U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------------
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
______________.
Commission File Number 33-32341-D
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WORLDPORT COMMUNICATIONS, INC.
---------------------------------------------------------------------
(Exact name of small business registrant as specified in its charter)
Delaware 84-1127336
--------------------------------- -----------------------------
(State or other jurisdiction (I. R. S. Employer ID Number)
of incorporation or organization)
9601 Katy Freeway, Suite 200, Houston, Texas 77024
-------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 461-4999
None
----
(Former name, former address and former fiscal year, if changed
since last report.)
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 registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[ X ] Yes [ ] No
Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
[ ] Yes [ ] No
Applicable only to corporate issuers
As of August 14, 1997, the Registrant had 16,033,333 shares of Common Stock par
value $0.0001 outstanding.
Transitional Small Business Disclosure Format (Check one):
[ ] Yes [ X ] No
1
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WORLDPORT COMMUNICATIONS, INC.
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996 . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
for the Three and Six Months Ended June 30,
1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1997 and 1996 . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 16
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 17
SIGNATURE 18
2
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PART I - FINANCIAL INFORMATON
ITEM 1. FINANCIAL STATEMENTS
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- -------------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 404,695 $ 1,552,829
Accounts receivable 652,257 -
Note receivable, including accrued interest 293,611 806,329
Prepaid expenses and other current assets 199,402 -
------------- -------------
Total current assets 1,549,965 2,359,158
PROPERTY AND EQUIPMENT, net of accumulated depreciation
and amortization 1,175,952 -
OTHER ASSETS
Goodwill, net of accumulated amortization 5,726,081 -
Note receivable, including accrued interest - 527,806
Other 74,290 2,068
------------- -------------
TOTAL ASSETS $ 8,526,288 $ 2,889,032
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 800,000 $ -
Current portion of capital lease obligations 144,076 -
Accounts payable and accrued expenses 2,186,115 99,742
Other current liabilities 111,728 -
------------- -------------
Total current liabilities 3,241,919 99,742
NOTE PAYABLE - 420,000
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES,
net of current portion 309,916 -
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value, 10,000,000 shares
authorized, no shares outstanding - -
Common stock, $0.0001 par value, 65,000,000 shares
authorized, 14,633,333 and 9,053,667 shares issued
and outstanding, respectively 1,463 905
Additional paid-in capital 5,906,416 2,664,291
Retained deficit (933,426) (295,906)
------------- -------------
Total stockholders' equity 4,974,453 2,369,290
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,526,288 $ 2,889,032
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- -------------------
1997 1996 1997 1996
-------- ------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 188,549 $ - $ 188,549 $ -
COST OF SERVICES 194,412 - 194,412 -
--------- --------- --------- ---------
Gross margin (5,863) - (5,863) -
OPERATING EXPENSES:
Selling, general and
administrative expenses 363,679 115,385 652,648 120,296
Depreciation and amortization 29,770 - 29,770 -
--------- --------- --------- ---------
Operating loss (399,312) (115,385) (688,281) (120,296)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income 29,827 - 59,786 126
Interest (expense) (5,741) - (9,025) -
--------- --------- --------- ---------
24,086 - 50,761 -
--------- --------- --------- ---------
LOSS BEFORE PROVISION
FOR INCOME TAXES (375,226) (115,385) (637,520) (120,170)
PROVISION FOR INCOME TAXES - - - -
--------- --------- --------- ---------
NET LOSS $(375,226) $(115,385) $(637,520) $(120,170)
========= ========= ========= =========
NET LOSS PER SHARE $ (0.03) $ (0.49) $ (0.06) $ (0.81)
========= ========= ========= =========
WEIGHTED AVERAGE
SHARES OUTSTANDING 11,185,532 235,824 10,377,763 148,398
========== ========= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (637,520) $(120,170)
Adjustments to reconcile net loss to net cash
used by operating activities -
Depreciation and amortization 29,770 -
(Increase) decrease in accounts receivable (21,577) (160)
(Increase) decrease in accrued interest receivable 32,191 -
(Increase) decrease in prepaid expenses and other assets (84,480) -
Increase (decrease) in accounts payable and accrued
expenses and other liabilities 21,797 895
----------- -----------
Net cash used by operating activities (659,819) (119,435)
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances related to acquisitions (1,178,000) -
Issuance of notes receivable (100,000) -
Collection of notes receivable 1,108,333 -
Capital expenditures (68,620) -
----------- -----------
Net cash used by investing activities (238,287) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on short-term debt (262,278) -
Proceeds from issuance of common stock,
net of offering expenses 12,250 114,400
----------- ----------
Net cash provided (used) by financing activities (250,028) 114,400
----------- -----------
NET DECREASE IN CASH (1,148,134) (5,035)
CASH, beginning of the period 1,552,829 14,539
----------- -----------
CASH, end of the period $ 404,695 $ 9,504
=========== ===========
CASH PAID DURING THE PERIOD FOR INTEREST $ 26,989 $ -
=========== ===========
CASH PAID DURING THE PERIOD FOR TAXES $ - $ -
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Cancellation of note payable for 1,680,000 shares
of common stock $ 420,000 $ -
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
WorldPort Communications, Inc. and its subsidiaries, ("WorldPort" or the
"Company"), a Delaware corporation, is a facilities-based network provider
of enhanced international and domestic telecommunication services. The
Company operates telecommunications switches and an operator services
platform in Omaha, Nebraska from which it provides enhanced services, such
as global calling cards and international prepaid debit cards to
individuals, small businesses and large corporate customers primarily in
the United States, Western Europe and Latin America.
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted in this Form 10-QSB pursuant to such rules and
regulations; however, management believes that the disclosures herein are
adequate to make the information presented not misleading. The financial
statements and notes thereto included in this Form 10-QSB should be read
in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-KSB/A for the year ended December
31, 1996.
In the opinion of the Company's management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the
Company's financial position as of June 30, 1997, and the results of
operations for the three and six months ended June 30, 1997 and 1996 and
cash flows for the six months ended June 30, 1997 and 1996. The results of
operations for the three and six months ended June 30, 1997 and 1996 are
not necessarily indicative of the operating results for the full years.
Prior to the closing of the acquisitions of Telenational Communications
Limited Partnership ("TNC") (see Note 2) and The Wallace Wade Company
("WWC") (see Note 8), the Company was a development stage enterprise and
devoted substantially all of its efforts to identifying and acquiring
businesses, developing a public market for its stock and raising capital.
With the closing of the acquisitions of TNC and WWC, the Company now has
operating assets and continuing operations. Accordingly, the financial
statement presentation and disclosures required for development stage
enterprises have been omitted.
Principles of Consolidation
---------------------------
The accompanying condensed consolidated financial statements include the
accounts of WorldPort and its wholly-owned subsidiaries after elimination
of all significant intercompany accounts and transactions.
6
<PAGE>
Property and Equipment
----------------------
Property and equipment are carried at cost. Expenditures for additions,
improvements and renewals which add significant value to the asset or
extend the life of the asset are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation of property and equipment using the straight-line method
based on the estimated useful lives of the assets ranging from three to 15
years.
Goodwill
--------
The excess purchase price over fair value of net assets acquired
("goodwill") is amortized using the straight-line method over 10 years.
The Company periodically evaluates the recoverability of goodwill and
measures the amount of impairment, if any, by assessing current and future
levels of income and cash flows as well as other factors, such as business
trends and prospects and market and economic conditions.
Revenue Recognition
-------------------
The Company recognizes revenue from its telecommunications services as
such services are provided to its customers.
Risk Factors
------------
The Company is subject to various risks in connection with the operation
of its business including, among other things, changes in external
competitive market factors, changes in the Company's business strategy or
an inability to execute its strategy due to unanticipated changes in the
market, the Company's lack of liquidity and operating history and
anticipated working capital or other cash requirements including the
Company's current working capital deficit and dependence upon additional
capital investment.
Funding of the Company's working capital deficit, current and future
operating losses and expansion of the Company will require substantial
continuing capital investment. The Company's strategy is to fund these
cash requirements through debt facilities or additional equity financing.
Although the Company has been able to arrange debt facilities or equity
financing to date, there can be no assurance that sufficient debt or
equity financing will continue to be available in the future or that it
will be available on terms acceptable to the Company. Failure to obtain
sufficient capital could materially affect the Company's acquisition and
operating strategies. The Company expects that future financing will
include equity placements; however, no assurance can be given that the
Company will be able to obtain additional financing on reasonable terms,
if at all (see Note 6).
Pending Accounting Pronouncement
--------------------------------
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, Earnings Per Share ("SFAS No.
128"). SFAS No. 128 replaces Accounting Principles Board Opinion 15,
Earnings Per Share, and simplifies the computation of earnings (loss) per
share ("EPS") by replacing the presentation of primary EPS with basic EPS,
which is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period.
SFAS No. 128 also requires dual presentation of basic and diluted EPS on
the face of the income statement for entities with complex capital
structures, and a reconciliation of the numerator and denominator used in
the basic EPS computation to the diluted EPS computation's numerator and
denominator. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. Earlier
7
<PAGE>
application is not permitted. Restatement of all prior period EPS data is
required. Management of the Company believes that the adoption of SFAS No.
128 will not have a material effect on previously reported EPS.
Certain Reclassifications
-------------------------
Certain reclassifications have been made to amounts previously reported to
conform to current year presentation.
(2) TNC ACQUISITION
---------------
On June 20, 1997, the Company completed the acquisition of substantially
all of the telecommunications assets and operations of TNC (the "TNC
Acquisition") pursuant to that certain Asset Purchase Agreement dated
April 23, 1997 (as amended by Amendment No. 1 to the Asset Purchase
Agreement dated June 20, 1997, collectively the "Asset Purchase
Agreement"). The results of operations of TNC are included in the
financial statements of the Company from the date of acquisition, June 20,
1997.
The assets and operations of TNC were purchased in exchange for (i)
3,750,000 shares of the Company's Common Stock (of which 1,000,000 shares
are being held pursuant to an escrow agreement for a period of 18 months
following the closing subject to certain purchase price adjustments
described below) and (ii) the assumption by the Company of certain
indebtedness of TNC up to a maximum of $4.6 million. The purchased assets
include telecommunications switches and other network equipment, customer
and vendor contracts, an FCC section 214 common carrier license, an
operator services center and other assets sufficient to continue the
ongoing business of TNC. The FCC section 214 common carrier license gives
the Company the authority to resell both international switched and
private line services of authorized carriers. The final purchase price is
subject to adjustment if (i) liabilities in excess of $4.6 million are
assumed, (ii) the Company is required to invoke certain indemnifications
by TNC, (iii) there are certain expense overruns, or (iv) there are
certain rejected contracts. In addition, certain creditors of TNC have the
option to convert all or a portion of their debt into shares of the
Company's Common Stock. In connection with the TNC Acquisition, the
Company incurred approximately $254,000 of transaction costs which were
capitalized as part of the purchase price. Of this amount, $150,000 is
payable to Maroon Bells Capital Partners ("MBCP") as a mergers and
acquisitions success fee ("M&A Success Fee") (see Note 7).
The TNC Acquisition was accounted for using the purchase method of
accounting and is subject to certain purchase price adjustments as
discussed above. The allocation of purchase price to the assets acquired
and liabilities assumed in the transaction has been initially assigned and
recorded based on preliminary estimates of fair value and may be revised
as additional information concerning the valuation of such assets and
liabilities becomes available.
The fair value of assets acquired and liabilities assumed in connection
with the TNC Acquisition is summarized as follows (in thousands):
Current assets $ 804
Property and equipment 1,121
Goodwill 5,742
-----
Assets acquired, net of cash 7,667
Less: Assumed liabilities and transaction costs 4,854
Common Stock issued 2,813
-----
Cash paid $ -
=====
8
<PAGE>
Prior to the closing of the TNC Acquisition, the Company loaned $1,178,000
to TNC to provide TNC with working capital. This amount was assumed in
connection with the acquisition.
Set forth below are unaudited pro forma combined results of operations of
the Company and TNC for the six months ended June 30, 1997 and 1996. The
unaudited pro forma data is presented on the basis that the TNC
Acquisition took place at the beginning of each of the fiscal periods
ended June 30, 1997 and 1996 (in thousands, except per share amounts):
1997 1996
---- ----
Revenues $ 3,766 $ 5,703
======= =======
Net loss from continuing operations $(2,785) $(1,272)
======= =======
Net loss per share from continuing operations $ (0.21) $ (0.26)
======= =======
Pro forma adjustments included in the amounts above primarily relate to:
(i) adjustment for pro forma goodwill amortization expense using a 10-year
estimated life and (ii) adjustment for non-recurring management fees paid
to the General Partner of TNC.
The summarized pro forma information is based on estimates, available
information and certain assumptions and may be revised as additional
information becomes available. The pro forma financial information does
not purport to represent what the Company's results of operations would
have been if the TNC Acquisition had occurred on the date assumed or to be
representative of the results of operations for any future period. Neither
the expected benefits or cost reductions anticipated by the Company nor
the future corporate overhead costs of the Company have been reflected in
the above pro forma information.
(3) PROPERTY AND EQUIPMENT
----------------------
Major categories of property and equipment at June 30, 1997 are summarized
below:
Switch and peripheral equipment $ 763,135
Computer equipment and software 146,096
Leasehold improvements 252,055
Furniture and fixtures 28,486
----------
1,189,772
Less: Accumulated depreciation and amortization (13,820)
----------
$1,175,952
==========
(4) DEBT AND CAPITAL LEASE OBLIGATIONS
----------------------------------
Debt
----
The Company's debt at June 30, 1997 consists of the following:
Value Partners, Ltd. $ 500,000
Various demand notes 300,000
----------
$ 800,000
==========
9
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In connection with the TNC Acquisition, the Company assumed a secured
promissory note payable to Value Partners, Ltd. The note is payable in
installments of $100,000 per month plus accrued interest at a rate of 14%
per annum beginning September 1, 1997. The note is secured by all of the
assets acquired by the Company in connection with the TNC Acquisition.
The Company also assumed $300,000 of unsecured notes payable to certain
individuals in connection with the TNC Acquisition. These notes are
payable on demand and bear interest at rates ranging from 12% - 15%.
Holders of certain of these notes have the option to convert them into
shares of the Company's Common Stock (see Note 2).
Capital Lease Obligations
-------------------------
In connection with the TNC Acquisition, the Company assumed certain
capital lease obligations. The carrying value of the assets under capital
lease is as follows:
Property and equipment $ 440,737
Less: Accumulated amortization (3,930)
-----------
Net leased property and equipment $ 436,807
===========
At June 30, 1997, minimum lease payments under this capital lease are as
follows:
1997 $ 97,356
1998 194,711
1999 194,711
2000 57,194
----------
543,972
Less: Amount representing interest 89,980
----------
Present value of minimum lease payments 453,992
Less: Current maturities 144,076
----------
Long-term capital lease obligation $ 309,916
==========
(5) COMMITMENTS AND CONTINGENCIES
-----------------------------
From time to time, the Company is involved in various lawsuits or claims
arising from the normal course of business. In the opinion of management,
none of these lawsuits or claims will have a material adverse effect on
the financial statements or results of operations of the Company.
(6) SERIES A PREFERRED STOCK OFFERING
---------------------------------
On May 8, 1997, the Company initiated a Private Placement Offering of the
Company's Series A Preferred Stock for $3.00 per share pursuant to an
Offering Memorandum (the "Series A Preferred Stock Offering"). On July
25, 1997, the offering price was reduced to $2.25 per share. There can
be no assurance that the Company will be successful in completing this
offering.
10
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(7) RELATED PARTY TRANSACTIONS
--------------------------
Pursuant to an Advisory Agreement between MBCP and the Company dated March
7, 1997, MBCP earns an M&A Success Fee in connection with all acquisitions
identified by MBCP which are consummated by the Company. The fee includes
a base plus an additional amount based on a percentage of the value of the
transaction. In connection with the TNC Acquisition, MBCP earned an M&A
Success Fee of approximately $275,000. In consideration of the Company's
development stage, MBCP has agreed to reduce its M&A Success Fee related
to the TNC Acquisition to $150,000.
MBCP is a shareholder of the Company and certain members of the Company's
Board of Directors are principals or employees of MBCP.
(8) SUBSEQUENT EVENTS
-----------------
WWC Acquisition
---------------
On July 3, 1997, the Company, through its wholly-owned subsidiary
WorldPort Acquisitions, Inc., ("WAI") completed a merger of WWC into WAI
pursuant to that certain Agreement and Plan of Merger dated April 20, 1997
(the "WWC Acquisition"). WWC was a telecommunications marketing consulting
firm which produced and implemented marketing strategies for clients
ranging from small companies to large corporate clients. Mr. John Dalton,
the Company's President and Chief Executive Officer, was the sole
shareholder of WWC.
In connection with the WWC Acquisition, the Company delivered to Mr.
Dalton (i) 1,400,000 shares of the Company's Common Stock, of which
500,000 shares are being held pursuant to an escrow agreement pending
delivery to the Company of certain audited Financial Statements of WWC and
900,000 shares are being held pursuant to the escrow agreement subject to
certain adjustments to the purchase price based on the Company entering
into business agreements that WWC had negotiated; (ii) $75,000 cash, of
which $37,500 was advanced to Mr. Dalton on June 6, 1997 with the
remaining $37,500 being deferred at Mr. Dalton's election until September
15, 1997; and (iii) a Promissory Note in the amount of $175,000 payable as
follows: one payment of $50,000 payable on October 1, 1997, and two
payments of $62,500 payable on February 1, 1998 and July 1, 1998.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contains many "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, including,
among others (i) results of operations (including expected changes in the
Company's revenues and strategy) and (ii) the Series A Preferred Stock Offering.
These forward-looking statements are based largely on the Company's current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from these forward-looking statements. Important
factors to consider in evaluating such forward-looking statements include (i)
the changes in external competitive market factors; (ii) changes in the
Company's internal budgeting process which might impact trends in the Company's
results of operations; (iii) anticipated working capital or other cash
requirements; (iv) changes in the Company's business strategy or an inability to
execute its strategy due to unanticipated changes in the market; (v) various
competitive factors that may prevent the Company from competing successfully in
the market place; (vi) the Company's lack of liquidity; (vii) the lack of a
public market for the Company's Series A Preferred Stock; (viii) the Company's
lack of operating history; and (ix) the Company's ability to attract and retain
key personnel with the skills and expertise necessary to manage its growth. In
light of these risks and uncertainties, there can be no assurance that the
events contemplated by the forward-looking statements contained in this Form
10-QSB will in fact occur.
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto included under Item 1 of
this Form 10-QSB. In addition, reference should be made to the Financial
Statements and Notes thereto and related Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Annual
Report on Form 10-KSB/A for the year ended December 31, 1996.
General
- - -------
WorldPort is a facilities-based network provider of enhanced international and
domestic telecommunication services. The Company operates telecommunications
switches and an operator services platform in Omaha, Nebraska from which it
provides enhanced services, such as global calling cards and international
prepaid debit cards to individuals, small businesses and large corporate
customers primarily in the United States, Western Europe and Latin America. The
Company's strategy is to expand its business through both internal business
development and the strategic acquisitions of telecommunication services
companies, such as TNC and WWC. See "TNC Acquisition" and "Subsequent Events".
Results of Operations
- - ---------------------
Prior to its acquisition of the assets and on-going operations of TNC, the
Company was a development stage company that had not generated revenues other
than interest income since inception. During the three and six months ended June
30, 1997, the Company incurred losses of $(375,226) and $(637,520),
respectively, compared to $(115,385) and $(120,170) during the same periods in
1996. Included in the losses incurred during the three and six months ended June
30, 1997 are the operating results of TNC subsequent to the closing of the TNC
Acquisition. Prior to the TNC Acquisition, TNC had experienced a history of
operating losses and cash flow deficiencies. The Company is currently in the
process of evaluating the assets, operations, vendor and customer relationships
of TNC in order to refocus the sales and marketing of the Company's products to
coincide with new distribution and carrier agreements currently under
negotiation by the Company. While the Company is now implementing certain
revenue enhancement and cost reduction initiatives, the Company anticipates that
it will continue to incur operating losses and cash flow deficiencies for the
foreseeable future. See "Liquidity and Capital Resources".
Revenues
- - --------
Revenues for the three and six months ended June 30, 1997, were $188,549
compared to $0 for the three and six month ended June 30, 1996. The increase in
12
<PAGE>
revenues was solely due to the inclusion of the operating results of TNC
subsequent to the closing of the TNC Acquisition on June 20, 1997.
Gross Margin
- - ------------
Gross margin for the three and six months ended June 30, 1997, was $(5,863)
compared to $0 for the three and six months ended June 30, 1996. The decrease in
gross margin was solely due to the inclusion of the operating results of TNC
subsequent to the closing of the TNC Acquisition on June 20, 1997.
Selling, General and Administrative Expenses
- - --------------------------------------------
Selling, general and administrative expenses increased to $363,679 from $115,385
and to $652,648 from $120,296 for the three and six months ended June 30, 1997
and 1996, respectively. The increase was due to (i) increased business
development and acquisition activity, (ii) the establishment and staffing of the
Company's corporate offices and (iii) the inclusion of the selling, general and
administrative expenses of TNC subsequent to the closing of the TNC Acquisition
on June 20, 1997.
Interest Income (Expense)
- - -------------------------
Interest income increased to $29,827 from $0 and to $59,786 from $126 for the
three and six months ended June 30, 1997 and 1996, respectively. The increase
was due to the interest from (i) a note receivable from Global Star
International, Inc. (the "GSI Note") which was paid in full on March 6, 1997,
(ii) the note receivable from Com Tech International Corporation ("Com Tech")
and (iii) the note receivable from TNC prior to the Company's acquisition of
TNC. See "Liquidity and Capital Resources".
Pro Forma Results (See Note 2 to the Condensed Consolidated Financial
Statements)
- - ---------------------------------------------------------------------
Pro forma revenues for the six months ended June 30, 1997 were approximately
$3,766,000 compared to approximately $5,703,000 for the six months ended June
30, 1996. The decrease in revenues was due primarily to the restructuring of a
contract effective January 1, 1997, with a distributor who is a significant
customer of TNC. Prior to January 1, 1997, the contract was structured as a
retail contract whereby TNC billed the distributor on a retail basis and paid a
commission to the distributor based on the retail billings. Effective January 1,
1997, the contract was changed to a wholesale contract whereby TNC bills the
distributor on a wholesale basis and pays no commissions to the distributor.
Through its renegotiation of the distribution agreement, the Company has
terminated the exclusive distribution provisions of the prior agreement and
gained the ability to directly market its calling cards and pre-paid phone cards
in the market served by the distributor. This contract renegotiation is
consistent with the Company's strategy to develop new distribution agreements
consistent with new carrier agreements under development by the Company
worldwide.
Pro forma loss from continuing operations for the six months ended June 30, 1997
was approximately $(2,785,000) compared to approximately $(1,272,000) for the
six months ended June 30, 1996. The increase in loss from continuing operations
was due primarily to (i) increased network costs associated with changes in
TNC's vendor contracts (ii) the write-off of a receivable from a significant
customer and (iii) increased selling, general and administrative costs
associated with the closing of the TNC Acquisition and the subsequent
implementation of new operating and administrative procedures, as well as the
Company's increased business development and acquisition activity and the
establishment and staffing of the Company's corporate offices. These increases
were partially offset by decreased commission expenses associated with the
restructuring of the contract discussed above.
Liquidity and Capital Resources
- - -------------------------------
The Company has a working capital deficit of $1,691,954 as of June 30, 1997,
compared to a working capital surplus of $2,259,416 at December 31, 1996. The
working capital deficit is due to the assumption of liabilities in conjunction
with the TNC Acquisition, the majority of which were trade payables and
short-term debt obligations. Trade receivables increased to $652,257 at June 30,
1997, from $0 at December 31, 1996 due to the TNC Acquisition.
Operations used $659,819 during the six months ended June 30, 1997, compared to
$119,435 for the six months ended June 30, 1996. Investing activities used
13
<PAGE>
$238,287 during the six months ended June 30, 1997, compared to $0 for the six
months ended June 30, 1996. Investing activities consisted primarily of
collection of the GSI Note and a portion of the Com Tech Note offset by cash
advances to TNC to fund working capital prior to the closing of the TNC
Acquisition. Financing activities used $250,028 during the six months ended June
30, 1997, while generating $114,400 for the six months ended June 30, 1996.
Financing activities for the six months ended June 30, 1997, consisted primarily
of payments on short-term debt obligations assumed in connection with the TNC
Acquisition. Financing activities for the six months ended June 30, 1996
consisted of proceeds from the issuance of Common Stock.
In addition to trade payables and vendor obligations assumed in connection with
the TNC Acquisition, the Company assumed a secured promissory note payable to
Value Partners, Ltd. which is payable in installments of $100,000 per month plus
accrued interest at a rate of 14% per annum beginning September 1, 1997. The
note is secured by all of the assets acquired by the Company in connection with
the TNC Acquisition. The Company also assumed $300,000 of unsecured notes
payable to certain individuals. These notes are payable on demand and bear
interest at rates ranging from 12% - 15%. Holders of certain of these notes have
the option to convert them into shares of the Company's Common Stock.
Funding of the working capital deficit, current and future operating losses and
expansion of the Company will require substantial continuing capital investment.
The Company's strategy is to fund these cash requirements through debt
facilities or additional equity financing. Although the Company has been able to
arrange debt facilities or equity financing to date, there can be no assurance
that sufficient debt or equity financing will continue to be available in the
future or that it will be available on terms acceptable to the Company.
Substantial additional debt or equity financing may be needed for the Company to
achieve its short-term and long-term business objectives. Failure to obtain
sufficient capital could materially affect the Company's acquisition and
operating strategies. The Company expects that future financing will include
equity placements; however, no assurance can be given that the Company will be
able to obtain additional financing on reasonable terms, if at all. See "Series
A Preferred Stock Offering" and "Subsequent Events".
Effective April 14, 1997, the Company and Com Tech entered into an agreement to
settle any and all claims that have been or could have been asserted in the
lawsuit entitled WorldPort Communications, Inc., formerly known as Sage
Resources, Inc., a Delaware corporation, plaintiff v. Com Tech International
Corporation, a Washington corporation, defendant, Case No. C96-4055SBA (the
"Settlement Agreement"). Pursuant to the Settlement Agreement, Com Tech agreed
to pay the Company all amounts due under a $500,000 promissory note (the "Com
Tech Note"). Com Tech agreed to pay $150,000 plus accrued interest on May 1,
1997. Com Tech also agreed to make six payments to the Company, on or before the
10th day of each month, beginning June 10, 1997 through November 1997. Each
payment consists of (i) $58,333.33 of principal, (ii) accrued interest on the
outstanding balance at twelve percent (12%) per annum, and (iii) $6,089.03,
which represents one-sixth of the total costs of litigation and other expenses
owing. As of August 14, 1997, Com Tech has paid the Company $401,489, which
represents $325,000 of principal and $76,489 of accrued interest and
reimbursement of litigation expenses and is current on its obligations under the
Settlement Agreement.
On May 8, 1997, the Company initiated a Private Placement Offering for up to
$5,000,000 under Regulation D of 1,666,667 shares of Series A Preferred Stock at
$3.00 per share pursuant to an Offering Memorandum dated May 8, 1997 (the
"Series A Preferred Stock Offering"). Holders of Series A Preferred Stock will
be entitled to receive annual cumulative dividends of 8%, payable in cash or in
shares of Common Stock of the Company, at the Company's option, as and when such
dividends are declared by the Company's Board of Directors. No public market
exists for the Company's Series A Preferred Stock and none is expected to
develop as a result of the Series A Preferred Stock Offering. The offer and sale
of the Series A Preferred Stock is not being registered under the Securities Act
of 1933, as amended, under U.S. or state securities laws or under the securities
laws of any other jurisdictions, and the Company's Series A Preferred Stock or
the Common Stock into which it is convertible may not be resold or otherwise
transferred unless it is subsequently registered or an exemption from applicable
registration requirements is available.
14
<PAGE>
On July 25, 1997, the offering price was reduced to $2.25 per share. There
can be no assurance that the Company will be successful in completing the Series
A Preferred Stock Offering.
TNC Acquisition
- - ---------------
On June 20, 1997, the Company completed the acquisition of substantially all of
the telecommunications assets and operations of TNC in exchange for (i)
3,750,000 shares of the Company's Common Stock (of which 1,000,000 shares are
being held pursuant to an escrow agreement for a period of 18 months following
the closing subject to certain purchase price adjustments described below) and
(ii) the assumption by the Company of certain indebtedness of TNC up to a
maximum of $4.6 million. The purchased assets include telecommunications
switches and other network equipment, customer and vendor contracts, an FCC
section 214 common carrier license, an operator services center and other assets
sufficient to continue the ongoing business of TNC. The FCC section 214 common
carrier license gives the Company the authority to resell both international
switched and private line services of authorized carriers. The final purchase
price is subject to adjustment if (i) liabilities in excess of $4.6 million are
assumed, (ii) the Company is required to invoke certain indemnifications by TNC,
(iii) there are certain expense overruns, or (iv) there are certain rejected
contracts. In addition, certain creditors of TNC have the option to convert all
or a portion of their debt into shares of the Company's Common Stock. Prior to
closing the TNC Acquisition, the Company loaned $1,178,000 to TNC to provide TNC
with working capital. This amount was assumed by the Company in connection with
the acquisition. See "Liquidity and Capital Resources".
On April 29, 1997, the Company and TNC entered into a Management Services
Agreement, wherein the Company provided to TNC day-to-day executive management
services. The Management Services Agreement provides certain indemnifications to
WorldPort as well as a covenant not to sue or assert any claim or action against
the Company arising from the services provided by the Company pursuant to the
Management Services Agreement. The Management Services Agreement terminated with
the closing of the TNC Acquisition on June 20, 1997.
The acquired telecommunications switches and operator services platform in
Omaha, Nebraska provide enhanced services, such as global calling cards and
international prepaid debit cards to individuals, small businesses and large
corporate customers primarily in the United States, Western Europe and Latin
America. Through the acquired operator services center, the Company provides
multilingual customer support. The U.S. switching and operator services center
enables customers in foreign countries to take advantage of lower cost routing
and higher transmission quality for international calls. The Company's services
are currently marketed through various distribution channels in the United
States, Western Europe and Latin America.
In conjunction with the TNC Acquisition, the Company entered into a two-year
employment agreement with Mr. Bruce Burton to serve as the Company's Executive
Vice President and Chief Operating Officer. Mr. Burton was the President and
Chief Operating Officer of TNC. The Company also entered into an eighteen (18)
month consulting agreement with Mr. Edmund Blankenau, the chief executive
officer of the General Partner of TNC. Pursuant to his consulting agreement, Mr.
Blankenau will earn a consulting fee of $7,000 per month during the term of his
agreement as well as being entitled to earn additional incentive compensation
for completed acquisitions and new business opportunities based on certain
established criteria.
On July 28, 1997, the Company and Mr. Burton agreed to terminate his
employment agreement and negotiate a consulting agreement acceptable to Mr.
Burton and the Company. The terms of the consulting agreement have not yet
been finalized between the Company and Mr. Burton.
On July 1, 1997, the Company entered into a four-year lease with a partnership
of which Mr. Blankenau is a partner, for its operating center in Omaha,
Nebraska. The Company's lease payment for the operating center, which includes
basic utilities, is $8,992 per month for the first three months subject to
quarterly operating expense adjustments beginning on October 1, 1997 through the
term of the lease.
15
<PAGE>
Related Party Transactions
Pursuant to an Advisory Agreement between MBCP and the Company dated March 7,
1997, MBCP earns an M&A Success Fee in connection with all acquisitions
identified by MBCP which are consummated by the Company. The fee includes a base
plus an additional amount based on a percentage of the value of the transaction.
In connection with the TNC Acquisition, MBCP earned an M&A Success Fee of
approximately $275,000. In consideration of the Company's development stage,
MBCP has agreed to reduce its M&A Success Fee related to the TNC Acquisition to
$150,000.
Subsequent Events
WWC Acquisition
- - ---------------
On July 3, 1997, the Company, through its wholly-owned subsidiary WAI, completed
a merger of WWC into WAI. WWC was a telecommunications marketing consulting firm
which produced and implemented marketing strategies for clients ranging from
small companies to large corporate clients. Mr. John Dalton, the Company's
President and Chief Executive Officer, was the sole shareholder of WWC.
In connection with the WWC Acquisition, the Company delivered to Mr. Dalton (i)
1,400,000 shares of the Company's Common Stock, of which 500,000 shares are
being held pursuant to an escrow agreement pending delivery to the Company of
certain audited Financial Statements of WWC and 900,000 shares are being held
pursuant to the escrow agreement subject to certain adjustments to the purchase
price based on the Company entering into business agreements that WWC had
negotiated; (ii) $75,000 cash, of which $37,500 was advanced to Mr. Dalton on
June 6, 1997 with the remaining $37,500 being deferred at Mr. Dalton's election
until September 15, 1997; and (iii) a Promissory Note in the amount of $175,000
payable as follows: one payment of $50,000 payable on October 1, 1997, and two
payments of $62,500 payable on February 1, 1998 and July 1, 1998.
Board of Directors
- - ------------------
In conjunction with the closing of the WWC Acquisition, Mr. Dalton agreed to
join the Board of Directors of the Company. In addition to Mr. Dalton, Mr.
Peter A. Howley has agreed to join the Board of Directors of the Company.
Mr. Howley is an experienced executive in the telecommunications industry
having served as the Chief Executive Officer of Centex Telemanagement, Inc.
from 1985 until 1994. Mr. Howley currently serves on the boards of other
telecommunications companies and was previously a member of the NASDAQ
Corporate Advisory Board and the American Business Conference.
On August 7, 1997, Messrs. Dalton and Howley were appointed to the Board of
Directors of the Company.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 8, 1996, the Company filed a lawsuit against Com Tech in the United
States District Court in the Northern District of California (Case No.
C-96-4055). The Company filed the lawsuit to collect $500,000 plus interest and
attorney's fees for amounts that Com Tech borrowed from the Company that is now
due, owing and unpaid. On April 14, 1997, the Company and Com Tech entered into
the Settlement Agreement. Pursuant to the Settlement Agreement, Com Tech agreed
to pay the Company all amounts due under the Com Tech Note.
See "Liquidity and Capital Resources".
16
<PAGE>
From time to time, the Company is involved in various lawsuits or claims arising
from the normal course of business. In the opinion of management, none of these
lawsuits or claims will have a material adverse effect on the financial
statements or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
- - --------
Exhibit No. Description
-----------
10.1 First Amended Loan Modification Agreement by
and between the Company, Telenational
Communications, Inc., Telenational
Communications Limited Partnership and Value
Partners, Ltd. dated June 20, 1997.
10.2 Second Amended and Restated Senior Secured
Promissory Note by and between the Company,
Telenational Communications, Inc. and Value
Partners, Ltd. Dated June 20, 1997.
10.3 First Amended Pledge and Security Agreement
by and between Telenational Communications,
Inc. and Value Partners, Ltd. dated June 20,
1997.
10.4 Notice and Certification of No Oral
Agreements by and between the Company,
Telenational Communications, Inc.,
Telenational Communications Limited
Partnership and Value Partners, Ltd. dated
June 20, 1997.
10.5 Consulting Agreement by and between Edmund
Blankenau and the Company dated June 20,
1997.
10.6 Employment Agreement by and between Bruce
Burton and the Company dated June 20, 1997.
10.7 Lease by and between Telenational
Communications, Inc. and 7300 Woolworth
Partnership dated July 1, 1997.
27 Financial Data Schedule
Reports on Form 8-K
- - -------------------
Form 8-K filed with the Securities and Exchange Commission on July 7, 1997.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLDPORT COMMUNICATIONS, INC.
------------------------------
Date: August 19, 1997 By: /s/ W.Dean Spies
----------------------------
W. Dean Spies
Chief Financial Officer and Treasurer
18
FIRST AMENDED
LOAN MODIFICATION AGREEMENT
This FIRST AMENDED LOAN MODIFICATION AGREEMENT ("Agreement") is made and
entered into as of this 20th day of June, 1997, by and between Value Partners,
Ltd., a Texas Limited Partnership, ("Lender"), Telenational Communications,
Inc., a Delaware Corporation ("TCI"), Telenational Communications Limited
Partnership, a Nebraska Limited Partnership, (Telenational") and WorldPort
Communications, Inc. ("WorldPort") (WorldPort and TCI shall be referred to
collectively herein as "Borrowers").
R E C I T A L S
A. On or about November 8, 1995, Telenational executed as Maker that certain
Unsecured Senior Promissory Note (the "Original Note") in the principal sum of
Eight Hundred Fifty Thousand and no/l00ths Dollars ($850,000.00) to Aden
Enterprises, Inc., d/b/a ECDI, Inc., as Payee ("Aden"), a copy of which is
attached hereto as Exhibit "A" and incorporated herein by reference. The
Original Note was pledged and assigned by Aden to the Lender and acquired at
public sale by the Lender pursuant to that certain Amended and Restated Pledge
Agreement executed by Aden in favor of the Lender and dated as of December 8,
1995. Telenational defaulted on the Original Note.
B. As a condition to and in consideration of the Lender forbearing from the
exercise of its right of immediate collection of the Original Note, and of the
Lender restructuring, reinstating, renewing, and extending the Original Note to
Telenational in the amount of $850,000.00, Telenational agreed (i) to enter into
that certain Loan Modification Agreement dated as of March 20, 1997 (the
"Telenational Loan Agreement"), a copy of which is attached hereto as Exhibit
"B" and by this reference incorporated herein, (ii) to enter into and execute
that certain Amended and Restated Promissory Note dated as of March 20, 1997
(the "Telenational Note"), a copy of which is attached hereto as Exhibit "C" and
by this reference incorporated herein, and (iii) to enter into that certain
Pledge and Security Agreement dated as of March 20, 1997 (the "Telenational
Pledge Agreement"), a copy of which is attached hereto as Exhibit "D" and by
this reference incorporated herein, pursuant to which certain collateral as
described therein was and continues to be pledged by Telenational to Lender. The
Telenational Loan Agreement, Telenational Note, the Telenational Pledge
Agreement and all related documents, including Financing Statements are referred
to herein as the "Telenational Documents".
C. On or about April 23, 1997, WorldPort , entered into an agreement with
Telenational pursuant to which TCI, as assignee of WorldPort, is to acquire
certain of the assets (the "Acquired Assets") and the business enterprise of
Telenational, which Acquired Assets are pledged by Telenational to Lender
pursuant to the Telenational Documents. As a condition to that transfer,
Telenational is required to obtain the consent of Lender to such transfer, given
that absent such consent, Telenational will be in default of the Telenational
Documents. Lender will consent so long as TCI and WorldPort enter into this
- - --------------------------------------------------------------------------------
FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 1
<PAGE>
Agreement and among other matters, execute, as joint and several obligors, those
documents defined herein as the Loan Documents, affirming, reinstating,
restating, replacing, renewing and amending the Telenational Loan Documents and
continuing the security interest of Lender in the Collateral, as that term is
defined in the Pledge Agreement. As partial consideration for the agreements
contained herein, Lender agrees to release its security interest in the Pledged
Securities, as that term is defined in the Telenational Pledge Agreement,
pursuant to the terms of this Agreement.
D. As of June 19, 1997, the principal amount of the Telenational Note is
$762,278.06 and accrued, unpaid interest is $15,880.79, as calculated pursuant
to the terms of the Telenational Note.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Lender, Telenational and Borrowers agree:
1. Obligations of Borrowers. In consideration of the Lender restructuring,
restating, reinstating, renewing and extending the Telenational Note and the
Telenational Pledge Agreement and consenting to the acquisition by TCI of the
Acquired Assets, subject to the lien granted Lender in the Telenational
Documents, as modified herein, Borrowers shall execute as joint and several
obligors documents amending, restating, reinstating, renewing and extending the
Telenational Documents, as modified, and agree that the Telenational Loan
Agreement, the Telenational Note and the Telenational Pledge Agreement shall be
restructured as set forth in this Agreement, in that certain Second Amended and
Restated Senior Secured Promissory Note (the "Note") executed by Borrowers in
favor of Lender, a copy of which is attached hereto as Exhibit "E" and by this
reference incorporated herein, in that certain First Amended Pledge and Security
Agreement executed by Borrowers and the Lender (the "Pledge Agreement"), a copy
of which is attached hereto as Exhibit "F" and by this reference incorporated
herein and in related documents including those necessary to continue Lender's
security interest in the Collateral in a form acceptable to Lender. This
Agreement, the Note, the Pledge Agreement and all documents executed in relation
to this transaction, and all other documents as set forth in and including that
certain Notice and Certification of No Oral Agreements, a copy of which is
attached hereto as Exhibit G and incorporated herein by reference, shall be
referred to herein as the "Loan Documents". All obligations of Borrowers to
Lender arising pursuant to the Loan Documents shall be referred to herein as the
"Indebtedness".
2. References in Loan Documents. All references in the Loan Documents to
the Note, the Pledge Agreement, and the Financing Statements shall henceforth
include references to the Note, the Pledge Agreement, and the Financing
Statements as such documents are modified, extended, reinstated, replaced,
amended and renewed hereby, and as such documents may, from time to time, be
further amended, modified, extended, reinstated, renewed, and/or increased.
3. Execution of Documents. Subject to the terms and conditions set forth
herein, Borrowers will execute in favor of Lender the Note, the Pledge
Agreement, documents necessary to amend the Financing Statements and the Notice
of No Oral Agreements, together with any other documents required by this
transaction.
- - --------------------------------------------------------------------------------
FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 2
<PAGE>
4. Confirmation of Liens. Borrowers as joint and several obligors hereby
grant, confirm, renew, affirm and restate to Lender the security interests,
liens, and rights of any kind or nature granted Lender in the Telenational
Documents, as amended in the Loan Documents, to secure payment of the Note.
Borrowers and Telenational confirm that this modification of the Telenational
Documents shall in no manner affect or impair any of the liens, security
interests or rights securing payment of the Note as to the Collateral, as that
term is defined in the Pledge Agreement. Borrowers confirm that the liens,
security interests and rights of Lender under the Loan Documents are valid and
subsisting liens, security interests and rights against the properties described
therein. Borrowers confirm that Lender is not waiving any rights or remedies it
had under the Original Note and the Telenational Documents, unless specifically
set forth herein, that such rights are not impaired, and that the purpose of
this instrument being in part, to renew, carry forward, and extend all such
rights, as modified and improved herein and in the other Loan Documents. Lender
shall have the right to exercise all rights and remedies of Lender under the
Loan Documents and under applicable law upon the occurrence of any default or
event of default under any of the Loan Documents and under any and all existing
or future amendments or modifications to any of the Loan Documents or to the
terms thereof. Because Lender hereby agrees to release its security interest in
the Pledged Securities, as that term is defined in the Telenational Pledge
Agreement, this provision shall not apply to the Pledged Securities. This
release of security interest in the Pledged Securities shall be effective upon
the reduction of principal balance of the Note to the sum of $500,000. When such
release is effective, Lender shall, within twenty-four (24) hours deliver the
Certificate representing such Pledged Securities with Federal Express or United
Postal Service for delivery to Telenational at the address specified in
paragraph 27 herein.
5. Representations, Warranties, Covenants and Agreements of Borrowers and
Telenational. Borrowers and Telenational represent, warrant and covenant to
Lender as follows: (a) the information set forth in the recitals of this
Agreement are true and correct in all respects; (b) the representations and
warranties of Borrowers and Telenational as set forth in the Loan Documents are
true and correct as of the date hereof; (c) Borrowers and Telenational hereby
confirm all covenants, obligations and duties of Borrowers and Telenational
under the Loan Documents, and (d) Telenational is the owner of the Collateral,
as that term is defined in the Pledge Agreement, and that Telenational has not
mortgaged, transferred, assigned or pledged any interest in the Collateral
except to Lender pursuant to the Loan Documents, unless otherwise designated in
the Loan Documents; (e) TCI, at the time of the execution of the Pledge
Agreement and on the Closing Date, as that term is defined herein, shall be the
owner of the Collateral, as that term is defined in the Pledge Agreement,
subject to the lien of Lender, and has not and will not mortgage, transfer,
assign or pledge any interest in the Collateral, except to Lender pursuant to
the Loan Documents.
6. Additional Representations and Warranties of Telenational.
Telenational represents and warrants to the Lender as follows:
(a) Organization, Standing, etc. Telenational is a limited
partnership duly organized, validly existing and in good standing under the laws
- - --------------------------------------------------------------------------------
FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 3
<PAGE>
of the State of Nebraska and has all requisite power and authority to own its
assets and carry on its business as presently conducted. IMTS, Inc., general
partner of Telenational, is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nebraska and has requisite power
and authority to own its assets and carry on its business as presently
conducted. Telenational has all requisite corporate power and authority to (i)
execute, deliver and perform its obligations under the Loan Documents, and (ii)
execute, deliver and perform its obligations under all other agreements and
instruments executed and delivered by it pursuant to or in connection with the
Loan Documents.
(b) Authorization and Execution. The execution, delivery and
performance by Telenational of the Loan Documents have been duly and validly
authorized and Telenational has the corporate power and authority to execute,
deliver and perform the Loan Documents. The Loan Documents have been duly
executed and delivered by Telenational and constitute a valid and binding
agreement of Telenational.
(c) Contravention. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
contravene or constitute a default under or violate (i) any provision of
applicable law or regulation the violation of which would have a material
adverse effect on Telenational or on the Loan Documents, (ii) the Articles of
Incorporation or Bylaws of Telenational or IMTS, Inc., or (iii) any agreement,
judgment, injunction, order, decree or other instrument binding upon
Telenational or any of its assets or properties, the violation of which would
have a material adverse effect on Telenational result in the creation or
imposition of any lien on any asset of Telenational or, on the Loan Documents.
(d) Litigation, Proceedings, Defaults. There is no action, suit,
investigation or proceeding pending against, or to the knowledge of Telenational
threatened against or affecting, Telenational or its respective assets before or
by any court or arbitrator or any governmental body, agency, department,
instrumentality or official. Telenational is not in violation their respective
Articles of Incorporation or Bylaws, and Telenational is not in violation of, or
in default under any provision of any applicable law or regulation or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
Borrowers which violation or default (i) would effect the validity of this
Agreement, the Note, the Pledge Agreement or any other document or agreement
executed or to be executed by Telenational pursuant hereto or in connection
herewith, or (ii) would impair the ability of Telenational to perform in any
material respect the obligations which it has under the Loan Documents, or any
such other document or agreement.
(e) Governmental Regulation. Except as required pursuant to the
Securities Act of 1933, as amended (the "Act") and State securities laws,
Telenational is not subject to any Federal or State law or regulation limiting
its ability to execute or issue the Loan Documents.
(f) Ownership of Property. Telenational has good record title in fee
simple to, or valid and subsisting leasehold interests in, all its real
property, and good title to all its other property, including the Collateral, as
that term is defined in the Pledge Agreement, in each case which is necessary or
useful in the conduct of its business. Each lease agreement under which
Telenational holds an interest in leased property is in full force and effect.
- - --------------------------------------------------------------------------------
FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 4
<PAGE>
(g) Documentation; No Material Misstatements. All of the necessary
documents related to the consummation of this transaction have been provided by
Telenational to the Lender and are true, correct and complete in all material
respects, and no written representation, warranty or statement made by
Telenational in or pursuant to this Agreement contains or will contain, when
made, any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation, warranty or statement not
misleading to a prospective purchaser of securities from Telenational, who is
seeking full information with respect to Telenational.
7. Additional Representations and Warranties of TCI. TCI
represents and warrants to the Lender as follows:
(a) Organization, Standing, etc. TCI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own its assets and carry
on its business as presently conducted. TCI has all requisite corporate power
and authority to (i) execute, deliver and perform its obligations under the Loan
Documents, and (ii) execute, deliver and perform its obligations under all other
agreements and instruments executed and delivered by it pursuant to or in
connection with the Loan Documents.
(b) Authorization and Execution. The execution, delivery and
performance by TCI of the Loan Documents hereunder have been duly and validly
authorized and TCI has the corporate power and authority to execute, deliver and
perform this Agreement and execute the Loan Documents. The Loan Documents have
been duly executed and delivered by TCI and constitute a valid and binding
agreement of TCI.
(c) Contravention. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
contravene or constitute a default under or violate (i) any provision of
applicable law or regulation the violation of which would have a material
adverse effect on TCI or on the Loan Documents, (ii) the Certificate of
Incorporation or Bylaws of TCI, or (iii) any agreement, judgment, injunction,
order, decree or other instrument binding upon TCI or any of its assets or
properties, the violation of which would have a material adverse effect on TCI
or result in the creation or imposition of any lien on any asset of TCI, or on
the Loan Documents.
(d) Litigation, Proceedings, Defaults. There is no action, suit,
investigation or proceeding pending against, or to the knowledge of TCI
threatened against or affecting, TCI or its assets before or by any court or
arbitrator or any governmental body, agency, department, instrumentality or
official. TCI is not in violation its Certificate of Incorporation or Bylaws,
and TCI is not in violation of, or in default under any provision of any
applicable law or regulation or of any agreement, judgment, injunction, order,
decree or other instrument binding upon TCI which violation or default (i) would
effect the validity of this Agreement, the Note, the Pledge Agreement or any
other document or agreement executed or to be executed by TCI pursuant hereto or
in connection herewith, or (ii) would impair the ability of TCI to perform in
- - --------------------------------------------------------------------------------
FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 5
<PAGE>
any material respect the obligations which it has under the Loan Documents or
any such other document or agreement.
(e) Governmental Regulation. Except as required pursuant to the
Securities Act of 1933, as amended (the "Act") and State securities laws, TCI is
not subject to any Federal or State law or regulation limiting its ability to
execute or issue the Loan Documents.
(f) Ownership of Property. On the Closing Date and at the time of
execution of the Loan Documents, TCI will have good record title in fee simple
to, or valid and subsisting leasehold interests in, all its real property, and
good title to all its other property, including that which in each case which is
necessary or useful in the conduct of its business and including the Collateral,
as that term is defined in the Pledge Agreement. Each lease agreement under
which TCI holds an interest in leased property is in full force and effect.
(g) Documentation; No Material Misstatements. All of the necessary
documents related to the consummation of this transaction have been provided by
TCI to the Lender and are true, correct and complete in all material respects,
and no written representation, warranty or statement made by TCI in or pursuant
to this Agreement contains or will contain, when made, any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
such representation, warranty or statement not misleading to a prospective
purchaser of securities from TCI, who is seeking full information with respect
to TCI.
8. Additional Representations and Warranties of WorldPort.
WorldPort represents and warrants to the Lender as follows:
(a) Organization, Standing, etc. WorldPort is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has requisite power and authority to own its assets and carry on
its business as presently conducted. WorldPort has all requisite corporate power
and authority to (i) execute, deliver and perform its obligations under the Loan
Documents, and (ii) execute, deliver and perform its obligations under all other
agreements and instruments executed and delivered by it pursuant to or in
connection with the Loan Documents.
(b) Authorization and Execution;. The execution, delivery and
performance by WorldPort of the Loan Documents hereunder has been duly and
validly authorized and WorldPort has the corporate power and authority to
execute, deliver and perform under the Loan Documents. The Loan Documents have
been duly executed and delivered by WorldPort and constitute a valid and binding
agreement of WorldPort.
(c) Contravention. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
contravene or constitute a default under or violate (i) any provision of
applicable law or regulation the violation of which would have a material
adverse effect on WorldPort or on the Loan Documents , (ii) the Certificate of
Incorporation or Bylaws of WorldPort, or (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon WorldPort or any of
its assets or properties, the violation of which would have a material adverse
effect on WorldPort or result in the creation or imposition of any lien on any
- - --------------------------------------------------------------------------------
FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 6
<PAGE>
asset of WorldPort, on the Loan Documents.
(d) Litigation, Proceedings, Defaults. There is no action, suit,
investigation or proceeding pending against, or to the knowledge of WorldPort
threatened against or affecting, WORLDPORT or its respective assets before or by
any court or arbitrator or any governmental body, agency, department,
instrumentality or official. Worldport is not in violation of its Certificate of
Incorporation or Bylaws, and WorldPort is not in violation of, or in default
under any provision of any applicable law or regulation or of any agreement,
judgment, injunction, order, decree or other instrument binding upon WorldPort
which violation or default (i) would effect the validity of this Agreement, the
Note, the Pledge Agreement or any other document or agreement executed or to be
executed by WorldPort pursuant hereto or in connection herewith, or (ii) would
impair the ability of WorldPort to perform in any material respect the
obligations which it has under the Loan Documents or any such other document or
agreement.
(e) Governmental Regulation. Except as required pursuant to the
Securities Act of 1933, as amended (the "Act") and State securities laws,
WorldPort is not subject to any Federal or State law or regulation limiting its
ability to execute or issue the Loan Documents.
(f) Ownership of Property. WorldPort has good record title in fee
simple to, or valid and subsisting leasehold interests in, all its real
property, and good title to all its other property, in each case which is
necessary or useful in the conduct of its business. Each lease agreement under
which WorldPort holds an interest in leased property is in full force and
effect.
(g) Documentation; No Material Misstatements. All of the necessary
documents related to the consummation of this transaction have been provided by
WorldPort to the Lender and are true, correct and complete in all material
respects, and no written representation, warranty or statement made by WorldPort
in or pursuant to this Agreement contains or will contain, when made, any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make such representation, warranty or statement not misleading to a
prospective purchaser of securities from WorldPort, who is seeking full
information with respect to WorldPort.
9. Representations and Warranties of Lender. The Lender represents
and warrants to Borrowers as follows:
(a) Authorization and Execution. The Lender has full legal right,
power, and authority (including the due authorization by all necessary
partnership action) to enter into this Agreement and to perform the Lender's
obligations hereunder without the need for the consent of any other person; and
this Agreement has been duly authorized, executed and delivered and constitutes
the legal, valid and binding obligation of the Lender enforceable against the
Lender in accordance with the terms hereof.
(b) Risk of Loss. The Lender is in a financial position to hold the
Note until maturity and is able to bear the economic risk and withstand a
complete loss of investment in the Note.
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 7
<PAGE>
(c) Experience. The Lender has such knowledge and experience
in financial and business matters that the Lender is capable of evaluating the
merits and risks of the investment in the Note and has the net worth to
undertake such risks.
(d) Advice. The Lender has obtained, to the extent the Lender
has deemed necessary, the Lender's own professional advice with respect to the
risks inherent in the investment in the Note, and the suitability of the
investment in the Note in light of the Lender's financial condition and
investment needs.
(e) Suitable Investment. The Lender believes that the investment in
the Note is suitable for the Lender based upon the Lender's investment
objectives and financial needs, and the Lender has adequate means for providing
for the Lender's current financial needs and has no need for liquidity of
investment with respect to the Note.
(f) Risk Factors. The Lender realizes that (i) the purchase of the
Note is a long term investment; (ii) the Lender must bear the economic risk of
investment until the Note matures and because the Note has not been registered
under the Act, the Note cannot be sold unless each is subsequently registered
under the Act or an exemption from such registration is available; and (iii)
there is presently no public market for the Note and the Lender may not be able
to liquidate the Lender's investment in the event of an emergency or pledge the
Note as collateral security for loans.
(g) Own Account. The Lender acknowledges that the Note is being
purchased for the Lender's own account and for investment and without the
intention of reselling or redistributing the same, and that the Lender made no
agreement with others regarding any of such Note.
(h) No Agreements. The Lender has no agreements (written or
oral), arrangements, understandings or commitments with any other investor
subscribing for Note.
(i) Accredited Investor. The Lender is an "accredited
investor" as defined under Regulation D under the Act.
(j) Entity Representations. The Lender was not organized for
the specific purpose of acquiring the Note and has total assets in excess of
$5,000,000.
10. Securities Laws Restrictions. The Lender acknowledges the Note will
not be sold or assigned unless the Lender shall have obtained (i) an opinion of
counsel satisfactory to the Borrowers that such proposed disposition or transfer
lawfully may be made without the registration of such Note pursuant to the Act
and applicable state securities laws, or (ii) such registration.
11. Legend on Note. The Lender acknowledges that the Note will each
bear a legend conspicuously endorsed reading substantially as follows:
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 8
<PAGE>
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE THEREFORE
MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR OTHERWISE DISTRIBUTED
FOR VALUE IN THE ABSENCE OF (i) AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE MAKER THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR
OTHER DISTRIBUTION IS EXEMPT FROM (OR NOT OTHERWISE SUBJECT TO) THE
REGISTRATION (OR QUALIFICATION) AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT OR LAWS, OR (ii) SUCH REGISTRATION OR QUALIFICATION.
12. Release of Lender. Each of the Borrowers and Telenational,
respectively, on behalf of itself and its respective partners (limited and
general) and the officers, directors, managers, partners, employees, agents,
attorneys, representatives and affiliates, and respective heirs, successors and
assigns each (collectively, the "Releasing Parties"), hereby release and forever
discharge Lender and its predecessors, successors, assigns, officers, directors,
managers, shareholders, employees, agents, attorneys, representatives, parent
corporations, subsidiaries and affiliates and partners (limited and general)
(collectively, the "Released Parties") from, and waive and relinquish, any and
all actions, causes of action, suits, debts, controversies, agreements,
promises, rights, variances, trespasses, damages, judgments, executions, claims
and demands whatsoever, in law, equity or otherwise, by reason of, arising from
or in connection with, or directly or indirectly attributable to, the Original
Note, the Telenational Documents, the Collateral, the Pledged Securities, the
Loan Documents, or the administration or enforcement thereof, the negotiation,
execution, and delivery of the Loan Documents, or any course of dealing between
any of the Released Parties and any of the Releasing Parties, in connection
therewith from the beginning of time through the date of actual execution
hereof. It is expressly understood and agreed that the terms hereof are
contractual and that the release given hereby shall not be construed as an
admission of liability, any liability being expressly denied on behalf of any
and all Released Parties.
13. No Release By Lender. Lender is not releasing any claims of any kind
or nature in entering into this Agreement, including any claims arising pursuant
to the terms of the Telenational Note, unless specifically set forth herein, and
other than the release of its security interest in the Pledged Securities,
pursuant to the terms hereof.
14. Claim Preserved. Neither the execution of the Telenational Documents
nor the Loan Documents, nor the acceptance by Lender of the pledge of the
Pledged Securities pursuant to the Telenational Pledge Agreement nor the release
of such pledge of the Pledged Securities pursuant to the terms hereof shall be
deemed a waiver of rights, claims or causes of action of any kind or nature
which the Lender may have related to the Pledged Securities or the underlying
transaction pursuant to which Telenational acquired the Pledged Securities. This
provision does not create any rights of action or claims which Lender does not
otherwise have.
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 9
<PAGE>
15. Representations and Warranties True at the Closing Date. The
representations and warranties of each party hereto contained in this Agreement
shall be deemed to have been made again at and as of the Closing Date as that
term is defined herein, and shall then be true and correct. At the Closing, each
party shall have delivered to all other parties a certificate, signed by an
executive officer and dated the Closing Date, to the foregoing effect.
16. Closing. The closing shall take place in the offices of Baird
Holm, Woodmen Tower, 1700 Farnam, 16th Floor, Omaha, Nebraska, 68102 on June
20, 1997 (the "Closing Date") at 1:00 p.m. o'clock Central Standard Time.
17. Special Notices to Borrowers. THIS LOAN IS DUE IN FULL ON JANUARY 1,
1998. AT MATURITY, YOU MUST PAY THE ENTIRE UNPAID PRINCIPAL BALANCE OF THE LOAN
AND ACCRUED UNPAID INTEREST THEN DUE. THE LENDER IS UNDER NO OBLIGATION TO
REFINANCE THE LOAN AT THAT TIME. YOU WILL THEREFORE BE REQUIRED TO MAKE PAYMENT
OUT OF OTHER ASSETS YOU MAY OWN, OR YOU WILL HAVE TO FIND A LENDER WILLING TO
LEND THE MONEY AT PREVAILING MARKET RATES, WHICH MAY BE CONSIDERABLY HIGHER THAN
THE INTEREST RATE ON THIS LOAN. IF YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY
HAVE TO PAY SOME OR ALL OF THE CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN
EVEN IF YOU OBTAIN REFINANCING FROM THE SAME LENDER.
18. Costs and Expenses. Borrowers agree to pay all costs and expenses
incurred by Lender in connection with the execution and consummation of this
Agreement, including, without limitation, all recording costs of documents
evidencing the continuation of the lien granted Lender in the Collateral, and
the fees and expenses of Lender's counsel in the sum of $22,800.00, which sum
shall be paid on the Closing Date.
19. Continued Effect. Except to the extent amended hereby or in
connection herewith, all terms, provisions, and conditions of the Loan
Documents shall remain enforceable and binding in accordance with their
respective terms.
20. Governing Law. The terms and provisions hereof shall be governed
by and construed in accordance with the laws of the State of Texas.
21. Further Amendments. All of the terms and provisions of the Loan
Documents are hereby amended and modified whereby necessary, even though not
specifically addressed herein, so as to conform to the amendments and
modifications set forth herein.
22. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto, and each
of the parties hereto hereby represents, warrants, and covenants to the other
that the persons executing this Agreement on behalf of such party have full
authority, power, and authorization to execute such document and to bind its
principal.
23. Entire Agreement. This Agreement supersedes all prior oral and
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 10
<PAGE>
written agreements and understandings of the parties hereto with respect to
the subject matter hereof.
24. Headings. The headings of the sections and subsections hereof
are inserted as a matter of convenience and for reference only and in no way
define, limit or describe the scope of this Agreement or the meaning of any
provision hereof.
25. Waivers. The failure of any party to act to enforce rights hereunder
shall not be deemed a waiver and shall not preclude enforcement of any rights
hereunder. No waiver of any term or provision of this Agreement on the part of a
party shall be effective for any purpose whatsoever unless such waiver is in
writing and signed by such party.
26. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the terms hereof, such provision shall be fully severable. This Agreement shall
be construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
27. Notices. Any request, demand, authorization, direction, notice,
consent, waiver, instruction, document or other communication provided or
permitted by this Agreement to be made upon, given or furnished to, or filed
shall be sufficient for every purpose hereunder if in writing and mailed,
registered or certified mail, postage prepaid or delivered by facsimile or
telecopier (if confirmed), as follows:
If to Telenational, to:
Telenational Communications Limited Partnership
7300 Woolworth Ave.
Omaha, Nebraska 68124
Attn: Bruce Burton
With copies to:
Baird & Holm
Woodman Tower
1700 Farnam, 16th Floor
Omaha, Nebraska 68102
Attn: Rick Putnam, Esq.
If to WorldPort and TCI, to:
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 11
<PAGE>
WorldPort Communications, Inc.
9601 Katy Freeway,
Suite 200
Houston, Texas 77024
Attn: John Dalton
With copies to:
Snell & Wilmer, L.L.P.
111 East Broadway
Suite 900
Salt Lake City, Utah 84111-1004
Attn: William C. Gibbs
If to Value Partners, to:
Value Partners, Ltd.
2200 Ross Ave.
Suite 4660 W
Dallas, Texas 75201-2790
Attn: Timothy Ewing
With copies to:
Bergman, Yonks, Stein & Bird L.L.P.
4514 Travis Street
Travis Walk, Suite 300
Dallas, Texas 75205
Attn: Jack R. Bird, Esq.
28. Attorney's Fees. In the event attorneys' fees or other costs are
incurred to secure performance of any of the obligations herein provided for, or
to establish damages for the breach thereof, or to obtain any other appropriate
relief, whether by way of prosecution or defense, the prevailing party shall be
entitled to recover reasonable attorneys' fees and costs incurred therein to the
extent allowed by applicable law.
29. Further Assurances. Each party hereto agrees to execute any and all
documents, and to perform such other acts, whether before or after closing, that
may be reasonably necessary or expedient to further the purposes of this
Agreement or to further assure the benefits intended to be conferred hereby.
30. Binding Effect. This Agreement shall be binding upon and inure to the
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 12
<PAGE>
benefit of the respective heirs, successors and assigns of the parties hereto,
and each of the parties hereto hereby represents, warrants, and covenants to the
other that the persons executing this Agreement on behalf of such party have
full authority, power, and authorization to execute such document and to bind
its principal.
31. NOTICE OF INVALIDITY OF ORAL AGREEMENTS. THIS WRITTEN AGREEMENT,
THE LOAN DOCUMENTS, AND ALL EXHIBITS HERETO REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
32. Usury. All agreements between Borrowers and Lender, whether now
existing or hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of demand or acceleration of the Final
Maturity Date, as that term is defined in the Note, or otherwise, shall the
interest contracted for, charged, received, paid or agreed to be paid to Lender
exceed the maximum amount permissible under the laws of the State of Texas
(hereinafter the "Applicable Law"). If, from any circumstance whatsoever,
interest would otherwise be payable to Lender in excess of the maximum amount
permissible under the Applicable Law, the interest payable to Lender shall be
reduced to the maximum amount permissible under the Applicable Law, and if from
any circumstance Lender shall ever receive anything of value deemed interest by
the Applicable Law in excess of the maximum amount permissible under the
Applicable Law, an amount equal to the excessive interest shall be applied to
the reduction of the principal hereof and not to the payment of interest, or if
such excessive amount of interest exceeds the unpaid balance of principal
hereof, such excess shall be refunded to Borrowers. All interest paid or agreed
to be paid to Lender shall, to the extent permitted by the Applicable Law, be
amortized, prorated, allocated and spread throughout the full period (including
any renewal or extension) until payment in full of the principal so that the
interest hereon for such full period shall not exceed the maximum amount
permissible under the Applicable Law. Lender expressly disavows any intent to
contract for, charge or receive interest in an amount which exceeds the maximum
amount permissible under the Applicable Law.
33. Counterparts. This Agreement may be executed in separate or multiple
counterparts by the parties, and all of such counterparts shall be considered as
one and the same instrument notwithstanding the fact that various counterparts
are signed by only one or more of the parties, and all of such Agreements shall
be deemed but one and the same Agreement.
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 13
<PAGE>
EXECUTED as of the date first above written.
LENDER:
VALUE PARTNERS, LTD.
By: Fisher Ewing Partners,
a Texas general partnership
General Partner
By: /s/Timothy Ewing
-------------------------------
Timothy Ewing
Its: General Partner
BORROWERS:
TELENATIONAL COMMUNICATIONS, INC.
By: /s/John Dalton
------------------------------
Its: President & C.E.O.
------------------------------
WORLDPORT COMMUNICATIONS, INC.
By: /s/John Dlaton
------------------------------
Its: President & C.E.O.
------------------------------
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 14
<PAGE>
OTHER PARTY:
TELENATIONAL COMMUNICATIONS
LIMITED PARTNERSHIP
By: IMTS, Inc.
-------------------------------
General Partner
By: /s/Edmund Blankenau
-------------------------------
Its: President
-------------------------------
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FIRST AMENDED
LOAN MODIFICATION AGREEMENT, PAGE 15
THE TRANSFER OF THIS NOTE IS RESTRICTED. SEE SECTION 12 HEREIN.
SECOND AMENDED AND RESTATED
SENIOR SECURED PROMISSORY NOTE
$850,000.00 June 20, 1997
Dallas, Texas
1. Agreement to Pay. FOR VALUE RECEIVED, the receipt of which is hereby
acknowledged, the undersigned, Telenational Communications, Inc., a Delaware
corporation ("TCI") and WorldPort Communications, Inc. ("WorldPort") (WorldPort
and TCI shall hereinafter be referred to collectively as the "Maker"), promise
to pay, as joint and several obligors, to the order of VALUE PARTNERS, LTD., a
Texas limited partnership, (hereinafter referred to as the "Payee", and Payee
and each successive owner and holder of this Note being hereinafter generally
referred to as the "Holder") in the manner provided for herein of the principal
sum of
EIGHT HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($850,000.00)
together with interest on the outstanding principal balance hereof remaining
from time to time unpaid at the rate provided in Section 2 hereof. This Note
reinstates, amends, renews, restates and replaces, according to all terms as
modified herein, that certain Amended and Restated Senior Secured Promissory
Note in the principal balance of $ 850,000.00 dated as of March 20, 1997
executed by Telenational Communications Limited Partnership, a Nebraska limited
partnership ("Telenational") in favor of Payee (the ATelenational Note@), which
Telenational Note reinstated, amended, renewed, restated and replaced that
certain Unsecured Senior Promissory Note dated as of November 8, 1995 (the
"Prior Note") originally payable by Telenational to ADEN ENTERPRISES, INC.,
(hereinafter referred to as AAden@) which Prior Note was assigned and pledged by
Aden to Payee and acquired at public sale by Payee pursuant to that certain
Amended and Restated Pledge Agreement dated as of December 8, 1995. This Note is
entitled to all of the liens, benefits, priorities, rights and privileges of the
Prior Note and the Telenational Note, and related loan documents, including that
certain Pledge and Security Agreement dated March 20, 1997 by and between
Telenational and Value (the ATelenational Pledge Agreement@) and that certain
Loan Modification Agreement dated March 20, 1997 by and between Telenational and
Payee, which are hereby ratified and carried forward in full force and effect,
as modified herein, in the Pledge Agreement and in the Loan Agreement, as
defined herein. Contemporaneous with the date hereof, Maker and the Payee are
entering into that certain First Amended Loan Modification Agreement (the ALoan
Agreement@).
2. Interest Rate.
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SECOND AMENDED AND RESTATED SENIOR SECURED
PROMISSORY NOTE, PAGE 1
<PAGE>
(a) The outstanding principal balance hereof shall bear simple interest at
the rate of the lesser of fifteen percent (15%) per annum through and including
June 19, 1997 or the Highest Lawful Rate, as defined herein, and commencing June
20, 1997, the lesser of fourteen percent (14%) per annum or the Highest Lawful
Rate, as defined herein (the "Regular Rate"), computed daily on the basis of a
360 day year consisting of twelve 30-day months for each day all or any part of
the principal balance hereof shall remain outstanding, but to the extent such
computation of interest might cause the rate of interest which this Note bears
to exceed the Highest Lawful Rate, such interest shall be computed on the basis
of a three hundred sixty-five (365) day or a three hundred sixty-six (366) day
year, as the case may be. If any installment of principal and/or interest is not
paid on or before ten (10) days following the date it is due or if the entire
unpaid principal balance and accrued unpaid interest is not paid on or before
the earlier to occur of the Final Maturity Date, as defined below, or any
acceleration of payment permitted hereby, all unpaid amounts of this Note,
including principal and interest, shall thereafter bear simple interest at a
default rate of the lesser of seventeen percent ( 17%) per annum or the Highest
Lawful Rate as defined herein .
(b) "Highest Lawful Rate" shall mean at the particular time in question
the maximum rate of interest which, under Applicable Law, Payee is then
permitted to charge Maker on this Note. "Applicable Law" shall mean (i) the laws
of the United States of America applicable to contracts made or performed in the
State of Texas, now or at any time hereafter prescribing maximum rates of
interest or eliminating maximum rates of interest on loans and extensions of
credit, (ii) the laws of the State of Texas including, without limitation,
Article 5069-1.04 of the Texas Revised Civil Statutes Annotated, as the same may
be amended from time to time ("Article 1.04"), now or at any time hereafter
prescribing or eliminating maximum rates of interest on loans and extensions of
credit, and (iii) any other laws at any time applicable to contracts made or
performed in the State of Texas which permit a higher interest rate ceiling
hereunder. If the maximum rate of interest which, under Applicable Law, Payee is
permitted to charge Maker on this Note shall change after the date hereof, the
Highest Lawful Rate shall be automatically increased or decreased, as the case
may be, from time to time as the effective date of each change in the Highest
Lawful Rate without notice to Maker. For purposes of determining the Highest
Lawful Rate under the Applicable Law of the State of Texas, the applicable rate
ceiling shall be the indicated rate ceiling described in and computed in
accordance with the provisions of section (a)(1) of Article 1.04; provided,
however, that in determining the Highest Lawful Rate, all fees and other charges
contracted for, charged or received by Payee in connection with the loan
evidenced by this Note which are either deemed interest under Applicable Law or
required under Applicable Law to be deducted from the principal balance hereof
to determine the rate of interest charged by this Note shall be taken into
account. To the extent permitted by Applicable Law, Payee may from time to time
substitute for the "indicated rate ceiling" referred to above any ceiling under
Article 1.04 or any other statute and revise the rate, index, formula or
provision of law used to compute the rate hereunder as provided therein.
(c) All agreements between Maker and Payee, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
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SECOND AMENDED AND RESTATED SENIOR SECURED
PROMISSORY NOTE, PAGE 2
<PAGE>
contingency, whether by reason of demand or acceleration of the Final Maturity
Date or otherwise, shall the interest contracted for, charged, received, paid or
agreed to be paid to Payee exceed the maximum amount permissible under
Applicable Law. If, from any circumstance whatsoever, interest would otherwise
be payable to Payee in excess of the maximum amount permissible under the
Applicable Law, the interest payable to Payee shall be reduced to the maximum
amount permissible under the Applicable Law, and if from any circumstance Payee
shall ever receive anything of value deemed interest by the Applicable Law in
excess of the maximum amount permissible under the Applicable Law, an amount
equal to the excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive amount
of interest exceeds the unpaid balance of principal hereof, such excess shall be
refunded to Maker. All interest paid or agreed to be paid to Payee shall, to the
extent permitted by the Applicable Law, be amortized, prorated, allocated and
spread throughout the full period (including any renewal or extension) until
payment in full of the principal so that the interest hereon for such full
period shall not exceed the maximum amount permissible under the Applicable Law.
Payee expressly disavows any intent to contract for, charge or receive interest
in an amount which exceeds the maximum amount permissible under the Applicable
Law. This paragraph shall control all agreements between Maker and Payee.
3. Pledge Agreement. Maker shall, upon execution of this Note and as partial
consideration for permitting the amendment, renewal, reinstatement, replacement
and extension of the Telenational Note, as amended, execute and cause to be
delivered to Bergman, Yonks, Stein & Bird, L.L.P., to the benefit of Payee, that
certain First Amended Pledge and Security Agreement (the APledge Agreement@),
which Pledge Agreement reinstates, amends, renews, restates and replaces the
Telenational Pledge Agreement, which Pledge Agreement is attached hereto as
Exhibit AA@, which by this reference is incorporated herein.
4. Payments. All accrued unpaid interest through June 19, 1997 in the amount of
$15,880.79 together with unpaid principal in the sum of $262,278.06 (which sum
shall reduce the unpaid principal obligation of the Note from $762,278.06 to
$500,000) shall be due and payable June 23, 1997. Commencing September 1, 1997
and on the first day of each of the four successive calendar months thereafter,
Maker shall pay monthly the sum of $100,000 as reduction of principal owing
hereunder, together with accrued unpaid interest due on such date of payment.
All accrued unpaid interest, together with all unpaid principal and any other
sums due pursuant to the terms hereof shall be due and payable January 1, 1998
(the "Final Maturity Date"). In addition, Maker shall, not later than June 23,
1997, pay attorney's fees, costs and expenses incurred by Payee in the
restructuring, enforcement and collection of the Telenational Note. All payments
to be made by Maker to the Payee hereunder shall be made to the Payee at 2200
Ross Avenue, Suite 4660 West, Dallas, Texas 75201, not later than 4:00 p.m.
Central Time on the date when due in lawful money of the United States and
immediately available funds. The Maker will promptly and punctually pay when due
(whether on a scheduled payment date or at maturity or upon the prepayment of
such Note) the principal of and interest on the Note, without any presentment
thereof, directly to the Holder of the Note at the address of such Holder shown
in the register maintained by the Maker for such purposes or at such other
address as the Holder may from time to time designate in writing to the Maker
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PROMISSORY NOTE, PAGE 3
<PAGE>
or, if a bank account is designated in any written notice to Maker from the
Holder, the Maker will make such payments by wire transfer or other immediately
available funds to such bank account, marked for attention as indicated, or in
such other manner or to such other account of the Holder in any bank in the
United States as such holder may from time to time direct in writing. The Holder
of the Note agrees that in the event it shall sell or transfer the Note it will,
prior to the delivery of the Note, make a notation thereon of all principal, if
any, prepaid on such Note and will also note thereon the date to which interest
has been paid on such Note. Upon repayment in full of the Note, the Holder of
the Note shall deliver such Note to the Maker for cancellation.
5. Affirmative Covenants. Each Maker covenants and agrees that so long as
the Note shall be outstanding:
(a) Principal and interest. Maker will pay or cause to be paid
punctually the principal of and interest on the Note at the times
and places and in the manner specified in the Note.
(b) Maintenance of existence. Maker will at all times do or cause to be
done all things necessary to maintain, preserve and renew its
existence and its rights, patents and franchises.
(c) Maintenance of Properties, Etc. TCI shall maintain its material
properties and assets in working order and condition and make all
necessary repairs, renewals, replacements, additions, betterments
and improvements thereto, so that the business carried on in
connection therewith may be conducted at all usual and ordinary
times.
(d) Compliance with laws. Maker will comply with all applicable
laws, rules, regulations, and orders of the United States of
America and of all foreign countries and of any state or
municipality, and of any instrumentality or agency of any thereof
(including applicable statutes, regulations, orders and
restrictions relating to equal employment opportunities and
environmental standards or controls) in respect of the conduct of
business and the ownership of property by Maker.
(e) Insurance. TCI will maintain adequate insurance with financially
sound and reputable insurance companies in such amounts and covering
such risks as is customarily carried by companies engaged in similar
businesses and similarly situated as TCI. TCI shall notify Holder of
any cancellations or material changes within five (5) business days
of notice of such cancellation or change.
(f) Taxes, assessments and other charges. Maker will pay punctually and
discharge when due and payable: (i) all taxes, assessments and other
governmental charges levied or imposed upon it or upon its income,
profits or properties and (ii) all claims (including, without
limitation, claims for labor, materials, supplies or services) which
might, if unpaid, become a lien upon any property of Maker.
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PROMISSORY NOTE, PAGE 4
<PAGE>
(g) Indebtedness. Maker will pay punctually and discharge when due and
payable any indebtedness heretofore or hereafter incurred or assumed
by it and discharge, perform and observe the covenants, provisions
and conditions to be discharged, performed and observed on the part
of Maker in connection therewith, or in connection with any
agreement or other instrument relating thereto.
(h) Books. Maker will keep at all times proper books of record and
account in which full, true and correct entries will be made of its
transactions in accordance with Generally Accepted Accounting
Principles.
(i) Statements, reports and certificates to be delivered by WorldPort.
From the date hereof and so long as the Holder shall hold the Note,
WorldPort will deliver to Holder at the address shown in the
register maintained by WorldPort the following:
(i) Quarterly financial statements. As soon as reasonably
possible, and in any event within 45 days after the close
of each of the first three fiscal quarters of WorldPort in
each fiscal year, (1) the unaudited consolidated balance
sheet of WorldPort and TCI as of the end of such period,
setting forth in comparative form the corresponding
figures for the preceding fiscal year end, and (2) the
unaudited consolidated statements of income and retained
earnings and cash flows of WorldPort and TCI for such
quarter and for the portion of the fiscal year ended with
such quarter and setting forth in comparative form the
corresponding figures for the corresponding periods of the
preceding fiscal year, all in reasonable detail and
certified by a principal financial officer of WorldPort
subject to year-end audit adjustments.
(ii) Other reports and statements. Promptly upon the mailing
to its equity holders of each annual report or other
report or communication, a copy of each such report or
communication; and promptly upon any filing by WorldPort
with the Securities and Exchange Commission, or any
governmental agency or agencies substituted therefor, or
with any national securities exchange, of any annual of
periodic or special report or registration statement, a
copy of such report or statement.
(j) Certificate of Default. Maker will deliver to the Holder,
forthwith upon becoming aware of any default or defaults in the
performance of any covenant, agreement or condition contained in
the Note and any related document, including the Pledge Agreement
(including notice of any event which with the giving of notice,
lapse of time or both would become an Event of Default), an
Officer=s= Certificate specifying such default or event of
default.
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SECOND AMENDED AND RESTATED SENIOR SECURED
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<PAGE>
(k) Additional information. Maker will deliver to Holder such other data
and information as from time to time may be reasonably requested by
the Holder.
(l) Other Documents. Maker will comply with all other convenants,
representations, warranties, terms and obligations of any document
related hereto, including that certain Loan Agreement and Pledge
Agreement.
6. Negative Covenants. Each Maker covenants and agrees that so long as
the Note shall be outstanding:
(a) Guarantees. TCI will not guarantee, directly or indirectly, any
obligation or indebtedness of any other Person. "Person" shall
include any individual, a corporation, a partnership, a business
entity, or a government, foreign or domestic, or any agency or
political subdivision thereof.
(b) Disposition of assets. TCI will not sell, assign, lease, transfer
or otherwise dispose of all or any portion of its properties or
assets to any third party, in any transaction or series of
transactions.
(c) Senior Debt. Subsequent to the date hereof, Maker will not incur,
create, assume or at any time become liable, contingently or
otherwise for any borrowed or other indebtedness that is senior in
right of payment to the obligations created herein. Nothing herein
shall be construed to permit the issuance of any indebtedness that
would be secured by any Collateral granted to the Payee to secure
the terms herein.
7. Negotiability; Offsets, Defenses or Counterclaims. This Note is freely
negotiable. The respective Maker knows of no defenses, setoffs, or counterclaims
existing as of the date hereof which could be asserted or brought by the
respective Maker or any other party in any suit or action for the collection of
any sum due hereunder.
8. Event of Default. An Event of Default shall mean the occurrence or
existence of any one or more of the following events, whether such occurrence
is voluntary or involuntary or comes about or is effected by operation of law
or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
authority: If either Maker
a. should fail to pay the principal of, or interest on, this Note
as and when due and payable, which failure shall continue for a
period of twenty (20) days;
b. shall fail to perform or observe any term, covenant, or agreement
contained herein, in the Loan Agreement, in the Pledge Agreement or
any document related hereto, which failure shall continue for a
period of twenty (20) days after Payee gives Maker notice of such
failure;
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SECOND AMENDED AND RESTATED SENIOR SECURED
PROMISSORY NOTE, PAGE 6
<PAGE>
c. If any representation, warranty or other statement of fact herein,
in the Loan Agreement or in the Pledge Agreement, or in any writing,
certificate, report or statement at any time furnished to Payee
pursuant to or in connection herewith shall be false or misleading
in any material respect; or
d. admit in writing either of their respective inability to pay
debts generally as they become due; files a petition for relief
under the bankruptcy laws or a petition to take advantage of any
insolvency act; makes an assignment for the benefit of creditors;
commences a proceeding for the appointment of a receiver,
trustee, liquidator or conservator of itself or the whole or any
substantial part of its property; files a petition or answer
seeking reorganization or arrangement or similar relief under the
Federal Bankruptcy Laws or any other applicable law or statute of
the United States or any State; is adjudged a bankrupt or
insolvent, or a court of competent jurisdiction shall enter any
order, judgment or decree appointing a receiver, trustee,
liquidator or conservator of either Maker or of the whole or any
substantial part of the property of either Maker or approves a
petition filed against either Maker seeking reorganization or
similar relief under the Federal Bankruptcy Laws or any other
applicable law or statute of the United States or any State; or
if, under the provisions of any other law for the relief or aid
of either Maker, a court of competent jurisdiction shall assume
custody or control of either Maker or the whole or any
substantial part of its property; or if there is commenced
against either Maker any proceeding for any of the foregoing
relief; or if either Maker, by any act indicates its consent to
approval of, or acquiescence in any such proceeding; either Maker
generally, does not pay, or shall be unable to pay, or shall
admit in writing its inability to pay its debts as such debts
become due; or
e. If any creditor of either Maker for any reason whatsoever hereafter
shall accelerate payment in whole or in part of any outstanding
material obligation owed to it by either Maker under any agreement
or arrangement, or if any judgment against either Maker or any
execution against any of its property of either Maker for any amount
remains unpaid, unstayed or undismissed for a period in excess of
ten days; or
f If either Maker shall cease to exist.
It is understood and agreed that time is of the essence in the performance
of the Note. If an Event of Default exists, then the Note at the time
outstanding shall immediately become due and payable together with interest
accrued thereon without presentment, demand, protest or notice of any kind,
including notice of intent to accelerate the payment of the unpaid balance of
the Note or of notice of acceleration, all of which are hereby waived by the
Maker. The Holder of the Note may also proceed to protect and enforce its rights
against either or both Maker either by suit in equity and/or by action at law,
or by other appropriate proceedings, whether for the specific performance (to
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SECOND AMENDED AND RESTATED SENIOR SECURED
PROMISSORY NOTE, PAGE 7
<PAGE>
the extent permitted by law) of any covenant or agreement contained in such
Note, or in aid of the exercise of any power granted in such Note, or may
proceed to enforce the payment of such Note or to enforce any other legal or
equitable right of the holder of such Note.
9. Notices. Any request, demand, authorization, direction, notice, consent,
waiver, or other document provided or permitted by this Note to be made upon,
given or furnished to, or filed with the Maker shall be sufficient for every
purpose hereunder if in writing and mailed, registered or certified mail,
postage prepaid, or delivered by facsimile or telecopy to each Maker, addressed
to each Maker at 9601 Katy Freeway, Suite 200, Houston, Texas 77024, telecopier
number (713) 461-8098, (or such other address, or telecopier number, as the
respective Maker may from time to time direct). Any notice to Payee shall be
sufficiently given if in writing and mailed, registered or certified mail,
postage prepaid, to the address set forth herein (or such other address as Payee
may from time to time direct). Any notice to a Holder (other than Payee) shall
be sufficiently given if in writing and mailed, registered or certified mail,
postage prepaid, to such address as Holder shall from time to time direct.
10. Consents, Waivers and Modifications. No term, covenant, agreement or
condition of the Note may be amended, supplemented or modified, or compliance
therewith waived (either generally or in a particular instance and either
retroactively or prospectively), except pursuant to a written instrument signed
by the Maker and the Holder. No course of dealing between the Maker and the
Holder of the Note or any delay or failure on the part of the Holder of the Note
in exercising any rights hereunder shall operate as a waiver of any rights of
such holder.
11. Governing Law. THIS NOTE SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES
OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF TEXAS.
WHENEVER POSSIBLE EACH PROVISION OF THIS NOTE SHALL BE INTERPRETED IN SUCH
MANNER AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION
OF THIS NOTE SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH
PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY,
WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS
OF THIS NOTE. WHENEVER IN THIS NOTE REFERENCE IS MADE TO THE PAYEE OR THE MAKER,
SUCH REFERENCE SHALL BE DEEMED TO INCLUDE, AS APPLICABLE, A REFERENCE TO THEIR
RESPECTIVE SUCCESSORS AND ASSIGNS. THE PROVISIONS OF THIS NOTE SHALL BE BINDING
UPON AND SHALL INURE TO THE BENEFIT OF SUCH SUCCESSOR AND ASSIGNS. THE MAKER'S
SUCCESSORS AND ASSIGNS SHALL INCLUDE, WITHOUT LIMITATION, A RECEIVER, TRUSTEE OR
DEBTOR IN POSSESSION FOR THE MAKER.
12. Securities Laws. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE
THEREFORE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR OTHERWISE
DISTRIBUTED FOR VALUE IN THE ABSENCE OF (i) AN OPINION OF COUNSEL REASONABLY
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SECOND AMENDED AND RESTATED SENIOR SECURED
PROMISSORY NOTE, PAGE 8
<PAGE>
ACCEPTABLE TO THE MAKER THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE OR OTHER
DISTRIBUTION IS EXEMPT FROM (OR NOT OTHERWISE SUBJECT TO) THE REGISTRATION (OR
QUALIFICATION) AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT OR LAWS, OR (ii)
SUCH REGISTRATION OR QUALIFICATION.
13. Attorneys Fees. In the case of a default, the Maker shall pay to the Holder,
to the extent permitted by law, such further amount as shall be sufficient to
cover the cost and expense of collection, including (without limitation)
reasonable attorneys' fees, costs and expenses.
14. Waiver of Protest. The Maker expressly waives demand, grace, notice of
intent to accelerate, notice of acceleration, presentment for payment, and
protest, and further agrees that this Note and the Pledge Agreement may be
renewed, and the time for payment extended without notice.
15. Successors and Assigns. All the covenants, stipulations, promises and
agreements in this Note contained by or on behalf of the Maker shall bind its
successors and assigns, whether so expressed or not.
16. Headings. The headings of the Sections of this Note are inserted for
convenience only and shall not be deemed to constitute a part of this Note.
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SECOND AMENDED AND RESTATED SENIOR SECURED
PROMISSORY NOTE, PAGE 9
<PAGE>
IN WITNESS WHEREOF, the Maker has caused this Note to be duly executed and
delivered as of the date first above written.
WORLDPORT COMMUNICATIONS, INC.
By: /s/John Dalton
---------------------------------
Its: President & C.E.O.
---------------------------------
TELENATIONAL COMMUNICATIONS, INC.
By: /s/John Dalton
---------------------------------
Its: President & C.E.O.
---------------------------------
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SECOND AMENDED AND RESTATED SENIOR SECURED
PROMISSORY NOTE, PAGE 10
FIRST AMENDED
PLEDGE AND SECURITY AGREEMENT
June 20, 1997
Omaha, Nebraska
This FIRST AMENDED PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated
as of June 20, 1997, is entered into by and between Telenational Communications,
Inc., a Delaware Corporation ("the Pledgor") and Value Partners, Ltd., a Texas
limited partnership (the "Secured Party"), in order to secure the payment of the
indebtedness hereinafter referred to of Pledgor
to the Secured Party.
R E C I T A L S
1. On or about November 8, 1995, Telenational Communications Limited
Partnership, a Nebraska limited partnership ("Telenational") executed as maker
that certain Unsecured Senior Promissory Note (the "Original Note") in the
principal sum of Eight Hundred Fifty Thousand and no/l00 Dollars ($850,000.00)
to Aden Enterprises, Inc., d/b/a ECDI, Inc., as Payee ("Aden"). The Original
Note was pledged and assigned by Aden to the Secured Party and acquired at
public sale by the Secured Party pursuant to that certain Amended and Restated
Pledge Agreement executed by Aden in favor of the Secured Party and dated as of
December 8, 1995.
2. Telenational defaulted on the Original Note. As a condition to and in
consideration of the Secured Party reinstating, renewing, and extending the
Original Note to Telenational in the amount of $850,000.00, Telenational agreed
(i) to enter into and execute that certain Amended and Restated Promissory Note
dated March 20, 1997 (the "Telenational Note"), and (ii) to pledge to the
Secured Party (a) all of the personal property of Telenational, including that
set forth in Exhibit "A" attached hereto and made a part hereof, (the "Personal
Property") and (b) 850,000 shares of Series A noncumulative Preferred Stock of
Enhanced Telecommunications Services, Inc., owned by Telenational, (the "Pledged
Securities") pursuant to that certain Pledge and Security Agreement dated March
20, 1997 (the "Telenational Pledge Agreement"). The Telenational Note, that
certain Loan Modification Agreement dated March 20, 1997 by and between Secured
Party and Telenational, the Telenational Pledge Agreement and all financing
statements and related documents shall be referred to herein as the
"Telenational Documents".
3. Pledgor desires to acquire the Personal Property from Telenational, subject
to the security interest granted the Secured Party in the Telenational Pledge
Agreement. WorldPort Communications, Inc. ("WorldPort") and Telenational entered
into that certain Asset Purchase Agreement dated April 23, 1997 (the "Asset
Purchase Agreement"), pursuant to which TCI, as assignee of WorldPort, is to
acquire the Personal Property, subject to the security interest of Secured
Party, as modified in the Loan Documents (as that term is defined herein).
Pledgor and its parent, WorldPort, have executed that certain Second Amended and
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 1
<PAGE>
Restated Senior Secured Promissory Note (the "Note") and that certain First
Amended Loan Modification Agreement (the "Loan Agreement") and the Pledgor has
executed this Agreement. The Note, this Agreement, the Loan Agreement, that
certain Certificate of No Oral Agreements, financing statements as amended by
the Pledgor (the "Financing Statements") and all related documents shall be
referred to herein as the "Loan Documents". This Agreement is entitled to all of
the liens, benefits, priorities, rights and privileges, as amended, reinstated,
restated, replaced, modified and granted herein and in the other Loan Documents,
which are hereby ratified and carried forward in full force and effect, of the
Original Note and the Telenational Documents.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein shall have the
meaning specified herein.
Section 2. Pledge.
(a) Pledgor Pledgor hereby pledges, assigns, transfers, and delivers to
the Secured Party, and hereby grants a security interest, and renews,
assumes and affirms the existing security interest of Secured Party in
the following (the "Collateral"): (a) the Personal Property, and (b)
all of the property compromising the Personal Property , and all
proceeds thereof and all substitutions, replacements and accessions
thereto. Cash proceeds from the Collateral shall promptly be delivered
to the Secured Party and shall, at the option of the Secured Party, be
held as Collateral for the Note and/or be applied to the obligations
of the Pledgor and WorldPort arising under the Loan Documents.
(b) The pledge of the Collateral shall be referred to herein as the
"Security Interest".
(c) Pledgor assumes all obligations of Telenational under the Telenational
Pledge Agreement, as modified herein. This Agreement amends, renews,
restates, reinstates replaces and affirms the security interest
granted Pledgor in the Telenational Pledge Agreement, as modified
herein, and the Pledgor expressly affirms that such priority created
therein is affirmed herein.
Section 3. Secured Obligations. The Security Interest shall secure, under
the circumstances set forth herein, the Secured Obligations. For purposes of
this Agreement, the term "Secured Obligations" shall mean the following (i) the
due and punctual payment and performance of the Note, and (ii) the reimbursement
of all costs incurred by the Secured Party to maintain, preserve and enforce the
Note, the Loan Agreement and this Agreement, collect the Secured Obligations and
maintain and preserve the Collateral, including without limitation the Secured
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 2
<PAGE>
Party's reasonable attorneys' fees, disbursements and legal expenses, and all
expenditures by Secured Party for taxes, insurance and repairs to and
maintenance of the Collateral.
Section 4. Pledgor's Obligations to Pay. Pledgor shall pay and perform all
of the Secured Obligations and any and all obligations set forth in the Loan
Documents as the same may become due according to their terms. Pledgor shall be
liable for, and shall reimburse to Secured Party, all expenses, including
reasonable attorneys= fees, incurred or paid in connection with establishing,
perfecting, maintaining, protecting or enforcing any of Secured Party=s rights
and remedies hereunder, including in, retaking, holding, preparing for sale or
lease, or selling and leasing, and the like, the Collateral.
Section 5. Protection of the Collateral. Pledgor shall defend the title to
the Collateral against all claims and demands whatsoever. Other than those
encumbrances set forth in Exhibit "B", attached hereto and by this reference
incorporated herein, Pledgor shall keep the respective Collateral free and clear
of all liens, charges, encumbrances, taxes and assessments, and shall pay all
taxes, assessments and fees relating to the Collateral. Upon request by Secured
Party, Pledgor, at the Pledgor's expense, shall furnish further assurances of
title, execute any further instruments and documents, and do any other acts,
that Secured Party may request, necessary to effectuate the purposes and
provisions of this Agreement, including, in order to perfect and protect the
Security Interest granted or purported to be granted hereby or to enable the
Secured Party to exercise and enforce the rights and remedies hereunder with
respect to any Collateral.
Pledgor shall not further sell, exchange, assign, transfer or otherwise
dispose of the Collateral, and shall not further encumber, hypothecate,
mortgage, create a lien on or security interest in the Collateral, without the
prior written consent of Secured Party in each instance. The risk of loss of the
Collateral at all times shall be borne by the Pledgor. Pledgor shall keep the
Collateral in good repair and condition and shall not misuse, abuse or waste the
Collateral or allow the Collateral to deteriorate except for normal wear and
tear.
Pledgor at all times shall maintain: (a) insurance covering the Collateral
and all other property of Pledgor against loss or damage by fire and other
hazards; (b) insurance against liability on account of damage to persons and
property; (c) all insurance required under applicable workmen=s compensation
laws; and (d) insurance covering such other risks as Secured Party reasonably
may request. Such insurance shall be in amounts satisfactory to Secured Party,
shall be maintained with responsible insurance carriers, shall name Pledgor and
Secured Party as their interests may appear as insured, and shall provide for at
least thirty (30) days notice to Secured Party prior to cancellation. Pledgor
from time to time, shall upon Secured Party=s written request, promptly furnish
or cause to be furnished to Secured Party evidence of the maintenance of all
insurance required to be maintained hereunder, including such originals or
copies of policies, certificates of insurance, riders and endorsements relating
thereto and proof of payment of premiums as Secured Party may request. If
Pledgor shall fail to maintain any such insurance, Secured Party may, but shall
not be obligated to, do so at the expense of Pledgor, in addition to the other
rights and remedies of Secured Party. Pledgor hereby appoints Secured Party the
attorney in fact of Pledgor for purposes of obtaining, adjusting and canceling
any such insurance and endorsing settlement drafts, and hereby assigns to
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 3
<PAGE>
Secured Party all sums which may become payable under such insurance, including
returned premiums and dividends, as additional security for the Secured
Obligations.
The Collateral shall be kept at Pledgor's place of business at 7300
Woolworth Ave., Omaha, Nebraska 68124, except for temporary removal in
connection with its ordinary use or unless Pledgor shall have obtained the prior
written consent of Secured Party for its removal to another location. Secured
Party shall have the right to enter upon Pledgor's premises at any reasonable
time, and from time to time, to inspect the Collateral.
Section 6. Filing and Recording. Pledgor shall execute and deliver to
Secured Party any financing statements, and shall procure for Secured Party any
other documents, necessary or appropriate to protect the security interest
granted, renewed, amended, reinstated, assumed and extended to Secured Party
hereunder and in the Telenational Pledge Agreement against the rights and
interests of third parties, and shall cooperate with the Secured Party to cause
the same to be duly filed in all places necessary to perfect the security
interest of Secured Party in the Collateral. In the event that any recording or
refiling thereof (or filing of any statements of continuation or assignment of
any financing statement) is required to protect and preserve such security
interest, Pledgor, at its own cost and expense, shall cause the same to be
re-recorded and/or refiled at the time and in the manner requested by Secured
Party. Pledgor hereby authorizes Secured Party to file or refile any financing
statements, continuation statements, and/or amended statements with respect to
the security interest granted pursuant to this Agreement which at anytime may be
required or appropriate, although the same may have been executed only by
Secured Party, and to execute such financing statement on behalf of Pledgor.
Pledgor hereby irrevocably designates Secured Party, its agents, representatives
and designees, as agent and attorney-in-fact for Pledgor for the aforesaid
purposes.
Section 7. Representations and Warranties.
Pledgor represents and warrants to the Secured Party as follows:
(i) Pledgor is not in default under any indenture, mortgage, deed of
trust, agreement or other instrument to which it is a party or by which it
may be bound. Neither the execution nor the delivery of this Agreement,
nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof, will violate any law or regulation,
or any order or decree of any court or governmental authority, or will
conflict with, or result in the breach of, or constitute a default under,
any indenture, mortgage, deed or trust, agreement or other instrument to
which Pledgor is a party or by which Pledgor may be bound, or result in
the creation or imposition of any lien, claim or encumbrance upon any
property of Pledgor.
(ii) Pledgor has the power to execute, deliver and perform the
provisions of this agreement and all instruments and documents delivered
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 4
<PAGE>
or to be delivered pursuant hereto, and has taken or caused to be taken
all necessary or appropriate actions to authorize the execution, delivery
and performance of this Agreement and all such instruments and documents.
(iii) The property described on Exhibit "A" hereto is all personal
property of any kind or nature owned, either directly or indirectly, by
Pledgor as of closing of the Asset Purchase Agreement.
(iv) Pledgor is the legal and equitable owner of the Collateral,
subject to the interest therein granted Secured Party. The ownership by
Pledgor of the Collateral is free and clear of all security interests,
liens, claims and encumbrances of every kind and nature, except as set
forth in Exhibit "B" hereto. Except as may be set forth in Exhibit "B"
annexed hereto, no financing statement covering the Collateral or its
proceeds is on file in any public office. Nothing herein shall be
construed either as a consent by Secured Party to the validity of such
encumbrances or as a waiver of Secured Party's right to contest such
encumbrances.
(v) No default exists, and no event which with notice or the
passage of time or both, would constitute a default under the Collateral
by any part thereto, and there are no offsets, claims or defenses against
the obligations evidenced by the Collateral, except as may be expressly
set forth in Exhibit "B" annexed hereto.
(vi) The Security Interest constitutes a valid and, upon
delivery of documents necessary to perfect the Secured Party=s security
interest in the Collateral, a perfected security interest in the
Collateral for payment and performance of the Secured Obligations, subject
only to those liens and encumbrances of record as set forth in Exhibit "B"
attached hereto and by this reference incorporated herein.
All representations and warranties of Pledgor contained herein shall
survive the execution, delivery and performance of this Agreement until
termination of this Agreement under Section 20.
Section 8. Release of Collateral. The Pledgor shall not sell or otherwise
dispose of the Collateral, or any part thereof or any interest therein. If the
Collateral, or any part thereof, is sold or otherwise disposed of in violation
of these provisions, the Security Interest of the Secured Party shall continue
in such Collateral or any part thereof notwithstanding such sale or other
disposition, and Pledgor will deliver any proceeds thereof to the Secured Party
to be, at the option of the Secured Party, held as Collateral hereunder, and/or
be applied to the obligations of the Pledgor.
Section 9. Secured Party Appointed Attorney-in-Fact. Pledgor hereby
irrevocably appoints the Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of any Pledgor and in its name or otherwise,
from time to time in the Secured Party's discretion, to take any action and to
execute any instrument that the Secured Party may deem reasonably necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation, to receive, endorse and collect all instruments made payable to
Pledgor representing any dividend, interest payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for the
same, when and to the extent permitted by this Agreement.
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<PAGE>
Section 10. Secured Party May Perform. Upon the occurrence and during the
continuance of an Event of Default (including an Event of Default resulting from
a failure to perform any agreement contained herein), if the Pledgor fails to
perform any agreement contained herein, the Secured Party may itself perform, or
cause performance of, such agreement, and the expenses of the Secured Party
incurred in connection therewith shall be payable by Pledgor under Section 15.
Section 11. Reasonable Care. The Secured Party shall have an obligation to
exercise reasonable care with respect to Collateral in its possession; provided,
however, that the Secured Party shall be deemed to have exercised reasonable
care if the Collateral is accorded treatment substantially comparable to that
which the Secured Party accords its own property or treatment substantially in
accordance with actions requested by Pledgor in writing (although the Secured
Party shall not be obligated to comply with any such requests and no failure to
do so shall be deemed to be a failure to exercise reasonable care).
Section 12. Events of Default
The occurrence of any one or more of the following events (hereinafter
referred to as AEvents of Default@) shall constitute a default hereunder,
whether such occurrence is voluntary or involuntary or comes about or is
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental authority:
(a) If a default in the payment of any principal or interest due
under the Note shall occur; or
(b) If a failure to pay, perform or observe any covenant, agreement,
term or provision of the Loan Documents, or any other agreement or
arrangement now or hereafter entered into between the parties to the
Loan Documents shall occur; or
(c) If any Event of Default shall occur under the terms of the Note
or the Loan Agreement.
(d) If there shall occur any reduction in the value of the
Collateral or any act of any of the Pledgor which imperils the
prospect of the full performance or satisfaction of the Secured
Obligations; or
(e) If all of or any part of the Collateral shall be sold,
transferred or assigned, or shall be further encumbered,
hypothecated, mortgaged, or made subject to any other lien or
security interest, without the prior written consent of Secured
Party.
Section 14. Remedies
If upon or after the occurrence of any Event of Default, the Secured Party
elects to exercise remedies under this Agreement (the occurrence of any such
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 6
<PAGE>
event shall be referred to as an "Acceleration"), then upon minimum notice
required by applicable law the Secured Obligations shall immediately become due
and payable in full without notice or demand and the following provisions shall
apply:
(a) The Secured Party may, with or without notice to Pledgor,
foreclose the security interest created herein by any available
judicial procedure, or take possession of the Collateral, or any
portion thereof, with or without judicial process, and enter any
premises where the Collateral may be located for the purpose of
taking possession of or removing the same, or rendering the same
unusable, or disposing of the Collateral on such premises, and
Pledgor agrees not to resist or interfere therewith;
(b) The Secured Party may require Pledgor to prepare, assemble or
collect the Collateral, at Pledgor's own expense, and make the same
available to Secured Party at such place as Secured Party may
designate, whether at Pledgor's premises or elsewhere;
(c) The Secured Party may exercise (in compliance with all
applicable securities laws) in respect of the Collateral, in
addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured
party after default under the Uniform Commercial Code in effect in
the State of Texas at that time, and the Secured Party may also,
without notice except as specified below, sell with or without
representations or warranties, the Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange, over
the counter or at the Secured Party's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices
and upon such other terms as the Secured Party may in its sole
discretion deem commercially reasonable or otherwise in such manner
as necessary to comply with applicable federal and state securities
laws. Upon consummation of any such sale, the Secured Party shall
have the right to assign, transfer and deliver to the purchaser or
purchasers at any such sale and such purchasers shall hold the
property sold absolutely, free from any claim or right on the part
of any Pledgor, and Pledgor hereby waives (to the extent permitted
by Law) all rights of redemption, stay or appraisal that it now has
or may at any time in the future have under any rule of law or
statute now existing or hereafter enacted;
(d) The Secured Party may execute and deliver documents of title,
certificates of origin, or other evidence of payment, shipment or
storage of any Collateral or proceeds on behalf of and in the name
of Pledgor;
(e) Should Pledgor fail to cure any default within three (3)
business days of receiving written notice of such default from the
Secured Party the Secured Party may remedy any default by Pledgor
hereunder, without waiving such default, and any monies expended in
so doing shall be chargeable with interest to Pledgor and added to
the Secured Obligations secured hereby;
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 7
<PAGE>
(f) The Secured Party may apply for a temporary restraining order,
and/or an injunction to restrain a breach or threatened breach of
this Agreement by Pledgor;
(g) Pledgor agrees that the Secured Party shall not be required to
register or qualify any of the Collateral under applicable state or
federal securities laws in connection with any such sale if the sale
is effected in a manner that complies with all applicable federal
and state securities laws or exemptions therefrom. The Secured Party
shall be authorized at any such sale (if it deems it advisable to do
so) to restrict the prospective bidders or purchasers to persons who
will represent and agree that they are purchasing the Collateral for
their own account for investment and not with a view to the
distribution or sale thereof. In the event that any such Collateral
is sold at private sale, Pledgor agrees that if such Collateral is
sold for a price that the Secured Party in good faith believes to be
reasonable under the circumstances then existing, then (a) the sale
shall be deemed to be commercially reasonable in all respects, (b)
Pledgor shall not be entitled to a credit against the Secured
Obligations in an amount in excess of the purchase price, and (c)
the Secured Party shall not incur any liability or responsibility to
Pledgor in connection therewith, notwithstanding the possibility
that a substantially higher price might have been realized at a
public sale. Pledgor hereby waives any claims against the Secured
Party arising by reason of the fact that the price at which the
Collateral may have been sold at such private sale was less than the
price which might have been obtained at a public sale or was less
than the Secured Obligations, even if the Secured Party accepts the
first offer received and does not offer the Collateral to more than
one offeree (other than the Secured Party or an affiliate of the
Secured Party), unless such sale was not commercially reasonable
under the circumstances;
(h) To the extent notice of sale shall be required by law, the
Secured Party shall give the Pledgor at least ten (10) days' (or
such longer period as shall be specified by applicable laws) notice
of the time and place of any public sale or the time after which any
private sale is to be made, which Pledgor agrees shall constitute
commercially reasonable notification. At any such sale, the Secured
Party, to the extent permitted by law, may bid (which bid may be, in
whole or in part, in the form of cancellation of Secured
Obligations) for and purchase for the account of the Secured Party
the whole or any part of the Collateral. The Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made
at the time and place to which it was so adjourned. If sale of all
or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Secured
Party until the sale price is paid by the purchaser or purchasers
thereof, but the Secured Party shall not incur any liability in case
any such purchaser or purchasers shall fail to take up and pay for
the Collateral so sold and, in case of any such failure, such
Collateral may be sold again upon like notice. Pledgor agrees that
any sale of the Collateral conducted by the Secured Party in
accordance with the foregoing provisions of this Section 14(h) shall
be deemed to be a commercially reasonable sale under the Uniform
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 8
<PAGE>
Commercial Code as in effect in the State of Texas from time to
time;
(i) As an alternative to exercising the power of sale herein
conferred upon it, the Secured Party may proceed by a suit or suits
at law or in equity to foreclose the security interest granted under
this Agreement and to sell the Collateral, or any portion thereof,
pursuant to a judgment or decree of a court or courts of competent
jurisdiction;
(j) Any cash held by the Secured Party as Collateral and all cash
proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral (i) prior to the occurrence of an Acceleration shall, at
the option of the Secured Party, be applied as is set forth in
subparts (x) and (y) of this paragraph, or be held by the Secured
Party as collateral for the Note, and (ii) following the occurrence
of an Acceleration may be held by the Secured Party as Collateral
and/or then or at any time thereafter applied as follows: (x) first,
to the payment to the Secured Party of the costs and expenses of
retaking, holding and preparing for sale of the Collateral and any
other fees, expenses, claims, demands, losses, judgments, damages
and liabilities arising out of or related to any Loan Document which
are payable to the Secured Party, including arising in the Note and
this Agreement, and (y) second, to the Secured Party for application
against or on account of all or any part of the Note; and
(k) Any surplus of such cash or cash proceeds held by the Secured
Party and remaining after payment in full of all the Note shall be
reassigned and redelivered as provided in Section 20 hereof.
Section 15. Expenses. The Secured Party shall be entitled to receive from
any proceeds of the Collateral, the amount of any and all reasonable expenses,
including, in the event of default, the fees and expenses of its counsel and of
any experts and agents which the Secured Party may incur in connection with (i)
the administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the rights of the Secured Party
hereunder, or (iv) the failure by any Pledgor to perform or observe any of the
provisions hereof.
Section 16. Security Interest Absolute. All rights of the Secured Party
hereunder, the interest, and all obligations of Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Loan Documents or
the Secured Obligations or any other agreement or instrument
relating to the Loan Documents or the Secured Obligations;
(ii) any change in the time, manner or place of payment of, or in
any other term of, the Loan Documents or the Secured Obligations, or
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 9
<PAGE>
any renewal or extension of the Loan Documents or the Secured
Obligations or any other amendment or waiver of or any consent to
any departure from this Agreement or any other agreement or
instrument;
(iii) any sale, exchange, release or nonperfection of any of the
Collateral, or any release of any guarantor or any person liable in
any manner for the collection of the Note or the Secured
Obligations, or any amendment or waiver of or consent to or
departure from any guaranty, the Loan Documents or the Secured
Obligations; or
(iv) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, Pledgor in respect of any
of the Loan Documents or the Secured Obligations.
Section 17. Amendments and Waivers. The Loan Documents represent the final
agreement agreed to by the parties. No amendment or waiver of any provision of
the Loan Documents, and no consent by Secured Party to any breach thereof by
Pledgor shall in any event be effective unless the same shall be in writing and
signed by the Secured Party, Pledgor and, if appropriate, any guarantor of any
Secured Obligation, and then such waiver or consent shall be effective only for
the specific purpose for which given. No course of dealing between Pledgor, any
guarantor of any Secured Obligation and Secured Party in exercising any rights
or remedies in the Loan Documents shall operate as a waiver or preclude the
exercise of any other rights or remedies in the Loan Documents. All such rights
and remedies shall continue unimpaired, notwithstanding any delay, extension of
time, renewal, compromise or other indulgence granted with respect to any of the
Secured Obligations. Pledgor hereby waives all notice of any such delay,
extension of time, renewal, compromise or indulgence, and consents to be bound
thereby as fully and effectually as if Pledgor expressly had agreed thereto in
advance. The aforesaid Note may be negotiated by Secured Party, without
releasing Pledgor or the Collateral.
Section 18. Time is of the Essence; No Waiver: Cumulative Remedies. Time
and exactitude of each of the terms, obligations, covenants and conditions of
this Agreement are hereby declared to be of the essence. No failure on the part
of the Secured Party to exercise, and no delay in exercising, any right, power
or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy by the Secured Party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
Section 19. Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns. The Secured Party may assign this
Agreement, and if assigned, the assignee shall be entitled, upon notifying
Pledgor, to the payment and performance of all of the Secured Obligations and
agreements of Pledgor hereunder and to all of the rights and remedies of Secured
Party hereunder, and Pledgor will assert no claims or defenses Pledgor may have
against Secured Party against the assignee. The gender and number used in this
Agreement are used for reference term only and shall apply with the same effect
whether the parties are masculine, feminine, neuter, singular or plural.
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 10
<PAGE>
Section 20. Termination. This Agreement shall terminate upon the payment
in full of the Note and Secured Obligations. Upon such termination, the Secured
Party shall reassign and redeliver (or cause to be reassigned and redelivered)
to appropriate Pledgor, or to such person or persons as Pledgor shall designate
or to whomever may be lawfully entitled to receive such surplus, against
receipt, such of the Collateral pledged by that Pledgor (if any) as shall not
have been sold or otherwise applied by the Secured Party pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments of reassignment and release. Any such reassignment shall be without
recourse upon or warranty by the Secured Party and at the expense of Pledgor.
Section 21. Addresses for Notices. Any notice or communication to be given
or made hereunder shall be in writing (including facsimile communication) and
may be given or made personally or by first class letter, telefax, courier telex
or tested telex, telegram or cable (confirmed, in the case of a telecopy, telex,
telegram or cable, by a letter delivered personally within, or dispatched by
first class mail within, twenty-four (24) hours of the dispatch of such telefax,
telex, telegram or cable) and shall be effective when actually received. For the
purposes hereof, the address of the Pledgor shall be the address maintained in
the records of the Secured Party (until notice of a change thereof is given as
provided in this Section 21), and the address of the Secured Party (until notice
of a change thereof is given as provided in this Section 21) shall be as
follows:
Value Partners, Ltd.
2200 Ross Avenue
Suite 4660 West
Dallas, Texas 75201.
Section 22. Continuing Security Interest; Assignments. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until termination as provided in herein, (ii) be
binding upon Pledgor, the Secured Party and their respective successors and
assigns, and (iii) inure, together with the rights, powers and remedies of
Pledgor and the Secured Party hereunder, to the benefit of Pledgor, the Secured
Party and their respective successors, transferees and assigns, as the case may
be.
Section 23. Governing Law. This Agreement and the rights and obligations
of the parties hereto shall be governed by and construed and enforced in
accordance with the laws of the State of Texas (other than conflict of laws
rules).
Section 24. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective. If any
provisions of this Agreement or any lien, security interest or other right of
the Secured Party hereunder shall be held to be invalid, illegal or
unenforceable under applicable law, such invalidity, illegality or
unenforceability shall not affect any other provision herein or any lien,
security interest or other right granted hereby.
Section 25. Usury. All agreements between Pledgor and the Secured Party,
whether now existing or hereafter arising and whether written or oral, are
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 11
<PAGE>
hereby limited so that in no contingency, whether by reason of demand or
acceleration of the Final Maturity Date, as that term is defined in the Note, or
otherwise, shall the interest contracted for, charged, received, paid or agreed
to be paid to the Secured Party exceed the maximum amount permissible under the
laws of the State of Texas (hereinafter the "Applicable Law"). If, from any
circumstance whatsoever, interest would otherwise be payable to the Secured
Party in excess of the maximum amount permissible under the Applicable Law, the
interest payable to the Secured Party shall be reduced to the maximum amount
permissible under the Applicable Law, and if from any circumstance the Secured
Party shall ever receive anything of value deemed interest by the Applicable Law
in excess of the maximum amount permissible under the Applicable Law, an amount
equal to the excessive interest shall be applied to the reduction of the
principal hereof and not to the payment of interest, or if such excessive amount
of interest exceeds the unpaid balance of principal hereof, such excess shall be
refunded to the party making such payment. All interest paid or agreed to be
paid to the Secured Party shall, to the extent permitted by the Applicable Law,
be amortized, prorated, allocated and spread throughout the full period
(including any renewal or extension) until payment in full of the principal so
that the interest hereon for such full period shall not exceed the maximum
amount permissible under the Applicable Law. The Secured Party expressly
disavows any intent to contract for, charge or receive interest in an amount
which exceeds the maximum amount permissible under the Applicable Law. This
paragraph shall control all agreements between Pledgor and the Secured Party.
Section 26. Multiple Counterparts. This Agreement may be executed in
separate or multiple counterparts by the parties, and all of such counterparts
shall be considered as one and the same instrument notwithstanding the fact that
various counterparts are signed by only one or more of the parties, and all of
such Agreements shall be deemed but one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the date first above written.
SECURED PARTY:
VALUE PARTNERS, LTD.
By: Fisher Ewing Partners,
a Texas general partnership
General Partner
By: /s/Timothy Ewing
----------------------------------------
Timothy Ewing
Its: General Partner
PLEDGOR:
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 12
<PAGE>
TELENATIONAL COMMUNICATIONS, INC.
By: /s/John Dalton
----------------------------------------
Its: President & C.E.O.
----------------------------------------
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 13
<PAGE>
EXHIBIT "A"
SCHEDULE OF PLEDGED ASSETS
A. All "accounts", as such term is defined in Article 9 of the UCC,
acquired by Pledgor pursuant to the Asset Purchase Agreement, shall include,
without limitation, each of the following, whether now owned or hereafter
acquired by the Pledgor: (a) all rights of the Pledgor to payment for goods sold
or leased or services rendered, whether or not earned by performance, (b) all
accounts receivable of the Pledgor, (c) all rights of the Pledgor to receive any
payment of money or other form of consideration, (d) all security pledged,
assigned or granted to or held by the Pledgor to secure any of the foregoing,
(e) all guaranties of, or indemnifications with respect to, any of the
foregoing, and (f) all rights of the Pledgor as an unpaid seller of goods or
services, including, but not limited to, all rights of stoppage in transit,
replevin, reclamation and resale. The total value of such accounts subject to
this Pledge shall not exceed the present value of such accounts held by or for
the benefit of Pledgor as of the date hereof.
B. All "chattel paper", as such term is defined in Article 9 of the UCC,
acquired by Pledgor pursuant to the Asset Purchase Agreement. The total value of
such chattel paper shall not exceed the present value of chattel paper held by
or for the benefit of Pledgor.
C. All "instruments", as such term is defined in Article 9 of the UCC,
acquired by Pledgor pursuant to the Asset Purchase Agreement, shall include all
promissory notes, drafts, bills of exchange, and trade acceptances of the
Pledgor, whether now owned or hereafter acquired. The total value of such
instruments shall not exceed the present value of instruments held by or for the
benefit of Pledgor.
D. All "general intangibles", as such term is defined in Article 9 of the
UCC, acquired by Pledgor pursuant to the Asset Purchase Agreement and shall
include, without limitation, each of the following: (1) all of the Pledgor=
service marks, trade names, trade secrets, registrations, goodwill, franchises,
licenses, permits, proprietary information, customer lists, designs, and
inventions; (2) all of the Pledgor= books, records, data, plans, manuals,
computer software, computer tapes, computer disks, computer programs, source
codes, object codes, and all rights of the Pledgor to retrieve data and other
information from third parties; (3) all of the Pledgor= contract rights,
partnership interests, joint venture interests, securities, deposit accounts,
investment accounts and certificates of deposit; (4) all rights of the Pledgor
to payment under letters of credit and similar agreements; (5) all tax refunds
and tax refund claims of the Pledgor, (6) all choses in action and causes of
action of the Pledgor (whether arising in contract, tort or otherwise and
whether or not currently in litigation) and all judgments in favor of the
Pledgor, (7) all rights and claims of the Pledgor under warranties and
indemnities, and (8) all rights of the Pledgor under any insurance, surety, or
similar contract or arrangement.
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 14
<PAGE>
E. All "documents", as such term is defined in Article 9 of the UCC,
acquired by Pledgor from Telenational pursuant to the Asset Purchase Agreement
including, without limitation, all documents of title and all receipts covering,
evidencing or representing goods now owned or hereafter acquired by the Pledgor.
F. All "equipment", as such term is defined in Article 9 of the UCC,
acquired by Pledgor from Telenational pursuant to the Asset Purchase Agreement
or hereafter acquired as a substitution, replacement or accession thereto by the
Pledgor, and, in any event shall include, without limitation, all switches,
machinery, equipment, furniture, fixtures, trade fixtures, trailers, rolling
stock, vessels, aircraft, and vehicles now owned by the Pledgor and any and all
additions, substitutions, and replacement of any of the foregoing, wherever
located, together with all attachments, components, parts, equipment, and
accessories installed thereon or affixed thereto.
G. All "inventory", as such term is defined in Article 9 of the UCC,
acquired by Pledgor from Telenational pursuant to the Asset Purchase Agreement,
and, in any event, shall include, without limitation, each of the following,
whether now owned or hereafter acquired by the Pledgor: (l) all goods and other
personal property of the Pledgor that are held for sale or lease or to be
furnished under any contract of service; (2) all raw materials, work-in-process,
finished goods, inventory, supplies and materials of the Pledgor; (3) all
wrapping, packaging, advertising, and shipping materials of the Pledgor; (4) all
goods that have been returned to, repossessed by or stopped in transit by the
Pledgor; and (5) all documents evidencing any of the foregoing. This shall
include the rights in and to the unredeemed value of prepaid telephone cards
commonly referred to as "breakage". The total value of such inventory shall not
exceed the present value of inventory held by or for the benefit of Pledgor.
H. All rights of Pledgor under any agreement (together with any collateral
or other security therefor existing at any time, the "Assigned Agreements"),
acquired by Pledgor from Telenational pursuant to the Asset Purchase Agreement
including, without limitation, (1) all rights of the Pledgor to receive moneys
due and to become due under or pursuant to the Assigned Agreements, (2) all
rights of the Pledgor to receive proceeds of any insurance, indemnity, warranty,
or guaranty with respect to the assigned Agreements, (3) all claims of the
Pledgor for damages arising out of or for breach of or default under the
assigned Agreements, and (4) all rights of the Pledgor to enforce and terminate
the Assigned Agreements, to performance by all obligors thereunder and to compel
performance and otherwise exercise all rights and remedies thereunder.
I. All of the following acquired by Pledgor from Telenational pursuant to
the Asset Purchase Agreement: (1) all copyrights, works protectable by
copyright, copyright registrations, and copyright applications of the Pledgor,
if any; (2) all renewals, extensions, and modifications thereof; (3) all income,
royalties, damages, profits, and payments relating to or payable under any of
the foregoing; (4) the right to sue for past, present, or future infringements
of any of the foregoing; (5) all other rights and benefits relating to any of
the foregoing throughout the world; and (6) all goodwill associated with
symbolized by any of the foregoing; in each case, whether now owned or hereafter
acquired by the Pledgor (collectively, the "Copyrights").
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FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 15
<PAGE>
J. All written agreements acquired by Pledgor from Telenational
pursuant to the Asset Purchase Agreement granting to the Pledgor any right to
use any Copyright.
K. All of the following acquired by Pledgor from Telenational pursuant to
the Asset Purchase Agreement: (1) all patents, patent applications, and
patentable inventions of the Pledgor, if any, and all of the inventions and
improvements described and claimed therein; (2) all continuations, divisions,
renewals, extensions, modifications, substitutions, continuations-in-part, or
reissues of any of the foregoing; (3) all income, royalties, profits, damages,
awards, and payments relating to or payable under any of the foregoing; (4) the
right to sue for past, present, and future infringements of any of the
foregoing; (5) all other rights and benefits relating to any of the foregoing
throughout the world; (6) all goodwill associated with any of the foregoing; in
each case, acquired by Pledgor from Telenational pursuant to the Asset Purchase
Agreement (collectively, the APatents@).
L. All written agreements acquired by Pledgor from Telenational pursuant
to the Asset Purchase Agreement granting to the Pledgor any right to use any
invention on which a Patent is in existence.
M. All of the following acquired by Pledgor from Telenational pursuant to
the Asset Purchase Agreement: (1) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, other business identifiers (including the rights and interest in
and to the use of the the logos and identifiers of any third parties which Maker
may have the right to use), prints and labels on which any of the foregoing have
appeared or appear, all registrations and recordings thereof, and all
applications in connection therewith including registrations, recordings, and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state thereof or any other country or
any political subdivision thereof; (2) all reissues, extensions and renewals
thereof; (3) all income, royalties, damages, and payments now or hereafter
relating to or payable under any of the foregoing including damages or payments
for past or future infringements of any of the foregoing; (4) the right to sue
for past, present, and future infringements of any of the foregoing; (5) all
rights corresponding to any of the foregoing throughout the world; and (6) all
goodwill associated with and symbolized by any of the foregoing; in each case,
whether now owned or hereafter acquired by the Pledgor (collectively, the
"Trademarks").
N. All written agreements acquired by Pledgor from Telenational
pursuant to the Asset Purchase Agreement granting to the Pledgor any right
to use any Trademark.
O. All other goods and personal property of the Pledgor of any kind or
character; whether tangible or intangible acquired by Pledgor from Telenational
pursuant to the Asset Purchase Agreement.
P. Those items set forth on Exhibit A-1 attached hereto and
incorporated herein by reference.
- - --------------------------------------------------------------------------------
FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 16
<PAGE>
Q. The proceeds, in cash or otherwise, of any of the property
described herein and all liens, security, rights, remedies and claims of the
Pledgor with respect thereto.
R. All "proceeds" of the property described herein, as such term is
defined in Section 9.306 of the UCC and, in any event, shall include, but not be
limited to; (1) any and all proceeds of any insurance, indemnity, warranty, or
guaranty payable to the Pledgor from time to time with respect to any of the
property described herein, (2) any and all payments (in any form whatsoever)
made or due and payable to the Pledgor from time to time in connection with any
requisition, confiscation, condemnation, seizure, or forfeiture of all or any
part of the property described herein, by any governmental authority (or any
person or entity acting, or purporting to act, for or on behalf of any
governmental authority); and (3) any and all other amounts from time to time
paid or payable under or in connection with any of the property described herein
and all products of the property described herein.
As used herein, "UCC" means the Uniform Commercial Code as in effect in
the State of Texas; provided, that if by mandatory provisions of law, the
perfection or effect of perfection or non-perfection of the security interest in
any Collateral to which this document relates is governed by the Uniform
Commercial Code as in effect on or after the date hereof in any other
jurisdiction, UCC means the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such perfection
or the effect of perfection or non-perfection.
- - --------------------------------------------------------------------------------
FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 17
<PAGE>
EXHIBIT B
SCHEDULE OF ENCUMBRANCES
Secured Party: BA Credit Corporation
Security: Equipment, Product, Proceeds
Filed: 6-1-93
Secured Party: Harris Corporation
Security: Equipment
Filed: 12-2-94
Secured Party: Bank of Nebraska
Security: Equipment, Product
Filed: 4-10-95
Secured Party: Business Leasing, Inc.
Security: Equipment
Filed: 6-17-96
Secured Party: Paul F. Schneider
Security: Accounts receivable on Telenational's customer base.
Filed: 8-12-96
Secured Party: Midcom Communications, Inc.
Security: Accounts receivable, inventory, equipment, general intangibles
and all other personal property.
Filed: 12-13-96
Secured Party: Value Partners, Ltd.
Security: Collateral, as defined in this Agreement.
Filed: March 24, 1997
- - --------------------------------------------------------------------------------
FIRST AMENDED PLEDGE AND SECURITY AGREEMENT, PAGE 18
NOTICE AND CERTIFICATION OF
NO ORAL AGREEMENTS
THIS NOTICE AND CERTIFICATION OF NO ORAL AGREEMENTS (this "Agreement")
is made by and among VALUE PARTNERS, LTD., a Texas Limited Partnership,
("Lender"), TELENATIONAL COMMUNICATIONS LIMITED PARTNERSHIP, a Nebraska Limited
Partnership, ("Telenational"), WorldPort Communications, Inc., a Delaware
Corporation ("WorldPort") and Telenational Communications, Inc., a Delaware
corporation and wholly owned subsidiary of WorldPort ("TCI" or "Subsidiary") as
of June 20, 1997 ( WorldPort and TCI shall be referred to herein as "Borrower").
Lender hereby gives the following notice to Borrower and Telenational,
and Borrower and Telenational hereby acknowledge and agree with such notice:
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
FOR PURPOSES OF THIS NOTICE, THE WRITTEN LOAN DOCUMENTS ARE COMPRISED
OF THE FOLLOWING (all of which are dated as of June 20, 1997);
1. First Amended Loan Modification Agreement
2. Second Amended and Restated Senior Secured Promissory Note in
the principal sum of $850,000
3. First Amended Pledge and Security Agreement
4. Amendment to Financing Statement - State (and related documents)
5. Amendment to Financing Statement - County (and related documents)
6. Notice and Certification of No Oral Agreements
7. Resolutions By the Unanimous Written Consent of the Directors of
IMTS, Inc.
8. Resolutions By the Unanimous Written Consent of the General
Partner of Value Partners, Ltd.
9. Resolutions By the Unanimous Written Consent of Directors of
WorldPort
NOTICE AND CERTIFICATION OF NO ORAL AGREEMENTS PAGE 1
<PAGE>
10. Resolutions By the Unanimous Written Consent of Directors of
Subsidiary
11. Security Interest Subordination Agreement
This Agreement may be executed in separate or multiple counterparts by
the parties, and all of such counterparts shall be considered as one and the
same instrument notwithstanding the fact that various counterparts are signed by
only one or more of the parties, and all of such Agreements shall be deemed but
one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first above written.
LENDER:
VALUE PARTNERS, LTD.
By: Fisher Ewing Partners,
a Texas general partnership
General Partner
By: /s/Timothy Ewing
----------------------------
Timothy Ewing
Its: General Partner
OTHER PARTIES:
TELENATIONAL COMMUNICATIONS LIMITED PARTNERSHIP
By: IMTS, Inc.
----------------------------
General Partner
By: /s/Edmund Blankenau
----------------------------
Its: President and CEO
BORROWERS:
WORLDPORT COMMUNICATIONS, INC.
NOTICE AND CERTIFICATION OF NO ORAL AGREEMENTS PAGE 2
<PAGE>
By: /s/John Dalton
---------------------------
Its: President & C.E.O.
---------------------------
TELENATIONAL COMMUNICATIONS, INC.
By: /s/John Dalton
---------------------------
Its: President & C.E.O.
---------------------------
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as of
April 25, 1997 by and between WorldPort Communications, Inc. a Delaware
Corporation ("WorldPort" or the "Company"), and Mr. Edmund Blankenau
(hereinafter referred to as the "Consultant"), and shall be effective upon the
date of closing of the Asset Purchase Agreement betweeen WorldPort and
Telenational Communications Limited Partnership (the "Closing").
W I T N E S S E T H:
WHEREAS, the Company desires to have the benefit of the Consultant's
efforts and services;
WHEREAS, the Consultant is willing to make available to the Company the
consulting services provided for in this Agreement as set forth below;
AGREEMENT
1 . TERM
The term of this Agreement shall commence upon the Closing and end on the
date eighteen (18) months from the Closing.
2 . CONSULTING SERVICES
(a) For the term of this Agreement, the Consultant agrees to render the
following consulting services to the Company:
(1) Provide assistance in the transition of aquired assets and
operations into the operations of the Company;
(2) Provide analysis regarding the telecommunications market
and assist in the identification of new markets and new services for the the
Company's existing markets;
(3) Provide assistance with regards to customer and vendor
relations;
(4) Provide assistance with regards to the identification of
potential acquisition targets and new business opportunities.
3 . COMPENSATION AND RELATED MATTERS.
(a) In consideration of the consulting services set forth in paragraph
2(a) above, and subject to the terms and conditions set forth herein, the
Company agrees to compensate the Consultant as follows: Commencing on the
date hereof, and during Consultant's employment, the Company shall pay to
the Consultant a Monthly Consulting Fee of Seven Thousand Dollars per month
<PAGE>
($7,000) payable on the first day of every month. The Monthly Consulting
Fee may be increased at the sole discretion of the Board of Directors of
the Company.
(b) During the Consultant's employment hereunder, the Consultant shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Consultant in performing services hereunder, including all
business, travel, and living expenses while away from home on business or
at the request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the Company's
policies and procedures, and that any expenses in excess of $500 have been
pre-approved by the Company.
(c) In addition to the Monthly Consulting Fee, the Consultant shall
be entitled to Incentive Compensation for completed acquisitions and new
business opportunities, which business development activities and the
related compensation shall be pre-determined and pre-approved by
Consultant and the Company on a case-by-case business. The terms and
conditions of such Incentive Compensation shall be as specified in that
certain letter from John Dalton to the Consultant dated June 10, 1997
(attached as Exhibit A to this Consulting Agreement).
4 . TERMINATION
(a) As a result of death: If the Consultant shall die during the term
of this Agreement, the Consultant's employment shall terminate on the
Consultant's date of death, and the Consultant's surviving spouse, or the
Consultant's estate if the Consultant dies without a surviving spouse,
shall be entitled to any Accrued and unpaid Consulting Fees for services
already rendered to the Company as of the death of the Consultant.
(b) As a result of Disability: If, as a result of the Consultant's
Disability, the Consultant shall have been unable to perform the
Consultant's duties hereunder on a full-time, continuous basis for two (2)
consecutive months or for an aggregate of three (3) months within any
twelve (12) month period and if within thirty (30) days after the Company
provides the Consultant with a Termination Notice, the Consultant shall not
have returned to the performance of the Consultant's duties on a full-time
basis, the Company may terminate this Agreement. In the event the
Consultant's services are no longer available to the Company on account of
the Consultant's Disability in accordance with this paragraph, the
Consultant shall receive any accrued and unpaid consulting fees for
services actually rendered as of the Termination Date.
(c) Termination Without Cause: Either party to this Agreement may
terminate the Consultant's employment hereunder without cause at any time
upon notice to the other party. In the event this Agreement is terminated
by the Company without cause, the Consultant shall be entitled to receive
from the Company on the Termination Date a lump-sum cash payment equal to
the remaining Monthly Consulting Fees that the Consultant would otherwise
- 2 -
<PAGE>
have earned over the duration of the remaining term of the Agreement (the
"Termination Payment").
(d) Termination as a result of cause. The Company may terminate the
Consultant for cause, upon the occurrence of any one or more of the
following acts or omissions:
(i) The determination in a binding and final judgment, order,
or decree by a court or administrative agency of competent
jurisdiction, that the Consultant has engaged in fraudulent conduct,
and the determination by the Board, in its sole discretion, that
such fraudulent conduct has a significant adverse impact on the
Company;
(ii) The unreasonable refusal by the Consultant to perform the
Consulting services and, after notice from the Company to the
Consultant, the Consultant's continuing refusal to commence his
services within 48 hours after giving of such notice by the Company;
(iii) The performance by the Consultant of his duties or
responsibilities in a manner constituting gross negligence;
(iv) In the event of termination for cause, as set forth
above, or in the event of termination by the Consultant, the
Consultant will be entitled to receive any accrued but unpaid
consulting fees for services actually performed, but will not be
entitled to the Termination Payment, except as otherwise provided by
Texas law.
5 . TERMINATION NOTICE.
Any termination by the Company or the Consultant of this Agreement shall
be communicated by written Notice of Termination to the Consultant, if such
Notice of Termination is delivered by the Company, and to the Company, if such
Notice of Termination is delivered by the Consultant. The Notice of Termination
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth the Termination Date.
6 . NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
In connection with the providing of consulting services hereunder, the
Company may provide the Consultant with information concerning the Company which
the Company deems confidential (the "Confidential Information"). The Consultant
understands and agrees that any Confidential Information disclosed to the
Consultant pursuant to this Agreement is secret, proprietary and of great value
to the Company, whihc value may be impaired if the secrecy of such information
is not maintained. The Consultant further agrees that he will take reasonable
security measures to preserve and protect the secrecy of such Confidential
Information, and to hold such information in confidence and not to disclose such
information, either directly or indirectly, to any person or entity during the
- 3 -
<PAGE>
term of this Agreement or any time following the expiration or termination date
hereof. The Consultant further agrees that:
(a) "Confidential Information" shall mean any and all methods,
inventions, improvements or discoveries, whether or not patentable or
copyrightable, and any other information of a secret, proprietary,
confidential, or generally undisclosed nature relating to the Company, its
products, customers, processes, and services, including information
relating to testing research, development, manufacturing, marketing, and
selling, disclosed to the Consultant or otherwise made known to the
Consultant as a consequence of or through the Consultant's engagement by
the Company (including information originated by the Consultant and
information obtained by the Conultant during any previous consulting or
employment engagement or any previous relationship with the Company) in any
technological area previously developed by the Company or developed,
engaged in, or researched, by the Company during the term of the
Consultant's engagement, including, but not limited to, trade secrets,
processes, products, formulae, apparatus, techniques, know-how, marketing
plans, data, improvements, strategies, forecasts, customer lists, and
technical requirements of customers, unless such information is in the
public domain to such an extent as to be readily available to the Company's
competitors.
(b) The Consultant acknowledges that the Company has exclusive
property rights to all Confidential Information and the Consultant hereby
assigns all rights that the Consultant might otherwise possess in any
Confidential Information to the Company. Except as required in the
performance of the Consultant's duties to the Company, the Consultant will
not at any time during or after the term of the Consultant's engagement,
which term shall include any time in which the Consultant may be retained
by the Company as a consultant, directly or indirectly use, communicate,
disclose, or disseminate any Confidential Information.
(c) All documents, records, notebooks, notes, memoranda, and similar
repositories of, or containing, Confidential Information made or compiled
by the Consultant at any time or made available to the Consultant prior to
or during the term of Consultant's engagement by the Company, including any
and all copies thereof, shall be the property of the Company, shall be held
by the Consultant in trust solely for the benefit of the Company, and shall
be delivered to the Company by the Consultant on the termination of the
Consultant's engagement or at any other time on the request of the Company.
(d) The Consultant will not assert any rights under any inventions,
copyrights, discoveries, concepts, or ideas, or improvements thereof, or
know-how related thereto, as having been made or acquired by the Consultant
prior to the Consultant's being engaged by the Company or during the term
of the Consultant's engagement if based on or otherwise related to
Confidential Information.
(e) Notwithstanding anything to the contrary in this Agreement, the
Consultant shall not be precluded from disclosing any of the Confidential
- 4 -
<PAGE>
Information pursuant to a valid order of any governmental or regulatory
authority, or pursuant to the order of any court or arbitor.
(f) The Consultant agrees that since a violation of this paragraph 6
would cause irreparable injury to the Comapny, and that there may not be an
adequate remedy at law for such violation, the Company shall have the
right, in addition to any other remedies available at law or in equity, to
enjoin the Consultant in a court of equity for violating the provisions of
this paragraph 6.
7 . INDEMNIFICATION.
The Company agrees to indemnify and hold the Consultant harmless from and
against any and all losses, liabilities, or costs (including, but not limited
to, reasonable attorney's fees), which the Consultant may sustain, incur, or
assume as a result of, or relative to, any allegation, claim, civil or criminal
action, proceeding, charge, or prosecution, which may be alleged, made,
instituted, or maintained against the Consultant or the Company, jointly or
severally, if (a) the Consultant was made a party to any action arising out of
or based upon the Consultant's rendering of services pursuant to this Agreement
and (b) the Consultant acted in good faith and in a manner reasonably believed
by the Consultant to be in or not opposed to the interests of the Company, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Not withstanding the foregoing, the Company
will not, however, indemnify the Consultant for any claims, liabilities, losses,
damages or expenses that result solely from bad faith, gross negligence or
willful misconduct by the Consultant.
8 . ATTORNEYS' FEES.
In the event that either party hereunder institutes any legal proceedings
in connection with its rights or obligations under this Agreement, the
prevailing party in such proceeding shall be entitled to recover from the other
party all costs incurred in connection with such proceeding, including
reasonable attorneys' fees, together with interest thereon as provided by
applicable law.
9 . INDEPENDENT CONTRACTOR STATUS; SERVICE ON THE BOARD OF DIRECTORS. It is
expressly understood and agreed that this is a consulting agreement only and
does not constitute an employer-emloyee relationship. Accordingly, the
Consultant agrees that the Consultant shall be solely responsible for payment of
his own taxes or sums due to federal, state or local governments, overhead,
workmen's compensation, fringe benefits, pension contributions or other
expenses. It is further understood and agreed that the Consultant is an
independent contractor and that the Company shall have no right to control the
activities of the Consultant other than during the express period of time in
which the Consultant is performing services hereunder, and that such control by
the Company is solely predicated upon the consulting services provided hereunder
and not because of any presumed employee-employer relationship. The Consultant
shall have no authority to bind the Company. The parties further acknowledge
that the Consultant's services hereunder are not exclusive.
- 5 -
<PAGE>
The Parties acknowledge that upon the Closing, Mr. Blankenau will be elected to
the Company's Board of Directors and shall serve for such one-year terms as he
may be re-elected from time-to-time by the shareholders of the Company. The
Consultant shall be compensated for his service as a Director of the Company
according to the usual and customary terms of compensation for a Director, which
Director's compensation shall be in addition to his Monthly Consulting Fees and
Incentive Compensation as described above.
10 . ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if
any of such provisions or any part hereof is declared invalid or unenforceable
by a court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions or the parts hereof and the applicability thereof
shall not be affected thereby.
11 . AMENDMENT OR TERMINATION.
This Agreement may not be amended or terminated during its term, except by
written instrument executed by both the Company and the Consultant.
12 . SURVIVABILITY.
The provisions of Sections 6, 7, 8 and 9 hereof and the provisions hereof
relating to the payment of the Accrued Benefits and the Severance Payment shall
survive the termination of this Agreement.
13 . ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement between the Consultant and
the Company with respect to the subject matter hereof and supersedes all prior
oral or written agreements, negotiations, commitments, and understandings with
respect thereto.
14 . GOVERNING LAW; VENUE.
This Agreement and the respective rights and obligations of the Consultant
and the Company hereunder shall be governed by and construed in accordance with
the laws of the State of Texas without giving effect to the provisions,
principles, or policies thereof relating to choice of law or conflict of laws.
15 . NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall be
deemed given when received, and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, postage prepaid, if to
the Company, to:
- 6 -
<PAGE>
WorldPort Communications, Inc.
9601 Katy Freeway, Suite 200
Houston, Texas 77024
with a copy to corporate counsel for the Company to:
Snell & Wilmer LLP
Attn: Mr. William C. Gibbs, Esq.
111 East Broadway, Suite 900
Salt Lake City, Utah 84111
Tel: 801-237-1907
or to such other address as the Company shall have given to the Consultant or,
if to the Consultant, to:
Mr. Edmund Blankenau
606 South 96th Street
Omaha, Nebraska 68114
with a copy to counsel for the Consultant to:
Douglas F. Duchek, Esq.
328 South 52nd Street, Third Floor
Omaha, Nebraska 68132
or to such other address as the Consultant shall have given to the Company.
16 . NO WAIVER.
No waiver by either party at any time of any breach by the other party of,
or any failure by the other party to comply with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or at any prior
or subsequent time.
17 . HEADINGS.
The headings herein contained are for reference only and shall not affect
the meaning or interpretation of any provision of this Agreement.
18 . COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
- 7 -
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
by its duly authorized officer, and the Consultant has executed this Agreement,
on the date and year first above written.
THE COMPANY:
WORLDPORT COMMUNICATIONS, INC.
/s/John Dalton
-----------------------------------
JOHN DALTON
CHIEF EXECUTIVE OFFICER
CONSULTANT:
/s/Edmund Blankenau
-----------------------------------
EDMUND BLANKENAU
- 8 -
<PAGE>
EXHIBIT A
Letter From John Dalton to Edmund Blankenau
Dated June 10, 1996
Specifying Terms and Conditions of Consultant's Incentive Performance
Compensation
- 9 -
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
April 25, 1997 by and between WorldPort Communications, Inc. a Delaware
Corporation ("WorldPort" or the "Company"), and Mr. Bruce Burton (hereinafter
referred to as the "Executive"), and shall be effective upon the date of Closing
of the asset purchase agreement betweeen WorldPort and Telenational
Communications, Ltd. (the "Closing").
W I T N E S S E T H:
WHEREAS, the Company desires to have the benefit of the Executive's
efforts and services;
WHEREAS, the Executive is willing to commit himself to serve the Company,
on the terms and conditions herein provided; and
WHEREAS, in order to effect the foregoing, the Company and the Executive
wish to enter into an employment agreement on the terms and conditions set forth
below.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1 . DEFINITIONS.
Whenever used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "Accrued Benefits" shall mean the amount payable not later than
ten (10) days following an applicable Termination Date, which shall be
equal to the sum of the following amounts:
(i) All salary earned or accrued through the Termination Date;
(ii) Reimbursement for any and all monies advanced in connection
with the Executive's employment for reasonable and necessary expenses
incurred by the Executive through the Termination Date;
(iii) Any and all other cash benefits previously earned through
the Termination Date and deferred at the election of the Executive or
pursuant to any deferred compensation plans then in effect;
(iv) All other payments and benefits to which the Executive may
be entitled under the terms of any benefit plan of the Company or
otherwise, including, but not limited to, any bonus declared by the
Board, any compensation for earned, but unused, vacation days, and any
unpaid automobile allowance.
<PAGE>
(b) "Affiliate" shall have the same meaning as given to that term in
Rule 12b-2 of Regulation 12B promulgated under the Securities Exchange Act
of 1934, as amended.
(c) "Board" shall mean the Board of Directors of the Company
(d) "Disability" shall mean a physical or mental condition whereby the
Executive is unable to perform on a full-time, continuous basis the
customary duties of the Executive under this Agreement.
(e) "Notice of Termination" shall mean the notice described in Section
9 hereof;
(f) "Termination Date" shall mean, except as otherwise provided in
Section 8 hereof,
(i) The Executive's date of death;
(ii) Thirty (30) days after the delivery of the Notice of
Termination terminating the Executive's employment on account of
Disability pursuant to Subsection 8(b) hereof, unless the Executive
returns on a full-time basis to the performance of Executive's duties
prior to the expiration of such period;
(iii) Thirty (30) days after the delivery of the Notice of
Termination if the Executive's employment is terminated by the
Executive voluntarily; and
(iv) Fifteen (15) days after the delivery of the Notice of
Termination if the Executive's employment is terminated by the Company
for any reason other than death or Disability.
2 . EMPLOYMENT.
The Company hereby agrees to employ the Executive and the Executive hereby
agrees to serve the Company, on the terms and conditions set forth herein.
3 . TERM.
The Company's employment of the Executive under the provisions of this
Agreement shall commence upon the Closing and end on the second anniversary of
the Closing, unless further extended or April of each year thereafter, the term
of the Executive's employment shall, unless sooner terminated as hereinafter
provided, be automatically extended for an additional one year period from the
date thereof unless, at least thirty (30) days before such date, the Company
shall have delivered to the Executive or the Executive shall have delivered to
the Company written notice that the term of the Executive's employment hereunder
will not be extended beyond its existing duration.
- 2 -
<PAGE>
4 . POSITIONS AND DUTIES.
The Executive shall serve as Executive Vice President and Chief Operating
Officer of WorldPort Communications, Inc. and the TNC business unit of
WorldPort, which may at the Company's discretion be operated as a wholly-owned
subsidiary of WorldPort, and in such additional capacities as may be reasonably
assigned to the Executive by the Board. In his capacity as Chief Operating
Officer of the Company's TNC operationing unit, the Executive shall have such
duties, responsibilities and authority as are usual and customary for executives
who hold the same or a substantially similar position with companies of
comparable size in the same industry as the Company. In connection with any
capacities, the Executive shall have such duties, responsibilities and authority
as may from time to time be reasonably assigned to the Executive by the Board.
The Executive shall devote substantially all the Executive's working time and
efforts to the business and affairs of the Company.
5 . PLACE OF PERFORMANCE.
In connection with the Executive's employment by the Company, the
Executive shall be based at the Company's facilities in Omaha, Nebraska except
for required travel on Company business, and expect as otherwise agreed-to
between the Executive and the Company.
6 . COMPENSATION AND RELATED MATTERS.
(a) Commencing on the date hereof, and during Executive's employment,
the Company shall pay to the Executive an annual salary of $144,000 per
annum payable in equal installments consistent with the Company's overall
payroll periods and distributions. Within 90 days from the date hereof, the
Board shall conduct a performance review of the Executive, after which the
Board, in its sole discretion, may increase the annual salary of the
Executive based upon such performance review. In addition to any increases
in salary specified in this Agreement, the Executive's salary may be
increased from time to time in accordance with normal business practices of
the Company at the full discretion of the Board.
(b) During the Executive's employment, the Executive shall receive all
bonuses if, when and as declared by the Board, including, but not limited
to, a performance bonus of up to 50% of the Executive's annual salary,
payable semi-annually beginning six months from the effective date of the
Executive's employment, based upon the successful completion of performance
criteria to be established by the CEO of the Company in conjunction with
the Board of Directors. During the first year of employment the Executive's
performance will be determined according to the criteria detailed in the
Letter Agreement between WorldPort and the Executive dated June 6, 1997
(attached herein as Exhibit A). After the first year of this agreement the
Executive's bonuses will be paid based upon performance objectives and
related compensation amounts as determined by the CEO and the Board.
- 3 -
<PAGE>
(c) During the Executive's employment hereunder, the Executive shall
be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in performing services hereunder, including all
business, travel, and living expenses while away from home on business or
at the request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the Company's
policies and procedures.
(d) The Executive shall be entitled to the number of vacation days in
each calendar year, and to compensation for earned but unused vacation
days, determined in accordance with the Company's vacation plan or policy.
The Executive shall also be entitled to all paid holidays provided by the
Company to its other executives.
(e) The Executive shall receive a car allowance of $400 per month,
with any annual increase to be determined by the Board, payable in
accordance with the Company's policies and proceedures
(f) The Executive shall be entitled to such other benefits, including,
but not limited to, medical insurance, life insurance, and disability
insurance determined in accordance with the Company's benefit plan or
policy.
(g) The Executive shall be granted non-qualified stock options to
purchase 250,000 shares of the Company's common stock at an exercise price
of $1.25 per share, to be issued in accordance with the Company's Long-Term
Incentive Stock Plan according to the following vesting schedule:
83,334 options vested on the effective date of this Agreement, 83,333
options vested after one year of service, 83,333 options vested after
two years of service.
7 . OFFICES.
The Executive agrees to serve without additional compensation, if elected
or appointed thereto, as a member of the board of directors of any subsidiary of
the Company; provided, however, that the Executive is indemnified for serving in
any and all such capacities to the fullest extent provided by applicable law.
8 . TERMINATION
(a) As a result of death: If the Executive shall die during the term
of this Agreement, the Executive's employment shall terminate on the
Executive's date of death, and the Executive's surviving spouse, or the
Executive's estate if the Executive dies without a surviving spouse, shall
be entitled to the Executive's Accrued Benefits as of the Termination Date.
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(b) As a result of Disability: If, as a result of the Executive's
Disability, the Executive shall have been unable to perform the Executive's
duties hereunder on a full-time, continuous basis for two (2) consecutive
months or for an aggregate of three (3) months within any twelve (12) month
period and if within thirty (30) days after the Company provides the
Executive with a Termination Notice, the Executive shall not have returned
to the performance of the Executive's duties on a full-time basis, the
Company may terminate the Executive's employment, subject to Section 9
hereof. During the term of the Executive's Disability prior to termination,
the Executive shall continue to receive all salary and benefits payable
under Section 6 hereof, including participation in all employee benefit
plans, programs, and arrangements in which the Executive was entitled to
participate immediately prior to the Disability; provided, however, that
the Executive's continued participation is permitted under the terms and
provisions of such plans, programs, and arrangements. In the event that the
Executive's participation in any such plan, program, or arrangement is
barred as the result of such Disability, the Executive shall be entitled to
receive an amount equal to the contributions, payments, credits, or
allocations which would have been paid by the Company to the Executive, to
the Executive's account, or on the Executive's behalf under any such plan,
program, or arrangement. In the event the Executive's employment is
terminated on account of the Executive's Disability in accordance with this
Section 8, the Executive shall receive the Executive's Accrued Benefits as
of the Termination Date and shall remain eligible for all benefits provided
by any long-term disability program of the Company in effect at the time of
such termination. The payment of the Accrued Benefits by the Company to the
Executive shall be in addition to, and not in lieu of, any benefits payable
by reason of the Executive's Disability to the extent provided under any
long-term disability program of the Company in effect at the time of the
Executive's termination, or under any disability insurance policy, or
otherwise.
(c) Termination Without Cause: Either party to this Agreement may
terminate the Executive's employment hereunder without cause at any time
upon notice to the other party, and upon any such termination, the
Executive shall be entitled to receive his Accrued Benefits. In the event
that the Company terminates the Executive's employment pursuant to this
Subsection 8(c), the Executive shall receive from the Company on the
Termination Date a lump-sum cash payment (the "Severance Payment"), as
severance, in an amount equal to seventy-five percent (75%) of the greater
of (i) the Executive's annual salary at the time of such termination, or
(ii) the Executive's annual salary, as set forth in Subsection 6(a) hereof.
(d) Termination as a result of cause. The Company may terminate the
Executive for cause, upon the occurrence of any one or more of the
following acts or omissions:
(i) The determination in a binding and final judgment, order,
or decree by a court or administrative agency of competent
jurisdiction, that the Executive has engaged in fraudulent conduct,
and the determination by the Board, in its sole discretion, that
such fraudulent conduct has a significant adverse impact on the
Company;
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(ii) The conviction of the Executive on a felony or
misdemeanor involving moral turpitude (as evidenced by a binding and
final judgment, order, or decree of a court of competent
jurisdiction) an the determination by the Board, in its sole
discretion, that such conviction has a significant adverse impact on
the Company;
(iii) The refusal by the Executive to perform the Executive's
duties or responsibilities (unless significantly changed without the
Executive's consent) and after notice from the Company to the
Executive, the Executive's continuing refusal to perform his duties
or responsibilities during the 48-hour period following the giving
of such notice;
(iv) The performance by the Executive of his duties or
responsibilities in a manner constituting gross negligence (unless
such duties or responsibilities have been significantly changed
without the Executive's consent).
(v) In the event of termination for cause, as set forth above,
the Executive will be entitled to receive his Accrued Benefits, but
will not be entitled to the Severance Payment, except as otherwise
provided by Texas law.
9 . TERMINATION NOTICE.
Any termination by the Company or the Executive of the Executive's
employment hereunder shall be communicated by written Notice of Termination to
the Executive, if such Notice of Termination is delivered by the Company, and to
the Company, if such Notice of Termination is delivered by the Executive. The
Notice of Termination shall indicate the specific termination provision in this
Agreement relied upon and shall set forth the Termination Date.
10 . NONDISCLOSURE OF PROPRIETARY INFORMATION.
Recognizing that the Company is presently engaged, and may hereafter
continue to be engaged, in the research and development of processes, the
manufacturing of products, or the performance of services, which involve
experimental and inventive work and that the success of its business depends
upon the protection of such processes, products, and services by patent,
copyright, or secrecy and that the Executive has had, or during the course of
Executive's engagement as an employee or consultant may have, access to
Proprietary Information, as hereinafter defined, of the Company and that the
Executive has furnished, or during the course of the Executive's engagement may
furnish, Proprietary Information to the Company, the Executive agrees that:
(a) "Proprietary Information" shall mean any and all methods,
inventions, improvements or discoveries, whether or not patentable or
copyrightable, and any other information of a secret, proprietary,
confidential, or generally undisclosed nature relating to the Company, its
products, customers, processes, and services, including information
relating to testing research, development, manufacturing, marketing, and
selling, disclosed to the Executive or otherwise made known to the
Executive as a consequence of or through the Executive's
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engagement by the Company (including information originated by the
Executive) in any technological area previously developed by the Company or
developed, engaged in, or researched, by the Company during the term of the
Executive's engagement, including, but not limited to, trade secrets,
processes, products, formulae, apparatus, techniques, know-how, marketing
plans, data, improvements, strategies, forecasts, customer lists, and
technical requirements of customers, unless such information is in the
public domain to such an extent as to be readily available to the Company's
competitors.
(b) The Executive acknowledges that the Company has exclusive property
rights to all Proprietary Information, and the Executive hereby assigns all
rights that the Executive might otherwise possess in any Proprietary
Information to the Company. Except as required in the performance of the
Executive's duties to the Company, the Executive will not at any time
during or after the term of the Executive's engagement, which term shall
include any time in which the Executive may be retained by the Company as a
consultant, directly or indirectly use, communicate, disclose, or
disseminate any Proprietary Information.
(c) All documents, records, notebooks, notes, memoranda, and similar
repositories of, or containing, Proprietary Information made or compiled by
the Executive at any time or made available to the Executive prior to or
during the term of Executive's engagement by the Company, including any and
all copies thereof, shall be the property of the Company, shall be held by
the Executive in trust solely for the benefit of the Company, and shall be
delivered to the Company by the Executive on the termination of the
Executive's engagement or at any other time on the request of the Company.
(d) The Executive will not assert any rights under any inventions,
copyrights, discoveries, concepts, or ideas, or improvements thereof, or
know-how related thereto, as having been made or acquired by the Executive
prior to the Executive's being engaged by the Company or during the term of
the Executive's engagement if based on or otherwise related to Proprietary
Information.
11 . ASSIGNMENT OF INVENTIONS.
(a) For purposes of this Section 11, the term "Inventions" shall mean
discoveries, concepts, and ideas, whether patentable or copyrightable or
not, including, but not limited to, improvements, know-how, data,
processes, methods, formulae, and techniques, as well as improvements
thereof, or know-how related thereto, concerning any past, present, or
prospective activities of the Company, which the Executive makes,
discovers, or conceives (whether or not during the hours of the Executive's
engagement or with the use of the Company's facilities, materials, or
personnel), either solely or jointly with others during the Executive's
engagement by the Company or any Affiliate of the Company and, if based on
or related to Proprietary Information, at any time after termination of
such engagement. All Inventions shall be the sole property of the Company,
and the Executive agrees to perform the provisions of this Section 11 with
respect thereto without the payment by the Company of any royalty or any
consideration therefor, other than the regular compensation paid to the
Executive in his capacity of as an employee or consultant.
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(b) The Executive shall maintain written notebooks in which the
Executive shall set forth, on a current basis, information as to the
Inventions, describing in detail the procedures employed and the results
achieved, as well as information as to any studies or research projects
undertaken on the Company's behalf. The written notebooks shall at all
times be the property of the Company and shall be surrendered to the
Company upon termination of the Executive's engagement or, upon request of
the Company, at any time prior thereto.
(c) The Executive shall apply, at the Company's request and expense,
for United States and foreign letters patent or copyrights, either in the
Executive's name or otherwise as the Company shall desire.
(d) The Executive hereby assigns to the Company all of the Executive's
rights to the Inventions and to applications for United States and/or
foreign letters patent or copyrigh ts and to United States and/or foreign
letters patent or copyrights granted in respect of the Inventions.
(e) The Executive shall acknowledge and deliver promptly to the
Company, without charge to the Company, but at its expense, such written
instruments (including applications and assignments) and do such other
acts, such as giving testimony in support of the Executive's inventorship,
as may be necessary in the opinion of the Company to obtain, maintain,
extend, reissue, and enforce United States and/or foreign letters patent
and copyrights relating to the Inventions and to vest the entire right and
title thereto in the Company or its nominee. The Executive acknowledges and
agrees that any copyright developed or conceived of by the Executive during
the term of the Executive's employment which is related to the business of
the Company shall be a "work for hire" under the copyright law of the
United States and other applicable jurisdictions.
(f) The Executive represents that the Executive's performance of all
of the terms of this Agreement and as an employee of or consultant to the
Company does not and will not breach any trust existing prior to the
Executive's employment by the Company. The Executive agrees not to enter
into any agreement, either written or oral, in conflict herewith and
represents and agrees that the Executive has not brought and will not bring
with the Executive to the Company or use in the performance of the
Executive's responsibilities at the Company any materials or documents of a
former employer which are not generally available to the public, unless the
Executive has obtained written authorization from the former employer for
their possession and use, and the Executive has provided a copy of such
written authorization to the Company.
(g) No provision of this Section 11 shall be deemed to limit the
restrictions applicable to the Executive under Section 10 hereof.
12 . SHOP RIGHTS.
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The Company shall also have the royalty-free right to use in its business,
and to make, use, and sell products, processes, and/or services derived from any
inventions, discoveries, concepts, and ideas, whether or not patentable,
including, but not limited to, processes, methods, formulas, and techniques, as
well as improvements thereof or know-how related thereto, concerning any past,
present, or prospective activities of the Company, which are not within the
scope of Inventions as defined in Section 11 hereof, but which are conceived or
made by the Executive during the period that the Executive is engaged by the
Company with the use or assistance of the Company's facilities, materials, or
personnel.
13 . NON-COMPETE.
The Executive hereby agrees that during the Executive's employment under
this Agreement, and for a period of nine months from the termination thereof,
the Executive will not, without the written consent of the Company:
(a) Within any jurisdiction or marketing area in which the Company or
any subsidiary thereof is doing business, own, manage, operate, or control
any Business, provided, however, that for purposes of this Subsection
13(a), ownership of securities of not in excess of five percent (5%) of any
class of securities of a public company shall not be considered as owning,
managing, operating, or controlling any Business except as specifically
decribed below in this paragraph 13; or
(b) Within any jurisdiction or marketing area in which the Company or
any subsidiary thereof is doing business, act as, or become employed as, an
officer, director, employee, consultant or agent of any Business; or
(c) Solicit any Business for, or sell any products that are in
competition with the Company's products to, any company, which is a
customer or client of the Company or any of its subsidiaries as of the
Termination Date; or
(d) Solicit the employment of, or hire, any full time employee
employed by the Company or its subsidiaries as of the Termination Date.
The Company acknowledges that the Executive is the owner of more than
5% of the outstanding shares of Enhanced Telecommunications Services, Inc.
(d/b/a Telenational Marketing, together "ETS") and that the Executive holds
the title of Chairman of the Board and Chief Executive Officer of ETS. The
Executive hereby represents that he does not participate in the day-to-day
management of ETS, but is active at the board level. ETS does not directly
compete with the business of the Company and is primarily in the
telemarketing business both inbound and outbound. ETS provides customer
service, information processing, sales, and call processing for a variety
of companies including competitors of the Company. The Company acknowledges
that the Executive's continued employment with and ownership in ETS will
specifically be excluded from the Non-Compete provisions of this Agreement,
so long as ETS does not engage in any new business which is directly
competitive with the Company's current business. The Executive
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and the Company acknowledge that a conflict of interest may exist with
regards to business transactions between the Company and ETS. The Executive
agrees to recuse himself from business decisions and actions on behalf of
the Company when and if such a conflict of interest could have a material
adverse effect on the Company's operations or financial condition.
The term "Business," as used in this Section 13, shall mean any person
or entity which is an international facilities-based telecommunications
carrier or any of the services which are necessarily provided by an
international facilities-based telecommunications carrier to its customers.
14 . REMEDIES AND JURISDICTION.
(a) The Executive hereby acknowledges and agrees that a breach of the
agreements contained in Section 13 of this Agreement will cause irreparable
harm and damage to the Company, that the remedy at law for the breach or
threatened breach of the agreements set forth in Section 13 of this
Agreement will be inadequate, and that, in addition to all other remedies
available to the Company for such breach or threatened breach (including,
without limitation, the right to recover damages), the Company shall be
entitled to injunctive relief for any breach or threatened breach of the
agreements contained in Section 13 of this Agreement.
(b) All claims, disputes and other matters in question between the
parties arising under this Agreement, except those pertaining to Section 13
hereof, shall, unless otherwise provided herein, be decided by arbitration
in the State of Texas in accordance with the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association
(including such procedures governing selection of the specific arbitrator
or arbitrators), unless the parties otherwise agree. The Company shall pay
the costs of any such arbitration. The award by the arbitrator or
arbitrators shall be final, and judgment may be entered upon it in
accordance with applicable law in any state or federal court having proper
jurisdiction.
15 . INDEMNIFICATION.
The Company agrees to indemnify and hold the Executive harmless from and
against any and all losses, liabilities, or costs (including, but not limited
to, reasonable attorney's fees), which the Executive may sustain, incur, or
assume as a result of, or relative to, any allegation, claim, civil or criminal
action, proceeding, charge, or prosecution, which may be alleged, made,
instituted, or maintained against the Executive or the Company, jointly or
severally, arising out of or based upon the Executive's employment with the
Company, to the fullest extent permitted by applicable law including, but not
limited to, any injury to person(s) or damage to property or business by reason
of any cause whatsoever, regardless of whether any such injury or damage is
caused by negligence on the part of the Executive. THIS INDEMNITY PROVISION IS
INTENDED TO INDEMNIFY THE EXECUTIVE (A) AGAINST THE CONSEQUENCES OF HIS OWN
NEGLIGENCE OR FAULT, REGARDLESS OF WHETHER THE EXECUTIVE IS SOLELY NEGLIGENT OR
CONTRIBUTORILY, PARTIALLY, JOINTLY, COMPARATIVELY, OR CONCURRENTLY NEGLIGENT
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WITH ANY OTHER PERSON, AND (B) AGAINST ANY LIABILITY OF THE EXECUTIVE BASED ON
APPLICABLE DOCTRINE OF STRICT LIABILITY. Not withstanding the foregoing, the
Company will not, however, indemnify the Executive for any claims, liabilities,
losses, damages or expenses that result solely from bad faith, gross negligence
or willful misconduct by the Executive.
16 . ATTORNEYS' FEES.
In the event that either party hereunder institutes any legal proceedings
in connection with its rights or obligations under this Agreement, the
prevailing party in such proceeding shall be entitled to recover from the other
party all costs incurred in connection with such proceeding, including
reasonable attorneys' fees, together with interest thereon as provided by
applicable law.
17 . SUCCESSORS.
This Agreement and all rights of the Executive hereunder shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, estate, executors, administrators, heirs, or beneficiaries. In
the event of the Executive's death, all amounts payable to the Executive under
this Agreement shall be paid to the Executive's surviving spouse, if the
Executive dies without a surviving spouse, to the Executive's estate. This
Agreement shall inure to the benefit of, be binding upon, and be enforceable by
or against, any successor, surviving or resulting corporation, or other entity
or any assignee of the Company to which all or substantially all of the business
and assets of the Company is transferred whether by merger, consolidation,
exchange, assignment, sale, lease, or other disposition or action.
18 . ENFORCEMENT.
The provisions of this Agreement shall be regarded as divisible, and if any
of such provisions or any part hereof is declared invalid or unenforceable by a
court of competent jurisdiction, the validity and enforceability of the
remainder of such provisions or the parts hereof and the applicability thereof
shall not be affected thereby.
19 . AMENDMENT OR TERMINATION.
This Agreement may not be amended or terminated during its term, except by
written instrument executed by both the Company and the Executive.
20 . SURVIVABILITY.
The provisions of Sections 10, 11, 12, 13 and 15 hereof and the provisions
hereof relating to the payment of the Accrued Benefits and the Severance Payment
shall survive the termination of this Agreement. 21 . ENTIRE AGREEMENT.
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21 . ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement between the Executive and
the Company with respect to the subject matter hereof and supersedes all prior
oral or written agreements, negotiations, commitments, and understandings with
respect thereto.
22 . GOVERNING LAW; VENUE.
This Agreement and the respective rights and obligations of the Executive
and the Company hereunder shall be governed by and construed in accordance with
the laws of the State of Texas without giving effect to the provisions,
principles, or policies thereof relating to choice of law or conflict of laws.
Venue of any arbitration or other legal proceeding or action relating to this
Agreement shall be proper in Harris County, Texas.
23 . NOTICE.
Notices given pursuant to this Agreement shall be in writing and shall be
deemed given when received, and if mailed, shall be mailed by United States
registered or certified mail, return receipt requested, postage prepaid, if to
the Company, to:
WorldPort Communications, Inc.
9601 Katy Freeway, Suite 200
Houston, Texas 77024
with a copy to corporate counsel for the Company to:
Snell & Wilmer LLP
Attn: Mr. William C. Gibbs, Esq.
111 East Broadway, Suite 900
Salt Lake City, Utah 84111
Tel: 801-237-1907
or to such other address as the Company shall have given to the Executive or,
if to the Executive, to:
Mr. Bruce Burton
7300 Woolworth Avenue
Omaha, Nebraska
Tel: (402) 392-7533
with a copy to counsel for the Executive to:
---------------------------
---------------------------
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or to such other address as the Executive shall have given to the Company.
24 . NO WAIVER.
No waiver by either party at any time of any breach by the other party of,
or any failure by the other party to comply with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or at any prior
or subsequent time.
25 . HEADINGS.
The headings herein contained are for reference only and shall not affect
the meaning or interpretation of any provision of this Agreement.
26 . COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Executive has executed this Agreement, on
the date and year first above written.
THE COMPANY:
WORLDPORT COMMUNICATIONS, INC.
/s/John Dalton
-----------------------------------
JOHN DALTON
CHIEF EXECUTIVE OFFICER
EXECUTIVE:
/s/Bruce Burton
-----------------------------------
BRUCE BURTON
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EXHIBIT A
Year One Performance Bonus Criteria
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OFFICE BUILDING LEASE This is a legally binding contract prepared on behalf
of the Building Owners and Managers Association of
Omaha, Inc., which assumes no responsibility for its
content.
THIS LEASE is entered into this 1st day of July, 1997, between 7300
Woolworth Partnership, Landlord, and Telenational Communications, Inc., Tenant.
1. Landlord leases to Tenant Section A, B and C on the Main floor of the
building known as 7300 Woolworth Avenue (the "Building"), Omaha, Douglas County,
Nebraska, as shown in red on Exhibit "A" (the "Premises"), containing
approximately 10,790 square feet of area, on the following terms and conditions.
TERM
2. The Lease shall be for a term of four years, beginning on the 1st day
of July, 1997, and ending on the 30th day of June, 2001, unless terminated
earlier as provided in this Lease.
If for any reason the Premises are delivered to Tenant on any date before
or after the term commencement date, rental for the period between the date of
possession and the term commencement date shall be adjusted on a pro rata basis.
Such earlier or later taking of possession shall not change the termination date
of this Lease. This Lease shall not be void or voidable in the event of a late
delivery by Landlord, nor shall Landlord be liable to Tenant for any resulting
loss or damage.
USE OF PREMISES
3. The Premises are leased to Tenant, and are to be used by Tenant, for
the purposes of telecommunications services and for no other purpose. Tenant
agrees to use the Premises in such a manner as to not interfere with the rights
of other tenants in the Building, to comply with all applicable government all
laws, ordinances, and regulations in connection with its use of the Premises, to
keep the Premises in a clean and sanitary condition, to use all reasonable
precaution to prevent waste, damage, or injury to the Premises.
RENT
4. (a) Base Rent. The total Base Rent under this Lease is FOUR HUNDRED
THIRTY-ONE THOUSAND SIX HUNDRED DOLLARS ($431,600.00). Tenant agrees to pay rent
to Landlord at 7300 Woolworth Avenue, Omaha, Nebraska, or at any other place
Landlord may designate in writing, in lawful money of the United States, in
monthly installments in advance, on the first day of each month, as follows:
for the period from July 1, 1997 to June 30, 2001 $8,992.00 per month.
(b) Rent Adjustment. In addition to the Base Rent, Tenant shall pay a pro
rata share of all "Excess Operating Expenses." "Operating Expenses" shall mean
all costs of maintaining and operating the Building, the related parking areas,
and grounds, including, but not limited to costs of labor, material and supplies
for maintenance, repair and operation of the Building, parking areas and
grounds, all landscaping, and other services, all costs of heating, air
<PAGE>
conditioning, water, sewer, gas, electricity, and other utilities serving the
Building and grounds, all insurance costs, and all taxes and special assessments
levied upon the Building, related parking areas, grounds, fixtures and personal
property used by Landlord at the Premises and management costs, including
building superintendents. Operating Expenses shall not include property
additions and capital improvements to the Property, alterations made for
specific Tenants, depreciation, debt service on long term debt, or income taxes
paid by Landlord. Excess Operating Expenses means all Operating Expenses greater
than $3.50 psf on annualized basis.
"Base Year" shall mean the calendar year in which the Lease commences.
"Tenant's pro rata share" shall mean the percentage determined by dividing
the square feet of the Premises as shown in Paragraph 1 by the square feet of
rentable areas of the Building as defined by the American National Standard
published by buildings Owners and Managers Association, which at the date hereof
is agreed to be 19,520 square feet.
(c) Computation of Rent Adjustment. At the conclusion of each three months
of each Year, Landlord's accountants shall determine the amount, if any, by
which Landlord's Operating Expenses are Excess Operating Expenses for the
period. Landlord shall notify Tenant of the amount of any Excess Operating
Expenses and Tenant shall, within twenty (20) days after receipt of such notice,
pay such amount as additional rent, in one sum.
(d) Payment of Rent. Tenant agrees to pay the Base Rent as and when due,
together with all adjustments and all other amounts required to be paid by
Tenant under this Lease. In the event of nonpayment of any amounts due under
this Lease, whether or not designated as rent, Landlord shall have all the
rights and remedies provided in this Lease or by law for failure to pay rent.
(e) Late Charge. If the Tenant fails to pay the Base Rent together with
the Tenant's share of the Operating Expenses and all other amounts required to
be paid by Tenant under this Lease, on or before the third day after such
payments are due, Tenant agrees to pay landlord a late charge of 5% of such
amount past due until all past due sums are paid in full.
(f) Security Deposit. As partial consideration for the execution of this
Lease, the Tenant has delivered to Landlord the sum of None as a Security
Deposit. The Security Deposit will be returned to Tenant at the expiration of
this Lease if Tenant has fully complied with all covenants and conditions of
this Lease.
SERVICES
5. Landlord shall deliver electricity, water, sewer, gas, perform common
area maintenance, and other repair and maintenance, as described, to the
Premises during normal business hours, and at such other times as Landlord may
deem necessary or desirable, in the manner customary to the Building. Landlord
shall have the right to discontinue any service during any period for which rent
is not promptly paid by Tenant. Landlord shall not be liable for damages, nor
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shall the rental be abated, for failure to furnish, or delay in furnishing, any
service when failure to furnish, or delay in furnishing, is occasioned in whole
or in part by needful repairs, renewals, or improvements, or by any strike or
labor controversy, or by any accident or casualty whatsoever, or by any
unauthorized act or default of any employee of Landlord, or for any other cause
or causes beyond the control of Landlord. Electricity furnished under this Lease
is for the normal operation of a business office only, and Landlord shall be
entitled to make additional charges for excess electricity requirements, such as
computers and other special business machines. Refer to paragraph 24 below as to
certain separately metered electrical services of Tenant.
ASSIGNMENT OR SUBLEASE
6. Tenant shall not assign this Lease or sublet the whole or any part of
the Premises, transfer this Lease by operation of law or otherwise, or permit
any other person except agents and employees of Tenant to occupy the Premises,
or any part thereof, without the prior written consent of Landlord. Landlord may
consider the following in determining whether to withhold consent (a) financial
responsibility of the new tenant, (b) identity and business character of the new
tenant, (c) nature and legality of the proposed use of the Premises.
Landlord shall have the right to assign its interest under this Lease or
the rent reserved hereunder.
TENANT'S IMPROVEMENTS
7. Tenant shall have the right to place partitions and fixtures and make
improvements or other alterations in the interior of the Premises at its own
expense. Prior to commencing any such work, Tenant shall first obtain the
written consent of Landlord for the proposed work. Landlord may, as a condition
to its consent, require that the work be done by Landlord's own employees and/or
under Landlord's supervision, but at the expense of Tenant, and that Tenant give
sufficient security that the Premises will be completed free and clear of liens
and in a manner satisfactory to Landlord. Upon termination of this Lease, at
Landlord's option, Tenant will repair and restore the Premises to its former
condition, at Tenant's expense, or any such improvements , additions, or
alterations installed or made by Tenant, except Tenant's trade fixtures, shall
become part of the Premises and the property of the Landlord. Tenant may remove
its trade fixtures at the termination of this Lease provided Tenant is not then
in default and provided further that Tenant repairs any damage caused by such
removal.
REPAIRS
8. Landlord agrees to make all necessary repairs to the exterior walls,
exterior doors, windows, and corridors of the Building and to keep the Building
in a clean, neat, and attractive condition. Landlord agrees to maintain the
Building equipment and mechanical systems in good repair, but Landlord shall not
be liable or responsible to Tenant for breakdowns or temporary interruptions in
service.
Tenant agrees that it will make all repairs and replacements to the
Premises not required to be made by Landlord, to do all redecorating,
remodeling, alteration, and painting required by it during the term of the Lease
at its own cost and expense, to pay for any repairs to the Premises or the
3
<PAGE>
Building made necessary by any negligence or carelessness of Tenant or any of
its agents or employees or persons permitted in the Building by Tenant, and to
maintain the Premises in a safe, clean, neat and sanitary condition. Tenant
shall be entitled to no compensation for inconvenience, injury, or loss of
business arising from the making of any repairs by Landlord, Tenant, or other
tenants to the Premises or the Building. In the event plumbing is or has been
installed in the Premises, Tenant is responsible for the repair and maintenance
of the plumbing system to the point where Tenant's system connects with
Landlord's system. At the sole discretion of Landlord, Tenant may be required to
install a meter to measure such water consumption.
CONDITION OF PREMISES
9. Except as provided herein, Tenant agrees that no promises,
representations, statements, or warranties have been made on behalf of Landlord
to Tenant respecting the condition of the Premises, or the manner of operating
the Building, or the making of any repairs to the Premises. By taking possession
of the Premises, Tenant acknowledges that the Premises were in good and
satisfactory condition when possession was taken. Tenant shall, at the
termination of this Lease, by lapse of time or otherwise, remove all of Tenant's
property and surrender the Premises to Landlord in as good condition as when
Tenant took possession, normal wear excepted.
PERSONAL PROPERTY AT RISK OF TENANT
10. All personal property in the Premises shall be at the risk of Tenant
only. Landlord shall not be liable for any damage to any property of Tenant or
its agents or employees in the Premises caused by steam, electricity, sewage,
gas or odors, or from water, rain, or snow which may leak into, issue or flow
into the Premises from any part of the Building, or from any other place, or for
any damage done to Tenant's property in moving same to or from the Building or
the Premises. Tenant shall give Landlord, or its agents, prompt written notice
of any damage to or defects in water pipes, gas or warming or cooling apparatus
in the Premises.
LANDLORD'S RESERVED RIGHTS
11. Without notice to Tenant, without liability to Tenant for damage or
injury to property, person, or business, and without effecting an eviction of
Tenant or a disturbance of Tenant's use or possession or giving rise to any
claim for setoff or abatement of rent, Landlord shall have the right to:
(a) Change the name or street address of the Building.
(b) Install and maintain signs on the exterior of the Building.
(c) Have access to all mail chutes according to the rules of the United
States Post Office Department.
(d) At reasonable times, to decorate, and to make, at its own expense,
repairs, alterations, additions and improvements, structural or otherwise, in or
to the Premises, the Building, or part thereof, and any adjacent building, land,
street, or alley, and during such operations to take into and through the
4
<PAGE>
Premises or any part of the Building all materials required, and to temporarily
close or suspend operation of entrances, doors, corridors, elevators, or other
facilities to do so.
(e) Possess passkeys to the Premises.
(f) Show the Premises to prospective tenants at reasonable times.
(g) Take any and all reasonable measures, including inspections or the
making of repairs, alterations, and additions and improvements to the Premises
or to the Building, which Landlord deems necessary or desirable for the safety,
protection, operation, or preservation of the Premises or the Building.
(h) Approve all sources furnishing signs, painting, and/or lettering to
the Premises, and approve all signs on the Premises prior to installation
thereof.
INSURANCE
12. Tenants shall not use or occupy the Premises or any part thereof in
any manner which could invalidate any policies of insurance now or hereafter
placed on the Building or increase the risks covered by insurance on the
Building or necessitate additional insurance premiums or policies of insurance,
even if such use may be in furtherance of Tenant's business purposes. In the
event any policies of insurance are invalidated by acts or omissions of Tenant,
Landlord shall have the right to terminate this Lease or, at Landlord's option,
to charge Tenant for extra insurance premiums required on the Building on
account of the increased risk caused by Tenant's use and occupancy of the
Premises. Each party hereby waives all claims for recovery from the other for
any loss or damage to any of its property insured under valid and collectible
insurance policies to the extent of any recovery collectible under such
policies. Provided, that this waiver shall apply only when permitted by the
applicable policy of insurance.
INDEMNITY
13. Tenant shall indemnify, hold harmless, and defend Landlord from and
against, and Landlord shall not be liable to Tenant on account of, any and all
costs, expenses, liabilities, losses, damages, suits, actions, fines, penalties,
demands, or claims of any kind, including reasonable attorney's fees, asserted
by or on behalf of any person, entity or governmental authority arising out of
or in any way connected with either (a) a failure by Tenant to perform any of
the agreements, terms, or conditions of this Lease required to be performed by
Tenant; (b) a failure by Tenant to comply with any laws, statutes, ordinances,
regulations, or orders of any governmental authority; or (c) any accident,
death, or personal injury, or damage to, or loss or theft of property which
shall occur on or about the Premises, or the Building, except as the same may be
the result of the negligence of Landlord, its employees, or agents.
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<PAGE>
LIABILITY INSURANCE
14. Tenant agrees to procure and maintain continuously during the entire
term of this Lease, a policy or policies of insurance in a company or companies
acceptable to Landlord, at Tenant's own cost and expense, insuring Landlord and
Tenant from all claims, demands, or actions; such comprehensive insurance shall
protect and name th Tenant as the Insured and shall provide coverage of at least
$1,000,000 for injuries to any one person, $1,000,000 for injuries to persons in
any one accident and $2,000,000 for damage to property, made by or on behalf of
any person or persons, firm or corporation arising from, related to, or
connected with the conduct and operation of Tenant's business in the Premises,
or arising out of and connected with the use and occupancy of sidewalks and
other Common Areas by the Tenant. All such insurance shall provide that Landlord
shall be given a minimum of ten (10) days notice by the insurance company prior
to cancellation, termination or change of such insurance. Tenant shall provide
Landlord with copies of the policies or certificates evidencing that such
insurance is in full force and effect and stating the term and provisions
thereof. If Tenant fails to comply with such requirements for insurance,
Landlord may, but shall not be obligated to, obtain such insurance and keep the
same in effect, and Tenant agrees to pay Landlord, upon demand, the premium cost
thereof.
DAMAGE BY FIRE OR OTHER CASUALTY
15. If, during the term of this Lease, the Premises shall be so damaged by
fire or any other cause except Tenant's negligent or intentional act so as to
render the Premises untenantable, the rent shall be abated while the Premises
remain untenantable; and in the event of such damage, Landlord shall elect
whether to repair the Premises or to cancel this Lease and shall notify Tenant
in writing of its election within sixty (60) days after such damage. In the
event Landlord elects to repair the Premises, the work or repair shall begin
promptly and shall be carried on without unnecessary delay. In the event
Landlord elects not to repair the Premises, the Lease shall be deemed cancelled
as of the date of the damage. Such damage shall not extend the Lease term.
CONDEMNATION
16. If the whole or any part of the Premises shall be taken by public
authority under the power of eminent domain, then the term of this Lease shall
cease on that portion of the Premises so taken, from the date of possession, and
the rent shall be paid to that date, with a proportionate refund by Landlord to
Tenant of such rent as may have been paid by Tenant in advance. If the portion
of the Premises taken is such that it prevents the practical use of the Premises
for Tenant's purposes, then Tenant shall have the right either (a) to terminate
this Lease by giving written notice of such termination to Landlord not later
than thirty (30) days after the taking; or (b) to continue in possession of the
remainder of the Premises, except that the rent shall be reduced in proportion
to the area of the Premises taken. In the event of any taking or condemnation of
the Premises, in whole or in part, the entire resulting award of damages shall
be the exclusive property of Landlord, including all damages awarded as
compensation for diminution in value to the leasehold, without any deduction for
the value of any unexpired term of this Lease, or for any other estate or
interest in the Premises now or hereafter vested in Tenant.
6
<PAGE>
DEFAULT OR BREACH
17. Each of the following events shall constitute a default or a breach of
this Lease by Tenant:
(a) If tenant fails to pay landlord any rent or additional rent when due
hereunder;
(b) If Tenant vacates or abandons the Premises;
(c) If Tenant files a petition in bankruptcy or insolvency or for
reorganization under any bankruptcy act, or voluntarily takes advantage of any
such act by answer or otherwise, or makes an assignment for the benefit of
creditors;
(d) If involuntary proceedings under any bankruptcy or insolvency act
shall be instituted against Tenant, or if a receiver or trustee shall be
appointed of all or substantially all of the property of Tenant, and such
proceedings shall not be dismissed or the receivership or trusteeship vacated
within thirty (30) days after the institution or appointment; or
(e) If Tenant fails to perform or comply with any other term or condition
of this Lease and if such nonperformance shall continue for a period of ten (10)
days after notice thereof by Landlord to Tenant, time being of the essence.
EFFECT OF DEFAULT
18. In the event of any default or breach hereunder, in addition to any
other right or remedy available to landlord, either at law or in equity,
Landlord may exert any one or more of the following rights:
(a) Landlord may re-enter the Premises immediately and remove the property
and personnel of Tenant, and shall have the right, but not the obligation, to
store such property in a public warehouse or at a place selected by Landlord, at
the risk and expense of Tenant.
(b) Landlord may retake the Premises and may terminate this Lease by
giving written notice of termination to Tenant. Without such notice, Landlord's
retaking will not terminate the Lease. On termination, Landlord may recover from
Tenant all damages proximately resulting from the breach, including the cost of
recovering the Premises and the difference between the rent due for the balance
of the Lease term, as though the Lease had not been terminated, and the
reasonable rental value of the Premises, which sum shall be immediately due
Landlord from Tenant.
(c) Landlord may relet the Premises or any part thereof for any term
without terminating this Lease, at such rent and on such terms as it may choose.
Landlord may make alterations and repairs to the Premises. In addition to
Tenant's liability to Landlord for breach of this lease, Tenant shall be liable
for all expenses of the reletting for any alterations and repairs made, and for
the rent due for the balance of the Lease term, which sums shall be immediately
due Landlord from Tenant. The amount due Landlord will be reduced by the net
rent received by Landlord during the remaining term of this Lease from reletting
7
<PAGE>
the Premises or any part thereof. If during the remaining term of this Lease
Landlord receives more than the amount due Landlord under this sub-paragraph,
the Landlord shall pay such excess to Tenant, but only to the extent Tenant has
actually made payment pursuant to this sub-paragraph.
SURRENDER -- HOLDING OVER
19. Tenant shall, upon termination of this Lease, whether by lapse of time
or otherwise, peaceably and promptly surrender the Premises to landlord. If
Tenant remains in possession after the termination of this Lease, without a
written lease duly executed by the parties, Tenant shall be deemed a trespasser.
If Tenant pays and Landlord accepts, rent for a period after termination of this
Lease, Tenant shall be deemed to be occupying the Premises only as a tenant from
month to month, subject to all the terms, conditions, and agreements of this
Lease, except that the rent shall be two times the monthly rent specified in the
lease immediately before termination.
SUBORDINATION AND ATTORNMENT
20. Landlord reserves the right to place liens and encumbrances on the
Premises superior in lien and effect to this Lease. This Lease and all rights of
Tenant hereunder shall at the option of Landlord, be subject and subordinate to
any liens and encumbrances now or hereafter imposed by Landlord upon the
Premises or the Building or any part thereof, and Tenant agrees to execute,
acknowledge, and deliver to Landlord, upon request any and all instruments that
may be necessary or proper to subordinate this Lease and all rights herein to
any such lien or encumbrance as may be required by Landlord.
In the event any proceedings are brought for the foreclosure of any
mortgage on the Premises, Tenant will attorn to the purchaser at the foreclosure
sale and recognize such purchaser as the Landlord under this Lease. The
purchase, by virtue of such foreclosure, shall be deemed to have assumed as
substitute Landlord, the terms and conditions of this Lease until the resale or
other disposition of its interest. Such assumption, however, shall not be deemed
an acknowledgment by the purchaser of the validity of any then existing claims
of Tenant against the prior Landlord.
Tenant agrees to execute and deliver such further assurances and other
documents, including a new lease upon the same terms and conditions contained
herein, confirming the foregoing, as such purchaser may reasonably request.
Tenant waives any right or election to terminate this Lease because of any such
foreclosure proceedings.
NOTICES
21. Any notice of demands to be given hereunder shall be given in writing
and sent by registered or certified mail to Landlord at: 7300 Woolworth Avenue,
Omaha, Nebraska 68124, and to Tenant at 9601 Katy Freeway, Suite 200, Houston,
Texas 77024 and WorldPort Communications, Inc. or at such other address as
either party may from time to time designate in writing. Each such notice shall
be deemed to have been given at the time it shall be personally delivered to
such address or deposited in the United States mail in the manner prescribed
herein.
8
<PAGE>
RIGHT TO TERMINATE
22. Landlord shall have the right to terminate this Lease at the end of
any calendar month by giving the Tenant written notice at least six months
before the date of the termination of Landlord's intention to remodel, remove or
demolish the Building, or to sell, or make a ground lease of the land
thereunder.
MISCELLANEOUS
23. (a) Binding on Assigns. All terms, conditions, and agreements of
this Lease shall be binding upon, apply, and inure to the benefit of the parties
hereto and their respective heirs, representatives, successors, and assigns.
(b) Amendment in Writing. This Lease contains the entire agreement between
the parties and may be amended only by subsequent written agreement.
(c) Waiver - None. The failure of Landlord to insist upon strict
performance of any of the terms, conditions and agreements of this Lease shall
not be deemed a waiver of any of its rights or remedies hereunder and shall not
be deemed a waiver of any subsequent breach or default of any of such terms,
conditions, and agreements. The doing of anything by Landlord which Landlord is
not obligated to do hereunder shall not impose any future obligation on Landlord
nor otherwise amend any provision of this Lease.
(d) No Surrender. No surrender of the Premises by Tenant shall be effected
by Landlord's acceptance of the keys to the Premises or of the rent due
hereunder, or by any other means whatsoever, without Landlord's written
acknowledgment that such acceptance constitutes a surrender.
(e) Captions. The captions of the various paragraphs in this Lease are for
convenience only and do not define, limit, describe, or construe the contents of
such paragraphs.
(f) Brokers. Tenant hereby warrants that no real estate broker has or will
represent it in this transaction and that no finder's fees have been earned by a
third party.
(g) Applicable Law. This Lease shall be governed by and construed in
accordance with the laws of the State of Nebraska.
OTHER PROVISIONS
24. All of Tenant's computers and switching equipment in the Switching
Room will be served by dedicated electrical lines, installed by and metered and
billed to the Tenant.
Until this Lease is executed on behalf of all parties hereto, it shall be
construed as an offer to lease of Tenant to Landlord.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day
and year first above written.
7300 Woolworth Partnership, Landlord
________________________________ By Edmund H. Blankenau
Witness Partner
________________________________ By /s/Edmund Blankenau
Witness ---------------------
Telenational Communications, Inc.
_______________________________ By John E. Dalton
Witness President
_______________________________ By /s/John Dalton
Witness ---------------------
GUARANTEE
The undersigned hereby unconditionally guarantee unto the Landlord the
payment of the rent and the performance of all of the covenants under the Lease
by the Tenant and hereby waive notice of any default under said Lease and agree
that this liability shall not be released or affected by an extension of time
for payment or by any forbearance by the Landlord.
Dated this 1st day of July, 1997
By: WorldPort Communications, Inc.
By: John E. Dalton
President
9601 Katy Avenue, Suite 200
Houston, TX 77024
RULES AND REGULATIONS
A. The entrances, corridors, passages, stairways and elevators shall be
under the exclusive control of the Landlord and shall not be obstructed or used
by the Tenant for any other purpose than ingress and egress to and from the
Premises, and the Landlord shall have the right to control ingress and egress to
and from the Building at all times.
B. Safes, furniture, boxes or other bulky articles shall be carried by the
freight elevator, or by the stairways or through the windows of the Building in
such a manner and at such hours as may be directed by the Landlord. Safes and
10
<PAGE>
other heavy articles shall be placed by the Tenant in such places only as may be
first specified in writing by the Landlord.
C. The Tenant shall not place nor permit to be placed any signs,
advertisements or notices in or upon any part of the Building, and shall not
place merchandise or showcases in front of the Building without the Landlord's
written consent.
D. The Tenant shall not put up nor operate any engine, boiler, dynamo, or
machinery of any kind, nor carry on any mechanical business in said Premises nor
place any explosive therein, nor use any kerosene or oils or burning fluids in
the Premises without first obtaining the written consent of the Landlord.
E. If the Tenant desires telegraphic or telephonic connections, the
Landlord will direct the electricians as to where and how the wires are to be
introduced and without such written directions no boring or cutting for wires
will be permitted.
F. No person or persons shall be employed by the Tenant for the purpose of
cleaning or of taking care of the Premises without the written consent of the
Landlord. Any person or persons so employed by the Tenant must be subject to and
under the control and direction of the Landlord.
G. The Landlord shall have the right to exclude or eject from the Building
animals of every kind, bicycles or any other wheeled vehicle, and all canvassers
and other persons who conduct themselves in such a manner as to be, in the
judgment of the Landlord, an annoyance to the tenants and a detriment to the
Building.
H. No additional locks shall be placed upon any doors of the Premises
without first obtaining the written consent of the Landlord and the Tenant will
not permit any duplicate keys to be made. If more than two keys for any door are
desired, the additional number shall be paid for by the Tenant. Upon termination
of this lease the Tenant shall surrender all keys of said Premises and of the
Building and shall give to the Landlord the combination of all locks on any
vaults and sales.
I. The Tenant shall not allow any curtains, filing cases nor other
articles to be placed against or near the glass in the partitions between the
Premises and the corridors of the Building, without first obtaining the written
consent of the Landlord.
J. The Landlord shall have the right to make such other and further
reasonable rules and regulations as, in the judgment of the Landlord, may from
time to time be needed for the safety, care and cleanliness and general
appearance of the Premises and for the preservation of good order therein.
11
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