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EX-10.1
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of the 21st day of
May, 1998, by and among XXXXXXX COMMUNICATIONS CORPORATION ("XXXXXXX"), MCC
ACQUISITION CORP., a wholly owned subsidiary of XXXXXXX ("MCCAC"), PRIORITY
INTERNATIONAL COMMUNICATIONS, INC., a wholly owned subsidiary of MCCAC ("PIC"),
PIC RESOURCES CORP., a wholly owned subsidiary of MCCAC ("PICR"), XXXXX XXXXXX
and XXXXXX XXXXXXXXX (together the "SHAREHOLDERS") and ATN COMMUNICATIONS, INC.,
a wholly-owned subsidiary of PICR ("ATN").
RECITALS
Whereas, XXXXXXX, MCCAC, PIC, PICR, the SHAREHOLDERS and ATN mutually
desire to enter into this Agreement and hereby each acknowledge the receipt of
good and valuable consideration therefor;
Whereas, a Stock Purchase Agreement dated as of August 22, 1997, as
amended as of October 29, 1997 and as of February 27, 1998 (the "PIC
Agreement"), was entered into by and among MCCAC, PIC and the SHAREHOLDERS;
Whereas, a Stock Purchase Agreement dated as of August 22, 1997, as
amended as of the 29th day of October, 1997 and as of February 27, 1998 (the
"PICR Agreement") was entered into by and between MCCAC, PICR, ATN, and the
SHAREHOLDERS;
Whereas, that certain Letter Agreement dated October 29, 1997 addressed
to the Shareholders of PICR and ATN (the "Letter Agreement") was executed and
delivered by XXXXXXX in conjunction with the execution of the PIC Agreement and
the PICR Agreement;
Whereas, the parties hereto desire to make certain additional
agreements and to modify certain terms and conditions of the PIC Agreement, the
PICR Agreement and the Letter Agreement all as expressly stated herein,
NOW THEREFORE, the parties do hereby agree as follows:
1. Section 1.3 of the PIC Agreement and Section 1.4 of the PICR
Agreement, each regarding a "Special Default Right", are hereby agreed to be
void and of no further force or effect.
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2. From and after the date hereof and until the Revised Short Term Note
(as defined herein) and the Long-Term Notes (as defined in the PIC Agreement)
are fully paid and all obligations due and owing to the Shareholders under
Section 1.3 of the PICR Agreement (the "Earn-Out Right"), as amended hereby, are
fully performed, XXXXXXX and MCCAC agree that, (i) they will take no action to
expand the number of Directors on the Board of Directors of PIC, PICR or ATN to
more than three members, (ii) they will always vote their shares or direct the
vote of shares of PIC, PICR and ATN stock for the election of both of the
SHAREHOLDERS as Directors of PIC, PICR and ATN, unless they commit acts
constituting fraud or felony to MCCAC, PIC or PICR, make material
misrepresentations to the officers or directors of MCCAC or materially disregard
their duties as Directors, (iii) they will authorize the prepayment of some or
all of the amounts owing on the Revised Short Term Note as cash reserves become
reasonably available in MCCAC, PIC, PICR or ATN, (iv) they will, following full
payment of the Revised Short Term Note, authorize the prepayment of some or all
of the amounts owing on the Long Term Notes as cash reserves become reasonably
available in MCCAC, PIC, PICR or ATN, and (v) will cause Xxxxx Xxxxxx to be
included in the slate of directors recommended by management of XXXXXXX to be
elected to the XXXXXXX Board of Directors unless he commits acts constituting
fraud or felony, makes a material misrepresentation to the officers or directors
of XXXXXXX or materially disregards his duties as a director and will reimburse
Xxxxx Xxxxxx for his travel and other expenses reasonably incurred at XXXXXXX'X
request in connection with his duties as a Director of XXXXXXX. MCCAC and
XXXXXXX further agree that, until the Revised Short-Term Note and the Long-Term
Notes are fully paid, they will not require, make or cause PIC to make any
principal payments on the $400,000 principal amount promissory note payable to
XXXXXXX.
3. The parties hereto agree that scheduled payments due on the Long
Term Notes and the Revised Short Term Note may in the future be funded out of
PIC, PICR or ATN cash reserves if the same are reasonably available. Provided
however, that MCCAC retains, (i) responsibility and obligation for making such
payments on a timely basis, and (ii) the right to approve the making of any
expenditures provided that such approval may not be unreasonably withheld or
delayed.
4. Upon execution of this Agreement MCCAC shall tender the amount of
$500,000 ($250,000 to be provided by XXXXXXX and $250,000 from PICR and ATN) as
a prepayment of amounts owed under the Short Term Note and the parties thereto
shall execute the Revised Short Term Note attached hereto as EXHIBIT A in
renewal and extension of the Short Term Note. The parties hereby agree that
after the application of the above referenced payment the principal balance of
the Revised Short Term Note is $340,000 and the Guaranty Agreement
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dated October 27, 1998 executed by XXXXXXX to guaranty payment of the Short Term
Note is still in full force and effect to guaranty the Revised Short Term Note.
5. Upon execution of this Agreement XXXXXXX shall irrevocably direct
its transfer agent to issue to Xxxxx Xxxxxx, Xxxxxx Xxxxxxxxx and Xxxxx Xxxxx an
aggregate of 571,428 shares of XXXXXXX Common Stock as a prepayment in the
amount of $1,000,000 of amounts owed under the Long Term Notes payable to Xxxxx
Weight and Xxxxxx Xxxxxxxxx. XXXXXXX will issue 540,000 shares to Xxxxx Xxxxxx,
28,571 shares to Xxxxxx Xxxxxxxxx, and 2,857 shares to Xxxxx Xxxxx. The parties
hereby agree that after the application of the above referenced payment (i) the
Guaranty Agreements dated October 27, 1998 executed by XXXXXXX to guaranty
payment of such notes are still in full force and effect and continue to
guaranty the Long Term Notes, (ii) the prepayment of principal will be applied
to installments of principal in the inverse order of their maturities, and (iii)
the principal balances of such Long Term Notes are as follows:
Xxxxx Xxxxxx $381,29.39
Xxxxxx Xxxxxxxxx $117,599.01
6. The parties agree that the shares described in paragraph 5 shall
also be subject to the Registration Rights Agreements each dated October 29,
1997, by and between XXXXXXX and Xxxxx Xxxxxx and XXXXXXX and Xxxxxx Xxxxxxxxx.
Xxxxx Xxxxxx hereby represents and warrants to MCCAC and XXXXXXX that he is not
receiving any consideration in exchange for the shares he has directed to be
issued to Xxxxx Xxxxx, as described in Paragraph 5. XXXXXXX hereby represents to
the SHAREHOLDERS that it has complied with all applicable laws and regulations
which may govern or restrict this transaction and that it is duly authorized by
its organizational and operating documents to sell such shares to the
SHAREHOLDERS.
7. The Earn-Out Right (Section 1.3 of the PICR Agreement) shall be
amended to read as follows:
"1.3 EARN-OUT RIGHT. At the end of each of the two periods of 12
consecutive full calendar months during the 24 month period beginning November
1, 1997, the amount of EBITDA (earnings before interest, taxes, depreciation and
amortization) generated by PICR, ATN, PIC and any subsidiary of any of them
which at the election of the PICR or ATN Board of Directors is determined to be
included for purposes of this calculation (collectively the "Subsidiary") shall
be measured and, if the Subsidiary has EBITDA of at least $1,000,000 for either
such period, Xxxxxxx Common Stock with an aggregate Quarterly Average Market
Value of $1.25 for each dollar of EBITDA earned in the relevant period in excess
of $1,000,000 shall be delivered to the
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SHAREHOLDERS (subject to the re-set provisions set forth below) within 120 days
after November 1, 1999. In addition to the foregoing, if at the end of the 24
month period beginning November 1, 1997, the Subsidiary has EBITDA of at least
$2,000,000, the Shareholders shall earn 25,000 additional shares of XXXXXXX
common stock for each $250,000 of EBITDA over $2,000,000 up to $4,000,000 and
50,000 shares of XXXXXXX common stock for each $250,000 of EBITDA over
$4,000,000. The shares will be delivered to the SHAREHOLDERS within 120 days
after November 1, 1999. At their option the SHAREHOLDERS may waive their rights
to re-set the earn-out period, as described below, and instead obtain delivery
of the shares earned pursuant to the foregoing provisions within 120 days after
the end of each relevant 12-month period. Should an acquisition by a Subsidiary
occur during the 24-month period described above, the income from which, in the
opinion of MCCAC and the board of directors of the Subsidiary, should not be
included in the calculation of the Earn-Out Right hereunder, such parties shall
establish a separate "earn-out" incentive applicable to the Shareholders to
provide appropriate incentives which gives recognition to the contribution to
the Subsidiary and the Shareholders over an appropriate term. It is the
intention of the Parties to not limit or inhibit the officers and directors and
shareholders in the pursuit of business opportunities or acquisitions for the
Subsidiaries notwithstanding the time limit and terms of the Earn-Out Right and
to xxxxxx and encourage business decisions which produce benefits to XXXXXXX and
MCCAC and the Subsidiaries and to provide appropriate recognition and incentive
to such undertakings. In the event that XXXXXXX provides resources in cash or
securities to finance acquisitions or investments by PIC, PICR or ATN, the
parties anticipate that some or all of the expenses incurred and the income
generated by such acquisitions or investments may, by subsequent agreement of
the parties, be excluded from the calculation of EBITDA for the purposes of the
Earn-Out Right. Notwithstanding anything provided herein to the contrary, in the
event the EBITDA number for the 24 month period beginning November 1, 1997 and
ending October 31, 1999 is not more than $4,000,000, and provided the
SHAREHOLDERS have not waived their re-set rights as described above, then the
24-month period to be used for all purposes under this Earn-Out Right shall be
changed to the 24-month period beginning April 1, 1998 and ending March 31, 2000
and the 12-month periods shall likewise be adjusted (the "Re-Set Period"). If
the earn-out period is re-set, the shares of XXXXXXX Common Stock which would
have been earned with respect to EBITDA during the November 1, 1997-October 31,
1999 period shall not be delivered to the Shareholders. Shares of XXXXXXX Common
Stock earned during the Re-Set Period shall be delivered to the SHAREHOLDERS
within 120 days after the expiration of the respective Re-Set Period. In the
event that MCCAC, PIC, PICR or ATN desire to make certain expenditures for the
long term betterment of such company which expenses would ordinarily be included
in the calculation of EBITDA under this Earn-Out Right, the parties agree such
expenses will be excluded from such EBITDA
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calculations in order to encourage the making of such expenditures. The parties
hereto agree that beginning March 1, 1998, for each completed call processed by
ATN for Incomex, Inc. during such 24 month period, a $2.50 per completed call
income addition to the EBITDA total for such 24 month period shall be made,
provided that, (i) at least $3.80 per call (the "Cost Component") is retained by
ATN and all further proceeds from the call are provided to Incomex, Inc., (ii)
that the $3.80 per call amount retained by ATN covers the cost of operation for
the calls and (iii) that ATN establishes an in house resolution group to
minimize bad debt from calls origination by Incomex, Inc. from Mexico.
Notwithstanding anything to the contrary herein, the Cost Component retained by
ATN shall be subject to adjustment up or down if ATN'S actual cost per completed
call is more or less, respectively, than $3.80. The shares which may be earned
under the Earn-Out Right shall be delivered to the SHAREHOLDERS in the
proportion of 90% thereof to Xxxxx Xxxxxx and 10% thereof to Xxxxxx Xxxxxxxxx
and shall be subject to the Registration Rights Agreements each dated October
29, 1997, by and between XXXXXXX and Xxxxx Xxxxxx and XXXXXXX and Xxxxxx
Xxxxxxxxx. XXXXXXX hereby agrees and represents to the SHAREHOLDERS that in
conjunction with the issuance of such shares, it has complied or will comply
with all applicable laws and regulations which may govern or restrict the
issuance of such shares and that it is or until be duly authorized by its
organizational and operating documents to issue such shares to the
SHAREHOLDERS."
8. The parties agree that (i) all of the obligations of XXXXXXX under
the Letter Agreement are hereby terminated, (ii) in the event that the parties
reach agreement for XXXXXXX to provide stock or cash to PICR, PIC or ATN to
facilitate acquisitions or growth, such agreement will contain a cost of capital
charge to the recipient to be reasonably agreed upon by the parties, and (iii)
provided there is no continuing payment default under either the Revised
Short-Term Note or the Long-Term Notes, cash flow generated by PIC, PICR and ATN
will be use to repay the approximately $110,000 advanced by XXXXXXX since
November 1, 1997.
9. Except as expressly provided herein, all terms and conditions of the
PIC Agreement, the PICR Agreement, and the Long Term Notes, remain in full force
and effect.
10. This Agreement shall be construed and enforced in accordance with
the laws of the State of Iowa without regard to conflicts of law principles. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any provisions of this Agreement.
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11. This Agreement may be amended or modified in whole or in part, only
by a duly authorized agreement in writing executed in the same manner as this
Agreement and which makes reference to this Agreement.
IN WITNESS WHEREOF the pages have hereunto caused this Agreement to be
duly executed as of the date first above written.
MCC ACQUISITION CORP.
By: /s/ Xxx Xxxxxxx
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Xxx Xxxxxxx, Chief Executive Officer
XXXXXXX COMMUNICATIONS
CORPORATION
By: /s/ Xxx Xxxxxxx
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Xxx Xxxxxxx, Chief Executive Officer
PRIORITY INTERNATIONAL
COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, President
PIC RESOURCES CORP.
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, President
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SHAREHOLDERS:
/s/ Xxxxx Xxxxxx
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XXXXX XXXXXX
/s/ Xxxxxx Xxxxxxxxx
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XXXXXX XXXXXXXXX
ATN COMMUNICATIONS, INC.
By: /s/ Xxxxx Xxxxxx
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Xxxxx Xxxxxx, Chief Executive Officer
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REVISED PROMISSORY NOTE
(SHORT-TERM NOTE)
$340,000.00 May 21, 0000
Xxxxx Xxxxxx, Xxxx
FOR VALUE RECEIVED, the undersigned, MCC ACQUISITION CORP. (the
"Company"), promises to pay to the order of XXXXXX B. HARDEGEE, Trustee for the
benefit of XXXXX XXXXXX and XXXXXX B. HARDEGEE (the "Holder"), the principal sum
of Three Hundred Forty Thousand Dollars ($340,000.00), payable in full on
December 1, 1998.
Prior to maturity, the unpaid principal balance of this Note shall bear
interest, payable on the first day of each month beginning July 1, 1998 at the
annual rate of twelve percent (12.0%). The unpaid balance of principal of this
Note shall bear interest after the due date until paid at the rate of eighteen
percent (18.0%) per annum.
This Note is issued in renewal, extension and replacement of the
original "Short-Term Note" dated October 31, 1997, as renewed and extended by
that certain AMENDED AND RESTATED PROMISSORY NOTE (SHORT-TERM NOTE) dated
February 27, 1998, which "Short-Term Note" was defined in and issued pursuant to
the Stock Purchase Agreement dated August 22, 1997, as amended by a First
Amendment dated October 31, 1997, and as further amended by a Second Amendment
dated February 27, 1998 (the "Purchase Agreement"), to which the Company and the
Holder are parties. This Note is secured by a Collateral Pledge and Security
Agreement dated October 29, 1997 executed by the Company and the Holder.
If Xxxxxxx Communications Corporation ("Xxxxxxx") completes any primary
offering of its equity securities (excluding any exercise of employee stock
options and exercise of outstanding warrants) at any time after the date hereof
and prior to June 30, 1999, the Company must apply an amount equal to at least
sixty-seven percent (67.0%) of the net proceeds of any such offering in excess
of $500,000.00 to prepay this Note. The Company shall make such prepayments
within five (5) business days after the receipt by Xxxxxxx of the proceeds from
the offering.
This Note may be prepaid by the Company at any time, in whole or in
part, without premium or penalty. The company shall be liable for all of the
Holder's collection expenses, including but not limited to reasonable attorneys'
fees and court costs.
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Until this Note has been paid in full, neither the Company, Priority
International Communications, Inc., ATN Communications, Inc. nor PIC Resources
Corp. will loan, contribute, distribute by dividend or advance any money to
Xxxxxxx.
The undersigned agrees to waive all notice of default, intent to
accelerate, acceleration, presentment and notice of dishonor.
MCC ACQUISITION CORP.
By: /s/ Xxx Xxxxxxx
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Xxx Xxxxxxx, Chief Executive Officer
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