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
MARCH 31, 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
WORLDPORT COMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 84-1127336
(State or other jurisdiction of (I.R.S. Employer ID Number)
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 April 25, 1997, the Registrant had 10,883,333 shares Common Stock
par value $.001 outstanding.
Transitional Small Business Disclosure Format
(Check one):
[ ] Yes [ X ] No
1
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WORLDPORT COMMUNICATIONS, INC.
(A Development Stage Company)
INDEX
<TABLE>
<CAPTION>
Page
Number
Part I. Financial Information
Item I. Financial Statements
<S> <C>
Condensed Balance Sheets as of March 31,
1997 (Unaudited) and December 31, 1996 3
Condensed Statements of Operations, for the Three
Months Ended March 31, 1997 and 1996 and for the
period from January 6, 1989 (Inception) to March
31, 1997
(Unaudited) 4
Condensed Statements of Cash Flows, for the Three
Months Ended March 31, 1997 and 1996 and for the
period from January 6, 1989 (Inception) to March
31, 1997
(Unaudited) 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 10
Part II. Other Information 14
</TABLE>
2
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WORLDPORT COMMUNICATIONS, INC.
(A Development-Stage Company)
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(Unaudited)
March 31, December 31,
1997 1996
Current Assets:
<S> <C> <C>
Cash $ 2,157,427 $ 1,552,829
Note receivable 500,000 800,000
Accrued interest 42,805 6,329
----------- -----------
Total Current Assets 2,700,232 2,359,158
Other Assets:
Note receivable, including accrued
interest - 527,806
Other 5,130 2,068
---------- ---------
Total Assets $ 2,705,362 $ 2,889,032
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 91,627 $ 75,936
Accounts payable, related party 76,556 -
Accrued interest payable - 23,706
Other - 100
----------- -----------
Total Current Liabilities 168,183 99,742
Note payable - 420,000
----------- -----------
Total Liabilities 168,183 519,742
----------- -----------
Stockholders' Equity:
Preferred stock, $.0001 par value,
10,000,000 shares authorized
none issued and outstanding - -
Common Stock, $.0001 par value, 65,000,000 shares authorized 10,883,333
shares at March 31, 1997 and 9,053,667 shares at December 31,
1996, issued and outstanding 1,088 905
Additional paid-in capital 3,094,291 2,664,291
Deficit accumulated during
development stage (558,200) (295,906)
----------- -----------
Total Stockholders' Equity 2,537,179 2,369,290
----------- -----------
Total Liabilities and Stockholders'
Equity $ 2,705,362 $ 2,889,032
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1996, has been taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of the financial statements.
3
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WORLDPORT COMMUNICATIONS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
January
Three Months Three Months 6, 1989
Ended Ended (Inception) to
March 31, March 31, March 31,
1997 1996 1997
Revenue:
<S> <C> <C> <C>
Interest income $ 29,959 $ 126 $ 70,830
----------- ----------- -----------
Operating Expenses:
Consulting fees, related party 30,000 - 140,000
Stock issued for consulting fees - - 36,740
Consulting fees 55,100 - 55,100
Legal and accounting 99,748 3,759 219,813
Interest 3,283 - 26,989
Salaries 7,500 - 17,500
Rent - 750 20,750
Travel 86,645 - 89,937
Other 9,977 402 22,201
----------- ---------- -----------
Total Operating Expenses 292,253 4,911 629,030
----------- ---------- -----------
Net (Loss) $ (262,294) $ (4,785) $ (558,200)
----------- ---------- -----------
Net (Loss) Per Share $ (0.03) $ (0.08) $ (0.84)
============ =========== ============
Weighted Average Number of Shares
Outstanding 9,580,608 60,000 663,955
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
WORLDPORT COMMUNICATIONS, INC.
(A Development Stage Company)
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
January 6,
Three Months Three Months 1989
Ended Ended (Inception) to
March 31, March 31, March 31,
1997 1996 1997
------------ ----------- --------
Cash flows from operating activities:
<S> <C> <C> <C>
Net (loss) $ (262,294) $ (4,785) $ (558,200)
Adjustments to assets and reconcile net (loss)
to net cash used by operating activities:
Amortization - - 200
Changes in assets and liabilities:
(Increase) in accrued interest
receivable (8,670) - (42,805)
Increase in other assets (5,130) - (5,130)
Increase in accounts payable, related
party 76,556 - 76,556
Increase (decrease) in accounts and
interest payable and other (8,114) 4,911 89,560
------------- ---------- ------------
Net Cash Provided by (Used in)
Operating Activities (207,652) 126 (439,819)
----------- ----------- -----------
Cash flows from investing activities:
Investment in notes receivable (100,000) - (1,400,000)
Collection of note receivable 900,000 - 900,000
Organization costs - - (200)
----------- ----------- -----------
Net Cash Provided by (Used in)
Investing Activities 800,000 - (500,200)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from note payable - - 500,000
Proceeds from issuance of common
stock, net of offering expenses 12,250 - 2,597,446
---------- ----------- -----------
Net Cash Provided by Financing
Activities 12,250 - 3,097,446
---------- ----------- -----------
Net increase in cash and cash
equivalents 604,598 126 2,157,427
Cash at Beginning of Period 1,552,829 14,539 -
----------- ----------- -----------
Cash at End of Period $ 2,157,427 $ 14,665 $ 2,157,427
=========== =========== ===========
Interest Paid $ 26,989 $ - $ 26,989
=========== =========== ===========
Income Taxes Paid $ - $ - $ -
=========== =========== ===========
Supplemental schedule of noncash investing and financing activities:
Cancellation of note payable for
1,680,000 shares of Common Stock $ 420,000 $ - $ 420,000
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
WORLDPORT COMMUNICATIONS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 (Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
WorldPort Communications, Inc. ("WorldPort" or the "Company") is a
publicly-held United States corporation incorporated in the state of
Delaware seeking to become a worldwide provider of enhanced
international telecommunication services to business customers,
individuals, long distance carriers and other emerging
telecommunications service providers.
The accompanying condensed 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 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 for the year
ended December 31, 1996.
In the opinion of management, the accompanying financial statements
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the Company's financial
position as of March 31, 1997, and the results of operations and cash
flows for the three months ended March 31, 1997 and 1996 and
inception-to-date. The results of operations for the three months ended
March 31, 1997 and 1996 are not necessarily indicative of the operating
results for the full years.
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
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
during the Company's fiscal year 1998 will not have a material effect
on previously reported EPS.
6
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(2) PENDING ACQUISITIONS
TNC Acquisition
On April 23, 1997, the Company entered into an Asset Purchase Agreement
to acquire substantially all of the telecommunications assets and
operations of Telenational Communications, Ltd. ("TNC") in exchange for
(i) 3,750,000 shares of the Company's Common Stock and (ii) the
assumption by the Company of certain indebtedness of TNC up to a
maximum of $4.5 million. The purchased assets include a
telecommunications switch 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 transfer or assignment of certain
contracts and licenses are subject to regulatory and other approvals,
which the Company believes that it and TNC will receive. The final
purchase price is subject to adjustment if (i) liabilities in excess of
$4.5 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. The closing of
the Asset Purchase Agreement is subject to (i) the Company's receipt
and acceptance of TNC's audited Financial Statements for 1996, (ii) the
grant by the Federal Communications Commission of a Joint Application
by Final Order for the transfer of the 214 license and (iii)
miscellaneous standard closing conditions. The Company expects to hold
the assets and operations acquired from TNC in a wholly-owned Delaware
subsidiary. Pursuant to the terms of a letter of intent and secured
promissory notes repayable upon demand, as of May 1, 1997, the Company
has loaned $900,000 to TNC to provide TNC with working capital in
anticipation of the closing of the Asset Purchase Agreement.
On April 29, 1997, the Company and TNC entered into a Management
Service Agreement (the "MSA"), wherein the Company provides to TNC
day-to-day executive management services. The term of the MSA is from
April 29, 1997 until the closing of the TNC Asset Purchase Agreement,
unless sooner terminated by the Company. Pursuant to the provisions of
the Management Services Agreement, the Company provides to TNC
day-to-day executive management services. WorldPort has the power,
authority, and duties ascribed to the position of the General Partner
of TNC functioning as a chief executive officer, including authority to
control and direct TNC's use and disposition of operating cash and
borrowed funds and TNC's general business operations. In addition,
WorldPort must (i) keep the General Partner of TNC generally informed
of its activities, (ii) not engage the services of any other
professional, the cost of which exceeds $10,000, without prior approval
from such General Partner, and (iii) not materially change the
direction or operations of TNC's business without prior approval from
such General Partner. The MSA also 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 MSA.
WWC Acquisition
Effective April 20, 1997, the Company entered into an Agreement and
Plan of Merger to acquire The Wallace Wade Company ("WWC"), a
privately-owned Texas corporation pursuant to the Agreement and Plan of
Merger into a wholly-owned subsidiary of the Company (the "WWC
Acquisition"). Mr. John Dalton, the Company's President and Chief
Executive Officer, is the sole shareholder of WWC. In connection with
the WWC Acquisition, the Company will issue to Mr. Dalton (i) 1,400,000
shares of the Company's Common Stock, of which 900,000 shares will be
held pursuant to an escrow agreement subject to certain adjustments to
the purchase price based on the Company entering into business
agreements currently being negotiated by WWC and 500,000 shares will be
held pursuant to the escrow agreement pending delivery to the Company
of certain audited Financial Statements of WWC, (ii) $75,000 cash and
(iii) a Promissory Note in the amount of $175,000 payable as follows:
7
<PAGE>
$50,000 ninety days after the closing of the WWC Acquisition and
$62,500 at the end of each of the 7th and 12th months following the
closing of the WWC Acquisition.
(3) NOVEMBER 1996 PRIVATE PLACEMENT OFFERING
On March 13, 1997, the Company closed a Private Placement Offering (the
"Offering") of 3,333,333 shares of Common Stock at $0.75 per share
pursuant to an Offering Memorandum dated November 1, 1996. In
connection with the Offering, the Company paid Dinton Trader S.A.
("Dinton Trader") $100,000 for service rendered in connection with the
Offering pursuant to the Financial Advisory Agreement dated October 31,
1996 between Dinton Trader and the Company.
(4) COMMITMENTS AND CONTINGENCIES
Employment Agreements
On April 7, 1997 the Company agreed to terms on a one-year employment
agreement with Mr. W. Dean Spies to serve as the Company's Chief
Financial Officer and Treasurer commencing on or before May 1, 1997.
Mr. Spies will earn a base salary of $82,000 per year and will be
eligible to earn incentive bonuses during the next 12 months of up to
$20,500 based on criteria to be established by the Board of Directors.
In addition, pursuant to Mr. Spies' employment agreement, Mr. Spies was
granted options to purchase 120,000 shares of Common Stock based on the
following vesting schedule: 40,000 options vested as of April 7, 1997
at an exercise price of $0.75 per share; 40,000 options vested as of
April 7, 1998 at an exercise price of $1.00 per share; and 40,000
options vested as of April 7, 1999 at an exercise price of $1.50 per
share. Mr. Spies is the nephew of Mr. Dalton, the Chief Executive
Officer of the Company.
On April 8, 1997, the Company entered into a three-year employment
agreement with Mr. John Dalton to serve as the Company's President and
Chief Executive Officer. Mr. Dalton will earn a base salary of $156,000
per year, and will be eligible to earn performance incentive bonuses up
to $100,000 during the next 12 months based on certain business
development and growth criteria. In addition, Mr. Dalton was granted
options to purchase Common Stock of the Company at an exercise price of
$2.00 per share, based on the following vesting schedule: 100,000
options vested after one year of service to the Company and 100,000
options vested after two years of service to the Company.
Leases
On April 15, 1997, the Company entered into a three year lease for its
administrative offices with lease payments beginning at $2,000 per
month increasing to $3,916 per month after six months with additional
annual escalations on April 1 through the term of the lease.
(5) SUBSEQUENT EVENTS
Com Tech Settlement Agreement
Effective April 14, 1997, the Company and Com Tech International
Corporation ("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"). As of May
1, 1997, Com Tech has paid the Company $199,472.23, which represents
8
<PAGE>
$150,000 of principal and $49,473.23 of accrued interest through May
10, 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 of the payments shall consist 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.
May 1997 Private Placement Offering
The Company has initiated a Private Placement Offering for up to
1,666,667 shares of the Company's Series A Preferred Stock for $3.00
per share pursuant to an Offering Memorandum dated May 8, 1997. No
shares have been issued nor have any proceeds yet been received in
connection with this offering. There can be no assurance that the
Company will be successful in completing this offering or that it will
raise any capital pursuant to this offering.
9
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
WorldPort is a publicly-held United States corporation incorporated in the state
of Delaware seeking to become a worldwide provider of enhanced international
telecommunications services to business customers, individuals, long distance
carriers and other emerging telecommunications service providers.
The Management's Discussion and Analysis of Financial Conditions 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); (ii) the contemplated closing of the Asset
Purchase Agreement to acquire substantially all of the telecommunications assets
and operations of TNC; (iii) the May 8, 1997 Private Placement of 1,666,667
shares of Series A Preferred Stock; (iv) the contemplated closing of the
acquisition of WWC pursuant to the Agreement and Plan of Merger into a
wholly-owned subsidiary of the Company; and (v) the profitability, if any, of
the income-producing commission-based contract with an international long
distance service provider that WWC currently holds with a certain long-distance
service provider.
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 or for the Common Stock
into which it is convertible; (viii) the Company's lack of operating history;
(ix) ability to close the TNC or the WWC transactions; and (x) 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.
Results of Operations
The Company is a development stage company that has not generated revenues other
than interest income since inception. The Company's strategy is to develop its
business through strategic acquisitions of telecommunication services companies,
such as TNC and WWC. Currently, however, the Company does not have any
operations. Management anticipates that the Company will not earn any revenues
until after the conclusion of a merger or acquisition, if any. Interest income
for the three months ended March 31, 1997 was $29,959 compared to $126 for the
same period in 1996. The increase was due to the interest from (i) the note
receivable from Global Star International, Inc. (the "GSI Note") which was paid
in full on March 6, 1997 and (ii) the Com Tech Note which has been accrued, but
not fully paid. As of May 1, 1997, Com Tech has paid the Company $199,472.23 on
the Com Tech Note. See "Liquidity and Capital Resources."
Liquidity and Capital Resources
The Company has limited working capital. Expansion of the Company will require
substantial continuing capital investment. Although the Company has been able to
arrange debt facilities or equity financing to date, there can be no assurance
that sufficient debt financing or equity 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
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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.
On July 1, 1996, the Company borrowed from Maroon Bells Capital Partners, Inc.
("Maroon Bells") $500,000 and loaned this amount (the "Maroon Bells Note") to
Com Tech. The Maroon Bells Note bore interest at 10% per annum, was
collateralized by an assignment of the Com Tech Note and was due on April 1,
1997. On October 3, 1996, the Company was notified by Maroon Bells that it had
assigned $80,000 principal amount of the Maroon Bells Note, to certain
non-affiliated entities (the "Assignees"). On October 15, 1996, the Company
negotiated a conversion of the $80,000 of assigned debt in exchange for the
issuance of 1,000,000 shares of Company Common Stock to the Assignees pursuant
to Regulation S. On March 7, 1997 Maroon Bells and the Company entered into a
Stock Issuance and Indemnification Agreement whereby (i) Maroon Bells agreed to
cancel the $420,000 outstanding principal and all accrued but unpaid interest as
of that date in exchange for 1,680,000 shares (the "Indemnification Shares") of
the Company's Common Stock, (ii) Maroon Bells agreed to indemnify the Company
for an amount up to $460,000 in cash, the Indemnification Shares or other
Company shares (based on $.25 per share), or a combination thereof, in the event
that the Company is unsuccessful in securing repayment of the Com Tech Note, and
(iii) Maroon Bells and the Company agreed to divide equally any proceeds, assets
or other consideration received by the Company as a result of the Com Tech Note
in excess of $540,000. Maroon Bells agreed to refrain from transferring or
selling the Indemnification Shares until such time as the disposition of the Com
Tech Note was determined.
Effective April 14, 1997, the Company and Com Tech entered into the Settlement
Agreement with respect to the Com Tech Note. Pursuant to the Settlement
Agreement, Com Tech agreed to pay the Company all amounts due under the Com Tech
Note. As of May 1, 1997, Com Tech has paid the Company $199,472.23, which
represents $150,000 of principal and $49,473.23 accrued interest through May 10,
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 of
the payments shall consist 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.
On March 7, 1997, the Company and Maroon Bells entered into a twelve (12) month
agreement (the "Advisory Agreement") wherein Maroon Bells agreed to provide
certain services to the Company in exchange for (a) a monthly retainer of
$10,000 per month (accrued but not payable until such time as the Company
successfully raises cumulative proceeds of $5,000,000 in equity or debt
financing) and (b) certain success fees payable when and if Maroon Bells
successfully assists the Company in certain transactions including, but not
limited to, mergers and acquisitions. As part of the Advisory Agreement, the
Company agreed to reimburse Maroon Bells for certain travel and out-of-pocket
expenses incurred by Maroon Bells on behalf of the Company.
On March 13, 1997, the Company closed a Private Placement Offering under
Regulation D (the "Offering") of 3,333,333 shares of Common Stock at $0.75 per
share pursuant to an Offering Memorandum dated November 1, 1996. The Company
received gross proceeds from the Offering totaling $2,500,000. The Offering
granted the investors certain demand and incidental registration rights. The
Company will use the proceeds from the Offering for acquisitions, including WWC
and TNC, and for general working capital purposes. The Company received
$2,500,000 proceeds from the Offering, all of which was received prior to
December 31, 1996, except for $112,250 which was received by March 13, 1997.
On May 8, 1997, the Company initiated a Private Placement Offering for up to
$5,000,000 under Regulation D (the "May 8, 1997 Private Placement") of 1,666,667
shares of Series A Preferred Stock at $3.00 per share pursuant to an Offering
Memorandum dated May 8, 1997. Holders of Series A Preferred Stock will be
entitled to receive annual cumulative dividends of $.24 per share, payable in
cash or in shares of Common Stock of WorldPort, at WorldPort'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 or for the Common Stock
into which it is convertible and none is expected to develop as a result of the
May 8, 1997 Private Placement. 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
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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. There can be no assurance that the Company will be
successful in completing the May 8, 1997 Private Placement or that it will
raise any capital pursuant to the May 8, 1997 Private Placement.
Subsequent Events
Employment Agreements
On April 7, 1997 the Company agreed to terms on a one-year employment agreement
with Mr. W. Dean Spies to serve as the Company's Chief Financial Officer and
Treasurer commencing on or before May 1, 1997. Mr. Spies will earn a base salary
of $82,000 per year and will be eligible to earn incentive bonuses during the
next 12 months of up to $20,500 based on criteria to be established by the Board
of Directors. In addition, pursuant to Mr. Spies' employment agreement, Mr.
Spies was granted options to purchase 120,000 shares of Common Stock based on
the following vesting schedule: 40,000 options vested as of April 7, 1997 at an
exercise price of $0.75 per share; 40,000 options vested as of April 7, 1998 at
an exercise price of $1.00 per share; and 40,000 options vested as of April 7,
1999 at an exercise price of $1.50 per share. Mr. Spies is the nephew of Mr.
Dalton, the Chief Executive Officer of the Company.
On April 8, 1997, the Company entered into a three-year employment agreement
with Mr. John Dalton to serve as the Company's President and Chief Executive
Officer. Mr. Dalton will earn a base salary of $156,000 per year, and will be
eligible to earn performance incentive bonuses up to $100,000 during the next 12
months based on certain business development and growth criteria. In addition,
Mr. Dalton was granted options to purchase Common Stock of the Company at an
exercise price of $2.00 per share, based on the following vesting schedule:
100,000 options vested after one year of service to the Company and 100,000
options vested after two years of service to the Company.
In connection with the hiring of the Company's new executive management team,
Mr. Edward Mooney resigned as President and Chief Executive Officer of the
Company effective April 7, 1997.
Leases
The Company maintains its offices at 9601 Katy Freeway, Suite 200, Houston,
Texas 77024, pursuant to a three-year lease agreement dated April 15, 1997. The
Company's lease payment for the office space, which includes basic utilities, is
initially $2,000 per month, increasing to $3,916 per month after six months with
additional annual escalations on April 1 through the term of the lease.
TNC Acquisition
On April 23, 1997, the Company entered into an Asset Purchase Agreement to
acquire substantially all of the telecommunications assets and operations of TNC
in exchange for (i) 3,750,000 shares of the Company's Common Stock and (ii) the
assumption by the Company of certain indebtedness of TNC up to a maximum of $4.5
million. The purchased assets include a telecommunications switch 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 transfer or assignment of certain
contracts and licenses are subject to regulatory and other approvals, which the
Company believes that it and TNC will receive. The final purchase price is
subject to adjustment if (i) liabilities in excess of $4.5 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. The closing of the Asset Purchase Agreement is subject to (i) the
Company's receipt and acceptance of TNC's audited Financial Statements for 1996,
(ii) the grant by the Federal Communications Commission of a Joint Application
by Final Order for the transfer of the 214 license and (iii) miscellaneous
standard closing conditions. The Company expects to hold the assets and
operations acquired from TNC in a wholly-owned Delaware subsidiary. Pursuant to
12
<PAGE>
the terms of a letter of intent and secured promissory notes repayable upon
demand, the Company has loaned $900,000 to TNC to provide TNC with working
capital in anticipation of the closing of the Asset Purchase Agreement.
TNC is a Nebraska limited partnership founded in 1989 to provide domestic and
international telecommunications services. TNC 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 customers primarily in the United States, Western Europe
and Latin America. TNC has approximately 50 employees, including 30 operators
that provide customers worldwide with assistance in completing calls to the U.S.
and international destinations through its automated operator services and its
live operators. TNC provides customer support in English and in other languages
such as Spanish, French, German, Portuguese and Mandarin. TNC's U.S. switching
and operator services center enables customers in foreign countries to take
advantage of least cost routing and transmission quality for calls made between
foreign countries. TNC's services are currently marketed in over 20 countries
through various distribution channels. The majority of TNC's revenues are
generated from international customers including business and individual
customers and, in some cases, from wholesale customers and major corporate
clients.
WWC Acquisition
Effective April 20, 1997, the Company entered into an Agreement and Plan of
Merger to acquire WWC into a wholly-owned subsidiary of the Company (the "WWC
Acquisition"). WWC is a telecommunications marketing consulting firm which
produces and implements marketing strategies for clients ranging from small
companies to large corporate clients. WWC currently holds one income-producing
commission-based contract with an international long distance service provider.
As of the effective date of the WWC Acquisition, WWC was in negotiations with a
large telecommunications network operator. WWC is also in negotiations to
establish a distribution channel for international calling cards and prepaid
debit cards.
Mr. John Dalton, the Company's President and Chief Executive Officer, is the
sole shareholder of WWC. In connection with the WWC transaction, the Company
will issue to Mr. Dalton (i) 1,400,000 shares of the Company's Common Stock, of
which 900,000 shares will be held pursuant to an escrow agreement subject to
certain adjustments to the purchase price based on the Company entering into
business agreements currently being negotiated by WWC and 500,000 shares will be
held pursuant to the escrow agreement pending delivery to the Company of certain
audited Financial Statements of WWC, (ii) $75,000 cash and (iii) a Promissory
Note in the amount of $175,000 payable as follows: $50,000 ninety days after the
closing of the Agreement and Plan of Merger and $62,500 at the end of each of
the 7th and 12th months after the closing of the Agreement and Plan of Merger.
There can be no assurance that the WWC Acquisition will be consummated nor can
there be any assurance that the contemplated contracts and business development
opportunities currently being negotiated by WWC will be consummated by either
WWC or the Company.
Management Services Agreement
On April 29, 1997, the Company and TNC entered into a Management Services
Agreement, wherein the Company will provide to TNC day-to-day executive
management services. The term of the Management Services Agreement is from April
29, 1997 until the closing of the TNC Asset Purchase Agreement, unless sooner
terminated by the Company. 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.
Private Placement
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. See
"Liquidity and Capital Resources".
13
<PAGE>
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".
Item 6. Exhibits and Reports on Form 8-K
Exhibits
2.1 Agreement and Plan of Merger by and among the Company,
WorldPort Acquisitions, Inc., The Wallace Wade Company,
and John W. Dalton, dated April 20, 1997.
2.2 Asset Purchase Agreement by and between the Company and
Telenational Communications Limited Partnership, dated
April 23, 1997.
10.1 Lease by and between the Company and Mission Life
Insurance Company, dated April 15, 1997.
10.2 Settlement Agreement by and between Com Tech
International Corporation and WorldPort
Communications, Inc., dated April 14, 1997.
10.3 Management Services Agreement by and between WorldPort
Communications, Inc. and Telenational Communications
Limited Partnership, dated April 29, 1997.
10.4 Employment Agreement by and between W. Dean Spies and
the Company effective April 7, 1997.
27 Financial Data Schedule
Reports on Form 8-K
None.
14
<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 May 15, 1997 By /s/ Dean Spies
------------ ----------------------
W. Dean Spies
Chief Financial Officer
15
AGREEMENT AND PLAN OF MERGER
by and among
WORLDPORT COMMUNICATIONS, INC.
a Delaware corporation,
WORLDPORT ACQUISITIONS, INC.
a Delaware corporation,
THE WALLACE WADE COMPANY
a Texas corporation ,
and
JOHN W. DALTON
an individual and sole shareholder of The Wallace Wade Company
DATED: April 20, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1. THE MERGER......................................................................................1
(a) Merger........................................................................1
(b) Effective Time................................................................2
(c) Certificate of Incorporation and Bylaws; Directors and Officers of
Surviving Corporation.........................................................2
(d) Conversion of Securities......................................................2
(e) Cash and Note Payment.........................................................2
(f) Delivery of Certificates of WorldPort Common Stock Into Escrow and
Conditions of Distribution....................................................2
2. REPRESENTATIONS AND WARRANTIES OF THE WWC
SHAREHOLDER.....................................................................................4
(a) Ownership of Shares...........................................................4
(b) No Transfer of WorldPort Shares...............................................4
(c) No Transfer of WWC's Shares...................................................4
(d) Authority.....................................................................4
(e) Compliance with Law...........................................................4
(f) No Litigation.................................................................4
(g) Solvency......................................................................4
(h) No Material Misstatements.....................................................5
(i) Securities Laws of Compliance.................................................5
3. REPRESENTATIONS AND WARRANTIES OF WWC...........................................................6
(a) Capitalization................................................................6
(b) Organization..................................................................6
(c) Authority.....................................................................6
(d) Financial Statements..........................................................7
(e) Subsidiaries..................................................................7
(f) Legal Proceedings.............................................................7
(g) Tax Returns...................................................................7
(h) Assets........................................................................7
(i) Conduct of Business...........................................................8
(j) Accounts Receivable...........................................................8
(k) Contracts.....................................................................8
(l) Contracts under Negotiation...................................................9
(m) Employment and Other Contracts................................................9
(n) ERISA.........................................................................9
(o) Employee Matters..............................................................9
(p) Labor Practices..............................................................10
(q) Real Property Ownership and Lease Obligations................................10
(r) Investment Company Act; Etc..................................................10
(s) Title........................................................................11
(t) Ownership of Proprietary Rights..............................................11
(u) Plans........................................................................11
(v) Permits; Authorizations......................................................11
(w) Other Obligations............................................................12
i
<PAGE>
(x) Approvals....................................................................12
(y) Untrue Statements............................................................12
(z) Availability of Documents....................................................12
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ACQUISITIONS, INC...............................12
(a) Organization, Standing and Qualification.....................................13
(b) Authority....................................................................13
(c) Compliance with Law..........................................................13
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
OF WORLDPORT...................................................................................13
(a) Capitalization...............................................................13
(b) Organization.................................................................13
(c) Authority....................................................................13
(d) Legal Proceedings............................................................14
(e) Tax Returns..................................................................14
(f) SEC Filings..................................................................14
(g) Assets.......................................................................14
(h) Conduct of Business..........................................................15
(i) Contracts....................................................................15
(j) Employment and Other Contracts...............................................15
(k) ERISA........................................................................16
(l) Labor Practices..............................................................16
(m) Real Property Ownership and Lease Obligations................................16
(n) Investment Company Act; Etc..................................................16
(o) Environmental Permits........................................................16
(p) Approvals....................................................................17
(q) Untrue Statements............................................................17
(r) Title........................................................................17
(s) Compliance with Law..........................................................17
(t) Capitalization of the WorldPort..............................................17
(u) Subsidiaries.................................................................17
(v) Plans........................................................................17
(w) Permits; Authorizations......................................................17
(x) Offering.....................................................................18
(y) Availability of Documents....................................................18
6. THE CLOSING....................................................................................18
(a) Closing......................................................................18
7. AGREEMENTS PENDING CLOSING.....................................................................18
(a) Agreements of The WWC Shareholder and WWC
Pending the Closing..........................................................18
(b) Agreements of WorldPort Pending the Closing..................................20
ii
<PAGE>
8. CONDITIONS PRECEDENT TO THE CLOSING............................................................21
(a) Conditions Precedent to WorldPort's Obligations..............................21
(b) Conditions Precedent to the Obligations of WWC and
The WWC Shareholder..........................................................23
9. OTHER MATTERS..................................................................................24
(a) Piggyback and Demand Registration Rights.....................................25
(b) "Market Stand-Off" Agreement.................................................25
(c) Substitution of WorldPort Into Any WWC Agreement.............................25
10. INDEMNIFICATION................................................................................25
(a) General Indemnification Obligation of WWC and The
WWC Shareholder..............................................................25
(b) General Indemnification Obligation of WorldPort..............................26
(c) Limitation of Indemnity......................................................26
(d) Method of Asserting Claims, Etc..............................................27
(e) Payment......................................................................28
11. TERMINATION AND AMENDMENT......................................................................28
(a) Termination..................................................................28
(b) Waiver.......................................................................29
12. MISCELLANEOUS..................................................................................29
(a) Brokers......................................................................29
(b) Expenses.....................................................................29
(c) Survival.....................................................................29
(d) Severability.................................................................29
(e) Notices......................................................................29
(f) Entire Agreement.............................................................30
(g) Binding Effect...............................................................30
(h) Governing Law................................................................30
(i) Press Releases...............................................................30
(j) Assignment...................................................................31
(k) Disclosure Schedule..........................................................31
(l) Counterparts; Headings.......................................................31
(m) Dispute Resolution...........................................................31
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Agreement") is effective as of the
20th day of April, 1997, by and among WorldPort Communications, Inc., a Delaware
corporation ("WorldPort"), WorldPort Acquisitions, Inc., a Delaware corporation
and a wholly-owned subsidiary of WorldPort ("Acquisitions, Inc."), The Wallace
Wade Company a Texas corporation ("WWC"), and the sole shareholder of WWC, John
W. Dalton (the "WWC Shareholder").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of WorldPort, Acquisitions,
Inc. and WWC have approved and adopted this Agreement (or with respect to
Acquisitions, Inc., will have approved and adopted this Agreement prior to
Closing (as hereafter defined)) providing for the merger of WWC into
Acquisitions, Inc. (the "Merger"), upon the terms and subject to the conditions
set forth herein, whereby each issued and outstanding share of WWC Capital Stock
(the "WWC Shares") will be converted into shares of WorldPort Common Stock, par
value $.0001 per share, (the "WorldPort Common Stock");
WHEREAS, WWC is a telecommunications marketing and consulting firm
which produces and implements marketing strategies for clients ranging from
small companies to large corporate clients;
WHEREAS, the WWC Shareholder, as the sole shareholder of WWC, has
approved and adopted this Agreement;
WHEREAS, WorldPort, as the sole shareholder of Acquisitions, Inc., has
approved and adopted this Agreement;
WHEREAS, for income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, WorldPort, Acquisitions, Inc., WWC, and the WWC Shareholder
desire to make certain representations, warranties and agreements in connection
with the Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
1. THE MERGER.
(a) Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Delaware General Corporation Law
(the "Act"), WWC shall be merged with and into Acquisitions, Inc. at
the Effective Time (as defined below). Following the Merger, the
separate corporate existence of WWC shall cease and Acquisition, Inc.
1
<PAGE>
shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and
obligations of WWC in accordance with the Act.
(b) Effective Time. The Merger shall become effective when (i)
the Certificate of Merger executed in accordance with the relevant
provisions of the Act, is filed with the Division of Corporation in the
Department of State of the State of Delaware and (ii) when the Articles
of Merger executed in accordance with the relevant provisions of the
Texas Business Corporation Act, are filed with the Secretary of State
of the State of Texas (the "Effective Time").
(c) Certificate of Incorporation and Bylaws; Directors and
Officers of Surviving Corporation.
(i) The Certificate of Incorporation and Bylaws of
Acquisitions, Inc., as in effect immediately prior to the
Effective Time, shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
(ii) The directors of Acquisitions, Inc. at the
Effective Time shall be the directors of the Surviving
Corporation and will hold office from the Effective Time until
their respective successors are duly elected or appointed and
qualified. The officers of Acquisitions, Inc. at the Effective
Time shall be the initial officers of the Surviving
Corporation.
(d) Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of the WWC
Shareholder and subject to the provisions of Section 1(f) hereof, all
WWC Shares issued and outstanding immediately prior to the Effective
Time shall be converted into 1,400,000 shares of validly issued, fully
paid and nonassessable shares of WorldPort Common Stock. All WWC
Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and each holder of a stock
certificate representing any WWC Shares shall cease to have any rights
with respect thereto, except the right to receive WorldPort Common
Stock and the Cash and Note Payment described below, and any cash,
without interest, in lieu of fractional shares to be issued or paid in
consideration therefor upon the surrender of such stock certificate.
(e) Cash and Note Payment. In addition to receipt of the
WorldPort Common Stock as described herein, the WWC Shareholder shall
also receive a cash payment in the total aggregate amount of TWO
HUNDRED FIFTY THOUSAND DOLLARS ($250,000) payable as follows: (i)
$75,000 to be delivered at Closing (as defined in Section 6) in the
form of a corporate check payable to the WWC Shareholder and (ii)
$175,000 pursuant to the terms of the promissory note (the "Note")
attached hereto as Exhibit B and incorporated herein by reference (the
"Cash and Note Payment").
(f) Delivery of Certificates of WorldPort Common Stock Into
Escrow and Conditions of Distribution. As soon as practicable after the
Effective Time, WorldPort shall prepare for the benefit of the WWC
Shareholder a certificate or certificates representing 1,400,000 shares
of WorldPort Common Stock. WorldPort shall deliver the 1,400,000 shares
2
<PAGE>
of WorldPort Common Stock to OTC Stock Transfer, Inc. as escrow agent
(the "Escrow Agent") at Closing, to be held in escrow and released to
the WWC Shareholder upon the occurrence of certain conditions and
performance objectives as set forth below and in the Escrow Agreement
attached hereto as Exhibit C and incorporated herein by reference (the
"Escrow Agreement"):
(i) WWC Financial Statements. As soon as practicable
after the Closing, but in any event not later than forty five
(45) days after the Closing, the WWC Shareholder will deliver
to WorldPort audited financial statements of WWC for the years
ending March 31, 1996 and 1997, together with the notes
thereto (the "WWC Financial Statements"), audited by Arthur
Andersen LLP ("Arthur Andersen"). Upon delivery to WorldPort
of the WWC Financial Statements the Escrow Agent shall deliver
to the WWC Shareholder a certificate or certificates
representing 500,000 shares of WorldPort Common Stock. In the
event the WWC Financial Statements are not delivered to
WorldPort within forty five (45) days after the Closing, the
Escrow Agent shall return 500,000 shares of the WorldPort
Common Stock to WorldPort for cancellation.
(1) Expenses. The fees and expenses of
Arthur Andersen in connection with the audit of the
WWC Financial Statements shall be borne one-third
(1/3) by the WWC Shareholder and two-thirds (2/3)by
WorldPort.
(ii) Business Relationship Agreement. Upon delivery
to WorldPort of a binding, executed agreement establishing a
formal business relationship, acceptable to WorldPort, between
Acquisitions, Inc. (or WorldPort) and an international
telecommunications network operator that provides customers
with voice and data services such as managed data network
services, virtual private networks, electronic commerce,
transaction processing transmission, VSAT, X.25, and frame
delay ("Business Relationship Entity"), including, but not
limited to, those entities set forth in the disclosure
schedule attached as Exhibit E hereto (the "Disclosure
Schedule"), the Escrow Agent shall deliver to the WWC
Shareholder a certificate or certificates representing 700,000
shares of WorldPort Common Stock. In the event that WorldPort
does not enter into an acceptable business relationship with a
Business Relationship Entity by December 31, 1997, the Escrow
Agent shall return 700,000 shares of WorldPort Common Stock to
WorldPort for cancellation.
(iii) New Business Development. Upon delivery to
WorldPort of a binding executed agreement(s) establishing
formal business relationships, acceptable to WorldPort,
between Acquisitions, Inc. (or WorldPort) and one or more
debit card/pre- paid calling card distribution networks, or
one or more long distance carriers or resellers, that results
in commitments to WorldPort of (a) consolidated gross revenues
in excess of $700,000 per month or (b) gross margins of
$50,000 per month, the Escrow Agent shall deliver to the WWC
Shareholder a certificate or certificates representing 200,000
shares of WorldPort Common Stock. In the event a formal
business relationship which is approved and acceptable to
WorldPort's Board of Directors, with one or more debit
card/pre-paid calling card distribution networks, or one or
more long distance service carriers or resellers, as described
3
<PAGE>
above is not entered into by December 31, 1997, the Escrow
Agent shall return 200,000 shares of WorldPort Common Stock
to WorldPort for cancellation.
2. REPRESENTATIONS AND WARRANTIES OF THE WWC SHAREHOLDER.
To induce WorldPort and Acquisitions, Inc. to enter into this Agreement, the WWC
Shareholder represents and warrants to WorldPort and Acquisitions, Inc. that the
following statements are true, correct and complete as of the date hereof, and
will be true, correct and complete as of the date of Closing.
(a) Ownership of Shares. The WWC Shareholder owns,
beneficially and of record, the one hundred percent (100%) of WWC
Shares, free and clear of any lien, security interest, pledge, claim,
demand or encumbrance or restriction of any kind or character
whatsoever, and the Shares represent all the issued and outstanding
shares of capital stock and equity securities of WWC. All such Shares
are duly authorized, validly issued, fully paid and nonassessable and
have, all the rights, privileges and preferences ordinarily accorded to
capital stock or equity securities.
(b) No Transfer of WorldPort Shares. The WWC Shareholder
represents and warrants that he has no present plan, intention or
arrangement to sell, transfer or otherwise dispose of any shares of
WorldPort Common Stock to be received in the Merger.
(c) No Transfer of WWC's Shares. The WWC Shareholder agrees
that prior to the Effective Time of the Merger, he will not sell,
transfer or otherwise dispose of any WWC Common Stock.
(d) Authority. The WWC Shareholder now has and will have, at
the Closing, full power, authority and legal right to enter into this
Agreement. This Agreement is the valid and binding obligation of the
WWC Shareholder.
(e) Compliance with Law. To the best knowledge of the WWC
Shareholder, the consummation of the transactions contemplated hereby
will be in compliance with all applicable laws, rules, regulations and
requirements of all Federal, state and local governmental authorities
without the necessity for any license or permit or other action or
permission in the nature thereof, or any registration with, or consent
of, any such governmental authority.
(f) No Litigation. There are no suits or proceedings at law or
in equity, or before or by any governmental agency or arbitrator,
pending, or to the best knowledge of the WWC Shareholder, threatened,
anticipated or contemplated, which in any way affect the consummation
of the transaction contemplated hereby or, if valid, would constitute
or result in a breach of any representation, warranty or Agreement set
forth herein.
(g) Solvency. The WWC Shareholder is not bankrupt nor
insolvent nor has the WWC shareholder assigned its estate for the
benefit of creditors, entered into any scheme or arrangement with
creditors, nor has any present intention to file a petition in
bankruptcy, assign its estate for the benefit of creditors, or enter
into any scheme or arrangement with creditors. The WWC Shareholder has
no knowledge of any basis for the filing by any other person of an
involuntary petition in bankruptcy with respect to any WWC Shareholder
or WWC.
4
<PAGE>
(h) No Material Misstatements. The WWC Shareholder has not
made any material misstatement of fact or omitted to state any material
fact necessary or desirable to make complete, accurate and not
misleading every representation, warranty and Agreement set forth
herein.
(i) Securities Laws of Compliance. The WWC Shareholder:
(i) Has been represented by such legal and tax
counsel and others, each of whom has been personally selected
by such WWC Shareholder, as the WWC Shareholder has found
necessary to consult concerning this transaction, and such
representation has included an examination of applicable
documents, and an analysis of all tax, financial, and
securities law aspects. The WWC Shareholder, his/her counsel
and advisors, and such other persons with whom the WWC
Shareholder has found it necessary to consult, have sufficient
knowledge and experience in business and financial matters to
evaluate the above information, and the merits and risks of
the share exchange contemplated by this Agreement, and to make
an informed investment decision with respect thereto;
(ii) WorldPort has made available to the WWC
Shareholder, his/her counsel and advisors, prior to the date
hereof, the opportunity to ask questions of, and to receive
answers from, WorldPort and its representatives, concerning
the terms and conditions of the Merger and access to obtain
any information, documents, financial statements, records and
books (A) relative to WorldPort, the business and an
investment in WorldPort, and (B) necessary to verify the
accuracy of any information furnished to the WWC Shareholder.
All materials and information requested by the WWC
Shareholder, his/her counsel and advisors, or others
representing the WWC Shareholder, including any information
requested to verify any information furnished to the WWC
Shareholder, have been made available and examined.
(iii) The WWC Shareholder is acquiring the WorldPort
Common Stock for his own account and not as a fiduciary for
any other person and for investment purposes only and not with
a view to or for the transfer, assignment, resale, or
distribution thereof, in whole or in part. The WWC Shareholder
understands the meaning and legal consequences of the
foregoing representations and warranties. The WWC Shareholder
is not an "underwriter" of the securities, as that term is
defined in Section 2(11) of the Securities Act of 1933
("Securities Act"), and the WWC Shareholder will not take or
cause to be taken any action that would cause either the WWC
Shareholder or WorldPort to be deemed an "underwriter" of the
securities.
(iv) The WWC Shareholder understands that the
WorldPort Common Stock has not been registered under the
Securities Act nor pursuant to the provisions of the
securities or other laws of any applicable jurisdictions. The
WWC Shareholder further understands that the WorldPort Common
Stock cannot be sold, assigned, pledged, transformed or
otherwise disposed of until such shares are registered or an
exemption from registration is available.
5
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF WWC. To further induce WorldPort
and Acquisitions, Inc. to enter into this Agreement, WWC and the WWC Shareholder
jointly and severally represent and warrant the following statements concerning
the affairs of WWC are true, correct and complete as of the date hereof, and
will be true, correct and complete as of the date of Closing.
(a) Capitalization. The WWC Capital Stock is duly authorized,
validly issued and fully paid and nonassessable. The WWC Capital Stock
was issued in compliance with all state and federal laws, including all
securities laws. There are no outstanding subscriptions, warrants,
options, preemptive rights, or other agreements or rights of any kind
to purchase or otherwise receive or be issued, or securities or
obligations of any kind convertible into, any shares of capital stock
of WWC.
(b) Organization. WWC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas, and
has full power and authority, corporate and otherwise, to carry on its
business as it is now being conducted and to own, or hold under lease,
and use its properties and assets in the manner in which and in the
places where such properties and assets are now owned or held and used,
and is qualified to do business and is in good standing in each other
jurisdiction where the nature or character of its business so requires
such qualification. WWC has delivered to WorldPort true copies of its
Articles of Incorporation and Bylaws, as are in full force and effect
as of the date of this Agreement.
(c) Authority. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of WWC and by the WWC
Shareholder. WWC has the corporate power and authority, to execute and
deliver this Agreement and, at Closing, will have the corporate power
and authority, and all requisite authority, respectively, to consummate
the transactions and perform the obligations contemplated hereby. This
Agreement constitutes the valid and binding obligation of WWC and is
enforceable against WWC in accordance with its terms. All persons who
have executed or will execute this Agreement on behalf of WWC have been
duly authorized to do so by all necessary corporate or other action.
Neither the execution and delivery of this Agreement by WWC nor the
consummation of the transactions contemplated by this Agreement, will,
with or without the giving of notice or the passage of time, or both,
violate, conflict with, result in the breach or termination of, or
constitute a default under (by WWC or any other entity by way of
substitution, novation or otherwise), or result in the acceleration of,
or entitle any party to terminate, any Agreement or instrument to which
WWC is a party or by which any of its property or business may be
bound, or accelerate any obligation under, or confer upon any other
person any interest or right (including any right of termination or
cancellation) in or with respect to any part of the property of WWC,
pursuant to (i) any provision of the Articles of Incorporation or
Bylaws of WWC, (ii) any provision of any judgment, order, injunction,
decree or award against or binding upon WWC or upon the securities,
property or business of WWC, (iii) any provision of any mortgage, lien,
lease, Agreement, license, contract, understanding, permit, instrument,
order, writ, award, judgment or decree to which WWC is a party or by
which it is bound or to which its properties or business are subject,
or (iv) any federal, state or local law, statute, ordinance, rule or
regulation of any jurisdiction applicable to WWC or to the securities,
property or business of WWC.
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(d) Financial Statements. WWC shall provide to WorldPort true
and correct copies of WWC's audited financial statements for the
periods ending March 31, 1996 and 1997 (the "WWC Financial Statements")
on or before forty-five (45) days after Closing. The WWC Financial
Statements shall fairly present WWC's financial condition and the
results of its operations on a consolidated basis at the relevant dates
thereof and for the periods covered thereby, and shall be prepared in
accordance with generally accepted accounting principles, consistently
applied.
(e) Subsidiaries. WWC has no subsidiaries.
(f) Legal Proceedings. Except as set forth in the disclosure
schedule, attached as Exhibit E hereto (the "Disclosure Schedule"),
there are no Legal Proceedings (defined below) pending or, to the
knowledge of WWC's directors or officers, threatened, nor, to the
knowledge of WWC's directors or officers, is there any basis for any
claim, cause of action or regulatory initiative which would give rise
to any contingent liability. To the knowledge of the directors and
officers of WWC, WWC has been and is operating its business in all
material respects in conformity with applicable laws, ordinances and
regulations to which WWC is subject. No notice of violations against or
affecting WWC's business has been received by WWC from any department
or agency of any federal, state or local government. Since its
organization, WWC has not been charged in any proceeding to which it
has been named as a party and served with process with any violation of
any existing statute, law, ordinance, rule, regulation, policy,
guideline, judgment, order or decree; and compliance with existing
statutes, laws, ordinances, rules, regulations, policies, guidelines,
judgments, orders or decrees in effect as of the date of this Agreement
has not had a material adverse effect on the business and operations of
WWC. For purposes of this Agreement, "Legal Proceedings" means all
suits, actions, administrative, arbitration, regulatory or other
similar proceedings (including proceedings concerning health or safety
violations, labor disputes or grievances, civil rights discrimination
cases and affirmative action proceedings) and all governmental
investigations or audits pending or, to the knowledge of a party,
threatened, and each judgment, order, injunction, decree or award
(whether rendered by a court, administrative agency, or by arbitration
pursuant to a grievance or other procedure) to which a party or by
which its properties or business are bound, which is unsatisfied or
requires continuing compliance therewith.
(g) Tax Returns. WWC has timely and correctly filed all
federal, state and local tax returns, whether relating to income,
sales, franchise, real or personal property or other types of taxes,
which have been required to be filed, and has paid all taxes as shown
on such returns and all assessments received by WWC to the extent such
assessments have become due.
(h) Assets. WWC owns, possesses and controls and has good and
marketable title to all of its assets, free and clear of any mortgage,
lien, claim, defect, charge, encumbrance and right of third parties.
Such assets are in good operating condition and repair, ordinary wear
and tear excepted, and conform to applicable ordinances, regulations,
building, zoning and other laws and directives.
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(i) Conduct of Business. Since March 31, 1997, WWC has
conducted its business in the ordinary course, consistent with past
practices, and has not (i) experienced any material adverse change in
its business, property, financial condition, net worth, or results of
operation or prospects, (ii) amended its Articles of Incorporation or
Bylaws, (iii) issued, transferred, sold or contracted to sell any WWC
Capital Stock or any bonds, warrants, options or other corporate
securities or obligations convertible into WWC Capital Stock, (iv)
declared or made any payment or distribution to its shareholders
(except for the payment of salaries at then existing rates and the
reimbursement of reasonable expenses to any of its shareholders), (v)
purchased options or purchased or redeemed any WWC Capital Stock, (vi)
incurred any obligation or liability, absolute or contingent, except
obligations and liabilities incurred in the ordinary course of the
operation of its business, (vii) cancelled, without payment in full,
any notes, loans or other obligations receivable from any officer,
director or shareholder or any member of the families of any officer,
director or shareholder, or from any corporation, partnership, or other
entity in which any officer, director or shareholder, or any member of
their families then had any direct or indirect interest, (viii)
mortgaged, pledged or subjected to lien any of its assets, (ix) sold,
assigned, or transferred any of its assets, or cancelled any debts or
claims held by it, except for fair market value in the ordinary course
of its business as carried on, at and prior to March 31, 1997, (x)
sold, assigned, transferred, mortgaged, pledged or subjected to lien or
permitted to lapse copyrights, trademarks, trade names, patents,
licenses or other intangible assets or rights to use such intangible
assets, (xi) increased the compensation payable, or to become payable
to its officers, directors or shareholders, or employees (the term
"compensation" to include salaries, bonuses, fringe benefits, pensions,
profit participations and payments or benefits of any kind whatsoever),
(xii) to the knowledge of its directors and officers, performed any act
which will make it liable for, or incurred any liability for, direct or
consequential damages not fully covered by insurance, or (xiii) made
any change in its method of accounting or accounting practices.
(j) Accounts Receivable. The accounts and notes receivable
shown in the WWC Financial Statements and all accounts and notes
receivable thereafter acquired by WWC prior to the Closing have been
collected or are reasonably expected to be collectible in the full
amounts therefor.
(k) Contracts. Except as set forth on the Disclosure Schedule,
WWC has no material obligation, contract, Agreement, lease, sublease,
commitment or understanding of any kind, nature or description, oral or
written, fixed or contingent, due or to become due, existing or
inchoate which involves an obligation in excess of $1,000 (the
"Material Contracts"). All Material Contracts set forth on the
Disclosure Schedule are, in full force and effect and are valid,
binding and enforceable in accordance with their respective terms; all
parties to such Material Contracts have complied in all material
respects with the provisions thereof; no such party is to the best of
WWC's or the WWC Shareholder's knowledge, in default in any respect
under any term thereof and to the best of WWC's and the WWC
Shareholder's knowledge, no event has occurred that with the passage of
time and/or giving of notice would constitute a material default by any
party under any provision thereof. No consent, approval or
authorization of any third party is required in connection with the
consummation of the transactions contemplated hereunder.
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(l) Contracts under Negotiation. WWC has developed certain
business relationships with (i) an international telecommunications
network operator that provides customers with voice and data services
such as managed data network services, virtual private networks,
electronic commerce, transaction processing transmission, VSAT, X.25,
and frame delay, including, but not limited to, those entities set
forth on Disclosure Schedule 1(f)(ii), and (ii) one or more debit
card/pre-paid calling card distribution networks, long distance
carriers or resellers, which will result in significant business
opportunities for Acquisitions, Inc. and/or WorldPort, including
favorable access to a global telecommunications network with
transmission facilities in over 200 countries worldwide.
(m) Employment and Other Contracts. Except as set forth on the
Disclosure Schedule, WWC is not, directly or indirectly, a party to any
written or oral (i) employment contract with any directors, officers or
employees having a term expiring after the Closing, (ii) sales
representation, agency or distribution contract or Agreement, (iii)
expense reimbursement plan or arrangement which will result in unpaid
obligations of WWC after the Closing, (iv) management, employment,
consulting, agency or other Agreement for personal services to be
rendered by any person (including, but not limited to, any investment
advisor, distributor, sales representative or agency, or advertiser),
or (v) contract with any shareholder or any person affiliated with any
shareholder.
(n) ERISA. WWC has not had since its organization, and
will not have at any time between the date of this Agreement and the
Closing, any ERISA Plan or Multi-Employer Plan.
(o) Employee Matters. Except as set forth on the
Disclosure Schedule, or as otherwise provided in this Agreement:
(i) All legally enforceable obligations of WWC,
whether arising by operation of law, contract, Agreement or
otherwise, for salaries, wages, vacation and holiday pay, sick
pay, incentive compensation, deferred compensation, sales
compensation and bonuses or other forms of compensation or
benefits which are, or may become, payable to its current or
former employees, directors, officers, agents or any other
individual (or any of their respective dependents, heirs,
legatees, beneficiaries or legal representatives) with respect
to periods ending on or before the Closing, have been paid, if
due, or adequate accruals, if accruals are required, in
accordance with generally accepted accounting principles, for
such payments will be made prior to the Closing.
(ii) WWC does not have any plan, program,
arrangement, Agreement or obligation to provide benefits in
the form of bonus, incentive, deferred compensation, dental,
stock options, medical, disability, hospitalization,
insurance, death benefits or any other employee benefits of
any kind whatsoever, which requires WWC to provide benefits to
its employees, directors, officers, agents or any other
individuals (or any of their respective dependents, heirs,
legatees, beneficiaries or legal representatives).
(iii) WWC has complied, and through the Closing will
continue to comply, with the provisions of the Consolidated
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Omnibus Reconciliation Act of 1985, as amended ("COBRA"),
relating to the continuation of insurance coverage for former
employees and their dependents.
(iv) WWC has complied with all material requirements
of the Code, ERISA and other applicable federal and state
laws, and the regulations promulgated thereunder, which relate
to any employees, former employees or beneficiaries of such
employees, or to any salary, bonus, incentive compensation,
deferred compensation, sales compensation, ERISA Plans or
other employee benefit plan or similar arrangement binding
upon WWC (whether or not existing on the date hereof or at the
Closing).
(v) WWC has no policies, plans or agreements with
respect to payments of severance pay to employees which could
require any payments or severance pay to any employees
terminated subsequent to the Closing. No employee terminated
by WWC on or prior to the Closing has or will have any right
to severance pay.
(vi) Neither the execution or delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, will (1) result in any payment, including
severance, unemployment compensation, golden parachute or
otherwise, becoming due under any employee benefit plan or
otherwise, (2) increase any benefits otherwise payable under
any such employee benefit plan, or (3) result in the
acceleration of the time of payment or vesting of any benefits
thereunder.
(p) Labor Practices. WWC is not a party to any collective
bargaining Agreement, and no union or group is seeking to become the
collective bargaining representative for any unit of the employees of
WWC. There are no pending (i) unfair labor practice complaints against,
(ii) arbitration proceedings or grievances involving, (iii) OSHA
citations, wage and hour complaints or EEO charges against, (iv) NIOSH
health hazard evaluation determinations against, or (v) findings of
noncompliance with respect to affirmative action requirements against
WWC, and there is no pending labor strike nor, to the knowledge of the
Directors and officers of WWC, has any such complaint, proceeding,
citation, charge, determination, finding or strike been threatened. WWC
has not experienced any material strike or work stoppage during the
three years prior to the date hereof. WWC is not engaged in any unfair
labor practices.
(q) Real Property Ownership and Lease Obligations. Except as
set forth in the Disclosure Schedule, WWC does not, as of the date of
this Agreement, and will not, between the date hereof and the Closing,
own any real estate interests or leasehold interests. All leases to
which WWC is a party are valid and in full force and effect, all rental
and other payments under such leases have been paid when due, and there
exists no default, or event which with the passage of time or notice or
both would constitute a default, under any such lease. The transaction
contemplated by this Agreement will not cause any of the leases to
terminate.
(r) Investment Company Act; Etc. WWC is not (i) an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended, (ii) a "holding company" or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a
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"subsidiary company" of a "holding company," as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended, or (iii)
a "public utility," as such term is defined in the Federal Power Act,
as amended.
(s) Title. Upon delivery of the WWC Capital Stock, WorldPort
will have good and marketable title thereto, free and clear of all
liens, encumbrances, preemptive rights, and other restrictions
whatsoever;
(t) Ownership of Proprietary Rights. WWC owns or has the right
to use all patents, trademarks, service marks, trade names, trade
secrets, business names, other source or business identifiers,
copyrights, designs, and other intellectual property; and all
proprietary techniques, processes, methods of production and
commercialization, specifications and know-how; and all licenses,
rights and rights of way, whether from private or governmental sources
(collectively "proprietary rights") pertaining to or useful in relation
to its business as now conducted or proposed to be conducted as
contemplated by WorldPort. No director, officer, shareholder, or key
employee has an interest, whether direct or indirect, in any business
which is a competitor of WWC;
(u) Plans. The Disclosure Schedule sets forth a true and
complete list of (1) each employment, profit sharing, deferred
compensation, bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, health, welfare, or incentive plan or contract
to which WWC is a party; and (2) each plan or Agreement under which
"fringe benefits" (including, but not limited to, vacation plans or
programs, sick leave plans or programs, dental or medical plans or
programs, severance plans or programs and related or similar benefits)
are afforded to employees of WWC. WWC is not in default with respect to
any material term of any such Agreement, plan, program or contract;
(v) Permits; Authorizations. WWC has all permits, licenses and
other authorizations necessary to the conduct of its business, and no
permits, licenses or other authorizations have been, or are required to
be, obtained or maintained, or will be required to be obtained or
maintained upon consummation of the transactions contemplated hereby,
and no governmental authority or agency with jurisdiction over WWC has
asserted or, to the best of the WWC Shareholder's and WWC's knowledge,
is likely to assert that any permits, licenses or other authorizations
have been, or are required to be, obtained or maintained by WWC, or
will be required to be obtained or maintained upon consummation of the
transactions contemplated hereby, other than those which WWC has
already obtained, with respect to the operation of WWC's business under
any law or any regulations in effect on the date hereof, including, but
not limited to, laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or
industrial or hazardous substances or wastes into the environment
(including, without limitation, ambient air, surface water, ground
water, land surfaces or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals
or industrial toxic or hazardous substances or wastes (collectively,
the "Environmental Laws"). Except as noted in the Disclosure Schedule,
to the best of the WWC Shareholder's and WWC's knowledge, WWC is in
substantial compliance, and upon consummation of the transactions
contemplated hereby will continue in substantial compliance, with all
material limitations,
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restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all laws applicable
to WWC (including all Environmental Laws) or contained in any
regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder,
unless the failure to so comply would not have a material and adverse
effect on the business of WWC. No events, conditions, activities,
practices, incidents, actions or plans of action taken or to be taken
by WWC or, to the best of the WWC Shareholder's and WWC's knowledge,
any predecessor in interest, are reasonably likely to interfere with or
prevent substantial compliance or continued compliance with, to the
extent any are applicable, all laws (including the Environmental Laws)
or with any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or
approved thereunder;
(w) Other Obligations. Except as and to the extent
specifically reflected or reserved against in the WWC Financial
Statements, and non-material items arising in the ordinary course of
business thereafter, WWC has no liabilities or obligations, whether
absolute, accrued, contingent or otherwise, whether due or to become
due (including, without limitation, any liability for taxes), which are
individually or in the aggregate, material to the WWC Shareholder's
condition (financial or otherwise) or the prospects of its business;
(x) Approvals. Except as set forth in this Agreement and
except as to matters for which WWC is responsible hereunder, to the
knowledge of WWC's directors and officers, no authorization, consent,
order, permit or approval of, or filing with, any federal, state, local
or foreign government or governmental agency or any other authority,
private person or entity, is necessary for the consummation by WWC of
the transactions contemplated by this Agreement.
(y) Untrue Statements. The representations or warranties of
WWC contained in this Agreement or any written certificate furnished to
WorldPort by or on behalf of WWC in connection herewith or in
connection with the transactions contemplated herein do not contain and
will not contain any untrue statement of a material fact and do not
omit and will not omit to state any material fact required to be stated
herein or therein or otherwise necessary to make the statements
contained herein or therein not false or misleading. All of the
representations and warranties made by WWC in this Agreement shall be
true and correct on the Closing with the same effect as if they had
been made on the Closing.
(z) Availability of Documents. The WWC Shareholder and WWC
have made available to WorldPort copies of all documents, including
without limitation all agreements, contracts, commitments, insurance
policies, leases, plans, instruments, undertakings, authorizations,
permits, licenses, rights of way, patents, trademarks, tradenames,
service marks, copyrights and applications therefor, referred to
herein. Such copies are true and complete and include all amendments,
supplements and modifications thereto or waivers currently in effect
thereunder.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF
ACQUISITIONS, INC. To induce WWC and the WWC Shareholder to enter into this
Agreement, Acquisitions, Inc. represents and warrants that the following
statements will be true, correct and complete as of the day of Closing:
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(a) Organization, Standing and Qualification. As of Closing,
Acquisitions, Inc. shall be duly organized and validly existing and in
good standing under the laws of the State of Delaware, and shall be
authorized and qualified to own and operate its properties and assets
and conduct its business in all jurisdictions where such properties and
assets are owned and operated and such business conducted.
(b) Authority. As of Closing, Acquisitions, Inc. shall
have the full right, power and authority to execute, deliver and
perform the terms of this Agreement. This Agreement shall have been
duly authorized by Acquisitions, Inc. and constitutes a binding
obligation of Acquisitions, Inc., enforceable in accordance with its
terms.
(c) Compliance with Law. Neither the execution and delivery of
this Agreement nor consummation of the transactions contemplated hereby
will conflict with or result in a breach of or constitute a default
under any provision of Acquisitions, Inc.'s Certificate of
Incorporation or Bylaws or any indenture, loan Agreement or other
material obligation or liability to which it is a party or by which it
is bound.
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF
WORLDPORT. To induce WWC and the WWC Shareholder to enter into this Agreement,
WorldPort represents and warrants that the following statements are true,
correct and complete as of the date hereof, and will be true, correct and
complete as of the date of Closing:
(a) Capitalization. The WorldPort Capital Stock is duly
authorized, validly issued and fully paid and nonassessable. The
WorldPort Capital Stock was issued in compliance with all state and
federal laws, including all securities laws. Except as is set forth in
the Disclosure Schedule, there are no outstanding subscriptions,
warrants, options, preemptive rights, or other agreements or rights of
any kind to purchase or otherwise receive or be issued, or securities
or obligations of any kind convertible into, any shares of capital
stock of WorldPort.
(b) Organization. WorldPort is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, has full power and authority, corporate and otherwise, to
carry on its business as presently conducted and to own, or hold under
lease, and use its properties and assets in the manner in which and in
the places where such properties and assets are now owned or held and
used. WorldPort is duly qualified to do business and is in good
standing in each other jurisdiction in which it is required to qualify,
except where the failure to so qualify would not have a material
adverse effect on WorldPort's business. WorldPort has delivered to WWC
true copies of its Certificate of Incorporation and Bylaws, as are in
full force and effect as of the date of this Agreement.
(c) Authority. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of WorldPort. WorldPort has
the corporate power and authority to execute and deliver this Agreement
and, at the Closing will have the corporate power and authority to
consummate the transactions and perform the obligations contemplated
hereby. This Agreement constitutes the valid and binding obligation of
WorldPort enforceable against WorldPort in accordance with its terms.
All persons who have executed or will execute this Agreement on behalf
of WorldPort have been duly authorized to do so by all necessary
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corporate action of WorldPort. Neither the execution and delivery of
this Agreement by WorldPort, nor the consummation of the transactions
contemplated by this Agreement, will, with or without the giving of
notice or the passage of time, or both, violate, conflict with, result
in the breach or termination of, or constitute a default under (by
WorldPort or any other entity by way of substitution, novation or
otherwise), or result in the acceleration of, or entitle any party to
terminate, any Agreement or instrument to which WorldPort is a party or
by which any of its property or business may be bound, or accelerate
any obligation under, or confer upon any other person any interest or
right (including any right of termination or cancellation) in or with
respect to any part of the property of WorldPort, pursuant to (i) any
provision of the Certificate of Incorporation or Bylaws of WorldPort,
(ii) any provision of any judgment, order, injunction, decree or award
against or binding upon WorldPort or upon the securities, property or
business of WorldPort, (iii) any provision of any mortgage, lien,
lease, Agreement, license, contract, understanding, permit, instrument,
order, writ, award, judgment or decree to which WorldPort is a party or
by which it is bound or to which its properties or business are
subject, or (iv) any federal, state or local law, statute, ordinance,
rule or regulation of any jurisdiction applicable to WorldPort or to
the securities, property or business of WorldPort.
(d) Legal Proceedings. Except as set forth in the Disclosure
Schedule, there are no Legal Proceedings pending or, to the knowledge
of WorldPort's directors or officers, threatened, nor, to the knowledge
of WorldPort's directors or officers, is there any basis for any claim,
cause of action or regulatory initiative which would give rise to any
contingent liability. To the knowledge of the directors and officers of
WorldPort, WorldPort has been and is operating its business in all
material respects in conformity with applicable laws, ordinances and
regulations to which WorldPort is subject. No notice of violations
against or affecting WorldPort's business has been received by
WorldPort from any department or agency of any federal, state or local
government. Since its organization, WorldPort has not been charged in
any proceeding to which it has been named as a party and served with
process with any violation of any existing statute, law, ordinance,
rule, regulation, policy, guideline, judgment, order or decree; and
compliance with existing statutes, laws, ordinances, rules,
regulations, policies, guidelines, judgments, orders or decrees in
effect as of the date of this Agreement has not had a material adverse
effect on the business and operations of WorldPort.
(e) Tax Returns. WorldPort has timely and correctly filed all
federal, state and local tax returns, whether relating to income,
sales, franchise, real or personal property or other types of taxes,
which have been required to be filed, and has paid all taxes as shown
on such returns and all assessments received by WorldPort to the extent
such assessments have become due.
(f) SEC Filings. In the last twelve (12) months, WorldPort has
filed all reports required to be filed pursuant to the Securities Act
of 1933 and the Securities Exchange Act of 1934, and the rules and
regulations promulgated thereunder.
(g) Assets. WorldPort owns, possesses and controls and has
good and marketable title to all of its assets, free and clear of any
mortgage, lien, claim, defect, charge, encumbrance and right of third
parties. Such assets are in good operating condition and repair,
ordinary wear and tear excepted, and conform to applicable ordinances,
regulations, building, zoning and other laws and directives.
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(h) Conduct of Business. Except as set forth in the Disclosure
Schedule, since March 31, 1997, or as otherwise disclosed in any of the
Company's filings with the Securities and Exchange Commission,
WorldPort has conducted its business in the ordinary course and has not
(i) experienced any material adverse change in its business, property,
financial condition, net worth, or results of operation or prospects,
(ii) amended its Certificate of Incorporation or Bylaws, (iii) except
for a contemplated private placement offering of up to $5,000,000 under
Regulation D of 1,666,667 shares of Series A Preferred Stock at $3.00
per share, issued, transferred, sold or contracted to sell any of
WorldPort's Capital Stock or any bonds, warrants, options or other
corporate securities or obligations convertible into WorldPort's
Capital Stock, (iv) declared or made any payment or distribution to its
shareholders (except for the payment of salaries at then existing rates
and the reimbursement of reasonable expenses to any of its
shareholders), (v) purchased options or purchased or redeemed any
WorldPort's Capital Stock, (vi) incurred any obligation or liability,
absolute or contingent, except obligations and liabilities incurred in
the ordinary course of the operation of its business, (vii) cancelled,
without payment in full, any notes, loans or other obligations
receivable from any officer, director or shareholder or any member of
the families of any officer, director or shareholder, or from any
corporation, partnership, or other entity in which any officer,
director or shareholder, or any member of their families then had any
direct or indirect interest, (viii) mortgaged, pledged or subjected to
lien any of its assets, (ix) sold, assigned, or transferred any of its
assets, or cancelled any debts or claims held by it, except for fair
market value in the ordinary course of its business as carried on, at
and prior to March 31, 1997, (x) sold, assigned, transferred,
mortgaged, pledged or subjected to lien or permitted to lapse
copyrights, trademarks, trade names, patents, licenses or other
intangible assets or rights to use such intangible assets, (xi)
increased the compensation payable, or to become payable to its
officers, directors or shareholders, or employees (the term
"compensation" to include salaries, bonuses, fringe benefits, pensions,
profit participations and payments or benefits of any kind whatsoever),
(xii) to the knowledge of its directors and officers, performed any act
which will make it liable for, or incurred any liability for, direct or
consequential damages not fully covered by insurance, or (xiii) made
any change in its method of accounting or accounting practices.
(i) Contracts. Except as set forth on the Disclosure Schedule,
WorldPort does not have any material obligation, contract, Agreement,
lease, sublease, commitment or understanding of any kind, nature or
description, oral or written, fixed or contingent, due or to become
due, existing or inchoate which involves an obligation in excess of
$25,000. All Material Contracts set forth on the Disclosure Schedule
are, in full force and effect and are valid, binding and enforceable in
accordance with their respective terms; all parties to such Material
Contracts have complied in all material respects with the provisions
thereof; no such party is to the best of WorldPort's knowledge, in
default in any respect under any term thereof and to the best of
WorldPort's knowledge, no event has occurred that with the passage of
time and/or giving of notice would constitute a material default by any
party under any provision thereof. No consent, approval or
authorization of any third party is required in connection with the
consummation of the transactions contemplated hereunder.
(j) Employment and Other Contracts. Except as set forth in
the Disclosure Schedule, WorldPort is not, directly or indirectly, a
party to any written or oral ( i ) employment
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contract with any directors, officers or employees having a term
expiring after the Closing, (ii) sales representation, agency or
distribution contract or Agreement, (iii) expense reimbursement plan or
arrangement which will result in unpaid obligations of WorldPort after
the Closing, (iv) management, employment, consulting, agency or other
Agreement for personal services to be rendered by any person
(including, but not limited to, any investment advisor, distributor,
sales representative or agency, or advertiser), or (v) contract with
any shareholder or any person affiliated with any shareholder.
(k) ERISA. Except as set forth in the Disclosure Schedule,
WorldPort has not had since its organization, and will not have at any
time between the date of this Agreement and the Closing, any ERISA Plan
or Multi-Employer Plan.
(l) Labor Practices. WorldPort is not and has not ever been a
party to any collective bargaining Agreement, and no union or group is
seeking to become the collective bargaining representative for any unit
of the employees of WorldPort. There are no pending (i) unfair labor
practice complaints against, (ii) arbitration proceedings or grievances
involving, (iii) OSHA citations, wage and hour complaints or EEO
charges against, (iv) NIOSH health hazard evaluation determinations
against, or (v) findings of noncompliance with respect to affirmative
action requirements against WorldPort, and there is no pending labor
strike nor, to the knowledge of the directors and officers of
WorldPort, has any such complaint, proceeding, citation, charge,
determination, finding or strike been threatened. WorldPort has not
experienced any material strike or work stoppage during the three years
prior to the date hereof. WorldPort is not engaged in any unfair labor
practices.
(m) Real Property Ownership and Lease Obligations. Except as
set forth in the Disclosure Schedule, WorldPort does not, as of the
date of this Agreement, and will not, between the date hereof and the
Closing, own any real estate interests or leasehold interests and
WorldPort is not a party to any lease and has no obligation to make any
rental or other payments.
(n) Investment Company Act; Etc. WorldPort is not (i) an
"investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as
amended, (ii) a "holding company" or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," as such terms are defined
in the Public Utility Holding Company Act of 1935, as amended, or (iii)
a "public utility," as such term is defined in the Federal Power Act,
as amended.
(o) Environmental Permits. WorldPort does not engage in or
conduct any business which requires any permits, licenses or other
authorizations which are required under federal, state and local laws
relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic materials or wastes into
ambient air, surface water, ground water or land, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or
hazardous or toxic materials or wastes.
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(p) Approvals. To the knowledge of WorldPort's directors and
officers, no authorization, consent, order, permit or approval of, or
filing with, any federal, state, local or foreign government or
governmental agency or any other authority, private person or entity,
is necessary for the consummation by WorldPort of the transactions
contemplated by this Agreement.
(q) Untrue Statements. The representations or warranties of
WorldPort contained in this Agreement or any written certificate
furnished to WWC by or on behalf of WorldPort in connection herewith or
in connection with the transactions contemplated herein do not contain
and will not contain any untrue statement of a material fact and do not
omit and will not omit to state any material fact required to be stated
herein or therein or otherwise necessary to make the statements
contained herein or therein not false or misleading. All of the
representations and warranties made by WorldPort in this Agreement
shall be true and correct on the Closing with the same effect as if
they had been made on the Closing.
(r) Title. Upon issuance of the WorldPort's Capital Stock, the
WWC Shareholder will have good and marketable title thereto, free and
clear of all liens, encumbrances, preemptive rights, and other
restrictions, other than the conditions set forth therein;
(s) Compliance with Law. WorldPort has no knowledge and has
not received any notice from any federal, state or local governmental
authority that its business does not comply, in all material respects,
with any applicable codes, laws, ordinances, rules, and regulations,
and no proceedings in respect thereto are pending or, to the knowledge
of WorldPort, threatened;
(t) Capitalization of the WorldPort. The authorized capital
stock of the WorldPort consists of 65,000,000 shares of Common Stock,
par value $.0001 per share, of which 10,883,333 shares are issued and
outstanding as of April 20, 1997; and 10,000,000 shares of Preferred
Stock, par value $.0001 per share, of which no shares are issued and
outstanding.
(u) Subsidiaries. Other than Acquisitions, Inc., WorldPort
has no subsidiaries and no other investment in any person or entity;
(v) Plans. Except as set forth in the Disclosure Schedule,
WorldPort has no employment, profit sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retirement, health,
welfare, or incentive plans for employees;
(w) Permits; Authorizations. No permits, licenses or other
authorizations have been, and no governmental authority or agency with
jurisdiction over WorldPort has asserted or, to the best of WorldPort's
knowledge, is likely to assert that any permits, licenses or other
authorizations have been required to be obtained or maintained by
WorldPort. To the best of WorldPort's knowledge, WorldPort is in
substantial compliance, and upon consummation of the transactions
contemplated hereby will continue in substantial compliance, with all
material limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables
contained in all laws applicable to WorldPort or contained in any
regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder,
unless the failure to so comply would not have a material and adverse
effect on the business of WorldPort. No events, conditions, activities,
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<PAGE>
practices, incidents, actions or plans of action taken or to be taken
by WorldPort or, to the best of WorldPort's knowledge, any predecessor
in interest, are reasonably likely to interfere with or prevent
substantial compliance or continued compliance with, to the extent any
are applicable, all laws or with any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder;
(x) Offering. Subject to the accuracy of the WWC Shareholder's
representations on Exhibit F hereof, the offer and sale of WorldPort's
Stock constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended and any
applicable state Blue Sky Laws;
(y) Availability of Documents. WorldPort has made available to
the WWC Shareholder copies of all documents, including without
limitation all agreements, contracts, commitments, insurance policies,
leases, plans, instruments, undertakings, authorizations, permits,
licenses, patents, trademarks, tradenames, service marks, copyrights
and applications therefor, referred to herein. Such copies are true and
complete and include all amendments, supplements and modifications
thereto or waivers currently in effect thereunder.
6. THE CLOSING.
(a) Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place on or before July 18,
1997, at the offices of WorldPort, or on such other date and time as
may be mutually agreed upon in writing by WorldPort and the WWC
Shareholder;
7. AGREEMENTS PENDING CLOSING.
(a) Agreements of The WWC Shareholder and WWC Pending the
Closing. The WWC Shareholder and WWC covenant and agree that, from the
date hereof through the Closing and except as otherwise agreed to in
writing by WorldPort:
(i) Ordinary Course. The WWC Shareholder shall cause
the business of WWC to be, and the business of WWC shall be,
conducted solely in the ordinary course consistent with past
practice, with no changes in methods of management, operation
or accounting;
(ii) Maintenance of Assets. The WWC Shareholder shall
cause WWC to, and WWC will, continue to maintain and service
the physical assets used in the conduct of its business in
good working order and condition and in the same manner as has
been its consistent past practice;
(iii) Employees. The WWC Shareholder shall cause WWC
to, and WWC will, use reasonable efforts to keep available the
services of the present employees and agents of its business
and to maintain the relations and goodwill with material
suppliers, customers, distributors and any others having
material business relations with WWC;
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(iv) Consents. WWC shall obtain all consents from
third parties necessitated by the terms of any contract to
which WWC is a party;
(v) Compliance with Law. WWC shall comply with all
laws, ordinances, rules, regulations and orders applicable to
WWC;
(vi) Performance of Obligations. WWC shall have
performed its obligations under all contracts and leases to
which it is subject, to the extent such performance is
required prior to the Closing.
(vii) Further Disclosure. The WWC Shareholder and WWC
shall promptly disclose to WorldPort in writing any
information contained in its representations and warranties or
the Exhibits which, is incomplete or is no longer correct as
of all times, commencing on the date hereof until the Closing.
To the extent that such disclosures are acceptable to
WorldPort, such disclosures shall be deemed to modify, amend
and supplement the representations and warranties of the WWC
Shareholder and WWC and/or the Exhibits for all purposes;
(viii) Sale and Transfer. The WWC Shareholder and WWC
shall not, directly or indirectly, sell or transfer all or any
part its assets, other than in the ordinary course of business
consistent with past practice, nor shall the WWC Shareholder
or WWC further encumber all or any part of their assets (other
than purchase money security interests) or initiate or
participate in any discussions or negotiations with respect to
a sale of its assets, a merger or consolidation of it with
another entity or enter into any Agreement to do any of the
foregoing. The WWC Shareholder and WWC shall not provide any
confidential information concerning WWC's business or its
properties or assets to any third party other than in the
ordinary course of business;
(ix) Amendments to Leases and Contracts. WWC shall
not amend any leases or material contracts to which it is a
party without the written consent of WorldPort;
(x) Access to Information. The WWC Shareholder and
WWC shall give to WorldPort's officers, employees, counsel,
accountants and other representatives free and full access to
and the right to inspect, during normal business hours, all of
the properties, assets, records, contracts and other documents
relating to WWC's business and shall permit them to consult
with the officers, employees, accountants, counsel and agents
of WWC for the purpose of making such investigation of WWC as
WorldPort shall desire to make, provided that such
investigation shall not unreasonably interfere with WWC's
business operations. Furthermore, The WWC Shareholder and WWC
shall furnish to WorldPort all documents, records and
information in The WWC Shareholder's or WWC's possession with
respect to the affairs of WWC's business and copies of any
working papers relating thereto, as WorldPort shall from time
to time reasonably request;
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(xi) Public Announcement. Upon execution of this
Agreement, WorldPort and the WWC Shareholder may agree on and
issue a joint press release describing the transactions set
forth in this Agreement for immediate release to the public.
(xii) Confidential Information. The WWC Shareholder
and WWC will hold, and shall cause all others, including The
WWC Shareholder's and WWC's counsel, independent certified
public accountants, appraisers and investment bankers to hold,
in confidence any confidential data or information made
available to the WWC Shareholder or WWC in connection with
this Agreement or with respect to WorldPort's business, using
the same standard of care to protect such confidential data or
information as would be used by a prudent and reasonable
business person in similar circumstances. If the transactions
contemplated by this Agreement are not consummated, The WWC
Shareholder agrees that it shall return or cause to be
returned to WorldPort all written materials and all copies
thereof that were supplied to the WWC Shareholder by WorldPort
and that contain any such confidential data or information,
and that the WWC Shareholder will continue to hold in
confidence any such information which it has in its
possession; and
(xiii) Action; Cooperation. The WWC Shareholder will
not knowingly take any action which would result in a breach
of any of its representations and warranties hereunder.
Furthermore, the WWC Shareholder shall cooperate with
WorldPort and use its best efforts to cause all of the
conditions to the obligations of the WWC Shareholder and
WorldPort under this Agreement to be satisfied on or prior to
the Closing.
(b) Agreements of WorldPort Pending the Closing. WorldPort
covenants and agrees that, from the date hereof through the Closing,
and except as otherwise agreed to in writing by the WWC Shareholder:
(i) Ordinary Course. WorldPort shall conduct its
business solely in the ordinary course consistent with past
practice, with no changes in methods of management, operation
or accounting;
(ii) Maintenance of Assets. WorldPort shall continue
to maintain and service its assets in the same manner as has
been its consistent past practice;
(iii) Compliance with Law. WorldPort shall comply
with all laws, ordinances, rules, regulations and orders
applicable to WorldPort;
(iv) Performance of Obligations. WorldPort shall
have performed its obligations under all contracts and leases
to which it is subject, to the extent such performance is
required prior to the Closing;
(v) Further Disclosure. WorldPort shall promptly
disclose to the WWC Shareholder in writing any information
contained in its representations and warranties or the
Exhibits which, is incomplete or is no longer correct as of
all times, commencing on the date hereof until the Closing. To
the extent that such disclosures are acceptable
20
<PAGE>
to the WWC Shareholder, such disclosures shall be deemed to
modify, amend and supplement the representations and
warranties of WorldPort and/or the Exhibits for all purposes;
(vi) Access to Information. WorldPort shall give to
the WWC Shareholder and to WWC's officers, employees, counsel,
accountants and other representatives free and full access to
and the right to inspect, during normal business hours, any
assets, records, contracts and other documents relating to
WorldPort and shall permit them to consult with the officers,
employees, accountants, counsel and agents of WorldPort for
the purpose of making such investigation of WorldPort as the
WWC Shareholder shall desire to make. Furthermore, WorldPort
shall furnish to the WWC Shareholder all documents, records
and information in WorldPort's possession with respect to its
business and copies of any working papers relating thereto in
WorldPort's possession as the WWC Shareholder shall from time
to time reasonably request;
(vii) Action; Cooperation. WorldPort will not
knowingly take any action which would result in a breach of
any of its representations and warranties hereunder.
Furthermore, WorldPort shall cooperate with the WWC
Shareholder and use its best efforts to cause all of the
conditions to the obligations of WorldPort and the WWC
Shareholder under this Agreement to be satisfied on or prior
to the Closing;
(viii) Confidential Information. WorldPort will hold,
and shall cause all others, including WorldPort's counsel,
independent certified public accountants, appraisers and
investment bankers to hold, in confidence any confidential
data or information made available to WorldPort in connection
with this Agreement or with respect to the WWC Shareholder's
business, using the same standard of care to protect such
confidential data or information as would be used by a prudent
and reasonable business person in similar circumstances;
provided that WorldPort may disclose such data and information
to potential investors and lenders. If the transactions
contemplated by this Agreement are not consummated, WorldPort
agrees that it shall return or cause to be returned to the WWC
Shareholder all written materials and all copies thereof that
were supplied to WorldPort by the WWC Shareholder and that
contain any such confidential data or information, and that
WorldPort will continue to hold in confidence any such
information which it has in its possession; and
(ix) Public Announcement. Upon execution of this
Agreement, WorldPort and the WWC Shareholder may agree on and
issue a joint press release describing the transactions set
forth in this Agreement for immediate release to the public.
8. CONDITIONS PRECEDENT TO THE CLOSING.
(a) Conditions Precedent to WorldPort's Obligations. All
obligations of WorldPort under this Agreement are subject to the
fulfillment or satisfaction, prior to or at the Closing, of each of the
following conditions precedent (any or all of which may be waived by
WorldPort):
(i) Representations and Warranties True as of the
Closing. The representations and warranties of WWC and the WWC
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Shareholder contained in this Agreement or in any Exhibit,
certificate or document delivered by WWC and the WWC
Shareholder to WorldPort pursuant to the provisions hereof
shall have been true on the date hereof and shall be true on
the Closing, with the same effect as though such
representations and warranties were made as of such date;
(ii) Compliance with this Agreement. WWC and the WWC
Shareholder shall have performed and complied with all
agreements and conditions required by this Agreement to be
performed or complied with by WWC and the WWC Shareholder
prior to or at the Closing;
(iii) Consents. WWC and the WWC Shareholder shall
have obtained all necessary consents from third parties as
contemplated by Section 7(a)(iv), above.
(iv) No Action. At the Closing date, no governmental
agency or body, or other person or entity, shall have
instituted or threatened any action to restrain or prohibit
any of the transactions contemplated by this Agreement;
(v) Approval of Counsel. All proceedings taken in
connection with the transactions contemplated herein and all
instruments and documents required in connection therewith or
incident thereto shall be satisfactory in form to legal
counsel for WorldPort;
(vi) Escrow Agreement. WWC and the WWC Shareholder
shall have executed an escrow Agreement in substantially the
form of Exhibit C;
(vii) Legal Proceedings. Except as set forth in the
Disclosure Schedule, no Legal Proceedings shall have been
filed, shall be pending or, to the knowledge of WWC and the
WWC Shareholder, threatened before any court or governmental
body to restrain or prohibit, or to obtain substantial damages
in respect of, this Agreement, or the consummation of the
transactions contemplated hereby, and there shall be no Legal
Proceedings filed, pending or threatened that, either
separately or in the aggregate, could materially and adversely
affect the business, operations or condition, financial or
otherwise, of WWC.
(viii) Resolutions. WorldPort shall have received
from WWC certified copies of resolutions duly adopted by the
Shareholder of WWC and by the Board of Directors of WWC
approving this Agreement.
(ix) Articles of Incorporation. WorldPort shall have
received a current copy of the Articles of Incorporation of
WWC, and any amendments thereto, certified as of a date not
more than five business days before the Closing by the Texas
Secretary of State, and a current copy of the Bylaws of WWC,
certified as of the Closing by WWC's Secretary.
(x) Good Standing. WorldPort shall have received a
certificate, issued by the Texas Secretary of State, as of a
date not more than five business days before the Closing,
stating that WWC is in good standing in the State of Texas.
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(xi) Incumbency of Officers. WorldPort shall have
received an incumbency certificate or certificates, dated the
Closing, certifying the incumbency of all officers of WWC who
have executed this Agreement.
(xii) Investment Representation. The WWC Shareholder
shall have executed an investment representation letter in
substantially the form of Exhibit F hereto;
(xiii) Execution of Other Agreements. WWC and the WWC
Shareholder shall have performed and complied with all
material agreements and conditions required to be performed or
complied with by it prior to or at the Closing;
(b) Conditions Precedent to the Obligations of WWC and The WWC
Shareholder. All obligations of WWC and the WWC Shareholder under this
Agreement are subject to the fulfillment or satisfaction, prior to or
at the Closing, of each of the following conditions precedent (any or
all of which may be waived by WWC and/or the WWC Shareholder):
(i) Representations and Warranties True as of the
Closing. The representations and warranties of WorldPort and
Acquisitions, Inc. contained in this Agreement or in any list,
certificate or document delivered by WorldPort or
Acquisitions, Inc. to WWC or the WWC Shareholder pursuant to
the provisions hereof shall be true on the Closing with the
same effect as though such representations and warranties were
made as of such date;
(ii) Incorporation of WorldPort Acquisitions, Inc.
WorldPort shall have filed all required documents with the
State of Delaware to incorporate Acquisitions, Inc. as a
wholly-owned subsidiary and shall have caused the appropriate
officers of Acquisition to have executed this Agreement;
(iii) Compliance with this Agreement. WorldPort shall
have performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by
WorldPort prior to or at the Closing;
(iv) Board of Directors Appointment. Mr. John Dalton
shall be appointed to the Board of Directors of WorldPort and
Acquisitions, Inc. effective as of the Closing.
(v) No Action. At the Closing date, no governmental
agency or body, or other person or entity, shall have
instituted or threatened any action to restrain or prohibit
any of the transactions contemplated by this Agreement;
(vi) Approval by WWC and The WWC Shareholder. All
documents and proceedings of WorldPort in connection with the
transactions contemplated hereby shall have been approved as
to form and substance by WWC and the WWC Shareholder and their
respective legal counsel, which approval will not unreasonably
be withheld.
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<PAGE>
(vii) Legal Proceedings. Except as set forth on the
Disclosure Schedule, no Legal Proceedings have been filed,
shall be pending or, to the knowledge of WorldPort, threatened
before any court or governmental body to restrain or prohibit,
or to obtain substantial damages in respect of, this
Agreement, or the consummation of the transactions
contemplated hereby, and there shall be no Legal Proceedings
filed, pending or threatened that, either separately or in the
aggregate, could materially and adversely affect the business,
operations or condition, financial or otherwise, of WorldPort.
(viii) Resolutions. The WWC Shareholder shall have
received from WorldPort a certified copy of the resolution
duly adopted by the Board of Directors of WorldPort approving
this Agreement.
(ix) Certificate of Incorporation. The WWC
Shareholder shall have received a current copy of the
Certificate of Incorporation of WorldPort and Acquisitions,
Inc. and any amendments thereto certified as of a date not
more than five business days before the Closing by Delaware
Secretary of State, and a current copy of the Bylaws of
WorldPort and Acquisitions, Inc., certified as of the Closing
by the respective corporate Secretary.
(x) Good Standing. The WWC Shareholder shall have
received certificates, issued by the Delaware Secretary of
State, as of a date not more than five business days before
the Closing, stating that both WorldPort and Acquisitions,
Inc. are in good standing in the State of Delaware.
(xi) Incumbency of Officers. The WWC Shareholder
shall have received an incumbency certificate or certificates,
dated as of Closing, certifying the incumbency of all officers
of WorldPort who have executed this Agreement.
(xii) Escrow Agreement. WorldPort shall have executed
an escrow Agreement in substantially the form of Exhibit C.
(xiii) Promissory Note. WorldPort shall have executed
a promissory note in substantially the form of Exhibit B.
(xiv) Registration Rights Agreement. WorldPort and
the WWC Shareholder shall have executed a registration rights
Agreement in substantially the form of Exhibit D.
(xv) Execution of Other Agreements. WorldPort shall
have performed and complied with all agreements and conditions
required by this Agreement to be performed or complied with by
it prior to or at the Closing.
9. OTHER MATTERS.
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(a) Piggyback and Demand Registration Rights. The WWC
Shareholder shall have piggyback registration rights and a one time
demand registration right with regard to the WorldPort Common Stock
received hereunder. These rights may be exercised pursuant to the
Registration Rights Agreement attached hereto as Exhibit D, and
incorporated herein by reference.
(b) "Market Stand-Off" Agreement. The WWC Shareholder hereby
agrees that, if requested by WorldPort and any underwriter of common
stock (or other securities of WorldPort) in connection with a public
offering of the securities of WorldPort pursuant to a registration
statement filed with the United States Securities and Exchange
Commission, the WWC Shareholder will not sell or otherwise transfer or
dispose of any shares of common stock of WorldPort (or other
securities) held by such the WWC Shareholder during the period
beginning seven (7) days prior to and ending one hundred eighty (180)
days following the date of the final prospectus of WorldPort as filed
under the Securities Act of 1933. The WWC Shareholder further agrees to
execute any Agreement requested by WorldPort and such underwriter with
respect to this paragraph, in a form satisfactory to WorldPort and such
underwriter. WorldPort may impose "stop-transfer" instructions with
respect to the common stock (or other securities) subject to the
foregoing restriction until the end of such 180 day period.
(c) Substitution of WorldPort Into Any WWC Agreement. Prior to
the Closing of this Agreement, WorldPort shall have the right, in the
place of WWC, to enter into any and all agreements, transactions or
other relationships that WWC has the right to enter.
10. INDEMNIFICATION.
(a) General Indemnification Obligation of WWC and The WWC
Shareholder. Subject to the limitations hereinafter provided, from and
after the Closing, WWC and The WWC Shareholder will indemnify and hold
harmless WorldPort and its successors and assigns (an "Indemnified
WorldPort Party") against and in respect of:
(i) Damages. Any and all damages, losses,
deficiencies, liabilities, costs and expenses (collectively,
"Damages") incurred or suffered by the Indemnified WorldPort
Party that result from, relate to or arise out of:
(1) Any and all liabilities and obligations
of WWC of any nature whatsoever, in existence as of
the Closing, except for those liabilities and
obligations of WWC set forth in the WWC Financial
Statements or disclosed in the schedules to this
Agreement;
(2) Any and all actions, suits, claims or
legal, administrative, arbitration, governmental or
other proceedings or investigations against an
Indemnified WorldPort Party that relate to the WWC
Shareholder or WWC to the extent that the event
giving rise thereto occurred prior to the Closing or
which result from or arise out of any action or
inaction prior to the Closing of the WWC Shareholder,
WWC, or any director, officer, employee, agent,
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representative or subcontractor of WWC, except for
those set forth in the WWC Financial Statements or
schedules to this Agreement; or
(3) Any misrepresentation, breach of
warranty or nonfulfillment of any Agreement or
covenant on the part of the WWC Shareholder under
this Agreement, or from any misrepresentation in or
omission from any certificate, schedule, statement,
document or instrument furnished to WorldPort
pursuant hereto (collectively, a "misrepresentation
or breach of warranty"). In determining the amount of
any Damages incurred as a result of any
misrepresentation or breach of warranty for purposes
of this subsection, any reference to "materiality" in
any representation, warranty or covenant contained in
this Agreement shall be ignored.
(ii) Actions. Any and all actions, suits, claims,
proceedings, investigations, demands, assessments, fines,
judgments, costs and other expenses (including, without
limitation, reasonable legal fees and expenses) (collectively,
"Actions") incident to any of the foregoing.
(b) General Indemnification Obligation of WorldPort. Subject
to the limitations hereinafter provided, from and after the Closing,
WorldPort will reimburse, indemnify and hold harmless WWC and the WWC
Shareholder and their successors and assigns (an "Indemnified WWC
Party") against and in respect of:
(i) Damages. Any and all damages incurred or suffered
by any Indemnified WWC Party that result from, relate to or
arise out of any misrepresentation, breach of warranty or
non-fulfillment of any Agreement or covenant on the part of
WorldPort under this Agreement or any other document delivered
by WorldPort pursuant to this Agreement, or from any
misrepresentation in or omission from any certificate,
schedule, statement, document or instrument furnished to WWC
or the WWC Shareholder pursuant hereto or thereto; and
(ii) Actions. Any and all Actions incident to any
of the foregoing or to the enforcement of this subsection 10.
(b)(ii).
(c) Limitation of Indemnity. Notwithstanding any provision in
this Agreement to the contrary, an Indemnifying Party (as hereinafter
defined) shall not be liable to an Indemnified Party (as hereinafter
defined) for indemnification under this Section 10 for:
(i) Dollar Amounts Limitations.
(1) Threshold Limitation. Neither WorldPort
nor the WWC Shareholder shall be liable for damages
or actions in an amount less than $5,000 in
connection with any claim hereunder relating to a
single occurrence or event, or for the first $25,000
of aggregate Damages or Actions in connection with
all claims hereunder; PROVIDED, HOWEVER, the
limitation herein provided shall not apply to any
claim by the WWC Shareholder against WorldPort for
failure to pay the full amount of the
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<PAGE>
purchase price (including, without limitation, the
distribution of WorldPort common stock as provided in
the Escrow Agreement).
(2) Ceiling Limitation. Except with respect
to claims relating to "Intentional
Misrepresentations" (as said term is hereinafter
defined), no party shall be liable for damages or
actions in excess of $1,000,000 in the aggregate;
PROVIDED, HOWEVER, the limitation herein provided
shall not apply to any claim by the WWC Shareholder
against WorldPort for failure to pay the full amount
of the purchase price (including, without limitation,
the distribution of WorldPort common stock as
provided in the Escrow Agreement).
(3) Definitions. For purposes of Subsection
10.(c)(i)(2), hereof, the term "Intentional
Misrepresentation" shall mean the making of any
representation or warranty by WWC or the WWC
Shareholder which to WWC or the WWC Shareholder's
knowledge at the time of making such representation
or warranty is false or inaccurate in any material
respects.
(ii) Time Limitation. It is the intention hereof that
all obligations of the parties to indemnify pursuant to this
Section 10 shall terminate on December 31, 1999 (the
"Indemnification Termination Date") with respect to all claims
for Damages and Actions, except those for which a Claim Notice
(as defined below) has been received on or before the
Indemnification Termination Date; and
(iii) Insurance. Neither WorldPort nor the WWC
Shareholder shall be liable for any claim hereunder to the
extent such claim is paid by any insurer.
(d) Method of Asserting Claims, Etc. In the event that any
claim or demand is asserted against or sought to be collected from an
Indemnified WorldPort Party or Indemnified WWC Party (an "Indemnified
Party") by a third party, the Indemnified Party shall promptly notify
the party from which indemnification is sought pursuant to paragraphs
10(a) and 10(b) above (the "Indemnifying Party") of such claim or
demand, specifying the nature of such claim or demand and the amount or
the estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim and
demand) (the "Claim Notice"). The Indemnifying Party shall have twenty
(20) days from its receipt of the Claim Notice (the "Notice Period") to
notify the Indemnified Party, (i) whether or not the Indemnifying Party
disputes its liability to the Indemnified Party hereunder with respect
to such claim or demand and (ii) notwithstanding any such dispute,
whether or not the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such claim or demand.
(i) Dispute of Liability. If the Indemnifying Party
disputes its liability with respect to such claim or demand or
the amount thereof (whether or not the Indemnifying Party
desires to defend the Indemnified Party against such claim or
demand as provided herein), such dispute shall be resolved in
accordance with section 12(m) hereof. Pending the resolution
of any dispute by the Indemnifying Party of its
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<PAGE>
liability with respect to any claim or demand, such claim or
demand shall not be settled without the prior written consent
of the Indemnified Party.
(ii) Defense. In the event that the Indemnifying
Party notifies the Indemnified Party within the Notice Period
that it desires to defend the Indemnified Party against such
claims or demand, then, provided: (i) that the Indemnifying
Party acknowledges that it is liable to indemnify the
Indemnified Party with respect to a particular claim; and (ii)
the Indemnifying Party has financial resources which are
reasonably adequate to pay the amount of the claim, except as
hereinafter provided, the Indemnifying Party shall have the
right to defend the Indemnified Party by appropriate
proceedings, which proceedings shall be promptly settled or
prosecuted by the Indemnifying Party to a final conclusion in
such a manner as to avoid any risk of the Indemnified Party
becoming subject to liability with respect thereto. If any
Indemnified Party desires to participate in, but not control,
any such defense or settlement, it may do so at its sole cost
and expense.
(iii) Indemnifying Party Liability. (1) If the
Indemnifying Party elects not to defend the Indemnified Party
against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or
otherwise, then the amount of any such claim or demand, or if
the same be defended by the Indemnifying Party or by the
Indemnified Party (but no Indemnified Party shall have any
obligation to defendant any such claim or demand), then that
portion thereof as to which such defense is unsuccessful, in
each case shall be conclusively deemed to be a liability of
the Indemnifying Party hereunder, unless the Indemnifying
Party shall have disputed its liability to the Indemnified
Party hereunder, as provided herein, in which event such
dispute shall be resolved in accordance with the dispute
resolution provisions set forth in Section 12(m) hereof; (2)
In the event an Indemnified Party should have a claim against
the Indemnifying Party hereunder that does not involve a claim
or demand being asserted against or sought to be collected
from it by a third party, the Indemnified Party shall promptly
send a Claim Notice with respect to such claim to the
Indemnifying Party. If the Indemnifying Party disputes its
liability with respect to such claim or demand, such dispute
shall be resolved in accordance with Section 12(m) hereof; if
the Indemnifying Party does not notify the Indemnified Party
within the Notice Period that it disputes such claim, the
amount of such claim shall be conclusively deemed a liability
of the Indemnifying Party hereunder.
(e) Payment. Upon determination of liability hereunder, the
appropriate party shall pay to the other, as the case may be, within
twenty (20) days after such determination, the amount of any claim for
indemnification made hereunder. Upon the payment in full of any claim
hereunder, then entity making payment shall be subrogated to the right
of the indemnified party against any person, firm or corporation with
respect to the subject matter of such claim.
11. TERMINATION AND AMENDMENT.
(a) Termination. This Agreement may be terminated by
WorldPort or the WWC Shareholder at any time prior to Closing upon
written notice to the other party if:
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<PAGE>
(i) the representations, warranties and agreements or
conditions of this Agreement to be complied with or performed
by WWC or the WWC Shareholder (in the case of WorldPort) or
WorldPort (in the case of WWC or the WWC Shareholder) on or
before the Closing shall not have then been complied with or
performed in some material respect and such material
noncompliance or nonperformance shall not have been waived by
the party giving notice of termination or shall not have been
cured by the defaulting party, or cure thereof commenced and
diligently prosecuted thereafter by such party within five (5)
days after written notice of such material noncompliance or
nonperformance is given by the non-defaulting party;
(ii) any governmental action is commenced to prevent
the consummation of the transactions contemplated hereby; or
(iii) the Parties agree to terminate by mutual
consent.
(b) Waiver. Any representations, warranties, agreements or
conditions of this Agreement may be waived at any time by the party
entitled to the benefit thereof by action taken and evidenced by a
written waiver executed by any such party.
12. MISCELLANEOUS.
(a) Brokers. The parties hereby represent and warrant, each to
the other, that, the parties have not dealt with any brokers in
connection with the transactions contemplated hereby, and that no
brokerage fees or commissions are owed to any party. In the event of
any allegation of any broker to the contrary, the party against which
liability is sought to be imposed by such broker shall defend the same
at its expense;
(b) Expenses. Each of the parties hereto will bear its own
legal fees and other expenses in connection with the transactions
contemplated by this Agreement;
(c) Survival. All parties agree that the representations,
warranties and agreements contained in this Agreement shall survive the
Closing and shall thereafter remain in full force and effect, for one
year from the date of Closing;
(d) Severability. If any term or provision of this Agreement,
including the exhibits hereto, or the application thereof to any
person, property or circumstances, shall to any extent be invalid or
unenforceable, the remainder of this Agreement, including the exhibits
or the application of such term or provision to persons, property or
circumstances other than those as to which it is invalid and
unenforceable, shall not be affected thereby, and each term and
provision of this Agreement and the exhibits shall be valid and
enforced to the fullest extent permitted by law;
(e) Notices. Any notices, requests or consents hereunder shall
be deemed given, and any instrument delivered, two days after they have
been mailed by first class mail, postage prepaid, or upon receipt if
delivered personally or by facsimile transmission, as follows:
29
<PAGE>
To WWC or The WWC Shareholder: John W. Dalton
326 5th Avenue
Sealy, Texas 77474
Tel: (409) 885-2622
With a copy to: Andrew Shebay III
One Riverway, Suite 1400
Houston, TX 77056
To WorldPort or Acquisitions: WorldPort Communications, Inc.
9601 Katy Freeway, Suite 200
Houston, Texas 77024
Attention: W. Dean Spies
Tel: (713) 461-4999
Fax : (713) 461-8098
With a copy to: William C. Gibbs
Snell & Wilmer L.L.P.
111 East Broadway, Suite 900
Salt Lake City, UT 84111
except that any of the foregoing may from time to time by written
notice to the other designate another address which shall thereupon
become its effective address for the purposes of this paragraph.
(f) Entire Agreement. This Agreement, including the exhibits
and documents referred to herein which are a part hereof, contains the
entire understanding of the parties hereto with respect to the subject
matter contained herein and may be amended only by a written instrument
executed by all parties hereto or their respective successors or
assigns. There are no restrictions, promises, warranties, covenants, or
undertakings other than those expressly set forth or referred to
herein. Any paragraph headings or table of contents contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement;
(g) Binding Effect. This Agreement shall inure to the benefit
of and be binding upon all parties hereto and their respective
successors, but shall not inure to the benefit of anyone other than the
parties signing this Agreement and their respective successors;
(h) Governing Law. This Agreement shall be governed by the
laws of the State of Delaware.
(i) Press Releases. Each party agrees that, unless approved by
the other parties hereto in advance and in writing, such party will not
make any public announcement, issue any press release or publicly
confirm any statements by third parties concerning the transactions
contemplated hereby, except as otherwise required by law. Further,
nothing contained herein shall prevent any shareholders which are
30
<PAGE>
corporations or partnerships from disclosing such information as they
deem necessary and advisable to their respective shareholders or
partners (whether general or limited), as the case may be.
(j) Assignment. This Agreement may not be assigned by any
party.
(k) Disclosure Schedule. The Disclosure Schedule referred to
in this Agreement is hereby incorporated in and made a part of this
Agreement.
(l) Counterparts; Headings. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.
(m) Dispute Resolution. Any and all disputes arising under or
involving this Agreement, directly or indirectly, or the interpretation
or performance thereof, or touching upon the rights or obligations of
any party hereunder, shall, if not settled by negotiation, be resolved
in the manner provided below.
(i) Mediation Prior to submitting any matter to
binding arbitration as provided herein, each party agrees to
first try in good faith to resolve any dispute by mediation
under the Procedures for Mediation of Business Disputes of the
Center for Public Resources, Inc.
(ii) Mediation Procedures. A demand for mediation
shall be made in writing and served upon the other party in
the same manner as otherwise provided for notice in this
Agreement. Within thirty (30) days of receipt of the demand
for mediation, the parties shall confer and select a mediator.
The site of any mediation session shall be within the State of
Texas. If (i) the parties are unable to agree upon the
mediator to use within fifteen (15) days after receipt of the
demand for mediation, (ii) the mediation is not undertaken in
a meaningful way within thirty (30) days after such notice, or
(iii) any unresolved dispute remains after mediation, then any
party may institute arbitration under this Section m(iii)
below. In any mediation, the fees and costs of the mediator
shall be borne equally by the parties to the mediation and
shall be payable upon invoice from the mediator. Each party
shall bear the fees and costs of its own legal counsel and
witnesses.
(iii) Binding Arbitration. All disputes not resolved
by negotiation or mediation as provided herein, shall at the
written request of any party be arbitrated pursuant to the
then prevailing Commercial Arbitration Rules of the American
Arbitration Association. The Arbitrator shall be agreed upon
by the parties or, if the parties cannot agree on the
arbitrator within ten (10) business day after either party
shall have requested such arbitration, the arbitrator shall be
appointed by the American Arbitration Association in
accordance with such Rules. The arbitration shall take place
in Texas. The arbitrator shall have the right to award or
include in his award any relief which he deems proper in the
circumstances, including, without limitation, specific
performance and injunctive relief, provided that the
arbitrator may not award exemplary or punitive damages. The
parties agree that the award of the arbitrator shall
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<PAGE>
be final and binding upon the parties; shall be the sole and
exclusive remedy between them regarding any claims,
counterclaims, issues, or accountings presented or pled to the
arbitrator; that it shall be made and shall promptly be
payable in U.S. dollars free of any tax, deduction or offset
(with respect to monetary awards) and that any costs, fees, or
taxes incident to enforcing the award shall, to the maximum
extent permitted by law, be charged against the party
resisting such enforcement. The award shall include interest
from the date of any damages incurred for breach or other
violation of this Agreement, and from the date of the award
until paid in full, at a rate to be fixed by the arbitrator.
The costs of any such arbitration, including without
limitation the administrative fee, arbitrator's fee,
attorneys' fees, fees of expert witnesses, and travel expenses
shall be borne by the losing party. Judgment upon the award of
the arbitrator may be entered in any court of competent
jurisdiction, or application may be made to such court for a
judicial acceptance of the award or an order of enforcement.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement effective as of the date set forth below.
WORLDPORT COMMUNICATIONS, INC.
By: /s/Dean Spies Date: April 20, 1997
-----------------------------------
Its: Chief Executive Officer
-----------------------------------
The WWC Shareholder:
/s/ John W. Dalton Date: April 20, 1997
- --------------------------------------
John W. Dalton
THE WALLACE WADE COMPANY
By: /s/ John W. Dalton Date: April 20, 1997
-----------------------------------
Its: President
-----------------------------------
WORLDPORT ACQUISITIONS, INC.
By: ____________________________________ Date: _____________
Its:_____________________________________
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<PAGE>
EXHIBIT A
WORLDPORT'S
COMMON SHARES
PERCENT ISSUED IN
OWNERSHIP OF WWC EXCHANGE FOR
NAME COMMON SHARES COMMON SHARES WWC SHARES
John W. Dalton 1,000 100% 1,400,000
<PAGE>
EXHIBIT B
PROMISSORY NOTE
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
<PAGE>
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT E
DISCLOSURE SCHEDULE
Schedule 1(f)(ii) Business Relationship Agreement
Schedule 3(f) Schedule of Legal Proceedings
Schedule 3(k) Contracts
Schedule 3(m) Employment and Other Contracts
Schedule 3(o) Employee Matters
Schedule 3(q) Real Property Ownership and Lease Obligations
Schedule 3(u) Plans
Schedule 3(v) Permits and Authorizations
Schedule 5(a) Schedule of Outstanding Subscriptions, Warrants,
Options, Preemptive Rights, or Other Agreements
Schedule 5(d) Legal Proceedings
Schedule 5(h) Conduct of Business
Schedule 5(i) Contracts
Schedule 5(j) Employment and Other Contracts
Schedule 5(k) ERISA
Schedule 5(m) Real Property Ownership and Lease Obligations
Schedule 5(v) Plans
<PAGE>
EXHIBIT F
THE WWC SHAREHOLDER'S REPRESENTATION LETTER
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and
entered into this 23rd day of April, 1997, by and between WorldPort
Communications, Inc., a Delaware corporation ("Buyer") and Telenational
Communications, Limited Partnership, a
Nebraska limited partnership ("Seller").
WHEREAS, Seller is a limited partnership with ownership
divided between a general partner (the "General Partner") and several limited
partners (each a "Limited Partner," and collectively with the General Partner,
the "Partners"), each with an ownership stake as set forth on Exhibit A hereto;
WHEREAS, Seller provides domestic and international
telecommunications services, and is a switch-based reseller of services of
interexchange carriers, and operates telecommunications switches and operator
services platforms in Omaha, Nebraska (the "Business");
WHEREAS, on April 4, 1997, Buyer and Seller signed that
certain letter of intent in contemplation of the transactions to be entered into
under this Agreement (the "Letter of Intent");
WHEREAS, Seller desires to sell, and Buyer desires to
purchase, the Purchased Assets and Assumed Liabilities and Assumed Obligations
in accordance with the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and promises
herein contained, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1. Purchase and Sale of Seller's Assets. At the Closing (as
hereafter defined), Seller shall sell, transfer, assign and deliver to Buyer,
and Buyer shall purchase, accept, assume and receive, all right, title and
interest in, to or arising from the Business, as a going concern, including the
Purchased Assets, but excluding the Excluded Assets.
1.2. Purchased Assets. The "Purchased Assets" are all of the
assets, properties, rights and claims used in, relating to or arising from the
conduct of the Business, including the following:
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(a) All accounts and notes receivable;
(b) All network and switching equipment;
(c) All Seller's rights to the FCC 214 License - File No.
I-T-C88-056, held in the name of the General Partner, dated March 8,
1988 (the "FCC 214 License");
(d) All Seller's rights to the South American calling card
business opportunity currently under development by Seller and its
officers;
(e) All cash, cash equivalents and marketable securities;
(f) All carrier contracts;
(g) All inventories;
(h) All rights to amounts received and receivable arising
from the judgment in favor of Seller in the case Telenational
Communications Limited Partnership v. Gateway Communications (HK) Ltd.
and Winston Lee, Doc. 934, No. 260, in the District Court of Douglas
County, Nebraska;
(i) All tools, machinery and equipment, whether owned or
leased;
(j) All vehicles and rights under vehicle leases;
(k) All office furnishings, shelves, equipment, telephone and
telecopy numbers, fixtures and supplies;
(l) All real property, whether owned or leased, including all
land, buildings, structures, easements, appurtenances and privileges
relating thereto, and all leaseholds, leasehold improvements, fixtures
and other appurtenances and options, including options to purchase and
renew, or other rights thereunder (the "Real Estate");
(m) All technical, operational, manufacturing or marketing
information, including new developments, inventions, know-how,
processes, ideas and trade secrets and documentation thereof and all
claims and rights related thereto;
(n) The contents of all bank accounts, lock boxes, safe
deposit boxes which are maintained for use in the conduct of the
Business;
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(o) All patents, trademarks, trade names, trade styles, logos
and service marks and all applications and registrations therefor and
licenses thereof;
(p) Copyrights and author's rights, whether published or
unpublished, including rights to prepare, reproduce and distribute
copies, compilations and derivative works;
(q) All customer files, all lists of customers, suppliers and
vendors, all rights and claims under sales contracts, customer orders,
service agreements, purchase orders, agent, dealer and distributorship
agreements and other similar commitments;
(r) All rights in, to and under the Material Contracts listed
on Schedule 2.15;
(s) All documents and records relating to the Purchased
Assets, or the operations or products of the Business (including
historical costing and pricing data), and employment and personnel
records for all employees of the Business that Buyer chooses to hire;
(t) All accounting books, records, ledgers and electronic
data processing materials;
(u) Rights under agreements with employees concerning
confidentiality and the assignment of inventions;
(v) All information systems, programs, software and
documentation thereof (including all electronic data processing
systems, program specifications, source codes, logs, input data and
report layouts and formats, record file layouts, diagrams, functional
specifications and narrative descriptions, flow charts and other
related material) which are used or intended to be used in the conduct
of the Business;
(w) Prepaid expenses, deferred charges and cash advanced by
customers of the Business and rights to volume rebates due from
suppliers;
(x) Subject to the agreements set forth on Schedule 1.2(x),
all goodwill associated with the Business, including all rights to use
the name "Telenational Communications";
(y) All warranties related to assets owned and services
received by Seller;
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(z) All permits, licenses, franchises, product registrations,
filings, authorizations, approvals and indicia of authority (and
pending applications for any thereof) to conduct the operations of the
Business and to own, construct, operate and maintain any product,
fixture, facility, equipment, vehicle, machinery or installation of the
Business; and
(aa) All other assets, properties, rights and claims related
to the operations of the Business or which arise in or from the conduct
thereof;
other than the Excluded Assets.
For purposes hereof, "Excluded Assets" means only the
following assets of Seller:
(i) 850,000 shares of the Series A Non-Cumulative Preferred
Stock of Enhanced Telecommunications Services, Inc. owned by Seller.
1.3. Assumed Liabilities. At Closing, Buyer shall assume and
at or after Closing, as necessary, Buyer shall discharge the following
liabilities of the Seller, but only to the extent to which they are recorded and
accrued on Schedule 1.3 or arise from the date of Schedule 1.3 through and
including the Closing Date (as hereafter defined) in the ordinary course of
business consistent with Seller's past practices (the "Assumed Liabilities"):
(a) Amounts owed by Seller to creditors under third party loan
agreements including amounts owed by Seller to Buyer under that certain
secured Promissory Note dated April 4, 1997 (the "Buyer Note");
(b) Liabilities to trade creditors for accounts payable which
arose in the ordinary course of the Business;
(c) Liabilities to creditors for accrued expenses and
liabilities for accrued payroll taxes which arose in the ordinary
course of the Business;
(d) Liabilities owed by Seller to creditors who are Partners
as shown on Schedule 1.3 up to a maximum of $600,000 (the "Affiliate
Liabilities");
(e) Liabilities owed by Seller to the General Partner for
accrued unpaid management fees or notes into which such accrued unpaid
management fees have been converted up to a maximum of $400,000 (the
"G.P. Liabilities");
(f) Liabilities and obligations to Buyer Employees (as
defined hereafter);
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(g) Liabilities to provide services to prepaid calling card
purchasers to the extent reflected as deferred revenue on the 1996 Financial
Statements consistent with Seller's past practices; and
(h) Liabilities under the leases for capital equipment.
At any time up until two (2) business days prior to Closing, the Partners to
whom amounts are owed under the Affiliate Liabilities may opt to receive the
common stock of Buyer, at $1.50 per share, as payment in lieu of cash. At any
time up until two (2) business days prior to Closing, the General Partner may
opt (with the consent of Buyer, which consent may be withheld in Buyer's sole
discretion) to receive the common stock of Buyer, at $1.50 per share, as payment
for the G.P. Liabilities in lieu of the G.P. Note, as defined hereafter. All
shares of Buyer's common stock delivered in satisfaction of the Affiliate
Liabilities are "Conversion Shares".
Buyer's assumption of the foregoing Assumed Liabilities is
qualified by the understanding that under no circumstances shall Buyer's
aggregate liability under the Assumed Liabilities exceed $4.5 million (the
"Liabilities Cap"). If the Assumed Liabilities exceed the Liabilities Cap, the
G.P. Liabilities to be assumed shall be reduced dollar for dollar until the
aggregate value of the Assumed Liabilities does not exceed the Liabilities Cap.
If, notwithstanding adjustments made in accordance with the foregoing sentence,
the value of the Assumed Liabilities is greater than the Liabilities Cap, Buyer,
in its sole discretion may elect to assume all or a portion of such additional
liabilities (the "Additional Liabilities"). To the extent that Buyer assumes any
Additional Liabilities, that number of the Escrowed Shares (as defined hereafter
and valued for this purpose at $1.50 per share) equal to the value of the
Additional Liabilities shall be distributed to Buyer.
1.4. Obligations. As of the Closing, Buyer will assume only
the obligations of Seller to perform after the Closing Date with respect to the
following obligations of Seller arising solely from the operation of the
Business (referred to herein as the "Assumed Obligations"):
(a) Obligations under supplier contracts and purchase orders
arising in the normal course of the Business consistent with Seller's
past practices;
(b) Obligations under sales contracts and customer orders
accepted in the normal course of the Business; and
(c) Obligations under the equipment operating leases to be
assumed by Buyer at Closing that arose in the ordinary course of the
Business.
Except as set forth in Section 1.3 or this Section 1.4, Buyer does not assume
and shall not be liable for any debt, obligation, responsibility or liability of
Seller or any affiliate thereof arising at any time or of the Business arising
on or prior to the Closing Date, whether known or unknown, contingent or
absolute, or otherwise, all of which are retained by Seller and Seller shall
indemnify, defend and hold harmless Buyer from and against all loss and expense
resulting from or related to any thereof.
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<PAGE>
Buyer shall defend, indemnify and hold harmless the Seller
from and against any and all liabilities, obligations, losses, claims, damages
(not including any incidental or consequential damages), costs and expenses
(including court costs and reasonable attorneys' fees) related to or arising
from Buyer's failure to fully perform and discharge the responsibilities of the
Seller with respect to the Assumed Liabilities and Assumed Obligations. The
Buyer further agrees to pay and discharge all such Assumed Liabilities and
Assumed Obligations as they come due.
1.5. Consideration. The aggregate consideration for the
Business and the Purchased Assets shall be as follows:
(a) 3,750,000 shares of Buyer's common stock subject to
adjustment if (i) the Liability Cap is exceeded and Buyer assumes any
Additional Liabilities, (ii) Buyer is due indemnification by Seller
under Article IX hereof, (iii) there are any Expense Overruns (as
defined in Section 12.3, or (iv) there are any Rejected Contracts (as
defined in Section 1.9(c)) (as adjusted in accordance herewith, the
"Buyer's Stock"); and
(b) Assumption of the Assumed Liabilities and Assumed
Obligations.
1.6. Closing. The transfer of assets contemplated by this
Agreement (the "Closing") shall occur at the offices of McDermott, Will & Emery,
227 West Monroe Street, Chicago, Illinois, at 10:00 A.M. on the tenth (10th)
business day following the later to occur of (i) the receipt and acceptance of
the 1996 Financial Statements and (ii) the grant by the Federal Communications
Commission (the "FCC") of a Joint Application (as defined hereafter) by Final
Order (as defined hereafter), or at such other time or place as may be mutually
agreed upon by the parties (the "Closing Date"). Upon consummation, the Closing
shall be deemed to take place as of the close of business on the Closing Date.
1.7. Deliveries by Buyer. At Closing, Buyer shall deliver the
following:
(a) Certificates evidencing the Buyer's Stock registered in
the name of Seller;
(b) Payment of the Affiliate Liabilities or delivery of the
Conversion Shares, as applicable;
(c) An Instrument of Assumption of Assumed Liabilities and
Assumed Obligations in substantially the form attached hereto as
Exhibit B executed on behalf of Buyer;
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(d) The Escrow Agreement in substantially the form attached
hereto as Exhibit C (the "Escrow Agreement") executed on behalf of
Buyer;
(e) The Registration Rights Agreement in substantially the
form attached hereto as Exhibit D (the "Registration Rights Agreement")
executed on behalf of Buyer;
(f) An opinion of counsel to Buyer, including, but not limited
to, opinions as to the organization, good standing and capitalization
of Buyer and the authority of Buyer to enter into and perform under
this Agreement and the enforceability of this Agreement against the
Buyer;
(g) A certificate of Buyer certifying as to the continued
accuracy of the representations and warranties made herein and
compliance with conditions precedent to the Closing;
(h) Certificate of the Secretary of Buyer certifying copies
of the Certificate of Incorporation and Bylaws of Buyer as of the
Closing Date;
(i) Payment or cancellation of the Buyer Note and a release
of Mr. Edmund Blankenau from his guaranty thereunder which guarantee
shall be returned to Mr. Blankenau at Closing; and
(j) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated hereby.
One Million (1,000,000) shares of the Buyer's Stock (the "Escrowed Shares")
shall, pursuant to the Escrow Agreement, be delivered to the Escrow Agent (as
defined in the Escrow Agreement). The remainder of the Buyer's Stock shall be
delivered to Seller. The consideration described in Section 1.7(b) shall be
delivered to Seller on behalf of the relevant Partners.
1.8. Deliveries by Seller. At the Closing, Seller shall
deliver the following to Buyer:
(a) A Bill of Sale in substantially the form attached hereto
as Exhibit E (the "Bill of Sale");
(b) An opinion of counsel to Seller, including, but not
limited to, opinions as to the organization, good standing and
capitalization of Seller and the authority of Seller to enter into and
perform under this Agreement and the enforceability of this Agreement
against the Seller;
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(c) A certificate of Seller certifying as to the continued
accuracy of the representations and warranties made herein and
compliance with conditions precedent to the Closing;
(d) Certificate of an officer of Seller certifying copies of
the organizational documents and ownership record book of Seller as of
the Closing Date;
(e) Any third party consents required for Seller to
consummate the transactions contemplated hereby;
(f) Trademark assignments, if any;
(g) Patent assignments, if any;
(h) Warranty deed to each parcel of Real Estate as required
by applicable law, if any;
(i) Consent and estoppel letters from each lessor of real or
personal property used in the Business;
(j) Except for the creditors set forth on Schedule 1.8 (j),
which creditors shall provide Seller with consents to the consummation
of the transactions contemplated hereunder and which consents Seller
shall also deliver to Buyer at Closing, payoff and release letters from
creditors of the Seller together with UCC-3 termination statements with
respect to financing statements filed against the Business or any of
the Purchased Assets;
(k) The Escrow Agreement executed on behalf of Seller;
(l) The Registration Rights Agreement executed on behalf of
Seller; and
(m) Such other endorsements, instruments or documents as may
be necessary or appropriate to carry out the transactions contemplated
hereby.
At the Closing, Seller shall take all steps necessary to place the Buyer in
actual possession and operating control of the Business and the Purchased
Assets.
1.9. Nonassignable Contracts.
(a) To the extent that the assignment by Seller of any sales
order, purchase order, lease or other contract included in the Purchased Assets
is not permitted without (i) the consent of the other party to the contract,
(ii) the approval of Buyer as a source of the products or services
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called for by such contract or (iii) the approval of Buyer as a lessee, this
Agreement shall not be deemed to constitute an assignment or an attempted
assignment of the same, if such assignment or attempted assignment would
constitute a breach thereof. However, unless otherwise agreed as to any
particular contract or order (or class thereof), Seller shall use commercially
reasonable efforts to obtain any and all such consents, approvals and novations.
(b) If any consent, approval or novation is requested but not
obtained, Seller shall cooperate with Buyer in any reasonable arrangement
designed to provide the Buyer with all of the benefits under such contract,
lease or order as if such consent, approval or novation had been obtained,
including subleases from Seller and, undertakings by Buyer of the work necessary
to complete contracts and to deliver goods and services called for thereunder as
the agent of Seller with the understanding that Seller shall then invoice the
purchaser for the goods and services provided and promptly remit the amount of
the receivable to Buyer. In any such arrangement, the Buyer shall have the sole
responsibility with respect to the completion of the work following Closing;
shall bear all costs and expenses with respect thereto arising or occurring
after the Closing Date; shall be solely entitled to the benefits; and shall be
solely responsible for any breach of contract with respect to the goods and
services of the Business to the extent they are manufactured or performed after
the Closing Date.
(c) If a consent, approval or novation requested by Buyer
pursuant to this Section is not obtained prior to the Closing Date and as a
result Buyer will not receive the benefit of the goods or services to be
received or the amounts to be paid pursuant to the underlying contract, lease or
order despite the best efforts of the parties to develop a suitable arrangement
pursuant to subsection (b) above (the "Rejected Contracts"), Buyer shall give
written notice at or prior to Closing that the following adjustments shall be
made:
(i) All rights of Seller with respect to each Rejected
Contract identified in Buyer's notice shall be deemed Excluded Assets
and shall not be deemed Purchased Assets for purposes of this
Agreement, including for the determination of the consideration to be
paid to Seller;
(ii) All liabilities and obligations of Seller with respect to
each Rejected Contract identified in Buyer's notice shall not be deemed
Assumed Liabilities for purposes of this Agreement, including
determination of the consideration to be paid to Seller, and
(iii) The consideration to be paid pursuant to Section 1.5(a)
above shall be reduced to account for the value of the Rejected
Contract. For the purposes of this reduction, the Buyer's Stock shall
be valued at $1.50 per Share.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as of the date
hereof, and as of the Closing Date, as follows:
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2.1. Authority. Seller has all requisite power and authority,
without the consent of any other person except for the creditors listed on
Schedule 1.8(j), and the Limited Partners, which consent shall have been
received prior to Closing, to execute and deliver this Agreement and the
agreements to be delivered at Closing and to carry out the transactions
contemplated hereby and thereby. All acts or proceedings required to be taken by
Seller to authorize the execution and delivery of this Agreement have been duly
and properly taken. All acts or proceedings required to be taken by Seller to
authorize the performance of this Agreement and all transactions contemplated
hereby will have been duly and properly taken on or before the Closing Date.
2.2. Validity. This Agreement has been, and the documents to
be delivered at Closing by Seller will be, duly executed and delivered and
constitute lawful, valid and binding obligations of Seller, enforceable in
accordance with their respective terms, except as enforcement may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights generally and by general equitable principles.
Except as set forth on Schedule 2.2, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in the creation of any lien, charge or encumbrance of any kind or the
acceleration of any indebtedness or other obligation of Seller, will not
otherwise restrict the ability of Buyer to carry on the Business after Closing
and are not prohibited by, do not violate or conflict with any provision of, and
do not constitute a default under or a breach of (a) the certificate of limited
partnership of Seller, (b) any note, bond, indenture, contract, agreement,
permit, license or other instrument to which Seller is a party or by which
Seller or any of its Purchased Assets is bound, (c) any order, writ, injunction,
decree or judgment of any court or governmental agency, or (d) any law, rule or
regulation applicable to Seller. Except as set forth in Schedule 2.2, no
approval, authorization, registration, consent, order or other action of or
filing with any person, including any court, administrative agency or other
governmental authority, is required for the execution and delivery by Seller of
this Agreement or the consummation by Seller of the transactions contemplated
hereby.
2.3. Due Organization.
Seller has been duly organized, and is validly existing and in
good standing under the laws of its state of formation, and has full power and
authority and all requisite rights, licenses, permits and franchises to own,
lease and operate its assets and to carry on the business in which it is
engaged.
2.4. Transactions with Affiliates. Except as set forth on
Schedule 2.4, since December 31, 1996, there has not been any distribution of
cash declared or paid or any other distribution of assets by the Seller made to
its Partners or affiliates. Except as set forth on Schedule 2.4, no Partner nor
any affiliate of Seller, directly or indirectly:
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(a) owns any debt, equity or other interest or investment
greater than 5% in any corporation, association or other entity which is a
competitor, lessor, lessee, customer, supplier or advertiser of the Seller or
the Business;
(b) has any cause of action or other claim whatsoever against
or owes any amount to, or is owed any amount by, the Seller;
(c) has any interest in or owns any property or right used in
the conduct of the Business;
(d) is a party to any contract, lease, agreement, arrangement
or commitment entered into with Seller or otherwise in connection with the
Business; or
(e) has outstanding any loan or advance from Seller.
2.5. Financial Statements. Buyer has received Seller's audited
financial statements for the years ended December 31, 1994 and 1995 (the "1994
and 1995 Financials") and Seller represents that the 1994 and 1995 Financials,
attached hereto as Schedule 2.5 are (i) accurate, correct and complete; (ii) in
accordance with the books of account and records of Seller; (iii) fair
presentations of the financial condition and results of operations of Seller as
of the dates and for the periods indicated therein; and (iv) prepared in
accordance with U.S. generally accepted accounting principles, as consistently
applied by Seller. Seller has also provided Buyer with an unaudited profit and
loss statement and balance sheet for the year ended December 31, 1996 (the
"Unaudited Financial Statements"), dated as of April 14, 1997. Except as set
forth on the Unaudited Financial Statements, Seller does not have any
liabilities or obligations of any nature (accrued, absolute, contingent or
otherwise) other than liabilities incurred in the ordinary course of business
since the date of the Unaudited Financial Statements on terms and conditions and
in amounts consistent with past practice and not exceeding $15,000, except as
set forth in Schedule 2.5. Prior to Closing, Seller shall present Buyer with the
audited financial statements of Seller for the year ended December 31, 1996 (the
"1996 Financial Statements"). The 1996 Financial Statements shall be (i)
accurate, correct and complete; (ii) in accordance with the books of account and
records of Seller; (iii) fair presentations of the financial condition and
results of operations of Seller as of the dates and for the periods indicated
therein; and (iv) prepared in accordance with U.S. generally accepted accounting
principles, as consistently applied by Seller.
2.6. Books and Records. The books of account, records of
ownership and other records (financial and otherwise) of Seller are in all
respects complete and correct and are maintained in accordance with good
business practices.
2.7. Interim Change. Except as set forth on Schedule 2.7,
since December 31, 1996 there have not been any of the following with respect to
Seller: (a) any material adverse change in the financial condition, assets,
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liabilities, personnel, business, prospects or relationships with suppliers,
customers, distributors, sales representatives, lenders, lessors or others (a
"Material Adverse Effect") or (b) any damage, destruction or loss of any
material assets, whether or not covered by insurance. Since December 31, 1996,
Seller has operated the Business in the ordinary course, consistent with past
practices.
2.8. Accounts Receivable. To the best of Seller's knowledge,
Schedule 2.8 hereto sets forth an accurate, correct and complete aging of all
outstanding accounts and notes receivable of Seller as of March 31, 1997. To the
best of Seller's knowledge, all outstanding accounts and notes receivable of
Seller are due and valid claims against account debtors for goods or services
delivered or rendered, are not subject to any defenses, offsets or counterclaims
and are collectible within 90 days of the date of the applicable invoice (net of
the stated allowance for doubtful accounts reflected on Schedule 2.8). All
receivables arose in the ordinary course of business. Except as set forth on
Schedule 2.8, no receivables are subject to prior assignment, claim, lien or
security interest. Where receivables arose out of secured transactions, all
financing statements and other instruments required to be filed or recorded to
perfect the title or security interest of Seller have been properly filed and
recorded.
2.9. Insurance. Schedule 2.9 is a complete and correct list
and summary description (including the name of the carrier, coverage, premium
and expiration date) of all policies of insurance or fidelity bond maintained by
Seller. Such policies are in full force and effect.
2.10. Title to Assets. Seller is the sole and exclusive legal
and equitable owner of all right, title and interest in and has good and
marketable title to all of the Purchased Assets. Except as set forth on Schedule
2.10, none of the Purchased Assets which the Seller purports to own are subject
to (a) any title defect or objection; (b) any contract of lease, license or
sale; (c) any security interest, mortgage, pledge, lien, charge or encumbrance
of any kind or character, direct or indirect, whether accrued, absolute,
contingent or otherwise, except minor liens and encumbrances which do not
materially detract from the value or interfere with the present use thereof; (d)
any royalty or commission arrangement; or (e) any claim, covenant or
restriction. Schedule 2.10 sets forth an accurate, correct and complete list of
all depreciable Purchased Assets. The Purchased Assets are in good operating
condition and repair (reasonable wear and tear excepted), are suitable for the
purposes for which they are presently being used, and are adequate to meet all
requirements of the Business as presently conducted. The Purchased Assets will
furnish the Buyer with all of the capacity and rights to produce, develop, use,
sell, distribute, install and service the products of the Business and to
perform the same services in the same manner as presently being performed by
Seller.
2.11. Proprietary Information. Except as set forth on Schedule
2.11, information in the nature of trade secrets, know-how or proprietary
information used by Seller, including but not limited to, customer lists,
customer files, mailing lists, copyrighted and copyrightable material,
electronic data processing systems, program specifications and technical
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information relating to the products and the operation of the Business (the
"Proprietary Information"): (a) is owned solely and exclusively by Seller free
and clear of any adverse claims; and (b) has been continuously maintained as
confidential information by Seller by taking all reasonable precautions to
protect the confidentiality of such Proprietary Information. Seller has no
knowledge of any violation of any trade secret rights or copyrights with respect
to the Proprietary Information by any other person, nor of any violation by
Seller of any trade secret rights, patents, trademarks or copyrights of any
other person.
2.12. Customers and Suppliers. All contracts or agreements
with customers and suppliers currently in effect were entered into by or on
behalf of Seller in the ordinary course of business at prices, in quantities and
on terms consistent with past practice. Seller has no reason to believe that any
customer or supplier will cease to do business with Seller after, or as a result
of, the consummation of any transactions contemplated hereby or that any
customer or supplier is threatened with bankruptcy or insolvency. Except as set
forth on Schedule 2.12 Seller knows of no fact, condition or event which would
adversely affect the relationship of Seller with any customer or supplier after
Closing.
2.13. Employees. Schedule 2.13 hereto sets forth an accurate,
correct and complete list and summary description of all agreements,
arrangements or understandings, written or oral, with officers, directors and
employees of Seller, including those regarding services to be rendered, terms
and conditions of employment, non-competition, confidentiality and compensation
(the "Employment Contracts"). Seller has provided Buyer with information that is
correct in all material respects with respect to (a) the length of service of
each employee of Seller (each a "Business Employee"); and (b) the compensation
(including terms of payment, bonuses, commissions and deferred compensation, as
well as any benefits) of each Business Employee. Schedule 2.13 contains a list
and summary description of all cash profit-sharing plans, benefit plans and
other compensation arrangements or understandings of Seller or to which Seller
is a party or otherwise bound. Seller has no pension or profit sharing plans
that require it to comply with the provisions of the Employee Retirement Income
Security Act of 1974, as amended. Seller is not a party to any collective
bargaining agreement. Seller has not suffered or sustained any labor disputes
resulting in any work stoppage. Seller does not have any unfunded liabilities in
connection with its 401(k) plan or in connection with any other retirement or
employee benefit plan.
2.14. Licenses and Permits. Schedule 2.14 hereto contains an
accurate, correct and complete list and summary description of each license
(including the FCC 214 License), permit, certificate, approval, exemption,
franchise, registration, variance, accreditation or authorization issued to
Seller or used in the Business, (collectively, the "Licenses and Permits"). The
Licenses and Permits are valid and in full force and effect and there are not
pending, nor, to the knowledge of Seller, threatened, any proceedings which
could result in the termination, revocation, limitation or impairment of any of
the Licenses and Permits. Except as set forth on Section 2.14, the execution of
this Agreement and the consummation of the transactions contemplated hereby will
not alter or result in the termination or modification of any License or Permit.
The Licenses and Permits listed on Schedule 2.14 include all licenses, permits,
certificates, approvals, exemptions, franchises, registrations, variances,
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accreditations and other authorizations as are necessary or appropriate in order
for Seller to own and conduct its business, sell and distribute its products,
operate its motor vehicles and occupy and lease its offices. No violations have
been recorded in respect of any Licenses and Permits, and Seller has no
knowledge of any meritorious basis therefor.
2.15. Material Contracts. Schedule 2.15 hereto sets forth an
accurate, correct and complete list of all contracts, instruments, commitments,
agreements, arrangements and understandings including all amendments and
supplements thereto, to which Seller is a party or is bound, or by which any of
the assets of Seller are subject or bound (i) which involve benefits or
obligations with a value individually or in the aggregate, of $20,000 or more,
or (ii) which otherwise involve any of the following types of contracts (the
items in (i) and (ii) being collectively referred to herein as the "Material
Contracts"):
(a) any customer and representative contracts;
(b) any vendor and carrier contracts;
(c) any sales, license, service or distribution agreements
and contracts;
(d) any leases of real or personal property;
(e) all Employment Contracts;
(f) all agreements and contracts containing requirements or
"take or pay" provisions;
(g) all agreements between Seller and any Partner or
affiliate of Seller;
(h) all agreements and contracts for insurance;
(i) all agreements and contracts with state, federal, local,
regulatory or other governmental entities;
(j) all agreements and contracts not to compete or otherwise
restricting activities;
(k) all agreements and contracts containing a provision to
indemnify any party or assume any tax, environmental or other liability; and
Except as set forth on Schedule 2.15, all Material Contracts
are valid, binding and enforceable in accordance with their terms and are in
full force and effect and none of the parties to any Material Contract are in
breach of, violation of, or in default under the terms of any such Material
Contract. Except as set forth on Schedule 2.15, no event has occurred which with
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notice or passage of time or both would result in a breach of, violation of, or
in default under, the terms of any Material Contract. Except as set forth on
Schedule 2.15, the consummation of the transactions contemplated hereby, without
notice to or consent or approval of any party, will not constitute a breach of,
violation of, or default under any provision of any Material Contract. There is
no adverse claim on the rights of Seller under any Material Contract. None of
the rights of Seller under any Material Contract will be impaired by the
consummation of the transactions contemplated by this Agreement, and all of such
rights will be enforceable by Buyer after the Closing Date without the consent
or agreement of any other party, including all rights to renew the applicable
Material Contract. Seller has delivered accurate, correct and complete copies of
each Material Contract to Buyer.
2.16. Taxes. All federal, state, county and other tax returns,
reports and declarations of every nature (including income, employment, excise,
property, sales and use taxes) required to be filed by or on behalf of Seller
have been filed or will be filed by their respective due dates, as extended, and
have been paid. There are no outstanding agreements or waivers extending the
statute of limitations with respect to the assessment of any federal income tax
or other tax. Except to the extent reflected on the Unaudited Financial
Statements or accrued in the Assumed Liabilities, since December 31, 1996,
Seller does not have any tax liability.
2.17. Legal Proceedings. Except as set forth in Schedule 2.17
hereto, Seller is not engaged in or a party to or, to the best of the knowledge
of Seller, threatened with any action, suit, proceeding, complaint, charge,
hearing, investigation or arbitration or other method of settling disputes or
disagreements; and, Seller does not know of, anticipate or have notice of any
reasonable basis for any such action. Seller has not received notice of any
investigation threatened or contemplated by any foreign, federal, state or local
governmental or regulatory authority, including those involving the working
conditions of employees, the Business' employment practices or policies, or
compliance with environmental regulations. Neither Seller nor any of the assets
of Seller is subject to any judgment, order, writ, injunction, stipulation or
decree of any court or any governmental agency or any arbitrator.
2.18. Compliance with Law.
(a) With respect to the United States:
Seller and the Business conform to all applicable statutes, codes,
ordinances, licensing requirements, laws, rules and regulations. Seller
has complied with all statutes, codes, ordinances, licensing
requirements, laws, rules, regulations, decrees, awards or orders
applicable to its business or operations; and there is not and will not
be any liability arising from or related to any violations thereof;
Seller has no knowledge of any violations of such laws. Seller has
submitted or filed all reports and statements required by all
applicable statutes, codes, ordinances, licensing requirements, laws,
rules and regulations in a timely manner and all such reports and
statements were true and correct in all material respects when
submitted or filed.
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(b) With respect to the laws of all other countries in which
Seller conducts the Business:
To the best of Seller's knowledge, Seller and the Business conform to
all applicable statutes, codes, ordinances, licensing requirements,
laws, rules and regulations. To the best of Seller's knowledge, Seller
has complied with all statutes, codes, ordinances, licensing
requirements, laws, rules, regulations, decrees, awards or orders
applicable to its business or operations; and there is not and will not
be any liability arising from or related to any violations thereof;
Seller has no knowledge of any violations of such laws. To the best of
Seller's knowledge, Seller has submitted or filed all reports and
statements required by all applicable statutes, codes, ordinances,
licensing requirements, laws, rules and regulations in a timely manner
and all such reports and statements were true and correct in all
material respects when submitted or filed.
2.19. Brokers. Seller has retained Mr. David Friedrich as a
broker. Schedule 2.19 accurately describes all obligations and liabilities of
Seller (the "Broker Fees") to Mr. Friedrich.
2.20. Seller's Investment Intent; Provisions of Information.
The Buyer's Stock acquired by Seller pursuant to this Agreement is being
acquired for Seller's own account, for investment and not with a view to the
distribution thereof within the meaning of Section 2 of the Securities Act of
1933, as amended (the "1933 Act"); provided, however, Seller shall be able to
distribute the Buyer's Stock to the Partners, so long as such distribution shall
not amount to a distribution within the meaning of Section 2 of the 1933 Act.
Seller is a sophisticated investor and has had access to all information
regarding Buyer necessary to make a decision to invest in the Buyer's Stock.
Seller has received from Buyer and has reviewed Buyer's 1995 and 1996 reports on
Form 10-KSB, Buyer's reports on Form 10-QSB for the first, second and third
quarters of 1996, the Buyer's report on Form S-8 dated February 7, 1997 and
Buyer's Private Placement Memorandum dated November 1, 1996.
2.21. Disclosure. The representations and warranties of
Seller contained in this Agreement and the schedules, certificates or other
written statements delivered pursuant to this Agreement or in connection with
the transactions contemplated herein, are each accurate, correct and complete in
all respects, and do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements and
information contained herein or therein not misleading. Each list and
description contained on any schedule delivered pursuant to this Agreement is
accurate and complete.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby represents and warrants to Seller as of the date
hereof, and as of the Closing Date, as follows:
3.1. Authority. Buyer has all requisite power and authority,
without the consent of any other person, to execute and deliver this Agreement
and the agreements to be delivered at Closing and to carry out the transactions
contemplated hereby and thereby. All corporate and other acts or proceedings
required to be taken by Buyer to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereby have been
duly and properly taken.
3.2. Validity. This Agreement has been, and the documents to
be delivered at Closing by Buyer will be, duly executed and delivered and
constitute lawful, valid and legally binding obligations of Buyer, enforceable
in accordance with their respective terms, except as enforcement may be limited
by applicable bankruptcy, reorganization, insolvency, moratorium and other laws
affecting creditors' rights generally and by general equitable principles. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in the creation of any lien,
charge or encumbrance of any kind or the acceleration of any indebtedness or
other obligation of Buyer and are not prohibited by, do not violate or conflict
with any provision of, and do not constitute a default under or a breach of (a)
Buyer's certificate of incorporation or bylaws, (b) any note, bond, indenture,
contract, agreement, permit, license or other instrument to which Buyer is a
party or by which Buyer or any of its assets is bound, (c) any order, writ,
injunction, decree or judgment of any court or governmental agency, or (d) any
law, rule or regulation applicable to Buyer.
3.3. Due Organization. Buyer is a corporation organized and
validly existing under the laws of the State of Delaware, and has full power and
authority to carry on the business in which it is engaged.
3.4. SEC Documents. Buyer has filed all reports, forms,
schedules and other documentation ("Reports") with the Securities Exchange
Commission as required by the Securities Exchange Act of 1934, as amended and as
required by the Securities Act of 1933, as amended. None of the Reports, as of
the respective dates, contained any untrue statement of material fact or omitted
to state a material fact necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
3.5. Access. Buyer and its agents have been given the access
to the assets, books, records and contracts as requested by Buyer, have been
given the opportunity to meet with officers and other representatives of Seller
for the purpose of investigating and obtaining information regarding the
Business and the Purchased Assets.
3.6. Capital Stock of Buyer. The authorized capital stock of
Buyer consists of 65,000,000 shares of common stock, par value $.0001 per share
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and 10,000,000 shares of preferred stock, par value $.0001 per share. As of the
date of this Agreement, 10,883,333 shares of common stock are issued and
outstanding, and no shares of common stock are held in the treasury of Buyer,
and no shares of preferred stock are issued and outstanding. All outstanding
shares of common stock are duly authorized, validly issued, fully paid and
nonassessable. Except as described on Schedule 3.7 attached hereto, there are no
outstanding subscriptions, options, calls, conversion rights, warrants or other
agreements or commitments of any nature whatsoever, either firm or conditioned,
obligating Buyer to issue, deliver, sell or otherwise encumber, or cause to be
issued, delivered, sold or otherwise encumbered, any additional shares of common
stock, or any securities convertible into or exchangeable for shares of common
stock of Buyer or obligating Buyer to grant, extend or enter into any such
agreement or commitment. Buyer represents and warrants that none of Buyer's
issued and outstanding common stock was issued in violation of any third party's
preemptive rights. Buyer represents and warrants that upon each issuance of
common stock hereunder, the shares of common stock issued shall be free and
clear of all liens, security interests and encumbrances of any kind whatsoever
and shall be duly authorized and validly issued, fully-paid and nonassessable.
3.7. No Violations. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict with, or result in any violation of, or default or loss of a benefit
under, or permit the acceleration of any obligation under, any provision of the
Certificate of Incorporation or Bylaws of Buyer, or any mortgage, indenture,
lease, covenant, agreement or other instrument, permit, concession, grant,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Buyer or its respective properties.
3.8. Financial Statements.
(a) Prior to the execution of this Agreement, Buyer has delivered to
Seller true and correct copies of (i) audited consolidated financial statements
of Buyer as of and for the fiscal years ended December 31, 1996 and 1995,
including the statements of condition, statements of operations, statements of
changes in shareholders' equity, statements of cash flow and related footnote
disclosures, and (ii) unaudited statement of condition and statement of
operations and statement of cash flow as of and for the period ended March 15,
1997 (collectively, "Buyer's Financials"). As of their respective date, such
Buyer's Financials present fairly the financial position of Buyer as of the
dates thereof and the results of its operations for the periods then ended.
Except as set forth on the Buyer's Financials and in Buyer's 1996 Form 10-KSB,
dated April 15, 1997, Buyer does not have any liabilities or obligations of any
nature (accrued, absolute, contingent or otherwise) other than liabilities
incurred in the ordinary course of business since the date of the Buyer's
Financials on terms and conditions and in amounts consistent with past practice
and not exceeding $15,000.
(b) Buyer has conducted its business since December 31, 1996, only in
the ordinary and usual course, and Buyer has not undergone or suffered any
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change in its condition (financial or otherwise), properties, assets,
liabilities, business operations or prospects which have been, in any case or in
the aggregate, materially adverse to Buyer.
3.9. No Litigation. Except as set forth on Schedule 3.10,
there is not pending or, to the knowledge of Buyer, threatened or existing, any
claim, unsatisfied judgment, litigation, governmental investigation or
proceeding before any court, arbitrator or federal or state or other
governmental commission, board or other agency, by or against or adversely
affecting the operations or financial condition of Buyer or its business,
property or assets or any business, property or assets with respect to which
Buyer has an agreement, understanding or arrangement to acquire.
3.10. Subsidiaries. Except as described on Schedule 3.11
attached hereto, Buyer does not control, directly or indirectly, any other
corporation, association, partnership or other business entity or own any shares
of capital stock or other securities of any other entity or any general or
limited partnership; nor has Buyer entered into any contract, agreement,
commitment or arrangement to acquire any such interest.
3.11. Registration Rights. Except as set forth in Schedule
3.12 and as provided in this Agreement, Buyer is not a party to, or otherwise
bound by, any agreement or commitment which obligates Buyer to register under
federal securities laws any of the Buyer's presently outstanding securities or
any of Buyer's securities which may hereafter be issued.
3.12. Tax Returns. Buyer has filed all federal and state
income tax returns and all other returns with respect to taxes, either federal
or state, which are required to be filed, and has paid all taxes shown as due on
such returns.
ARTICLE IV
ACTIONS PENDING CLOSING
4.1. Interim Conduct of Business. From the date hereof until
the Closing, Seller shall preserve, protect and maintain the Business, and
operate the Business consistent with prior practice and in the ordinary course
of business. Without limiting the generality of the foregoing, from the date
hereof until the Closing, except as otherwise agreed by Buyer in writing, Seller
shall not:
(a) merge, liquidate, consolidate, amend its limited
partnership agreement or effect any other organizational change;
(b) expressly enter into, amend or terminate, or agree to
enter into, amend or terminate any Material Contract, except as noted on
Schedule 4.1 hereto, and shall comply with all obligations under all the
Material Contracts in all material respects;
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(c) sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of, any assets, properties, rights or claims, except
in the ordinary course of business and at prices and on terms consistent with
past practice;
(d) incur or become subject to, nor agree to incur or become
subject to, any debt, obligation or liability, contingent or otherwise, except
current liabilities in the ordinary course of business and consistent with past
practice;
(e) fail to maintain, keep, and preserve all of its properties
(tangible and intangible) necessary or useful in the proper conduct of its
business in good working order and condition, ordinary wear and tear excepted;
(f) fail to comply in all respects with applicable laws,
rules, regulations, and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments, and
governmental charges imposed upon it or upon its property;
(g) forgive or cancel any debts or claims, or waive any
rights thereto;
(h) enter into any other transaction outside the ordinary
course of business; and
(i) take or omit to take any action which could have a
Material Adverse Effect or cause any representation or warranty herein to become
false in any material respect.
From the date hereof through the Closing, Seller shall confer on a regular and
frequent basis with one or more designated representatives of Buyer to report
material operational matters and the general status of on-going operations of
the Business. Seller shall promptly notify Buyer of any threatened or actual
loss of an agent or any affinity groups, and any material change in the
financial condition, results of operations, personnel, properties, business or
prospects of Seller and shall keep Buyer fully informed of such events and
permit Buyer's representatives to participate in all discussions relating
thereto.
4.2. Assistance of Seller. Seller shall assist Buyer in
Buyer's attempts to renegotiate certain of the Assumed Liabilities with the
creditors associated with such liabilities.
4.3. Access. Seller shall give Buyer and its employees,
lenders, financial advisors, attorneys, accountants and other authorized
representatives full and free access to all properties, facilities, personnel,
accountants, customers, vendors, books, contracts, leases, commitments and
records of Seller, and shall furnish Buyer with all financial and operating data
and other information as to the Business and the assets, properties, rights and
claims of Seller, as Buyer may from time to time request.
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ARTICLE V
COVENANTS
Seller hereby agrees to keep, perform and fully discharge the
following covenants and agreements:
5.1. Continued Assistance. From time to time after Closing, at
Buyer's request and without further consideration, Seller shall execute,
acknowledge and deliver such documents, instruments or assurances and take such
other action as Buyer may reasonably request to carry out the provisions hereof
and the transactions contemplated hereby.
5.2. No Solicitation. Until the termination of this Agreement,
Seller shall not permit its officers, directors or representatives to, solicit,
encourage (including by way of furnishing any non-public information concerning
the operations, properties or assets of Seller), entertain or enter into any
discussions or negotiations with respect to any proposal to acquire Seller or
any substantial portion of its assets.
5.3. Taxes. Seller shall promptly pay and fully discharge any
income, excise, employment, sales or use taxes imposed as a result of the sale,
transfer, conveyance or assignment of the Buyer's Stock pursuant to the
transactions contemplated hereby.
5.4. Best Efforts. Seller shall use its best efforts to
consummate the transactions contemplated by this Agreement and shall not take
any other action inconsistent with its obligations hereunder or which could
hinder or delay the consummation of the transactions contemplated hereby. From
the date hereof through the Closing Date, Seller shall use its best efforts to
negotiate in good faith the Closing Agreements (as defined in Section 6.9),
fulfill each party's conditions to Closing, perform the covenants required to be
performed by them, obtain all necessary consents and to cause each of their
representations and warranties to remain true and correct in all respects as of
the Closing Date. Seller shall use its best effort to cause the General Partner
to cooperate with Buyer in the preparation, filing and prosecution of the Joint
Application.
5.5. No Inconsistent Actions. Neither Seller nor any of its
affiliates shall take any action inconsistent with the General Partner's
obligations as an applicant to the Joint Application, and neither Seller nor any
of its affiliates shall cause, influence or encourage any person or entity to
petition the FCC to revoke or deny the Application (as defined hereafter) or the
Joint Application.
Buyer hereby agrees to keep, perform and fully discharge the
following covenants and agreements:
5.6. Best Efforts. Buyer shall use its best efforts to
consummate the transactions contemplated by this Agreement and shall not take
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any other action inconsistent with its obligations hereunder or which could
hinder or delay the consummation of the transactions contemplated hereby. From
the date hereof through the Closing Date, Buyer shall use its best efforts to
negotiate in good faith the Closing Agreements (as defined in Section 6.9), to
prepare, file and prosecute the Joint Application, fulfill each party's
conditions to Closing, perform the covenants required to be performed by them,
obtain all necessary consents and to cause each of their representations and
warranties to remain true and correct in all respects as of the Closing Date.
From the date hereof, Buyer shall use its best efforts to prepare, file and
prosecute the Application.
5.7. No Inconsistent Actions. Buyer shall not take any action
inconsistent with its obligations as an applicant to the Application and the
Joint Application, and it shall not cause, influence or encourage any person or
entity to petition the FCC to revoke or deny the Application or Joint
Application.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE
OF BUYER
The obligations of Buyer to consummate the transactions to be
performed by it in connection with the Closing is subject to the satisfaction of
each of the following conditions:
6.1. Approval. Buyer's Board of Directors shall have approved
the form and substance of this Asset Purchase Agreement and the other agreements
and instruments contemplated hereby.
6.2. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Seller contained herein shall be accurate in
all respects as if made on and as of the Closing Date. Seller shall have
performed all of the obligations and complied with each and all of the
covenants, agreements and conditions required to be performed or complied with
on or prior to the Closing.
6.3. Assignment of Rights and Interests. Buyer shall have
received from Seller, Mr. Bruce Burton and Mr. Edmund Blankenau an assignment of
all their rights to and interests in all business opportunities currently under
development by Seller and its officers.
6.4. 1996 Financial Statements. Buyer shall have received the
1996 Financial Statements and these statements shall (a) include an opinion from
Seller's independent auditors, O'Donnell, Ficenec, Wills & Ferdig qualified only
as to going concern, and (b) not deviate, in any material manner, from the
Unaudited Financial Statements. For the purposes of this Section 6.4, "material"
shall be defined as follows: for the 12-months ending December 31, 1996:
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(i) the amounts set forth on the 1996 Financial Statements for
each of Net Sales, Total Current Assets, Total Assets,
Accounts Payable, Notes Payable, Total Long-Term Liabilities
and Total Labilities shall not deviate from the amounts set
forth for such items on the Unaudited Financial
Statements by more than five percent (5%);
(ii) the amount set forth on the 1996 Financial Statements for Loss
from Operations shall not deviate from the amount set forth
for such item on the Unaudited Financial Statements by more
than ten percent (10%); and
(iii) the amount set forth on the 1996 Financial Statements for Net
Loss shall not deviate from the amount set forth for such item
on the Unaudited Financial Statements by more than twenty-five
percent (25%).
6.5. No Pending Action. No action, suit, proceeding or
investigation before or in any court, administrative agency or other
governmental authority shall be pending or threatened wherein an unfavorable
judgment, decree or order would prevent the carrying out of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated hereby, cause such transactions to be rescinded, or affect the
right of Buyer to own, operate or control the Business.
6.6. Consents. All consents by third parties that are required
for the consummation of the transactions contemplated hereby, or that are
required in order to prevent a breach of or a default under or a termination of
any agreement to which Seller is a party or to which any portion of the property
of Seller is subject, shall have been obtained or provided for.
6.7. Regulatory Approvals. All administrative agencies or
other government authorities shall have taken such action as may be required to
permit the consummation of the transactions contemplated hereby and such actions
remain in full force and effect including, but not limited to, (i) the FCC grant
by Final Order of the Application for Temporary Section 214 Authority, to be
filed by Buyer and the General Partner, in respect of the FCC 214 License (the
"Joint Application") and (ii) the filing by Buyer of the Application for Section
214 Authority in respect of the FCC 214 License (the "Application"). For the
purposes of this Agreement, a "Final Order" is an FCC action granting the Joint
Application and the Application, as to which the time for filing for
administrative or judicial review or reconsideration or for the FCC to set aside
such grant on its own motion has expired without any such filing having been
made or FCC action taken, or, in the event of such filing or FCC action, the FCC
grant has been reaffirmed or upheld and the time for filing for administrative
or judicial review or reconsideration of such reaffirmed or upheld grant and for
the FCC to set aside such reaffirmed or upheld grant on its own motion, has
expired without any such filing having been made or FCC action having been
taken.
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6.8. Condition of Business. There shall have been no Material
Adverse Effect with respect to Seller or the Business, and there shall have been
no change or event which could reasonably be expected to have a Material Adverse
Effect on Seller or the Business. Neither Seller nor the Business shall have
been adversely affected in any way by any act of God, fire, flood, accident,
war, labor disturbance, legislation (proposed or enacted), or other event or
occurrence, whether or not covered by insurance.
6.9. Closing Agreements. The parties shall have executed,
acknowledged and delivered the following (collectively, the "Closing
Agreements"):
(a) Two-year employment agreement effective as of the Closing
Date, between Buyer and Mr. Bruce Burton in form and substance
reasonably satisfactory to Mr. Burton and Buyer;
(b) Eighteen-month consulting and non-competition agreement
between Buyer and Mr. Edmund Blankenau in form and substance reasonably
satisfactory to Mr. Blankenau and Buyer; and
(c) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated by this
Agreement and to comply with the terms hereof.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE
OF SELLER
The obligations of Seller to consummate the transactions to be
performed by it in connection with the Closing is subject to the satisfaction of
each of the following conditions:
7.1. Approval. The General Partner and a majority in interest
of the Limited Partners shall have approved the form and substance of this Asset
Purchase Agreement and the other agreements and instruments contemplated hereby.
7.2. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Buyer contained herein shall be accurate in
all respects as if made on and as of the Closing Date. Buyer shall have
performed all of the obligations and complied with each and all of the
covenants, agreements and conditions required to be performed or complied with
on or prior to the Closing.
7.3. Closing Agreements. The parties shall have executed,
acknowledged and delivered the Closing Agreements.
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7.4. No Pending Action. No action, suit, proceeding or
investigation before or in any court, administrative agency or other
governmental authority shall be pending or threatened wherein an unfavorable
judgment, decree or order would prevent the carrying out of this Agreement or
any of the transactions contemplated hereby, declare unlawful the transactions
contemplated hereby or cause such transactions to be rescinded.
7.5. Regulatory Approvals. All administrative agencies or
other government authorities shall have taken such action as may be required to
permit the consummation of the transactions contemplated hereby and such actions
remain in full force and effect including, but not limited to, (i) the FCC grant
by Final Order of the Joint Application and (ii) the filing by Buyer of the
Application.
7.6 [intentionally omitted]
7.7 Release of Guaranties. Schedule 7.7 lists (i) the Assumed
Liabilities for which Mr. Edmund Blankenau has provided personal guaranties of
performance (the "Guaranties") and (ii) the maximum exposure (calculated in
United States dollars) that Mr. Blankenau faces under each of the Guaranties.
Buyer shall have used its best efforts to effect the release of Mr. Blankenau
from the Guaranties. Seller and Mr. Blankenau shall have used their best efforts
to assist Buyer in this undertaking. Buyer shall hold Mr. Blankenau harmless
from any continued exposure under Guaranties from which Buyer has not been able
to secure Mr. Blankenau's release prior to Closing (the "Remaining Guaranties")
in accordance with Section 8.4.
ARTICLE VIII
POST-CLOSING OBLIGATIONS
If the Closing occurs, the appropriate parties agree to keep,
perform and fully discharge the following covenants and agreements:
8.1. Escrow. Pursuant to the Escrow Agreement, the Escrowed
Shares shall remain in the Escrow (as defined in the Escrow Agreement) until the
Termination Date (as defined in the Escrow Agreement) (a) as security for any
Additional Liabilities that may be assumed by Buyer in accordance with Section
1.3, (b) as security for Seller's indemnity obligations in accordance with
Article IX or Article X hereof, and (c) as security for any Expense Overruns (as
defined hereafter) that may be payable by Buyer in accordance with Section 12.3.
8.2. Amendment to Bylaws. Buyer shall amend Buyer's Bylaws to
provide that the number of directors of Buyer be increased from three (3) to
four (4), and that in connection with the increase of the number of Buyer's
directors, Mr. Edmund Blankenau shall be appointed to fill the new vacancy and
shall thereafter be nominated to serve for the one-year term commencing on the
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date of Buyer's next shareholder meeting at which the board of directors is
elected.
8.3. Settlement Statement. Within ninety (90) days following
the Closing, Buyer and Seller shall work together in good faith to draft a
settlement statement (the "Settlement Statement") setting forth, as of the
Closing Date, the value of the Additional Liabilities and the G.P. Liabilities.
If, as set forth on the Settlement Statement, any amounts are due and owing to
the General Partner in connection with the G.P. Liabilities, then the General
Partner shall, within two (2) business days of the release of the Settlement
Statement, instruct Buyer to either (a) make a 24-month term note, payable to
the General Partner in a principal amount equal to the value of the G.P.
Liabilities as set forth on the Settlement Statement (which principal amount
shall be paid in full at the end of the term), earning interest at the prime
rate, as published in the Wall Street Journal for the date of the Settlement
Statement, plus one percent (1%) (the "G.P. Note"), or (b) instruct Buyer to
issue to the General Partner the number of shares of Buyer's common stock
(valued for this purpose at the higher of (i) $1.50 per share and (ii) the price
per share in the last equity placement of Buyer's common stock prior to the date
of the Settlement Statement) equal to the value of the G.P. Liabilities as set
forth on the Settlement Statement.
8.4. Remaining Guaranties. Following Closing, Buyer shall
use its best efforts to effect the release of Mr. Edmund Blankenau from the
Remaining Guaranties. Seller and Mr. Blankenau shall use their best efforts to
assist Buyer in this undertaking. Buyer shall reimburse Mr. Blankenau for any
liability that he incurs under the Remaining Guaranties.
8.5. FCC Licensing. The Buyer, Seller and the affiliates
of Seller shall use their best efforts following Closing to expedite the grant
by the FCC of the Application by Final Order.
ARTICLE IX
EMPLOYEES
9.1. Continued Association With the Business. Seller shall use
its best efforts to encourage the employees of the Business to continue their
employment until Closing and thereupon encourage such employees to accept
employment with Buyer. Seller shall indemnify and hold Buyer harmless against
any claims by any employee for Seller relating to events or occurrences through
Closing, including any severance or termination pay obligations based upon prior
policies of Seller or arising from the transactions contemplated hereby except
for the vacation benefits extended to Buyer Employees pursuant to Section
9.3(b). Effective at Closing, Seller shall terminate its employment relationship
with all employees of the Business.
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9.2. Employee Benefit Plans. Buyer shall not assume or be
responsible for any retirement, 401(k), profit-sharing or similar benefit plan,
or any liabilities related thereto. Seller shall grant 100% vesting credit to
all of its employees as of the Closing Date in any retirement, 401(k),
profit-sharing or similar benefit plan. Seller shall cause such participants to
have full rights to all distribution alternatives available to terminated
employees and shall effect such distribution within thirty (30) days of a notice
of election of any participant.
9.3. Employment and Employee Benefits.
(a) On or before the Closing Date, Buyer shall provide Seller
with a list of the employees of the Business (not covered by a collective
bargaining agreement) employed by Seller on the Closing Date, who will be
offered employment by Buyer commencing immediately after the Closing Date (those
employees accepting such offers of employment being the "Buyer Employees").
(b) To the extent reflected on the Unaudited Financial
Statements or accrued in the Assumed Liabilities, Buyer shall provide the Buyer
Employees all vacation accrued as employees of the Business but not yet received
as of the Closing Date shall require all Buyer Employees accepting a position to
waive in writing a claim against Seller for accrued but unused vacation
benefits, to the extent reflected on the Unaudited Financial Statements or
accrued in the Assumed Liabilities, and shall continue for such Buyer Employees
Seller's vacation policies through the calendar year of the Closing Date and
until thereafter changed by written notice to the Buyer Employees.
(c) As of the Closing Date, all employees of the Business will
cease participation in Seller's retirement and welfare plans (within the meaning
of ERISA). Welfare claims incurred but not reported as of the Closing Date or
other welfare claims made upon Seller's welfare plans by employees of the
Business after the Closing Date will be treated by Seller's plans as if the
covered employees had been terminated from employment at 11:59 PM on the Closing
Date.
(d) This Section is not intended to, and does not, create any
rights or obligations to or for the benefit of anyone, other than Buyer and
Seller.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1. Survival. All covenants and agreements contained in this
Agreement or in any agreement or other document delivered pursuant hereto shall
be deemed to be material and to have been relied upon by the parties hereto and
shall survive the Closing and be enforceable until the covenant or agreement has
been fully performed. Unless otherwise specified, the representations and/or
warranties contained in this Agreement or in any agreement or other document
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delivered pursuant hereto shall be deemed to be material and to have been relied
upon by the parties hereto and shall survive the Closing and be enforceable
for a period ending three years from closing.
10.2. Indemnification.
(a) Buyer shall indemnify and hold harmless Seller, from and
against any and all loss, diminution in value, damage, cost, expense (including
court costs and attorneys' fees and expenses and costs of investigation), fine,
penalty, suit, action, claim, deficiency, liability or obligation caused by or
arising from (i) any misrepresentation, breach of warranty or failure to fulfill
any covenant or agreement of Buyer contained herein or in any agreement or other
document delivered pursuant hereto and (ii) any and all claims of third parties
made based upon facts alleged that, if true, would have constituted such a
misrepresentation, breach or failure.
(b) Seller shall indemnify and hold harmless Buyer, from and
against any and all loss, diminution in value, damage, cost, expense (including
court costs and attorneys' fees and expenses and costs of investigation), fine,
penalty, suit, action, claim, deficiency, liability or obligation caused by or
arising from (i) any misrepresentation, breach of warranty or failure to fulfill
any covenant or agreement of Seller contained herein or in any agreement or
other document delivered pursuant hereto, and (ii) any and all claims of third
parties made based upon facts alleged that, if true, would constitute such a
misrepresentation, breach or failure.
(c) The representations, warranties, covenants and agreements
contained in this Agreement shall not be affected by any party hereto or by
anyone on behalf of any such party: (i) investigating, verifying or examining
any matters with respect to Seller, the Business, this Agreement or the
transactions contemplated hereby; (ii) having the opportunity to investigate,
verify or examine any matters related to Seller, the Business, this Agreement or
the transactions contemplated hereby; or (iii) failing to determine or discover
any facts which were determinable or discoverable by any such party. All rights
contained in this Article are cumulative and are in addition to all other rights
and remedies which are otherwise available, pursuant to the terms of this
Agreement or applicable law. All indemnification rights shall be deemed to apply
in favor of the indemnified party's officers, directors, representatives,
subsidiaries, affiliates, successors and assigns. Neither the Seller nor the
Buyer shall have any right to indemnification for any breach of representation
or warranty hereunder until it has claims of at least $20,000 in the
aggregate (the "Threshold Amount") and then the indemnifying party shall be
responsible for the entire amount of all such claims, including the Threshold
Amount.
10.3. Defense of Third Party Claims. With respect to each
third party claim subject to this Article (a "Third Party Claim"), the party
seeking indemnification (the "Indemnified Party") shall give prompt notice to
the indemnifying party (the "Indemnifying Party") of the Third Party Claim,
provided that failure to give such notice promptly shall not relieve or limit
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the obligations of the Indemnifying Party except to the extent the Indemnifying
Party is materially prejudiced thereby. If the remedy sought in the Third Party
Claim is solely money damages or if the Indemnified Party otherwise permits,
then the Indemnifying Party, at its sole cost and expense, may, upon notice to
the Indemnified Party within fifteen (15) days after the Indemnifying Party
receives notice of the Third Party Claim, assume the defense of the Third Party
Claim. If it assumes the defense of a Third Party Claim, then the Indemnifying
Party shall select counsel reasonably satisfactory to the Indemnified Party to
conduct the defense. The Indemnifying Party shall not consent to a settlement
of, or the entry of any judgment arising from, any Third Party Claim, unless (i)
the settlement or judgment is solely for money damages and the Indemnifying
Party admits in writing its liability to hold the Indemnified Party harmless
from and against any losses, damages, expenses and liabilities arising out of
such settlement or (ii) the Indemnified Party consents thereto, which consent
shall not be unreasonably withheld. The Indemnifying Party shall provide the
Indemnified Party with fifteen (15) days prior notice before it consents to a
settlement of, or the entry of a judgment arising from, any Third Party Claim.
The Indemnified Party shall be entitled to participate in the defense of any
Third Party Claim, the defense of which is assumed by the Indemnifying Party,
with its own counsel and at its own expense. With respect to Third Party Claims
in which the remedy sought is not solely money damages, (i) the Indemnifying
Party shall, upon notice to the Indemnified Party within fifteen (15) days after
the Indemnifying Party receives notice of the Third Party Claim, be entitled to
participate in the defense with its own counsel at its own expense and (ii) the
Indemnified Party shall not consent to any settlement of, or entry of any
judgment arising from, such Third Party Claim unless the Indemnifying Party
consents thereto, which consent shall not be unreasonably withheld. If the
Indemnifying Party does not elect to assume or participate in the defense of any
Third Party Claim in accordance with the terms of this Section 10.3, then the
Indemnifying Party shall be bound by the results obtained by the Indemnified
Party with respect to the Third Party Claim. The parties shall cooperate in the
defense of any Third Party Claim and the relevant records of each party shall be
made available on a timely basis.
ARTICLE XI
TERMINATION AND WAIVER
11.1. Termination or Abandonment. Notwithstanding anything
contained in this Agreement to the contrary, this Agreement may be terminated
and abandoned at any time prior to the Closing:
(a) by the mutual written consent of Buyer and Seller;
(b) by Buyer or Seller if any court of competent jurisdiction
or governmental body, authority or agency having jurisdiction shall have issued
an order, decree or ruling or taken any other action restraining, enjoining or
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otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and nonappealable;
(c) by Buyer, if one or more of the conditions to the
obligation of Buyer to close has not been fulfilled by June 30, 1997; provided,
however, that delays in regulatory transfers, which delays arise through no
fault of Seller, shall not constitute a failure to fulfill a condition to the
obligation of Buyer to close unless such regulatory transfers have not occurred
by September 30, 1997; or
(d) by Seller, if one or more of the conditions to the
obligation of Seller to close has not been fulfilled by June 30, 1997.
In the event of termination of this Agreement pursuant to this Section 11.1,
this Agreement shall terminate and there shall be no other liability on the part
of Seller to Buyer or on the part of Buyer to Seller except as otherwise
provided herein and except liability arising out of a breach of this Agreement
or the failure by a party to perform its covenants hereunder, in which event,
the non-breaching party reserves the right to seek all available remedies. The
termination of this Agreement pursuant to this Section 11.1 shall become
effective on the date (x) in the case of a termination pursuant to Section
11.1(a), the consent is executed and (y) in the case of a termination pursuant
to Section 11.1(b), (c) or (d), written notice is given by the terminating party
to the other party hereto.
11.2. Extension of Time, Waiver, Etc. At any time prior to
the Closing, Buyer and Seller may by written instrument:
(a) extend the time for the performance of any of the
obligations or acts of the other party; and
(b) waive compliance with any of the agreements of the other
party contained herein; provided, however, that no failure or delay by any
party, in exercising any right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other rights hereunder.
ARTICLE XII
GENERAL PROVISIONS
12.1. Amendments and Waiver. No amendment, waiver or consent
with respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by Buyer and Seller, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
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12.2. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be delivered in person or
sent by registered or certified mail, postage prepaid, commercial overnight
courier (such as Express Mail, Federal Express, etc.) with written verification
of receipt or by telecopy. A notice shall be deemed given: (a) when delivered by
personal delivery (as evidenced by the receipt); (b) five (5) days after deposit
in the mail if sent by registered or certified mail; (c) one (1) business day
after having been sent by commercial overnight courier as evidenced by the
written verification of receipt; or (d) on the date of confirmation if
telecopied.
(a) If to Buyer:
WorldPort Communications, Inc.
901 Katy Freeway, Suite 200
Houston, Texas 77024
Attn: John Dalton
With a copy to:
McDermott, Will & Emery
227 W. Monroe Street
Chicago, Illinois 60606
Fax: (312) 984-3669
Attn: Stanley H. Meadows, P.C.
(b) If to Seller:
Telenational Communications, Limited Partnership
7300 Woolworth Avenue
Omaha, Nebraska 68154
Fax: (402) 392-1451
Attn: Bruce Burton
Any party may change its address for receiving notice by written notice given to
the others named above.
12.3. Expenses.
(a) Other than (i) liabilities of up to $25,000 to cover
Seller's accountants' fees related to the transactions contemplated under this
Agreement, (ii) liabilities of up to $20,000 to cover Seller's attorneys' fees
related to the transactions contemplated under this Agreement and (iii)
liabilities (excluding costs associated with effecting the release of the
Guaranties) of up to $10,000 to cover legal fees incurred as a result of actions
against Seller taken by Seller's creditors that arise from the transactions
contemplated hereunder (each a "Transaction Cost"), which shall be paid by
Buyer, each party shall bear its own legal, accounting and administrative
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expenses in connection with the investigation, negotiation and consummation of
the transaction contemplated hereby.
(b) To the extent the any Transaction Cost exceed the limits
set forth in Section 12.3(a) and to the extent Seller requests Buyer to pay the
Broker Fees (collectively, the "Expense Overruns"), then the Expense Overruns
shall be reimbursed to Buyer by the delivery to Buyer from the Escrow Agent of
that number of shares of the Buyer's Stock (valued for this purpose at $1.50 per
share) equal to the amount of the Expense Overruns.
12.4. Confidentiality.
(a) As used in this Agreement, "Confidential Information"
means confidential business information regarding any party to this Agreement or
its affiliates, including, without limitation, customer lists and files, prices
and costs, business and financial records, information relating to personnel
contracts, stock ownership, liabilities, litigation and the terms of this
Agreement. "Confidential Information" shall not include: (i) any information
already in the possession of the party to this agreement that is subject to the
confidentiality obligation (the "Obligated Party"), prior to the date hereof, or
information available to the Obligated Party from public records or from other
sources in accordance with law; (ii) any information that is in the public
domain or subsequently enters the public domain otherwise than through
disclosure by the Obligated Party or any of the Obligated Party's
representatives; (iii) any information that is capable of being independently
developed by or on behalf of the Obligated Party without reference to the
Confidential Information; or (iv) any information that is acquired from a person
(other than the party disclosing Confidential Information (the "Disclosing
Party")) not known by the Obligated Party to be providing such information in
breach of a confidentiality obligation to the Disclosing Party.
(b) Seller on the one hand and Buyer on the other, will treat
the Confidential Information disclosed by the other as confidential, will use
the Confidential Information only in connection with their evaluation of the
transaction contemplated hereby, and will not disclose it to others.
(c) If the Obligated Party becomes legally compelled by
deposition, subpoena, or other court or governmental action to disclose any of
the Confidential Information, then the Obligated Party will give the Disclosing
Party prompt notice to that effect, and will cooperate with the Disclosing Party
if the Disclosing Party seeks to obtain a protective order concerning the
Confidential Information. The Obligated Party will disclose only such
Confidential Information as its counsel shall advise is legally required.
(d) The provisions of this Section 12.4 shall survive the
Closing and termination without consummation of this Agreement. The parties
acknowledge that remedies at law may be inadequate to protect against breach of
this Section, and the Obligated Party hereby in advance agrees to the granting
of injunctive relief in the Disclosing Party's favor without proof of actual
damages as a remedy for breach of this Section 12.4.
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12.5. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
12.6. Successors and Assigns. This Agreement shall bind and
inure to the benefit of the parties named herein and their respective successors
and assigns. After Closing, Buyer shall be entitled to assign its rights and
duties under this Agreement without the consent of any other party hereto. No
other party may assign its rights or duties under this Agreement without the
prior written consent of Buyer.
12.7. Entire Transaction. This Agreement and the documents
referred to herein contain the entire understanding among the parties with
respect to the transactions contemplated hereby and supersedes all other
agreements, understandings and undertakings among the parties on the subject
matter hereof.
12.8. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Illinois. Each party hereby irrevocably and unconditionally consents and submits
to the in personam jurisdiction of Illinois state courts and federal courts
located in Chicago, Illinois over all matters relating to this Agreement. Each
party agrees that service of process in any action or proceeding hereunder may
be made upon such party by certified mail, return receipt requested to the
address for notice set forth herein. Each party irrevocably waives any objection
it may have to the venue of any action, suit or proceeding brought in such
courts or to the convenience of the forum and each party irrevocably waives the
right to proceed in any other jurisdiction. Final judgment in any such action,
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which shall
be conclusive evidence of the fact and the amount of any indebtedness or
liability of any party therein described.
12.9. Other Rules of Construction. References in this
Agreement to sections, schedules and exhibits are to sections of, and schedules
and exhibits to, this Agreement unless otherwise indicated. Words in the
singular include the plural and in the plural include the singular. The word
"or" is not exclusive. The word "including" shall mean including, without
limitation. The section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. For purposes of this Agreement, "affiliate"
shall mean any officer, director, stakeholder or employee of Seller, as
appropriate, any member of the immediate family of any such person, or any
corporation, partnership, trust or other entity in which Seller, as appropriate,
or any of the foregoing individuals is a director, officer, partner or trustee
or has an equity interest in excess of 5%. The term affiliate shall also include
any entity which controls, or is controlled by, or is under common control with,
any of the individuals or entities described in the preceding sentence.
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12.10. Announcements. The parties shall cooperate in the
preparation of any announcements regarding the transactions contemplated by this
Agreement. No announcement of this Agreement or any transaction contemplated
hereby shall be made by any party prior to the Closing without the written
approval of Buyer (which approval shall not be unreasonably withheld).
12.11. Partial Invalidity. In the event that any provision
of this Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
12.12. Schedules. All schedules attached hereto or required
to be delivered pursuant to this Agreement shall be prepared as of the date
hereof or as otherwise set forth herein or therein.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this
Agreement or caused this Agreement to be executed on its behalf by a duly
authorized officer, all as of the date first written above.
WORLDPORT COMMUNICATIONS, INC.
By: /s/ John W. Dalton
---------------------------
Its: President & C.E.O.
---------------------------
TELENATIONAL COMMUNICATIONS,LIMITED PARTNERSHIP
By: IMTS, Inc., General Partner
By: /s/ Edmund Blankenau
---------------------------
Its: President & C.E.0
---------------------------
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<PAGE>
EXHIBIT A
GENERAL PARTNER AND LIMITED PARTNERS
(see attached)
A-1
<PAGE>
EXHIBIT B
INSTRUMENT OF ASSUMPTION
This INSTRUMENT OF ASSUMPTION, dated as of __________, 1997,
is delivered to Telenational Communications, Limited Partnership, a Nebraska
limited partnership (the "Seller"), pursuant to the Asset Purchase Agreement by
and between Seller and WorldPort Communications, Inc., a Delaware corporation
(the "Buyer"), dated _________, 1997 (the "Agreement"). All capitalized terms
used in this Instrument of Assumption and not otherwise defined shall have the
meanings given to them in the Agreement.
WHEREAS, the Agreement provides that Buyer assume the Assumed
Liabilities and the Assumed Obligations.
NOW, THEREFORE, pursuant to the Agreement and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged:
(a) Effective as of the date hereof, Buyer hereby assumes and
agrees to satisfy, discharge and pay the Assumed Liabilities and Assumed
Obligations as set forth in the Agreement.
(b) Neither the making nor the acceptance of this Instrument
of Assumption shall enlarge, restrict or otherwise modify the terms of the
Agreement.
(c) This Instrument of Assumption shall not confer any rights
or remedies upon any person or entity other than the Seller and its successors
and permitted assigns.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
to be executed on its behalf by a duly authorized officer this day of _________,
1997.
WORLDPORT COMMUNICATIONS, INC.
By:
Its:
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EXHIBIT C
ESCROW AGREEMENT
This Escrow Agreement ("Escrow Agreement") is made and entered into as
of _________ __, 1997, by and among WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation ("Buyer"), TELENATIONAL COMMUNICATIONS, LIMITED PARTNERSHIP, a
Nebraska limited partnership ("Seller"), and OTC Stock Transfer, Inc. ("Escrow
Agent").
R E C I T A L S:
A. Buyer and Seller entered into that certain Asset Purchase Agreement
dated __________, 1997 (with the other agreements referred to therein or
delivered pursuant thereto, the "Asset Purchase Agreement"). All capitalized
terms not defined in this Agreement shall have the meaning given them in the
Asset Purchase Agreement.
B. The Asset Purchase Agreement provides that, concurrently with the
execution of the Asset Purchase Agreement, Buyer and Seller will enter into an
Escrow Agreement in the form hereof.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, it is agreed:
1. Escrow. As of the Closing Date, Buyer will deposit one million
(1,000,000) shares of Buyer's common stock (as adjusted from time to time in
accordance herewith, the "Shares") in an escrow account with the Escrow Agent
(the "Escrow"). Escrow Agent shall hold the Shares as the agent of Buyer and
subject to the terms of this Agreement. Escrow Agent shall hold the Shares until
it receives a written notice, requesting that a distribution of some or all of
the Shares be made, whereupon Escrow Agent shall make distributions from the
Escrow under the following circumstances:
(i) Fifteen days after receipt of a notice from Buyer that Buyer
has assumed Additional Liabilities, Escrow Agent shall
immediately distribute to Buyer that number of Shares (valued
for this purpose at $1.50 per share) equal to such Additional
Liabilities, unless during such fifteen day period, the Escrow
Agent receives written notice from Seller that such notice
from Buyer is incorrect (a "Dispute Notice");
(ii) Fifteen days after receipt of a notice from Buyer that Seller
has incurred Expense Overruns, Escrow Agent shall immediately
distribute to Buyer that number of the Shares (valued for this
purpose at $1.50 per share) equal to the amount of the Expense
Overruns, unless during such fifteen day period, the Escrow
Agent receives a Dispute Notice from Seller;
C-1
<PAGE>
(iii) Fifteen days after receipt of a notice from Buyer requesting
Escrow Agent to make a distribution to Buyer as an indemnified
party under Article IX or X of the Asset Purchase Agreement,
Agent shall immediately distribute to Buyer that number of the
Shares (valued for this purpose at $1.50 per share) equal to
the value of such indemnification amount, unless during such
fifteen day period, the Escrow Agent receives a Dispute Notice
from Seller;
(iv) Promptly after receipt of a joint direction from Buyer and
Seller, Escrow Agent shall transfer the Shares as prescribed
in said joint direction.
(v) If a Dispute Notice is timely received by Escrow Agent, Buyer
and Seller shall undertake to obtain as promptly as possible a
final resolution of such dispute (a "Dispute"). Upon a final
resolution of such Dispute, Buyer and Seller shall execute a
joint direction that Escrow Agent transfer the Shares in
accordance with such final resolution. Absent such joint
direction, Escrow Agent shall continue to hold the Shares
until it receives from either Buyer or Seller a certified copy
of an order or judgment of a court of competent jurisdiction
determining the disposition to be made of the Shares, together
with a certificate from such party that such party also has
provided the other party with a certified copy of such order
or judgment. Upon receipt thereof, the Escrow Agent shall
distribute the Shares in accordance with such order or
judgment.
Any notice provided by Buyer to Escrow Agent under Sections 1(i), (ii) or (iii)
shall be provided simultaneously to Seller, and any Dispute Notice provided by
Seller to Escrow Agent under Sections 1(i), (ii) or (iii) shall be provided
simultaneously to Buyer.
2. Term of Escrow; Termination Date. The term of this Escrow Agreement
("Term") shall be from the Closing Date of the Asset Purchase Agreement until
the Termination Date. This Escrow Agreement shall terminate on the earlier of
(i) the date on which the balance of the Shares in the Escrow drops to zero and
(ii) eighteen (18) months following Closing, provided, however, if one or more
Disputes are outstanding after eighteen months following Closing, then at such
time as a final resolution of the last of such Disputes is entered and all
distributions are made in accordance therewith (the "Termination Date"). To the
extent any of the Shares and their associated dividends are still held in the
Escrow as of the Termination Date, Escrow Agent shall turn over such remainder
to Seller.
3. Dividends, Voting and Rights of Ownership. All dividends paid during
the Term on the Shares (including stock dividends, cash dividends or dividends
payable in securities) shall be paid over directly to Escrow Agent, who shall
hold such dividends pending distribution of the underlying Shares pursuant to
paragraphs 1 and 2 hereof. The distributions made by Escrow Agent pursuant to
paragraphs 1 and 2 hereof shall not include any dividends paid on the Shares
prior to such distribution. Prior to distribution, the Seller shall have the
right to vote or not vote the Shares, or any portion thereof, in its sole
discretion.
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<PAGE>
4. No Encumbrance. None of the Shares held in the Escrow nor any
beneficial interest therein may be pledged, sold, assigned or transferred,
including by operation of law, by Seller or be taken or reached by any legal or
equitable process in satisfaction of any debt or other liability of Seller.
5. Power to Transfer the Shares. The Escrow Agent is hereby granted the
power to effect any transfer of the Shares held in the Escrow contemplated by
this Escrow Agreement. Buyer will cooperate with Escrow Agent in promptly
issuing stock certificates to effect such transfers.
6. Responsibilities of Escrow Agent. Escrow Agent shall perform all
of the duties expressly required of it under the terms of this Escrow Agreement
and shall not have any other duties or responsibilities that are not expressly
set forth herein.
7. Fees and Expenses. The reasonable fees and expenses of Escrow Agent
shall be paid as requested by Escrow Agent by Buyer. Such fees and expenses of
Escrow Agent shall not include the parties' respective attorneys' fees and
costs.
8. Exculpation and Indemnity. Buyer and Seller shall, jointly and
severally, indemnify, defend and hold Escrow Agent harmless from any and all
expenses, costs, damages and liabilities arising or incurred by reason of it
serving as Escrow Agent hereunder unless such expenses, costs, damages and
liabilities result from Escrow Agent's gross negligence or willful misconduct.
Escrow Agent shall be entitled to rely, and shall be protected in doing so, upon
any notice, instrument or signature believed by it to be genuine and to have
been signed or presented by the proper party or parties duly authorized to do
so.
9. Resignation and Discharge. Escrow Agent may resign and be discharged
from its duties hereunder at any time by giving notice of such resignation to
Buyer and Seller. Upon such notice, a successor Escrow Agent shall be appointed
by Buyer and Seller and become Escrow Agent hereunder effective upon the
resignation date specified in such notice. Escrow Agent shall continue to serve
until its successor accepts the assignment of the Escrow Agent's rights and
obligations hereby, but need not continue to serve longer than sixty (60) days
after the date of its notice of resignation.
10. Notices. All notices provided for herein or required hereby shall
be given or made in accordance with Section 12.2 of the Asset Purchase
Agreement. Such notice, if to Escrow Agent, shall be addressed to:
OTC Stock Transfer, Inc.
231 East 21st South
Salt Lake City, Utah 84115
fax: (801) 486-0562
11. Governing law. This Escrow Agreement is to be governed by, and
interpreted under, the laws of the State of Illinois.
C-3
<PAGE>
12. Counterparts. This Escrow Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Escrow Agreement has been executed and
delivered by the parties as of the date first above written.
WORLDPORT COMMUNICATIONS, INC., a
Delaware corporation
By:
Its:
TELENATIONAL COMMUNICATIONS, LIMITED
PARTNERSHIP, a Nebraska limited partnership
By:
Its:
OTC STOCK TRANSFER, INC.,
a Utah corporation
By:
Its:
C-4
<PAGE>
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into this ____ day of ____________, 1997, by and between WorldPort
Communications, Inc., a Delaware corporation ("Buyer") and Telenational
Communications, Limited Partnership, a Nebraska limited partnership ("Seller").
WHEREAS, Buyer and Seller have entered into that certain Asset
Purchase Agreement, dated __________, 1997 (the "Asset Purchase Agreement"); and
WHEREAS, pursuant to Sections 1.7 and 1.8 of the Asset
Purchase Agreement, Buyer and Seller have agreed to execute and deliver this
Agreement.
NOW, THEREFORE, in consideration of the premises and promises
herein contained, the parties agree as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Asset Purchase Agreement.
2. Demand Registration Rights. Seller understands that at any time
eighteen months following the Closing Date, subject to the provisions of Section
9, upon the delivery to Buyer of a written request of the holders ("Holders") of
the Minimum Registration Amount (as hereafter defined) of the Registrable
Securities (as hereafter defined) outstanding, requesting that Buyer effect the
registration under the Securities Act of 1933, as amended (the "Act") (a "Demand
Registration"), and requesting a firm commitment underwriting as a means for the
disposition thereof, Buyer will promptly give written notice of such requested
registration to all other Holders of Registrable Securities, and Buyer thereupon
will use its best efforts to effect, as expeditiously as possible, the
registration under the Act (in accordance with the intended method of
disposition specified in the notice from the initial requesting Holder) of the
Registrable Securities which Buyer has been so requested to register, all to the
extent necessary to permit the disposition of the Registrable Securities so to
be registered; provided, however that Buyer shall not be required to register
such Registrable Securities if, in the reasonable opinion of the Board of
Directors of Buyer, it would not be in the best interests of Buyer to register
such Registrable Securities. "Minimum Registration Amount" means 2,000,000
shares of common stock of Buyer ("Common Stock") before any stock splits,
reverse stock splits or other recapitalizations which may occur after the date
hereof. "Registrable Securities" means (i) any shares of Buyer's Stock issuable
under the Asset Purchase Agreement, and (ii) any other Common Stock issuable
with respect to the Common Stock referred to in clause (i) by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
D-1
<PAGE>
3. Right to Piggyback. Subject to the provisions of Section 9, whenever
Buyer proposes to register any of its Common Stock under the Act for sale in an
underwritten public offering, and the registration form to be used may be used
for the registration (a "Piggyback Registration," and together with a Demand
Registration, a "Registration") of Registrable Securities, Buyer will give
written notice to all holders of Registrable Securities of its intention to
effect such a registration and will, except as otherwise provided herein,
include in such registration all Registrable Securities with respect to which
Buyer has received written requests for inclusion therein within 15 days after
the receipt of Buyer's notice.
4. Registration Expenses. Buyer will pay all expenses incident to
Buyer's performance of or compliance with the provisions set forth in this
Agreement, including without limitation all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws, printing expenses,
messenger and delivery expenses, and fees and disbursements of counsel for Buyer
and all independent certified public accountants, underwriters (excluding
discounts and commissions) and other persons retained by Buyer.
5. Priority on Primary Registrations. If a Registration is an
underwritten primary registration on behalf of Buyer, and the managing
underwriters advise Buyer in writing that in their opinion the number of
securities required to be included in such registration exceeds the number which
can be sold in an orderly manner in such offering within a price range
acceptable to Buyer, Buyer will include in such registration (i) first, the
securities Buyer proposes to sell, (ii) second, the Registrable Securities
requested to be included in such registration and other securities as to which
the holders have similar registration rights and have requested similar
registration, pro rata among the holders of such Registrable Securities and
other securities on the basis of the number of shares owned by each such holder,
and (iii) third, other securities requested to be included in such registration.
6. Priority on Secondary Registrations. If a Registration is an
underwritten secondary registration on behalf of holders of Buyer's securities,
and the managing underwriters advise Buyer in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering within a price
range acceptable to the holders initially requesting such registration, Buyer
will include in such registration (i) first, the securities requested to be
included therein by the holders requesting such registration, (ii) second, the
Registrable Securities requested to be included in such registration and other
securities as to which the holders have similar registration rights and have
requested similar registration, pro rata among the holders of such Registrable
Securities and other securities on the basis of the number of shares owned by
each such holder, and (iii) third, other securities requested to be included in
such registration.
7. Holdback Agreement. Each holder of Registrable Securities agrees
not to effect any public sale or distribution (including sales pursuant to Rule
144) of equity securities of Buyer, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 90-day period beginning on the effective date of any underwritten
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<PAGE>
Registration (except as part of such underwritten registration), unless the
underwriters managing the registered public offering otherwise agree. Seller
agrees that it will not transfer its Shares in a non-public sale or distribution
to any transferee without such transferee first agreeing in writing to be bound
by the terms of this Agreement.
8. Indemnification.
(i) Buyer agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers and directors and each
person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to Buyer by such holder expressly for use
therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after Buyer has
furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, Buyer will indemnify such
underwriters, their officers and directors and each person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.
(ii) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder will furnish
to Buyer in writing such information and affidavits as Buyer reasonably requests
for use in connection with any such registration statement or prospectus and, to
the extent permitted by law, will indemnify Buyer, its directors and officers
and each person who controls Buyer (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify will be individual to each
holder and will be limited to the net amount of proceeds received by such holder
from the sale of Registrable Securities pursuant to such registration statement.
(iii) Any person entitled to indemnification hereunder will
(a) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (b) permit such indemnifying party
to assume the defense of such claim. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who elects not to, assume the
defense of a claim will not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with
respect to such claim.
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<PAGE>
(iv) The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of securities.
Buyer also agrees to make such provisions, as are reasonably requested by an
indemnified party, for contribution to such party in the event Buyer's
indemnification is unavailable for any reason.
9. Termination. The rights to Demand Registration for those Holders who
choose not to participate in the registration undertaken pursuant to a Demand
Registration shall terminate upon such registration. In all other cases, the
rights to Demand Registration with respect to particular Registrable Securities
shall terminate on the earlier of (i) the date two years and six months
following the Closing Date, (ii) the date on which the particular Registrable
Securities may be sold pursuant to paragraph (k) of Rule 144, or (iii) the date
on which the Registerable Securities may be sold pursuant to other provisions of
the Act or the rules and regulations promulgated thereunder as will allow the
sale of all Registrable Securities then held by the holder thereof without
limitation on the manner of the sale and without any governmental filings. The
rights to Piggyback Registrations with respect to particular Registrable
Securities shall terminate on the earlier of (i) the fifth anniversary of the
Closing Date, (ii) the date on which the particular Registrable Securities may
be sold pursuant to paragraph (k) of Rule 144, or (iii) the date on which the
Registerable Securities may be sold pursuant to other provisions of the Act or
the rules and regulations promulgated thereunder as will allow the sale of all
Registrable Securities then held by the holder thereof without limitation on the
manner of the sale and without any governmental filings.
10. General Provisions.
a. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
b. Successors and Assigns. This Agreement shall bind and inure
to the benefit of the parties named herein and their respective successors and
assigns. After Closing, Buyer shall be entitled to assign its rights and duties
under this Agreement without the consent of any other party hereto, and Seller
shall be entitled to assign its rights hereunder to Partners when it distributes
shares of Common Stock from Seller to such Partners in accordance with Section
2.20 of the Asset Purchase Agreement.
c. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Illinois. Each party hereby irrevocably and unconditionally consents and submits
to the in personam jurisdiction of Illinois state courts and federal courts
located in Chicago, Illinois over all matters relating to this Agreement. Each
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<PAGE>
party agrees that service of process in any action or proceeding hereunder may
be made upon such party by certified mail, return receipt requested to the
address for notice set forth herein. Each party irrevocably waives any objection
it may have to the venue of any action, suit or proceeding brought in such
courts or to the convenience of the forum and each party irrevocably waives the
right to proceed in any other jurisdiction. Final judgment in any such action,
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which shall
be conclusive evidence of the fact and the amount of any indebtedness or
liability of any party therein described.
d. Other Rules of Construction. References in this Agreement
to sections are to sections of this Agreement unless otherwise indicated. Words
in the singular include the plural and in the plural include the singular. The
word "or" is not exclusive. The word "including" shall mean including, without
limitation. The section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
e. Partial Invalidity. In the event that any provision of
this Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
D-5
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this
Agreement or caused this Agreement to be executed on its behalf by a duly
authorized officer, all as of the date first written above.
WORLDPORT COMMUNICATIONS, INC.
By: /s/ John W. Dalton
--------------------------
Its:President & C.E.O.
--------------------------
TELENATIONAL COMMUNICATIONS, LIMITED PARTNERSHIP
By: /s/ Edmund Blankenau
--------------------------
Its:President & C.E.O
--------------------------
D-6
<PAGE>
EXHIBIT E
BILL OF SALE
This BILL OF SALE is delivered to WorldPort Communications,
Inc., a Delaware corporation (the "Buyer"), pursuant to the Asset Purchase
Agreement by and between Buyer and Telenational Communications, Limited
Partnership, a Nebraska limited partnership (the "Seller"), dated _________,
1997 (the "Agreement").
WHEREAS, the Agreement provides that the Seller shall sell,
transfer, assign and deliver to the Buyer, all right, title and interest in and
to the Purchased Assets as defined in the Agreement.
NOW, THEREFORE, pursuant to the Agreement and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged:
Effective as of the date hereof, Seller hereby irrevocably
contributes, sells, transfers, assigns, conveys and delivers to Buyer and its
successors and assigns forever, the Purchased Assets, TO HAVE AND TO HOLD the
same for its and their own use and benefit forever.
Seller hereby constitutes and appoints Buyer as its true and
lawful attorney-in-fact, with full power of substitution and resubstitution, in
the name of Seller but on behalf of and for the benefit of Buyer (i) to demand,
collect and receive for the account of Buyer all of the Purchased Assets; (ii)
to institute or prosecute, in the name of Seller or otherwise, all proceedings
which Buyer may deem necessary or convenient in order to realize upon, affirm or
obtain title to or possession of or to collect, assert or enforce any property,
claim, right or title of any kind in or to the Purchased Assets; (iii) to defend
and compromise any and all actions, suits or proceedings in respect of any of
the Purchased Assets subject to any obligations in the Agreement; and (iv) to do
all such acts and things in relation thereto as Buyer shall deem desirable.
Seller agrees that the foregoing powers are coupled with an interest and are and
shall be irrevocable by Seller for any reason.
All of the terms and provisions of this Bill of Sale shall be
binding upon Seller and its successors and assigns, and shall inure to the
benefit of Buyer and its successors and assigns. Seller hereby covenants and
agrees with Buyer that it will duly execute and deliver all such instruments of
sale, transfer, assignment and conveyance and all such notices, releases and
other documents as may be necessary more fully to sell, transfer, assign and
convey to, and vest in Buyer, all and singular, the Purchased Assets.
This Bill of Sale shall not confer any rights or remedies upon
any person or entity other than the Buyer and its successors and permitted
assigns. Neither the making nor the acceptance of this instrument shall enlarge,
restrict or otherwise modify the terms of the Agreement.
E-1
<PAGE>
All capitalized terms used in this Bill of Sale and not
otherwise defined shall have the meanings given to them in the Agreement.
IN WITNESS WHEREOF, the undersigned have caused this Bill of
Sale to be executed on their behalf by a duly authorized officer this day of
_________, 1997.
TELENATIONAL COMMUNICATIONS, LIMITED
PARTNERSHIP
By: /s/ Edward Blankenau
------------------------
Its: President & C.E.O.
------------------------
E-2
<PAGE>
WORLDPORT SCHEDULES
AND
DISCLOSURE MATERIALS
SCHEDULES
- ---------
Schedule 3.6 Capital Stock of Buyer
Schedule 3.8 Financial Statements (Interim Changes)
Audited Financial Statements for 1995 and
1996 included in Form 10KSB Filings
(attached)
Schedule 3.9 Litigation
Schedule 3.10 Subsidiaries
Schedule 3.11 Registration Rights
Schedule 3.12 Tax Returns
WORLDPORT DISCLOSURE MATERIALS
- ------------------------------
Form 10KSB for period ending December 31, 1996
Form 10QSB for period ending September 30, 1996
Form 10QSB for period ending June 30, 1996
Form 10QSB for period ending March 31, 1996
Form 10KSB for period ending December 31, 1995
Form S-8 filed February 11, 1997
WorldPort Private Offering Memorandum dated November 1, 1996
OTHER
- -----
Other WorldPort Disclosure Materials Provided to Telenational
<PAGE>
Schedules to Asset Purchase Agreement dated April 23, 1997
Schedule 1.2(x) Use of Name
Schedule 1.3 Assumed Liabilities
Schedule 1.8(j) Authority/Creditors
Schedule 2.2 Validity/Authority
Schedule 2.4 Transactions with Affiliates/Partners
Schedule 2.5 Financial Statements
Schedule 2.7 Interim Changes/Potential Material
Adverse Effect
Schedule 2.8 Outstanding Accounts/Notes Receivable
Schedule 2.9 List/Summary Description of Insurance
Policies or Fidelity Bond
Schedule 2.10 Asset List
Schedule 2.11 Proprietary Information
Schedule 2.12 Customers and Suppliers
Schedule 2.13 Employees/Benefits
Schedule 2.14 Licenses & Permits
Schedule 2.15 Material Contracts
Schedule 2.17 Legal Proceedings
Schedule 2.19 Brokers (Friedrich)
Schedule 4.1 Interim Conduct of Business
Schedule 7.7 Assumed Liabilities/Guaranties
OFFICE LEASE AGREEMENT
BALI III PARK BUILDING
MISSION LIFE INSURANCE COMPANY
Company Name
WORLDPORT COMMUNICATIONS, INC.
Date of Lease
April 15, 1997
Initial Initial
ii
<PAGE>
OFFICE LEASE AGREEMENT
INDEX
ARTICLE I FUNDAMENTAL LEASE PROVISIONS: DEFINITIONS..................1
1.1 Fundamental Lease Provisions................................1
1.2 Certain Definitions.........................................2
1.3 Other Definitions...........................................2
ARTICLE II MONETARY PROVISIONS.........................................2
2.1 Base Rental.................................................2
2.2 Tenant's Share of Certain Costs.............................2
2.3 Personal Property Taxes.....................................3
2.4 Taxes for Leasehold Improvements............................3
2.5 Late Payments...............................................3
2.6 Security Deposit............................................3
ARTICLE III PREMISES, COMMON AREA, SERVICE AREAS.......................4
3.1 Required Condition of Premises..............................4
3.2 Minor Variations in Area....................................4
3.3 Ceilings, Walls, Floors.....................................4
3.4 Common and Service Areas....................................4
3.5 Delay.......................................................4
ARTICLE IV USE.........................................................4
4.1 Permitted Use...............................................4
4.2 Rules.......................................................4
4.3 Additional Covenants of Tenant..............................5
4.4 Control of Buildings and Common Areas.......................5
4.5 Minimization of Disruption..................................5
ARTICLE V SERVICE AND UTILITIES.......................................5
5.1 Services by Landlord........................................5
5.2 Tenant's Obligations........................................5
5.3 Tenant's Additional Service Requirement.....................5
5.4 Interruption of Utility Service.............................6
ARTICLE VI REPAIRS AND MAINTENANCE.....................................6
6.1 Landlord's Repair Obligations...............................7
6.2 Tenant's Obligations........................................7
6.3 Rights of Landlord..........................................7
6.4 Condition on Surrender......................................7
6.5 Alterations by Tenant.......................................7
6.6 Payment of Costs: Mechanic's Liens.........................8
ARTICLE VII LANDLORD'S RIGHT OF ENTRY...................................8
7.1 Entry.......................................................8
7.2 "For Rent" Signs............................................8
ARTICLE VIII INSURANCE, FIRE AND CASUALTY DAMAGE.........................8
8.1 Insurance on Building.......................................8
8.2 Casualty Covered by Insurance...............................8
8.3 Casualties Not Covered by Landlord's Insurance..............8
8.4 Tenant's Property Insurance.................................8
8.5 Mortgagee Requirements......................................9
8.6 Termination of Lease........................................9
8.7 Waiver of Subjugation.......................................9
Initial Initial
iii
<PAGE>
ARTICLE IX INDEMNITY AND PUBLIC LIABILITY INSURANCE 9
9.1 Indemnity...................................................9
9.2 Liability Insurance.........................................9
9.3 Tenant's Failure to Maintain Insurance......................9
ARTICLE X CONDEMNATION 9
10.1 Total or Substantial Condemnation...........................9
10.2 Partial Condemnation........................................9
10.3 Disposition of Awards.......................................9
ARTICLE XI ASSIGNMENT, TRANSFER AND SUBLEASING BY TENANT 10
11.1 Landlord's Consent Required................................10
11.2 Transfer of Voting Interest................................10
11.3 No Release.................................................10
11.4 No Mortgage................................................10
11.5 Transfer of Landlord's Interest............................10
11.6 Bankruptcy.................................................10
ARTICLE XII HOLDING OVER...............................................11
ARTICLE XIII DEFAULT BY TENANT: LANDLORD'S REMEDIES....................11
13.1 Events of Default..........................................11
13.2 Remedies of Landlord.......................................11
13.3 Tenant's Liability for Landlord's Damages..................12
ARTICLE XIV BANKRUPTCY OR INSOLVENCY OF TENANT.........................13
14.1 Liquidation................................................13
14.2 Reorganization.............................................13
14.3 Subsequent Liquidation or Petition.........................13
14.4 Assignment.................................................14
14.5 Reasonable Charges.........................................14
14.6 Consent....................................................14
14.7 Intent.....................................................14
ARTICLE XV LIEN FOR RENT..............................................14
ARTICLE XVI SUBORDINATION AND ATTORNMENT...............................15
ARTICLE XVII TENANT ESTOPPEL LETTER.....................................15
ARTICLE XVIII QUIET ENJOYMENT............................................15
ARTICLE XIX NO IMPLIED WAIVER..........................................15
ARTICLE XX NOTICES....................................................15
20.1 Payments Due Landlord......................................15
20.2 Notices....................................................16
20.3 Change in Addresses........................................16
ARTICLE XXI SUBSTITUTION OF SPACE......................................16
21.1 Substitution Space.........................................16
21.2 Maximum Base Rental........................................16
21.3 Condition of Premises......................................16
21.4 Commencement of Rent.......................................16
21.5 Reimbursement of Expenses..................................16
ARTICLE XXII MISCELLANEOUS..............................................16
22.1 Attorney's Fees............................................16
22.2 Broker's Commission........................................16
22.3 Force Majeure..............................................16
22.4 Use of Language............................................16
22.5 Captions...................................................16
22.6 Successors.................................................17
22.7 Sublease...................................................17
22.8 Severability...............................................17
22.9 Charges for Services.......................................17
22.10 Personal Liability.........................................17
22.11 Damage From Certain Causes.................................17
22.12 Notice and Cure to Landlord and Mortgagee..................17
22.13 Governing Law..............................................17
Initial Initial
iv
<PAGE>
22.14 No Reduction of Rental.....................................17
22.15 No Partnership.............................................17
22.16 No Oral Changes............................................18
22.17 Entirety: No Representations and Warranties...............18
22.18 Attachments................................................18
EXHIBIT "A" - Floor Plan of Premises
"B" - Legal Description of the Land
"C" - Operating Cost Computation
"D" - Rules
"E" - Guaranty - Purposely Omitted
"F" - Financing Statements - Purposely Omitted
"G" - Janitorial Services - Used for General Standarad
"H" - Sprecial Provisions
RIDER 101 _ - Work Letter
201 _ - Parking Agreement
301 _ - Option to Extend
Initial Initial
v
<PAGE>
OFFICE LEASE AGREEMENT
STATE OF TEXAS ss.
COUNTY OF HARRIS ss.
THIS LEASE (herein so called, both in reference to this Agreement and
to the real estate transaction between Landlord and Tenant), made and entered
into by and between MISSION LIFE INSURANCE COMPANY , a Texas Corporation
("Landlord"), and Worldport Communications, Inc. , a Corporation (hereinafter
called "Tenant").
WITNESSETH:
Effective on the execution of this Lease (even if the Commencement Date
is a later date), Landlord hereby leases to Tenant, and Tenant hereby takes from
Landlord, the Demised Premises described in this Agreement, as depicted by the
floor plan attached as Exhibit "A", in the office building named as the
"Building" below, for the Term set forth in Section 1.1(m) and on the following
terms, conditions and covenants:
ARTICLE I
FUNDAMENTAL LEASE PROVISIONS: DEFINITIONS
The following list sets out the Fundamental Lease Provisions and
certain other definitions pertaining to the this Lease:
1.1 Fundamental Lease Provisions
(a) "Landlord": MISSION LIFE INSURANCE COMPANY
(b) Landlord's Mailing Address: 9235 Katy Freeway,
Houston, Texas 77024
(c) "Tenant": WORLDPORT COMMUNICATIONS, INC.
(d) Tenant's Mailing Address:
(i) Before the Commence Date:
(ii) After the Commencement Date: 9601 Katy
Freeway, Suite ,200 Houston, Texas 77024
(e) "Guarantor(s)" (if applicable, Guaranty attached as
Exhibit "E"):
(f) Guarantor's Street Address(es):
(g) "Building" (including street address ): Bali III Park
Building, 9601 Katy Freeway, Houston, Texas 77024
(h) "Premises": The portion of the Building to be
leased pursuant to this Lease, as shown on the
Attached Exhibit
"A", containing approximately 4,272
square feet of Rentable Area. The address of the
Premises is 9601 Katy Freeway, Suite 200 , Houston,
Texas, 77024
(i) "Base Rental": SEE ATTACHED EXHIBIT "H" - SPECIAL
PROVISIONS
(j) "Security Deposit" $ 5,100.00
(k) "Anticipated Commencement Date": APRIL 9, 1997
(l) "Commencement Date": The date on which the Premises
are "ready for occupancy," as defined in Rider 101.
(m) "Term": The period of THREE ( 3 ) years beginning
with the first day after the Commencement Date (or
beginning on the Commencement Date if that date is
the first day of a calendar month).
(n) "Area of the Building": 45,500, the stipulated total
number of square feet of Rentable Area in the
Building.
(o) "Area of the Premises": 4,272, the stipulated number
of square feet of Rentable Area in the Premises.
(p) "Landlord's Operating Cost Contribution": $ 5.50 for
each square foot in the Area of the Building.
(q) "Broker": GLENN HARDY
1.2 Certain Definitions
Initial Initial
1
<PAGE>
(a) "Rentable Area": Area computed in accordance with the
current American National Standard adopted by the
Building Owners and Managers Association
International ("BOMA").
(b) "Tenant's Pro Rata Share": The Area of the Premises
divided by the Area of the Building.
(c) "Building Facilities": All equipment, machinery,
facilities and other personal property located in the
Building or on the Land (as hereinafter described)
and/or used or utilized solely in connection with the
operation and/or maintenance of the Building, or any
part thereof.
(d) "Land": The parcel of real property more particularly
described in Exhibit "B" attached hereto, on which
the Building is or will be constructed.
(e) "Project": The Land and the Building, parking related
thereto, all Building Facilities and all
appurtenances pertaining to the foregoing.
(f) "Common Area(s)": The portion of the Building which
is for the common use of all Tenants (and their
customers, clients, invitees, contractors), including
among other facilities, corridors, tunnels, elevator
foyers, rest rooms, mechanical rooms, janitorial
closets, electrical and telephone closets, vending
area, lobby area, drinking fountains, meeting rooms,
sidewalks, curbs, enclosed mall area, loading areas,
lighting facilities, delivery passages, decks and
other parking facilities, landscaping, and other
common rooms and common facilities.
(g) "Service Areas": "Service Areas" will refer to areas,
spaces, facilities and equipment serving the Building
(whether or not located within the Building) but to
which Tenant and other occupants of the Building will
not have access, including, but not limited to,
mechanical, telephone, electrical and similar rooms,
and air and water refrigeration equipment.
(h) "Lease Year": A period of Twelve consecutive calendar
months (during the Term beginning on January 1 and
ending on December 31, except that the first Lease
Year begins on the Commencement Date of this Lease
and ends on the next following December 31 and the
last Lease Year begins on January 1 of the calendar
year in which the Term ends and ends on the last day
of the Term.
(i) "Rules": The Rules for the Building attached as
Exhibit D" as modified from time-to-time in
accordance with Section 4.2.
1.3 Other Definitions Other terms defined in this Lease have the
meanings assigned to them elsewhere in this Lease.
ARTICLE II
MONETARY PROVISIONS
2.1 Base Rental. Tenant shall pay to Landlord, without offset or
deduction, Base Rental for the Premises in monthly
installments in advance. Rent begins to accrue hereunder on
the Commencement Date. One such monthly installment shall be
made on or before the date of execution of this Lease, and
alike monthly installment shall be made on or before the
Commencement Date and at the first day of each calendar month
during the Term, beginning with the second month. Rent for any
partial month shall be prorated on a per diem basis. Landlord
aquistion waive for Calendar 1997 escalation.
2.2 Tenant's Share of Certain Costs. In addition to other sums due
from Tenant under this Lease, Tenant shall pay to Landlord, in
the manner and at the times set forth below, Tenant's Pro Rata
Share of Operating Costs, including Energy Costs, for each
Lease Year with the exception of calendar year 1997 which
Landlord shall waive:
(a) Operating Costs. "Operating Costs" means all costs,
charges, and expense incurred by Landlord in connection with
owning, operating, maintaining, repairing, insuring and
managing the Building, and the Building's portion of the
Common Areas and Service Areas, computed on an accrual basis
and including, with limitation, costs, charges and expenses
incurred with respect to the items enumerated as "Operating
Cost Examples" in Paragraph A of Exhibit "C" to this Lease,
and including Energy Costs. Operating Costs do not include
those items enumerated as "Operating Cost Exclusions" in
Paragraph B of Exhibit "C" to this Lease. "Energy Costs" means
the cost incurred by Landlord for (i) any and all forms of
fuel or energy utilized in connection with the operation,
maintenance, and use of the Building, Common Areas and Service
Areas, (ii) sales, use, excise and other taxers assessed by
Governmental authorities on energy sources, and (iii) other
reasonable costs of providing energy to the Building, Common
Areas and Service Areas. If less than 95% of the Area of the
Building is occupied during a Lease Year, then for purposes of
determining the Operating Costs for that lease Year shall be
determined as if the Building had been occupied to that extent
for that Lease Year, taking into account the fixed or variable
nature of the particular costs and expenses.
(b) Tenant's Pro Rata Share of Operating Costs. Tenant's Pro
Rata Share of Operating Costs for any Lease Year is computed
by multiplying Tenant's Pro Rata Share times Excess Operating
Costs. "Excess Operating Costs" means the difference between
(i) the Operating Costs for as Lease Year minus (ii) the
product of (A) Landlord's Operating Cost Contribution
multiplied times (B) the area of the Building.
(c) Estimated Costs. Tenant's Pro Rata Share of Operating
Costs for the remainder of the first Lease Year and for each
subsequent Lease Year of the Term shall be estimated in good
faith by Landlord, and notice of the estimated amounts will be
given to Tenant as soon as reasonable before the Commencement
Date or the beginning of each Lease Year, as the case may be.
For each full Lease Year of the Term, Tenant shall pay to
Landlord each month, at the same time the monthly installment
of Base Rental is due, an amount equal to one-twelfth (1/12)
of the estimated Tenant's Pro Rata Share of Operating Costs
due for that year. If the first and last Lease Years are less
than full calendar years, then Tenant shall pay to Landlord,
each month for those Lease Years, at the same time the monthly
installment of Base Rental is due, an amount equal to the
amount of estimated Tenant's Pro Rata Share of Operating Costs
for the partial Lease Year divided by the number of full
calendar months of the partial year.
(d) Estimate Revisions. At any time and from time to time
during the Term, Landlord may, by giving notice to Tenant,
change the monthly amount then payable by Tenant for Tenant's
estimated Pro Rata Share of Operating Costs to reflect
Initial Initial
2
<PAGE>
more accurately, in the reasonable judgment of Landlord,
Tenant's actual Pro Rata Share of Operating Costs for the then
current Lease Year. Tenant shall begin paying the revised
estimated amount together with the next monthly payment of
Base Rental due after receipt by Tenant of Landlord's notice.
(e) Annual Adjustments. Within 180 days of the end of the
Lease Year, or as soon as reasonably possible, Landlord will
prepare and deliver to Tenant a statement setting forth the
calculation of the actual Tenant's Pro Rata Share of Operating
Costs for the previous Lease Year. Within 30 days after
receipt of the statement of the actual Tenant's Pro Rate Share
of Operating Costs, Tenant shall pay to Landlord, or Landlord
will credit against the next rental or other payment or
payments due from Tenant, as the case may be, the difference
between the actual Tenant's Pro Rata Share of Operating Costs
for the preceding Lease Year and the estimated Tenant's Pro
Rata Share of Operating Costs paid by Tenant during that year.
(f) Final Partial Year. If the Term expires or this Lease
terminates before a final determination of the actual Tenant's
Pro Rata Share of Operating Costs, then the amount of
adjustment between the estimated Tenant's Pro Rata Share and
the actual Tenant's Pro Rata Share of Operating Costs payable
for the preceding Lease Year and/or the final partial Lease
Year of the term will be estimated by the Landlord based on
the best data available to Landlord at the time of the
estimate. Before the scheduled last day of the Term, or as
soon as possible after an earlier termination date, an
adjustment will be made between Landlord and Tenant. The
obligations set forth in the preceding sentence shall survive
expiration or earlier termination of this Lease.
2.3 Personal Property Taxes. Tenant shall pay, before delinquency,
all taxes, fees or charges, rates, duties and assessments that
are imposed, levied or assessed directly against Tenant, or
indirectly through Landlord, and payable during the Term
thereof, on Tenant's equipment, furniture, movable trade
fixtures and other personal property located in the Premises.
Tenant shall also pay, before delinquency, business and other
taxes, fees or charges, rates, duties and assessments imposed,
levied or assessed because of Tenant's occupancy of the
Premises or on the business or income of Tenant generated from
the Premises.
2.4 Taxes for Leasehold Improvements. If any authority levying
real and personal property taxes against the Building
includes, as a standard practice for determining the value of
the Building for tax purposes, a component for tenant
improvements or nonmovable trade fixtures of individual
tenants, Tenant shall pay to Landlord any portion of those
taxes which is attributable to the value of tenant
improvements or nonmovable trade fixtures in the Premises in
excess of the value (as of the first day of the Term or as of
the date of such levying, whichever date is used by the taxing
authority) of Building standard or existing improvements
(collectively, "above Standard Improvements"). On receipt of
any such tax statement, Landlord will compute Tenant's share
of taxes attributable to Above Standard Improvements, and
submit a statement to Tenant evidencing the method of
calculation. Tenant shall pay to Landlord together with the
next monthly installment of Base Rental due after the receipt
of Landlord's statement the entire amount due under this
Section 2.4. The method of calculation of the share of taxes
attributable to Above Standard Improvements will be subject to
adjustment by Landlord from time to time in order to reflect
the method currently utilized by taxing authorities to
calculate taxes for Above Standard Improvements. If Tenant is
assessed for taxes for Above Standard Improvements directly by
the taxing authorities, then Tenant shall pay them before
delinquency and deliver to Landlord copies of receipts for
payment of those taxes and assessments no later than ten (10)
days before the deadline for payment without imposition of
penalty.
2.5 Late Payments.
(a) Late Charge. If any amounts due under this Lease from
Tenant to Landlord are not received by Landlord by the tenth
(10th) calendar day after the date due, then the amount past
due is subject to a five percent 5%) late payment and service
charge, payable by Tenant immediately on demand by Landlord,
to be applied to defray Landlord's administrative and other
overhead expenses.
(b) Administrative Reimbursement. If Landlord performs
construction, maintenance, or repairs for Tenant under Section
6.3, 8.2, or 13.2 of this Lease, then Tenant shall reimburse
Landlord within five (5) days after receipt of an invoice from
Landlord for the cost of those items plus an amount equal to
fifteen percent (15%) of those costs ("Administrative
Reimbursement") to reimburse Landlord for administration and
overhead.
2.6 Security Deposit. On its execution of this Lease, Tenant shall
deposit with Landlord, in addition to the advance payment of
Base Rental described in Section 2.1, the Security Deposit.
The Security Deposit shall be held by Landlord without
interest as security for the performance of Tenant's
obligations under this Lease. The Security Deposit is not an
advance payment of rental or the full measure of liquidated
damages on a default by Tenant. On an Event of Default
(hereinafter defined), Landlord may, from time to time and
without prejudice to any other remedy provided herein or by
law, use the Security Deposit to cure the Event of Default.
After an application of the Security Deposit, Tenant shall pay
to Landlord, on demand, the amount necessary to replenish the
Security Deposit to its original amount. On the expiration or
termination of the Term, any remaining balance of the Security
Deposit shall be returned by Landlord to Tenant if Tenant is
not then in default.
Unless there has been a permitted assignment of this Lease
pursuant to Article XI, and in connection therewith Landlord
receives written notice of an assignment of the right to
receive the Security Deposit or the remaining balance thereof,
Landlord may return the Security Deposit to the original
Tenant, regardless of one or more assignments or Tenant's
interest in the Security Deposit. In this event, on the return
of the Security Deposit (or balance thereof) to the original
Tenant (or permitted assignee, as appropriate), Landlord has
no further liability with respect to the Security Deposit.
On a transfer of the Premises, this Lease or the Building,
Landlord may transfer the Security Deposit to the transferee,
after which Landlord is released from all liability for the
return of the Security Deposit, for which Tenant shall look
solely to the transferee.
ARTICLE III
PREMISES, COMMON AREAS, SERVICE AREAS
3.1 Required Condition of Premises. Except to the extent that
Landlord is obligated to construct improvements in the
Premises, and except for Landlord's agreement to complete or
correct construction items, as described in the second
paragraph of the Section 3.1, as provided on an exhibit
attached to this Agreement, the Premises are delivered to
Tenant and are being leased "AS IS" and "WITH ALL FAULTS," and
Landlord makes no representation or warranty of any kind,
expressed or implied, with respect to the
Initial Initial
3
<PAGE>
condition of the Premises (including habitability, fitness or
suitability for particular purpose of the Premises, or that
the Building or the improvements to the Premises have been
constructed in a good and workmanlike manner). TO THE MAXIMUM
EXTENT PERMITTED BY APPLICABLE LAW, LANDLORD HEREBY DISCLAIMS,
AND TENANT WAIVES THE BENEFIT OF, ANY AND ALL IMPLIED
WARRANTIES, INCLUDING IMPLIED WARRANTIES OF HABITABILITY,
FITNESS OR SUITABILITY FOR PURPOSE, OR THAT THE BUILDING OR
THE IMPROVEMENTS IN THE PREMISES HAVE BEEN CONSTRUCTED IN A
GOOD WORKMANLIKE MANNER. TENANT EXPRESSLY ACKNOWLEDGES THAT
LANDLORD DID NOT CONSTRUCT OR APPROVE THE QUALITY OF
CONSTRUCTION OF THE BUILDING.
The taking of possession of the Premises by Tenant
conclusively established that the Premises and the Building
were at that time in satisfactory order and condition except
for (i) minor matters of structural, mechanical, electrical,
and finish adjustment in the Premises (commonly referred to as
"punch list items") specified in reasonable detail on a list
delivered by Tenant to Landlord within fifteen (15) days after
the date on which Tenant takes possession of the Premises and
(ii) defects not discoverable on inspection and about which
Tenant notified Landlord within one (1) year after taking
possession of the Premises. Landlord neither makes nor offers
any other construction warranties of any kind or nature
whatsoever.
3.2 Minor Variations In Area. The Area of the Premises contained
Section 1.1(o) has been calculated in accordance with the
foregoing definitions and is agreed to be the Area of the
Premises regardless of minor variations resulting from
construction of the Building and/or tenant improvements.
3.3 Ceilings, Walls, Floors. Tenant acknowledges that pipes,
ducts, conduits, wires and equipment serving other parts of
the Building may be located above acoustical ceiling surfaces,
below floor surfaces or within walls in the Premises.
3.4 Common and Service Areas. Tenant is hereby granted a
non-exclusive right to use the Common Areas during the Term of
this Lease for their intended purposes, in common with others,
subject to the terms and conditions of this Lease, including,
without limitation, the Rules.
3.5 Delay. If the Premises are not ready for occupancy by Tenant
on the Anticipated Commencement Date, for any reason other
than a delay caused by Tenant, the obligations of Landlord and
Tenant shall nevertheless continue in full force and effect.
However, except as otherwise provided in Rider 101, the Term
of this Lease shall not begin and rent shall not begin to
accrue until the actual Commencement Date. The delay in
commencement of the Term and in the accrual of rent described
in the foregoing sentence constitutes full settlement of all
claims that Tenant might otherwise have by reason of the
Premises not being ready for occupancy on the Anticipated
Commencement Date.
If the Premises are not ready for occupancy by Tenant on the
Anticipated Commencement Date due to one or more delays caused
by Tenant, or anyone acting under or for the Tenant, or due to
any cause other than Landlord's fault, Landlord has no
liability and the obligations of Tenant under this Lease
(including, without limitation, the obligation to pay rent)
shall nevertheless begin as of the Commencement Date.
ARTICLE IV
USE
4.1 Permitted Use. The Premises shall be used and occupied only
for general office purposes, and not otherwise. The Premises
are being used by Tenant for commercial, business use and are
not residential property.
4.2 Rules. Tenant's use of the Premises and the Common Areas are
subject at all times during the Term to the Rules attached to
the Lease as Exhibit "D" and to any modifications of those
Rules and any additional Rules from time to time promulgated
by Landlord. Additional Rules will not become effective and a
part of this Lease until a copy of them has been delivered to
Tenant.
Landlord will use its best efforts to cause all tenants to
comply with the Rules however, the inability of Landlord to
cause another occupant of the Building to comply with the
Rules will neither excuse Tenant's obligation to comply with
the Rules or any other obligation of Tenant under this Lease
nor cause Landlord to be liable to Tenant for any damage
resulting to Tenant. Tenant shall cause Tenant's employees,
servants and agents to comply with the Rules.
4.3 Additional Covenants of Tenant.
(a) Laws, Statutes, Etc. Tenant shall, at Tenant's sole cost,
promptly comply with all laws, statutes, ordinances,
regulations, guidelines, restrictive covenants or requirements
now in force or hereafter enacted and with the requirements of
any governmental authority having jurisdiction over the
Building, board of fire underwriters, utility company serving
the Building or other similar body now or hereafter
constituted, relating to or affecting the condition, use or
occupancy of the Premises. The judgment of any court of
competent jurisdiction or the admission of Tenant in any
action against Tenant, whether Landlord is a party thereto or
not, that Tenant has violated any of the foregoing is
conclusive of that fact between Landlord and Tenant.
(b) Nuisance. Tenant shall not do or permit anything to be
done in or about the Premises which will in any way obstruct
or interfere with the operation of the Building or Common
Areas or with the rights of other tenants or occupants of the
Building or Common Areas or injure, disturb or annoy other
tenants or occupants of the Building or Common Areas.
(c) Building Reputation. Tenant shall not use or permit the
Premises to be used for any objectionable purpose or any
purpose which, in the reasonable opinion of the Landlord,
harms or tends to harm the business or reputation of the
Landlord or Building or reflects unfavorably on the Building,
or any part of the building, or deceives or defrauds the
public.
(d) Fire Hazards. Tenant shall not cause, maintain or permit
anything to be done in the Premises nor keep anything in the
Premises which will, in the opinion of the Landlord, increase
the possibility of fire or other casualty or increase the then
existing premiums for or void the coverage of any insurance on
the Building or contents of the Building.
4.4 Control of Building and Common Areas. The Building and Common
Areas will be at all times under the exclusive control,
management and operation of Landlord. Landlord may from time
to time (i) alter or redecorate the Building (including the
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Common Areas or Service Areas) or construct additional
facilities adjoining or approximate to the Building; (ii)
close temporarily doors, entry ways, public spaces and
corridors and interrupt or suspend temporarily Building
services and facilities in order to perform any redecorating
or alteration or alteration in order to prevent the public
from acquiring prescriptive rights in the Common Areas; and
(iii) change the name of the Building.
4.5 Minimization of Disruption. Landlord will attempt not to
disrupt Tenant's operations in the Premises during the
exercise of Landlord's rights of Section 4.4 or 7.1, but is
not required to incur extra expenses in order to minimize the
disruption. Tenant hereby waives all claims for damages or
injuries or interference with Tenant's business, loss of
occupancy, or quiet enjoyment and any other loss resulting
from the exercise by Landlord of any right under Section 4.4
or 7.1. No exercise by Landlord of any right under Sections
4.4 or 7.1 constitutes actual or constructive eviction or
breach of any expressed or implied covenant for quiet
enjoyment.
ARTICLE V
SERVICES AND UTILITIES
5.1 Services by Landlord. So long as Tenant is not in default
under this Lease, and subject to the conditions and standards
contained in this Lease and to standards, limitations and
guidelines imposed by governmental authorities and utility
companies, Landlord will furnish or cause to be furnished,
while Tenant is occupying the Premises, the following services
and utilities:
(a) Water at the normal temperature of the supply of water to
the Building or lavatory and drinking purposes, through
fixtures installed by Landlord or by Tenant with Landlords
consent;
(b) Janitorial cleaning services to those portions of the
Premises used for office purposes, five (5) days per week
(except on holidays observed by the Building), in accordance
with the Specifications used in comparable properties to
obtain an acceptable condition.
(c) Heated and refrigerated air conditioning, at such
temperatures and in such quantities as Landlord determines are
reasonably necessary and stated as standard hours of operation
in "Exhibit "D" for the reasonably comfortable use and
occupancy of the Premises for general office purposes;
(d) Routine maintenance in the Common Areas;
(e) Electric current to the Premises for Building standard
office lighting and office machines that consume electric
current within the limits set forth in Sections 5.3(a)(i);
(f) Twenty-four (24) hour, non-exclusive, passenger elevator
service and, when scheduled through the Building management,
non-exclusive freight elevator service to the floors(s) on
which the Premises are located; and
(g) Replacement of Building standard light bulbs, and
fluorescent tubes in the Premises.
5.2 Tenant's Obligations. Tenant shall pay for, before
delinquency, all telephone charges and the cost or charge for
all other materials and services not expressly the obligation
of Landlord that are furnished to or used on, in or about the
Premises during the Term of this Lease.
5.3 Tenant's Additional Service Requirements.
(a) Additional Services Requiring Landlord's Consent. Except
as otherwise expressly provided elsewhere in this Lease
(including any exhibit attached to this Lease), Tenant shall
not, without Landlord's prior consent in writing, do the
following:
(i) Install or use special lighting beyond building
standard, or any equipment machinery, or device in
the Premises which requires a nominal voltage of more
than 120 volts, single phase, or which, in Landlords
reasonable judgment, exceeds the capacity of existing
feeders conductors, risers, or wiring in or to the
Premises or Building, or which requires amounts of
water in excess of that usually furnished or supplied
for use in office space or which will decrease the
amount or pressure of water or the amperage or
voltage of electricity that Landlord can furnish to
other occupants of the Building;
(ii) Install or use any heat or cold-generating
equipment, machinery, or device that affects the
temperature otherwise maintainable by the heat or air
conditioning systems of the Building;
(iii) Use portions of the Premises for special
purposes requiring greater or more difficult cleaning
work than office areas, such as, but without
limitation, kitchens, reproduction rooms, interior
glass partitions, and non-Building standard materials
or finishes; or
(iv) Accumulate refuse or rubbish (A) in excess of
that ordinarily accumulated in business office
occupancy, or (B) at times other than Building
standard cleaning times.
(b) Providing Additional Services. If, in the reasonable
opinion of Landlord, additional services to Tenant
are necessary, Landlord may:
(i) Require that Tenant cease the activity or remove
the item (or Landlord may refuse to permit the
activity or installation of the item), causing (or
which will cause) the need for the additional
service, if Landlord and Tenant are not able to agree
on a mutually satisfactory method for providing the
additional services, or in Landlord's reasonable
judgment, providing the additional service is not
operationally or economically feasible;
(ii) With respect to additional utility consumption,
install and maintain separate metering devices, or
cause periodic usage surveys to be prepared by an
engineer employed by Landlord for that purpose. Cost
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of the additional utility consumption plus, if
Landlord installs and maintains separate meters,
the costs of the meters and of their installation,
maintenance and repair, or if Landlord orders usage
surveys, the cost of those surveys, is the obligation
of Tenant;
(iii) With respect to heat or cold-generating
equipment, furnish additional heat or air
conditioning to the Premises, or install
supplementary heating or air conditioning units in
the Premises of elsewhere in the Building, or modify
the existing heating or air conditioning system in
the Premises. The cost of additional heat or air
conditioning, supplementary units, or modifications
to the existing system is the obligation of Tenant;
(iv) With respect to lighting beyond Building
standard, purchase and replace, at Tenant's expense,
light bulbs and ballasts and/or fixtures; and/or
(v) With respect to additional cleaning work,
instruct Landlord's janitorial contractor to provide
the services, the cost of which is the obligation of
Tenant.
(c) After Hours Heat or Air Conditioning. Landlord shall, on
request and at Tenant's expense, provide after hours heat or
air conditioning. The cost of after hours heat or air
conditioning will be determined from time to time by Landlord
as calculated by an electrical engineer and, on request,
confirmed in writing to Tenant as Landlor's actual cost of
providing such service.
(d) Payment. Tenant shall pay to Landlord the cost of any
additional service and any other costs for which Tenant is
obligated under Section 5.3(b) or (c) within five (5) days
after receipt of an invoice from Landlord.
5.4 Interruption of Utility Service. Landlord will use its best
efforts to provide or cause to be provided the services
required of Landlord under this Lease. However, Landlord
reserves the right, without any liability to Tenant and
without affecting Tenant's covenants and obligations under
this Lease, to stop or interrupt or reduce any of the services
listed in Section 5.1 or to stop, interrupt or reduce any
other services required of Landlord under this Lease, whenever
and for so long as may be necessary, in Landlord's reasonable
judgment, by reason of (i) accidents or emergencies, (ii) the
making of repairs or changes that Landlord in good faith
considers necessary or which it is required or permitted by
this Lease or by law to make, (iii) difficulty in securing
proper supplies of fuel, water, electricity, labor or
supplies, (iv) the compliance by Landlord with governmental,
quasi-governmental or utility company energy conservation
measures, or (v) the exercise by Landlord of any right
contained Section 4.4. Landlord shall, on an interruption of a
utility service, use its best efforts it cause the service to
be resumed as soon as practicable. However, no interruption or
stoppage of any services shall be construed as an eviction of
Tenant nor will interruption or stoppage cause an abatement of
the rent payable under this Lease or in any manner relieve
Tenant from any of Tenant's obligations under this Lease.
Landlord is not liable for any interruption or stoppage of any
services or for any damage to persons or property resulting
from that stoppage. See Exhibit H, Special Provisions, Item 5,
Essential Services for exception.
ARTICLE VI
REPAIRS AND MAINTENANCE
6.1 Landlord's Repair Obligations. Landlord will, subject to the
casualty provisions of Article VIII, maintain the (i) Common
Areas and Service Areas, (ii) roof, foundation, exterior
windows and load-bearing items of the Building; (iii) exterior
(located outside the Premises) surfaces of walls; (iv)
plumbing, pipes and conduits located in the Common Areas or
Service Areas of the Building; and (v) the Building central
heating, Ventilation and air conditioning, electrical,
mechanical and plumbing systems. Landlord is not required to
make any repair in connection with or resulting from (1) any
alteration or modification to the Premises or to Building
equipment performed by, for or because of Tenant or to special
equipment or systems installed by, for or because of Tenant,
(2) the installation, use or operation of Tenant's property,
fixtures and equipment, (3) the moving of Tenant's property in
or out of the Building or in and about the Premises, (4)
Tenant's use or occupancy of the Premises in violation of
Article IV or in a manner not contemplated by the parties at
the time of execution of this Lease (e.g., subsequent
installation of special use rooms), (5) the acts or omissions
of Tenant and Tenant's employees, agents, invitees,
subtenants, licensees or contractors, or (6) fire or other
casualty, except as provided in Article VIII. Depending on the
nature of repairs undertaken by Landlord, the cost of the
repairs will be borne solely by Landlord or will be reimbursed
to Landlord either by a particular tenant or tenants or by all
tenants as an operating Cost.
6.2 Tenant's Obligations. Except for janitorial services provided
by Landlord and Landlord's obligations under Sections 3.1 and
6.1, Tenant, at Tenant's expense, shall maintain the Premises
in good order, condition and repair including, without
limitation, the interior surfaces of the windows, walls and
ceilings; floors; wall and floor coverings, window coverings;
doors; interior windows; and all switches, fixtures and
equipment in the premises. On receipt of reasonable notice
from Tenant, Landlord will perform, at the expense of Tenant,
all repairs and maintenance to plumbing, pipes and electrical
wiring located within walls, above ceiling surfaces and below
floor surfaces resulting from the use of the Premises by
Tenant. Tenant is not responsible for any plumbing, pipes and
electrical wiring, switches, fixtures and equipment located in
the Premises but serving another tenant or for portions of the
central heat, ventilation and air conditioning, electrical,
mechanical and plumbing systems of the Building which are
located in the Premises, except for (i) repairs resulting from
the acts of Tenant and Tenant's employees, agents, invitees,
subtenants, licensees or contractors, (ii) modifications made
to any of those systems by, for, or because of Tenant, and
(iii) special equipment installed by, for, or because of
Tenant.
6.3 Rights of Landlord. If Tenant fails, in Landlord's reasonable
judgment, to maintain the Premises in good order, condition
and repair, then Landlord may perform the maintenance,
repairs, refurbishing or repairing at Tenant's expense.
6.4 Condition on Surrender. On the expiration or earlier
termination of this Lease, or on the exercise by Landlord of
Landlord's right to re-enter the Premises without terminating
this Lease, Tenant shall surrender the Premises in the same
condition as received or as subsequently improved by Landlord
or Tenant, except for (i) ordinary wear and tear, and (ii)
damage by fire, earthquake, acts of God or the elements for
which damage Landlord has received all insurance proceeds, and
shall deliver to Landlord all keys for the Premises and
combinations to safes located in the Premises. Tenant shall,
at Landlord's option, remove, or cause to be removed, from the
Premises or the Building, at Tenant's expense and as of the
expiration or termination of this Lease, all signs, notices,
displays, millwork, nonmovable trade fixtures, or, subject to
Subsection 6.5(d) of this Lease, any non-Building standard
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tenant improvements placed in the Premises or the Building.
Tenant shall repair, at Tenant's expense, any damage to the
Premises or the Building resulting from the removal of any
item, including without limitation, repairing the floor and
patching and painting the walls where reasonably required by
Landlord. Tenant, however, has no obligation to remove any
improvements in place in the Premises at the Commencement Date
of this Lease. Tenant's obligations under this Section 6.4
shall survive the expiration or earlier termination of this
Lease. If Tenant fails to remove any item of property
permitted or required to be removed at the expiration or
earlier termination of the Term, Landlord may, at Landlord's
option, (a) remove that property from the Premises or Building
at Tenant's expense and sell or dispose of it in a manner that
Landlord considers advisable, or (b) place that property in
storage at Tenant's expense. Any property of Tenant remaining
in the Premises ten (10) days after the expiration or
termination of this Lease will be deemed to have been
abandoned by Tenant.
6.5 Alterations by Tenant.
(a) Approval Required. Tenant shall not make, or cause or
permit to be made, any additions, alterations, installations
or improvements in or to the Premises (collectively,
"Alterations"), without the prior written consent of Landlord.
Unless Landlord has waived the requirement in writing,
together with Tenant's request for approval of an Alteration,
Tenant must also submit details with respect to design
concept, plans and specifications, names of and financial and
other pertinent information about proposed contractors
(including without limitation, the labor organization
affiliation or lack of affiliation of any contractors),
certificates of insurance to be maintained by Tenant's
contractors, hours of construction, proposed construction
methods, details with respect to the quality of the proposed
work and reasonable evidence of security (such as payment and
performance bonds) to assure timely completion and payment of
the costs of the work by the contractor. With respect to an
Alteration that is visible from outside the Premises, the
Alteration must, in the opinion of Landlord, also be
architecturally and aesthetically harmonious with the
remainder of the Building.
(b) Complex Alterations. If the nature, volume or complexity
of any proposed Alteration will affect the basic heat,
ventilation and air conditioning or other Building Facilities
or systems or the Building, Tenant shall furnish to Landlord
information reasonably required by Landlord to insure Landlord
that the Alternation meet Landlord's reasonable requirements
so as not to adversely affect the Building or Building
Facilities or systems; otherwise, Landlord may require that
the work be designed by consultants designated by Landlord and
be performed by Landlord or Landlord's contractors.
(c) Standard or Work. All work to be performed by or for
Tenant pursuant hereto will be performed diligently and in a
first-class, workmanlike manner, and in compliance with all
applicable laws, ordinances, regulations and rules of any
public authority having jurisdiction over the Building and/or
Tenant and, so long as communicated in writing to Tenant,
Landlord's insurance carriers. Landlord has the right, but not
the obligation, to inspect periodically the work on the
Premises and may make required changes in the method or
quality of the work.
(d) Ownership of alterations. Except for Tenant's telephone
system and computer system, all Alterations made by or for
Tenant (other than Tenant's movable trade fixtures),
immediately become the property of Landlord, without and
cabinetry are considered improvements of the Premises and not
movable trade fixtures, regardless of how or where affixed. No
Alterations will be removed by Tenant from the Premises either
during or at the expiration or earlier termination of the
Term, and they shall be surrendered as a part of the Premises
unless the Alteration is not Building-standard and Landlord
has requested that Tenant remove it. Tenant may request at the
time of submission to Landlord of Tenant's information in
connection with a proposed Alteration that Landlord designate
which non-Building standard Tenant improvements resulting from
the Alteration are subject to removal at the end of the Term.
In the absence of such a request, all non-Building standard
improvements resulting from the Alteration are subject to
removal in accordance with the provisions of this Lease.
6.6 Payment of Costs: Mechanic's Liens. Except for costs that
Landlord agrees with Tenant in writing to pay (including in an
Exhibit or Rider attached to this Lease), Tenant shall pay for
all costs incurred or arising out of alterations, additions or
improvements in or to the Premises and shall not permit a
mechanic's or materialman's lien to be asserted against the
Premises. On Landlord's request, Tenant shall deliver to
Landlord proof of payment reasonably satisfactory to Landlord
of all costs incurred or arising out of any such alterations,
additions or improvements.
If Tenant contracts with a third party for the construction of
improvements in the Premises, or for the supply of materials
relating thereto, Tenant shall obtain validly executed and
acknowledged lien waivers from any party who might assert a
mechanic's or materialmen's lien as a result of Tenant's
contract, regardless of the probable or ultimate validity of
that lien. If a lien is filed against the Premises or any
interest of Landlord or Tenant in the Building, then Tenant
shall cause same to be discharged of record within ten (10)
days after its filing. If Tenant fails to obtain that
discharge, then, in addition to any other right or remedy of
Landlord, Landlord may (buy is not obligated to) discharge the
lien, either by paying the amount claimed to be due or by
procuring a bond, or by any other means. Any amount paid by
Landlord to obtain the discharge of the lien, with interest on
that amount at the lesser of eighteen percent (18%) per annum
or the highest lawful rate, from the date of Landlord's
payment to the date of repayment to Landlord, shall be paid by
Tenant to Landlord on demand.
ARTICLE VII
LANDLORD'S RIGHT OF ENTRY
7.1 Entry. In addition to its re-entry rights under Section 13.2,
Landlord and its authorized agents may, during reasonable
hours, enter the Premises (i) to inspect their general
condition and state of repair, (ii) to make repairs required
or permitted under this Lease, (iii) to show the Premises to
any prospective purchaser or mortgagee, or (iv) for any
other reasonable purpose. Landlord may show the Premises to a
prospective tenant only within the final 90 days of the Term.
7.2 "For Rent" Signs. During the final 90 days of the Term,
Landlord and its authorized agents may erect and maintain
on or about the Premises signs advertising the Building or
Premises for lease.
ARTICLE VIII
INSURANCE, FIRE AND CASUALTY DAMAGE
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8.1 Insurance on Building. Landlord shall maintain fire and
extended coverage insurance on the Building in an amount not
less than 80% (or such greater percentage as necessary to
comply with co-insurance requirements of the policy) of the
"replacement cost" thereof, as defined in a Replacement Cost
Endorsement to be attached thereto. Subject to the provisions
of Section 8.2 and 8.5 below, that insurance is for Landlord's
sole benefit and is under its sole control.
8.2 Casualty Covered by Insurance. If the Building, or any part
thereof, is damaged or destroyed by any peril covered by the
insurance described in Section 8.1, then Tenant shall give
immediate notice thereof to Landlord, and Landlord shall at
its sole costs and expense proceed with reasonable diligence
to rebuild and repair the damaged areas to substantially the
condition in which they existed before the damage or
destruction, except that Landlord is not required to rebuild,
repair or replace any part of the partitions, fixtures,
additions or other improvements placed in, on or about the
Premises by Tenant, nor is Landlord required in any event to
expend more than the amount of insurance proceeds actually
received by Landlord as a result of fire or other casualty.
Rental payable by Tenant under this Lease shall be abated to
the extent that the Premises are rendered uninhabitable by the
casualty.
8.3 Casualties Not Covered By Landlord's Insurance. If the
Premises, or any part thereof, are damaged or destroyed by a
casualty other than a peril covered by the insurance to be
provided by Landlord under Section 8.1, or if any other
improvements situated on the Premises are damaged or
destroyed, then Tenant shall at its sole cost and expense
proceed with reasonable diligence to rebuild and repair the
damaged improvements to substantially the condition in which
they existed before the damage or destruction, subject to
Landlord's approval of the plans and specifications for the
rebuilding and repairing.
8.4 Tenant's Property Insurance. Tenant shall maintain insurance
on all alterations, additions, partitions and improvements
erected by or on behalf of Tenant in, on or about the Premises
in an amount not less than 80% (or such greater percentage as
necessary to comply with co-insurance requirements of the
policy) of the "replacement cost" thereof, as defined in the
Replacement Cost Endorsement to be attached to the policy.
Written evidence of the required insurance coverage or
certified copies of policies and receipts evidencing payment
of the premiums therefor shall be delivered to Landlord before
the Commencement Date. Not less than ten (10) days before the
expiration date of any such policies, written evidence of
insurance or certified copies of renewals thereof (bearing
notations evidencing the payment of renewal premiums) shall be
delivered to Landlord. All policies shall be procured by
Tenant from financially responsible insurance companies
acceptable secured by as mortgage or deed of trust covering
the Premises requires that the insurance proceeds be applied
to that indebtedness, then Landlord may terminate this Lease
by delivering written notice of termination to Tenant within
thirty (30) days after the requirement is made by the
lienholder, whereupon all further rights and obligations of
each party hereunder shall cease and terminate.
8.6 Termination of Lease. Notwithstanding anything contained to
the contrary in this Article VIII, if the Building or the
Premises is destroyed by a fire or other casualty to the
extent that, in Landlord's reasonable judgment, the Building
or the Premises cannot practically be rebuilt to its
pre-existing condition within one hundred twenty (120) days,
or in any event during the last twelve (12) months of the
Term, then Landlord may, at Landlord's sole option, terminate
this Lease within ninety (90) days from the date of
destruction, by delivering written notice thereof to Tenant,
in which case neither party hereto shall have any further
obligations hereunder to the other except for Landlord's
obligations under Section 2.6.
8.7 Waiver of Subrogation. Each of Landlord and Tenant waives any
and every claim in its favor against the other during the Term
of this Lease for any and all loss of, or damage to, any of
its property located within or upon, or constituting a part
of, the Premises, which loss or damage is covered by valid and
collectible fire and extended coverage insurance policies.
These mutual waivers are in addition to, and not in limitation
or derogation of, any other waiver or release contained in
this Lease with respect to any loss of, or damage to, property
of Tenant. Because the mutual waivers will preclude the
assignment of a claim by way of subrogation or otherwise to an
insurance company (or any other person), each party hereto
shall immediately give to each insurance company which has
issued to it policies of fire and extended coverage insurance,
written notice of the terms of the waiver, and shall cause
those insurance policies to be properly endorsed, if
necessary, to prevent the invalidation of insurance coverages
by reason of the waiver.
ARTICLE IX
INDEMNITY AND PUBLIC LIABILITY INSURANCE
9.1 Indemnity. Landlord is not liable to Tenant or Tenant's
employees, agents, patrons or visitors, or to any other person
whomsoever, for any injury to person or damage to property on
or about the Premises, if caused by the action or inaction of
Tenant, its agents, servants or employees, or of any other
person entering upon the Premises under the expressed or
implied invitation of Tenant, or caused by the Building or the
improvements located on the Premises becoming out of repair,
or caused by leakage of gas, oil, water or steam or by
electricity emanating from the Premises, or due to any cause
whatsoever. Tenant hereby indemnifies Landlord and agrees to
hold it harmless from any loss, expense or claims, including
attorney's fees, arising out of any such damage or injury,
except injury to persons or damage to property the sole cause
of which is the gross negligence or wilful misconduct of
Landlord.
9.2 Liability Insurance. Tenant shall procure and maintain
throughout the Term at its sole cost and expense, a policy or
policies of comprehensive general liability insurance, for
bodily injury or death or property damage, insuring Landlord
and Tenant against all claims, demands, or actions relating to
the Premises on an occurrence basis with a minimum combined
single limit with policy limits of not less than $1,000,000
per occurrence for injury to persons (including death), and
for property damage or destruction, including loss of use. All
policies shall be procured by Tenant from financially
responsible insurance companies acceptable to Landlord, and
shall name Landlord, and any other party reasonably designated
by Landlord, as "additional insureds." Written evidence of the
required insurance coverage or certified copies of policies
and receipts evidencing payment of premiums therefor shall be
delivered to Landlord before the Commencement Date. Not less
than ten (10) days before the expiration date of any policies,
written evidence of insurance or certified copies of the
renewals thereof (bearing notations evidencing the payment of
renewal premiums) shall be delivered to Landlord. All policies
shall provide that not less than thirty (30) days' written
notice shall be given to Landlord before a policy may be
canceled.
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9.3 Tenant's Failure to Maintain Insurance. If Tenant fails to
comply with the foregoing insurance requirements, then
Landlord may (in addition to having available to it all other
remedies provided herein on the occurrence of an Event of
Default) obtain such insurance, and Tenant shall pay to
Landlord on demand, as additional rent hereunder, the premium
cost thereof plus interest at the lesser of eighteen percent
(18%) per annum or the highest lawful rate, from the date of
payment by Landlord until payment by Tenant.
ARTICLE X
CONDEMNATION
10.1 Total or Substantial Condemnation. If all or a substantial
part of the Premises is taken for any public or quasi-public
use under any governmental law, ordinance or regulation or by
right of eminent domain, or is sold to the condemning
authority under threat of condemnation, then this Lease shall
terminate and the rent shall be abated during the unexpired
portion of the Term, effective from the date of taking of the
Premises by the condemning authority.
10.2 Partial Condemnation. If less than a substantial part of the
Premises is taken for public or quasi-public use under any
governmental law, ordinance or regulation, or by right of
eminent domain, or is sold to the condemning authority under
threat of condemnation, then Landlord, at its option, may be
written notice to Tenant terminate this Lease or shall
forthwith at its sole expense restore and reconstruct the
building in which the Premises are located and improvements
made by Tenant or any assignee, subtenant or other occupant of
the of the Premises) to make the same reasonably suitable for
the uses for which the Premises are leased, as provided in
Section 4.1.
10.3 Disposition of Awards. All awards arising from a total or
partial taking of the Premises, of Tenant's leasehold estate,
or a taking for temporary use shall belong to and be the
property of Landlord without any participation by Tenant.
Tenant hereby assigns to Landlord any share of any such award
that might otherwise be payable to Tenant. Tenant hereby
waives any rights it may have with respect to the loss of its
leasehold estate pursuant to this Lease and the Premises as a
result of
ARTICLE XI
ASSIGNMENT, TRANSFER AND SUBLEASING BY TENANT
11.1 Landlord's Consent Required.
(a) No Assignment or Subletting. Tenant shall not assign or in
any manner transfer this Lease or any estate or interest
therein, or sublet the Premises or any part thereof, or grant
any license, concession or other right of occupancy of any
portion of the Premises without the prior written consent of
Landlord. Consent by Landlord to one or more assignments or
sublettings shall not operate as a waiver of Landlord's right
to any subsequent assignments and sublettings. All assignments
and sublettings shall be subject to the use limitations stated
in Section 4.1.
(b) Required Information. If Tenant desires to assign this
Lease or to sublet all or part of the Premises, then Tenant
shall notify Landlord at least sixty (60) days in advance of
the date on which Tenant desires to make the assignment or
enter into the sublease. Tenant shall provide Landlord with a
copy of the proposed assignment or sublease, and sufficient
information concerning the proposed assignee or subtenant to
allow Landlord to make informed judgments as to the financial
condition, reputation, operations and general desirability of
the proposed assignee or subtenant.
(c) Landlord's Options. Within thirty (30) days after
Landlord's receipt of the documents and information described
in Section (b) above, Landlord has the following options:
(i) cancel the Lease as to all of the Premises if
Tenant proposes to assign the Lease or sublet more
than fifty percent (50%) of the Premises, or cancel
the Lease as to the portion of the Premises proposed
to be sublet if Tenant proposes to sublet less than
fifty percent (50%) of the Premises; or
(ii) consent to the proposed assignment or sublease,
subject to the other provisions contained in this
Article XI; or
(iii) refuse to consent to the proposed assignment or
sublease but allow Tenant to continue its search for
an assignee or subtenant that will be acceptable to
Landlord, which option will be deemed to have been
elected by Landlord unless Landlord gives Tenant
written notice to the contrary.
(d) Legal Fees and Other Expenses. To reimburse Landlord for
administrative and legal expenses associated with its review
and/or preparation of legal documents relating to a proposed
assignment or sublease, Tenant shall pay to Landlord the
amount of all reasonable legal fees and expenses incurred by
Landlord in connection with its review of Tenant's request,
plus any legal fees and disbursements incurred in the
preparation and review of any documentation. Tenant shall pay
these amounts within five (5) days after its receipt of an
invoice from Landlord, as additional rent.
11.2 Transfer of Voting Interest. If Tenant is a corporation or
partnership and if any time during the Term of this Lease
(including extensions, those persons who own a majority or
either the outstanding voting shares or all outstanding shares
of capital stock or the controlling partnership interests of
Tenant at the time of the execution of this Lease, cease to
own a majority of those shares or partnership interest (except
as the result of transfers by devise or descent ), then the
change in ownership of a majority of those shares or
partnership interests is deemed an assignment of this Lease by
Tenant and therefore subject in all respects to the provisions
of Section 11.1. The previous sentence shall not apply,
however, if at the time of the execution of this Lease the
outstanding voting shares of capital stock or partnership
interests of Tenant are listed on a recognized security
exchange or over-the-counter market.
11.3 No Release. Notwithstanding any assignment or subletting,
Tenant and any Guarantor of Tenant's obligations under this
Lease shall remain fully responsible and liable for the
payment of the rent herein specified and for compliance with
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all of Tenant's other obligations under this Lease (even if
future assignments and sublettings occur after the assignment
or subletting by Tenant, and regardless of whether or not
Tenant's approval has been obtained for those future
assignments and sublettings). Moreover, if the rental due
and payable by a sublessee (or a combination of the rental
payable for the sublessee plus any bonus or other
consideration relating thereto) exceeds the rental payable
under this Lease, or if with respect to a permitted
assignment, permitted license or other transfer by Tenant
permitted by Landlord, the consideration payable to
Tenant by the assignee, licensee or other transferee exceeds
the rental payable under this Lease, then Tenant shall pay to
Landlord the excess amounts within ten (10) days after receipt
thereof by Tenant. Finally, on an assignment or subletting, it
is understood and agreed that all rentals paid to Tenant by an
assignee of sublessee are received by Tenant in trust for
Landlord, to be forwarded immediately to Landlord without
offset or reduction of any kind. On Landlord's election, those
rentals shall be paid directly to Landlord as specified under
this Lease (to be applied as a credit against Tenant's accrued
rental obligations, with any excess being the sole property of
Landlord).
11.4 No Mortgage. Tenant shall not mortgage, pledge or otherwise
encumber its interest in this Lease or in the Premises.
11.5 Transfer of Landlord's Interest. On a transfer and assignment
by Landlord of its interest in this Lease, or all or part of
the Building, Landlord shall thereby be released from any
further obligations hereunder, and Tenant shall look solely to
the successor in interest of Landlord for performance of those
obligations. Any security given by Tenant to secure
performance oaf Tenant's obligations hereunder may be
transferred by Landlord to the successor in interest, and
Landlord shall thereby be discharged of any further obligation
relating thereto. On a transfer of its interest in the
Building or Premises, Landlord may become a mortgagee for
proposes of Article XIV.
11.6 Bankruptcy. If this Lease is assigned in connection with
a bankruptcy proceeding, the provisions of Article XIV apply.
oaf Tenant's obligations hereunder may be transferred by
Landlord to the successor in interest, and Landlord shall
thereby be discharged of any further obligation relating
thereto. On a transfer of its interest in the Building or
Premises, Landlord may become a mortgagee for proposes of
Article XIV.
11.6 Bankruptcy. If this Lease is assigned in connection with a
bankruptcy proceeding, the provisions of Article XIV apply.
ARTICLE XII
HOLDING OVER
Without in any way affecting Landlord's rights and remedies under this
Lease, if Tenant holds over after the expiration or termination of the Lease,
then Tenant shall pay as monthly rent during each month of the holdover period
an amount equal to 150% of the amount of monthly rent due for the last month of
the Term. No holding over by Tenant after the Term of this Lease, either with or
without the consent and acquiescence of Landlord, shall extend the Term for a
period longer than one month unless that Term is extended in a writing executed
by Landlord. Any holding over without the written consent of Landlord shall be
on a tenacy-at-sufferance basis. On an unauthorized holding over, Tenant shall
indemnify Landlord against all claims for damages with respect to any other
lessee or prospective lessee to whom Landlord has leased all or any part of the
Premises.
ARTICLE XIII
DEFAULT BY TENANT: LANDLORD'S REMEDIES
13.1 Events of Default. The following events (individually, an
"Event of Default," and collectively, "Events of Default")
constitute defaults under this Lease:
(a) Failure of Tenant to pay when due an installment of the
rent or any other amount payable to Landlord hereunder.
(b) Failure of Tenant to comply with any term, condition or
covenant of this Lease.
(c) Insolvency of, or the making of a transfer in fraud of
creditors or a general assignment for the benefit of creditors
by Tenant or a Guarantor of Tenant's obligations under this
Lease.
(d) Filing of a petition under any section or chapter of the
United States Bankruptcy Code, as amended, or under any
similar law or statute of the United States or any State
thereof, by Tenant or by a Guarantor of Tenant's obligations
under this Lease, or entry of an order for relief in a
bankruptcy proceeding against Tenant or a Guarantor.
(e) Appointment of a receiver, trustee or liquidator of Tenant
or of a Guarantor or for all or substantially all of the
assets of Tenant or of a Guarantor of Tenant's obligations
under this Lease.
(f) Abandonment by Tenant of any substantial portion of the
Premises or cessation of use of the Premises for the purpose
leased.
(g) Assignment of Tenant's interest in this Lease by operation
of law.
13.2 Remedies of Landlord. On the occurrence of an Event of Default
listed in Section 13.1, Landlord may pursue any one or more of
the following remedies after giving Tenanat seven (7) days
written notice of such event of default except as otherwise
indicated (and, further, Tenant is liable for damages as
provided in Section 13.3):
(a) Termination. Terminate this Lease by giving written notice
of termination to Tenant, in which event Tenant shall
immediately surrender the Premises to Landlord. If Tenant
fails to so surrender the Premises, then Landlord may, without
prejudice to any other remedy it has for possession of the
Premises or arrearages in rent or other damages, re-enter and
take possession of the Premises and expel or remove Tenant and
any other person occupying the Premises or any part thereof,
by any lawful means.
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(b) Continuation of Lease: Reletting of Premises. Landlord may
continue this Lease in full force and effect, in which case
Tenant is liable for all rents and other amounts payable under
this Lease. Landlord may, nevertheless, re-enter and take
possession of the Premises, by any lawful means, without
terminating this Lease and without being liable for
prosecution or for any claim for damages therefor, and relet
the Premises and apply the rent received to the account of
Tenant. No reletting by Landlord is considered to be for its
own account unless Landlord has notified Tenant that this
Lease has been terminated. Landlord may relet the Premises for
a period or periods of time equal to, lesser or greater than
the remainder of the Term, and on whatever terms and
conditions Landlord, in its sole discretion, deems advisable.
Landlord's action under this subsection (b) is not considered
an acceptance of Tenant's surrender of the Premises unless
Landlord expressly so notifies or agrees with Tenant in
writing.
(c) Act for Tenant. Re-enter the Premises by any lawful means,
without terminating this Lease, and do whatever Tenant is
obligated to do under the terms of this Lease. Tenant shall
pay to Landlord, on demand, expenses incurred by Landlord in
effecting compliance with Tenant's obligations under this
Lease, plus interest thereon at the lesser of 18% per annum or
the highest lawful rate, from the date expended until repaid.
Landlord is not liable for any damages resulting to Tenant
from such action, whether caused by negligence of Landlord or
otherwise.
(e) Recapture of Advance Benefits. In addition to the remedies
set forth in Section 13.2(a)-(d), inclusive, on the occurrence
of an Event of Default by Tenant under this Lease with respect
to which Landlord elects either to terminate this Lease or,
without terminating this Lease, to terminate Tenant's
possession of the Premises, (i) Tenant shall pay to Landlord
in cash on demand an amount equal to all "Reimbursable Costs"
(as defined below) for which Tenant has not yet vested (as
defined below), and (ii) any remaining rental abatement and/or
other concessions that have not yet accrued under this Lease
shall terminate. As used herein, the "Reimbursable Costs"
means the total of (i) the aggregate dollar value of all
rental abatements that Tenant has received under this Lease;
(ii) any amount paid by Landlord for tenant leasehold
improvements in the Premises; and (iii) the aggregate dollar
amount which has been paid to or on behalf of Tenant under
this Lease, including, without limitation, any brokerage
commission paid and/or payable by Landlord in connection with
execution of this Lease. Because the Reimbursable Costs were
incurred by Landlord in reliance on Tenant's fully performing
Tenant's obligations under this Lease. Tenant hereby
acknowledges that Landlord will be damaged on a default by
Tenant in an amount equal to the aggregate dollar value of the
Reimbursable Costs for which Tenant has not yet vested, in
addition to (and not in lieu of) any other damages suffered by
Landlord. Tenant shall vest as to Reimbursable Costs at the
rate of (A) 100% divided by the number of months in the
initial Term for which Tenant is obligated to pay full rent,
(B) multiplied by the number of months for which Tenant has
paid full rent and is not otherwise in default hereunder. No
vesting shall occur with respect to any month for which Tenant
has not paid rent or in which Tenant is otherwise in default
hereunder. For example, if Tenant is obligated to pay full
rent for 50 months, then Tenant shall vest hereunder at the
rate of 2% for each month for which it pays full rent.
(f) Lease Remedies Not Exclusive: Lease Supersedes Property
Code. Pursuit of any of the foregoing remedies does not
constitute an irrevocable election of remedies nor preclude
pursuit of any other remedy provided elsewhere in this Lease
or by applicable law, and none is exclusive of another unless
so provided in this Lease or by applicable law. Likewise,
forbearance by landlord to enforce one or more of the remedies
available to it on an Event of Default does not constitute a
waiver of that default or of the right to exercise that remedy
later or of any rent, damages or other amounts due to Landlord
hereunder. In the case of a conflict, and to the extent that
Section 92 of the Texas Property Code applies to this Lease,
the terms of this Lease supersede and control the provisions
of Section 92 of the Texas Property Code.
13.3 Tenant's Liability For Landlord's Damages.
(a) In General. In all events, Tenant is liable for all
damages of whatever kind or nature, direct or indirect,
suffered by Landlord as a result of the occurrence of an Event
of Default. If Tenant fails to promptly pay Landlord for the
damages suffered, Landlord may pursue a monetary recovery from
Tenant. Included among those damages are all expenses incurred
by Landlord in repossessing the Premises (including, among
other expenses, increased insurance premiums resulting from
Tenant's vacancy), all expenses incurred by Landlord in
reletting the Premises (including, among other expenses, those
incurred for repairs, remodelling, replacements,
advertisements and brokerage fees), all concessions granted to
a new tenant on a reletting, all losses incurred by Landlord
as a result of Tenant's default (including, among other
losses, any adverse reaction by Landlord's mortgagee or by
other tenants or prospective tenants of the Building) and a
reasonable allowance for Landlord's administrative efforts,
salaries and overhead attributable directly or indirectly to
Tenant's default and Landlord's pursuit of the rights and
remedies provided under this Lease or by applicable law.
(b) Termination of Lease. If Landlord terminates this Lease
under Section 13.2(a), then Tenant shall pay to Landlord on
demand the amount of all loss and damage suffered by Landlord
by reason of the termination, to be determined by one or a
combination of the following measures of damages:
(i) Until Landlord is able, through good faith
efforts (the nature of which shall be at Landlord's sole
discretion), to relet the Premises, Tenant shall pay to
Landlord on or before the first day of each calendar month,
the amounts required to be paid by Tenant under this Lease.
After the Premises have been relet by Landlord, Tenant shall
pay to Landlord on the 20th day of each calendar month, the
difference between the amount required to be paid by Tenant
under this Lease for that calendar month and the amount
actually collected by Landlord for that month. If it becomes
necessary for Landlord to bring suit to collect a deficiency,
Landlord may allow the deficiency to accumulate and may bring
an action on several or all of the accrued deficiencies at one
time. No suit shall prejudice in any way Landlord's right to
bring a similar action for any deficiency or deficiencies that
arise later. Any amount collected by Landlord form subsequent
tenants for any calendar month which exceeds the amounts
required to be paid by Tenant under this Lease shall be
credited to reduce Tenant's liability for any calendar month
for which the amount collected by Landlord is less than the
amount required to be paid by Tenant, as Tenant's sole right
to that excess.
(ii) When Landlord desires to do so, including after
it has elected to proceed under subparagraph (i) immediately
above (that election not being exclusive under this Lease).
Landlord may demand a final settlement. On that demand,
Landlord is entitled to receive from Tenant the difference
between the total of all amounts required to be paid by Tenant
under this Lease for the remainder of the Term minus the
reasonable rental value of the Premises for that period, with
such difference to be discounted to a present value based on a
rate equal to the rate of interest allowed by law in Texas
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when the parties to a contact have not agreed on a particular
rate of interest (or, in the absence of such a stipulated
rate, at the rate of 10% per annum).
(iii) Landlord's election to proceed under subsection
(i) above shall not prejudice its right thereafter to cancel
that election in favor of the remedy described in subsection
(ii) above, so long as at the time of that cancellation,
Tenant is still in default.
(c) Continuation of Lease: Reletting of Premises. If Landlord
elects to continue this Lease in effect, then Tenant is liable
for the rent and other accounts due hereunder. If Landlord
relets the Premises for the account of Tenant, then the
amounts actually received by Landlord shall be credited to the
amounts owed by Tenant under this lease (including the amounts
described in Section 13.3(a)).
ARTICLE XIV
BANKRUPTCY OR INSOLVENCY OF TENANT
14.1 Liquidation. If Tenant becomes a debtor under Chapter 7 of the
federal Bankruptcy Code, 11 U.S.C. ss.ss. 101 et seq. (the
"Bankruptcy Code"), and Tenant's trustee or Tenant elects to
assume this Lease for the purpose of assigning it, or
otherwise, then that election and assignment may be made only
if the provisions of Sections 14.2 and 14.4 are satisfied. If
Tenant or Tenant's trustee fails to elect to assume this Lease
within 60 days after an order for relief is entered against
Tenant, or such additional time as is provided by the court
within that 60-day period, then this Lease shall be deemed to
have been rejected. Immediately after that rejection, Landlord
may repossess the Premises without further obligation to
Tenant or Tenant's trustee and this Lease shall terminate, but
Landlord's right to be compensated for damages (including,
without limitation, liquidated damaged provided for under this
Lease) in any such proceeding shall survive.
14.2 Reorganization. If a petition for reorganization or adjustment
of debts is filed concerning Tenant under Chapter 11 of the
Bankruptcy Code, or a proceeding is filed under Chapter 7 of
the Bankruptcy Code and is converted to a Chapter 11 case,
then Tenant's trustee or Tenant, as debtor-in-possession, must
elect to assume this Lease within 120 days after an order for
relief is entered against Tenant, or Tenant's trustee or the
debtor-in-possession shall be deemed to have rejected this
Lease. If Tenant, Tenant's trustee or the debtor-in-possession
fails to perform all of Tenant's obligations under this Lease
within the time periods (excluding grace periods) required for
that performance, then no election by Tenant's trustee or the
debtor-in-possession to assume this Lease, whether under
Chapter 7 or Chapter 11, is effective unless each of the
following conditions has been satisfied.
(a) Defaults Cured. Tenant's trustee or the
debtor-in-possession cures all defaults under the Lease, or
provides Landlord with Assurance (as defined below) that it
will cure, (i) all defaults that can be cured by the payment
of money within 10 days from the date of such assumption and
(ii) all other defaults under this Lease that can be cured by
the performance of the act needed to effect the cure promptly
after the date of assumption.
(b) Compensation for Damages. Tenant's trustee or the
debtor-in-possession and, if this Lease has been guaranteed,
Guarantor compensates, or provides Landlord with Assurance
that within 10 days from the date of such assumption it will
compensate, Landlord for any actual pecuniary loss incurred by
Landlord arising from the default of Tenant, Tenant's trustee,
or the debtor-in-possession as indicated in any statement of
actual pecuniary loss sent by Landlord to Tenant's trustee or
the debtor-in-possession.
(c) Assurance of Future Performance. Tenant's trustee or the
debtor-in-possession provides Landlord with Assurance of the
future performance of the obligations of Tenant under the
Lease, Lessee's trustee or the debtor-in- possession, and if
that Assurance has been provided, Tenant's trustee or the
debtor-in-possession shall also (i) deposit with Landlord, as
security for the timely payment of rent under this Lease, an
amount equal to three (3) months' Base Rental, and (ii) pay in
advance to Landlord on the date that Base Rental is due and
payable, one-twelfth (1/12) of Tenant's annual obligations for
any other purpose (e.g., taxes and insurance) pursuant to this
Lease. The obligations imposed on Tenant's trustee or the
debtor-in-possession shall continue with respect to Tenant or
any assignee of this Lease after the completion of bankruptcy
proceedings.
(d) No Breach of Other Obligations. The assumption will not
breach or cause a default under any provision of any other
lease, mortgage, financing agreement or other agreement by
which Landlord is bound relating to the Premises or any larger
development of which the Premises are a part.
For purposes of this Article XIV, Landlord and Tenant
acknowledge that "Assurance" means no less than (i) Tenant's
trustee or the debtor-in-possession has and will continue to
have sufficient unencumbered assets after the payment of all
secured obligations and administrative expenses to assure
Landlord that sufficient funds will be available to fulfill
the obligations of Tenant under this Lease and there has been
deposited with Landlord, or the Bankruptcy Court has entered
an order segregating, sufficient cash payable to Landlord,
and/or Tenant's trustee or the debtor-in-possession shall have
been granted a valid and perfected first lien and security
interest and/or mortgage in property of Tenant, Tenant's
trustee or the debtor-in- possession, acceptable as to value
and kind to Landlord, to secure to Landlord the obligation of
Tenant, Tenant's trustee or the debtor-in-possession to cure
the defaults under this Lease, monetary and/or non-monetary,
within the time periods set forth above, and (if this Lease
has been guaranteed) (ii) Guarantor has cured all defaults
under this Lease that can be cured by the payment of money and
has undertaken to promptly cure all other defaults under this
Lease that can be cured by the performance of any act and, if
this Lease has been guaranteed, Landlord has received a duly
authorized and binding undertaking of Guarantor that Guarantor
remains obligated under its Guaranty to the same extent as if
the circumstances giving rise to the requirement that
Assurance be provided had not occurred, together with a
statement of Guarantor's certified public accountants
certifying that the net worth of Guarantor, on a consolidated
basis but exclusive of any net worth of Lessee, is in excess
of $250,000.00. For an individual Guarantor, there shall be
excluded from the Guarantor's net worth for purposes hereof
any equity in the Guarantor's principal residence. For a
non-individual Guarantor, there shall be excluded from that
Guarantor's net worth for purposes hereof its basis in its
fixed assets, including land and buildings.
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14.3 Subsequent Liquidation or Petition. If this Lease is assumed
in accordance with Section 14.2 and thereafter Tenant is
liquidated or files a petition for reorganization or
adjustment of debts under Chapter 11 of the Bankruptcy Code,
Landlord may, at its option, terminate this Lease and all
rights of Tenant hereunder, by giving Tenant notice of its
election so to terminate within 30 days after occurrence of
either of such events.
Initial Initial
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14.4 Assignment.
(a) Adequate Assurance of Future Performance. If Tenant's
trustee or the debtor-in-possession assumes this Lease
pursuant to the terms and provisions of Sections 14.1 or 14.2
for the purpose of assigning (or otherwise elects to assign)
this Lease to an assignee other than Guarantor, then this
Lease may be so assigned only if the proposed assignee
provides adequate assurance of future performance of all of
the terms, covenants and conditions of this Lease to be
performed by Tenant including, without limitation, the
obligation to pay Base Rental. As used herein, "adequate
assurance of future performance" means that no less than each
of the following conditions has been satisfied:
(i) The proposed assignee has furnished Landlord with
either (A) a current financial statement audited by a
certified public accountant indicating a net worth and working
capital in amounts that Landlord reasonably determines are
sufficient to assure the future performance by the assignee of
Tenant's obligations under this Lease or (B) a guaranty, or
guaranties, in form and substance satisfactory to Landlord
from one or more persons with a net worth and working capital
in amounts that Landlord reasonably determines are sufficient
to assure the future performance of Tenant's obligations under
this Lease.
(ii) The proposed assignment will not release or
impair any guaranty of the obligations of Tenant (including
Guarantor and the proposed assignee) under this Lease.
(iii) The proposed assignee and its guarantors have a
demonstrated financial condition and operating performance
similar or superior to that of Tenant and any Guarantor of
Tenant's obligations under this Lease at the date that Tenant
became a tenant hereunder.
(b) Any and all monies or other considerations payable or
otherwise to be delivered in connection with the assignment
referred to in subparagraph (i) next above shall be paid or
delivered to Landlord, shall be and remain the exclusive
property of Landlord and shall not constitute property of
Tenant or of the estate of Tenant within the meaning of the
Bankruptcy Code. Any and all monies or other considerations
constituting Landlord's property under the preceding sentence
not paid or delivered to Landlord shall be held in trust for
the benefit of Landlord and be promptly paid to or turned over
to Landlord.
(c) Any person or entity to which this Lease is assigned
pursuant to the provisions of the Bankruptcy Code shall be
deemed without further act or deed to have assumed all of the
obligations arising under this Lease on and after the date of
such assignment. Any such assignee shall on demand execute and
deliver to Landlord an instrument confirming the assumption.
14.5 Reasonable Charges. When, pursuant to the Bankruptcy Code,
Tenant's trustee or the debtor-in-possession is obligated to
pay reasonable use and occupancy charges for the use of the
Premises, the charges shall not be less than the Base Rental
and all other amounts payable to Tenant under this Lease.
14.6 Consent. Neither the whole nor any portion of Tenant's
interest in this Lease or its estate in the Premises shall
pass to any trustee, receiver, assignee for the benefit of
credits, or any other person or entity, or otherwise by
operation of law under the laws of any state having
jurisdiction of the person or property of Tenant unless
Landlord has consented to the transfer in writing. No
acceptance by Landlord of Base Rental or any other payments
from a trustee, receiver, assignee, person or other entity
shall be deemed to constitute such consent by Landlord, nor
shall it be deemed a waiver of Landlord's right to terminate
this Lease for transfer of Tenant's interest under this Lease
without such consent.
14.7 Intent. Landlord and Tenant acknowledge, for themselves and
for each of their successors and assigns, their intent to have
the applicable provisions of ss 365 of the Bankruptcy Code, or
any successor provision, apply to this Lease.
ARTICLE XV
LIEN FOR RENT
IN CONSIDERATION OF THE MUTUAL BENEFITS ARISING UNDER THIS LEASE,
TENANT HEREBY GRANTS TO LANDLORD A LIEN AND SECURITY INTEREST IN ALL PROPERTY OF
TENANT (INCLUDING, BUT NOT LIMITED TO, ALL FIXTURES, MACHINERY, EQUIPMENT,
FURNISHINGS, AND OTHER ARTICLES OF PERSONAL PROPERTY NOW OR HEREAFTER PLACED IN
OR ON THE PREMISES BY TENANT, TOGETHER WITH THE PROCEEDS FROM THE DISPOSITION OF
THE THOSE ITEMS) [THE "COLLATERAL"], NOW OR HEREAFTER PLACED IN OR UPON THE
PREMISES, AS SECURITY FOR PAYMENT OF ALL RENT AND OTHER SUMS AGREED TO BE PAID
BY TENANT HEREIN. THE PROVISIONS OF THIS ARTICLE XV CONSTITUTE A SECURITY
AGREEMENT UNDER THE TEXAS UNIFORM COMMERCIAL CODE, AND LANDLORD HAS AND MAY
ENFORCE A SECURITY INTEREST IN THE COLLATERAL. THE COLLATERAL SHALL NOT BE
REMOVED WITHOUT THE CONSENT OF LANDLORD UNTIL ALL ARREARAGES IN RENT AND OTHER
SUMS OF MONEY THEN DUE TO LANDLORD HEREUNDER HAVE BEEN PAID AND DISCHARGED. ON
OR BEFORE THE COMMENCEMENT DATE, TENANT SHALL EXECUTE, AS DEBTOR, TWO OR MORE
FINANCING STATEMENTS, IN THE FORMS OF EXHIBIT"F" ATTACHED HERETO, TO PERFECT
THIS SECURITY INTEREST PURSUANT TO THE TEXAS UNIFORM COMMERCIAL CODE. LANDLORD
MAY AT ITS ELECTION AT ANY TIME FILE A COPY OF THIS LEASE AS A FINANCING
STATEMENT. LANDLORD, AS SECURED PARTY, HAS ALL OF THE RIGHTS AND REMEDIES
AFFORDED A SECURED PARTY UNDER THE TEXAS UNIFORM COMMERCIAL CODE IN ADDITION TO
AND CUMULATIVE OF THE LANDLORD'S LIENS AND RIGHTS PROVIDED BY LAW OR BY THE
OTHER TERMS AND PROVISIONS OF THIS LEASE.
Initial Initial
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ARTICLE XVI
SUBORDINATION AND ATTORNMENT
Landlord may transfer, assign, mortgage and convey in whole or in part
the Building or the Land, and any and all of its rights under this Lease, and
noting herein shall be construed as a restriction on Landlord's right to do so.
Tenant hereby subordinates this Lease and all rights of Tenant hereunder to the
lien of any mortgage or deed of trust now or hereafter placed against the
Premises, and all renewals substitutions and extensions thereof, and all such
liens are superior to and prior to this Lease. If a mortgagee or other
lienholder acquires the Premises as a purchaser at a foreclosure sale (any such
mortgagee or other lienholder or purchaser at a foreclosure sale being each
hereinafter referred to as the "Purchaser at Foreclosure"), then Tenant shall
(at the sole and absolute election of the Purchaser at Foreclosure) thereafter
remain bound to the same effect as if a new and identical Lease between the
Purchaser at Foreclosure, as Landlord, and Tenant, as Tenant, had been entered
into for the remainder of the Term of the Leaser in effect at the time of
foreclosure. Tenant shall, on request, execute any certificate or instrument
necessary desirable further to effect the subordination of this Lease to the
mortgage or deed of trust liens, or to confirm a lienholder's election to
continue the Lease in effect after foreclosure, as above provided. Tenant shall
attorn and pay rent to the Purchaser at Foreclosure as if that party were a
signatory to this Agreement. Tenant hereby constitutes and appoints Landlord as
Tenant's attorney-in-fact to execute any such certificate or instrument time to
subordinate its lien to this Lease and to Tenant's rights hereunder such that a
foreclosure of that lien will result in the purchase of the affected property
subject to the rights of Tenant hereunder, and Tenant has no right or ability to
unilaterally prevent that result. On an act or omission by Landlord which might
allow Tenant to terminate this Lease or to claim a partial or total eviction,
Tenant shall not exercise any such right until (i) it has given written notice
to the holder of any mortgage, deed of trust or other lien on the Premises, of
the act or omission, and (ii) a reasonable period for remedying the act or
omission has elapsed following the giving of notice.
ARTICLE XVII
TENANT ESTOPPEL LETTER
On the request of Landlord made from time-to-time with at least five
(5) business days' notice, Tenant shall execute and deliver to Landlord, or to a
mortgagee or prospective purchaser as directed by Landlord, a statement in
writing certifying that, among other things, (i) all of the construction work in
or relating to the Premises has been satisfactorily completed, (ii) Tenant has
accepted the work in or relating to, and is in possession of, the Premises,
(iii) the Lease is in full force and effect and has not been amended, modified
or superseded, (iv) there is no existing default on Landlord's or Tenant's part,
(v) rent has begun to accrue but has not been paid more than one month in
advance, (vi) Tenant has no knowledge of any pledge or assignment by Landlord of
the Lease or rentals due thereunder, except for the assignment to Landlord's
lenders. If any of the foregoing matters is not true at the time that Landlord
requests the written statement, then Tenant shall specify in detail any
differences.
ARTICLE XVIII
QUIET ENJOYMENT
Landlord has neither made nor authorized any other person (including
Broker or any other brokers) to make any representations, covenants or
warranties with respect to the Premises except as expressly set forth in this
Lease. Landlord warrants that it has full right and power to execute and perform
this Lease and to grant the estate demised herein and that Tenant, on payment of
the rent and performance of the covenants herein contained, shall peaceably and
quietly have, hold and enjoy the Premises during the full Term of the Lease,
subject to the rights of lienholders under Article XVI and if, Landlord is the
lessee under a ground lease, to the rights of a lessor under a ground lease.
ARTICLE XIX
NO IMPLIED WAIVER
Landlord's failure to insist at any time on the strict performance of
any covenant or agreement, or its failure to exercise any option, right, power
or remedy contained in this Lease, shall not be construed as a waiver or a
relinquishment thereof for the future. The waiver of or redress for any
violation of any term, covenant, agreement, or condition contained in this Lease
shall not prevent a subsequent act being a violation. Landlord shall be
considered to have waived a provision of this Lease only if specifically
expressed in a writing signed by Landlord. No expressed waiver shall affect any
matter other than the one specified in the waiver and only for the time and in
the manner specifically stated. Landlord's receipt of rent with knowledge of the
breach of a covenant or agreement contained in this Lease shall not be deemed a
waiver of the breach. No payment by Tenant or acceptance by Landlord of a lesser
amount than the monthly installment of rent due under this Lease shall be
considered other than on account of the earliest rent due hereunder, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment as rent be deemed an accord and satisfaction. Landlord may accept a
check or payment without prejudice to Landlord's right to recover the balance of
the rent due or to pursue any other remedy provided in this Lease.
ARTICLE XX
NOTICES
Each provision of this Lease or any applicable governmental laws,
ordinances, regulations, and other requirements with reference to the sending,
mailing or delivery of any notice, communication, request, reply or advice
(hereinafter severally and collectively called "notice"), or with reference to
the making of any payment by Tenant to Landlord, shall have been complied with
when and if the following steps are taken:
20.1 Payments Due Landlord. All rent and other payments required to
be made by Tenant to Landlord hereunder shall be payable to
Landlord in the County in which the Building is located, at
the address set out in Section 1.1, or at such other address
as Landlord specified from time to time. All such payments
shall, for the purposes of this Lease, notwithstanding the
provisions of Section 20.2 be deemed paid only when actually
received by Landlord. Except as may be provided otherwise in
this Lease, all amounts payable under this Lease shall be
payable in coin or currency of the United States of American
which at the time of payment is legal tender for public and
private debts.
Initial Initial
15
<PAGE>
20.2 Notices. Any notice or document required to be delivered
hereunder, or any notice given by either party hereto to the
other party, shall be deemed to be delivered if actually
received or, whether or not received, on deposit in the United
States mail, postage prepaid, certified or registered mail
(with or without return receipt requested), addressed to the
appropriate party at its respective address set out in Section
1.1 or at such other address as that party has theretofore
specified in accordance with Section 20.3. Notice given in any
other manner is effective only if and when received by the
party to be notified. If a party intentionally avoids receipt
of notice, then notice is deemed received given by any means
by which services of process can be effected under applicable
law.
20.3 Change in Addresses. The parties hereto and their respective
heirs, successors, legal representatives, and assigns may from
time to time change their respective addresses by giving at
lease fifteen (15) days' written notice to the other party,
delivered in compliance with this Article XX.
ARTICLE XXI
SUBSTITUTION OF SPACE
21.1
ARTICLE XXII
MISCELLANEOUS
22.1 Attorney's Fees. If, as a result of any breach or default by
Tenant of its respective obligations under this Lease,
Landlord employs an attorney to enforce or defend any of its
right or remedies hereunder, and if Landlord prevails, than
Tenant shall pay to Landlord the reasonable attorney's fees
incurred by Landlord.
22.2 Broker's Commission. Tenant and Landlord hereby indemnify each
other, and shall hold each other harmless from and against,
all liabilities arising from any claim for a "broker's or
leasing agent's" commission, other than with respect to the
commissions which the indemnified party has agreed, in
writing, to pay, including any agreed to be paid to the
Broker(s) named in Section 1.1(q).
22.3 Force Majeure. If the performance by Landlord of any provision
of this Lease is delayed or prevented by any act of God,
strike, lockout, shortage of material or labor, restriction by
any governmental authority, civil riot, flood, and other cause
not within the control of Landlord, then the period for
Landlord's performance of the provision shall be automatically
extended for the same amount of time that Landlord is so
delayed or hindered.
22.4 Use of Language. Words of any gender used in this Lease
include any other gender, and words in the singular include
the plural, unless the context otherwise requires.
22.5 Captions. The captions or headings of paragraphs in this
Lease are inserted for convenience only, and shall not be
considered in construing the provisions hereof if any question
of intent arises.
22.6 Successors. The terms, conditions and covenants contained in
this Lease inure to the benefit of, and are binding on, the
parties hereto and their respective successors in interest,
assigns and legal representatives, except as otherwise herein
expressly provided. All rights, powers, privileges,immunities
and duties of Landlord under this Lease, including without
limitation, notices required or permitted to be delivered by
Landlord to tenant hereunder, may, at Landlord's option, be
exercised or performed by Landlord's agent attorney.
22.7 Sublease. If this Lease is in fact a sublease, then Tenant
accepts this Lease subject to all of the terms and conditions
of the lease under which Landlord holds the Premises as
lessee. Tenant shall do no act or thing that would constitute
a violation by Landlord of its obligation under such lease.
Initial Initial
16
<PAGE>
22.8 Severability. If any provision of this Lease is finally held
by a court of competent jurisdiction to be invalid or
unenforceable, then the invalid or unenforceable provision
shall be deemed severed from this Lease and the validity and
enforceability of the remaining provisions of this Lease shall
be unaffected.
22.9 Charges For Services. Any amount payable by Tenant to Landlord
hereunder is considered to be rent due and shall be included
in any lien for rent. The non-payment of any such amounts due
is an Event of Default hereunder giving rise to Landlord's
exercise of any remedies available hereunder or at law.
22.10 Personal Liability. Landlord's liability to Tenant for any
default by Landlord under this Lease is limited to Landlord's
interest in the Building and the Land, and Tenant agrees to
look solely to Landlord's interest therein for the recovery of
any judgment against Landlord, it being intended that neither
Landlord nor any of its partners, shareholders, agents,
affiliates, officers or directors shall be personally liable
for any judgment or deficiency.
22.11 Damage From Certain Causes. Landlord is not liable or
responsible to Tenant for any loss or damage to any property
or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order,
requisition, or order of governmental body or authority, or
for any damage or inconvenience that may arise through repair
or alteration of any part of the Land, the Building or the
Premises, or a failure to make any such repairs.
22.12 Notice And Cure to Landlord and Mortgagee. On any act or
omission by Landlord which might give, or which Tenant claims
or intends to claim gives. Tenant the right to damages from
Landlord or the right to terminate this Lease by reason of a
constructive or actual eviction from all or part of the
Premises, or otherwise, Tenant shall not sue for damages or
attempt to terminate until it has given written notice of the
act or omission to Landlord and to the holder(s) of the
indebtedness or other obligations secured by any mortgage or
deed of trust affecting the Premises, and a reasonable period
of time for remedying the act or omission has elapsed
following the giving of the notice, during which time Landlord
and the lienholder(s), or either of them, their agents or
employees, may enter upon the Premises and do therein whatever
is necessary to remedy the act or omission. During the period
after the giving of notice and during the remedying of the act
or omission, the Base Rental payable by Tenant shall not be
abated and apportioned except to the extent that the Premises
are untenantable.
22.13 Governing Law. This Lease and the rights and obligations of
the parties hereto shall be interpreted, construed, and
enforced in accordance with the local laws of the State of
Texas.
22.14 No Reduction of Rental. Except as otherwise expressly and
unequivocally provided in this Agreement, Tenant shall not for
any reason withhold or reduce the amounts payable by Tenant
under this Lease, it being understood that the obligations of
Landlord hereunder are independent of Tenant's obligations. In
this regard, if Landlord commences any proceedings against
Tenant for nonpayment of rentals or any other sum due and
payable by Tenant under this Lease, Tenant shall not interpose
a counterclaim or other claim against Landlord of claim
against Landlord in such proceedings, then in addition to any
other lawful remedy of Landlord, on motion of Landlord the
counterclaim or other claim asserted by Tenant shall be
severed out of the proceedings instituted by Landlord and
those proceedings may proceed to final judgment separately and
apart from and without consolidation with or reference to the
status of the counter claim or any other claim asserted by
Tenant. Furthermore, if Landlord is required by a governmental
authority to reduce energy consumption, to impose a parking or
similar charge with respect to the Building, to restrict the
hours of operation of, limit access to or reduced parking
spaces available at the Building, or take other limiting
actions, then Tenant is not entitled to rent abatement or to
terminate this Lease.
22.15 No Partnership. Notwithstanding the fact that a portion of the
rent reserved under this Lease may be a percentage of Tenant's
Gross Sales, and notwithstanding anything else to the
contrary, Landlord is not and under no circumstances shall it
be considered to be a partner of Tenant or engaged in a joint
venture with Tenant.
22.16 No Oral Changes. This Lease may not be changed or terminated
orally, but only in writing executed by both parties hereto.
22.17 ENTIRETY: NO REPRESENTATIONS AND WARRANTIES. THIS LEASE,
INCLUDING ONLY THE ATTACHMENTS HERETO SPECIFIED IN SECTION
22.18, EMBODIES THE ENTIRE AGREEMENT BETWEEN THE PARTIES AND
SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, INCLUDING
ANY LETTERS OF INTENT, IF ANY, RELATING TO THE SUBJECT MATTER
HEREOF. LANDLORD HAS NOT MADE, AND TENANT MAY NOT RELY ON, ANY
REPRESENTATIONS OR WARRANTIES WITH REGARD TO THE BUILDING,
PREMISES OR OTHERWISE, EXPRESSED OR IMPLIED, EXCEPT AS STATED
IN THIS LEASE. IN PARTICULAR, LANDLORD HAS NOT AUTHORIZED ANY
AGENT OR BROKER TO MAKE A REPRESENTATION OR WARRANTY
INCONSISTENT WITH THE TERMS OF THIS LEASE AND TENANT MAY NOT
RELY ON ANY SUCH INCONSISTENT REPRESENTATION OR WARRANTY.
[THIS SPACE INTENTIONALLY LEFT BLANK]
22.18 Attachments. If the box next to any of the following documents
is marked, then the document is attached to this Lease, and
it, as well as all drawings and documents prepared pursuant
thereto, are a part of this Lease:
Exhibit "A" - Floor Plan
Exhibit "B" - Legal Description
Exhibit "C" - Operating Cost Computation
Exhibit "D" - Rules
Exhibit "E" - Guaranty of Lease Agreement PURPOSELY OMITTED
Exhibit "F" - Financing Statements PURPOSELY OMITTED
Exhibit "G" - Janitorial Services USED FOR GENERAL STANDARD
Exhibit "H" - Special Provisions
Initial Initial
17
<PAGE>
Rider 101 - Work Letter
Rider 201 - Parking Agreement
Rider 301 - Option to Extend
THIS LEASE is executed and effective this 15th day of April, 1997.
LANDLORD: MISSION LIFE INSURANCE COMPANY
a Texas Corporation
By: /s/ Donald C. Earthman
Name: Donald C. Earthman
Title: Executive Vice President & C.E.O.
TENANT: WORLDPORT COMMUNICATIONS, INC.
an Corporation
By: /s/ John W. Dalton
Name: John W. Dalton
Title: President & CEO
Initial Initial
18
<PAGE>
RIDER 101
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
Work Letter
Landlord shall have the carpet cleaned and the paint touched up as needed in the
Leased Premises described herein, not to exceed fifty cents ($ .50) per net
rentable square foot of lease area.
RIDER 101A-1
Initial Initial
<PAGE>
RIDER 201A
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
PARKING AGREEMENT
1. (a) Parking Spaces - Tenant's Obligation. Landlord shall permit
Tenant to use, and Tenant shall pay Landlord for, at all times during
the term of this Lease, parking spaces associated with the Building in
the following quantities and for the Basic Parking Charge (herein so
called ) set forth below for each parking space:
Reserved
Number of Spaces Basic Parking
Charge per Space
ONE ( 1 ) $ -0- per month
-------------------------------- --------------- ----------------
and
THREE ( 3 ) $ 25.00 per month
-------------------------------- ---------------- -------------------
(b) Parking Spaces - Tenant's Option. In addition to the parking
spaces, if any, that Tenant is obligated to pay for under paragraph (a)
above, Landlord shall permit Tenant to use, at its option, additional
spaces such that the total number of spaces available to Tenant from
time to time equals one space for each 429 square feet of Area of the
Premises. Tenant shall pay the Basic Parking Charge for each parking
space used by it pursuant to this paragraph (b).
2. Basic Parking Charge. Tenant shall pay to Landlord during the term of
this Lease, as additional rental hereunder, the Basic Parking Charge
specified above for each of the parking spaces (i) required to be paid
for pursuant to paragraph 1(a) above, and (ii) actually used by Tenant
pursuant to paragraph 1(b), such amount to be payable monthly advance
on the first day of each and every calendar month during the term of
this Lease. The applicable Basic Parking Charge may be adjusted
periodically (but no more often than every six (6) months throughout
the Term of this Lease beginning on the first day of January of the
first Lease Year after the date on which this Lease commences (and on
the first day of each July and January thereafter) to equal the then
prevailing market rate for parking spaces. In no event shall any
adjustment in the prevailing market rate decrease the Basic Parking
Charge below that in effect in the immediately preceding Lease Year.
A pro rata portion of the Basic Parking Charge shall be payable for the
first partial calendar month if the Term of this Lease commences on a
date other than the first day of a calendar month. Default by Tenant in
the payment of any Basic Parking Charge is a default in the payment of
rent, giving to Landlord all rights and remedies available to it in
such event.
3. Other Parking Provisions.
(a) Landlord may, at its option, provide a reasonable means of
controlling access to the Parking Areas.
(b) Landlord may relocate any parking areas or spaces from time to
time, and may also use portions of the Parking Area outside of the
designated areas for free, visitor, or other parking needs of the
Landlord.
(c) Landlord may made, modify and enforce rules and regulations
relating to the parking of automobiles in the Parking Area, and Tenant
shall observe those rules and regulations. Landlord also may change the
size of the Parking Area.
(d) Tenant is responsible for ensuring that its employees and agents do
not park their automobiles in visitor parking areas or spaces, if any,
established by Landlord, or in parking spaces or areas, if any,
reserved or designated by Landlord for the use of other tenants of the
Building, or for other purposes (such as for retail tenants) so long as
such designation does not result in there being fewer than the number
of spaces in the Parking Area specified in paragraph 1(b) above
available for Tenant's use. Tenant shall furnish to Landlord the state
automobile license numbers of automobiles of Tenant and its employees
who will occupy Tenant's parking spaces from time to time, within five
(5) days from Tenant's receipt of written notice from Landlord
requesting the information.
(e) Landlord is not liable or responsible for any loss of or to any
automobile or vehicle or equipment or other property therein, or damage
to property or injury to person, unless the loss, damages, or injury is
proximately caused by the gross negligence of Landlord or its
employees.
(f) Landlord may, in its sole discretion form time to time, designate
parking spaces in any parking areas for exclusive use of specified
tenants of the Building. The location and the number of those spaces
shall be determined by Landlord in its sole discretion, and Landlord
may from time to time change the location and number of those spaces.
(g) This Parking Agreement is not deemed to create a bailment between
the parties, it being agreed and understood that the relationship
created between Landlord and Tenant with regard to the parking spaces
and Parking Area is that of licensor and licensee, respectively.
(h) If fifty percent (50%) or more of the Parking Area is damaged by
fire or other casualty, or if the insurance proceeds payable as a
result of the casualty to the Parking Area are applied by Landlord's
mortgagee to Landlord's mortgage debt against the Building and/or
Parking Area, or if there is a material, uninsured loss to the Parking
Area, then Landlord may, at its option, terminate this Parking
Agreement by notifying Tenant in writing of the termination within
thirty (30) days of the date of the casualty. If this Parking Agreement
is not so terminated by Landlord, then Landlord shall either (i)
proceed to restore the Parking Area and provide Tenant with alternative
parking during the restoration, or (ii) not restore the Parking Area,
but provide Tenant with alternate parking throughout the remainder of
the Term of this Parking Agreement.
RIDER 201A-1
Initial Initial
<PAGE>
RIDER 301A
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
Option to Extend
Tenant has ONE ( -1- ) option(s) (the "Option") to renew and to extend
the Term of this Lease for twenty-four ( 24 ) months each [(the "Renewal
Term")], that Option(s) to follow consecutively on the expiration of the Term of
this Lease, provided that at the time that the Option to renew is exercised,
this Lease is in full force and effect and Tenant is not in default hereunder.
The Option shall be exercised by Tenant's giving to Landlord written notice of
its intention to renew and extend the Term of this Lease at least six (6 months)
before the expiration date of the initial Term [or Renewal Term, as
appropriate,] of this Lease. The renewal and extension of this Lease for the
Renewal Term shall be on and under the same covenants, agreements, terms,
provisions, and conditions as are contained herein for the initial Term of the
Lease, including those providing for adjustments to the rent during the Renewal
Term; provided, however, that the Base Rental for the first year of the renewal
Term shall be at $14.00 per net rentable square foot per year and the second
year at $15.00 per net rentable square foot per year. Any assignment or
subletting by Tenant in violation or breach of Section 11.1 of this Lease shall
terminate the Option(s) of Tenant set forth herein. Any termination of this
Lease during the initial Term shall terminate all rights of renewal and
extension set forth in this Rider 301A.
At any time up to five (5) business days before the date by which
Tenant is required to exercise a renewal Option, Tenant may request in writing a
quote from Landlord of the Base Rental, and other amounts payable as described
in Section 1.2. that will be applicable for the next Renewal Term. Landlord
shall respond to a timely written request by providing Tenant a written quote of
the Base Rental within three (3) business days after Landlord's receipt of
Tenant's request. In addition, Landlord, may (but is not obligated to) provide
to Tenant at any time a quote of the Base Rental for a Renewal Term.
RIDER 301A-1
Initial Initial
<PAGE>
EXHIBIT "A"
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
Floor Plan of Premises
[MAP]
<PAGE>
EXHIBIT "B"
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
Legal Description of the Land
1.5175 acres of land (66,102 square feet), more or less, being Lot Two (2) of
BALI PARK SUBDIVISION, recorded in Volume 224, Page 50 of the Harris County Map
Records, Hedwig Village, Harris, Texas ; being more particularly described by
metes and bounds as follows, to wit:
BEGINNING at a 5/8 inch iron rod marking the Northwest corner of the BALI PARK
SUBDIVISION, being the Northwest corner of the herein described tract, on the
South line of Katy Freeway (I.H. 10) right-of-way;
THENCE South 89 degrees 22 minutes, 26 seconds, East, 148.97 feet along the
North line of BALI PARK SUBDIVISION and the South line of Katy Freeway
right-of-way to a 5/8 inch iron rod found for the Northeast corner of Lot 2,
also being the Northwest corner of Lot 1;
THENCE South 00 degrees 13 minutes, 20 seconds, East 444.83 feet along the
common line for Lot 1 and Lot 2 being the centerline of a private street known
as Bali Chase to a 5/8 inch iron rod marking the Southeast corner of Lot 2 and
the Southwest corner of Lot 1 being on the North line of Lot 3;
THENCE North 89 degrees 22 minutes, 26 seconds, West, 148.28 feet along the
common line between Lot 2 and Lot 3 to a 5/8 inch iron rod marking the Northwest
corner of Lot 3 and the Southwest corner of Lot 2;
THENCE North 00 degrees 18 minutes, 40 seconds, West, 444.84 feet along the West
boundary of BALI PARK SUBDIVISION to the POINT OF BEGINNING.
EXHIBIT B-2
Initial Initial
<PAGE>
EXHIBIT "C"
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
Operating Cost Computation
A. Operating Cost Examples. The following are, without limitation,
examples of costs included in the computation of Operating Costs:
(1) all taxes, assessments, and other governmental charges, whether
federal, state, county or municipal, and whether they be by taxing
districts or authorities presently taxing the Premises and Building or
by others, subsequently created or otherwise, and any other taxes and
assessments levied or assessed against the Land, the Building and other
associated improvements situated on the Land, and the Building
Facilities, including interest on installment payments, and including
all costs and fees (including attorney's fees) incurred by Landlord in
contesting or negotiating with taxing authorities;
(2) all reasonable costs and expenses of operating, maintaining and
repairing (including replacing components of) Building Facilities,
including elevators, escalators, heat, ventilation, and air
conditioning systems, and all other mechanical or electrical systems
serving the Building;
(3) all reasonable costs and expenses incurred in cleaning the
Building;
(4) costs of all utilities for the Project, including without
limitation, the cost of water and power, heating, lighting, air
conditioning, ventilating and sewer rents or charges for the Project;
(5) all supplies and materials reasonably used in the operation and
maintenance of the Project;
(6) costs of all insurance relating to the Project, including the cost
of casualty and liability insurance applicable to the Project and
Landlord's personal property used in connection therewith;
(7) amortization of costs of or rental expenses for any machinery,
equipment or other improvements installed by Landlord to conform to any
law, ordinance, rule, regulation, or order of any governmental
authority having jurisdiction over the Project which was enacted or
promulgated after construction on the Project began, or for the purpose
and in reasonable anticipating or reducing energy costs in the Project
or other Operating Costs;
(8) expenses and fees (including attorney's fees) incurred in
contesting the validity or applicability of any governmental enactments
that may affect Operating Costs;
(9) general maintenance costs and expenses reasonably incurred in
connection with the Project (including, but not limited to, security,
maintenance of all exterior and interior landscaping, garbage and other
waste removal, non-tenant alterations and decorations, heating and air
conditioning repairs and all labor utilized and supplied consumed with
respect to any general Project maintenance);
(10) janitorial service and window cleaning for the Building, including
the Common Areas and Service Areas (including materials, supplies,
Building standard light bulb, equipment and tools therefor and rental
and appreciation costs related to the foregoing), or contracts with
third parties to provide the same;
(11) the cost of providing security to the Building and Parking Area;
(12) reasonable management costs of the Project (including, but not
limited to, any management fee payable by Landlord with respect to the
Project, audit and accounting expenses and legal fees), and Landlord's
overhead expenses directly attributable to Project management; and
13) wages, salaries, fees, pension benefits, taxes, unemployment and
disability insurance, worker's compensation insurance, social security
benefits and any other expenses reasonably incurred with respect to all
personnel engaged in the operation, maintenance, leasing or security of
the Project. The term "personnel" shall include, but not be limited to,
employees such as superintendents, engineers, electricians, clerks,
mechanics,helpers, security officers. porter, cleaners, window washers,
as well as contract laborers performing services with respect to the
Project.
B. Operating Cost Exclusions. The following are, without limitation,
examples of costs excluded from the computation of Operating Costs:
(1) leasing commissions, attorney's fees, costs and disbursements
and other expenses incurred in leasing, renovating or
improving space for tenants or prospective tenants of the
Building;
(2) costs incurred by Landlord in the discharge of its obligations
under the Work Letter;
(3) costs (including permit, license and inspection fees) incurred
in renovating or otherwise improving or decorating, painting
or redecorating space for tenants of vacant space;
(4) Landlord's costs of any services sold to tenants for which
Landlord is entitled to be reimbursed by such tenants as an
additional charge or rental over and above the Base Rental and
Operating Costs payable under the lease with the tenant or
other occupant;
(5) any depreciation and amortization on the Building, except as
expressly permitted herein;
(6) interest on debt or amortization payments on any mortgages or
deeds of trust or any other debt for borrowed money;
(7) all items and services for which Tenant reimburses Landlord
outside of Operating Costs or pays third person or which
Landlord provides selectively to one or more tenants or
occupants of the Building (other than Tenant) without
reimbursement;
(8) advertising and promotional expenditures; and
EXHIBIT C-2
Initial Initial
<PAGE>
(9) repairs or other work occasioned by fire, windstorm or other
work paid for through insurance or condemnation proceeds.
b:\lease.ml EXHIBIT C-2
Initial Initial
<PAGE>
EXHIBIT "D"
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
Rules
1. Tenant, its agents, servants,and employees shall not block or obstruct
any of the entries, passages, doors, hallways or stairways of the
Building, or place, empty or throw any rubbish, litter, trash or
material of any nature into those areas, or permit those areas to be
used at any time except for ingress and egress of Tenant, its agents,
servants, employees, visitors or invitees. No tenant and no employee,
agent or invitee of a tenant shall go onto the roof of the Building.
2. Tenant shall refer all contractors, contractor's representatives and
installation technicians rendering any service to Tenant to Landlord
for Landlord's supervision, approval and control before performance of
any contractual service. This provision applies to all work performed
in the Building, including, without limitation, installation of
telephones, telegraph equipment, electrical devices and attachments and
installations of any nature affecting floors, walls woodwork, trim,
windows, ceilings, equipment or any other physical portion of the
Building.
3. Movement in and out of the Building of furniture, office equipment or
other bulky materials, or movement through Building entrances or
lobbies, or dispatch or receipt by Tenant of any merchandise or
materials which requires use of elevators or stairways shall be
restricted to reasonable hours designated by Landlord. All such
movement shall be under the supervision of Landlord and in the manner
agreed between Tenant and Landlord by prearrangement before performance
of any movement. Prearrangement initiated by Tenant shall include
determination by Landlord, and subject to Landlord's decision and
control, of the time, method and routing of movement, and limitations
imposed by safety or other reasonable concerns which may prohibit any
article, equipment or any other item from being brought into the
Building. Tenant shall assume all risk as to damage to articles moved
and injury to persons or public engaged or not engaged in the movement,
including equipment, property and personnel of Landlord if damaged or
injured as a result of acts by Tenant or Tenant's employees, agents or
contractors in connection with carrying out this service for Tenant
from the time of entering property to completion of work; and Landlord
is not liable for any such act, or any damage or loss to any of the
property or persons resulting from any such act in connection with such
service performed for Tenant, and Tenant hereby agrees to indemnify,
defend and hold Landlord, harmless from and against any and all such
damage, injury or less, including attorney's fees arising with respect
thereto.
4. No signs, advertisements or notices are allowed in any form on windows
or doors inside or outside the Premises or any other part of the
Building, and no signs except in uniform location and uniform styles
fixed by Landlord are permitted on exterior identification pylons, if
any, in the public corridors or on corridor doors or entrances to the
Premises. All signs shall be contracted for by Landlord for Tenant at
the reasonable rate fixed by Landlord form time to time, and Tenant
shall be billed and pay for such service accordingly on demand.
Following move-in, no nails, hooks or screws shall be driven or
inserted in any part of the Building (other than for the handling of
pictures, diplomas or other items of a like nature), except by the
maintenance personnel of the Building, nor shall any part be defaced by
tenants.
5. No draperies, shutters, or other window coverings shall be installed on
exterior windows or walls or windows and doors facing public corridors
without Landlord's written approval. Landlord may require installation
and continued use of uniform window coverings for such windows.
6. No portion of the Premises or any other part of the Building may at any
time be used or occupied as sleeping or lodging quarters.
7. Tenant shall not place, install or operate in the Premises or in any
other part of the Building any engine, stove or machinery, or conduct
mechanical operations or cook thereon or therein (except for coffee
machines, microwave ovens and other breakroom appliances of a
residential nature), or place or use in or about the Premises any
explosive, gasoline, kerosene, oil, acids, caustics or any other
inflammable, explosive or hazardous materials, fluid or substance
without the prior written consent of Landlord. The preceding sentence
does not prohibit the storage of photocopier or other typical office
supplies within the Premises.
8. Any directory of the Building provided by Landlord shall be exclusively
for the display of the name and location of tenants in the Building,
and Landlord may exclude any other names therefrom and may limit the
number of listings per tenant. Tenant shall pay Landlord's standard
charge for Tenant's listing thereon and for any changes by Tenant.
9. Landlord is not responsible for lost or stolen personal property,
equipment, money or any article taken from the Premises or the
Building, whether or not any such area is locked against entry.
10. Tenant shall keep, and shall cooperate with Landlord and Landlord's
employees and agents in keeping, the Premises in a clean and tidy
condition at all times.
11. No curtains, blinds or screens may be attached to or hung, or used in
connection with, any window or door of the Premises without the prior
written approval of Landlord as to the quality, type, design, color and
manner of attaching the same. No protective screen, grating, shade or
other enclosing device may be used on the portion of the Premises
abutting the Common Areas, courts, atria or public corridors without
Landlord's prior written approval as to the quality, type, design,
color and manner of attaching the same, to the end that all storefronts
facing those Common Areas shall be compatible in appearance. Tenant
shall regularly clean, repair and, if necessary in Landlord's
reasonable judgment, replace any awnings, used in connection with the
Premises, so that such awnings always convey the image of a first-class
establishment.
12. Tenant, its agents, servants or employees shall not bring into the
Building or the Premises or keep on the Premises any dog, bird or
animal. Tenant, its agents, servants or employees shall not bring into
the Building or keep on the Premises any bicycle or other vehicle
without the prior written consent of Landlord.
13. No additional locks shall be placed on any door in or providing access
to the Premises without the prior written consent of Landlord. A
reasonable number of keys to the Premises and security access cards for
the Building (if that method is used) will be furnished by Landlord and
neither Tenant, its agents, servants, or employees, shall have any
duplicate keys made. Landlord may at all times keep a pass key to the
Premises. All keys shall be returned to Landlord promptly on
termination of this Lease. Tenant shall pay a reasonable amount fixed
by Landlord from time to time for each key and security access card
issued by Landlord in replacement of one previously issued.
EXHIBIT D-2
Initial Initial
<PAGE>
14. Tenant shall give Landlord prompt notice of all accidents to or defects
in air conditioning equipment, plumbing, electrical facilities or any
part of appurtenance of the Premises.
15. Landlord will not permit entrance to Tenant's offices by use of pass
keys controlled by Landlord to any person at any time without
permission by Tenant, except employees, contractors, or service
personnel directly supervised by Landlord or employees of the United
States Postal Service.
16. Employees of Landlord shall not receive or carry messages for or to any
Tenant or other person, and shall not contract with or render free or
paid services to any Tenant or Tenant's agents, employees or invitees.
If Landlord's employees perform any such services, then those employees
are solely the agents of Tenant regardless of whether or how payment is
arranged for services, and Landlord is expressly relieved form any all
liability in connection with any such services and any associated
injury or damage to person or property.
17. Landlord may exclude or expel from the Building any person who, in the
judgment of the Landlord, is intoxicated or under the influence of
liquor or drugs, or who in any manner acts in violation of the Rules of
the Building.
18. Tenant shall not use the plumbing facilities of the Premises for any
purpose other than that for which they were constructed. Tenant shall
not dispose of any substances in such facilities which may clog, erode,
or damage the plumbing pipes, lines, or conduits of the Building
whether through the utilization of "garbage disposal" units or
otherwise. Tenant shall pay for all damages resulting to any fixtures
or appliances from misuse by Tenant, or Tenant's agents or employees,
and Landlord is in no way responsible therefor.
19. Landlord may prescribe the weight and position of safes, computers and
other heavy equipment which shall, in all cases, in order to distribute
their weight, stand on supporting devices approved by Landlord. All
damage done to the Premises or to the Building by placing in or taking
out any property of Tenant unless caused by the negligence or wilful
misconduct of Landlord or Landlord's employees or agents, or done by
Tenant's property while in the Premises or the Building, shall be
repaired immediately at the sole expense of Tenant.
20. To ensure orderly operation of the Building, no ice, minerals other
water, towels, newspapers, etc. shall be delivered to the Premises
except by persons approved by Landlord in advance in writing.
21. Landlord may refuse admittance to the Building from 7 p.m. to 7 a.m.
daily, or on Sundays or on legal holidays, to any person or persons who
cannot furnish satisfactory identification, or to any person or persons
who, for any other reason in Landlord's judgment, should be denied
access to the Premise. Landlord, for the protection of the tenants and
their effects, may prescribe hours and intervals during the night, on
Sundays and holidays, when all persons entering and departing the
Building are required to enter their names, the offices to which they
are going or form which they are leaving, and the time of entrance or
departure in a register provided for that purpose by Landlord.
22. Canvassing, soliciting and peddling in the Building are prohibited, and
each Tenant shall cooperate to prevent the same.
23. Alternations and miscellaneous job orders shall at all times be
directed to the Building manager's office to facilitate the orderly and
otherwise proper processing of that work in accordance with any
covenants of the Lease applicable thereto.
24. Landlord may waive any one or more of these Rules for the benefit of
any particular tenant or tenants, but no waiver by Landlord shall be
construed as a waiver of such Rules in favor of any other tenant or
tenants, or prevent Landlord form thereafter enforcing all Rules
against any or all of the tenants of the Building.
25. Landlord may rescind or amend any of these Rules and make other and
further reasonable rules as in its judgment are from time to time
necessary and desirable.
26. These Rules are in addition to, and shall not be construed to in any
way modify, alter, or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of Premises in the Building.
27. Standard Hours of Operation are: Monday - Friday 7:00am - 6:00pm,
Saturday 8:00am - 1:30pm, closed on all Federal Holidays.
EXHIBIT D-2
Initial Initial
<PAGE>
EXHIBIT "G"
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
Janitorial Services
I. PREMISES
A. The following GENERAL cleaning shall be performed nightly:
1. Empty and wipe clean waste basket and remove
contents to disposal area.
2. Empty and clean all ash trays.
3. Vacuum all rugs and carpeted areas.
4. Dust furniture, files, fixtures and all low reach
areas.
5. Remove marks and smudges from vertical surfaces.
6. Clean all water fountains.
7. Sweep all private stairways; vacuum if carpeted.
8. Damp mop spillage in office and public areas as
required.
9. Dust all telephones as necessary.
10. Clean doors, door knobs, light switches and other
door areas of frequent usage.
B. The WASH ROOMS shall be cleaned nightly as follows:
1. Damp mop.
2. Scrub floors as necessary.
3. Clean all mirrors, bright work and enameled surfaces.
4. Wash and disinfect all fixtures.
5. Empty all receptacles and remove refuse for disposal.
6. Fill toilet issue, soap and towel dispensers.
7. Clean flushometers and other metal work as required.
8. Wash and polish all wall partitions, tile walls, and
enamel surfaces from trim to floor as required.
9. Vacuum all louvers and ventilating grilles, and dust
light fixtures as required.
C. The FLOORS shall be cleaned with the frequency indicated:
1. Sweep and buff ceramic tile, marble or terrazzo
floors nightly and wash or scrub as necessary, not
less than monthly.
2. Sweep vinyl asbestos floors and bases nightly.
3. Wax and buff tile floors monthly and strip as
necessary but not less frequently than annually.
D. GLASS shall be cleaned as follows:
1. Clean all perimeter windows as required, but no less
than three times a year, inside and out.
2. Wipe clean all metal during this cleaning.
E. HIGH DUSTING shall be performed every four months, as follows:
1. Dust and wipe clean all closet shelving when empty.
2. Dust all picture frames, charts, graphs, etc.,
monthly.
3. Damp dust all air conditioning diffusers.
4. Dust the exterior surfaces of lighting fixtures.
5. Dust venetian blinds as necessary.
F. The following shall be done DAILY:
1. Check all washrooms for toilet tissue and sanitary
napkins replacements.
2 Clean all "Security Rooms" (those rooms used for
storage of confidential material which cannot be
opened with a Building master key) as necessary.
It is understood that no services of the character herein provided for shall be
performed on Saturdays, Sundays or holidays.
II. OTHER AREAS OF THE BUILDING
A. Entrance Lobby and Public Areas:
1. Sweep and wash lobby and entrance vestibule floors
nightly and machine scrub floors as necessary. Wax,
buff, apply sealer or finished as directed by
building manager, but not less than once a week.
2. Clean sweep public, elevator lobby, and corridor
flooring nightly. Wash stone, ceramic tile, marble or
terrazzo flooring once per week (machine scrub floors
as necessary). Resilient flooring shall be maintained
once vacuumed nightly and shampooed as necessary.
3. Wipe down all metal surfaces in the lobby, building
exterior and polish as required once a month at a
minimum.
4. Dust all lobby and public corridor walls nightly and
wash as required.
5. High dust and wash all electrical and air
conditioning fixtures at least once per month in
elevator lobbies, corridors, and entrance lobby.
6. Dust mail depository and clean mail chute glass
throughout the Building, nightly. Telephone booths
shall be swept daily and the glass cleaned nightly.
7. Clean cigarette urns, screen sand and supply sand as
necessary on a daily basis.
EXHIBIT G-2
Initial Initial
<PAGE>
8. Clean entrances and lobby doors at least once per
day. On the first rental floor, clean all office
doors as necessary to remove dirt and finger marks.
9. Wash all rubber mats and clean wool or nylon runner
nightly as necessary if used during the day.
B. Elevators
1. Clean saddles, doors and frames of elevator lobby
nightly.
2. Clean saddles and frames on floors above lobby once
per week and vacuum dirt from door tracks nightly.
3. Clean inside surfaces of elevators cabs nightly.
4. Clean elevator pits weekly.
5. Wash and wax resilient floor in elevators nightly.
NOTE: If carpets are installed, regular carpet care shall be provided in lieu
of item 5. Shampoo elevator carpets as necessary including spares.
C. Public Stairwells
1. Check all public stairwells throughout the Building
and keep in clean condition, sweep daily and mop as
necessary, but at least once per week.
2. Inspect and keep clean fire hoses, extinguishers and
similar equipment and report any discrepancies to the
Building Manager and enter in log book.
3. Dust all railings, etc., weekly and high dusting
quarterly.
D. Building Service Areas
1. Hose all ramps, loading docks, truck, areas, etc.,
daily and scrub if necessary, or as instructed by
Building Manager.
2. Clean mechanical equipment areas, electric and
telephone closets as often as necessary, or as
instructed by Building Manager.
3. Keep elevator areas in a neat, clean condition at all
times. Keep wastepaper, cardboard and rubbish, etc.,
stored in an approved area. Clean the floors, walls
and doors, etc., as necessary.
E. Exterior Cleaning
Maintain entire building exterior, including metal work,
entrance doors, building trim and exterior window frames and
mullions. Clean standpipes, and sprinkler connections and hose
bibs.
F. Sidewalk Areas
1. Sweep sidewalk daily, weather permitting.
2. Maintain sidewalks in a safe condition.
3. Keep in clean condition and water daily all planting
areas.
G. Window Cleaning
1. Clean all windows on the outside and inside from main
floor to the roof as required, but not less than
three times a year as directed by Building Manager.
Wipe clean window frames and associated metal at the
same time.
2. Clean directory glass daily.
3. Clean all mail chute glass as required.
4. Reports of areas cleaned shall be turned in to the
Building manager's office daily.
H. Pest Control
1. The public spaces throughout the Building shall be
kept under pest control treatment at least monthly.
2. All service shall be rendered by licensed Board of
Health operators, with special emergency calls on
request at no extra charge.
EXHIBIT G-2
Initial Initial
<PAGE>
EXHIBIT "H"
ATTACHED TO AND MADE A PART OF
OFFICE LEASE AGREEMENT
SPECIAL PROVISIONS
1. BASE RENTAL.
Lessee shall pay monthly installments of Base Rental as outlined in the
following shcedule:
Months Monthly Base Rental Square Feet/NRA
4/97 $1,466.67 4,272 (Based on 22 days)
5/97 - 7/97 $2,000 4,272
8/97 - 10/97 $3,000 4,272
11/97 - 3/98 $3,916 4,272
4/98 - 3/99 $4,094 4,272
4/99 - 3/00 $4,628 4,272
Lessor shall have the option to increase the Base Market Rental to a
fair market rental as reasonably determined by Lessor in its sole
discretion (Market Adjustment to Base Rental) at any time during this
lease Term by providing Lessee with written notice ("Notice").
If Lessor exercises this adjustment to Base Rental, Lessor shall
compensate Lessee for such adjustment by paying to Lessee
simultaneously with the Notice, an amount equal to the amount of the
difference between (a) the increased Base Rental over the remainder of
the term, and (b) the negotiated rental rate contained in this Lease,
which payment shall be made simultaneously with the delivery of the
Notice.
2. RIGHT OF FIRST REFUSAL.
Tenant shall have the continuing right of first refusal on the
contiguous space(s) remaining in suite 200, approximately 1,558 net
rentable square feet, and suites 270, 260, and 260a (as shown on H-1
attached). Landlord also agrees not to market the 1,558 square feet in
suite 200 and/or suite 270 prior to 7/1/97 in order to allow Tenant
immediate availability of such space for its intended expansion. Should
Landlord have a bonafide offer to lease any of the suites denoted on
H-1, Landlord shall notify Tenant by written notice, including the
terms of such offer, and Tenant shall have five (5) business days to
elect to exercise its right of first refusal on said space under the
same terms and conditions of such bonafide offer. Should Tenant elect
to exercise this right, Landlord shall prepare the necessary lease
documentation and Tenant shall execute same within thirty (30) days of
its election.
3. APPROVED ASSIGNEE/SUBLESSEE
Tenant shall have the right without consent of Landlord, to sublease
all or any portion of the Premises or to assign its right under this
Lease, including all renewal options, expansion options, preferential
rights and rights pertaining to parking (i) to any Affiliate of Tenant,
(ii) to any successor entity to Tenant created by merger,
consolidation, liquidation or reorganization, or (ii) to any entity
which acquires ownership of all or substantially all of the assets of
Tenant, whether or not there is a change in Tenant's name. Tenant shall
give Landlord immediate written notice of any such sublease or
assignment. For the purpose of definition in this area, Affiliate shall
mean any of the following which have a financial strength equal to or
greater than Tenant; (i) a subsidiary of Tenant in which Tenant owns
directly at least fifty-one percent (51%) of the voting securities and
voting interest, (ii) a corporation, partnership, personal estate,
trust, or any combination of the foregoing, which own at least
fifty-one percent (51%) directly or indirectly of the voting securities
and voting interests in Tenant ("Tenant's Parent Company"), and (iii) a
subsidiary of Tenant's Parent Company, if any, in which Tenant's Parent
Company owns at least fifty-one percent (51%) directly or indirectly of
the voting securities and voting interests thereof.
4. PROPRIETARY FILES
Notwithstanding the Landlord's rights as outlined in Article XV,
Landlord shall exempt certain files ("Proprietary Files") pertaining to
information specific to Tenant's clients and computers and business
records. This information must be kept separate from other
administrative files belonging to Tenant at all times to be classified
as Proprietary Files.
5. ESSENTIAL SERVICES
Subject to Casualty and/or Condemnation, which shall control in the
circumstances described therein, Landlord and Tenant agree that there
are certain building services without which Tenant cannot occupy the
Premises for the purpose for which it was originally leased. The
services are heating, ventilation, air conditioning, electrical
service, elevator service, water and plumbing services (the "Essential
Services"). Provided that such interuption or malfunction was not
caused by the intentional act, omision, negligence or willful
misconduct of Tenant or its contractors or the circumstances set forth
in Casualty and Condemnation hereof, should Landlord fail to provide
any one or more of the Essential Services for a continuous period of
five (5) business days or longer after written notice to Landlord,
then, to the extent that Landlord's failure to provide any of the
Essential Services causes Tenant to be unable to use all or a portion
of the Premises for the purpose for which it was originally leased,
rent shall abate in proportion to the portion of the premises not
usable until the Essential Service or Services are restored.
6. COMMISSIONS
Trinity Hope, Inc. or its Assignee, agrees to pay Glenn Hardy
("Tenant's Broker") a commission of 4% at closing. If Trinity Hope,
Inc.
EXHIBIT H-1
Initial Initial
<PAGE>
does not successfully complete the closing of Escrow, Dated February
13, 1997 betwen Mission Life Insurance and Trinity Hope, Inc. Tenant
will receive free rent from Mission Life Insurance equivalent to the
commission due Tenant's broker through the initial rental period (April
9th thru March '00). In which event Worldport would then pay Tenant's
Broker the Commission in lieu of rent. As an example, if Worldport does
not occupy more than 4,272 sq. ft. during the initial term the
commission due would be $140,710.67 X 4% = $5,628.43. This amount
$5,628.43/$2,000=2.81 months of free rent.
7. TENANT IMPROVEMENTS
The cost of Tenant Improvements specified in Rider 101, if any, would
be handled in the same way as in item 6. Trinity Hope, Inc. or its
assignee agree to paint where necessary and clean the carpets. This
cost will not exceed $.50 per square foot of occupied area.
EXHIBIT H-1
Initial Initial
<PAGE>
EXHIBIT H-1
RIGHT OF FIRST REFUSAL SPACE
[MAP]
SETTLEMENT AGREEMENT
This Settlement Agreement is entered into as of the 14th day
of April, 1997, between Com Tech International Corporation ("Com Tech") and
WorldPort Communications, Inc., formerly known as Sage Resources, Inc.
("WorldPort").
RECITALS
There is presently pending in the United States District Court
for the Northern District of California a civil action 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 "Lawsuit"), in which WorldPort
is asserting various claims against Com Tech.
All of the claims are set forth in the pleadings and other
documents in the case files. WorldPort and Com Tech have now determined to
compromise and settle any and all claims that have been or could have been
asserted in the Lawsuit. The parties enter into this Agreement after consulting
with their respective counsel and being fully advised of their legal rights.
AGREEMENT
In order to carry out and give effect to the foregoing, and in
consideration of the mutual promises, agreements and undertakings set forth
below, each of the parties agrees as follows:
1. Contract Balance. The parties agree that for the purposes of this
Agreement, the principal balance owing by Com Tech to WorldPort under a
promissory note dated June 27, 1996 (the "Note") is $500,000, plus accrued
interest at ten percent (10%) per annum. A copy of the Note is attached as
Exhibit A. The parties agree that Exhibit B correctly and accurately reflects
all payments, interest, late charges and principal balances prior to execution
of this Agreement.
2. Payments by Com Tech. Com Tech agrees to pay WorldPort all amounts
due under the Note as follows: (a) on or before April 14, 1997, Com Tech shall
pay WorldPort the sum of $27,805.56, which represents accrued interest through
December 31, 1996; and (b) on or before May 1, 1997, Com Tech shall pay
WorldPort the sum of $171,666.67, which represents $150,000 of principal and
$21,667.67 accrued interest through such date. Com Tech also agrees to make six
payments to WorldPort, on or before the 10th day of each month, beginning June
10, 1997 through November 1997. Each of the payments shall consist of $58,333.33
of principal, plus accrued interest on the outstanding balance at twelve percent
(12%) per annum, plus $6,089.03, which represents one-sixth of the total
litigation and other expenses owing. (These payments would begin at $67,922.36
in June 1997 and decline to $65,005.70 in November 1997 as the principal balance
is paid down, as reflected in Exhibit C hereto.) Payments are to be made by wire
transfer or check made payable to WorldPort.
1
<PAGE>
3. Stipulation to Entry of Judgment. Concurrent with the parties'
execution of this Agreement, the parties also shall enter into the Stipulation
for Entry of Judgment attached as Exhibit D, which will be filed only if there
exists an uncured event of default as specified in paragraph 4, below. The
parties also shall enter into the Stipulation and Joint Motion for Conditional
Dismissal attached as Exhibit E.
4. Events of Default. The following shall be "events of default" under
this Agreement: (a) the termination of the Acquisition Agreement dated April 15,
1997 by and among Com Tech, its shareholders and Circle International
Communications, Inc. and the transactions and the ancillary agreements
referenced therein ("Com Tech's Recapitalization"); (b) Com Tech's failure to
make any of the payments called for in paragraph 2 of this Agreement by 3:00
p.m. Pacific Time on the date specified in paragraph 2; or (c) any material
breach of this Agreement, other than Com Tech's failure to make any of the
schedule payments. Com Tech shall have ten business days from the date a payment
is due, or from the date of receipt of written Notice of Default from WorldPort
for any other breach, in which to cure such default(s). The parties agree that
the Notice of Default may be sent by facsimile.
If an event of default occurs and is not cured by Com Tech
within ten business days from the date a payment is due or from Com Tech's
receipt of a Notice of Default, WorldPort may reactivate the Lawsuit according
to the Stipulation and Joint Motion for Conditional Dismissal and present the
Stipulation for Entry of Judgment to the court for entry of judgment. Upon entry
of such judgment, in addition to any other remedies available, WorldPort may
execute on such judgment immediately.
5. Security. Notwithstanding the Stipulation to Entry of Judgment or
the Judgment, the June 27, 1996 Assignment, Pledge, and Security Agreement shall
remain in full force and effect unless and until the payments under paragraph 2
of this Agreement are made in full. In connection with that Assignment, Pledge,
and Security Agreement, Com Tech shall issue irrevocable instructions to Datamax
de Mexico, S.A. de C.V. to distribute income from the Datamax joint venture to
WorldPort upon receiving notice from WorldPort of an event of default under
paragraph 4 of this Agreement.
Additionally, Com Tech assigns certain assets, described in
Exhibit F, to WorldPort in order to secure payment of the amounts specified in
paragraph 2, below. If an event of default under paragraph 4 occurs, WorldPort
immediately may take possession of such assigned assets. In taking possession of
any security specified in this paragraph, WorldPort shall credit the fair market
value of the security and assigned assets against the amounts due and owing
under this Agreement.
6. Mutual Release. Upon s atisfaction of the terms of this
Settlement Agreement, the parties to this Agreement hereby mutually release,
acquit and discharge one another forever from any and all claims, cross-claims,
2
<PAGE>
counterclaims, third-party claims and demands, which any party to this Agreement
could have asserted in the pending lawsuit. The parties are not releasing or
waiving any claims arising out of or created by this Agreement.
7. Joint Drafting. This Agreement was drafted by both parties,
and in the event of any dispute over interpretation of this Agreement, there
shall be no bias or presumption against the position or interpretation offered
by either party.
8. Attorneys' Fees and Costs. Should it be necessary for any party to
this Agreement to initiate legal proceedings to enforce this Agreement or
adjudicate any issues under this Agreement, the prevailing party shall be
entitled to recover its reasonable attorneys' fees, costs and disbursements.
9. General. This Agreement may be executed in counterparts, each
of which will be deemed an original and together constitute the same Agreement
whether both parties execute each counterpart. This Agreement is governed by the
laws of the State of California. Captions are for convenience only and do not
express, limit or expand any provision or the intent of this Agreement.
The parties have executed this Agreement effective as of the
date first written above.
COM TECH INTERNATIONAL CORP.
4/25/97
- -------------------- /s/ Sal Meir
Dated By: --------------------------------------
Sal Meir
--------------------------------------
Its: President & CEO
--------------------------------------
WORLDPORT COMMUNICATIONS, INC.
4/23/97
- --------------------- /s/ John W. Dalton
Dated By: --------------------------------------
John W. Dalton
--------------------------------------
Its: President & CEO
3
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (this "Agreement") is entered into
as of April 29, 1997, by and between WorldPort Communications, Inc., a Delaware
corporation ("Consultant") and Telenational Communications Limited Partnership,
a Nebraska limited partnership ("TNC").
WHEREAS, Consultant and TNC have entered into that certain Asset
Purchase Agreement, dated April 23, 1997 (the "Asset Purchase Agreement"); and
NOW, THEREFORE, in consideration of the premises and promises herein
contained, the parties agree as follows:
1. Capitalized Terms. All capitalized terms used in this Agreement
and not otherwise defined herein shall have the respective meanings ascribed to
them in the Asset Purchase Agreement.
2. Engagement. TNC hereby engages Consultant to perform and Consultant
hereby agrees to perform, to the best of its abilities, management services on
behalf of TNC, all upon the terms and conditions set forth herein.
3. Term. The term of this Agreement shall commence on the date hereof
and continue until the Closing under the Asset Purchase Agreement, unless sooner
terminated by Consultant.
4. Management Services and Business Operations.
(a) During the term of this Agreement, Consultant shall
provide to TNC day-to-day executive management services. To accomplish this,
Consultant shall provide to TNC the services of the WorldPort Management Team
(or such other individuals ("Successor") of comparable talent and skills as
consultant designates) who shall have all of the power, authority, and duties
ascribed to the position of the General Partner of TNC functioning as a chief
executive officer, including authority to control and direct TNC's use and
disposition of operating cash and borrowed funds and TNC's general business
operations. In addition, Consultant will provide to TNC such additional services
as TNC and Consultant mutually deem appropriate in TNC's best interests.
Consultant shall (i) keep the General Partner of TNC generally informed of its
activities, (ii) not engage the services of any other professional, the cost of
which exceeds $10,000, without prior approval from such General Partner, and
(iii) not materially change the direction or operations of TNC's business
without prior approval from such General Partner. In the event a dispute between
the Consultant and the General Partner of TNC arises, such dispute will be
referred to the board of directors of the General Partner for resolution. TNC
Management shall provide to the consultant weekly written reports on the
financial and operating status of TNC.
<PAGE>
(b) In performing its services hereunder, Consultant shall
devote its expertise and talents to the management and operation of TNC and to
spend such time as is reasonably required to discharge its responsibilities and
duties; provided, however, that nothing in this Agreement shall restrict
Consultant, its officers, directors, shareholders, employees, and affiliates,
including the WorldPort Management Team (the "Consultant Parties"), from
engaging in or providing services to any other business, venture, or enterprise.
In addition, nothing in this Agreement shall create, or be construed to create,
any representation or promise by Consultant or any other Consulting Party
regarding the viability of TNC, the ability of Consultant or the other
Consulting Parties to effect the transactions contemplated by the Asset Purchase
Agreement or the Plan, or the future profitability or performance of TNC.
TNC Agrees to permit the Consultant Parties to have full access to all premises,
properties, personnel, books, records, contracts, and documents of or pertaining
to TNC.
5. Potential Conflict of Interest. The parties acknowledge that
pursuant to the terms of the Asset Purchase Agreement, Consultant and one or
more of the Consultant Parties expect to have direct or indirect interests in
TNC that create or may create conflicts or potential conflicts of interest. Such
conflicts may arise due to, among other things, the status of Consultant and the
other Consultant Parties as potential or existing owners of TNC assets and
lenders of TNC. The parties agree that the covenants set forth in Sections 7 and
8 below are intended, among other things, to protect and exculpate Consultant
and the other consultant Parties from any claims or liabilities relating to any
conflicts of interest involving any of the Consultant Parties.
6. Nature of Relationship. This Agreement creates an independent
contractor relationship between TNC and Consultant and no joint venture,
partnership, or fiduciary relationship is created by this Agreement. Neither
Consultant nor TNC shall have any right to bind or create any obligation on the
part of the other, and neither shall have any liability for the debts or
obligations of the other.
7. Indemnification. In the event any of the Consultant Parties is made
a party or is threatened to be made a party to or was or is involved in or
called as a witness in any action, suit or proceeding, whether civil (including
bankruptcy), criminal, administrative, or investigative, and any appeal
therefrom (hereinafter, collectively a "proceeding"), in connection with or
related to the provision of services to TNC or its subsidiaries pursuant to the
terms hereof, including any action to successfully enforce this Agreement, such
Consultant Party shall be indemnified and held harmless by TNC.
8. Covenant Not to Sue. TNC hereby agrees not to sue or assert any
claim or action against any of the Consultant Parties that arises from or
relates to the services of any Consultant Party (or any Successor) or any other
matter relating to the services of Consultant or any Consultant Party hereunder
(and whether such services were performed or omitted prior to or after the date
of this Agreement), including without limitation, any claim of lender liability,
equitable subordination, or otherwise, but excluding any claim arising from the
willful and wanton misconduct, fraud, or gross negligence of any Consultant
Party.
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9. Survival. The provisions of Sections 5, 6, 8, 9, 10 and 11 shall
survive termination of this Agreement for any reason. The provisions hereof
shall apply to the acts or omissions taken by any Consultant Party,
notwithstanding that subsequent hereto that such party ceased to be a Consultant
Party.
10. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered in person or sent by
registered or certified mail, postage prepaid, commercial overnight courier
(such as Express Mail, Federal Express, etc.) with written verification of
receipt or by telecopy. A notice shall be deemed given (a) when delivered by
personal delivery (as evidenced by the receipt); (b) five (5) days after deposit
in the mail if sent by registered or certified mail; (c) one (1) business day
after having been sent by commercial overnight courier as evidenced by the
written verification of receipt; or (d) on the date of confirmation if
telecopied.
(a) If to Consultant:
WorldPort Communications, Inc.
9601 Katy Freeway, Suite 200
Houston, TX 77024
Telephone: (
Fax: ( )
With a copy to:
McDermott, Will & Emery
227 W. Monroe Street
Chicago, IL 60606
Fax: (312) 984-3669
Attention: Helen Friedli, P.C.
(b) If to TNC:
Telenational Communications Limited Partnership
7300 Woolworth Avenue
Omaha, NE 68124
Telephone: (402) 392-1110
Fax: (402) 392-1451
Any party may change its address for receiving notice by written notice given to
the others named above.
11. Miscellaneous.
(a) Severability; Construction. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
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effective and valid under applicable law, but if any provision of this Agreement
is held to be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of this Agreement.
(b) Entire Agreement. This Agreement constitutes the entire
agreement by and among the parties hereto with respect to the subject matter
hereof..
(c) Amendments and Governing Law. This Agreement may be
amended, modified and supplemented, or compliance with any provision hereunder
waived, only by a written instrument executed by TNC and Consultant. This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of Texas without giving effect to any choice or conflict of
law provision or rule (either of the State of Texas or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Texas.
IN WITNESS WHEREOF, the parties have executed this Consulting Agreement
on the date first above written.
WORLDPORT TELECOMMUNICATIONS, INC.
By /s/ John W. Dalton
----------------------------------------
Its: PRESIDENT & CEO
-----------------------------------------
TELENATIONAL COMMUNICATIONS
LIMITED PARTNERSHIP
By /s/ Edmund Blankenau
----------------------------------------
Its: CEO
-----------------------------------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
effective as of April 7, 1997 by and between WorldPort Communications, Inc. a
Delaware Corporation ("WorldPort" or the "Company"), and Mr. W. Dean Spies
(hereinafter referred to as the "Executive").
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,
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any bonus declared by the Board, any compensation for earned,
but unused, vacation days, and any unpaid automobile
allowance.
(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 on the effective date hereof ("the Closing") and end on
the first anniversary of the Closing, unless further extended or sooner
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terminated as hereinafter provided. On the first anniversary of the Closing and
on the last day of February 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.
4. POSITIONS AND DUTIES.
The Executive shall serve as Chief Financial Officer and Treasurer of
WorldPort and in such additional capacities as may be reasonably assigned to the
Executive by the Board. In his capacity as Chief Financial Officer and Treasurer
of the Company, 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 corporate offices in Houston, Texas
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
$82,000 payable on the 15th and last day of each month (or in such
other installments consistent with the Company's policies and
procedures and as agreed to by the Executive). 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 25% of the Executive's
annual salary based upon performance criteria to be established by the
Board to be determined and paid semi-annually.
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(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 $200 per
month, with any annual increase to be determined by the Board, payable
in accordance with the Company's policies and procedures.
(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 four-year stock purchase
options to purchase 120,000 (one hundred twenty thousand) shares of the
Company's common stock based on the following vesting schedule at the
exercise prices indicated:
40,000 options vested at the Closing at an exercise
price of $0.75 per share; 40,000 options vested after
one year of service to the Company at an exercise
price of $1.00 per share;
40,000 options vested after two years of service to
the Company at an exercise price of $1.50 per share.
7. OFFICES.
The Executive agrees to serve without additional compensation, if
elected or appointed thereto, as a member of the Board or 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.
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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.
(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 fifty percent (50%) of
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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;
(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) and 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.
(e) In the event that the Executive is terminated by
the Company pursuant Subsections 8(a), 8(b) or 8(c), all stock options
granted pursuant to Subsection 6(g) as well as any stock options
subsequently granted shall become fully vested as of the Termination
Date.
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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 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.
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(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.
(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.
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(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 copyrights 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.
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
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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, and
for a period of one year 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; 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 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.
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(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
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.
11
<PAGE>
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.
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.
12
<PAGE>
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, TX 77024
Tel: (713) 461-4999
Fax: (713) 461-8098
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
Fax: 801-237-1950
or to such other address as the Company shall have given to the Executive or, if
to the Executive, to:
W. Dean Spies
507 Knoll Forest Drive
Sugar Land, TX 77479
Tel: (281) 343-9125
or to such other address as the Executive shall have given to the Company.
13
<PAGE>
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 W. Dalton
------------------------------------------------
JOHN W. DALTON
CHIEF EXECUTIVE OFFICER AND PRESIDENT
EXECUTIVE:
/s/ W. Dean Spies
------------------------------------------------
W. DEAN SPIES
14
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