costs on the agent's behalf. While the
Company billed these customers for approximately $1,000,000 in
long distance usage during 1994, due to circumstances beyond the
Company's control, the <PAGE> payment performance was well below, and
the attrition rate well above what the Company typically
experiences with respect to small and medium-sized business
customers. As a result, bad debt expense was in excess of the
normal expected rate, and agent commissions were insufficient to
pay off the loans which became due in December 1994. As of
December 31, 1995, the total amount due from the agent, including
the loans was approximately $498,000. As of December 31, 1994,
the Company had recorded $100,000 as an allowance against the
start-up costs due from the agent and uncollected billings due
from the customers represented by this agent. During the year
ended December 31, 1995, the Company determined that all start-up
costs and billings from this agent are uncollectible and,
accordingly, $398,000 was written off. This write-off negatively
impacted sales, general and administrative expenses for the year
ended December 31, 1995. These residential long distance users
are no longer customers of the Company. See "Legal Proceedings."
RESULTS OF OPERATIONS
Total Revenues. Total revenues increased from
$16,984,324 in 1994 to $17,099,635 in 1995, an increase of
$115,311 or approximately 1%. While the total number of minutes
billed during 1995 increased approximately 8% over 1994, the
average revenue per minute decreased approximately 9%. Also
contributing to the flat revenue increase was the loss in late
1994 of an agent that represented a large number of residential
customers.
Direct Operating Costs. Direct operating costs
increased from $12,642,307 in 1994 to $13,399,190 in 1995, an
increase of $756,883 or approximately 6%. As a percentage of
revenues, direct operating costs increased from approximately 74%
in 1994 to 78% in 1995. Direct operating costs for 1994 included
$150,000 in customer appreciation credits from one of the
Company's interexchange carriers. Without the $150,000 credit,
direct operating costs for 1994 would have been $12,792,307 or
approximately 75% of revenue. Direct operating costs for 1995
were negatively impacted by a $200,000 write-off of credits due
from a supplier. Without the $200,000 write-off, direct
operating costs for 1995 would have been $13,199,190 or
approximately 77% of revenue. The increase in direct operating
costs as a percentage of revenues, as adjusted, results primarily
from competitive pressures previously mentioned which reduced the
revenue per minute charged to the Company's customers while the
rates charged the Company by the major underlying carrier
remained relatively constant.
Selling, Administrative and General Expenses. The
Company's selling, administrative and general expenses increased
from $3,912,979 in 1994 to $4,847,248 in 1995, an increase of
$934,269 or approximately 24%. As a percentage of revenue,
selling, administrative and general expenses increased from 23%
in 1994 to 28% in 1995. The biggest single increase in this
expense category in dollars was in compensation expense.
Compensation expenses increased from $2,136,194 in 1994
to $2,418,641 in 1995, an increase of $282,447 or approximately
13%. Salaries for sales related positions increased from
$168,594 to $299,205, an increase of $130,611 or approximately
77%, which increase resulted from the addition of several sales
positions throughout 1995. Agent commissions increased from
$1,310,236 to $1,435,996, an increase of $125,760 or
approximately 10% due to the introduction in 1995 of a commission
plan designed to attract high volume agents.
Billing expenses increased from $469,050 in 1994 to
$610,196 in 1995, an increase of $141,146 or approximately 30%.
This increase is attributable in part to an increase in monthly
processing fees charged by the Company's billing agent. The
number of Company call records processed increased significantly
during 1995 and the Company is charged by its billing agent on a
per record basis. In addition, the amount of stored historical
information within the billing system continued to accumulate
during 1995. The Company took measures in early 1996 to find
alternative storage methods for such information in order to
reduce the portion of billing expenses attributable to such
storage.
Bad debt expenses increased from $537,640 in 1994 to
$739,374 in 1995, an increase of $201,734 or approximately 38%.
During 1994, the Company signed an agreement with an agent
representing more than 25,000 residential customers. In order to
facilitate the movement of these customers, the Company loaned
$141,000 to the agent as an advance against future commissions
and paid certain start-up costs on the agent's behalf. While the
Company billed these customers for some long distance usage
during 1994, due to circumstances beyond the Company's control,
the payment performance was well below, and the attrition rate
well above, what the Company typically experiences with respect
to its small and medium-sized business customers. At December
31, 1994, a reserve of $100,000 was established against amounts
due from this agent whose receivable, including unpaid charges,
aggregated $498,000. During 1995, the Company and this agent
became involved in litigation, and it has been determined that no
recovery on the amounts will be made. As a result, the remaining
receivable of $398,000 was written off. The Company is currently
negotiating a mutual release of all claims with this agent and
does not expect to incur any additional liability as a result of
the litigation.
<PAGE>
Office occupancy expenses which include office leases,
equipment leases, telephone expense and insurance expense
increased from $255,479 in 1994 to $364,703 in 1995, an increase
of $109,224 or approximately 43%. The increase is a result of
additional leased space occupied during January 1995 and related
expenses associated with an increase in personnel.
Fees for professional services increased from $251,484
in 1994 to $319,207 in 1995, an increase of $67,723 or
approximately 27%. This increase resulted primarily from
increases in the costs of legal and accounting services
associated with the litigation with an agent and the potential
merger previously mentioned. A significant amount of legal
expenses were also incurred in connection with the litigation
previously mentioned.
Travel expense increased from $53,334 in 1994 to
$104,804 in 1995, an increase of $51,470 or approximately 97%.
The increase is directly attributable to the addition of Area
Sales Directors in late 1994. See "Description of Business -
Marketing."
Income Tax Effect. In 1995, the Company reduced the
deferred tax asset to zero.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 1994 and December 31, 1995, the Company
had a net worth of $1,479,219 and a deficit of $237,041,
respectively. In 1994, the Company generated $301,463 cash from
operations. Contributing to the cash generated from operations
during 1994 was a $150,000 customer appreciation credit the
Company received from one of its carriers. In 1995, the Company
used $64,222 cash in operations. While the Company reported a
net loss of $1,718,510 for 1995, non-cash items such as
depreciation and amortization, provision for doubtful accounts
and deferred income taxes collectively contributed $1,316,067 of
the total loss. The remaining portion of the total loss,
$402,443, along with a $118,481 increase in accounts receivable
and a $691,755 increase in accounts payable, contributed to the
cash used in operating activities.
The Company has a contract with a firm to provide
subscriber statement processing and billing services. The
contract is for a period of three (3) years and expires in
September 1996. Terms of the contract provide for a monthly base
charge with additional per unit processing charges. Termination
of this contract for cause requires a 90-day period during which
any breach of the contract can be cured, plus a requirement for a
subsequent written 30-day notice. Termination for cause requires
the payment of all amounts owed. Termination of the contract for
the convenience of the Company requires a written 180-day notice
and a termination fee equal to one year's charges. The Company
is required to make minimum payments of $5,000 per month.
The Company has a contract with Sprint to provide
telecommunications services for the Company's customers. The
agreement covers the pricing of the services for a term of two
years beginning September 1995. The Company has an annual
minimum usage commitment of $12,000,000 through August 1996 and
$14,400,000 from September 1996 to August 1997. In the event the
Company's customers use less than the minimum commitment, the
difference is due and payable by the Company to Sprint. Assuming
a monthly average requirement of $1,000,000 under the Sprint
contract, for the period from September, 1995 through December
1995 the Company accumulated a shortfall of $719,545. The
Company anticipates additional shortfall amounts to accumulate
during 1996. In the event the proposed merger with Phoenix
Network, Inc. occurs, the Company currently anticipates that all
accumulated shortfall amounts will be addressed in a new contract
between Sprint and the surviving corporation. In the event the
proposed merger does not occur, the Company has begun
negotiations with Sprint to address the accumulated shortfall.
While the Company believes the accumulated shortfall at December
31, 1995, and any additional shortfall amounts, will be resolved
in a manner which will not have a material adverse effect on the
business or financial condition of the Company in the event the
proposed merger does not occur, there can be no assurance of such
a result. If the Company were required to pay the full amount of
accumulated shortfalls, this would have a material adverse effect
on the Company's financial condition.
The Company has a contract with WilTel, Inc. ("WilTel")
to provide telecommunications services at discounted rates which
will vary based upon the amount of usage by the Company. The
term of this usage commitment is thirty-nine (39) months. The
Company's agreement with WilTel calls for a minimum monthly usage
commitment of $50,000 through January 1998. In the event the
Company's customers use less than the minimum commitment in any
month, the difference is due and payable by the Company to WilTel
in the following month. The Company was in compliance with the
contractual requirements of the agreement throughout the year
ended December 31, 1995.
<PAGE>
On June 8, 1995, the Company entered into a revolving
credit facility which allows for maximum borrowings by the
Company of the lesser of $1,000,000 or 50% of eligible (less than
61 days old) receivables. Interest is payable monthly at the
bank's prime rate (8.5% at December 31, 1995) plus 1%. Under the
terms of the credit facility, the Company is required to meet
certain financial covenants. At December 31, 1995, the Company
was in default of certain of these financial covenants, which
defaults are continuing. While the Company currently does not
expect these defaults to impair its ability to utilize this
facility during the remainder of the existing term, it may
negatively impact the Company's ability to renew the credit
facility. In the event the credit facility cannot be renewed or
the Company is unable to utilize the existing facility, the
Company would attempt to obtain a comparable credit facility from
an alternative financing source. While the Company has been able
to obtain such facilities in the past, there can be no assurance
that the Company will be able to obtain a credit facility with
comparable terms or at all. The inability to obtain a credit
facility would have a material adverse effect on the Company's
financial condition and business. The line is secured by all of
the Company's accounts receivable. During 1995, the Company had
used this facility for short terms borrowings, but had no
outstanding borrowings at year end.
In accordance with the terms of the credit facility,
the Company purchased a term life insurance policy on this key
employee with a face amount of $1,750,000 during the year ended
December 31, 1994. Annual premiums are approximately $3,500.
At December 31, 1995, the Company had a ratio of
current assets to current liabilities of 0.86, as opposed to 1994
when such ratio was 1.49. Working capital deficit at December
31, 1995 was $391,502, as compared to working capital of
$1,112,197 at December 31, 1994.
The Company's business as a non-facilities based
reseller of long distance telecommunications services is
generally not a capital intensive business, and at December 31,
1995, the Company had no material commitments for capital
expenditures. The Company anticipates any additional capital
expenditures in the future will be confined to minimal purchases
of office fixtures and equipment.
Currently none of the Company's customers represents
more than 2% of the monthly revenues.
The proposed merger would reduce the Company's direct
operating costs through volume discounts on long-distance pricing
from its carriers and would provide certain economies of scale
that together management believes would allow its operations to
become profitable and allow it to compete for new and existing
customers. If for any reason the proposed merger is not
consummated, the Company plans to increase its sales and reduce
its costs and will continue to explore other strategic
alternatives (which may include financings, mergers,
acquisitions, joint ventures or other strategic transactions).
In addition, if the proposed merger is not consummated, the
Company intends to negotiate new contracts with its carriers
which would allow its operations to become profitable.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Dependence on Service Providers. The Company depends
on a continuing and reliable supply of telecommunications
services from facilities-based, interexchange carriers. Because
the Company does not own or lease switching or transmission
facilities, it depends on these providers for the
telecommunications services used by its customers and to provide
the Company with the detailed information on which it bases its
customer billings. The Company's ability to expand its business
depends both upon its ability to select and retain reliable
providers and on the willingness of such providers to continue to
make telecommunications services and billing information
available to the Company for its customers on favorable terms and
in a timely manner. See "Description of Business - Vendors."
Potential Adverse Effects of Rate Changes. The Company
bills its customers for the costs of the various
telecommunications services procured on their behalf. The total
billing to each customer is generally less than telephone charges
for the same service provided by the major carriers. The Company
believes its lower customer bills are an important factor in its
ability to attract and retain customers. To the extent the
differential between the telephone rates offered by the major
carriers directly to their customers and the cost of the bulk-
rate telecommunications services procured by the Company from its
underlying carriers decreases, the savings the Company is able to
obtain for its customers could decrease and the Company could
lose customers or face increased difficulty in attracting new
customers. If the Company elected to offset the effect of any
such decrease by lowering its rates, the Company's operating
results would also be adversely affected.
<PAGE>
Competition. An existing or potential customer of the
Company has numerous other choices available for its
telecommunications service needs, including obtaining services
directly from the same carriers whose services the Company
offers. From time to time, the Company's competitors may be able
to provide a range of services comparable to or more extensive
than those available to the Company's customers at rates
competitive with the Company's rates. In addition, most
prospective customers of the Company are already receiving
service directly from at least one long distance carrier, and
thus the Company must convince prospective customers to alter
these relationships to generate new business. The Company
competes with three major interexchange carriers, AT&T, MCI and
Sprint, other large carriers, including Frontier and WorldCom,
and several hundred smaller carriers. Additionally, as a result
of legislation enacted by the federal government in February of
1996, the RBOCs and GTOCs will have, upon compliance with certain
regulatory requirements, the right to provide long distance
service. Many of the RBOCs and GTOCs have already announced
their intention to enter the business of providing long distance
service. The telecommunications industry is highly competitive
and subject to rapid technological and regulatory change.
Because the tariffs offered by the major carriers for
telecommunications services are not proprietary in nature, there
are no effective barriers to entry into the Company's line of
business. Because of the considerably greater resources of
competitors of the Company, there can be no assurance that the
Company will be able to remain competitive in the current
telecommunications environment. See "Description of Business -
Competition."
Possible Volatility of Stock Price. The market price
of the Company's Common Stock has, in the past, fluctuated
substantially over time and may in the future be highly volatile.
Factors such as the announcements of potential mergers,
acquisitions, joint ventures or other strategic combinations
involving the Company, rate changes for various carriers,
technological innovation or new products or service offerings by
the Company or its competitors, as well as market conditions in
the telecommunications industry generally and variations in the
Company's operating results, could cause the market price of the
Common Stock to fluctuate substantially. Because the public
float for the Company's Common Stock is small, additional
volatility may be experienced.
Control by Officers and Directors. As of March 28,
1996, the Company's executive officers and directors beneficially
owned or controlled approximately 52.9% of the total voting power
represented by the Company's outstanding capital stock, taking
into account that holders of the Company's Class A Common Stock
are entitled to five votes per share of such stock and assuming
the exercise of all outstanding options for the Company's capital
stock which are exercisable within sixty (60) days. The votes
represented by the shares beneficially owned or controlled by the
Company's executive officers and directors would, if they were
cast together, control the election of a majority of the
Company's directors and the outcome of most corporate actions
requiring stockholder approval.
Investors who purchase Common Stock of the Company may
be subject to certain risks due to the concentrated ownership of
the capital stock of the Company. Such risks include: (i) the
shares beneficially owned or controlled by the Company's
executive officers and directors could, if they were cast
together, delay, defer or prevent a change in control of the
Company, such as an unsolicited takeover, which might be
beneficial to the stockholders, and (ii) due to the substantial
ownership or control of outstanding shares by the Company's
executive officers and directors and the potential adverse impact
of such substantial ownership or control on a change in control
of the Company, it is less likely that the prevailing market
price of the outstanding shares of the Company's Common Stock
will reflect a "premium for control" than would be the case if
ownership of the outstanding shares were less concentrated.
Governmental Regulation. As a reseller of long
distance telecommunications services, the Company is subject to
many of the same regulatory requirements as facilities-based
interexchange carriers. The intrastate long distance
telecommunications operations of the Company are also subject to
various state laws and regulations, including certification
requirements. Generally, the Company must obtain and maintain
certificates of public convenience and necessity from regulatory
authorities in most states where it offers service, and in some
of these jurisdictions it must also file and obtain prior
regulatory approval of tariffs for intrastate offerings. There
can be no assurance that the regulatory authorities in one or
more states or the FCC will not take action having an adverse
effect on the business or financial condition of the Company.
See "Description of Business - Regulation."
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants . . . 13
Consolidated Balance Sheet as of December 31, 1995 . . . 14
Consolidated Statements of Operations for the Years Ended
December 31, 1995 and December 31, 1994 . . . . . . 16
Consolidated Statements of Stockholders' Deficit for the
Years Ended December 31, 1995 and December 31, 1994 17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995 and December 31, 1994 . . . . . . 18
Notes to the Consolidated Financial Statements . . . . . 20
<PAGE>
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
AmeriConnect, Inc.
We have audited the accompanying consolidated balance sheet of
AmeriConnect, Inc. (a Delaware corporation) and subsidiary as of
December 31, 1995, and the related consolidated statements of
operations, stockholders' deficit, and cash flows for each of the
two years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of AmeriConnect, Inc. and subsidiary as of
December 31, 1995, and the consolidated results of their
operations and their consolidated cash flows for each of the two
years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Kansas City, Missouri
February 16, 1996
<PAGE>
<TABLE>
AMERICONNECT, INC.
Consolidated
Balance Sheet
<CAPTION>
ASSETS December 31, 1995
CURRENT ASSETS
<S> <C>
Cash $ 293,492
Accounts receivable, net of allowance of
$361,260 (Notes 1, 2 and 6) 1,961,815
Accounts receivable-trade, with affiliates
(Note 3) 6,065
Accounts receivable-agents, including
accrued interest(Note 11) 1,492
Notes receivable-director/shareholder
(Note 3) 14,500
Prepaid commissions 126,042
Other current assets 94,251
Total current assets 2,497,657
NON-CURRENT ASSETS
Equipment and software, net of
accumulated depreciation and
amortization of $230,868 (Note 1) 143,202
Deposits 19,528
TOTAL ASSETS $2,660,387
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
AMERICONNECT, INC.
Consolidated
Balance Sheet
<CAPTION>
December 31, 1995
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
<S> <C>
Accounts payable (Notes 1, 2 and 6) $2,782,432
Sales taxes payable 97,460
Accrued office closing costs (Note 9) 8,539
Other accrued liabilities 733
Total current liabilities 2,889,164
NON-CURRENT LIABILITIES
Customer deposits 8,264
Total liabilities 2,897,428
COMMITMENTS AND CONTINGENCIES (Notes 5, 6, 8 and 10) --
STOCKHOLDERS' DEFICIT (Note 8)
Class A common stock, par value $.00001 per share; 10,000,000 shares
authorized; issued 6,562,033 shares 66
Common stock, par value $.01 per share; 20,000,000 shares authorized;
issued 6,504,967 shares 65,050
Additional paid-in capital 3,642,731
<PAGE>
Accumulated deficit (3,943,025)
Treasury stock - class A common, at cost; 5,970,000 shares (60)
Treasury stock - common, at cost; 180,250 shares (1,803)
Total stockholders' deficit (237,041)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $2,660,387
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
AMERICONNECT, INC.
Consolidated
Statements of Operations
<CAPTION>
For the Year Ended December 31,
1995 1994
<S> <C> <C>
REVENUES (Notes 1, 2, 3 and 6)
Sales $17,022,095 $16,923,025
Sales to affiliates 77,540 61,299
Total revenues 17,099,635 16,984,324
COSTS AND EXPENSES
Direct operating costs 13,399,190 12,642,307
Selling, administrative and general expenses 4,847,248 3,912,979
Depreciation and amortization (Note 1) 76,693 43,793
Total costs and expenses 18,323,131 16,599,079
Operating income (loss) (1,223,496) 385,245
OTHER INCOME (EXPENSE)
Interest income 19,898 28,000
Interest expense (6,558) (18,157)
Interest expense to director/shareholder (Note 3) (1,587) --
Loan fees (1,250) (3,332)
<PAGE>
Miscellaneous (5,517) 46,229
Total other income (expense) 4,986 52,740
NET INCOME (LOSS) BEFORE INCOME TAXES (1,218,510) 437,985
INCOME TAX EXPENSE (NOTES 1 AND 8)
Currently payable -- 16,405
Deferred 500,000 --
Total income tax expense 500,000 16,405
NET INCOME (LOSS) $(1,718,510) $421,580
Net income (loss) per common and common equivalent $(0.228) $0.061
share (Note 1)
Weighted average common and common equivalent shares
outstanding (Note 1) 7,550,710 6,868,221
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
AMERICONNECT, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class A
Common Stock Common Stock
Additional
Paid-In Accumulated
Description Shares Amount Shares Amount Capital Deficit
Balance, January 1, 1994 6,788,833 $ 68 5,251,167 $52,512 $3,350,479 ($2,646,095)
Conversion of Class A
to Common (113,400) (1) 113,400 1,134 (1,133)
Issuance of Common
to directors 19,000 190 3,888
Net income for the year 421,580
Stock options exercised 933,000 9,330 289,130
Balance, December 31, 1994 6,675,433 $ 67 6,316,567 $63,166 $3,642,364 ($2,224,515)
Net loss for the year (1,718,510)
Stock options exercised 75,000 750 1,500
Conversion of Class A to
Common (113,400) (1) 113,400 1,134 (1,133)
Balance, December 31, 1995 6,562,033 $66 6,504,967 $65,050 $3,642,731 ($3,943,025)
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
AMERICONNECT, INC.
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
Treasury Stock Treasury
Class A Common Stock Common Stock
<S> <C> <C> <C> <C> <C>
Description Shares Amount Shares Amount Total
Balance, January 1, 1994 (5,970,000) ($60) (180,250) ($1,803) $ 755,101
Conversion of Class A
to Common
Issuance of Common
to directors 4,078
Net income for the year 421,580
Stock options exercised 298,460
Balance, December 31, 1994 (5,970,000) ($60) (180,250) ($1,803) $1,479,219
Net loss for the year (1,718,510)
Stock options exercised 2,250
Conversion of Class A to
Common
Balance, December 31, 1995 (5,970,000) ($60) (180,250) ($1,803) ($237,041)
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
AMERICONNECT, INC.
Consolidated
Statements of Cash Flows
<CAPTION>
For the Year Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income (expense) $(1,718,510) $421,580
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 76,693 43,793
Provision for doubtful accounts 739,374 537,640
Deferred income taxes 500,000 --
(Increase) decrease in assets:
Accounts receivable (118,481) (517,299)
Accounts receivable-trade from affiliates 3,804 (6,055)
Prepaid commissions (88,764) 7,641
Other current assets (57,041) (36,569)
Deposits 511 (11,494)
Increase (decrease) in liabilities:
Accounts payable 691,755 (97,881)
Accrued office closing costs (10,153) (54,521)
<PAGE>
Sales taxes payable (34,193) 50,187
Other accrued liabilities (29,832) (28,840)
Deferred income (13,384) (14,219)
Customer deposits (6,001) 7,500
Net cash provided by (used in) operating activities (64,222) 301,463
Cash flows from investing activities:
Purchase of equipment and software (95,263) (108,001)
Note receivable-director/shareholder (3,000) (11,500)
Notes receivable-agents (23,115) (206,995)
Payments on agents' notes receivable 70,900 5,838
Net cash used in investing activities (50,478) (320,658)
Cash flows from financing activities:
Proceeds from bank loan 6,143,950 3,450,000
Payments on bank loan (6,143,950) (3,450,000)
Sale of stock to officer -- 297,000
Distribution of stock to director -- 4,078
Sale of stock to employees 2,250 1,460
Net cash provided by financing activities 2,250 302,538
Net increase (decrease) in cash (112,450) 283,343
<PAGE>
Cash at beginning of year 405,942 122,599
Cash at end of year $293,492 $405,942
<PAGE>
Supplemental disclosure of cash flow information:
Cash Paid During the Year for:
Interest $7,854 $18,072
Income Taxes $3,340 $20,105
</TABLE>
See accompanying notes to financial statements
<PAGE>
Supplemental disclosure of non-cash financing activities:
During the third quarter of 1994 and the fourth quarter of
1995, separate private transactions took place in which, in each
case, 113,400 shares of Class A Common Stock were converted to
Common Stock. The effect of this was to reduce the Class A
Common Stock account by $1.00 and to increase the Common Stock
account by $1,134 for each transaction. This occurs because the
par value of the Class A is $.00001 per share and the par value
of the Common is $.01 per share.
See accompanying notes to financial statements
<PAGE>
AMERICONNECT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY: AmeriConnect, Inc. and its wholly owned
subsidiary, AmeriConnect, Inc. of New Hampshire (collectively,
the "Company") resell long distance telecommunications services
primarily to individuals and small to medium-sized businesses.
AmeriConnect, Inc. of New Hampshire was formed June 28, 1993, in
order to do business in the state of New Hampshire.
PRINCIPLES OF CONSOLIDATION: The consolidated
financial statements include the accounts of AmeriConnect, Inc.
and its wholly-owned subsidiary, AmeriConnect, Inc. of New
Hampshire. All material intercompany accounts and transactions
have been eliminated.
RECOGNITION OF REVENUE: The Company purchases network
services primarily at bulk rates and resells the services to its
customers at marginally higher rates. Revenue and its associated
costs are recognized on an accrual basis in the period during
which the usage occurs.
EQUIPMENT AND SOFTWARE: Equipment and purchased
software are recorded at cost. Depreciation and amortization are
provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service
lives. The straight-line method of depreciation is used for all
assets for financial reporting purposes, but accelerated methods
are used for tax purposes.
INCOME PER COMMON AND COMMON EQUIVALENT SHARE: Income
per share is based upon the weighted average of common and common
equivalent shares outstanding during the period.
COMMON STOCK EQUIVALENTS: Common stock equivalents
considered in the calculation of income per common and common
equivalent share include options outstanding under the Company's
1988 and 1994 stock option plans.
INCOME TAXES: Deferred income taxes result from timing
differences between pretax accounting income and taxable income.
Deferred tax assets in 1994 arose primarily from net operating
loss carryforwards. (See Note 7.)
USE OF ESTIMATES: In preparing financial statements in
conformity with generally accepted accounting principles, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
NOTE 2 - ECONOMIC DEPENDENCY AND CONCENTRATION OF CREDIT RISK
ECONOMIC DEPENDENCY: The Company operates as a non-
facilities-based reseller of long distance telecommunications
services to individuals and small to medium-sized businesses.
The Company acquires its network services by contracting with two
underlying interexchange carriers (Sprint Communications, L.P.
("Sprint") and WilTel, Inc. ("WilTel")). As of December 31,
1995, the Company was indebted to Sprint and WilTel for normal
monthly services in the amount of $2,266,170 and $296,661,
respectively, which are included in accounts payable on the
accompanying consolidated balance sheet.
CONCENTRATION OF CREDIT RISK: The Company grants
credit to its customers, who include individuals and small to
medium-sized businesses.
<PAGE>
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES
SALES TO RELATED ENTITIES: Sales of long distance
service to entities related to shareholders aggregated $77,540
and $61,299 for the years ended December 31, 1995 and 1994,
respectively. Such sales were consummated on terms similar to
those prevailing with unrelated customers.
NOTE RECEIVABLE - DIRECTOR/SHAREHOLDER: During 1994
and early 1995, the Company made loans totaling $14,500 to a
director/shareholder. They were secured by 19,000 shares of the
Company's common stock and bore interest at 2 1/2% over the
published prime rate found in The Wall Street Journal. The loans
were paid in full on January 24, 1996.
NOTE 4 - SIGNIFICANT SALES TO MAJOR CUSTOMERS
During 1995 and 1994, no customer accounted for 2% or
more of the Company's gross revenue.
NOTE 5 - OPERATING LEASES
The Company leases office space at 6750 W. 93rd St.,
Suite 110, Overland Park, Kansas, under a lease calling for
payments of $2,653 per month through August 31, 1998. An
amendment to that lease, executed on February 1, 1994, for
additional office space calls for payments of $2,243 per month
from February 1, 1994 through August 31, 1998. A second
amendment to the lease for additional office space calls for
payments of $2,362 per month from January 1, 1995 through
December 31, 1999. Rental expense for the years ended December
31, 1995 and 1994, was $87,967 and $56,358, respectively.
The Company also leases office equipment and furniture
under various operating leases. As of December 31, 1995,
remaining minimum annual rental commitments under noncancelable
operating leases for office space, office equipment and furniture
are as follows:
<TABLE>
Total Rent
Fiscal Years Commitments
<CAPTION>
<C> <C>
1996 $143,602
1997 103,945
1998 67,517
1999 28,350
$343,414
</TABLE>
Total expenses recognized for all operating leases
including leases for office space for the years ended December
31, 1995 and 1994 were $156,366 and $106,489, respectively.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company has a contract with a firm to provide
subscriber statement processing and billing services. The
contract is for a period of three (3) years and expires in
September 1996. Terms of the contract provide for a monthly base
charge with additional per unit processing charges. Termination
of this contract for cause requires a 90-day period during which
any breach of the contract can be cured, plus a requirement for a
subsequent written 30-day notice. Termination for cause requires
the payment of all amounts owed. Termination of the contract for
the convenience of the Company requires a written 180-day notice
and a termination fee equal to one year's charges. The Company
is required to make minimum payments of $5,000 per month.
<PAGE>
The Company has a contract with Sprint to provide
telecommunications services for the Company's customers. The
agreement covers the pricing of the services for a term of two
years beginning September 1995. The Company has an annual
minimum usage commitment of $12,000,000 through August 1996 and
$14,400,000 from September 1996 to August 1997. In the event the
Company's customers use less than the minimum commitment, the
difference is due and payable by the Company to Sprint. Assuming
a monthly average requirement of $1,000,000 under the Sprint
contract, for the period from September, 1995 through December
1995 the Company accumulated a shortfall of $719,545. The
Company anticipates additional shortfall amounts to accumulate
during 1996. In the event the proposed merger with Phoenix
Network, Inc. occurs, the Company currently anticipates that all
accumulated shortfall amounts will be addressed in a new contract
between Sprint and the surviving corporation. In the event the
proposed merger does not occur, the Company has begun
negotiations with Sprint to address the accumulated shortfall.
While the Company believes the accumulated shortfall at December
31, 1995, and any additional shortfall amounts, will be resolved
in a manner which will not have a material adverse effect on the
business or financial condition of the Company in the event the
proposed merger does not occur, there can be no assurance of such
a result. If the Company were required to pay the full amount of
accumulated shortfalls, this would have a material adverse effect
on the Company's financial condition.
The Company has a contract with WilTel to provide
telecommunications services at discounted rates which will vary
based upon the amount of usage by the Company. The term of this
usage commitment is thirty-nine (39) months. The Company's
agreement with WilTel calls for a minimum monthly usage
commitment of $50,000 through January 1998. In the event the
Company's customers use less than the minimum commitment in any
month, the difference is due and payable by the Company to WilTel
in the following month. The Company was in compliance with the
contractual requirements of the agreement throughout the year
ended December 31, 1995.
On June 8, 1995, the Company entered into a revolving
credit facility which allows for maximum borrowings by the
Company of the lesser of $1,000,000 or 50% of eligible (less than
61 days old) receivables. Interest is payable monthly at the
bank's prime rate (8.5% at December 31, 1995) plus 1%. Under the
terms of the credit facility, the Company is required to meet
certain financial covenants. The line is secured by all of the
Company's accounts receivable. During 1995, the Company had used
this facility for short terms borrowings, but had no outstanding
borrowings at year end. At December 31, 1995, the Company was in
default of certain of these financial covenants, which defaults
are continuing. While the Company currently does not expect
these defaults to impair its ability to utilize this facility
during the remainder of the existing term, it may negatively
impact the Company's ability to renew the credit facility. In
the event the credit facility cannot be renewed or the Company is
unable to utilize the existing facility, the Company would
attempt to obtain a comparable credit facility from an
alternative financing source. While the Company has been able to
obtain such facilities in the past, there can be no assurance
that the Company will be able to obtain a credit facility with
comparable terms or at all. The inability to obtain a credit
facility would have a material adverse effect on the Company's
financial condition and business.
In accordance with the terms of the credit facility,
the Company purchased a term life insurance policy on this key
employee with a face amount of $1,750,000 during the year ended
December 31, 1994. Annual premiums are approximately $3,500.
NOTE 7 - INCOME TAXES
The valuation of the deferred tax asset includes the
following amounts:
<TABLE>
1995 1994
<CAPTION>
<S> <C> <C>
Deferred tax asset $1,667,882 $1,091,512
Valuation allowance (1,667,882) (591,512)
Deferred tax asset $ -0- $ 500,000
</TABLE>
<PAGE>
The approximate tax effect caused by the net operating
loss carryforward, and the difference in treatment for book and
tax for allowance for doubtful accounts and prepaid commissions
gives rise to the deferred tax asset at December 31, 1995 and
1994 of $1,667,882 and $1,091,512, respectively. In 1994, the
valuation allowance was established to reduce the deferred tax
asset to the amount that will more likely than not be realized.
In 1995, the Company increased the valuation on its deferred tax
asset by $1,076,370, reducing the deferred asset to zero. Because
of the operating loss in 1995, the Company is no longer able to
determine that it would more likely than not realize the deferred
tax asset. As a result of this change in estimate, the valuation
allowance was increased by $500,000, which related to the
deferred tax asset as of December 31, 1994, and an additional
valuation allowance of $576,370 was recorded to offset the
additional deferred tax asset created by the net operating loss
in 1995.
In 1994, management believed that it would realize the
deferred tax asset of $500,000. The deferred tax asset was
classified in the accompanying consolidated balance sheet as a
$250,000 current and a $250,000 long-term asset.
The valuation allowance was adjusted for the years
ended December 31, 1995 and 1994, as follows:
<TABLE>
1995 1994
<CAPTION>
<S> <C> <C>
Valuation allowance,
beginning of year $591,512 $688,200
Valuation adjustment 576,370 (96,688)
Adjustment in allowance
due to change in
estimate 500,000 --
Valuation allowance,
end of year $1,667,882 $591,512
</TABLE>
The income tax expense reflected in the consolidated
statements of operations differs from the amount computed at
federal statutory income tax rates. The principal differences
are as follows:
<TABLE>
1995 1994
<CAPTION>
<S> <C> <C>
Federal income tax
expense computed
at statutory rate $(389,436) $ 139,980
State income tax effect (73,111) 26,280
Net operating loss
carryforward 462,547 (158,564)
Alternative minimum
tax effect -- 8,709
Valuation adjustment
due to change
in estimate 500,000 --
Income tax expense $500,000 $ 16,405
</TABLE>
<PAGE>
The components of income tax expense related to
continuing operations are as follows:
<TABLE>
1995 1994
<CAPTION>
<S> <C> <C>
Current $ -- $16,405
Deferred 500,000 --
$500,000 $16,405
</TABLE>
The Company has available for income tax purposes the
following net operating loss carryforwards at December 31, 1995:
<TABLE>
Year of Expiration Amount
<CAPTION>
<C> <C>
2005 $ 363,712
2006 1,671,205
2007 185
2008 185
2010 1,687,506
$3,722,793
</TABLE>
NOTE 8 - COMMON STOCK, WARRANTS AND OPTIONS
PUBLIC OFFERING: In its initial public offering in
1989, the Company issued 828,000 units each of which consisted of
five shares of previously unissued common stock, par value $.01
per share, and five redeemable Class A Warrants at a price per
unit of $5.00. Each of the Class A Warrants, which was
transferable separately immediately upon issuance, entitled the
holder to purchase for $1.00 one share of common stock and one
redeemable Class B common stock purchase warrant ("Class B
Warrant"). The Class A Warrants expired on May 29, 1994. Each
Class B Warrant entitled the holder to purchase one share of
common stock at $1.50 until May 29, 1994. The warrants are not
common stock equivalents for the purposes of the earnings per
share computations. (See Note 1.) In addition, the Company
granted the underwriter and finder options to purchase 57,600 and
14,400 units, respectively, at $6.00 per unit exercisable over a
period of four years commencing one year from the date of the
prospectus.
MISSING STOCK CERTIFICATES: Prior to the Company's
initial public offering, the stockholders of record as of March
29, 1989, executed escrow agreements which required the placement
in escrow of 150,000 shares of outstanding common stock and
5,970,000 shares of outstanding Class A common stock pending the
achievement of certain earnings objectives. These earnings
objectives were not met and, consequently, all of the shares
subject to the escrow agreement were retired and have been
accounted for as treasury stock since December 31, 1992. In
addition, in connection with the execution of a voting trust
agreement in 1989, certificates representing 3,014,751 shares of
Class A common stock were issued in the name of a voting trust in
substitution for the certificates held by some of the
stockholder-parties to the voting trust agreement. This voting
trust expired in June of 1992. During the first quarter of 1992,
however, the Company learned that the escrow agent associated
with the escrow agreements asserts that it has never received the
stock certificates representing the shares subject to the escrow
agreements. During the same period, the Company discovered that
the certificates representing 2,975,751 of the shares transferred
to the voting trust were never delivered to the Company for
cancellation. The Company has been unable to locate neither the
original share certificates nor the certificates issued to the
voting trust. As a result, if a stockholder attempted to
transfer any of the shares subject to the escrow agreements or
the voting trust agreement in violation of such agreements, there
can be no assurance that an innocent transferee could not
<PAGE>
successfully claim the right to the shares purportedly
transferred to him or her. The Company believes, however, that
the legends affixed to each of the missing certificates, which
state that the shares are subject to the restrictions of the
voting trust agreement and the escrow agreements, respectively,
are sufficient to prevent a transferee from acquiring a valid
claim with respect to the shares represented by the missing
certificates. In addition, the Company has obtained affidavits
from each holder of the missing certificates that no such
purported transfers have been made.
STOCK RIGHTS: The rights and preferences of common
stock and Class A common stock are substantially identical except
that each share of common stock entitles the holder to one vote
whereas, each share of Class A common stock entitles the holder
to five votes. Class A common stock automatically converts into
common stock on a one-for-one basis upon sale or transfer to an
entity or individual who was not a holder of Class A common stock
before such sale or transfer, or at any time at the option of the
holder. During each of 1994 and 1995, 113,400 shares of Class A
stock were converted to common stock through private
transactions.
STOCK OPTION PLANS: On July 29, 1988, the Company
adopted a stock option plan allowing 300,000 shares of unissued
but authorized common stock for issuance of incentive and/or non-
qualified stock options. At December 31, 1995, all options had
been granted under the plan, and 23,000 options had been returned
to the Company by employees who resigned prior to vesting. Such
returned options are again available for use under the plan.
On May 27, 1994, the Company adopted a second stock
option plan allowing for 500,000 shares of unissued but
authorized common stock for issuance of incentive and/or non-
qualified stock options. As of December 31, 1995, 487,000
options under this plan had been granted and 142,000 options had
been returned to the Company by employees who resigned prior to
vesting. Such returned options are again available for use under
the plan.
Stock option plan transactions for the year ended December 31,
1995, are summarized below:
<TABLE>
1988 Plan 1994 Plan Total
<CAPTION>
<S> <C> <C> <C>
Outstanding,
beginning of year 260,000 247,500 507,500
Granted -0- 234,500 234,500
Exercised (75,000) -0- (75,000)
Cancelled (16,000) (137,000) (153,000)
Outstanding,
end of year 169,000 345,000 514,000
Option price per
share exercised $0.03-$0.50 -- $0.03-$0.50
Price for
outstanding
options $0.03-$0.50 $0.26-$0.75 $0.03-$0.75
</TABLE>
The expiration dates for the options issued under the
1988 Plan range from May 1998 to December 2003. At December 31,
1995, 23,000 shares were available for future grants under the
1988 Plan.
The expiration dates for the options issued under the
1994 Plan range from August 2004 to December 2005. At December
31, 1995, 155,000 shares were available for future grants under
the 1994 Plan.
STOCK ISSUED WITH RESPECT TO SERVICE ON BOARD OF
DIRECTORS: In October 1992, the Board approved the issuance of
stock as compensation to directors not receiving any other form
of compensation from the Company. Each qualifying director
received 5,000 shares of common stock for each quarter of
service. During 1994, 19,000 shares of common stock were issued
pursuant to the Board action, but no shares were issued pursuant
thereto in 1995.
<PAGE>
STOCK ISSUABLE WITH RESPECT TO REVOLVING CREDIT
FACILITY: In connection with a revolving credit agreement with
Robert R. Kaemmer, President of the Company, Mr. Kaemmer had the
option to purchase up to 900,000 shares of common stock at $0.33
per share. Mr. Kaemmer exercised this option by purchasing
900,000 shares of common stock on April 27, 1994.
NOTE 9 - OFFICE CLOSING COSTS
After reviewing the costs of maintaining its
Washington, D.C. sales office, the projected sales from that
location, and the general financial condition of the Company, the
Board decided to close the office effective December 31, 1991.
All estimated costs and expenses directly associated with the
closing of the office were accrued as of December 31, 1991, and
recognized in the financial statements. Subsequent payments of
the accrued costs were charged to the liability account, accrued
office closing costs.
NOTE 10 - KEY EMPLOYEE INCENTIVE COMPENSATION PLAN
The Company has an incentive compensation plan which
provides for incentive payments to a key employee based on 5% of
net earnings before depreciation and amortization and income
taxes. Expenses under the plan amount to $-0- and $27,726 for
the years ended 1995 and 1994, respectively.
In addition, during the year ended December 31, 1994,
the board of directors authorized a one-time performance bonus of
$45,000 to this key employee. The payment was made during the
second quarter of 1994.
NOTE 11 - NOTES RECEIVABLE
The Company conducts a portion of its business through
agents. Some of these agents have borrowed from the Company in
order to obtain necessary capital to expand their operations.
These borrowings are represented by short term promissory notes.
The terms of the notes permit the Company to withhold the monthly
payments from commissions due the agents, if necessary. The
interest rate for all the notes is 2 1/2% over the prime rate
published by The Wall Street Journal. At December 31, 1994, a
reserve of $100,000 was established against amounts due from a
specific agent whose receivable, including unpaid charges,
aggregated $498,061. During 1995, the Company and this agent
became involved in litigation, and it has been determined that no
recovery on the amounts will be made. As a result, the remaining
receivable of $398,061 was written off. The Company is currently
negotiating a mutual release of all claims with this agent and
does not expect to incur any additional liability as a result of
the litigation.
NOTE 12 - ONGOING OPERATIONS
The accompanying financial statements have been
prepared in accordance with generally accepted accounting
principles. The Company reported a net loss of $1,718,510 in 1995.
As a result, liabilities exceeded assets by $237,041. Non-cash items
such as depreciation and amortization, provision for doubtful accounts
and deferred income taxes collectively contributed $1,316,067 of
the loss. The remaining $402,443, along with a $118,481 increase
in accounts receivable and a $691,755 increase in accounts
payable, contributed to cash used in operations of $64,222. In light
of the foregoing, in order to become profitable, the Company must achieve
sufficient volume levels to obtain additional discounts under its existing
carrier contracts or negotiate new contracts with its carriers to obtain
favorable pricing at existing volume levels and reduce other costs. In
addition, the Company may explore financing and other strategic
transactions, such as the proposed merger (discussed in Note 13 below).
The proposed merger would reduce the Company's direct operating
costs through volume discounts on long-distance pricing from its carriers
and would provide certain economics of scale which management believes
would allow its operations to become profitable and allow it to compete
for new and existing customers. If, for any reason, the proposed merger
is not consummated, the Company plans to increase sales and
reduce its costs and will continue to explore other strategic
alternatives (which may include financings, mergers,
acquisitions, joint ventures or other strategic transactions).
<PAGE>
NOTE 13 - SUBSEQUENT EVENT
On January 15, 1996, the Company and Phoenix Network,
Inc. ("Phoenix"), a San Francisco, California-based long distance
reseller and provider of value-added telecommunications services,
signed a letter of intent to merge the two companies in a stock-
for-stock transaction. The parties currently are negotiating a
definitive merger agreement. In connection with the proposed
merger, Phoenix expects to issue approximately 4 million new
shares of common stock in exchange for all of the outstanding
shares of the Company. It is currently anticipated that the
closing will take place on or about August 15, 1996, pending the
obtaining of all necessary regulatory approvals and approval of
the shareholders of both companies. There can be no assurance
that the ongoing negotiations between the Company and Phoenix
will in fact result in the execution of a definitive merger
agreement or that the terms of any such agreement would be as
described above.
NOTE 14 - FOURTH QUARTER ADJUSTMENTS
During the fourth quarter 1995, the Company recorded adjustments
of approximately $940,000 relating primarily to receivables and the
deferred tax asset.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
During the two most recent fiscal years, there were no
changes in or disagreements with the Company's independent
certified public accountants.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The information required by Item 9 is incorporated
herein by reference to (i) the information under the caption
"Election of Directors" (except that the information set forth
under the subcaption "Compensation of Directors" is expressly
excluded from such incorporation) and (ii) the information under
the caption "Compliance with Section 16(a) of the Securities
Exchange Act of 1934," in each case, in the Company's definitive
Proxy Statement to be filed with the Commission not later than
120 days after the end of the fiscal year covered by this Form
10-KSB.
ITEM 10. EXECUTIVE COMPENSATION
The information required by Item 10 is incorporated
herein by reference to the Company's definitive Proxy Statement
to be filed with the Commission not later than 120 days after the
end of the fiscal year covered by this Form 10-KSB.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 11 is incorporated
herein by reference to the Company's definitive Proxy Statement
to be filed with the Commission not later than 120 days after the
end of the fiscal year covered by this Form 10-KSB.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 12 is incorporated
herein by reference to the Company's definitive Proxy Statement
to be filed with the Commission not later than 120 days after the
end of the fiscal year covered by this Form 10-KSB.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 CERTIFICATE OF INCORPORATION, AS AMENDED TO DATE -
Incorporated by reference - previously filed as
Exhibit 3.1 to Registrant's Form 10-QSB for the
quarterly period ended June 30, 1994.
3.3 BYLAWS - Incorporated by reference - previously filed
as Exhibit 3.3 to Registration Statement on Form S-1
under the Securities Act of 1933 filed by Registrant.
Registration Statement No. 33-23845.
4.1 FORM OF UNIT PURCHASE OPTION - Incorporated by
reference - previously filed as Exhibit 4.1 to
Registration Statement on Form S-1 under the
Securities Act of 1933 filed by Registrant.
Registration Statement No. 33-23845.
<PAGE>
4.2 FORM OF WARRANT AGREEMENT - Incorporated by reference
- previously filed as Exhibit 4.2 to Registration
Statement on Form S-1 under the Securities Act of
1933 filed by Registrant. Registration Statement No.
33-23845.
10.1 TERMINATION AGREEMENT, DATED JANUARY 14, 1992, with
Gordon Hutchins, Jr. - Incorporated by reference -
previously filed as Exhibit 10.1 to Registrant's Form
10-KSB for the fiscal year ended December 31, 1992
filed March 31, 1993.
10.2 1988 STOCK OPTION PLAN - Incorporated by reference -
previously filed as Exhibit 10.4 to Registration
Statement on Form S-1 under the Securities Act of
1933 filed by Registrant. Registration Statement No.
33-23845.
10.3 1994 STOCK OPTION PLAN, DATED MAY 27, 1994 -
Incorporated by reference - previously filed as
Exhibit 4.3 to Registration Statement on Form S-8
under the Securities Act of 1933 filed by Registrant,
Registration Statement No. 33-80058.
10.4 DATA PROCESSING SERVICE AGREEMENT WITH AFFILIATED
COMPUTER SYSTEMS COMMERCIAL SERVICES, INC. -
Incorporated by reference - previously filed as
Exhibit 10.12 to Registrant's Form 10-KSB for the
fiscal year ended December 31, 1990 filed April 9,
1991.
10.5 SECOND ADDENDUM PROPOSAL TO DATA PROCESSING SERVICE
AGREEMENT IN EXHIBIT 10.4 HERETO, DATED OCTOBER 4,
1993 - Incorporated by reference - previously filed
as Exhibit 10.4 to Registrant's Form 10-KSB for the
fiscal year ended December 31, 1993 filed March 30,
1994.
10.6 OFFICE BUILDING LEASE FOR REGISTRANT'S FACILITY IN
OVERLAND PARK, KANSAS, DATED AUGUST 20, 1993 -
Incorporated by reference - previously filed as
Exhibit 10.5 to Registrant's Form 10-KSB for the
fiscal year ended December 31, 1993 filed March 30,
1994.
10.7 AMENDMENT TO OFFICE BUILDING LEASE, DATED FEBRUARY 1,
1994 - Incorporated by reference - previously filed
as Exhibit 10.6 to Registrant's Form 10-KSB for the
fiscal year ended December 31, 1993 filed March 30,
1994.
10.8 OFFICE BUILDING LEASE FOR REGISTRANT'S FACILITY IN
MCLEAN, VIRGINIA, AS AMENDED TO DATE - Incorporated
by reference - previously filed as Exhibit 10.13 to
Registrant's Form 10-KSB for fiscal year ended
December 31, 1991.
10.9 AGREEMENT TO RENEW SUBLEASE FOR REGISTRANT'S FACILITY
IN MCLEAN, VIRGINIA, DATED FEBRUARY 14, 1994 -
Incorporated by reference - previously filed as
Exhibit 10.8 to Registrant's Form 10-KSB for the
fiscal year ended December 31, 1993 filed March 30,
1994.
10.10 VOLUME PURCHASE AGREEMENT, DATED MAY 17, 1994, WITH
SPRINT COMMUNICATIONS COMPANY L.P. - Incorporated by
reference - previously filed as Exhibit 1 to
Registrant's Form 10-QSB for the quarterly period
ended June 30, 1994.
10.11 TELECOMMUNICATIONS SERVICES AGREEMENT, DATED JUNE 27,
1994, WITH WILTEL, INC. - Incorporated by reference -
previously filed as Exhibit 2 to Registrant's Form
10-QSB for the quarterly period ended June 30, 1994.
10.12 AMENDMENT TO TELECOMMUNICATIONS SERVICES AGREEMENT,
DATED NOVEMBER 1, 1994, WITH WILTEL, INC. -
Incorporated by reference - previously filed as
Exhibit 10.12 to Registrant's Form 10-KSB for the
fiscal year ended December 31, 1994 filed March 31,
1995. *
<PAGE>
10.13 REVOLVING LOAN AGREEMENT AND ADDENDA, DATED MAY 10,
1994, WITH MERCANTILE BANK OF KANSAS - Incorporated
by reference - previously filed as Exhibit 10.13 to
Registrant's Form 10-KSB for the fiscal year ended
December 31, 1994 filed March 31, 1995.
10.14 ASSIGNMENT OF LIFE INSURANCE POLICY AS COLLATERAL,
DATED MAY 10, 1994, TO MERCANTILE BANK OF KANSAS -
Incorporated by reference - previously filed as
Exhibit 10.14 to Registrant's Form 10-KSB for the
fiscal year ended December 31, 1994 filed March 31,
1995.
10.15 SECURITY AGREEMENT, DATED MAY 10, 1994, WITH
MERCANTILE BANK OF KANSAS - Incorporated by
reference - previously filed as Exhibit 10.15 to
Registrant's Form 10-KSB for the fiscal year ended
December 31, 1994 filed March 31, 1995.
10.16 PROMISSORY NOTE, DATED MAY 10, 1994, WITH MERCANTILE
BANK OF KANSAS - Incorporated by reference -
previously filed as Exhibit 10.16 to Registrant's
Form 10-KSB for the fiscal year ended December 31,
1994 filed March 31, 1995.
10.17 SECURITY AGREEMENT, DATED MAY 10, 1994, WITH
MERCANTILE BANK OF KANSAS - Incorporated by
reference - previously filed as Exhibit 10.17 to
Registrant's Form 10-KSB for the fiscal year ended
December 31, 1994 filed March 31, 1995.
10.18 EMPLOYMENT AGREEMENT, DATED JANUARY 1, 1995, WITH
ROBERT R. KAEMMER - Incorporated by reference -
previously filed as Exhibit 10.18 to Registrant's
Form 10-KSB for the fiscal year ended December 31,
1994 filed March 31, 1995.**
10.19 PROMISSORY NOTE, DATED JUNE 15, 1994, WITH RICHARD K.
HALFORD - Incorporated by reference - previously
filed as Exhibit 10.19 to Registrant's Form 10-KSB
for the fiscal year ended December 31, 1994 filed
March 31, 1995.
10.20 PROMISSORY NOTE, DATED AUGUST 1, 1994, WITH RICHARD
K. HALFORD - Incorporated by reference - previously
filed as Exhibit 10.20 to Registrant's Form 10-KSB
for the fiscal year ended December 31, 1994 filed
March 31, 1995.
10.21 PLEDGE AGREEMENT, DATED NOVEMBER 23, 1994, WITH
RICHARD K. HALFORD - Incorporated by reference -
previously filed as Exhibit 10.21 to Registrant's
Form 10-KSB for the fiscal year ended December 31,
1994 filed March 31, 1995.
10.22 REVOLVING CREDIT AGREEMENT, DATED NOVEMBER 10, 1992,
WITH ROBERT R. KAEMMER - Incorporated by reference -
previously filed as Exhibit 10.8 to Registrant's Form
10-KSB for the fiscal year ended December 31, 1992
filed March 31, 1993.
10.23 AMENDMENT TO REVOLVING CREDIT AGREEMENT, DATED MAY 7,
1993, WITH ROBERT R. KAEMMER - Incorporated by
reference - previously filed as Exhibit 10.16 to
Registrant's Form 10-KSB for the fiscal year ended
December 31, 1993 filed March 30, 1994.
10.24 PROMISSORY NOTE, DATED NOVEMBER 10, 1992, WITH ROBERT
R. KAEMMER - Incorporated by reference - previously
filed as Exhibit 10.9 to Registrant's Form 10-KSB for
the fiscal year ended December 31, 1992 filed March
31, 1993.
10.25 AMENDMENT TO PROMISSORY NOTE, DATED MAY 7, 1993, WITH
ROBERT R. KAEMMER - Incorporated by reference -
previously filed as Exhibit 10.18 to Registrant's
Form 10-KSB for the fiscal year ended December 31,
1993 filed March 30, 1994.
<PAGE>
10.26 SECURITY AGREEMENT, DATED NOVEMBER 10, 1993, WITH
ROBERT R. KAEMMER - Incorporated by reference -
previously filed as Exhibit 10.10 to Registrant's
Form 10-KSB for the fiscal year ended December 31,
1992 filed March 31, 1993.
10.27 SETTLEMENT AGREEMENT, DATED MAY 1, 1992, WITH AETNA
LIFE INSURANCE COMPANY - Incorporated by reference -
previously filed as Exhibit 10.11 to Registrant's
Form 10-KSB for the fiscal year ended December 31,
1992 filed March 31, 1993.
10.28 CARRIER TRANSPORT SWITCHED SERVICES AGREEMENT, DATED
JULY 28, 1995, WITH SPRINT COMMUNICATIONS COMPANY
L.P.*
10.29 AMENDMENT TO CARRIER TRANSPORT SWITCHED SERVICES
AGREEMENT, DATED OCTOBER 30, 1995, WITH SPRINT
COMMUNICATIONS COMPANY L.P.*
10.30 AMENDMENT TO CARRIER TRANSPORT SWITCHED SERVICES
AGREEMENT, DATED FEBRUARY 29, 1996, WITH SPRINT
COMMUNICATIONS COMPANY L.P.
10.31 REVOLVING LOAN AGREEMENT AND ADDENDA, DATED JUNE 8,
1995, WITH MERCANTILE BANK OF KANSAS.
10.32 PROMISSORY NOTE, DATED JUNE 8, 1995, WITH MERCANTILE
BANK OF KANSAS.
10.33 COMPREHENSIVE SECURITY AGREEMENT, DATED JUNE 8, 1995,
WITH MERCANTILE BANK OF KANSAS.
10.34 SECURITY AGREEMENT, DATED JUNE 8, 1995, WITH
MERCANTILE BANK OF KANSAS.
10.35 PROMISSORY NOTE, DATED APRIL 3, 1995, WITH RICHARD K.
HALFORD.
10.36 AMENDMENT NO. 1 TO PLEDGE AGREEMENT, DATED APRIL 3,
1995, WITH RICHARD K. HALFORD.
10.37 EXTENSION OF JUNE 15, 1994 PROMISSORY NOTE, DATED
DECEMBER 29, 1995, WITH RICHARD K. HALFORD.
10.38 EXTENSION OF AUGUST 1, 1994 PROMISSORY NOTE, DATED
DECEMBER 29, 1995, WITH RICHARD K. HALFORD.
10.39 EXTENSION OF APRIL 3, 1995 PROMISSORY NOTE, DATED
DECEMBER 29, 1995, WITH RICHARD K. HALFORD.
10.40 LETTER TO MERCANTILE BANK OF KANSAS, DATED JANUARY
24, 1996, REGARDING THE FULL SATISFACTION BY RICHARD
K. HALFORD OF THE PROMISSORY NOTES DATED JUNE 15,
1994, AUGUST 1, 1994 AND APRIL 3, 1995.
10.41 SECOND AMENDMENT TO OFFICE BUILDING LEASE FOR
REGISTRANT'S FACILITY IN OVERLAND PARK, KANSAS, DATED
NOVEMBER 23, 1994.
21.1 LIST OF SUBSIDIARIES OF THE REGISTRANT - Incorporated
by reference - previously filed as Exhibit 21.1 to
Registrant's Form 10-KSB for the fiscal year ended
December 31, 1994 filed March 31, 1995.
23 CONSENT OF GRANT THORNTON LLP.
27 FINANCIAL DATA SCHEDULE.
(b) Reports on Form 8-K
<PAGE>
On January 17, 1996, the Company filed a report on Form
8-K under Item 5 - Other Events regarding a press release issued
by the Company and Phoenix Network, Inc. ("Phoenix") announcing
that they had signed a letter of intent (the "Letter of Intent")
to merge the Company and Phoenix in a stock-for-stock
transaction.
On March 19, 1996, the Company filed a second report on
Form 8-K under Item 5 - Other Events regarding a press release
issued by the Company and Phoenix announcing that they had
extended the term of the Letter of Intent.
* Confidential material deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
** Management contract or compensatory plan or arrangement
required to be identified by Item 13(a).
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange
Act, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
AMERICONNECT, INC.
By: /s/ Robert R. Kaemmer
Robert R. Kaemmer
President and Director
Date: April 15, 1996
In accordance with the Exchange Act, this report has
been signed below by the following persons on behalf of the
issuer and in the capacities and on the date indicated.
/s/ Robert R. Kaemmer April 15, 1996
Robert R. Kaemmer
President and Director
(Principal Executive Officer and
Principal Financial Officer)
/s/ Janet M. Flynn April 15, 1996
Janet M. Flynn
Secretary, Director
/s/ Richard K. Halford April 15, 1996
Richard K. Halford
Director
<PAGE>
EXHIBIT INDEX
NUMBER ITEM PAGE
10.28 CARRIER TRANSPORT SWITCHED SERVICES AGREEMENT, DATED
JULY 28, 1995, WITH SPRINT COMMUNICATIONS COMPANY L.P.*
10.29 AMENDMENT TO CARRIER TRANSPORT SWITCHED SERVICES
AGREEMENT, DATED OCTOBER 30, 1995, WITH SPRINT
COMMUNICATIONS COMPANY L.P.*
10.30 AMENDMENT TO CARRIER TRANSPORT SWITCHED SERVICES
AGREEMENT, DATED FEBRUARY 29, 1996, WITH SPRINT
COMMUNICATIONS COMPANY L.P.
10.31 REVOLVING LOAN AGREEMENT AND ADDENDA, DATED JUNE 8,
1995, WITH MERCANTILE BANK OF KANSAS.
10.32 PROMISSORY NOTE, DATED JUNE 8, 1995, WITH MERCANTILE
BANK OF KANSAS.
10.33 COMPREHENSIVE SECURITY AGREEMENT, DATED JUNE 8, 1995,
WITH MERCANTILE BANK OF KANSAS.
10.34 SECURITY AGREEMENT, DATED JUNE 8, 1995, WITH MERCANTILE
BANK OF KANSAS.
10.35 PROMISSORY NOTE, DATED APRIL 3, 1995, WITH RICHARD K.
HALFORD.
10.36 AMENDMENT NO. 1 TO PLEDGE AGREEMENT, DATED APRIL 3,
1995, WITH RICHARD K. HALFORD.
10.37 EXTENSION OF JUNE 15, 1994 PROMISSORY NOTE, DATED
DECEMBER 29, 1995, WITH RICHARD K. HALFORD.
10.38 EXTENSION OF AUGUST 1, 1994 PROMISSORY NOTE, DATED
DECEMBER 29, 1995, WITH RICHARD K. HALFORD.
10.39 EXTENSION OF APRIL 3, 1995 PROMISSORY NOTE, DATED
DECEMBER 29, 1995, WITH RICHARD K. HALFORD.
10.40 LETTER TO MERCANTILE BANK OF KANSAS, DATED JANUARY 24,
1996, REGARDING THE FULL SATISFACTION BY RICHARD K.
HALFORD OF THE PROMISSORY NOTES DATED JUNE 15, 1994,
AUGUST 1, 1994 AND APRIL 3, 1995.
10.41 SECOND AMENDMENT TO OFFICE BUILDING LEASE FOR
REGISTRANT'S FACILITY IN OVERLAND PARK, KANSAS, DATED
NOVEMBER 23, 1994.
23 CONSENT OF GRANT THORNTON LLP.
27 FINANCIAL DATA SCHEDULE.
* Confidential material deleted and filed separately with the
Commission pursuant to a request for confidential treatment.
<PAGE>
EXHIBIT 10.28
<PAGE>
CARRIER TRANSPORT SWITCHED SERVICES AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into by and between SPRINT
COMMUNICATIONS COMPANY L.P. ("Sprint"), and AmeriConnect, Inc. ("Customer").
Sprint and Customer are "Parties" hereto.
In consideration of the mutual promises contained herein, the Parties agree as
follows:
1. DEFINITIONS. Capitalized terms appearing in bold print are defined in
EXHIBIT 1.
2. CONFIDENTIALITY. During the TERM and thereafter, neither Party shall
disclose any terms of this Agreement, including pricing, or PROPRIETARY
INFORMATION of the other Party. PROPRIETARY INFORMATION shall remain the
property of the disclosing Party. A Party receiving PROPRIETARY INFORMATION
shall: (i) use or reproduce such information only when necessary to perform
this Agreement; (ii) provide at least the same care to avoid disclosure or
unauthorized use of such information as it provides to protect its own
PROPRIETARY INFORMATION; (iii) limit access to such information to its
employees or agents who need such information to perform this Agreement; and
(iv) return or destroy all such information, including copies, after the need
for it has expired, upon request of the disclosing Party, or upon termination
of this Agreement.
Because of the unique nature of PROPRIETARY INFORMATION, a breach of this
paragraph may cause irreparable harm for which monetary damages may be
inadequate compensation. Accordingly, in addition to other available
remedies, a Party may seek injunctive relief to enforce this paragraph.
3. TERM. If this Agreement is executed by Sprint prior to the first day
of the month, then the TERM shall commence on the first day of the following
month; otherwise, the TERM shall commence on the first day of the second month
following the month in which it is executed by Sprint. The TERM will continue
after commencement for the period specified in ATTACHMENT A.
4. TERMINATION FOR CAUSE.
4.1. A party may terminate this Agreement upon the other Party's failure to
cure any of the following within 30 days following written notice thereof:
(a) the (i) insolvency, corporate reorganization, arrangement with creditors,
receivership or dissolution of the other Party; or (ii) institution of
bankruptcy proceedings by or against the other Party; (b) assignment or
attempted assignment of the Agreement or any interest therein, except as
permitted by Paragraph 24 hereof; (c) change in control of the defaulting
Party without the other Party's prior written consent, which consent shall not
be unreasonably withheld; (d) a
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
final order by a government entity with appropriate jurisdiction that a
SERVICE or the relationship hereunder is contrary to law or regulation; or (e)
breach of any provision herein not otherwise referred to in Paragraph 4.
4.2. Sprint may terminate this Agreement immediately and without notice if
Customer fails to cure a breach as provided in Paragraph 8 or breaches a
provision of Paragraph 17 or 18.
4.3. Customer may terminate the Agreement upon 30 days written notice if
special rate adjustments exceed the maximum provided in Paragraph 16.
4.4. Upon termination of this Agreement a Party may recover from the other
all sums it is owed at the time of termination.
5. TERMINATION WITHOUT CAUSE: EARLY TERMINATION CHARGE.
5.1. Customer may terminate this Agreement at any time without cause upon
90 days prior written notice to Sprint and payment to Sprint of the EARLY
TERMINATION CHARGE in Subparagraph 5.2. SERVICE will be discontinued the
first business day of the fourth month after such notice of termination.
5.2. CARRIER TRANSPORT BASE RATES and PROMOTIONAL DISCOUNTS are based on
Customer's agreement to purchase SERVICE for the entire TERM. It is difficult
if not impossible to calculate Sprint's loss if Customer terminates the
Agreement pursuant to Subparagraph 5.1 prior to the end of the TERM.
Therefore, to compensate Sprint for such loss, and not as a penalty, Customer
shall pay Sprint an EARLY TERMINATION CHARGE in the event of such termination.
The EARLY TERMINATION CHARGE shall equal [*]% of the sum of the MINIMUM
COMMITMENT for each month remaining in the TERM when SERVICE is discontinued
pursuant to Subparagraph 5.1. The EARLY TERMINATION CHARGE shall be paid
within 30 days after the notice provided pursuant to Subparagraph 5.1.
6. APPLICATION OF TARIFFS: INTERSTATE ADJUSTMENT.
6.1. Interstate and international SERVICE shall be provided pursuant to
TARIFF as supplemented by this Agreement. In the event of a conflict between
this Agreement and any TARIFF, the TARIFF shall control.
6.2. Intrastate SERVICE is provided pursuant to TARIFF in every respect.
PROMOTIONAL DISCOUNTS will not apply to intrastate SERVICE. An INTERSTATE
ADJUSTMENT may be applied based on intrastate usage as provided in ATTACHMENT
D. The INTERSTATE ADJUSTMENT shall be based on intrastate usage at the
PRODUCT HIERARCHY LEVEL and will equal the difference between (a) such usage
priced at TARIFF less TARIFF discounts and (b) such usage priced at the
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
INTERSTATE ADJUSTMENT RATE in ATTACHMENT D less DISCOUNT ONE discounts. The
INTERSTATE ADJUSTMENT for a given month shall not exceed interstate billing
for such month.
6.3. Customer shall pay all TARIFF charges including, without limitation,
fixed charges, feature charges, enhanced 800 charges, access facility charges,
installation and other non-recurring charges.
6.4. Sprint may modify or withdraw TARIFFS from time to time, which may
include discontinuation of any SERVICE without Sprint's liability.
7. RELATIONSHIP OF PARTIES. Neither this Agreement nor the provision of
SERVICE creates a joint venture, partnership or agency between Sprint and
Customer. Customer is the service provider with respect to END USERS. Sprint
is merely a supplier to Customer with no relationship to END USERS.
8. USE OF NAME AND MARKS. This Agreement confers no right to use the
name, service marks, trademarks, copyrights, patents or CIC of either Party
except as expressly provided herein. Neither Party shall take any action
which would compromise the registered copyrights or service marks of the
other. Sprint's name is proprietary and nothing herein constitutes a general
license authorizing its use. Customer may not: (a) promote or advertise
Sprint's name or capabilities to END USERS or prospective END USERS; (b)
attempt to sell its service using Sprint's name; or (c) represent to END USERS
or prospective END USERS that they would be Sprint customers or that they may
obtain Sprint service from Customer.
Sprint shall provide Customer written notice of a breach of this paragraph.
Customer shall use its best efforts to immediately cure such breach, advising
Sprint of its actions. If, in Sprint's opinion, Customer fails to effect a
cure within 30 days of Sprint's notice, then Sprint may, at its option,
terminate the Agreement pursuant to Subparagraph 4.2.
Sprint's provision of NETWORK EXTENSION SERVICE may result in END USERS being
notified by their LEC that Sprint is their designated PIC. Therefore, to
avoid confusion and potential "slamming" complaints, Sprint hereby authorizes
Customer to use Sprint's name under the following conditions to provide END
USERS from whom Customer has obtained a PIC AUTHORIZATION with a fulfillment
piece containing the following Notice (the "Notice"):
We want to affirm how ______ will provide your long distance
service. Although ________ will provide your invoice and
customer service, we use major national carriers to actually
carry your long distance calls.
After subscribing to our service, you may receive a notice from
your local phone company which says that your long distance
"Carrier of Choice" is
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Sprint. __________ has selected Sprint as the long distance
network provider it will use to handle your calls. That selection
was based on your quality and price requirements. If you have any
questions about your order, please call our toll free customer
service number, 1-800-____-_________.
If Customer subscribed to Sprint Express, calls placed by END USERS to the
Sprint ITFS number will be answered "Sprint operator." This may cause
confusion if the END USER does not know its calls are being carried on the
Sprint network. Therefore, to avoid such confusion, Sprint hereby authorizes
Customer to provide END USERS who use Sprint Express with a fulfillment piece
containing the following notice (the "Sprint Express Notice"): "International
call origination may be provided by a Sprint operator." Sprint may withdraw
consent to use the Sprint Express Notice upon 10 days written notice.
Customer shall obtain Sprint's prior written approval of any fulfillment piece
in which the Notice or the Sprint Express Notice will appear.
9. SERVICE. SERVICES provided hereunder are described in EXHIBIT 2.
10. LEGAL COMPLIANCE: REMEDIES FOR NON-COMPLIANCE.
10.1. Customer represents and warrants that (a) it has obtained all licenses
and regulatory authority necessary to operate as contemplated herein and (b)
it will not submit an END USER ANI for activation without obtaining and
maintaining a proper PIC AUTHORIZATION.
10.2. If, in Sprint's opinion, Customer breaches this paragraph, Sprint may
(a) terminate this Agreement pursuant to Subparagraph 4.1(e), (b) reject END
USER ANIS submitted by Customer for placement under its account and/or (c)
discontinue PROMOTIONAL DISCOUNTS. If Sprint elects option (b) or (c), it
will resume accepting ANIS and/or reinstate PROMOTIONAL DISCOUNTS only after
Customer produces evidence satisfactory to Sprint that it has cured its
breach.
11. CUSTOMER RESPONSIBILITIES.
11.1. Customer shall not be relieved of any obligation hereunder by virtue
of the fact that SERVICE is ultimately used by END USERS.
11.2. Customer shall produce for Sprint's inspection, at Customer's expense,
any PIC AUTHORIZATION within 48 hours after Sprint's oral or written request,
or within any shorter period required by a LEC or regulatory agency. If
Customer fails to comply with this subparagraph then Sprint may (a)
discontinue PROMOTIONAL DISCOUNTS and/or (b) refuse to activate additional
ANIS under Customer's account.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
11.3. Customer shall reimburse Sprint for any charge assessed by a LEC for
processing a PIC request initiated by Customer and pay Sprint a PIC Assessment
Fee equal to [*]% of such charge.
11.4. Customer shall be solely responsible for END USER solicitation,
service requests, creditworthiness, customer service, billing and collection.
11.5. Customer shall be financially liable for usage generated by each END
USER ANI activated by Sprint until such ANI is presubscribed to another IXC.
Customer may request Sprint to block NETWORK EXTENSION SERVICE to an ANI upon
the END USER'S failure to pay Customer, subject to Customer's prior
certification to Sprint that it has given the END USER any notice required by
law. Customer shall reimburse Sprint for expenses incurred to block an ANI.
11.6. Customer shall be solely liable for amounts it cannot collect from END
USERS, and billing adjustments it grants END USERS, including adjustments for
fraudulent charges, directory assistance or any other form of credit.
11.7. Customer shall comply with Sprint's network interface procedures when
it orders its own access facilities.
12. SERVICE ACTIVATION. Sprint will use reasonable efforts to provide
switched SERVICE within 15 days, and dedicated SERVICE within 30 days,
following Customer's order, or the requested delivery date, whichever is
later. These deadlines will be extended by the time it takes to address
activation errors or obtain from Customer a complete and accurate order or PIC
AUTHORIZATION. Customer shall reimburse Sprint for LEC imposed fees resulting
from a request to expedite SERVICE.
13. PRICING: FORWARD PRICING: GENERAL CONDITIONS.
13.1. PRICING. CARRIER TRANSPORT BASE RATES and PROMOTIONAL DISCOUNTS are
contained in the ATTACHMENTS hereto.
13.2. PRICES IN LIEU OF OTHER DISCOUNTS. CARRIER TRANSPORT BASE RATES and
PROMOTIONAL DISCOUNTS are extended in lieu of any other TARIFF or contractual
discount, special pricing, or discount term plan. Discounts upon discounts
are only permitted if expressly provided for herein.
13.3. PRICES CONTINGENT ON PERFORMANCE. CARRIER TRANSPORT BASE RATES and
PROMOTIONAL DISCOUNTS are contingent on Customer's full performance of all
terms of the Agreement. If Customer fails to pay the undisputed portion of an
invoice pursuant to Paragraph 17, all
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
SERVICE for which payment is past due may, at Sprint's option, be priced at
CARRIER TRANSPORT BASE RATES.
13.4. PER MINUTE CHARGES. CARRIER TRANSPORT BASE RATES are invoiced based
on PER MINUTE CHARGES utilizing the RATE PERIODS and BILLING INCREMENTS in
ATTACHMENT B.
13.5. SWITCHED ORIGINATION, TERMINATION AND 800 ORIGINATION CHARGES.
Customer shall pay the charges specified in ATTACHMENT B for each originating
minute and each terminating minute of an interstate call that originates
and/or terminates in a NON-BELL SERVICE AREA.
13.6. PROMOTIONAL PRICING LEVELS. Customer will receive DISCOUNT ONE and
DISCOUNT TWO discounts applied only to RATE ELEMENTS as provided in
ATTACHMENTS C and D.
13.7. FORWARD PRICING. As a transition to the pricing hereunder, DISCOUNT
TWO discounts may be based for a period of time on the greater of Customer's
actual DISCOUNT TWO MONTHLY VOLUME OF SERVICE or a specified FORWARD PRICING
VOLUME OF SERVICE. The FORWARD PRICING VOLUME OF SERVICE and the period
during which it may be applied are specified in ATTACHMENT A.
13.8. PRICING CONTINGENT ON PRIMARY CARRIER STATUS. Pricing hereunder is
contingent on Customer utilizing Sprint as its PRIMARY CARRIER for the PRIMARY
CARRIER SERVICES listed in ATTACHMENT A.
If 800 SERVICE is a PRIMARY CARRIER SERVICE then Customer shall (a) designate
Sprint as its PRIMARY CARRIER in the 800 Service Management System database
for all interstate 800 traffic that is not originated directly by Customer and
(b) maintain access facilities sufficient to send at least [*]% of its traffic
to Sprint with no more than [*]% blockage during the peak busy hour of
Customer's average business day.
If Dial 1 WATS is a PRIMARY CARRIER SERVICE then [*]% of all END USER ANIS
under Customer's control shall be PICED to Sprint during the TERM.
If Ultra WATS is a PRIMARY CARRIER SERVICE then Customer shall maintain access
facilities sufficient to send to Sprint at least [*]% of the traffic Customer
does not terminate itself.
Customer shall produce, within 30 days following Sprint's request, evidence
acceptable to Sprint that it is in compliance with this subparagraph. Failure
to maintain Sprint as PRIMARY CARRIER on any PRIMARY CARRIER SERVICE will
result in SERVICE being provided hereunder at CARRIER TRANSPORT BASE RATES for
the remainder of the TERM. Customer may select a temporary back-up carrier
for any period during which it is affected by a Sprint network outage.
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
14. SURCHARGES.
14.1. MINIMUM COMMITMENT SURCHARGE. Any month Customer fails to meet the
MINIMUM COMMITMENT stated on ATTACHMENT A, Customer shall pay a surcharge for
SERVICE provided during such month equal to the difference between the MINIMUM
COMMITMENT and Customer's NET USAGE. The MINIMUM COMMITMENT shall not relieve
Customer of any credit or security obligation hereunder.
14.2. LEC CAP SURCHARGE. Any month Customer exceeds the MAXIMUM NON-BELL
TRAFFIC PERCENTAGE specified in ATTACHMENT B for any SERVICE type, Customer
shall pay Sprint the per minute surcharge for such SERVICE specified in
ATTACHMENT B for each minute above the MAXIMUM NON-BELL TRAFFIC PERCENTAGE
that originates from or terminates to a NON-BELL SERVICE AREA. MAXIMUM NON-
BELL TRAFFIC PERCENTAGES will be calculated independently for originating and
terminating minutes at each PRODUCT HIERARCHY LEVEL.
14.3. MINIMUM AVERAGE TIME REQUIREMENT SURCHARGE. Any month Customer fails
to equal or exceed the MINIMUM AVERAGE TIME REQUIREMENT specified in
ATTACHMENT B for SERVICES specified in ATTACHMENT B, then Customer shall pay
Sprint a per minute surcharge on such usage equal to (a) the per minute
surcharge specified in ATTACHMENT B multiplied by (b) the difference between
(i) the number of minutes the SERVICE was used and (ii) the number of calls
using the SERVICE multiplied by the MINIMUM AVERAGE TIME REQUIREMENT. This
surcharge shall be calculated at each PRODUCT HIERARCHY LEVEL.
14.4. NONCOMPLETE CALL SURCHARGE. Any month Customer exceeds the MAXIMUM
NONCOMPLETE 800 CALL PERCENTAGE for interstate Ultra 800 and/or interstate
FONline 800 traffic as stated on ATTACHMENT B, Customer shall pay Sprint a
surcharge equal to the amount stated in ATTACHMENT B for each NONCOMPLETE 800
CALl in excess of the MAXIMUM NONCOMPLETE 800 CALL PERCENTAGE. This surcharge
shall be calculated at each PRODUCT HIERARCHY LEVEL.
14.5. MINIMUM PORT USAGE SURCHARGE. Any month Customer fails to equal or
exceed the MINIMUM PORT USAGE per ACTIVE ULTRA WATS PORT as stated on
ATTACHMENT A, Customer shall pay Sprint a surcharge on its Ultra WATS usage
equal to the difference between (a) Customer's actual NET USAGE for Ultra
WATS SERVICE and (b) the MINIMUM PORT USAGE multiplied by the total number of
ACTIVE ULTRA WATS PORTS. This surcharge shall be calculated at each PRODUCT
HIERARCHY LEVEL.
15. SERVICE CHARGES. Customer shall pay Sprint a $[*] service charge for
each END USER ANI or 800 number Customer submits for activation (a) that
Sprint determines lacks a proper PIC AUTHORIZATION or (b) that requires Sprint
to disconnect or transfer such ANI or 800 number from Sprint's data base
before placing it within Customer's CTIS hierarchy. However, the service
charge provided for in 15(b) will be waived if such END USER ANIS,
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
or 800 numbers, do not exceed [*]% of the total ANIS, or 800 numbers, submitted
by Customer during the previous 90 days.
16. SPECIAL RATE ADJUSTMENTS.
16.1. Sprint may, after 60 days notice to Customer, adjust the price of
SERVICE provided hereunder to reflect (a) changes in the average per-minute
rate of interstate LEC access charges imposed on Sprint and/or (b) changes in
international net settlements or currency exchange rates.
16.2. If during any period of 12 consecutive months the adjustments to a
rate provided for herein exceed [*] percent of such rate, then Customer may
terminate the Agreement pursuant to Subparagraph 4.3.
17. PAYMENT FOR SERVICE.
17.1. PAYMENT OBLIGATION. Customer shall pay Sprint for SERVICE pursuant to
the terms of this Agreement and applicable TARIFFS.
17.2. CALL DETAIL. Sprint will provide Customer with a call detail media
containing Customer's SERVICE usage. Sprint may, at it's option, and without
liability to Customer, modify the format of the call detail media following 30
days written notice to Customer.
17.3. PAYMENT PROCEDURE. Sprint will invoice Customer monthly for SERVICE
provided hereunder. Invoices shall be due and payable upon receipt.
Undisputed charges for SERVICE that are not paid within 30 days after
Customer's receipt of the invoice shall be past due. Interest will be charged
on past due amounts beginning the 31st day following Customer's receipt of the
invoice at a rate equal to the lesser of [*]% per annum or the maximum rate
allowed by law.
The price of SERVICE is exclusive of applicable taxes. CARRIER TRANSPORT BASE
RATES and PROMOTIONAL DISCOUNTS are contingent on Customer providing Sprint
with certificates from appropriate taxing authorities exempting Customer from
taxes that would otherwise be invoiced hereunder.
17.4. BILLING DISPUTES. If Customer in good faith disputes any invoiced
amount, it shall submit to Sprint, within 30 days following receipt of the
invoice, full payment of the undisputed portion of the invoice and written
documentation identifying and substantiating the disputed amount. If the
Parties, in good faith, cannot resolve the dispute within a reasonable period
of time, then the dispute shall be settled by arbitration pursuant to
Paragraph 22.
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
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18. PAYMENT SECURITY. Provision of SERVICE is contingent on credit
approval by Sprint. Upon request by Sprint, Customer shall provide Sprint
with financial statements, or other indications of Customer's financial
circumstances. If Customer's financial circumstances or payment history is or
becomes unacceptable to Sprint, then Sprint may require a deposit, irrevocable
letter of credit or other form of security acceptable to Sprint. Customer's
failure to provide such security within 20 days following Sprint's request
shall constitute a default under Subparagraph 4.2.
19. INDEMNIFICATION. Each Party (as "Indemnitor") shall indemnify, defend
and hold harmless the other Party (as "Indemnitee") from and against any and
all liabilities, costs, damages, fines, assessments, penalties and expenses
(including reasonable attorney's fees) resulting from (a) breach of any
provision in this Agreement by Indemnitor, its employees or agents, or (b) any
misrepresentation or illegal act of Indemnitor, its employees or agents,
arising out of the Indemnitor's performance hereunder.
Customer shall indemnify, defend and hold Sprint harmless from and against any
and all liabilities, costs and damages (including reasonable attorney's fees)
resulting from any claim arising out of: (i) use of SERVICE by Customer to
extend its service to END USERS; (ii) use of SERVICE by Customer or END USERS;
(iii) libel, slander, or patent or trademark infringement arising from the
combination or use of SERVICE with Customer provided service or facilities; or
(iv) Customer's marketing, advertising, sales or promotional activities.
20. LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING
LOSS OF PROFITS, LOSS OF CUSTOMERS OR GOODWILL ARISING FROM THE RELATIONSHIP
OR CONDUCT OF BUSINESS HEREUNDER.
21. WARRANTIES. WARRANTIES AND REMEDIES SET FORTH IN THE AGREEMENT AND
SPRINT'S TARIFFS ARE THE ONLY WARRANTIES AND REMEDIES WITH RESPECT TO THE
SERVICE, AND ARE IN LIEU OF ANY OTHER WARRANTY, WRITTEN OR ORAL, STATUTORY,
EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
22. ARBITRATION. Any dispute arising out of or relating to the Agreement
will be finally settled by arbitration in accordance with the rules of the
American Arbitration Association. The arbitration will be governed by the
United States Arbitration Act, 9 U.S.C. Sec. 1, et. seq., and judgment upon
the award rendered by the arbitrator(s) may be entered by any court with
jurisdiction. The arbitration will be held in the Kansas City, MO
metropolitan area.
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23. NOTICES. Notices, requests or other communications (excluding
invoices) hereunder shall be in writing and sent by certified mail addressed
as follows:
If to Sprint: Sprint Communications Company
3100 Cumberland Circle
Atlanta, GA 30339
Attention: Vice President-Diversified Brands
With copy to: Sprint Communications Company
8140 Ward Parkway
Kansas City, MO 64114
Attention: Vice President Law-Marketing/Sales
If to Customer: AmeriConnect, Inc.
6750 West 93rd Street, Suite 110
Overland Park, KS 66212
Attention: Robert Kaemmer
24. ASSIGNMENT. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated to any other entity without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld.
25. EXCUSABLE DELAY. In the event of an EXCUSABLE DELAY the performance
obligations of the Parties hereunder shall be suspended and the TERM shall be
extended for a period of time equal to the length of such delay; provided,
however, the affected Party shall promptly notify the other Party of the
nature of the delay and the estimated time that it will continue. If an
EXCUSABLE DELAY continues for more than 90 days and has a material adverse
impact on the other Party, such other Party may, at its option and upon
written notice to the other Party, such other Party may, at its option and
upon written notice to the other Party, terminate this Agreement without
liability other than payment for SERVICE provided prior to termination.
Notwithstanding the foregoing, neither Party may invoke this paragraph with
regard to any event listed in Paragraph 4 or to delay performance of
Paragraphs 17 or 18.
26. CAPTIONS. Captions of the paragraphs and subparagraphs herein are for
convenience only, are not part of the Agreement and shall not define or limit
any of the Agreement's terms.
27. CHOICE OF LAW. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Kansas.
28. RULES OF CONSTRUCTION. No rule of construction requiring
interpretation against the draftsman shall apply in the interpretation of this
Agreement.
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29. ENTIRE AGREEMENT. This Agreement, together with the attached EXHIBITS
and ATTACHMENTS, represents the entire agreement of the Parties with respect
to the subject matter hereof and supersedes all other agreements between the
Parties relating to the SERVICE.
30. MODIFICATION OF AGREEMENT. This Agreement, including its EXHIBITS and
ATTACHMENTS, may be amended, modified or supplemented only by a separate
written document executed by both parties with the formality of this
Agreement.
31. WAIVER OF TERMS. No term or provision herein shall be waived, and no
breach or default excused, unless such waiver or consent is in writing and
signed by the Party to which it is attributed. No consent by a Party to, or
waiver of, a breach or default by the other, whether express or implied, shall
constitute a consent to, or waiver of, any subsequent breach or default.
32. PARTIAL INVALIDITY. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate or render the Agreement unenforceable, but rather the Agreement
shall be construed as if not containing the invalid or unenforceable
provision. However, if such provision is an essential element of this
Agreement, the Parties shall promptly attempt to negotiate a substitute
therefor.
33. CUMULATIVE REMEDIES. Except as otherwise provided herein, the
remedies provided for in this Agreement are in addition to any other remedies
available at law or in equity.
34. EXPIRATION OF OFFER. Sprint's offer to enter into this Agreement
shall be withdrawn if the Agreement is not executed by both Parties within 45
days after the PROPOSAL DATE stated on ATTACHMENT A.
EXECUTED and made effective as provided herein.
AmeriConnect, Inc. SPRINT COMMUNICATIONS COMPANY, L.P.
By: /s/ Robert R. Kaemmer By: /s/ Patti Manuel
Robert R. Kaemmer Patti Manuel
President President, BSG Sales
Date:_________________________ Date:______________________________
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EXHIBIT 1
DEFINITIONS
Capitalized terms appearing in bold print in the Agreement, its Exhibits and
Attachments are defined as follows:
"ACTIVE ULTRA WATS PORT" means a Customer access port (DS-0 equivalent)
connected to Sprint and activated as Ultra WATS SERVICE.
"ANI" means a calling telephone number identification which is forwarded to an
IXC by a LEC as a call is placed.
"ASSOCIATED LOCATION" means a physical premise to or from which Sprint
provides SERVICE which is: (a) owned or leased by Customer; (b) occupied by a
business in which Customer has an equity interest of at least a [*]%; or (c)
occupied by a franchisee of Customer.
"ATTACHMENT" means a supplement attached to, and a part of, the Agreement.
"BILLING INCREMENT" means a TARIFFED billing increment, unless otherwise
stated in ATTACHMENT B.
"CALLING CARD" means a card issued to an END USER in Customer's name
containing an authorization code that the END USER may use to originate calls
over Sprint's network as provided in EXHIBIT 2.
"CARRIER FONCARD SERVICE" means a SERVICE consisting of a Sprint authorization
code incorporated into Customer's CALLING CARD which, together with Customer's
service enhancements, is provided to END USERS for use in originating calls
over Sprint's network as provided in EXHIBIT 2.
"CARRIER TRANSPORT BASE RATES" means the prices provided herein for CARRIER
TRANSPORT SERVICE.
"CARRIER TRANSPORT SERVICE" means switched SERVICE purchased under the
Agreement and invoiced under CTIS.
"CIC" means an IXC carrier identification code.
"CTIS" means Sprint's Carrier Transport Invoicing System.
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
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"DAY RATE PERIOD" means the TARIFF day rate period unless otherwise specified
herein.
"DISCOUNT ONE" means a RATE ELEMENT specific discount that (1) is based on
Customer's DISCOUNT ONE MONTHLY VOLUME OF SERVICE and (2) is applied to usage
at the Service Hierarchy Level that has been priced at CARRIER TRANSPORT BASE
RATES.
"DISCOUNT ONE MONTHLY VOLUME OF SERVICE" means the volume of Customer's
monthly usage, at each PRODUCT HIERARCHY LEVEL, for a specific RATE ELEMENT
priced at CARRIER TRANSPORT BASE RATES.
"DISCOUNT RATE PERIOD" means the TARIFF international discount rate period
unless otherwise specified herein.
"DISCOUNT THREE" means a RATE ELEMENT specific discount that (1) is based on
Customer's DISCOUNT THREE MONTHLY VOLUME OF SERVICE and (2) is applied at the
PRODUCT HIERARCHY LEVEL or the SERVICE HIERARCHY LEVEL to interstate or
international usage to the LATAs or countries specified in ATTACHMENT C.
"DISCOUNT THREE MONTHLY VOLUME OF SERVICE" means the volume of Customer's
monthly usage, at the PRODUCT HIERARCHY LEVEL or SERVICE HIERARCHY LEVEL, of
interstate or international minutes to the specific LATAs or countries
identified in ATTACHMENT C and priced based on the usage levels and RATE
PERIODS specified in ATTACHMENT C.
"DISCOUNT TWO" means a RATE ELEMENT specific discount that (1) is based on
Customer's DISCOUNT TWO MONTHLY VOLUME OF SERVICE and (2) is applied to usage
at the SERVICE HIERARCHY LEVEL that has been priced at CARRIER TRANSPORT BASE
RATES less DISCOUNT ONE discounts.
"DISCOUNT TWO MONTHLY VOLUME OF SERVICE" means the volume of Customer's
monthly usage, at the MASTER HIERARCHY LEVEL, of all CARRIER TRANSPORT
SERVICES, including directory assistance SERVICES, priced at CARRIER TRANSPORT
BASE RATES after the application of DISCOUNT ONE discounts, but prior to the
application of DISCOUNT TWO discounts. DISCOUNT TWO MONTHLY VOLUME OF SERVICE
does not include CARRIER TRANSPORT SERVICE charges that are not based on
usage, Clearline Service charges, Private Line charges, any charge associated
with access (dedicated or non-dedicated), facilities charges, any usage
related fixed charge, any non-recurring charge such as installation charges,
taxes, surcharges, transfer fees, or interest.
"EARLY TERMINATION CHARGE" means the charge imposed for terminating the
Agreement prior to expiration of the TERM as provided in Paragraph 5 thereof.
"ECONOMY RATE PERIOD" means the TARIFF international economy rate period.
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"END USER" means a customer of Customer to whom Sprint extends NETWORK
EXTENSION SERVICE at a NON-ASSOCIATED LOCATION.
"EVENING RATE PERIOD" means the TARIFF evening rate period unless otherwise
specified herein.
"EXCUSABLE DELAY" means any event that prevents a Party from performing its
obligations hereunder and that is beyond the reasonable control and without
the fault or negligence of such Party.
"EXHIBIT" means a supplement attached to, and a part of, the Agreement.
"FORWARD PRICING VOLUME OF SERVICE" means the volume of service specified in
ATTACHMENT A upon which DISCOUNT TWO discounts may be based as provided in
Subparagraph 13.7 of the Agreement.
"INTERSTATE ADJUSTMENT" means the adjustment under Subparagraph 6.2 to the
invoice for interstate usage that is based on the level of intrastate usage.
"INTERSTATE ADJUSTMENT RATE" means the rate identified in ATTACHMENT D that is
used to determine the INTERSTATE ADJUSTMENT as provided in Subparagraph 6.2.
"IXC" means interexchange carrier.
"LEC" means local exchange carrier.
"MASTER HIERARCHY LEVEL" means billing hierarchy level 1.
"MAXIMUM NONCOMPLETE 800 CALL PERCENTAGE" means, for each month, for each
Service type, the ratio, expressed as a percentage, of (i) the aggregate
number of NONCOMPLETE 800 CALLS during such period divided by (ii) the
aggregate number of 800 calls during such period. This percentage shall be
calculated at each PRODUCT HIERARCHY LEVEL.
"MAXIMUM NON-BELL TRAFFIC PERCENTAGE" means, for each month, the ratio,
expressed as a percentage, of (i) the number of minutes during such period
that originate from, or terminate in, a NON-BELL SERVICE AREA, divided by (ii)
the total number of minutes during such period. MAXIMUM NON-BELL TRAFFIC
PERCENTAGES will be calculated independently for originating and terminating
minutes at the PRODUCT HIERARCHY LEVEL.
"MINIMUM AVERAGE TIME REQUIREMENT" means the minimum average call duration,
expressed in minutes, for SERVICES as specified in ATTACHMENT B. MINIMUM
AVERAGE TIME REQUIREMENT calculations will be made at each PRODUCT HIERARCHY
LEVEL.
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"MINIMUM COMMITMENT" means the minimum monthly usage commitment stated on
ATTACHMENT A. The calculation to determine whether Customer has met the
MINIMUM COMMITMENT shall be based on Customer's invoiced NET USAGE.
"MINIMUM PORT USAGE" means the minimum NET USAGE for Ultra WATS Service stated
on ATTACHMENT A that Customer shall generate per ACTIVE ULTRA WATS PORT.
"NETWORK EXTENSION SERVICE" means Service that Sprint extends to the NON-
ASSOCIATED LOCATION of an END USER.
"NET USAGE" means the monthly amount invoiced for use of a SERVICE net of
DISCOUNT ONE, DISCOUNT TWO and DISCOUNT THREE discounts. NET USAGE includes
the following as they apply to particular SERVICES: monthly per-minute usage
charges invoiced under the Agreement; route advance charges; real time ANI
charges; switched origination and termination charges; directory assistance
charges; MINIMUM AVERAGE TIME REQUIREMENT Surcharges; Noncomplete Call
Surcharges; FONcard surcharges; and LEC Cap Surcharges.
"NIGHT/WEEKEND RATE PERIOD" means the TARIFF night/weekend rate period unless
otherwise specified herein.
"NONCOMPLETE 800 CALL" means an attempted FONline 800 or Ultra 800 call that
is not completed to the called number for any reason.
"NON-ASSOCIATED LOCATION" means any physical premise to or from which Sprint
provides SERVICE that is not an ASSOCIATED LOCATION.
"NON-BELL SERVICE AREA" means the geographic service area of any "independent"
LEC which is not a Bell Operating Company.
"OFF PEAK RATE PERIOD" means (a) the EVENING RATE PERIOD and the NIGHT/WEEKEND
RATE PERIOD for interstate traffic and (b) the DISCOUNT RATE PERIOD and
Economy RATE PERIOD for international traffic.
"PEAK RATE PERIOD" means (a) the DAY RATE PERIOD for interstate traffic and
(b) the STANDARD RATE PERIOD for international traffic.
"PER MINUTE CHARGE" means the per minute charge for SERVICE as set forth in
EXHIBIT C based on RATE PERIODS and BILLING INCREMENTS stated in ATTACHMENT B.
"PIC" means primary interexchange carrier.
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"PIC AUTHORIZATION" means an END USER'S selection of a PIC that meets the
requirements of federal and state law.
"PRIMARY CARRIER" means the IXC designated by Customer as its first routing
choice and primary overflow carrier.
"PRIMARY CARRIER SERVICE" means the SERVICE specified in ATTACHMENT A for
which Sprint shall be Customer's PRIMARY CARRIER.
"PRODUCT HIERARCHY LEVEL" means the level in the Customer billing hierarchy
directly above the SERVICE HIERARCHY LEVEL which ties SERVICE together for
purposes of reporting. Each PRODUCT HIERARCHY LEVEL is considered
independently for calculation and application of DISCOUNT ONE, LEC Cap
Surcharges, MINIMUM AVERAGE TIME REQUIREMENT Surcharges, NONCOMPLETE 800 CALL
Surcharges and MINIMUM PORT USAGE Surcharges.
"PROMOTIONAL DISCOUNTS" is a collective reference to DISCOUNT ONE, DISCOUNT
TWO, DISCOUNT THREE and INTERSTATE ADJUSTMENTS.
"PROPOSAL DATE" means the date indicated on ATTACHMENT A that the Agreement is
offered by Sprint to Customer.
"PROPRIETARY INFORMATION" means (a) written information of a Party which is
clearly and conspicuously marked as proprietary or confidential or which is
accompanied by written notice that such information is confidential, or (b) a
verbal communication which is subsequently confirmed in writing to the other
Party as confidential or proprietary information which (i) is maintained in
confidence and secrecy by the disclosing Party, (ii) is valuable to the
disclosing Party because of such confidence or secrecy, and (iii) is subject
to the disclosing Party's reasonable efforts to maintain such confidentiality
and secrecy. PROPRIETARY INFORMATION shall not include information which (1)
is at any time in the public domain other than through wrongdoing on the part
of an entity owing a duty of confidentiality to the disclosing Party, (2) is
within legitimate possession of the receiving Party without obligation of
confidentiality, (3) is lawfully received from a third party having rights
therein without restriction of the right to disseminate the information, (4)
is independently developed without breach of any obligation of confidentiality
through parties without access to or knowledge of such PROPRIETARY
INFORMATION, (5) is disclosed with prior written approval of the other Party,
(6) is transmitted after the disclosing Party has received written notice from
the receiving Party that it does not desire to receive further PROPRIETARY
INFORMATION, or (7) is obligated to be produced under order of a court of
competent jurisdiction.
"RATE ELEMENT" means a jurisdictional element of the rate for a particular
SERVICE. For example, Ultra WATS rates consist of separate RATE ELEMENTS for
interstate, intrastate,
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Canada, Mexico domestic, Mexico international, other international, and
directory assistance usage.
"RATE PERIODS" is a collective reference to the DAY RATE PERIOD, DISCOUNT RATE
PERIOD, ECONOMY RATE PERIOD, EVENING RATE PERIOD, NIGHT/WEEKEND RATE PERIOD,
OFF PEAK RATE PERIOD, PEAK RATE PERIOD, and STANDARD RATE PERIOD.
"SERVICE" means the service identified in the EXHIBITS and ATTACHMENTS that
Sprint shall provide and Customer shall purchase hereunder.
"SERVICE HIERARCHY LEVEL" means the lowest level in the Customer's billing
hierarchy.
"STANDARD RATE PERIOD" means the TARIFF standard rate period for international
SERVICE unless otherwise specified herein.
"TARIFF(S)" means any applicable tariff filed by Sprint with the Federal
Communications Commission for interstate or international SERVICE (including
TARIFF revisions) and/or any applicable tariff filed with a state regulatory
commission for intrastate SERVICE. Should Sprint no longer file TARIFFS in
order to provide SERVICE, then TARIFF shall mean the standard rate tables and
terms and conditions that replace such TARIFFS.
"TERM" means the term of the Agreement as provided in Paragraph 3 thereof.
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EXHIBIT 2
SERVICES
The following SERVICES are provided pursuant to the Agreement:
1. WATS SERVICE.
1.1. ULTRA WATS. Ultra WATS is provided hereunder for switched outbound
traffic with interstate or international termination that originates over
dedicated special access (DS-1 or DS-3) circuits. Ultra WATS includes both
Carrier Ultra WATS and Network Extension Ultra WATS.
1.2. CARRIER ULTRA WATS. Carrier Ultra WATS is Ultra WATS Service
subscribed to, and paid for, by Customer that originates from an ASSOCIATED
LOCATION. Carrier Ultra WATS may be obtained only by a carrier with its own
CIC.
1.3. NETWORK EXTENSION ULTRA WATS. Network Extension Ultra WATS is Ultra
WATS Service subscribed to, and paid for, by Customer but connected directly
to a NON-ASSOCIATED LOCATION.
1.4. DIAL 1 WATS. Dial 1 WATS is provided hereunder for switched outbound
traffic utilizing Feature Group D protocol having interstate or international
termination.
1.5. DBG SWITCHED DIGITAL SERVICE. Switched digital CARRIER TRANSPORT
SERVICE is a combination of LEC switched data capabilities and the Sprint data
network that is billed under CTIS.
2. 800 SERVICE.
2.1. ULTRA 800. Ultra 800 is provided hereunder for Customer switched
inbound traffic with interstate or international origination that terminates
over dedicated special access (DS-1 or DS-3) circuits. Ultra 800 includes
both Carrier Ultra 800 and Network Extension Ultra 800.
2.2. CARRIER ULTRA 800. Carrier Ultra 800 is Ultra 800 SERVICE subscribed
to, and paid for, by Customer that terminates to an ASSOCIATED LOCATION.
Carrier Ultra 800 may be obtained only by a carrier with its own CIC.
2.3. NETWORK EXTENSION ULTRA 800. Network Extension Ultra 800 is Ultra 800
SERVICE subscribed to, and paid for, by Customer but connected directly to an
NON-ASSOCIATED LOCATION.
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2.4. FONLINE 800. Sprint FONline 800 is provided hereunder for switched
inbound traffic, terminating on Feature Group D protocol, having interstate or
international origination.
2.5. INTERNATIONAL 800 ORIGINATION. International origination 800 ("ITFS")
for Ultra 800 and FONline 800 SERVICE shall be provided subject to
availability. Because of a limited quantity of 800 numbers in some countries,
Sprint may, as it deems appropriate, after 30 days notice, disconnect any 800
number which does not generate at least [*] minutes of usage during any period
of three consecutive months. ITFS traffic must be terminated directly in the
continental U.S. If reorigination occurs, ITFS traffic is subject to foreign
PTT interruption and is beyond Sprint's control. ITFS SERVICE shall be
provided pursuant to TARIFF, including rates, discounts and 800 number
charges, unless otherwise provided herein.
2.6. COMMAND ROUTING BETWEEN ULTRA 800 AND FONLINE 800. Customer locations
requiring command routing between Ultra 800 and FONline 800 will be billed in
a separate billing system and will not receive special pricing under the
Agreement until it can be supported by CTIS.
3. FONVIEW. FONview is not available for SERVICE billed under CTIS.
4. DIRECTORY ASSISTANCE.
4.1. INTERSTATE. Interstate directory assistance provided hereunder must
have a domestic origination over Customer's circuits. Sprint may modify
directory assistance prices provided in the Agreement to reflect changes in
LEC directory assistance charges.
4.2. INTERNATIONAL. International directory assistance is provided
pursuant to TARIFF. International directory assistance must have a domestic
origination over Customer's circuits and request numbers must be located in
the countries listed in Sprint's FCC TARIFF 1, Section 2.1. International
directory assistance may be obtained by calling a Sprint operator who will
request the number from the appropriate country's international operator.
Sprint may modify directory assistance prices provided in the Agreement to
reflect changes in directory assistance charges of other countries.
4.3. TOLL-FREE 800 DIRECTORY LISTINGS. Customer's 800 numbers shall not be
eligible for any toll-free 800 directory listing at Sprint's expense.
5. CARRIER FONCARD SERVICE.
5.1. CARRIER FONCARD SERVICE consists of an authorization code issued by
Sprint which Customer will incorporate into a CALLING CARD. The CALLING CARD,
together with Customer provided service enhancements, will be provided in
Customer's name to END USERS who may
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
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use the card to originate calls over Sprint's network in the contiguous U.S.
and selected countries. Sprint will transport Customer's CALLING CARD traffic
with the same quality as Sprint FONcard traffic.
5.2. AVAILABILITY. CARRIER FONCARD SERVICE is provided subject to (a)
availability and compatibility of facilities, (b) Customer fulfillment, and
(c) 800 access origination, which Customer agrees may be withheld by Sprint in
certain LATAs because of facility constraints.
5.3. ACTIVATION. Sprint will provide Customer with activated authorization
codes to be imprinted on Customer's CALLING CARDS. The codes will be provided
within 30 days following Customer's request and notice to Sprint of Customer's
fulfillment vendor.
5.4. 800 ACCESS. Customer may elect CALLING CARD access to a Sprint
operator using either a "Generic" or "Branded" 800 access number. The
operator response to a Generic 800 call will be similar to: "Long Distance,
may I help you?" Calls to a Branded access number will be answered by an
operator assigned exclusively to Customer. Operator response to Branded
access calls will be similar to: "(CUSTOMER) Long Distance Operator."
Customer shall pay a non-recurring charge for establishing account access as
provided in ATTACHMENT B.
5.5. SERVICE REPRESENTATIVE. Sprint will designate a representative to
provide Customer service. This representative will not be available for
direct contact by END USERS.
5.6. NON-EMERGENCY DEACTIVATION. Sprint will advise Customer of the
process for requesting non-emergency deactivation of an authorization code.
Sprint may periodically deactivate unused authorization codes to minimize
potential fraud. Sprint will notify Customer of any such deactivation.
Emergency deactivation is provided for in Subparagraph 5.9 of this Attachment.
5.7. REMEDY FOR SERVICE FAILURE. Notwithstanding anything to the contrary
in Subparagraph 4.1(e) of the Agreement, Customer's sole and exclusive remedy
for failure of a particular CARRIER FONCARD SERVICE shall be discontinuation
of the affected SERVICE subject to Paragraph 25 of the Agreement.
5.8. CUSTOMER OBLIGATIONS. Customer shall, at Customer's expense: (a)
design, manufacture and distribute its CALLING CARDS; (b) solicit END USERS in
its own name in compliance with Paragraph 8 of the Agreement; (c) address END
USER service requests; (d) determine END USER creditworthiness; (e) define its
relationship with END USERS relative to its CALLING CARD service by tariff or
contract; (f) provide CALLING CARD fulfillment using a bonded fulfillment
vendor; (g) supply its fulfillment vendor with necessary END USER information;
(h) maintain its own END USER data base; (i) provide END USER customer
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service, billing and collection; (j) maintain its own END USER customer
service number, which shall be printed on each CALLING CARD; (k) establish
internal CALLING CARD management procedures; (l) monitor for fraud and code
abuse; and (m) cooperate and interface with Sprint to prevent fraud or code
abuse as provided herein.
Customer shall provide Sprint with all order authorizations, service
applications and information that Sprint requires to establish and maintain
CARRIER FONCARD SERVICE and proper invoicing.
Customer shall be liable for (a) all usage charged to an activated
authorization code after the code is provided to Customer or its agent, (b)
non payment by END USERS, and (c) billing adjustments granted to END USERS as
provided in Subparagraph 11.6 of the Agreement.
Customer shall indemnify and hold Sprint harmless from any claim or damages
resulting from Sprint's deactivation of an authorization code at Customer's
request.
5.9. CODE ABUSE; FRAUD; EMERGENCY DEACTIVATION. Sprint and Customer will
cooperate to deter CALLING CARD fraud and code abuse. Sprint will monitor
usage of Customer CALLING CARDS to detect fraud or code abuse in the same
manner that it monitors FONcard usage of its own customers. This activity
will not create any liability on the part of Sprint resulting from code abuse
or fraud. Customer shall be liable for all usage charged to an activated
authorization code that results from fraud or code abuse.
Sprint will notify Customer of (a) the process Customer may use to obtain
emergency deactivation of a lost or stolen CALLING CARD and (b) the process
Sprint will use to notify Customer of suspected fraud or code abuse.
Customer shall maintain a 7 day per week, 24 hour per day, contact that Sprint
will immediately notify if fraud or code abuse is suspected. Customer shall
advise Sprint within 30 minutes after receiving such notice whether it wants
the authorization code deactivated. If Sprint is unable to reach Customer's
contact, or if Customer fails to respond to Sprint's notice within 30 minutes,
Sprint may, in its discretion, deactivate the authorization code and advise
Customer of its actions. Sprint shall incur no liability for such
deactivation.
Sprint shall be liable for calls charged to an authorization code after a
period of 4 hours following an appropriate emergency deactivation request.
Requests for credit pursuant to this subparagraph shall be supported by
appropriate documentation. Sprint will investigate and, in its discretion,
either approve or reject such requests. Notwithstanding anything in Paragraph
18 of the Agreement, the amount of any credit request under this subparagraph
shall not be deducted as a disputed charge prior to payment of an invoice.
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Attachment A
A.3. TERM OF AGREEMENT: 24 months
A.13.7. FORWARD PRICING - FORWARD PRICING VOLUME OF SERVICE
Not Applicable
A.13.8. PRIMARY CARRIER REQUIREMENT. Customer shall utilize Sprint as its
PRIMARY CARRIER for the following PRIMARY CARRIER SERVICES
Not Applicable
A.14.1. MINIMUM COMMITMENT
CARRIER TRANSPORT MONTHLY
MONTHS NET USAGE COMMITMENT
1-12 $1,000,000
13-24 $1,200,000
A.14.5. MINIMUM PORT USAGE: $[*] Minimum Net Ultra WATS Usage Per Port
PROMOTIONAL ACF/COC/EFC CHARGES
All ACF Charges will be per applicable tariff.
Monthly recurring COC charges will be $[*] per port.
Monthly recurring EFC charges will be $[*] per port when Customer
utilizes Sprint's entrance facilities.
A.34 PROPOSAL DATE: July 21, 1995
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment B - 1
B.13.4. Billing Increments/Usage Periods for Per Minute Charges.
Service will be invoiced based on PER MINUTE CHARGES utilizing
TARIFFED RATE PERIODS and TARIFFED BILLING INCREMENTS, unless
specifically set forth below:
Initial Additional
Service Type/ Billing Increment Billing Increment
Rate Element (sec) (sec)
Interstate Ultra WATS [ [
Canada Term. Ultra WATS
Mexico US Element Ultra WATS
Mexico Int'l. Element Ultra WATS
Other Int'l Ultra WATS
Interstate Dial 1 WATS
Canada Term. Dial 1 WATS
Mexico US Element Dial 1 WATS
Mexico Int'l. Element Dial 1 WATS
Other Int'l Dial 1 WATS * *
Interstate Ultra 800
Canada Orig. Ultra 800
Mexico Ultra 800
Other Int'l. Ultra 800
Caribbean Ultra 800
Interstate FONline 800
Canada Orig. FONline 800
Mexico FONline 800
Other Int'l. FONline 800
Caribbean FONline 800
Interstate FONcard ] ]
B.13.5. NON-BELL SWITCHED ORIGINATION/TERMINATION/800 ORIGINATION CHARGE.
Not applicable
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment B - 2
B.14.2 LEC CAP MAXIMUM NON-BELL TRAFFIC.
Maximum Originating Maximum Terminating Non-Bell
Service Type Non-Bell Traffic % Non-Bell Traffic % Surcharge
Dial 1 WATS [ [ [
FONline 800 *
FONcard ] * *
Ultra WATS
Net Ext N/A ]
Ultra 800 Net Ext [*] ]
B.14.3. MINIMUM AVERAGE CALL DURATION: MINIMUM AVERAGE TIME REQUIREMENT
(MATR) shall not apply unless specifically set forth below:
Service Type MATR MATR Surcharge
N/A N/A N/A
PROMOTIONAL MONTHLY RECURRING 800 CHARGES:
Customer's Monthly Recurring FONline 800 service charge will be $[*]
per FONline 800 account per month. There will be no more than [*]
800 numbers per FONline 800 account.
Customer's 800 numbers (FONline 800 and Ultra 800) requiring 800 Toll-
free Directory Assistance Listings will be charged an additional Monthly
Recurring Charge of $[*] per month per 800 number requiring such
listing.
B.14.4. MAXIMUM NONCOMPLETE CALL PERCENTAGE.
Ultra 800 and FONline 800Maximum NoncompletePer Call
Usage Type (Rate Element)800 Call PercentageSurcharge
Intrastate/Interstate [ % [
* *
International/Canadian %] ]
[ * ]
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 1
INTERSTATE SWITCHED NETWORK EXTENSION BASE RATES
LATA DIAL 1 WATS FONLINE 800 CARRIER FONCARD
GROUP* PEAK OFF-PEAK PEAK OFF-PEAK PEAK OFF-PEAK
1 [ [ [ [ [ [
* * * * * *
2 ] ] ] ] ] ]
Interstate and Intrastate Carrier FONcard Surcharge: [*] Per Call **
INTERSTATE SWITCHED NETWORK EXTENSION TWO YEAR TERM DISCOUNT 1: [*]%
INTERSTATE SWITCHED NETWORK EXTENSION DISCOUNT 2
MONTHLY VOLUME OF DIAL 1 WATS FONLINE 800 CARRIER FONCARD
CARRIER TRANSPORT SERVICE PEAK OFF-PEAK PEAK OFF-PEAK PEAK OFF-PEAK
[ [ [ [ [ [ [
* * * * * * *
] ] ] ] ] ] ]
* See LATA Group Descriptions. Group 2 rates apply to usage originating
from/terminating to Group 2 LATAs. Group 2 rates are not eligible for
Discount 2.
** FONcard Surcharge not eligible for Discounts
DIAL 1 WATS DIRECTORY ASSISTANCE
Interstate Directory Assistance Rate: $ [
Canada & Caribbean Directory Assistance Rate: $ *
Other International Directory Assistance Rate: $ ]
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 2
INTERSTATE DEDICATED NETWORK EXTENSION BASE RATES
LATA ULTRA WATS NET EXT ULTRA 800 NETWORK EXT
GROUP* PEAK OFF-PEAK PEAK OFF-PEAK
1 [ [ [ [
* * * *
2 ] ] ] ]
INTERSTATE DEDICATED NETWORK EXTENSION NEW CUSTOMER PROMO DISCOUNT 1: [*]%
For dedicated Network Extension Service (Ultra WATS and Ultra 800), Customer
will be eligible for the New Customer Promotion Discount 1 above (applied to
the interstate base rate usage) for all existing accounts and new accounts
that were not dedicated access users on the Sprint network for the six (6)
months immediately preceding receipt of order. Any new accounts that were
dedicated access users on the Sprint network for the six (6) months preceding
receipt of order will be billed in a separate billing product hierarchy level
and will not receive the New Customer Promotion discount.
INTERSTATE DEDICATED NETWORK EXTENSION DISCOUNT 2
MONTHLY VOLUME OF ULTRA WATS NET EXT ULTRA 800 NETWORK EXT
CARRIER TRANSPORT SERVICE PEAK OFF-PEAK PEAK OFF-PEAK
[ [ [ [ [
* * * * *
] ] ] ] ]
* See LATA Group Descriptions. Group 2 rates are not eligible for
Discount 2.
ULTRA WATS NETWORK EXTENSTION DIRECTORY ASSISTANCE
Interstate Directory Assistance Rate: [
Canada & Caribbean Directory Assistance Rate: *
Other International Directory Assistance Rate: ]
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 3
CANADA TERMINATING BASE RATES
PER MINUTE
Dial 1 WATS [
Ultra WATS Net Ext *
Carrier Ultra WATS ]
FONcard
CANADA TERMINATING TWO YEAR TERM DISCOUNT 1: [*]%
CANADA TERMINATING DISCOUNT 2
MONTHLY VOLUME OF DIAL 1 ULTRA WATS
CARRIER TRANSPORT SERVICE WATS NETWORK EXTENSION FONCARD
[ [ [ [
* * * *
] ] ] ]
CANADA ORIGINATING BASE RATES
PER MINUTE
FONline 800 [
Ultra 800 Net Ext
Carrier Ultra 800 *
FONcard ]
CANADA ORIGINATING TWO YEAR TERM DISCOUNT 1: [*]%
CANADA ORIGINATING DISCOUNT 2
MONTHLY VOLUME OF ULTRA 800
CARRIER TRANSPORT SERVICE FONLINE 800 NETWORK EXTENSION FONCARD
[ [ [ [
* * * *
] ] ] ]
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 4
MEXICO TERMINATING BASE RATES
DOMESTIC ELEMENT BASE RATES PER MINUTE
PEAK OFF-PEAK
Dial 1 WATS [ [
Ultra WATS Net Ext * *
Carrier Ultra WATS ] ]
INTERNATIONAL ELEMENT PER MINUTE BASE RATES
PEAK OFF-PEAK
MEXICO RATE STEP* 1ST ADD'L 1ST ADD'L
1 [ [ [ [
2
3
4 * * * *
5
6
7
8 ] ] ] ]
MEXICO TERMINATING TWO YEAR TERM DISCOUNT 1: [*]%
MEXICO TERMINATING DISCOUNT 2
MONTHLY VOLUME OF DIAL 1 ULTRA WATS
CARRIER TRANSPORT SERVICE WATS NETWORK EXTENSION
[ [ [
* * *
] ] ]
MEXICO TERMINATING FONCARD BASE RATES PER MINUTE **: Peak Off-Peak
[*] [*]
* Mexico Rate Steps are defined in Sprint FCC Tariff #2
** FONcard rates not eligible for discounts
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 5
MEXICO ORIGINATING BASE RATES *
(Ultra 800 Network Extension & FONline 800)
<TABLE>
<CAPTION>
US Rate Area 1 US Rate Area 2 US Rate Area 3 US Rate Area 4
Standard Economy Standard Economy Standard Economy Standard Economy
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mexico Zone 1 [ [ [ [ [ [ [ [
Mexico Zone 2
Mexico Zone 3 * * * * * * * *
Mexico Zone 4 ] ] ] ] ] ] ] ]
</TABLE>
MEXICO ORIGINATING TWO YEAR TERM DISCOUNT 1: [*]%
MEXICO ORIGINATING FONCARD BASE RATES PER MINUTE ** Peak Off-Peak
[*] [*]
* US Rate Area and Mexico Rate Zone are defined in Sprint FCC Tariff #2.
** FONcard rates not eligible for discounts
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 6
<TABLE>
Interstate Carrier UltraWATS LATA Groups
<CAPTION>
GROUP 1 GROUP 2
<S> <C> <C> <C> <C> <C> <C> <C>
128 Boston, MA 490 New Orleans, LA 222 Trenton, NJ 482 Jackson, MS
132 New York Metro 524 Kansas City, MO 234 Pittsburgh, PA 520 St. Louis, MO
224 Newark, NJ 552 Dallas, TX 238 Baltimore, MD 536 Oklahoma City, OK
228 Philadelphia, PA 560 Houston, TX 248 Richmond, VA 538 Tulsa, OK
236 Washington, DC 628 Minneapolis, MN 320 Cleveland, OH 558 Austin, TX
340 Detroit, MI 656 Denver, CO 324 Columbus, OH 566 San Antonio, TX
358 Chicago, IL 666 Phoenix, AZ 336 Indianapolis, IN 635 Cedar Rapids, IA
426 Raleigh, NC 674 Seattle, WA 430 Greenville, SC 660 Utah
438 Atlanta, GA 722 San Francisco, CA 452 Jacksonville, FL 721 Las Vegas, NV
460 Miami, FL 730 Los Angeles, CA 458 Orlando, FL 732 San Diego, CA
468 Memphis, TN 920 Connecticut
470 Nashville, TN 922 Cincinnati, OH
480 Mobile, AL
GROUP 3 GROUP 4
130 Rhode Island 478 Montgomery, AL 126 Springfield, MA 492 Baton Rouge, LA
133 Poughkeepsie, NY 486 Shreveport, LA 244 Roanoke, VA 546 Amarillo, TX
134 Albany, NY 521 Columbia, MO 246 Culpepper, VA 550 Abilene, TX
136 Syracuse, NY 522 Springfield, MO 330 Evansville, IN 554 Longview, TX
138 Binghampton, NY 528 Little Rock, AR 332 South Bend, IN 556 Waco-Temple, TX
140 Buffalo, NY 532 Wichita, KS 334 Auburn/Hunt., IN 562 Beaumont, TX
252 Norfolk, VA 534 Topeka, KS 338 Bloomington, IN 568 Brownsville, TX
322 Youngstown, OH 540 El Paso, TX 346 Lansing, MI 570 Bryan, TX
325 Akron, OH 542 Midland, TX 350 Green Bay, WI 620 Rochester, MN
326 Toledo, OH 544 Lubbock, TX 366 Bloomington, IL 624 Duluth, MN
328 Dayton, OH 548 Wichita Falls, TX 368 Peoria, IL 626 St. Cloud, MN
348 Grand Rapids, MI 564 Corpus Christi, TX 370 Champ.-Urban, IL 636 Fargo-Brainerd, ND
354 Madison, WI 630 Sioux City, IA 424 Greensboro, NC 668 Tucson, AZ
356 Milwaukee, WI 632 Des Moines, IA 428 Wilmington, NC 676 Spokane, WA
374 Springfield, IL 634 Davenport, IA 432 Florence, SC 720 Reno, NV
420 Asheville, NC 644 Omaha, NE 436 Charleston, SC 728 Fresno, CA
422 Charlotte, NC 646 Grand Island, NE 440 Savannah, GA 736 Monterey, CA
434 Columbia, SC 658 Colorado Spgs, CO 442 Augusta, GA 738 Stockton, CA
454 Gainsville, FL 672 Portland, OR 444 Albany, GA 924 Erie, PA
456 Daytona Beach, FL 726 Sacramento, CA 446 Macon, GA 937 Richmond, IN
462 Louisville, KY 952 Tampa, FL 448 Pensacola, FL 939 Ft. Myers, FL
476 Birmingham, AL 974 Rochester, NY 450 Panama City, FL 953 Tallahasse, FL
477 Huntsville, AL 472 Chattanooga, TN 956 Bristol/JoCty, TN
474 Knoxville, TN 958 Lincoln, NE
488 Lafayette, LA 973 Palm Springs, CA
GROUP 5 GROUP 6
120 Maine 362 Cairo, IL 670 Eugene, OR 820 Puerto Rico
122 New Hampshire 364 De Kalb, IL 724 Chico, CA 822 U.S. Virgin Islands
124 Vermont 376 Quincy, IL 734 Bakersfield, CA 832 Alaska
220 Atlantic City, NJ 464 Owensboro, KY 740 San Luis Ob., CA 834 Hawaii
226 Capital, PA 466 Winchester, KY 923 Lima-Mansfield, OH 921 Fishers Island, NY
230 Altoona, PA 484 Biloxi, MS 927 Harrisonburg, VA 929 Edinburg, VA
232 Northeast, PA 526 Fort Smith, AR 928 Charlottesville, VA 932 Bluefield, WV
240 Hagerstown, MD 530 Pine Bluff, AR 938 Terre Haute, IN 963 Kalispell, MT
242 Salisbury, MD 638 Bismark, ND 949 Fayetteville, NC 980 Navajo Terr., AZ
250 Lynchburg, VA 640 Sioux Falls, SD 951 Rocky Mount, NC 981 Navajo Terr., UT
254 Charleston, WV 648 Great Falls, MT 960 Coeur D'Alene, ID ALL OTHERS
256 Clarksburg, WV 650 Billings, MT 961 San Angelo, TX
342 Marquette, MI 652 Boise, ID 976 Mattoon, IL
344 Saginaw, MI 654 Cheyenne, WY 977 Macomb, IL
352 Eau Claire, WI 664 New Mexico 978 Olney, IL
360 Rockford, IL
</TABLE>
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 7
<TABLE>
Interstate Carrier Ultra 800, Dial 1 WATS, FONline 800, FONcard,
Ultra WATS Network Extension and Ultra 800 Network Extension LATA Groups
<CAPTION>
GROUP 1
<S> <C> <C> <C> <C> <C> <C> <C>
120 Maine 350 Green Bay, WI 486 Shreveport, LA 654 Cheyenne, WY
122 New Hampshire 352 Eau Claire, WI 488 Lafayette, LA 656 Denver, CO
124 Vermont 354 Madison, WI 490 New Orleans, LA 658 Colorado Spgs, CO
126 Springfield, MA 356 Milwaukee, WI 492 Baton Rouge, LA 660 Utah
128 Boston, MA 358 Chicago, IL 520 St. Louis, MO 664 New Mexico
130 Rhode Island 360 Rockford, IL 521 Columbia, MO 666 Phoenix, AZ
132 New York Metro 362 Cairo, IL 522 Springfield, MO 668 Tucson, AZ
133 Poughkeepsie, NY 364 De Kalb, IL 524 Kansas City, MO 670 Eugene, OR
134 Albany, NY 366 Bloomington, IL 526 Fort Smith, AR 672 Portland, OR
136 Syracuse, NY 368 Peoria, IL 528 Little Rock, AR 674 Seattle, WA
138 Binghampton, NY 370 Champ.-Urban, IL 530 Pine Bluff, AR 676 Spokane, WA
140 Buffalo, NY 374 Springfield, IL 532 Wichita, KS 720 Reno, NV
220 Atlantic City, NJ 376 Quincy, IL 534 Topeka, KS 721 Las Vegas, NV
222 Trenton, NJ 420 Asheville, NC 536 Oklahoma City, OK 722 San Francisco, CA
224 Newark, NJ 422 Charlotte, NC 538 Tulsa, OK 724 Chico, CA
226 Capital, PA 424 Greensboro, NC 540 El Paso, TX 726 Sacramento, CA
228 Philadelphia, PA 426 Raleigh, NC 542 Midland, TX 728 Fresno, CA
230 Altoona, PA 428 Wilmington, NC 544 Lubbock, TX 730 Los Angeles, CA
232 Northeast, PA 430 Greenville, SC 546 Amarillo, TX 732 San Diego, CA
234 Pittsburgh, PA 432 Florence, SC 548 Wichita Falls, TX 734 Bakersfield, CA
236 Washington, DC 434 Columbia, SC 550 Abilene, TX 736 Monterey, CA
238 Baltimore, MD 436 Charleston, SC 552 Dallas, TX 738 Stockton, CA
240 Hagerstown, MD 438 Atlanta, GA 554 Longview, TX 740 San Luis Ob., CA
242 Salisbury, MD 440 Savannah, GA 556 Waco-Temple, TX 920 Connecticut
244 Roanoke, VA 442 Augusta, GA 558 Austin, TX 922 Cincinnati, OH
246 Culpepper, VA 444 Albany, GA 560 Houston, TX 923 Lima-Mansfield, OH
248 Richmond, VA 446 Macon, GA 562 Beaumont, TX 924 Erie, PA
250 Lynchburg, VA 448 Pensacola, FL 564 Corpus Christi, TX 927 Harrisonburg, VA
252 Norfolk, VA 450 Panama City, FL 566 San Antonio, TX 928 Charlottesville, VA
254 Charleston, WV 452 Jacksonville, FL 568 Brownsville, TX 937 Richmond, IN
256 Clarksburg, WV 454 Gainsville, FL 570 Bryan, TX 938 Terre Haute, IN
320 Cleveland, OH 456 Daytona Beach, FL 620 Rochester, MN 939 Ft. Myers, FL
322 Youngstown, OH 458 Orlando, FL 624 Duluth, MN 949 Fayetteville, NC
324 Columbus, OH 460 Miami, FL 626 St. Cloud, MN 951 Rocky Mount, NC
325 Akron, OH 462 Louisville, KY 628 Minneapolis, MN 952 Tampa, FL
326 Toledo, OH 464 Owensboro, KY 630 Sioux City, IA 953 Tallahasse, FL
328 Dayton, OH 466 Winchester, KY 632 Des Moines, IA 956 Bristol/JoCty, TN
330 Evansville, IN 468 Memphis, TN 634 Davenport, IA 958 Lincoln, NE
332 South Bend, IN 470 Nashville, TN 635 Cedar Rapids, IA 960 Coeur D'Alene, ID
334 Auburn/Hunt., IN 472 Chattanooga, TN 636 Fargo-Brainerd, ND 961 San Angelo, TX
336 Indianapolis, IN 474 Knoxville, TN 638 Bismark, ND 973 Palm Springs, CA
338 Bloomington, IN 476 Birmingham, AL 640 Sioux Falls, SD 974 Rochester, NY
340 Detroit, MI 477 Huntsville, AL 644 Omaha, NE 976 Mattoon, IL
342 Marquette, MI 478 Montgomery, AL 646 Grand Island, NE 977 Macomb, IL
344 Saginaw, MI 480 Mobile, AL 648 Great Falls, MT 978 Olney, IL
346 Lansing, MI 482 Jackson, MS 650 Billings, MT
348 Grand Rapids, MI 484 Biloxi, MS 652 Boise, ID
GROUP 2
820 Puerto Rico 921 Fishers Island, NY 980 Navajo Terr., AZ
822 U.S. Virgin Islands 929 Edinburg, VA 981 Navajo Terr., UT
832 Alaska 932 Bluefield, WV ALL OTHERS
834 Hawaii 963 Kalispell, MT
</TABLE>
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 8
OTHER INTERNATIONAL DISCOUNTS
OTHER INTERNATIONAL DISCOUNT 1: [*]%
Other International Discount 2 Schedules
ULTRA WATS NETWORK EXTENSION:
MONTHLY VOLUME OF COUNTRY COUNTRY COUNTRY COUNTRY
CARRIER TRANSPORT USAGE GROUP 1 GROUP 2 GROUP 3 GROUP 4
[ [ [ [ [
* * * * *
] ] ] ] ]
DIAL 1 WATS:
MONTHLY VOLUME OF COUNTRY COUNTRY COUNTRY COUNTRY
CARRIER TRANSPORT USAGE GROUP 1 GROUP 2 GROUP 3 GROUP 4
[ [ [ [ [
* * * * *
] ] ] ] ]
GROUP 1 GROUP 2 GROUP 3 GROUP 4
Australia Belgium Argentina All Others
Austria Denmark Brazil
Finland Germany China
France India Israel
Hong Kong Italy Philippines
Japan Netherlands Poland
Singapore South Korea Spain
Sweden Switzerland
Taiwan Venezuela
United Kingdom
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 9
<TABLE>
Other International Base Rates
<CAPTION>
- - - - -ULTRA WATS- - - - - - - - -DIAL 1 WATS - - -
CTRY STD. DISC. ECON. STD. DISC. ECON.
COUNTRY CODE $/MIN. $/MIN. $/MIN. $/MIN. $/MIN. $/MIN
<S> <C> <C> <C> <C> <C> <C> <C>
ALBANIA 355 [ [ [ [ [ [
ALGERIA 213
AMER. SAMOA 684
ANGOLA 244
ANGUILLA 809
ANTIGUA 809
ARGENTINA 54
ARMENIA 7
ARUBA 297
ASCENSION ISLDS. 247
ATLANTIC OCEAN E 871
ATLANTIC OCEAN W 874
AUSTRALIA 61 * * * * * *
AUSTRALIAN EXTN. TER. 672
AUSTRIA 43
AZERBAIJAN 7
BAHAMAS 809
BAHRAIN 973
BANGLADESH 880
BARBADOS 809
BELARUS 7
BELGIUM 32
BELIZE 501
BENIN 229
BERMUDA 809
BHUTAN 975 * * * * * *
BOLIVIA 591
BOSNIA & HERZEGOVINA 387
BOTSWANA 267
BRAZIL 55
BRITISH VIRGIN ISLDS 809
BRUNEI 673
BULGARIA 359
BURKINA FASO 226
BURUNDI 257
CAMBODIA 855
CAMEROON 237
CAPE VERDE ISLAND 238
CAYMAN ISLANDS 809
CENTRAL AFRICAN REP. 236
CHAD REPUBLIC 235
CHILE 56
CHINA 86
COLOMBIA 57
CONGO 242 ] ] ] ] ] ]
</TABLE>
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 10
<TABLE>
Other International Base Rates
<CAPTION>
- - - - -ULTRA WATS- - - - - - - - - DIAL 1 WATS - - -
CTRY STD. DISC. ECON. STD. DISC. ECON.
COUNTRY CODE $/MIN. $/MIN. $/MIN. $/MIN. $/MIN. $/MIN
<S> <C> <C> <C> <C> <C> <C> <C>
COOK ISLANDS 682 [ [ [ [ [ [
COSTA RICA 506
CROATIA, REPUB OF 385
CUBA 53
CYPRUS 357
CZECH REPUBLIC 42
DENMARK 45
DIEGO GARCIA 246
DJIBOUTI 253
DOMINICA 809
DOMINICAN REPUBLIC 809
ECUADOR 593
EGYPT 20
EL SALVADOR 503 * * * * * *
EQUATORIAL GUINEA 240
ERITREA 291
ESTONIA 372
ETHIOPIA 251
FAEROE ISLANDS 298
FALKLAND ISLANDS 500
FIJI ISLANDS 679
FINLAND 358
FRANCE 33
FRENCH ANTILLES 590
FRENCH GUIANA 594
FRENCH POLYNESIA 689
GABON 241
GAMBIA 220 * * * * * *
GEORGIA 7
GERMANY 49
GHANA 233
GIBRALTAR 350
GREECE 30
GREENLAND 299
GRENADA 809
GUADELOUPE 590
GUAM 671
GUANTANAMO BAY 539
GUATEMALA 502
GUINEA 224
GUINEA-BISSAU 245
GUYANA 592
HAITI 509
HONDURAS 504
HONG KONG 852 ] ] ] ] ] ]
</TABLE>
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 11
<TABLE>
<CAPTION>
Other International Base Rates
- - - - -ULTRA WATS- - - - - - - - - DIAL 1 WATS - - -
CTRY STD. DISC. ECON. STD. DISC. ECON.
COUNTRY CODE $/MIN. $/MIN. $/MIN. $/MIN. $/MIN. $/MIN
<S> <C> <C> <C> <C> <C> <C> <C>
HUNGARY 36 [ [ [ [ [ [
ICELAND 354
INDIA 91
INDIAN OCEAN REGION 873
INDONESIA 62
IRAN 98
IRAQ 964
IRELAND 353
ISRAEL 972
ITALY 39
IVORY COAST 225
JAMAICA 809
JAPAN 81 * * * * * *
JORDAN 962
KAZAKHSTAN 7
KENYA 254
KIRGISTAN 7
KIRIBATI 686
KUWAIT 965
LAOS 856
LATVIA 371
LEBANON 961
LESOTHO 266
LIBERIA 231
LIBYA 218
LIECHTENSTEIN 41
LITHUANIA 370
LUXEMBOURG 352 * * * * * *
MACAO 853
MACEDONIA 381
MADAGASCAR 261
MALAWI 265
MALAYSIA 60
MALDIVES 960
MALI REPUBLIC 223
MALTA 356
MARSHALL ISLANDS 692
MAURITANIA 222
MAURITIUS 230
MAYOTTE ISLAND 269
MICRONESIA 691
MOLDOVA 373
MONACO 33
MONGOLIA 976
MONTENEGRO 381 ] ] ] ] ] ]
</TABLE>
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 12
<TABLE>
<CAPTION>
Other International Base Rates
- - - - -ULTRA WATS- - - - - - - DIAL 1 WATS - - -
CTRY STD. DISC. ECON. STD. DISC. ECON.
COUNTRY CODE $/MIN. $/MIN. $/MIN. $/MIN. $/MIN. $/MIN
<S> <C> <C> <C> <C> <C> <C> <C>
MONTSERRAT 809 [ [ [ [ [ [
MOROCCO 212
MOZAMBIQUE 258
MYANMAR (BURMA) 95
NAMIBIA 264
NAURU 674
NEPAL 977
NETHERLANDS 31
NETHERLANDS ANTIL 599
NEVIS ISLAND 809
NEW CALEDONIA 687
NEW ZEALAND 64
NICARAGUA 505 * * * * * *
NIGER REPUBLIC 227
NIGERIA 234
NIUE 683
NORWAY 47
OMAN 968
PACIFIC OCEAN REGION 872
PAKISTAN 92
PALAU REPUBLIC 680
PANAMA 507
PAPUA NEW GUINEA 675
PARAGUAY 595 * * * * * *
PERU 51
PHILIPPINES 63
POLAND 48
PORTUGAL 351
QATAR 974
REUNION ISLAND 262
ROMANIA 40
RUSSIA 7
RWANDA 250
SAINT HELENA 290
SAINT KITTS 809 * * * * * *
SAINT LUCIA 809
SAINT PIERRE 508
SAINT VINCENT 809
SAIPAN 670
SAN MARINO 39
SAO TOME 239
SAUDI ARABIA 966
SENEGAL 221
SERBIA 381
SEYCHELLES ISLAND 248 ] ] ] ] ] ]
</TABLE>
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 13
<TABLE>
<CAPTION>
Other International Base Rates
- - - - -ULTRA WATS- - - - - - - DIAL 1 WATS - - -
CTRY STD. DISC. ECON. STD. DISC. ECON.
COUNTRY CODE $/MIN. $/MIN. $/MIN. $/MIN. $/MIN. $/MIN
<S> <C> <C> <C> <C> <C> <C> <C>
SIERRA LEONE 232 [ [ [ [ [ [
SINGAPORE 65
SLOVAKIA 381
SLOVENIA, REPUB OF 386
SOLOMON ISLANDS 677
SOUTH AFRICA 27
SOUTH KOREA 82
SPAIN 34
SRI LANKA 94
SURINAME 597
SWAZILAND 268
SWEDEN 46
SWITZERLAND 41 * * * * * *
SYRIAN ARAB REPUBLIC 963
TAIWAN 886
TAJIKISTAN 7
TANZANIA 255
THAILAND 66
TOGO 228
TONGA ISLANDS 676
TRINIDAD 809
TUNISIA 216
TURKEY 90
TURKMENISTAN 7
TURKS & CAICOS ISLDS 809 * * * * * *
TUVALU 688
UGANDA 256
UKRAINE 7
UNITED ARAB EMIRATES 971
UNITED KINGDOM 44
URUGUAY 598
UZBEKISTAN 7
VANUATU 678
VENEZUELA 58
VIETNAM 84
WALLIS & FUTANA IS 681
WESTERN SAMOA 685
YEMEN ARAB REPUBLIC 967
ZAIRE 243
ZAMBIA 260
ZIMBABWE 263 ] ] ] ] ] ]
</TABLE>
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment C - 14
Other International Toll Free (US Inbound)
Ultra 800 Base Rates
BASE RATE BASE RATE
COUNTRY PER MINUTE COUNTRY PER MINUTE
ANTIGUA [ JAPAN [
AUSTRALIA LIECHTENSTEIN
BAHAMAS LUXEMBOURG
BAHRAIN MALAYSIA
BARBADOS MONACO
BELGIUM NETHERLAND ANTILLES
BERMUDA NETHERLANDS
BOLIVIA NEW ZEALAND
BRAZIL NICARAGUA
CHILE NORWAY
CHINA PANAMA
COLOMBIA PHILIPPINES
COSTA RICA * PORTUGAL *
CYPRUS SAIPAN
DENMARK SAN MARINO
DOMINICAN REP SINGAPORE
ECUADOR SOUTH AFRICA
EL SALVADOR KOREA (SOUTH)
FINLAND SPAIN
FRANCE SWEDEN
GERMANY SWITZERLAND
GUAM TAIWAN
GUATEMALA THAILAND
HONG KONG TRINIDAD
INDONESIA TURKEY
IRELAND UNITED KINGDOM
ISRAEL VATICAN CITY
ITALY ] VENEZUELA ]
ITFS DISCOUNT 1
MONTHLY VOLUME OF
CARRIER TRANSPORT ITFS USAGE DISCOUNT 1
[ [
* *
] ]
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment D - 1
<TABLE>
Interstate Adjustment Base Rates and Discounts
<CAPTION>
BASE RATES BASE RATES
DAY EVENING N/W DAY EVENING N/W
SERVICE STATE ($/MIN) ($/MIN) ($/MIN) STATE ($/MIN) ($/MIN) ($/MIN)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dial 1 WATS AK [ [ [ MT [ [ [
AL NC
AR ND
AZ NE
CA <F1> NH
CA <F2> NJ
CO NM
CT NV
DE NY
FL OH
GA OK
HI OR
IA * * * PA * * *
ID RI
IL SC
IN SD
KS TN
KY TX
LA UT
MA VA
MD VT
ME WA
MI WI
MN WV
MO WY ] ] ]
MS ] ] ]
</TABLE>
Interstate Adjustment Discount 1<F3>
[ [
* *
] ]
[FN]
<F1> Interstate Adjustment Base Rate for California Intrastate/Intralata
traffic.
<F2> Interstate Adjustment Base Rate for California Intrastate/Interlata
traffic.
<F3> Discount 1 calculated based on Intrastate usage rated at Interstate
Adjustment base rates (for all 50 states) at the billing hierarchy
Product level (level 4).
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment D - 2
<TABLE>
Interstate Adjustment Base Rates and Discounts
<CAPTION>
BASE RATES BASE RATES
DAY EVENING N/W DAY EVENING N/W
SERVICE STATE ($/MIN) ($/MIN) ($/MIN) STATE ($/MIN) ($/MIN) ($/MIN)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FONline 800 AK [ MT [ [ [
and FONCARD AL NC
AR ND
AZ NE
CA <F1> NH
CA <F2> NJ
CO NM
CT NV
DE NY
FL OH
GA OK
HI OR
IA PA
ID * RI * * *
IL SC
IN SD
KS TN
KY TX
LA UT
MA VA
MD VT
ME WA
MI WI
MN WV
MO WY ] ] ]
MS ]
Interstate Adjustment Discount 1<F3>
[ [
* *
] ]
<FN>
<F1> Interstate Adjustment Base Rate for California Intrastate/Intralata traffic.
<F2> Interstate Adjustment Base Rate for California Intrastate/Interlata traffic.
<F3> Discount 1 calculated based on Intrastate usage rated at Interstate Adjustment base rates (for all 50
states) at the billing hierarchy Product level (level 4).
</TABLE>
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment D - 3
<TABLE>
Interstate Adjustment Base Rates and Discounts
<CAPTION>
BASE RATES BASE RATES
DAY EVENING N/W DAY EVENING N/W
SERVICE STATE ($/MIN) ($/MIN) ($/MIN) STATE ($/MIN) ($/MIN) ($/MIN)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carrier Ultra AK [ [ [ MT [ [ [
WATS & AL NC
Ultra WATS AR ND
Net Ext. AZ NE
CA <F1> NH
CA <F2> NJ
CO NM
CT NV
DE NY
FL OH
GA OK
HI OR
IA * * * PA * * *
ID RI
IL SC
IN SD
KS TN
KY TX
LA UT
MA VA
MD VT
ME WA
MI WI
MN WV
MO WY ] ] ]
MS ] ] ]
Interstate Adjustment Discount 1<F3>
[ [
* *
] ]
<FN>
<F1> Interstate Adjustment Base Rate for California Intrastate/Intralata traffic.
<F2> Interstate Adjustment Base Rate for California Intrastate/Interlata traffic.
<F3> Discount 1 calculated based on Intrastate usage rated at Interstate Adjustment base rates (for all 50
states) at the billing hierarchy Product level (level 4).
</TABLE>
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment D-4
<TABLE>
Interstate Adjustment Base Rates and Discounts
<CAPTION>
BASE RATES BASE RATES
DAY EVENING N/W DAY EVENING N/W
SERVICE STATE ($/MIN) ($/MIN) ($/MIN) STATE ($/MIN) ($/MIN) ($/MIN)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carrier AK [ [ [ MT [ [ [
Ultra 800 & AL NC
Ultra 800 AR ND
Net Ext. AZ NE
CA <F1> NH
CA <F2> NJ
CO NM
CT NV
DE NY
FL OH
GA OK
HI OR
IA * * * PA * * *
ID RI
IL SC
IN SD
KS TN
KY TX
LA UT
MA VA
MD VT
ME WA
MI WI
MN WV
MO WY ] ] ]
MS ] ] ]
Interstate Adjustment Discount 1<F3>
[ [
* *
] ]
<FN>
<F1> Interstate Adjustment Base Rate for California Intrastate/Intralata traffic.
<F2> Interstate Adjustment Base Rate for California Intrastate/Interlata traffic.
<F3> Discount 1 calculated based on Intrastate usage rated at Interstate Adjustment base rates (for all 50
states) at the billing hierarchy Product level (level 4).
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
SPRINT PROPRIETARY INFORMATION - RESTRICTED
</TABLE>
EXHIBIT 10.29
<PAGE>
AMENDMENT TO
CARRIER TRANSPORT SWITCHED SERVICES AGREEMENT
THIS AMENDMENT (the "Amendment") is made by SPRINT COMMUNICATIONS COMPANY L.P.
("Sprint") and AmeriConnect, Inc. ("Customer"), to that certain Carrier
Transport Switched Services Agreement which was executed on or about 7/28/95
(the "Agreement"). Sprint and Customer are "Parties" hereto.
In consideration of the mutual promises contained herein, the Parties amend
the Agreement as follows:
1. The following Attachments, or parts of an Attachment, are stricken from
the Agreement in their entirety. Each Attachment, or part of an Attachment,
so stricken shall be replaced as part of the Agreement with the attachment to
this Amendment that bears the same title or heading.
* Attachment D-2
* Attachment D-4
2. If this Amendment is executed by Sprint prior to the first day of the
month, then the Amendment shall become effective on the first day of the
following month; otherwise, the Amendment shall become effective the first day
of the second month following the month in which it is executed by Sprint.
3. All other terms and conditions of the Agreement shall remain in full
force and effect.
EXECUTED and made effective as provided herein.
AMERICONNECT, INC. SPRINT COMMUNICATIONS COMPANY, L.P.
By: /s/ Robert R. Kaemmer By: /s/ Patti Manuel
Robert R. Kaemmer Patti Manuel
Title: President Vice President - BSG
Date: 10/30/95 Date: 10/30/95
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment D-2
INTERSTATE ADJUSTMENT BASE RATES AND DISCOUNTS
BASE RATES BASE RATES
Day Evening N/W Day Evening N/W
Service State ($/min) ($/min) ($/min) State ($/min) ($/min) ($/min)
FONline 800 and
FONCARD
IL [ * * * ]
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
Sprint Proprietary Information -
RESTRICTED
<PAGE>
Attachment D-4
INTERSTATE ADJUSTMENT BASE RATES AND DISCOUNTS
BASE RATES BASE RATES
Day Evening N/W Day Evening N/W
Service State ($/min) ($/min) ($/min) State ($/min) ($/min) ($/min)
Carrier Ultra
800 &
ULTRA 800
NET EXT
IL [ * * * ]
* Confidential material omitted and filed separately with the Commission
pursuant to a request for confidential treatment.
Sprint Proprietary Information -
RESTRICTED
EXHIBIT 10.30
<PAGE>
AMENDMENT TO
CARRIER TRANSPORT SWITCHED SERVICES AGREEMENT
THIS AMENDMENT (the "Amendment") is made by SPRINT COMMUNICATIONS
COMPANY L.P. ("Sprint") and Americonnect, Inc. ("Customer"), to
that certain Carrier Transport Switched Services Agreement which
was executed on or about 7/28/95 (the "Agreement"). Sprint and
Customer are "Parties" hereto.
In consideration of the mutual promises contained herein, the
Parties amend the Agreement as follows:
1. The following Attachments, or parts of an Attachment, are
stricken from the Agreement in their entirety. Each Attachment,
or part of an Attachment, so stricken shall be replaced as part
of the Agreement with the attachment to this Amendment that bears
the same title or heading.
* Attachment A (Section A.14.1)
2. If this Amendment is executed by Sprint prior to the first
day of the month, then the Amendment shall become effective on
the first day of the following month; otherwise, the Amendment
shall become effective the first day of the second month
following the month in which it is executed by Sprint.
3. All other terms and conditions of the Agreement shall remain
in full force and effect.
EXECUTED and made effective as provided herein.
Americonnect, Inc. SPRINT COMMUNICATIONS COMPANY L.P.
By: /s/ Robert R. Kaemmer /s/ R. Michael Franz
R. Michael Franz
President DBG
Title: President
Date: 2/26/96 Date: 2/29/96
SPRINT PROPRIETARY INFORMATION - RESTRICTED
<PAGE>
Attachment A
A.14.1 MINIMUM ANNUAL COMMITMENT:
CARRIER TRANSPORT
NET ANNUAL USAGE
MONTHS COMMITMENT
1-12 (year 1) $1,000,000
13-24 (year 2) $1,200,000
*This commitment will be on an annual basis. If at the end of
the first 12 months of the agreement (Year 1 of contract),
Customer has not billed net usage of $12,000.00 then customer
will be assessed minimum commitment surcharges as stated in
Section 14.1. If at the end of months 13-24 (year 2 of contract)
Customer has not billed net usage of $14,400,000 (for months 13-
24) then customer will be assessed minimum commitment surcharges
as stated in Section 14.1
PROPRIETARY INFORMATION
RESTRICTED
EXHIBIT 10.31
<PAGE>
REVOLVING LOAN AGREEMENT
THIS REVOLVING LOAN AGREEMENT (this "Agreement"), dated and effective as
of the 8th day of June, 1995, by and between Mercantile Bank of Kansas
("Bank"), a Kansas state bank with its principal place of business at 4700
West 50th Place, Roeland Park, Kansas 66205 and AmeriConnect, Inc.
("Borrower"), a Delaware corporation with its principal place of business at
6750 W. 93rd Street, Suite 110, Overland Park, Ks 66212 has reference to the
following facts and circumstances:
A. Borrower has requested that Bank loan monies to Borrower and Bank,
in the event it accepts this Agreement in writing, will lend
monies to Borrower pursuant hereto.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit hereafter made by Bank to or for the benefit of Borrower and for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS AND TERMS
1.1 The following terms and/or phrases shall have the meanings set forth and
shall be applicable to the singular and plural form, giving effect to
the numerical difference; whenever the context so requires, the use of
"it" in reference to Borrower shall mean Borrower as identified at the
beginning of this Agreement:
(A) "AFFILIATE": any person that, directly or indirectly, through one
or more intermediaries, controls the Borrower (a "Controlling
Person") or any Person (other than the Borrower or a subsidiary)
which is controlled by or is under common control with a
Controlling Person. As used herein, the term "control" means
possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or
otherwise.
(B) "BORROWER'S LIABILITIES": all obligations and liabilities of
Borrower to Bank (including, without limitation, all debts, claims
and indebtednesses) whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time
to time hereafter owing, due or payable, however evidenced,
created, incurred, acquired or owing and however arising, whether
under this Agreement, the Note or any Other Agreements, instrument
and/or
<PAGE>
documents heretofore, now and/or from time to time hereafter executed
by, and/or on behalf of Borrower, and delivered to Bank, or by
operation of law or otherwise.
(C) "BORROWER'S OBLIGATIONS": all terms, conditions, warranties,
representations, agreements, undertakings, covenants and
provisions (other than Borrower's Liabilities) to be performed,
discharged, kept, observed or complied with by Borrower pursuant
to this Agreement or under any Other Agreements, instrument and/or
document heretofore, now and/or from time to time hereafter
executed by, and/or on behalf of, Borrower, and delivered to Bank.
(D) "BUSINESS DAY": any day other than a Saturday, Sunday or legal
holiday observed by Bank.
(E) "CHARGES": all Federal, State, County, City and/or other
governmental taxes, levies, assessments, charges, claims or
encumbrances upon and/or relating to Borrower's business,
Borrower's ownership and/or use of any of its assets and/or
Borrower's income and/or gross receipts.
(F) "CREDIT": the definition ascribed to this term in Section 2.1.
(G) "ENVIRONMENTAL LAW": the definition ascribed to this term in
Section 4.1(E).
(H) "EVENT OF DEFAULT": the definition ascribed to this term in
Section 6.1.
(I) "FINANCIALS": those financial statements of Borrower, if any,
heretofore, concurrently herewith or hereafter delivered by or on
behalf of Borrower to Bank.
(J) "GUARANTOR": any Person which has guaranteed to Bank the payment,
collection or performance of all or any portion of Borrower's
Liabilities and/or Borrower's Obligations and/or has granted to
Bank a security interest in, or lien or encumbrance upon, some or
all of such Person's real and/or personal property to secure the
payment and/or performance of all or any portion of Borrower's
Liabilities and/or Borrower's Obligations.
(K) "INDEBTEDNESS": all obligations and liabilities of Borrower to
any Person other than Bank (including, without limitation, all
debts, claims and indebtednesses) whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and/or
from time to time hereafter
<PAGE>
owing, due or payable, however evidence, created, incurred, occurred
or owing and howsoever arising, whether under written or oral
agreement, by operation of law, or otherwise.
(L) "LOANS": the definition ascribed to this term in Section 2.1.
(M) "NOTE": the promissory note in the form attached hereto as
Exhibit A to be executed and delivered by Borrower to Bank in
evidence of the Credit (as defined in Section 2.1).
(N) "OTHER AGREEMENTS": all agreements, instruments and documents,
including, without limitation, loan agreements, security
agreements, guaranties, mortgages, deeds of trust, notes, pledges,
applications and agreements for letters of credit, letters of
credit, advices of credit, bankers acceptances, notices, financing
statements and all other written matter heretofore, now and/or
from time to time hereafter executed by and/or on behalf of
Borrower and delivered to Bank, or issued by Bank upon the
application and/or other request of, and on behalf of, Borrower.
(O) "PERSON": any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether
national, federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division,
agency, body or department thereof).
(P) "TERMINATION DATE": June 1, 1996, or such later date to which it
may be extended pursuant to Section 7.12.
(Q) "UNMATURED EVENT OF DEFAULT": any event or condition which, with
the lapse of time or giving of notice to Borrower or both, would
constitute an Event of Default.
1.2 Except as otherwise defined in this Agreement, all accounting words,
terms and/or phrases used herein shall have the meanings customarily
given them in accordance with generally accepted accounting principles.
2. CREDIT: GENERAL TERMS
2.1 Subject to the terms and conditions of this Agreement and the Other
Agreements and provided that an Event of Default or Unmatured Event of
Default, does not then exist, Bank agrees to make such loans or advances
(individually a "Loan" and collectively, the "Loans") to Borrower, as
<PAGE>
Borrower may from time to time request, of up to, but not in excess of,
$1,000,000.00, at any time outstanding (the "Credit"). Loans made by
Bank may be repaid, and subject to the terms and conditions hereof,
reborrowed to, but not including the Termination Date, unless the Credit
is otherwise terminated as provided in this Agreement. In the event the
outstanding principal balance of the Loans exceeds the limitations set
forth above, Borrower shall immediately and without notice or demand,
make the necessary payments to eliminate such excess.
2.2 All Loans made hereunder and other liabilities of Borrower arising
hereunder shall be paid by Borrower on the Termination Date, unless
payable sooner pursuant to the terms of this Agreement and/or the Note,
but may, at Borrower's election, be repaid in whole or in part any time
prior to such date without premium or penalty unless otherwise stated in
the Note.
2.3 All fees, and all interest payable in respect of the Credit, shall be
computed on the basis of a year of 360 days, and charged for the actual
number of days elapsed. Whenever any payment to be made under this
Agreement, the Note or the Other Agreements shall be due on a non-
Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall be included in the computation of
interest due upon the Credit.
2.4 If Bank shall determine at any time after the date hereof that the
adoption of any law, rule or regulation regarding capital adequacy, or
any change therein or in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Bank
with any request or directive regarding capital adequacy (whether or not
having the force of law) from any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of
return on Bank's capital as a consequence of its obligations hereunder
to a level below that which Bank could have achieved, but for such
adoption, change or compliance (taking into consideration Bank's
policies with respect to capital adequacy) by an amount deemed by Bank
to be material, then Borrower shall pay to Bank upon demand such amount
or amounts, in addition to the amounts payable under the provisions of
this Agreement or the Other Agreements, as will compensate Bank for such
reduction. Determinations by Bank for purposes of this Section of the
additional amount or amounts required to compensate Bank shall be
conclusive in the absence of manifest error. In determining such amount
or amounts, Bank may use any reasonable averaging and attribution
methods.
<PAGE>
3. CONDITIONS PRECEDENT TO DISBURSEMENT
3.1 (A) The obligation of the Bank to make the initial Loan to Borrower
under the Credit is subject to the condition precedent that Bank
shall have received each of the following, duly executed and in
form and substance satisfactory to Bank:
(i) Duly executed copy of this Agreement;
(ii) Note, payable to the order of Bank and dated as of the date
of the initial Loan;
(iii) Guaranty duly executed by: N/A;
(iv) Subordination and Stand-By Agreement duly executed by: N/A;
(v) Secretary's Certificate, Partnership Certificate or
affidavit or sole proprietorship (said form being dictated
by Borrower's legal entity);
(vi) Security Agreement;
(vii) Pledge Agreement; and
(viii) Such other opinions, documents, certificates or
approvals as Bank reasonably may request.
(B) The obligation of the Bank to make the initial Loan and each
subsequent Loan is subject to satisfaction of the following
conditions precedent:
(i) No change in the condition or operations, financial or
otherwise, of Borrower shall have occurred, which change, in
the reasonable credit judgment of Bank may have a material
adverse effect on Borrower;
(ii) Before and after giving effect to such Loan, no Event of
Default or Unmatured Event of Default shall have occurred
and be continuing hereunder; and
(iii) Before and after giving effect to such Loan, all
representations and warranties of Borrower hereunder and/or
under the Other Agreements shall be true and correct as
though made on the date of such Loan.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES
4.1 To induce Bank to enter into this Agreement and to make Loans to
Borrower, Borrower makes the following representations and warranties to
Bank, all of which shall survive the execution of this Agreement and the
making of the initial Loan:
(A) Borrower is a Delaware duly organized and existing and in good
standing under the laws of the jurisdiction in which it was
incorporated and/or established, and has all requisite power and
authority, corporate and/or otherwise, to conduct its business and
to own its properties. Borrower is duly licensed and/or qualified
to do business and in good standing in all jurisdictions in which
the laws thereof require Borrower to be so licensed and/or
qualified.
(B) The execution, delivery and performance by Borrower of this
Agreement and the other Agreements, are within the powers of
Borrower, corporate or otherwise, have been duly authorized by all
necessary action and do not and will not: (i) require any consent
or approval of the stockholders of Borrower; (ii) violate any
provision of any certificate or articles of incorporation, by-
laws, partnership agreement or other agreements of Borrower or of
any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award binding upon or applicable to
Borrower; (iii) require the consent or approval of, or filing or
registration with, any governmental body, agency or authority;
and/or (iv) result in a breach of or constitute a default under,
or result in the imposition of any lien, charge or encumbrance
upon any property of Borrower. This Agreement and the Other
Agreements constitute legal, valid and binding obligations of
Borrower enforceable against Borrower in accordance with their
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization and other similar laws of general
application affecting the enforcement of creditor's right or by
general principles of equity.
(C) Borrower is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(D) All employee pension and benefit plans subject to the Employee
Retirement Income Security Act of 1974 ("ERISA") which are
maintained for employees of Borrower, are in compliance in all
material respects with the applicable provisions of ERISA.
<PAGE>
(E) The operations of Borrower comply in all respects with the
Comprehensive Environmental Response, Compensation and Liability
Act, any so-called "Superfund" or "Superlien" law or any other
federal, state or local laws, rules, regulations, orders or
decrees (collectively, "Environmental Laws") relating to, or
imposing liabilities or standards of conduct concerning any
hazardous substances, pollutants, contaminants, toxic or dangerous
waste, substance or material defined as such in any Environmental
Law. There are no actions or proceedings which are pending, or to
the knowledge of Borrower threatened, against Borrower under any
Environmental Law.
(F) The Financials, copies of which have been furnished to Bank, are
complete and correct and fairly present the financial condition of
Borrower as of the dates referred to therein, and the results of
their operations for the periods then ended, all in accordance
with generally accepted accounting principles applied on a
consistent basis. Since the date thereof, there has been no
material adverse change in the property, financial condition or
business operations of Borrower.
(G) Borrower has and at all times hereafter shall have good and
marketable title to all of its assets, real and personal, free and
clear of all liens, security interests, mortgages, claims and/or
encumbrances except those granted in favor of Bank, those existing
as of the date of this Agreement as reflected in the Financials
and/or otherwise disclosed therein and those referred to in
Section 5.1(A) hereof.
(H) Except for trade payables arising in the ordinary course of its
business since the dates reflected in the Financials and/or as
otherwise disclosed therein, Borrower has no Indebtedness.
(I) Borrower is not in default with respect to any indenture, loan
agreement, mortgage, deed of trust or similar agreement relating
to the borrowing of monies to which it is a party or by which it
is bound.
(J) Borrower has and is in good standing with the respect to all
governmental permits, certificates, consents and franchises
necessary to continue the conduct of business conducted by it and
to own or lease and operate its properties as now owned or leased
by it.
(K) Borrower is not a party to any agreement, instrument or
undertaking, or subject to any other restriction (i) which
materially or adversely affects, or may in the future so affect,
the property, financial condition or business operations of
Borrower, or (ii) under or pursuant to which Borrower is or will
be required to place (or under which any
<PAGE>
other Person may place) a lien upon any of its properties to secure
payment and/or performance of any liability or obligation, either
upon demand or upon the happening of any condition or event, with
or without demand.
(L) There are no actions or proceedings which are pending or
threatened against Borrower, which (i) relate to the execution,
delivery or performance of this Agreement and/or any of the Other
Agreements, or (ii) would cause any material adverse change in the
property, financial condition or business operations of Borrower.
(M) The proceeds of any Loan shall be used for proper business
purposes and consistently with all applicable laws and statutes.
Borrower is not in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any Loan shall be used to
purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock.
(N) No information, exhibit or report furnished by Borrower to Bank in
connection with the negotiation, execution or future performance
of this Agreement, contains any false or misleading information or
misstatement of any facts.
5. COVENANTS
5.1 So long as any of Borrower's Liabilities shall remain unpaid, Borrower
shall not do any of the following without the prior written consent of
Bank:
(A) Create or permit to be created or allow to exist any mortgage,
pledge, encumbrance or other lien upon or security interest in any
property or assets now owned or hereafter acquired by Borrower,
except (i) such as exist and/or are granted to Bank hereunder or
under any of the Other Agreements; (ii) liens for Charges which
are not yet due and payable; (iii) mechanics', materialmen's,
bankers', warehousemen's and similar liens arising in the ordinary
course of business and securing obligations of Borrower that are
not over due for a period of more than sixty (60) days or are
being contested in good faith by appropriate proceedings
diligently pursued; (iv) liens arising in connection with worker's
compensation, unemployment insurance, pensions and social security
benefits which are not over due or are being contested in good
faith by appropriate proceedings diligently pursued; (v) liens
arising for purchase money acquisitions as permitted
<PAGE>
in section 5.1(B) below; or (vi) zoning restrictions, easements,
licenses, restrictions on the use of real property or minor
irregularities in title thereto, which do not materially detract
from the value or impair the use of such real property.
(B) Incur or permit to exist any Indebtedness except (i) Indebtedness
under the terms of this Agreement; (ii) Indebtedness hereafter
incurred in connection with liens permitted under Section 5.1(A)
hereof; (iii) Indebtedness for purchase money acquisitions not in
excess of an aggregate amount of $1,000,000.00 at any point in
time; and (iv) other Indebtedness approved in writing by Bank.
(C) Permit or suffer any levy, attachment or restraint to be made
affecting any of its assets or permit or suffer any receiver,
trustee or assignee for the benefit of creditors, or any other
custodian to be appointed to take possession of all or any of
Borrower's assets.
(D) Acquire any other business or make any loan, advance or extension
of credit to, or investment in, any other Person, or create or
participate in the creation of any subsidiary or joint venture,
except: (i) investments in (a) Bank repurchase agreements,
(b) savings accounts or certificates of deposit in a financial
institution of recognized standing, (c) obligations issued or
fully guaranteed by the United States, and (d) prime commercial
paper maturing within ninety (90) days of the date of acquisition
by Borrower; (ii) loans and advances made to employees and agents
in the ordinary course of business, such as travel and
entertainment advances and similar items; and (iii) investments
shown on the Financials, provided that such investments shall not
be increased.
(E) Liquidate or dissolve, or merge with or into or consolidate with
or into any other Person, or sell, lease, transfer or otherwise
dispose of all or any substantial part of its property, assets or
business (other than sales made in the ordinary course of
business), amend, modify or supplement Borrower's certificate or
articles of Incorporation, bylaws, partnership agreement or other
document evidencing the existence of Borrower as a legal entity.
(F) Discount or sell with recourse, or sell for less than the face
amount thereof, any of its notes or accounts receivable, whether
now owned or hereafter acquired.
(G) Guaranty or otherwise, in any way, become liable with respect to
the obligations or liabilities of any Person, other than in
connection with
<PAGE>
the endorsement of instruments or items for payment for deposit or
collection in the ordinary course of its business.
(H) Enter into any transaction, including without limitation, the
purchase, sale or exchange of property or the rendering of any
services, with any Affiliate, or enter into, assume or suffer to
exist any employment, consulting or other like contract with any
Affiliate or any officer, director or partner of any Affiliate,
except a transaction or contract which is in the ordinary course
of business and is upon fair and reasonable terms no less
favorable than would be obtained in a comparable arms-length
transaction with a person not an Affiliate.
5.2 So long as any of Borrower's Liabilities shall remain unpaid, Borrower
shall do all of the following, unless waived in writing by Bank:
(A) Maintain insurance in such amounts and against such risks as are
customary by companies engaged in the same or similar businesses
and similarly situated.
(B) Maintain standard and modern system for accounting in accordance
with generally accepted principles of accounting consistently
applied throughout all accounting periods and consistent with
those applied in the preparation of the Financials, and furnish to
Bank such information respecting the business, assets and
financial condition of Borrower as Bank reasonably may request
and, without request, furnish to Bank: (i) within forty-five (45)
days after the end of each of the first three (3) quarters of each
fiscal year of Borrower, consolidated and/or, if applicable,
consolidating balance sheet(s) and statement(s) of income and
surplus of Borrower and its consolidated subsidiaries as of the
close of such quarter and of the comparable quarter in the
preceding fiscal year in reasonable detail and accompanied by a
certificate of the chief financial officer of Borrower stating
that such statements are true and correct (subject to audit and
normal year-end adjustments) and that, as of the close of the last
period covered in such financial statements, no condition or event
had occurred which constitutes an Event of Default or Unmatured
Event of Default hereunder (or if there was such a condition or
event, specifying the same); and (ii) as soon as available, and in
any event within ninety (90) days after the close of each fiscal
year of Borrower, a copy of the detailed long-form audit report
for such year and accompanying consolidated and/or, if applicable,
consolidating financial statements of Borrower and its
consolidated subsidiaries, as prepared by independent certified
public accountants selected by Borrower and satisfactory to Bank.
<PAGE>
(C) Permit representatives of Bank to visit and inspect any of the
properties and examine any of the books and records of Borrower at
any reasonable time and as often as reasonably may be desired.
(D) Possess and maintain all necessary franchises, patents,
trademarks, trade names, copyrights and licenses to conduct its
respective business(es).
6. DEFAULT
6.1 The occurrence of any one of the following shall constitute a default
("Event of Default") by Borrower under this Agreement:
(A) If Borrower shall fail to pay any of Borrower's Liabilities, when
due and payable, or declared due and payable;
(B) If Borrower shall default in the performance or observance of any
of Borrower's Obligations (not constituting an Event of Default
under any other clause of this Section 6.1);
(C) If any representation, warranty, statement, report or certificate
made or delivered by Borrower, or any of its officers, employees
or agents, to Bank is not true and correct in any material respect
when made or deemed made;
(D) If Borrower, or any Guarantor shall (i) become insolvent, (ii) not
be paying their respective debts generally as such debts become
due, (iii) make an assignment for the benefit of creditors or
cause or suffer any of their respective assets to come within the
possession of any receiver, trustee or custodian, (iv) have a
petition filed by or against any of them under the Bankruptcy
Reform Act of 1978, as amended, or any similar law or regulation,
(v) have any of their respective assets attached, seized or levied
upon or (vi) otherwise become the subject of any insolvency or
creditor enforcement proceedings;
(E) If Borrower shall default in the payment, when due, whether by
acceleration or otherwise, of any Indebtedness of Borrower, and
such default is declared and is not cured within the time, if any,
specified therefore in any agreement governing the same, or any
event or condition shall occur which results in the acceleration
of the maturity of any Indebtedness of Borrower or enables the
holder thereof to accelerate the maturity of any such
Indebtedness;
<PAGE>
(F) The death or incompetency of any individual Guarantor or the
appointment of a conservator for all or any portion of any such
Guarantors assets;
(G) If one or more judgments or decrees shall be entered against
Borrower involving, individually, or in the aggregate, a liability
of $10,000.00 or more and such judgments or decrees shall not have
been vacated discharged or stayed pending appeal within sixty (60)
days after the entry thereof;
(H) If this Agreement or any of the Other Agreements, including,
without limitation, the Note, at any time after their respective
execution and delivery, shall cease to be in full force and
effect, shall be declared null and void, shall be revoked or
terminated or shall be subject to any contest by any Person as to
their validity and/or enforceability, for any reason, or if
Borrower shall for any reason deny any further liability to Bank
hereunder and thereunder; or
(I) The occurrence of any default or Event of Default under any of the
Other Agreements which is not cured within the time, if any,
specified in such Other Agreement.
6.2 Upon the occurrence of any Event of Default or upon the occurrence, and
during the continuance of any of the events described in Section 6.1
(notwithstanding Borrower's right to cure same), Bank shall have no
further obligation to, and may then forthwith cease making Loans to or
for the benefit of Borrower under this Agreement and the Other
Agreements without any notice to Borrower. Upon an Event of Default,
without notice by Bank to or demand by Bank of Borrower, Borrower's
Liabilities shall be immediately due and payable. Bank, in its sole
discretion, upon an Event of Default may exercise one or more of the
rights and remedies accruing to Bank under this Agreement or any of the
Other Agreements and/or applicable law upon default by a Borrower,
including, without limitation, the right to set off and/or reduce to
cash and apply to the payment of any of Borrower's Liabilities, any
monies, reserves, deposits, certificates of deposit, deposit accounts
and interest and dividends thereon, securities, cash and other property
in the possession of or under the control of Bank or any of Bank's
affiliates (as defined in section 7.10).
7. MISCELLANEOUS
7.1 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Bank on account of
Borrower's Liabilities and Borrower agrees that Bank shall have the
continuing exclusive
<PAGE>
right to apply and reapply any and all such payments in such manner as
Bank may deem advisable, notwithstanding any entry by Bank upon any of its
books and records.
7.2 This Agreement and the Other Agreements may not be modified, altered or
amended except by an agreement in writing signed by Borrower and Bank.
Borrower may not sell, assign or transfer this Agreement or the Other
Agreements or any portion thereof, including, without limitation,
Borrower's rights, titles, interests, remedies, powers and/or duties
thereunder. Borrower consents to Banks' grant of participations in or
sale, assignment, transfer or other disposition, at any time or from
time to time hereafter, of this Agreement or the Other Agreements, or
any portion thereof, including, without limitation, Bank's rights,
titles, interests, remedies, powers and/or duties.
7.3 Bank's failure at any time or times hereafter to require strict
performance by Borrower or failure to enforce Bank's rights, under any
provision of this Agreement or the Other Agreements shall not waive,
affect or diminish any right of Bank thereafter to demand strict
compliance and performance therewith or to enforce Bank's rights. Any
suspension or waiver by Bank of an Event of Default shall not suspend,
waive or affect any other Event of Default, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None
of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement and the Other
Agreements, and no Event of Default by Borrower under this Agreement and
the Other Agreements, shall be deemed to have been suspended or waived
by Bank unless such suspension or waiver is by an instrument in writing
signed by an officer of Bank and directed to Borrower specifying such
suspension or waiver.
7.4 If any provision of this Agreement or the Other Agreements or the
application thereof is held invalid or unenforceable, the remainder of
this Agreement and the application of such provision to other Persons or
circumstances will not be affected thereby and the provisions of this
Agreement and the Other Agreement shall be severable in any such
instance.
7.5 This Agreement and the Other Agreements shall be binding upon and inure
to the benefit of the successors and assigns of Borrower and Bank. This
provision, however, shall not be deemed to modify Section 7.2 hereof.
7.6 Except as otherwise specifically provided in this Agreement, Borrower
waives any and all notice or demand which Borrower might be entitled to
receive with respect to this Agreement by virtue of any applicable
statute or
<PAGE>
law, and waives presentment, demand and protest and notice of presentment,
protest, default, dishonor, non-payment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at
any time held by Bank on which Borrower may in any way be liable and
hereby ratifies and confirms whatever Bank may do in this regard.
7.7 Upon demand by Bank, Borrower shall reimburse Bank for all costs, fees
and expenses incurred by Bank or for which Bank becomes obligated, in
connection with the negotiation, preparation and conclusion of this
Agreement and the Other Agreements, including, without limitation, all
fees, costs and expenses of attorneys retained by Bank (including
attorneys who are employees of Bank and/or any of its affiliates).
7.8 This Agreement and the Other Agreements are submitted by Borrower to
Bank (for Bank's acceptance or rejection thereof) at Bank's principal
place of business as an offer by Borrower to borrow monies from Bank and
shall not be binding upon Bank or become effective until and unless
accepted by Bank, in writing, at said place of business. If so accepted
by Bank, this Agreement and the Other Agreements shall be deemed to have
been made at said place of business. This Agreement and the Other
Agreements shall be governed and controlled by the internal laws of the
State of Kansas as to interpretation, enforcement, validity,
construction, effect and in all other respects, without reference to
principles of choice of law.
7.9 JURISDICTION. TO INDUCE BANK TO ACCEPT THIS AGREEMENT AND ALL OTHER
AGREEMENTS RELATED HERETO, BORROWER HEREBY IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS
IN ANY WAY, MANNER OR RESPECT ARISING OUT OF OR FROM OR RELATED TO THIS
AGREEMENT OR ANY AGREEMENT RELATED HERETO OR ANY COLLATERAL HELD BY BANK
IN CONNECTION HEREWITH OR THEREWITH SHALL BE LITIGATED ONLY IN COURTS
HAVING SITUS WITHIN THE CITY OF OLATHE, STATE OF KANSAS OR IN THE CITY
OF KANSAS CITY, STATE OF KANSAS. BORROWER HEREBY CONSENTS AND SUBMITS
TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN
EITHER OF SAID CITIES IN THE STATE OF KANSAS. BORROWER HEREBY WAIVES
ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT IN ACCORDANCE WITH THIS SECTION. BORROWER AND BANK IRREVOCABLY
WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH
BORROWER AND BANK ARE PARTIES.
<PAGE>
7.10 To the extent permitted by applicable law, if at any time or times
hereafter Bank employs counsel (including attorneys who are employees of
Bank and/or any of its affiliates) (A) for advice or other
representation with respect to this Agreement, the Note or the Other
Agreement or the administration of the Credit, (B) to represent Bank in
any litigation, contest, dispute, suit or proceeding or to commence,
defend or intervene or take any other action in or with respect to any
such matter, or (C) to enforce any rights of Bank against Borrower
and/or any Guarantor, the reasonable costs, fees and expenses incurred
by Bank in any manner or way with respect to the foregoing, shall be
part of Borrower's Liabilities, payable by Borrower to Bank on demand.
For purposes of this Agreement "affiliate" of the Bank shall include but
not be limited to Mercantile Bank Inc. ("MBI") and any banking or non-
banking subsidiary of MBI, whether owned, controlled by, controlling or
under common control with MBI directly or individually through any
subsidiary.
7.11 To the extent that Bank receives any payment on account of Borrower's
Liabilities, and any such payment(s) or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside, subordinated and/or required to be repaid to a trustee, receiver
or any other party under any bankruptcy act, state or federal law,
common law or equitable cause, then, to the extent of such payment(s)
received, Borrower's Liabilities, or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if
such payment(s) had not been received by Bank and applied on account of
Borrower's Liabilities.
7.12 This Agreement shall terminate on June 1, 1996 unless the Credit is
otherwise terminated pursuant to the terms of this Agreement. Borrower
may terminate the Credit at any time upon written notice to Bank and
payment in full of the outstanding principal balance of, and accrued and
unpaid interest on, the Loans and all other of Borrower's Liabilities
under this Agreement. All of Bank's rights and remedies, the liens and
security interest of Bank in the Collateral and all of Borrower's
Liabilities shall survive termination of the Credit extended to Borrower
hereunder until all of the Borrower's Liabilities have been paid in
full. The termination or cancellation of the Credit shall not affect or
impair the liabilities and obligations of Borrower and/or any Guarantor
or any one or more of them to Bank or Bank's rights with respect to any
Loans and advances made and other Borrower's Liabilities incurred prior
to such termination or with respect to the Collateral.
7.13 All notices, requests and other communications to any party hereunder
shall be in writing (including bank wire, telex or similar writing) and
shall be given to such party at its address or telex number set forth on
the signature pages
<PAGE>
hereof or such other address or telex number as such party may hereafter
specify. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the
telex number specified in this Section and the appropriate answer back is
received, (ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered at the
address specified in this Section.
<PAGE>
NOTICE. THIS AGREEMENT IS THE FINAL EXPRESSION OF THE CREDIT AGREEMENT
BETWEEN BORROWER AND BANK, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY
PRIOR OR CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN BORROWER AND BANK. IF
THERE ARE ANY ADDITIONAL TERMS, THEY ARE REDUCED TO WRITING AS FOLLOWS: N/A
I/WE AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT EXISTS BETWEEN BORROWER
AND BANK.
BORROWER: BANK:
AmeriConnect, Inc. MERCANTILE BANK OF KANSAS
By: /s/ Robert R. Kaemmer By:_______________________________
Robert R. Kaemmer, President
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year specified at the beginning hereof.
BORROWER/CORPORATION AmeriConnect, Inc.
(Print Corporation Name)
By:_________________________________ By: /s/ Robert R. Kaemmer
Print Name:_________________________ Print Name: Robert R. Kaemmer
Title:______________________________ Title: President
Address:____________________________ Address: 6750 W. 93rd Street,
Suite 110
____________________________________ Overland Park, Ks 66212
TELEX:______________________________ TELEX:_____________________________
<PAGE>
BORROWER/PARTNERSHIP ___________________________________
(Print Partnership Name)
By:_________________________________ By:________________________________
Print Name: ________________________ Print Name:________________________
Title: General Partner Title: General Partner
Address:____________________________ Address:___________________________
____________________________________ ___________________________________
TELEX:______________________________ TELEX:_____________________________
BORROWER/INDIVIDUAL ___________________________________
____________________________________ ___________________________________
(Print Name) (Print Name)
____________________________________ ___________________________________
(Signature) (Signature)
Address:____________________________ Address: __________________________
____________________________________ ___________________________________
TELEX:______________________________ TELEX: ____________________________
<PAGE>
ACCEPTANCE
Accepted this 8th day of June, 1995, at Bank's principal place of business in
the City of Roeland Park, State of Kansas.
BANK:
MERCANTILE BANK OF KANSAS
By: /s/ James A. Thomas
Title: James A. Thomas, Sr. Vice President
Address: 4700 W. 50th Place
Roeland Park, Kansas 66205
<PAGE>
ADDENDUM TO LOAN AGREEMENT
This is an Addendum to the Revolving Loan Agreement executed by
and between Mercantile Bank of Kansas ("Bank") and AmeriConnect, Inc.
("Borrower") on June 8, 1995 ("Agreement").
Borrower and Bank agree that the following terms shall be incorporated into
the Agreement as if fully set forth therein:
1. DEFINITIONS AND TERMS
(1) The following terms and/or phrases shall have the meanings set forth
thereafter and such meanings shall be applicable to the singular and
plural form, giving effect to the numerical difference; whenever the
context so requires, the use of "it" in reference to Borrower shall mean
Borrower as identified at the beginning of this Agreement:
(A) "Consolidated Current Ratio": the relationship, expressed as a
numerical ratio, between: (i) the amount of all assets which,
under generally accepted accounting principles, would appear as
current assets on the consolidated balance sheet of Borrower; and
(ii) the amount of all liabilities which, under generally accepted
accounting principles, would appear as current liabilities on such
balance sheet, including, without limitation, (a) all liabilities
payable on demand or maturing (whether by reason of specified
maturity, fixed prepayment, sinking funds or accruals of any kind,
or otherwise) within twelve (12) months or less from the date of
the relevant statement, (b) all lease and rental obligations due
within twelve (12) months or less, and (c) all customers' advances
and progress billings on contracts.
(B) "Consolidated Net Earnings": the excess of: (i) all revenues and
income derived from operation in the ordinary course of business
(excluding extraordinary gains and profits upon the disposition of
investments and fixed assets); over (ii) all expenses and other
proper charges against income (including payment or provision for
all applicable income and other taxes and all principal payments
to be made with respect to the Loan within twelve (12) months, but
excluding extraordinary losses and losses upon the disposition of
investments and fixed assets), all as determined on a consolidated
basis in accordance with generally accepted accounting principles.
(C) "Consolidated Net Working Capital": an amount equal to the
difference between: (i) the amount of all assets which, under
generally accepted accounting principles, would appear as current
assets on the consolidated balance sheet of Borrower; less (ii)
the amount of all liabilities which,
<PAGE>
under generally accepted accounting principles, would appear as
current liabilities on such balance sheet, including, without
limitation, (a) all liabilities payable on demand or maturing
(whether by reason of specified maturity, fixed prepayment,
sinking funds or accruals of any kind, or otherwise) within
twelve (12) months or less from the date of the relevant
statement, (b) all lease and rental obligations due within
twelve (12) months or less, and (c) all customers' advances
and progress billings on contracts.
(D) "Consolidated Tangible Net Worth": the total of all assets which,
under generally accepted accounting principles, would appear as
assets on the consolidated balance sheet of Borrower, less all of
the following: (i) the book amount of all such assets which would
be treated as intangibles under generally accepted accounting
principles, including, without limitation, all such items as
goodwill, trademarks, trademark rights, trade names, trade name
rights, brands, copyrights, patents, patent rights, licenses,
deferred charges and unamortized debt discount and expense; (ii)
any write-up in the book value of any such assets resulting from a
revaluation thereof subsequent to the date of the Financials (iii)
all reserves, including reserves for depreciation, obsolescence,
depletion, insurance and inventory valuation, but excluding
contingency reserves not allocated for any particular purpose and
not deducted from assets; (iv) the book amount, if any, of shares
of Borrower's "Treasury Stock"; (v) "Consolidated Total
Liabilities" (hereinafter defined); and (vi) all investments in
foreign Affiliates and nonconsolidated domestic Affiliates.
(E) "Consolidated Total Liabilities": the total of all liabilities of
Borrower which, under generally accepted accounting principles,
would appear on a consolidated balance sheet of Borrower.
(The terms and conditions on the reverse side hereof are an integral part of
this agreement and are incorporated herein by reference.)
<PAGE>
2. COVENANTS
2.1 So long as any of Borrower's Liabilities shall remain unpaid, Borrower
shall do the following, unless waived in writing by Bank:
(A) At all times maintain:
(i) Consolidated Net Working Capital in the amount of at least
$200,000.00; and
(ii) Consolidated Tangible Net Worth in the amount of at least
$1,000,000.00 for the fiscal year ending 12/31, 1995 and
shall increase by 50% of Consolidated Net Earnings for each
fiscal year thereafter with such increases to be cumulative
for each fiscal year; and
(iii) Consolidated Net Earnings in the amount of at least
$200,000.00; for the fiscal year ending 12/31, 1995 and
shall thereafter remain positive for each fiscal year; and
(iv) a ratio of Consolidated Total Liabilities to Consolidated
Tangible Net Worth of not more than 4 to 1; and
(v) a Consolidated Current Ratio of at least 1.15:1.
Except as provided herein, all terms and conditions of the Agreement
remain unchanged and in full force and effect. Borrower reaffirms all
representations, warranties and covenants in the Agreement as of the date
hereof. Borrower further represents and warrants that it is not in default
under any of its obligations under the Agreement and that the execution and
delivery of the Addendum is duly authorized, and that all necessary and proper
acts have been performed or taken. Whenever any reference shall be made to
the Agreement, it shall be deemed to mean the Agreement as amended hereby.
This Addendum shall be deemed to be a contract made under the laws of
the State of Kansas and the rights and obligations of the parties hereunder
shall be construed and controlled by the laws of the State of Kansas. This
Addendum shall be binding upon and inure to the parties hereto and to their
respective assessors and assigns.
NOTICE. THIS AGREEMENT IS THE FINAL EXPRESSION OF THE CREDIT AGREEMENT BETWEEN
BORROWER AND BANK, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR OR
CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN BORROWER AND BANK. IF THERE ARE
ANY ADDITIONAL TERMS, THEY ARE REDUCED TO WRITING AS FOLLOWS:
<PAGE>
N/A
I/WE AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT EXISTS BETWEEN BORROWER AND BANK.
BANK: BORROWER:
MERCANTILE BANK OF KANSAS AmeriConnect, Inc.
By: /s/ James A. Thomas By: /s/ Robert R. Kaemmer
(signature) (signature)
James A. Thomas Robert R. Kaemmer
(print name) (print name)
TITLE: Sr. Vice President TITLE: President
IN WITNESS WHEREOF, this Addendum has been entered into as of the
________ day of ______________________, __________.
BANK: BORROWER:
MERCANTILE BANK OF KANSAS AmeriConnect, Inc.
(print name of Borrower)
By: /s/ James A. Thomas By: /s/ Robert R. Kaemmer
(signature) (signature)
James A. Thomas Robert R. Kaemmer
(print name) (print name)
TITLE: Sr. Vice President TITLE: President
<PAGE>
EXHIBIT A
Borrowing Base Certificate
This Borrowing Base Certificate is delivered pursuant to the terms of
that certain Revolving Loan Agreement dated June 8, 1995, by and between
Mercantile Bank of Kansas and AmeriConnect, Inc. (the "Loan Agreement"). All
capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to them in the Loan Agreement.
Borrower hereby represents and warrants to Bank that the following
information is true and correct as of ________________________, 19___:
A. 1. Total Accounts $_______________
2. Ineligible Accounts $_______________
3. Eligible Accounts (Item 1 minus Item 2) $_______________
4. 50% of face amount Eligible Accounts $_______________
B. 5. Total Inventory $_______________
6. Ineligible Inventory $_______________
7. Eligible Inventory (Item 5 minus Item 6) $_______________
8. N/A% of face amount of Eligible Inventory $_______________
Borrower hereby further represents and warrants to Bank that the
following information is true and correct as of __________________________,
19___:
9. Aggregate principal amount of
outstanding Loans $_______________
10. Borrowing Base Excess (Deficit) (Item 4 and
8 minus Item 9) (Negative amount represents
mandatory repayment $
===============
If Item 10 above is negative, this Borrowing Base Certificate is
accompanied by the mandatory repayments required under the Loan Agreement.
<PAGE>
This Borrowing Base Certificate is dated the _____ day of
________________, 19___.
Borrower
AmeriConnect, Inc.
By:_____________________________________
Title:__________________________________
<PAGE>
ADDENDUM TO REVOLVING LOAN AGREEMENT
(Borrowing Base/AR & Inventory)
This is an Addendum to the Revolving Loan Agreement entered into by and
between AmeriConnect, Inc. ("Borrower") and Mercantile Bank of Kansas ("Bank")
on June 8, 1995 ("Agreement").
Borrower and Bank agree the following terms and conditions shall be
incorporated into the Agreement as if fully set forth therein.
1. Definitions and Terms.
The following terms and/or phrases shall have the meanings set forth
thereafter and such meanings shall be applicable to the singular and plural
form, giving effect to the numerical difference; whenever the context so
requires, the use of "it" in reference to Borrower shall mean Borrower as
identified at the beginning of this Agreement:
(A) "Accounts" mean any account of the Borrower and any other right of
the Borrower to payment for goods sold or leased or for services
rendered, whether or not evidenced by an instrument or chattel
paper and whether or not yet earned by performance;
(B) "Accounts Receivable Availability" means an amount of up to 50% of
the Borrower's Eligible Accounts;
(C) "Borrowing Base" means an amount equal to the sum of the Accounts
Receivable Availability and the Inventory Availability;
(D) "Borrowing Base Certificate" shall have the meaning ascribed to
such term in Section 2.1.1;
(E) "Eligible Accounts" means any Accounts except the following: (a)
Accounts created from the sale of goods on non-standard terms
and/or that call for payment to be made later than Thirty-Five
(35) days from the date of sale or lease; (b) Accounts unpaid more
than Sixty (60) days from the date of invoice; (c) Accounts of any
Obligor with Twenty percent (20%) or more of the outstanding
balance unpaid for more than Ninety (90) days from the date of
invoice; (d) Accounts with respect of which the Obligor is an
officer, employee, agent, parent, subsidiary or affiliate of
Borrower or is related or has common shareholders, officers or
directors with Borrower; (e) Accounts with respect to consignment
sales; (f) Accounts with respect to which payment by the Obligor
is or may be conditional; (g) Accounts with respect to which
Borrower is or may become liable to the Obligor for goods sold or
services rendered by such Obligor to Borrower; (h) Accounts with
respect to which the
<PAGE>
Obligor is not a resident of the United States; (i) Accounts with
respect to which any warranty or representation provided in
Section 3.1(A) is not true and correct; (j) Accounts which are
progress payments accounts or contra accounts; and (k) any and
all other Accounts Bank deems, in its sole and absolute
discretion, to be unacceptable. Accounts of Borrower which are
at any time Eligible Accounts but which subsequently fail to
meet any of the foregoing requirements shall no longer be an
"Eligible Account".
(F) "Eligible Inventory" means Inventory which meets the following
requirements: (a) it is owned by Borrower, and not subject to any
assignment, claim or lien, other than (i) a lien in favor of Bank,
and (ii) liens consented to by Bank in writing; (b) it is new and
unused except as Bank may otherwise consent in writing; (c) except
as Bank may otherwise consent, it is not stored with a bailee,
warehouseman or similar party; if so stored with Bank's consent,
such bailee, warehouseman or similar party has issued and
delivered to Bank, in form and substance acceptable to Bank, such
documents and agreements as Bank may require, including but not
limited to warehouse receipts therefor in Bank's name; (d) it has
not been deemed unacceptable by Bank in its sole and absolute
discretion, due to age, type, category, quality and/or quantity;
(e) it is not inventory which in any way fails to meet or violates
any warranty, representation or covenant contained in this
Agreement or any Other Agreement relating directly or indirectly
to such Borrower's Inventory; and (f) it is not Inventory which
consists of work-in-process or other Inventory (other than raw
material Inventory) which is used or consumed in connection with
the manufacture, packing, shipping, advertising, selling or
finishing of goods held by Borrower for sale or lease, including,
without limitation, packaging or mailing supplies. Inventory of a
Borrower which is at any time Eligible Inventory but which
subsequently fails to meet any of the foregoing requirements shall
no longer be Eligible Inventory.
(G) "Inventory" means all of Borrower's goods held for sale or lease
or to be furnished under contracts of service or if so furnished,
or if they are raw materials, work in process or materials used or
consumed in a business;
(H) "Inventory Availability" means an amount up to 0% of the Borrowers
Eligible Inventory.
(I) "Obligor" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government, who is
and/or may become obligated to Borrower under or on account of
Accounts.
<PAGE>
2. Credit: General Terms:
Section 2.1 of the Agreement shall be amended to read as follows:
2.1 Subject to the terms and conditions of this Agreement and the Other
Agreements and provided that no Event of Default does not then exist,
Bank agrees that the maximum amount of loans or advances (individually
"Loan" and collectively, the "Loans") as Borrower may from time to time
request up to but not in excess of ONE MILLION AND NO/100**********
($1,000,000.00), provided, however, that in no event shall the maximum
amount of Loans to Borrower exceed the Borrowing Base (the "Credit").
Loans made by Bank may be repaid, and subject to the terms and
conditions hereof, reborrowed up to but not including the Termination
Date, unless the Credit is otherwise terminated as provided in this
Agreement. In the event that the outstanding principal of the Loans
exceeds the Credit, Borrower shall, immediately and without notice or
demand, make the necessary payment(s) to eliminate such excess.
2.1.1(a) Borrower shall deliver to Bank on the Fifteenth (15th) day of each
month commencing on June 15, 1995 (regardless of whether or not a
borrowing is made on that date), a Borrowing Base Certificate in
the form of Exhibit A attached hereto and incorporated herein by
reference (a "Borrowing Base Certificate") setting forth:
(i) the Borrowing Base and its components as of the end of the
immediately preceding month;
(ii) the aggregate principal amount of all outstanding Loans; and
(iii) the difference, if any, between the Borrowing Base and the
aggregate principal amount of all outstanding Loans.
The Borrowing Base shown in such Borrowing Base Certificate shall be and
remain the Borrowing Base hereunder until the next Borrowing Base Certificate
is delivered to Bank, at which time the Borrowing Base shall be the amount
shown in such subsequent Borrowing Base Certificate. Each Borrowing Base
Certificate shall be certified (subject to normal year-end adjustments) as to
truth and accuracy by the President or principal financial officer of
Borrower.
(b) If at any time the Borrowing Base as shown on the most recent
Borrowing Base Certificate shall be less than the aggregate
principal amount of all outstanding Loans, Borrower shall be
automatically required (without demand or notice of any kind by
Bank, all of which are hereby expressly waived by Borrower) to
immediately repay the Loans in an amount sufficient to reduce
<PAGE>
such aggregate principal amount of outstanding Loans to the
amount of the Borrowing Base.
2.1.2 Procedure for Borrowing. Subject to the terms and conditions hereof,
Bank shall cause the Loans to be made to Borrower at any time and
from time to time up to the Termination Date upon timely prior oral
or written notice ("Borrowing Notice") to Bank specifying: (1) the
desired amount of the Loan and (2) the date on which the Loan
proceeds are to be made available to Borrower. Such Borrowing
Notice, if in writing, shall be in the form of the notice attached
hereto as Exhibit B. Each Borrowing Notice must be received by
Bank not later than 10:00 a.m. (Bank's local time) on the Business
Day on which a Loan is to be made. A Borrowing Notice shall not be
revocable by Borrower. Subject to the terms and conditions hereof,
provided that Bank has received the Borrowing Notice, Bank shall
(unless Bank determines that any applicable condition specified in
this Agreement has not been satisfied) make such Loan to Borrower
by crediting the amount of such Loan to Borrower's account at Bank,
Account not later than 2:00 p.m. (Bank's local time) on the
Business Day specified in said Borrowing Notice. Borrower hereby
authorizes Bank to rely on telephonic, telegraphic, telecopy, telex
or written instructions of any person identifying himself as a
person authorized to request a Loan or make a repayment hereunder,
and on any signature which Bank believes to be genuine, and Borrower
shall be bound thereby in the same manner as if such person were
actually authorized or such signature were genuine. Borrower also
hereby agrees to indemnify Bank and hold Bank harmless from and
against any and all claims, demands, damages, liabilities, losses,
costs and expenses relating to or arising out of or in connection
with the acceptance of instruction for making Loans or repayments
hereunder.
(The terms and conditions on the reverse side hereof are an integral
part of this agreement and are incorporated herein by reference).
EXHIBIT 10.32
<PAGE>
For Use With Loan Agreements
PROMISSORY NOTE
$1,000,000.00 Date: June 8, 1995
FOR THE VALUE RECEIVED, the undersigned, AmeriConnect, Inc., a Delaware
Corporation ("Borrower") hereby unconditionally promise to pay, to the order
of Mercantile Bank of Kansas ("Bank")
On June 1, 1996, the principal amount of ONE MILLION AND NO/100
Dollars ($1,000,000.00) or if less, the aggregate unpaid principal
amount of all advances made by Bank to Borrower and evidenced by
this Note. The aggregate principal amount which Bank shall be
committed to have outstanding hereunder at any one time shall not
exceed **********ONE MILLION AND NO/100********** Dollars
($1,000,000.00), which amount may be borrowed, paid, reborrowed
and repaid, in whole or in part. The initial advance, all
subsequent advances and all payments made on account of principal
may be endorsed by the holder hereof in its records or, at its
option, on a schedule attached to this Note, which in the absence
of manifest error shall be evidence of the principal owing and
unpaid on this Note. Borrower further promises to pay to the
order of Bank interest on the principal amount from time to time
outstanding hereunder at the rate of 1.0% per annum over the
"Prime Rate", adjustable daily. Interest is billed as of the last
day of each month and is payable by the 10th of the following
month, beginning with the payment billed June 30, 1995 and due
July 10, 1995, with any remaining accrued interest due at maturity
of June 1, 1996.
After maturity, interest shall be payable on demand on the outstanding
principal balance at a rate equal to 2.00% per annum in excess of the
otherwise payable rate. In addition, if Borrower fails to make any payment of
any principal or interest on this Note when due, Borrower promises to pay to
the order of Bank on demand a late fee in an amount not to exceed the greater
of $25.00 or 5.00% of each late payment. All payments received by Bank shall
be applied first to the payment of billed/due and unpaid late fees and the
costs and expenses hereinafter described, next to billed/due and unpaid
interest hereon, and the remainder to principal. For purposes of this Note
the term "Prime rate" shall be the interest rate announced from time to time
by Bank as its "Prime rate" on commercial loans (which rate shall fluctuate as
and when said Prime rate shall change). Interest shall be computed on the
basis of a year consisting of 360 days and paid for actual days elapsed.
All required payments shall be made in immediately available funds in
lawful money of the United Sates of America at the office of Bank situated at
4700 W. 50th Place, Roeland Park, Kansas 66205 or at such other place as the
holder may designate in writing. The acceptance by the holder hereof of any
principal or interest due after the date it is due as
<PAGE>
described above shall not be held to establish a custom or waive any rights of
the holder to enforce prompt payment of any other principal or interest
payments or otherwise.
Bank may record the date and amount of all loans and all payments
hereunder in the records it maintains. Bank's books and records showing the
account between Bank and Borrower shall be conclusive evidence of the
outstanding amounts under this Note in the absence of manifest error.
This Note is referred to in that certain Revolving Loan Agreement dated
6/8/95 by and between Borrower and Bank to which reference is made for a
statement of additional terms and conditions, including acceleration, which
may affect this Note.
Borrower has the right to prepay this Note in whole or in part at any
time without penalty or premium, provided: (1) all billed/due and unpaid
interest shall accompany such prepayment; (2) there is not a default under any
of the terms of this Note at the time of prepayment; and (3) all prepayments
shall be credited and applied to the installments of principal in inverse
order of their stated maturity.
Borrower agrees to pay to Bank, upon demand by Bank, all reasonable
costs, charges and expenses (including, without limitation, to the extent
permitted by applicable law, the reasonable fees and expenses of any attorney
[including but not limited to, any attorney employed by Bank or any affiliate
of Bank] retained by Bank) incurred by Bank in connection with (a) the
collection or enforcement of Borrower's liabilities and obligations under this
Note, (b) the collection and enforcement of Bank's right in and to any
Collateral (hereinafter defined), and/or (c) any litigation, contest, dispute
or other proceeding (whether instituted by Bank, Borrower or any other person
or entity) in any way relating to Borrower's liabilities and obligations
hereunder and/or to the "Collateral". Borrower's obligations, as aforesaid,
shall survive payment of this Note. For purposes of this Note, the term
"affiliate of Bank" shall mean any entity which controls, is controlled by or
is under common control with Bank, including, without limitation, Mercantile
Bancorporation Inc. ("MBI") and any banking or non-banking subsidiary of MBI.
Presentment, demand for payment, protest and notice of dishonor and of
protest are hereby severally waived by all parties hereto, whether as maker,
endorser or guarantor to Bank.
TO INDUCE BANK TO ACCEPT THIS AGREEMENT AND ALL OTHER AGREEMENTS RELATED
HERETO, BORROWER HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO BANK'S SOLE AND
ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT
ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR ANY AGREEMENT RELATED
HERETO OR ANY COLLATERAL HELD BY BANK IN CONNECTION HEREWITH OR THEREWITH
SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN
<PAGE>
THE CITY OF OLATHE, STATE OF KANSAS OR IN THE CITY OF KANSAS CITY, STATE OF
KANSAS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN EITHER OF SAID CITIES IN THE
STATE OF KANSAS. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT IN ACCORDANCE WITH THIS SECTION.
BORROWER AND BANK IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY ACTION IN WHICH BORROWER AND BANK ARE PARTIES.
The liabilities and obligations of Borrower under this Note shall be
secured by (a) Accounts Receivable, Inventory, Furniture, Fixtures, Equipment,
Life Insurance and (b) any and all balances, credits, deposits or monies of or
in the name of Borrower now or hereafter maintained with, and any and all
other property of or in name of Borrower now or hereafter in the possession of
Bank; and (c) any and all of Bank's security interests, liens or encumbrances
heretofore, now and/or from time to time hereafter granted by Borrower and/or
any endorser or guarantor to Bank, including but not limited to the security
interests granted pursuant to Security Agreement (Comprehensive) dated 6/8/95
and Security Agreement 6/8/95 (collectively the "Collateral").
Borrower hereby grants to Bank a security interest in the Collateral for
the payment of all liabilities and obligations of Borrower under this Note,
and all renewals and extensions thereof and for the payment of all other
present and future obligations to Bank regardless of whether currently
contemplated or agreed upon. In addition to and not in limitation of all
rights of offset that Bank or any other holder of this Note may have under
applicable law Bank or such other holder of this Note shall have the right to
appropriate and apply to the payment of this Note any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter with
Bank or other holder.
If any of the following events ("Events of Default") shall occur: (a)
the Borrower fails to make any payment on this Note when the same shall become
due and payable, whether under the terms of this Note or under any agreement,
instrument or document heretofore, now or at any time or times hereafter
delivered to Bank by Borrower; (b) a default or an event of default under any
agreement, instrument or document heretofore now or at any time or times
hereafter delivered to Bank by Borrower which is not cured within the time, if
any specified therefore in such agreement, instrument or document then, and in
each such event, Bank or the holder of this Note may, at its option, declare
the entire outstanding principal amount of and all billed/due and unpaid
interest on this Note and all other amounts payable by the Borrower hereunder
to be forthwith due and payable, whereupon all of the unpaid principal amount,
billed/due and unpaid interest and all such other amounts shall become and be
immediately due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the borrower,
and Bank or holder may exercise any and all other rights and remedies which it
may have under this Note or any
<PAGE>
other agreement, document or instrument evidencing, securing or guaranteeing
the payment of this Note or under applicable law.
Notwithstanding anything contained herein to the contrary, in no event
shall interest accrue under this Note at a rate in excess of the highest rate
permitted by applicable law, and if interest (including any charge or fee held
to be interest by a court of competent jurisdiction) in excess thereof shall
be paid, then the excess shall constitute a payment of, and be applied to, the
principal balance hereof then outstanding, or at Bank's election, shall be
repaid to the undersigned.
NOTICE. THIS AGREEMENT IS THE FINAL EXPRESSION OF THE
CREDIT AGREEMENT BETWEEN BORROWER AND BANK, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS ORAL
CREDIT AGREEMENT BETWEEN BORROWER AND BANK. IF THERE ARE ANY
ADDITIONAL TERMS, THEY ARE REDUCE TO WRITING AS FOLLOWS: N/A
I/WE AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT EXISTS
BETWEEN BORROWER AND BANK.
BORROWER: BANK:
AmeriConnect, Inc. MERCANTILE BANK OF KANSAS
By: /s/ Robert R. Kaemmer By: /s/ James A. Thomas, Sr. V.P.
Robert R. Kaemmer, President
All obligations of the Borrower (if more than one) hereunder are
joint and several. This Note shall be governed by and construed in accordance
with the laws of the State of Kansas.
BORROWER/CORPORATION AmeriConnect, Inc.
(Print Corporation Name)
By:_________________________________ By: /s/ Robert R. Kaemmer
Print Name:_________________________ Print Name: Robert R. Kaemmer
Title:______________________________ Title: President
Address:____________________________ Address:6750 W. 93rd Street, Suite 110
____________________________________ Overland Park, KS 66212
BORROWER/PARTNERSHIP ____________________________________
(Print Partnership Name)
By:_________________________________ By:_________________________________
Print Name:_________________________ Print Name:_________________________
Title: General Partner Title: General Partner
Address:____________________________ Address:____________________________
____________________________________ ___________________________________
BORROWER/INDIVIDUAL
____________________________________ ____________________________________
(Print Name) (Print Name)
____________________________________ ___________________________________
(Signature) (Signature)
Address:____________________________ Address:___________________________
____________________________________ ___________________________________
____________________________________ ____________________________________
(Print Name) (Print Name)
____________________________________ ___________________________________
(Signature) (Signature)
Address:____________________________ Address:___________________________
____________________________________ ___________________________________
EXHIBIT 10.33
<PAGE>
COMPREHENSIVE SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement"), made as of the 8th day
of June, 1995, by and between Mercantile Bank of Kansas ("Bank"), with its
principal place of business at 4700 West 50th Place, Roeland Park, Kansas
66205, and AmeriConnect, Inc. ("Borrower"), a Delaware Corporation with its
principal place of business at 6750 W. 93rd Street, Suite 110, Overland Park,
Kansas 66212, has reference to the following facts and circumstances:
A. BORROWER, now and from time to time hereafter, may request loans,
advances, extensions of credit and/or other financial
accommodations from Bank; and
B. Bank, to secure further the payment of "Borrower's Liabilities"
(hereinafter defined) has requested that Borrower execute and
deliver this Agreement in favor of Bank.
NOW, THEREFORE, in consideration of any loan, advance, extension
of credit and/or other financial accommodation at any time made by Bank to or
for the benefit of Borrower, and of the promises set forth herein, the parties
hereto agree as follows:
1. DEFINITIONS AND TERMS
1.1 The following words, terms and/or phrases shall have the meanings
set forth thereafter and such meanings shall be applicable to the
singular and plural form thereof, giving effect to the numerical
difference; whenever the context so requires, the use of "it" in
reference to Borrower shall mean Borrower as identified at the
beginning of this Agreement:
(A) "ACCOUNT": the definition ascribed to this term in Section
2.1 below.
(B) "BORROWER'S LIABILITIES": all obligations and liabilities of
Borrower to Bank (including, without limitation, all debts,
claims and indebtednesses) whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now
and/or from time to time hereafter owing, due or payable,
however evidenced, created, incurred, acquired or owing and
however arising, whether under this Agreement or the "Other
Agreements" (hereinafter defined), instrument and/or
documents heretofore, now and/or from time to time hereafter
executed by, and/or on behalf of Borrower, and delivered to
Bank, or by operation of law or otherwise.
(C) "BORROWER'S OBLIGATIONS": all terms, conditions,
warranties, representations, agreements, undertakings,
covenants and provisions (other than Borrower's Liabilities)
to be performed, discharged, kept, observed
<PAGE>
or complied with by Borrower pursuant to this Agreement and/or
any of the Other Agreements, instruments and/or document
heretofore, now and/or from time to time hereafter executed by
and/or on behalf of Borrower, and delivered to Bank.
(D) "CHARGES": all national, federal, state, county, city,
municipal and/or other governmental (or any instrumentality,
division, agency, body or department thereof, including,
without limitation, the Pension Benefit Guaranty
Corporation) taxes, levies, assessments, charges, liens,
claims or encumbrances upon and/or relating to the
"Collateral" (hereinafter defined), Borrower's Liabilities,
Borrower's Obligations, Borrower's business, Borrower's
ownership and/or use of any of its assets, and/or Borrower's
income and/or gross receipts.
(E) "COLLATERAL": the definition ascribed to this term in
Section 2.1 below.
(F) "ENVIRONMENTAL LAW": the definition ascribed to this term
in Section 3.1(F).
(G) "EQUIPMENT": the definition ascribed to this term in
Section 2.1 below.
(H) "EVENT OF DEFAULT": the definition ascribed to this term in
Section 5.1 below.
(I) "FINANCIALS": those financial statements of Borrower, if
any, heretofore or concurrently herewith delivered by or on
behalf of Borrower to Bank.
(J) "GENERAL INTANGIBLES": the definition ascribed to this term
in Section 2.1 below.
(K) "GUARANTOR": any Person which has guaranteed to Bank the
payment, collection or performance of all or any portion of
Borrower's Liabilities and/or Borrower's Obligations, and/or
has granted to Bank a security interest in, or lien or
encumbrance upon, some or all of such Person's real and/or
personal property to secure the payment and/or performance
of all or any portion of Borrower's Liabilities and/or
Borrower's Obligations.
(L) "HAZARDOUS MATERIAL": the definition ascribed to this term
in Section 5.1(F).
(M) "INDEBTEDNESS": all obligations and liabilities of Borrower
to any Person other than Bank (including, without
limitation, all debts, claims and indebtednesses) whether
primary, secondary, direct, contingent, fixed or otherwise,
heretofore, now and/or from time to time hereafter owing,
due
<PAGE>
or payable, however evidenced, created, incurred, acquired or
owing and however arising, whether under written or oral
agreement, by operation of law, or otherwise.
(N) "INVENTORY": the definition ascribed to this term in
Section 2.1 below.
(O) "LOANS": any and all loans, advances, extensions of credit
and/or other financial accommodations of any kind or nature
made by Bank at any time to, for the benefit of or at the
request of Borrower, including, without limitation, all
reimbursement obligations arising in connection with Bank's
issuance of any letters of credit upon the application of
Borrower.
(P) "OBLIGOR": any Person who is and/or may become obligated to
Borrower under or on account of Accounts.
(Q) "OTHER AGREEMENTS": all agreements, instruments and
documents, including, without limitation, loan agreements,
security agreements, guaranties, mortgages, deeds of trust,
notes, pledges, applications and agreements for letters of
credit, letters of credit, advices of credit, bankers
acceptances, notices, financing statements and all other
written matter heretofore, now and/or from time to time
hereafter executed by and/or on behalf of Borrower and
delivered to Bank, or issued by Bank upon the application
and/or other request of, and on behalf of Borrower.
(R) "PERSON": any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or
government (whether national, federal, state, county, city,
municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department
thereof).
(S) "PREMISES": any real property (or interest therein) at any
time owned (beneficially or directly) or leased by Borrower
or otherwise used by Borrower in the conduct of its
business.
(T) "RECORDS": the definition ascribed to this term in Section
2.1 below.
(U) "STOCK": all shares, interests, participations or other
equivalents (however designated) of or in a corporation,
whether or not voting, including, but not limited to, common
stock, warrants, preferred stock, convertible debentures and
all agreements, instruments and documents convertible, in
whole or in part, into any one or more or all of the
foregoing.
(V) "SUPPLEMENTAL DOCUMENTATION": the definition ascribed to
this term in Section 2.3 below.
<PAGE>
1.2 Except as otherwise defined in this Agreement or the Other
Agreements, all words, terms and/or phrases used herein and
therein shall be defined by the applicable definition therefor (if
any) in the Uniform Commercial Code as adopted by the State of
Kansas.
2. COLLATERAL: GENERAL TERMS
2.1 To secure the prompt payment to Bank of Borrower's Liabilities and
the prompt, full and faithful performance by Borrower of
Borrower's Obligations, Borrower grants to Bank a security
interest in and to, and assigns and pledges to Bank, all of
Borrower's now existing and/or owned and hereafter arising and/or
acquired: (a) all of the items listed on the schedule attached
hereto, if any; (b) accounts, chattel paper, contract rights,
leases and rental income thereunder, leasehold interests, letters
of credit, instruments and documents ("Accounts"), and all goods
whose sale, lease or other disposition by Borrower have given rise
to Accounts and have been returned to or repossessed or stopped in
transit by Borrower; (c) all patents, copyrights and trademarks,
and all applications for and registrations of the foregoing, all
trade names, goodwill, beneficial interests, rights to tax refunds
and all other general intangibles of any kind or nature whatsoever
("General Intangibles"); (d) all inventory of Borrower, wherever
located, whether in transit, held by others for Borrower's
account, covered by warehouse receipts, purchase orders and
contracts, or in the possession of any carriers, forwarding
agents, truckers, warehousemen, vendors or other Persons,
including, without limitation, all raw materials, work in process,
finished merchandise, supplies, goods, incidentals, office
supplies and packaging materials ("Inventory"); (e) goods (other
than Inventory), machinery, equipment, vehicles, appliances,
furniture, furnishings and fixtures ("Equipment"); (f) monies,
reserves, deposits, certificates of deposit and deposit accounts
and interest or dividends thereon, securities, cash, cash
equivalents and other property now or at any time or times
hereafter in the possession or under the control of Bank, any of
its affiliates (as defined in Section 6.10) or its bailee; (g) all
books, records, computer records, ledger cards, programs and other
computer materials, customer and supplier lists, invoices, orders
and other property and general intangibles at any time evidencing
or relating to the Collateral ("Records"); (h) all accessions to
any of the Collateral and all substitutions, renewals,
improvements and replacement of and additions thereto; (i) all
other property of Borrower, real and/or personal, in which
Borrower heretofore, now and/or from time to time hereafter has
granted or grants to Bank a security interest, assignment, lien,
claim or other encumbrance; and (j) all products and proceeds of
the foregoing (whether such proceeds are in the form of cash, cash
equivalents, proceeds of insurance policies, Accounts, General
Intangibles, Inventory, Equipment, Records or otherwise). All of
the foregoing is referred to herein individually and collectively
as the "Collateral." Borrower shall make appropriate entries upon
its financial
<PAGE>
statements and Records disclosing Bank's security interest in and
assignment and pledge of the Collateral.
2.2 If the Collateral shall at any time or from time to time become
unsatisfactory to Bank, Borrower shall upon demand, pledge,
assign, transfer and deposit with Bank and grant to Bank a
security interest in and to such additional property satisfactory
to Bank as Bank may request.
2.3 Borrower shall execute and/or deliver to Bank, at any time and
from time to time hereafter at the request of Bank, all
agreements, instruments, documents and other written matter (the
"Supplemental Documentation") that Bank reasonably may request, in
form and substance acceptable to Bank, to perfect and maintain
perfected Bank's security interest, lien and/or encumbrance in
and/or assignment and pledge of the Collateral and to consummate
the transactions contemplated in or by this Agreement and the
Other Agreements. Borrower, irrevocably, hereby appoints Bank
(and all Persons designated by Bank for that purpose) as
Borrower's true and lawful attorney (and agent-in-fact) to sign
the name of Borrower on the Supplemental Documentation and to
deliver the Supplemental Documentation to such Persons as Bank, in
its sole and absolute discretion, may elect. Borrower agrees that
a carbon, photographic or photostatic copy, or other reproduction,
of this Agreement or of any financing statement, shall be
sufficient as a financing statement.
2.4 Bank (by any of its officers, employees and/or agents) shall have
the right, at any time or times during Borrower's usual business
hours, to inspect the Collateral (and the Premises upon which it
is located) and all related Records and to verify the amount and
condition of or any other matter relating to the Collateral. All
costs, fees and expenses incurred by Bank, or for which Bank
becomes obligated, in connection with such inspection and/or
verification shall constitute part of Borrower's Liabilities,
payable by Borrower to Bank on demand.
2.5 Borrower warrants and represents to and covenants with Bank that:
(a) except as specifically stated at the end of this Section,
Bank's security interest in the Collateral is now and at all times
hereafter shall be perfected and have a first priority; (b) the
offices and/or locations where Borrower keeps the Collateral and
the Records are at the locations specified at the end of this
Section and Borrower shall not remove such Records and/or the
Collateral therefrom and shall not keep any of such Records and/or
the Collateral at any other office or location unless Borrower
gives Bank written notice thereof at least thirty (30) days prior
thereto and the same is within the continental United States of
America; and (c) the addresses specified at the end of this
Section include and designate Borrower's chief executive office,
chief place of business and other offices and places of business
and are Borrower's sole offices and places of business. Borrower,
by written notice delivered to Bank at least thirty (30) days
prior thereto, shall advise
<PAGE>
Bank of Borrower's opening of any new office or place of business
or its closing of any existing office or place of business and any
new office or place of business shall be within the continental
United States of America. Prior liens, if any: N/A; locations of
Collateral, the Records, Borrower's principal place of business and
all other offices and places of business: 6750 W. 93rd Street,
Suite 110, Overland Park, KS 66212.
2.6 Bank, in its sole and absolute discretion, without waiving or
releasing any of Borrower's Obligations or any Event of Default,
may at any time or times hereafter, but shall be under no
obligation to pay, acquire and/or accept an assignment of any
security interest, lien, encumbrance or claim asserted by any
Person against the Collateral. All sums paid by Bank in respect
thereof and all costs, fees and expenses, including reasonable
attorneys' fees, court costs, expenses and other charges relating
thereto incurred by Bank or for which Bank becomes obligated on
account thereof shall be part of Borrower's Liabilities payable by
Borrower to Bank on demand.
2.7 No authorization given by Bank pursuant to this Agreement or the
Other Agreements to sell any specified portion of Collateral or
any items thereof, and no waiver by Bank in connection therewith
shall establish a custom or constitute a waiver of the prohibition
contained in this Agreement against such sales, with respect to
any portion of the Collateral or any item thereof not covered by
said authorization.
2.8 Regardless of the adequacy of any Collateral, any deposits or
other sums at any time credited by or payable or due from Bank or
any bailee of Bank to Borrower, or any monies, cash, cash
equivalents, certificates of deposit, securities, instruments,
documents or other assets of Borrower in the possession or control
of Bank or its bailee for any purpose may at any time be reduced
to cash and applied by Bank to, or setoff by Bank against,
Borrower's Liabilities hereunder.
2.9 With respect to Accounts, except as otherwise disclosed by
Borrower to Bank in writing, Borrower warrants and represents to
Bank that: (a) they are genuine, and in all respects are what they
purport to be and are not evidenced by a judgment; (b) they
represent undisputed, bona fide transactions completed in
accordance with the terms and provisions contained in the invoices
and other documents delivered to Bank with respect thereto; (c)
the amounts thereof, which may be shown on any Schedule of
Accounts and/or all invoices and statements delivered to Bank with
respect thereto, are actually and absolutely owing to Borrower and
are not contingent for any reason; (d) there are no setoffs,
counterclaims or disputes existing or asserted with respect
thereto and Borrower has not made any agreement with any Obligor
thereof for any deduction therefrom except a regular discount
allowed by Borrower in the ordinary course of its business for
prompt payment; (e) there are no facts, events or occurrences
which in any way impair
<PAGE>
the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the amount thereof, which may be shown on any
Schedule of Accounts and on all invoices and statements delivered to
Bank with respect thereto; (f) to the best of Borrower's knowledge
all Obligors have the capacity to contract and are solvent; (g) the
services furnished and/or goods sold giving rise thereto are not
subject to any lien, claim, encumbrance or security interest except
that of Bank; (h) Borrower has no knowledge of any fact or
circumstance which would impair the validity or collectibility
thereof; and (i) to the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any
Obligor which might result in any material adverse change in its
financial condition.
2.10 Bank shall have the right, at any time or times after an Event of
Default, in its sole and absolute discretion, without notice
thereof to Borrower: (a) to notify any or all Obligors that the
Accounts have been assigned to Bank and that Bank has a security
interest therein; (b) to direct such Obligors to make all payments
due from them to Borrower upon the Accounts directly to Bank; and
(c) to enforce payment of and collect, by legal proceedings or
otherwise, the Accounts in the name of Bank and Borrower.
2.11 Borrower, irrevocably, hereby designates, makes, constitutes and
appoints Bank (and all Persons designated by Bank) as Borrower's
true and lawful attorney (and agent-in-fact) from and after an
Event of Default, with power, without notice to Borrower and at
such time or times thereafter as Bank, in its sole and absolute
discretion, may determine, in Borrower's or Bank's name: (a) to
demand payment of the Accounts; (b) to enforce payment of the
Accounts by legal proceedings or otherwise; (c) to exercise all of
Borrower's rights and remedies with respect to the collection of
the Accounts; (d) to settle, adjust, compromise, extend or renew
the Accounts; (e) to settle, adjust or compromise any legal
proceedings brought to collect the Accounts; (f) to sell or assign
the Accounts upon such terms, for such amounts and at such time or
times as Bank deems advisable; (g) to discharge and release the
Accounts; (h) to prepare, file and sign Borrower's name on any
notice of lien, assignment or satisfaction of lien or similar
document in connection with the Accounts; (i) to prepare, file and
sign Borrower's name on any proof of claim in bankruptcy or
similar document against any Obligor; and (j) to endorse the name
of Borrower upon any chattel paper, document, instrument, invoice,
freight bill, bill of lading or similar document or agreement
relating to the Accounts.
2.12 Borrower shall be liable or responsible for: (a) the safekeeping
of Inventory; (b) any loss or damage thereto or destruction
thereof occurring or arising in any manner or fashion from any
cause; (c) any diminution in the value thereof; or (d) any act or
default of any carrier, warehouseman, bailee or forwarding agency
thereof or other Person whomsoever.
<PAGE>
2.13 Borrower warrants and represents to and covenants with Bank that:
(a) Inventory shall be kept only at the locations specified in
Section 2.5 hereof; (b) Borrower, immediately upon demand by Bank
therefor, now and from time to time hereafter, shall execute and
deliver to Bank Designations of Inventory specifying Borrower's
cost of Inventory and such other matters and information relating
to Inventory as Bank may request; (c) Borrower does now keep and
hereafter at all times shall keep correct and accurate Records
itemizing and describing the kind, type, quality and quantity of
Inventory, Borrower's cost therefor and selling price thereof and
the daily withdrawals therefrom and additions thereto all of which
Records shall be available (during Borrower's usual business
hours), upon demand, to any of Bank's officers, employees or
agents for inspection and copying thereof; (d) all Inventory is
now and hereafter at all times shall be of good, merchantable and
first-grade quality, free from defects; (e) Inventory shall not
now or at any time or times hereafter be comprised of any altered,
damaged, out-dated, second-grade, second-hand, out-of-style,
discontinued or reconditioned goods; (f) Inventory is not now and
shall not at any time or times hereafter be stored with a bailee,
warehouseman or similar party without Bank's prior written
consent, and, in such event, Borrower will concurrently therewith
cause any such bailee, warehouseman or similar party to issue and
deliver to Bank, in form and substance acceptable to Bank,
warehouse receipts therefor in Bank's name; (g) any of Bank's
officers, employees or agents shall have the right, upon demand,
now and at any time or times hereafter during Borrower's usual
business hours, to inspect and examine Inventory and to check and
test the same as to quality, quantity, value and condition; and
(h) Bank's exercise of any of the rights or remedies described in
Article 5 of this Agreement or in any of the Other Agreements
shall not constitute a violation of any applicable law, or a
breach of any provision contained in any agreement, instrument or
document concerning the assignment or license of, or the payment
of royalties for, any patents, patent rights, trade names,
trademarks, trade secrets, know-how, copyrights or any other form
of intellectual property now or at any time or times hereafter
protected as such by any applicable law. All costs, fees and
expenses incurred by Bank in connection therewith (or which Bank
becomes obligated to pay) shall be part of Borrower's Liabilities,
payable by Borrower to Bank on demand.
2.14 Until an Event of Default, Borrower may sell Inventory in the
ordinary course of its business (which does not include a transfer
in partial or total satisfaction of Indebtedness). Borrower shall
be liable or responsible for: (a) the safekeeping of Inventory;
(b) any loss or damage thereto or destruction thereof occurring or
arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; and (d) any act or default of any
carrier, warehouseman, bailee or forwarding agency thereof or
other Person whomsoever.
2.15 Borrower warrants and represents to Bank that, except as disclosed
in Section 2.5 hereof, Borrower has good, indefeasible, and
merchantable title, free and clear
<PAGE>
of all liens, claims and encumbrances, to and ownership of the
Equipment. Borrower, immediately upon demand by Bank, shall execute
and deliver to Bank schedules of Equipment containing such
information requested by Bank. Equipment shall be kept and/or
maintained solely at locations specified in Section 2.5.
2.16 Borrower shall keep and maintain the Equipment in good operating
condition and repair and shall make all necessary replacements
thereof and renewals thereto so that the value and operating
efficiency thereof shall at all times be maintained and preserved.
Borrower shall not permit any such items to become a fixture to
real estate or accession to other personal property.
2.17 Borrower, immediately on demand by Bank, shall deliver to Bank any
and all evidence of ownership of, including, without limitation,
certificates of title to and applications for title to, any
Equipment.
2.18 Borrower shall notify Bank within five (5) days after it shall
acquire any Equipment covered by certificates of title. With
respect to such newly acquired Equipment, Borrower shall deliver
to Bank, simultaneously with such notice, the certificates of
title relating to such Equipment and appropriate financing
statements, if required by applicable law, duly completed by
Borrower, to enable Bank to perfect its lien in such Equipment.
3. WARRANTIES AND REPRESENTATIONS
3.1 Borrower represents and warrants to Bank that:
(A) Borrower is a Delaware Corporation duly organized and
existing and in good standing under the laws of the
jurisdiction in which it was incorporated and/or
established, and has all requisite power and authority,
corporate and/or otherwise, to conduct its business and to
own its properties. Borrower is duly licensed and/or
qualified to do business and in good standing in all
jurisidictions in which the laws thereof require Borrower to
be so licensed and/or qualified.
(B) The execution, delivery and performance by Borrower of this
Agreement and the Other Agreements, are within the powers of
Borrower, corporate or otherwise, have been duly authorized
by all necessary action and do not and will not: (i) require
any consent or approval of the stockholders of Borrower;
(ii) violate any provision of any certificate or articles of
incorporation, by-laws, partnership agreement or other
agreements of Borrower or of any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or
award binding upon or applicable to Borrower; (iii) require
the consent or approval of, or filing or registration
<PAGE>
with, any governmental body, agency or authority; and/or (iv)
result in a breach of or constitute a default under, or
result in the imposition of any lien, charge or encumbrance
upon any property of Borrower. This Agreement and the Other
Agreements constitute legal, valid and binding obligations
of Borrower enforceable against Borrower in accordance with
their terms, except as enforceability maybe limited by
bankruptcy, insolvency, reorganization and other similar
laws of general application affecting the enforcement of
creditor's right or by general principles of equity.
(C) Borrower warrants and represents to and covenants with Bank
that Borrower shall not, without Bank's prior written
consent thereto, which Bank may or may not give in its sole
discretion, concurrently or hereafter; (a) grant a security
interest in, assign, sell or transfer any of Borrower's
assets to any Person or permit, grant, or suffer a lien,
claim or encumbrance upon any of Borrower's assets, except;
(i) liens set forth in Section 4.1(A) of this Agreement;
(ii) liens created by this Agreement and the Other
Agreements; (iii) liens for Charges which are not yet due
and payable, or which are permitted pursuant to Section 4.3
of this Agreement; (iv) mechanics', materialmen's, bankers',
carriers', warehousemen's and similar liens arising in the
ordinary course of business and securing obligations of
Borrower that are not overdue for a period of more than
sixty (60) days or are being contested in good faith by
appropriate proceedings diligently pursued, provided that in
the case of any such contest any proceedings commenced for
the enforcement of such liens shall have been duly suspended
and such provision for the payment of such liens has been
made on the books of Borrower as may be required by
generally accepted accounting principles; (v) liens arising
in connection with worker's compensation, unemployment
insurance, old age pensions and social security benefits
which are not overdue or are being contested in good faith
by appropriate proceedings diligently pursued, provided that
in the case of any such contest any proceedings commenced
for the enforcement of such liens shall have been duly
suspended and such provision for the payment of such liens
has been made on the books of Borrower as may be required by
generally accepted accounting principles; (vi) liens
incurred in the ordinary course of business to secure the
performance of statutory obligations arising in connection
with progress payments or advance payments due under
contracts with the United States government or any agency
thereof entered into in the ordinary course of business,
liens incurred or deposits made in the ordinary course of
business to secure the performance of tenders, statutory
obligations, bids, leases, performance bonds, fee and
expense arrangements with trustees and fiscal agents and
other similar obligations (exclusive of obligations incurred
in connection with the borrowing of
<PAGE>
money or the payment of the deferred purchase price of property)
and liens directly securing appeal and release bonds, provided
that adequate provision for all such obligations has been made
on the books of Borrower in accordance with generally accepted
accounting principles; and (vii) zoning restrictions,
easements, licenses, restrictions on the use of real
property or minor irregularities in title thereto, which do
not materially detract from the value or impair the use of
such real property:
(D) Borrower is not an "investment company" or a company
"controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(E) All employee pension and benefit plans subject to the
Employee Retirement Income Security Act of 1974 ("ERISA")
which are maintained for employees of Borrower, are in
compliance in all material respects with the applicable
provisions of ERISA.
(F) The operations of Borrower comply in all respects with the
Comprehensive Environmental Response, Compensation and
Liability Act, any so-called "Superfund" or "Superlien" law
or any other federal, state or local laws, rules,
regulations, orders or decrees (collectively, "Environmental
Laws") relating to, or imposing liabilities or standards of
conduct concerning any hazardous substances, pollutants,
contaminants, toxic or dangerous waste, substance or
material defined as such in any Environmental Law
(collectively, "Hazardous Materials"). There are no
proceedings which are pending, or to the knowledge of
Borrower threatened, against Borrower under any
Environmental Law.
(G) The Financials, copies of which have been furnished to Bank,
are complete and correct and fairly present the financial
condition of Borrower as of the dates referred to therein,
and the results of their operations for the period then
ended, all in accordance with generally accepted accounting
principles applied on a consistent basis. Since the date
thereof, there has been no material adverse change in the
property, financial condition or business operations of
Borrower.
(H) Borrower has and at all times hereafter shall have good and
marketable title to all of its assets, real and personal,
free and clear of all liens, security interests, mortgages,
claims and/or encumbrances except those granted in favor of
Bank, those existing as of the date of this Agreement as
reflected in the Financials and/or as otherwise disclosed
therein and those referred to in Section 2.5 hereof.
<PAGE>
(I) Except for trade payables arising in the ordinary course of
its business since the dates reflected in the Financials
and/or as otherwise disclosed therein, Borrower has no
Indebtedness.
(J) Borrower is not in default with respect to any indenture,
loan agreement, mortgage, deed of trust or similar agreement
relating to the borrowing of monies to which it is a party
or by which it is bound.
(K) Borrower has and is in good standing with the respect to all
governmental permits, certificates, consents and franchises
necessary to continue the conduct of its business as
previously conducted by it and to own or lease and operate
its properties as now owned or leased by it.
(L) Borrower is not a party to any agreement, instrument or
undertaking, or subject to any other restriction (i) which
materially or adversely affects, or may in the future so
affect, the property, financial condition or business
operations of Borrower, or (ii) under or pursuant to which
Borrower is or will be required to place (or under which any
other Person may place) a lien upon any of its properties to
secure payment and/or performance of any liability or
obligation, either upon demand or upon the happening of any
condition or event, with or without demand.
(M) There are no actions or proceedings which are pending or
threatened against Borrower, which (i) relates to the
execution, delivery or performance of this Agreement and/or
any of the Other Agreements, or (ii) would cause any
material adverse change in the property, financial condition
or business operations of Borrower.
(N) The proceeds of any Loans shall be used for business
purposes and consistently with all applicable laws and
statutes. Borrower is not in the business of extending
credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the
Board of Governors of the Federal Reserve System), and no
proceeds of any Loans shall be used to purchase or carry any
margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
(O) No information, exhibit or report furnished by Borrower to
Bank in connection with the negotiation, execution or future
performance of this Agreement, contains any false or
misleading information or misstatement of any facts.
<PAGE>
4. COVENANTS
4.1 So long as any of Borrower's Liabilities shall remain unpaid,
Borrower shall not do, any of the following without the prior
written consent of Bank:
(A) Create or permit to be created or allow to exist any
mortgage, pledge, encumbrance or other lien upon or security
interest in any property or assets now owned or hereafter
acquired by Borrower, except (i) such as exist and/or are
granted to Bank hereunder or under any of the Other
Agreements; (ii) liens for Charges which are not yet due and
payable; (iii) mechanics', materialmen's, bankers',
warehousemen's and similar liens arising in the ordinary
course of business and securing obligations of Borrower that
are not over due for a period of more than sixty (60) days
and are being contested in good faith by appropriate
proceedings diligently pursued; (iv) liens arising in
connection with worker's compensation, unemployment
insurance, pensions and social security benefits which are
not over due or are being contested in good faith by
appropriate proceedings diligently pursued; or (v) zoning
restrictions, easements, licenses, restrictions on the use
of real property or minor irregularities in title thereto,
which do not materially detract from the value or impair the
use of such real property.
(B) Permit or suffer any levy, attachment or restraint to be
made affecting any of its assets or Collateral or permit or
suffer any receiver, trustee or assignee for the benefit of
creditors, or any other custodian to be appointed to take
possession of all of any of Borrower's assets or any of the
Collateral.
(C) Acquire any other business or make any loan, advance or
extension of credit to, or investment in, any other Person,
or create or participate in the creation of any subsidiary
or joint venture, except: (i) investments in (a) Bank
repurchase agreements, (b) savings accounts or certificates
of deposit in a financial institution of recognized
standing, (c) obligations issued or fully guaranteed by the
United States, and (d) prime commercial paper maturing
within ninety (90) days of the date of acquisition by
Borrower; (ii) loans and advances made to employees and
agents in the ordinary course of business, such as travel
and entertainment advances and similar items; and (iii)
investments shown on the Financials, provided that such
investments shall not be increased.
(D) Liquidate or dissolve, or merge with or into or consolidate
with or into any other Person, or sell, lease, transfer or
otherwise dispose of all or any substantial part of its
property, assets or business (other than sales made in the
ordinary course of business), amend, modify or supplement
<PAGE>
Borrowers certificate or articles of Incorporation, bylaws,
partnership agreement or other document evidencing the
existence of Borrower as a legal entity.
(E) Discount or sell with recourse, or sell for less than the
fact amount thereof, any of its notes or accounts
receivable, whether now owned or hereafter acquired.
(F) Guaranty or otherwise, in any way, become liable with
respect to the obligations or liabilities of any Person,
other than in connection with the endorsement of instruments
or items for payment for deposit or collection in the
ordinary course of its business.
4.2 Borrower, at its sole cost and expense, shall keep and maintain:
(a) the Collateral insured for the greater of the full insurable
value or the full replacement value thereof against loss or damage
by fire, theft, explosion, sprinklers and all other hazards and
risks ordinarily insured against by other owners or users of
properties in similar businesses; (b) business interruption
insurance; and (c) public liability insurance relating to
Borrower's ownership and use of its assets. All such policies of
insurance shall be in form, with insurers and in such amounts as
may be satisfactory to Bank. Borrower shall deliver to Bank
certificates for each policy of insurance, evidence of payment of
all premiums for each such policy and, upon Bank's request
therefor, copies of all such policies. Such policies of insurance
(except those of public liability) shall contain an endorsement,
in form and substance acceptable to Bank, showing loss payable to
Bank. Such endorsement or an independent instrument furnished to
Bank, shall provide that all insurance companies will give Bank at
least thirty (30) days prior written notice before any such policy
or policies of insurance shall be altered or canceled and that no
act or default of Borrower or any other Person shall affect the
right of Bank to recover under such policy or policies of
insurance in case of loss or damage. Borrower hereby directs all
insurers under such policies of insurance (except those of public
liability) to pay all proceeds payable thereunder directly to
Bank. Borrower, irrevocably, appoints Bank (and all officers,
employees or agents designated by Bank) as Borrower's true and
lawful attorney (and agent-in-fact) for the purpose of endorsing
the name of Borrower on any check, draft, instrument or other item
of payment for the proceeds of such policies of insurance.
Furthermore, Borrower, irrevocably, appoints Bank (and all
officers, employees or agents designated by Bank) as Borrower's
true and lawful attorney (and agent-in-fact) from and after an
Event of Default, for the purpose of making, settling and
adjusting claims under such policies of insurance and for making
all determinations and decisions with respect to such policies of
insurance. In the event Borrower at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance
required above or to pay any premium in whole or in part relating
thereto, then Bank, without waiving or releasing any of Borrowers
<PAGE>
Obligations or any Event of Default hereunder, may at any time or
times thereafter (but shall be under no obligation to do so)
obtain and maintain such policies of insurance and pay such
premium and take any other action with respect thereto which Bank
deems advisable. All sums so disbursed by Bank, including
reasonable attorneys' fees, court costs, expenses and other
charges relating thereto, shall be part of Borrower's Liabilities,
payable by Borrower to Bank on demand.
4.3 Borrower shall pay promptly, when due, all of the Charges,
provided, however, that notwithstanding the foregoing, Borrower
may permit or suffer the Charges to attach to Borrower's assets
and may dispute, without prior payment thereof, the Charges,
provided that Borrower, in good faith, shall be contesting the
same in an appropriate proceeding, enforcement thereof against any
assets of Borrower shall be stayed and appropriate reserves
therefor shall have been established on the Records of Borrower in
accordance with generally accepted accounting principles. In the
event Borrower, at any time or times hereafter, shall fail to pay
the Charges as required herein, Borrower shall so advise Bank
thereof in writing: Bank may, without waiving or releasing any of
Borrower's Obligations or any Event of Default hereunder, in its
sole and absolute discretion, at any time or times thereafter,
make such payment, or any part thereof and take any other action
with respect thereto which Bank deems advisable. All sums so paid
by Bank and any expenses, including reasonable attorneys' fees,
court costs, expenses and other charges relating thereto, shall be
part of Borrower's Liabilities, payable by Borrower to Bank on
demand.
4.4 Borrower shall: (a) pay or discharge or otherwise satisfy at or
before maturity or before the same becomes delinquent, all
Indebtedness, provided, however that Borrower shall not be
required to pay any Indebtedness which is unsecured while the same
is being contested by it in good faith and by appropriate
proceedings so long as Borrower shall have set aside on its books
reserves in accordance with generally accepted accounting
principles with respect thereto and title to any property of
Borrower is not jeopardized; (b) preserve and maintain its
corporate existence, rights, privileges and franchises in the
jurisdiction of its incorporation or organization, and quality and
remain qualified to do business in each other jurisdiction in
which such qualification is necessary in view of its business or
operations; (c) comply with all laws, rules, regulations and
governmental orders (federal, state and local) having
applicability to it or to the businesses at any time conducted by
it, where the failure to so comply would have a material adverse
effect, either individually or in the aggregate, on the business,
condition (financial or otherwise), assets, operations or
prospects of Borrower; and (d) duly and punctually pay and perform
each of its obligations under this Agreement and the Other
Agreements in accordance with the terms thereof.
<PAGE>
4.5 Maintain standard and modern system for accounting in accordance
with generally accepted principles of accounting consistently
applied throughout all accounting periods and consistent with
those applied in the preparation of the Financials, and furnish to
Bank such information respecting the business, assets and
financial condition of Borrower as Bank reasonably may request
and, without request, furnish to Bank: (i) within forty-five (45)
days after the end of each of the first three (3) quarters of each
fiscal year of Borrower, consolidated and/or, if applicable,
consolidating balance sheet(s) and statement(s) of income and
surplus of Borrower and its consolidated subsidiaries as of the
close of such quarter and of the comparable quarter in the
preceding fiscal year in reasonable detail and accompanied by a
certificate of the chief financial officer of Borrower stating
that such statements are true and correct (subject to audit and
normal year-end adjustments) and that, as of the close of the last
period covered in such financial statements, no condition or event
had occurred which constitutes an Event of Default hereunder (or
if there was such a condition or event, specifying the same); and
(ii) as soon as available, and in any event within ninety (90)
days after the close of each fiscal year of Borrower, a copy of
the detailed long-form audit report for such year and accompanying
consolidated and/or, if applicable, consolidating financial
statements of Borrower and its consolidated subsidiaries, as
prepared by independent certified public accountants selected by
Borrower and satisfactory to Bank.
4.6 Permit representatives of Bank to visit and inspect any of the
properties and examine any of the books and records of Borrower at
any reasonable time and as often as reasonably may be desired.
4.7 Possess and maintain all necessary patents, franchises,
trademarks, trade names, copyrights and licenses to conduct its
respective business(es).
5. DEFAULT
5.1 The occurrence of any one of the following events shall constitute
a default ("Event of Default") under this Agreement: (a) Borrower
shall default in the performance or observance of any of
Borrower's Obligations under this Agreement; (b) Borrower shall
default in the performance or observance of any other of
Borrower's Obligations; (c) if any representation or warranty on
the part of Borrower contained in this Agreement or the Other
Agreements, or any document, instrument or certificate delivered
pursuant hereto or thereto shall have been incorrect in any
material respect when made or deemed made; (d) if Borrower fails
to pay Borrower's Liabilities, when due and payable or declared
due and payable; (e) if the Collateral, any collateral securing
the obligations to Bank of any Guarantor or any other material
portion of Borrower's or any such Guarantor's assets, are
attached, seized, subjected to a writ of distress warrant, or are
levied upon, or come within the possession of any receiver,
trustee,
<PAGE>
custodian or assignee for the benefit of creditors; (f)
if a petition under any section or chapter of the Bankruptcy
Reform Act of 1978, as amended, or any similar law or regulation
shall be filed by Borrower or any Guarantor or if Borrower or any
Guarantor shall make an assignment for the benefit of creditors or
if any case or proceeding is filed by Borrower or any Guarantor
for its dissolution or liquidation; (g) if Borrower or any
Guarantor is enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its business
affairs or if a petition under any section or chapter of the
Bankruptcy Reform Act of 1978, as amended, or any similar law or
regulation is filed against Borrower or any Guarantor or if any
case or proceeding is filed against Borrower or any Guarantor for
its dissolution or liquidation and such injunction, restraint or
petition is not dismissed or stayed within thirty (30) days after
the entry or filing thereof; (h) if an application is made by
Borrower or any Guarantor for the appointment of a receiver,
trustee or custodian for the Collateral, any collateral securing
such Guarantor's obligations to Bank or any other material portion
of Borrower's or such Guarantor's assets; (i) if an application is
made by any Person other than Borrower or any Guarantor for the
appointment of a receiver, trustee, or custodian for the
Collateral, any collateral securing any such Guarantor's
obligations to Bank or any other material portion of Borrower's or
such Guarantor's assets and the same is not dismissed within
thirty (30) days after the application therefor; (j) except as
permitted in Section 4.3 above, if a notice of any Charge is filed
of record with respect to all or any of Borrower's assets, or if
any Charge becomes a lien or encumbrance upon the Collateral or
any other of Borrower's assets and the same is not released within
thirty (30) days after the same becomes a lien or encumbrance; (k)
if Borrower is in default in the payment of Indebtedness (other
than Borrower's Liabilities) and such default is declared and is
not cured within the time, if any, specified therefor in any
agreement governing the same; (l) the death or incompetency of
Borrower (if an individual) or any Guarantor (which is an
individual), or the appointment of a conservator for all or any
material portion of Borrower's or any such Guarantor's assets or
the Collateral; (m) the occurrence of a default or Event of
Default under any agreement, instrument and/or document executed
and delivered by any Guarantor to Bank, which is not cured within
the time, if any, specified therefor in such agreement, instrument
or document; (n) the occurrence of a default or an Event of
Default under any of the Other Agreements, which is not cured
within the time, if any, specified therefor in such Other
Agreement; (o) if one or more judgments or decrees shall be
entered against Borrower involving, individually, or in the
aggregate, a liability of $10,000.00 or more and all such
judgments or decrees shall not have been vacated, discharged or
stayed pending appeal within sixty (60) days from the entry
thereof; (p) if this Agreement or any of the Other Agreements
shall cease for any reason to be in full force and effect (other
than by reason of the satisfaction of all of Borrower's
Liabilities or voluntary release by Bank of any Other Agreement)
or Borrower or any other Person (other than Bank) shall disavow
its obligations thereunder, or shall contest
<PAGE>
the validity or enforceability of any thereof; or (q) if any lien or
security interest in any Collateral or any collateral securing the
obligations of any Guarantor to Bank shall for any reason cease to
be a legal, valid, perfected or enforceable first priority lien on
and security interest in such Collateral or Guarantor's collateral
(other than by reason of the payment in full of all obligations
secured thereby or voluntary release by the secured party of such
Collateral or Guarantor's collateral).
5.2 All of Bank's rights and remedies under this Agreement and the
Other Agreements are cumulative and non-exclusive.
5.3 Upon an Event of Default or the occurrence of any one of the
events described in Section 5.1, without notice by Bank to or
demand by Bank of Borrower, Bank shall have no further obligations
to and may then forthwith cease making Loans to or for the benefit
of Borrower. Upon an Event of Default, without notice by Bank to
or demand by Bank of Borrower's Liabilities shall be due and
payable, forthwith.
5.4 Upon an Event of Default, Bank, in its sole and absolute
discretion, may: (a) exercise any one or more of the rights and
remedies accruing to a secured party under the Uniform Commercial
Code of the relevant state or states and any other applicable law
upon default by a debtor; (b) enter, with or without process of
law and without breach of the peace, any Premises where the
Collateral is or may be located, and without charge or liability
to Bank therefor seize and remove the Collateral from said
Premises and/or remain upon said Premises and use the same for the
purpose of collecting, preparing and disposing of the Collateral;
and (c) sell or otherwise dispose of the Collateral at public or
private sale for cash or credit provided, however, that Borrower
shall be credited with the net proceeds of such sale only when
such proceeds are actually received by bank.
5.5 Upon an Event of Default, Borrower, immediately upon demand by
Bank, shall assemble the Collateral and make it available to Bank
at a place or places to be designated by Bank which are reasonably
convenient to Bank and Borrower. Borrower recognizes that in the
event Borrower fails to perform, observe or discharge any of
Borrower's Obligations, no remedy of law will provide adequate
relief to Bank, and agrees that Bank shall be entitled to
temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
5.6 Any notice required to be given by Bank of a sale, lease, other
disposition of the Collateral or any other intended action by
Bank, deposited in the United States mail, postage prepaid and
duly addressed to Borrower at its principal place of business
specified at the beginning of this Agreement not less than five
(5) days prior to such proposed action, shall constitute
commercially reasonable and fair notice to Borrower thereof.
<PAGE>
5.7 Upon an Event of Default, Borrower agrees that Bank may, if Bank
deems it reasonable, postpone or adjourn any such sale of the
Collateral from time to time by an announcement at the time and
place of sale or by announcement at the time and place of such
postponed or adjourned sale, without being required to give a new
notice of sale. Borrower agrees that Bank has no obligation to
preserve rights against prior parties to the Collateral. Further,
Borrower waives and releases any cause of action and claim against
Bank as a result of Bank's possession, collection or sale of the
Collateral, any liability or penalty for failure of Bank to comply
with any requirement imposed on Bank relating to notice of sale,
holding of sale or reporting of sale of the Collateral, and, to
the extent permitted by law, any right of redemption from such
sale.
5.8 In the event Bank seeks possession of the Collateral through
replevin or other court process, Borrower hereby irrevocably
waives (a) any bond, surety or security required as an incident to
such possession, and (b) any demand for possession of the
Collateral prior to commencement of any suit or action to recover
possession thereof.
6. MISCELLANEOUS
6.1 Borrower waives the right to direct the application of any and all
payments at any time or times hereafter received by Bank on
account of Borrower's Liabilities and Borrower agrees that Bank
shall have the continuing exclusive right to apply and reapply any
and all such payments in such manner as Bank may deem advisable,
notwithstanding any entry by Bank upon any of its books and
records.
6.2 This Agreement and the Other Agreements may not be modified,
altered or amended except by an agreement in writing signed by
Borrower and Bank. Borrower may not sell, assign or transfer this
Agreement or the Other Agreements or any portion thereof,
including, without limitation, Borrower's rights, titles,
interests, remedies, powers and/or duties thereunder. Borrower
consents to Bank's sale, assignment, transfer or other
disposition, at any time or from time to time hereafter, of this
Agreement or the Other Agreements, or any portion thereof,
including, without limitation, Bank's rights, titles, interests,
remedies, powers and/or duties.
6.3 Bank's failure at any times hereafter to require performance by
Borrower of any provision of this Agreement or the Other
Agreements shall not waive, affect or diminish any right of Bank
thereafter to demand strict compliance and performance therewith.
Any suspension or waiver by Bank of an Event of Default shall not
suspend, waive or affect any other Event of Default, whether the
same is prior or subsequent thereto and whether of the same or of
a different type. None of the undertakings, agreements,
warranties, covenants and representations of Borrower contained in
this Agreement and the Other
<PAGE>
Agreements, and no Event of Default by Borrower under this Agreement
and the Other Agreements, shall be deemed to have been suspended or
waived by Bank unless such suspension or waiver is by an instrument
in writing signed by an officer of Bank and directed to Borrower
specifying such suspension or waiver.
6.4 If any provision of this Agreement or the Other Agreements or the
application thereof is held invalid or unenforceable, the
remainder of this Agreement and the application of such provision
to other Persons or circumstances will not be affected thereby and
the provisions of this Agreement and the Other Agreements shall be
severable in any such instance.
6.5 This Agreement and the Other Agreements shall be binding upon and
inure to the benefit of the successors and assigns of Borrower and
Bank. This provision, however, shall not be deemed to modify
Section 6.2 hereof.
6.6 Except as otherwise specifically provided in this Agreement,
Borrower waives any and all notice or demand which Borrower might
be entitled to receive with respect to this Agreement by virtue of
any applicable statute or law, and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor,
non-payment, maturity, release, compromise, settlement, extension
or renewal of any or all commercial paper, accounts, contract
rights, documents, instruments, chattel paper and guaranties at
any time held by Bank on which Borrower may in any way be liable
and hereby ratifies and confirms whatever Bank may do in this
regard.
6.7 Upon demand by Bank, Borrower shall reimburse Bank for all costs,
fees and expenses incurred by Bank or for which Bank becomes
obligated, in connection with the negotiation, preparation and
conclusion of this Agreement and the Other Agreements, including,
without limitation, all fees, costs and expenses of attorneys
retained by Bank (including attorneys who are employees of Bank
and/or any of its affiliates).
6.8 This Agreement and the Other Agreements are submitted by Borrower
to Bank (for Bank's acceptance or rejection thereof) at Bank's
principal place of business and shall not be binding upon Bank or
become effective until and unless accepted by Bank, in writing, at
said place of business. If so accepted by Bank, this Agreement
and the Other Agreements shall be deemed to have been made at said
place of business. This Agreement and the Other Agreements shall
be governed and controlled by the internal laws of the State of
Kansas as to interpretation, enforcement, validity, construction,
effect and in all other respects, without reference to principles
of choice of law.
6.9 TO INDUCE BANK TO ACCEPT THIS AGREEMENT AND ALL OTHER AGREEMENTS
RELATED HERETO, BORROWER HEREBY IRREVOCABLY
<PAGE>
AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT ARISING OUT OF
OR FROM OR RELATED TO THIS AGREEMENT OR ANY AGREEMENT RELATED HERETO
OR ANY COLLATERAL HELD BY BANK IN CONNECTION HEREWITH OR THEREWITH
SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE CITY OF
OLATHE, STATE OF KANSAS OR IN THE CITY OF KANSAS CITY, STATE OF
KANSAS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF
ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN EITHER OF SAID
CITIES IN THE STATE OF KANSAS. BORROWER HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT IN
ACCORDANCE WITH THIS SECTION. BORROWER AND BANK IRREVOCABLY WAIVE
THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH
BORROWER AND BANK ARE PARTIES.
6.10 To the extent permitted by applicable law, if at any time or times
hereafter Bank employs counsel (including attorneys who are
employees of Bank and/or any of its affiliates) (A) for advice or
other representation with respect to this Agreement or the Other
Agreements or the administration, (B) to represent Bank in any
litigation, contest, dispute, suit or proceeding or to commence,
defend or intervene or take any other action in or with respect to
any such matter, or (C) to enforce any rights of Bank against
Borrower and/or any Guarantor, the reasonable costs, fees and
expenses incurred by Bank in any manner or way with respect to the
foregoing, shall be part of Borrower's Liabilities, payable by
Borrower to Bank on demand. For purposes of this Agreement
"affiliate" of the Bank shall include, but not be limited to
Mercantile Bancorporation, Inc. ("MBI") and any banking or non-
banking subsidiary of MBI, whether owned, controlled by,
controlling or under common control with MBI directly or
indirectly through any subsidiary.
6.11 This agreement shall continue in full force and effect until
Borrower's Liabilities are fully paid, performed and discharged.
To the extent that Bank receives any payment on account of
Borrower's Liabilities, and any such payment(s) or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated and/or required to be repaid
to a trustee, receiver or any other party under any bankruptcy
act, state or federal law, common law or equitable cause, then, to
the extent of such payment(s) received, Borrower's Liabilities, or
part thereof intended to be satisfied shall be revived and
continue in full force and effect, as if such payment(s) had not
been received by Bank and applied on account of Borrower's
Liabilities.
6.12 Except as otherwise specifically provided herein, requests and
other communications to any party shall be in writing (including
bank wire, telex or
<PAGE>
similar writing) and shall be given at its address or telex number
set forth on the signature pages hereof or such other address or
telex number as may hereafter be specified. Each such notice,
request or other communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified
in this Section and the appropriate confirmation is received, (ii) if
given by mail, 72 hours after such communication is deposited by the
mails with first class postage prepaid addressed as aforesaid or
(iii) if given by any other means, when delivered at the address
specified in this Section.
NOTICE. THIS AGREEMENT IS THE FINAL EXPRESSION OF THE CREDIT AGREEMENT
BETWEEN BORROWER AND BANK, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY
PRIOR OR CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN BORROWER AND BANK. IF
THERE ARE ANY ADDITIONAL TERMS, THEY ARE REDUCED TO WRITING AS FOLLOWS: N/A
I/WE AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT EXISTS BETWEEN
BORROWER AND BANK.
BORROWER: BANK:
AmeriConnect, Inc. MERCANTILE BANK OF KANSAS
By: /s/ Robert R. Kaemmer By:_______________________________
Robert R. Kaemmer, President
IN WITNESS WHEREOF, this Agreement has been duly executed as of
the day and year specified at the beginning hereof.
BORROWER/CORPORATION AmeriConnect, Inc.
By:________________________________ By: /s/ Robert R. Kaemmer
Print Name:_________________________ Print Name: Robert R. Kaemmer
Title:_______________________________ Title: President
Address:____________________________ Address: 6750 W. 93rd Street,
Suite 110
___________________________________ Overland Park, KS 66212
TELEX:____________________________ TELEX:____________________________
<PAGE>
BORROWER/PARTNERSHIP ___________________________________
(Print Partnership Name)
By:________________________________ By:_________________________________
Print Name:_________________________ Print Name:_________________________
Title: General Partner Title: General Partner
Address:____________________________ Address:____________________________
___________________________________ __________________________________
TELEX:____________________________ TELEX:____________________________
BORROWER/INDIVIDUAL
By:_______________________________ By:________________________________
Print Name:________________________ Print Name:_________________________
Address:___________________________ Address:____________________________
__________________________________ __________________________________
TELEX:_____________________________ TELEX:____________________________
By:________________________________ By:_______________________________
Print Name:_________________________ Print Name:_________________________
Address:____________________________ Address:____________________________
___________________________________ __________________________________
TELEX:_____________________________ TELEX:____________________________
Accepted this 8th day of June, 1995, at Bank's principal place of business in
the City of Roeland Park, State of Kansas.
<PAGE>
BANK:
MERCANTILE BANK OF KANSAS
By: /s/ James A. Thomas
Title: James A. Thomas,
Sr. Vice President
Address: 4700 W. 50th Place
Roeland Park, Kansas 66205
EXHIBIT 10.34
<PAGE>
SECURITY AGREEMENT
THIS AGREEMENT, is made and entered into as of the 8th day of
June, 1995, by and between AmeriConnect, Inc., a[an] Delaware
Corporation (whether one or more hereinafter referred to as
"Debtor") with its principal place of business at
_________________________, and MERCANTILE BANK OF KANSAS, a
Kansas state bank, with an address of 4700 West 50th Place,
Roeland Park, Kansas 66205 as Secured Party (hereinafter
referred to as "Secured Party"). Both Debtor and Secured Party
are hereinafter referred to in the singular and neuter.
RECITAL:
Debtor is about to become or is indebted to Secured Party
and it is contemplated that Debtor may from time to time become
further indebted to Secured Party in the sole discretion of
Secured Party.
NOW, THEREFORE, for and in consideration of any loan,
advance, or other credit heretofore, concurrently herewith, or
hereafter extended by Secured Party to Debtor, the Secured Party
and Debtor agree as follows:
I. GRANT OF SECURITY INTEREST:
A. Collateral. Debtor hereby grants to Secured Party as
secured party to secure Debtor's Obligations
hereinafter defined, a continuing security interest in
the following described property of Debtor, wherever
situated:
Assignment of Life Insurance Policy No. 40989967 with
Transamerica Occidental Life Insurance Company on the
life of Robert R. Kaemmer with a face amount of
$1,750,000.00, and all additions and attachments
thereto, and all replacements thereof and substitutions
therefor.
whether now owned or hereafter acquired by Debtor or
now in existence or hereafter arising, all rights of
Debtor in any way relating to the foregoing, all
proceeds thereof and all books and records in any form
relating thereto (the property subject to the security
interest herein granted being sometimes collectively
referred to as the "Collateral").
B. No Sale of Collateral. The granting of a security
interest in proceeds does not authorize the sale of any
of the Collateral except such Collateral as is
inventory held for sale and then only to a buyer in the
ordinary course of Debtor's business.
<PAGE>
II. OBLIGATIONS SECURED:
The security interests herein granted are granted to secure
all loans and advances and other credit heretofore, concurrently
herewith, or hereafter made or extended by Secured Party to
Debtor (including, but not limited to, those evidenced by a
promissory note or notes, or open account, overdrafts, and
advances under letters of credit) all interest thereon and
collection costs (including, but not limited to attorneys' fees
and expenses to the extent not prohibited by applicable law)
thereof, as well as any and all other liabilities of Debtor to
Secured Party, now existing or hereafter arising hereunder or
otherwise, absolute or contingent (as guarantor for the
obligations of another or otherwise), whether created directly or
acquired by Secured Party as assignee or otherwise, joint or
several, joint and several, due or to become due, whether similar
or dissimilar to any other obligations, and all renewals and
extensions of any of the foregoing. The foregoing are sometimes
hereinafter referred to as "Debtor's Obligations" or
"Obligations". It is intended that all of Debtor's Obligations
be secured hereunder irrespective of whether other or further
property of the same or similar or a different type or nature
than that herein encumbered is encumbered to secure any one or
more of Debtor's Obligations at the time of the creation thereof
or prior or subsequent to the creation thereof. Until all
Obligations have been fully satisfied, Secured Party's liens and
security interests in and to all of the Collateral, and all
products and proceeds thereof, shall continue in full force and
effect.
III. WARRANTIES OF DEBTOR:
As a material inducement to Secured Party to extend credit to
Debtor, Debtor, and if Debtor is other than an individual, the
person(s) signing on behalf of Debtor, represent and warrant to
Secured Party that:
A. Good Standing. Debtor is a Delaware Corporation duly
organized and existing and in good standing under the
laws of the jurisdiction in which it is incorporated
and/or established, and has all requisite power and
authority, corporate and/or otherwise, to conduct its
business and own its properties. Debtor is duly
licensed and/or qualified to do business and is in good
standing in all jurisdictions in which the laws thereof
require Debtor to be so licensed and/or qualified.
B. Authority. The execution, delivery and performance by
Debtor of this Security Agreement and of any financing
statements relating hereto and the incurring of any
Obligations are within the powers of Debtor, corporate
or otherwise, have been duly authorized by all
necessary action and do not and will not: (i) require
any consent or approval of the stockholders of Debtor;
(ii) violate any provision of any certificate or
articles of incorporation, by-laws, partnership
agreement or other agreements of Debtor or of any law,
rule, regulation, order, writ, judgment, injunction,
decree, determination or award binding upon or
applicable to Debtor; (iii) require the consent or
<PAGE>
approval of, or filing or registration with, any
governmental body, agency or authority; and/or
(iv) result in a breach of or constitute a default
under, or result in the imposition of any lien, charge
or encumbrance upon any property of Debtor. This
Security Agreement constitutes a legal, valid and
binding obligation of Debtor enforceable against Debtor
in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency,
reorganization and other similar laws of general
application affecting the enforcement of creditor's
right or by general principles of equity.
C. No Other Liens. With the sole exception of the
security interest granted hereby, Debtor is, or, as to
Collateral to be acquired after the date hereof, shall
be, the owner of the Collateral free from any lien,
security interest or encumbrance, and Debtor will
defend the Collateral against all claims and demands of
all persons (except Secured Party) at any time claiming
the same or any interest therein.
D. No Other Financing Statements. There is not now, and
shall not be until all of Debtor's Obligations are
discharged, any financing statement covering any of the
Collateral on file in any public office other than
financing statements filed by or on behalf of Secured
Party.
E. Not Investment Company. Debtor is not an "investment
company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company
Act of 1940, as amended.
F. ERISA Compliance. All employee pension and benefit
plans subject to the Employee Retirement Income
Security Act of 1974 ("ERISA") which are maintained for
employees of Debtor, are in compliance in all material
respects with the applicable provisions of ERISA.
G. Environmental Compliance. The operations of Debtor
comply in all respects with the Comprehensive
Environmental Response, Compensation and Liability Act,
any so-called "Superfund" or "Superlien" law or any
other federal, state or local laws, rules, regulations,
orders or decrees (collectively, "Environmental Laws")
relating to, or imposing liabilities or standards of
conduct concerning any hazardous substances,
pollutants, contaminants, toxic or dangerous waste,
substance or material defined as such in any
Environmental Law (collectively, "Hazardous
Materials"). There are no actions or proceedings which
are pending, or to the knowledge of Debtor threatened,
against Debtor under any Environmental Law.
H. Accurate Information. The financial statements and
other information furnished by or on behalf of Debtor
for purposes of obtaining credit, are complete and
correct and fairly present the financial condition of
Debtor as of
<PAGE>
the dates referred to therein, and the results of their
operations for the periods then ended, all in accordance
with generally accepted accounting principles applied on
a consistent basis. Since the date thereof, there has
been no material adverse change in the property, financial
condition or business operations of Debtor. No information,
exhibit or report furnished by Debtor to Secured Party in
connection with the negotiation, execution or future
performance of this Security agreement, contains any
false or misleading information or misstatement of any
facts.
I. Marketable Title. Debtor has and at all times
hereafter shall have good and marketable title to all
of its assets, real and personal, free and clear of all
liens, security interests, mortgages, claims and/or
encumbrances except those granted in favor of Secured
Party, and those existing as of the date of this
Security Agreement as reflected in the financial
statements furnished to Secured Party by Debtor and/or
otherwise disclosed therein.
J. No Other Indebtedness. Except for trade payables
arising in the ordinary course of its business since
the dates reflected in the financial statements
furnished to Secured Party by Debtor and/or as
otherwise disclosed therein, Debtor has no indebtedness
or obligations to any person other than Secured Party.
K. No Default. Debtor is not in default with respect to
any indenture, loan agreement, mortgage, deed of trust
or similar agreement relating to the borrowing of
monies to which it is a party or by which it is bound.
L. Necessary Permits. Debtor has and is in good standing
with the respect to all governmental permits,
certificates, consents and franchises necessary to
continue the conduct of its business as previously
conducted by it and to own or lease and operate its
properties as now owned or leased by it.
M. No Adverse Agreements. Debtor is not a party to any
agreement, instrument or undertaking, or subject to any
other restriction (i) which materially or adversely
affects, or may in the future so affect, the property,
financial condition or business operations of Debtor,
or (ii) under or pursuant to which Debtor is or will be
required to place (or under which any other person may
place) a lien upon any of its properties to secure
payment and/or performance of any liability or
obligation, either upon demand or upon the happening of
any condition or event, with or without demand.
N. No Adverse Proceedings. There are no actions or
proceedings which are pending or threatened against
Debtor, which (i) relates to the execution, delivery or
performance of this Security Agreement or (ii) would
cause any
<PAGE>
material adverse change in the property, financial
condition or business operations of Debtor.
O. Use of Proceeds. The proceeds of any indebtedness of
Debtor secured hereby shall be used for proper business
purposes and consistently with all applicable laws and
statutes. Debtor is not in the business of extending
credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation U issued by the
Board of Governors of the Federal Reserve System), and
no proceeds of any Loan shall be used to purchase or
carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin
stock.
P. Location of Collateral. Debtor's chief place of
business, chief executive office, place where all its
inventory and equipment subject to this Agreement are
located, and place where its books and records relating
to equipment, inventory, accounts and contract rights
subject to this Agreement are kept is at the address
given at the beginning of this Agreement, and Debtor
has no other places of business or locations of
inventory and/or equipment and records, except as
follows: N/A
IV. COVENANTS OF DEBTOR:
A. Collect Receivables. Debtor shall endeavor to collect
all accounts subject to this Agreement, when due, and
take such action with respect thereto as Secured Party
may request, or, in the absence of such request, as is
reasonable for Debtor's business and the protection of
Secured Party's security interest.
B. Deliver Proceeds. Debtor shall, upon Secured Party's
request, deliver to Secured Party no later than the
banking day following the date of receipt, in the form
received, except for the endorsement to Secured Party's
order, all cash, checks, and other instruments for the
payment of money which are received by Debtor in
payment for or as proceeds of any Collateral, to be
applied by Secured Party in reduction of any of the
Obligations in such order as Secured Party may elect or
deposit the same in a deposit account over which
Secured Party alone shall have power of withdrawal
("the Collateral Account") as further security for the
Obligations, from which Secured Party may at its
election make reductions in the Obligations or make
available to Debtor portions to be used in the conduct
of Debtor's business.
C. Rejections, Returns or Repossession of Inventory.
Debtor shall notify Secured Party immediately of any
rejections, returns or repossessions of any inventory
subject to this Agreement to the extent that any such
action taken together with other such actions in any
calendar month exceeds five percent (5%) of Debtor's
outstanding accounts at the beginning of such month.
<PAGE>
D. Public Filings; Notice to Other Creditors. Debtor
shall execute such financing statements or other
documents or instruments, pay the cost of filing the
same in, and searching the records of, such public
offices, and take such other actions as Secured Party
may deem necessary or desirable to perfect and to
ascertain the priority of perfection of the security
interests hereby granted. A carbon, photographic or
other reproduction of this Agreement or of a financing
statement is sufficient to be filed as a financing
statement. In the event that, in Secured Party's
opinion, any of the Collateral is or becomes subject to
the Federal Assignment of Claims Act, Debtor shall take
all steps required by Secured Party to comply with said
Act. Secured Party may notify any other person,
whether or not a creditor of Debtor, of the existence
of this Agreement and Secured Party's security interest
in the Collateral. Debtor waives any claim against
Secured Party based on or arising out of any such
notification.
E. Records. Debtor shall furnish Secured Party such
information relating to it, its account debtors (if the
Collateral consists of accounts or general intangibles)
and the Collateral as Secured Party or its agents may
request, and permit Secured Party or its agents to
visit any place where any Collateral (including books
and records) may be kept, and to audit, copy and make
extracts therefrom, and will deliver any such books and
records to Secured Party or its agents upon request,
and will mark or stamp its records to show Secured
Party's security interest upon request. Secured Party
or its agents are expressly authorized to verify the
accuracy of such books and records by any method
Secured Party or its agents deem reasonable, including,
but not limited to, direct contact with any and all
account debtors (if the Collateral consists of
accounts). All of the foregoing may be accomplished as
often as Secured Party deems appropriate.
F. Location of Collateral. Debtor shall keep all its
Collateral at the locations set forth in III P hereof
and its books and records pertaining to the Collateral
and maintain its chief executive office and chief place
of business at the address set forth at the beginning
of this Agreement, and shall not store any Collateral
in any other places nor move its books and records nor
change the location of its chief executive office and
chief place of business without giving Secured Party at
least thirty (30) days prior written notice, provided
that as to any inventory subject to this Agreement held
for lease which is mobile or of the type normally used
by the lessee at more than one location, it will be
stored at such address when not on lease and provided
that as to any mobile equipment or equipment of a type
normally used in more than one (1) location which is
subject to this Agreement, Debtor will store it at such
location when not in use.
<PAGE>
G. Not to Dispose of Collateral. Debtor shall not, except
for the sale or lease of inventory (subject to this
Agreement) to a buyer or lessee in the ordinary course
of Debtor's business, create or permit to exist any
other lien on, or sell, assign or transfer, any part or
all of the Collateral.
H. Insurance. Debtor shall keep all Collateral insured at
all times to the full insurable value thereof, by
policies of insurance with loss payable clauses in
favor of Secured Party and Debtor as their interests
may appear, providing for at least thirty (30) days'
prior written notice to Secured Party of any
cancellation, with such companies, insuring against
such losses, casualties and injuries, and in such form
as Secured Party may require. Such policies or, at
Secured Party's option, certificates thereof, shall be
delivered to Secured Party. Secured Party may, but
shall not be obligated to, pay the cost of such
insurance, or insurance insuring Secured Party's
interest alone, upon Debtor's failure to furnish such
insurance. Secured Party may, at its option, apply all
or any part of any proceeds of such insurance to the
Obligations or may make the same or any part thereof
available to Debtor.
I. Commercial Paper; Documents. Debtor shall, if any of
the Collateral shall be evidence by promissory notes,
trade acceptances, or other instruments for the payment
of money, immediately deliver the same to Secured Party
appropriately endorsed to Secured Party's order, and
regardless of the form of such endorsement, Debtor
waives demand, presentment, notice of dishonor and all
other notices with respect thereto.
J. Name, Address or Ownership Changes. Debtor shall
notify Secured Party at least thirty (30) days before
Debtor (i) changes its name, trade name or name under
which it does business, (ii) makes use of any new or
additional names, (iii) opens any new or additional
places of business or closes any place of business, or
(iv) adds any additional partners (if a partnership).
K. Condition of Collateral. Debtor shall keep all
Collateral in first class order and repair, excepting
any loss, damage or destruction which is fully covered
by proceeds of insurance, not use or permit to be used
any inventory or equipment subject to this Agreement in
violation of any statute, regulation, rule, ordinance
or insurance policy, and pay promptly when due all
taxes and assessments thereon or upon use and operation
thereof.
L. Endorsement; Application of Proceeds. Secured Party is
expressly authorized to endorse, in the name of Debtor,
any item that may come into Secured Party's possession
in any manner, representing any payment on, or other
proceeds of, the Collateral, and to apply the proceeds
of the Collateral to Debtor's Obligations in any manner
Secured Party determines. Debtor hereby waives demand,
presentment, notice of dishonor and all other notices
with
<PAGE>
respect thereto, and this authorization shall be
deemed a power coupled with an interest, and
irrevocable until all Obligations are paid in full.
M. Actions by Secured Party. Secured Party may from time
to time, at its option (but shall not be required to),
perform any agreement of the Debtor hereunder which the
Debtor shall fail to perform and take any other action
which Secured Party deems necessary or advisable for
the maintenance or preservation of any of the
Collateral or the interest of Secured Party therein
(including, but not limited to, the discharge of taxes
or liens of any kind against the Collateral or the
procurement of insurance), and Debtor agrees forthwith
to reimburse Secured Party, on demand, for all expenses
of Secured Party in connection with the foregoing,
together with interest thereon at the highest lawful
rate, or if there is no maximum lawful rate, at the
highest rate in effect with respect to any of Debtor's
Obligations at the time the Secured Party advances any
money, from the date of each advance until reimbursed
by Debtor. Any amounts advanced shall be added to, and
become a part of, the Obligations. Secured Party may,
for the foregoing purpose, act in its own name or that
of Debtor, and may also act for the purpose of
adjusting, selling, compromising or collecting any
account, or any insurance policies on the Collateral or
cancelling any insurance policy on the Collateral, or
endorsing any check or draft received in connection
therewith, in payment of a loss, for all which purposes
Debtor hereby grants to Secured Party and to any
officer or agent of Secured Party its power of
attorney, coupled with an interest, and irrevocable so
long as any of the Obligations shall be outstanding,
and hereby ratifies and confirms any and all such
actions that Secured Party or any of its officers or
agents may take pursuant to the power granted in this
Agreement, and waives any claim against Secured Party
and all such officers or agents by reason of any of the
foregoing actions or by reason of any actions taken
pursuant to Section VI hereof, except for any action
taken in actual bad faith.
N. Fixtures. Debtor shall not, except with the express
prior written consent of Secured Party, permit any of
the Collateral consisting of equipment to become so
affixed to real estate or personal property as to
become a part thereof.
O. Collateral Updates. Debtor shall promptly notify
Secured Party in writing of (i) any loss of, damage to,
or depreciation in the value of any or all of the
Collateral, and (ii) any occurrence or condition that
Debtor knows or has reason to know does or may impair
the value of any or all of the Collateral.
V. EVENTS OF DEFAULT:
Debtor shall be in default under this Agreement upon the
occurrence of any one or more of the following events, sometimes
hereinafter referred to as "Events of Default":
<PAGE>
A. Nonpayment or Nonperformance. Default in the payment
or performance of any of Debtor's Obligations
(including any installment payment), or default in any
obligation, covenant or liability contained or referred
to herein, or default in any note or other writing
evidencing or securing the same, or default of any
endorser, guarantor or surety for any liability or
obligation of Debtor to Secured Party, any such default
to be determined after applicable cure periods, if any.
B. Misrepresentation. If any warranty, representation or
statement made or furnished to Secured Party by or on
behalf of Debtor or any endorser, guarantor or surety
for Debtor, proves to have been false or untrue or
misleading in any material respect when made or
furnished.
C. Default in Payment or Performance of Other Debts. The
occurrence of any event which results in the
acceleration of the maturity of any indebtedness of
Debtor or any endorser, guarantor or surety for Debtor
to others under any indenture, note, mortgage,
agreement or undertaking.
D. Impairment of Collateral. Uninsured loss, theft,
damage, or destruction, or sale (except as herein
expressly permitted) or encumbrance, to or of, any of
the Collateral or the making of any levy, seizure or
attachment thereof or thereon or the failure by Debtor
to properly care for or protect any of the Collateral.
E. Material Adverse Change. The occurrence of any event
or condition which, in Secured Party's discretion,
constitutes a material adverse change in the business
or financial condition of Debtor or any endorser,
guarantor or surety for Debtor or which materially and
adversely affects the ability of any of the foregoing
to perform their respective obligations to Secured
Party.
F. Termination of Guaranty. If any guarantor for Debtor
attempts to terminate such guarantor's guaranty prior
to its stated termination date or gives notice that
such guarantor's guaranty is terminated with respect to
all events that occur after the date of termination.
G. Disability or Death. If any guarantor or Debtor, if an
individual, dies or becomes physically or mentally
disabled to such an extent that such guarantor or
Debtor is unable to make managerial decisions for a
period which exceeds thirty (30) calendar days.
H. Insecurity. The written notification to Debtor by
Secured Party stating that Secured Party, in its
discretion, deems itself to be insecure with respect to
the repayment of the Obligations or with respect to any
of the Collateral, and specifying the reasonable basis
therefor.
<PAGE>
I. Impairment of Debtor or Guarantor. If Debtor or any
endorser, guarantor or surety of Debtor shall:
(i) discontinue business, or
(ii) make a general assignment for the benefit of its
or their respective creditors, or
(iii) apply for or consent to the appointment of a
custodian, receiver, trustee or liquidator of
all or a substantial part of their respective
assets, or
(iv) be adjudicated a bankrupt or insolvent or have an
order for relief entered with respect to any of
them, or
(v) file a voluntary petition in bankruptcy or file a
petition or an answer seeking a composition,
reorganization or an arrangement with creditors or
seeking to take advantage of any other law
(whether federal or state) relating to relief for
debtors, or admit (by answer, default or
otherwise) the material allegations of any
petition filed against any of them in any
bankruptcy, reorganization, composition,
insolvency or other proceeding (whether federal or
state) relating to relief for debtors, or
(vi) suffer or permit to continue unstayed and in
effect for thirty (30) consecutive days any
judgment, decree or order entered by a court or
governmental agency of competent jurisdiction,
which assumes control of any of them or approves a
petition seeking a reorganization, composition or
arrangement of any of them or any other judicial
modification of the rights of any of their
respective creditors, or appoints a custodian,
receiver, trustee or liquidator for any of them or
for all or a substantial part of any of their
respective business or assets, or
(vii) not be paying their respective debts as they
become due, or
(viii) be enjoined or restrained from conducting all
or a material part of any of their businesses
as now conducted and the same is not
dismissed and dissolved within thirty (30)
days after the entry thereof.
J. Litigation. Any litigation or administrative
proceeding ensues, and is not dismissed within thirty
(30) days, involving Debtor or a guarantor for Debtor,
and the adverse result of such litigation or proceeding
would have, in Secured Party's reasonable opinion, a
materially adverse effect on Debtor or a guarantor,
endorser or surety, for Debtor.
VI. RIGHTS AND REMEDIES OF SECURED PARTY:
Secured Party shall have the following rights and remedies:
A. Collect Receivables. Secured Party shall have the
right to notify account and contract debtors obligated
on any part or all of the Collateral to make payment
thereof directly to Secured Party, and Secured Party
may take control of all
<PAGE>
proceeds of any of the Collateral, which rights Secured
Party may exercise at any time whether or not Debtor
is then in default. Until such time as Secured Party
elects to exercise such rights, Debtor is authorized
to collect and enforce all such contracts and accounts
in accordance herewith. The cost of collection and
enforcement, including attorneys' fees and expenses,
if and to the extent not prohibited by applicable law,
shall be borne by Debtor whether the same are incurred
by Secured Party or Debtor.
B. Acceleration. Upon the occurrence of any Event of
Default, Secured Party may, without notice or demand,
declare all of Debtor's Obligations to be immediately
due and payable, irrespective of the terms of any note
or other writing evidencing the same and whether any
such note or writing contains any provision for
acceleration of the maturity thereof.
C. Possession. Upon the occurrence of any Event of
Default, Secured Party shall be entitled to the
immediate possession of the Collateral, and may require
Debtor to assemble the Collateral and records relating
thereto and make items thereof available to Secured
Party or its agents at a place to be designated by
Secured Party or its agents which is reasonably
convenient to both parties, and Secured Party or its
agents shall have the right, and Debtor does hereby
authorize and empower Secured Party or its agents to
enter upon the premises wherever the Collateral may be,
in order to remove the same, and Secured Party or its
agents may proceed to dispose of the Collateral in
whole or in part, in any commercially reasonable
manner, including but not limited to, public or private
sale, lease or both, for cash or credit or partly for
each, after first giving notice to Debtor in the manner
hereinafter provided, and apply the proceeds thereof
first to costs and expenses of retaking, holding, and
preparing for sale or lease or other disposition and of
such sale or lease or other disposition and the like
(including, but not limited to, reasonable attorneys'
fees and expenses), then to the Obligations in such
order as Secured Party may determine, until discharged
in full and the balance of such persons, including
Debtor, as may be lawfully entitled thereto.
D. Expenses. To the extent not prohibited by applicable
law, Debtor shall pay Secured Party on demand any and
all expenses, including, but not limited to, legal
expenses and reasonable attorneys' fees incurred or
paid by Secured Party in protecting the Collateral or
enforcing the Obligations and other rights of Secured
Party hereunder, including its right to take possession
of the Collateral, whether with respect to any
bankruptcy type proceeding or otherwise, and all such
expenses shall become a part of the Obligations and
bear interest as aforesaid whether or not litigation be
commenced.
E. Secured Party as Attorney-in-Fact. Insofar as the
Collateral shall consist of accounts, instruments,
chattel paper, documents of title, general intangibles,
<PAGE>
things in action or the like, Secured Party may (and is
hereby for the following purposes irrevocably
constituted the attorney-in-fact of Debtor under a
power coupled with an interest until all Obligations
are discharged) either in its own name or in the name
of Debtor, and without prior notice to Debtor, demand
possession or payment of, endorse, collect, issue or
accept, receipt for, settle, compromise, adjust, sue
for possession or payment of, foreclose or realize upon
any of the Collateral, all as Secured Party may
determine, whether or not the Obligations are then due,
and for the further purpose of realizing Secured
Party's rights therein and in furtherance of these
powers, Secured Party may receive, open and dispose of
mail addressed to Debtor and endorse instruments,
notes, checks, drafts, money orders, documents of title
or other evidences of payment, shipment or storage of
any form of Collateral on behalf of and in the name of
Debtor, Debtor hereby ratifying and confirming any and
all such actions as Secured Party may take pursuant
hereto and waiving any claim against Secured Party or
any of its officers or agents by reason of any of the
foregoing actions except for any action taken in actual
bad faith.
F. Disposition. Upon the occurrence of any Event of
Default, Secured Party may proceed to dispose of the
collateral, in whole or in part, in one or more lots,
in any commercially reasonable manner, including but
not limited to sale (which may be public or private, or
public as to some Collateral and private as to other
Collateral), lease or both, for cash or credit or
partly for each, after first giving notice to Debtor in
the manner hereinafter provided, and Secured Party may
apply the proceeds of any such disposition first to
costs and expenses of retaking, holding and preparing
for sale or lease or other disposition, second to costs
and expenses of the sale or lease or other disposition
(including but not limited to reasonable attorneys'
fees and expenses, if and to the extent not prohibited
by applicable law), and third to the Obligations in
such order as Secured Party may determine, until
discharged in full. Any balance of such proceeds
remaining after discharge of the Obligations in full
shall be distributed to such persons, including Debtor,
as may be lawfully entitled thereto.
G. Notice of Disposition. If Secured Party disposes of
any part or all of the Collateral, unless the
Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a
recognized market, Secured Party will give Debtor
reasonable notice of the time and place of any public
sale thereof, or the time after which any private sale
or other intended disposition thereof is to be made.
The requirement of reasonable notice shall be met if
such notice is mailed, postage-prepaid, to the address
of Debtor specified in or as provided in Section VIIH.
hereof at least ten (10) days before the day of the
public sale, or ten (10) days before the date after
which the private sale or other intended disposition
may take place.
<PAGE>
H. Transfer of Title. Secured Party may at any time, in
its sole discretion, transfer any securities
constituting Collateral into its own name or that of
its nominee and receive the income therefrom and hold
the same as security for Debtor's Obligations or apply
such income to principal and interest due on such
Obligations.
I. Additional Rights and Remedies. In addition, Secured
Party shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code as
though fully set out herein.
VII. GENERAL PROVISIONS:
A. Assignment. This Agreement, including but not limited
to any rights granted or duties imposed herein, may not
be assigned, delegated, sublicensed, conveyed,
transferred, or encumbered by Debtor without the prior
written consent of Secured Party. Secured Party may
assign this Assignment and its security interest and
rights hereunder, in whole or in part, to any
transferee of the whole or any part of the Obligations.
B. Captions. The captions and headings appearing in this
Agreement have been inserted solely for the purpose of
ready reference. They shall not be deemed to define,
limit, expand or otherwise affect the scope or intent
of this Agreement or any provision hereof.
C. Compliance With Laws. Debtor shall comply with all
statutes, rules, and regulations applicable to the
performance of its obligations under this Agreement.
D. Cumulative Rights. Each and every right granted to
Secured Party hereunder or under any document or
arrangement incident or related thereto, or otherwise
available to Secured Party at law or in equity, is and
shall be deemed cumulative, not alternative, and may be
exercised in Secured Party's sole discretion from time
to time. No failure on the part of Secured Party to
exercise, and no delay in exercising any rights
hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise or commencement to
exercise by Secured Party of any right hereunder
preclude any other or further exercise thereof, or the
exercise of any other right.
E. Definitions. Words used in this Agreement which are
defined in the Uniform Commercial Code shall have the
meanings given to such words in such Code for purposes
of this Agreement, unless the context clearly indicates
otherwise. Unless the context indicates otherwise,
words importing the singular number shall include the
plural number and vice versa. The word "person" shall
include but not be limited to natural persons,
associations, partnerships, and
<PAGE>
corporations. If more than one person signs this Agreement
as Debtor, then references herein to "Debtor" shall refer
to each of them individually and all of them collectively,
as the context may require, and their obligations hereunder
shall be joint and several. The word "or" shall not be
exclusive. Words of a given gender and number shall
include correlative words of other genders and numbers
as the context requires.
F. Incidental Acts. Each party to this Agreement agrees
to perform any other or further acts, and execute and
deliver any other or further documents, as may be
necessary or appropriate to implement this Agreement.
G. Modification. This Agreement shall not be modified in
any manner, in whole or in part, except by a written
instrument signed by each party to be bound thereby.
H. Notices. All notices, demands or other communications
("Communications") required or permitted hereunder
shall be in writing (including telecopy, telegraphing,
telex or cable communications) and mailed, telecopied,
telegraphed, telexed, cabled or delivered, if to
Secured Party or if to Debtor at their respective
addresses set forth above. All Communications must be
in writing and must be mailed, telegraphed, telecopied,
delivered by reputable overnight courier service,
delivered in person or sent by telex or cable to the
appropriate party at the address set forth herein or to
such other address as may be designated by it in a
written notice to all other parties. Any Communication
given by telegram, telecopy, telex or cable must be
confirmed within 48 hours by letter. Any Communication
given by mail will be effective on the earlier of
receipt or the third calendar day after deposit in the
United States mail, certified or registered, postage
prepaid. Any communication given by telegraph or cable
shall be effective when delivered to the telegraph
company with charges prepaid. Any Communication given
by telex, telecopy, overnight courier service or
personal delivery shall be effective when received.
I. No Duty to Protect Collateral. Secured Party shall
have no duty or obligation to collect or protect all or
any part of the Collateral or any proceeds or products
thereof, nor to preserve any rights against any person
or entity, except to provide reasonable physical
protection for such Collateral as may be in Secured
Party's possession from time to time.
J. Original; Counterparts. This Agreement may be executed
in any number of originals or counterparts, each of
which shall be deemed an original, but all of which
together shall constitute only one instrument.
K. Severability. Any provision of this Agreement which is
unenforceable in any jurisdiction is hereby waived, but
only for that jurisdiction in which the
<PAGE>
provision is unenforceable and only to the extent
unenforceable, and without affecting any other provision
of this Agreement.
L. Successors. This Agreement shall bind and inure to the
benefit of each party and its successors, assigns,
agents and representatives.
M. Time Periods. Whenever any part is obligated to act
within a specified time period, such period shall
begin, if triggered by an event, on the day next
following the day on which the event occurred, and if
triggered by a planned future event, on the last day
within the specified time period preceding the planned
future event. In any case, said time period will
expire at 2:00 p.m., Secured Party's local time, on the
final day of said period.
N. Waivers Limited. Any waiver by any party of any
provision of this Agreement shall not be construed or
deemed to be a waiver of any other provision of this
Agreement, nor a waiver of any subsequent breach of the
same or any other provision of this Agreement, unless
such waiver is in writing and signed by the party to be
bound by it.
O. Additional Collateral. In addition to all other rights
and remedies of Secured Party hereunder, Secured Party
may require and Debtor agrees to provide additional
collateral or security for Debtor's Obligations at any
time Secured Party deems itself insecure; and if such a
requirement is imposed, now or in the future, Secured
Party shall have any rights and remedies contained in
any mortgage, security agreement or other documents
executed by Debtor in connection therewith.
P. Account Methods. The Debtor shall compute the net
income of the Debtor under the method of accounting on
the basis of which the Debtor regularly computes the
net income of the Debtor in keeping the Debtor's books
and records. The Debtor shall not change the method of
accounting on the basis of which the Debtor regularly
computes the net income of the Debtor in keeping the
Debtor's books and records without giving Secured Party
prior written notice of such change. A change in the
method of accounting of the Debtor includes a change in
the overall plan of accounting for income or expenses
or a change in the treatment or any material item used
in such overall plan. A "material item" is any item
which involves the proper time for the inclusion of the
item in income or the taking of an expense. Changes in
the method of accounting of the Debtor include, but are
not limited to (i) a change from the cash receipts and
disbursements method to an accrual method; (ii) a
change from an accrual method to the cash receipts and
disbursements method; (iii) a change involving the
method or basis used in the valuation of inventories;
(iv) a change from the cash or accrual method to a
long-term contract method; (v) a change from a long-
term contract method to the cash or accrual method;
<PAGE>
(vi) a change involving the adoption, use, or
discontinuance of any other specialized method of
computing net income; or (vii) a change in the
treatment of any other material item of income or
expense.
Q. Effective Date. This Agreement shall be effective when
signed by the Debtor.
R. Deposits. As additional security for all of the
Obligations, Debtor grants to Secured Party a security
interest in and assigns to Secured Party all of
Debtor's right, title and interest in and to any
deposits or other sums at any time credited by or due
from Secured Party to Debtor and in and to all property
of Debtor in the possession or custody of Lender for
any purpose (including property left in safekeeping or
custody).
S. Choice of Law. This Agreement shall be governed in all
respects, including but not limited to interpretation
and performance, by the laws of the State of Kansas.
All references to the Uniform Commercial Code shall be
to such Code as enacted in the such State.
T. Jurisdiction. TO INDUCE SECURED PARTY TO ACCEPT THIS
AGREEMENT AND ALL OTHER AGREEMENTS RELATED HERETO, THE
DEBTOR HEREBY IRREVOCABLY AGREES THAT, SUBJECT TO
SECURED PARTY'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS
OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT ARISING
OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR ANY
AGREEMENT RELATED HERETO OR ANY COLLATERAL HELD BY
SECURED PARTY IN CONNECTION HEREWITH OR THEREWITH SHALL
BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN THE
CITY OF OLATHE, STATE OF KANSAS OR IN THE CITY OF
KANSAS CITY, STATE OF KANSAS. THE DEBTOR HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURT LOCATED WITHIN EITHER OF SAID
CITIES IN THE STATE OF KANSAS. THE DEBTOR HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE
VENUE OF ANY LITIGATION BROUGHT IN ACCORDANCE WITH THIS
SECTION. SECURED PARTY AND DEBTOR IRREVOCABLY WAIVE
THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION
IN WHICH SECURED PARTY AND DEBTOR ARE PARTIES.
NOTICE. THIS AGREEMENT IS THE FINAL EXPRESSION OF THE CREDIT
AGREEMENT BETWEEN DEBTOR AND SECURED PARTY, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS ORAL
CREDIT AGREEMENT BETWEEN DEBTOR AND SECURED PARTY. IF THERE ARE
ANY ADDITIONAL TERMS, THEY ARE REDUCED TO WRITING AS
<PAGE>
FOLLOWS: N/A
I/WE AFFIRM THAT NO UNWRITTEN ORAL AGREEMENT EXISTS BETWEEN
DEBTOR AND SECURED PARTY.
DEBTOR: SECURED PARTY:
AmeriConnect, Inc. MERCANTILE BANK OF KANSAS
By: /s/ Robert R. Kaemmer By: /s/ James A. Thomas, Sr. V.P.
Robert R. Kaemmer, President
IN WITNESS WHEREOF, this Agreement has been duly executed as
of the day and year specified at the beginning hereof.
DEBTOR:
ATTEST: CORPORATION
(Corporate Seal)
_______________________ Secretary AmeriConnect, Inc.
(Print Name of Corporation)
BY:______________________________ BY: /s/ Robert R. Kaemmer
(Signature) (Signature)
PRINT NAME:______________________ PRINT NAME: Robert R. Kaemmer
TITLE:___________________________ TITLE: President
ADDRESS:_________________________ ADDRESS: 6750 W. 93rd Street,
_________________________________ Ste. 110
Overland Park, KS 66212
TELEX:___________________________ TELEX:_____________________________
<PAGE>
PARTNERSHIP SOLE PROPRIETORSHIP/INDIVIDUAL
_________________________________ BY:________________________________
(Print Name of Partnership) (Signature)
BY:______________________________ PRINT NAME:________________________
(Signature) ADDRESS:___________________________
PRINT NAME:______________________ ___________________________________
TITLE: General Partner TELEX:_____________________________
ADDRESS:_________________________
_________________________________
TELEX:___________________________
ACCEPTANCE:
Accepted this 8th day of June, 1995, at Secured Party's principal place
of business in the City of Roeland Park, State of Kansas.
SECURED PARTY:
MERCANTILE BANK OF KANSAS
BY: /s/ James A. Thomas, Sr. V.P.
TITLE: James A. Thomas, Sr. Vice President
ADDRESS: 4700 W. 50th Place
Roeland Park, Kansas 66205
TELEX:______________________________________
EXHIBIT 10.35
<PAGE>
NOTE
$3,000 Overland Park, Kansas
April 3, 1995
FOR VALUE RECEIVED, the undersigned, Richard K. Halford (the
"Borrower"), hereby unconditionally promises to pay to the order of
AmeriConnect, Inc., or its registered assigns (the "Holder"), at 6750 West
93rd Street, Suite 110, Overland Park, Kansas, 66212, in lawful money of the
United States of America and in immediately available funds, the principal
amount of THREE THOUSAND DOLLARS ($3,000), together with interest on the
principal amount hereof from the date hereof, compounded annually, at the
prime rate published from time to time by Citibank, N.A. plus 2% per annum,
payable in full on December 31, 1995. Provided, however, that in no event
shall the rate of interest exceed the maximum rate of nonusurious interest
allowed from time to time by law, as is now or, to the extent allowable by
law, as hereinafter may be in effect, to be paid by the Borrower (and to the
extent permitted by law, interest on any overdue principal or interest
thereon).
The Borrower may prepay all or any portion of this Note at any
time and from time to time without premium or penalty of any kind.
If any one of the following events (each, an "Event of Default")
shall occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise): (i) there should be a default in the payment
of principal or interest due hereunder; or (ii) the Borrower fails to perform
or observe any term, covenant or agreement contained in the Pledge Agreement,
as amended and in effect as of the date hereof, between the Borrower and the
Holder (the "Pledge Agreement"), or after the execution and delivery of the
Pledge Agreement and prior to its termination in accordance with its terms,
the Pledge Agreement ceases, for any reason, to be in full force and effect or
the Borrower so asserts or the liens created by the Pledge Agreement cease to
be enforceable or to the same effect and priority purported to be created
thereby; or (iii) the Borrower or any other person liable hereon should make
an assignment for the benefit of creditors; or (iv) attachment or garnishment
proceedings are commenced against the Borrower or any other person liable
hereon; or (v) a receiver, trustee or liquidator is appointed over or
execution levied upon any property of the Borrower; or (vi) proceedings are
instituted by or against the Borrower or any other person liable hereon under
any bankruptcy, insolvency, reorganization, receivership or other law relating
to the relief of debtors from time to time in effect, including without
limitation the United States Bankruptcy Code, as amended; then (a) if such
Event of Default is an event specified in clauses (v) or (vi) above, this Note
shall automatically become immediately due and payable at par together
<PAGE>
with interest accrued thereon, without presentment, demand, protest or notice
of any kind, all of which are hereby waived by the Borrower, and (b) if such
Event of Default is not an event specified in clauses (v) or (vi) above, the
registered holder may at its option, by notice in writing to the Borrower,
declare this Note to be, and the Note shall thereupon be and become,
immediately due and payable at par together with interest accrued thereon,
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Borrower.
All payments made hereunder shall be made in lawful currency of
the United States of America by certified or bank cashier's check payable to
AmeriConnect, Inc., 6750 West 93rd Street, Suite 110, Overland Park, Kansas,
66212, or at such other place as the registered holder may designate in
writing. All payments made hereunder, whether a scheduled installment,
prepayment, or payment as a result of acceleration, shall be allocated first
to costs and expenses of the registered holder resulting from collection
efforts with respect to this Note, second to accrued but unpaid interest, and
third to installments of principal remaining outstanding hereunder, first to
principal amounts overdue then to principal amounts currently due and then to
installments of principal due in the future in the inverse order of their
maturity.
The Borrower agrees to pay all reasonable costs of collection,
including attorneys' fees, paid or incurred by the registered holder in
enforcing this Note on default or the rights and remedies herein provided.
This Note is secured as provided in the Pledge Agreement.
The Borrower, for itself and for any guarantors, sureties,
endorsers and/or any other person or persons now or hereafter liable hereon,
if any, hereby waives demand of payment, presentment for payment, protest,
notice of nonpayment or dishonor and any and all other notices and demands
whatsoever, and any and all delays or lack of diligence in the collection
hereof, and expressly consents and agrees to any and all extensions or
postponements of the time of payment hereof from time to time at or after
maturity and any other indulgence and waives all notice thereof.
No delay or failure by the registered holder in exercising any
right, power, privilege or remedy hereunder shall affect such right, power,
privilege or remedy or be deemed to be a waiver of the same or any part
thereof; nor shall any single or partial exercise thereof or any failure to
exercise the same in any instance preclude any further or future exercise
thereof, or exercise of any other right, power, privilege or remedy, and the
rights and privileges provided for hereunder are cumulative and not exclusive.
The delay or failure to exercise any right hereunder shall not waive such
right.
<PAGE>
The registered holder may sell, assign, pledge or otherwise
transfer all or any portion of his interest in this Note at any time or from
time to time without prior notice to or consent of and without releasing any
party liable or becoming liable hereon.
By executing this Note the Borrower represents to the registered
holder that he is duly authorized and empowered to execute and deliver this
Note and that this Note constitutes the legal and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF KANSAS.
IN WITNESS WHEREOF, the undersigned has duly caused this Note to
be executed and delivered at the place specified above and as of the date
first written above.
BORROWER
/s/ Richard K. Halford
Richard K. Halford
EXHIBIT 10.36
<PAGE>
AMENDMENT NO. 1 TO PLEDGE AGREEMENT (the "Amendment"), dated as of
April 3, 1995, by and between AMERICONNECT, INC., a Delaware corporation
("Secured Party"), and RICHARD K. HALFORD ("Pledgor").
W I T N E S S E T H:
WHEREAS, Secured Party and Pledgor are parties to that certain
Pledge Agreement, dated as of November 23, 1994 (the "Original Agreement");
and
WHEREAS, on April 3, 1995, Secured Party loaned to Pledgor $3,000,
which borrowing is evidenced by a note dated April 3, 1995 (the "Third Note");
and
WHEREAS, Secured Party requires Pledgor to extend Secured Party's
existing security interest in the Collateral so as to secure Pledgor's
obligations under the Third Note in addition to the First Note and the Second
Note; and
WHEREAS, capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Original Agreement; and
WHEREAS, Secured Party and Pledgor desire to amend certain terms
of the Original Agreement;
NOW, THEREFORE, in consideration of the mutual terms, conditions
and other agreements set forth herein, the parties hereto agree to the
following amendments to the Original Agreement as follows:
ARTICLE I
AMENDMENTS
SECTION 1.1 The definition of the term "Notes" in the second
recital of the Original Agreement is hereby amended to include the Third Note
in addition to the First Note and the Second Note.
SECTION 1.2. Except as amended by this Amendment, the
Original Agreement shall remain in full force and effect.
SECTION 1.3. On and as of the date hereof, and after giving
effect to this Amendment, Pledgor represents that no default has occurred and
is continuing under the Original Agreement.
<PAGE>
SECTION 1.4. This Amendment shall become effective upon the
execution hereof by Secured Party and Pledgor.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed as of the day and year first above written.
AMERICONNECT, INC.
By: /s/ Robert R. Kaemmer
Name: Robert R. Kaemmer
Title: Chief Executive Officer
"Secured Party"
/s/ Richard K. Halford
Richard K. Halford
"Pledgor"
EXHIBIT 10.37
<PAGE>
EXTENSION OF PROMISSORY NOTE
EXTENSION OF PROMISSORY NOTE (the "Extension"), dated as of
December 29, 1995, by and between AMERICONNECT, INC., a Delaware corporation
(the "Holder"), and RICHARD K. HALFORD (the "Borrower"), both being parties to
that certain Note dated June 15, 1994 (the "Note").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and conditions of the Note,
Borrower has previously delivered to Holder a Note, dated June 15, 1994, in
the original principal sum of $10,000; and
WHEREAS, Holder and Borrower desire to extend the date on which
the Note is payable in full to May 15, 1996.
NOW, THEREFORE, for and in consideration of the foregoing and
other good and valuable consideration, the parties hereto do hereby agree as
follows:
1. The Note shall be extended to be payable in full on May 15,
1996.
2. Borrower agrees to print the following legend on the Note:
"This Note is subject to any and all terms, conditions and modifications
as provided in the Extension of Promissory Note dated as of December 29,
1995."
3. Except as amended by this Extension, the Note shall remain
in full force and effect.
4. This Extension shall become effective upon the execution
hereof by Holder and Borrower.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Extension
to be duly executed as of the day and year first above written.
/s/ Richard K. Halford
Richard K. Halford
"BORROWER"
AMERICONNECT, INC.
By: /s/ Robert R. Kaemmer
Name: Robert R. Kaemmer
Title: President
"HOLDER"
EXHIBIT 10.38
<PAGE>
EXTENSION OF PROMISSORY NOTE
EXTENSION OF PROMISSORY NOTE (the "Extension"), dated as of
December 29, 1995, by and between AMERICONNECT, INC., a Delaware corporation
(the "Holder"), and RICHARD K. HALFORD (the "Borrower"), both being parties to
that certain Note dated August 1, 1994 (the "Note").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and conditions of the Note,
Borrower has previously delivered to Holder a Note, dated August 1, 1994, in
the original principal sum of $1,500; and
WHEREAS, Holder and Borrower desire to extend the date on which
the Note is payable in full to May 15, 1996.
NOW, THEREFORE, for and in consideration of the foregoing and
other good and valuable consideration, the parties hereto do hereby agree as
follows:
1. The Note shall be extended to be payable in full on May 15,
1996.
2. Borrower agrees to print the following legend on the Note:
"This Note is subject to any and all terms, conditions and modifications
as provided in the Extension of Promissory Note dated as of December 29,
1995."
3. Except as amended by this Extension, the Note shall remain
in full force and effect.
4. This Extension shall become effective upon the execution
hereof by Holder and Borrower.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Extension
to be duly executed as of the day and year first above written.
/s/ Richard K. Halford
Richard K. Halford
"BORROWER"
AMERICONNECT, INC.
By: /s/ Robert R. Kaemmer
Name: Robert R. Kaemmer
Title: President
"HOLDER"
EXHIBIT 10.39
<PAGE>
EXTENSION OF PROMISSORY NOTE
EXTENSION OF PROMISSORY NOTE (the "Extension"), dated as of
December 29, 1995, by and between AMERICONNECT, INC., a Delaware corporation
(the "Holder"), and RICHARD K. HALFORD (the "Borrower"), both being parties to
that certain Note dated April 3, 1995 (the "Note").
W I T N E S S E T H:
WHEREAS, pursuant to the terms and conditions of the Note,
Borrower has previously delivered to Holder a Note, dated April 3, 1995, in
the original principal sum of $3,000; and
WHEREAS, Holder and Borrower desire to extend the date on which
the Note is payable in full to May 15, 1996.
NOW, THEREFORE, for and in consideration of the foregoing and
other good and valuable consideration, the parties hereto do hereby agree as
follows:
1. The Note shall be extended to be payable in full on May 15,
1996.
2. Borrower agrees to print the following legend on the Note:
"This Note is subject to any and all terms, conditions and modifications
as provided in the Extension of Promissory Note dated as of December 29,
1995."
3. Except as amended by this Extension, the Note shall remain
in full force and effect.
4. This Extension shall become effective upon the execution
hereof by Holder and Borrower.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Extension
to be duly executed as of the day and year first above written.
/s/ Richard K. Halford
Richard K. Halford
"BORROWER"
AMERICONNECT, INC.
By: /s/ Robert R. Kaemmer
Name: Robert R. Kaemmer
Title: President
"HOLDER"
EXHIBIT 10.40
<PAGE>
January 24, 1996
Mercantile Bank of Kansas
9900 W. 87th Street
Overland Park, KS 66212
Dear Sirs:
This will confirm that per our stock registration records, Mr. Richard K.
Halford is the rightful owner of Certificate No. 0300 for 19,000 shares of
Amerifax, Inc. (nka AmeriConnect, Inc.) common stock, and that the certificate
delivered to you herein is the original certificate described hereof.
This delivery is being granted against payment of $14,527.16 in satisfaction
of all principal and interest due AmeriConnect, Inc. by Richard K. Halford
from those certain promissory notes dated June 15, 1994, August 1, 1994 and
April 3, 1995.
Sincerely,
AmeriConnect, Inc.
By: /s/ Janet M. Flynn Secretary
Attest: /s/ Mark D. Zach
EXHIBIT 10.41
<PAGE>
SECOND AMENDMENT
THIS DOCUMENT will serve as a Second Amendment to both the primary
Standard Office Lease executed on August 20, 1993 for 2,547 square feet and
expanded with 2,153 square feet for a total of 4,700 square feet on December
21, 1993 at 6750 West 93rd Street, Suite 110, Overland Park, Kansas.
The Lease is amended by the Tenant expanding into an additional 2,100
square feet in the most northeasterly pod of the first floor of the subject
property (as indicated on the attached floor plan). The demised premises will
now total 6,800 square feet.
The payment of rent on this expanded 2,100 square feet of the demised
premises will commence January 1, 1995 and expire December 31, 1999.
The terms of rent will be $13.50 per square foot for this additional
2,100 square feet. The monthly payment of $2,360.50. One months rent and
another months rent of security deposit totalling $4,725.00 will be required
upon execution of this Second Amendment. All other terms and conditions of
the primary Lease and first Amendment shall apply to this Second Amendment and
remain in full force and effect except the following:
1. The lease expiration of the primary Lease and the first Amendment will
be modified to expire concurrently with this Second Amendment on
December 31, 1999.
2. Comparable tenant finish will be provided on this expansion space as was
provided in the previous 4,700 square feet of demised premises. The
expansion space will be built out per the attached floor plan at sole
cost to the Landlord. Landlord and Tenant shall agree on tenant finish
materials used prior to Tenant's occupancy of January 1, 1995.
3. This Amendment will modify the base year operating expenses for the
primary Lease and the First Amendment to a 1994 base year for all
leases.
Signatures and dates executed on the lines provided below represent agreement
by both parties.
LANDLORD: TENANT:
MO-CON HUNT, INC. AMERIFAX, INC.
/s/ Donna Lee /s/ Robert R. Kaemmer
Donna Lee Robert R. Kaemmer
11/25/94 11/23/94
Date Date
Consent of Independent Auditors
We have issued our report dated February 16, 1996, accompanying
the consolidated financial statements included in the Annual
Report of AmeriConnect, Inc. and subsidiary on Form 10-KSB for
the year ended December 31, 1995. We hereby consent to the
incorporation by reference of said report in the Registration
Statement of AmeriConnect, Inc. and subsidiary on Form S-8 (File
No. 33-80058, effective June 10, 1994).
GRANT THORNTON LLP
/s/ Grant Thornton LLP
Kansas City, Missouri
April 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AMERICONNECT, INC. CONTAINED IN ITS ANNUAL REPORT ON
FORM 10-KSB FOR THE YEARLY PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 293,492
<SECURITIES> 0
<RECEIVABLES> 2,345,132
<ALLOWANCES> 361,260
<INVENTORY> 0
<CURRENT-ASSETS> 2,497,657
<PP&E> 374,070
<DEPRECIATION> 230,868
<TOTAL-ASSETS> 2,660,387
<CURRENT-LIABILITIES> 2,889,164
<BONDS> 0
0
0
<COMMON> 65,116
<OTHER-SE> (302,157)
<TOTAL-LIABILITY-AND-EQUITY> 2,660,387
<SALES> 17,099,635
<TOTAL-REVENUES> 17,099,635
<CGS> 13,399,190
<TOTAL-COSTS> 18,323,131
<OTHER-EXPENSES> 6,767
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,145
<INCOME-PRETAX> (1,218,510)
<INCOME-TAX> 500,000
<INCOME-CONTINUING> (1,718,510)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,718,510)
<EPS-PRIMARY> (0.228)
<EPS-DILUTED> (0.228)
</TABLE>
