EXHIBIT 10.4
Registered Holder: WorldCom Inc.
$28,500,000.00
NETCO COMMUNICATIONS CORPORATION
102 UNION PLAZA
333 NORTH WASHINGTON AVENUE
MINNEAPOLIS, MINNESOTA 55401
7% Subordinated Note
Due December 31, 2003
For Value Received, NETCO COMMUNICATIONS CORPORATION, a Minnesota
corporation, (hereinafter called the "Issuer") hereby promises to pay to the
order of WorldCom Inc., or the registered holder (hereinafter referred to as the
"Holder") the principal amount of Twenty Eight Million Five Hundred Thousand
Dollars ($28,500,000), or such lesser amount as has been actually advanced to
Issuer by Holder pursuant to that certain Preferred Stock, Subordinated Note and
Warrant Purchase Agreement dated November 14, 1996, as amended, upon
presentation of this certificate, in legal tender of the United States of
America at the time of payment hereof, to the account of holder according to
Holder's written instructions, on December 31, 2003, or sooner as hereinafter
provided.
The Issuer further agrees to pay interest on the principal amount remaining
unpaid from time to time thereon from the date hereof at the rate of seven
percent (7%) per annum. Interest shall accrue from the date of purchase of this
Note (hereinafter, the "Note"), and be payable on June 30 and December 31 of
each year, commencing with the first interest payment on December 31, 1996. The
Issuer shall, upon request of the registered Holder, mail a check or draft
representing such interest to the registered holder at the address designated by
the registered holder and appearing on the books of registration maintained by
the Issuer. Except as otherwise provided in Atricle 2, no interest shall accrue
or be paid on this Note after December 31, 2003.
If any payment due hereunder is not received by the Holder within 15 days
from the date due, Issuer shall pay a late payment charge of Five Dollars
($5.00) or four percent (4%) of the amount of the delinquency, whichever is
greater.
The following terms, covenants, and conditions shall apply to this Note.
ARTICLE 1
SUBORDINATION
1.1) The Issuer and the Holder of this Note, by acceptance hereof,
agree that the payment of the principal and interest on this Note is, to the
extent stated herein, expressly subordinated to the prior payment of the
principal and interest on all existing or future obligations of the Issuer for
money borrowed from a bank, trust, insurance, or other financial institution
engaged in the business of lending money, which is hereinafter referred to as
"Senior Indebtedness." In the event of any receivership, insolvency, assignment
for the benefit of creditors, bankruptcy, reorganization, or arrangement with
creditors (whether or not pursuant to bankruptcy or other insolvency laws), sale
of all or substantially all of the assets, dissolution, liquidation, or any
other marshaling of the assets and liabilities of the Issuer, or in the event
the Note shall be declared due and payable upon the occurrence of an event of
default (as specified herein), (1) no amount shall be paid by the Issuer in
respect of the principal or interest on this Note at the time outstanding,
unless and until the principal of and interest on the Senior Indebtedness then
outstanding shall have been paid in full, and (2) no claim or proof of claim
shall be filed with the Issuer by or on behalf of the holder of this Note which
shall assert any right to receive any payments in respect of the principal of
and interest on this Note except subject to the payment in full of the principal
and interest of all of the Senior Indebtedness then outstanding.
ARTICLE 2
EVENT OF DEFAULT
2.1) Each of the following shall constitute an Event of Default:
(a) Failure to pay interest when due, continued for thirty (30) days;
(b) Failure to pay principal or premium when due;
(c) An assignment for the benefit of creditors of the Issuer,
adjudication of Issuer as a bankrupt, or petition for the reorganization of the
Issuer pursuant to Chapter 7 or 11 of the United States Bankruptcy Code, as the
same may be amended.
2.2) Upon the occurrence of any Event of Default specified in Section
2.1(c) above, the entire unpaid principal balance hereof, together with all
accrued and unpaid interest thereon and all other sums owing hereunder, shall
become immediately due and payable, without presentation, demand or further
action of any kind. Upon the occurrence of any Event of Default specified in
Section 2.1 (a) or Section 2.1 (b) above, the holder of this Note shall have the
sole option of declaring the unpaid principal
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balance hereof together with all other sums owing hereunder immediately due and
payable, without presentation, demand or further action of any kind.
2.3) Upon the occurrence of any Event of Default and before and after
acceleration of the entire unpaid principal balance of this Note, interest shall
continue to accrue thereafter at a rate equal to two percent (2%) per annum in
excess of the then applicable rate of interest under this Note until this Note
is paid in full, including the period following entry of any judgment. Both
before and after any default, interest shall be calculated on the basis of a
360-day year but charged on the basis of actual number of days elapsed in any
calendar year of part thereof.
2.4) Holder may waive any default before or after the same has been
declared without impairing the Holder's right to declare a subsequent default
hereunder, this right being a continuing right.
2.5) Upon an Event of Default, Holder shall not be deemed, by any act
of omission or commission to have waived any of its rights or remedies unless
such waiver is in writing and signed by Holder, and then only to the extent
specifically set forth in the writing. A waiver as to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to a
subsequent event.
ARTICLE 3
PREPAYMENT
3.1) This Note may be prepaid at any time, in whole or in part, prior
to maturity at the option of the Issuer, upon payment of all, or such lesser
portion of the principal amount as specified in the notice, together with
interest accrued to the date fixed for payment. If the Holder hereof fails or
neglects to present this Note for payment at the time and place specified in
such notice, this Note shall cease to bear interest on the portion to be
prepaid, as set forth in the notice, unless payment hereof is refused upon the
presentation of the same at or after the time specified in such notice.
ARTICLE 3
PAYMENT
4.1) Payment to the Holder of principal and interest shall be a complete
discharge of the Issuer's liability with respect to such payment, but the Issuer
may, at any time, require the presentation hereof as a condition precedent to
such payment.
4.2) No recourse shall be had for the payment of the principal, or
interest, or for any claim based thereon, or otherwise, against any
incorporator, shareholder, officer, director, or agent, past, present, or
future, of the Issuer, whether by virtue of any
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constitution, statute, rule of law, enforcement of any assessment, or penalty,
or by reason of any matter prior to delivery of this Note, or otherwise. All
such liability, by the acceptance hereof, is a part of the consideration to the
Issuer hereof, and is expressly waived.
ARTICLE 5
DIVIDENDS
5.1) Until payment in full of this Note, the Issuer may not declare any
dividend payable in cash or property on its Common Stock, with the sole
exception of any stock split in the form of a dividend payable in shares of
common stock.
ARTICLE 6
NOTICE
6.1) All notices, requests, demands and other communications under this
Note shall be in writing and shall be deemed to have been given on the date of
service if served personally on the party to whom notice is to be given, or on
the third day after mailing if mailed to the party to whom notice is to be given
by first class mail, registered or certified, postage prepaid to the Issuer at
its address stated on the front page of this Note and to the Holder at its
address as listed in the register of the Issuer. Either party may change its
address for purposes of this Article 6.1 by giving the other party written
notice of the new address in the manner set forth above.
ARTICLE 7
MISCELLANEOUS
7.1) All parties liable for the payment of this Note agree to pay on
demand, all costs of collection and to cure any default under this Note
including, but not limited to, reasonable attorneys' fees actually incurred.
7.2) The undersigned and all endorsers, sureties and guarantors of this
Note, jointly and severally waive notice of and consent to any and all
extensions of this Note or any part hereof without notice, and each hereby
waives presentment, demand for payment, protest and notice of dishonor, demand,
protest and nonpayment.
7.3) The remedies of Holder as provided herein shall be cumulative and
concurrent, and may be pursued singly, successively or together against Issuer
at the
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sole discretion of Holder, and the failure to exercise any such right or remedy
shall in no event be construed as a waiver or release of the same.
7.4) Issuer's obligations hereunder shall extend to and bind Issuer's
successors and assigns. This Note may be amended only by an instrument in
writing signed by both Issuer and Holder.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed by its
President and Secretary.
Dated: December 16, 1996 NETCO COMMUNICATIONS CORPORATION
By: /s/ Edward J. Driscoll, III
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Edward J. Driscoll, III
President and Secretary
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