Exhibit 10.8
GUARANTY AGREEMENT
NETCO COMMUNICATIONS CORPORATION
and
WORLDCOM INC.
September 26, 1997
GUARANTY AGREEMENT
Guaranty Agreement (herein "Agreement") made this 26th day of September,
1997, by and between NETCO COMMUNICATIONS CORPORATION, a Minnesota corporation,
having its principal place of business at 102 Union Plaza, 333 North Washington
Avenue, Minneapolis, Minnesota 55401 ("NETCO") and WORLDCOM INC., a Georgia
corporation, having its principal place of business at 515 East Amite Street,
Jackson, Mississippi 39201 ("WCOM").
Whereas, NETCO is engaged in the development and implementation of high
speed, digital data transportation delivery and ancillary data storage and
remote proofing services addressed initially to the printing and prepress
industries, and requires significant permanent financing to accomplish such
development and implementation; and
Whereas, WCOM is engaged in the sale and marketing of voice and data
transmission over its multinational communications infrastructure; and
Whereas, WCOM and NETCO are parties to a certain Convertible Note Purchase
Agreement dated September 12, 1996 (the "Convertible Note Agreement") pursuant
to which WCOM purchased from NETCO a 10% Convertible Subordinated Note due
September 30, 1999, (the "Convertible Note") in principal amount of $5,000,000;
and
Whereas, WCOM and NETCO are parties to a certain Preferred Stock,
Subordinated Note and Warrant Purchase Agreement dated November 14, 1996
pursuant to which WCOM purchased from NETCO 100,000 shares of Preferred Stock
for $10,000,000 and 4,157,500 warrants to purchase Common Stock for
$19,000,000.00 (the "Stock, Note and Warrant Purchase Agreement"); and
Whereas, NETCO desires that WCOM agree to guaranty a certain three year
revolving credit loan facility in favor of NETCO in the maximum principal amount
of $35,000,000 by the First National Bank of Chicago ("FNBC") (the "First
Chicago Facility") for the purpose of providing NETCO with long term financing
to fund and facilitate the deployment and implementation of NETCO's services
over WCOM's communications infrastructure; and
Whereas, WCOM is agreeable to guaranteeing NETCO's obligations under the
First Chicago Facility on the terms and conditions and for the consideration set
forth in this Agreement; and
Whereas, NETCO is unable to obtain long term financing on terms as favorable
as those provided in the First Chicago Facility and this Agreement without the
guaranty of WCOM, which WCOM is not obligated to provide.
NOW THEREFORE, in consideration of the foregoing premises, and of the
consideration provided herein, the parties agree as follows:
I. THE GUARANTY
1.01 Guaranty of the First Chicago Facility. Subject to the terms and
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conditions set forth in this Agreement, and provided that the First Chicago
Facility is acceptable to WCOM in form and content, WCOM hereby agrees to
provide its limited guaranty, in form attached hereto as Exhibit A (the "WCOM
Guaranty"), of the obligations of NETCO arising under the First Chicago
Facility, not to exceed the principal amount of Thirty-Five Million Dollars
($35,000,000), in form acceptable to WCOM and NETCO.
II. GRANT TO WCOM OF WARRANTS
2.01 Grant of the Warrants. Subject to the terms and conditions set forth
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in this Agreement, and in consideration of the WCOM Guaranty, NETCO grants to
WCOM 1,679,234 Class A and 2,840,967 Class B Common Stock Purchase Warrants
entitling WCOM to purchase, until December 31, 2000, subject to the terms and
conditions hereof, up to an aggregate total of 4,520,201 shares of NETCO's
authorized and unissued Common Stock, par value $.0l per share, at an initial
exercise price of Nineteen Dollars Fifty Cents ($19.50) per share, subject to
adjustment, and upon the additional terms and conditions, set forth in the
"Common Stock Purchase Warrant" in form appended to this Agreement as Exhibit B
and incorporated herein by this reference.
III. CREDIT FACILITIES
3.01 Provision of Credit Facilities. As further consideration for the
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WCOM Guaranty, NETCO agrees that the WCOM Guaranty will satisfy all obligations
of WCOM under Article V of the Stock, Note and Warrant Purchase Agreement.
IV. REPRESENTATIONS AND WARRANTIES OF NETCO
4.01 NETCO hereby represents and warrants to WCOM that, as of the date
hereof and as of the Closing provided for in Section 7.01 hereof:
(a) Corporate Organization and Power; Qualification. NETCO is duly
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organized, validly existing and in good standing as a corporation under the laws
of the state of Minnesota, has all corporate power and authority to own its
properties and to carry on its businesses as now being and hereafter proposed to
be conducted and is duly qualified and in good standing as a foreign
corporation, and is authorized to do business, in all jurisdictions in which the
character of its properties or the nature of its businesses requires such
qualification or authorization, except for qualifications and authorizations the
lack of which, singly or in the aggregate, has not had and will not have a
materially adverse effect on NETCO.
(b) Subsidiaries. NETCO does not own, directly or indirectly, any capital
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stock or other equity securities of any corporation nor does NETCO have any
direct or indirect ownership interest, including interests in partnerships and
joint ventures, in any other entity or business, with the sole exceptions of
WAMNET, Inc., a Minnesota corporation and Netco Communications Corporation of
Canada, Inc., a Canadian corporation, each of which is a wholly owned subsidiary
of NETCO.
(c) Authorization; Enforceability. NETCO has the power, and has taken, or
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will take prior to closing, all necessary action (including any necessary
stockholder action) to authorize it, to execute, deliver and perform in
accordance with their respective terms this Agreement, the First Chicago
Facility and the Common Stock Purchase Warrant. This Agreement has been, and
the First Chicago Facility and the Common Stock Purchase Warrant, when executed
and delivered by NETCO to WCOM and FNBC, respectively, will have been, duly
executed and delivered by NETCO and is, and when so delivered will be, legal,
valid and binding obligations of NETCO, enforceable against NETCO in accordance
with their respective terms.
(d) No Violations; Consent. The execution, delivery and performance in
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accordance with their respective terms by NETCO of this Agreement, and of the
First Chicago Facility and the Common Stock Purchase Warrant, do not and will
not as of closing or thereafter (i) require any governmental approval or any
other consent or approval, including any consent or approval of the stockholders
of NETCO, other than governmental approvals and other consents and approvals
that have been obtained, are final and not subject to review on appeal or to
collateral attack, are in full force and effect or (ii) violate, conflict with,
result in a breach of, constitute a default under, or result in or require the
creation of any lien upon any assets of NETCO under, any contract to which NETCO
is a party or by which NETCO or any of its properties may be bound. WCOM agrees
that neither the First Chicago Facility nor the issuance of the Warrants
hereunder is a violation of the Convertible Note Agreement.
(e) Litigation. There are not, in any court or before any arbitrator of
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any kind or before or by any governmental or non-governmental body, any actions,
suits or proceedings pending or threatened (nor, to the knowledge of NETCO, is
there any basis therefor) against or in any other way relating to or affecting
(a) NETCO or (b) any of its businesses or properties, other than as is disclosed
in Schedule 4.01(e) hereto.
(f) Taxes. NETCO has filed (or obtained extensions of the time by which it
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is required to file) all United States federal, state and local income tax
returns and all other material tax returns required to be filed by it and has
paid all taxes shown due on the returns so filed as well as the other taxes,
assessments and governmental charges which have become due, except such taxes,
if any, as are being contested in good faith and as to which adequate reserves
have been provided. NETCO will continue to make all such filings in a timely
manner and pay all such taxes, assessments and other governmental charges
required of it.
(g) Capitalization. (i) As of the date hereof, the authorized capital
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stock of NETCO consists of 20,000,000 shares of which 15,000,000 are Common
Shares and 5,000,000 are undesignated shares. NETCO does not hold any of its
shares in treasury.
(ii) 1,295,971 Common Shares are issued and outstanding and have been
validly issued and are fully paid and nonassessable and are not subject to
preemptive rights.
(iii) 100,000 of the undesignated shares have been designated as the
Preferred Stock having the rights and preferences set forth on Exhibit 1 to the
Stock, Note and Warrant Purchase Agreement, and have been duly authorized and
validly issued to WCOM.
(iv) Except as contemplated by this Agreement and the Stock, Note and
Warrant Purchase Agreement, and as disclosed on Schedule 1 to that Agreement or
Schedule 4.01 (g) (iv) to this Agreement, there are no outstanding
subscriptions, options, warrants or other rights of any kind to acquire any
additional shares of capital stock of NETCO, or other instruments or securities
convertible into or exchangeable for, or which otherwise confer on the holder
thereof any right to acquire, any such additional shares, nor is NETCO committed
to issue any such option, warrant, right, or security, or any other instrument
convertible into a security.
(v) Except as expressly provided for in the Stock, Note and Warrant
Purchase Agreement, there are no agreements relating to voting, purchase or sale
of capital stock between NETCO and any of its stockholders or affiliates, and to
the best of NETCO's knowledge, among any of its stockholders.
(h) NETCO has delivered to WCOM copies of its financial statements
(including balance sheets, income statements, changes in stockholders equity and
statements of cash flow) for the period from inception [September 1994] through
December 31, 1996 and for the six month period ended June 30, 1997. Such
financial statements (x) fairly present the financial condition, assets and
liabilities of NETCO at their respective dates and the results of its operations
and changes in its cash flows for the periods covered thereby, (y) were prepared
in accordance with generally accepted accounting principles except as may be
noted therein, and (z) were prepared from the books and records of NETCO, which
books and records are complete and correct and fairly reflect all material
transactions of NETCO's business.
V. REPRESENTATIONS AND WARRANTIES OF WCOM
5.01 WCOM hereby represents and warrants to NETCO that:
(a) WCOM has been given access to full and complete information regarding
the Company and has utilized such access to its satisfaction for the purpose of
obtaining information WCOM desires or deems relevant to the decision to grant
the WCOM Guaranty.
(b) WCOM is an "accredited investor" within the meaning of Rule 501(a) of
the General Rules and Regulations under the Securities Act of 1933.
VI. COVENANTS OF NETCO
6.01 Affirmative Covenants. NETCO hereby agrees that until the payment in
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full of all amounts due under, and the termination or the expiration of, the
First Chicago Facility, and the payment and performance of all of its
obligations under this Agreement, except with the prior written consent of WCOM,
it shall:
(a) Payment of Obligations. Pay, discharge or otherwise satisfy at or
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before maturity or before they become delinquent, as the case may be, all its
material obligations and liabilities of whatever nature, including without
limitation those arising under the First Chicago Facility, except when the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings.
(b) Conduct of Business and Maintenance of Existence. Continue to engage
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in business of the same general type as currently conducted by it and preserve,
renew and keep in full force and effect its corporate existence; take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business; and comply with all applicable
requirements of law except to the extent that the failure to comply therewith
would not, individually or in the aggregate, have a material adverse effect on
the business, operations, property, condition (financial or otherwise) or
prospects of NETCO.
(c) Use of Proceeds. NETCO will, and will cause each of its subsidiaries
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to, use the proceeds of any amounts drawn under the First Chicago Facility only
for capital expenditures and operating capital expenditures approved by the
Board of Directors of NETCO.
(d) Insurance. NETCO will, and will cause each subsidiary to, maintain
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with financially sound and reputable insurance companies insurance on all their
property in such amounts and covering such risks as is consistent with sound
business practice, and NETCO will furnish WCOM upon request full information as
to the insurance carried.
(e) Maintenance of Properties. NETCO will, and will cause each subsidiary
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to, do all things necessary to maintain, preserve, protect and keep its property
in good repair, working order and condition, and make all necessary and proper
repairs, renewals, and replacements so that its business carried on in
connection therewith may be properly conducted at all times.
(f) Additional Covenants. Comply with the additional covenants and
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agreements set forth in Schedule 6.01(f) hereof.
(g) Notices. Promptly give notice to WCOM:
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(i) of the occurrence of any Event of Default as that may be defined
in the First Chicago Facility or this Agreement;
(ii) of any (i) default or event of default under any contractual
obligation of NETCO or any of its Subsidiaries or (ii) litigation, investigation
or proceeding which may exist at any time between NETCO or any of its
Subsidiaries and any governmental authority, which in the case of either (i) or
(ii) above, if not cured or if adversely determined, as the case may be, would
have a material adverse effect on the business, operations, properties,
condition (financial or otherwise) or prospects of NETCO;
(iii) of any litigation or proceeding affecting NETCO or any of its
Subsidiaries in which the amount claimed is $100,000.00 or more and not covered
by insurance or (ii) in which injunctive or similar relief is sought which, if
obtained, would have a material adverse effect on the business, operations,
properties, condition (financial or otherwise) or prospects of NETCO or (iii)
arising out of this Agreement.
6.02 Negative Covenants. NETCO agrees that until payment in full of all
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amounts due under, and the termination or expiration of, the First Chicago
Facility, and the payment and performance by NETCO of all its obligations under
this Agreement, except with the prior written consent of WCOM, it shall not:
(a) Limitation on Indebtedness and Guarantee Obligations. Create, incur,
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assume or suffer to exist any Indebtedness or Guarantee Obligations other than:
(i) Indebtedness arising under this Agreement;
(ii) Indebtedness and Guaranty Obligations of NETCO and its
Subsidiaries existing on the date of this Agreement and listed in Schedule 6.02;
(iii) Additional Indebtedness incurred to finance the acquisition of
equipment or indebtedness incurred as a part of the sale and leaseback of NETCO
equipment in an aggregate principal amount not exceeding the amount which may be
approved by NETCO's Board of Directors from time to time for such purposes;
(iv) Indebtedness arising under (i) standby letters of credit issued
to secure performance obligations in the ordinary course of business, and (ii)
Indebtedness of NETCO or any Subsidiary in respect of surety, utility, appeal or
similar bond issued in the ordinary course of business, the aggregate amount of
such Indebtedness not exceeding the amount which may be approved by NETCO's
Board of Directors from time to time for such purposes;
(v) any extension, renewal or refinancing of the Indebtedness
permitted pursuant to clause (b) above on terms and conditions satisfactory to
WCOM and in an aggregate principal amount not exceeding the amount of such
Indebtedness outstanding at the time of such extension, renewal or refinancing;
and
(vi) in addition to the Indebtedness permitted by clauses (a) through
(c) above, Indebtedness of NETCO incurred in the ordinary course of business in
an aggregate principal amount not to exceed the amount which may be approved by
NETCO's Board of Directors from time to time for such purposes.
(b) Prohibition of Fundamental Changes. Make any material change in the
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present method of conducting business or engage in any type of business other
than of the same general type now conducted by it.
(c) Prohibition of Investments, Loans and Advances. Make any advance,
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loan, extension of credit or capital contribution to, purchase or acquire any
stock, bonds, notes, debentures or other securities of, purchase or acquire any
assets constituting an ongoing business of or make any other investment in, any
other person, except:
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(i) investments in Cash Equivalents;
(ii) extensions of trade credit in the ordinary course of business;
and
(iii) acquisitions approved by NETCO's Board of Directors and
consented to by WCOM pursuant to the Convertible Note Agreement.
(d) Limitation on Capital Expenditures. Make or commit to make (by way of
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the acquisition of securities of a person or otherwise) any expenditures in
respect of the purchase or other acquisition of fixed or capital assets
(excluding any such asset acquired in connection with normal replacement and
maintenance programs properly charged to current operations) except for
expenditures in the ordinary course of business not exceeding the amount
approved by NETCO's Board of Directors during any fiscal year of NETCO.
(e) Liens. NETCO will not, nor will it permit any subsidiary to, create,
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incur, or suffer to exist any lien in, of or on any property of NETCO or any of
its subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be delinquent
or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with
Generally Accepted Accounting Principles shall have been set
aside on its books.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith
by appropriate proceedings and for which adequate reserves shall
have been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar
character and which do not in any material way affect the
marketability of the same or interfere with the use thereof in
the business of NETCO or its Subsidiaries.
(v) Liens existing on the date hereof and described in Schedule
6.02(e).
(f) Sale of Accounts. NETCO will not, nor will it permit any Subsidiary
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to, sell or otherwise dispose of any notes receivable or accounts receivable,
with or without recourse, except as may be permitted by the Board of Directors
of NETCO.
(g) Amendment of Credit Agreement. Agree or consent or otherwise permit
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any amendment to the Credit Agreement without the prior written consent of WCOM.
6.03 Reimbursement and Indemnification.
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(a) Reimbursement. Upon notice by WCOM that it has paid or advanced
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pursuant to the WCOM Guaranty any funds to FNBC in payment of any principal,
interest or any other amounts whatever due or payable, or asserted by FNBC to be
due or payable, under the First Chicago Facility, NETCO shall immediately pay
and reimburse WCOM all such funds before 1:00 p.m. on the first business day
following the date of such notice.
(b) Indemnification. NETCO shall indemnify and hold harmless WCOM, and
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its directors, officers, employees, agents and representatives, from and against
any and all claims, demands, actions, causes of action, payments, losses, costs,
damages, liabilities and expenses, including, without limitation, reasonable
legal fees (collectively, "Losses") arising out of (i) any breach by NETCO of
any representation, warranty, covenant or obligation in the First Chicago
Facility, and (ii) any breach by NETCO of any representation, warranty, covenant
or obligation in this Agreement. Upon notice by WCOM that it has incurred
Losses, NETCO shall immediately pay such Losses to WCOM before 1:00 p.m. on the
first business day following the date of such notice.
VII. CLOSING
7.01 Closing. Closing shall occur at the offices of NETCO, at such time
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as may be agreed by NETCO and WCOM, on or before September 26, 1997.
7.02 Conditions to Closing. The Closing shall be conditioned upon
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satisfaction of all of the following requirements;
(a) The approval of this Agreement by NETCO's Board of Directors and by
WCOM;
(b) The due authorization and approval by NETCO's Board of Directors of
the Common Stock Purchase Warrant;
(c) Such certificates, dated as of the Closing, from officers of NETCO as
WCOM may reasonably request relating to the representations, warranties and
covenants given by NETCO herein or to the satisfaction of these conditions of
closing;
7.03 Delivery. At Closing, NETCO shall deliver the Common Stock Purchase
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Warrant to WCOM upon WCOM's execution of the Guaranty Agreement required in
connection with the First Chicago Facility.
VIII. TERMINATION; EVENTS OF DEFAULT
8.01 Termination.
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(a) Prior to Closing. Either party may terminate this Agreement prior to
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Closing upon any failure, including its own failure, to satisfy any of the
Conditions to Closing set forth in Section 7.02 hereof.
(b) Post Closing. Either party may terminate this Agreement if, within
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30 days after Closing, NETCO has not entered into the First Chicago Facility,
and, in such event, the Warrants issued at Closing shall be deemed cancelled.
8.02 Consequences of Termination. Neither party shall be liable to the
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other upon any termination in accordance with Section 8.01 hereof.
8.03 Events of Default. Upon the occurrence of any of the following
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events:
(a) NETCO shall fail to pay any principal of or interest on the First
Chicago Facility when due in accordance with the terms thereof or shall fail to
pay any amount payable hereunder within five days after any such amount becomes
due in accordance with the terms thereof or hereof;
(b) Any representation or warranty made or deemed made by NETCO in the
First Chicago Facility or in this Agreement or in any certificate or other
statement furnished at any time under or in connection with the First Chicago
Facility or this Agreement shall prove to have been incorrect in any material
respect on or as of the date made or deemed made;
(c) NETCO shall default in the observance or performance of any agreement
contained in this Agreement;
(d) NETCO shall default in the observance or performance of any other
covenant or agreement contained in the First Chicago Facility or this Agreement;
(e) NETCO or any of its Subsidiaries shall default in any payment of
principal of or interest on any Indebtedness (other than indebtedness under the
First Chicago Facility) or in the payment of any Guarantee Obligation, in either
case where the principal amount thereof then outstanding exceeds $25,000.00
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Guarantee Obligation was created; or (ii)
default in the observance or performance of any other agreement or condition
relating to any such Indebtedness or Guarantee Obligation or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity, any applicable grace
period having expired, or such Guarantee Obligation to become payable, any
applicable grace period having expired;
(f) (i) NETCO or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or NETCO or any of its
Subsidiaries shall make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against NETCO or any of its Subsidiaries in any
case, proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such adjudication
or appointment or (B) remains undismissed, undischarged or unbonded for a period
of 60 days; or (iii) there shall be commenced against NETCO or any of its
Subsidiaries any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) NETCO or any of
its Subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) NETCO or any of its Subsidiaries shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due; or
(g) One or more judgments or decrees shall be entered against NETCO or any
of its Subsidiaries involving in the aggregate a liability (not paid or fully
covered by insurance) of $25,000.00 or more and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
30 days from the entry thereof; then, and in any such event, (a) if such event
is an Event of Default specified in clause (i) or (ii) of paragraph (f) above
with respect to NETCO, automatically this Agreement shall immediately terminate
and the reimbursement and indemnification obligations of NETCO hereunder (with
accrued interest thereon) and all other amounts owing under this Agreement shall
immediately become due and payable notwithstanding any provision herein which
may otherwise require the giving of prior notice by WCOM and (b) if such event
is any other Event of Default, so long as any such Event of Default shall be
continuing, either or both of the following actions may be taken: (i) WCOM may
by notice to NETCO and FNBC declare the WCOM Guaranty and this Agreement
terminated immediately, provided that Section VI, Section VIII and Section IX of
this Agreement shall survive any such termination until all NETCO's obligations
to WCOM under Sections VI and VIII have been fully paid and discharged, and (ii)
WCOM may by notice to NETCO declare all reimbursement and indemnification
obligations hereunder and all other amounts owing under this
Agreement to be due and payable forthwith, whereupon the same shall immediately
become due and payable. Except as expressly provided above in this Section
8.03, presentment, demand, protest and all other notices of any kind are hereby
expressly waived.
IX. MISCELLANEOUS
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9.01 Amendments, Waivers and Consents. No provision in this Agreement may
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be altered or amended, and compliance with any covenant or provision set forth
herein may not be omitted or waived, except by an instrument in writing duly
executed by WCOM and NETCO. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
9.02 Notices. All notices required or permitted by this Agreement shall be
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in writing, and shall be hand delivered, sent by facsimile or sent by nationally
recognized overnight delivery service or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to WCOM:
WorldCom Inc.
515 E. Amite
Jackson, Mississippi 39201
Attention: K. William Grothe, Jr.
Vice President
Telephone: (601)360-8051
Telecopy: (601)974-8233
with a copy to:
WorldCom Inc.
515 E. Amite
Jackson, Mississippi 39201
Attention: William Anderson
General Counsel
Telephone: (601)360-8977
(601)360-8282
(b) If to the NETCO:
Netco Communications Corporation
102 Union Plaza
333 North Washington Ave.
Minneapolis, MN 55401
Attention: Edward J. Driscoll, III
President
Telephone: (612)204-3100
Telecopy: (612)204-3101
with a copy to:
George H. Frisch
5030 Woodlawn Boulevard
Minneapolis, Minnesota 55417
Telephone: (612)724-2929
Telecopy: (612)724-8387
or to such other person or address as any party hereto shall specify by notice
in writing to the other parties. All such notices and other communications
shall be effective when received.
9.03 Binding Effect; Assignment. This Agreement shall be binding upon and
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inure to the benefit of the NETCO and WCOM. No assignment of rights or
delegation of duties arising under this Agreement may be made by any party
hereto without the prior written consent of the other parties.
9.04 Third-Party Beneficiaries. This Agreement is for the sole benefit of
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the parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any person, other than the parties
hereto and such assigns, any legal or equitable right hereunder.
9.05 Entire Agreement; Savings. This Agreement, the Stock, Note and
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Warrant Purchase Agreement and the Convertible Note and Convertible Note
Agreement and the Common Stock Purchase Warrant constitute the entire agreement
between the parties hereto with respect to the subject matter contained herein
and therein and supersede all other prior understandings or agreements, both
written and oral, between the parties with respect to the matters contained
herein and therein; provided, however, that nothing in this Agreement shall be
deemed in any way to affect the Convertible Note Agreement or the Convertible
Note, or the Stock, Note and Warrant Purchase Agreement or the instruments
contemplated thereby or hereby which shall each continue in accordance with
their respective terms, unaffected by this Agreement.
9.06 Severability. The provisions of this Agreement are severable and, in
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the event that any court of competent jurisdiction shall determine that any one
or more of the provisions or part of a provision contained in this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement; but this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of a provision, had never been contained herein, and such
provisions or part reformed so that it would be valid, legal and enforceable to
the maximum extent possible.
9.07 Governing Law. This Agreement shall be governed by, and construed in
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accordance with, the law of the State of Minnesota without regard to its
principles of conflicts of laws.
9.08 Headings. Article, Section and subsection headings in this Agreement
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are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
9.09 Counterparts. This Agreement may be executed in two or more
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counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart by original or facsimile signature.
9.10 Expenses. Each of the parties hereto shall pay the fees and expenses
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of its respective counsel, accountants and other experts (including any broker,
finder, advisor or intermediary) and shall pay all other expenses incurred by it
in connection with the negotiation, preparation and execution of this Agreement
and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
"NETCO"
NETCO COMMUNICATIONS CORPORATION
By: /s/ Edward J. Driscoll, III
-----------------------------------
Edward J. Driscoll, III
Its: President and Secretary
"WCOM"
WORLDCOM INC.
By: /s/ K. William Grothe, Jr.
____________________________________
K. William Grothe, Jr.
Its: Vice President
Schedule 4.01 (e)
1. Arbitration proceeding entitled, Piper Jaffray, Inc., Claimant vs.
Netco Communications Corporation, Respondent, before the National Association of
Securities Dealers, Inc., case no. 9703288, claiming a commission of $1,450,000.
2. Related litigation being commenced by NETCO against Piper Jaffray,
Inc., and Joseph Caruso in the District Court of Hennepin, County, State of
Minnesota. The suit against Piper Jaffray seeks a declaratory judgment
invalidating the engagement letter upon which the claim identified above is
based, on the grounds that the engagement letter violates a particular provision
of Minnesota law which requires all fees and commissions charged by a licensed
broker-dealer to be "reasonable" and also violates a related rule requiring a
licensed broker-dealer to abide by "high standards of commercial honor and just
and equitable principles of trade." The suit against Caruso will seek damages
arising from his representations and conduct in connection with his obtaining
and performing the engagement.