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
SEPTEMBER 30, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_____________ TO ______________.
Commission File Number 33-32341-D
WORLDPORT COMMUNICATIONS, INC.
----------------------------------
(Exact name of small business registrant as specified in its charter)
Delaware 84-1127336
- --------------------------------- -----------------------------
(State or other jurisdiction (I. R. S. Employer ID Number)
of incorporation or organization)
9601 Katy Freeway, Suite 200, Houston, Texas 77024
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 461-4999
None
----
(Former name, former address and former fiscal year, if changed
since last report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
Applicable only to corporate issuers
As of November 18, 1997, the Registrant had 16,033,333 shares of Common Stock
par value $0.0001 and 493,889 shares of Preferred Stock par value $0.0001
outstanding.
Transitional Small Business Disclosure Format (Check one):
[ ] Yes [X] No
1
<PAGE>
WORLDPORT COMMUNICATIONS, INC.
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 . . . . . . . 3
Condensed Consolidated Statements of Operations
for the Three and Nine Months Ended September 30,
1997 and 1996 . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1997 and 1996 . 5
Notes to Condensed Consolidated Financial Statements . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 18
SIGNATURE 21
2
<PAGE>
PART I - FINANCIAL INFORMATON
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
September 30, December 31,
1997 1996
----- ----
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 48,377 $ 1,552,829
Accounts receivable, net of allowance for doubtful accounts of $24,500 627,700 -
Note receivable, including accrued interest 117,444 806,329
Prepaid expenses and other current assets 272,243 -
----------- -----------
Total current assets 1,065,764 2,359,158
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization 1,110,478 -
OTHER ASSETS
Goodwill and other intangible assets, net of accumulated amortization 6,911,104 -
Note receivable, including accrued interest - 527,806
Other 143,118 2,068
----------- -----------
TOTAL ASSETS $ 9,230,464 $ 2,889,032
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 500,000 $ -
Short-term debt - related parties 400,000 -
Current portion of capital lease obligations 148,810 -
Accounts payable and accrued expenses 2,624,086 99,742
Other current liabilities 59,280 -
----------- -----------
Total current liabilities 3,732,176 99,742
NOTE PAYABLE - 420,000
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES,
net of current portion 270,890 -
OTHER LONG-TERM LIABILITIES 76,360
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value, 10,000,000 shares
authorized, 163,889 and no shares outstanding, respectively 16 -
Common stock, $0.0001 par value, 65,000,000 shares authorized,
16,033,333 and 9,053,667 shares issued and outstanding respectively 1,603 905
Additional paid-in capital 7,325,011 2,664,291
Retained deficit (2,175,592) (295,906)
----------- -----------
Total stockholders' equity 5,151,038 2,369,290
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,230,464 $ 2,889,032
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
<TABLE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------------- -------------------------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES $ 1,506,238 $ - $ 1,694,787 $ -
COST OF SERVICES 1,346,865 - 1,541,277 -
------------ ------------ ------------ ------------
Gross margin 159,373 - 153,510 -
OPERATING EXPENSES:
Selling, general and
administrative expenses 1,062,150 21,525 1,714,798 141,821
Depreciation and amortization 283,033 - 312,803 -
------------ ------------ ------------ -----------
Operating loss (1,185,810) (21,525) (1,874,091) (141,821)
------------ ------------ ------------ -----------
OTHER INCOME (EXPENSE)
Interest income 5,833 12,639 65,619 12,765
Interest (expense) (62,187) - (71,212) -
------------ ------------ ------------ -----------
(56,354) 12,639 (5,593) 12,765
------------ ------------ ------------ -----------
LOSS BEFORE PROVISION
FOR INCOME TAXES (1,242,164) (8,886) (1,879,684) (129,056)
PROVISION FOR INCOME TAXES - - - -
------------- ------------- ------------ -------------
NET LOSS $ (1,242,164) $ (8,886) $ (1,879,684) $ (129,056)
============= ============= ============ =============
NET LOSS PER SHARE $ (0.08) $ - $ (0.15) $ (0.08)
============= ============= ============ =============
WEIGHTED AVERAGE
SHARES OUTSTANDING 15,987,682 4,220,000 12,304,915 1,520,513
============= ============= ============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
<TABLE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30
--------------------------------
1997 1996
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (1,879,684) $ (129,056)
Adjustments to reconcile net loss to net cash
used by operating activities -
Depreciation and amortization 312,803 -
(Increase) decrease in accounts receivable 234 (160)
Decrease in accrued interest receivable 33,357 -
Increase in prepaid expenses and other assets (217,709) -
Increase in accounts payable and accrued
expenses and other liabilities 61,492 920
--------------- -------------
Net cash used by operating activities (1,689,507) (128,296)
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances related to acquisitions (1,178,000) -
Cash paid in connection with acquisitions, net of cash acquired (36,941) -
Issuance of notes receivable (100,000) -
Collection of notes receivable 1,283,333 -
Capital expenditures (92,767) -
--------------- --------------
Net cash used by investing activities (124,375) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on short-term debt (262,278) -
Payments on obligations under capital lease (34,292) -
Proceeds from issuance of notes payable - related parties 225,000 -
Proceeds from issuance of preferred stock 368,750 -
Proceeds from issuance of common stock, net of offering expenses 12,250 114,400
--------------- --------------
Net cash provided by financing activities 309,430 114,400
--------------- --------------
NET DECREASE IN CASH (1,504,452) (13,896)
CASH, beginning of the period 1,552,829 14,539
--------------- --------------
CASH, end of the period $ 48,377 $ 643
=============== ==============
CASH PAID DURING THE PERIOD FOR INTEREST $ 47,136 $ -
=============== ==============
CASH PAID DURING THE PERIOD FOR TAXES $ - $ -
=============== ==============
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Cancellation of note payable for 1,680,000 shares of common stock $ 420,000 $ -
=============== ==============
Issuance of short-term debt to related party in connection
with acquisition $ 175,000 $ -
=============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Basis of Presentation
---------------------
WorldPort Communications, Inc. and its subsidiaries, ("WorldPort" or
the "Company"), a Delaware corporation, is a facilities-based network
provider of international and domestic long distance services. The
Company's strategy is to provide international voice and data services
to long distance carriers, corporations, businesses, marketers and
distributors of international long distance services, and to other
alternative telecommunications services providers primarily in the
United States, Western Europe and Latin America. From its switching
center in Omaha, Nebraska, the Company provides services such as
international least cost routing, global calling card and enhanced
services and operator services.
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-QSB pursuant
to such rules and regulations; however, management believes that the
disclosures herein are adequate to make the information presented not
misleading. The financial statements and notes thereto included in this
Form 10-QSB should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form
10-KSB/A for the year ended December 31, 1996.
In the opinion of the Company's management, the accompanying condensed
consolidated financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly the
Company's financial position as of September 30, 1997, and the results
of operations for the three and nine months ended September 30, 1997
and 1996 and cash flows for the nine months ended September 30, 1997
and 1996. The results of operations for the three and nine months ended
September 30, 1997 and 1996 are not necessarily indicative of the
operating results for the full years.
Prior to the closing of the acquisitions of Telenational Communications
Limited Partnership ("TNC") and The Wallace Wade Company ("WWC") (see
Note 2), the Company was a development stage enterprise and devoted
substantially all of its efforts to identifying and acquiring
businesses, developing a public market for its stock and raising
capital. With the closing of the acquisitions of TNC and WWC, the
Company now has operating assets and continuing operations.
Accordingly, the financial statement presentation and disclosures
required for development stage enterprises have been omitted.
Goodwill and Other Intangible Assets
------------------------------------
The excess purchase price over fair value of net assets acquired
("goodwill") is amortized using the straight-line method over 10 years.
6
<PAGE>
Other intangible assets, predominantly contracts, are amortized using
the straight-line method over 5 years.
The Company periodically evaluates the recoverability of its goodwill
and other intangible assets and measures the amount of impairment, if
any, by assessing current and future levels of income and cash flows as
well as other factors, such as business trends and prospects and market
and economic conditions.
Risk Factors
------------
The Company is subject to various risks in connection with the
operation of its business including, among other things, changes in
external competitive market factors, changes in the Company's business
strategy or an inability to execute its strategy due to unanticipated
changes in the market, the Company's lack of liquidity and operating
history and anticipated working capital or other cash requirements
including the Company's current working capital deficit and dependence
upon additional capital investment.
Liquidity
---------
Funding of the Company's working capital deficit, current and future
operating losses and expansion of the Company will require substantial
continuing capital investment. The Company's strategy is to fund these
cash requirements through debt facilities or additional equity
financing. Although the Company has been able to arrange debt
facilities or equity financing to date, there can be no assurance that
sufficient debt or equity financing will continue to be available in
the future or that it will be available on terms acceptable to the
Company. Failure to obtain sufficient capital could materially affect
the Company's acquisition and operating strategies. The Company expects
that future financing will include equity placements; however, no
assurance can be given that the Company will be able to obtain
additional financing on reasonable terms, if at all (see Note 5). The
Company has currently made none of its scheduled payments on its debt
obligation to Value Partners, Ltd. (see Note 3).
Pending Accounting Pronouncement
--------------------------------
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, Earnings Per Share
("SFAS No. 128"). SFAS No. 128 replaces Accounting Principles Board
Opinion 15, Earnings Per Share, and simplifies the computation of
earnings (loss) per share ("EPS") by replacing the presentation of
primary EPS with basic EPS, which is computed by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding for the period. SFAS No. 128 also requires
dual presentation of basic and diluted EPS on the face of the income
statement for entities with complex capital structures, and a
reconciliation of the numerator and denominator used in the basic EPS
computation to the diluted EPS computation's numerator and denominator.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods. Earlier
application is not permitted. Restatement of all prior period EPS data
is required. Management of the Company believes that the adoption of
SFAS No. 128 will not have a material effect on previously reported
EPS.
7
<PAGE>
Certain Reclassifications
-------------------------
Certain reclassifications have been made to amounts previously reported
to conform to current period presentation.
(2) ACQUISITIONS
------------
TNC Acquisition
---------------
On June 20, 1997, the Company completed the acquisition of
substantially all of the telecommunications assets and operations of
TNC (the "TNC Acquisition") pursuant to that certain Asset Purchase
Agreement dated April 23, 1997 (as amended by Amendment No. 1 to the
Asset Purchase Agreement dated June 20, 1997, collectively the "Asset
Purchase Agreement"). The results of operations of TNC are included in
the financial statements of the Company from the date of acquisition,
June 20, 1997.
The assets and operations of TNC were purchased in exchange for (i)
3,750,000 shares of the Company's Common Stock (of which 1,000,000
shares are being held pursuant to an escrow agreement for a period of
18 months following the closing subject to certain purchase price
adjustments described below) and (ii) the assumption by the Company of
certain indebtedness of TNC up to a maximum of $4.6 million. The
purchased assets include telecommunications switches and other network
equipment, customer and vendor contracts, an FCC section 214 common
carrier license, an operator services center and other assets
sufficient to continue the ongoing business of TNC. The FCC section 214
common carrier license gives the Company the authority to resell both
international switched and private line services of authorized
carriers. The final purchase price is subject to adjustment if (i)
liabilities in excess of $4.6 million are assumed, (ii) the Company is
required to invoke certain indemnifications by TNC, (iii) there are
certain expense overruns, or (iv) there are certain rejected contracts.
During the period subsequent to the closing of the TNC Acquisition, the
Company and TNC have held several negotiations regarding the specific
liabilities of TNC to be assumed by the Company. As a result of those
negotiations, certain current liabilities which were initially proposed
by TNC to be assumed by the Company were not assumed. Additionally
certain other current liabilities which were initially proposed by TNC
not to be assumed by the Company were assumed. While these negotiations
resulted in changes with respect to specific liabilities of TNC assumed
by the Company, the aggregate liabilities of TNC assumed by the Company
remained $4.6 million (see Note 3).
WWC Acquisitions
----------------
On July 3, 1997, the Company, through its wholly-owned subsidiary
WorldPort Acquisitions, Inc., ("WAI") completed a merger of WWC into
WAI pursuant to that certain Agreement and Plan of Merger dated April
20, 1997 (the "WWC Acquisition"). WWC was a telecommunications
marketing consulting firm which produced and implemented marketing
strategies for clients ranging from small companies to large corporate
clients. Mr. John Dalton, the Company's President and Chief Executive
Officer, was the sole shareholder of WWC.
In connection with the WWC Acquisition, the Company delivered to Mr.
Dalton (i) 1,400,000 shares of the Company's Common Stock, of which
200,000 shares are being held pursuant to an escrow agreement subject
to certain adjustments to the purchase price based on the Company
8
<PAGE>
entering into business agreements that WWC had negotiated; (ii) $75,000
cash, of which $37,500 was advanced to Mr. Dalton on June 6, 1997 and
$15,000 was paid on October 10, 1997 with the remaining $22,500 being
deferred by Mr. Dalton until December 31, 1997 ; and (iii) a Promissory
Note (the "WWC Note") in the amount of $175,000 payable as follows: one
payment of $50,000 payable on October 1, 1997, and two payments of
$62,500 payable on February 1, 1998 and July 1, 1998. The $50,000
payment which was due on October 1, 1997 has been deferred by Mr.
Dalton until December 31, 1997.
The WWC Acquisition was accounted for using the purchase method of
accounting and is subject to certain purchase price adjustments as
discussed above. The allocation of purchase price to the assets
acquired and liabilities assumed in the transaction has been initially
assigned and recorded based on preliminary estimates of fair value and
may be revised as additional information concerning the valuation of
such assets and liabilities becomes available.
The fair value of assets acquired and liabilities assumed in connection
with the WWC Acquisition is summarized as follows (in thousands):
Current assets $ 6
Property and equipment 3
Goodwill and other intangible assets 1,315
-----
Assets acquired, net of cash 1,324
Less: WWC Note 175
Deferred cash payment 37
Assumed liabilities and transaction costs 24
Common Stock issued 1,050
-----
Cash paid $ 38
=======
Set forth below are unaudited pro forma combined results of operations
of the Company, TNC and WWC for the nine months ended September 30,
1997 and the year ended December 31, 1996. The unaudited pro forma data
is presented on the basis that the TNC Acquisition and the WWC
Acquisition took place at the beginning of the fiscal period ended
September 30, 1997 and the year ended December 31, 1996 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----- ----
<S> <C> <C>
Revenues $ 5,273 $ 12,548
======== =========
Net loss from continuing operations $ (4,131) $ (2,629)
======== =========
Net loss per share from continuing operations $ (0.26) $ (0.35)
======== =========
</TABLE>
Pro forma adjustments included in the amounts above primarily relate
to: (i) adjustment for pro forma goodwill amortization expense using a
10-year estimated life; (ii) adjustment for pro forma contract
amortization expense using a 5-year life; (iii) adjustment for
non-recurring management fees payable to the General Partner of TNC and
(iv) adjustment for acquisition costs incurred and expensed by TNC in
connection with the TNC Acquisition.
9
<PAGE>
The summarized pro forma information is based on estimates, available
information and certain assumptions and may be revised as additional
information becomes available. The pro forma financial information does
not purport to represent what the Company's results of operations would
have been if the TNC Acquisition and the WWC Acquisition had occurred
on the dates assumed or to be representative of the results of
operations for any future period. Neither the expected benefits or cost
reductions anticipated by the Company nor the future corporate overhead
costs of the Company have been reflected in the above pro forma
information.
(3) DEBT AND CAPITAL LEASE OBLIGATIONS
----------------------------------
Debt
----
The Company's debt at September 30, 1997 consists of a secured
promissory note payable to Value Partners, Ltd., which was assumed in
connection with the TNC Acquisition. The note is payable in
installments of $100,000 per month plus accrued interest at a rate of
14% per annum beginning September 1, 1997. The note is secured by all
of the assets acquired by the Company in connection with the TNC
Acquisition. As of November 18, 1997, the Company has made none of the
scheduled payments on this note. The note provides that an event of
default thereunder occurs when the Company fails to pay the principal
of or interest on the note as and when due, which failure continues for
a period of twenty days. The note also provides that if an event of
default exists, then the note shall immediately become due and payable
together with interest accrued thereon, without demand or notice.
As discussed in Note 2, subsequent to the closing of the TNC
Acquisition, the Company and TNC have negotiated the specific
liabilities of TNC to be assumed by the Company. It was originally
contemplated by TNC that the Company would assume $300,000 of
unsecured notes payable to certain individuals in connection with the
TNC Acquisition. As a result of the subsequent analysis by TNC and the
Company, it was determined that these demand notes would not be assumed
by the Company. Rather, it was determined that the Company assumed an
additional $300,000 of trade payables in connection with the TNC
Acquisition.
Debt - Related Parties
----------------------
The Company's debt - related parties at September 30, 1997 consists of
the following:
Bridge Notes $ 225,000
WWC Note (See Note 2) 175,000
------------
$ 400,000
============
In September 1997, the Company entered into an arrangement with Maroon
Bells Capital Partners, Inc. ("MBCP") whereby MBCP would arrange for
the Company to borrow from MBCP and certain other unaffiliated entities
pursuant to certain promissory notes (the "Bridge Notes"). The Bridge
Notes bear interest at 10% per annum, mature on December 31, 1997 and
are convertible into equity in the Company on terms to be negotiated in
good faith.
(4) COMMITMENTS AND CONTINGENCIES
-----------------------------
From time to time, the Company is involved in various lawsuits or
claims arising from the normal course of business. In the opinion of
10
<PAGE>
management, none of these lawsuits or claims will have a material
adverse effect on the financial statements or results of operations of
the Company.
(5) SERIES A PREFERRED STOCK OFFERING
---------------------------------
On May 8, 1997, the Company initiated a Private Placement Offering of
the Company's Series A Preferred Stock for $3.00 per share pursuant to
an Offering Memorandum (the "Series A Preferred Stock Offering"). On
July 25, 1997, the offering price was reduced to $2.25 per share. As of
September 30, 1997, the Company had received $368,750 in exchange for
163,889 shares of the Company's Series A Preferred Stock. On November
14, 1997, the Company closed the Series A Preferred Stock Offering. The
Company has received total proceeds of $1,111,250 in exchange for
493,889 shares of the Company's Series A Preferred Stock.
(6) RELATED PARTY TRANSACTIONS
--------------------------
Pursuant to an Advisory Agreement between MBCP and the Company dated
March 7, 1997, MBCP earns an M&A Success Fee, as defined in the
Advisory Agreement, in connection with all acquisitions identified by
MBCP which are consummated by the Company. The fee includes a base plus
an additional amount based on a percentage of the value of the
transaction. In connection with the TNC Acquisition, MBCP earned an M&A
Success Fee of approximately $275,000. In consideration of the
Company's development stage, MBCP reduced its M&A Success Fee related
to the TNC Acquisition to $150,000 (see Note 7).
The Company and MBCP have entered into an arrangement whereby MBCP will
arrange for the Company to borrow from MBCP and certain other
unaffiliated entities pursuant to certain Bridge Notes (see Notes 3 and
7).
MBCP is a shareholder of the Company and certain members of the
Company's Board of Directors are principals or employees of MBCP.
On July 3, 1997, the Company, through its wholly-owned subsidiary WAI
completed a merger of WWC into WAI pursuant to that certain Agreement
and Plan of Merger dated April 20, 1997. Mr. John Dalton, the Company's
President and Chief Executive Officer, was the sole shareholder of WWC
(see Note 2).
(7) SUBSEQUENT EVENTS
-----------------
Subsequent to September 30, 1997, the Company borrowed an additional
$660,000 pursuant to the Bridge Notes. On November 17, 1997, MBCP
converted the unpaid balance of its M&A Success Fee related to the TNC
Acquisition, totaling $135,000, into a Bridge Note. As of November 18,
1997, the Company has $1,020,000 in Bridge Notes outstanding.
On October 31, 1997, the Company entered into a lease agreement with
Forsythe/McArthur Associates, Inc., (the "Lease") through which the
Company has placed an order for Cisco Systems network equipment to be
installed in various cities in the United States and Europe. The Lease
calls for monthly payments in the amount of $121,701 for a period of 36
months commencing on March 1, 1998.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto included under Item 1 of
this Form 10-QSB. In addition, reference should be made to the Financial
Statements and Notes thereto and related Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Annual
Report on Form 10-KSB/A for the year ended December 31, 1996. The information
set forth in Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") contains "forward-looking statements" that
involve risks and uncertainties. Many factors could cause actual results to
differ materially from those contained in the forward-looking statements below.
See "Outlook".
General
- -------
WorldPort is a facilities-based network provider of international and domestic
long distance services. The Company's strategy is to provide international voice
and data services to long distance carriers, corporations, businesses, marketers
and distributors of long distance services, and to other alternative
telecommunications services providers primarily in the United States, Western
Europe and Latin America. From its switching center in Omaha, Nebraska, the
Company provides services such as international least cost routing, global
calling card and enhanced services and operator services. The Company's strategy
is to expand its business through both internal business development and the
strategic acquisition of telecommunication services companies, such as TNC and
WWC. See "Acquisitions" and "Outlook".
Outlook
- -------
This section, and other sections of the document, contains "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 profitability) and (ii) the Company's
strategy for expanding its business.
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 and its ability to raise
additional capital ; (vii) the lack of a public market for the Company's Series
A Preferred Stock; (viii) the Company's lack of operating history and current
operating losses; and (ix) the Company's ability to attract and retain key
personnel with the skills and expertise necessary to manage its growth. In light
of these risks and uncertainties, there can be no assurance that the events
contemplated by the forward-looking statements contained in this Form 10-QSB
will in fact occur.
The Company's strategy is to expand its telecommunications facilities in Europe
and Latin America in order to pursue market opportunities made possible by
deregulation and privatization. As part of this strategy, WorldPort has
commenced the deployment of a European gateway through which the Company seeks
to provide international carriers and other high-volume customers with
alternative routes for cost-effective, high quality voice, data and Internet
services within Europe and between Europe and the Americas. The Company's
European gateway deployment is designed to provide it with the infrastructure
needed to compete effectively in the rapidly deregulating European marketplace.
12
<PAGE>
The Company also continues to develop new business opportunities in Latin
America. To date, the Company has developed new carrier relationships to provide
international long distance services between the United States, Mexico and the
Caribbean.
On September 4, 1997 the Company entered into an international strategic
agreement (the "Agreement") with EQUANT Network Services, Inc., ("EQUANT"),
which operates one of the world's largest telecommunications networks (the
"Network"). Under the terms of the Agreement, EQUANT will provide WorldPort with
access to the Network which includes state-of-the-art switches strategically
positioned around the world. WorldPort will utilize the Network to expand its
international long distance services to new markets and to more effectively
serve its existing customers. The Agreement will enable WorldPort to connect
overseas customers to its Omaha, Nebraska switching center and to other future
WorldPort switching centers in the U.S., Europe and Latin America. The Company
intends to coordinate the installation and location of certain of its switches
and other telecommunications equipment with EQUANT, including co-location of
WorldPort equipment at EQUANT facilities in certain markets.
The Network covers over 225 countries and territories, has more than 120,000
user connections world-wide and offers a broad range of voice and data solutions
to multinational corporations in a variety of industries, with local support
available from over 150 help desks around the world. As a single network,
services are fully-managed end-to-end. These services are offered on an
international scale and include X.25 and Frame Relay, messaging, Global Voice
Services, Business Intranet and Internet Solutions and high performance remote
access services.
Results of Operations
- ---------------------
Prior to its acquisition of the assets and on-going operations of TNC, the
Company was a development stage company that had not generated revenues other
than interest income since inception. During the three and nine months ended
September 30, 1997, the Company incurred losses of $(1,242,164) and
$(1,879,684), respectively, compared to $(8,886) and $(129,056) during the same
periods in 1996. Included in the losses incurred during the three and nine
months ended September 30, 1997 are the operating results of TNC and WWC
subsequent to the closing of the TNC Acquisition and the WWC Acquisition. Prior
to the TNC Acquisition, TNC had experienced a history of operating losses and
cash flow deficiencies. To address and remedy these historical operating losses,
the Company has instituted new financial controls, modified existing products
and added new products in a strategy to enhance the profitability of the TNC
operations. In addition, the Company is now utilizing the TNC operations as the
network platform from which to launch new revenue generating agreements that it
has under development with international carriers and distributors. While the
Company believes these measures will have a positive impact on its future
results of operations, the Company anticipates that it will continue to incur
operating losses and cash flow deficiencies for the foreseeable future. See
"Liquidity and Capital Resources" and "Outlook".
Revenues
- --------
Revenues for the three and nine months ended September 30, 1997, were $1,506,238
and $1,694,787, respectively compared to $0 for the three and nine month ended
September 30, 1996. The increase in revenues was due solely to the inclusion of
the operating results of TNC subsequent to the closing of the TNC Acquisition on
June 20, 1997.
Gross Margin
- ------------
Gross margin for the three and nine months ended September 30, 1997, was
$159,373 and $153,510, respectively compared to $0 for the three and nine months
13
<PAGE>
ended September 30, 1996. The increase in gross margin was due solely to the
inclusion of the operating results of TNC subsequent to the closing of the TNC
Acquisition on June 20, 1997.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses increased to $1,062,150 from
$21,525 and to $1,714,798 from $141,821 for the three and nine months ended
September 30, 1997 and 1996, respectively. The increase was due to (i) increased
business development and acquisition activity, (ii) the establishment and
staffing of the Company's corporate offices and (iii) the inclusion of the
selling, general and administrative expenses of TNC subsequent to the closing of
the TNC Acquisition on June 20, 1997.
Interest Income (Expense)
- -------------------------
Interest income decreased to $5,833 from $12,639 and increased to $65,619 from
$12,765 for the three and nine months ended September 30, 1997 and 1996,
respectively. The increase was due to the interest from (i) a note receivable
from Global Star International, Inc. (the "GSI Note") which was paid in full on
March 6, 1997, (ii) a note receivable from Com Tech International Corporation
("Com Tech") and (iii) the note receivable from TNC prior to the Company's
acquisition of TNC.
Interest expense for the three and nine months ended September 30, 1997 was
$62,187 and $71,212, respectively compared to $0 for the three and nine months
ended September 30, 1996. The increase in interest expense is due to the debt
assumed by the Company in connection with the TNC Acquisition on June 20, 1997.
See "Liquidity and Capital Resources".
Pro Forma Results (See Note 2 to the Condensed Consolidated Financial
Statements)
- --------------------------------------------------------------------------------
Pro forma revenues for the nine months ended September 30, 1997 were
approximately $5,273,000 compared to approximately $12,548,000 for the year
ended December 31, 1996. The decrease in revenues was due primarily to the
restructuring of a contract, effective January 1, 1997, with a distributor who
is a significant customer of TNC. Prior to January 1, 1997, the contract was
structured as a retail contract whereby TNC billed the distributor on a retail
basis and paid a commission to the distributor based on the retail billings.
Effective January 1, 1997, the contract was changed to a wholesale contract
whereby TNC bills the distributor on a wholesale basis and pays no commissions
to the distributor.
Through its re-negotiation of the distribution agreement, the Company has
terminated the exclusive distribution provisions of the prior agreement and
gained the ability to directly market its calling cards and pre-paid phone cards
in the market served by the distributor. This contract re-negotiation is
consistent with the Company's strategy to develop new distribution agreements
consistent with new carrier relationships under development by the Company
worldwide. See "Outlook".
Pro forma loss from continuing operations for the nine months ended September
30, 1997 was approximately $(4,131,000) compared to approximately $(2,629,000)
for the year ended December 31, 1996. The increase in loss from continuing
operations was due primarily to (i) increased network costs associated with
changes in TNC's vendor contracts; (ii) the write-off of a receivable from a
significant customer and (iii) increased selling, general and administrative
costs associated with the closing of the TNC Acquisition and the subsequent
implementation of new operating and administrative procedures, as well as the
Company's increased business development and acquisition activity and the
establishment and staffing of the Company's corporate offices. These increases
were partially offset by decreased commission expenses associated with the
restructuring of the contract discussed above.
Liquidity and Capital Resources
- -------------------------------
14
<PAGE>
The Company currently has a working capital deficit and has operated at a loss
since its inception. Funding of the working capital deficit, current and future
operating losses and expansion of the Company will require substantial
continuing capital investment. The Company's strategy is to fund these cash
requirements through debt facilities or additional equity financing. Although
the Company has been able to arrange debt facilities or equity financing to
date, there can be no assurance that sufficient debt or equity financing will
continue to be available in the future or that it will be available on terms
acceptable to the Company. Substantial additional debt or equity financing may
be needed for the Company to achieve its short-term and long-term business
objectives. Failure to obtain sufficient capital could materially affect the
Company's acquisition and operating strategies. The Company expects that future
financing will include equity placements; however, no assurance can be given
that the Company will be able to obtain additional financing on reasonable
terms, if at all. See "Series A Preferred Stock Offering", "Bridge Notes" and
"Subsequent Events".
As of September 30, 1997, the Company has a working capital deficit of
$2,666,412 compared to a working capital surplus of $2,259,416 at December 31,
1996. The working capital deficit is due to (i) the assumption of liabilities in
conjunction with the TNC Acquisition, the majority of which were trade payables
and short-term debt obligations, (ii) the issuance of the note payable in
connection with the WWC Acquisition and (iii) the operating losses of the
Company. Trade receivables increased to $627,700 at September 30, 1997, from $0
at December 31, 1996 due to the TNC Acquisition.
Operations used $1,689,507 during the nine months ended September 30, 1997,
compared to $128,296 for the nine months ended September 30, 1996. Investing
activities used $124,375 during the nine months ended September 30, 1997,
compared to $0 for the nine months ended September 30, 1996. Investing
activities consisted primarily of collection of the GSI Note and a portion of
the Com Tech Note offset by cash advances to TNC to fund working capital prior
to the closing of the TNC Acquisition and cash paid to WWC in connection with
the closing of the WWC Acquisition. Financing activities generated $309,403
during the nine months ended September 30, 1997 compared to $114,400 for the
nine months ended September 30, 1996. Financing activities for the nine months
ended September 30, 1997, consisted of (i) payments on short-term debt and
capital lease obligations assumed in connection with the TNC Acquisition and
(ii) proceeds from the issuance of notes payable and (iii) proceeds from the
issuance of notes payable to related parties and (iv) proceeds from the issuance
of 163,889 shares of the Company's Series A Preferred Stock. Financing
activities for the nine months ended September 30, 1996 consisted of proceeds
from the issuance of Common Stock. See "Series A Preferred Stock Offering",
"Bridge Notes" and "Subsequent Events".
In addition to trade payables and vendor obligations assumed in connection with
the TNC Acquisition, the Company assumed a secured promissory note payable to
Value Partners, Ltd. which is payable in installments of $100,000 per month plus
accrued interest at a rate of 14% per annum beginning September 1, 1997. The
note is secured by all of the assets acquired by the Company in connection with
the TNC Acquisition. As of November 18, 1997, the Company has made none of the
scheduled payments on this note. The note provides that an event of default
thereunder occurs when the Company fails to pay the principal of or interest on
the note as and when due, which failure continues for a period of twenty days.
The note also provides that if an event of default exists, then the note shall
immediately become due and payable together with interest accrued thereon,
without demand or notice. The Company plans to attempt to restructure these
obligations or to refinance these obligations through additional debt facilities
on more favorable terms to the Company or through additional equity financing;
however, no assurance can be given that the Company will be able to restructure
these obligations or to obtain additional financing.
Effective April 14, 1997, the Company and Com Tech entered into an agreement to
settle any and all claims that have been or could have been asserted in the
lawsuit entitled WorldPort Communications, Inc., formerly known as Sage
15
<PAGE>
Resources, Inc., a Delaware corporation, plaintiff v. Com Tech International
Corporation, a Washington corporation, defendant, Case No. C96-4055SBA (the
"Settlement Agreement"). Pursuant to the Settlement Agreement, Com Tech agreed
to pay the Company all amounts due under a $500,000 promissory note (the "Com
Tech Note"). Com Tech agreed to pay $150,000 plus accrued interest on May 1,
1997. Com Tech also agreed to make six payments to the Company, on or before the
10th day of each month, beginning June 10, 1997 through November 1997. Each
payment consists of (i) $58,333.33 of principal, (ii) accrued interest on the
outstanding balance at twelve percent (12%) per annum, and (iii) $6,089.03,
which represents one-sixth of the total costs of litigation and other expenses
owing. As of November 18, 1997, Com Tech has paid the Company all amounts due
under the Settlement Agreement.
On May 8, 1997, the Company initiated a Private Placement Offering for up to
$5,000,000 under Regulation D of 1,666,667 shares of Series A Preferred Stock at
$3.00 per share pursuant to an Offering Memorandum dated May 8, 1997 (the
"Series A Preferred Stock Offering"). Holders of Series A Preferred Stock will
be entitled to receive annual cumulative dividends of 8%, payable in cash or in
shares of Common Stock of the Company, at the Company's option, as and when such
dividends are declared by the Company's Board of Directors. No public market
exists for the Company's Series A Preferred Stock and none is expected to
develop as a result of the Series A Preferred Stock Offering. The offer and sale
of the Series A Preferred Stock is not being registered under the Securities Act
of 1933, as amended, under U.S. or state securities laws or under the securities
laws of any other jurisdictions, and the Company's Series A Preferred Stock or
the Common Stock into which it is convertible may not be resold or otherwise
transferred unless it is subsequently registered or an exemption from applicable
registration requirements is available. On July 25, 1997, the offering price was
reduced to $2.25 per share. On November 14, 1997, the Company closed the Series
A Preferred Stock Offering. The Company has received total proceeds of
$1,111,250 in exchange for 493,889 shares of the Company's Series A Preferred
Stock.
In connection with the WWC Acquisition, the Company was obligated to pay $75,000
cash at closing to Mr. John Dalton. As of November 18, 1997, $52,500 has been
paid to Mr. Dalton with the remaining $22,500 having been deferred by Mr. Dalton
until December 31, 1997. In addition to the cash paid at closing, the Company
issued to Mr. Dalton, the WWC Note in the amount of $175,000 payable as follows:
one payment of $50,000 payable on October 1, 1997, and two payments of $62,500
payable on February 1, 1998 and July 1, 1998. The $50,000 payment which was due
on October 1, 1997 has been deferred by Mr. Dalton until December 31, 1997. See
"WWC Acquisition".
In September 1997, the Company entered into an arrangement with MBCP whereby
MBCP would arrange for the Company to borrow from MBCP and certain other
unaffiliated entities pursuant to certain promissory notes (the "Bridge Notes").
The Bridge Notes bear interest at 10% per annum, mature on December 31, 1997 and
are convertible into equity in the Company on terms to be negotiated in good
faith. As of November 18, 1997, the Company has $1,020,000 in Bridge Notes
outstanding. See "Related Party Transactions".
TNC Acquisition
- ---------------
On June 20, 1997, the Company completed the acquisition of substantially all of
the telecommunications assets and operations of TNC in exchange for (i)
3,750,000 shares of the Company's Common Stock (of which 1,000,000 shares are
being held pursuant to an escrow agreement for a period of 18 months following
the closing subject to certain purchase price adjustments described below) and
(ii) the assumption by the Company of certain indebtedness of TNC up to a
maximum of $4.6 million. The purchased assets include telecommunications
switches and other network equipment, customer and vendor contracts, an FCC
section 214 common carrier license, an operator services center and other assets
sufficient to continue the ongoing business of TNC. The FCC section 214 common
carrier license gives the Company the authority to resell both international
switched and private line services of authorized carriers. The final purchase
price is subject to adjustment if (i) liabilities in excess of $4.6 million are
assumed, (ii) the Company is required to invoke certain indemnifications by TNC,
(iii) there are certain expense overruns, or (iv) there are certain rejected
16
<PAGE>
contracts. In addition, certain creditors of TNC have the option to convert all
or a portion of their debt into shares of the Company's Common Stock. Prior to
closing the TNC Acquisition, the Company loaned $1,178,000 to TNC to provide TNC
with working capital. This amount was assumed by the Company in connection with
the acquisition. See "Liquidity and Capital Resources".
The Company utilizes the acquired switching equipment and international operator
services platform in Omaha, Nebraska to provide calling card and other enhanced
telecommunications services to marketers of telecommunications services,
corporate customers and businesses primarily in the United States, Western
Europe and Latin America. Through the acquired operator services center, the
Company provides multilingual customer support. The U.S. switching and operator
services center enables customers in foreign countries to take advantage of
lower cost routing and higher transmission quality for international calls. The
Company's services are currently marketed through various distribution channels
in the United States, Western Europe and Latin America.
WWC Acquisition
- ---------------
On July 3, 1997, the Company, through its wholly-owned subsidiary WAI, completed
a merger of WWC into WAI. WWC was a telecommunications marketing consulting firm
which produced and implemented marketing strategies for clients ranging from
small companies to large corporate clients. Mr. John Dalton, the Company's
President and Chief Executive Officer, was the sole shareholder of WWC.
In connection with the WWC Acquisition, the Company delivered to Mr. Dalton (i)
1,400,000 shares of the Company's Common Stock, of which 200,000 shares are
being held pursuant to an escrow agreement subject to certain adjustments to the
purchase price based on the Company entering into business agreements that WWC
had negotiated; (ii) $75,000 cash, of which $52,500 has been paid to Mr. Dalton
as of November 18, 1997; and (iii) the WWC Note in the amount of $175,000. See
"Liquidity and Capital Resources".
Related Party Transactions
- --------------------------
Pursuant to an Advisory Agreement between MBCP and the Company dated March 7,
1997, MBCP earns an M&A Success Fee in connection with all acquisitions
identified by MBCP which are consummated by the Company. The fee includes a base
plus an additional amount based on a percentage of the value of the transaction.
In connection with the TNC Acquisition, MBCP earned an M&A Success Fee of
approximately $275,000. In consideration of the Company's development stage,
MBCP reduced its M&A Success Fee related to the TNC Acquisition to $150,000.
The Company and MBCP have entered into an arrangement whereby MBCP will arrange
for the Company to borrow from MBCP and certain other unaffiliated entities
pursuant to certain Bridge Notes. As of November 18, 1997, the Company has
$1,020,000 in Bridge Notes outstanding.
MBCP is a shareholder of the Company and certain members of the Company's Board
of Directors are principals or employees of MBCP.
On July 3, 1997, the Company, through its wholly-owned subsidiary WAI completed
a merger of WWC into WAI pursuant to that certain Agreement and Plan of Merger
dated April 20, 1997. Mr. John Dalton, the Company's President and Chief
Executive Officer, was the sole shareholder of WWC. See "WWC Acquisition".
Subsequent Events
- -----------------
17
<PAGE>
Subsequent to September 30, 1997, the Company borrowed an additional $660,000
pursuant to the Bridge Notes. On November 17, 1997, MBCP converted the unpaid
balance of its M&A Success Fee related to the TNC Acquisition, totaling
$135,000, into a Bridge Note.
On October 31, 1997, the Company entered into a lease agreement with
Forsythe/McArthur Associates, Inc., (the "Lease") through which the Company has
placed an order for Cisco Systems network equipment to be installed in various
cities in the United States and Europe. The Lease calls for monthly payments in
the amount of $121,701 for a period of 36 months commencing on March 1, 1998.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved in various lawsuits or claims arising
from the normal course of business. In the opinion of management, none of these
lawsuits or claims will have a material adverse effect on the financial
statements or results of operations of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Exhibit No. Description
2.1 Asset Purchase Agreement by and between
the Company and Telenational
Communications Limited Partnership
dated April 23, 1997, previously filed
with Form 10-QSB for the fiscal quarter
ended March 31, 1997, and incorporated
herein by reference.
2.2 Amendment No. 1 to the Asset Purchase
Agreement by and between the Company
and Telenational Communications Limited
Partnership, dated June 20, 1997,
previously filed with Form 8-K dated
July 7, 1997, and incorporated herein
by reference.
2.3 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, previously filed with
Form 8-K dated July 7, 1997, and
incorporated herein by reference.
3.1 Certificate of Incorporation for the
Company previously filed with Form
10-QSB for the fiscal quarter ended
September 30, 1996, and incorporated
herein by reference.
3.2 Bylaws of the Company previously filed
with Form 10-QSB for the fiscal quarter
ended September 30, 1996, and
incorporated herein by reference.
10.1 Promissory Note by and between the
Company and Cablex Electronique, Ltd.
dated September 11, 1997.
10.2 Promissory Note by and between the
Company and Le Chevlier Noir, Ltd.
dated September 11, 1997.
10.3 Promissory Note by and between the
Company and Woodlands, Ltd. dated
October 1, 1997.
10.4 Promissory Note by and between the
Company and Maroon Bells Capital
Partners, Inc. dated October 9, 1997.
10.5 Agreement for the Provision of
Corporate Voice Communication Services
between EQUANT Network Services, Inc.
and the Company dated September 4,
1997.
19
<PAGE>
10.6 Master Equipment Lease Agreement by
and between the Company and
Forsythe/McArthur Associates, Inc.
dated October 31, 1997.
10.7 Lease Schedule A by and between the
Company and Forsythe/McArthur
Associates, Inc. dated October 30,
1997.
10.8 Lease by and between the Company and
Mission Life Insurance Company, dated
April 15, 1997, previously filed with
Form 10-QSB for the fiscal quarter
ended March 31, 1997 and incorporated
herein by reference.
10.9 Settlement Agreement by and between Com
Tech International Corporation and the
Company dated April 14, 1997,
previously filed with Form 10-QSB for
the fiscal quarter ended March 31, 1997
and incorporated herein by reference.
10.10 Management Services Agreement by and
between the Company and Telenational
Communications Limited Partnership,
dated April 29, 1997, previously filed
with Form 10-QSB for the fiscal quarter
ended March 31, 1997 and incorporated
herein by reference.
10.11 Employment Agreement by and between W.
Dean Spies and the Company effective
April 7, 1997, previously filed with
Form 10-QSB for the fiscal quarter
ended March 31, 1997 and incorporated
herein by reference.
10.12 First Amended Loan Modification
Agreement by and between the Company,
Telenational Communications, Inc.,
Telenational Communications Limited
Partnership and Value Partners, Ltd.
dated June 20, 1997, previously filed
with Form 10-QSB for the fiscal quarter
ended June 30, 1997 and incorporated
herein by reference.
10.13 Second Amended and Restated Senior
Secured Promissory Note by and between
the Company, Telenational
Communications, Inc. and Value
Partners, Ltd. Dated June 20, 1997,
previously filed with Form 10-QSB for
the fiscal quarter ended June 30, 1997
and incorporated herein by reference.
10.14 First Amended Pledge and Security
Agreement by and between Telenational
Communications, Inc. and Value
Partners, Ltd. dated June 20, 1997,
previously filed with Form 10-QSB for
the fiscal quarter ended June 30, 1997
and incorporated herein by reference.
10.15 Notice and Certification of No Oral
Agreements by and between the Company,
Telenational Communications, Inc.,
Telenational Communications Limited
Partnership and Value Partners, Ltd.
dated June 20, 1997, previously filed
with Form 10-QSB for the fiscal quarter
ended June 30, 1997 and incorporated
herein by reference.
20
<PAGE>
10.16 Consulting Agreement by and between
Edmund Blankenau and the Company dated
June 20, 1997, previously filed with
Form 10-QSB for the fiscal quarter
ended June 30, 1997 and incorporated
herein by reference.
10.17 Employment Agreement by and between
Bruce Burton and the Company dated June
20, 1997, previously filed with Form
10-QSB for the fiscal quarter ended
June 30, 1997 and incorporated herein
by reference.
10.18 Lease by and between Telenational
Communications, Inc. and 7300 Woolworth
Partnership dated July 1, 1997,
previously filed with Form 10-QSB for
the fiscal quarter ended June 30, 1997
and incorporated herein by reference.
27.1 Financial Data Schedule
Reports on Form 8-K
- -------------------
Form 8-K filed with the Securities and Exchange Commission on July 7, 1997.
Form 8-K/A filed with the Securities and Exchange Commission on September 5,
1997.
21
<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: November 19, 1997 By: /s/ W. Dean Spies
-------------------------------------
W. Dean Spies
Chief Financial Officer and Treasurer
22
PROMISSORY NOTE
$125,000 September 11, 1997
FOR VALUE RECEIVED, WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (together with its successors and assigns, herein called the
"Debtor"), promises to pay to Cablex Electronique, Ltd., or its successors or
assigns (herein called the "Holder"), the principal sum of ONE HUNDRED
TWENTY-FIVE THOUSAND AND 00/100 DOLLARS ($125,000), together with accrued
interest on the unpaid principal hereof at a rate of 10% per annum from the date
hereof, subject to the terms and conditions set forth herein.
The Debtor shall pay all outstanding principal due under this
Note and all accrued and unpaid interest no later than December 31, 1997.
Following such date, the interest rate on any unpaid principal and interest
hereunder shall accrue at a rate of 15% per annum until paid in full.
The advances represented by this Promissory Note are made
pursuant to an up to $5,000,000 bridge financing arrangement through Maroon
Bells Capital Partners, Inc. (the "Bridge Financing"). Payments of both
principal and interest under this Promissory Note (as amended, modified,
refinanced or refunded in whole or in part from time to time, herein called this
"Note") are to be made c/o Maroon Bells Capital Partners, Inc. 100 California
Street, Suite 1160, San Francisco, California 94111, or at such other place as
the Holder shall designate in writing, in lawful money of the United States of
America.
The Debtor represents and warrants to the Holder that: (i) the
Debtor is a corporation duly formed, validly existing, and in good standing
under the laws of Delaware; (ii) the execution, delivery, and performance by the
Debtor of this Note have been duly authorized by all necessary corporate action
and do not and will not (A) contravene the Debtor's Articles of Incorporation or
Bylaws; (B) violate or cause a breach or default of any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Debtor; or (C) violate or result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which the Debtor is a party or by which
it or its properties may be bound or affected; and (iii) this Note is the legal,
valid, and binding obligation of the Debtor enforceable against the Debtor in
accordance with its terms, except to the exteny that such enforcement may be
limited by applicable bankruptcy, insolvency, and other similar laws affecting
creditors' rights generally and principles of equity.
So long as any amount of principal or interest under this
Note shall remain unpaid or outstanding, except as otherwise agreed to in
writing by Holder: (i) the Debtor will preserve and maintain its corporate
existence and good standing in the jurisdiction of its formation; and (ii) the
Debtor will conduct its businesses and operations only in, and not take any
<PAGE>
action except in, the ordinary course of business consistent with past practice,
including, but not limited to, the following: (A) not make any payment of any
distribution to any shareholder, or otherwise redeem or acquire any shareholder
interest; (B) not 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; or (C) not incur or become subject to, nor agree to incur or become
subject to, any debt, obligation or liability, contingent or otherwise, except
additional borrowings under the Bridge Financing, and current liabilities in the
ordinary course of business, consistent with past practice.
Debtor shall have the right to prepay this Note in whole or in
part at any time, without penalty or premium.
Debtor hereby waives diligence, presentment, demand for
payment, protest and notice of any kind whatsoever in connection with this Note,
now or hereafter required by applicable law.
The Holder shall have the right to convert all or any portion
of the outstanding principal and interest payable hereunder into equity
interests in Debtor on terms acceptable to Debtor and the Holder. Debtor and the
Holder agree to negotiate in good faith with respect to such conversion rights.
Debtor hereby agrees to pay all of Holder's costs and expenses
related to this Note, and the related documents and transactions, upon demand.
Debtor hereby agrees to pay all costs of collection, including reasonable
attorneys' fees and all costs of suit incurred by Holder in any proceeding for
the collection of the debt evidenced hereby, or in any litigation or controversy
arising from or connected with this Note.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note shall bind and inure to the benefit of Debtor and
Holder and their respective executors, administrators, legal representatives,
heirs, distributees, legatees, successors and assigns.
This Note shall be governed by and construed in accordance
with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Debtor has signed and delivered this Note
as of the day and year first above written.
WORLDPORT COMMUNICATIONS, INC.
By: /s/ W. Dean Spies
Name: W. Dean Spies
Title: Chief Financial Officer
PROMISSORY NOTE
$100,000 September 19, 1997
FOR VALUE RECEIVED, WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (together with its successors and assigns, herein called the
"Debtor"), promises to pay to Le Chevlier Noir, Ltd., or its successors or
assigns (herein called the "Holder"), the principal sum of ONE HUNDRED THOUSAND
AND 00/100 DOLLARS ($100,000), together with accrued interest on the unpaid
principal hereof at a rate of 10% per annum from the date hereof, subject to the
terms and conditions set forth herein.
The Debtor shall pay all outstanding principal due under this
Note and all accrued and unpaid interest no later than December 31, 1997.
Following such date, the interest rate on any unpaid principal and interest
hereunder shall accrue at a rate of 15% per annum until paid in full.
The advances represented by this Promissory Note are made
pursuant to an up to $5,000,000 bridge financing arrangement through Maroon
Bells Capital Partners, Inc. (the "Bridge Financing"). Payments of both
principal and interest under this Promissory Note (as amended, modified,
refinanced or refunded in whole or in part from time to time, herein called this
"Note") are to be made c/o Maroon Bells Capital Partners, Inc. 100 California
Street, Suite 1160, San Francisco, California 94111, or at such other place as
the Holder shall designate in writing, in lawful money of the United States of
America.
The Debtor represents and warrants to the Holder that: (i) the
Debtor is a corporation duly formed, validly existing, and in good standing
under the laws of Delaware; (ii) the execution, delivery, and performance by the
Debtor of this Note have been duly authorized by all necessary corporate action
and do not and will not (A) contravene the Debtor's Articles of Incorporation or
Bylaws; (B) violate or cause a breach or default of any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Debtor; or (C) violate or result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which the Debtor is a party or by which
it or its properties may be bound or affected; and (iii) this Note is the legal,
valid, and binding obligation of the Debtor enforceable against the Debtor in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, and other similar laws affecting
creditors' rights generally and principles of equity.
So long as any amount of principal or interest under this
Note shall remain unpaid or outstanding, except as otherwise agreed to in
writing by Holder: (i) the Debtor will preserve and maintain its corporate
existence and good standing in the jurisdiction of its formation; and (ii) the
Debtor will conduct its businesses and operations only in, and not take any
<PAGE>
action except in, the ordinary course of business consistent with past practice,
including, but not limited to, the following: (A) not make any payment of any
distribution to any shareholder, or otherwise redeem or acquire any shareholder
interest; (B) not 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; or (C) not incur or become subject to, nor agree to incur or become
subject to, any debt, obligation or liability, contingent or otherwise, except
additional borrowings under the Bridge Financing, and current liabilities in the
ordinary course of business, consistent with past practice.
Debtor shall have the right to prepay this Note in whole or in
part at any time, without penalty or premium.
Debtor hereby waives diligence, presentment, demand for
payment, protest and notice of any kind whatsoever in connection with this Note,
now or hereafter required by applicable law.
The Holder shall have the right to convert all or any portion
of the outstanding principal and interest payable hereunder into equity
interests in Debtor on terms acceptable to Debtor and the Holder. Debtor and the
Holder agree to negotiate in good faith with respect to such conversion rights.
Debtor hereby agrees to pay all of Holder's costs and expenses
related to this Note, and the related documents and transactions, upon demand.
Debtor hereby agrees to pay all costs of collection, including reasonable
attorneys' fees and all costs of suit incurred by Holder in any proceeding for
the collection of the debt evidenced hereby, or in any litigation or controversy
arising from or connected with this Note.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note shall bind and inure to the benefit of Debtor and
Holder and their respective executors, administrators, legal representatives,
heirs, partners, legatees, successors and assigns.
This Note shall be governed by and construed in accordance
with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Debtor has signed and delivered this Note
as of the day and year first above written.
WORLDPORT COMMUNICATIONS, INC.
By: /s/ W. Dean Spies
Name: W. Dean Spies
Title: Chief Financial Officer
PROMISSORY NOTE
$500,000 October 1, 1997
FOR VALUE RECEIVED, WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (together with its successors and assigns, herein called the
"Debtor"), promises to pay to Woodlands Ltd., or its successors or assigns
(herein called the "Holder"), the principal sum of FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($500,000), together with accrued interest on the unpaid
principal hereof at a rate of 10% per annum from the date hereof, subject to the
terms and conditions set forth herein.
The Debtor shall pay all outstanding principal due under this
Note and all accrued and unpaid interest no later than December 31, 1997.
Following such date, the interest rate on any unpaid principal and interest
hereunder shall accrue at a rate of 15% per annum until paid in full.
The advances represented by this Promissory Note are made
pursuant to an up to $5,000,000 bridge financing arrangement through Maroon
Bells Capital Partners, Inc. (the "Bridge Financing"). Payments of both
principal and interest under this Promissory Note (as amended, modified,
refinanced or refunded in whole or in part from time to time, herein called this
"Note") are to be made c/o Maroon Bells Capital Partners, Inc. 100 California
Street, Suite 1160, San Francisco, California 94111, or at such other place as
the Holder shall designate in writing, in lawful money of the United States of
America.
The Debtor represents and warrants to the Holder that: (i) the
Debtor is a corporation duly formed, validly existing, and in good standing
under the laws of Delaware; (ii) the execution, delivery, and performance by the
Debtor of this Note have been duly authorized by all necessary corporate action
and do not and will not (A) contravene the Debtor's Articles of Incorporation or
Bylaws; (B) violate or cause a breach or default of any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Debtor; or (C) violate or result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which the Debtor is a party or by which
it or its properties may be bound or affected; and (iii) this Note is the legal,
valid, and binding obligation of the Debtor enforceable against the Debtor in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, and other similar laws affecting
creditors' rights generally and principles of equity.
<PAGE>
So long as any amount of principal or interest under this Note
shall remain unpaid or outstanding, except as otherwise agreed to in writing by
Holder: (i) the Debtor will preserve and maintain its corporate existence and
good standing in the jurisdiction of its formation; and (ii) the Debtor will
conduct its businesses and operations only in, and not take any action except
in, the ordinary course of business consistent with past practice, including,
but not limited to, the following: (A) not make any payment of any distribution
to any shareholder, or otherwise redeem or acquire any shareholder interest; (B)
not 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; or
(C) not incur or become subject to, nor agree to incur or become subject to, any
debt, obligation or liability, contingent or otherwise, except additional
borrowings under the Bridge Financing, and current liabilities in the ordinary
course of business, consistent with past practice.
Debtor shall have the right to prepay this Note in whole or in
part at any time, without penalty or premium.
Debtor hereby waives diligence, presentment, demand for
payment, protest and notice of any kind whatsoever in connection with this Note,
now or hereafter required by applicable law.
The Holder shall have the right to convert all or any portion
of the outstanding principal and interest payable hereunder into equity
interests in Debtor on terms acceptable to Debtor and the Holder. Debtor and the
Holder agree to negotiate in good faith with respect to such conversion rights.
Debtor hereby agrees to pay all of Holder's costs and expenses
related to this Note, and the related documents and transactions, upon demand.
Debtor hereby agrees to pay all costs of collection, including reasonable
attorneys' fees and all costs of suit incurred by Holder in any proceeding for
the collection of the debt evidenced hereby, or in any litigation or controversy
arising from or connected with this Note.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note shall bind and inure to the benefit of Debtor and
Holder and their respective executors, administrators, legal representatives,
heirs, distributees, legatees, successors and assigns.
This Note shall be governed by and construed in accordance
with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Debtor has signed and delivered this Note
as of the day and year first above written.
WORLDPORT COMMUNICATIONS, INC.
By: /s/ W. Dean Spies
Name: W. Dean Spies
Title: Chief Financial Officer
PROMISSORY NOTE
$4,275,000 October 9, 1997
FOR VALUE RECEIVED, WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (together with its successors and assigns, herein called the
"Debtor"), promises to pay to Maroon Bells Capital Partners, Inc., or its
successors or assigns (herein called the "Holder"), the principal sum of FOUR
MILLION TWO HUNDRED SEVENTY FIVE THOUSAND AND 00/100 DOLLARS ($4,275,000),or
such lesser amount as may have been advanced or may in the future be advanced to
the Debtor by the Holder, together with accrued interest on the unpaid principal
hereof at a rate of 10% per annum from the date of each respective advance,
subject to the terms and conditions set forth herein. A schedule of the amounts
heretofore advanced to Debtor by the Holder is attached hereto as Annex A.
The Debtor shall pay all outstanding principal due under this
Note and all accrued and unpaid interest no later than December 31, 1997.
Following such date, the interest rate on any unpaid principal and interest
hereunder shall accrue at a rate of 15% per annum until paid in full.
The advances represented by this Promissory Note are made
pursuant to an up to $5,000,000 bridge financing arrangement through Maroon
Bells Capital Partners, Inc. (the "Bridge Financing"). Payments of both
principal and interest under this Promissory Note (as amended, modified,
refinanced or refunded in whole or in part from time to time, herein called this
"Note") are to be made at the Holder's address at Maroon Bells Capital Partners,
Inc. 100 California Street, Suite 1160, San Francisco, California 94111, or at
such other place as the Holder shall designate in writing, in lawful money of
the United States of America.
The Debtor represents and warrants to the Holder that: (i) the
Debtor is a corporation duly formed, validly existing, and in good standing
under the laws of Delaware; (ii) the execution, delivery, and performance by the
Debtor of this Note have been duly authorized by all necessary corporate action
and do not and will not (A) contravene the Debtor's Articles of Incorporation or
Bylaws; (B) violate or cause a breach or default of any provision of any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award applicable to the Debtor; or (C) violate or result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease, or instrument to which the Debtor is a party or by which
it or its properties may be bound or affected; and (iii) this Note is the legal,
valid, and binding obligation of the Debtor enforceable against the Debtor in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, and other similar laws affecting
creditors' rights generally and principles of equity.
<PAGE>
So long as any amount of principal or interest under this
Note shall remain unpaid or outstanding, except as otherwise agreed to in
writing by Holder: (i) the Debtor will preserve and maintain its corporate
existence and good standing in the jurisdiction of its formation; and (ii) the
Debtor will conduct its businesses and operations only in, and not take any
action except in, the ordinary course of business consistent with past practice,
including, but not limited to, the following: (A) not make any payment of any
distribution to any shareholder, or otherwise redeem or acquire any shareholder
interest; (B) not 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; or (C) not incur or become subject to, nor agree to incur or become
subject to, any debt, obligation or liability, contingent or otherwise, except
additional borrowings under the Bridge Financing, and current liabilities in the
ordinary course of business, consistent with past practice.
Debtor shall have the right to prepay this Note in whole or in
part at any time, without penalty or premium.
Debtor hereby waives diligence, presentment, demand for
payment, protest and notice of any kind whatsoever in connection with this Note,
now or hereafter required by applicable law.
The Holder shall have the right to convert all or any portion
of the outstanding principal and interest payable hereunder into equity
interests in Debtor on terms acceptable to Debtor and the Holder. Debtor and the
Holder agree to negotiate in good faith with respect to such conversion rights.
Debtor hereby agrees to pay all of Holder's costs and expenses
related to this Note, and the related documents and transactions, upon demand.
Debtor hereby agrees to pay all costs of collection, including reasonable
attorneys' fees and all costs of suit incurred by Holder in any proceeding for
the collection of the debt evidenced hereby, or in any litigation or controversy
arising from or connected with this Note.
This Note may not be changed orally, but only by an agreement
in writing, signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
This Note shall bind and inure to the benefit of Debtor and
Holder and their respective executors, administrators, legal representatives,
heirs, distributees, legatees, successors and assigns.
This Note shall be governed by and construed in accordance
with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Debtor has signed and delivered this Note
as of the day and year first above written.
WORLDPORT COMMUNICATIONS, INC.
By: /s/ W. Dean Spies
Name: W. Dean Spies
Title: Chief Financial Officer
<PAGE>
Annex A
- -------
Date of Advance Amount of Advance
- --------------- -----------------
October 9, 1997 $ 60,000
October 17, 1997 100,000
November 17, 1997 135,000
AGREEMENT
FOR THE PROVISION OF CORPORATE VOICE COMMUNICATION SERVICES
(Dated September 4, 1997)
between
EQUANT NETWORK SERVICES, INC.
and
WORLDPORT COMMUNICATIONS, INC.
Contract Ref: GVS/US/CUSTOMER/09/97/00
NOTE:
** This material has been omitted pursuant to a request for confidential
treatment and the omitted material has been filed separately with the Securities
and Exchange Commission.
<PAGE>
This Agreement is made on as of the 4th day of September, 1997 ("Effective
Date") between:
BETWEEN:
EQUANT Network Services, Inc., a company incorporated in the State of Delaware,
whose principal office is located at 3100 Cumberland Circle, Suite 1200,
Atlanta, Georgia 30339 ("EQUANT"); and
Worldport Communications, Inc., a company incorporated in the State of Delaware
whose principal office is located at 7300 Woolworth Avenue, Omaha, Nebraska
68124 ("Customer").
RECITALS:
(A) Customer desires to obtain the Service from EQUANT in order to
facilitate voice communications between the Locations.
(B) EQUANT has agreed to provide and Customer has agreed to use the
Service pursuant to the terms and conditions set out in this
Agreement.
IT IS AGREED as follows:
1. Definitions
In this Agreement:
"Acceptance Tests" means the tests to be carried out by EQUANT in
order for the Service to be commissioned, as specified in Schedule 3;
"Associated Company" means in relation to a party, the holding company
of such party or any majority owned subsidiary of such party or
holding company;
"Charges" means the charges to be paid by Customer for the Service as
specified in Schedule 2;
"CPE" means any equipment, including cables and connectors, sited at
the Locations and supplied by EQUANT to Customer under this Agreement;
"Customer Facilities" means all such equipment and communications
lines (other than Tail Circuits, CPE and Software which EQUANT
supplies to Customer hereunder) including without limitation Customer
owned or licensed Switch equipment and software, magnetic media,
programs and other facilities, including personnel, required by
Customer for its use of the Service;
"Date of Acceptance" means in respect of each Location the date the
Acceptance Tests are successfully completed;
"Dollars" or "$" means United States Dollars;
PAGE 1
<PAGE>
"End User" means any of Customer's subscribers obtaining the Service
under this Agreement; an End user may not be an airline or other air
transport-related company, ** of ** or ** services, ** provider or
competitor of EQUANT or its Associated Companies, unless agreed to in
writing by EQUANT;
"Initial Term" means **
"Locations" means the locations to which the Service is to be provided
as listed in Schedule 1 and any other locations subsequently added to
this Agreement;
"Network" means the EQUANT's network used to provide the Service; the
Network excludes Tail Circuits, Customer owned or licensed Switch
equipment and software, power supplies, public data networks and CPE;
"Order Form" means EQUANT's standard order form as modified from time
to time;
"Performance Levels" means the performance levels to which the Service
is to conform, as set out in Schedule 4;
"Service" means the corporate voice communications service described
in Schedule 1;
"Software" means the software programs and each and every component
thereof, as amended from time to time, including all developments,
versions or releases thereof whether existing now or becoming
available in the future, and all related documentation, which may be
supplied by EQUANT or Sub-Contractors in connection with the provision
of the Service, whether integral to CPE or otherwise;
"Sub-Contractor" means an Associated Company of EQUANT, Societe
Internationale de Telecommunications Aeronautiques or any other third
party whose identity has been notified to Customer, who may under
contract to EQUANT, perform or provide part of the Service under this
Agreement;
"Support Services" means the services specified in Clause 6;
"Switch" means Customer's network services exchange which is used to
access voice services and which forms part of the Customer Facilities;
"Tail Circuit" means a telecommunications circuit or other means of
access leased from a TO and used to connect the Locations to the
nearest Network node or such other node as Customer may agree.
"TO" means a governmental or non-governmental entity authorised to own
or lease and operate telecommunications circuits or other
telecommunications capacity and to lease said circuits or capacity to
providers such as EQUANT;
2. Scope and Purpose of Agreement
2.1 This Agreement sets out the terms and conditions on which EQUANT shall
provide the Service and the Support Services to Customer and Customer's End
Users.
2.2 Under this Agreement, Customer shall be entitled to (1) use the Service
for its own internal business purposes and in doing so may connect its
Associated Companies; and (2) resell the Service as an integral part of
Customer's Service, to End Users, subject to Clauses 2.4 and 2.5. The
PAGE 2
<PAGE>
parties may decide to jointly market the Service and Customer's Service
from time to time and will confirm any conditions relating thereto in a
supplement to this Agreement.
2.3 Customer shall not be entitled to market, distribute or sell the
Service to any third party other than Associated Companies and End Users,
nor in any event resell or permit an Associated Company or End User to
resell the Service or provide the Service for resale to the general public,
or to such classes of users as to be effectively available to the general
public, that in any way jeopardizes EQUANT's status as a non-public,
non-common carrier, private network provider or in any way, which in the
exclusive opinion of EQUANT, contravenes the letter or intent of
regulations in force governing telecommunications in any country. Customer
shall not use the Service to allow "international simple resale" of leased
circuits to or from any country. Any of the foregoing prohibited activities
or resale shall constitute a material breach of this Agreement.
2.4 In marketing, distributing, and selling the Service pursuant to Clause
2.3, Customer shall be solely responsible for all risks and expenses
incurred and shall act in all respects on its own account. Customer shall
pay for all Service ordered by Customer irrespective of any payment terms
it may agree with any End User.
2.5 This Agreement may be extended to include the telehousing of Switch and
other Customer owned equipment by EQUANT in EQUANT Associated Company
premises. Any such additional services will be subject to separate
conditions and charges as set out in a supplement to this Agreement.
2.6 If EQUANT, in its reasonable discretion, determines that its provision
of Service to Customer will in any way jeopardize: (1) EQUANT's ability or
authority to provide Service; or (2) its status as a non-public, non-common
carrier, or private network provider, then EQUANT retains the right to
refuse, suspend, or discontinue the provision of Service to Customer in any
Location by providing to Customer prior written notice as is appropriate
under the circumstances. In the event of such refusal, suspension, or
discontinuation of Service, the parties shall consult with each other in an
attempt to find an alternative solution, if any, that would allow the
provision of Service in accordance with this Clause 2.6.
3. Term and Termination
3.1 This Agreement becomes effective from the Effective Date and, except as
provided under Clause 3.2, will continue in full force and effect for the
Initial Term. Thereafter, this Agreement shall continue for successive
terms of ** unless a party gives written notice of termination of this
Agreement to the other party at least 60 days before the end of the Initial
Term or any renewal thereof. In the event that this Agreement is extended
after the Initial Term by operation of this Clause, the Committed Volume
for ** set forth in Schedule 2, Clause 6.3 shall continue to apply to any
renewal term.
3.2 Either party may terminate this Agreement by written notice to the
other party with immediate effect if:
PAGE 3
<PAGE>
3.2.1 the other party commits any material breach of this Agreement, and
does not remedy the breach (if it is capable of remedy) within 14
days of written notice of the breach being given by the non-defaulting
party;
3.2.2 an order is made or an effective resolution is passed for the
dissolution or discontinuation or termination of the other party
except for the purposes of a consolidation , merger or restructuring ;
3.2.3 an encumbrancer takes possession or a receiver is appointed over
the whole or any part of the undertaking or assets of the other party;
3.2.4 the other party becomes insolvent or makes any special arrangements or
any special assignment for the benefit of its creditors, or is the
subject of a voluntary or involuntary filing under the insolvency or
bankruptcy laws of any jurisdiction.
3.3 Each party's further rights and obligations under this Agreement shall
cease immediately on termination of this Agreement, but termination shall
not affect: (a) a party's rights and obligations accrued as at termination;
and (b) any provision of this Agreement expressed to survive its
termination.
3.4 Following a notice of termination by Customer pursuant to Clause 3.2,
EQUANT shall continue to provide the Service and the Support Services to
Customer for a reasonable migration period subject to payment of the
Charges by Customer in accordance with this Agreement and under the terms
and conditions of this Agreement, save that nothing in this provision shall
obligate EQUANT to (a) provide Service to Customer for resale to an End
User if Customer is not contractually bound to provide the Service to an
End User prior to Customer's receipt of notice of EQUANT's intent to
terminate, or (b) provide Service to Customer for resale to an End User for
a period longer than the term of any contract for the provision of
Customer's Service with an End User. This Agreement shall terminate
immediately upon cessation of the Service to all Locations following such
migration period.
3.5 On termination of this Agreement for whatever reason each party will
immediately return to the other any and all property of whatever kind and
nature provided under this Agreement and belonging to the other.
4. Provision of Service - EQUANT's Obligations
4.1 EQUANT shall provide the Service to Customer at the Locations commencing
from each Date of Acceptance.
4.2 The Service shall conform to the service description in Schedule 1 and
shall comply with the Performance Levels.
4.3 EQUANT reserves the right to make operational changes to the Service,
provided that such changes shall not adversely affect the Service provided
to Customer nor cause Customer to incur increased charges.
4.4 EQUANT shall ensure at all times that its provision of the Service to
Customer is in accordance with all applicable telecommunications, data
protection and other laws.
4.5 EQUANT shall have no obligations with respect to the use, operation,
performance or repair of the Customer Facilities including, without
limitation, Switches.
PAGE 4
<PAGE>
5. Use of the Service - Customer's Obligations
5.1 Customer shall pay the Charges from each Date of Acceptance in accordance
with Clause 11.
5.2 Customer shall accept the Service at the Locations on the Date of
Acceptance.
5.3 Subject to Clause 4.4, Customer shall ensure at all times that its use of
the Service (and the use of the Service by its End Users) is in accordance
with all applicable telecommunications, data protection and other laws in
any country where the Service has been provided by EQUANT.
5.4 Customer shall not directly connect to the Network nor permit its
Associated Companies or End Users to directly connect to the Network any
equipment not type approved by EQUANT. EQUANT reserves the right to
immediately disconnect (or require the disconnection of) any equipment
connected in breach of this provision.
5.5 Customer shall not directly connect to the Network nor permit its
Associated Companies or End Users to directly connect to the Network, the
network of any other network supplier unless EQUANT has given Customer its
prior written approval. Any breach of this provision shall be a material
breach of this Agreement.
5.6 Customer shall ensure that any of its End Users and Associated Companies
connected to the Network shall comply at all times with the obligations of
Customer under this Agreement.
5.7 Customer shall be at all times responsible for the operation and
performance of Switch equipment, including the provisioning and
installation of any extra capacity or other modifications required for the
implementation of the Service. Customer shall also be responsible for
ensuring the support or presence, during implementation activities, of the
appropriate technical personnel from its Switch supplier. EQUANT shall not
be responsible for the correction of, or performance issues associated
with, faults traced back to the Switch, but EQUANT shall provide Customer
with all available information concerning such faults, and reasonable
assistance in support of Customer's efforts to obtain correction.
5.8 Customer shall be responsible for obtaining and maintaining the Customer
Facilities to a level necessary for EQUANT to provide the Service.
6. Support Services
6.1 EQUANT shall provide for the benefit of Customer help desk facilities
("Help Desk") in order that Customer may obtain technical advice and
guidance on the operation and use of the Service and for the reporting of
Service faults. The location of the Help Desk shall be subject to
reasonable change at any time. The Help Desk will be available at all times
to answer all service related queries from Customer's designated personnel.
The Help Desk will respond only to Customer's designated personnel; all
contact with the Help Desk shall be with Customer. EQUANT shall use its
reasonable efforts to respond to Customer promptly on any query which is
Service related.
6.2 EQUANT shall provide the escalation procedures specified in Schedule 4 to
facilitate the prompt and orderly resolution of any faults in the Service.
6.3 EQUANT shall provide Tail Circuit management services for all Tail Circuits
which shall comprise:
PAGE 5
<PAGE>
6.3.1 the ordering and management of the connection of Tail Circuits,
modems and other communications equipment from the relevant TOs or
other third party vendors as applicable; in the event EQUANT is unable
to order Tail Circuits due to regulatory impediment, Customer agrees
to order them itself, in its own name;
6.3.2 the testing and acceptance of Tail Circuits, modems and other
communications equipment;
6.3.3 the notification of Tail Circuit faults to Customer and/or the
relevant TO on EQUANT becoming aware of the faults and the
co-ordination and expediting of Service restoration;
6.3.4 payment to TOs and other third party vendors in local currency
on Customer's behalf, where applicable. This service does not,
however, affect Customer's liability with respect to such Tail
Circuits, modems or other communications equipment and all sums paid
by EQUANT to TOs or other third party vendors in respect thereof,
which shall be reimbursed by Customer to EQUANT as more fully
described in Schedule 2).
7. CPE
7.1 The Service may include the provision by EQUANT of CPE. EQUANT warrants
that it has the right to provide or procure the provision of the CPE to
Customer, its Associated Companies and End Users and that all such persons
will have the right to use all CPE so provided for the duration of this
Agreement.
7.2 EQUANT shall connect the CPE at the Locations on dates and times to be
agreed by the parties. Should connection require the removal or
disconnection of any existing CPE of Customer or its End Users, Customer
shall permit, and obtain all necessary consent for the removal or
disconnection of such equipment and shall give EQUANT all necessary
assistance to enable such work to be carried out.
7.3 Charges for each item of CPE at a Location shall, in accordance with
Schedule 2, commence on the Date of Acceptance of the Service at a Location
and unless otherwise stated in this Agreement, shall continue for a minimum
period of **, provided that no CPE charges shall be payable with respect to
CPE if this Agreement or any Service under this Agreement has been
terminated by Customer pursuant to Clause 3.2.
7.4 The CPE shall at all times remain the sole and exclusive property of
EQUANT or its Sub-Contractors and Customer shall have no property rights or
interest in the CPE but shall have the right to quiet possession and the
right to use the CPE under the terms and conditions of this Agreement.
7.5 Customer shall have the following obligations with respect to the CPE:
7.5.1 not to sell, assign, sub-let, pledge or part with possession or
control of the CPE or any interest therein;
7.5.2 not to change, remove or obscure any labels, plates, insignia,
lettering or other markings which are on the CPE at the time of its
connection or which may afterwards be placed on the CPE by EQUANT or
by any person authorised by EQUANT;
7.5.3 to keep the CPE free from distress, liens or claims of lien.
PAGE 6
<PAGE>
7.5.4 not to move the CPE from the Location to which it was delivered and
connected without EQUANT's prior written consent;
7.5.5 not to use the CPE or permit it to be used contrary to any law or any
regulation for the time being in force;
7.5.6 to ensure that proper environmental conditions as recommended by
EQUANT are maintained for the CPE and that the exterior surfaces are
kept clean and in good condition;
7.5.7 not to make any modifications to the CPE;
7.5.8 to insure the CP for its full replacement value for the duration of
this Agreement;
7.5.9 to provide EQUANT with all reasonable access to the Locations in order
to comply with its responsibilities pursuant to Clause 7.7.
7.6 Upon termination or expiration of this Agreement, Customer shall
surrender possession of the CPE in good order, repair and condition,
reasonable wear and tear excepted, to EQUANT.
7.7 Subject to Clause 7.5, EQUANT shall ensure that the CPE is in good
working order at the time of commissioning, and remains in good working
order for the duration of this Agreement. If a Service fault occurs which
has been caused by a failure in the CPE, EQUANT shall repair the fault as
soon as possible following notification of the fault by Customer or
detection of the fault by EQUANT, whichever first occurs. If a visit to a
Location is required, within ** of notification by Customer, EQUANT shall
ensure that a Sub-Contractor arrives at the affected Location and commences
any remedial activities provided: (a) the notification is received, and the
call for repair can be made during the normal business day of the
Sub-Contractor located nearest to the affected Location; and (b) the
Location is situated within a ** mile radius of the nearest EQUANT service
center ("Normal Service"). Remedial service on CPE other than Normal
Service shall be carried out by EQUANT through its Sub-Contractors as soon
as is practicably possible, taking into account availability of service
personnel, the time and date of Customer's notification and the country
concerned.
7.8 Any visits to a Location or repairs to CPE made necessary by: (a)
damage to the CPE not caused by EQUANT or a Sub-Contractor; (b)
interventions other than normal interventions carried out by non-EQUANT
personnel; (c) modifications to the CPE which have not been approved by
EQUANT or have been carried out by personnel unapproved by EQUANT; (d)
improper treatment of the CPE by Customer or an End User; (e) failure by
Customer or its End User to meet the CPE manufacturer's specifications as
advised by EQUANT to Customer on environmental conditions; (f) negligence
on the part of Customer or its End User; or (g) any force majeure event,
shall entitle EQUANT to increase its charges for the Service at the
affected Location, such increase in charges to be equal to the actual and
reasonable cost to EQUANT of restoring the Service.
PAGE 7
<PAGE>
8. Software
EQUANT, for and on behalf of itself and any Associated Company of EQUANT
having ownership thereof, hereby grants to Customer and its Associated
Companies for the duration of this Agreement, non-exclusive and
non-transferable licenses to use Software for the purposes of using the
Service. Customer acknowledges that the provision of Software is made by
EQUANT strictly for use in conjunction with the Service and Customer agrees
not to produce, copy (except for the purpose of retaining a back-up copy),
alter, modify, or add to the Software or any part thereof, nor to attempt
or to allow a third party to attempt to reverse engineer, translate or
convert the Software from machine readable to human readable form, except
as permitted by applicable law.
9. Intellectual Property Rights
9.1 All intellectual property rights in the Service, Network and the Software
are either licensed to or the property of EQUANT or an Associated Company
of EQUANT and nothing contained in this Agreement shall be deemed to convey
title or ownership interest therein to Customer.
9.2 Subject to Clause 9.3, EQUANT warrants that the Service will not infringe
third party intellectual property rights in any country where the Service
is provided to Customer.
9.3 In the event of any breach of the warranty set forth in Clause 9.2:
9.3.1 EQUANT shall indemnify Customer against any claims, proceedings
and reasonable expenses, provided that Customer: (a) promptly notifies
EQUANT in writing of the claim; and (b) gives EQUANT sole control of
the defense and all related settlement negotiations; and
9.3.2 EQUANT will either procure the right f or Customer to continue
using the Service (including the part of the Service that has
infringed) at no additional cost to Customer or provide alternative
Service at no additional cost to Customer.
9.4 Notwithstanding Clause 9.3, EQUANT shall have no liability for any
intellectual property infringement claim based upon the combination,
operation or use of the Service with equipment, data or software not
supplied by EQUANT if the cause of the infringement is due to such
combination, operation or use, nor shall EQUANT's liability to Customer in
respect of CPE or software not proprietary to EQUANT, exceed any
intellectual property infringement warranties provided to EQUANT, its
Associated Companies or Sub-Contractors.
10. Confidentiality
10.1 In this Clause 10, "Confidential Information" means the contents of this
Agreement and all information disclosed (whether in writing, or orally or
whether directly or indirectly) by a party (the "Disclosing Party") to the
other party (the "Receiving Party") whether before or after the Effective
Date, including, without limitation, information relating to the Disclosing
Party's products and services, operations, customers and prospects,
know-how, design rights, trade secrets, market opportunities and/or
business affairs.
10.2 During this Agreement and after termination or expiration of this
Agreement for any reason the Receiving Party:
10.2.1 may not use Confidential Information for any purpose other than
for the performance of its obligations or the exercise of its rights
under this Agreement;
10.2.2 may not disclose Confidential Information to any third party; and
10.2.3 shall use best efforts to prevent the unauthorised use or disclosure
of Confidential Information.
PAGE 8
<PAGE>
10.3 The restrictions imposed by Clause 10.2 shall not apply to the
disclosure of Confidential Information;
10.3.1 which is now in, or hereafter comes into the public domain
other than by the Receiving Party's breach of this Agreement;
10.3.2 which is required by law to be disclosed to any person who is
authorised by law to receive the same;
10.3.3 to a court, arbitrator or administrative tribunal in the course
of proceedings before it to which the Receiving Party is a party in a
case where such disclosure is required by such proceedings.
10.4 Where the Receiving Party is required to disclose any Confidential
Information pursuant to Clause 10.3, it shall give as much advance notice
thereof to the Disclosing Party it is reasonably able and shall use
reasonable efforts to limit the extent of any such disclosure.
11. Charges and Payment
11.1 All Charges shall be invoiced by EQUANT to Customer in Dollars monthly
in advance for all fixed recurring Charges and monthly in arrears for all
other Charges, and shall be payable by Customer, without deduction or
set-off, within 30 days of receipt of an invoice by Customer.
11.2 All Charges are exclusive of value added tax, sales tax, excise tax, gross
receipts tax, withholding tax and any similar tax which may be applicable
thereto and Customer agrees to pay all such applicable taxes.
11.3 EQUANT reserves the right to make a reasonable charge for any work
performed by EQUANT which is attributable to Customer's failure to perform
any of its obligations under this Agreement, provided that such work is
necessary in the reasonable discretion of EQUANT and that wherever
feasible, EQUANT shall have notified Customer in advance.
11.4 Failure by Customer to pay any Charges in accordance with this Agreement
shall entitle EQUANT without prejudice to its other rights and remedies
under this Agreement to:
11.4.1 charge interest on a daily basis from the original due date at
the rate of 4 percentage points above the Chase Manhattan Bank's Prime
Rate in force from time to time; and/or
11.4.2 suspend the Service, having given 14 days written notice of its
intention to do so, and Customer having failed to remedy its payment
default during that time; and/or
11.4.3 the remedies set out in Clause 11.5 below.
11.5 Prior to the commencement of any Service, Customer shall issue an
irrevocable and renewable letter of credit in favor of EQUANT ("Letter of
Credit"). The Letter of Credit shall be issued from a financial institution
chartered in the United States approved by both parties. The terms of the
Letter of Credit shall permit EQUANT to draw upon it on demand in the event
that Customer becomes delinquent in its payment obligations hereunder. For
the first ** of the term of the Agreement, the Letter of Credit shall be
for **. After the first ** of the term of the Agreement, EQUANT may, in its
sole discretion, require Customer to increase the amount of the Letter of
Credit to an amount to be determined by EQUANT, which amount will not
exceed ** month's Committed Volume for the period.
PAGE 9
<PAGE>
12. Exclusions and Limitations of Liability
12.1 EXCEPT AS EXPRESSLY SET OUT IN THIS AGREEMENT, EQUANT MAKES NO WARRANTIES
AND HEREBY DISCLAIMS ANY WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTY OF SATISFACTORY QUALITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE SERVICE OR ANY CPE OR SOFTWARE PROVIDED UNDER OR IN RELATION
TO THIS AGREEMENT.
12.2 SUBJECT TO CLAUSE 13, BUT OTHERWISE NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER
PARTY FOR ANY INCIDENTAL, SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES
HOWSOEVER ARISING INCLUDING, BUT NOT LIMITED TO, ANY DAMAGES FOR LOST TIME,
INCOME, REVENUE, CLIENTS' GOODWILL, PROFITS OR OTHER SIMILAR ITEMS, OR ANY
BUSINESS INTERRUPTION OF ANY KIND, EVEN IF THE OTHER PARTY HAS BEEN
INFORMED OF THE POSSIBILITY OF SUCH DAMAGES IN ADVANCE.
12.3 Subject and without prejudice to Clauses 12.2, 12.4, 13 and Schedule 4, and
without prejudice to Customer's obligation to pay any Charges hereunder for
Service provided, the parties' maximum liability under this Agreement is
limited in respect of each event or series of connected events as follows:
$1,000,000 in respect of physical damage to or loss of tangible property;
$100,000 in respect of all other events.
12.4 Nothing in this Agreement shall exclude or limit a party's liability for
gross negligence and death and/or personal injury.
12.5 The parties' sole obligations and liabilities are as stated in this
Agreement and all other representations, conditions, warranties and terms
express or implied whether by statute, law or otherwise are hereby excluded
to the full extent permitted by law.
13. Indemnities
13.1 Customer irrevocably and unconditionally agrees to indemnify and keep
indemnified EQUANT from and against any and all claims, liabilities,
losses, damages, costs, expenses, including reasonable legal fees and other
costs of litigation or arbitration on an indemnity basis, (collectively,
"Losses") resulting from or arising out of (a) any action brought against
EQUANT by Customer's Associated Companies or End Users relating to the
provision of the Service by EQUANT under this Agreement; and (b) the use of
the Service by Customer, its Associated Companies or End Users or the use
of the Service by any other third party who gains access to the Service due
to Customer's, its Associated Companies or End User's wrongful acts or
omissions.
13.2 EQUANT irrevocably and unconditionally agrees to indemnify and keep
indemnified Customer, from and against any and all Losses resulting from,
or arising out of a wrongful act or omission by EQUANT, except any Losses
resulting from or arising out of any act or omission by Customer (whether
wrongful or otherwise) relating to the provision of Service by EQUANT under
this Agreement.
PAGE 10
<PAGE>
13.3 Except for Losses resulting from, or arising out of any action brought
against EQUANT by Customer's Associated Companies or End Users and Losses
arising under 13.1 (b), for which no limit applies, the parties' liability
under Clauses 13.1 and 13.2 shall not exceed the exclusions and limitations
of liability set forth in Clause 12.
13.4 This Clause 13 shall survive any termination or expiration of this
Agreement.
14. Ordering Procedure
14.1 Any and all orders for Service shall be made by Customer executing and
delivering to EQUANT an Order Form.
14.2 This Agreement supersedes any terms and conditions contained in an Order
Form unless otherwise agreed by the parties in writing.
15. Force Majeure
15.1 No failure or omission by either party (other than failure of Customer to
pay EQUANT the Charges due for Service performed up to the effective date
of force majeure) to carry out or to perform any of the terms or conditions
of this Agreement shall give the other party a claim against such party, or
be deemed a breach of this Agreement, if and to the extent that such
failure or omission arises from force majeure as later defined.
15.2 The party prevented from performing due to force majeure shall promptly
notify the other party of the cause and the anticipated duration thereof
and shall use its reasonable efforts to remove such cause and to resume
performance of this Agreement as soon as such cause is removed.
15.3 The term "force majeure", as used in this Agreement shall include, without
limitation, earthquake, fire, flood, epidemic, act of war, whether declared
or undeclared, blockade, insurrection, riot or other cause(s) beyond the
reasonable control of either of the parties.
15.4 Should any circumstance of force majeure continue for more than 30 days,
Customer may either suspend or terminate the affected Service without
liability or obligation except for any liability for outstanding charges
under this Agreement including, without limitation, Tail Circuit charges
and cancellation penalties, and minimum CPE charges for the period set out
in Clause 7.3. If Customer has suspended the Service, Customer shall resume
payment for the Service from the date of resumption of the Service.
16. Applicable Law and Arbitration
16.1 This Agreement and all matters regarding the interpretation and/or
enforcement hereof, shall be governed exclusively by the law of the State
of Georgia, except in so far as the Federal law of the United States of
America may control any aspect of this Agreement, in which case Federal law
shall govern such aspect.
16.2 All disputes arising in connection with this Agreement shall be settled
initially by internal dispute resolution and then, if necessary,
exclusively by arbitration before a single arbitrator in Atlanta, Georgia
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Each party irrevocably consents to personal
jurisdiction and to ex parte action should any party refuse to participate
in such proceedings. The arbitrator's award shall be final and binding on
all parties and judgement on the award may be entered and the award
enforced in any court having jurisdiction thereof.
PAGE 11
<PAGE>
16.2.1 Notwithstanding the above, disputes arising in connection with
invoicing and payment will not be settled by arbitration.
17. General
17.1 Notices Any notice to be made by either party to the other shall be
sufficiently made if sent by prepaid first class mail or facsimile or
delivered by hand to the party to be served at the address appearing on
page 1 of this Agreement or such other address as may be notified in
writing by one party to the other. Except in the case of delivery by hand,
or evidence to the contrary, the notice shall be deemed to have been made
on the day on which such communication ought to have been delivered in due
course of postal or facsimiled communication.
17.2 Assignment
17.2.1 Either party may at any time assign all or part of its rights and
obligations under this Agreement to it's Associated Company, provided
always that: (a) the assignee is not a direct competitor of the other
party; or (b) such assignment would not cause the other party to incur
materially increased costs in connection with the provision of the
Service or this Agreement.
17.2.2 Subject to Clauses 17.2.1 and 17.6, neither party may assign,
subcontract or otherwise dispose of this Agreement or any part thereof
without the written consent of the other party, such consent not to be
unreasonably withheld.
17.3 No Waivers No failure or delay of either party in exercising any right
under this Agreement shall be deemed a waiver of the right. No waiver of
any default on any one occasion shall constitute a waiver of any subsequent
default. No single or partial exercise of any right shall preclude the
further or full exercise of it.
17.4 No Third Party Beneficiaries, Agency or Partnership Notwithstanding
that Customer's Associated Companies and End Users may utilize the Service
in accordance with the terms of this Agreement, it is agreed between the
parties that Customer and only Customer may commence proceedings in its own
name to enforce all obligations and liabilities of EQUANT hereunder and
that EQUANT agrees to look only to Customer for due performance of this
Agreement. Nothing contained herein shall entitle either EQUANT to commence
any proceedings against any of Customer's Associated Companies or End Users
or any of Customer's Associated Companies or End Users to commence any
proceedings against EQUANT.
This Agreement is not intended to create a joint venture or partnership
between the parties and neither party is authorised to act as the agent for
the other.
17.5 Invalidity If any term, provision, or clause of this Agreement or any
portion of such term, provision or clause is held invalid or unenforceable,
the remainder of this Agreement will not be affected thereby and each
remaining term, provision or clause or portion thereof will be valid and
enforceable to the full extent permitted by law.
17.6 Sub-contractors EQUANT shall be entitled to subcontract any of its
obligations to a Sub-Contractor. EQUANT shall not be entitled to
subcontract any of its obligations under this Agreement to any other person
without the prior written consent of Customer which consent shall not be
unreasonably withheld. EQUANT shall be responsible for the acts and
omissions of any Sub-Contractor..
PAGE 12
<PAGE>
17.7 Entire Agreement This Agreement including all Schedules and Order Forms,
constitutes the entire agreement between the parties relating to the
Service and supersedes all previous oral or written communications,
proposals and agreements in respect thereof. This Agreement may not be
modified, except by supplements duly executed by the parties.
17.8 Interpretations In this Agreement unless otherwise stated: (a) the headings
used are included for convenience only and are not to be used in construing
or interpreting this Agreement; (b) any reference to the plural shall
include the singular and any reference to the singular shall include the
plural; (c) any reference to a clause shall be a clause of the body of this
Agreement unless otherwise specifically stated; and (d) any reference to a
schedule shall be a schedule to this Agreement.
In the event of any conflict or inconsistency between the provisions of (1)
the body of this Agreement and (2) the Schedules and (3) Order Forms, the
following order of control shall apply:
(1) the body of the Agreement;
(2) the Schedules;
(3) Order Forms.
Subject to the above, the Schedules and Order Forms shall be incorporated
into and form a part of this Agreement.
IN WITNESS WHEREOF, EQUANT and Customer have duly executed this Agreement as of
the day and year first above written.
EQUANT Customer
By: /s/ B. J. Berenson By: /s/ John W. Dalton
-------------------------- --------------------------
Name: B. J. Berenson Name: John W. Dalton
-------------------------- --------------------------
Title: President Title: President & CEO
-------------------------- --------------------------
Date: 9-8-97 Date: 9-8-97
-------------------------- --------------------------
PAGE 13
<PAGE>
SCHEDULE 1 - SERVICE DESCRIPTION
1. GLOBAL VOICE SERVICE ("GVS")
EQUANT shall provide Customer with Global Voice Service between the
Locations set forth below. The Global Voice Service is based on the virtual
private network (VPN) concept which allows EQUANT to provide private
network functionality combined with flexibility, resilience and cost
effectiveness of a shared network. This is achieved by programming an
organization's dial plan and call routing parameters within a Closed User
Group (CUG) facility so that calls can be identified, routed, and charged
appropriately.
1.1 Call Types The following call types are supported:
1.1.1 On-Net which allows calls to be routed between customer's sites
directly connected to the Network. **
1.1.2 Off-Net* which allows calls to be routed via the Public Switched
Telephone Network (PSTN) to locations that are not directly connected
to the Network.
1.1.3 Virtual On-Net* which allows calls dialed as part of customer's
private numbering scheme but routed, after appropriate number
translation within the Network, via the Public Switched Telephone
Network (PSTN) to locations that are not directly connected to the
Network.
1.1.4 Forced On-Net which allows calls **
*Off-Net calling and virtual On-Net calling via the PSTN is offered only where
prevailing voice regulations allow.
1.2 EQUANT's Global Voice Service is designed for international site to
site corporate voice traffic. The service is based on establishment of a
virtual private network ("VPN") which provides private network
functionality over a shared network.
1.3 Global Voice Service will provide call connectivity between Customer's
Switch in Omaha, Nebraska, allowing users to dial between each other
(On-Net) over the Network. In addition, users have the ability to originate
calls from a direct access location, and have these calls terminated over
the PSTN (Off-Net) to all international direct dial (IDD) destinations.
1.4 Global Voice Service will allow Customer to define a private numbering
plan in any format, including numbers already in use, which will form a
specific closed user group.
2. PROJECT MANAGEMENT SERVICE
GVS Project Management shall include, without limitation, defining the
scope of the project, implementation milestones, develop dial plan,
features and technical specifications, confirm network engineering design
and development a site details document, and overall management of
Customer's account.
3. CUSTOMER SERVICE SUPPORT FOR GLOBAL VOICE SERVICES
SCHEDULE 1, PAGE 1
<PAGE>
See Schedule 4
4. LOCATIONS
Locations Type of Service Date of Connection
--------- --------------- ------------------
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
** GVS to be determined
SCHEDULE 1, PAGE 2
<PAGE>
SCHEDULE 2 - CHARGES
1. Charges
EQUANT shall provide Customer with the Service for the Charges specified in
the tables to this Schedule 2 ("Tables"). Charges shall be invoiced and
paid in accordance with Clause 11 of this Agreement. Subject to Clauses 4
and 7 of this Schedule 2, all Charges are fixed for the Initial Term.
2. Commencement of Charges
All charges shall commence from the Date of Acceptance of the Service at a
Location except that: (a) Tail Circuit charges shall commence from the date
of installation of the Tail Circuit at a Location by the TO; (b) any
Software license fees shall commence from the date of delivery of the
Software to Customer.
3. Tail Circuit Charges
Tail Circuit charges shall be as specified in the Table or otherwise as
notified by EQUANT from time to time. Tail Circuit charges are fixed for **
periods and then adjusted in line with actual charges from TOs. No credits
or additional charges in respect of variances between Tail Circuit charges
and actual TO charges to EQUANT for Tail Circuits shall apply.
4. Tail Circuit Management Charges
Tail Circuit management Charges shall be ** of Tail Circuit Charges or **
per month per Tail Circuit, whichever is greater.
5. CPE
EQUANT shall notify Customer what the Charges are for any CPE added after
the Effective Date.
6. Minimum Revenue Commitment
Customer shall make the following minimum revenue commitment for Global
Voice Service ("Minimum Revenue Commitment"). The Minimum Revenue
Commitment excludes charges for Tail Circuits, international private lines,
or other types of local access and one-time charges for installation and
project management:
Year of Agreement Term Commitment ($$)
---------------------- ---------------
** **
If Customer fails achieve the Minimum Revenue Commitment, then Customer
will pay the difference between the actual charges and the Minimum Revenue
Commitment. Customer will pay said amount within 30 days of receiving
EQUANT's invoice for same. This payment is the maximum penalty relating to
Customer's failure to meet the Minimum Revenue Commitment, however,
additional penalties apply to Customer's failure to maintain the ** usage
set forth at Table 1.2.
SCHEDULE 2, PAGE 1
<PAGE>
7. Charges Review
Customer may request a review of EQUANT's On-Net and Off-Net per minute
charges ("Adjustable Charges") on each anniversary date of the Effective
Date ("Annual Price Review"). The Annual Price Review will constitute ** to
be selected by agreement of the parties, for services equivalent to the
Service, at all the Locations, and for a contract term equivalent to the
balance of the Initial Term **. If as the result of the Annual Price
Review, it is demonstrated that the total of the Adjustable Charges in
effect on the date of the Annual Price Review is at least ** than the **
being then ** by any of the **, then the Adjustable Charges payable by
Customer may, in EQUANT's sole discretion, be reduced as of the relevant
anniversary of the Effective Date. In the event there is a reduction of
charges, there shall be no reduction in the Minimum Revenue Guarantee. If
EQUANT does not reduce its Adjustable Charges, Customer shall be entitled,
within a thirty (30) day period following EQUANT's notification of its
decision, to terminate this Agreement pursuant to Clause 3.2. Nothing in
this Clause 7 shall affect Customer's obligations under Clause 2.2 of
Schedule 3.
8. Off-Net Charges
If Off-Net Service volume (in minutes) originating from the ** and destined
for ** exceeds ** of the total Off-Net Service volume (in minutes)
originating from the **, destined for the rest of **, then EQUANT reserves
the right to alter the pricing to reflect the increased traffic volumes.
9. Billing Increments
For GVS, EQUANT charges in ** increments.
SCHEDULE 2, PAGE 2
<PAGE>
TABLES TO SCHEDULE 2
Table 1.1
EQUANT shall charge On-Net Service at ** per minute.
Table 1.2
EQUANT GVS Off-Net Service Pricing- ** to ** Off-Net (in Dollars)
Country Discounted Cost Per Minute
- ------- --------------------------
**
Customer must maintain a **. In the event Customer does not maintain the **,
then an additional charge of ** shall apply to the difference between actual (i)
actual minutes used and (ii) the number of minutes required to achieve the **.
The ** shall apply to Charges going forward.
TABLE TO SCHEDULE 2
<PAGE>
SCHEDULE 3 - LOCATIONS - CONNECTION and DISCONNECTION,
ACCEPTANCE TESTS
1. Connection of the Service to Locations
1.1 EQUANT shall use all reasonable efforts to connect the Service at a
Location on the dates specified in Schedule 1 or if not so stated on dates
agreed by the parties and in any event as soon as possible after the date
the Tail Circuits are made available by the TOs. EQUANT shall use all
reasonable efforts to ensure that Tail Circuits are ordered and
administered by EQUANT so as to facilitate the availability of Tail
Circuits in accordance with TOs' usual lead times. However, EQUANT shall
have no responsibility, nor liability for delays caused by Customer, TOs or
any event of force majeure as defined in Clause 15. In the event of any
such delays, EQUANT shall use all reasonable efforts to provide the Service
as set out in this Agreement at the earliest opportunity. EQUANT reserves
the right to connect an interim service of an equivalent functionality and
performance should such delays occur.
1.2 Customer shall use all reasonable efforts to accept the Service at the
Locations on agreed connection dates. EQUANT reserves the right to commence
its Charges for any delayed Service due to Customer's breach of this
provision, and in addition no such delay shall affect EQUANT's right to
receive reimbursement for all TO and other third party vendor charges in
respect of Tail Circuits and communications equipment incurred from the
date of any contract between EQUANT and any TO or other third party vendor.
1.3 Customer also understands that should EQUANT, its agents or Sub-Contractors
carry out a visit to a Location in order to connect the Service, and then
be unable to do so as a result of any act or omission by Customer, EQUANT
reserves the right to charge Customer for such visit at its then current
manpower rates for such time and its reasonable travel and out of pocket
expenses.
2. Disconnection of the Service to Locations
2.1 Customer agrees not to disconnect the Locations from the Network during the
Initial Term from the Date of Acceptance connection of each location unless
Customer substitutes any Location with a new Location provided EQUANT is
able to provide Service at the new Location. EQUANT shall be entitled to
invoice Customer a connection and project management charge for the new
Location as agreed by Parties.
2.2 Any disconnection of a Location shall be conditional on Customer providing
the following:-
2.2.1 at least 90 days prior written notice;
2.2.2 payment of an early disconnection charge equal to **; and
2.2.3 payment of a lump sum equal to the depreciated value of the CPE
as at the date of disconnection, based on the original price paid by
EQUANT or its Sub-Contractors for the CPE plus ** of such original
price as a fee for administration and disconnection save that no such
sum shall be payable if EQUANT is able (as reasonably determined by
EQUANT) to redeploy the CPE either with Customer or another customer
or within the Network; and
2.2.4 any contingent Tail Circuit charges including any cancellation
penalties; EQUANT will mitigate any such charges by terminating any
Tail Circuit leases as soon as practicable following notification of
the disconnection.
SCHEDULE 3, PAGE 1
<PAGE>
3. Acceptance Tests
EQUANT shall carry out the following Acceptance Tests for each Location
from sites remote to the Location:
3.1 Global Voice Services
---------------------
3.1.1 EQUANT will verify that a path exists between the demarcation
point at Customer's Location (i.e. SWITCH or other type of switch) and
the Network Node, as defined in Schedule 4.
3.1.2 EQUANT will verify that speech quality standards meet or exceed
public switched telecommunications network ("PSTN") quality.
3.1.3 EQUANT will prove the compatibility of the SWITCH configuration
with the signalling protocol and the Customer's dial plan.
3.1.4 EQUANT will verify call routing for Off-Net and On-Net calls.
SCHEDULE 3, PAGE 2
<PAGE>
SCHEDULE 4 - PERFORMANCE LEVELS FOR GLOBAL VOICE SERVICES
1. INTRODUCTION
This Schedule gives Customer an indication of those areas of quality that
EQUANT measures for the Service.
2. GRADE OF SERVICE
IGVN GRADE OF SERVICE or I-GOS, is defined as the probability of a call
being blocked due to insufficient network capacity.
The Network is designed and engineered to offer a **. This means that a
maximum of ** of the calls may be blocked by insufficient network capacity
in the busiest hour of the day.
The grade of service is calculated every ** minutes on a DMS trunk and
every ** minutes on a M1 trunk. Grade of service is defined as ErlangB
(traffic carried, number of working circuits). This will be reported on
each Customer site.
The GVN NETworks management system is the tool used for the logging and
calculation of these GVN GOS indicators.
Call blocking probability is based upon accurate traffic forecasting, which
forecasts are provided by Customer. In the event that Customer has provided
to EQUANT substantially inaccurate forecasts of its traffic, the above
grade of service target does not apply.
Performance against this target is monitored across the core network* by
EQUANT's network management system at its Global Voice Service Operations
Center in London. Performance statistics are for inbound call blocking
(i.e. Grade of Service for calls delivered to Customer from EQUANT' Central
Office Switches).
* The core network is defined as the transmission and switching elements of
the EQUANT Service excluding any access capacity to the core network.
3. USE OF SATELLITE TRANSMISSION
In general, EQUANT configures transmission paths so that a maximum of 1
satellite hop shall be used for any given voice routing. However, there are
limited circumstances in which more than 1 satellite hop may be used. These
are: (i) for emergency routing where satellite capacity is deployed to back
up first choice terrestrial routings; and (ii) for connection between 2
countries in regions where satellite capacity is predominantly used for
international transmission.
SCHEDULE 4, PAGE 1
<PAGE>
4. NETWORK AVAILABILITY
GVN Core Network Availability shall mean the up-time (expressed as
percentage) of EQUANT's central office switching systems and their
associated network trunks, excluding Maintenance Windows and local access
lines.
The core network is designed to offer a target availability of **.
5. FAULT CLEARANCE
EQUANT aims to clear ** of Customer reported faults determined to be on the
Network within ** hours of their first report by Customer.
Those faults that fall outside this target are escalated within EQUANT's
operational structure to a senior manager within the EQUANT Voice
Operations.
The Customer fault reporting channel is to the Help Desk.
Customer Feedback During Fault Clearance
When a fault is reported by Customer to the Help Desk, the first feedback
from the Help Desk to Customer will be within ** of the initial report.
Following this initial feedback, subsequent feedback will be at least **.
Reported faults will not be regarded by EQUANT as cleared unless this
clearance is confirmed by Customer.
Fault Reporting
EQUANT can provide regular reports on its fault clearance performance. More
detailed reports can be provided on exceptional faults as agreed between
Customer and EQUANT. These reports, covering the nature of the fault and
the history of its resolution, are generally provided for faults not
cleared within the above target resolution time.
SCHEDULE 4, PAGE 2
<PAGE>
6. CUSTOMER SERVICE TARGETS
Support Center - General
- ------------------------------------------------------
Support Center Response 100% of call answered with ** seconds
Support Center Coverage 24 hour per day, 7 days a week
Language Support All Principle Languages
Fault Clearance - Core Network
- ------------------------------------------------------
** of Faults Cleared ** Hours
** of Faults Cleared ** Hours
Fault Not Found Response 0%
Repeat Faults ** within ** Months
Fault Clearance - End-to-End Network
- -------------------------------------------------------
** of Faults Cleared or Passed ** Hours
Back to Customer
** of Faults Cleared ** Hours
Faults Not Cleared Within 24 Hours Daily Exception Reports
First Response to Customer Within ** (or customer defined)
Fault Not Found Response 0%
Fault Closure Customer Only
Repeat Faults ** within ** Months
Customer Notification & Reports
- -------------------------------------------------------
Core Network Faults - Customer Immediate Broadcast Message to all
Affecting Affected Customers
Summary of all Reported Faults Monthly (or customer defined)
Detail of Faults with (GREATER THAN)
** Hour Resolution Within ** Hours of Fault Resolution
Planned Outages 5 Days Notice (or customer defined)
SCHEDULE 4, PAGE 3
<PAGE>
7. NON-PERFORMANCE
Customer understands and agrees that the Performance Levels in this
Schedule 4 are targeted performance levels only.
Customer's sole and exclusive remedy for any non-performance hereunder
shall be as follows:
If any serious problems with the Service due to EQUANT (and not a TO)
persist for a period of ** days (such problems being notified in writing by
Customer), then Customer shall be entitled at its option to suspend the
volume commitments specified in Schedule 2 until the problems have been
fixed;
For the purposes of this provision, 'serious' means a problem which
materially affects Customer's ability to use the Service.
SCHEDULE 4, PAGE 4
MASTER EQUIPMENT LEASE AGREEMENT
WORLDPORT COMMUNICATIONS, INC. (Lessee) No. F30743
- ---------------------------------------------------- -----------
9601 KATY FREEWAY, SUITE 200 HOUSTON, TX 77024 (Address) Date 10/31/97
- ---------------------------------------------------- ----------
Forsythe/McArthur Associates, Inc. ("FMA" or "Lessor"), by its acceptance
hereof, agrees to lease to Lessee, and Lessee agrees to lease from FMA, in
accordance with the terms and conditions hereinafter set forth, the equipment
("Equipment") described in equipment schedules ("Schedule(s)") which are
executed from time to time by FMA and Lessee. Each Schedule shall refer to and
incorporate by reference this Agreement and, when signed by the parties, shall
constitute a separate lease (a "Lease") for the Equipment therein described on
the terms and conditions stated therein and, to the extent not inconsistent with
such Schedule, on the terms and conditions stated in this Agreement.
1. TERM OF LEASE: The term of a Lease as to any item of Equipment shall commence
(the "Commencement Date") on the date set forth in the Schedule on which such
item of Equipment is described (herein a "related Schedule") and shall continue
in force thereafter until the Lease is terminated as to such item of Equipment
by either party upon not less than 90 days prior written notice to the other
party; provided, however, that a Lease shall in no event be terminated as to any
item of Equipment prior to the expiration of the minimum term specified therefor
("Minimum Term") in the related Schedule, and that no notice of termination
shall be effective if given more than 180 days before the date of termination.
Any notice of termination given by either party may not be withdrawn without the
written consent of the other party. Except as otherwise expressly provided
herein, each Lease is irrevocable for the full term thereof and for the
aggregate rental therein provided. If, after notice of termination is given by
Lessee with respect to a Lease in accordance herewith, Lessee and FMA agree in
writing to renew such Lease prior to the end of the Minimum Term thereof, such
renewal shall become effective on the later of (i) the last day of the Minimum
Term of such Lease, or (ii) the date 45 days after the date of such agreement to
renew, and such Lease shall continue in force until the effective date of such
renewal.
2. RENTAL CHARGES & TAXES: The monthly rental charge ("Monthly Rent") for each
item of Equipment as set forth in the related Schedule shall begin on the
Commencement Date and shall be due and payable by Lessee in advance on the first
day of each month thereafter (except for the first payment which shall be a pro
rata portion of the Monthly Rent, calculated on a 30-day basis, due and payable
on the Commencement Date). All amounts payable by Lessee under a Lease shall be
absolute and unconditional and shall not be subject to any defense, setoff,
counterclaim or recoupment for any reason whatsoever, and such amounts shall be
and continue to be payable in all events.
Lessee covenants and agrees to pay when due or reimburse and indemnify and hold
FMA harmless from and against all taxes, fees or other charges of any nature
whatsoever (together with any related interest or penalties not arising from
negligence on the part of FMA) now or hereafter imposed or assessed during the
term of a Lease against FMA, Lessee or the Equipment by any federal, state,
county, or local government authority upon or with respect to the Equipment or
upon the ordering, purchase, sale, ownership, delivery, leasing, possession,
use, operation, return or other disposition thereof or upon the rents, receipts
or earnings arising therefrom or upon or with respect to any Schedule (excepting
only federal, state and local taxes based on or measured by the net income of
FMA or any franchise tax upon FMA measured by FMA's capital, capital stock or
net worth). FMA shall be responsible for the filing of all personal property tax
returns relating to the Equipment and shall pay all taxes indicated thereon on
behalf of Lessee. Lessee shall reimburse FMA for all taxes paid by FMA which are
the responsibility of Lessee hereunder within 10 days of receipt of FMA's
invoice therefor.
3. OVERDUE PAYMENTS: For each payment of Monthly Rent or other sum due hereunder
that is not paid when due, and for each month in which such payment remains past
due, Lessee agrees to pay FMA a delinquency charge at the rate of 1.5% of such
payment, provided that such a delinquency charge is not prohibited by law,
otherwise at the highest rate Lessee can legally obligate itself to pay and/or
FMA can legally collect. Any sum due hereunder other than Monthly Rent shall be
considered past due 5 days after the due date shown on FMA's invoice therefor.
4. USE OF EQUIPMENT: Each item of Equipment will be kept by Lessee in its sole
possession and control, will at all times be located at the location stated in
the related Schedule, and will not be removed therefrom without the prior
written consent of FMA. All costs and expenses of every nature that may be
incurred in connection with the permitted movement of the Equipment between
locations (including any additional property taxes or other taxes resulting from
such movement) shall be borne by Lessee. If Lessee fails to so notify FMA and,
as a result of such failure, FMA has paid or is required by the jurisdiction
where the Equipment was originally located to continue to pay taxes of the sort
for which Lessee is responsible under this Agreement, then Lessee shall
reimburse FMA for such taxes, which payment (less FMA's reasonable costs and
expenses) will be refunded to Lessee if and when FMA receives a corresponding
refund from said jurisdiction. Lessee will not make or permit to be made any
alteration or addition to the Equipment (other than manufacturer's approved
engineering changes).
FMA shall not be liable to Lessee for any loss, damage or expense of any kind or
nature whatsoever and howsoever, directly or indirectly, caused (including,
without limitation, any loss of business) by (a) any item of Equipment, (b) the
use, maintenance, repair, service or adjustment thereof, (c) any delay or
failure to provide any maintenance, repair, service or adjustment thereto or (d)
any interruption of service or loss of use thereof.
Page 1 of 4
<PAGE>
5. LOSS OF OR DAMAGE TO EQUIPMENT - INSURANCE: Lessee shall be responsible for
and hereby assumes the entire risk of the Equipment being lost, damaged,
destroyed, stolen or otherwise rendered unfit or unavailable for use from the
date of its shipment to Lessee until the date of return to and receipt therefor
by FMA. If any item of Equipment is lost, damaged, destroyed, stolen or
otherwise rendered unfit or unavailable for use, Lessee shall give FMA immediate
notice thereof and the Lease to which such Equipment is subject shall continue
in full force and effect without any abatement in the Monthly Rent applicable to
such item of Equipment. Lessee shall determine, and notify FMA, within 15 days
after the date of the occurrence of any damage to any item of Equipment whether
such item can be repaired. In the event Lessee determines that such item of
Equipment can be repaired, Lessee, at its expense, shall cause such item to be
promptly repaired. If an item of Equipment is lost, destroyed or stolen, or if
Lessee determines that a damaged item of Equipment cannot be repaired, Lessee
shall, at FMA's direction, within 30 days of such occurrence, either replace the
item with an identical item of Equipment, the title to which shall thereupon
vest in FMA and which thereafter shall be considered the item of Equipment
subject to the related Schedule with no abatement in the Monthly Rent applicable
thereto or, in FMA's sole discretion, pay to FMA an amount equal to the sum of
(i) all unpaid Monthly Rent in respect of such item of Equipment through the end
of the Minimum Term applicable thereto as set forth in the related Schedule (or
the last day of any extended term then in effect with respect to such item) and
(ii) FMA's estimate of the fair market value of such item of Equipment at the
end of the Minimum Term applicable thereto as set forth in the related Schedule
(or at the end of any extended term then in effect with respect to such item).
Upon such payment, Lessee's obligation to pay Monthly Rent for such item of
Equipment shall cease.
Lessee shall cause the Equipment to be insured against loss or damage for not
less than the insurance value set forth in the related Schedule, and shall carry
comprehensive general liability and property damage insurance covering the
Equipment and its use. All such insurance shall be in form and amount and with
companies approved by FMA and shall name FMA (or any Assignee, as hereinafter
defined) as an additional insured, as its interest may appear. Lessee shall pay
the premiums for such insurance and shall deliver said policies or duplicates
thereof or certificates thereunder to FMA, together with endorsements thereon or
independent instruments whereby each insurer agrees that it will give FMA a
right to 30 days written notice before said policies can be altered or cancelled
and the right to payment of premium without obligation. The proceeds of such
insurance, at the option of FMA, shall be applied (i) toward the replacement,
restoration or repair of the Equipment or (ii) toward payment of the obligations
of Lessee under the Lease to which such Equipment is subject. Lessee hereby
appoints FMA as Lessee's attorney-in-fact to make claims for, receive payment
of, and execute and endorse all documents, checks or drafts for, loss or damage
under any said insurance policies.
6. MAINTENANCE, REPAIRS AND INSTALLATION: Lessee shall, at its expense, (a)
obtain and keep in full effect, throughout the term of a Lease, a contract from
the manufacturer of the Equipment subject to the Lease (or from another
reputable computer maintenance organization approved by FMA) providing for
standard maintenance service (as that term is defined by the manufacturer) and
(b) otherwise maintain the Equipment in good working order and appearance and
make all necessary adjustments and repairs thereto. Lessee will provide required
suitable electric current to operate the Equipment and a suitable place of
installation for the Equipment with all appropriate facilities as specified by
the manufacturer. Lessee will grant access to the Equipment to FMA, its
designee, or the organization providing computer maintenance services for the
Equipment during normal working hours for inspection, repair, maintenance,
installation of engineering changes and for any other reasonable purpose. Lessee
shall immediately notify FMA of all details concerning any accident arising out
of the alleged or apparent improper manufacture, functioning or operation of the
Equipment. Lessee will at all times cooperate with the manufacturer of the
Equipment so as to permit the prompt installation of all engineering changes on
the Equipment as and when determined necessary or desirable by the manufacturer.
Prior to termination of a Lease as to any item of Equipment, Lessee, at its sole
expense, shall return such item of Equipment in the same condition as when
received by Lessee, reasonable wear and tear resulting from proper use thereof
alone excepted, to FMA at such location as shall be designated by FMA. If any
item of Equipment is maintained by other than the manufacturer thereof, Lessee
shall cause such item of Equipment to be eligible, at Lessee's sole expense, for
such manufacturer's standard maintenance service prior to its return to FMA and
shall provide suitable evidence thereof.
7. TITLE AND UPGRADE: Each item of Equipment shall remain personal property of,
and the title thereto shall remain in, FMA or its Assignee exclusively, and
Lessee shall have no right, title or interest therein and no right to purchase
or otherwise acquire title to or ownership of such item except as set forth in
the related Schedule. All replacement parts, additions and accessories
(excluding feature additions and model changes, as those terms are defined by
the manufacturer) incorporated in or affixed to the Equipment after the
commencement of a Lease to which such Equipment is subject shall be the property
of FMA. Any feature addition or model change ("Upgrade") shall be incorporated
in or affixed to the Equipment only with the prior written consent of FMA. FMA
shall have the right of first refusal to match any proposal for the purchase or
lease of an Upgrade. If an Upgrade has been incorporated in or affixed to the
Equipment and such Upgrade was not leased by FMA, FMA shall have the option to
purchase such Upgrade at the end of the Minimum Term of the related Schedule for
the fair market value thereof (based on the average of three appraisals from
dealers who deal in equipment of that type, one selected by FMA, one by Lessee
and one by the other two). If FMA does not purchase such Upgrade, Lessee shall,
at the request of FMA (and absent such request, at its option, Lessee may),
before the related Schedule terminates, at Lessee's expense, remove the Upgrade
and restore the Equipment using identical components removed therefrom (if any).
Lessee shall at its expense protect and defend FMA's title to the Equipment
against all persons claiming against or through Lessee, at all times keeping the
Equipment free from any legal process or encumbrance whatsoever, including, but
not limited to, liens, attachments, levies and executions (except any placed
thereon by FMA), and shall give FMA immediate written notice of any such legal
process or encumbrance and shall indemnify FMA from any loss caused thereby.
Lessee shall execute or obtain from third parties and deliver to FMA, upon FMA's
request, such further instruments and assurances as FMA deems necessary or
advisable for the confirmation or perfection of FMA's rights hereunder.
In the event a Lease is determined to be a security agreement, Lessee hereby (i)
grants to FMA a security interest in the Equipment subject thereto to secure the
payment and performance of Lessee's obligations thereunder and (ii) authorizes
FMA, at Lessee's expense, to cause the Lease (including a carbon, photographic
or other reproduction thereof), or any statement or other instrument relating to
the Lease showing the interest of FMA in the Equipment, including Uniform
Commercial Code financing statements, to be filed or recorded and re-filed or
re-recorded, and Lessee grants FMA the right to execute Lessee's name to any
such statement or instrument. Lessee agrees to execute and deliver any statement
or instrument requested by FMA for such purpose, and agrees to pay or reimburse
FMA for any searches, any filing, recording or stamp fees, and any expenses or
taxes arising from the filing or recording of any such instrument or statement.
The Equipment is, and shall at all times be and remain, personal property,
notwithstanding that the Equipment or any part thereof may now be, or hereafter
become, in any manner affixed or attached to real property or any improvements
thereon.
8. NO WARRANTIES: FMA MAKES TO LESSEE NO WARRANTY, GUARANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT, INCLUDING, BUT NOT LIMITED
TO, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUALITY OR CAPACITY OF
THE EQUIPMENT, WORKMANSHIP, COMPLIANCE WITH THE REQUIREMENTS OF ANY LAW, RULE,
SPECIFICATION OR CONTRACT PERTAINING TO THE EQUIPMENT OR PATENT INFRINGEMENT OR
PATENT DEFECTS. LESSEE ACKNOWLEDGES THAT EACH LEASE OF THE EQUIPMENT IS "AS IS."
FMA IS NOT RESPONSIBLE OR LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL
Page 2 of 4
<PAGE>
OR CONSEQUENTIAL DAMAGES OR LOSSES RESULTING FROM THE INSTALLATION, OPERATION OR
USE OF THE EQUIPMENT OR ANY PRODUCTS MANUFACTURED THEREBY. FURTHER,
NOTWITHSTANDING FMA'S ACCEPTANCE OF ANY ORDER OR SUPPLEMENTAL ORDER, FMA IS NOT
RESPONSIBLE OR LIABLE FOR ANY SUCH DAMAGES OR LOSSES, RESTITUTION, SPECIFIC
PERFORMANCE OR ANY OTHER REMEDY IN THE EVENT THAT FOR ANY REASON ANY VENDOR OF
GOODS FAILS TO TIMELY DELIVER THE SAME TO FMA OR LESSEE OR IN ANY OTHER MANNER
OR RESPECT BREACHES OR FAILS TO PERFORM ITS CONTRACT WITH FMA. FMA MAKES NO
WARRANTY AS TO THE TREATMENT OF A LEASE FOR TAX OR ACCOUNTING PURPOSES.
9. TRANSPORTATION AND INSTALLATION: All transportation, rigging, drayage,
in-transit insurance, and other charges payable for delivery of the Equipment to
and from Lessee, and all installation and disconnect charges, shall be paid by
Lessee.
10. NON-WAIVER: FMA's failure at any time to require strict performance by
Lessee of any of the provisions of a Lease shall not waive or diminish FMA's
right thereafter to demand strict compliance therewith or with any other
provision. Waiver of any default shall not waive any other default. FMA's rights
under a Lease are cumulative and not alternative and may be exercised
successively or concurrently.
11. QUIET POSSESSION: Conditioned upon Lessee's performing its obligations under
a Lease, FMA covenants to and with Lessee that Lessee shall peaceably and
quietly hold and use the Equipment subject to the Lease during the term thereof
without let or hindrance.
12. DEFAULT AND REMEDIES: The occurrence of any one or more of the following
events ("Events of Default") shall constitute a default under any Lease: (a)
Lessee fails to pay the Monthly Rent or any other amount due FMA on or before
the fifth day after the same is due; (b) any financial statement, information or
representation or warranty given to FMA is false or misleading as of the date it
was given by or on behalf of Lessee; (c) Lessee fails to observe or perform any
other term, condition, obligation, agreement or covenant set forth in such
Lease, and such failure continues for a period of 10 days after receipt of
written notice thereof from FMA; (d) Lessee assigns or attempts to assign such
Lease, or removes, transfers, encumbers, sublets or parts with possession of any
item of Equipment subject to such Lease, or attempts to do any of the foregoing,
or suffers or permits any of the foregoing to occur except as expressly
permitted in such Lease; (e) Lessee ceases doing business as a going concern, or
it or its shareholders or partners take any action looking toward its
dissolution or liquidation; (f) Lessee becomes insolvent, or generally fails or
admits in writing its inability or unwillingness to pay its debts as they become
due, or makes a general assignment for the benefit of creditors; or Lessee
applies for, acquiesces in or consents to the appointment of any receiver,
trustee or other custodian for it or for all or any substantial part of its
property; or such receiver, trustee or other custodian is appointed without its
application or consent, and such appointment continues undischarged for a period
of 60 days; or any bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding is commenced with respect to Lessee and, if such case or
proceeding is not commenced by Lessee, it is consented to or acquiesced in by
Lessee, or remains for 60 days undismissed; or Lessee takes any action to
authorize, or in furtherance of, any of the foregoing; (g) an Event of Default
by Lessee under any other Lease; or (h) an event of default or event which, with
the giving of notice or the passage of time, or both, would constitute a default
under any other lease or agreement between FMA and Lessee.
If an Event of Default occurs, FMA may, at its option, do any or all of the
following to the full extent permitted by law: (i) recover from Lessee, as
liquidated damages for loss of a bargain and not as a penalty, as to any or all
Leases, an amount equal to the present value of all Monthly Rent to be paid by
Lessee during the remaining Minimum Term or any extended term then in effect,
discounted at the rate of 6% per annum, which amount shall be accelerated and
become immediately due and payable; (ii) sue for and recover all rents and other
amounts due or to become due with respect to any or all items of Equipment;
(iii) require Lessee to assemble all Equipment at Lessee's expense, at a place
reasonably designated by FMA; or (iv) remove any physical obstructions for
removal of the Equipment from the place where the Equipment is located and take
possession of any or all items of Equipment, without notice or demand, wherever
the same may be located, disconnecting and separating all such Equipment from
any other property, with or without any court order or pre-taking hearing or
other process of law. Lessee hereby waives any and all damages occasioned by
such retaking. FMA may, at its option, ship, store, repair or lease all
Equipment so removed and sell or otherwise dispose of any such Equipment at a
private or public sale. FMA may expose Equipment at Lessee's premises at
reasonable business hours without being required to remove the Equipment.
In the event that Lessee shall have paid to FMA the liquidated damages referred
to in the preceding paragraph, FMA hereby agrees to pay to Lessee, promptly
after receipt thereof, either (a) if FMA re-leases the Equipment, all rentals or
proceeds received from the reletting of the Equipment during the balance of the
Minimum Term of the related Schedule or any successive period then in effect
(after deduction of all expenses incurred by FMA), or (b) if FMA sells the
Equipment, all proceeds received from the sale (after deduction of the estimated
fair market value of the Equipment as of the end of the Minimum Term or at the
end of any extended term then in effect and of all expenses incurred by FMA),
said amount never to exceed the amount of the liquidated damages paid by Lessee.
For purposes of the foregoing, in the event of any reletting by FMA of any item
of Equipment, "all rentals or proceeds received from the reletting of the
Equipment" shall mean the present value (discounted to the Commencement Date of
the re-lease using the interest rate at which FMA has non-recourse financing or
a non-recourse financing commitment with respect to such re-lease) of the
monthly rent for such item under re-lease to a third party, taking into account
only that monthly rent of such re-lease which is payable on or before the last
day of the Minimum Term of the related Schedule (or the last day of any extended
term then in effect with respect to such item of Equipment). Lessee agrees that
FMA shall have no obligation to sell the Equipment. Lessee shall in any event
remain fully liable for reasonable damages as provided by law and for all costs
and expenses incurred by FMA as a result of such default including, but not
limited to, all court costs and reasonable attorneys' fees. Lessee hereby agrees
that, in any event, it will be liable for any deficiency after any sale, lease
or other disposition by FMA. The rights afforded FMA hereunder shall not be
deemed to be exclusive, but shall be in addition to any rights or remedies
provided by law.
If, upon the termination of the related Schedule as to any item of Equipment,
Lessee fails or refuses to return and deliver possession of such item of
Equipment to Lessor on the prescribed date, in addition to all other rights and
remedies available to FMA, Lessee shall be liable to FMA for Monthly Rent
applicable to such item of Equipment until the last day of the month in which
such item is returned to FMA, and any damages FMA may suffer by reason of being
unable to deliver such item of Equipment to another party.
13. ASSIGNMENTS: Neither a Lease nor Lessee's rights thereunder shall be
assignable by Lessee. FMA shall have the right to assign a Lease or any part
thereof. If FMA assigns the rents reserved therein or all or any of FMA's other
rights thereunder, or amounts equal thereto, the right of FMA's assignee
("Assignee") to receive the rentals as well as any other right assigned
thereunder shall not be subject to any defense, setoff, counterclaim or
recoupment which may arise out of any breach of any obligation of FMA thereunder
or by reason of any other indebtedness or liability at any time owing by FMA to
Lessee. All rentals due thereunder shall be payable to Assignee by Lessee
whether or not the Lease is terminated by operation of law or otherwise,
including, without limitation, termination arising out of bankruptcy,
reorganization or similar proceedings involving FMA. On receipt of notification
of such assignment, Lessee, subject to its rights thereunder, shall hold the
Equipment for and on behalf of Assignee and will relinquish possession thereof
only to Assignee or pursuant to its written order. Lessee on receiving notice of
any such assignment shall abide thereby and make payment as may therein be
directed, and agrees to acknowledge such assignment to Assignee. Following any
such assignment the term "FMA" shall be deemed to include or refer to Assignee
Page 3 of 4
<PAGE>
provided that such Assignee shall not be deemed to assume any obligation or duty
imposed upon FMA under the Lease and Lessee shall look only to FMA for
performance thereof.
14. LIABILITY: Lessee shall indemnify and save FMA harmless from, and defend FMA
against, any and all claims, actions, proceedings, injuries, deaths, expenses,
damages and liabilities, including attorneys' fees, arising in connection with
the Equipment or any Lease, including without limitation, the manufacture,
selection, purchase, delivery, possession, use, operation, maintenance, leasing
and return of the Equipment and acts of Lessee in failing to maintain the
Equipment in good repair.
15. PERFORMANCE AND EXECUTION: Lessee represents and warrants to FMA that (i)
the execution and performance of this Agreement and each Schedule has been duly
authorized by Lessee and that, upon execution by Lessee and FMA of this
Agreement and each Schedule, such Schedule will constitute a valid obligation
binding upon, and enforceable against, Lessee in accordance with its terms, (ii)
neither the execution of this Agreement or any Schedule nor the due performance
thereof by Lessee will result in a breach of, or constitute a default under or
violation of Lessee's certificate or articles of incorporation and by-laws (or
other organizational documents) or any agreement to which Lessee is a party or
by which any interest of Lessee may be affected, (iii) Lessee is duly organized
and in good standing under the laws of its jurisdiction of organization and is
and will continue to be duly qualified to do business and in good standing in
any jurisdiction where any item of Equipment is to be located, (iv) the person
executing this Agreement on behalf of Lessee has been and each person executing
a Schedule, upon execution of such Schedule, will be duly authorized to do so,
and (v) any and all financial statements and other information with respect to
Lessee furnished by Lessee to FMA will be, when furnished, and will remain at
the time of execution of any Schedule, true and correct without any misleading
omissions, excepting any changes which have been disclosed in a written notice
to FMA.
16. ADDITIONAL DOCUMENTATION: Lessee shall deliver promptly to FMA the following
documentation as and when requested by FMA: (i) financial information, including
without limitation a copy of Lessee's balance sheets and income statements for
Lessee's three prior fiscal years, certified by independent certified public
accountants, and such other current financial information with respect to the
financial condition and operations of Lessee as FMA from time to time may
reasonably request; (ii) a certificate of the resolutions of the board of
directors of Lessee duly authorizing or ratifying this Agreement or any
Schedule; (iii) a certificate of incumbency setting forth the names and
signatures of those persons authorized to execute this Agreement or any Schedule
on behalf of Lessee; (iv) landlord and mortgagee waivers in form and substance
satisfactory to FMA or any Assignee (or secured party) with respect to any
premises upon which any item of Equipment is located; (v) an opinion of counsel
for Lessee as to the matters set forth in clauses (i) through (iv) of Section 15
hereof, and as to such other matters as FMA reasonably may request; and (vi)
such documentation confirming the execution of any Lease necessary or desirable
to effect any assignment, perfect any interest of FMA, any secured party or
Assignee, or for such other purposes relating to any Lease or any assignment
thereof as FMA reasonably may request. If such a request for documentation is
made prior to the delivery of any item of Equipment, receipt of such
documentation shall be a condition precedent to FMA's obligation to deliver such
item.
17. PERFORMANCE BY FMA: In the event Lessee fails to comply with any provision
of a Lease, FMA shall have the right, but shall not be obligated, to effect such
compliance on behalf of Lessee upon five days prior written notice to Lessee. In
such event, all monies advanced or expended by FMA, and all expenses incurred by
FMA in effecting such compliance, shall be deemed to be additional rent, and
shall be paid by Lessee to FMA at the time of the next payment of Monthly Rent.
18. MISCELLANEOUS: Any notice or other communication relating to a Lease shall
be delivered or mailed, by first-class mail, postage prepaid, to FMA or Lessee
at its address above shown or at any later address last known to the sender. Any
notice or other communication mailed as aforesaid shall be deemed to have been
given three days after the date sent.
In the event that any Lease is terminated as to any item of Equipment, FMA shall
advise Lessee in writing of those items of Equipment which remain subject to
such Lease, the Monthly Rent payable in respect of such items and the aggregate
insurance value thereof. Upon Lessee's receipt of such written advice, such
Lease shall, without further action on the part of either party, be deemed
amended to the extent set forth in such advice.
If more than one Lessee is named in a Lease, the liability of each shall be
joint and several. Lessee will not affix any item of Equipment to any real
property or any improvements thereon if, as a result thereof, such item will
become a fixture under applicable law. All representations, warranties,
indemnities and covenants contained in this Agreement and in any Schedule shall
continue in full force and effect and shall survive notwithstanding the full
payment of all amounts due hereunder and thereunder or the termination of
Lessee's right of possession and/or the taking of possession by FMA of any item
of Equipment. Each Lease shall inure to the benefit of and shall be binding upon
Lessee and FMA and their respective successors and assigns. If FMA supplies
Lessee with labels, Lessee shall label any and all items of Equipment and shall
keep the same affixed in a prominent place.
If the provisions of any Schedule are inconsistent with the provisions of this
Agreement, then the provisions of such Schedule shall prevail.
Each Lease shall be deemed to have been made in Cook County, Illinois,
regardless of the order in which the signatures of the parties shall be affixed
thereto, and shall be interpreted, and the rights and liabilities of the parties
hereto determined, in accordance with the internal laws of the State of
Illinois. Lessee hereby consents and agrees to the exclusive jurisdiction of any
State or Federal court within the State of Illinois for resolution of any
matters in connection with the interpretation, construction and enforcement of
any Lease.
This Agreement and any Schedule may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument. If FMA grants a security
interest in all or any part of a Schedule, the Equipment covered thereby and/or
sums payable thereunder, only that counterpart of the Schedule marked "Secured
Party Original" shall constitute chattel paper and shall be effective to
transfer FMA's rights therein.
19. SEVERABILITY: If any provision of a Lease or any remedy therein provided
shall be invalid under any applicable law, such provision shall be inapplicable
and deemed omitted, but the remaining provisions thereof, including the
remaining default remedies, shall be given effect in accordance with their
manifest intent.
20. ENTIRE AGREEMENT: This Agreement and each Schedule into which this Agreement
is incorporated by reference collectively shall constitute the entire agreement
between the parties with respect to a Lease. No supplier or agent of FMA is
authorized to bind FMA or to waive or modify any term hereof or thereof. No term
or condition of this Agreement or any Schedule may be waived or amended except
in writing and executed by a duly authorized representative of each party.
Each party to this Agreement hereby warrants and represents that its signatory
whose signature appears below is duly authorized by all necessary corporate
action to execute this Agreement as of the date first above written.
Page 4 of 4
<PAGE>
FORSYTHE/McARTHUR ASSOCIATES, INC. WORLDPORT COMMUNICATIONS, INC.
-----------------------------------
(Lessee)
By: /s/ Rick Forsythe By: /s/ John W. Dalton
---------------------------- ------------------------------
Authorized Signatory Authorized Signatory
Name: Rick Forsythe Name: John W. Dalton
---------------------------- ------------------------------
Type or Print Type or Print
Title: CEO Title: President / CEO
---------------------------- ------------------------------
Each Schedule can be accepted by FMA only if signed at FMA's office in Illinois
by an executive officer of FMA.
Page 5 of 4
LEASE
SCHEDULE
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
MINIMUM TERM: 36 Months.
LESSEE: WORLDPORT COMMUNICATIONS, INC
EQUIPMENT LOCATION: VARIOUS - SEE BELOW
COMMENCEMENT DATE: March 1, 1998.
MANUFACTURER: CISCO SYSTEMS
Equipment Serial Monthly
Qty Type Model Description Number Rent
--- ---- ----- ----------- ------ ----
Location: HEATHROWSTRAAT 10 1043 CH AMERSTERDAM-SLOTERDIJK, NETHERLANDS,
1 BC-512011 ALARM RELAY INTFC(ARI)BACK CRD
2 BC-6171A-E1 BACK CARD/E1(BC-E1)
1 BC-6353A-E1 FASTPAD E1 BACK CARD(FPC-E1)
1 BC-UAI-1E3 UNIVERSAL ATM INTERFACE
2 BC5083ARS449 HDM BACKCARD/4499(SDI-RS449)
2 CAB-590076 IPX 16/32 POWER CORD
2 CAB-7513ACE AC POWER CORD
8 CAB-V35MT MALE DTE V35 CABLE, 10 FT
1 CISCO7513/4X CISCO7513/4X2,13SLOT, 2 CYBUS
3 CON-OSP-32R IGX32-RM,32SLOT NPM,SCM MAINT
3 CON-OSP-7513 CISCO7513 COMPRE PREM MAINT
3 CON-OSP-ALM 2IGX-ALM/B W/2 BC-UAI-1E3,MAIN
18 CON-OSP-CVM CVM ADPCM, COMP MAINT
3 CON-OSP-FRM FRMRELAY MOD IGX16, COMPMAINT
3 CON-OSP-FTM FAST PAD TRUNK MOD, COMP MAINT
3 CON-OSP-HDM HIGHSPSYNCDATAMODULE-COMPMAINT
6 CON-OSP-NTM NETWRK TRUNK MOD, COMP MAINT
3 CON-OSP-PA8E PRT ADPTR-8PRT ETHRNT COMPMAIN
3 CON-OSPPA4T 4PR SERIAL ADAPTER, COMP MAINT
3 CONOSPAIPE3 ATM,E3,SM,34MBPS COMP MAINT
3 CONOSPFRM31 FRAME RELAY MOD 31, COMPMAINT
3 CONOSPNPM32 COMP MAINT REDNDT NTWRK PROCES
3 CONOSPPAFET PRTADPTR, 1PRT FE, 1OOTX MAINT
6 CONOSPVIP240 COMP MAINT VERSATILE PROCESSOR
3 CX-AIP-E3 ATM INTFC,E3 COAX, 34 MBPS
1 FR-IR75 RSP1,2,7000 INTRDOMAIN RT LIC
INITIALS
________FMA
________Lessee
Page 1 of 9
<PAGE>
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
Equipment Serial Monthly
Qty Type Model Description Number Rent
--- ---- ----- ----------- ------ ----
1 FR-NF75 RSP1,2,7000 NETFLW SWTCH LIC
1 FR-WPP75 CISCO 7500 SERIES WAN PACK LIC
1 IGX-ALM/A IGX ATM LINE MODULE
1 IGX-ARM ALARM RELAY MODULE
1 IGX-FTM FASTPAD TRUNK MODULE
2 IGX-HDM HIGHSPEED SYNCH DATA MODULE
1 IGX-NPM-32-R REDUNDANT NTWRK PRC MOD32MDRAM
2 IGX-NTM NETWORK TRUNK MODULE
1 IGX-SW-8256 SYSTEM SOFTWARE LICENSE
1 IGX32-AC4-2 QUAD AC 875WPWRSUPLYDUALACINPT
1 IGX32-RM 32 SLOT NPM,SCM
1 IGXALM/BE3P IGX-ALM/B-E3-PAIR=
1 IGXALMAFWD IGX ATM LINE MODULE
2 IGXALMBFWD ALM/A FIRMWARE REVISION
1 IGXFTMFWD FTM FIRMWARE REVISION
2 IGXHDMFWD HDM FIRMWARE VERSION
2 IGXNTMFWD NTM FIRMWARE REVISION
3 IGXUVME1EC TWO IGX-UVM(IGX-UVM-E1EC-PAI)
6 IGXUVMFWD UVM FIRMWARE VERSION
2 MEM-RSP4-64 RSP44 MB DRAM OPTION
2 MEMRSP4FLC 20MB FLASH CARD
1 PA-4T+ 4 PORT SERIAL PORT ADAPTOR
1 PA-8E 8 PORT ETHERNET 10 BASET ADPTR
1 PWR-7513/4X2 CISCO7513/4X2 DUAL AC POWER
2 RSP4 7500 SERIES RTE SWITCH PROCESS
1 SF75CV-11.X RSP1,RSP2,RSP7000 IP SET
1 VIP2-40 2ND GEN VERSATILE INTERF PRO.
Location: UNIT 4 PRIORS WAY BRAYWIK, MAIDENHEAD BERKS SL6 2HP, UNITED KINGDOM,
1 BC-512011 ALARM RELAY INTFC(ARI)BACK CRD
4 BC-6171A-E1 BACK CARD/E1(BC-E1)
1 BC-UFI-12V35 UFM-U BACK CARD
1 CAB-2V35MT CABLE FOR IGX-UFM-U
2 CAB-590076 IPX 16/32 POWER CORD
2 CAB-7513ACE AC POWER CORD
8 CAB-V35MT MALE DTE V35 CABLE, 10 FT
1 CISCO7513/4X CISCO7513/4X2,13SLOT, 2 CYBUS
3 CON-OSP-32RM IGX32-RM,32SLOT NPM,SCM MAINT
3 CON-OSP-7513 CISCO7513 COMPRE PREM MAINT
72 CON-OSP-CVM CVM ADPCM, COMP MAINT
3 CON-OSP-FRM FRMRELAY MOD IGX16, COMPMAINT
3 CON-OSP-FTM FAST PAD TRUNK MOD, COMP MAINT
12 CON-OSP-NTM NETWRK TRUNK MOD, COMP MAINT
3 CON-OSP-PA8E PRT ADPTR-8PRT ETHRNT COMPMAIN
Page 2 of 9
<PAGE>
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
Equipment Serial Monthly
Qty Type Model Description Number Rent
--- ---- ----- ----------- ------ ----
3 CONOSPNPM32 COMP MAINT REDNDT NTWRK PROCES
3 CONOSPPA8TV PRTADPT-8PRT SERIALV.35,MAINT
6 CONOSPVIP240 COMP MAINT VERSATILE PROCESSOR
1 FR-IR75 RSP1,2,7000 INTRDOMAIN RT LIC
1 FR-NF75 RSP1,2,7000 NETFLW SWTCH LIC
1 FR-WPP75 CISCO 7500 SERIES WAN PACK LIC
1 IGX-ARM ALARM RELAY MODULE
1 IGX-FS-UFM FORESIGHT LICENSE
1 IGX-NPM-32-R REDUNDANT NTWRK PRC MOD32MDRAM
4 IGX-NTM NETWORK TRUNK MODULE
1 IGX-SW-8256 SYSTEM SOFTWARE LICENSE
1 IGX-UFM-U UNIVERSAL FRAME RELAY
1 IGX32-AC4-2 QUAD AC 875WPWRSUPLYDUALACINPT
1 IGX32-RM 32 SLOT NPM,SCM
4 IGXNTMFWD NTM FIRMWARE REVISION
1 IGXUFMUFWD UFM-U FIRMWARE REVISION
12 IGXUVME1ECP TWO IGX-UVM(IGX-UVM-E1EC-PAI)
24 IGXUVMFWDE UVM FIRMWARE VERSION
2 MEM-RSP4-64 RSP44 MB DRAM OPTION
2 MEMRSP4FLC 20MB FLASH CARD
1 PA-4T+ 4 PORT SERIAL PORT ADAPTOR
1 PA-8E 8 PORT ETHERNET 10 BASET ADPTR
1 PWR-7513/4X2 CISCO7513/4X2 DUAL AC POWER
3 2 RSP4 7500 SERIES RTE SWITCH PROCESS
1 SF75CV-11.X RSP1,RSP2,RSP7000 IP SET
1 VIP2-40 2ND GEN VERSATILE INTERF PRO.
Location: ROCHUSSWSTRAAT 198 BUILDING OF ENECO ENERGY AUTHORITY OF ROTTERDAM,
NETHERLANDS,
1 BC-512011 ALARM RELAY INTFC(ARI)BACK CRD
2 BC-6171A-E1 BACK CARD/E1(BC-E1)
1 BC-6353A-E1 FASTPAD E1 BACK CARD(FPC-E1)
1 BC-UAI-1E3 UNIVERSAL ATM INTERFACE
2 BC5083ARS449 HDM BACKCARD/4499(SDI-RS449)
2 CAB-590076 IPX 16/32 POWER CORD
2 CAB-7513ACE AC POWER CORD
8 CAB-V35MT MALE DTE V35 CABLE, 10 FT
1 CISCO7513/4X CISCO7513/4X2,13SLOT, 2 CYBUS
3 CON-OSP-32R IGX32-RM,32SLOT NPM,SCM MAINT
3 CON-OSP-7513 CISCO7513 COMPRE PREM MAINT
3 CON-OSP-ALM 2IGX-ALM/B W/2 BC-UAI-1E3,MAIN
6 CON-OSP-CVM CVM ADPCM, COMP MAINT
3 CON-OSP-FRM FRMRELAY MOD IGX16, COMPMAINT
3 CON-OSP-FTM FAST PAD TRUNK MOD, COMP MAINT
Page 3 of 9
<PAGE>
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
Equipment Serial Monthly
Qty Type Model Description Number Rent
--- ---- ----- ----------- ------ ----
6 CON-OSP-HDM HIGHSPSYNCDATAMODULE-COMPMAINT
6 CON-OSP-NTM NETWRK TRUNK MOD, COMP MAINT
3 CON-OSP-PA8E PRT ADPTR-8PRT ETHRNT COMPMAIN
3 CON-OSPPA4T+ 4PR SERIAL ADAPTER, COMP MAINT
3 CONOSP32AC4 QUAD AC 875W PWRSPLY, COMPMAIN
3 CONOSPAIPE3 ATM,E3,SM,34MBPS COMP MAINT
3 CONOSPFRM3 FRAME RELAY MOD 31, COMPMAINT
3 CONOSPNPM3 COMP MAINT REDNDT NTWRK PROCES
3 CONOSPPAFE PRTADPTR, 1PRT FE, 1OOTX MAINT
6 CONOSPVIP240 COMP MAINT VERSATILE PROCESSOR
3 CX-AIP-E3 ATM INTFC,E3 COAX, 34 MBPS
1 FR-IR75 RSP1,2,7000 INTRDOMAIN RT LIC
1 FR-NF75 RSP1,2,7000 NETFLW SWTCH LIC
1 FR-WPP75 CISCO 7500 SERIES WAN PACK LIC
1 IGX-ALM/A IGX ATM LINE MODULE
1 IGX-ARM ALARM RELAY MODULE
1 IGX-FTM FASTPAD TRUNK MODULE
2 IGX-HDM HIGHSPEED SYNCH DATA MODULE
1 IGX-NPM-32-R REDUNDANT NTWRK PRC MOD32MDRAM
2 IGX-NTM NETWORK TRUNK MODULE
1 IGX-SW-8256 SYSTEM SOFTWARE LICENSE
1 IGX32-AC4-2 QUAD AC 875WPWRSUPLYDUALACINPT
1 IGX32-RM 32 SLOT NPM,SCM
1 IGXALM/BE3 IGX-ALM/B-E3-PAIR=
1 IGXALMAFWD IGX ATM LINE MODULE
2 IGXALMBFWD ALM/A FIRMWARE REVISION
1 IGXFTMFWDE FTM FIRMWARE REVISION
2 IGXHDMFWDE HDM FIRMWARE VERSION
2 IGXNTMFWDE NTM FIRMWARE REVISION
1 IGXUVME1ECP TWO IGX-UVM(IGX-UVM-E1EC-PAI)
2 IGXUVMFWDE UVM FIRMWARE VERSION
2 MEM-RSP4-64 RSP44 MB DRAM OPTION
2 MEMRSP4FLC2 20MB FLASH CARD
1 PA-4T+ 4 PORT SERIAL PORT ADAPTOR
1 PA-8E 8 PORT ETHERNET 10 BASET ADPTR
1 PWR-7513/4X2 CISCO7513/4X2 DUAL AC POWER
2 RSP4 7500 SERIES RTE SWITCH PROCESS
1 SF75CV-11.X RSP1,RSP2,RSP7000 IP SET
1 VIP2-40 2ND GEN VERSATILE INTERF PRO.
Location: NV CASEMA DECIMALAAN 16 3526 AJ UTRECHT, NETHERLANDS,
1 BC-512011 ALARM RELAY INTFC(ARI)BACK CRD
2 BC-6171A-E1 BACK CARD/E1(BC-E1)
1 BC-6353A-E1 FASTPAD E1 BACK CARD(FPC-E1)
Page 4 of 9
<PAGE>
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
Equipment Serial Monthly
Qty Type Model Description Number Rent
--- ---- ----- ----------- ------ ----
1 BC-UAI-1E3 UNIVERSAL ATM INTERFACE
2 BC5083ARS449 HDM BACKCARD/4499(SDI-RS449)
2 CAB-590076 IPX 16/32 POWER CORD
2 CAB-7513ACE AC POWER CORD
8 CAB-V35MT MALE DTE V35 CABLE, 10 FT
1 CISCO7513/4X CISCO7513/4X2,13SLOT, 2 CYBUS
3 CON-OSP-32R IGX32-RM,32SLOT NPM,SCM MAINT
3 CON-OSP-7513 CISCO7513 COMPRE PREM MAINT
3 CON-OSP-ALM 2IGX-ALM/B W/2 BC-UAI-1E3,MAIN
18 CON-OSP-CVM CVM ADPCM, COMP MAINT
3 CON-OSP-FRM FRMRELAY MOD IGX16, COMPMAINT
3 CON-OSP-FTM FAST PAD TRUNK MOD, COMP MAINT
3 CON-OSP-NTM NETWRK TRUNK MOD, COMP MAINT
3 CON-OSP-PA8E PRT ADPTR-8PRT ETHRNT COMPMAIN
3 CONOSP32AC4 QUAD AC 875W PWRSPLY, COMPMAIN
3 CONOSPAIPE3 ATM,E3,SM,34MBPS COMP MAINT
3 CONOSPNPM3 COMP MAINT REDNDT NTWRK PROCES
3 CONOSPPA8TV PRTADPT-8PRT SERIALV.35,MAINT
6 CONOSPVIP240 COMP MAINT VERSATILE PROCESSOR
3 CX-AIP-E3 ATM INTFC,E3 COAX, 34 MBPS
1 FR-IR75 RSP1,2,7000 INTRDOMAIN RT LIC
1 FR-NF75 RSP1,2,7000 NETFLW SWTCH LIC
1 FR-WPP75 CISCO 7500 SERIES WAN PACK LIC
1 IGX-ALM/A IGX ATM LINE MODULE
1 IGX-ARM ALARM RELAY MODULE
1 IGX-FTM FASTPAD TRUNK MODULE
2 IGX-HDM HIGHSPEED SYNCH DATA MODULE
1 IGX-NPM-32-R REDUNDANT NTWRK PRC MOD32MDRAM
2 IGX-NTM NETWORK TRUNK MODULE
1 IGX-SW-8256 SYSTEM SOFTWARE LICENSE
1 IGX32-AC4-2 QUAD AC 875WPWRSUPLYDUALACINPT
1 IGX32-RM 32 SLOT NPM,SCM
1 IGXALM/BE3P IGX-ALM/B-E3-PAIR=
1 IGXALMAFWD IGX ATM LINE MODULE
2 IGXALMBFWD ALM/A FIRMWARE REVISION
1 IGXFTMFWDE FTM FIRMWARE REVISION
2 IGXHDMFWDE HDM FIRMWARE VERSION
2 IGXNTMFWDE NTM FIRMWARE REVISION
3 IGXUVME1ECP TWO IGX-UVM(IGX-UVM-E1EC-PAI)
6 IGXUVMFWDE UVM FIRMWARE VERSION
2 MEM-RSP4-64M RSP44 MB DRAM OPTION
2 MEMRSP4FLC 20MB FLASH CARD
1 PA-4T FOUR PORT SERIAL CARD
1 PA-8E 8 PORT ETHERNET 10 BASET ADPTR
Page 5 of 9
<PAGE>
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
Equipment Serial Monthly
Qty Type Model Description Number Rent
--- ---- ----- ----------- ------ ----
1 PWR-7513/4X2 CISCO7513/4X2 DUAL AC POWER
2 RSP4 7500 SERIES RTE SWITCH PROCESS
1 SF75CV-11.X RSP1,RSP2,RSP7000 IP SET
1 VIP2-40 2ND GEN VERSATILE INTERF PRO.
Location: 6 MAIDEN LANE 4TH FLOOR, NEW YORK,NY
1 BC-512011 ALARM RELAY INTFC(ARI)BACK CRD
4 BC-6171A-E1 BACK CARD/E1(BC-E1)
1 BC-UFI-12V35 UFM-U BACK CARD
1 CAB-2V35MT CABLE FOR IGX-UFM-U
2 CAB-590076 IPX 16/32 POWER CORD
2 CAB-7513ACE AC POWER CORD
8 CAB-V35MT MALE DTE V35 CABLE, 10 FT
1 CISCO7513/4X CISCO7513/4X2,13SLOT, 2 CYBUS
3 CON-OSP-32R IGX32-RM,32SLOT NPM,SCM MAINT
3 CON-OSP-7513 CISCO7513 COMPRE PREM MAINT
12 CON-OSP-NTM NETWRK TRUNK MOD, COMP MAINT
3 CON-OSP-PA8E PRT ADPTR-8PRT ETHRNT COMPMAIN
3 CON-OSP-UFM UNIV FRAME RELAY MOD-COMP MAIN
3 CON-OSPPA4T 4PR SERIAL ADAPTER, COMP MAINT
3 CONOSP32AC4 QUAD AC 875W PWRSPLY, COMPMAIN
9 CONOSPAIPDS ATM DS3 INTFC COMP PREM MAINT
18 CONOSPIGXUF CON-OSP-IGXUFMPA COMP MAINT
3 CONOSPNPM3 COMP MAINT REDNDT NTWRK PROCES
3 CONOSPVIP24 COMP MAINT VERSATILE PROCESSOR
3 CX-AIP-DS3 ATM INTERFACE
1 FR-IR75 RSP1,2,7000 INTRDOMAIN RT LIC
1 FR-NF75 RSP1,2,7000 NETFLW SWTCH LIC
1 FR-WPP75 CISCO 7500 SERIES WAN PACK LIC
1 IGX-ARM ALARM RELAY MODULE
1 IGX-FS-UFM FORESIGHT LICENSE
1 IGX-NPM-32-R REDUNDANT NTWRK PRC MOD32MDRAM
4 IGX-NTM NETWORK TRUNK MODULE
1 IGX-SW-8256 SYSTEM SOFTWARE LICENSE
1 IGX-UFM-U UNIVERSAL FRAME RELAY
1 IGX32-AC4-2 QUAD AC 875WPWRSUPLYDUALACINPT
1 IGX32-RM 32 SLOT NPM,SCM
4 IGXNTMFWD NTM FIRMWARE REVISION
1 IGXUFMUFWD UFM-U FIRMWARE REVISION
6 IGXUVME1ECP TWO IGX-UVM(IGX-UVM-E1EC-PAI)
12 IGXUVMFWDE UVM FIRMWARE VERSION
2 MEM-RSP4-64 RSP44 MB DRAM OPTION
2 MEMRSP4FLC 20MB FLASH CARD
1 NM-SV-1.8203 STRATAVIEW PLUS
Page 6 of 9
<PAGE>
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
Equipment Serial Monthly
Qty Type Model Description Number Rent
--- ---- ----- ----------- ------ ----
1 PA-4T+ 4 PORT SERIAL PORT ADAPTOR
1 PA-8E 8 PORT ETHERNET 10 BASET ADPTR
1 PWR-7513/4X2 CISCO7513/4X2 DUAL AC POWER
2 RSP4 7500 SERIES RTE SWITCH PROCESS
1 SF75CV-11.X RSP1,RSP2,RSP7000 IP SET
1 VIP2-40 2ND GEN VERSATILE INTERF PRO.
Location: PTT TOWER (DC2) PRINCESS MRIJKELAAN LOUISE HENRIEETE STRAAT 75,
NETHERLANDS,
1 BC-512011 ALARM RELAY INTFC(ARI)BACK CRD
2 BC-6171A-E1 BACK CARD/E1(BC-E1)
1 BC-6353A-E1 FASTPAD E1 BACK CARD(FPC-E1)
1 BC-UAI-1E3 UNIVERSAL ATM INTERFACE
2 BC5083ARS449 HDM BACKCARD/4499(SDI-RS449)
2 CAB-590076 IPX 16/32 POWER CORD
2 CAB-7513ACE AC POWER CORD
8 CAB-V35MT MALE DTE V35 CABLE, 10 FT
1 CISCO7513/4X CISCO7513/4X2,13SLOT, 2 CYBUS
3 CON-OSP-32R IGX32-RM,32SLOT NPM,SCM MAINT
3 CON-OSP-7513 CISCO7513 COMPRE PREM MAINT
3 CON-OSP-ALM 2IGX-ALM/B W/2 BC-UAI-1E3,MAIN
6 CON-OSP-CVM CVM ADPCM, COMP MAINT
3 CON-OSP-FRM FRMRELAY MOD IGX16, COMPMAINT
3 CON-OSP-FTM FAST PAD TRUNK MOD, COMP MAINT
6 CON-OSP-HDM HIGHSPSYNCDATAMODULE-COMPMAINT
6 CON-OSP-NTM NETWRK TRUNK MOD, COMP MAINT
3 CON-OSP-PA8E PRT ADPTR-8PRT ETHRNT COMPMAIN
3 CON-OSPPA4T 4PR SERIAL ADAPTER, COMP MAINT
3 CONOSP32AC4 QUAD AC 875W PWRSPLY, COMPMAIN
3 CONOSPAIPE3 ATM,E3,SM,34MBPS COMP MAINT
3 CONOSPFRM3 FRAME RELAY MOD 31, COMPMAINT
3 CONOSPNPM3 COMP MAINT REDNDT NTWRK PROCES
3 CONOSPPAFE PRTADPTR, 1PRT FE, 1OOTX MAINT
6 CONOSPVIP24 COMP MAINT VERSATILE PROCESSOR
3 CX-AIP-E3 ATM INTFC,E3 COAX, 34 MBPS
1 FR-IR75 RSP1,2,7000 INTRDOMAIN RT LIC
1 FR-NF75 RSP1,2,7000 NETFLW SWTCH LIC
1 FR-WPP75 CISCO 7500 SERIES WAN PACK LIC
1 IGX-ALM/A IGX ATM LINE MODULE
1 IGX-ARM ALARM RELAY MODULE
1 IGX-FTM FASTPAD TRUNK MODULE
2 IGX-HDM HIGHSPEED SYNCH DATA MODULE
1 IGX-NPM-32-R REDUNDANT NTWRK PRC MOD32MDRAM
2 IGX-NTM NETWORK TRUNK MODULE
Page 7 of 9
<PAGE>
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
Equipment Serial Monthly
Qty Type Model Description Number Rent
--- ---- ----- ----------- ------ ----
1 IGX-SW-8256 SYSTEM SOFTWARE LICENSE
1 IGX32-AC4-2 QUAD AC 875WPWRSUPLYDUALACINPT
1 IGX32-RM 32 SLOT NPM,SCM
1 IGXALM/BE3 IGX-ALM/B-E3-PAIR=
1 IGXALMAFWD IGX ATM LINE MODULE
2 IGXALMBFWD ALM/A FIRMWARE REVISION
1 IGXFTMFWDE FTM FIRMWARE REVISION
2 IGXHDMFWDE HDM FIRMWARE VERSION
2 IGXNTMFWDE NTM FIRMWARE REVISION
1 IGXUVME1ECP TWO IGX-UVM(IGX-UVM-E1EC-PAI)
2 IGXUVMFWDE UVM FIRMWARE VERSION
2 MEM-RSP4-64 RSP44 MB DRAM OPTION
2 MEMRSP4FLC 20MB FLASH CARD
1 PA-4T+ 4 PORT SERIAL PORT ADAPTOR
1 PA-8E 8 PORT ETHERNET 10 BASET ADPTR
1 PWR-7513/4X2 CISCO7513/4X2 DUAL AC POWER
2 RSP4 7500 SERIES RTE SWITCH PROCESS
1 SF75CV-11.X RSP1,RSP2,RSP7000 IP SET
1 VIP2-40 2ND GEN VERSATILE INTERF PRO.
-------------
Total $121,701.00
1. Lessee hereby certifies that the Equipment leased under this Schedule has
been delivered, installed, found to be in good working order and is hereby
accepted for use (or has continuously been accepted for use), all on the
Commencement Date.
2. FMA shall supply the above Equipment on or about November 31, 1997.
3. The Monthly Rent herein is subject to change if this contract is not
properly executed and received by FMA by November 9, 1997.
4. This Lease Schedule is contingent upon FMA's receipt of Master Equipment
Lease Agreement No. 30743 to be returned to FMA simultaneously with this
Schedule properly executed by Lessee.
INITIALS
________FMA
________Lessee
Page 8 of 9
<PAGE>
LEASE AGREEMENT NO. F30743 DATED October 31, 1997.
SCHEDULE A DATED: October 30, 1997.
5. Without limiting the provisions of Master Lease Agreement No. 30743, Lessee
acknowledges and agrees that this Lease shall be net of, and that Lessee
shall be responsible for the payment of, all applicable U.S. and foreign
taxes, duties and any other assessments except for state, federal or
foreign taxes based solely on FMA's income. Lessee agrees not to deduct
from the payment of Monthly Rent any amounts for withholding taxes or any
other taxes. It is understood that FMA does not claim to have any expertise
with respect to foreign tax matters and that Lessee shall not look to FMA
for any such expertise and shall not hold FMA responsive therefor.
6. Notwithstanding anything in Lease Agreement No.F30743 to the contrary, FMA
shall at its expense, obtain the manufacturer's on site maintenance, for a
period of three years covering the Minimum Term of the Lease, for the
Equipment described above. Any maintenance expense arising thereafter shall
be Lessee's sole responsibility and expense.
7. The terms and conditions of Lease Agreement No. F30743 are herein
incorporated by reference.
8. Insurance Value: $4,448,167.00
FORSYTHE McARTHUR ASSOCIATES, INC. WORLDPORT COMMUNICATIONS, INC
BY /s/ Rick Forsythe BY /s/ John W. Dalton
------------------------------------ ---------------------------------
An Authorized Signatory
NAME Rick Forsythe NAME John W. Dalton
---------------------------------- -------------------------------
TITLE Authorized Signatory DATE TITLE President / CEO DATE
-------------------- ------ ---------------- --------
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 48377
<SECURITIES> 0
<RECEIVABLES> 652200
<ALLOWANCES> (24500)
<INVENTORY> 0
<CURRENT-ASSETS> 1065764
<PP&E> 1216731
<DEPRECIATION> (106253)
<TOTAL-ASSETS> 9230464
<CURRENT-LIABILITIES> 3732176
<BONDS> 347250
0
16
<COMMON> 1603
<OTHER-SE> 5149419
<TOTAL-LIABILITY-AND-EQUITY> 9230464
<SALES> 1694787
<TOTAL-REVENUES> 1694787
<CGS> 1541277
<TOTAL-COSTS> 1541277
<OTHER-EXPENSES> 2027601
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (71212)
<INCOME-PRETAX> (1879684)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1879684)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1879684)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
