Terremark Worldwide Inc

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on September 30, 2002, was approximately $42,505,087, based on the closing market price of the registrant’s common stock ($0.34) as reported by the American Stock Exchange on such date.

The number of shares outstanding of the registrant’s Common Stock, par value $0.001 per share, as of June 25, 2003 was 306,452,865.

We operate facilities at strategic locations around the world from which we assist users of the Internet and large communications networks in communicating with other users and networks. Our primary facility is the NAP of the Americas, where we provide exchange point, colocation and managed services to carriers, Internet service providers, network service providers, government entities, multi-national enterprises and other end users.

Network access points are locations where two or more networks meet to interconnect and exchange Internet and data traffic (traffic of data, voice, images, video and all forms of digital telecommunications), much like air carriers meet at airports to exchange passengers and cargo. Instead of airlines and transportation companies, however, participation in NAPs comes from telecommunications carriers, Internet service providers and large telecommunications and Internet users in general. Tier-1 NAPs are large centers that access and distribute Internet traffic and, following the airport analogy, operate much like large, international airport passenger and cargo transportation terminals or “hubs.”

Initially, four NAPs — in New York, Washington, D.C., Chicago, and San Francisco — were created and supported by the National Science Foundation as part of the transition from the United States government-financed Internet to a commercially operated Internet. Since that time, privately owned NAPs have been developed, including the NAP of the Americas. We refer to our facilities as TerreNAP Centers.

Our TerreNAP Centers are carrier-neutral. We enable our customers to freely choose from among the many carriers available at TerreNAP Centers the carriers with which they wish to do business. We believe the carrier neutrality provides us with a competitive advantage when compared to carrier-operated network access points where customers are limited to conducting business with one carrier.


	•	the site and platform they need to exchange Internet and data traffic;

	•	a menu of related professional and managed services; and

	•	space to house their equipment and their network facilities in order to be close to the Internet and data traffic exchange connections that take place at the NAP of the Americas.

Currently, our customers include telecommunications carriers such as AT&T, MCI, Qwest and Sprint, enterprises such as Bacardi USA, Intrado and Crescent Heights, and government agencies including the Diplomatic Telecommunications Services Programming Office (DTSPO), a division of the United States Department of State, and the City of Coral Gables.

On April 28, 2000, Terremark Holdings, Inc. completed a reverse merger with AmTec, Inc., a public company. Contemporaneous with the reverse merger, we changed our corporate name to Terremark Worldwide, Inc. and adopted “TWW” as our trading symbol on the American Stock Exchange. Historical information of the surviving company is that of Terremark Holdings, Inc.

Terremark was formed in 1982 and, along with its subsidiaries, was engaged in the development, sale, leasing, management and financing of various real estate projects. Terremark provided these services to private and institutional investors, as well as for its own account. The real estate projects with which Terremark was involved included retail, high-rise office buildings, mixed-use projects, condominiums, hotels and governmental assisted housing. Terremark was also involved in a number of ancillary businesses that complemented its core development operations. Specifically, Terremark engaged in brokering financial services, property management, construction management, condominium hotel management, residential sales and commercial leasing and brokerage, and advisory services.

After the April 28, 2000 merger, and as a result of changes in our business conditions, including market changes in the telecommunications industry and the lack of debt and equity financing vehicles to fund other business expansion, we began to redefine and focus our strategy, and began implementing a plan to exit all lines of business and real estate activities not directly related to the TerreNAP Center strategy. Lines of business discontinued included IP fax services, unified messaging services, and telephony. Non-core real estate activities exited included real estate development, property management, financing and the ancillary businesses that complemented the real estate development operations. Our real estate activities currently include technology construction work and management of the property where the NAP of the Americas is located. As of March 31, 2002, we had completed the exit of lines of business and real estate activities not related to our TerreNAP Center strategy.

Our principal executive office is located at 2601 S. Bayshore Drive, Miami, Florida 33133. Our telephone number is (305) 856-3200.

The Internet is a collection of many independent networks interconnected with each other to form a network of networks. Users on different networks are able to communicate with each other through interconnection between these networks. To accommodate the fast growth of traffic over the Internet, an organized approach for network interconnection was needed. The exchange of traffic between these networks became known as peering. The points and places where these networks exchange traffic, or peer, with each other are known as network access points, or NAPs.

Since the beginning of the Internet, major traffic aggregation and exchange points have developed around the world. The first four Tier-1 NAPs were built in the United States in the early 1990’s to serve the northern part of the country, from East Coast to West Coast, and are located in New York, Washington, Chicago and San Francisco. These NAPs were built with sponsorship from the National Science Foundation in order to promote Internet development and used the existing infrastructures of telecommunication companies, to which ownership of the NAPs was eventually transferred. These four Tier-1 NAPs offer only connectivity services.

We own and operate the only carrier-neutral Tier-1 NAP, which is known as the NAP of the Americas, located at 50 NE 9th Street, Miami, Florida 33132, approximately five miles from our corporate headquarters. The NAP of the Americas enables customers to locate equipment next to each other, and provides customers with other managed services. Using the airport analogy again, customers at the NAP of the Americas exchange and redirect Internet and data traffic to multiple destinations, and purchase various managed services, similar to what happens in air terminals with the provision of fuel, maintenance, spare parts and food. The exchange of Internet traffic without payment is known as “peering.” When a fee is paid, it is referred to as “transit.”

During the past few years, the telecommunications and Internet industry has come under economic and commercial pressure to restructure and reduce costs. While this uncertain environment has presented us with some challenges that are more fully discussed below, there have been some positive effects for us resulting from the current industry situation. For example, as many telecom and Internet companies have been forced to reduce their overhead, the market of talented employees available to us has increased. As a result, we have been able to build a robust operations and engineering team, thereby reducing our reliance on third party vendors and consultants.

Another positive side effect of the industry downturn is that many telecommunications carriers have discontinued plans to build their own data centers to provide high quality colocation space for their customers. This retrenchment, however, did not reduce the telecommunications carriers’ need to present their customers with competitive offerings that include highly conditioned, carrier-grade colocation facilities. We built the NAP of the Americas specifically to address the needs of these telecommunications and enterprise customers and to provide them with an alternative to making these expenditures. Consequently, we believe that the NAP of the Americas has become an attractive solution for these telecommunications carriers because it provides a carrier-neutral forum — the airport — for these companies to sell their connectivity and still maintain direct

relationships with their end-user customers. Therefore, while our significant investment in the NAP of the Americas has placed burdens on our financial resources, we believe that our strategy will be successful.

The NAP of the Americas created a new business model for NAPs by providing customers with:


	•	the connectivity of a world-class NAP in a carrier-neutral facility;

	•	the ability to locate equipment next to other customers; and

	•	managed services meeting the design and operational specifications of multinational carriers, enterprises and government customers.

Our strategy is to leverage our major connectivity hubs to sell services to customers within and outside of our TerreNAP Centers. For example, we are currently designing, implementing and managing the deployment of a global commercial Internet access solution for the Diplomatic Telecommunications Service — Program Office, under three publicly awarded contracts, to satisfy their requirements at designated locations overseas. Although the NAP of the Americas serves as the hub to manage this solution, we are leveraging our international carrier relationships to provide this customer with connectivity and technology solutions to communicate with U.S. government locations around the world.

In an effort to limit the additional capital required, our business model for expansion is best compared to that of a management company model in the hospitality industry. The model contemplates that a local in-country partner would own and fund the development and build-out of the facility in which the TerreNAP Center would be located. The facility would ideally be a new development built to the exacting specifications required for a top level NAP (as is the case in Miami), but it may be located in an existing building that is retrofitted to conform to those specifications. We intend to control the operations of the NAP and be the primary tenant in our partners’ building, sharing data center and services revenue via a long-term lease or management contract.

In February 2002, we entered into an agreement with Fundacao de Amparo a Pesquisa do Estado de Sao Paulo, the research foundation for the State of Sao Paulo, to operate and manage the NAP created by FAPESP, which we have renamed the NAP do Brasil. Pursuant to the twenty year agreement, FAPESP turned over the network access point to Terremark, which we intend to enhance and intend to move to new facilities modeled after the operational design of the NAP of the Americas by the end of 2003. Pre-existing FAPESP customers have the right to continue to receive services at the then existing levels without payment until February 2004. FAPESP will receive 6% of the revenue generated by the enhanced NAP do Brazil for the first five years of operation, 5% during the following five years, and 1% during the last ten years. The term may be extended for an additional ten-year period, during which FAPESP would again receive 1% of the revenues. As of June 13, 2003, we have 30 customers in Brazil. For the year ended March 31, 2003, our Brazilian operations generated losses of approximately $605,000.

In June 2002, we entered into an exclusive agreement with the Comunidad Autonoma de Madrid to develop and operate carrier-neutral network access points in Spain. As part of that agreement, the parties formed NAP de las Americas — Madrid S.A. to own and operate carrier-neutral NAPs in Spain, modeled after the NAP of the Americas. The shareholders in this new company are the Comunidad through its Instituto Madrileno de Desarrollo — IMADE, the Camara Oficial de Comercio e Industria de Madrid, Red Electrica Telecomunicaciones, S.A., Telvent Sistemas y Redes S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de Coslada, S.A. (CTC). At the time the NAP de las Americas — Madrid S.A. was formed, we owned 1% of its equity, which we subsequently increased to 10%. We have the option to purchase up to another 30% of the shares owned by the Comunidad, CTC and the Camara at cost, plus LIBOR. We provided the technical and operational know-how for the development of an interim NAP which became operational in July 2002. We will work with NAP de Las Americas — Madrid S.A. to select a permanent site, design the Madrid NAP and operate the business going forward. During the year ended March 31, 2003, we recognized approximately $340,000 in revenues from services billed to the NAP de Las Americas — Madrid S.A.

When the facilities in Brazil and Madrid are operational, we will have TerreNAP Centers located at three major crossroads of Internet and data traffic. Miami, the home of the NAP of the Americas, is ranked by Telegeography, researcher and publisher of international telecom statistics, in its Packet Geography 2002, as the number one International Internet Hub City for Latin America and the Caribbean. Sao Paulo, where the NAP do Brasil is located, is ranked second and Madrid is ranked eighteenth of the Top 50 International Internet Hub Cities in the world. We believe the Madrid network access point will also benefit from Madrid’s strategic geographic location by serving as an Internet gateway to the European Union, North Africa and the Americas.

We continue to explore other locations and have targeted Mexico as a prospective hub city in Latin America.

The combination of connectivity, neutrality and quality of our facilities allows us to provide the following value proposition to our customers at the NAP of the Americas:


	•	Carrier-neutrality: Carriers and other customers are willing to locate their equipment within our facility because we neither discriminate against nor give preference to any individual or group of customers. Locating equipment at a NAP is known in the industry as “colocation.”

	•	Connectivity: Our customers can access any of the more than 50 network providers present at the NAP of the Americas.

	•	“Zero-Mile” Access: Because the NAP of the Americas provides carrier-grade colocation space directly adjacent to the point at which the traffic is exchanged, there is effectively “zero” distance between the peering point and customers’ equipment, which reduces points of failure and cost and increases efficiency, and creates a new paradigm, connecting all participants at a distance of zero miles.

	•	Service Level Agreements: The NAP of the Americas guarantees its customers 100% power availability and environmental stability.

	•	Outsourcing of Services: Because of the NAP of the Americas’ staff’s expertise, our customers find it more cost effective to contract the TerreNAP Team to design, deploy, operate and manage their equipment and networks at the NAP of the Americas than to hire dedicated staff to perform those functions.

	•	Lower Costs, Increased Efficiency and Quality of Service: The combination of these attributes helps our customers reduce their total costs of providing services to their customers by eliminating local loop charges to connect their facility to the peering point, backhaul charges to and from connecting points, and the cost of redundancy to mitigate risks associated with increased points of failure along these routes.

Furthermore, in the wake of September 11 and given the heightened focus on homeland security, we are focusing on meeting the security sensitive technology needs of federal, state and local governments, as well as large enterprises. Our value proposition to this sector revolves around our security, critical mass of Internet and data connectivity and carrier neutrality.


	Exchange Point Service: The NAP of the Americas provides a service called Exchange Point Service, which is designed to facilitate both peering and the purchase of transit, among customers.

	Colocation Services: The NAP of the Americas provides the physical environment necessary to keep a customer’s Internet and telecommunications equipment up and running 24 hours a day, seven days a week. This facility is custom designed to exceed industry standards for electrical and environmental systems. In addition, it offers a wide range of physical security features, including biometric scanners,


	man traps, smoke detection, fire suppression systems, motion sensors, secured access, video camera surveillance and security breach alarms. High levels of reliability are achieved through a number of redundant subsystems including power and fiber trunks from multiple sources.

	Managed Services: Our managed services are designed to support our customers’ mission-critical needs that focus on producing faster network response times. The NAP of the Americas currently offers the following managed services:


	•	Add/ Drop Multiplexer Service (ADMS) — This service provides customers maximum interconnection efficiency. ADMS leverages best in class operational support systems to provide rapid provisioning, monitoring and management of customer circuits.

	•	Network Deployment and Relocation Services — This service leverages our team of engineers to assist customers with the deployment and relocation of critical systems both within and outside the NAP of the Americas. Our team will identify, schedule, document and monitor activities required for successful relocation of equipment as part of the overall network relocation project. Our engineers use QED (Quality, Efficiency, Delivery) best practices project management methodology, to minimize customer effort while maximizing efficient utilization of our resources, overall plan quality and information transfer to customer personnel.

	•	Engineering Services — We offer facility and equipment design and engineering services, including structural, mechanical, electrical and network systems, all provided by our staff of industry certified engineers.

	•	Installation Services — Our installation services specialists provide basic installation of our customers’ equipment. This service reduces our customers’ implementation times, and increases the productivity of our customers’ technical personnel, by avoiding costly downtime due to lack of materials and equipment management and project coordination.

	•	Managed Router Service (MRS) — This service offers customers cost savings and convenience by providing Internet access without the need to purchase or manage an Internet router. MRS leverages the mass of carriers at the our facility, offering access through the configuration of Border Gateway Protocol and the management of necessary hardware. Customer networks performance is optimized and multi-home configurations offer increased redundancy and reliability.

	•	Network Management Services — This service assists customers in achieving maximum uptime by enlisting our engineers at our facility’s Network Operations Center to monitor and manage their equipment located within and outside the facility.

	•	Systems Monitoring Services — This service assists customers in achieving maximum uptime by enlisting engineers to monitor their equipment located at our facilities or anywhere else on their network.

	•	Professional Staging Service — This service turns the implementation of any network or telecom environment into a simple plug and play process. Customers ship their equipment to the NAP or alternate destination for installation, and the Staging Services team gathers and inspects all the equipment components. The same team then assembles, configures, tests, and completes an inventory of the equipment, reducing the time required for a customer to install and load final configurations on site. The service also ensures that all ordered components are configured and installed properly in a controlled and stable environment.

	•	Reference Timing — We offer a fully redundant managed timing reference source from our Datum NetSync Plus® SSU-2000 Rubidium system for delivering DS1/ E1 synchronization and Network Time Protocol. This service allows our customers to save on equipment costs, installation times and maintenance of our customers’ network timing reference by using our on site Stratum source.


	•	Remote Hands Assistance — Remote Hands assists customers that need to remotely access their equipment to perform simple troubleshooting or minor maintenance tasks on a 24x7x365 basis that do not require tools or equipment. Remote Hands services are available on demand or per contract.

	•	Smart Hands Assistance — Smart Hands enhances the Remote Hands service with more complex remote assistance using industry certified engineers for troubleshooting and maintenance.

	•	Turn Key Solution — Our staff can provide full integration activities for all aspects of a “turn key” global project. Along with the planning, design and engineering related to the network and the general program management to control the project, we manage vendors, purchase equipment, receive, store and manage inventory, provision, test, ship, track, install, turn up, monitor and manage performance of the network and monitor and maintain equipment and services.

Our customer contracts have terms of between one year and twenty years, with an average of four years. Our customer contracts do not allow for early termination before the stated maturity date and typically provide for penalties if they are cancelled prior to their expiration. As of June 13, 2003, we have over 100 customers at the NAP of the Americas. Latin American Nautilus USA Inc. and Progress Telecom accounted for approximately $1.4 million (or 14%) and $1.0 million (or 10%) in data center revenues, respectively, for the twelve months ended March 31, 2003. No customer accounted for more than 10% of data center revenues for the twelve months ended March 31, 2002. Listed below are the 17 of the 20 leading telecommunications carriers, according to TeleGeography, Inc., a researcher and publisher of international telecom statistics, which utilize our colocation services:


	•	AT&T Corp.

	•	Deutsche Telekom (T-Systems)

	•	Embratel

	•	Emergia USA (Telefónica)

	•	France Telecom

	•	Genuity Inc.

	•	Global Crossing

	•	Latin America Nautilus USA (Telecom Italia)

	•	Level 3 Communications, Inc.

	•	AboveNet Communications, Inc.

	•	Verio Inc.

	•	Progress Telecom

	•	Qwest Communications International Inc.

	•	SBC Communications Inc.

	•	Sprint Corporation

Our sales strategy has a deliberate approach to obtain new customers. Initially, we established the critical mass of customer connectivity and Tier-1 status for the NAP of the Americas. We accomplished this by signing contracts with the Tier-1 telecommunications carriers and Internet service providers that account for the majority of the world’s Internet and data fiber backbone. This created the critical mass of connectivity that differentiates the NAP of the Americas from other facilities that offer a limited choice of carriers. We successfully completed this phase during the second quarter of fiscal year 2002 and have continued to add carrier customers to our portfolio to ensure the best possible selection of connectivity for our current and future customers.

With the NAP of the Americas positioned as the major connectivity point in the southern United States and in all of Latin America, in the third quarter of fiscal year 2002, we started focusing on selling our services to enterprises and government agencies by leveraging our critical mass of Internet and data connectivity. We have developed offerings that address the needs of large enterprises and government agencies that benefit from colocating their information systems in a carrier-neutral secure facility with access to multiple carriers. We believe that this approach has been very successful.

During the third quarter of fiscal year 2002, we also focused on leveraging our engineering and operations expertise to provide a targeted portfolio of managed services, particularly network and systems provisioning and operations services. This program has been successful, and a number of customers have entered into exclusive service agreements that call for our staff to provide all needed managed services for their equipment at the NAP of the Americas, including engineering, installation and on-going operations. We intend to continue introducing new services based on customer demand.

To execute our sales strategy, we have a staff of experienced sales executives divided into a new sales group and a service managers group. The new sales group is focused on establishing new customer relationships. The service managers group works with our existing customers to better understand how we can add value to their operations, expand our services and ensure customer satisfaction.

The NAP of the Americas is neither a traditional data center, nor a traditional NAP. Unlike the other four Tier-1 NAPs in the United States, the NAP of the Americas combines exchange point services (to facilitate peering) with carrier-grade colocation space and managed services. Consequently, we believe that the NAP of the Americas is competitively unique and can only be replicated through the expenditures of significant funds over a lengthy period, an unlikely event in today’s telecommunications environment.

We believe that carriers and Internet service providers have no need to be in two different NAPs serving the same geographic area. Therefore, to the extent that carriers are located in the NAP of the Americas and have already invested significant funds to establish their presence at the NAP of the Americas, this is an incentive for them to remain our customers. In addition, a competing NAP would require the backing of carriers and Internet service providers serving this area, most of which are already our customers.


	•	Internet data centers operated by established U.S. communications carriers such as AT&T, Qwest, and Level3. Unlike the major network providers, which constructed data centers primarily to help sell bandwidth, we have assembled a critical mass of carrier connectivity in one location, providing superior diversity, pricing and performance. Carrier data centers only provide one choice of carriers and generally require capacity minimums as part of their pricing structures. Locating in our TerreNAP Centers provides access to top tier networks and allows customers to negotiate the best prices with a number of carriers resulting in better economics and redundancy.


	•	Vertically integrated web site hosting, collocation and ISP companies such as AboveNet/ MFN, Digex/ WorkCom and Cable & Wireless/ Exodus. Most managed service providers require that customers purchase their entire network and managed services directly from them. We are a network and service provider hub and allow customers the ability to contract directly with the networks and web-hosting partner best for their business. By locating in a TerreNAP Center, hosting companies add more value to our business proposition — by bringing in more partners and customers and thus creating a virtual market place.

As of March 31, 2003, we had 131 full-time employees in the United States and four full-time employees in Brazil. Of these employees, 60 were in data center operations, 22 were in sales and marketing and 49 were in general and administrative.

Our employees are not represented by a labor union and are not covered by a collective bargaining agreement. We believe that our relations with our employees are good.

We lease 120,000 square feet at the Technology Center of the Americas for the NAP of the Americas. The term of the lease commenced in October 2001 and is for 20 years. Annual rent is approximately $2,500,000. We are also responsible for other expenses.

We also lease approximately 40,000 square feet for a colocation facility in Santa Clara, California. The term of the lease commenced in January 2001 and is for 20 years. Annual rent is approximately $1,400,000.

We also lease approximately 14,660 square feet for our corporate office in Miami, Florida. The term of the lease commenced in April 2000 and is for five years. Annual rent is approximately $483,000. We are also responsible for other expenses.

We also lease approximately 12,000 square feet for office space in Miami, Florida. Annual rent is approximately $192,000. The term of the lease commenced in February 2001 and is for five years.

On November 8, 2002, Cupertino Electric, Inc. filed a complaint against Terremark Worldwide, Inc., Terremark Technology Contractors, Inc. and Technology Center of the Americas, Inc. in the Miami-Dade County Circuit Court Eleventh Judicial Circuit. Cupertino Electric asserted a claim of breach of contract and sought to foreclose on a construction lien each in an amount of approximately $15 million, including interest.

On December 2, 2002, Kinetics Mechanical Services, Inc. filed a complaint against Terremark Worldwide, Inc., Terremark Technology Contractors, Inc. and Technology Center of the Americas, Inc. in the Miami-Dade County Circuit Court Eleventh Judicial Circuit. Kinetics Mechanical Services asserted a claim of breach of contract and sought to foreclose on a construction lien each in an amount of approximately $2.8 million, not including interest.

In May 2003, in connection with a series of transactions among CRG LLC, Cupertino Electric and Kinetics Mechanical Services, both of the Cupertino Electric and Kinetics Mechanical Services actions were dismissed.

No matters were submitted to a vote of our stockholders during the year ended March 31, 2003.

Our common stock, par value $0.001 per share, is quoted under the symbol “TWW” on the American Stock Exchange. We have the authority to issue:


	•	400,000,000 shares of common stock, par value $0.001 per share; and

	•	10,000,000 shares of preferred stock, par value $0.001 per share, which are issuable in series on terms to be determined by our board of directors, of which 20 shares are designated as Series G Convertible Preferred Stock, and 294 shares are designated as Series H Convertible Preferred Stock.


	•	306,452,865 shares of our common stock were outstanding;

	•	20 shares of our Series G Convertible Preferred Stock were outstanding and held by an entity in which Manual Medina, our Chairman and Chief Executive Officer, owns a 50% interest and could have been converted into 2,036,825 shares of our common stock; and

	•	294 shares of our Series H Convertible Preferred Stock were outstanding and held by one holder of record. Each share of Series H Convertible Preferred Stock may be converted into 1,000 shares of our common stock.

The following table sets forth, for the fiscal quarters indicated, the high and low sales prices for our common stock on the American Stock Exchange. Quotations are based on actual transactions and not bid prices.

Holders of our common stock are entitled to receive dividends or other distributions when and if declared by our board of directors. The right of our board of directors to declare dividends, however, is subject to any rights of the holders of other classes of our capital stock and the availability of sufficient funds under Delaware law to pay dividends. In accordance with a credit facility agreement with a financial institution, we may not pay cash or stock dividends without the written consent of the financial institution.

During the quarter ended December 31, 2002, debt holders entered into irrevocable agreements to convert approximately $17.1 million of debt and accrued interest into our common stock at $0.75 per share. The debt holders included Miguel Rosenfeld and Joseph Wright, members of our board of directors, each converting $517,000 in debt. This transaction closed in January 2003 and resulted in a $4.9 million inducement charge. At closing, we issued 22.8 million shares of our common stock.

In August 2002, we issued warrants to purchase 100,000 shares of our common stock in a private offering to accredited investors for an aggregate purchase price of $61,000 pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. The warrants were subsequently converted into 100,000 shares of our common stock.

In June 2002, the NAP de las Americas-Madrid purchased 5 million shares of our common stock at $1.00 per share. The shares were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation S promulgated thereunder. As a result of subsequent sales of our common shares, we are obligated to issue an additional 3.6 million shares to NAP de Las Americas-Madrid S.A. As of June 25, 2003, these additional shares have not yet been issued. We anticipate issuing these shares in the quarter ended September 30, 2003.

In April 2002, we received a binding commitment from a group, including Miguel Rosenfeld and Guillermo Amore, members of our board of directors, and Manuel D. Medina, our Chairman and Chief Executive Officer, for the purchase of $7.5 million of common stock at $0.75 per share. The shares were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. In May 2002, we issued 10 million shares of our common stock for $3.6 million in cash and the conversion of $3.9 million in short term promissory notes to equity. Mr. Rosenfeld purchased 1,668,000 shares for $1,251,000, Mr. Amore purchased 1,501,502 shares for $1,126,127 and Mr. Medina purchased 1,134,667 shares for $851,000.

In April 2002, we entered into a Put and Warrant purchase agreement with TD Global Finance (“TDGF”). In July 2002, we exercised our right to sell to TDGF 17,648,842 common shares for $0.58 per share for a total of $10.2 million. During August 2002, we received $10.2 million in related cash. In conjunction with the sale, we issued three call warrants, each granting TDGF the right to purchase 1,176,588 shares of our common stock. The shares and the warrants were sold pursuant to Section 4(2) and/or 3(b) of the Securities Act and Regulation D promulgated thereunder. The warrants expired without exercise on January 16, 2003.

The selected financial statement data set forth below has been derived from our financial statements, which have been audited by our independent certified public accountants. The information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the Notes thereto included elsewhere in this report.


(1)	Long term obligations include convertible debt, deferred rent, deferred revenue, notes payable, less current portion and capital lease obligations, less current portion.
(2)	Stockholders’ equity as of March 31, 2000 and 1999 includes approximately $4,777 in convertible preferred stock. See “Management’s Discussion and Analysis-Liquidity and Capital Resources” regarding certain subsequent events.
(3)	Amount includes a one-time contract termination fee of $1,095.

The quarterly selected financial statement data set forth below has been derived from our unaudited financial statements. The information should be read in conjunction with those financial statements and our Consolidated Financial Statements and the Notes thereto included elsewhere in this report.

The following discussion of results of operations and financial condition is based upon and should be read in conjunction with our Consolidated Financial Statements and Notes thereto contained elsewhere in this filing.

Our consolidated financial statements as of and for the year ended March 31, 2003 were prepared on the assumption that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Our independent auditors have issued a report dated June 30, 2003 stating that our recurring operating losses, negative cash flows, and liquidity deficit raise substantial doubt as to our ability to continue as a going concern. Investors in our securities should review carefully our financial statements and the report of our independent accountants thereon. See “— Liquidity and Capital Resources” below for a description of our plans to mitigate the effect of our going concern uncertainty.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes the following significant accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:


	•	revenue recognition and allowance for bad debt;

	•	accounting for income taxes; and

	•	impairment of long-lived assets.

Currently, we derive our revenues from monthly recurring fees for colocation and exchange point services and some managed services. We also receive income from non-recurring installation, managed services and construction activities, primarily from technology construction work. Revenues from colocation, exchange point services and some managed services are billed monthly and recognized ratably over the term of the contract. Installation fees are generally billed in the period in which the installation is performed but deferred and recognized ratably over the term of the related contract. Managed services fees are billed and recognized in the period in which the services are provided. Construction activities are billed in accordance with contract terms, but revenues are recognized on the percentage-of-completion method.

Revenue is recognized as service is provided when there is persuasive evidence of an arrangement, the fee is fixed or determinable and collection of the receivable is reasonably assured. We assess collection based on a number of factors, including transaction history with the customer and the credit-worthiness of the customer. We do not request collateral from customers. If we determine that collection is not reasonably assured, we defer the fee and recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash. As of March 31, 2003 and 2002, our accounts receivable amounted to $494,736 and $1,621,978, respectively, and were net of allowance for doubtful accounts of approximately $120,340 and $270,316, respectively.

Revenues from construction contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to total estimated costs for each contract. This method is used because management considers cost incurred to be the best measure of progress on these contracts. The duration of a construction contract generally exceeds one year. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as other liabilities and represent billings in excess of revenues recognized. Construction contract expense costs include all direct material and labor costs and indirect costs related to contract performance such as indirect labor, supplies, tools, repairs, bad debt and depreciation. Provisions for estimated losses on uncompleted contracts are made in the period in which losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions can be reasonably estimated. Accordingly, it is possible that our current estimates relating to completion cost and profitability of our uncompleted contracts will vary from actual results. Excluding depreciation, profit margins (construction contract revenue less construction contract expenses) on construction contracts for the years ended March 31, 2003, 2002 and 2001 were $315,658, $857,163 and $2,097,991, respectively.

We analyze current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of our allowance for bad debts.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce tax assets to the amounts expected to be realized.

We currently have provided for a full valuation allowance against our net deferred tax assets. We have considered future taxable income and tax planning strategies in assessing the need for the valuation allowance. Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Should we determine that we would be able to realize our deferred tax assets in the foreseeable future, an adjustment to the deferred tax assets would increase income in the period such determination is made.

We account for impairment of long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which we adopted in fiscal 2003. This standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Such events and circumstances include, but are not limited to, prolonged industry downturns, significant decline in our market value and significant reductions in our projected cash flows. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to estimated undiscounted future net cash flows expected to be generated by the asset. Significant judgments and assumptions are required in the forecast of future operating results used in the preparation of the estimated future cash flows, including long-term forecasts of the number of additional customer contracts, profit margins, terminal growth rates and discounted rates. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Prior to adoption of SFAS No. 144, we accounted for long-lived assets in accordance with SFAS No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.”

As of March 31, 2003 and 2002, our long-lived assets, including property and equipment and identifiable intangible assets and goodwill, totaled $64,482,834 and $74,309,157, respectively. For the years ended March 31, 2003, 2002 and 2001, we recognized impairment charges amounting to $4,020,300, $18,973,670 and $4,155,178, respectively.

For the year ended March 31, 2003, approximately 75% of our total revenues were generated from data center operations. The remainder was substantially related to technology construction work. For the year ended March 31, 2002 approximately 20% of total revenues were generated from data center operations, approximately 52% was from real estate projects and technology construction work, and approximately 28% was from property and construction management. For the year ended March 31, 2001, approximately 1.0% of total revenues were generated from data center operations, approximately 60% was from real estate projects

and technology construction work, and approximately 39% was from property and construction management. During the past three years, our results of operations have been significantly impacted by:


	•	our shift in focus to the housing and management of Internet infrastructure after the NAP of the Americas became operational in July 2001;

	•	the sale of our telecom facilities management operations in February 2001; and

	•	our exit from non-core real estate activities by March 31, 2002. Non-core real estate activities included real estate development, property management, financing and other ancillary businesses which complemented the development operations. Our real estate activities currently include technology infrastructure construction work and management of the property where the NAP of the Americas is located.

Revenue. Total revenue decreased $1.2 million, or 7.5%, to $14.7 million for the year ended March 31, 2003 from $15.9 million for the year ended March 31, 2002. The decrease is due to a reduction in our development, management and construction contracts revenue of approximately $9.0 million partially offset by an increase in data center revenue, including contract termination fee, of approximately $7.8 million.

Data center revenue increased $6.7 million to $9.9 million for the year ended March 31, 2003 from $3.2 million for the year ended March 31, 2002. Revenues consisted of recurring revenues of $8.4 million and $2.9 million respectively, for the years ended March 31, 2003 and 2002, primarily from charges for colocation, power, peering and some managed services. Non-recurring revenues were $1.5 million and $355,000, respectively, for the years ended March 31, 2003 and 2002, primarily related to managed services and the recognized portion of deferred installation revenue. Installation fees are recognized ratably over the term of the contract. The increase in revenues was primarily the result of an increase in orders from existing customers and growth in our deployed customer base from 40 customers as of March 31, 2002 to 86 customers as of March 31, 2003. We anticipate an increase in revenues from colocation, power and peering and revenues from managed services as we add more customers to the NAP of the Americas, sell additional services to existing customers and introduce new products and services.

Data center — contract termination fee was $1.1 million for the year ended March 31, 2003 and represents amounts received from two customers for the termination of their contracted services with the NAP of the Americas. No fees were received during the year ended March 31, 2002. Contract termination fees are recognized upon contract termination when there are no remaining contingencies or obligations on our part.

Development, commission and construction fees decreased $3.0 million, or 93.8%, to $197,000 for the year ended March 31, 2003 from $3.2 million for the year ended March 31, 2002. The decrease in development, commission and construction fees is primarily the result of our exiting of the underlying non-core real estate activities. We do not expect any significant amount of revenues from development, commission and construction fees.

Management fees decreased $1.0 million, or 83.3%, to $200,000 for the year ended March 31, 2003 from $1.2 million for the year ended March 31, 2002. The decrease is a result of our exiting the management of commercial and residential properties. The only facility we currently manage is TECOTA, the property in which the NAP of the Americas is located. We collect from TECOTA a monthly management fee of approximately $8,000 or 3% of cash collected by TECOTA, whichever is greater. During the fiscal year ended March 31, 2002, we managed approximately 10 properties. Because we do not plan to manage properties other than TECOTA, we anticipate that management fees will not be a significant source of revenues in the future.

Construction contract revenue decreased $5.0 million, or 60.2%, to $3.3 million for the year ended March 31, 2003 from $8.3 million for the year ended March 31, 2002. During the year ended March 31, 2003 we completed eleven contracts and, as of March 31, 2003, had two construction contracts in process. During the year ended March 31, 2002, we completed two contracts and, as of March 31, 2002, we had five

construction contracts in process. The decrease in revenues from construction contracts is due to a decrease in the average revenue per contract, which went from average revenue per contract of $3.6 million in fiscal year 2002 to average revenue per contract of $500,000 in fiscal year 2003. Due to our opportunistic approach to our construction business, we expect revenues from construction contracts to significantly fluctuate from quarter to quarter. We anticipate focusing our efforts on obtaining construction contracts for projects related to technology infrastructure.

Data Center Operations Expenses. Data center operations expenses remained constant at $11.2 million for the years ended March 31, 2003 and 2002. Data center operations consist mainly of rent, operations personnel, electricity, chilled water and security services. With the exception of electricity and chilled water, the majority of these expenses are fixed in nature. However, commencing in fiscal year 2004, we anticipate that certain data center expenses, principally costs related to managed services, will increase as we provide additional services to existing customers and introduce into the market new products and services. We also expect that our costs of electricity and chilled water costs will increase in the future as we add more customers to the NAP of the Americas. The number of employees whose salaries are included in data center operations remained constant at 60 during the years ended March 31, 2003 and 2002.

Contract Construction Expenses. Contract construction expenses decreased $4.4 million, or 59.5%, to $3.0 million for the year ended March 31, 2003 from $7.4 million for the year ended March 31, 2002. This decrease is a result of the decrease in number of contracts and dollar amount of those projects as discussed above in “revenues from construction contracts.” We do not currently anticipate losses on any of the individual contracts.

Start-up Costs — Data Centers. There were no start-up costs for the year ended March 31, 2003. Start-up costs for the year ended March 31, 2002 primarily relate to the NAP of the Americas in Miami, Florida, and were approximately $3.4 million.

General and Administrative Expenses. General and administrative expenses decreased $3.1 million, or 19.9%, to $12.5 million for the year ended March 31, 2003 from $15.6 million for the year ended March 31, 2002. General and administrative expenses consist primarily of salaries and related expenses, professional service fees, rent and other general corporate expenses. The decrease in general and administrative expenses is mainly due to decreases in rent of $1.9 million and payroll of $1.0 million.

Carrying costs, including rent, for our Corvin facility in Santa Clara, California for the year ended March 31, 2003 were reflected in the facility’s impairment charge in the previous year. In accordance with SFAS No. 121, we recognized as of March 31, 2002 an impairment charge of $5.5 million, including $1.5 million in expected lease carrying costs for the period of time until the facility could be sublet. During the second quarter ended September 30, 2002, an additional $350,000 in expected lease carrying costs were recognized and included as part of impairment of long-lived assets. During the year ended March 31, 2002, the rent for the Corvin facility for that year was included in general and administrative expenses.

The decrease in payroll is mainly attributable to staff reductions. The number of employees whose salaries are included in general and administrative expenses decreased from 63 for the year ended March 31, 2002 to 50 for the year ended March 31, 2003.

The remaining period over period decrease in general and administrative expenses is mainly attributable to a decrease in general corporate overhead resulting from our exit of non-core real estate activities in the year ended March 31, 2002.

Sales and Marketing Expenses. Sales and marketing expenses increased $600,000, or 16.7%, to $4.2 million for the year ended March 31, 2003 from $3.6 million for the year ended March 31, 2002. The significant components of sales and marketing expenses are salaries, commissions, provision for bad debt expenses and marketing. The increase in sales and marketing expenses was mainly attributable to an increase in investor relations expense of $442,000 and an increase in provision for bad debt expenses of approximately $265,000. We issued warrants valued at approximately $442,000 to a third party for investor relations services. Provision for bad debt expense consists of full provisions related to eight customers. We have commenced

legal action against many of these customers. The number of employees whose salaries are included in sales and marketing expenses increased slightly from 21 as of March 31, 2002 to 22 as of March 31, 2003.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased $2.2 million, or 30.1%, to $5.1 million for the year ended March 31, 2003 from $7.3 million for the year ended March 31, 2002. This decrease in depreciation and amortization expense was mainly due to the cessation of $3.5 million in amortization of goodwill and intangible assets in accordance with current accounting standards and a decrease in depreciation of approximately $0.4 million related to our colocation facility in Santa Clara, California and non core assets. The decrease was partially offset by an increase in depreciation of approximately $1.7 million primarily from assets of the NAP of the Americas that were put in service during fiscal year 2002 and had a full year of depreciation in fiscal year 2003.

Impairment of Long-Lived Assets. Due principally to the decline and uncertainty of the telecommunications and Internet infrastructure markets, we recognized the following impairment charges:

As a result of impairment charges in the years ended March 31, 2003 and 2002, the long-lived assets described in the table above became fully impaired.

Due to our unsuccessful efforts to lease space at our colocation facility in Santa Clara, California, during the quarter ended September 30, 2001, we granted an option to one of our vendors (a contractor involved with the facility’s build-out) to purchase the leasehold improvements and assume the existing lease for approximately $4.0 million. Based on this option, we recorded a $6.6 million impairment charge in the quarter ended September 30, 2001 to write the improvements down to the option amount. Subsequently, we continued to search for alternatives, which included subleasing or selling our leasehold improvements . In the quarter ended March 31, 2002, upon expiration of the option, we listed our leasehold improvements for sale, indicating a definite change in the strategy. We are now actively looking for a buyer to assume the existing lease or sublease all or a substantial portion of the space. The existing lease is $118,000 per month, with scheduled annual increases, for a twenty-year term ending in 2020. We believe that the most likely outcome is that the property will be subleased or leased from the landlord to a third party and that we will receive no consideration for the leasehold improvements. Based on this most likely scenario, in the quarter ended March 31, 2002, we recorded an additional $5.5 million impairment, resulting in the asset being fully reserved. We also established as of March 31, 2002 reserves for leasehold carrying costs, consisting primarily of monthly rent. As of March 31, 2003, we had approximately $1.4 million in related reserves which we anticipate will carry the facility through March 2004.

The decline in the telecommunications industry and resulting decline in related real estate construction and leasing activities caused us to perform, during the years ended March 31, 2003 and 2002, impairment analyses of our promote interests in TECOTA acquired in the telecom facilities management operations and the goodwill related to the Post Shell acquisition. Our analyses were based on estimated fair value determined by the discounted future expected cash flows method. The analyses anticipated obtaining additional construction contracts for Post Shell and additional tenants for TECOTA. We determined that the assets, which are included in our telecom facilities management and real estate services segments, were impaired as of March 31, 2002 by approximately $3.8 million and $3.2 million, respectively. During the year ended March 31, 2003, no significant contracts were awarded to Post Shell and no tenants were added to TECOTA. As a result, we impaired the remaining $905,000 in TECOTA promote interests and $2.3 million in Post Shell goodwill.

During the fiscal year ended March 31, 2003, we wrote off $450,000 related to equipment that has been held for installation for more than one year and is considered obsolete.

On October 15, 2002, we entered into a joint venture agreement to develop and operate a HIPPA compliant network access point at the NAP of the Americas in Miami, Florida. We acquired a 10% interest in the joint venture company by issuing a $1.0 million promissory note. As the joint venture was not fully funded by December 31, 2002, we determined that our joint venture interest was impaired. Therefore, we recognized a $1.0 million impairment as of December 31, 2002. Effective March 31, 2003, we and the other joint venture partner entered into an agreement to declare void all the then current agreements and contracts, including the joint venture agreement. As a result, we were no longer obligated under the promissory note. The results of operations present, on a net basis, the effects of the formation and the dissolution of the joint venture and accordingly no gain or loss was recognized as a result of these transactions.

Interest Income. Interest income increased $39,000, or 40.2%, to $136,000 for the year ended March 31, 2003 from $97,000 for the year ended March 31, 2002. The increase was due to the recording of interest income on a $5.0 million note receivable from our Chief Executive Officer which began accruing interest in September 2002.

Inducement on Debt Conversion. During the year ended March 31, 2003, we incurred a non-cash expense of $5.0 million related to the $15.8 million of our convertible debt that was converted into 22.0 million shares of our common stock. The debt was converted at $0.75 per share, which was approximately 50% below the stated conversion price. This expense represents the fair value of the additional common shares issued by us as a result of the lower conversion price.

Interest Expense. Interest expense increased $1.2 million, or 12.2%, to $11.0 million for the year ended March 31, 2003 from $9.8 million for year ended March 31, 2002. The increase was due to an increase of $33.0 million in the average debt balance outstanding. The increase was offset by the conversion of $15.8 million in convertible debt during the quarter ended December 31, 2002 and reduction in the interest rate of the Ocean Bank loan from 9.25% to 7.50%. Based on the April 30, 2003 transactions, we expect cash interest payments to be reduced by approximately $900,000 for the year ended March 31, 2004.

Gain On the Sale of Real Estate Held for Sale. In July 2001, we sold Fortune House II for $17.2 million and recorded a gain of approximately $3.9 million. During the year ended March 31, 2002, we also sold six condominium units and recorded a net gain of $0.3 million. The last condominium unit was sold in the quarter ended March 31, 2002.

Net Loss. Net loss decreased $16.2 million, or 28.2%, to $41.2 million for the year ended March 31, 2003 from $57.4 million for the year ended March 31, 2002. The net loss for the year ended March 31, 2003 is mainly due to non-cash items, including impairment charges of long-lived assets of approximately $4.0 million and depreciation and amortization expense of approximately $5.1 million, interest expense of approximately $11.0 million, and approximately $11.2 million of expenses generated from the operations of the NAP of the Americas.

Revenue. Total revenue decreased $24.2 million, or 60.3%, to $ 15.9 million for the year ended March 31, 2002 from $40.1 million for the year ended March 31, 2001, reflecting our exit of the real estate development business.

Data center revenue increased $2.9 million to $3.2 million for the year ended March 31, 2002 from $0.3 million for the year ended March 31, 2001. The increase in data center revenue was attributable to our peering, colocation and managed services offered at the NAP of the Americas, which became operational in July 2001. The data center revenue in the prior year was derived from our peering and colocation services offered at the interim NAP which became operational in December 2000. Our deployed customer base increased from four as of March 31, 2001 to 40 as of March 31, 2002. We expect data center revenues to

increase in future periods as customers set up their operations in the NAP of the Americas. Future data center revenues will be derived from peering, colocation and managed services.

Revenue from real estate sales was $2.8 million for the year ended March 31, 2001 and was attributable to the sale of twelve condominium units. We exited our real estate development business as of March 31, 2001. Accordingly, the real estate sales during year ended March 31, 2002, consisting of six condominium units sold, were recorded net of their related cost and included in gain on the sale of real estate held for sale.

Development, commission and construction fees decreased $9.3 million to $3.2 million for the year ended March 31, 2002 from $12.5 million for the year ended March 31, 2001. This decrease is primarily the result of our exiting the real estate development business and telecom facilities management operations as of March 31, 2001.

Management fees decreased $1.0 million, or 45.5%, to $1.2 million for the year ended March 31, 2002 from $2.2 million for the year ended March 31, 2001. The decrease is a result of our exiting the management of commercial and residential properties.

Revenues from construction contracts decreased $14.1 million, from $22.4 million for the year ended March 31, 2001 to $8.3 million for the year ended March 31, 2002. The decrease is attributable to the reduction in the number of contracts. During the year ended March 31, 2002, we completed two contracts and, as of March 31, 2002, we had five construction contracts in process. During the year ended March 31, 2001, we completed twelve contracts and, as of March 31, 2001, we had seven contracts in process.

Data Center Operations Expenses. Data center operations expenses increased $10.0 million to $11.2 million for the year ended March 31, 2002 from $1.2 million for the year ended March 31, 2001. The increase was attributable to us moving to our permanent facilities, the NAP of the Americas, which became operational in July 2001. The data center operations expense in the prior year was derived from operations of the interim NAP facility, which became operational in December 2000. Data center operations consist mainly of rent, operations personnel, electricity, chilled water and security services. With the exception of electricity and chilled water, the majority of these expenses are fixed in nature.

Construction Contract Expenses. Contract construction expenses decreased $12.9 million to $7.4 million for year ended March 31, 2002 from $20.3 million for the year ended March 31, 2001. The decrease is in line with the decrease in revenues from construction contracts. Construction contract expenses are primarily the result of the number of contracts in process, stage of completion and dollar amount of those projects.

Start-up Costs — Data Centers. Start-up costs decreased $3.1 million to $3.4 million for the year ended March 31, 2002 from $6.5 million for the year ended March 31, 2001. The decrease is mainly attributable to our permanent facilities, the NAP of the Americas, becoming operational in July 2001. Start-up costs in fiscal year 2001 also included costs of the interim NAP facility.

General and Administrative Expenses. General and administrative expenses decreased by $4.3 million to $15.6 million for the year ended March 31, 2002 from approximately $19.9 million for the year ended March 31, 2001. The decrease is attributable to staff reductions and corporate infrastructure related to non-core assets. During fiscal year 2002, our efforts included establishing internal operations to support our Internet infrastructure services strategy. The significant components of these expenses include personnel, insurance, office expenses and professional fees. In addition, during the year ended March 31, 2002, we implemented several cost-savings initiatives, including staff reductions and an overall decrease in discretionary spending.

Sales and Marketing Expenses. Sales and marketing expenses increased $0.8 million, or 28.6%, to $3.6 million for the year ended March 31, 2002 from $2.8 million for the year ended March 31, 2001. The increase is principally due to $3.1 million in marketing expenses for our TerreNAP Data Centers including NAP of the Americas, partially offset by a $2.2 million decrease in marketing expenses associated with the sale of real estate.

Depreciation and Amortization Expense. Depreciation and amortization expense increased $4.0 million to $7.3 million for the year ended March 31, 2001 from $3.3 million for the year ended March 31, 2002. The

increase resulted primarily from the depreciation of the leasehold improvements and equipment used in the NAP of the Americas, which were placed in service on July 1, 2001. Therefore, no similar expenses were recorded for the comparable period during 2001.

Impairment of Long-lived Assets. During the year ended March 31, 2002, in accordance with SFAS No. 121, we evaluated the carrying value of our leasehold improvements related to our colocation facility in Santa Clara and our goodwill related to Post Shell and our TECOTA promote interests. Our investment in our Santa Clara facility was impaired due to a decline in the technology sector and general economic conditions. Accordingly, we recorded an impairment charge of approximately $12.0 million. In addition, changes in business conditions in the telecommunications industry and resulting decline in related construction projects caused us to record an impairment to Post Shell’s goodwill of approximately $3.2 million. Furthermore, the decline in real estate leasing activities caused us to record an impairment of $3.8 million to the TECOTA promote interests. As a result of our agreement to sell certain telecom facilities management operations, during the year ended March 31, 2001, we recognized a $4.2 million impairment of intangible assets relating to management contracts sold.

Interest Income. Interest income decreased $0.4 million to $0.1 million for the year ended March 31, 2002 from $0.5 million for the year ended March 31, 2001 due to a decrease in our average cash balances invested and a decline in short-term interest rates.

Interest Expense. Interest expense increased $8.7 million to $9.8 million for the year ended March 31, 2002 from $1.1 million for the year ended March 31, 2001 due to an increase in our average debt balance outstanding.

Gain On the Sale of Real Estate Held for Sale. During the year ended March 31, 2002, we sold Fortune House II for $17.2 million and recorded a gain of $3.9 million. We also sold six condominium units and recorded a net gain of $0.3 million.

Net Loss From Continuing Operations. Net loss from continuing operations increased $36.0 million to $57.4 million for the year ended March 31, 2002 from $21.4 million for the year ended March 31, 2001. The increase was primarily due to non-cash items, which include impairment of long-lived assets of approximately $19 million, and depreciation and amortization expense of approximately $7.3 million. Also contributing to the loss were interest expense of approximately $9.8 million and $14.6 million of expenses generated from the start-up and operations of the NAP of the Americas.

Loss From Discontinued Operations and Loss on Disposition of Discontinued Operations. In March 2001, we implemented our plan to dispose of acquired businesses whose operations reflect Internet faxing, unified messaging and telephony services. These operations were acquired earlier in the year ended March 31, 2001 in association with the AmTec, Spectrum Communication, IXS.Net and Asia Connect acquisitions. Since the operations represent a class of customer and a major line of business, the results of these activities and estimated loss on disposal are accounted for as discontinued operations. The loss on disposition of discontinued operations of $61.1 million includes write-off of approximately $54.4 million in goodwill. For the year ended March 31, 2001, discontinued operations had $1.8 million of total revenues and a loss of $11.4 million, net of $10.2 million in goodwill amortization. For the year ended March 31, 2002, there were no losses from discontinued operations or loss on disposition of discontinued operations.

On April 30, 2003, Ocean Bank revised its $44.0 million credit facility with us by converting $15.0 million of the outstanding principal balance into equity and extending the term of the remaining $29.0 million until April 30, 2006. Concurrent with this transaction, we paid all past due interest as of March 31, 2003, plus accrued interest through April 28, 2003 totaling approximately $1.6 million and prepaid approximately $900,000 of interest.

On April 30, 2003, CRG LLC completed the purchase, at a discount, of our $22.6 million construction payables (including accrued interest) to Cupertino Electric, Inc. and Kinetics Mechanical Services, Inc. and Kinetics Systems Inc. Cupertino and Kinetics were construction contractors for the NAP of the Americas. At the closing, the construction payables were converted into 30,133,334 shares of our common stock.

On April 30, 2003, we issued 10% Subordinated Secured Convertible Debentures due April 30, 2006 for an aggregate principal amount of $25.0 million. The debt is convertible into shares of our stock at $0.50 per share. Interest is payable quarterly beginning July 31, 2003. The debentures were issued in exchange for $10.3 million in cash, $9.5 million in a promissory note due in full May 30, 2003 and $5.2 million of notes payable which were converted into the Subordinated Debentures. Included in the $5.2 million is $2.0 million of cash received in March 2003 in anticipation of the transaction.

The maker of the $9.5 million promissory note failed to pay but agreed on June 16, 2003 to assign the note and the debenture to an entity newly formed by the son of a director of the Company. Payments received as of June 30, 2003 aggregated approximately $5.8 million and the remaining $3.7 million is due no later than August 15, 2003. Two of the Company’s directors have guaranteed payment and performance in accordance with the amended terms of the note. Management believes that collection on the remaining balance is reasonably assured. In connection with this transaction, the Company will recognize a beneficial conversion feature of $9.5 million, based on the June 16, 2003 measurement date.

The following condensed pro forma balance sheet gives effect to the following transactions as if they had occurred on March 31, 2003:


	•	Ocean Bank debt conversion of $15.0 million in debt to equity;

	•	payment of $1.6 million past due and accrued interest and $0.9 million in prepaid interest to Ocean Bank;

	•	CRG transaction whereby $21.6 million in construction payables plus $1.0 million in accrued interest was converted to equity;

	•	issuance of Subordinated Debentures for $16.1 million in cash, $5.2 million in conversion of notes payable and $3.7 million in amounts receivables under the $9.5 million promissory note.

(1) Includes $9.5 million from beneficial conversion, $9.6 million and $14.1 million in common stock and paid in capital from the Ocean Bank debt conversion and CRG transaction, respectively, and $8.5 million in gain from CRG transaction.

From the time of the merger through March 31, 2003, we have incurred net operating losses of approximately $202.6 million. Our cash flows from operations for the years ended March 31, 2003 and 2002 were negative and our working capital deficit was approximately $39.0 million and $88.3 million as of March 31, 2003 and 2002, respectively. Due to our recurring losses from operations, the uncertainty surrounding the anticipated increase in revenues and the lack of committed sources of additional debt or equity, substantial doubt exists about our ability to continue as a going concern.

Historically, we have met our liquidity needs primarily through obtaining additional debt financing and the issuance of equity interests. Some of our debt financing was either provided by or guaranteed by Manuel D. Medina, our Chief Executive Officer and Chairman of the Board. In prior periods we also successfully shut down or disposed of non-core operations and implemented a series of expense reductions to reduce our liquidity needs.

Based on customer contracts signed as of June 13, 2003, our monthly cash deficit from operations is approximately $1.4 million. In order to eliminate this current monthly cash deficit from operations, the new monthly revenues required range from $2.0 million to $3.0 million. This range of new revenue depends on the mix of the services sold and their corresponding margin. Our required revenues are based on existing contracts, including those recently announced with the U.S. Government and enterprises, and expected future contracts from potential customers currently in the sales pipeline. We have identified additional potential customers, including the federal, state and local governments, and are actively offering available services to them. However, our projected revenues and planned cash needs depend on several factors, some of which are beyond

our control, including the rate at which our services are sold to the government sector and the commercial sector, the ability to retain our customer base, the willingness and timing of potential customers outsourcing the housing and management of their technology infrastructure to us, the reliability and cost-effectiveness of our services and our ability to market our services.

The majority of our planned operating cash improvement is expected to come from an increase in revenues and cash collections from customers. If we fail to achieve planned revenues we will require additional financing. There can be no assurance that additional financing will be available, or that, if available the financing will be obtainable on terms acceptable to us or that any additional financing would not be substantially dilutive to existing shareholders. If we need to obtain additional financing and fail to do so, it may have a material adverse effect on our ability to meet financial obligations and operate as a going concern. Consequently, the uncertainty surrounding the anticipated increase in revenues, including the rate at which services are sold, raises substantial doubt about our ability to continue as a going concern.

We will continually evaluate opportunities to sell additional equity or debt securities, obtain credit facilities from lenders, or restructure our debt to further strengthen our financial condition or for strategic reasons.

Cash used in operations for the year ended March 31, 2003 was approximately $18.3 million compared to cash used in continuing operations of $35.7 million for the year ended March 31, 2002, a decrease of $17.4 million. This period over period decrease was primarily due to a $16.2 million decrease in our net loss to $41.2 million in fiscal year 2003 when compared to $57.4 million in fiscal year 2002.

Cash used in investing activities for the year ended March 31, 2003 was $1.3 million compared to cash used in investing activities of $29.4 million for the year ended March 31, 2002, a decrease of $28.1 million. The amount of cash used in investing activities has decreased as we have now completed the build out of the NAP of the Americas and a portion of our colocation facility in Santa Clara, California. For the year ended March 31, 2003, cash of $1.0 million was used primarily for the purchase of property and equipment related to the NAP of the Americas. For the year ended March 31, 2002, cash of $45.8 million was used primarily for the purchase of property and equipment related to the NAP of the Americas and our colocation facility in Santa Clara, California.

Cash provided by financing activities for the year ended March 31, 2003 was $20.8 million compared to cash provided by financing activities of $59.9 million for the year ended March 31, 2002, a decrease of $39.1 million. The period over period decrease in cash provided by financing activities resulted primarily from a decrease of $56.8 million of new borrowings partially offset by an increase in sale of common stock and warrants of $17.0 million.

We had a net working capital deficit of approximately $39.0 million and stockholder’s deficit of approximately $46.5 million at March 31, 2003 and incurred a net loss of approximately $41.2 million for the year then ended. This loss is principally the result of:


	•	non-cash items, including impairment charges of long-lived assets of approximately $4.0 million, and depreciation and amortization expense of approximately $5.1 million;

	•	interest expense of approximately $11.0 million;

	•	approximately $11.2 million of expenses generated from the operations of the NAP of the Americas; and

	•	not generating sufficient revenue during the year to support the increase in infrastructure.

Ocean Bank Credit Facility: On September 5, 2001, we borrowed $48.0 million from Ocean Bank. The Ocean Bank credit facility is secured by all of our assets and allows for up to a $25.0 million junior lien

position on the assets of our NAP of the Americas, Inc. subsidiary. To obtain the original loan, we paid a $720,000 commitment fee to Ocean Bank. The proceeds of the original credit facility were used to:


	•	repay a $10.0 million short-term loan from Manuel D. Medina, our Chief Executive Officer, the proceeds of which we had used to fund the build out of the NAP of the Americas (Mr. Medina, in turn, used the $10.0 million to repay a personal $10.0 million short-term loan from Ocean Bank);

	•	repay $3.5 million of debt that we owed to Ocean Bank under a line of credit personally guaranteed by Mr. Medina;

	•	pay $1.2 million in loan costs related to the $48.0 million credit facility (including a $720,000 commitment fee); and

	•	fund the NAP of the Americas build out costs.

Mr. Medina has personally guaranteed the credit facility. In addition to Mr. Medina’s personal guarantee of the credit facility, and in order to obtain the facility, the bank required Mr. Medina, prior to the bank disbursing funds under the credit facility, to (i) provide $5.0 million certificate of deposit to the bank as collateral on certain personal loans that Mr. Medina has with the bank and (ii) commit to accelerate the maturity date of those personal loans to December 31, 2001. Subsequent to September 2001, Mr. Medina and the bank changed the maturity date on the personal loans, first to December 31, 2001 and later to July 1, 2002. In the event of our default under the credit facility, Mr. Medina also agreed to subordinate debt that we owed to Mr. Medina. Mr. Medina has repaid part of those personal loans to the bank through liquidation of the $5.0 million certificate of deposit in January 2002 leaving an outstanding principal balance of approximately $4.8 million. In addition, he exercised his right under the personal loan agreements to extend their maturity date from July 1, 2002 to June 30, 2003. As of June 30, 2003, such personal loans have matured and are unpaid. Accordingly, and as further discussed below, Mr. Medina could demand the Company to provide cash collateral for Mr. Medina’s outstanding loan balances aggregating approximately $4.8 million. Mr. Medina has an option under the relevant loan documents to extend the loan to December 31, 2003 that requires a principal payment of $300,000. Although the option to extend expires June 30, 2003, Mr. Medina is currently in discussions with Ocean Bank regarding extending the loan, and believes that Ocean Bank will agree to extend the loan.

In consideration of Mr. Medina’s agreeing to repay his indebtedness to Ocean Bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing our credit facility and approximately $21.0 million of construction payables, we entered into an amended and restated employment agreement with him. Under the terms of the amended and restated employment agreement, we will indemnify Mr. Medina from any personal liability related to his guarantees of our debt, use commercially reasonable efforts to relieve Mr. Medina of all his guarantees of our debt, provide up to $6.5 million of cash collateral to the bank should Mr. Medina be unable to repay the personal loans when due and provide a non interest-bearing $5.0 million loan to Mr. Medina for as long as his guarantees of our debt exist. If the loan to Mr. Medina becomes in default, we have a right of offset against all amounts payable by us to Mr. Medina, the aggregate of which is approximately $3.0 million as of March 31, 2003. Subsequent to March 31, 2003, the amount was reduced to $1.5 million. Mr. Medina agreed that we have the right to withhold payment to him of $1,375,000 in convertible debentures owned by him until the note receivable is repaid. The note receivable from Mr. Medina is shown as an adjustment to equity. The $48.0 million credit facility and the note receivable from Mr. Medina were approved by our board of directors.

In July 2002, we and Mr. Medina modified the terms of his $5.0 million non-interest bearing note payable to us. As amended, the note has a maturity date of December 5, 2004 and bears interest subsequent to September 5, 2002 at 2%, the applicable federal rate. Interest is due in bi-annual installments. We will review the collectibility of this note on a quarterly basis.

In August 2002, we amended the terms of our credit facility. The modified credit facility reduced the annual interest rate to 7.50%. Under the terms of the amended facility, the initial maturity date was extended to September 2003 and we had the option to exercise two six-month extension periods each at a cost of 0.5% of the principal balance outstanding together with a principal repayment of $2.5 million. During each extension

period, a $250,000 monthly principal repayment plus interest would have been due. At closing, the total amount of the loan was disbursed except for approximately $6.6 million that was held as an interest reserve. Through June 2002, the interest reserve was disbursed monthly to make interest payments. We commenced making monthly interest payments in July 2002. All other material provisions of the credit facility remained unchanged.

On April 30, 2003, Ocean Bank revised its $44.0 million credit facility with us by converting $15.0 million of the outstanding principal balance into 20 million shares of our common stock and extending the term of the remaining $29.0 million until April 30, 2006. Under the new terms, interest will be payable monthly at an annual rate of 5.25% for the first twelve months and 7.5% thereafter. Concurrent with this transaction, we paid all past due interest.

Construction Payables: On November 8, 2002, CRG, LLC entered into an agreement with Cupertino to purchase our entire $18.5 million construction payable (including accrued interest) to Cupertino. Under the terms of their agreement, CRG was to pay Cupertino $8.4 million for the $18.5 million of our debt. On November 11, 2002, we entered into an agreement with CRG that provided us with the option, upon the closing of the purchase of our debt by CRG from Cupertino, to repay the entire debt at a discount by either issuing shares of our common stock valued at $0.75 per share or making a cash payment.

On December 5, 2002, CRG entered into an agreement with Kinetics to purchase our entire $4.1 million construction payable (including accrued interest) to Kinetics. Under the terms of their agreement CRG was to pay Kinetics $1.9 million. On December 5, 2002, we also entered into an agreement with CRG that provided us the option, upon the closing of the purchase of the debt by CRG from Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., to repay the entire debt at a discount by either issuing shares of our common stock valued at $0.75 per share or making a cash payment.

On April 30, 2003, CRG completed the purchase of the obligations to Cupertino and Kinetics in accordance with the agreements dated November 11, 2002 and December 5, 2002, respectively. Upon closing, the construction payables were converted into equity in accordance with the November 11, 2002 and December 5, 2002 option agreements.

CRG was created by Mr. Christian Altaba, one of our shareholders, for the purpose of buying our debt from Cupertino Electric and Kinetics Mechanical Services. None of the participants in CRG were or currently are our officers or directors. There is no affiliation between CRG and Cupertino or Kinetics. CRG is managed by Mr. Altaba.

Convertible Debentures: As of March 31, 2003, we had not paid approximately $1,242,000 of accrued interest on our convertible debt due on or before March 31, 2003. Subsequent to March 31, 2003, we paid such amounts. During November 2002, we made an offer to all of the holders of the convertible debentures to convert their debentures, including accrued interest as of September 30, 2002, into our common shares at the lower of their current conversion price or $0.75. Approximately $26.4 million of the convertible debentures had stated conversion prices in excess of $0.75 per share. As of December 31, 2002, approximately $15.8 million of the convertible debt and accrued interest of approximately $520,000 was converted to equity. As a result, we recognized $5.0 million inducement on debt conversion expense which represents the fair value of the additional common shares issued as a result of the lower conversion price. The holders of the convertible debt had a 30 day period during January 2003 to require us to repay the outstanding principal balance. During April 2003 and May 2003, we made payments totaling approximately $1.0 million to five holders of the convertible debentures who exercised their right to request an acceleration of payment.

Other: In August 2002, we modified the terms of a note payable to a financial institution. The maturity date was extended until December 2002 with some principal payments to be made monthly and the remaining principal and interest due at maturity. In conjunction with the modification and extension of this note, we issued 400,000 shares of our common stock valued at $180,000 to a shareholder, who formerly guaranteed the note. On March 31, 2003, the principal balance of the note was $667,178. On March 31, 2003, we entered into a forbearance agreement with the lender and modified the terms of our note. Under the modified agreement terms, we made principal payments of $100,000 and $125,000 in April 2003 and May 2003, respectively and

the financial institution retained the right to enforce accelerated remedies if we default on the modified note. We are also required to make seven consecutive monthly principal payments of $25,000 commencing on June 1, 2003, with interest on the outstanding balance to be paid monthly, and a balloon payment on or before December 31, 2003, representing full and final payment of outstanding principal and accrued interest. We made the required payment on June 1, 2003.

As of March 31, 2003, we had not paid approximately $602,740 relating to a lease. We have negotiated a payment plan with the vendor where partial payments are to be made.

Between April 2002 and June 2003, we borrowed an aggregate of $9.9 million of short-term debt bearing interest between 9% and 10%, including $1.6 million from Manuel D. Medina, our Chief Executive Officer and $80,000 from Guillermo Amore, a member of our board of directors. During the same period, we repaid $2.8 million of short-term debt, including $740,500 to Mr. Medina, $117,000 to Mr. Amore and $37,500 to Miguel Rosenfeld, who is also a member of our board of directors.

On October 30, 2002, we entered into an agreement with Mr. Arturo Ehrlich to assist us in raising capital. We issued warrants to purchase 1.2 million shares of our common stock at $0.75 per share to Mr. Ehrlich together with a cash payment of $180,000 as an advance for future expenses. Mr. Ehrlich is a director of a corporation that lent us $3.0 million in October 2002.

In May 2001, we issued 294 shares of Series H redeemable convertible preferred stock for $500,000. The preferred stock provides for a preferential annual dividend of $102 per share and is initially convertible into 294,000 shares of common stock. The preferred stock is redeemable at $1,700 per share plus unpaid dividends at the request of One Vision Worldwide on June 1, 2005.

The Technology Center of the Americas, LLC, (“TECOTA”), an entity in which we have a 0.84% membership interest, owns the building that leases the space to us for the NAP of the Americas under a 20 year lease. The construction of TECOTA was funded with $48.0 million in equity and $61.0 million in construction financing from a consortium of banks. We guaranteed these construction loans during development and construction of TECOTA. After TECOTA was built, some of the banks released us from the guarantee, the result of which was to reduce the guarantee to $5.5 million. As of March 31, 2003, the TECOTA debt outstanding under the construction loan was $35.4 million. We do not expect to fund any amounts under our guaranty.

We guarantee up to $6.5 million in personal debt of Manuel D. Medina, our Chief Executive Officer and Chairman. See “— Liquidity and Capital Resources” for details.

We lease space for our operations, office equipment and furniture under non-cancelable operating leases. Some equipment is also leased under capital leases, which are included in leasehold improvements, furniture and equipment. The following table represents the minimum future operating and capital lease payments for these commitments, as well as the combined aggregate maturities for the following obligations for each of the twelve months ended March 31:

As a result of our sale of common shares in August 2002 at $0.58 per share, we are committed to issue an additional 3.6 million shares to NAP de las Americas-Madrid S.A. As of June 25, 2003, these shares had not yet been issued.

In March 2003, the FASB reached a consensus on Emerging Issues Task Force (EITF) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”. The consensus provides guidance on the accounting for multiple element revenue arrangements. It also provides guidance on how to separate multiple element revenue arrangements into its separate units of accounting and how to measure and allocate the arrangement’s total consideration to each unit. The effective date of EITF 00-21 is for revenue arrangements entered into in fiscal periods (interim or annual) beginning after June 15, 2003. Early application is permitted. We do not expect the adoption of EITF 00-21, effective July 1, 2003, to have a material effect on our financial statements.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51: This Interpretation provides guidance for determining a primary beneficiary period. The effective date of Interpretation No. 46 is the first interim period beginning after June 15, 2003 for variable interest entities acquired before February 1, 2003 and immediately to variable interest entities created after January 31, 2003. NAP de las Americas — Madrid S.A. may be a variable interest entity in accordance with FIN 46. Our maximum related exposure to loss is approximately $500,000 at March 31, 2003. We do not expect the adoption of FIN 46, effective July 1, 2003, to have a material effect on our financial statements.

On December 31, 2002, the FASB issued FASB Statement No. 148 (SFAS 148), “Accounting for Stock-Based Compensation — Transition and Disclosure, amending FASB Statement No. 123 (SFAS 123), Accounting for Stock-Based Compensation.” This Statement amends SFAS 123 to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of that Statement to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. Finally, SFAS 148 amends APB Opinion No. 28, Interim Financial Reporting, to require disclosure about those effects in interim financial information. For entities that voluntarily change to the fair value based method of accounting for stock-based employee compensation, the transition provisions are effective for fiscal years ending after December 15, 2002. For all other companies, the disclosure provisions and the amendment to APB No. 28 are effective for interim periods beginning after December 15, 2002. We do not plan to change to the fair value based method of accounting for stock-based employee compensation. We have complied with the disclosure required in the March 31, 2003 financial statements.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” For guarantees issued or modified after December 31, 2002, a liability shall be recognized for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements were effective for interim and annual financial statements for periods ending after December 15, 2002. We currently guarantee the aggregate amount of approximately $12.0 million in debt. See — “Guarantees and Commitments” for details. FIN 45 will impact our financial position or results of operations in subsequent periods if these guarantees are modified.

In April 2002, the Financial Accounting Standards Board (FASB) approved SFAS 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” In addition to rescinding SFAS 4, 44, and 64 and amending SFAS 13, SFAS145 establishes a financial reporting standard for classification of extinguishment of debt in the financial statements in accordance with APB 30. SFAS 145 will be effective for our fiscal year ended March 31, 2004. We do not expect the adoption of SFAS 145 to have a material effect on our financial position or results of operations. However, SFAS 145 will have an impact on the presentation of our results of operations for the quarter ended June 30, 2003. On April 30,

2003, we entered into financing transactions that will result in debt restructuring gains. See “— Liquidity and Capital Resources.”

This Annual Report may contain “forward-looking statements” based on our current expectations, assumptions, and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “will,” “may,” and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of several factors more fully described in “Risk Factors” and elsewhere in this Annual Report. The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made. We undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Our recurring losses from operations and the lack of committed sources of additional debt or equity to support working capital deficits raises substantial doubt about our ability to continue as a going concern. From the time of the merger through March 31, 2003, we have incurred net operating losses of approximately $202.6 million. Our cash flows from operations for the years ended March 31, 2003 and 2002 were negative and our working capital deficit was approximately $39.0 million and $88.3 million as of March 31, 2003 and 2002, respectively.

The majority of our planned operating cash improvement during our fiscal year 2004 is expected to come from an increase in revenues and cash collections from customers. If we fail to achieve planned revenues of $2.0 million to $3.0 million a month, then we will require additional financing. There can be no assurances that additional financing will be available, or that, if available the financing will be obtainable on terms acceptable to us or that any additional financing would not be substantially dilutive to existing shareholders. If we need to obtain additional financing and fail to do so, it may have a material adverse effect on our ability to meet financial obligations and operate as a going concern. Consequently, recurring losses from operations, the uncertainty surrounding the anticipated increase in revenues, including the rate at which services are sold and the lack of committed sources of additional debt or equity, raises substantial doubt about our ability to continue as a going concern.

Our substantial leverage could adversely affect our ability to fulfill our obligations and operate our business. As of March 31, 2003, our total liabilities were approximately $115.5 million, obligations guaranteed by us were $10.3 million and our total shareholders’ deficit was $46.5 million. Our substantial debt and guarantees could have important consequences to you, including the following:


	•	our substantial leverage increases our vulnerability to economic downturns and adverse competitive and industry conditions and could place us at a competitive disadvantage compared to those of our competitors that are less leveraged;

	•	our debt service obligations could limit our flexibility in planning for, or reacting to, changes in our business and our industry and could limit our ability to pursue other business opportunities, borrow more money for operations or capital in the future and implement our business strategies;

	•	our level of debt may restrict us from raising additional financing on satisfactory terms to fund working capital, capital expenditures, product development efforts, strategic acquisitions, investments and alliances, and other general corporate requirements;

	•	covenants in our debt instruments limit our ability to pay dividends or make other restricted payments and investments; and


	•	our total guarantees are approximately $10.3 million and if we are required to fund under these guarantees our liquidity and cash flows would be adversely affected.

We may be unable to raise the funds necessary to repay or refinance our indebtness. We are obligated to make principal and interest payments on our credit facility with Ocean Bank each year until it matures in 2006. Additionally, $49.2 million of our credit facilities mature in 2007. Each of these obligations requires significant amounts of liquidity. We may need additional capital to fund those obligations. Our ability to arrange financing and the cost of this financing will depend upon many factors, including:


	•	general economic and capital markets conditions, and in particular the non-investment grade debt market;

	•	conditions in the Internet infrastructure market;

	•	credit availability from banks or other lenders;

	•	investor confidence in the telecommunications industry generally and our company specifically; and

	•	the success of our TerreNAP Centers.

If we need additional funds, our inability to raise them will have an adverse effect on our operations. If we decide to raise additional funds by incurring debt, we may become subject to additional or more restrictive financial covenants and ratios.

We are required to incur significant expenses in an effort to attract customers to our facilities. Our ability to generate increased revenue is substantially dependent on the willingness of potential customers to locate their critical operations at our facilities. Our ability to attract new customers depends on a variety of factors, including the willingness of carriers to exchange traffic at our facilities, the willingness of businesses to outsource their mission-critical data operations, the reliability and cost-effectiveness of our services and our ability to effectively market our services. We expect to continue to make additional significant investments in sales and marketing. The increase in our sales and marketing efforts may not result in increased sales of our services. We intend to develop alternative distribution and lead generation relationships with potential channel partners. Any failure by us to develop these relationships could materially and adversely impact our ability to generate increased revenues.

If we do not locate financial or strategic partners, we may have to delay or abandon expansion plans. Expenditures commence well before a TerreNAP Center opens, and it may take an extended period to approach break-even capacity utilization. It takes a significant period of time to select the appropriate location for a new TerreNAP Center, construct the necessary facilities, install equipment and telecommunications infrastructure and hire operations and sales personnel. As a result, we expect that individual TerreNAP Centers will experience losses for more than one year from the time they are opened. As a part of our TerreNAP Center strategy, we intend to rely on third-party financial or strategic partners to fund the development costs. If we are unable to establish such third-party relationships, we may delay or abandon some or all of our development and expansion plans or otherwise forego market opportunities, making it difficult for us to generate additional revenue and to respond to competitive pressures.

Our operations in Brazil and Spain expose us to risks not faced by companies transacting business only in the United States. We have operations in foreign countries, including NAP facilities, sales personnel and customer support operations in Sao Paulo, Brazil and Madrid, Spain. We intend to expand to other international locations in the future. These operations are subject to economic risks inherent in doing business in foreign countries, including the following:


	•	Disruptions in Foreign Markets. Disruptions in financial markets and the deterioration of the underlying economic conditions in some countries could have an impact on our sales to customers located in, or whose end-user customers are located in, these countries.

	•	Fluctuations in Currency Exchange Rates. Currency instability in geographic markets other than the United States may make our services more expensive than services offered by others that are priced in the local currency. Moreover, many of the costs associated with our operations located outside the


		United States are denominated in local currencies. As a consequence, the increased strength of local currencies against the U.S. dollar in countries where we have foreign operations would result in higher effective operating costs and, potentially, reduced earnings. Currently, we do not hedge our foreign exchange risk. We cannot assure you that fluctuations in foreign exchange rates will not have a negative effect on our operations and profitability.

	•	Longer Payment Cycles. Our customers outside of the United States are often allowed longer time periods for payment than our U.S. customers. This increases the risk of nonpayment due to the possibility that the financial condition of particular customers may worsen during the course of the payment period.

	•	Tariffs, Duties, Limitations on Trade and Price Controls. Our international operations are affected by limitations on imports, currency exchange control regulations, transfer pricing regulations, price controls and other restraints on trade. In addition, the governments of some countries in which we have operations, have the ability to exercise significant influence over many aspects of their domestic economies and international trade.

	•	Potential Adverse Tax Consequences. Our international operations create a risk of potential adverse tax consequences, including imposition of withholding or other taxes on payments by our customers.

	•	Credit and Access to Capital Risks. Our local financial or strategic partners could have reduced access to working capital due to higher interest rates, reduced bank lending resulting from contractions in the money supply or the deterioration in their financial condition, or the inability to access other financing.

	•	Distributions and other payments from our subsidiaries and affiliates may be subject to foreign taxes. Distributions of earnings and other payments, including interest, we receive from our subsidiaries and affiliates may be subject to withholding taxes imposed by the jurisdictions in which these entities are formed or operating. These taxes would reduce the amount of after-tax cash we would receive from these entities.

	•	New Competitors and Competitive Environment. As we expand our operations in markets outside the United States, we will also encounter new competitors and competitive environments. Our foreign competitors may enjoy a government-sponsored monopoly on telecommunications services essential to our business, and will generally have a better understanding of their local industry and longer working relationships with local infrastructure providers.

We may not be able to compete effectively in the market for data center services. The market for data center services is extremely competitive and subject to rapid technological change. Our current and potential competitors include providers of data center services, global, regional and local telecommunications companies and Regional Bell Operating Companies, and information technology outsourcing firms. Many of our existing competitors have greater market presence and financial and personnel resources than we do. Our competitors include Internet data centers operated by established communications carriers such as AT&T, Level 3, MCI and Qwest. We also compete with providers of data services centers, regional Bell operating companies that offer Internet access and information technology outsourcing firms. The principal competitive factors in our market include:


	•	ability to deliver services when requested by the customer;

	•	Internet system engineering and other professional services expertise;

	•	customer service;

	•	network capability, reliability, quality of service and scalability;

	•	variety of managed services offered;

	•	access to network resources, including circuits, equipment and interconnection capacity to other networks;

	•	broad geographic presence;

	•	price;


	•	ability to maintain and expand distribution channels;

	•	brand name recognition;

	•	timing of introductions of new services;

	•	physical and network security;

	•	financial resources; and

	•	customer base.

Some of our competitors may be able to develop and expand their data center services faster, devote greater resources to the marketing and sale of their products and adopt more aggressive pricing policies than we can. In addition, these competitors have entered and will likely continue to enter into business relationships to provide additional services that compete with the services we provide.

Our products and services have a long sales cycle that may materially adversely affect our business, financial condition and results of operations. A customer’s decision to purchase services at a TerreNAP Center typically involves a significant commitment of resources and will be influenced by, among other things, the customer’s confidence in our financial strength. As a result, we have a long sales cycle. Delays due to the length of our sales cycle may materially adversely affect our business, financial condition and results of operations.

We believe our market is likely to consolidate in the near future, which could result in increased price and other competition. Some of our competitors who sell bandwidth may be able to provide customers with additional benefits relating to the customer’s Internet system and network management solutions, including reduced local and long distance communications costs, which could reduce the overall costs of their services relative to ours. We may not be able to offset the effects of any price reductions.

We are dependent on key personnel and the loss of these key personnel could have a material adverse effect on our success. We are highly dependent on the services of Manuel D. Medina, our Chairman. In an attempt to reduce costs, we have eliminated some management positions. Our potential growth and expansion and the merger and integration of separate businesses, are expected to place increased demands on our management skills and resources. Therefore, our success also depends upon our ability to hire and retain additional skilled and experienced management personnel. Employment and retention of qualified personnel is important due to the competitive nature of our industry.

Our President, Chairman and Chief Executive Officer, cannot be removed without cause which could delay, defer or prevent change in control of our company or impede a merger, consolidation, takeover or other business combination. Under the terms of our agreement with Manuel D. Medina, our President, Chairman and Chief Executive Officer, as long as Mr. Medina’s guarantees of our debt exist, we have agreed to nominate Mr. Medina to our board of directors and not remove Mr. Medina, unless for good cause, or remove any of our officers without Mr. Medina’s consent. This could delay, defer or prevent change in control of our company or impede a merger, consolidation, takeover or other business combination that you, as a stockholder, may otherwise view favorably.

If the price of our shares remains low or our financial condition deteriorates, we may be delisted by the American Stock Exchange. Our common stock currently trades on the American Stock Exchange (Amex). The Amex requires companies to fulfill specific requirements in order for their shares to continue to be listed. Our securities may be considered for delisting if:

(ii) it appears that the extent of public distribution or the aggregate market value of the securities has become so reduced as to make further dealings on the Amex inadvisable; or

(iii) we have sustained losses which are so substantial in relation to our overall operations or our existing financial condition has become so impaired that it appears questionable whether we will be able to continue operations and/or meet our obligations as they mature.

For example, the Amex may consider suspension or delisting of a stock if the stock has been selling for a substantial period of time at a low price per share. Our common stock has been trading at relatively low prices for the past eighteen months and we have sustained net losses for the past three fiscal years. Therefore, our common stock is at risk of being delisted by the Amex. If our shares are delisted from the Amex, our stockholders could find it difficult to sell our stock. To date we have had no communication from the Amex regarding delisting. If our common stock is delisted from the Amex, we may apply to have our shares quoted on NASDAQ’s Bulletin Board or in the “pink sheets” maintained by the National Quotation Bureau, Inc. The Bulletin Board and the “pink sheets” are generally considered to be less efficient markets than the Amex. In addition, if our shares are no longer listed on the Amex or another national securities exchange in the United States, our shares may be subject to the “penny stock”’ regulations. If our common stock were to become subject to the penny stock rules it is likely that the price of our common stock would decline and that our stockholders would find it difficult to sell their shares. If our stock were to become delisted we could be in default of various agreements, including the Ocean Bank credit facility.

Our business could be harmed by prolonged electrical power outages or shortages, or increased costs of energy. Our NAP facilities are susceptible to regional costs of power, electrical power shortages and planned or unplanned power outages caused by these shortages. A power shortage may result in an increase of the cost of energy, which we may not be able to pass on to our customers. We attempt to limit exposure to system downtime by using backup generators and power supplies. Power outages, which last beyond our backup and alternative power arrangements, could harm our customers and our business.

We have not entered into any financial instruments for trading or hedging purposes.

Our carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses is a reasonable approximation of their fair value.

Our exposure to market risk resulting from changes in interest rates relates primarily to our debt. An immediate 10% increase or decrease in current interest rates would furthermore not have a material impact on our debt obligations due to the fixed nature of our debt obligations. The fair market value of our long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. These interest rate changes may affect the fair market value of the fixed interest rate debt but do not impact our earnings or cash flows.

To date, all of our recognized revenue has been denominated in U.S. dollars, generated mostly from customers in the U.S., and our exposure to foreign currency exchange rate fluctuations has been minimal. We expect that future revenues may be derived from operations outside of the U.S. and may be denominated in foreign currency. As a result, our operating results or cash flows may be impacted due to currency fluctuations relative to the U.S. dollar.

Furthermore, to the extent we engage in international sales that are denominated in U.S. dollars, an increase in the value of the U.S. dollar relative to foreign currencies could make our services less competitive in the international markets. Although we will continue to monitor our exposure to currency fluctuations, and when appropriate, may use financial hedging techniques in the future to minimize the effect of these fluctuations, we cannot assure you that exchange rate fluctuations will not adversely affect our financial results in the future.

Some of our operating costs are subject to price fluctuations caused by the volatility of underlying commodity prices. The commodity most likely to have an impact on our results of operations in the event of significant price change is electricity. We are closely monitoring the cost of electricity. To the extent that electricity costs continue to rise, we are investigating opportunities to pass these additional power costs onto our customers that utilize this power. We do not employ forward contracts or other financial instruments to hedge commodity price risk.

The financial statements required by this Item 8 are attached hereto as Exhibit (a)(1).

Our executive officers, directors and some of our key employees, and their ages as of June 13, 2003, are as follows:

Manuel D. Medina has served as our Chairman of the Board, President and Chief Executive Officer since April 28, 2000, the date of our merger, and as that of Terremark since its founding in 1982. In addition, Mr. Medina is a managing partner of Communications Investors Group, the holder of the Series G preferred stock. Mr. Medina has been a director of Fusion Telecommunications International since December 14, 1998. Before founding Terremark, Mr. Medina, a certified public accountant, worked with PricewaterhouseCoopers LLP. Subsequently, he established and operated an independent financial and real estate consulting company. Mr. Medina earned a Bachelors of Science degree in Accounting from Florida Atlantic University in 1974.

Joseph R. Wright, Jr. has served as our Vice Chairman of the Board since April 28, 2000. Prior to that, Mr. Wright served as Chairman of the Board from May 1995 to April 2000, when Terremark Holdings, Inc. concluded a reverse merger into Amtec Inc., a telecommunications company of which he was Chairman and Chief Executive Officer. Mr. Wright currently is President and Chief Executive Officer of PanAmSat, a global provider of satellite-based communication services. Mr. Wright also served as Chairman of the Board of GRC International, Inc., a United States public company that provides technical information technology support to government and private entities, from 1996 to 2000. He is also Co-Chairman of Baker & Taylor Holdings, Inc., an international book and video distribution company, and Vice Chairman of Jefferson Consulting Group, a Washington D.C. consulting firm. From 1989 to 1994, Mr. Wright served as Executive Vice President, Vice Chairman and Director of W.R. Grace & Co., an international chemicals and health care

company, President of Grace Energy Corporation and Chairman of Grace Environmental Company. From 1982 to 1989, Mr. Wright held the positions of Director and Deputy Director of the Office of Management and Budget, The White House, and was a member of President Reagan’s cabinet. Before 1982, he served as Deputy Secretary, United States Department of Commerce, President of Citicorp Retail Services and Retail Consumer Services, held posts in the United States Department of Agriculture and the United States Department of Commerce, and was Vice President and Partner of Booz Allen & Hamilton, a management consulting firm.

Guillermo Amore has served as a member of our board of directors since February 2001. From August 2000 to February 2001, Mr. Amore served as the President and Chief Operating Officer of our wholly-owned subsidiary, Terremark Latin America, Inc., prior to which, he served as Chairman and Chief Executive Officer of Spectrum Telecommunications Corporation until its acquisition. Mr. Amore has nearly 35 years of telecommunications experience, much of it focused on the developing markets of Latin America and the Caribbean. During his tenure at GTE Corporation he built an extensive network of contacts in the region. These contacts served him well in business development and regulatory affairs during his stewardship of Grupo Isacell S.A. of Mexico and of Spectrum Telecommunications. Mr. Amore holds an MBA from Harvard University and a Bachelors degree in Science in Electrical Engineering from Pontificia Universidad Javeriana, Colombia.

Timothy Elwes has served as a member of our board of directors since April 2000. Mr. Elwes has also served as member of the board of directors of Timothy Elwes & Partners Ltd., a financial services company, from May 1978 until October 1994, the business of which was merged into Fidux Trust Co. Ltd. in December 1995. Mr. Elwes is a director of Fidux Trust Co. Ltd. He is also a non-executive director of Partridge Fine Arts plc, a public company since 1989. He has served as a director of Makecater Ltd., a property-developing company, since 1995. Since 1989 he has served as a director of Tagring Ltd., a financial services company.

Fernando Fernandez-Tapias has served as a member of our board of directors since March 31, 2003. Since May 1991, Mr. Fernandez-Tapias has served as the President of Naviera F. Tapias. Mr. Fernandez-Tapias has also served as a board member of Union Fenosa. In addition, Mr. Fernández-Tapias founded Roll-On Roll-Off, Interpuertos, Spain Shipping, Naviera Amura and Naviera Roda. Mr. Fernández-Tapias currently serves as the President of the Cámara Oficial de Comercio e Industria de Madrid (Official Chamber of Commerce and Industry of Madrid). Mr. Fernández-Tapias holds a degree from the Instituto Internacional de Empresas de la Universidad Comercial de Deusto.

Jose Maria Figueres-Olsen has served as a member of our board of directors since October 2000. Mr. Figueres-Olsen is the former President of Costa Rica, serving as the head of state of his native country from 1994 to 1998, during which he made sustainable development the cornerstone of his administration and led his country into the digital economy through the implementation of several IT programs and the attraction of foreign investment including Intel. Since leaving office, President Figueres-Olsen has served as a Director of the Digital Nations Consortium, launched by the MIT Media Lab to develop a new generation of technologies and applications that enable people to design, create, and learn new ways to become more active participants in developing societies. President Figueres-Olsen also serves on the Board of Directors of the World Resources Institute, the World Wildlife Fund, the Stockholm Environment Institute, and Leadership in Environment and Development. President Figueres-Olsen holds a degree in Industrial Engineering from the United States Military Academy at West Point and a Masters degree in Public Administration (Mason Fellow) from the John F. Kennedy School of Government at Harvard University.

Arthur L. Money has served as a member of our board of directors since May 2003. Since September 2002, Mr. Money has been a member of the board of directors of Rainbow Technologies, Inc., a provider of Information Technology security solutions. From 1999 to 2001, Mr. Money was the Assistant Secretary of Defense (C3I) and Department of Defense CIO. Prior to this, Mr. Money served as the Assistant Secretary of the Air Force for Research, Development, and Acquisition, and was Vice President and Deputy General Manager of TRW. From 1989 to 1995, Mr. Money was President of ESL, Inc. He has received distinguished public service awards from the U.S. Department of Defense (Bronze Palm), the U.S. Air Force, and the U.S. Navy. He is currently President of ALM Consulting specializing in command control and communications,

intelligence, signal processing, and information processing. Mr. Money received his Master of Science Degree in Mechanical Engineering from the University of Santa Clara and his Bachelor of Science Degree in Mechanical Engineering from San Jose State University.

Marvin S. Rosen has served as a member of our board of directors since April 2000. Mr. Rosen is a co-founder of Fusion Telecommunications International and has served as its Vice Chairman since December 1998. From September 1995 through January 1997, Mr. Rosen served as the Finance Chairman of the Democratic National Committee. Mr. Rosen currently serves on the Board of Directors of the Children’s Health Fund (New York City), since 1994, the Robert F. Kennedy Memorial, since 1995, Bio-Medical Disposal, Inc., since 1998 and Fusion Telecommunications International, Inc., since 1997, where he has also been Vice-Chairman since December 1998. Mr. Rosen received his Bachelor of Science degree in Commerce from the University of Virginia, his LL.B. from Dickinson School of Law and his LL.M. in Corporations from New York University Law School.

Miguel J. Rosenfeld has served as a member of our board of directors since April 2000. Since November 1991, he has also served as a Senior Vice President of Delia Feallo Productions, Inc., where he has been responsible for the development of soap opera productions in Latin America. From January 1995 until May 1998, he was the Director of Affiliates and Cable for Latin America for Protele, a division of Televisa International LLC. From December 1984 until September 1998, he was a sales manager for Capitalvision International Corporation. Mr. Rosenfeld holds a Bachelors degree in Administration from the University of Buenos Aires which he earned in 1975.

Joel A. Schleicher has served as a member of our board of directors since April 2000. Mr. Schleicher served as Chairman and Chief Executive Officer of Interpath (the predecessor company to USinternetworking prior to merger) from May 2000 to July 2002. He presently serves as consultant and advisor and is a member of the board of directors of several domestic and international companies, both public and private. From June 1998 to January 2000, Mr. Schleicher was the Chief Executive Officer for Expanets, a roll-up of 26 local interconnects into a nationwide provider of networked communications solutions to mid-sized enterprises. From 1989 through 1995, he served as the Chief Operating Officer and President for Nextel Communications, Inc. Mr. Schleicher received a BSB in Accounting from the Carlson School of Management at the University of Minnesota.

Brian K. Goodkind has served as our Executive Vice President and Chief Operating Officer since April 2000. Prior to that, since April 1998, Mr. Goodkind served as the Vice-Chairman, Executive Vice President, and General Counsel to Terremark. In this capacity, Mr. Goodkind oversaw the operations, risk management, systems development, and legal matters for Terremark. Mr. Goodkind has been a member of the Florida Bar since 1982, and was in private practice for 16 years, specializing in commercial litigation, employment law, international transactions and real estate. His experience includes over 11 years, from 1986 to 1998, as one of two founding partners of a seventy-attorney full-service law firm, for which he served as managing partner for over five years. Mr. Goodkind received his Bachelor of Arts degree from the University of Alabama and his J.D. from the University of Florida.

Jose A. Segrera has served as our Senior Vice President and Chief Financial Officer since September 2001. From September 2000 to June 2001, Mr. Segrera served as our Vice President — Finance. From January 2000 to September 2000, Mr. Segrera served as the interim Chief Financial Officer of FirstCom Corporation. From June 1996 to November 1997, Mr. Segrera was a manager in the assurance practice at KPMG Peat Marwick LLP. Mr. Segrera received his Bachelors in Business Administration and his Masters in Professional Accounting from the University of Miami.

Jose E. Gonzalez has served as our Senior Vice President, General Counsel and Secretary since January 2001. Prior to joining Terremark, Mr. Gonzalez served as the Vice President and Regional Counsel for Sunbeam Corporation, responsible for legal affairs throughout Canada, Latin America/ Caribbean and Asia. From 1995 to 1998, Mr. González was Assistant General Counsel, International, responsible for the international legal affairs of Blockbuster Entertainment, a subsidiary of Viacom, Inc. From 1990 to 1995 Mr. González was a member of the General Counsel’s Office of the American Express Company, where he served as Regional Counsel for Latin America and the Caribbean. Mr. González received his Bachelors of

Arts degree from Fordham University in 1982 and his Juris Doctor from Fordham University School of Law in 1985. He is a member of the Bar of the State of New York and certified to practice as in-house counsel by the Bar of the State of Florida.

Jamie Dos Santos has served as our Senior Vice President and Chief Marketing Officer since March 2003. From April 2001 to March 2003, Ms. Dos Santos served as Senior Vice President Global Sales. From 1981 to April 2001, Ms. Dos Santos worked with the Bell System. Ms. Dos Santos held various positions during her tenure with Telcordia/ Bell Systems including Director of Professional Services Latin America, Regional Account Director starting her career as a Business Service Representative prior to divestiture. Ms. Dos Santos attended the University of Florida and Bellcore’s elite Technical training curriculum receiving various degrees in telecommunications.

Sandra B. Gonzalez-Levy has served as our Senior Vice President, Corporate Communications since July 2000. From January 1997 to June 2000, Mrs. Gonzalez-Levy was President and Chief Executive Officer of the Miami-Dade Community College Foundation, Inc. Mrs. Gonzalez-Levy was Group Senior Vice President and Public Relations Director with Barnett Bank, N.A. From 1980 to December 1996, she was with the Greater Miami Chamber of Commerce, most recently as Senior Vice President in charge of the International Economic Development and Hispanic Business Departments. Mrs. Gonzalez-Levy holds a Masters degree of Business Administration from Barry University.

Marvin Wheeler has served as our Senior Vice President, Worldwide Operations since March 2003. From March 2001 to March 2003, Mr. Wheeler served as Senior Vice President of Operations and General Manager of the NAP of the Americas. From June 1978 to March 2000, Mr. Wheeler worked at BellSouth managing Data Center and WAN/ LAN Operations in addition to directing some of the 24/7 operations centers in the Southeast United States. Mr. Wheeler graduated from the University of Florida, where he earned a degree in Business Administration with a concentration in marketing.

Aviva Budd has served as our Senior Vice President since April 2000. Mrs. Budd is responsible for obtaining and managing relationships with financial institutions and other strategic partners. Mrs. Budd has previously been involved with us for over 20 years as counselor and advisor. Mrs. Budd began her career as an attorney in New York City with the firm of Paul Weiss Rifkin Wharton & Garrison. Mrs. Budd received her Bachelor of Science degree from the University of Connecticut, Summa Cum Laude, and her JD from Harvard Law School, Cum Laude.

Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

Based solely on our review of the copies of the forms furnished to us and written representations of the reporting persons, we believe that during the fiscal year ended March 31, 2003 all Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with, except each of Manuel Medina, Guillermo Amore and Miguel Rosenfeld filed a Form 4 on December 23, 2002 which Form 4 should have been filed no later than May 10, 2002.

The following table presents information concerning compensation for the chief executive officer and our three most highly compensated executive officers for services in all capacities during the fiscal years indicated. We collectively refer to our chief executive officer and our three most highly compensated executive officers as

the “named executive officers.” No other compensation was received by our named executive officers during the last 3 fiscal years.

The following table sets forth information concerning grants of stock options made during the fiscal year ended March 31, 2003 to our named executive officers. No stock appreciation rights were granted during the fiscal year ended March 31, 2003.


(1)	These amounts are based on assumed appreciation rates of 5% and 10% set by the Securities and Exchange Commission rules and are not intended to forecast possible future appreciation, if any, of our stock price.

Aggregated Options Exercises In Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth information regarding option exercises by our named executive officers during the fiscal year ended March 31, 2003 and options they held on March 31, 2003. No stock appreciation rights were granted during the fiscal year ended March 31, 2003.


(1)	Based on a per share price of $0.36, the closing price of the common stock as reported on the American Stock Exchange on March 31, 2003, minus the exercise price of the option, multiplied by the number of shares underlying the option.

We maintain a policy of compensating our directors using stock option grants. For their services as our directors for our fiscal year ended March 31, 2003, each of our directors received 100,000 stock options. These options are granted to both employee and independent directors on the same terms. We reimburse our directors for all out-of-pocket expenses incurred in the performance of their duties as directors. We currently do not pay fees to our directors for attendance at meetings.

We entered into an agreement with Joseph Wright, Jr., one of our directors, commencing September 21, 2001, engaging Mr. Wright as an independent consultant. The agreement is for a term of one year after which it renews automatically for successive one-year periods. Either party may terminate the agreement by providing 90 days notice. The agreement provides for an annual compensation of $100,000, payable monthly.

Manuel D. Medina entered into a one year agreement, commencing March 10, 2000, employing him as our President and Chairman of the Board. On September 6, 2001, in consideration of Mr. Medina agreeing to repay his indebtedness to Ocean Bank earlier than otherwise required, pledging a certificate of deposit to the bank and personally guaranteeing our credit facility and approximately $21 million of construction payables, Mr. Medina’s employment agreement was amended and restated. The term of the amended and restated agreement commenced April 28, 2001 and employs Mr. Medina as our President, Chief Executive Officer and Chairman of the Board. The amended and restated agreement is for a term of twelve months and automatically renews for successive one year terms until either party gives written notice of its intention not to renew. The amended and restated agreement provides for an annual base salary of $350,000 and is subject to increases. Additionally, as long as Mr. Medina’s guarantees of our debt exist, we have agreed to nominate Mr. Medina to our Board of Directors and not remove Mr. Medina, unless for good cause, or remove any of our officers from their positions without Mr. Medina’s consent. Pursuant to the terms of his agreement, Mr. Medina is prohibited from competing with Terremark for a one year period following termination of his employment with Terremark.

Brian K. Goodkind has entered into an agreement, commencing March 3, 2003, employing him as our Executive Vice President. The agreement is for an indefinite term until either party gives written notice of its intention not to terminate. The agreement provides for an annual base salary of $250,000 and is subject to increases. Pursuant to the terms of his agreement, Mr. Goodkind is prohibited from competing with Terremark for a one year period following termination of his employment with Terremark.

Jose E. Gonzalez has entered into an agreement, commencing March 3, 2003, employing him as our Senior Vice President and General Counsel. The agreement is for an indefinite term until either party gives written notice of its intention not to terminate. The agreement provides for an annual base salary of $185,000 and is subject to increases. Pursuant to the terms of his agreement, Mr. Gonzalez is prohibited from competing with Terremark for a one year period following termination of his employment with Terremark.

Jose A. Segrera has entered into a one year employment agreement, commencing September 25, 2001, employing him as our Chief Financial Officer. The agreement automatically renews for successive one year terms until either party gives written notice of its intention not to renew. In June 2001, Mr. Segrera’s title was changed to Senior Vice President and Chief Financial Officer. The agreement provides for an annual base salary of $150,000 and is subject to increases. Pursuant to the terms of his agreement, Mr. Segrera is prohibited from competing with Terremark for a one year period following termination of his employment with Terremark.

If either of Manuel D. Medina or Jose A. Segrera is terminated without cause, each is entitled to continue to receive his annual base salary through the date his employment would have ended under the terms of his agreement, but in no event for more than six months, and certain other benefits.

If either of Brian K. Goodkind or Jose E. Gonzalez is terminated without cause, each is entitled to continue to receive his annual base salary and certain other benefits for a period of six months from the date of termination.

If the employment of any of either Manuel D. Medina, Brian K. Goodkind, Jose E. Gonzalez or Jose A. Segrera is terminated within one year of a change in control of the Company, each is entitled to continue to receive a payment equal to the sum of two times his annual base salary, incentive compensation, and the value of any fringe benefits plus any accrued incentive compensation through the date of termination and certain other benefits. The definition of a “change in control” in the applicable employment agreements includes the resignation of Manuel D. Medina as both our Chairman and Chief Executive Officer, his death, or his absence from the day to day business affairs of the Company for more than 90 consecutive days due to disability or incapacity.

The following directors served as members of the compensation committee during the 2003 fiscal year: Timothy Elwes, Miguel J. Rosenfeld and Kenneth I. Starr. None of the members of the compensation committee was, at any time either during or before such fiscal year, an employee of ours or any of our subsidiaries.

The following table sets forth information regarding the beneficial ownership of shares of our voting stock as of June 13, 2003 by:


	•	each director;

	•	each of our named executive officers;

	•	each person that is known by us to beneficially own more than 5% of the outstanding shares of our voting stock; and

	•	all of our directors and named executive officers as a group.

As of June 13, 2003, we had 306,410,198 shares of our common stock outstanding, 20 shares of Series G Convertible Preferred Stock outstanding and 294 shares of Series H Convertible Preferred Stock outstanding. The outstanding shares of Series G and Series H Convertible Preferred Stock, as of June 13, 2003, were convertible into, and had voting rights equivalent to, 2,036,825 and 294,000 shares of our common stock, respectively.

For purposes of the following table, a person is deemed to be the beneficial owner of securities that can be acquired by the person within 60 days from June 13, 2003 upon the exercise of warrants or options or upon the conversion of debentures or preferred shares. Each beneficial owner’s percentage is determined by assuming that options or warrants that are held by the person, but not those held by any other person, and which are exercisable within 60 days from June 13, 2003, have been exercised. Unless otherwise indicated, we believe that all persons named in this table have sole voting power and investment power over all the shares beneficially owned by them. Unless otherwise indicated, the address of each person listed in the following table is 2601 South Bayshore Drive, Miami, Florida 33133.


	*	Less than one percent.


(1)	For purposes of this table, beneficial ownership is computed pursuant to Rule 13d-3 under the Exchange Act; the inclusion of shares as beneficially owned should not be construed as an admission that such shares are beneficially owned for purposes of the Exchange Act. Under the rules of the Securities and Exchange Commission, a person is deemed to be a “beneficial owner” of a security he or she has or shares the power to vote or direct the voting of such security or the power to dispose of or direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security.
(2)	Includes 200,000 shares of common stock underlying options and 889,277 shares of common stock underlying convertible debentures. As reported in Mr. Medina’s Schedule 13D, and any amendments thereto, filed with the Securities and Exchange Commission on October 4, 2002, these include 7,021,682 shares as to which Mr. Medina has sole voting power but does not have dispositive power. Does not include shares of common stock which may be acquired upon conversion of the Series G Preferred Stock held by Communications Investors Group, an entity in which Mr. Medina is a partner and holds a 50% interest.
(3)	Includes 3,400,000 shares of common stock underlying options and 10,000 shares owned by Mr. Wright’s sibling, over which Mr. Wright has investment control. Does not include 50,000 shares held in trust for the benefit of Mr. Wright’s grandchildren, with respect to which Mr. Wright disclaims beneficial ownership.
(4)	Includes 167,000 shares of common stock underlying options, 1,131,807 shares of common stock underlying convertible debentures, and 10,000 shares owned by Mr. Amore’s sibling, over which Mr. Amore has investment control. Also includes 610,909 shares of common stock held by a trust, with respect to which Mr. Amore disclaims beneficial ownership except to the extent of his pecuniary interest therein. Does not include 1,745,550 shares held in a trust for the benefit of Mr. Amore’s grandchildren, with respect to which Mr. Amore disclaims beneficial ownership.
(5)	Includes 200,000 shares of common stock underlying options and 1,137,208 shares held indirectly by Mr. Rosenfeld. Does not include 58,105 shares held by Mr. Rosenfeld’s children and mother, with respect to which Mr. Rosenfeld disclaims beneficial ownership.


(6)	Includes 245,000 shares of common stock underlying options and 205,810 shares underlying convertible debentures.
(7)	Includes 288,334 shares of common stock underlying options.
(8)	Includes 200,000 shares of common stock underlying options.
(9)	Includes 240,000 shares of common stock underlying options.


(10)	Includes 200,001 shares of common stock underlying options.
(11)	Includes 191,667 shares of common stock underlying options.
(12)	Includes 34,000 shares of common stock underlying options.
(13)	As reported in CRG, LLC’s Schedule 13D, and any amendments thereto, filed with the Securities and Exchange Commission on May 9, 2003. Christian Altaba is the manager and sole member of CRG, LLC. Christian Altaba is deemed the beneficial owner of the shares held by CRG, LLC.
(14)	The address of the beneficial owner is 780 N.W. 42nd Avenue, Miami, Florida 33126.
(15)	The address of the beneficial owner is P.O. Box N-65, Charlotte House, Charlotte Street, Nassau, Bahamas. Francis Lee is the natural person deemed to be the beneficial owner of the shares held by this entity.
(16)	Represents 20 shares of Series G Convertible Preferred Stock which are convertible into 2,036,825 shares of common stock. The partners of Communications Investors Group are Manuel D. Medina and Andres Altaba, each of whom has a 50% interest.
(17)	Represents 294 shares of Series H Convertible Preferred Stock which are convertible into 294,000 shares of common stock.

This table summarizes share and exercise price information about our equity compensation plans as of March 31, 2003.

Upon conversion of outstanding promissory notes in April 2002, two of our directors, Guillermo Amore and Miguel Rosenfeld, received 1,501,503 shares and 1,134,641 shares of our common stock, respectively. The original principal amounts of the notes converted by Messrs. Amore and Rosenfeld were $1,126,127 and $850,980, respectively. The conversion price of $0.75 per share was determined by our management and approved by the board of directors, with Messrs. Amore and Rosenfeld abstaining, after considering recent quoted market prices of our stock, recent equity transactions and our business plan and financial projections.

We have entered into indemnification agreements with all of our directors and some of our officers, to provide them with the maximum indemnification allowed under our bylaws and applicable law, including indemnification for all judgments and expenses incurred as the result of any lawsuit in which such person is named as a defendant by reason of being a director, officer or employee of the Company, to the extent such indemnification is permitted by the laws of Delaware. We believe that the limitation of liability provisions in our Amended and Restated Certificate of Incorporation and the indemnification agreements will enhance our ability to continue to attract and retain qualified individuals to serve as directors and officers.

In the quarter ended September 30, 2001 in connection with our borrowing of $48.0 million from Ocean Bank we issued a non-interest bearing note receivable to Mr. Medina. Mr. Medina has personally guaranteed the debt with Ocean Bank. Mr. Medina also agreed to repay his personal indebtedness to Ocean Bank. At that

time, we amended Mr. Medina’s employment agreement to indemnify Mr. Medina from any personal liability related to his guarantees of our debt, to provide him up to $6.5 million of cash collateral to the bank should he be unable to repay his personal loans (which is not anticipated), and provide him the non-interest bearing $5.0 million loan. (Mr. Medina also guaranteed payment of approximately $18.0 million in construction payables until CRG, LLC converted those payables into our shares on April 30, 2003).

The note was non-interest bearing and did not have a definite due date. No fee was paid to Medina for his guarantee of the Ocean Bank loan. In July 2002, the terms of the non-interest bearing $5.0 million loan were amended. The amended note has a maturity date of December 5, 2004 and bears interest subsequent to September 5, 2002.

In April 2003, in connection with the issuance of the Subordinated Debentures we received $400,000 from two directors, Joseph Wright and Jose Maria Figueres-Olsen, and $50,000 from an employee and shareholder.

In January 2003, we obtained a $53,000 unsecured, due on demand loan at 10% interest, from Manuel Medina, our Chief Executive Officer. The loan, including accrued interest was repaid during January 2003.

In January 2003, we obtained an $80,000 unsecured, due on demand loan at 10% interest from Guillermo Amore, a member of our board of directors. The loan, including accrued interest was repaid during February 2003.

In January 2003, we obtained a $38,000 unsecured, due on demand loan at 10% interest from a corporation controlled by Andres Altaba, one of our shareholders.

In the quarter ended December 31, 2002, approximately $1.4 million including accrued interest, of related party debt was converted to equity at approximately $0.75 per share.

In November 2002, we obtained a $600,000 unsecured loan at 9% interest due on demand from CRG, LLC. Subsequent to March 31, 2003, the note, including accrued interest was repaid.

In March 2003 and October 2002, we made interest payments of approximately $60,000 and $162,000, respectively related to notes payable to Mr. Medina and Miguel Rosenfeld, one of our directors.

In June 2002, we acquired for $250,000, 10% of the equity in the NAP de las Americas-Madrid S.A. During the twelve months ended March 31, 2003, we recognized approximately $340,000 in revenues from NAP de las Americas-Madrid S.A. In January 2003, we made an additional investment of $84,000 in NAP de las Americas — Madrid S.A. We also have the option to purchase up to another 30% of the NAP de las Americas-Madrid shares owned by the Comunidad and the Camara at cost, plus LIBOR.

Included in accounts receivable is a non-trade receivable of approximately $59,000 due from an entity controlled by Marvin Rosen, a member of our board of directors. There is also a corresponding payable of approximately $59,000 to the same entity.

Included in interest income is approximately $61,000 from a $5.0 million receivable from Mr. Medina.

Based on their evaluation as of a date within 90 days prior to the filing date of this Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

We were billed $329,000, in aggregate, by PricewaterhouseCoopers LLP for professional services rendered for the audit of our annual financial statements for the fiscal year ended March 31, 2003 and the reviews of the financial statements included in our filings on Forms 10-Q for that fiscal year.

PricewaterhouseCoopers LLP did not provide any professional services, other than the audit and review services described above, for the fiscal year ended March 31, 2003. PricewaterhouseCoopers LLP did not provide any services related to financial information systems design and implementation during the fiscal year ended March 31, 2003.

(a) 1 and 2. The financial statements listed in the accompanying Table of Contents to Consolidated Financial Statements and Financial Statement Schedule on page F-1 herein are filed as part of this report.

3. The exhibits listed in the Exhibit Index are filed with or incorporated by reference as part of this report.

(b) No reports were filed on Form 8-K during the fourth quarter of the fiscal year ended March 31, 2003.

(c) The following exhibits, which are furnished with this Annual Report or incorporated herein by reference, are filed as part of this Annual Report.


	*	Filed herewith


	(1)	Previously filed as part of the Company’s Current Report on Form 8-K dated March 6, 1997.
	(2)	Previously filed as part of the Company’s Definitive Proxy Statement filed on April 18, 1996.
	(3)	Previously filed as part of the Company’s Definitive Proxy Statement filed on March 24, 2000.
	(4)	Previously filed as part of the Company’s Current Report on Form 8-K dated February 28, 2001.
	(5)	Previously filed as an exhibit to the Company’s Registration Statement on Form S-3 filed May 15, 2000.
	(6)	Previously filed as exhibit 3.5 to the Company’s Annual Report on Form 10-K filed on July 16, 2001.


	(7)	Previously filed as exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q filed on February 14, 2001.
	(8)	Previously filed as exhibit 4.5 to the Company’s Annual Report on Form 10-K filed on July 15, 2002.
	(9)	Previously filed as exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 15, 2003.


(10)	Previously filed as part of the Company’s Transition Report on Form 10-KSB for the transition period from October 1, 1994 to March 31, 1995.
(11)	Previously filed as exhibit 10.6 to the Company’s Annual Report on Form 10-KSB filed June 29, 2000.
(12)	Previously filed as exhibit 10.6 to the Company’s Annual Report on Form 10-K filed on July 16, 2001.
(13)	Previously filed as exhibit 10.1 to the Company’s Quarterly report on Form 10-Q filed on November 14, 2001.
(14)	Previously filed as exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 14, 2000.
(15)	Previously filed as exhibit 10.2 to the Company’s Quarterly report on Form 10-Q filed on November 14, 2001.
(16)	Previously filed as an exhibit to the Company’s Current Report on Form 8-K filed on April 15, 2003.

Pursuant to the requirements of Section 13 or 15(d) 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, on the 30th day of June 2003.


	By:	/s/ MANUEL D. MEDINA



	Manuel D. Medina, Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)


	By:	/s/ JOSÉ A. SEGRERA



	Executive Vice President and Chief Financial Officer (Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

1. I have reviewed this annual report on Form 10-K of Terremark Worldwide, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:


	a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

	c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):


	a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

1. I have reviewed this annual report on Form 10-K of Terremark Worldwide, Inc.;


	a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

	b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

	c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;


	a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

	b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in stockholders’ deficit and of cash flows present fairly, in all material respects, the financial position of Terremark Worldwide, Inc. and its subsidiaries at March 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management, our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and lack of committed sources of additional debt or equity to support deficits in working capital that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 3 to the consolidated financial statements, on April 1, 2002, the Company adopted Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets” and No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.”

The accompanying notes are an integral part of these consolidated financial statements.

Terremark Worldwide, Inc. (together with its subsidiaries, the “Company”) operates facilities at strategic locations around the world from which we assist users of the worldwide Internet and large communications networks in communicating with other users and networks. Our primary facility is the NAP of the Americas, a carrier-neutral Tier-1 network access point (“NAP”). The NAP of the Americas, which became operational in July 2001, is located in Miami, Florida, and provides exchange point, colocation and managed services to carriers, Internet service providers, network service providers, government entities, multinational enterprises and other end users. The Company’s strategy is to leverage its connectivity to sell services to customers within and outside of the Company’s TerreNAP Data Centers.

In February 2002, the Company entered into an agreement with Fundacao de Amparo a Pesquisa do Estado de Sao Paulo (“FAPESP”), the research foundation for the State of Sao Paulo, to operate and manage the NAP created by FAPESP, which the Company has renamed the NAP do Brasil. Pursuant to the twenty year agreement, FAPESP turned over the network access point to the Company, which the Company intends to enhance and intends to move to new facilities modeled after the operational design of the NAP of the Americas by the end of 2003. Pre-existing FAPESP customers have the right to continue to receive services at the early levels without payment until February 2004. FAPESP will receive 6% of the revenue generated by the enhanced NAP do Brazil for the first five years of operation, 5% during the following five years, and 1% during the last ten years. The term may be extended for an additional ten-year period, during which FAPESP would again receive 1% of the revenues. For the year ended March 31, 2003, the Brazilian operations generated losses of approximately $695,000.

In June 2002, the Company entered into an exclusive agreement with the Comunidad Autonoma de Madrid (“Comunidad”), to develop and operate carrier-neutral network access points in Spain. As part of that agreement, the parties formed NAP de las Americas — Madrid S.A. to own and operate carrier-neutral NAPs in Spain, modeled after the NAP of the Americas. The shareholders in the new company are the Comunidad through its Instituto Madrileno de Desarrollo — IMADE, the Camara Oficial de Comercio e Industria de Madrid (“Camara”), Red Electrica Telecomunicaciones, S.A., Telvent Sistemas y Redes S.A., a subsidiary of Abengoa S.A., and Centro de Transportes de Coslada, S.A. (“CTC”). At the time the NAP de las Americas È Madrid S.A. was formed, the Company owned 1% of the equity, which the Company subsequently increased to 10%. The Company acquired for $250,000, 10% of the equity in the NAP de las Americas — Madrid S.A. In January 2003, the Company made an additional investment of $84,000 in NAP de Las Americas — Madrid S.A. and maintained its 10% equity interest. The Company has the option to purchase up to another 30% of the shares owned by the Comunidad, CTC and the Camara at cost, plus LIBOR. The Company provided the technical and operational know-how for the development of an interim NAP which became operational in July 2002.

On April 28, 2000, the predecessor to the Company, Terremark Holdings, Inc. (THI) merged with and into AmTec, Inc., a publicly traded international telecommunications and services company. For accounting purposes the merger was treated as a reverse acquisition with the Company being the acquirer. As a result, historical information is that of THI.

Prior to the merger with AmTec, the Company was engaged in the development, sales, leasing, management and financing of retail, high-rise office buildings, mixed-use projects, condominiums, hotels and government-assisted housing. The Company was also involved in a number of ancillary businesses that complemented its development operations. Specifically, the Company engaged in offering financial services, property management, construction management, condominium hotel management, residential and commercial leasing brokerage, and advisory services. By March 31, 2002, the Company exited non-core real estate activities, real estate development, property management, financing and the ancillary businesses that

complimented these real-estate development operations. Our real estate activities currently include technology construction work and management of the properties where the NAP of the Americas is located.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liabilities and commitments in the normal course of business. From the time of the merger through March 31, 2003, the Company has incurred net operating losses of approximately $202.6 million. The Company’s cash flows from operations for the years ended March 31, 2003 and 2002 were negative and the working capital deficit was approximately $39.0 million and $88.3 million as of March 31, 2003 and 2002, respectively. Due to recurring losses from operations and the lack of committed sources of additional debt or equity to support working capital deficits, substantial doubt exists about the Company’s ability to continue as a going concern.

On April 30, 2003, Ocean Bank revised its $44.0 million credit facility with the Company by converting at $.75 per common share $15.0 million of the outstanding principal balance under the credit facility into 20 million shares of the Company’s common stock with an approximate $9.6 million market value and extending the term of the remaining $29.0 million until April 30, 2006. The resulting $5.4 million debt restructuring gain will be deferred in notes payable and amortized as reductions in interest expense over the life of the remaining debt. Concurrent with this transaction, the Company paid all past due interest as of March 31, 2003, plus accrued interest through April 28, 2003 totaling approximately $1.6 million and prepaid interest of approximately $900,000.

On April 30, 2003, CRG, LLC (“CRG”), an entity newly formed by a shareholder of the Company, completed the purchase, at a discount, of the Company’s $22.6 million construction payables (including accrued interest) to Cupertino Electric, Inc., Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., all of which were construction contractors for the NAP of the Americas. At the closing, CRG’s purchased construction payables were converted at $.75 per common share into 30,133,334 shares of the Company’s common stock with an approximate $14.1 million market value in accordance with the November 11, 2002 and the December 5, 2002 option agreements (see Note 10). The Company will record an approximate $8.5 million debt restructuring gain from these transactions.

On April 30, 2003, the Company issued 10% Subordinated Secured Convertible Debentures (the “Subordinated Debentures”) due April 30, 2006 for an aggregate principal amount of $25.0 million. The debentures are convertible into shares of the Company’s stock at $0.50 per share. Interest is payable quarterly beginning July 31, 2003. The debentures were issued in exchange for $10.3 million in cash, $9.5 million in a promissory note due in full May 30, 2003 and $5.2 million of notes payable converted to the Subordinated Debentures. Included in the $5.2 million is $2.0 million of cash received in March 2003 in anticipation of the debenture transaction.

The following condensed pro forma balance sheet gives effect to the following transactions as if they had occurred on March 31, 2003: (1) Ocean Bank debt conversion of $15.0 million in debt to equity, (2) Payment of $1.6 million in past due and accrued interest and $.9 million in prepaid interest to Ocean Bank, (3) CRG transaction whereby $21.6 million in construction payables plus $1.0 million in accrued interest was converted

to equity, and (4) issuance of Subordinated Debentures for $16.1 million in cash collected, $5.2 million in conversion of notes payable and $3.7 million in amounts receivable under the 9.5 million promissory note.

Historically, the Company has met its liquidity needs primarily through obtaining additional debt financing and the issuance of equity interests. Some of the debt financing was either provided by or guaranteed by Manuel D. Medina, the Company’s Chief Executive Officer and Chairman of the Board of Directors. In prior periods, the Company also shut down or disposed of non-core operations and implemented expense reductions to reduce the Company’s liquidity needs.

Based on customer contracts signed as of June 13, 2003, the Company’s monthly cash deficit from operations is approximately $1.4 million. In order to eliminate this monthly cash deficit from operations, the new monthly revenues required range from $2.0 million to $3.0 million. This range of new revenue depends on the mix of the services sold and their corresponding margin. The Company’s required revenues are based on existing contracts, including those recently announced with the U.S. Government and enterprises, and expected future contracts from potential customers currently in the sales pipeline. The Company has identified potential customers, including the federal, state and local governments, and is actively offering available services to them. However, the Company’s projected revenues and planned cash needs depend on several factors, some of which are beyond the Company’s control, including the rate at which its services are sold, the ability to retain its customer base, the willingness and timing of potential customers outsourcing the housing

and management of their technology infrastructure to the Company, the reliability and cost-effectiveness of the Company’s services and the Company’s ability to market its services.

The majority of the Company’s planned operating cash improvement is expected to come from an increase in revenues and cash collections from customers. If the Company fails to achieve planned revenues, it will require additional financing. There can be no assurances that additional financing will be available, or that, if available the financing will be obtainable on terms acceptable to the Company or that any additional financing would not be substantially dilutive to existing shareholders. If the Company needs to obtain additional financing and fails to do so, it may have a material adverse effect on the Company’s ability to meet financial obligations and operate as a going concern.

A summary of significant accounting principles and practices used by the Company in preparing its consolidated financial statements follows.

The Company’s consolidated financial statements include the accounts of the Company’s wholly owned subsidiaries. All significant inter-company balances and transactions are eliminated in consolidation.

The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. These principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include revenue and costs related to construction contracts and impairment of long-lived assets.

Certain reclassifications have been made to the prior years’ financial statements to conform with current year presentation.

The Company considers all amounts held in highly liquid instruments with an original purchased maturity of three months or less to be cash equivalents. Cash and cash equivalents include cash balances maintained in the operating and interest-bearing money market accounts at the Company’s banks.

For investments in less than majority-owned entities where the Company does not exercise significant influence, the Company uses the cost method of accounting. For investments in less than majority-owned entities where the Company exercises significant influence, the Company uses the equity method of accounting.

Restricted cash at March 31, 2003 and March 31, 2002 represents cash deposits with a financial institution collateralizing a $750,000 letter of credit issued to the lessor of the Company’s colocation facility in Santa Clara, California (Note 6). The Company is actively attempting to sublease the facility or to sell the Company’s leasehold interest. Due to the uncertainties surrounding the future release of this collateral, the Company has classified such cash deposits as long term assets.

Property and equipment includes acquired assets and those accounted for under capital leases. Acquired assets are recorded at cost and capital leased assets are recorded at the net present value of minimum lease payments. Property and equipment are depreciated on the straight-line method over their estimated remaining useful lives, as follows:

Costs for improvements and betterments that extend the life of assets are capitalized. Maintenance and repair expenditures are expensed as incurred.

Other assets consist of loan costs, prepaid expenses and other. Loan costs, principally loan origination and related fees, are deferred and amortized as interest expense over the life of the respective loan using the straight-line method, which approximates the effective interest method.

As of April 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS 142, goodwill and intangible assets that have indefinite lives are not amortized but rather are tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable. The goodwill impairment test involves a two-step approach. Initially the fair value of the Company’s reporting units are compared with their carrying amount, including goodwill, to identify potential impairment. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for the excess, if any, of the carrying value of goodwill over the implied fair value of goodwill. Intangible assets that have finite useful lives continue to be amortized over their useful lives.

Prior to the adoption of SFAS 142, intangible assets were generally amortized on the straight-line method over five years. In accordance with SFAS 142, the Company ceased amortization of its intangible assets with indefinite lives and completed an initial impairment test of intangible assets as of April 1, 2002. Management determined in the initial impairment test that these assets were not impaired based on their fair values. Fair value was estimated using the expected present value of future cash flows and the assumed market capitalization at the reporting unit level.

As of April 1, 2002, the Company accounts for impairment of long-lived assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to estimated undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset. Prior to adoption of SFAS No. 144, the Company accounted for long-lived assets in accordance with SFAS No. 121, “Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.”

Rent expense under operating leases is recorded on the straight-line method based on total contracted amounts. Differences between amounts contractually due and that reported are included in deferred rent.

The Company estimates the fair value of financial instruments through the use of public market prices, quotes from financial institutions, discounted cash flow analyses and other available information. Judgment is required in interpreting data to develop estimates of market value and, accordingly, amounts are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The Company does not hold its financial instruments for trading or speculative purposes.

The Company’s short-term financial instruments, including cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, equaled their book value. The fair value of capital lease obligations and convertible debentures, based on management estimates equaled their book value due to obligations or borrowings with similar interest rates, maturities and extent of collateralization. The fair value of the Company’s redeemable preferred stock is estimated to be its liquidation value, which includes accumulated but unpaid dividends. The fair value of other financial instruments the Company held for which it is practicable to estimate such value is as follows:

As of March 31, 2003, fair value of the Company’s notes payable was based on April 30, 2003 partial settlement and other information, including recent activity of the Company’s debt instruments. As of March 31, 2002, fair value of the Company’s notes payable was based on quotes from financial institutions and other information.

As of March 31, 2003, fair value of construction payables, including accrued interest was determined to be $13,537,162 based on April 30, 2003 settlement. See Note 10 for additional information. As of March 31, 2002, fair value of construction payables was estimated to equal their carrying value due their short-term nature.

The Company uses the fair value method to value warrants granted to non-employees. The Company determined the fair value for non-employee warrants using the Black-Scholes option-pricing model with the same assumption used for employee grants, except for expected life which was assumed to be between 1 and 10 years.

determines that collection is not reasonably assured, the Company defers the fee and recognizes revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.

Data center revenues consist of monthly recurring fees for colocation and exchange point services and non-recurring installation and managed services fees. Revenues from colocation and exchange point services are recognized ratably over the period of usage. Installation fees are deferred and recognized ratably over the term of the related contract. Managed services fees are recognized in the period in which the services are provided. Revenues from development, commission, management fees and construction fees are recognized in the period in which the services are provided.

Revenues from construction contracts are recognized on the percentage-of-completion method, measured by the percentage of costs incurred to date to total estimated costs for each contract. This method is used because management considers cost incurred to be the best measure of progress on these contracts. The duration of a construction contract generally exceeds one year. Billings in excess of costs and estimated earnings on uncompleted contracts are classified as other liabilities and represent billings in excess of revenues recognized. Construction contract expenses costs include all direct material and labor costs and indirect costs related to contract performance such as indirect labor, supplies, tools, repairs, bad debt and depreciation. Provisions for estimated losses on uncompleted contracts are made in the period in which losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions can be reasonably estimated. Accordingly, it is possible that the current estimates relating to completion cost and profitability of its uncompleted contracts will vary from actual results.

Management analyzes accounts receivable and analyzes current economic news and trends, historical bad debts, customer concentrations, customer credit-worthiness and changes in customer payment terms when evaluating revenue recognition and the adequacy of the allowance for bad debts.

The Company uses the intrinsic value-based method to account for its employee stock-based compensation plans. Under this method, compensation expense is based on the difference, if any, on the date of grant, between the fair value of the Company’s shares and the exercise price of the option.

Had compensation costs been determined using the fair value method for the Company’s stock-based compensation plans, net loss and loss per common share would have been as follows:

The Company’s fair value calculations for employee grants were made using the Black-Scholes option pricing model with the following weighted average assumptions:

Basic earnings (loss) per share (“EPS”) equals net income (loss) divided by the number of weighted average common shares. Diluted EPS includes potentially dilutive securities such as stock options and convertible securities. The effect of shares issuable upon exercise of convertible preferred stock, warrants and stock options is anti-dilutive, therefore diluted earnings (loss) per share is not presented in a comparative format.

Two customers accounted for approximately $1.4 million and $1.0 million of data center revenues for the twelve months ended March 31, 2003. No customer accounted for more than 10% of Data Center revenues for the year ended March 31, 2002.

In March 2003, the FASB reached a consensus on Emerging Issues Task Force (EITF) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables”. The consensus provides guidance on the accounting for multiple element revenue arrangements. It also provides guidance on how to separate multiple element revenue arrangements into its separate units of accounting and how to measure and allocate the arrangement’s total consideration to each unit. The effective date of EITF 00-21 is for revenue arrangements entered into in fiscal periods (interim or annual) beginning after June 15, 2003. Early application is permitted. The Company does not expect the adoption of EITF 00-21, effective July 1, 2003, to have a material effect on its financial statements.

In January 2003, the FASB issued Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” This Interpretation provides guidance for determining a primary beneficiary period. The effective date of FIN 46 is the first interim period beginning after June 15, 2003 for variable interest entities acquired before February 1, 2003 and immediately to variable interest entities created after January 31, 2003. NAP de las Americas — Madrid S.A. may be a variable interest entity in accordance

with FIN 46. The Company’s maximum related exposure to loss is approximately $500,000 at March 31, 2003. The Company does not expect the adoption of FIN 46, effective beginning on July 1, 2003, to have a material effect on its financial statements.

On December 31, 2002, the FASB issued FASB Statement No. 148 (SFAS 148), “Accounting for Stock-Based Compensation — Transition and Disclosure, amending FASB Statement No. 123 (SFAS 123), Accounting for Stock-Based Compensation.” This Statement amends SFAS 123 to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of that Statement to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. Finally, SFAS 148 amends APB Opinion No. 28, Interim Financial Reporting, to require disclosure about those effects in interim financial information. For entities that voluntarily change to the fair value based method of accounting for stock-based employee compensation, the transition provisions are effective for fiscal years ending after December 15, 2002. For all other companies, the disclosure provisions and the amendment to APB No. 28 are effective for interim periods beginning after December 15, 2002. The Company does not plan to change to the fair value based method of accounting for stock-based employee compensation.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” For guarantees issued or modified after December 31, 2002, a liability will be recognized for the fair value of the obligation undertaken in issuing the guarantee. The disclosure requirements were effective for interim and annual financial statements for periods ending after December 15, 2002. The Company currently guarantees the aggregate amount of approximately $12 million in debt (see Note 14). FIN 45 will impact the Company’s financial position or results of operations in subsequent periods, if these guarantees are modified.

In April 2002, the FASB approved FASB Statement No. 145 (SFAS 145), “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections.” In addition to rescinding SFAS 4, 44, and 64 and amending SFAS 13, SFAS 145 establishes a financial reporting standard for classification of extinguishment of debt in the financial statements in accordance with APB 30. SFAS 145 will be effective for the Company’s fiscal year ended March 31, 2004. Management does not expect the adoption of SFAS 145 to have a material effect on the Company’s financial position. However, SFAS 145 will impact the presentation of the results of operations for the quarter ended June 30, 2003 (see Note 2).

During the year ended March 31, 2001, the Company issued $37,545,457 of common stock to acquire five businesses, Telecom Routing Exchange Developers, Inc., Post Shell Technology Contractors, Inc., Spectrum Telecommunications, IXS.Net and Asia Connect L.L.C. In the same period the Company disposed of all of these businesses except for Post Shell Technology Contractors.

On February 23, 2001, the Company sold certain of its telecom facilities management operations to MP Telecom, LLC (“MP”), an entity owned by certain officers and a director of the Company. Assets sold included all of the Company’s equity ownership interests (including any rights to “promote” interests) in the T-Rex branded “Telecom Hotel” together with assets owned by Telecom. Routing Exchange Developers, Inc., a wholly owned subsidiary of the Company. As part of the transaction, the Company retained its management rights for The Technology Center of the Americas (“TECOTA”), in which the NAP of the Americas is located. The purchaser conveyed to the Company its rights to the promote and equity interests in TECOTA. As a result of these transactions, effective March 31, 2001, the Company owned 100% of the promote interest and .84% of the equity interests in TECOTA.

As part of the transaction, MP conveyed to the Company 1,400,000 shares of the Company’s common stock, representing a portion of 8,000,000 shares issued to MP and its affiliates in conjunction with the T-Rex acquisition. MP also conveyed its minority interest in the Company’s colocation business. The Company paid $900,000 to the purchaser in connection with the transaction. The principals of MP and certain Company officers agreed, until December 25, 2001, to limit the aggregate number of Company shares sold by them during any trading day.

In March 2001, the Company implemented its plan to dispose of certain acquired businesses whose operations included IP fax, unified messaging and telephony services. Since the operations represented a class of customer and a major line of business as contemplated in APB 30, the results of these activities and estimated loss on disposal are accounted for as discontinued operations.

As of March 31, 2001, $2,245,896 in assets, exclusive of goodwill, had been disposed. Remaining assets to be disposed amounted to $6,390,009. Subsequent to March 31, 2001, these assets were sold for proceeds aggregating $500,000 in cash and assumption by the purchaser of approximately $1,740,838 in liabilities. The loss on disposition of discontinued operations includes the write-off of $54,381,681 in goodwill. For the year ended March 31, 2001, discontinued operations had $1,760,640 of total revenues and a loss of $11,346,447, net of $10,153,140 in goodwill amortization. The net liabilities for discontinued operations at March 31, 2002 and 2001 primarily represent trade payables, which remain an obligation of the Company. In addition, the Company at March 31, 2003 and 2002 has guaranteed approximately $550,000 in debt related to discontinued operations.

In February 2001, the Company sold for $4,750,000 certain rights, including the entitlement to a contingent payment and related preferred return, under agreements entered into in connection with a hotel development project in Miami, Florida. For the year ended March 31, 2001, these proceeds were included in development, commission and construction fees.

Property and equipment includes approximately $53.7 million and $60.0 million in assets related to the NAP of the Americas at March 31, 2003 and 2002, respectively. These amounts are net of accumulated depreciation.

During the fiscal year ended March 31, 2003, the Company wrote off $450,000 related to equipment that has been held for installation for more than one year and is considered obsolete.

During the fiscal years ended March 31, 2003 and 2002, the Company reached a compromise with vendors regarding certain invoices and adjusted the asset value to the amount finally paid. As a result the Company recorded a reduction of approximately $1.3 million and $1.0 million, respectively, in property and equipment.

Due to the Company’s unsuccessful efforts to lease space at the collocation facility in Santa Clara, California, in the quarter ended September 30, 2001, the Company granted an option to one of its vendors (a contractor involved with the facility’s build-out) to purchase the leasehold improvements and assume the existing lease for approximately $4.0 million. Based on this option, the Company recorded a $6.6 million impairment charge in the quarter ended September 30, 2001 to write the improvements down to the option amount. Subsequently, the Company continued to search for alternatives, which included subleasing or selling the entire facility. In the quarter ended March 31, 2002, upon expiration of the option, the Company listed the property for sale, indicating a definite change in the strategy. The Company is now actively looking for a buyer to assume the existing lease or sublease the leased space. Rent under the existing lease is $118,000 per month, with scheduled annual increases, with a twenty-year term ending in 2020. The Company believes that the most likely outcome is that the property will be subleased or leased from the landlord to a third party and that the Company will receive no consideration for the leasehold improvements. Based on this most likely scenario, in the quarter ended March 31, 2002, the Company recorded an additional $5.5 million impairment, resulting in the asset being fully reserved. The Company also established, as of March 31, 2002, a reserve for leasehold carrying costs, consisting primarily of monthly rent. As of March 31, 2003, the Company had approximately $1.4 million in related reserves which it anticipates will carry the costs of the facility through March 2004.

Included in prepaid expenses and other is a note receivable from a corporation controlled by a shareholder of the Company for $360,000 and related accrued interest of approximately $111,000. The note receivable matures on March 31, 2004.

A reconciliation of net loss and loss per share to exclude amortization expense in the prior year period follows:

On October 15, 2002, the Company entered into a joint venture agreement to develop and operate a HIPPA compliant network access point at the NAP of the Americas in Miami, Florida. The Company acquired a 10% interest in MedNAP L.L.C., the joint venture company, by issuing a $1.0 million promissory note. As the joint venture was not fully funded by December 31, 2002, the Company determined that its joint venture interest was impaired. Therefore, the Company recognized a $1.0 million impairment as of December 31, 2002. Effective March 31, 2003, the Company and the other joint venture partner entered into an agreement to declare void and with no further consequences all the then current agreements and contracts, including the joint venture agreement. As a result, the Company was no longer obligated to the promissory note and recorded in the quarter ended March 31, 2003, a $1.0 million gain. The results of operations for the year ended March 31, 2003, present on a net basis the effects of the formation and the dissolution of the joint venture and accordingly no net gain or loss was recognized as a result of these transactions.

The decline in the telecommunications industry and resulting decline in related real estate construction and leasing activities caused the Company to perform an impairment analysis during the years ended March 31, 2003 and 2002 of its promote interests in TECOTA acquired in the telecom facilities management operations sale and of its goodwill acquired in the Post Shell acquisition. The Company’s analyses were based on estimated fair value determined by the discounted future expected cash flows method and anticipated obtaining additional construction contracts for Post Shell and additional tenants for TECOTA. Based on these analyses, the Company determined that these assets, which are included in its telecom facilities management and real estate services segments, were impaired as of March 31, 2002 by approximately $3.8 million and $3.2 million, respectively. During the year ended March 31, 2003, no significant contracts were awarded to Post Shell and no tenants were added to TECOTA. As a result, the Company impaired the remaining $905,000 in TECOTA promote interests and $2.3 million in Post Shell goodwill.

During the quarter ended December 31, 2000, the Company recognized an impairment of intangible assets of $4,155,178 in contemplation of the sale of telecom facilities management operation (see Note 5), which closed during the quarter ended March 31, 2001.

In May 2002, the Company obtained a $1.5 million loan at 10% interest from its Chief Executive Officer, Mr. Manuel D. Medina, which became due in September 2002. During September 2002, the Company repaid $500,000 plus accrued interest of $48,493 and Mr. Medina agreed to extend the note until June 30, 2003.

On September 5, 2001, the Company closed on a $48 million loan from Ocean Bank. During August 2002, the Company modified the facility. Under the modified terms, the initial maturity date was extended to September 2003 and the Company had the option to exercise two six-month extension periods. At closing, the total amount of the loan was disbursed except for approximately $6.6 million that was held as an interest reserve. Through June 2002, the interest reserve was disbursed monthly to make interest payments. The amendment reduced the annual interest rate to 7.50%. The Company commenced making monthly interest payments in July 2002. All other material provisions of the credit facility remained unchanged. To obtain the original loan, the Company paid a $720,000 commitment fee to the lender. The proceeds of the original credit facility were used to:


	•	repay a $10 million short-term loan from Mr. Medina, the proceeds of which the Company had used to fund the build out of the NAP of the Americas (Mr. Medina, in turn, used the $10 million to repay a personal $10 million short-term loan from Ocean Bank);

	•	repay $3.5 million of debt that the Company owed to Ocean Bank under a line of credit personally guaranteed by Mr. Medina;


	•	pay $1.2 million in loan costs related to the $48 million credit facility (including $720,000 commitment fee); and

	•	fund the NAP of the Americas build out costs.

On April 30, 2003, Ocean Bank revised its credit facility by converting $15.0 million into equity and extending the term of the remaining balance until April 2006. Under the new terms, interest will be payable monthly at an annual rate of 5.25% for the first twelve months and 7.5% thereafter. As of March 31, 2003, the Company was past due in its payment to Ocean Bank of approximately $1.4 million of accrued interest. Concurrent with this transaction, the Company paid all past due interest (see Note 2).

The credit facility is secured by all of the Company’s assets and allows for up to a $25 million junior lien position on the assets of its NAP of the Americas, Inc. subsidiary. Mr. Medina has personally guaranteed the $48 million credit facility.

In addition to Mr. Medina’s personal guarantee of the credit facility, and in order to obtain the facility, the bank further required Mr. Medina, prior to the bank disbursing funds under the credit facility, to (i) provide a $5.0 million certificate of deposit to the bank as collateral for certain personal loans that Mr. Medina has with the bank and (ii) commit to accelerate the maturity date of those personal loans to December 31, 2001. Subsequent to September 2001, Mr. Medina and the bank changed the maturity date on the personal loans, first to December 31, 2001 and later to July 1, 2002. In the event of the Company’s default under the credit facility Mr. Medina also agreed to subordinate any debt that the Company owed to Mr. Medina until the loan is repaid in full. Mr. Medina has repaid part of those personal loans to the bank through liquidation of the $5.0 million certificate of deposit in January 2002 leaving an outstanding principal balance of approximately $4.8 million and he has exercised his right under such personal loan agreements to extend their maturity date from July 1, 2002 to June 30, 2003. As of June 30, 2003, such personal loans have matured and are unpaid. Accordingly, and as further discussed below, Mr. Medina could demand the Company to provide cash collateral for Mr. Medina’s outstanding loan balances aggregating approximately $4.8 million. Mr. Medina has an option under the relevant loan documents to extend the loan to December 31, 2003 that requires a principal payment of $300,000. Although the option to extend expires June 30, 2003, Mr. Medina is currently in discussions with Ocean Bank regarding extending the loan, and believes that Ocean Bank will agree to extend the loan.

On September 5, 2001 and in consideration of Mr. Medina’s agreeing to repay his indebtedness to the bank earlier than otherwise required, pledging the certificate of deposit to the bank and personally guaranteeing the $48 million credit facility and approximately $21 million of construction payables, the Company entered into an amended and restated employment agreement with him dated . Under the terms of the amended and restated employment agreement, the Company will indemnify Mr. Medina from any personal liability related to his guarantees of the Company’s debt, use commercially reasonable efforts to relieve Mr. Medina of all his guarantees of the Company’s debt, provide up to $6.5 million of cash collateral to the bank should Mr. Medina be unable to repay the personal loans when due and provide a non interest-bearing $5.0 million loan to Mr. Medina for as long as his guarantees of the Company’s debt exist. If the loan to Mr. Medina becomes in default, the Company has a right of offset against all amounts payable by the Company to Mr. Medina, the aggregate of which is approximately $3.0 million as of March 31, 2003. Subsequent to March 31, 2003, the amount was reduced to $1.5 million. Mr. Medina and the Company have agreed that the Company has the right to withhold payment to Mr. Medina of the $1,375,000 in convertible debt held by him until the note to the Company is repaid. The note receivable from Mr. Medina is shown as an adjustment to equity. The $48 million credit facility and the note receivable from Mr. Medina were approved by the Board of Directors.

Mr. Medina’s note to the Company has a maturity date of December 5, 2004 and bears interest subsequent to September 5, 2002 at 2%, the applicable federal rate. Interest is due in bi-annual installments beginning on June 30, 2003. The Company will review the collectibility of this note on a quarterly basis.

In August 2002 the Company modified the terms of a note payable to a financial institution to extend the maturity date to December 2002 with certain principal payments to be made monthly with remaining principal and interest due at maturity. In conjunction with the modification and extension of this note, the Company issued 400,000 shares of the Company’s common stock valued at $180,000 to a shareholder, a former guarantor of the note. The principal balance on the note on March 31, 2003 was $667,178. On March 31, 2003, this financial institution and the Company entered into a forbearance agreement and modified the terms of their note. Under the modified agreement terms, the Company made principal payments of $100,000 and $125,000 in April 2003 and May 2003, respectively and the financial institution retained the right to enforce accelerated remedies if the Company defaults on the modified note. The Company is also required to make seven consecutive monthly principal payments of $25,000 commencing on June 1, 2003, with interest on the outstanding balance to be paid monthly, and a balloon payment on December 31, 2003; representing full and final payment of outstanding principal and accrued interest. We made the required payment on June 1, 2003.

Interest expense of approximately $11.1 million, $9.8 million, and $1.1 million, net of amounts capitalized to leasehold improvements and real estate inventories totaling $0, $891,644, and $605,332 was recognized in fiscal years 2003, 2002 and 2001, respectively.

Construction payables relate to construction of the NAP of the Americas and the Company’s colocation facility in Santa Clara, California and include approximately $21.7 million due to two vendors under promissory notes originally bearing interest at annual rates ranging from 8.5 to 10 percent. Mr. Medina guaranteed $18 million due under these promissory notes but was subsequently released upon closing of the April 30, 2003 financing transactions (see Note 2).

On November 8, 2002, CRG, LLC entered into an agreement with Cupertino Electric, Inc. to purchase the entire $18.5 million construction payable (including accrued interest) owed to Cupertino. On November 11, 2002, the Company entered into an agreement with CRG that provided the Company the option, upon the closing of the purchase of the debt by CRG from Cupertino, to repay the entire debt at a discount by either issuing shares of the Company’s common stock valued at $0.75 per share or making a cash payment of $9.9 million (see Note 2).

On December 5, 2002, CRG, LLC entered into an agreement with Kinetics Mechanical Services, Inc. and Kinetics Systems Inc. to purchase the Company’s $4.1 million construction payable (including accrued interest) to Kinetics Mechanical Services, Inc. and Kinetics Systems Inc. On December 5, 2002, the Company entered into an agreement with CRG that provided the Company with the option, upon the closing of the purchase of the debt by CRG from Kinetics Mechanical Services, Inc. and Kinetics Systems Inc., to

repay the entire debt at a discount by either issuing shares of the Company’s common stock valued at $0.75 per share or making a cash payment of $2.4 million (see Note 2).

The Company has outstanding approximately $12,155,000 and $2,750,000 of 13% and 13.125% subordinated convertible debt, respectively, as of March 31, 2003. The 13% debt matures on December 31, 2005 and the 13.125% debt matures on August 30, 2004. The debt is convertible into the Company’s stock at a weighted average conversion price of $1.82 and $0.61 for the convertible debt issued at 13% and 13.125%, respectively. Prepayment by the Company is permitted under both debt instruments, but will entitle holders of the 13% subordinated debentures to warrants or a premium over their outstanding principal and interest based upon the following schedule:

As of March 31, 2003, the Company had not paid approximately $1,242,000 of accrued interest due on or before March 31, 2003. Subsequent to March 31, 2003, the Company paid such amounts.

During November 2002, the Company made an offer to all of the holders of the convertible debentures to convert their debentures, including accrued interest as of September 30, 2002, into the Company’s common shares at the lower of their current conversion price or $0.75. Approximately $26.4 million of the convertible debentures had stated conversion prices in excess of $0.75 per share. As of December 31, 2002, approximately $15.8 million of the convertible debt and accrued interest of approximately $520,000 was converted to 21.8 million shares of the Company’s common stock. As a result, the Company recognized a $4.9 million inducement on debt conversion expense which represents the fair value of the additional common shares issued by the Company as a result of the lower conversion price.

The holders of the 13% debt had a 30 day period during January 2003 to require the Company to repay the outstanding principal balance. During April 2003 and May 2003, the Company made payments totaling approximately $0.9 million to five holders of the convertible debentures who exercised their right to request an acceleration of payment.

In December 2002, $373,000 of warrants were converted to 818,000 shares of common stock at $0.01 per share.

During the quarter ended December 31, 2002, holders of notes payable entered into irrevocable agreements to converted approximately $.8 million in debt and accrued interest into approximately 1.0 million shares of the Company’s common stock at $0.75 per share.

In August 2002, the Company issued 100,000 warrants valued at $61,000, which were subsequently converted to 100,000 shares of common stock.

In June 2002, the NAP de las Americas — Madrid S.A. purchased 5 million shares of the Company’s common stock at $1.00 per share. As a result of the subsequent sale of certain common shares, the Company is obligated to issue an additional 3.6 million shares to NAP de Las Americas-Madrid S.A. As of June 25,

2003, these shares have not yet been issued. The Company anticipates issuing these shares in the quarter ended September 30, 2003.

In April 2002, the Company received a binding commitment from two directors and some of the Company’s shareholders for the purchase of $7.5 million of common stock at $.75 per share. In May 2002, the Company issued 10 million shares of the Company’s common stock for $3.6 million in cash and the conversion of $3.9 million in short term promissory notes to equity.

In April 2002, the Company entered into a Put and Warrant purchase agreement with TD Global Finance (“TDGF”). On July 19, 2002, the Company exercised its right to sell to TDGF 17,648,824 common shares for $0.58 per share for a total of $10.2 million. During August 2002, the Company received the $10.2 million in related cash. The Company used these proceeds for general corporate purposes. In conjunction with the sale, the Company issued three call warrants, each granting TDGF the right to purchase 1,176,588 shares of the Company’s common stock. The warrants expired without exercise on January 16, 2003.

On March 7, 2002, 100,000 warrants issued on March 1, 2002 at $0.01 per share were converted to 100,000 shares of common stock.

On February 19, 2002, $242,700 of convertible debt was converted to 160,071 shares of common stock at $1.52 per share.

In conjunction with the AmTec merger on April 28, 2000, the Company sold 68,722,349 shares of common stock to a third party for approximately $28.1 million.

The Company has the authority to issue 10,000,000 shares of preferred stock, par value $0.001 per share, which are issuable in series on terms to be determined by its board of directors.

The Company had 4,176,693 shares of convertible preferred stock outstanding. The $1 par value preferred stock had a 10% cumulative preferred dividend, payable annually commencing March 31, 2000. During April 2000, the preferred stock was acquired by certain members of the Company’s management and were converted into 7,853,985 shares of the Company’s common stock.

In May 2001, the Company issued 294 shares of Series H redeemable convertible preferred stock for $500,000. The preferred stock allows for a preferential annual dividend of $102 per share and is currently convertible into 294,000 shares of common stock. The preferred stock is redeemable at $1,700 per share plus any unpaid dividends at the request of the holder, commencing on June 1, 2005.

The Company has 20 outstanding shares of Series G convertible preferred stock (“Series G Preferred”), which do not bear dividends. Conversion of the Series G Preferred into common stock is based on the issue price plus an 8% per annum non-compounding premium, divided by the lesser of: (a) $1.50 per Series G Preferred share or (b) the closing price of the Company’s common stock, as reported on the American Stock Exchange, on the business day immediately preceding the conversion. The Series G Preferred also has a stated liquidation preference value of $100,000 per share plus 8% in-kind dividends since March 1999, the date of issuance. The holders have no voting rights except with respect to matters that affect rights related to the Series G Preferred. The holder of these shares is a corporation owned by Mr. Medina, Chief Executive Officer

and a shareholder of the Company. As of March 31, 2003, the Series G Preferred shares could have been converted into 2,016,508 of the Company’s common shares.

During the period from March 2001 through March 2003, the Company issued stock options and warrants to third parties for services and to facilitate certain debt and equity transactions.

The following table summarizes information about stock options and warrants outstanding as of March 31, 2003:

The Company has three stock option plans, whereby incentive and nonqualified options and stock appreciation rights may be granted to employees, officers, directors, and consultants of the Company. There are 17,500,000 shares of common stock reserved for issuance under these plans. The exercise price of the options is determined by the Board of Directors, but in the case of an incentive stock option, the exercise price may not be less than 100% of the fair market value at the time of grant. Options vest over periods not to exceed ten years.

On October 19, 2001, the Company issued options to purchase 100,000 shares of common stock to each member of the Company’s Board of Directors, for a total of 900,000 options. The exercise price of the options is $0.67 per share. The options were immediately exercisable.

The following table summarizes information about options outstanding at March 31, 2003:

No provision for income taxes was recorded for each of the three years in the period ended March 31, 2003 as the Company incurred net operating losses in each year. The Company considered future taxable income and tax planning strategies in assessing the need for a valuation allowance. Based on the available objective evidence, the Company believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets as of March 31, 2003 and 2002.

The Company’s federal and state net operating loss carryforwards begin to expire in 2011. Utilization of the net operating losses generated prior to the AmTec merger may be limited by the Internal Revenue Code.

The reconciliation between the statutory income tax rate and the effective income tax rate on pre-tax (loss) income is as follows:

The Company leases space for its operations, office equipment and furniture under operating leases. Certain equipment is also leased under capital leases, which are included in leasehold improvements, furniture and equipment.

Technology Center of the Americas LLC (“TECOTA”), an entity in which the Company has a .84% member interest, owns the building which leases the space for the NAP of the Americas to the Company under a 20 year lease. Rent expense under the lease amounted to approximately $3.6 million, $2.7 million and $0 for the years ended March 31, 2003, 2002 and 2001.

The Company has entered into capital lease agreements with third parties for equipment related primarily to the NAP of the Americas. Generally, the lease terms are for 48 months, and the aggregate related gross assets total approximately $6.1 million. As of March 31, 2003 the Company had not paid approximately $359,000 relating to these leases. Subsequent to March 31, 2003, the Company paid such amounts.

In October 2000, the Company signed a 20-year lease for the colocation facility in Santa Clara, California.

As of March 31, 2003, the Company had not paid approximately $602,740 relating to a certain lease. The Company has negotiated a payment plan with the vendor where partial payments are to be made.

Operating lease expense, in the aggregate, amounted to approximately $6.0 million, $7.0 million, and $1.3 million for the years ended March 31, 2003, 2002 and 2001, respectively.

At March 31, 2003, future minimum lease payments for each of the following five years and thereafter under non-cancellable operating and capital leases having a remaining term in excess of one year are as follows:

In connection with its investment in NAP de las Americas — Madrid S.A., the Company is committed to make an additional capital contribution of approximately $200,000.

From time to time, the Company is involved in various litigation relating to claims arising out of the normal course of business. These claims are generally covered by insurance. The Company is not currently subject to any litigation which singularly or in the aggregate could reasonably be expected to have a material adverse effect on the Company’s financial position or results of operations.

The construction of TECOTA was funded with $48 million in equity and $61 million in construction loans from a consortium of banks. The Company guaranteed such construction loans during the development and construction of TECOTA. After TECOTA was built, certain banks released the Company from the guarantee, the result of which was to reduce the guarantee to $5.5 million. As of March 31, 2003, TECOTA debt outstanding under the construction loan was $35.4 million. The Company does not expect to fund any amounts under the guarantee.

The Company has guaranteed $4.8 million in personal debt of Manuel D. Medina, the Company’s Chief Executive Officer and Chairman.

The Company has entered into an agreement to provide construction and management services to TECOTA for fees. For the year ended March 31, 2003, 2002 and 2001 the Company earned approximately $510,000, $515,000 and $1.4 million in related fees, respectively.

Due to the nature of the following relationships, the terms of the respective agreements might not be the same as those that would result from transactions among wholly unrelated parties.

The Company’s Chief Executive Officer and other related parties have either provided or guaranteed some of our debt or equity financing. In addition, services are provided to entities in which the Company owns stock. Following is a summary of transactions in each of the three years ended March 31, 2003 and balances with related parties included in the accompanying balance sheet as of March 31, 2003 and 2002.

During the year ended March 31, 2003, approximately $1.4 million, including accrued interest, of related party debt was converted to equity at $.75 per share.

In April 2003, in connection with the issuance of the Subordinated Debentures the Company received $400,000 from two directors and $50,000 from an employee and shareholder.

In January 2003, the Company obtained $53,000 and $80,000 unsecured, due on demand loans at 10% interest, from its Chief Executive Officer and a member of the Company’s Board of Directors. The loans, including accrued interest were repaid during January 2003 and February 2003.

Included in accounts receivable is a non-trade receivable of approximately $59,000, net of $151,000 in write-offs during the year ended March 31, 2003 due from a related party. There is also a corresponding payable of approximately $59,000 to the same related party.

In February 2001, the Company sold certain operations to related parties (Note 4).

As of March 31, 2003 and 2002, the Company had two reportable business segments, data center operations and real estate services. The data center operations segment provides Tier 1 NAP, Internet infrastructure and managed services in a data center environment. The real estate services segment constructs and manages real estate projects focused in the technology sector. The Company’s reportable segments are strategic business operations that offer different products and services.

During the year ended March 31, 2001, the Company had an additional segment, telecom facilities management, which developed, managed and leased facilities catering primarily to the telecommunications industry. In conjunction with the Company’s change in its strategy related to its colocation facility in Santa Clara, California, the Company no longer considers the remaining operations to be separate from its other two segments. Therefore, amounts related to the colocation facility have been reclassified in the current and prior year presentations to their respective March 31, 2003 segments.

The accounting policies of the segments are the same as those described in significant accounting policies. Revenues generated among segments are recorded at rates similar to those recorded in third-party transactions. Transfers of assets and liabilities between segments are recorded at cost. The Company evaluates performance based on the segment’s net operating results. The following presents information about reportable segments.

A reconciliation of total segment loss from operations to loss before income taxes for the twelve months ended March 31, 2003, 2002 and 2001 follows:

F-31 EX-4.6 3 g83542exv4w6.txt FORM OF 10% SUBORDINATED CONVERTIBLE DEBENTURES EXHIBIT 4.6 ALL PAYMENTS UNDER THIS SUBORDINATED SECURED CONVERTIBLE DEBENTURE ARE SUBORDINATED TO CERTAIN SENIOR INDEBTEDNESS PURSUANT TO THE TERMS AND CONDITIONS OF THE SUBORDINATION AGREEMENT REFERRED TO BELOW (AS FROM TIME TO TIME AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED). NEITHER THIS DEBENTURE NOR THE COMMON STOCK INTO WHICH IT IS CONVERTIBLE HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (I) PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT THAT HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (II) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON THE COMPANY FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE COMPANY, OR OTHER COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAWS. TERREMARK WORLDWIDE, INC. 10.0% SUBORDINATED SECURED CONVERTIBLE DEBENTURE DUE APRIL 30, 2006 This SUBORDINATED SECURED CONVERTIBLE DEBENTURE (this "Debenture"), is made and entered into as of the later of the dates set forth on the execution page below, by and between Terremark Worldwide, Inc., a Delaware corporation (the "Company"), and the investor or investors as set forth on the execution page below, or their registered assigns as recorded in the Company's books (the "Investor"). This Debenture is one of an aggregate of up to $25,000,000 principal amount of 10.0% Subordinated Secured Convertible Debentures due April 30, 2006(the "Debentures") issued by the Company. RECITALS: A. The Company desires to obtain financing for its capital needs through the issue and sale of debentures convertible into shares of the Company's common stock, par value $.001 (the "Common Stock"). B. The Company desires to sell and the Investor desires to buy this Debenture. NOW, THEREFORE, in consideration of the above recitals and the mutual covenants, representations, warranties and agreements set forth herein, and for the purpose of defining the terms and provisions of this Debenture, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto intending to be legally bound do hereby agree as follows: 1. PRINCIPAL AND INTEREST. The Company will pay the principal amount set forth on the execution page below (the "Principal") on April 30, 2006 (the "Principal Payment Date") to the Investor, or successor thereof, registered on the books of the Company (the "Holder"), as of the close of business on (i) the date immediately preceding the Principal Payment Date or, in the alternative, (ii) the date immediately preceding the Principal Payment Date that in the State of Florida is not a holiday and a day on which banks are authorized to close (the "Principal Record Date"). This Debenture will bear interest at the rate of 10.0% per annum (the "Interest"), which will be paid quarterly on July 31, October 31, January 31 and April 30 of each year, beginning on July 31, 2003 and on the Principal Payment Date, until the outstanding principal amount of this Debenture has been paid in full (individually, an "Interest Payment Date," collectively, the "Interest Payment Dates," and the Interest Payment Dates together with the Principal Payment Date, the "Payment Dates") to the Holder as of the close of business on (i) the date immediately preceding the Interest Payment Date, or, in the alternative, (ii) the date immediately preceding the Interest Payment Date which in the State of Florida is a Business Day (as hereafter defined) if the date specified in (i) is not a Business Day (collectively, the "Interest Record Dates"). Interest shall be computed on the basis of a 360-day year of twelve 30-day months. For the purposes hereof, the term "Business Day" shall mean any day which is not a Saturday, Sunday or day on that banks in the State of Florida are authorized or obligated by law, executive order or governmental decree to be closed. 2. METHOD OF PAYMENT. The Company will pay Principal and Interest (i) in money of the United States that at the time of payment is legal tender for payment of public and private debts or (ii) by its check payable in such money delivered to the Holder's registered address as reflected in the Company's books. If the Payment Dates are other than Business Days, payment may be made on the next succeeding day that is a Business Day and no interest shall accrue for the intervening period. 3. CONVERSION. (a) The Holder shall have the right, from time to time at any time after May 1, 2004 and prior to the payment of the outstanding principal of this Debenture, or redemption of this Debenture, to convert the entire unpaid principal amount of this Debenture together with accrued but unpaid interest (or any portion of such amounts that is $1,000,000 or an integral multiple thereof or such lesser amount as may be the entire original Debenture issued to such Holder), into that number of fully paid and non-assessable shares of Common Stock equal to the aggregate principal amount of (and accrued but unpaid interest on) this Debenture being converted, as of the Date of Conversion (as defined below), divided by the Conversion Price set forth below. Upon any such conversion, the Company shall pay to the Holder all accrued and unpaid interest on the principal amount of this Debenture so converted to the extent such interest is not converted. (b) In order to convert this Debenture, the accrued but unpaid interest hereon or a portion thereof, into shares of Common Stock, the Holder must telecopy or otherwise deliver prior to 5:00 p.m., Eastern Time, on any Business Day, a copy of the fully executed notice of conversion in the form attached hereto as Exhibit A (the "Notice of Conversion") to the Company at its principal office, which notice shall specify the amount to be converted on the 2 date the Notice of Conversion is delivered to the Company (the "Date of Conversion") together with a copy of the Schedule of Conversion in the form attached hereto as Exhibit B, duly completed as appropriate. No fractional shares of Common Stock shall be issued upon conversion. In lieu of any fractional share to which the Holder would otherwise be entitled, the Company shall pay cash to such Holder based on the closing price of the Common Stock on the last trading day prior to the Date of Conversion. (c) The Company shall issue and deliver, within 15 Business Days after delivery to the Company of the Notice of Conversion to the Holder or to the nominee of such Holder, at the address of the Holder on the books of the Company or as otherwise directed by such Holder, a certificate or certificates for the number of shares of Common Stock to which the Holder shall be entitled as aforesaid. The person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of the Date of Conversion. (d) The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock such number of shares of Common Stock as shall from time to time be sufficient to effect the conversion of the principal amount of this Debenture and all interest that would accrue thereon through the Principal Payment Date; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect such conversion, the Company shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. (e) Following any conversion, the principal amount of this Debenture shall be reduced by an amount equal to the portion so converted. Appropriate adjustments shall be made on the records of the Company. (f) The conversion price per share of Common Stock shall be equal to $0.50 (the "Conversion Price") with respect to this Debenture, subject to adjustment from time to time, pursuant to the following provisions: In case (i) the outstanding shares of the Common Stock shall be subdivided into a greater number of shares, (ii) a dividend or other distribution in Common Stock shall be paid in respect of Common Stock, (iii) the outstanding shares of Common Stock shall be combined into a smaller number of shares thereof, or (iv) any shares of the Company's capital stock are issued by reclassification of the Common Stock (including any reclassification upon a consolidation or merger in which the Company is the continuing corporation), the Conversion Price in effect immediately prior to such subdivision, combination or reclassification or at the record date of such dividend or distribution shall, simultaneously with the effectiveness of such subdivision, combination or reclassification or immediately after the record date of such dividend or distribution, be proportionately adjusted to equal the product obtained by multiplying the Conversion Price by a fraction, the numerator of which is the number of outstanding shares of Common Stock (on a fully diluted basis) prior to such combination, subdivision, reclassification or dividend, and the denominator of which is that number of outstanding shares of Common Stock (on a fully diluted basis) after giving effect to such combination, subdivision, reclassification or dividend. 3 For purposes of this Debenture, "on a fully diluted basis" means that all outstanding options or rights to subscribe for shares of Common Stock and all securities convertible into or exchangeable for shares of Common Stock (such options, rights and securities are collectively referred to herein as "Convertible Securities") and all options or rights to acquire Convertible Securities have been exercised, converted or exchanged. (g) If, prior to the conversion of the entire principal amount of this Debenture, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, sale of all or substantially all of the Company's assets, or other similar event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Company or another entity, or other property, then the Holder shall thereafter have the right to purchase and receive upon conversion of this Debenture (or the conversion of the accrued and unpaid interest hereon), upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such shares of stock, securities and/or other property as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore purchasable and receivable upon the conversion of this Debenture held by such Holder had such merger, consolidation, exchange of shares, recapitalization, sale of all or substantially all of the assets or reorganization not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion) shall thereafter be applicable, as nearly as may be practicable in relation to any shares of stock or securities thereafter deliverable upon the exercise hereof. (h) No adjustment of the Conversion Price shall be made in an amount less than $.05 per share. Upon any adjustment of the Conversion Price, then and in each case the Company shall give written notice thereof to the Holder at the address of such Holder as shown on the books of the Company, which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the methods of calculation and the facts upon which such calculation is based. (i) The Company will use its commercially reasonable efforts to register and list the shares of Common Stock issued upon conversion as more fully set forth in the Subscription Agreement pursuant to which this Debenture was issued. Notwithstanding the foregoing, no transfer of the Common Stock issuable upon conversion pursuant to this Section 3 shall be permitted prior to May 1, 2004. For the purposes of this Debenture, the term "Transfer" shall include any direct or indirect sale, assignment, pledge, encumbrance or other granting of an interest in the shares of Common Stock. 4. PAYING AGENT AND REGISTRAR. The Company shall act as authenticating agent, paying agent, and registrar. The Company may, without notice, engage a third party to act as authenticating agent, paying agent, or registrar. 5. SUBSCRIPTION AGREEMENT. The Company has issued this Debenture in connection with that certain Subscription Agreement dated as of the later of the dates set forth on the execution page below between the Company and the Investor (the "Subscription Agreement"). This Debenture is subject to all the terms of 4 the Subscription Agreement. To the extent permitted by applicable law, in the event of any inconsistency between the terms of Subscription Agreement and the Debenture, the terms of the Subscription Agreement shall control. Pursuant to the Subscription Agreement and by its purchase and acceptance of this Debenture, each Holder has appointed The Bank of New York Trust Company of Florida, N.A. as Collateral Agent (the "Collateral Agent"), to act on behalf of the Holders as more fully set forth in the Collateral Agent Agreement, dated as of the date hereof (the "Collateral Agent Agreement"), between the Company and the Collateral Agent, the terms of which are incorporated herein by reference. 6. SUBORDINATION. The indebtedness evidenced hereby and any and all modifications, restatements, refinancings and renewals hereof are subordinated to certain indebtedness of the Company to Ocean Bank pursuant to that certain Subordination Agreement, dated as of April 30, 2003 (such agreement, as amended from time to time, the "Subordination Agreement"), among Ocean Bank and The Bank of New York Trust Company of Florida, N.A., as Collateral Agent for the benefit of and on behalf of the holders of the Debentures. The holder of this Debenture will be subject to the terms and conditions of the Subordination Agreement, as more fully set forth in the Subscription Agreement. 7. SECURITY. This Debenture and the amounts payable hereunder, including principal and accrued interest, is secured by that certain Second Leasehold Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing between NAP of the Americas, Inc., a Florida corporation and the Company's wholly-owned subsidiary ("NAPA"), and the Collateral Agent, on behalf of the holders of the Debentures, dated as of the date hereof ("Mortgage"), to which reference is hereby made for a description of the collateral provided thereby and the rights of the Company and the Holder with respect to such collateral. The parties acknowledge that this Debenture shall be a negotiable instrument with the meaning of and as contemplated by the Uniform Commercial Code as enacted by the State of Florida. 8. REDEMPTION. The entire Principal amount of this Debenture (or any portion that is $3,000,000 or an integral multiple thereof) will be redeemable, at the Company's option, at any time or from time to time (the "Redemption Date") after May 1, 2004 by giving not less than 15 nor more than 60 days' prior notice by overnight courier to the Holder's last address as it appears the books of the Company, and by delivering the amount of Principal the Company wishes to redeem plus accrued and unpaid Interest thereon, if any, calculated on a pro rata basis up to the Redemption Date on the Redemption Date, in the manner described in Section 2, Method of Payment. On and after the Redemption Date, interest shall cease to accrue on the Principal redeemed, unless the Company defaults in the payment of the Redemption Price. Notwithstanding the giving of notice by the Company pursuant to this Section 8, the Holder shall have the right to convert this Debenture by giving notice to the Company pursuant to Section 3. Such notice must be given no later than 10 days after its receipt of the notice of redemption. 9. DENOMINATIONS; TRANSFER; EXCHANGE. The Investor may register the transfer or exchange of the Debenture by submitting to the registrar of the Company (the "Registrar") the following completed documents: (i) the Assignment Form attached as Exhibit C and (ii) the Letter Regarding Transfer attached as Exhibit D. The Registrar may require the Investor, among other things, to 5 furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Subscription Agreement. The Registrar need not register the transfer, or exchange the Debenture, if the Debenture is selected for redemption. 10. PERSONS DEEMED OWNERS. The Holder shall be treated as the owner of the Debenture for all purposes in accordance with the Collateral Agent Agreement. 11. AMENDMENT; SUPPLEMENT; WAIVER. The Debenture may be amended or supplemented with the consent of the Holder and any existing default or compliance with any provision may be waived with the consent of the Holder. 12. DEFAULTS AND REMEDIES. Upon the occurrence of and during the continuation of any of the events described in clauses (a) through (e) below, the Collateral Agent will promptly notify in writing the Holders of the Debentures. Upon the written direction of holders of a majority of the outstanding principal amount of the Debentures (the "Required Holders"), the Collateral Agent shall declare the occurrence and continuation of such event to constitute an "Event of Default." Such Event of Default shall cease immediately upon the cessation of the event described in clauses (a) through (e) below on which such Event of Default was based: (a) the Company's default, which continues for a period of at least 15 days, in the payment of Principal under, or Interest on, this Debenture when the same becomes due and payable upon redemption or otherwise; (b) the breach by the Company or NAPA of any covenant or agreement in this Debenture, the Second Mortgage or any other Loan Document, as defined in the Second Mortgage (other than a breach described in clause (a) above), and such breach continues for a period of 30 consecutive days after written notice to the Company by the Collateral Agent, provided, that if such breach is not curable within 30 days, then such period shall be extended for an additional 60 consecutive days so long as the Company is diligently attempting to cure such breach; (c) any final judgment or order against the Company (not covered by insurance) for the payment of money in excess of $1,000,000 in the aggregate for all such final judgments or orders (treating any deductibles, self-insurance or retention as not so covered) and which is not paid or discharged, or if there shall be any period of 60 consecutive days following the entry of a final judgment or order that causes the aggregate amount for all such final judgments or orders outstanding and not paid or discharged against the Company to exceed $1,000,000, and for which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (d) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company for all or substantially all of the property and assets of the Company or (iii) the winding up or liquidation of the affairs of the Company and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or 6 (e) the Company (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order of relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Company or for all or substantially all of the property and assets of the Company or (iii) effects any general assignment for the benefit of creditors. At any time upon the occurrence and during the continuation of an Event of Default, the Required Holders may direct the Collateral Agent in writing to declare the outstanding Principal and the accrued and unpaid Interest, if any, on all Debentures, including this Debenture, to be immediately due and payable: The Holder may not enforce the Subscription Agreement or the Debenture, except as provided in said documents. This Debenture shall be governed by the laws of the State of Florida. 13. NOTICES. All notices by the Company to the Holder hereunder shall be in writing and shall be deemed to have been given (i) when delivered personally, (ii) when received via facsimile if on a business day during customary business hours (otherwise, on the next business day), (iii) three (3) days after being deposited in the United States mail, registered, postage prepaid, or (iv) the next business day after being delivered to a nationally recognized overnight courier. 7 IN WITNESS WHEREOF, the undersigned has executed this Debenture in the principal amount and on the date set forth below: ISSUER: TERREMARK WORLDWIDE, INC. By: ---------------------------------- Print Name: --------------------------- Title: ------------------------------- NAME AND ADDRESS OF INVESTOR: Debenture No. ---------- - ------------------------------- - ------------------------------- - ------------------------------- $ Debenture Principal Amount ------------------- Date of Issuance: April 30, 2003 Conversion Price: $0.50 per share 8 EXHIBIT A NOTICE OF CONVERSION Terremark Worldwide, Inc. 2601 S. Bayshore Drive Miami, FL 33133 Attention: _________________ The undersigned irrevocably elects to convert $___________ of the principal amount of, and accrued but unpaid interest on, the 10.0% Subordinated Secured Convertible Debenture due April 30, 2006 (the "Debenture") into ________ _________ shares of Common Stock (the "Common Stock") of Terremark Worldwide, Inc. (the "Company") according to the conditions set forth in the Debenture as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any. The undersigned represents and warrants that all offers and sales by the undersigned of the shares of Common Stock issuable upon conversion shall be made pursuant to the registration of such shares of Common Stock under the Securities Act of 1933, as amended, or pursuant to an exemption from registration under such Act. Date of conversion: ----------------------------- Signature: ----------------------------- Name: ----------------------------- Address: ----------------------------- ----------------------------- ----------------------------- Exhibit A-1 EXHIBIT B SCHEDULE OF CONVERSION The following exchanges of a part of this Debenture for shares of Common Stock have been made:

Schedule B-1 EXHIBIT C ASSIGNMENT FORM Terremark Worldwide, Inc. 2601 S. Bayshore Drive Miami, FL 33133 Attention: _________________ To assign the Debenture, fill in the form below: (I) or (We) assign and transfer the Debenture to: (Insert Assignee's Soc. Sec. Or Tax I.D. No.) (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer the Debenture on the books of the Company. The agent may substitute another to act for him/her. Date: Your Signature: -------------- ------------------------------------- (Sign exactly as your name appears on the other side of the Debenture) Signature Guarantee: ------------------------------------------------------ Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor program reasonably acceptable to the Registrar). Exhibit C-1 EXHIBIT D LETTER REGARDING TRANSFERS -------------, ---- Terremark Worldwide, Inc. 2601 S. Bayshore Drive Miami, FL 33133 Attention: _________________ Re: Terremark Worldwide, Inc. 10.0% Subordinated Secured Convertible Debenture Due April 30, 2006 Ladies and Gentlemen: In connection with our proposed purchase of the 10.0% Subordinated Secured Convertible Debenture due April 30, 2006 (the "Debenture") dated as of the later of the dates set forth on the execution page between Terremark Worldwide, Inc. (the "Company") and the investor named on the execution page of the Debenture (the "Investor"), we confirm that: 1. We understand that any subsequent transfer of the Debenture is subject to certain restrictions and conditions set forth in the Subscription Agreement dated as of the later of the dates set forth on the execution page of the Debenture between the Company and the Investor (the "Subscription Agreement") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Debenture except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We understand that the offer and sale of the Debenture has not been registered under the Securities Act, and that the Debenture may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that we will not resell or otherwise transfer the Debenture except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and we further agree to provide to any person to whom the Debenture is transferred a notice advising such transferee that resales of the Debenture are restricted as stated herein. 3. We understand that, on any proposed resale of the Debenture, we will be required to furnish to the Company, such certifications, legal opinions and other information as the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We acknowledge that the Exhibit D-1 Company will rely upon the truth and accuracy of such information. We further understand that the Debenture purchased by us will bear a legend to the foregoing effect. 4. We are an "accredited investor" as defined in Rule 501 of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. 5. We are acquiring the Debenture purchased by us for our account or for one or more accounts (each of which is an "accredited investor") as to each of which we exercise sole investment discretion. We are not acquiring the Debenture with a view toward distribution thereof in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction. 6. We acknowledge that the Debenture is subject to the terms and conditions of a certain Subordination Agreement dated as of April 30, 2003 by and between Ocean Bank and The Bank of New York Trust Company of Florida, N.A., as Collateral Agent (such agreement, as amended from time to time, the "Subordination Agreement"). We hereby agree to be bound by and to comply with the terms of the Subordination Agreement. We acknowledge and agree that Ocean Bank shall be a third party beneficiary of this paragraph. The Company is entitled to rely upon this letter and is irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, By: ----------------------- Name: ---------------------- Title: --------------------- Exhibit D-2 EX-10.17 4 g83542exv10w17.txt COLLATERAL AGENT AGREEMENT EXHIBIT 10.17 COLLATERAL AGENT AGREEMENT COLLATERAL AGENT AGREEMENT, dated as of April 30, 2003, made by Terremark Worldwide Inc., a Delaware corporation (the "Borrower"), NAP of the Americas, Inc., a Florida corporation and wholly-owned subsidiary of the Borrower ("NAPA"), and The Bank of New York Trust Company of Florida, N.A., a national banking association, as Collateral Agent (the "Collateral Agent"), for the benefit of the holders from time to time (the "Secured Creditors") of the 10.0% Subordinated Secured Convertible Debentures due April 30, 2006 (the "Debentures") issued by the Borrower. W I T N E S S E T H : WHEREAS, NAPA and the Borrower are currently indebted to Ocean Bank, a Florida banking corporation ("Senior Lender"), pursuant to that certain Amended and Restated Credit Agreement dated as of April 30, 2003 among the Borrowers and the Senior Lender. WHEREAS, the obligations of the Borrower to the Secured Creditors pursuant to the Debentures (the "Obligations") are secured by the grant to the Collateral Agent, on behalf of the Secured Creditors, of a lien on and security interest in all of NAPA's right, title and interest in and to its property (the "Collateral") pursuant to that certain Second Leasehold Mortgage and Security Agreement, Assignment of Leases, Rents and Fixture Filing (the "Second Mortgage"), that certain Second Assignment of Leases and Rents and Security Deposits (the "Assignment"), UCC-1 Financing Statements and other documents intended to secure the Obligations; all capitalized terms used but not defined herein shall have the meanings provided therefor in the Second Mortgage; NOW, THEREFORE, the Borrower, NAPA and the Collateral Agent agree as follows for the benefit of each other and for the equal and ratable benefit of the Secured Creditors: ARTICLE I THE AGENT 1.1 APPOINTMENT. Pursuant to the Subscription Agreements dated as of the date hereof (the "Subscription Agreements") entered into by the Secured Creditors and the Borrower, the terms of which are binding upon all subsequent holders of the Debentures, the Secured Creditors have irrevocably designated the Collateral Agent to act as specified herein. Pursuant to their respective Subscription Agreements, the Secured Creditors have irrevocably authorized, and each holder of any Debenture by the acceptance of such Debenture shall be deemed to have irrevocably authorized, the Collateral Agent to take such action on their behalf under the provisions of this Agreement, and any other instruments and agreements referred to herein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Collateral Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Collateral Agent may perform any of its duties hereunder by or through its officers, directors, agents, employees or affiliates and the Collateral Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. 1.2 NATURE OF DUTIES. (a) The Collateral Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement, the Subscription Agreement relating to the purchase of the Debentures, the Second Mortgage and the Assignment. Neither the Collateral Agent nor any of its officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by them hereunder or in connection herewith, unless caused by its or their gross negligence or willful misconduct. The duties of the Collateral Agent shall be mechanical and administrative in nature; the Collateral Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Secured Creditor; and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement except as expressly set forth herein. (b) Beyond the exercise of reasonable care in the custody thereof, the Collateral Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Collateral Agent shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral (such filing and/or recording to be the responsibility of the Borrower). The Collateral Agent shall be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property and shall not be liable or responsible for any loss or diminution in the value of any of the Collateral, by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Collateral Agent in good faith. (c) The Collateral Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the liens in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, except to the extent such action or omission constitutes gross negligence, bad faith or willful misconduct on the part of the Collateral Agent, for the validity or sufficiency of the Collateral or any agreement or assignment contained therein, for the validity of the title of NAPA to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Collateral Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement, the Second Mortgage, the Assignment, or any other document related to the transactions contemplated hereunder, by NAPA, the Borrower or the Secured Creditors. 2 (d) The Collateral Agent shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement. 1.3 LACK OF RELIANCE ON THE COLLATERAL AGENT. Independently and without reliance upon the Collateral Agent, each Secured Creditor and the holder of each Debenture, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrower in connection with the sale of the Debentures and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrower and its subsidiaries and, except as expressly provided in this Agreement, the Collateral Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Secured Creditor with any credit or other information with respect thereto, whether coming into its possession before the sale of the Debentures or at any time or times thereafter. The Collateral Agent shall not be responsible to any Secured Creditor for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any Debentures or the financial condition of the Borrower or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any Debentures, or the financial condition of the Borrower or the existence or possible existence of any Default or Event of Default. 1.4 CERTAIN RIGHTS OF THE COLLATERAL AGENT. If the Collateral Agent shall request instructions from the holders of a majority of the outstanding principal amount of the Debentures (the "Required Secured Creditors") with respect to any act or action (including failure to act) in connection with this Agreement, the Collateral Agent shall be entitled to refrain from such act or taking such action unless and until the Collateral Agent shall have received instructions from the Required Secured Creditors; and the Collateral Agent shall not incur liability to any Secured Creditor by reason of so refraining. Without limiting the foregoing, no Secured Creditor shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or refraining from acting hereunder in accordance with the instructions of the Required Secured Creditors. No provision of this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 1.5 RELIANCE. The Collateral Agent shall be entitled to conclusively rely, and shall be fully protected in relying, upon any note, writing, opinion, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message 3 signed, sent or made by any Person that the Collateral Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and its duties hereunder and thereunder, upon advice of counsel selected by the Collateral Agent. The Collateral Agent shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Collateral Agent, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Collateral Agent shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of NAPA or the Borrower, personally or by agent or attorney at the sole cost of NAPA or the Borrower and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. 1.6 FEES; REIMBURSEMENT; INDEMNIFICATION. (a) NAPA and the Borrower agree: (i) to pay to the Collateral Agent from time to time such compensation as the Borrower and the Collateral Agent shall from time to time agree in writing for all services rendered by it hereunder; (ii) except as otherwise expressly provided herein, to reimburse the Collateral Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by the Collateral Agent in accordance with any provision of this Agreement (including the compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence or bad faith; and (iii) to indemnify each of the Collateral Agent or any predecessor Collateral Agent and their agents for, and to hold them harmless against, any and all loss, damage, claims, liability or expense, including taxes (other than taxes based upon, measured by or determined by the income of the Collateral Agent), arising out of or in connection with the acceptance or administration of this Agreement, including the costs and expenses of defending itself against any claim (whether asserted by the Secured Creditors, NAPA, the Borrower or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, or in connection with enforcing the provisions of this Section, except to the extent that such loss damage, claim, liability or expense is due to its own gross negligence or bad faith. (b) To the extent the Collateral Agent is not reimbursed and indemnified by NAPA or the Borrower pursuant hereto or to the Second Mortgage, the Secured Creditors will reimburse and indemnify the Collateral Agent in proportion to the outstanding principal amount of Debentures they hold for and against any and all liabilities, obligations, losses, damages, penalties, claims (whether asserted by the Secured Creditors, NAPA, the Borrower or any other Person), actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Collateral Agent in performing its duties hereunder or in any way relating to or 4 arising out of this Agreement; provided that no Secured Creditor shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Collateral Agent's gross negligence or willful misconduct. (c) The provisions of this Section 1.6 shall survive the termination of this Agreement. 1.7 THE COLLATERAL AGENT IN ITS INDIVIDUAL CAPACITY. The Collateral Agent and its affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, investment banking, trust or other business with, or provide debt financing, equity capital or other services (including financial advisory services) to, the Borrower or any of its Affiliates (or any Person engaged in a similar business the Borrower or any of its Affiliates) as if they were not performing the duties specified herein and may accept fees and other consideration from the Borrower or any of its Affiliates for services in connection with this Agreement and otherwise without having to account for the same to the Secured Creditor. 1.8 SECURED CREDITORS. The Collateral Agent may deem and treat the payee of any Debenture as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Borrower and the Collateral Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Debenture shall be conclusive and binding on any subsequent holder, transferee, assignee or endorsee, as the case may be, of such Debenture or of any Debenture or Debentures issued in exchange therefor. 1.9 RESIGNATION BY THE AGENT. (a) The Collateral Agent may resign from the performance of all its respective functions and duties hereunder at any time by giving 15 business days' prior written notice to the Secured Creditors. Such resignation shall take effect upon the appointment of a successor Collateral Agent pursuant to clauses (b) and (c) below or as otherwise provided below. (b) Upon any such notice of resignation by the Collateral Agent, the Required Secured Creditors shall appoint a successor Collateral Agent hereunder or thereunder who shall be a commercial bank or trust company reasonably acceptable to the Borrower. (c) If a successor Collateral Agent shall not have been so appointed within such 15 business day period, the Collateral Agent with the consent of the Borrower (which consent shall not be unreasonably withheld or delayed), shall then appoint a successor Collateral Agent who shall serve as 5 Collateral Agent hereunder or thereunder until such time, if any, as the Required Secured Creditors appoint a successor Collateral Agent as provided above. (d) If no successor Collateral Agent has been appointed pursuant to clause (b) or (c) above by the 20th business day after the date such notice of resignation was given by the Collateral Agent, the Collateral Agent's resignation shall become effective and the Required Secured Creditors shall thereafter perform all the duties of the Collateral Agent hereunder until such time, if any, as the Required Secured Creditors appoint a successor Collateral Agent as provided above. 1.10 STATEMENT AS TO DEFAULT. The Borrower or NAPA shall deliver to the Collateral Agent, as soon as possible and in any event within five days after the Borrower or NAPA becomes aware of the occurrence of any event of default under the Debentures or an event which, with notice or the lapse of time or both, would constitute an event of default, an officer's certificate setting forth the details of such event of default or default and the action which the Company proposes to take with respect thereto. ARTICLE II MISCELLANEOUS 2.1 PAYMENT OF EXPENSES, ETC. The Borrower shall, whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Collateral Agent (including, without limitation, the reasonable fees and disbursements of its counsel) in connection with the preparation, execution and delivery of this Agreement, any amendment, waiver or consent relating hereto and the administration or enforcement of this Agreement. 2.2 NOTICES. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed as follows: (a) if to NAPA or the Borrower, at: Terremark Worldwide, Inc. 2601 Bayshore Drive Miami, Florida 33133 Attention: Jose E. Gonzalez, Senior Vice President and General Counsel Tel. No.: (305) 856-3200 Fax No.: (305) 856-8190 6 (b) if to the Collateral Agent, at: The Bank of New York Trust Company of Florida, N.A. 10161 Centurion Parkway Jacksonville, Florida 32256 Attn: Sharon Atkinson Tel. No.: (904) 645-1991 Fax No.: (904) 645-1997 (c) if to any Secured Creditor, at the address set forth opposite such Secured Creditor's signature on its respective Debenture; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. The Collateral Agent shall promptly send via Federal Express or other reputable overnight courier to (x) all Secured Creditors, any notices or other documents that the Borrower requests that the Collateral Agent send to the Secured Creditors and (y) to the Borrower, any notices that it receives from the Secured Creditors. 2.3 WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Borrower, NAPA and the Collateral Agent (with the written consent of the Required Secured Creditors). 2.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon NAPA, the Borrower and their respective successors and assigns (although NAPA and Borrower may not assign their rights and obligations hereunder except with the consent of each Secured Creditor) and shall inure to the benefit of the Collateral Agent and the Secured Creditors and their respective successors and assigns. All agreements, statements, representations and warranties made by NAPA and the Borrower herein or in any certificate or other instrument delivered by NAPA and the Borrower or on their behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement regardless of any investigation made by the Secured Creditors or on their behalf. 2.5 HEADINGS DESCRIPTIVE. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 2.6 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF FLORIDA. 2.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which 7 shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Collateral Agent. 2.8 SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 2.9 BENEFIT OF AGREEMENT. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and assigns. * * * * * * 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. NAP OF THE AMERICAS, INC. By: ---------------------------------- Name: Title: TERREMARK WORLDWIDE, INC. By: ---------------------------------- Name: Title: THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A. By: ---------------------------------- Name: Title: 9 EX-10.18 5 g83542exv10w18.txt SECOND LEASEHOLD MORTGAGE & SECURITY AGREEMENT EXHIBIT 10.18 --------------------- DATE: APRIL 30, 2003 --------------------- Return to: Emmet, Marvin & Martin, LLP 120 Broadway, 32nd Floor New York, NY 10271 Attn: Irving C. Apar --------------------- SECOND LEASEHOLD MORTGAGE AND SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING DATED AS OF APRIL 30, 2003 GIVEN BY NAP OF THE AMERICAS, INC., A FLORIDA CORPORATION MORTGAGOR FOR THE BENEFIT OF THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A. MORTGAGEE SECURING THE ORIGINAL PRINCIPAL SUM OF FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00) NOTWITHSTANDING ANY PROVISIONS CONTAINED HEREIN TO THE CONTRARY, THIS MORTGAGE AND THE LIENS CREATED HEREBY ARE SUBJECT TO AND SUBORDINATE TO THE LIENS OF THE SENIOR MORTGAGE AND THE OTHER SENIOR LOAN DOCUMENTS (AS SUCH TERMS ARE DEFINED IN THE FOLLOWING DESCRIBED SUBORDINATION AGREEMENT) PURSUANT TO THAT CERTAIN SUBORDINATION AGREEMENT BETWEEN MORTGAGEE, MORTGAGOR, OCEAN BANK AND TERREMARK WORLDWIDE, INC. DATED APRIL 30, 2003, TO BE RECORDED IN THE PUBLIC RECORDS OF MIAMI-DADE COUNTY, FLORIDA SIMULTANEOUSLY WITH THE RECORDATION OF THIS MORTGAGE WHICH SUBORDINATION AGREEMENT IS INCORPORATED HEREIN BY REFERENCE AND MADE A PART HEREOF. - ------------------------------------------------------------------------------ NOTE TO RECORDER: THIS INSTRUMENT ENCUMBERS LEASEHOLD INTERESTS WHICH ARE NOT INTERESTS IN REAL ESTATE PURSUANT TO THE CASE OF AURORA GROUP. LTD. V. DEPARTMENT OF REVENUE AND IS NOT SUBJECT TO THE NON-RECURRING TAX ON INTANGIBLE PERSONAL PROPERTY. TABLE OF CONTENTS

(i)

(ii) SECOND LEASEHOLD MORTGAGE AND SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING THIS SECOND LEASEHOLD MORTGAGE AND SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE FILING (THIS "MORTGAGE") IS EXECUTED AS OF THE 30TH DAY OF APRIL, 2003, BY NAP OF THE AMERICAS, INC., A FLORIDA CORPORATION, HAVING OFFICES AT 2601 SOUTH BAYSHORE DRIVE, SUITE 900, MIAMI, FLORIDA 33133 ("MORTGAGOR"), IN FAVOR OF THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A., HAVING OFFICES AT 10161 CENTURION PARKWAY, JACKSONVILLE, FLORIDA 32256 ("MORTGAGEE"), FOR THE BENEFIT OF THE HOLDERS FROM TIME TO TIME OF THE 10.0% SUBORDINATED SECURED CONVERTIBLE DEBENTURES DUE APRIL 30, 2006 ISSUED BY TERREMARK WORLDWIDE, INC., A DELAWARE CORPORATION ("TERREMARK"), THE PARENT CORPORATION OF MORTGAGOR (THE "DEBENTURES"). 1. GRANTING CLAUSES. 1.1 MORTGAGE. For valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confirmed, Terremark has executed and delivered the Debentures and the other Loan Documents (as such terms and all other capitalized terms used in this Mortgage are hereinafter defined in this Mortgage or in Rider 1, attached hereto and incorporated herein by this reference as if set out in full herein) and hereby irrevocably and absolutely grants, transfers, assigns, mortgages, bargains, sells and conveys to Mortgagee all the following (collectively, the "Mortgaged Property"): (a) the leasehold estate created by the NAPA Lease in and to the Leased Premises, being a portion of the Project upon the land located in Miami-Dade County, Florida and more particularly described in EXHIBIT "A," attached hereto and incorporated herein by this reference, including, without limitation, all of Mortgagor's rights to surrender, terminate, cancel, modify, change, supplement, alter, or amend the NAPA Lease, and all of Mortgagor's options to extend and/or renew the NAPA Lease; (b) any and all other rights of Mortgagor with respect to the Leased Premises, whether pursuant to the NAPA Lease or otherwise; (c) the Improvements, and any and all appurtenances and additions thereto and any and all betterments, renewals, substitutions and replacements thereof; (d) the Equipment; (e) all right, title and interest of Mortgagor in and to all construction and other materials of every kind and nature used or installed in, on, or in connection with, or incorporated into, the Improvements from time to time, or intended to be used or installed in, on, or in connection with, or incorporated into, the Improvements from time to time, whether or not located upon the Leased Premises or any other portion of the Project; (f) all and singular the tenements, hereditaments, agreements, privileges, royalties, and rights of way and appurtenances belonging or in anywise appertaining to the Leased Premises and Improvements, including all agreements or rights granting, conveying or creating, for the benefit of the Leased Premises, any easement, right or license in any way affecting or accruing to the benefit of the Leased Premises or the Improvements (whether in gross or appurtenant, and whether for ingress and egress, drainage, utilities, parking or any other purposes), and the reversion or reversions, remainder and remainders, rents, issues and profits thereof; and also all the estate, right, title, interest, property, claim and demand whatsoever of Mortgagor, of, in and to the same and of, in and to every part and parcel thereof; (g) all right, title and interest of Mortgagor, if any, in and to the land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Leased Premises or any other portion of the Project, on, in or to the air space over the Project, or any parcel thereof, and all rights of ingress and egress with respect to the Leased Premises or any other portion of the Project; (h) all Rents and all rights (but not obligations) of Mortgagor in, to and under any and all Leases, and the rights to enforce, whether at law or in equity or by any other means, all terms, covenants and other provisions thereof and all options thereunder; (i) all rights (but not obligations) of Mortgagor in, to and under any and all Contracts; (j) all rights (but not obligations) of Mortgagor in, to and under any and all insurance policies maintained by or for the benefit of Mortgagor with respect to the Mortgaged Property, and/or the business of Mortgagor conducted in connection therewith, all premiums paid thereunder and all proceeds paid or due and payable thereunder; (k) all sums held in escrow at any time and from time to time by Mortgagee or any third party pursuant to this Mortgage and/or any other Loan Document, including, but not limited to, any account for (i) Property Taxes or Insurance premiums, (ii) security deposits, Contract deposits and operating expenses, or (iii) reserves of any kind. (l) all rights (but not obligations) of Mortgagor in, to and under any and all proceeds, compensation, awards, damages and other payments (collectively, "proceeds") paid or due and payable by any Governmental Authority on account of any Taking in respect of the Mortgaged Property, including interest thereon, and the right to receive the same; (m) all rights (but not obligations) of Mortgagor in, to and under all Accounts Receivable; (n) all rights (but not obligations) of Mortgagor in, to and under any and all claims and/or causes of action of any kind whatsoever arising in tort, by contract or otherwise which Mortgagor now has or may at any time hereafter acquire with respect to the Mortgaged Property or any of portion of the Project, or any part thereof or interest therein, or the business of Mortgagor conducted in connection therewith; (o) all rights (but not obligations) of Mortgagor in, to and under all contracts of sale for the Mortgaged Property or any other portion of the Project, or any part thereof or interest therein, and all sums paid or due -2- and payable thereunder, including, without limitation, any and all earnest moneys and/or other deposits made or due and payable thereunder; (p) all rights (but not obligations) of Mortgagor in, to and under all General Intangibles; (q) all rights (but not obligations) of Mortgagor in, to and under all Permits, Plans, Warranties and Reports; (r) all rights (but not obligations) of Mortgagor in, to and under all Equipment Leases; (s) all rights (but not obligations) of Mortgagor with respect to: (i) any construction, design, architectural and engineering agreements relating to the Improvements or any part thereof, and (ii) payment and/or performance bonds, sureties, letters of credit and similar instruments issued with respect to all or any part of the Leased Premised, Improvements, or Equipment, together with any and all rights (but not obligations) of Mortgagor relating to any of the foregoing and necessary or desirable for Mortgagee to use any of the foregoing upon the occurrence of an Event of Default under any of the Loan Documents; (t) all right, title and interest of Mortgagor as "declarant," "developer," "owner" or other similar capacity in, to and under any declaration of covenants, restrictions and easements and any other homeowners' or property owners' documents filed in respect of or otherwise affecting the Leased Premises or any other portion of the Project; (u) all other rights and interests of Mortgagor, tangible and intangible, relating to the Mortgaged Property and the development, construction, operation and management thereof; (v) all additions and appurtenances to, and all extensions, improvements, betterments, renewals, replacements and substitutions of, any of the foregoing hereafter acquired by or released to Mortgagor or constructed, assembled or placed on the Leased Premises, Improvements or any other portion of the Mortgaged Property, and all conversions of security constituted thereby, which additions, appurtenances and extensions, improvements, betterments, renewals, replacements, substitutions and conversions, immediately upon such acquisition, release, construction, assembling or placement, as the case may be, and in each case, without any further granting by Mortgagor, shall become part of the Mortgaged Property, and shall be subject to the security interest hereof fully, completely and with the same effect as though owned by Mortgagor on the date hereof and specifically described herein; and (w) all proceeds of the conversion, voluntary or involuntary, permitted or otherwise, of any of the foregoing into cash or liquidated claims. TO HAVE AND TO HOLD for the purpose of securing the due, prompt and complete (1) payment of all principal, interest and other sums due and payable under the Debentures, (2) payment of all other sums which may now or hereafter be due and owing to Mortgagee under the terms of this Mortgage or any other Loan Document, including, without limitation, interest thereon, and (3) observance, performance, fulfillment and discharge of each and every obligation, covenant, -3- condition, warranty, representation and agreement in the Debentures, this Mortgage and/or any other Loan Document, regardless of how characterized herein or therein (collectively, the "Obligations"). 1.2 SECURITY AGREEMENT. To further secure the Obligations, Mortgagor hereby grants to Mortgagee a security interest under the Uniform Commercial Code in and to any and all personal property and fixtures constituting the Mortgaged Property or any part thereof or interest therein, now owned or hereafter acquired, including, without limitation, the Equipment, Contracts, Accounts Receivable, General Intangibles and Equipment Leases and in and to any and all proceeds of the foregoing. This Mortgage shall constitute a "security agreement" under the Uniform Commercial Code, and Mortgagor and Mortgagee shall constitute the "debtor" and "secured party", respectively, thereunder. To the extent any part or interest in the Mortgaged Property may at any time be real property, fixtures, personal property or other, Mortgagee shall have a lien thereon. Mortgagee shall have any and all rights with respect to the personal property constituting the Mortgaged Property or any part thereof or interest therein afforded a secured party under the Uniform Commercial Code. Such rights shall be in addition to, but not in limitation of, the rights afforded Mortgagee with respect to real property under this Mortgage, all of which may be exercised concurrently or alternatively at the option of Mortgagee, without election or waiver of remedies. 1.3 FIXTURE FILING. This Mortgage constitutes a fixture filing with respect to any goods or other items which are or are to become fixtures, and is intended to be filed in the real estate records of Miami-Dade County, Florida. 1.4 LOAN DOCUMENTS. Reference is hereby made to the Debentures and the other Loan Documents, all of whose terms, covenants and provisions are incorporated herein by this reference. 2. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS OF MORTGAGOR. Mortgagor hereby represents, warrants, covenants and agrees as follows: 2.1 PAYMENT OF INDEBTEDNESS. Terremark shall pay all principal, interest and other sums payable under each of the Debentures, as and when due thereunder in accordance with the terms and conditions thereof. The applicable terms of the Debentures are incorporated herein by this reference. 2.2 TITLE OF MORTGAGOR. Mortgagor represents and warrants that Mortgagor has full right to execute and deliver this Mortgage and that Mortgagor has, subject to those exceptions to title in the title policy insuring this Mortgage and approved by Mortgagee, in its own right, good and indefeasible title to the Mortgaged Property which is free from all liens and encumbrances (subject only to exceptions to title stated on Schedule B of the policy of title insurance issued in favor of Senior Lender in connection with the Senior Loan Documents and to the liens of the Senior Lender pursuant to the Senior Credit Agreement), and has full power and authority to encumber the same by this Mortgage. Mortgagor shall make, execute, acknowledge and deliver in due form of law all such further or other deeds or assurances as may at any time hereafter be desired or required for the purpose of more fully and effectually encumbering and mortgaging the Mortgaged Property as hereby encumbered and mortgaged or intended so to be, unto Mortgagee, for the purposes set forth herein, and shall warrant and defend the Mortgaged Property and all parts thereof and interests -4- therein unto all and every person or persons deriving any estate, right, title or interest therein under this Mortgage, against Mortgagor and all persons claiming through Mortgagor. 2.3 OPERATION OF PREMISES. Mortgagor shall maintain the Mortgaged Property in good condition and repair. Mortgagor shall use and operate the Mortgaged Property in accordance with the terms and conditions of the NAPA Lease for the uses specified therein. Mortgagor shall not commit or suffer any waste of the Mortgaged Property and shall substantially comply with, or cause to be substantially complied with, all Governmental Requirements. Mortgagor shall not remove, demolish or materially alter or enlarge any Improvements or construct any additional Improvements, without the prior written consent of Mortgagee in each instance. Mortgagor shall complete and pay for, within a reasonable time, any Improvement now or at any time hereafter in the process of construction on the Mortgaged Property. Without Mortgagee's prior written consent in each instance, Mortgagor shall not: (i) initiate, join in or consent to (A) any change in any private restrictive covenant, zoning ordinance, Permit, or other public or private restrictions, limiting or affecting in any manner all or any part of the Mortgaged Property, and/or the uses which may be made thereof, or (B) any change in the existing access to and from the Mortgaged Property, including, but not limited to, any vacation of any public roads, streets or access ways; or (ii) record any declaration of condominium, or other covenants, conditions or restrictions against the Mortgaged Property, or any part thereof. 2.4 PAYMENT OF PROPERTY TAXES. Subject to the provisions of Sections 2.4 and 2.5 of this Mortgage, Mortgagor shall pay all Property Taxes and other charges and liens now or hereafter assessed or levied against the Mortgaged Property or any part thereof or interest therein on or before March 1 of each calendar year for which same are assessed. In case Mortgagor shall fail to pay such taxes by March 1 of such year, Mortgagee may, but shall not be obligated to, pay the same in whole or part. All sums so paid by Mortgagee in discharge of such Property Taxes and other charges and liens shall be due and payable by Mortgagor to Mortgagee on demand. All sums so advanced and all interest thereon shall be a lien on and security interest in the Mortgaged Property and shall be secured by this Mortgage. Notwithstanding the foregoing, Mortgagor shall not be required to pay any Property Taxes which are payable by the Project Owner and not separately assessed against the Mortgaged Property, but to the extent any such Property Taxes are payable as part of Tenant's Proportionate Share of Real Estate Taxes (as such terms are defined in the NAPA Lease), Tenant shall pay same to the Project Owner in accordance with the provisions of the Lease. 2.5 CONTESTING PROPERTY TAXES. Mortgagor shall have the right to contest or object to the amount or validity of any Property Taxes separately assessed against the Mortgaged Property by appropriate legal proceedings, but no such contest shall be deemed or construed in any way to relieve, modify or extend Mortgagor's covenant to pay such Property Taxes unless (i) payment of the Property Taxes that Mortgagor intends to contest or object to would, by operation of law, constitute a waiver of Mortgagor's right to contest the same and (ii) the conduct of legal proceedings to contest or object to such Property Taxes shall conclusively operate to prevent the sale of the Mortgaged Property or any part thereof or interest therein, in payment of such Property Taxes, prior to final determination of such proceedings. In no event shall Mortgagor's decision to contest the imposition of any Property Taxes affect Mortgagor's obligation to continue to make payments to Mortgagee or its designee on account of Property Taxes, as elsewhere provided herein. -5- 2.6 INSURANCE COVERAGE. Mortgagor shall at all times provide, maintain and keep in force the following policies of insurance: (a) Property insurance against loss or damage to the Improvements by fire and all other risks of physical loss or damage (including windstorm), with coverage known as "all risk," and containing an "agreed amount endorsement" or other endorsement to eliminate application of the coinsurance clause. The amount of such coverage shall in no event be less than the full replacement cost of the Improvements (without deduction for depreciation), including, without limitation, sprinkler leakage, demolition cost, cost of debris removal, increased cost of construction arising from operation or enforcement of building laws and ordinances. The deductible for such coverage shall in no event be less than Ten Thousand Dollars ($10,000.00) with respect to the losses for any casualty other than wind damage. The windstorm deductible shall in no event exceed two percent (2%) of the estimated replacement cost of the Improvements, exclusive of foundations and footings; (b) If the Improvements are located in a Special Flood Hazard Area, as defined by the Flood Insurance Rate Map issued by the Department of Housing and Urban Development, flood insurance. Such amount shall in no event be less than the full replacement cost of the Improvements (without deduction for depreciation); (c) To the extent that any Rents realized from the Mortgaged Property constitute rental income (as such term is commonly understood in the insurance industry), insurance against loss of rental income caused by the perils required to be insured against in (a), (b), (e), and (f) of this Section, on an Actual Loss Sustained basis. In no event shall the amount of such coverage be less than one (1) year's gross rental income, excluding only non-continuing expenses; (d) To the extent that any Rents realized from the Mortgaged Property constitute business income (as such term is commonly understood in the insurance industry), insurance against loss of business income caused by the perils required to be insured against in (a), (b), (e) and (f) of this Section, on an Actual Loss Sustained basis. In no event shall the amount of such coverage be less than one (1) year's gross business income, excluding only non-continuing expenses; (e) Boiler and machinery insurance covering damage to pressure vessels, air tanks, boilers, machinery, pressure piping, electrical, heating, ventilation and air conditioning equipment, and elevator and escalator equipment, provided the Improvements contain equipment of such nature; (f) Comprehensive General Commercial liability insurance (including coverage for elevators and escalators, if any, on the Mortgaged Property and completed operations coverage for two (2) years after construction of Improvements has been completed), on an "occurrence" basis, against claims for bodily injury including death, property damage and "Personal Injury" occurring in, on or about the Mortgaged Property and the adjoining streets, sidewalks and passageways. In no event shall the amount of such coverage be less than Ten Million and No/100 Dollars ($10,000,000.00); -6- (g) Motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles, containing minimum limits per occurrence of One Million Dollars ($1,000,000.00); (h) Workers' Compensation insurance (including Employers' Liability) in accordance with all Governmental Requirements for all employees of Mortgagor engaged on or with respect to the Mortgaged Property; (i) During the course of any construction or repair of the Improvements or any portion thereof (in addition to the coverages described above), (1) Workers Compensation insurance (including Employers' Liability) in accordance with all Governmental Requirements on all employees of contractors, subcontractors, consultants and vendors engaged on or with respect to the Mortgaged Property; (2) Comprehensive General Commercial liability insurance covering operations of all contractors and subcontractors (including coverage for elevators and escalators, if any, on the Mortgaged Property and completed operations coverage for two (2) years after construction of Improvements has been completed), on an "occurrence" basis, against claims for bodily injury including death, property damage and "Personal Injury" occurring in, on or about the Mortgaged Property and the adjoining streets, sidewalks and passageways. In no event shall the amount of such coverage be less than Ten Million and No/100 Dollars ($10,000,000.00); (3) Builders' risk completed value insurance against "all risks of physical loss," including collapse and transit coverage, in nonreporting form, covering the total value of work performed and equipment, supplies and materials furnished, and containing the "permission to occupy before completion of work" endorsement. The amount of such coverage shall in no event be less than the full replacement cost of the Improvements (without deduction for depreciation). The deductible for such coverage shall in no event be less than Ten Thousand Dollars ($10,000.00); and (4) Evidence that the general contractor has obtained and is maintaining in full force and effect at all times adequate contractor's liability insurance (including automobile liability and contractual liability coverage) and Worker's Compensation Insurance in accordance with all Governmental Requirements; and 2.7 POLICIES AND PREMIUMS. (a) At least thirty (30) days prior to the expiration of each insurance policy, Mortgagor shall furnish Mortgagee with written evidence of the payment of the premium and arrangements for the reissuance of a policy continuing insurance in force as required by this Mortgage. (b) All policies required hereunder shall contain a provision that such policies shall not be canceled or materially amended, which term shall include any reduction in the scope or limits of coverage, without at least thirty (30) days prior written notice to Mortgagee. -7- (c) All policies of insurance shall be issued by companies which are authorized to do business in the State of Florida and shall have a Best's rating of not less than A/XIII. (d) If Mortgagor fails to keep in force the policies of insurance required by this Mortgage, Mortgagee may, but shall not be obligated to, procure such insurance or single interest insurance for such risks covering Mortgagee's interest and pay the premiums for any such insurance, all without Mortgagor's consent, so as to prevent any lapse in coverage. All sums advanced by Mortgagee to pay premiums on insurance policies which Mortgagor is required to maintain hereunder shall be due and payable by Mortgagor to Mortgagee on demand. All sums so advanced and all interest thereon shall be a lien on and security interest in the Mortgaged Property and shall be secured by this Mortgage in addition to all of the other Obligations. (e) In the event of foreclosure of this Mortgage or other transfer of title or assignment of the Mortgaged Property in lieu of foreclosure, all right, title and interest of Mortgagor in and to all policies of insurance required by this Mortgage shall, including all premiums theretofore paid by Mortgagor, inure to the benefit of and pass to Mortgagee or any other purchaser or purchasers of the Mortgaged Property at the foreclosure sale. 2.8 PAYMENT OF INSURANCE PREMIUMS. Mortgagor shall pay, when and as due and payable, all premiums with respect to all insurance policies required hereunder. In case Mortgagor shall default in the payment thereof when the same shall be due and payable, Mortgagee may, but shall not be obligated to, pay the same in whole or part. All sums so paid by Mortgagee for such insurance premiums shall be due and payable by Mortgagor to Mortgagee on demand. All sums so advanced and all interest thereon shall be a lien on and security interest in the Mortgaged Property and shall be secured by this Mortgage. Upon request of Mortgagee, Mortgagor shall exhibit to Mortgagee receipts for the payment of such insurance premiums. 2.9 PROJECT INSURANCE. Mortgagor shall, on an annual basis, commencing with the first anniversary of the date hereof, and on each April 30 thereafter, request from the Project Owner evidence of such insurance covering the Project as is in effect from time to time, including any and all such insurance required by the provisions of the NAPA Lease. To the extent that the cost of any such insurance is included in Tenant's Proportionate Share of Operating Charges (as such terms are defined in the NAPA Lease), Tenant shall pay same to the Project Owner in accordance with the provisions of the Lease. 2.10 LEASES. (a) Except for service orders and license agreements entered into between customers of Mortgagor and Mortgagor, Mortgagor shall not enter into any Leases without Mortgagee's prior written consent in each instance, which consent may be granted or withheld in Mortgagee's sole discretion, unless: (i) such Lease provides for Rents due and payable thereunder at market rates and otherwise be upon such terms and conditions as are agreed to as the result of good faith, bona fide arms-length negotiations; (ii) the demised premises under such Lease is used solely for legal purposes consistent with the NAPA Lease and any use restrictions of record; (iii) such Lease does not grant any option or right to acquire the Mortgaged Property or any part thereof or interest therein; (iv) such Lease is at all times subject, subordinate and inferior in all respects to the lien and operation of this Mortgage and all other Loan -8- Documents, and the tenant thereunder enters into an agreement confirming same or the Lease so provides; and (v) Mortgagor obtains the consent of the Project Owner to enter into any Leases to the extent such consent is required by the terms of the NAPA Lease. (b) Mortgagor shall pay, perform and discharge, in all material respects, as and when payment, performance and discharge are due, all obligations of Mortgagor as landlord under all Leases. Mortgagor shall give Mortgagee prompt notice of any default by Mortgagor claimed by any tenant under any Lease, together with a copy of any notice of default given by any such tenant to Mortgagor. (c) Mortgagor shall, at Mortgagor's expense: (i) enforce all material covenants and agreements on the tenant's part to be performed or complied with under each of the Leases and on any guarantor's part to be performed or complied with under any guaranty given in connection with any Lease; (ii) diligently pursue all commercially reasonable remedies, including, without limitation, claims for damages available at law or in equity against any tenant under a Lease or guarantor thereof; and (iii) appear in and defend any action or proceeding arising from or connected with any of the Leases or any obligation or liability of Mortgagor as landlord thereunder. (d) Mortgagor shall not, without Mortgagee's prior written consent in each instance, accept prepayment of rent under any Lease or permit any tenant to offset or credit sums due and payable by Mortgagor to such tenant against Rents, as the case may be, for more than thirty (30) days in advance. Mortgagor shall not, without the prior written consent of Mortgagee, create, or subordinate any Leases to (or permit, allow, or suffer any such subordination), any lien or security interest which would be superior to the Leases or would, upon foreclosure thereof, extinguish the Leases. (e) Mortgagor shall, from time to time, execute, acknowledge and deliver to Mortgagee an assignment of the Leases, in form and substance satisfactory to Mortgagee, transferring and assigning Mortgagor's interest in the Leases to Mortgagee as security for the Debentures and other Loan Documents. Mortgagor shall furnish to Mortgagee copies of all Leases requested by Mortgagee within ten (10) days following Mortgagee's demand therefor. (f) Notwithstanding the foregoing, so long as no Default or Event of Default exists and is continuing, Mortgagor may enter into collocation agreements on commercially reasonable, market rate terms and conditions. 2.11 ENVIRONMENTAL COMPLIANCE. (a) In addition to and without limiting any other Obligations, Mortgagor shall substantially comply with all Environmental Laws relating to the Mortgaged Property and the conduct of Mortgagor's business in connection therewith. Mortgagor shall remove and dispose of any Hazardous Substance found on, in, under or affecting the Mortgaged Property which do not comply with Environmental Law. All such removals and disposal shall be undertaken and performed in substantial compliance with Environmental Laws. Mortgagor shall not release, or permit, allow or suffer any release or threat of release, of any Hazardous Substance on, in, under or affecting the Mortgaged Property or from the Mortgaged Property onto any properties adjacent to the Mortgaged Property, -9- except for such DE MINIMIS reasonable releases typically associated with the use of portions of the Mortgaged Property or the Project for driving and parking motor vehicles or with the normal and routine usage of cleaning products, and which are not likely to result in any material liability under any Environmental Laws. Mortgagor shall not generate or permit, allow or suffer any Hazardous Substances to be generated on, in or under the Mortgaged Property. Mortgagor shall not store or permit, allow or suffer Hazardous Substances to be stored on, in or under the Mortgaged Property (except for such amounts commonly and lawfully stored for use in the normal maintenance and operation of the Mortgaged Property for its intended purpose). Mortgagor shall not permit, allow or suffer any lien under any Environmental Law to attach to or encumber the Mortgaged Property or any part thereof or interest therein. (b) Mortgagor shall indemnify and defend Mortgagee (with attorneys reasonably acceptable to Mortgagee) and hold Mortgagee harmless from and against any and all Environmental Losses. (c) If Mortgagor shall fail to comply with any of the provisions of this Section or any provision of any other Loan Document relating to Hazardous Substances and/or Environmental Laws, Mortgagee shall have the right (upon providing prior written notice to Mortgagor), but not the obligation, to enter upon the Mortgaged Property and to expend funds to cure such failure by performing such remedial work as may be necessary to make the Mortgaged Property conform to all Environmental Laws. Any amounts expended by Mortgagee as a result thereof shall be due and payable by Mortgagor to Mortgagee on demand. All such amounts and all interest thereon shall be part of the Obligations secured by this Mortgage and shall constitute a lien on and security interest in the Mortgaged Property. Any partial exercise by Mortgagee of Mortgagee's remedies herein, including any partial undertaking by Mortgagee of remedial work, shall not obligate Mortgagee to continue to exercise such remedies or complete any remedial work commenced or take any further or additional actions or require Mortgagee to expend or incur any further sums in connection therewith. The exercise by Mortgagee of Mortgagee's remedies herein shall not operate to place upon Mortgagee any responsibility for the operation, control, care, management or repair of the Mortgaged Property, or make Mortgagee the "owner" or "operator" of the Mortgaged Property or a "responsible party" within the meaning of Environmental Laws. (d) Mortgagor shall provide Mortgagee with prompt written notice: (i) upon Mortgagor becoming aware of the presence of any Hazardous Substance on the Mortgaged Property or any property adjacent thereto or of any release or threat of release of any Hazardous Substance on, in, under or affecting the Mortgaged Property or emanating from the Mortgaged Property, (ii) upon Mortgagor's receipt of any notice from any Governmental Authority in connection with any Hazardous Substance on, in, under or affecting the Mortgaged Property or emanating from the Mortgaged Property, and (iii) upon Mortgagor's obtaining knowledge of any incurrence of any expense by any Governmental Authority in connection with the assessment, containment or removal of any Hazardous Substances located on, in, under or affecting the Mortgaged Property or emanating from the Mortgaged Property. -10- 2.12 CASUALTY. (a) If the Mortgaged Property or any part thereof or interest therein is damaged or destroyed by any casualty, Mortgagor shall give prompt written notice thereof to Mortgagee, and shall obtain and deliver to Mortgagee, at Mortgagor's cost, a reasonably detailed determination of the estimated cost of restoration prepared by a general contractor/engineer reasonably acceptable to Mortgagee. (b) Mortgagee shall have the exclusive right to receive all proceeds of insurance payable on account of any loss, damage or destruction affecting the Mortgaged Property or any part thereof or interest therein (subject to the Senior Lender's prior rights to control such insurance proceeds), and Mortgagor hereby authorizes and directs each insurance company to pay all such insurance proceeds directly to Mortgagee. Mortgagor hereby absolutely, unconditionally and irrevocably assigns to Mortgagee all of Mortgagor's rights to such insurance proceeds, including, without limitation, the right to receive the same, and Mortgagor agrees to execute such further assignments confirming the foregoing as Mortgagee may from time to time require. If Mortgagor receives any such insurance proceeds, Mortgagor shall immediately turn over same to Mortgagee. Mortgagee shall have the right, but not the obligation, to commence, appear in and prosecute in its own name, any action or proceeding in connection with any loss, damage or destruction and/or any insurance proceeds payable on account thereof. Without Mortgagee's prior written consent, Mortgagor shall not settle, adjust or compromise any claim for loss, damage or destruction affecting the Mortgaged Property, or any part thereof or interest therein, under any policies of insurance, and Mortgagee is hereby authorized and empowered by Mortgagor to settle, adjust or compromise all claims for loss, damage or destruction affecting the Mortgaged Property, or any part thereof or interest therein, under any policies of insurance without Mortgagor's consent. Mortgagee shall not be responsible for any failure to collect any insurance proceeds, regardless of the cause of such failure. (c) So long as no Event of Default shall have occurred and be continuing, Mortgagee shall apply all of the Net Insurance Proceeds paid on account of any damage to or destruction of the Mortgaged Property to the Restoration Costs. (d) Mortgagor shall repair all damage and destruction and restore the Mortgaged Property to a condition equal to or better than their condition before the casualty. Mortgagee shall disburse the Net Insurance Proceeds from time to time as work progresses, subject to the satisfaction of the following conditions: (1) Delivery to Mortgagee of evidence that all permits, licenses and approvals required for the work have been obtained and are in full force and effect; (2) Delivery to Mortgagee prior to each disbursement of Net Insurance Proceeds, of certificates of the approved architect or engineer that (A) all of the work completed has been done in compliance with the approved plans and specifications, if any, (B) such disbursement is justly required to reimburse Mortgagor for payments by Mortgagor to, or which are justly due to, contractors, subcontractors, materialmen, laborers, engineers, architects or other persons rendering services or materials for the work, (C) the amount of -11- such disbursement, when added to all sums previously disbursed by Mortgagee, does not exceed the value of the work done to the date of such certificate, and (D) the amount of Net Insurance Proceeds held by Mortgagee after such disbursement (without taking into account any holdbacks) will be sufficient on completion of the work to pay for the same in full; (3) Delivery to Mortgagee, prior to each disbursement of Net Insurance Proceeds, of waivers or releases of lien for work completed and title searches confirming that there has not been filed with respect to the Mortgaged Property any mechanics', construction, or other lien or instrument for the retention of title in respect of any part of the work not discharged of record; and (4) Delivery when the work has been completed of a copy of any and all certificates required by law to render occupancy of the Improvements and tenant spaces legal. Mortgagee shall not be obligated to disburse Net Insurance Proceeds more frequently than monthly but shall make monthly disbursements if requested in writing by Mortgagor subject to Mortgagor's compliance with this Section 2.12. The restoration shall be done and completed by Mortgagor in an expeditious and diligent fashion and in substantial compliance with all applicable Governmental Requirements. All plans and specifications required in connection with the restoration shall be subject to review and approval as to compliance with the provisions of this subparagraph (d) by Mortgagee's inspecting engineer. (e) Mortgagee shall have the right, but not the obligation, to apply any proceeds held by it to cure any Event of Default by Mortgagor under the Loan Documents. Mortgagee shall have no obligation to release any insurance proceeds, following the occurrence and during the continuance of any Event of Default, in which event Mortgagee shall have the right to apply the same to any Obligations in such order as Mortgagee may determine. Excess insurance proceeds, if any, remaining after the completion of any repair and restoration being paid for out of Net Insurance Proceeds (and after the payment by Mortgagor of the portion of the costs and expenses thereof equal to the amount of any deductible under Mortgagor's insurance policy) shall be applied to any Obligations secured hereby in such order as Mortgagee may determine. (f) Nothing herein shall excuse Mortgagor from operating and maintaining the Mortgaged Property following such casualty in accordance with Section 2.3 ("Operation of Premises") of this Mortgage, or from promptly repairing all damage and restoring the Mortgaged Property to a condition equal to or better than the condition of the Mortgaged Property before the casualty, regardless of whether or not there are insurance proceeds available for such purposes or whether the amount of insurance proceeds is sufficient therefor, subject, however, to such temporary closure of the Mortgaged Property or portions thereof as may be necessary to effectuate repairs thereto so long as such closures are limited in scope and time to that which is consistent with prompt and diligent completion of such repairs and are in compliance with the provisions of the NAPA Lease. Neither the application by Mortgagee of any such insurance proceeds to the Obligations nor the release of the same to Mortgagor for the repair and restoration of the Mortgaged Property, or otherwise, shall cure or waive any Event of Default under this Mortgage or invalidate any act done pursuant to any notice of default given pursuant thereto. -12- (g) Notwithstanding any loss, damage or destruction of the Mortgaged Property or any part thereof or interest therein, or the application of any insurance proceeds realized thereby to the Obligations, Terremark shall continue to pay the Debentures in accordance with the terms thereof and perform all the other Obligations under this Mortgage until the entire indebtedness secured hereby has been paid in full and all other Obligations have been fully performed. No loss, damage or destruction shall be deemed to reduce any Obligations secured by this Mortgage or stay the accrual of interest thereon except to the extent insurance proceeds are actually received by the holders of the Debentures. (h) If, following the occurrence of any loss, damage or destruction to the Premises, any part thereof or interest therein, but prior to the receipt by Mortgagee of any of the proceeds thereof, the Mortgaged Property shall be sold on foreclosure of this Mortgage, Mortgagee shall have the right to receive all insurance proceeds payable on account of such loss, damage or destruction and apply such proceeds to any deficiency found to be due upon such sale, with legal interest thereon, whether or not a deficiency judgment on this Mortgage shall have been sought or recovered or denied, and to all fees, costs and expenses, including reasonable attorneys' fees and expenses, incurred by Mortgagee in connection with the collection of such proceeds. 2.13 CONDEMNATION. (a) Mortgagor shall give prompt written notice to Mortgagee of the occurrence of any Taking or of the receipt by Mortgagor of any notice or other information regarding any Taking or contemplated Taking, and shall promptly deliver to Mortgagee copies of all papers and pleadings served in connection with any and all Takings. (b) Mortgagee shall have the exclusive right to receive all proceeds payable to Mortgagor on account of any Taking (subject to the Senior Lender's prior rights to control such proceeds), and Mortgagor hereby authorizes and directs the Government Authorities doing such taking to pay all proceeds payable on account thereof directly to Mortgagee. If Mortgagor receives any such condemnation proceeds, Mortgagor shall immediately turn over same to Mortgagee. Mortgagee shall have the right, but not the obligation, to commence, appear in and prosecute in its own name any action or proceeding in connection with any Taking. Without Mortgagee's prior written consent, Mortgagor shall not settle or compromise any such action or proceeding, and Mortgagee is hereby authorized and empowered by Mortgagor to compromise or settle the same without Mortgagor's consent. Mortgagor hereby absolutely, unconditionally and irrevocably assigns to Mortgagee all of Mortgagor's rights in respect of any Taking, including, without limitation, the right to receive all proceeds thereof, and Mortgagor agrees to execute such further assignments confirming the foregoing as Mortgagee may from time to time require. Mortgagee shall not be responsible for any failure to collect any such proceeds, regardless of the cause of such failure. (c) Mortgagee shall have the right, in its sole and absolute discretion and regardless of any impairment of security or lack thereof, to apply all or any part of the Net Condemnation Proceeds of any Taking to (i) the Obligations, in such order as Mortgagee may determine in its sole discretion, or (ii) the Taking Restoration Costs. Mortgagor hereby acknowledges that in determining whether or not, in Mortgagee's sole and absolute discretion, to elect (i) or (ii) above, Mortgagee may take into account, among other factors, the following: -13- (1) The existence of any Default or Event of Default; (2) whether the remaining portion of the Mortgaged Property, after repair and restoration, will be economically viable; (3) whether the Mortgaged Property, as so restored, satisfies Mortgagee's then existing criteria for making loans on similar properties; (4) the estimated Taking Restoration Costs; and (5) the factors listed in clauses (3) through (11) of Subsection 2.12(c) above. Notwithstanding the foregoing provisions of this subparagraph (c), provided that no Event of Default then exists, Mortgagee shall make such Net Condemnation Proceeds available to Mortgagor for the sole purpose of paying the Taking Restoration costs, subject to and in accordance with the provisions of subparagraph (d) below, unless the casualty for which such Net Condemnation Proceeds were paid occurs within four (4) months of the maturity date of the Loan, as such maturity date has been or may be extended pursuant to the terms of the Debentures. (d) If, pursuant to subparagraph (c) above, Mortgagee elects (or is required pursuant to subparagraph (c) above) to make such Net Condemnation Proceeds available to Mortgagor for the sole purpose of paying the Taking Restoration Costs instead of reduction of the Obligations as required herein, then: (1) Mortgagor shall to the maximum extent possible, repair all damage and restore the remaining portion of the Mortgaged Property to a condition equal to or better than the condition of the entire Premises before the Taking; and (2) Mortgagee shall disburse such Net Condemnation Proceeds from time to time as such work progresses, subject to such disbursement procedures, terms and conditions as Mortgagee may establish. Such procedures, terms and conditions may include, without limitation, the criteria set forth in Section 2.12 ("Casualty") of this Mortgage with respect to the disbursement of Net Insurance Proceeds for repair and restoration. (e) Mortgagor acknowledges and agrees that the rights granted Mortgagee in this Section 2.13 in the event of any Taking of the Mortgaged Property, any part thereof or interest therein, constitute reasonable protections of Mortgagee's security therein, and that Mortgagor's agreement to comply with such terms, conditions and procedures as Mortgagee may impose in return for its agreement to apply the Net Condemnation Proceeds for repair and restoration constitutes consideration to Mortgagee for waiving its right hereunder to apply such proceeds to reduction of the indebtedness secured hereby. Mortgagee shall have the right, but not the obligation, to apply any Net Condemnation Proceeds held by it to cure any default by Mortgagor under the Loan Documents. Mortgagee shall have no obligation to release any Net Condemnation Proceeds, even after agreeing to apply the same to the Taking Restoration Costs for the Mortgaged Property, or after work thereon has commenced, following the occurrence of a Default or Event of Default under this Mortgage, in which event Mortgagee shall have the right to apply the same to any indebtedness secured hereby in such order as Mortgagee may determine. Excess Net Condemnation Proceeds, if any, remaining after the completion of any repair and restoration being paid for out of Net Condemnation Proceeds, shall be applied to any Obligations secured hereby in such order as Mortgagee may determine. -14- (f) Nothing herein shall excuse Mortgagor from operating and maintaining the Mortgaged Property or any portion thereof remaining after such Taking in accordance with the Section 2.2 ("Operation of Premises") of this Mortgage, or from promptly repairing and restoring the Premises or the remaining portion thereof, to the maximum extent possible, to a condition equal to or better than the condition of the entire Premises before such Taking, regardless of whether or not there are condemnation proceeds available for such purposes or whether the amount of such proceeds is sufficient therefor, subject, however, to such temporary closure of the Mortgaged Property or portions thereof as may be necessary to effectuate repairs and restoration so long as such closures are limited in scope and time to that which is consistent with prompt and diligent completion of such repairs and restoration and are in compliance with the provisions of the NAPA Lease. Neither the application by Mortgagee of any such proceeds to the Obligations secured hereby nor the release of the same to Mortgagor for the repair and restoration of the Mortgaged Property or otherwise shall cure or waive any Default or Event of Default under this Mortgage or invalidate any act done pursuant to any notice of default given pursuant thereto. (g) Notwithstanding the occurrence of any Taking or the application of any proceeds realized thereby to the Obligations secured hereby, Mortgagor shall continue to pay the Debentures in accordance with the terms thereof and perform all the other obligations under this Mortgage until the entire indebtedness secured hereby has been paid in full and all other Obligations have been fully performed. No Taking shall be deemed to reduce any Obligations secured by this Mortgage or stay the accrual of interest thereon, except to the extent any proceeds thereof are actually received by Mortgagee and Mortgagee has given written notice to Mortgagor of the application of such proceeds to the reduction of the Obligations. (h) Notwithstanding anything in this Mortgage to the contrary, if, following the occurrence of any Taking but prior to the receipt by Mortgagee of any of the proceeds thereof, the Mortgaged Property shall be sold on foreclosure of this Mortgage, Mortgagee shall have the exclusive right to receive all proceeds payable on account of such Taking and apply such proceeds to any deficiency found to be due upon such sale, with legal interest thereon, whether or not a deficiency judgment on this Mortgage shall have been sought or recovered or denied, and to all fees, costs and expenses, including attorneys' fees and expenses, incurred by Mortgagee in connection with the collection of such proceeds. 2.14 RESTRICTIONS ON ALIENATION AND FURTHER ENCUMBRANCES. (a) Mortgagor shall not, without Mortgagee's prior written consent in each instance, which may be given or withheld in Mortgagee's absolute and sole discretion, voluntarily or involuntarily sell, assign, convey, transfer, grant, or otherwise dispose of (or permit, allow or suffer same), or permit, allow or suffer any person to voluntarily or involuntarily purchase or otherwise acquire, the Mortgaged Property or any legal or beneficial interest in the Mortgaged Property or any part thereof or interest therein (including, without limitation, any "net," "master" or "ground" leasing of the Mortgaged Property) except in the ordinary course of business. (b) Mortgagor shall not, without Mortgagee's prior written consent in each instance, which may be given or withheld in Mortgagee's absolute and sole discretion, permit, allow or suffer: (i) any change in the -15- organizational structure of Mortgagor; or (ii) any voluntary or involuntary sale, assignment, conveyance, transfer, or other disposition of any shares or other legal or beneficial interest in Mortgagor. (c) Mortgagor shall not, without Mortgagee's prior written consent in each instance, which may be given or withheld in Mortgagee's absolute and sole discretion, voluntarily or involuntarily (i) sell, assign, convey, transfer, grant or otherwise dispose of the Mortgaged Property, or any part thereof or interest therein, as security for any indebtedness, other obligations, or otherwise, (ii) assign the whole or any part of the Leases or the rents, issues, profits, royalties, bonuses, income or other benefits derived from or produced by the Mortgaged Property, (iii) except in the ordinary course of business, otherwise lien, mortgage, collateralize, pledge, grant a security interest in, or in any way hypothecate, directly or indirectly, the Mortgaged Property (including, but not limited to, the Leases and Rents and Mortgagor's right, title, interest and estate in, to and under the NAPA Lease), or any part thereof or interest therein, (iv) lien, mortgage, encumber, collateralize, pledge or in any way hypothecate, directly or indirectly, any shares or other legal or beneficial interest in Mortgagor, or (v) permit, allow or suffer any of the foregoing to take place. (d) Notwithstanding the foregoing subparagraph (c), Mortgagor shall have the right, without first obtaining Mortgagee's consent, to remove and dispose of, free and clear of the lien and security interest of this Mortgage, such Equipment as may from time to time become worn out or obsolete, provided that Mortgagor shall either (1) simultaneously with or prior to removing any such Equipment, replace such Equipment with other equipment of a value at least equal to that of the replaced Equipment, free and clear of any leases, title retention or security agreement, or other encumbrance, and by such removal and replacement Mortgagor shall be deemed to have subjected such Equipment to the lien and security interest of this Mortgage, or (2) promptly pay over to Mortgagee all net cash proceeds received from such disposition, which sums shall be applied by Mortgagee to any Obligations in such order as Mortgagee may determine. (e) Notwithstanding the foregoing subparagraph (c), the filing of one or more mechanics' or construction liens against the Mortgaged Property shall not be an Event of Default hereunder if such lien complies with the provisions of Section 2.15 of this Mortgage ("Construction Liens"). 2.15 CONSTRUCTION LIENS. Mortgagor shall, within fifteen (15) days after Mortgagor receives notice or otherwise learns thereof, pay and discharge, at Mortgagor's cost and expense, all construction liens, encumbrances and charges upon the Mortgaged Property, or any part thereof, or any interest therein. Mortgagor shall have the right to contest in good faith the validity of any such lien, encumbrance or charge, provided that Mortgagor shall first deposit a bond, cash or other security, in conformance with Chapter 713, Florida Statutes, with respect to such lien(s), in such amounts and in such form and content so as to cause such lien(s) to be removed as lien(s) against the Mortgaged Property, and deliver to Mortgagee such proof of the removal of such lien(s) as shall be satisfactory to Mortgagee in its sole and absolute discretion. 2.16 EASEMENTS AND RESTRICTIONS. All proposed easements, plats, declarations of condominium, declarations of covenants and restrictions, homeowner's association documents, and other instruments (and any amendment to or modifications of any such instruments) which would or might affect the title to the Mortgaged Property shall be submitted to Mortgagee for Mortgagee's -16- approval (and execution solely as a lienholder if Mortgagee approves same) prior to the execution thereof by Mortgagor, accompanied by a survey showing the exact proposed location thereof, as applicable, and such other information as Mortgagee shall reasonably require. Mortgagor shall not subject the Mortgaged Property, or any part thereof, to any declaration of condominium, timeshare documents or restrictive covenant without the prior written consent of Mortgagee. 2.17 EQUIPMENT AND EQUIPMENT LEASES. (a) During the term of this Mortgage, the Mortgaged Property shall be furnished and equipped in a manner required by the Lease and as appropriate to the Project. (b) Mortgagor covenants and agrees that all Equipment encumbered by this Mortgage shall be fully paid for and free from all liens, encumbrances, leases, and title retention agreements when delivered and installed upon the Mortgaged Property, and all such Equipment shall be deemed to be realty and part of the freehold, to the maximum extent permitted by law. Subject to the provisions of the Senior Credit Agreement concerning Existing Equipment Leases, as defined therein, Mortgagor shall not enter into any material Equipment Lease, or any other material agreement by which Mortgagor is given possession of the Equipment without ownership thereof, without Mortgagee's prior written consent. Mortgagor specifically acknowledges and agrees that Mortgagee may condition such consent on the satisfaction of such requirements as Mortgagee may specify, including, but not limited to, requirements that the Equipment Lease shall: (i) be with unaffiliated third party vendors, at arms' length, market rate terms and conditions; (ii) provide that the lessor shall give Mortgagee written notice of default by Mortgagor under the Equipment Lease, and a reasonable period of time from the date of the default, but in no event less than thirty (30) days, in which to cure the default; (iii) provide that the lessor unconditionally consents to Mortgagor's grant of a lien and encumbrance upon, and security interest in, such Equipment Lease pursuant to this Mortgage and the other Loan Documents, and covenants and agrees that in the event Mortgagee or its designee forecloses upon this Mortgage or otherwise realizes upon or becomes the owner of any of the Mortgaged Property, such lessor shall, at the Mortgagee's request: (x) recognize Mortgagee or its designee and the successors and assigns of the Mortgagee or its designee as the holder of the rights of the lessee under such Equipment Lease; and (y) accept payment and performance by each such party of the obligations of the lessee thereunder. (iv) not be modified or terminated without Mortgagee's prior written consent; (v) include a requirement that the leased Equipment be kept and used exclusively on, and in connection with the business conducted at, the Mortgaged Property; (vi) include an express release of any statutory or common law landlord's lien on any other property of Mortgagor; -17- (vii) give Mortgagor and/or Mortgagee the right to purchase the Equipment subject to the Equipment Lease, by paying the unamortized value of such Equipment and no other premiums, fees, charges or other sums; and (viii) otherwise be satisfactory in form and content to Mortgagee. No item of Equipment which is subject to an Equipment Lease may be brought onto the Mortgaged Property prior to Mortgagor's delivery to Mortgagee of a copy of the Equipment Lease and Mortgagee's written approval of same. (c) All Equipment shall be used directly and exclusively in the operation or management of the Mortgaged Property. Mortgagor shall at all times duly and promptly perform and comply, in all material respects, with all obligations of Mortgagor under any material Equipment Lease, and if Mortgagor shall fail to do so, Mortgagee may, upon the occurrence and during the continuance of an Event of Default, but shall not be obligated to, take any action as Mortgagee deems necessary or desirable to prevent or to cure any default or alleged default by Mortgagor thereunder. Upon receipt by Mortgagee, during the continuance of an Event of Default, of any written notice of such a default by Mortgagor in the observance or performance of any of the terms, covenants or conditions in the Equipment Leases, Mortgagee may rely thereon and may, but shall not be obligated to, take any required action to prevent or cure such default, even if the existence of such default or the nature thereof be questioned or denied by or on behalf of Mortgagor. Mortgagor shall deliver to Mortgagee, at any time and from time to time, upon request by Mortgagee, evidence reasonably satisfactory to Mortgagee that the Equipment Leases are in full force and effect, without default thereunder by any party, and without the occurrence of any event, which would, upon the lapse of time or the giving of notice, or both, result in a default thereunder. Mortgagor shall give Mortgagee prompt written notice of any material default by any party under any material Equipment Lease. 2.18 RECORDS AND ACCOUNTS. Mortgagor shall keep or cause to be kept full, true and complete records and books of account, in accordance with generally accepted accounting principles on a calendar year basis. Mortgagor's accounts shall be kept current at all times, and all transactions of Mortgagor shall be promptly and accurately entered therein. All Mortgagor's records and books of account, originals of all documents with respect to its organization, all minute books and other records relating to its continued existence, complete and accurate records of all persons, directly or indirectly through one or more intermediary persons, owning a legal or beneficial interest in Mortgagor as shareholders, partners, members or otherwise, originals of all Leases, Contracts, Permits, insurance policies and any and all other agreements relating to or affecting the Mortgaged Property, all correspondence and other files relating thereto, originals of all licenses and permits, all plans and specifications with respect to the Mortgaged Property, all environmental reports, financial analyses, engineering reports, appraisals and other studies undertaken by, for or at the direction of Mortgagor with respect to the Mortgaged Property and all other documents and materials of any kind whatsoever relating to Mortgagor, the Mortgaged Property and/or the business of Mortgagor conducted thereat normally and usually maintained by owners of similar properties shall be kept and maintained by Mortgagor at the Mortgaged Property or at the principal office of Mortgagor. 2.19 REPORTS TO MORTGAGEE. In addition to all other deliveries which Mortgagor is required to make to Mortgagee elsewhere in this Mortgage and without limiting Mortgagor's obligations with respect thereto, Mortgagor shall -18- deliver the following to Mortgagee, all of which shall be prepared at Mortgagor's sole cost and expense: (1) No later than ten (10) days following Mortgagee's demand therefor, upon the occurrence and during the continuance of an Event of Default, copies of all Leases, Contracts, Equipment Leases, and other agreements relating to or affecting Mortgagor or the Mortgaged Property, certified as true and complete by an Approved Signatory. (2) No later than ten (10) days following Mortgagee's demand therefor, a certificate of Mortgagor stating the amount of the then unpaid principal balance of the Debentures, the amount of any unpaid interest accrued thereon, the interest rate then being earned on the outstanding principal balance of the Debentures, the date to which the last installment of interest or principal and interest has been paid, and whether or not, to the best of Mortgagor's knowledge, any Default or Event of Default then exists. (3) No later than ten (10) business days after Mortgagor's receipt thereof, true and complete copies of (1) all written notices of default, given to Mortgagor by any tenant under a Lease or by any party to a material Contract, Equipment Lease or other agreement with respect to or affecting Mortgagor or the Mortgaged Property, (2) all notices issued by any Governmental Authority having jurisdiction over Mortgagor or the Mortgaged Property of any violation of Governmental Requirements at the Mortgaged Property, and (3) all notices, correspondence, legal papers or other documents relating to any material suits, proceedings or other actions threatened in writing, being commenced or pending against Mortgagor or the Mortgaged Property before any court of law, administrative agency, arbitration panel or other adjudicating body. 2.20 MORTGAGEE'S DUE DILIGENCE. (a) Mortgagee and its officers, employees, representatives, consultants, accountants, advisers, contractors and other agents shall have the right, but not the obligation, at any time and from time to time, upon the occurrence and during the continuance of an Event of Default, on reasonable advance notice during ordinary business hours (1) to enter upon the Mortgaged Property and all portions thereof in order to conduct any and all inspections, tests, appraisals and other investigations, including, without limitation, physical inspections and environmental audits and tests, as Mortgagee may in its sole and absolute discretion deem necessary or advisable, (2) inspect, copy (at Mortgagor's expense) and audit all of Mortgagor's files, accounts, books and records, including, without limitation, the documents and materials described in Section 2.18 (Records and Accounts) at the Mortgaged Property or Mortgagor's principal office, and (3) conduct discussions with tenants under Leases, mortgagees under other mortgages, parties under Contracts, Equipment Leases and other agreements pertaining to or affecting Mortgagor, the Mortgaged Property or the business of Mortgagor conducted with respect thereto and/or any Governmental Authorities having jurisdiction over Mortgagor or the Mortgaged Property or any part thereof or interest therein. (b) Mortgagor shall cooperate with and assist Mortgagee in its efforts to acquire such information with respect to Mortgagor, the Mortgaged Property and/or the business of Mortgagor conducted thereon as Mortgagee may reasonably require and shall promptly answer such inquiries with respect thereto as Mortgagee may at any time or from time to time make. -19- (c) All fees, costs and expenses, including, without limitation, reasonable attorneys' fees and expenses, incurred or expended by Mortgagee in conducting such due diligence with respect to Mortgagor, the Mortgaged Property and/or the business of Mortgagor with respect thereto upon the occurrence and during the continuance of an Event of Default, including, without limitation, physical inspections, appraisals and environmental audits and tests, shall be deemed to be incurred and/or expended in connection with the collection of the Obligations and Mortgagee shall be reimbursed by Mortgagor therefor as provided in Section 2.21 (Reimbursement of Expenses). 2.21 REIMBURSEMENT OF EXPENSES. Any and all fees, costs and expenses incurred or expended by Mortgagee, including, without limitation, reasonable attorneys' fees and expenses, whether in connection with any action or proceeding or not, to sustain the lien of this Mortgage or its priority, or to protect or enforce any of its rights and remedies hereunder or judgments rendered in connection with the Loan Documents, or to recover any indebtedness hereby secured, or for any title examination or title insurance policy relating to the title to the Mortgaged Property, shall be due and payable by Mortgagor to Mortgagee on demand. All sums so advanced and all interest thereon shall be a lien on and security interest in the Mortgaged Property and shall be secured by this Mortgage in addition to all other Obligations. 2.22 NAPA LEASE. Mortgagor represents, warrants covenants and agrees that: (a) Mortgagor shall promptly pay when due, prior to the time when non-payment would give the lessor under the NAPA Lease the right to terminate the NAPA Lease, all rents (including minimum or base rents, percentage rents and additional rents), taxes and all other sums and charges mentioned in and made payable by the NAPA Lease. (b) Mortgagor shall keep and perform each and every covenant, agreement and obligation of the lessee set forth in the NAPA Lease, will do all things necessary to preserve and keep unimpaired Mortgagor's rights under the NAPA Lease and will not commit, suffer or permit any breach thereof. If Mortgagor shall default under the NAPA Lease or if the lessor thereunder shall allege a default by Mortgagor, Mortgagee may (but shall not be obligated to) immediately, in addition to exercising any of its remedies provided in ARTICLE THREE of this Mortgage with respect to an Event of Default, at its option and without being bound by any curative or grace period provided for the NAPA Lease or by this Mortgage, take any action necessary or desirable to cure any default alleged or otherwise by Mortgagor in the performance of any of the terms, covenants and conditions of the NAPA Lease. Upon receipt by Mortgagee of any written notice of default by Mortgagor in the observance or performance of any provisions of the NAPA Lease, Mortgagee may rely thereon and may (but shall not be obligated to) take any action required to prevent or cure such default even though the existence of such default or the nature thereof be questioned or denied by or on behalf of Mortgagor. Mortgagor hereby expressly grants to Mortgagee, and agrees that Mortgagee shall have the absolute and immediate right, upon notice to Mortgagor in any manner Mortgagee elects, including without limitation notice by telephone or telefax, to enter in and upon the Premises or any part thereof to such extent and as often as Mortgagee, in its sole discretion, deems necessary or desirable in order to cure any such default by Mortgagor under the NAPA Lease. All sums so expended shall be secured by the lien of this Mortgage, shall be due upon demand and shall be secured by the lien of this Mortgage. -20- (c) Mortgagor shall give immediate notice to Mortgagee of any material defaults by the lessor or the Mortgagor under the NAPA Lease, or the receipt by Mortgagor of any notice of such a default or of the intention of lessor or lessee thereunder to terminate the NAPA Lease, or of any notice, summons or legal process which may affect the validity of the NAPA Lease or the term thereof or which may affect either Mortgagor's or Mortgagee's interests in, or possession of, the Premises, or any part thereof, or which relates to any payment, act or thing, which is required by this Mortgage or the NAPA Lease to be paid, done or performed. Mortgagor shall furnish to Mortgagee, promptly upon request, any and all information concerning the performance by Mortgagor of Mortgagor's obligations under the NAPA Lease, and shall permit Mortgagee or its agent at all reasonable times to make investigation of or concerning such performance. Mortgagor shall take all reasonable steps, including legal proceedings, to protect its own right, title and interest in any of the Premises and to enable Mortgagee to defend its interests therein. (d) Mortgagor shall not assign, transfer or encumber in any way whatsoever all or any part of the NAPA Lease, or all or any part of the rents, profits, or other income from the Premises, to any person without the prior written consent of Mortgagee, which may be given or withheld in Mortgagee's sole discretion, and any assignment, transfer or encumbrance of the NAPA Lease or of such rents, profits and other income without such prior written consent shall be null, of no effect and absolutely void. (e) Mortgagor covenants that it shall not, without Mortgagee's prior written consent, which may be given or withheld in Mortgagee's sole discretion: (i) surrender the leasehold estate or any other interest in the NAPA Lease, (ii) terminate or cancel the NAPA Lease, (iii) materially modify, change, supplement, alter or amend the NAPA Lease, or (iv) release the lessor thereunder from any material obligations imposed upon it thereby, either orally or in writing. As further security for the repayment of the indebtedness secured hereby and for the performance of the covenants herein and in the NAPA Lease contained, Mortgagor hereby assigns to Mortgagee all of its rights, privileges, and prerogatives as lessee under the NAPA Lease to surrender, terminate, cancel, modify, change, supplement, alter or amend the NAPA Lease in violation of the foregoing, and any such surrender, termination, cancellation, modification, change, supplement, alteration or amendment of the NAPA Lease without Mortgagee's prior written consent thereto shall be void and of no force and effect. (f) Mortgagor covenants that no release or forbearance of any of the Mortgagor's obligations under the NAPA Lease, pursuant to the NAPA Lease or otherwise, shall release Mortgagor from any of its obligations under this Mortgage, including its obligations with respect to the payment of rent as provided for in the NAPA Lease and the performance of all of the terms, provisions, covenants, conditions and agreements contained in the NAPA Lease, to be kept, performed and complied with by lessee therein. (g) The provisions of this Mortgage and the other Loan Documents shall be deemed to be obligations of Mortgagor in addition to Mortgagor's obligations as lessee with respect to similar matters contained in the NAPA Lease, and the inclusion herein of any covenants and agreements relating to similar matters under which Mortgagor is obligated under the NAPA Lease shall not restrict or limit Mortgagor's duties and obligations to keep and perform promptly all of its covenants, agreements and obligations as lessee -21- under the NAPA Lease; provided, however, that nothing in this Mortgage and the other Loan Documents shall be construed as requiring the taking of or the committing to take any action by Mortgagor or Mortgagee which would cause a default under the NAPA Lease. (h) So long as this Mortgage is in effect, there shall be no merger of the NAPA Lease or any interest therein nor of the leasehold estate created thereby with the fee estate in the Premises or any portion thereof by reason of the fact that the NAPA Lease or such interest therein or such leasehold estate may be held directly or indirectly by or for the account of any person who shall hold the fee estate in the Premises or any portion thereof or any interest of the lessor under the NAPA Lease. Mortgagor shall not exercise any options or rights, if any, under the NAPA Lease with respect to the acquisition of fee title to the NAPA Lease Land or otherwise acquire such fee title, without Mortgagee's prior written consent and any attempt by Mortgagor to do so without Mortgagee's prior written consent shall be void and of no force or effect. In case Mortgagor acquires the fee title or any other estate, title or interest in the Premises covered by the NAPA Lease, this Mortgage shall attach to and be a lien upon the fee title or such other estate so acquired, and such fee title or other estate shall, without further assignment, mortgage or conveyance, become and be subject to the lien of and encumbered by this Mortgage. Mortgagor shall promptly notify Mortgagee in writing of any such acquisition by Mortgagor and, on written request by Mortgagee, shall cause to be executed and recorded all such other and further assurances or other instruments in writing as may in the opinion of Mortgagee be required to carry out the intent and meaning hereof. (i) Mortgagor shall, promptly after the execution and delivery of this Mortgage and the other Loan Documents, notify the lessor under the NAPA Lease in writing of the execution and delivery thereof and deliver or cause to be delivered to such lessor a copy of this Mortgage. (j) If the NAPA Lease is terminated prior to the natural expiration of their respective terms by reason of default of the lessee thereunder, and if, pursuant to any provision the NAPA Lease, or otherwise, Mortgagee or its designee shall acquire from the lessor thereunder a new lease of the Premises, or of any part of the Premises, Mortgagor shall have no right, title or interest in or to such new lease or the leasehold estate created thereby. (k) Mortgagor hereby represents and warrants that: (i) the NAPA Lease is in all respects valid and existing; (ii) Mortgagor is not in default under any of its terms or provisions, (iii) there does not exist a state of facts which upon notice and lapse of any applicable grace period would constitute a default thereunder, (iv) no controversies exist involving any claim of such default, and (v) the terms of the NAPA Lease have not been changed or modified except as mentioned in the definition of "NAPA Lease" as set forth in Rider 1 to this Mortgage. (l) Mortgagor shall furnish to Mortgagee, upon demand, proof of payment of all items which are required to be paid by Mortgagor pursuant to the NAPA Lease and proof of payment of which are required to be given to the lessor under the NAPA Lease. (m) Mortgagor shall execute and deliver, on request of Mortgagee, such instruments as Mortgagee may deem useful or required to permit Mortgagee to cure any default under any term of the NAPA Lease or permit -22- Mortgagee to take such other action as Mortgagee considers desirable to cure or remedy the matter in default and preserve the interest of Mortgagee in the Premises. (n) Mortgagor shall, at no cost to Mortgagee, use its diligent good faith efforts to obtain and deliver to Mortgagee from lessor, within fifteen (15) days after written request by Mortgagee and at no cost to Mortgagee, any lessor's estoppel certificate provided for in the NAPA Lease. (o) In each and every instance under the NAPA Lease where Mortgagor, as lessee, has the right or authority to appoint or select an appraiser and/or an arbitrator, Mortgagor shall relinquish this right or authority to Mortgagee on demand, and Mortgagee, may, at its option, within the time periods required under the NAPA Lease, after consultation with Mortgagor, choose the subject appraiser and/or arbitrator on behalf of Mortgagor. (p) For the purpose of curing any default by Mortgagor under the NAPA Lease, Mortgagee may (but shall not be obligated to) do any act or execute any document in the name of Mortgagor or as its attorney-in-fact in its name or otherwise to do any and all acts and to execute any and all documents which in the opinion of Mortgagee may be necessary or desirable to cure any default under the NAPA Lease or to preserve any rights of Mortgagor in, to or under the NAPA Lease, or sublease thereof, or to preserve any rights of Mortgagor whatsoever in respect to any part of the Premises. (q) The curing by Mortgagee of any default by Mortgagor under the NAPA Lease shall not remove or waive, as between Mortgagor and Mortgagee, the Event of Default which occurred hereunder by virtue of the default by Mortgagor under the NAPA Lease. (r) To the extent allowable by law, Mortgagor agrees as follows: (1) The lien of this Mortgage shall attach to any and all of Mortgagor's rights and remedies arising hereafter under or pursuant to Subsection 365(h) of the Bankruptcy Code, 11 U.S.C. 101 et seq. or any amendments thereto (the "Bankruptcy Code"), including, without limitation, all of Mortgagor s rights to remain in possession of the Premises. (2) Mortgagor shall not, without first obtaining Mortgagee's prior written consent, elect to treat the NAPA Lease as terminated under Subsection 365(h)(1) of the Bankruptcy Code. Any such election made without first obtaining Mortgagee's prior written consent shall be void. (3) Mortgagor hereby unconditionally assigns, transfers and sets over to Mortgagee, all of Mortgagor's claims and rights to the payment of damages arising from any rejection by lessor of the NAPA Lease under the Bankruptcy Code. If Mortgagor does not do so or after an Event of Default and while same continues, Mortgagee shall have the right to proceed in its own name or in the name of Mortgagor in respect of any claim, suit, action or proceeding relating to the rejection of the NAPA Lease, including, without limitation, the right to file and prosecute, with the joinder of Mortgagor, any proofs of claim, complaints, motions, applications, notices and other documents, in any case with respect to ground lessor under the Bankruptcy Code. This assignment constitutes a present, irrevocable and unconditional assignment of -23- the foregoing claims, rights and remedies, and shall continue in effect until all of the indebtedness and obligations secured by this Mortgage shall have been satisfied and discharged in full. Any amounts received by Mortgagee as damages arising out of the rejection of the NAPA Lease as aforesaid shall be applied first to all fees, costs and expenses of Mortgagee (including, without limitation, reasonable attorneys' fees and expenses) incurred in connection with the exercise of any of its rights or remedies under this paragraph, and then applied in accordance with the provisions of this Mortgage in the manner and order specified for condemnation proceeds. (4) If any action, proceeding, motion or notice shall be commenced or filed with respect to the lessor under the NAPA Lease or the Premises in connection with any case under the Bankruptcy Code and Mortgagor fails to participate in any such litigation to the reasonable satisfaction of Mortgagee, Mortgagee shall have the option, to the exclusion of Mortgagor, exercisable upon written notice from Mortgagee to Mortgagor, to conduct and control any such litigation with counsel of Mortgagee's choice. Mortgagee may proceed in its own name or in the name of Mortgagor in connection with any such litigation, and Mortgagor agrees to execute any and all powers, authorizations, consents or other documents required by Mortgagee in connection therewith. Any expenditures or payments made or incurred by Mortgagee in connection with the prosecution or conduct of such litigation shall be secured by the lien of this Mortgage and shall, at the option of Mortgagee, be repayable immediately upon demand; and if Mortgagor shall fail to repay Mortgagee any such advance with interest as hereinafter provided within ten (10) days after demand for repayment of same, Mortgagee may, at its option, declare all sums evidenced by the Debentures or secured by this Mortgage to be immediately due and payable, and avail itself of any and all rights and remedies provided for herein. Mortgagor shall not commence any action, suit, proceeding or case, or file any application or make any motion, in respect of the NAPA Lease in any such case under the Bankruptcy Code without first obtaining the prior written consent of Mortgagee. (5) Mortgagor shall, promptly after obtaining knowledge thereof, notify Mortgagee orally, by telephone, of any filing by or against the lessor under the NAPA Lease of a petition under the Bankruptcy Code, such telephone notice to be given to the location for Mortgagee specified herein for notice. Mortgagor shall also immediately thereafter and forthwith give written notice of such filing to Mortgagee, setting forth any information available to Mortgagor as to the date of such filing, the court in which such petition was filed, and the relief sought therein. Mortgagor shall also promptly, after Mortgagor's receipt, deliver to Mortgagee copies of any and all notices, summonses, pleadings, applications and other documents received by Mortgagor in connection with any such petition and in connection with any proceedings relating thereto. (6) If there is filed by or against Mortgagor a petition under the Bankruptcy Code, and Mortgagor as lessee under the NAPA Lease, determines to reject the NAPA Lease pursuant to Section 365(a) of the Bankruptcy Code, Mortgagor shall give Mortgagee prior written notice of the date on which Mortgagor shall apply to the Bankruptcy Court for authority to reject the NAPA Lease. Such date of application by Mortgagor shall not be less than ten (10) days from the date of receipt as provided herein by Mortgagee. Mortgagee shall have the right, but not the obligation, to serve upon Mortgagor within such ten day period a written notice stating: (i) Mortgagee demands that Mortgagor assume and assign the NAPA Lease to Mortgagee pursuant to Section 365 -24- of the Bankruptcy Code; and (ii) that Mortgagee covenants to cure or provide adequate assurance of prompt cure of all defaults and provide adequate assurance of future performance under the NAPA Lease. If Mortgagee serves upon Mortgagor the written notice described in the preceding sentence, Mortgagor shall not seek to reject the NAPA Lease and shall comply with the demand provided for in clause (i) of the preceding sentence within thirty (30) days after such written notice shall have been given subject to the performance by Mortgagee of the covenant provided for in clause (ii) of the preceding sentence. (7) Effective upon the entry of any order for relief with respect to Mortgagor under Chapter 7 of the Bankruptcy Code, Mortgagor hereby assigns and transfers to Mortgagee a non-exclusive right to apply to the Bankruptcy Court under Subsection 365(d)(1) of the Bankruptcy Code for an order extending the period during which a NAPA Lease may be rejected or assumed. All of the covenants of this Section 2.22 shall also apply to any subsequent leases affecting the Mortgaged Property where Mortgagor is lessee. The generality of the provisions of this section relating to the NAPA Lease shall not be limited by other provisions of this Mortgage setting forth particular obligations of Mortgagor which are also required of Mortgagor as the lessee under the NAPA Lease. 3. EVENTS OF DEFAULT AND REMEDIES. 3.1 EVENTS OF DEFAULT. Upon the occurrence and during the continuation of any of the events described in clauses (a) through (e) below, the Mortgagee shall promptly notify in writing the holders of the Debentures. Upon the written direction of the holders of a majority of the outstanding principal amount of the Debentures (the "Required Holders"), the Mortgagee shall declare the occurrence and continuation of such event to constitute an Event of Default. Such Event of Default shall cease immediately upon the cessation of the event described in clauses (a) through (e) below on which such Event of Default was based. (a) Terremark's default, which continues for a period of at least 15 days, in the payment of Principal under, or Interest on, the Debentures when the same becomes due and payable upon redemption or otherwise; (b) the breach by Terremark or Mortgagor of any covenant or agreement in this Mortgage, the Debentures or any other Loan Document (other than a breach described in clause (a) above), and such breach continues for a period of 30 consecutive days after written notice to Mortgagor or Terremark by Mortgagee, provided, that if such breach is not curable within 30 days, then such period shall be extended for an additional 60 consecutive days so long as Mortgagor or Terremark is diligently attempting to cure such breach; (c) any final judgment or order against Terremark (not covered by insurance) for the payment of money in excess of $1,000,000 in the aggregate for all such final judgments or orders (treating any deductibles, self-insurance or retention as not so covered) and which is not paid or discharged, or if there shall be any period of 60 consecutive days following the entry of a final judgment or order that causes the aggregate amount for all such final judgments -25- or orders outstanding and not paid or discharged against Terremark to exceed $1,000,000, and for which a stay of enforcement of such final judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; (d) a court having jurisdiction in the premises enters a decree or order for (i) relief in respect of Terremark in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, (ii) appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of Terremark for all or substantially all of the property and assets of Terremark or (iii) the winding up or liquidation of the affairs of Terremark and, in each case, such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (e) Terremark (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order of relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of Terremark or for all or substantially all of the property and assets of Terremark or (iii) effects any general assignment for the benefit of creditors. 3.2 ACCELERATION. At any time upon the occurrence and during the continuation of an Event of Default, the Required Holders may direct the Mortgagee in writing to declare the outstanding principal and the accrued and unpaid interest, if any, on all Debentures, and all other sums of any kind whatsoever secured by this Mortgage and/or payable under any other Loan Documents to be immediately due and payable in their entirety. 3.3 FORECLOSURE. Upon the occurrence and during the continuation of any Event of Default, Mortgagee shall have the right to collect all indebtedness, charges, and other sums then due and payable under this Mortgage and any of the other Loan Documents by proceeding against the Mortgaged Property, or any part thereof or interest therein, by foreclosure, or other action at law or in equity for the enforcement of this Mortgage, or otherwise, as permitted by the laws of the State of Florida. Mortgagor hereby waives any right it may have to require the marshaling of its assets. Mortgagee shall have the right to foreclose the Mortgaged Property in its entirety, or any part thereof or interest therein, as Mortgagee in its sole and absolute discretion shall determine, in one or more sales in such order and priority as Mortgagee may in its sole and absolute discretion deem necessary or advisable. All sums realized from any such foreclosure sale, less all costs and expenses of such sale, shall be applied to the payment of any indebtedness, charges and other sums then due and payable under this Mortgage and any of the other Loan Documents in such order as Mortgagee shall determine in its sole and absolute discretion. If, following any such foreclosure sale, any indebtedness, charges and other sums secured hereby, whether or not then due and payable, shall remain unpaid or unsatisfied in any respect, this Mortgage, the Debentures and the other Loan Documents, and all Obligations of Mortgagor hereunder and thereunder, shall continue in full force and effect until such unpaid and unsatisfied indebtedness is fully paid and satisfied as therein provided. 3.4 REMEDIES UNDER THE UNIFORM COMMERCIAL CODE. Upon the occurrence of any Event of Default, Mortgagee may exercise any or all of the remedies available to a secured party under the Uniform Commercial Code, including, but not limited to: -26- (a) Either personally or by means of a court appointed receiver, take possession of all or any portion of the property described in Section 1.2 of this Mortgage and exclude therefrom Mortgagor and all others claiming under Mortgagor, and thereafter hold, store, use, operate, manage, maintain and control, make repairs, replacements, alterations, additions and improvements to and exercise all rights and powers of Mortgagor in respect of such property or any part thereof. In the event Mortgagee demands or attempts to take possession of such property in the exercise of any rights under any of the Loan Documents, Mortgagor promises and agrees to promptly turn over and deliver complete possession thereof to Mortgagee; (b) Without written notice to or demand upon Mortgagor, make such payments and do such acts as Mortgagee may deem necessary to protect its security interest in such property, including, without limitation, paying, purchasing, contesting or compromising any encumbrance, charge or lien which is prior to or superior to the security interest granted hereunder and, in exercising any such powers or authority, to pay all expenses incurred in connection therewith; (c) Require Mortgagor to assemble such property or any portion thereof, at a place designated by Mortgagee and reasonably convenient to both parties, and promptly to deliver such property to Mortgagee, or an agent or representative designated by it. Mortgagee, and its agents and representatives, shall have the right to enter upon any or all of Mortgagor's premises and property to exercise Mortgagee's rights hereunder; and (d) Sell, lease or otherwise dispose of such property at public sale, with or without having the property at the place of sale, and upon such terms and in such manner as Mortgagee may determine. Mortgagee may be a purchaser at any such sale. It is expressly agreed that if, upon an Event of Default, Mortgagee should proceed to dispose of any property in accordance with the provisions of the Uniform Commercial Code, ten (10) days' notice by Mortgagee to Mortgagor shall be deemed to be reasonable notice under any provision of the Uniform Commercial Code requiring such notice; provided that, to the extent permitted by applicable law, Mortgagee may at its option dispose of such property in accordance with Mortgagee's rights and remedies with respect to Premises pursuant to the provisions of this Mortgage in lieu of proceeding under the Uniform Commercial Code. 3.5 MORTGAGEE'S RIGHTS OF SETOFF. Upon the occurrence and during the continuance of an Event of Default, Mortgagee may offset and apply to any or all of the Obligations all monies, credits and other property of any nature whatsoever, and the proceeds thereof, of Mortgagor or any Guarantor now or at any time hereafter in the possession of, in transit to or from, under the custody or control of, or on deposit with, Mortgagee, including all escrow and reserve accounts of Mortgagor. 3.6 MORTGAGEE'S RIGHTS OF CURE. Upon the occurrence and during the continuance of an Event of Default, Mortgagee, in its sole discretion, without obligation to do so, without notice to or demand upon Mortgagor and without releasing Mortgagor from any obligation, may take any action Mortgagee deems necessary to cure such Event of Default. Any sums advanced by Mortgagee to pay the cost of curing such default shall be due and payable by Mortgagor to Mortgagee on demand. All sums so advanced and all interest thereon shall be part of the Obligations and secured by this Mortgage. If, at the time Mortgagee elects to cure such default, Mortgagee shall hold any insurance or condemnation proceeds, Property Tax or insurance escrows or other sums pursuant to this Mortgage or any other Loan Document, and Mortgagee may, at its option and without notice to Mortgagor, apply such funds, in such order as it deems -27- appropriate, to the payment of all costs of such cure, notwithstanding anything to the contrary elsewhere contained in the Loan Documents, in lieu of advancing its own funds for such purpose. If Mortgagee has advanced its own funds to cure such default, Mortgagee shall have the right, at any time that any such advances remain unpaid, without notice to Mortgagor, to apply any proceeds, escrows or other sums then held by Mortgagee or any third party pursuant to this Mortgage or any other Loan Document, notwithstanding anything to the contrary elsewhere contained in the Loan Documents, to the payment of such advances and all outstanding and unpaid interest, if any, thereon. Upon demand by Mortgagee, Mortgagor shall immediately replenish the amount of any proceeds, escrows or other sums so applied by Mortgagee so that Mortgagee (or such third party, as applicable), shall thereafter hold the same amount of proceeds, escrows and other sums which Mortgagee (or such third party, as applicable), would have held but for the exercise of the rights granted Mortgagee in this Section. No such application or replenishment shall be deemed to cure the Event of Default. 3.7 APPOINTMENT OF RECEIVER. Mortgagee, in any action to foreclose this Mortgage, or upon the actual or threatened waste to any part of the Mortgaged Property, or upon the occurrence and during the continuation of an Event of Default under this Mortgage or any other Loan Document, shall be at liberty to apply (in an ex parte proceeding, if Mortgagee so elects) for the appointment of a receiver of the rents and profits of the Mortgaged Property without notice, and shall be entitled to the appointment of such receiver as a matter of right, without consideration of the value of the Mortgaged Property as security for the amounts due Mortgagee or the solvency of any person or corporation liable for the payment of such amounts. 3.8 ALL LEGAL AND EQUITABLE REMEDIES. Mortgagee shall have the right from time to time to enforce any legal or equitable remedy against Mortgagor and to sue to enforce any covenant or undertaking of Mortgagor contained herein; and/or to recover any sums, whether interest, damages for failure to pay principal or any installment thereof, taxes, installments of principal, or any other sums required to be paid under the terms of this Mortgage, as the same become due, without regard to whether or not the principal sum secured or any other sums secured by the Debentures and Mortgage shall be due and without prejudice to the right of Mortgagee thereafter to enforce any appropriate remedy against Mortgagor, including an action of foreclosure, or any other action, for a default or defaults by Mortgagor existing at the time such earlier action was commenced. 3.9 RIGHTS DISTINCT AND CUMULATIVE. The rights of Mortgagee arising under this Mortgage shall be separate, distinct and cumulative and none of them shall be in exclusion of the others or any remedy now or hereafter existing at law or in equity or by statute; and no act of Mortgagee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision, anything herein or otherwise to the contrary notwithstanding. Every power or remedy given by any of the Loan Documents to Mortgagee, or to which Mortgagee may be otherwise entitled, may be exercised concurrently or independently, from time to time and as often as may be deemed expedient by Mortgagee. Mortgagee may pursue inconsistent remedies. 3.10 ACCORD AND SATISFACTION. The acceptance by Mortgagee of any sum after the same is due shall not constitute a waiver of the right either to -28- require prompt payment, when due, of all other sums hereby secured or to declare a Default or Event of Default under this Mortgage or any of the other Loan Documents. The acceptance by Mortgagee of any sum in an amount less than the sum then due shall be deemed an acceptance on account only and upon condition that it shall not constitute a waiver of the obligation of Mortgagor to pay the entire sum then due, and failure of Mortgagor to pay such entire sum then due shall be an Event of Default notwithstanding such acceptance of such amount on account, as aforesaid. Mortgagee shall, at all times thereafter and until the entire sum then due shall have been paid, and notwithstanding the acceptance by Mortgagee thereafter of further sums on account, or otherwise, be entitled to exercise all rights in this Mortgage and any of the other Loan Documents conferred upon Mortgagee and the right to exercise any rights or remedies hereunder shall in no way be impaired, whether any of such amounts are received prior or subsequent to such proceeding, election or exercise. Consent by Mortgagee to any action or inaction of Mortgagor which is subject to consent or approval of Mortgagee hereunder shall not be deemed a waiver of the right to require such consent or approval to future or successive or actions or inactions. 3.11 RESERVATION OF RIGHTS. No failure by Mortgagee to insist upon the strict performance by Mortgagor of any of the terms and provisions hereof shall be deemed to be a waiver of any of the terms and provisions hereof, and Mortgagee, notwithstanding any such failure, shall have the right thereafter to insist upon the strict performance by Mortgagor of any and all of the terms and provisions of this Mortgage to be performed by Mortgagor. Neither Mortgagor nor any other person now or hereafter obligated for the payment of the whole or any part of the sums now or hereafter secured by this Mortgage shall be relieved of such obligation by reason of the failure of Mortgagee to comply with any request of Mortgagor, or of any other person so obligated, to take action to foreclose this Mortgage, or otherwise enforce any of the provisions of this Mortgage, or of any Obligations, or by reason of the release, regardless of consideration, of the whole or any part of the security held for the Obligations, or by reason of any agreement or stipulation between any subsequent owner or owners of the Mortgaged Property and Mortgagee extending the time of payment or modifying the terms of the Debentures or Mortgage without first having obtained the consent of Mortgagor or such other person, and in the latter event, Mortgagor and all such other persons shall continue to be liable for the making of such payments according to the terms of any such agreement of extension or modification unless expressly released and discharged in writing by Mortgagee. Regardless of consideration, and without the necessity for any notice to or consent by the holder of any subordinate lien on the Mortgaged Property, Mortgagee may release the obligation of anyone at any time liable for any of the Obligations or any part of the security held for the Obligations and may extend the time of payment or otherwise modify the terms of the Debentures and/or any other Loan Document without, as to the security or the remainder thereof, in anywise impairing or affecting the lien of this Mortgage or the priority of such lien, as security for the payment and performance of the Obligations as it may be so extended or modified, over any subordinate lien; that the holder of any subordinate lien shall have no right to terminate any lease affecting the Mortgaged Property whether or not such lease be subordinate to this Mortgage; and that Mortgagee may resort for the payment of the Obligations to any other security therefor held by Mortgagee in such order and manner as Mortgagee may elect. 3.12 WAIVER OF AUTOMATIC STAY. The Debentures are being purchased in reliance on Mortgagor's express assurances that it shall not attempt to delay or frustrate the exercise of any rights or remedies granted Mortgagee hereunder -29- upon the occurrence of an Event of Default hereunder. In the event Mortgagor or any Party in Interest directly or indirectly files a petition under the United States Bankruptcy Code or under any similar federal or state law or statute, Mortgagor admits and agrees that such petition shall have been filed in bad faith and in abrogation of Mortgagor's express assurances to Mortgagee hereunder to the contrary, to frustrate or delay the foreclosure and/or sale of the Mortgaged Property, or any part thereof or interest therein, and the exercise of the other rights and remedies available to Mortgagee under this Mortgage, the other Loan Documents and/or at law or in equity, and shall be deemed to have been so filed in the United States Bankruptcy Court or other court in which such filing was made and that Mortgagee shall have, in addition to any and all other rights and remedies available to Mortgagee under this Mortgage, the other Loan Documents and/or at law or in equity, the right (and Mortgagor shall interpose no objection thereto and hereby waives its rights with respect thereto) to request and receive from the Bankruptcy Court, or by such other court, immediate relief from the automatic stay imposed under Section 362 of the United States Bankruptcy Code or by similar provision of any other federal or state law or statute, any stay or other restriction on the rights and remedies of Mortgagee under any of the court's equitable powers, a termination of the exclusive period provided by Section 1121 of the United States Bankruptcy Code, or by any similar provision of any other federal or state law or statute, and a dismissal of the bankruptcy case or proceeding. Nothing in this Mortgage shall be deemed in any way to limit or restrict any rights of Mortgagee to seek in the United States Bankruptcy Court or any other court of competent jurisdiction, any relief Mortgagee may deem appropriate in the event that a voluntary or involuntary petition under any title of the United States Bankruptcy Code or any other federal or state law or statute is filed by or against Mortgagor. 3.13 MORTGAGOR'S WAIVERS. To the full extent permitted by law, Mortgagor agrees that Mortgagor shall not at any time insist upon, plead, claim or take the benefit or advantage of any law now or subsequently in force providing for any appraisement, valuation, stay, moratorium, extension, or reinstatement of the Obligations hereby prior to any sale of the Mortgaged Property to be made pursuant to any provisions contained in this Mortgage or prior to the entering of any decree, judgment or order of any court of competent jurisdiction, or any right under any statute to redeem all or any part of the Mortgaged Property so sold. Mortgagor, for Mortgagor and Mortgagor's successors and assigns, and for any and all persons ever claiming any interest in the Mortgaged Property, to the full extent permitted by law, knowingly, intentionally and voluntarily with and upon the advice of competent counsel, waives, releases, relinquishes and forever forgoes: (a) all rights of valuation, appraisement, stay of execution, reinstatement and notice of election or intention to mature or declare due the Obligations (except such notices as are specifically provided for in this Mortgage); (b) all right to a marshaling of the assets of Mortgagor, including the Mortgaged Property, to a sale in the inverse order of alienation, or to direct the order in which any of the Mortgaged Property shall be sold in the event of foreclosure of the liens and security interests created or through power of sale and agrees that any court having jurisdiction to the foreclose such liens and security interests may order the Mortgaged Property sold as an entirety; and (c) all rights and periods of redemption provided under applicable law. To the fullest extent permitted by law, Mortgagor shall not have or assert any right under any statute or rule of law pertaining to the exemption of homestead or other exemption under any -30- federal, state or local law now or hereafter in effect, the administration of estates of decedents or other matters whatever to defeat, reduce or affect the right of Mortgagee under the terms of this Mortgage to a sale of the Mortgaged Property, for the collection of the Obligations without any prior or different resort for collection, or the right of Mortgagee under the terms of this Mortgage to payment of the Obligations out of the proceeds of sale of the Mortgaged Property in preference to every other claimant whatever. Mortgagor knowingly, intentionally, or voluntarily, with and upon the advice of competent counsel, waives, releases, relinquishes and forever forgoes all present and future statutes of limitations as a defense to any action to enforce the provisions of this Mortgage or to collect any of the Obligations to the fullest extent permitted by law. 3.14 INDEMNIFICATION. In addition to any other indemnifications provided herein or in the other Loan Documents, Mortgagor shall protect, defend, indemnify and save harmless Mortgagee, and any participants with respect to the Loan Documents, and their respective directors, officers, employees, agents and Affiliates, and the respective successors and assigns of each of the foregoing parties, from and against all liabilities, obligations, claims, demands, damages, penalties, causes of action, losses, fines, fees, costs and expenses (including, without limitation, reasonable attorneys' fees and expenses), imposed upon or incurred by or asserted against Mortgagee by reason of: (i) Mortgagor's ownership and operation of the Mortgaged Property or any interest therein; (ii) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Mortgaged Property or the Project or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways occurring prior to a Foreclosure Transfer; (iii) any use, nonuse or condition in, on or about the Mortgaged Property or the Project or any part thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways occurring prior to a Foreclosure Transfer; (iv) any failure on the part of Mortgagor to perform or comply with any of the terms of this Mortgage or any of the other Loan Documents occurring prior to a Foreclosure Transfer; (v) performance of any labor or services or the furnishing of any materials or other property in respect of the Mortgaged Property or the Project or any part thereof occurring prior to a Foreclosure Transfer; (vi) any representation or warranty made in the this Mortgage or the other Loan Documents being false or misleading in any material adverse respect as of the date such representation or warranty was made; (vii) any claim by brokers, finders or similar persons claiming to be entitled to a commission in connection with any Lease or other transaction involving the Mortgaged Property or any part thereof under any legal requirement or any liability asserted against Mortgagee with respect thereto; (viii) the claims of any lessee of all or any portion of the Mortgaged Property or any person acting through or under any lessee or otherwise arising under or as a consequence of any Lease occurring prior to a Foreclosure Transfer (except for claims related to breach by Mortgagee of any agreements between Mortgagee and such lessees); and (ix) any claims for payment of documentary stamp taxes and/or intangible personal property taxes (as well as any penalties, interest or other sums claimed to be due on account of any alleged failure to pay any such taxes) due on the execution, delivery or recording of this Mortgage or any of the other Loan Documents or any prior documents renewed, amended or restated hereby or thereby. Any amounts payable to Mortgagee by reason of the application of this Section or of subsection 2.11(b) shall be due and payable within ten (10) days of written demand therefor and shall be secured by the Mortgage. The obligations and liabilities of Mortgagor under this Section shall survive any termination, satisfaction or assignment of this Mortgage or any Foreclosure Transfer. -31- 4. GENERAL PROVISIONS. 4.1 NOTICES. (a) All Notices shall be in writing, shall be addressed to the intended recipient at the address of such party set forth on RIDER 2, attached hereto and incorporated herein by this reference as if set out in full herein, and shall be either delivered to such party by nationally recognized overnight delivery service (such as Federal Express or Emery Air Freight), by hand delivery, by telecopy, or by mailing to such party by certified mail, return receipt requested, postage prepaid. Either party hereto may at any time and from time to time by Notice given as herein provided change the address to which future Notices to such party are to be given. (b) Any party hereto giving a Notice to the other pursuant to this Section shall simultaneously give a true and complete copy of such Notice to each of the persons designated by the intended recipient thereof on RIDER 2 to receive such copies. Each such copy shall be addressed to the intended recipient at the address of such person set forth on RIDER 2 and shall be given by hand delivery, telecopy, overnight delivery service, or certified mail in the same manner provided above for the giving of Notices. Either party hereto may at any time and from time to time by Notice given as herein provided change the identity or address of the persons designated to receive such copies or designate additional persons to receive such copies. In no event, however, shall Mortgagee be obligated to give copies of any Notice to Mortgagor to more than four persons at any time. (c) No Notice given by any party hereto shall be of any force or effect unless such Notice is given in accordance with all of the provisions of this Section. (d) All Notices shall be deemed to have been given and received (1) on the date of delivery if delivered before 5:00 p.m. on a business day; if not, on the next business day, (2) if delivered to a nationally recognized overnight courier service, one day after delivery of such Notice to such service, (3) if deposited in the United States mail, three (3) days after mailing, or (4) on the day of telecopy transmission if transmitted before 5:00 p.m. on a business day; if not, on the next business day; provided, however, that, when any Notice must be given under any provision of a Loan Document on or before a certain date or within a certain period or number of days, such Notice shall be deemed to have been given, solely for such purpose, on the date the same was hand-delivered, delivered to such overnight courier or deposited in the United States mails. 4.2 GOVERNING LAW. This Mortgage shall be governed by and construed and interpreted in accordance with the laws of the State of Florida, without application of its conflict of law principles. 4.3 BRUNDAGE CLAUSE. In the event of the passage after the date of this Mortgage of any law of, or applicable to, the State of Florida, deducting from the value of real and/or personal property for the purposes of taxation any lien thereon or security interest therein or changing in any way the laws for the taxation of mortgages, deeds of trust or security interests or debts secured by mortgage, deed of trust or security interest for state or local purposes or the manner of the collection of any such taxes, and imposing a tax, either directly or indirectly, on the Debentures, this Mortgage or any other Loan Document or on any Obligation, Mortgagee shall have the right, by giving written notice to Mortgagor, to declare the entire unpaid principal balance of the -32- Debentures and all accrued and unpaid interest thereon to be due and payable in full on a date specified in such notice which shall in no event be less than thirty (30) days following the giving of such notice; provided, however, that such election shall be ineffective if Mortgagor is permitted by law to pay the whole of such tax in addition to all other payments required hereunder and if Mortgagor, prior to such specified date, does pay such tax and agrees to pay any such tax when thereafter levied or assessed against the Mortgaged Property, and such agreement shall constitute a modification of this Mortgage. 4.4 MORTGAGEE'S DISCRETION. (a) Mortgagor expressly agrees and confirms that, unless expressly provided to the contrary in any particular instance, any and all rights of Mortgagee to give or withhold any consent, approval or other authorization requested by Mortgagor with respect to the Debentures, this Mortgage or any other Loan Document, to make any election or exercise any option granted therein, to make any decision or determination with respect thereto, to modify or amend any of the Loan Documents or waive any obligation of Mortgagor thereunder or grant any extension of time for performance of the same or to take or omit to take any other action of any kind whatsoever, Mortgagee shall, to the maximum extent permitted by law, have the right, and Mortgagor expressly acknowledges Mortgagee's right, in each instance, to take such action or to omit to take such action in its sole and absolute discretion, whether or not the applicable provision of the Loan Document in question expressly so provides. (b) Whenever Mortgagor shall, by Notice or otherwise, request that Mortgagee give any consent, approval or other authorization with respect to the Debentures, this Mortgage or any other Loan Document, make any election or exercise any option granted therein, make any decision or determination with respect thereto, disburse insurance and/or condemnation proceeds to or for the benefit of Mortgagor, modify or amend any of the Loan Documents or waive any Obligation of Mortgagor or grant any extension of time for performance of the same or take or omit to take any other action of any kind whatsoever, Mortgagor shall pay such reasonable fees as Mortgagee shall establish at any time and from time to time for performing such services for its borrowers and all fees, costs and expenses including, without limitation, reasonable attorneys' fees and expenses, incurred by Mortgagee in reviewing and/or processing Mortgagor's request, whether or not Mortgagee shall grant such request. All such fees and costs and expenses shall be due and payable by Mortgagor to Mortgagee on demand. All sums so advanced and all interest thereon shall be a lien on and security interest in the Mortgaged Property and shall be secured by this Mortgage in addition to all other Obligations. 4.5 INTERPRETIVE PROVISIONS. Wherever used in this Mortgage, unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, the word "Mortgage" shall mean this Mortgage as may be amended, modified, supplemented, renewed, restated, extended, replaced, substituted, split, consolidated or increased from time to time; the word "Mortgagor" shall mean Mortgagor and/or any subsequent owner or owners of the Mortgaged Property; the word "Mortgagee" shall mean Mortgagee or any subsequent holder or holders of this Mortgage; the word "person" shall mean "an individual, corporation, joint venture, trust, partnership, limited liability company, or unincorporated association"; and pronouns of any gender shall include the other genders; and either the singular or plural shall include the other. Whether or -33- not specifically stated in any provision of this Mortgage, reference therein to (i) any law, statute, ordinance, code, rule, regulation or other Governmental Requirement shall mean and include any and all modifications, amendments and replacements thereof, (ii) the phrase "including" shall mean "including, without limitation" and (iii) any right of Mortgagee shall mean, unless expressly provided therein to the contrary, such right without any corresponding obligation. 4.6 AMENDMENTS. This Mortgage cannot be changed except by an agreement in writing, signed by the party against whom enforcement of the change is sought. 4.7 SALES AND PARTICIPATION. Mortgagee shall have the right in connection with any actual or proposed sale of any Debenture, to deliver to such actual or prospective purchaser or participant any and all information which Mortgagee may have with respect to the Loan Documents, Mortgagor, the Mortgaged Property and/or the business of Mortgagor with respect thereto, including, without limitation, the Loan Documents, all information obtained by Mortgagee pursuant to the Section of this Mortgage entitled "Mortgagee's Due Diligence" or otherwise and all reports, statements, notices and other material delivered to Mortgagee pursuant to the Section of this Mortgage entitled "Reports to Mortgagee", or otherwise. Whenever under any provision of this Mortgage, Mortgagor is required to deliver any report, statement, notice or other material to Mortgagee following demand, including, without limitation, quarterly reports on operations, copies of Leases, Contracts and other agreements and estoppel certificates, Mortgagor shall, if Mortgagee so requests, deliver the same, certified as herein provided, to such actual or prospective purchaser or participant as Mortgagee shall designate. 4.8 PARTIAL REDUCTION OF INDEBTEDNESS. If at any time or from time to time Mortgagee shall apply net proceeds from the sale of Equipment, Net Insurance Proceeds, Net Condemnation Proceeds or any other sums held or received by Mortgagee (other than installments of principal and/or interest paid in accordance with the terms and conditions of the Debentures which shall be applied as provided therein) in partial reduction of the indebtedness secured hereby, such sums shall be applied in such order as Mortgagee shall determine. Any sums applied by Mortgagee to the reduction of the principal of the Debentures shall be deemed to be applied to the last installments due on such principal and shall not reduce the amount of any scheduled installments of principal and/or interest on the Debentures which shall continue to be due and payable in the amounts provided for in the Debentures on the dates therein provided until the Obligations are fully paid and satisfied, unless otherwise provided in the Debentures. 4.9 FURTHER ASSURANCE OF TITLE. If at any time Mortgagee has reasonable cause to believe that any advance under any of the Loan Documents is not secured or will or may not be secured by this Mortgage in accordance with the terms hereof, subject only to matters in the title policy insuring this Mortgage or approved by Mortgagee, then Mortgagor shall, within fifteen (15) days after written notice from Mortgagee, do all things and matters necessary to assure to the satisfaction of Mortgagee that any advance previously made under any of the Loan Documents or to be made under any of the Loan Documents, is secured or will be secured by the Mortgage in accordance with the terms hereof, subject to matters in the title policy. 4.10 RELATIONSHIP OF PARTIES. The relationship between Mortgagor and Mortgagee is that of a Mortgagor and Mortgagee only, and neither of those parties is, nor shall it hold itself out to be, the agent, employee, joint venturer or partner of the other party. -34- 4.11 INCONSISTENCY WITH OTHER LOAN DOCUMENTS. This Mortgage and the other Loan Documents are to be read in pari materia, and shall be construed in such a manner as to afford the greatest possible protection and benefit for Mortgagee. In the event of an express conflict between the terms of the Debentures and the terms of any other Loan Documents as to payment terms, the terms of the Debentures shall control. 4.12 TIME IS OF THE ESSENCE. Time is of the essence in respect of each and every covenant, condition, term, provision and agreement of this Mortgage and the other Loan Documents. 4.13 SUBMISSION TO JURISDICTION. MORTGAGOR, AND ALL OTHER OBLIGORS, JOINTLY AND SEVERALLY, IRREVOCABLY AND UNCONDITIONALLY (A) AGREE THAT ANY SUIT, ACTION, OR OTHER LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS MORTGAGE SHALL BE BROUGHT EXCLUSIVELY, AT THE OPTION OF MORTGAGEE, IN THE CIRCUIT COURT IN AND FOR THE ELEVENTH JUDICIAL CIRCUIT IN AND FOR MIAMI-DADE COUNTY, FLORIDA, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA, UNLESS OTHERWISE REQUIRED BY OPERATION OF LAW; (B) CONSENT TO THE JURISDICTION OF EACH SUCH COURT IN ANY SUCH SUIT, ACTING OR PROCEEDING; AND (C) WAIVE ANY OBJECTION WHICH IT OR THEY MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY OF SUCH COURTS. -35- 4.14 WAIVER OF JURY TRIAL AND CONSEQUENTIAL AND PUNITIVE DAMAGES. EXCEPT AS PROHIBITED BY LAW, MORTGAGOR AND MORTGAGEE (BY ACCEPTANCE HEREOF) EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY AND THE RIGHT TO CLAIM OR RECEIVE CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY LITIGATION (INCLUDING, BUT NOT LIMITED TO, ANY CLAIMS, CROSS-CLAIMS AND THIRD PARTY CLAIMS) BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS INSTRUMENT OR ANY OF THE OTHER THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED THEREIN, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF MORTGAGOR OR MORTGAGEE. IF THE SUBJECT MATTER OF ANY LITIGATION IS ONE IN WHICH THE WAIVER OF JURY TRIAL IS PROHIBITED, NEITHER MORTGAGOR NOR MORTGAGEE SHALL PRESENT AS A NON-COMPULSORY COUNTERCLAIM IN SUCH LITIGATION ANY CLAIM ARISING OUT OF THIS INSTRUMENT. FURTHERMORE, NEITHER MORTGAGOR NOR MORTGAGEE SHALL SEEK TO CONSOLIDATE ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY LITIGATION IN WHICH A JURY TRIAL CANNOT BE WAIVED. MORTGAGOR HEREBY CERTIFIES THAT NO REPRESENTATIVE OR AGENT OF MORTGAGEE, NOR MORTGAGEE'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT MORTGAGEE WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. MORTGAGOR ACKNOWLEDGES THAT THE PROVISIONS OF THIS PARAGRAPH ARE A MATERIAL INDUCEMENT TO MORTGAGEE TO PERFORM ITS OBLIGATIONS. 5. FUTURE ADVANCES. This Mortgage shall secure such future advances as may be made by Mortgagee, at its option and for any purpose, within twenty (20) years from the date of this Mortgage. All such future advances shall be included within the "Obligations," shall be secured to the same extent as of made on the date of the execution of this Mortgage, and shall take priority from the time this Mortgage is filed for record as provided by law. The total amount of indebtedness secured by this Mortgage may decrease or increase from time to time, but the total unpaid balance so secured by this Mortgage shall not exceed the maximum principal amount of $25,000,000, plus interest and any disbursements made for the payment of taxes, levies or insurance on the Mortgaged Property, with interest on those disbursements, plus any increase in the principal balance as the result of negative amortization or deferred interest. Without the prior written consent of Mortgagee, which Mortgagee may grant or withhold in its sole discretion, Mortgagor shall not file for record any notice limiting the maximum principal amount that may be secured by this Mortgage to a sum less than the maximum principal amount set forth in this paragraph. -36- IN WITNESS WHEREOF, the undersigned Mortgagor does hereby set forth its hand and seal as of the 30th day of April, 2003. Signed, sealed and delivered "MORTGAGOR" in the presence of: NAP OF THE AMERICAS, INC., a Florida corporation /s/ R. D. SICTHA By: /s/ JOSE SEGRERA - ------------------------ --------------------------------- Name: R. D. Sichta Name: Jose Segrera Title: Vice President /s/ JOSE E. GONZALEZ - ------------------------ Name: Jose E. Gonzalez ACKNOWLEDGMENTS STATE OF FLORIDA COUNTY OF MIAMI-DADE The foregoing instrument was acknowledged before me this 30th day of April, 2003, by ______________, as__________________ of NAP of the Americas, Inc., a Florida corporation on behalf of that corporation. Personally Known ____________ OR Produced Identification__________ Type of Identification Produced____________________ Signature: ------------------------------ Name: [Print or type] ------------------- Title: Notary Public Serial No., if any: --------------------- My commission expires: -37- RIDER 1 DEFINITION OF CERTAIN TERMS Each of the following terms when appearing in the Mortgage to which the Rider 1 is attached shall have the meaning given such term below. "Accounts Receivable" means all right, title and interest of Mortgagor in and to all accounts, and accounts receivable arising from, out of or in connection with the operation of the Mortgaged Property, including, but not limited to, all such accounts and accounts receivable arising as a result of items sold or leased, or for services rendered, whether or not yet earned by performance, and not evidenced by an instrument or chattel paper, including (i) all accounts arising from the operation of the Mortgaged Property, and (ii) all rights to payment from any consumer credit/charge card organization or entity (such as, or similar to, the organization or entities which sponsor and administer the American Express Card, the Visa Card, the MasterCard, the Discovery Card, or the Carte Blanche Card). Accounts Receivable shall include those now existing or hereafter created, substitutions therefor, proceeds (whether cash or non-cash, movable or immovable, tangible or intangible) received upon the sale, exchange, transfer, collection or other disposition or substitution thereof and any and all of the foregoing and proceeds therefrom. "Affiliate" means any person or entity which directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control any other person or entity, where control is defined as the power, directly or indirectly, to direct the policies, procedures or actions of such person or entity, whether by stock ownership, voting rights, contract or otherwise. "Approved Signatory" means any individual who is the president, vice president, chief executive officer or chief financial officer of Mortgagor. "Contracts" means any and all contracts, agreements and other undertakings of any kind whatsoever, written or oral, for the delivery of services and/or the acquisition of supplies or materials in connection with the ownership, management, operation, maintenance, leasing, construction and/or improvement of the Mortgaged Property (including, without limitation, all contracts and agreements for the purchase of Equipment) and including all refunds, rebates, security deposits or other expectancy under or from any such contracts, agreements and other undertakings. The term "Contracts" shall specifically include any and all bilateral or multilateral peering agreement and any other peering or other agreements or arrangements related to the use of the Mortgaged Property as a network access point, "telecom hotel" or any other similar use. "Controlling Interest" means the legal or beneficial ownership, use, enjoyment or benefit of, directly or indirectly through one or more intermediate persons: (1) in the case of a corporation, (i) fifty (50%) percent or more of the issued and outstanding shares of any class of stock of such corporation, (ii) fifty (50%) percent or more of the aggregate of all issued and outstanding shares of all classes of stock of such corporation or (iii) the right to receive fifty (50%) percent or more of any dividends or other distributions made by such corporation at any time or from time to time; -38- (2) in the case of a limited partnership, (i) any general partner interest therein, (ii) fifty (50%) percent or more of any interest in a general partner therein, (iii) fifty (50%) percent or more of the partner interests of all the partners therein, or (iv) the right to receive fifty (50%) percent or more of any profits, gains, losses, cash flow or distributions of such partnership at any time or from time to time; (3) in the case of a general partnership or joint venture, (i) fifty (50%) percent or more of any interests of all the partners or venturers therein or (ii) the right to receive fifty (50%) percent or more of any profits, gains, losses, cash flow or distributions of such partnership or joint venture at any time or from time to time; or (4) in the case of a trust or other entity, (i) fifty (50%) percent or more of the interests of all persons owning, using, enjoying or benefiting from such entity or (ii) the right to receive fifty (50%) percent or more of the profits, gains, losses, cash flow or distributions of such entity at any time or from time to time; or (5) in the case of a limited liability company, (i) fifty (50%) percent or more of any interests of all the members therein or (ii) the right to receive fifty (50%) percent or more of any profits, gains, losses, cash flow or distributions of such company at any time or from time to time. "Debentures" means the 10.0% Subordinated Secured Convertible Debentures due April 30, 2006 of Terremark in the aggregate principal amount of up to $25,000,000, as may be amended, modified, supplemented, renewed, restated, extended, replaced, substituted, split, consolidated or increased from time to time. "Default" means any event, circumstance or condition which, with the giving of notice or the passage of time, or both, would cause or result in an Event of Default. "Development Agreements" means any all approved site plans, development plans, development orders or development agreements as they relate to the Mortgaged Property, or any part thereof, and all environmental, water, sewer, drainage, road, dredging, excavation, fill and all other development agreements with any Governmental Authority having jurisdiction over the Mortgaged Property, or any part thereof. "Environmental Laws" collectively means and includes all present and future Governmental Requirements relating to the environment and environmental conditions or to any Hazardous Substance or Hazardous Substance Activity (including, without limitation, the Comprehensive Environmental Response Compensation, and Liability Act of 1980, 42 U.S.C. 9601, et seq., the Federal Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. 6901, et seq., the Federal Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Clean Air Act, 33 U.S.C. 7401, et seq., the Clean Air Act, 42 U.S.C. 7401, et seq., the Toxic Substances Control Act, 15 U.S.C. 2601-2629, the Safe Drinking Water Act, 42 U.S.C. 300f-300j, the Emergency Planning and Community Right-To-Know Act, 42 U.S.C. 1101, et seq., and any so-called "Super Fund" or "Super Lien" law, environmental laws administered by the Environmental Protection Agency, any -39- similar state and local laws and regulations, all amendments thereto and all regulations, orders, decisions, and decrees now or hereafter promulgated thereunder). "Environmental Losses" means Losses suffered or incurred by Mortgagee, arising out of or as a result of: (i) the occurrence, prior to a Foreclosure Transfer, of any Hazardous Substance Activity; (ii) any violation, prior to a Foreclosure Transfer, of any applicable Environmental Laws, federal, state or local, relating to the Mortgaged Property or to the ownership, use, occupancy, or operation thereof; (iii) any investigation, inquiry, order, hearing, action, or other proceeding by or before any Governmental Authority in connection with any Hazardous Substance Activity occurring or allegedly occurring prior to a Foreclosure Transfer; or (iv) any claim, demand or cause of action, or any action or other proceeding, whether meritorious or not, brought or asserted against Mortgagor or Mortgagee, regardless of when such claim, demand, or cause of action or other proceeding is brought or asserted, which directly or indirectly relates to, arises from or is based on any of the foregoing or any allegation of the foregoing. "Equipment" means, to the extent that the same are not Improvements, all machinery, apparatus, goods, equipment, materials, supplies, fittings, fixtures (including all heating, air conditioning, plumbing, lighting, communications and elevator fixtures), chattels, inventory and articles of personal property and accessions thereof, and appurtenances and additions thereto, and betterments, renewals, replacements thereof and substitutions therefor (including electric and electronic equipment, switches, routers and other equipment associated with the use of the Mortgaged Property as a network access point, "telecom hotel" or any other similar use), heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, alarm systems, equipment for electronic monitoring, cooling, heating and air conditioning systems, elevators, escalators, fittings, apparatus, tools, machinery, engines, dynamos, motors, boilers, incinerators, conduits, compressors, call systems, brackets, signs, billboards and other identifications (together with any right to maintain the same), and all other furniture, furnishings, fixtures and equipment and other property of every kind and nature whatsoever, in every case to the extent now owned or hereafter acquired by Mortgagor, or in which Mortgagor now has or hereafter acquires any interest, now or hereafter located in or upon the Leased Premises or any other portions of the Project, or appurtenances thereto, or usable in connection with the present or future operation and occupancy of the Mortgaged Property, and all building equipment materials and supplies of any nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Leased Premises or any other portion of the Project, or appurtenant thereto, or usable in connection with the present or future operation and occupancy of the Mortgaged Property, and all other present and future "equipment" (as defined in the Uniform Commercial Code) of Mortgagor, and the right, title and interest of Mortgagor in and to any of the Equipment which may be subject to any lease or security agreement (as defined in the Uniform Commercial Code). "Equipment Leases" means all leases of Equipment entered into by Mortgagor, as lessee, and any other person or entity, as lessor, and all modifications, extensions, renewals and substitutions for such leases. Equipment Leases shall include any purchase of Equipment with purchase money financing. "Event of Default" has the meaning set forth in Section 3.1 hereof. -40- "Foreclosure Transfer" means the transfer of title to all or any part of the Mortgaged Property (1) at a foreclosure sale under this Mortgage pursuant to judicial decree, (2) by deed in lieu of such foreclosure, or (3) under the jurisdiction of a bankruptcy court. "General Intangibles" means all right, title and interest of Mortgagor in and to any accounts, chattel paper, instruments, chattel paper, claims, deposits and any other general intangibles now or hereafter arising with respect to, or which may in any way pertain to, the Mortgaged Property, including, without limitation, all bank or similar accounts, any trademarks, service marks, trade names, or other names under or by which the Mortgaged Property may at any time be operated or known, the good will of Mortgagor in connection therewith and the right of Mortgagor to carry on business under any or all such name or names and any variant or variants thereof, insofar as the same may be transferable by Mortgagor without breach of any agreement pursuant to which Mortgagor may have obtained its right to use such name or names, and any and all trademarks, prints, labels, advertising concepts, materials and literature. "Governmental Authorities" means the United States of America, the State of Florida, Miami-Dade County, Florida, and any political subdivision of any of the foregoing, and any agency, department, commission, authority, board, bureau, instrumentality or quasi governmental authority or corporation having or asserting jurisdiction over the Mortgaged Property, or any part thereof of interest therein, or over Mortgagor. "Governmental Requirement" means any law, ordinance, code, order, rule, regulation or requirement of or issued by any Governmental Authority that affects or is applicable to the Mortgaged Property and/or the Improvements, Mortgagor and/or any Guarantors, including any Environmental Laws, erosion control ordinance, doing-business or licensing law, building code, ordinance, zoning law, land-use ordinance, development agreements, Permit Obligations, OSHA requirements, FEMA requirements, ADA requirements and all securities laws. "Hazardous Substance" means, at any time, any of the following which are in levels or amounts regulated by Environmental Laws: (i) asbestos and any asbestos containing material, (ii) any substance or material that is then defined or listed in, or otherwise classified pursuant to, any Environmental Laws or any applicable laws or regulations as a "hazardous substance", "hazardous material", "hazardous waste", "infectious waste", "toxic substance", "toxic pollutant" or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or "EP toxicity", or (iii) any petroleum and drilling fluids, produced waters, and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources. "Hazardous Substance Activity" means any actual use, packaging, labeling, treatment, leaching, spill, cleanup, storage, holding, existence, release, emission, discharge, generation, processing, abatement, removal, disposition, handling or transportation of any Hazardous Substance from, under, into or on the Mortgaged Property or surrounding property (but only to the extent of seepage, release, discharge, migration, disposal or other actions are in violation of any Environmental Laws). -41- "Improvements" means all structures and other improvements now or hereafter existing, erected or placed on, upon or within the Leased Premises, or in any way used in connection with the use, enjoyment, occupancy or operation of the Leased Premises or any portion thereof; all fixtures of every kind and nature whatsoever now or hereafter owned by Mortgagor and used or procured for use in connection with the Mortgaged Property. "Leased Premises" means the premises demised pursuant to the NAPA Lease and defined therein as the "Premises", such premises including, but not necessarily limited to: (i) a portion of the Project comprising approximately 149,184 square feet of Rentable Area (as defined in the NAPA Lease) located on the second floor of the Project; and (ii) any and all right, title and interest of Mortgagor to use or have access the roof, risers, common areas or other portions of the Project, and to connect any Improvements or Equipment to any equipment or facilities located on the roof or within the risers, common areas or other portions of the Project. "Leases" means any and all leases, subleases (including, but not limited to, any subleases under the NAPA Lease), tenancies, licenses, rental agreements, occupancy agreements, use agreements, concession agreements, and other agreements of whatever form (whether oral or written) now or hereafter affecting all or any part of the Leased Premises, Improvements, Equipment or other Mortgaged Property, and any and all guarantees, extensions, renewals, replacements and modifications thereof and all remainders, reversions and other rights and estates appurtenant thereto, including, but not limited to renewal options and expansion rights, all modifications, extensions and renewals thereof and all rights to renew or extend the term thereof, all right and privilege of Assignor to terminate, cancel, abridge, merge, modify, surrender or amend. For purposes hereof, the term "Leases" shall include the Colocation Agreements, whether or not same are otherwise designated as or deemed to be lease agreements. "Loan Documents" means all documents and instruments evidencing, securing or otherwise relating to the Debentures, including, but not limited to, the Debentures, this Mortgage, the Subscription Agreement, the Subordination Agreement and all other instruments now or hereafter given by or on behalf of Terremark or Mortgagor to or for the benefit of Mortgagee, as may be amended, modified, supplemented, renewed, restated, extended, replaced, substituted, split, consolidated or increased from time to time (including any future advances or other advances thereunder). "Losses" means any and all losses, liabilities, damages, demands, claims (including claims for any personal injury, including wrongful death, or property damage, real or personal), actions, judgments, causes of action, assessments, penalties, costs and expenses incurred by Mortgagee, including, without limitation, all amounts contributed for investigation, monitoring, remediation, response action, removal, restoration and permit acquisition and the reasonable fees of outside legal counsel, environmental experts, and accountants and the charges of in-house legal counsel and accountants. "NAPA Lease" means that certain Lease Agreement dated October 16, 2000, together with a Basic Lease Information Rider thereto, between the Project Owner, as Landlord, and Mortgagor, as Tenant, pursuant to which the Project Owner has leased the Leased Premises to Mortgagor, and Mortgagor has leased the Leased Premises from the Project Owner. -42- "Net Condemnation Proceeds" means the amount by which (i) all net condemnation proceeds paid on account of any Taking exceed (ii) all commercially reasonable costs and expenses, including, without limitation, the reasonable fees of attorneys, appraisers, engineers and other consultants and advisers and Mortgagee's out of pocket expenses, incurred by Mortgagee or Mortgagor in connection with the collection or recovery of such proceeds, Mortgagee's decision to apply such proceeds of either the reduction of the Obligations and/or the repair and restoration of the Mortgaged Property, and/or administering and/or monitoring the application and/or disbursement of such proceeds to the repair and restoration of the Mortgaged Property. "Net Insurance Proceeds" means the amount by which (i) all insurance proceeds paid on account of any damage or destruction to the Mortgaged Property or any part thereof or interest therein, exceed (ii) all commercially reasonable costs and expenses, including, without limitation, the reasonable fees of attorneys, appraisers, engineers and other consultants and advisers and Mortgagee's out of pocket expenses, incurred by Mortgagee or Mortgagor in connection with the collection or recovery of such proceeds, Mortgagee's decision to apply such proceeds to either the reduction of the Obligations and/or the repair and restoration of the Mortgaged Property, and/or administering and/or monitoring the application and/or disbursement of such proceeds to the repair and restoration of the Mortgaged Property. "Notice" means any notice, request, demand, consent, or other communication by any party to this Mortgage or other Loan Document to any other party thereto. "Party in Interest" means Mortgagor, any legal or beneficial owner of the Mortgaged Property or any part thereof or interest therein, or any individual or entity personally liable for all or any portion of the Obligations, including, without limitation, any indemnitor of all or any portion of the Obligations, any partner of a Party in Interest if such Party in Interest is a general partnership, any venturer of a Party in Interest if such Party in Interest is a joint venture, any general or limited partner of a Party in Interest if such Party in Interest is a limited partner, and any member of a Party in Interest if such Party in Interest is a limited liability company. "Permits" means all right, title and interest of Mortgagor in and to all governmental applications, permits, transferable development rights, licenses, approvals, consents, authorizations and rights, contractual or otherwise, of any kind now or hereafter existing in connection with the Mortgaged Property, or any part thereof, including, without limitation, the Development Agreements, building applications and permits, certificates of occupancy or use, certificates of completion and alcoholic beverage licenses. "Plans" means all architectural, engineering and similar plans, specifications, drawings, renderings, maps, site plans, profiles, studies, shop drawings, plats, proposed plats and similar documents relating to the Mortgaged Property, or any part thereof. "Project" means the land described in EXHIBIT A, together with the building and other improvements located thereon, commonly known as "Technology Center of the Americas." -43- "Project Owner" means Technology Center of the Americas, LLC, a Delaware limited liability company, which is the owner in fee simple of the Project (subject to, inter alia, the NAPA Lease), and any successor in interest as owner of the Project or any portion thereof. "Property Taxes" means all real estate taxes, personal property taxes, betterments, assessments (general and special), imports, levies, water, utility and sewage charges, and all other taxes and public charges, imposed upon or assessed against Mortgagor or the Mortgaged Property or otherwise payable by Mortgagor pursuant to the provisions of the NAPA Lease, or upon the revenues, rents, issues, income and profits of use or possession thereof, any of which might, if unpaid, result in a lien on the Mortgaged Property, regardless to whom paid or assessed, any assessment, license fee, license tax, business license fee or tax, commercial rental tax, levy, charge, penalty, tax or similar imposition, imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, architectural, lighting, drainage or other improvement or special assessment district thereof, against any legal or equitable interest in the Mortgaged Property. "Rents" means any and all rents (including, without limitation, minimum rents and additional rents), credits, cash, deposits, advanced rents, accounts, rights, royalties, security deposits, issues, profits, revenues, income, proceeds, earnings and other benefits of every nature of the Mortgaged Property arising at any time (including, without limitation, after the filing of any petition under any present or future federal or state bankruptcy or similar law) from the use or enjoyment thereof, including, without limitation, cash, letters of credit or securities deposited thereunder to secure performance by the tenants of their obligations thereunder, whether such cash, letters of credit or securities are to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due, additional, percentage, participation and other rentals, fees and deposits, any and all sums paid or due and payable in connection with the modification or termination of any of the Leases, or in settlement or satisfaction of any claim or dispute for unpaid rent or other Lease obligations, whether in connection with litigation, bankruptcy or otherwise, liquidated damages following default and all proceeds payable under any policy of insurance covering loss of rents resulting from untenantability due to destruction or damage to the Mortgaged Property, together with the immediate and continuing right to collect and receive the same, whether now due or hereafter becoming due, and together with all rights and claims of any kind that Mortgagor may have against any tenant, lessee or licensee under the Leases or against any other occupant of the Mortgaged Property and all rents, oil and gas or other mineral royalties, revenues and bonuses, issues and profits from the Mortgaged Property, and all proceeds from the sale or other disposition of the Leases. "Restoration Costs" means the cost of repairing, replacing and restoring any and all loss, damage or destruction affecting the Mortgaged Property or any part thereof or interest therein. "Reports" means any and all studies, reports, audits and similar documents now or hereafter conducted or prepared with respect to the Mortgaged Property, or any part thereof, including, without limitation, environmental audits and tests, soil tests, appraisals and inspections. -44- "Senior Credit Agreement" means that certain Amended and Restated Credit Agreement dated as of April 30, 2003 among Terremark, the Mortgagor and Ocean Bank, a Florida-chartered bank, as lender. "Senior Lender" means Ocean Bank, a Florida-chartered bank, as lender pursuant to the Senior Credit Agreement, its successors and assigns. "Senior Loan Documents" means the Senior Loan Documents as defined and described in the Subordination Agreement. "Subordination Agreement" means that certain Subordination Agreement dated as of April 30, 2003 by and among Mortgagor, Mortgagee, Senior Lender and Terremark, to be recorded in the Public Records of Miami-Dade County, Florida. "Taking" means the taking of the Mortgaged Property or any part thereof or interest therein by reason of any public improvement or condemnation proceeding or by the exercise of the power of eminent domain or any other activity by any Governmental Authority of any kind on or off the Mortgaged Property, including, without limitation, selection of the grade of any street, resulting in damage or injury to the Mortgaged Property or any part thereof or interest therein, including, without limitation, reduction in the value thereof. "Taking Restoration Costs" means the cost of restoring the Mortgaged Property to an economically viable commercial property after a Taking has occurred. "Uniform Commercial Code" means the Uniform Commercial Code as enacted into law in the State of Florida. "Warranties" means all warranties and guarantees of construction contractors and/or subcontractors issued and/or delivered in connection with the Improvements and/or warranties and guarantees of suppliers or manufacturers issued and/or delivered in connection with the Improvements and/or the Equipment. -45- RIDER 2 SPECIAL NOTICE PROVISIONS Notices to Mortgagee: The Bank of New York Trust Company of Florida, N.A. 10161 Centurion Parkway Jacksonville, Florida 32256 Attn: Sharon Atkinson Fax: (904) 645-1997 and with a copy to: Emmet, Marvin & Martin, LLP 120 Broadway, 32nd Floor New York, New York 10271 Attn: Irving C. Apar, Esq. Fax: (212) 238-3100 Notices to Mortgagor or Terremark: Terremark Worldwide, Inc. 2601 South Bayshore Drive, Suite 900 Miami, Florida 33133 Attn: Jose Gonzalez, Esq. Fax: (305) 856-8190 and with a copy to: Greenberg Traurig, P.A. 1221 Brickell Avenue Miami, Florida 33131 Attn: Paul Berkowitz, Esq. Fax: (305) 579-0717 -46- EXHIBIT "A" LEGAL DESCRIPTION Lots 1 through 20, inclusive, in Block 38 North, City of Miami, according to the Plat thereof, as recorded in Plat Book B, Page 41, Public Records of Miami-Dade County, Florida. -47- EX-10.19 6 g83542exv10w19.txt SUBORDINATION AGREEMENT EXHIBIT 10.19 Return to: Emmet, Marvin & Martin, LLP 120 Broadway, 32nd Floor New York, NY 10271 Attn: Irving C. Apar - SPACE ABOVE THIS LINE FOR RECORDING DATA - SUBORDINATION AGREEMENT This Subordination Agreement (this "AGREEMENT") is made as of April 30, 2003, by and between OCEAN BANK, a Florida banking corporation (the "SENIOR LENDER"); and THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A., a national banking association, as Collateral Agent (the "COLLATERAL AGENT"), on behalf of and for the benefit of the holders from time to time (the "SUBORDINATED CREDITORS") of the 9% Subordinated Secured Convertible Debentures due April 30, 2006 (the "SUBORDINATED DEBENTURES") issued by TERREMARK WORLDWIDE, INC., a Delaware corporation ("TERREMARK"). R E C I T A L S A. Terremark and NAP of the Americas, Inc., a Florida corporation and a wholly owned subsidiary of Terremark ("NAPA") (together, the "BORROWERS" and each individually a "BORROWER") are currently indebted to the Senior Lender pursuant to that certain Amended and Restated Credit Agreement dated as of March 31, 2001 among the Borrowers and the Senior Lender (the "SENIOR CREDIT AGREEMENT") and the Senior Note (defined below). The outstanding principal balance of the Senior Note as of the date hereof is [$28,974,552.64] and interest thereon has been paid to and including April 29, 2003. All obligations of the Borrowers to the Senior Lender, whether direct or contingent, now existing or hereafter arising, under the Senior Credit Agreement and the other Senior Loan Documents (as defined below) are herein referred to collectively as the "SENIOR DEBT". B. The Senior Debt is evidenced and secured by, INTER ALIA, (i) the Senior Credit Agreement, (ii) that certain Renewal Promissory Note in the original principal amount of [$28,974,552.64] of even date herewith from Borrowers in favor of Senior Lender (the "SENIOR NOTE"), (iii) that certain Leasehold Mortgage, Security Agreement, Assignment of Rents, Leases and Profits dated as of September 5, 2001 from NAPA in favor of Senior Lender recorded in Official Records Book 19890, Page 0695, Public Records of Miami-Dade County, Florida, as modified by that certain Modification of Leasehold Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing and of Assignment of Leases and Rents and Security Deposits by and between NAPA and Senior Lender dated August 7, 2002, recorded in Official Records Book 20591, Page 1313, Public Records of Miami-Dade County, Florida, as further modified by that certain Second Modification of Leasehold Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing, and of Assignment of Leases and Rents and Security Deposits by and between NAPA and Senior Lender dated as of April 30, 2003, to be recorded in the Public Records of Miami-Dade County, Florida (collectively, the "SENIOR MORTGAGE"), which encumbers, INTER ALIA, the 1 Leased Premises (as defined therein) which constitute a part of the real property described in EXHIBIT "A" attached hereto and made a part hereof (iv) that certain Assignment of Leases and Rents and Security Agreements dated as of September 5, 2001 from NAPA in favor of Senior Creditor recorded in Official Records Book 19890, Page 743, Public Records of Miami-Dade County, Florida, (v) UCC-1 Financing Statements, (vi) Guaranty Agreements from the Guarantors (as defined in the Senior Credit Agreement), (vii) Pledge and Security Agreements dated as of September 5, 2001 executed by the Guarantors, and (viii) various other security agreements, pledge agreements, UCC-1 Financing Statements and other instruments, documents and certificates evidencing, securing or relating to the Senior Debt (collectively, the "SENIOR LOAN DOCUMENTS", which term shall include all amendments, modifications, extensions, renewals, consolidations, replacements and substitutions with respect to any of the foregoing documents). C. The obligations of Terremark to the Subordinated Creditors pursuant to the Subordinated Debentures (the "SUBORDINATED OBLIGATIONS") are secured by the grant to the Collateral Agent, on behalf of the Subordinated Creditors, of a second priority lien on and security interest in NAPA's right, title and interest in and to its property described in the Second Mortgage (the "SUBORDINATED COLLATERAL") pursuant to that certain Second Leasehold Mortgage and Security Agreement and Assignment of Leases and Rents and Fixture Filing (the "SECOND MORTGAGE") (together with the Subordinated Debentures and the UCC-1 financing statements and other documents intended to secure the Subordinated Obligations, (the "SUBORDINATED LOAN DOCUMENTS", which term shall include all amendments, modifications, extensions, renewals, consolidations, replacements and substitutions with respect to any of the foregoing documents). D. The term "SUBORDINATED DEBT" shall mean any indebtedness, obligation or liability of Terremark or NAPA to Subordinated Creditors arising out of or in connection with the Subordinated Loan Documents, including without limitation, the Subordinated Obligations. E. It is a condition to the Senior Lender's agreement to enter into the Senior Credit Agreement and to its acceptance of delivery of the Senor Note that the Collateral Agent, on behalf of the Subordinated Creditors, enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. RECITALS; DEFINITIONS. The foregoing recitals are true and correct and are incorporated herein by this reference. Capitalized terms used herein shall have the meanings ascribed to them in this Agreement unless the provisions of this Agreement specify otherwise. 2. SUBORDINATION. (a) The Collateral Agent, on behalf of Subordinated Creditors, hereby absolutely and unconditionally agrees that, regardless of the sequence of execution and delivery of, or the order of recordation or filing in or any public records registry or filing system of any of the Subordinated Loan Documents and the Senior Loan Documents, and regardless of the priority of any liens created or evidenced by the Senior Loan Documents by the operation of applicable law or otherwise, the Subordinated Loan Documents and the Subordinated Debt shall be and hereby are made unconditionally subject, subordinate and inferior in all respects and for all purposes to: (i) the Senior Debt, including but not limited to, all interest which may hereafter accrue on the Senior Debt, and all future advances made under the Senior Loan Documents, and all interest which may hereafter accrue thereon, except as expressly provided in Section 2(b) below; (ii) the Senior Loan Documents and the liens and security interests created thereby (the "SENIOR LIENS"); (iii) all of the terms, covenants, conditions, representations and warranties contained in the Senior Loan Documents; (iv) any and all amendments, modifications, extensions, renewals, consolidations, replacements and substitutions of and to any of Senior Loan Documents; and (v) all amounts now or hereafter owing by the Borrowers under the Senior Loan Documents, except as otherwise provided in Section 2(b) of this Agreement. 2 (b) The subordination of the Subordinated Debt under this Agreement will not extend to any future advances made by the Senior Lender under the Senior Loan Documents other than those made: (i) to cure any defaults under the Lease (as defined in the Senior Credit Agreement), (ii) to cure any defaults under the Subordinated Loan Documents or the Senior Loan Documents, (iii) to protect and preserve the lien and priority of, and the validity and enforceability of, any of the Senior Loan Documents, or (iv) to enforce the provisions of any of the Senior Loan Documents, including, all costs and expenses incurred by Senior Lender in the exercise of any of its rights or remedies under any of the Senior Loan Documents, together with any interest accrued on any future advances described in clauses (i) through (iv). (c) Until all of the Senior Debt shall have been indefeasibly paid in full, the Borrowers shall not, directly or indirectly, make any payment on account of, or transfer any collateral in addition to the Subordinated Collateral, for any part of the Subordinated Debt, or any other indebtedness or obligations of the Borrowers to the Subordinated Creditors, and neither the Collateral Agent nor the Subordinated Creditors shall demand or accept from the Borrowers or any other person or entity any such payment or additional collateral, nor cancel, set off or otherwise discharge any part of the Subordinated Debt, whether by acceleration or otherwise, and none of the Borrowers, the Collateral Agent or the Subordinated Creditors shall otherwise take or permit any action in violation of the terms of this Agreement. Notwithstanding the foregoing: (i) interest is permitted to be paid by Terremark (and accepted and retained by the Subordinated Creditors) as and when required by the terms of the Subordinated Debentures in effect as of the date of this Agreement; and (ii) principal payments may be paid by Terremark (and accepted and retained by the Subordinated Creditors), in each case only so long as: (x) no Default or Event of Default (as those terms are defined or described in the Senior Loan Documents) then exists, and (y) any such payment of principal or interest does not create a Default or Event of Default under any of the Senior Loan Documents. (d) If any payment on the Subordinated Debt is not made when originally due because of the provisions of Section 1(c) above (a "POSTPONED PAYMENT"), such Postponed Payment shall be permitted to be made by Terremark (and permitted to be accepted and retained by the Subordinated Creditors), if and only if: (i) the Default or Event of Default giving rise to the prohibition against payment to the Subordinated Creditors at the time originally due because of the provisions of Section 1(c) above has been cured and (ii) no other Default or Event of Default then exists under any of the Senior Loan Documents. (e) Until the Subordinated Debt is indefeasibly paid in full, the Senior Lender agrees to provide to the Collateral Agent written notice of the occurrence of any Default or Event of Default under the Senior Loan Documents, such written notice to be given to Collateral Agent at the same time as written notice is given to Borrowers; provided, however, that the failure of Lender to deliver such written notice to Collateral Agent shall not affect any of the rights of the Senior Lender under this Agreement or any of the Senior Loan Documents, or the priority of the Senior Loan Documents and Senior Liens as provided in the Senior Loan Documents and this Agreement, and shall not constitute a release, waiver or impairment of any obligation or liability of Borrowers under the Senior Loan Documents. (f) The Subordinated Obligations will include any obligations or liabilities of Borrowers arising from any claims for rescissions asserted by any of the Subordinated Creditors. 3. SUBORDINATED LOAN DOCUMENTS. The Collateral Agent, on behalf of Subordinated Creditors, hereby agrees with Senior Lender as follows: (a) Neither Collateral Agent nor any Subordinated Creditor will execute, deliver or record any of the Subordinated Loan Documents without first obtaining the prior written consent of Senior Lender, which consent shall not be unreasonably withheld or delayed, unless the Senior Lender has first recorded the Senior Loan Documents granting Senior Lender a perfected security interest in the collateral in which recording the applicable Subordinated Loan Document would perfect Subordinated Creditors' security interest. 3 (b) Neither Collateral Agent nor any Subordinated Creditor shall amend or modify any of the Subordinated Loan Documents without the prior written consent of Senior Lender, provided that, the Collateral Agent, the Subordinated Creditors, or the Borrowers may amend or modify any Subordinated Loan Document without the consent of the Senior Lender if the following conditions are fulfilled: (i) such amendment or modification is necessary or appropriate in Subordinated Creditors' reasonable business judgment to attach, perfect or preserve any security interest of Subordinated Creditors in the Subordinated Collateral, (ii) such amendment or modification does not increase the then outstanding principal balance of the Subordinated Obligations, shorten the payment period with respect to payments of principal or interest, increase the interest rate applicable to the Subordinated Debentures, or amend or purport to amend the terms by which the Subordinated Debentures are subject to this Subordination Agreement, and (iii) such amendment or modification does not materially increase the financial obligations of Borrowers. (c) The aggregate principal balance of the Subordinated Debentures shall not at any time exceed $25,000,000 and the principal amount secured by the Subordinated Loan Documents shall not at any time exceed $25,000,000, plus any future advances made by Collateral Agent under the Subordinated Loan Documents: (i) to cure any defaults under the Lease, (ii) to cure any defaults under the Subordinated Loan Documents or Senior Loan Documents, (iii) to protect and preserve the lien and priority of, and the validity and enforceability of, the Subordinated Loan Documents, and (iv) to enforce the provisions of any of the Subordinated Loan Documents, including, all costs and expenses incurred by Subordinate Creditors and Collateral Agent in the exercise of any of their rights or remedies under any of the Subordinated Loan Documents. 4. BANKRUPTCY, INSOLVENCY, ETC. Neither the Collateral Agent nor the Subordinated Creditors will commence or join with each other or any other creditor or creditors of the Borrowers in commencing any bankruptcy, reorganization or insolvency proceedings against the Borrowers. 5. ENFORCEMENT ACTIONS. (a) Neither the Collateral Agent nor any Subordinated Creditor will take any Enforcement Action with respect to any of the Subordinated Collateral or either Borrower without the Senior Lender's prior written consent, unless and until the Senior Debt has been indefeasibly paid in full and the Senior Loan Documents terminated; PROVIDED, however, that (a) nothing contained herein will be deemed to prohibit the Collateral Agent from intervening or participating in any judicial or bankruptcy proceeding to the extent necessary to preserve or protect the interests of the Subordinated Creditors; and (b) the Collateral Agent will be free to take any Enforcement Action with respect to any of the Subordinate Collateral or either Borrower without any consent from the Senior Lender provided that each of the following conditions shall have been and continue to be met: (i) an Event of Default under the Subordinated Credit Documents (other than an Event of Default arising solely as a result of the occurrence of an Event of Default under the Senior Loan Documents) has occurred and is continuing, (ii) the Collateral Agent has given the Senior Lender written notice of such Event of Default, and (iii) the Senior Lender has not taken and pursued in good faith any Enforcement Action within 60 days after the date that each of the conditions in clauses (i) through (iii), inclusive of this proviso have been met (such 60-day period being herein referred to as the "STANDSTILL PERIOD"). Notwithstanding anything in this Section 5 to the contrary, in the event that the Senior Lender gives the Borrowers written notice that an Event of Default has occurred under any of the Senior Loan Documents, the Senior Lender shall give the Collateral Agent a copy of such notice, and in the event the Senior Lender elects to sell, collect or otherwise dispose of any of the Senior Collateral during the continuation of any Event of Default under any of the Senior Loan Documents, the Senior Lender shall give the Collateral Agent an Enforcement Notice to that effect. (b) Neither the Collateral Agent nor any Subordinated Creditor shall, in any Enforcement Action, name as a defendant any tenant or licensee or occupant under any Lease (as defined in the Second Mortgage) or take any other action to terminate any Lease, nor consent to the termination or voluntary surrender of any Lease, in each case with the prior written consent of Senior Lender. 4 (c) In those instances in which the Subordinated Loan Documents confer upon Collateral Agent the right to consent to or approve matters pertaining to the NAPA Lease and the Mortgaged Property (as defined in the Second Mortgage, including, without limitation, Leases, Collateral Agent shall not withhold or delay its consent or approval as to any such matters as to which Borrowers or Senior Lender has requested Collateral Agent's consent or approval, if Senior Lender has given its consent or approval. (d) For purposes of this Agreement, the following terms have the meanings ascribed to them below: "ENFORCEMENT ACTION" shall mean, collectively or individually for any person: (i) to make demand for payment of or accelerate the maturity of any of the indebtedness owed by the Borrowers to such person, (ii) to take possession of or to collect any property of the Borrowers, or (iii) to commence the enforcement (by judicial proceedings or otherwise) of any of the rights and remedies with respect to any of the property of the Borrowers existing upon any Event of Default under the Senior Loan Documents or Subordinated Loan Documents, as applicable. "ENFORCEMENT NOTICE" shall mean a written notice delivered by the Senior Lender or the Collateral Agent to the other at a time when an Event of Default has occurred and is continuing under the Senior Loan Documents or Subordinated Loan Documents, as applicable (i) specifying the relevant Event of Default and (ii) stating that an Enforcement Action shall commence or has commenced. 6. ADDITIONAL COVENANTS OF SUBORDINATED CREDITORS. The Collateral Agent, on behalf of the Subordinated Creditors, hereby agrees that so long as any sum shall remains outstanding on the Senior Debt or any other amounts secured by the Senior Loan Documents: (a) The Collateral Agent agrees to deliver written notice to the Senior Lender of any Event of Default (as defined in the Subordination Loan Documents) under the Subordinated Loan Documents and copies of all other notices required to be delivered to the Borrowers under the Subordinated Loan Documents, such written notice to be delivered to Senior Lender at the same time as notice thereof is delivered to the Borrowers; (b) The Senior Lender shall have the right, but not the obligation, to cure any default under the Subordinated Loan Documents, including the right to cure such default by making a future advance under the Senior Loan Documents, and Collateral Agent and Subordinated Creditors agree to accept any such cure timely made by the Senior Lender; (c) The Collateral Agent, on behalf of the Subordinated Creditors, does hereby subordinate to the Senior Liens and the Senior Loan Documents all right, title and interest, if any, in and to all insurance proceeds, condemnation awards, proceeds from the sale of any property or either Borrower, Rents (as defined in the Senior Mortgage), and all other property of any kind or nature now or hereafter encumbered by the Senior Loan Documents or assigned or pledged to Senior Lender pursuant to the provisions of the Senior Loan Documents (including but not limited to all personalty and equipment) in connection with the Senior Debt (collectively, the "Senior Collateral"), and the Collateral Agent, on behalf of the Subordinated Creditors, agrees that the amount of such proceeds, awards and Rents shall be applied pursuant to the terms and provisions of the Senior Mortgage and other Senior Loan Documents; (d) Neither the Collateral Agent nor any of the Subordinated Creditors shall acquire, by subrogation or otherwise, any lien, estate, right or other interest in the Senior Collateral which is or may be prior in right to the Senior Mortgage or the other Senior Loan Documents. To the extent the Collateral Agent or any of the Subordinated Creditors acquires any such lien, estate, right or interest which might otherwise be prior in right to the Senior Mortgage or Senior Loan Documents, such lien, estate, right or interest shall be automatically and unconditionally subordinated to the Senior Debt, the Senior Liens and the Senior Loan Documents. 5 7. PAYMENTS ON SUBORDINATED DEBT. Should any payment or collateral (in addition to that set forth in the Subordinated Loan Documents) for any part of the Subordinated Debt be received by the Collateral Agent or any Subordinated Creditors in violation of the terms of this Agreement, such payment or collateral shall be delivered forthwith to the Senior Lender for application to the indebtedness of the Borrowers to the Senior Lender or otherwise held pursuant to this Agreement. The Senior Lender is irrevocably authorized and appointed attorney-in-fact for the Collateral Agent and the Subordinated Creditors to supply any required endorsement or assignment. Until so delivered, any such payment or collateral shall be held by the Collateral Agent or any such Subordinated Creditor in receipt of such payment or collateral in trust for the Senior Lender and shall not be commingled with other funds or property of the Collateral Agent or any such Subordinated Creditor. 8. FORECLOSURE OF SENIOR LOAN DOCUMENTS. The Collateral Agent, on behalf of the Subordinated Creditors, acknowledges that the Senior Lender reserves the right to foreclose the Senior Loan Documents or exercise any other right or remedy with respect to the Senior Loan Documents, in whole or in part, in such order or manner as the Senior Lender elects in its sole discretion. The Collateral Agent, on behalf of the Subordinated Creditors, hereby waives any and all rights it may have to require a marshaling of the Borrowers' assets to repay the Senior Debt in the event of a foreclosure of the Senior Mortgage or the enforcement by the Senior Lender of any of its rights or remedies in connection with the Senior Loan Documents. 9. EXERCISE OF RIGHTS BY SENIOR LENDER. The Senior Lender may, without affecting the subordination of the Subordinated Debt and the Subordinated Loan Documents: (a) release or compromise any obligation of any nature with respect to the Senior Loan Documents, (b) release its security interest in, or surrender, release or permit any substitution or exchange of all or any part of any properties securing repayment of the Senior Note, (c) retain or obtain a security interest in any property to secure payment of the Senior Note, or (d) extend, replace, consolidate, modify, or supplement any of the original or subsequent Senior Loan Documents, subject to any express limitations set forth in this Agreement. 10. SUBORDINATED DEBENTURES. The Collateral Agent, on behalf of the Subordinated Creditors, represents that the Subordinated Debt is not evidenced or secured by any note, bond or other written agreement except the Subordinated Debentures and the Subordinated Loan Documents in the form provided to the Senior Lender. The Collateral Agent, on behalf of the Subordinated Creditors, agree that the Subordinated Debentures shall carry on the facing page thereof the following legend: "This Debenture has been subordinated to certain Senior Debt pursuant to the provisions of a Subordination Agreement dated April 30, 2003, among the maker, the holder hereof and Ocean Bank. Each holder hereof shall be subject to all of the terms and conditions of such Subordination Agreement." 11. NO OTHER EVIDENCE OF SUBORDINATED DEBT. The Borrowers shall not issue any further instrument or other written evidence with respect to the Subordinated Debt. 12. BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the Senior Lender, the Collateral Agent, and the Subordinated Creditors, and their respective successors and assigns. 13. SPECIFIC ENFORCEMENT. The Senior Lender is hereby authorized to demand specific performance of this Agreement at any time when the Collateral Agent or the Subordinated Creditors shall have failed to comply with any provision hereof. The Collateral Agent or the Subordinated Creditors hereby irrevocably waive any defenses based on the adequacy of a remedy at law which might be asserted as a bar to the action of the Senior Lender. 14. FURTHER ASSURANCES. The Collateral Agent, on behalf of the Subordinated Creditors, and each Subordinated Creditor individually, shall execute and deliver to the Senior Lender, and Senior Lender shall execute and deliver to Collateral Agent and Subordinated Creditors, such further instruments as any such party may at any time or times reasonably request in order to carry out the provisions and intent of this Agreement. 6 15. NO OBLIGATIONS ON SUBORDINATED DEBT. The rights granted to the Senior Lender hereunder are solely for its protection and nothing herein contained shall impose on the Senior Lender any duties with respect to the Subordinated Debentures or any property of the Borrowers, except such duties as are imposed by law and cannot be waived by agreement. 16. RECEIPT OF DOCUMENTS. The Collateral Agent, on behalf of the Subordinated Creditors, hereby acknowledges that each of the Subordinated Creditors has received copies, or has been given the opportunity to review to its satisfaction, of the Senior Note and the other Senior Loan Agreements. 17. RECORDATION. The parties hereto agree that this Agreement may, at the option of Senior Lender, be recorded in the Public Records of Miami-Dade County, Florida. 18. NOTICES. All notices hereunder shall be in writing and shall be deemed to have been given (unless otherwise required by the specific provisions hereof in respect of any matter) (i) when delivered personally, (ii) when received via facsimile if on a business day during customary business hours (otherwise, on the next business day), (iii) three (3) days after being deposited in the United States mail, registered, postage prepaid, or (iv) the next business day after being delivered to a nationally recognized overnight courier, addressed as follows: If to the Collateral Agent or any The Bank of New York Trust Company of of the Subordinated Creditors: Florida, N.A. 10161 Centurion Parkway Jacksonville, Florida 32256 Attn: Sharon Atkinson Fax: (904) 645-1997 With a copy to: Emmet, Marvin & Martin, LLP 120 Broadway, 32nd Floor New York, New York 10271 Attn: Irving C. Apar, Esq. Fax: (212) 238-3100 If to Borrowers: Terremark Worldwide, Inc. NAP of the Americas, Inc. 2601 South Bayshore Drive, Suite 900 Miami, Florida 33133 Attn: Jose Gonzalez, Esq. Fax: (305) 856-8190 With a copy to: Greenberg Traurig, P.A. 1221 Brickell Avenue Miami, Florida 33131 Attn: Paul Berkowitz, Esq. Fax: (305) 579-0717 7 If to the Senior Lender: Ocean Bank 780 N. W. 42nd Avenue, Suite 300 Miami, Florida 33126 Attn: Luis Consuegra, Esq., General Counsel Fax: (305) 446-1276 With a copy to: Shutts & Bowen, LLP 1500 Miami Center 201 South Biscayne Boulevard Miami, FL 33131 Attn: C. Richard Morgan, Esq. Fax: (305) 347-7771 19. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. 20. AMENDMENTS. This Agreement represents the entire agreement with respect to the subject matter hereof, and supersedes all prior negotiations, agreements and commitments. This Agreement may be amended only by written instrument signed by the Collateral Agent and the Senior Lender. 21. GOVERNING LAW: CONSENT TO JURISDICTION; AND WAIVER OF JURY TRIAL. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, without giving effect to any conflict of laws rule or principle which would give effect to the laws of another jurisdiction. The Collateral Agent, on behalf of the Subordinated Creditors, and the Senior Lender submit to the exclusive jurisdiction of the state and federal courts located in Miami-Dade County, Florida. THE COLLATERAL AGENT, ON BEHALF OF THE SUBORDINATED CREDITORS, AND THE SENIOR LENDER WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN. 22. DISCLAIMER. Collateral Agent shall not be deemed to owe any fiduciary duty to Senior Lender and shall not be liable to Senior Lender if Collateral Agent shall in good faith mistakenly pay over or distribute to Subordinated Creditors, the Borrowers or any other person cash, property or securities to which Senior Lender is entitled to receive by virtue of this Agreement or otherwise, provided, that the foregoing shall not release any obligation of the Subordinated Creditors to pay over such cash, property or securities to the Senior Lender. With respect to Senior Lender, Collateral Agent undertakes to perform or observe only such of its covenants or obligations as are specifically set forth in this Agreement and no implied covenants or obligations shall be read into this Agreement against Collateral Agent. EXECUTION PAGE FOLLOWS 8 IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. WITNESSES: SENIOR LENDER: OCEAN BANK, a Florida banking corporation - --------------------------- By: Print Name: ---------------------------------------- ------------------------ Name: ---------------------------------------- Title: - --------------------------- ---------------------------------------- Print Name: ------------------------ COLLATERAL AGENT: THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A., for itself and on behalf of the Subordinated Creditors - --------------------------- By: Print Name: ---------------------------------------- ------------------------ Name: ---------------------------------------- Title: - --------------------------- ---------------------------------------- Print Name: ------------------------ 9 JOINDER OF BORROWERS The undersigned (i) approve of the terms of this Agreement, (ii) agree that the terms hereof are and shall be binding upon and enforceable against the Borrowers, and (iii) acknowledge and agree that they are not intended to be third party beneficiaries of this Agreement, and shall have no right to enforce same against the Senior Lender or the Collateral Agent. WITNESSES: TERREMARK WORLDWIDE, INC., a Delaware corporation - --------------------------- By: Print Name: ---------------------------------------- ------------------------ Name: ---------------------------------------- Title: - --------------------------- ---------------------------------------- Print Name: ------------------------ NAP OF AMERICAS, INC., a Florida corporation - --------------------------- By: Print Name: ---------------------------------------- ------------------------ Name: ---------------------------------------- Title: - --------------------------- ---------------------------------------- Print Name: ------------------------ 10 STATE OF FLORIDA ) ) SS: COUNTY OF MIAMI-DADE ) The foregoing instrument was acknowledged before me this _____ day of April, 2003, by ________________, as _______________ of OCEAN BANK, on behalf of that bank. He is personally known to me or has produced a driver's license as identification. Notary Public, State of ----------------- Print Name: ------------------------------ My commission expires: (Seal) STATE OF ) ) SS: COUNTY OF ) The foregoing instrument was acknowledged before me this _____ day of April, 2003, by ___________________________, as __________________________ of THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A., on behalf of that association He is personally known to me or has produced a driver's license as identification. Notary Public, State of ----------------- Print Name: ------------------------------ My commission expires: (Seal) 11 STATE OF FLORIDA ) ) SS: COUNTY OF MIAMI-DADE ) The foregoing instrument was acknowledged before me this _____ day of April, 2003, by ____________________, as ______________ of TERREMARK WORLDWIDE, INC., a Delaware corporation, on behalf of that corporation. He is personally known to me or has produced a driver's license as identification. Notary Public, State of ----------------- Print Name: ------------------------------ My commission expires: (Seal) STATE OF FLORIDA ) ) SS: COUNTY OF MIAMI-DADE ) The foregoing instrument was acknowledged before me this _____ day of April, 2003, by ____________________, as ______________ of NAP OF THE AMERICAS, INC., a Florida corporation, on behalf of that corporation. He is personally known to me or has produced a driver's license as identification. Notary Public, State of ----------------- Print Name: ------------------------------ My commission expires: (Seal) 12 EXHIBIT "A" Lots 1 through 20, inclusive, in Block 38 NORTH, CITY OF MIAMI, according to the Plat thereof, as recorded in Plat Book B, Page 41, Public Records of Miami-Dade County, Florida. EX-10.20 7 g83542exv10w20.txt SECOND ASSIGNMENT OF LEASE EXHIBIT 10.20 ----------------------- DATE: APRIL 30, 2003 ----------------------- Return To: Emmet, Marvin & Martin, LLP 120 Broadway, 32nd Floor New York, New York 10271 Attn: Irving C. Apar ----------------------- SECOND ASSIGNMENT OF LEASES AND RENTS AND SECURITY DEPOSITS THIS SECOND ASSIGNMENT OF LEASES AND RENTS AND SECURITY DEPOSITS (this "Assignment") is made as of April 30, 2003, by NAP OF THE AMERICAS, INC., a Florida corporation ("Assignor"), whose address is 2601 South Bayshore Drive, Miami, FL 33133, in favor of THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A. ("Assignee"), whose address is 10161 Centurion Parkway, Jacksonville, FL 32256. W I T N E S S E T H: WHEREAS, Terremark Worldwide, Inc., a Delaware corporation ("Terremark"), which owns all of the outstanding capital stock of Assignor, has issued and sold 10% Subordinated Secured Convertible Debentures due 2006 (the "Debentures") and the holders from time to time of the Debentures have appointed Assignee to act as collateral agent on their behalf. WHEREAS, the Debentures are secured by, among other things, that certain Second Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing, dated of even date herewith, given by Assignor to Assignee (the "Second Mortgage"), to be recorded in the Public Records of Miami-Dade County, Florida prior to the recordation of this Assignment, which Mortgage encumbers, inter alia, the Leased Premises; all capitalized terms used but not otherwise defined herein shall have the meanings provided therefore in the Mortgage. =============================================================================== NOTWITHSTANDING ANY PROVISIONS CONTAINED HEREIN TO THE CONTRARY, THIS ASSIGNMENT AND THE LIENS CREATED HEREBY ARE SUBJECT TO AND SUBORDINATE TO THE LIENS OF THE SENIOR MORTGAGE AND THE OTHER SENIOR LOAN DOCUMENTS (AS SUCH TERMS ARE DEFINED IN THE FOLLOWING DESCRIBED SUBORDINATION AGREEMENT) PURSUANT TO THAT CERTAIN SUBORDINATION AGREEMENT BETWEEN ASSIGNEE, ASSIGNOR, OCEAN BANK AND TERREMARK DATED APRIL 30, 2003, TO BE RECORDED IN THE PUBLIC RECORDS OF MIAMI-DADE COUNTY, FLORIDA SIMULTANEOUSLY WITH THE RECORDATION OF THIS ASSIGNMENT WHICH SUBORDINATION AGREEMENT IS INCORPORATED HEREIN BY REFERENCE AND MADE A PART HEREOF. WHEREAS, the Leased Premises is a portion of that certain real property situated in the County of Miami-Dade, State of Florida, as is more particularly described on Exhibit A attached hereto and incorporated herein by this reference; and WHEREAS, Assignor is desirous of further securing to Assignee the performance of the terms, covenants and agreements hereof and of the other Subordinated Loan Documents. NOW, THEREFORE, in consideration of the purchase of the Debentures and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor does hereby irrevocably, absolutely and unconditionally transfer, sell, assign, pledge, bargain, set over and convey to Assignee, its successors and assigns, all of the right, title and interest of Assignor, either now existing or hereafter acquired, in and to any and all Leases and Rents. TO HAVE AND TO HOLD the same unto Assignee, its successors and assigns. IT IS AGREED that this Assignment is made upon the following terms, covenants and conditions: 1. This instrument is a present, complete, effective, irrevocable, absolute and unconditional assignment of the Rents and of the Leases and a present, absolute, unconditional and executed grant of the powers herein granted to Assignee, and not an assignment for security; and the existence or exercise of Assignor's revocable license to collect Rent shall not operate to subordinate this assignment to any subsequent assignment, and such assignment shall be fully operative without any further action on the part of any party, and Assignee shall be entitled upon the occurrence and during the continuance of an Event of Default to all Rents, whether or not Assignee takes possession of the Mortgaged Property or any part thereof. Assignor is hereby permitted, at the sufferance of Assignee and at its discretion, and is hereby granted a revocable license by Assignee, to collect the Rents and to take all actions with respect to all Leases, present and future, subject to the terms of the Second Mortgage, this Assignment and the other Subordinated Loan Documents, unless and until there shall have occurred and be continuing an Event of Default. Upon the occurrence and during the Continuance of an Event of Default, the aforementioned license granted to Assignor automatically shall terminate without notice to Assignor, and Assignee may thereafter, without taking possession of the Mortgaged Property, take possession of the Leases and collect the Rents. Further, from and after such termination, Assignor shall be the agent of Assignee in collection of the Rents, and any Rents so collected by Assignor shall be held in trust by Assignor for the sole and exclusive benefit of Assignee and Assignor shall, within one (1) business day after receipt of any Rents, pay the same to Assignee to be applied by Assignee as hereinafter set forth. Furthermore, upon the occurrence and during the Continuance of an Event of Default and termination of the aforementioned license, Assignee shall have the right and authority, without any notice whatsoever to Assignor and without regard to the adequacy of the security therefore, to: (a) manage and operate the Mortgaged Property, with full power to employ agents to manage the same; (b) demand, collect, receive and sue for the Rents, including those past due and unpaid; and (c) do all acts relating to such management of the Mortgaged Property, including, but not limited to, negotiation of new Leases, making adjustments of existing Leases, contracting -2- and paying for repairs and replacements to the Mortgaged Property or used in any way in the operation, use and occupancy of the Mortgaged Property as in the sole subjective judgment and discretion of Assignee may be necessary to maintain the same in a tenantable condition, purchasing and paying for such additional furniture and equipment as in the sole subjective judgment of Assignee may be necessary to maintain a proper rental income from the Mortgaged Property, employing necessary managers and other employees, purchasing fuel, providing utilities and paying for all other expenses incurred in the operation of the Mortgaged Property, maintaining adequate insurance coverage over hazards customarily insured against and paying the premiums therefore. Assignee may apply the Rents received by Assignee from the Mortgaged Property, after deducting the costs of collection thereof, including, without limitation, attorneys' fees and a management fee for any management agent so employed, against amounts expended for repairs, upkeep, maintenance, service, fuel, utilities, taxes, assessments, insurance premiums and such other expenses as Assignee incurs in connection with the operation of the Mortgaged Property and against interest, principal, required escrow deposits and other sums which have or which may become due, from time to time, under the terms of the Subordinated Loan Documents, in such order or priority as to any of the items so mentioned as Assignee, in its sole subjective discretion, may determine. The exercise by Assignee of the rights granted Assignee in this paragraph, and the collection of the Rents and the application thereof as herein provided, shall not be considered a waiver by Assignee of any default under the Subordinated Loan Documents or prevent foreclosure of any liens on the Mortgaged Property nor shall such exercise make Assignee liable under any of the Leases. Assignee hereby expressly reserving all of its rights and privileges under the Mortgage and the other Loan Documents as fully as though this Assignment had not been entered into. 2. Assignor agrees to deliver to Assignee, within thirty (30) days after Assignee's request, a true and complete copy of every Lease and, within ten (10) days after Assignee's request, a complete list of the Leases, certified pursuant to an officer's certificate stating the demised premises, the names of the Lessees, the Rents payable under the Leases, the date to which such Rents have been paid, the terms of the Leases, the dates of occupancy, the dates of expiration, any Rent concessions, work obligations or other inducements granted to the Lessees, and any renewal options. 3. Without limiting the rights granted hereinabove, upon the occurrence and during the continuance of an Event of Default, Assignee may, but shall not be obligated to, without prior notice to or demand on Assignor and without releasing Assignor from any obligation hereof, make or perform the same in such manner and to such extent as Assignee may deem necessary to protect the security hereof, including specifically, without limitation, entering upon the Mortgaged Property, and collecting, retaining and applying the Rents toward payment of the Obligations in such priority and proportions as Assignee in its discretion shall deem proper, disposing by the usual summary proceedings any lessee defaulting in making any payment due under any Lease or sublease to Assignee or defaulting in the performance of any of its other obligations under its Lease or sublease, letting the Mortgaged Property, the Improvements or any portion thereof, applying the Rents on account of the Obligations, and performing such other acts as Assignee is entitled to perform hereunder appearing in and defending any action or proceeding purporting to affect the security hereof or the rights or powers of Assignee, performing or discharging any obligation, covenant or agreement of Assignor under any of the Leases, and performing such other acts as -3- Assignee is entitled to perform hereunder, and, in exercising any of such powers, paying all necessary fees, costs and expenses, employing counsel and incurring and paying reasonable attorneys' fees and expenses. Any sum advanced or paid by Assignee for any such purpose, including, without limitation, reasonable attorneys' fees and expenses, together with interest thereon at the Default Rate from the date paid or advanced by Assignee until repaid by Assignor, shall immediately be due and payable to Assignee by Assignor on demand and shall be secured by the Mortgage and by all of the other Loan Documents. The execution of this Assignment constitutes and evidences the irrevocable consent of Assignor to Assignee's entry upon and taking of possession of the Mortgaged Property or any portion thereof pursuant to the provisions of this Section 3. 4. In addition to the rights which Assignee may have herein, upon the occurrence and during the continuance of any Event of Default, Assignee, at its option, may require Assignor to pay monthly in advance to Assignee, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Mortgaged Property as may be in the possession of Assignor and may require Assignor to vacate and surrender possession of the Mortgaged Property to Assignee or to such receiver and, in default thereof, Assignor may be evicted by summary proceedings or otherwise. 5. This Assignment shall not operate to place responsibility for the control, care, management or repair of the Mortgaged Property upon Assignee, nor for the performance of any of the terms and conditions of any of the Leases, nor shall it operate to make Assignee responsible or liable for any waste committed on the Mortgaged Property by the tenants or any other party or for any dangerous or defective condition of the Mortgaged Property or for any negligence in the management, upkeep, repair or control of the Mortgaged Property. Assignee shall not be liable for any loss sustained by Assignor resulting from Assignee's failure to let the Mortgaged Property or from any other act or omission of Assignee in the management, upkeep, repair or control of the Mortgaged Property. Assignor shall and does hereby indemnify and hold Assignee harmless from and against any and all liability, loss, claim, demand or damage which may or might be incurred by reason of this Assignment, including, without limitation, claims or demands for security deposits from tenants of space in the Improvements deposited with Assignor, and from and against any and all claims and demands whatsoever which may be asserted against Assignee by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in any of the Leases. Should Assignee incur any liability by reason of this Assignment or in defense of any claim or demand for loss or damage as provided above, the amount thereof at the Default Rate from the date paid or incurred by Assignee until repaid by Assignor shall be immediately due and payable to Assignee by Assignor upon demand and shall be secured by the Mortgage and by all of the other Loan Documents. It is expressly acknowledged and agreed by Assignor that the indemnity contained in this Agreement protects Assignee from the consequences of Assignee's acts or omissions, including, without limitation, the negligent acts or omissions of Assignee, to the extent provided by law; provided, however, that nothing contained herein shall be deemed to require Assignor to indemnify Assignee from Assignee's gross negligence or willful misconduct. 6. This Assignment shall not be construed as making Assignee a mortgagee-in-possession. 7. Assignee is obligated to account to Assignor only for such Rents as are actually collected or received by Assignee. 8. Assignor hereby further presently and absolutely assigns to Assignee subject to the terms and provisions of this Assignment: (a) any award or other payment which Assignor may hereafter become entitled to receive with respect to any of the Leases as a result of or pursuant to any bankruptcy, insolvency or -4- reorganization or similar proceedings involving the tenants under such Leases; and (b) any and all payments made by or on behalf of any tenant of any part of the Mortgaged Property in lieu of Rents. Assignor hereby irrevocably appoints Assignee as its attorney-in-fact to, upon the occurrence and during the continuance of an Event of Default, appear in any such proceeding and to collect any such award or payment, which power of attorney is coupled with an interest by virtue of this Assignment and is irrevocable so long as any sums are outstanding under the Loan. 9. Assignor represents, warrants and covenants to and for the benefit of Assignee: (a) that Assignor now is (or with respect to any Leases not yet in existence, will be immediately upon the execution thereof) the absolute owner of the landlord's interest in the Leases, with full right and title to assign the same and the Rents due or to become due thereunder; (b) that, other than this Assignment and the Senior Assignment, there are no outstanding assignments of the Leases or Rents; (c) that no Rents have been discounted, released, waived, compromised or otherwise discharged except for prepayment of rent of not more than one (1) month prior to the accrual thereof; (d) that there are not material defaults now existing under any of the Leases by the landlord or tenant, and there exists no state of facts which, with the giving of notice or lapse of time or both, would constitute a default under any of the Leases by the landlord or tenant, except as disclosed in writing to Assignee; (e) that Assignor has and shall duly and punctually observe and perform all covenants, conditions and agreements in the Leases on the part of the landlord to be observed and performed thereunder and (f) the Leases are in full force and effect and are the valid and binding obligations of Assignor, and, to the knowledge of Assignor, are the valid and binding obligations of the tenants thereto. 10. Assignor covenants and agrees that Assignor shall not, without the prior written consent of Assignee: (a) accept any payment of Rent or installments of Rent for more than one month in advance; (b) enter into any Lease not in conformity with the provisions of the Mortgage; (c) except as may be expressly permitted by the provisions of the Mortgage, cancel or terminate any Lease or amend or modify any Lease; (d) take or omit to take any action or exercise any right or option which would permit the tenant under any Lease to cancel or terminate any Lease; (e) discount, release, waive, compromise or otherwise discharge any Rents payable or other obligations under the Leases; (f) further pledge, transfer, mortgage or otherwise encumber or assign the Leases or future payments of Rents or incur any material indebtedness, liability or other obligation to any tenant, lessee or licensee under the Leases; or (g) permit any Lease to become subordinate to any lien other than the lien of the Mortgage. 11. Assignor covenants and agrees that Assignor shall, at its sole cost and expense, appear in and defend any action or proceeding arising under, growing out of, or in any manner connected with the Leases or the obligations, duties or liabilities of the landlord or tenant thereunder, and shall pay on demand all fees, costs and expenses, including, without limitation, reasonable attorneys' fees and expenses, which Assignee may incur in connection with Assignee's appearance, voluntary or otherwise, in any such action or proceeding, together with interest thereon at the Default Rate from the date incurred by Assignee until repaid by Assignor. 12. At any time, Assignee may, at its option, notify any tenants or other parties of the existence of this Assignment. Assignor does hereby specifically authorize, instruct and direct each and every present and future -5- tenant, lessee and licensee of the whole or any part of the Mortgaged Property to pay all unpaid and future Rents to Assignee upon receipt of demand from Assignee so to pay the same upon the occurrence and during the continuance of an Event of Default and Assignor hereby agrees that each such present and future tenant, lessee and licensee may rely upon such written demand from Assignee so to pay such Rents without any inquiry into whether there exists an Event of Default or whether Assignee is otherwise entitled to such Rents. Assignor hereby waives any right, claim or demand which Assignor may now or hereafter have against any present or future tenant, lessee or licensee by reason of such payment of Rents to Assignee, and any such payment shall discharge such tenant's, lessee's or licensee's obligation to make such payment to Assignor. 13. Assignee may take or release any security for the Obligations, may release any party primarily or secondarily liable for the Obligations, may grant extensions, renewals or indulgences with respect to the Obligations and may apply any other security therefore held by it to the satisfaction of any of the Obligations without prejudice to any of its rights hereunder. 14. The acceptance of this Assignment and the collection of the Rents in the event Assignor's license is terminated, as referred to above, shall be without prejudice to Assignee. The rights of Assignee hereunder are cumulative and concurrent, may be pursued separately, successively or together and may be exercised as often as occasion therefore shall arise, it being agreed by Assignor that the exercise of any one or more of the rights provided for herein shall not be construed as a waiver of any of the other rights or remedies of Assignee, at law or in equity or otherwise, so long as any obligation under the Subordinated Loan Documents remains unsatisfied. 15. This Assignment shall be in full force and effect continuously from the date hereof to and until all of the Obligations have been indefeasibly paid and otherwise fully performed and satisfied. 16. In addition to, but not in lieu of, any other rights hereunder, Assignee shall have the right to institute suit and obtain a protective or mandatory injunction against Assignor to prevent a breach or default, or to enforce the observance, of the agreements, covenants, terms and conditions contained herein, as well as the right to damages occasioned by any breach or default by Assignor. 17. This Assignment shall continue and remain in full force and effect during any period of foreclosure with respect to the Mortgaged Property. 18. Assignor hereby covenants and agrees that Assignee shall be entitled to all of the rights, remedies and benefits available by statute, at law, in equity or as a matter of practice for the enforcement and perfection of the intents and purposes hereof. To the extent permitted by applicable law, Assignee shall, as a matter of absolute right and without regard to the adequacy of the security under the Loan Documents, be entitled, upon application to a court of applicable jurisdiction and without further notice, to the appointment of a receiver to obtain and secure the rights of Assignee hereunder and the benefits intended to be provided to Assignee hereunder. -6- 19. This Assignment shall be construed and enforced in accordance with the laws of the State of Florida, without application of its conflict of law principles. 20. Nothing in this Assignment shall ever be construed as subordinating the Subordinated Loan Documents to any Lease; provided, however, that any proceeding by Assignee to foreclose its liens encumbering the Mortgaged Property, enforce any other remedy contained in the Loan Documents, or any action by way of entry into possession after default, shall not operate to terminate any Lease unless Assignee elects in writing to do so or unless the tenant is named as a defendant in Assignee's foreclosure action. 21. This Assignment shall not constitute or evidence any payment whatsoever on account of the Obligations, and the Obligations shall be reduced only to the extent of cash payments actually paid to Assignee and applied by Assignee in reduction of the unpaid balance thereof. 22. This Assignment is subordinate and subject to that certain Assignment of Leases and Rents and Security Deposits dated as of September 5, 2001, made by and between Assignor and Ocean Bank, a Florida banking corporation (the "Senior Assignment"). -7- IN WITNESS WHEREOF, Assignor has executed this Assignment as of the day and year first above written. Signed, sealed and delivered NAP OF THE AMERICAS, INC., in the presence of: a Delaware corporatino By: /s/ JOSE SEGRERA ------------------------------- By: /s/ R. D. SICHTA Name: Jose Segrera -------------------------- Title: Vice President Name: R. D. Sichta Title: Assistant Secretary STATE OF FLORIDA COUNTY OF MIAMI-DADE The foregoing instrument was acknowledged before me this 30th day of April, 2003, by ______________, as__________________ of NAP OF THE AMERICAS, INC., a Florida corporation on behalf of that corporation. Personally Known ____________ OR Produced Identification__________ Type of Identification Produced____________________ Signature: ---------------------------------- Name: [Print or type] --------------------------------------------- Title: Notary Public Serial No., if any: -------------------------- My commission expires: -8- EXHIBIT A LEGAL DESCRIPTION Lots 1 through 20, inclusive, in Block 38 North, City of Miami, according to the Plat thereof, as recorded in Plat Book B, Page 41, Public Records of Miami-Dade County, Florida. -9- EX-10.21 8 g83542exv10w21.txt DEBT CONVERSION AGREEMENT EXHIBIT 10.21 DEBT CONVERSION AGREEMENT THIS DEBT CONVERSION AGREEMENT, dated as of April 30, 2003 (this "AGREEMENT"), by and among Terremark Worldwide, Inc., a Delaware corporation ("TERREMARK"), NAP of the Americas, Inc., a Florida corporation ("NAPA," and, together with Terremark, the "BORROWERS"), and Ocean Bank, a Florida banking corporation (the "LENDER"). RECITALS A. The Borrowers and the Lender are parties to a certain Amended and Restated Credit Agreement dated as of September 5, 2001 (the "FIRST AMENDED AND RESTATED CREDIT AGREEMENT"), pursuant to which the Lender has made a loan to the Borrowers in the original principal amount of $48,000,000 (the "LOAN"). B. The Borrowers have requested the Lender to convert $15,000,000 of the outstanding principal balance of the Loan into shares of the common stock, par value $0.001 per share, of Terremark (the "TERREMARK COMMON STOCK"), on the terms and subject to the conditions set forth in this Agreement. C. The Lender is willing to convert $15,000,000 of the outstanding principal balance of the Loan into shares of the Terremark Common Stock, on the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE 1 CERTAIN DEFINITIONS 1.1 CERTAIN DEFINITIONS. The following capitalized terms have the meanings set forth below: (a) "AFFILIATE" of a particular Person means any other Person controlling, controlled by or under control with such Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of voting securities, contract, or otherwise. (b) "COMMISSION" means the Securities and Exchange Commission. (c) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (d) "GOVERNMENTAL AUTHORITY" means any government, political subdivision or governmental or regulatory authority, agency, board, bureau, commission, instrumentality or court or quasi-governmental authority (in each case, whether federal, state or local and whether domestic or foreign). (e) "HOLDERS" means the Lender and its successors and permitted assigns as provided in Section 5.5. (f) "LAWS" means, collectively, all statutes, laws, codes and ordinances, and any rules or regulations of any Governmental Authority (in each case, whether federal, state or local and whether foreign or domestic). (g) "LIENS" means any lien, encumbrance, change, security interest, restriction (including any restriction on voting rights or disposition), equity, claim or third party right of any nature whatsoever. (h) "PERSON" means any natural person, corporation, trust, partnership, limited liability company or partnership, joint venture, unincorporated organization, Governmental Authority, or other entity. (i) "REGISTRABLE SECURITIES" means (i) the Shares to be issued to the Lender under this Agreement, and (ii) any Terremark Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, such Shares. (j) "RULE 144" means Rule 144 of the Commission's General Rules and Regulations under the Securities Act, or any similar or substitute rule permitting the sale of restricted securities that may hereafter be adopted by the Commission. (k) "SECURITIES ACT" means the Securities Act of 1933, as amended. (l) "TAXES" means, collectively, any taxes imposed by any Governmental Authority, including all income, alternative minimum, gross receipts, sales, use, ad valorum, franchise, capital, paid-up capital, profits, license, withholding, payroll, employment, excise, unemployment insurance, social security, severance, stamp, occupational, property, environmental, windfall profit, custom, duty, transfer, documentary or other taxes, all governmental fees or other like assessments or charges of any kind whatsoever, and any information, reporting or backup-withholding obligations, together with any interest, penalty or additional amounts imposed by any Governmental Authority responsible for the imposition of such taxes. (m) "TAX RETURNS" means all returns, reports, filings, estimates, declarations, claims for refund, information returns or statements required to be filed by any Person. ARTICLE 2 ISSUANCE OF TERREMARK COMMON STOCK 2.1 ISSUANCE OF TERREMARK COMMON STOCK. Upon the terms and subject to the conditions of this Agreement, at the Closing (as defined below), Terremark will issue and deliver to the Lender, and Lender will acquire from Terremark, 20,000,000 shares (the "SHARES") of the Terremark Common Stock. 2.2 CONSIDERATION FOR SHARES. In consideration for the issuance of the Shares, at the Closing, the Lender will cancel $15,000,000 of the outstanding principal amount of the Loan, and shall amend the promissory note evidencing the Loan to so indicate. 2.3 Closing. (a) CLOSING. The closing of the transactions contemplated by this Agreement (the "CLOSING"), will take place at 10:00 a.m. (Miami time) on April 30, 2003 (the "CLOSING DATE") at the offices of Shutts & Bowen LLP at 201 South Biscayne Boulevard, Suite 1500, Miami, Florida 33131 or at such other place and time as may be mutually agreed upon by Borrowers and the Lender. (b) Deliveries at Closing. At the Closing: (i) Terremark will issue and deliver to the Lender a stock certificate in definitive form, registered in the name of the Lender or its designee, representing the Shares. 2 (ii) The Borrowers and the Lender will execute and deliver the Second Amended and Restated Credit Agreement, substantially in the form of Exhibit A to this Agreement; (iii) The Borrowers will execute and deliver a Renewal Promissory Note, substantially in the form of Exhibit B to this Agreement. (iv) The Borrowers and Guarantors will execute and deliver the following additional agreements and documents listed on SCHEDULE 2.3 to this Agreement. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE BORROWERS The Borrowers hereby jointly and severally represent and warrant to the Lender as follows: 3.1 CORPORATE EXISTENCE AND QUALIFICATION. Each of the Borrowers has been duly organized and is validly existing as a corporation in good standing under the laws of its state of incorporation, with full power and authority (corporate and other) to own, lease and operate its properties and assets and to conduct its business, as it is now being conducted. Each of the Borrowers is qualified to do business as a foreign corporation and is in good standing in each jurisdiction of the United States, or any other country, state, province, or political subdivision in which the character of the business conducted by it or the nature of the properties owned or leased by it makes such qualification necessary for the conduct of its business, except where the failure to so qualify would not have a material adverse effect on such Borrower. 3.2 AUTHORITY. Each Borrower has full right, power and authority to enter into this Agreement and each of the Exhibits to this Agreement, and this Agreement and each of the Exhibits to this Agreement has been duly authorized, executed and delivered by each Borrower and constitutes the legal, valid and binding agreement of each Borrower, enforceable against it in accordance with its terms. 3.3 APPROVALS. Except as set forth in SCHEDULE 3.3, no consent, approval or authorization of, or registration, qualification or filing with, any Governmental Authority or any other Person is required to be made by either of the Borrowers in connection with the execution, delivery or performance by either of the Borrowers of this Agreement and each of the Exhibits to this Agreement or the consummation by them of the transactions contemplated by this Agreement and each of the Exhibits to this Agreement. 3.4 NO VIOLATIONS. Except as set forth in SCHEDULE 3.4, the execution, delivery and performance of this Agreement and each of the Exhibits to this Agreement and the consummation by each of the Borrowers of the transactions contemplated hereby and thereby, do not and will not (i) violate or conflict with the organizational documents of either of the Borrowers; (ii) assuming that the consents and approvals referred to in SCHEDULE 3.3 are duly obtained, (A) violate, conflict with or result in a breach of any of the provisions of or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration or the creation of Lien upon any of the assets or properties of either the Borrowers or any of their subsidiaries under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement, or other instrument or obligation to which either of the Borrowers or any of their subsidiaries is a party or by which either of the Borrowers or any of their subsidiaries may be bound or to which either of the Borrowers or any of their subsidiaries or any of their respective properties or assets may be subject, or (B) violate any Law, judgment, ruling, order, writ, injunction or decree applicable to any Borrower or any of their subsidiaries or any of their respective properties or assets. 3.5 ISSUANCE OF SHARES. Terremark has duly authorized the issuance of the Shares to the Lender or its designee by all necessary corporate action and, when paid for in accordance with the terms of this Agreement, the Shares will be validly issued and outstanding, fully paid and nonassessable, free and clear of all Liens, including any preferential rights of other shareholders of any nature 3 or third parties and the Lender or its designee will be entitled to all rights accorded to a holder of Terremark Common Stock. Assuming that the representations and warranties of the Lender in Article IV hereof are true and correct, Terremark has complied with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares under this Agreement. 3.6 CAPITALIZATION. Immediately following the Closing, the authorized capital stock of Terremark will consist of (i) 400,000,000 shares of Terremark Common Stock, of which 306,290,197 shares will be issued and outstanding, and (ii) 10,000,000 shares of preferred stock, par value $0.001 per share, of which (A) 20 shares will be designated as Series G convertible preferred stock and 5,882 shares will be designated as Series H convertible preferred stock, and (B) 20 shares of Series G convertible preferred stock will be outstanding and convertible into 2,015,746 shares of Terremark Common Stock, and (C) 294 shares of Series H convertible preferred stock will be outstanding and convertible into 294,000 shares of Terremark Common Stock. Immediately following the Closing, Terremark will have outstanding options, warrants and convertible debentures exercisable for or convertible into a total of 40,809,634 shares of Terremark Common Stock. 3.7 COMPLIANCE WITH LAW. Neither Borrower is in violation of any Law, judgment, ruling, order, writ, injunction or decree to which it may be subject and the business of each Borrower has been and is presently being conducted in accordance with all applicable Laws, except where the failure to be in accordance would not have a material adverse effect on such Borrower. Each Borrower has received all franchises, permits, licenses, consents and other authorizations and approvals of all Governmental Authorities necessary for the conduct of its business as now being conducted by it, except where the failure to receive such franchises, permits, licenses, consents and other authorizations and approvals would not have a material adverse effect on such Borrower. 3.8 SEC REPORTS. Terremark has duly filed with the Commission all reports (individually a "SEC Report" and collectively the "SEC Reports") required to be filed by it under the Securities Act and the Exchange Act. The consolidated financial statements of Terremark and the related notes contained in Terremark's Annual Report on Form 10-K for the fiscal year ended March 31, 2002 and its Quarterly Report on Form 10-Q for the quarter ended December 31, 2002, present fairly the consolidated financial position of Terremark as of the dates indicated therein and the consolidated results of its operations and cash flows for the periods therein specified. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods therein specified. Except as set forth in the financial statements or the SEC Reports, neither of the Borrowers has any material liabilities, contingent or otherwise, other than liabilities incurred in the ordinary course of business subsequent to December 31, 2002. The SEC Reports complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, as of their respective filing or effective dates, and the information contained therein was true and correct in all material respects as of the date or effective date of such documents and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.9 TAXES. Each Borrower and each of their subsidiaries have accurately prepared and filed all Tax Returns required by Law to be filed by it, has paid or made provisions for the payment of all Taxes shown to be due and adequate provisions have been and are reflected in the consolidated financial statements of Terremark for all current Taxes to which any of them is subject and which are not currently due and payable. 3.10 ACTIONS PENDING. There is no action, suit, claim, investigation or proceeding ("Litigation") pending or, to the knowledge of either Borrower, threatened against either Borrower or any of their subsidiaries which questions the validity of this Agreement and the transactions contemplated by this Agreement, or any action taken or to be taken pursuant to this Agreement. Except as disclosed in the SEC Reports, there is no Litigation pending or, to the knowledge of either Borrower, threatened, against or involving the Borrowers or any of their subsidiaries or any of their respective properties or assets, or 4 any outstanding orders, judgments, injunctions, awards or decrees of any Governmental Authority against either Borrower or any of their subsidiaries. 3.11 RELATED-PARTY TRANSACTIONS. To the knowledge of Borrowers, no employee, officer, director or 5% shareholder of Terremark or any member of his or her immediate family (a "Related Party") is indebted to either of the Borrowers, or any of their subsidiaries. Except as listed on SCHEDULE 3.11, neither of the Borrowers nor any of their subsidiaries is indebted (or committed to make loans or extend or guarantee credit) to any Related Party. To the knowledge of the Borrowers, except as disclosed in the SEC Reports, no Related Party has any direct or indirect ownership interest in any firm or corporation with which either of the Borrowers or their subsidiaries is affiliated or with which either of the Borrowers or any of their subsidiaries has a business relationship. To the knowledge of the Borrowers, except as disclosed in the SEC Reports, no Related Party is directly or indirectly interested in any material contract with either of the Borrowers or any of their subsidiaries. 3.12 DISCLOSURE. Neither this Agreement nor the Exhibits hereto nor any other documents, certificates or instruments furnished to the Lender by or on behalf of the Borrowers or any of their subsidiaries in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in light of the circumstances under which they were made herein or therein, not misleading. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE LENDER 4.1 The Lender represents and warrants to Terremark that: (a) The Lender acknowledges that the offer, issuance and sale to it of the Shares is intended to be exempt from the registration requirements of the Securities Act, pursuant to the provisions of Regulation D promulgated by the Commission under the Securities Act. (b) The Lender is an "accredited investor," as such term is defined in Rule 501(a) of the Commission's General Rules and Regulations under the Securities Act. (c) Without limiting or conditioning the Representations and Warranties of the Borrowers contained in Article III above, the Lender acknowledges that (i) during the course of the transaction and prior to this Agreement it has received information relating to the Borrowers; (ii) has been given a reasonable opportunity to ask questions of and receive answers from the Borrowers and their representatives concerning the Borrowers; and (iii) it has the requisite knowledge and experience in financial business matters to be capable of evaluating the merits and risks of investing in the Company; (d) It is the Lender's present intention that the Shares being acquired by the Lender are for the account of the Lender or its designee and not with a present view to or for sale in connection with any distribution thereof. (e) The Lender understands that (i) the issuance of the Shares to the Lender has not been registered under the Securities Act, (ii) Lender may not sell, pledge, hypothecate or otherwise transfer the Shares or any interest therein except in a transaction which is registered under the Securities Act or which is exempt from the registration requirements of the Securities Act, and (iii) Terremark will make a notation on the certificate evidencing the Shares and shall instruct its transfer agent to such effect. 5 ARTICLE 5 REGISTRATION OF SHARES Terremark covenants and agrees with the Lender as follows: 5.1 REGISTRATION AND LISTING (a) Terremark will use commercially reasonable efforts to cause to be effective, on or before April 30, 2004, a registration statement under the Securities Act (the "Registration Statement"), to permit the resale of the Registrable Securities by the Holders. Terremark will also cause the Registrable Securities to be listed on the American Stock Exchange as promptly as practicable. (b) Terremark will prepare and file with the Commission the Registration Statement and use commercially reasonable efforts to cause the Registration Statement to become and remain effective until the earlier of such time as all the Registrable Securities have been sold pursuant to the Registration Statement or are freely tradable by the Holders under Rule 144(k). (c) Terremark will prepare and file with the Commission such amendments and supplements to the Registration Statement and any prospectus used in connection therewith as may be necessary to keep the Registration Statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by the Registration Statement. (d) Terremark will furnish to the Holders such number of copies of a prospectus, in conformity with the requirements of the Securities Act, and such other documents, as the Holders may reasonably request in order to facilitate the sale of the Registrable Securities owned by the Holders. (e) Terremark will perform all necessary actions to register or qualify the securities covered by the Registration Statement under such other securities or blue sky laws of such jurisdictions within the United States as the Holders will reasonably request, and perform all necessary actions as may be required in such jurisdictions; provided, however, that Terremark will not be obligated to file any general consent to service of process or qualify as a foreign corporation in any jurisdiction. (f) Terremark will notify each Holder of the Registrable Securities covered by the Registration Statement at any time when a prospectus relating to Registrable Securities is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (g) Terremark will furnish, at the request of any Holder, on the date that the Registration Statement becomes effective, an opinion, dated such date, of the counsel representing Terremark for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to Holder. 5.2 EXPENSES OF REGISTRATION. Terremark will pay all expenses incurred in connection with any registration, filing or qualification pursuant to Article V, including (without limitation), all registration, filing and qualification fees, printers and accounting fees, fees and disbursements of counsel for Terremark, and reasonable fees and disbursements of counsel for the Lender which are directly related to such registration, filing and qualification; provided, however, that underwriting discounts and commissions will be borne by the Holders. 5.3 INDEMNIFICATION AND CONTRIBUTION. In the event any Registrable Securities are included in the Registration Statement: 6 (a) to the extent permitted by law, (1) Terremark will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for such Holder and each Person, if any, who controls such Holder or such underwriter within the meaning of the Securities Act or the Exchange Act, against any expenses, claims, damages or liabilities (collectively "LOSSES"), to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such Losses arise out of or are based upon any of the following statements, omissions or violations (collectively, a "VIOLATION"): (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by Terremark of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law; and (2) Terremark will pay as incurred to such Holder and each such underwriter and controlling Person, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Loss; provided, however, that the indemnity agreement contained in this Section 5.3 will not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of Terremark (which consent will not be unreasonably withheld or delayed) nor will Terremark be liable in any such case for any such Loss to the extent that it arises out of or is based upon a Violation which occurs in reliance upon written information furnished expressly for use in connection with such registration by any such Holder or any such underwriter or controlling Person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless Terremark, each of its directors, and each of its officers who has signed the Registration Statement, each Person, if any, who controls Terremark within the meaning of the Securities Act, any underwriter and any controlling person of any such underwriter, against any Loss to which any of the foregoing Persons may become subject, under the Securities Act, the Exchange Act or other federal or state Law, insofar as such Loss arises out of or is based upon any Violations, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon written information furnished by the Holder expressly for use in connection with the Registration Statement; provided, however, that the indemnity agreement contained in this Section 5.3 will not apply to amounts paid in settlement of any such Loss if such settlement is effected without the consent of the Holder (which consent will not be unreasonably withheld or delayed); and further provided, that in no event will any indemnity under this Section 5.3 exceed the proceeds from the offering received by such Holder (net of underwriting discounts and commissions). (c) Promptly after receipt by an indemnified party under this Section 5.3 of notice of the commencement of any action (including any action by any Governmental Authority), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 5.3, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party will have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the indemnified party or parties; provided, however, that an indemnified party will have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would, in the written opinion of counsel to the indemnified party, be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, will relieve such indemnifying party of any liability to the indemnified party under this Section 5.3, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 5.3. (d) The obligations of Terremark and the Holders under this Section 5.3 will survive the completion of any offering of Registrable Securities pursuant to the Registration Statement. 7 (e) If the indemnification provided for in this Section 5.3 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any Loss, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, will contribute to the amount paid or payable by such indemnified party as a result of such Loss or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such Loss as well as any other relative equitable considerations. The relative fault of the indemnifying party and of the indemnified party will be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 5.4 REPORTS UNDER EXCHANGE ACT. With a view to making available to the Holder the benefits of Rule 144 promulgated under the Securities Act and any other rule or regulation of the Commission that may at any time permit Holder to sell securities of Terremark to the public without registration, Terremark will: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144 at all times; (b) maintain registration of the Terremark Common Stock under Section 12 of the Exchange Act; and (c) file with the Commission in a timely manner all reports and other documents required of Terremark under the Securities Act and the Exchange Act. 5.5 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause Terremark to register Registrable Securities pursuant to this Agreement may be assigned by a Holder to a transferee or assignee; provided Terremark is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned. 5.6 CHANGES IN REGISTRABLE SECURITIES. If, and as often as, there is any change in the Registrable Securities by way of stock split, stock dividend, combination or reclassification, or through a merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment will be made in the provisions hereof so that the rights and privileges granted hereby will continue with respect to the Registrable Securities as so changed. ARTICLE 6 CONDITIONS 6.1 CONDITIONS TO OBLIGATIONS OF THE LENDER. The obligation of the Lender to consummate the transactions contemplated by this Agreement is subject to the satisfaction of each and every one of the following conditions on or prior to the Closing, any or all which may be waived in whole or in part by the Lender: (a) The representations and warranties of the Borrowers contained in this Agreement will be true and correct in all material respects as of the Closing. (b) The Borrowers will have performed and complied, in all material respects, with all agreements and conditions required by this Agreement to be performed and complied with by them prior to or on the Closing. 8 (c) Terremark will have delivered to the Lender, a stock certificate, in the name of the Lender or its designee, evidencing the Shares. (d) The Borrowers will have executed and delivered the Second Amended and Restated Credit Agreement, the Renewal Note and .the other documents required by Section 2.3. (e) The Borrower will have delivered an opinion of counsel to the effect that the Shares issued to the Lender all duly authorized, validly issued, fully paid and non-assessable. (f) The Borrowers will have delivered to the Lender evidence, in form and substance satisfactory to the Lender and its counsel, that the Borrowers have received the amount of at least $15,000,000 from the issuance of Terremark's 10% Subordinated Debentures due 2006 (the "Subordinated Debentures"). (g) The Borrowers and The Bank of New York, on behalf of the holders of the Subordinated Debentures, will have executed and delivered to the Lender a Subordination Agreement substantially in the form of EXHIBIT A to this Agreement (the "SUBORDINATION AGREEMENT"). (h) The Borrowers will have delivered to the Lender evidence, in form and substance satisfactory to the Lender and its counsel, that all obligations of the Borrowers to Cupertino Electric, Inc. and Kinetics Systems, Inc. have been satisfied in full. (i) The Lender will have received such other certifications and documents from the Borrowers as the Lender may reasonably request. 6.2 CONDITIONS TO OBLIGATIONS OF THE BORROWERS. The obligation of the Borrowers to consummate the transactions contemplated by this Agreement is subject to the satisfaction of each and every one of the following conditions on or prior to the Closing, any or all of which may be waived, in whole or in part by the Borrowers: (a) The representations and warranties of the Lender contained in this Agreement will be true and correct in all material respects as of the Closing. (b) The Lender will have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by the Lender prior to or on the Closing Date. (c) The Lender will have entered into and delivered the Second Amended and Restated Credit Agreement. ARTICLE 7 TERMINATION 7.1 TERMINATION. This Agreement may be terminated at any time on or prior to the Closing: (a) by mutual consent of the parties; or (b) at the election of the Lender if: (aa) the Borrowers have breached or failed to perform or comply with any of their representations, warranties, covenants or obligations under this Agreement, or (bb) any of the conditions set forth in Section 6.1 is not satisfied as and when required by this Agreement, or (cc) the Closing has not been consummated by May 5, 2003; or (c) at the election of either of the Borrowers, if: (aa) the Lender has breached or failed to perform or comply with any of its 9 representations, warranties, covenants and obligations under this Agreement, or (bb) any of the conditions set forth in Section 6.2 is not satisfied as and when required by this Agreement or (cc) if the Closing has not been consummated by May 5, 2003. 7.2 NOTICE OF TERMINATION. Written notice of any termination pursuant to Section 7.1 will be given by the party electing to terminate this Agreement to the other parties and such notice will state the reason for the termination. 7.3 EFFECTS OF TERMINATION. Upon the termination of this Agreement prior to the consummation of the Closing in accordance with the terms hereof, this Agreement will become null and void and have no effect, and none of the parties will have any liability to the others pursuant to this Agreement. The termination of this Agreement will not affect any of the rights of the Lender under the First Amended and Restated Credit Agreement or any other of the Loan Documents (as defined therein), nor any of the duties and obligations of the Borrowers under the First Amended and Restated Credit Agreement or any other of the Loan Documents. ARTICLE 8 SURVIVAL AND INDEMNIFICATION 8.1 RELIANCE ON AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties of the parties in this Agreement, and in any of the certificates, documents or other agreements delivered in connection with this Agreement, will (a) be deemed to have been relied upon by the parties, notwithstanding any investigation hereto or hereafter made by any party, and (b) will survive the execution and delivery of this Agreement and the Closing of the transactions contemplated by this Agreement. 8.2 INDEMNIFICATION. After the Closing, each of the Borrowers will indemnify the Lender and each of its agents and representatives (collectively the "Indemnitees") and hold them harmless against any Loss which any Indemnitee may suffer, sustain or become subject to, as a result or in connection with a breach by the Borrowers of any representation, warranty or covenant set forth in this Agreement, any of the Exhibits to this Agreement, or any certificates executed and delivered in connection with the Closing of the transactions contemplated by this Agreement. ARTICLE 9 MISCELLANEOUS 9.1 COST, EXPENSES AND TAXES. The Borrowers will pay (or, if appropriate, reimburse the Lender for) on demand all reasonable costs and expenses in connection with the preparation, execution, delivery, filing and administration of this Agreement, each of the Exhibits to this Agreement and any other documents to be delivered under this Agreement, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for Lender, with respect thereto and with respect to advising the Lender as to its rights and responsibilities under this Agreement, and all costs and expenses (including reasonable counsel fees and expenses, including those incurred at the appellate level and in bankruptcy proceedings) in connection with the enforcement of this Agreement and each of the Exhibits to this Agreement. In addition, Borrowers will pay (or, if appropriate, reimburse the Lender for) on demand any and all documentary stamp, intangible and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing or recording of this Agreement, and each of the Exhibits to this Agreement, and will indemnify the Lender and hold it harmless from and against any and all liabilities (including penalties and interest) with respect to or resulting from any delay in paying or omission to pay such taxes and fees. 10 9.2 NOTICES. (a) All notices, requests, approvals, consents and other communications provided for under this Agreement (collectively, a "NOTICE") will be in writing, will be addressed to the intended recipient at the address of such party set forth below, and will be either delivered to such party by nationally recognized overnight delivery service (such as Federal Express or Emery Air Freight), by hand delivery, by facsimile or by mailing to such party by certified mail, return receipt requested, postage prepaid. Any party hereto may at any time and from time to time by notice given as herein provided change the address to which future notices to such party are to be given. (b) Any party hereto giving a notice to any other party pursuant to this Section will simultaneously give a true and complete copy of such notice to each of the Persons designated by the intended recipient thereof as set forth below to receive such copies. Each such copy will be addressed to the intended recipient at the address of such Person set forth below and will be given in the same manner provided above for the giving of notices. Any party may at any time and from time to time by notice given as herein provided change the identity or address of the Persons designated to receive such copies or designate additional persons to receive such copies. In no event, however, will the Lender be obligated to give copies of any notice to Borrowers to more than four persons at any time. (c) No notice given by any party hereto will be of any force or effect unless such notice is given in accordance with all of the provisions of this Section. (d) All notices will be deemed to have been given and received (1) on the date of delivery if delivered before 5:00 p.m. on a business day; if not, on the next business day, (2) if delivered to a nationally recognized overnight courier service, one day after delivery of such notice to such service, (3) if deposited in the United States mail, three (3) days after mailing, or (4) on the date sent by facsimile if sent before 5:00 P.M. on a business day, if not, on the next business day; provided, however, that, when any notice must be given under any provision of this Agreement on or before a certain date or within a certain period or number of days, such notice will be deemed to have been given, solely for such purpose, on the date the same was hand-delivered, delivered to such overnight courier or deposited in the United States mails. (e) Notices will be addressed (subject to the foregoing provisions concerning change of addresses) as follows: If to TWW: Terremark Worldwide, Inc. 2601 South Bayshore Drive, Suite 900 Miami, Florida 33133 Attn: Jose Gonzalez, Esq. Fax: (305) 856-8190 If to NAPA: NAP of the Americas, Inc. 2601 South Bayshore Drive, Suite 900 Miami, Florida 33133 Attn: Jose Gonzalez, Esq. Fax: (305) 856-8190 If to the Lender: Ocean Bank 780 N.W. 42nd Avenue Miami, Florida 33126 Attn: Terry Curry and to: Ocean Bank 780 N.W. 42nd Avenue Miami, Florida 33126 Attn: Luis Consuegra, General Counsel 11 and with a copy to: Shutts & Bowen LLP 201 South Biscayne Boulevard 1500 Miami Center Miami, Florida 33131 Attn: C. Richard Morgan, Esq. 9.3 BROKERAGE OR SIMILAR FEES. The Borrowers will pay all brokerage commissions or similar fees due and payable in connection with the transactions contemplated by this Agreement and will indemnify the Lender from the claims of any Persons asserting a claim for such fees. The Lender and the Borrowers represent to one another that they know of no one entitled to such fees. 9.4 JURISDICTION. Each Borrower hereby irrevocably agrees that any action or proceeding relating hereto or any other document relating to this Agreement that is brought by such Borrower will be tried by the courts of the State of Florida sitting in Miami-Dade County, Florida or the United States district courts sitting in such county. Each Borrower hereby irrevocably submits, in any such action or proceeding that is brought by the Lender, to the non-exclusive jurisdiction of each such court, irrevocably waives the defense of an inconvenient forum with respect to any such action or proceeding, and agrees that service of process in any such action or proceeding may be made upon each Borrower by mailing a copy thereof to such Borrower at such Borrower's address set forth in Section 9.2 (as well as by any other lawful method). Each Borrower hereby irrevocably appoints Brian Goodkind, Esq., whose address is 2601 South Bayshore Drive, Coconut Grove, Florida 33133 as his or its agent to receive service of process in any such action or proceeding on such Borrower's behalf. Service of process on one Borrower in any such action or proceeding will constitute service on all other Borrowers, and each Borrower irrevocably appoints each other Borrower as its agent to accept service of process on it in any such action or proceeding. 9.5 CONFIDENTIALITY. The Borrowers may have furnished and may in the future furnish to the Lender certain information concerning Borrowers which Borrowers have or will have advised the Lender in writing is non-public, proprietary or confidential in nature ("CONFIDENTIAL INFORMATION"). The Lender confirms to Borrowers that it is the Lender's policy and practice to maintain in confidence all Confidential Information which is provided to it under agreements providing for the extension of credit and which is identified to it as confidential, and that it will protect the confidentiality of Confidential Information submitted to it with respect to Borrowers under this Agreement; provided, however, that (i) nothing contained herein will prevent the Lender or any assignee from disclosing Confidential Information: (1) to its affiliates and their respective directors, officers and employees and to any legal counsel, auditors, appraisers, consultants or other persons retained by it or its affiliates as professional advisors, on the condition that such information not be further disclosed except in compliance with this Section; (2) under color of legal authority, including, without limitation, to any regulatory authority having jurisdiction over it or its operations or to or under the authority of any court deemed by it to be competent jurisdiction; and (3) to any actual or potential assignee of or participant in the Lender's or such assignee's rights and obligations under this Agreement, to the extent such actual or potential assignee or participant has agreed to maintain such information in confidence on the basis set forth in this section; and (ii) the terms of this section will be inapplicable to any information furnished to it which is in its possession prior to the delivery to it of such information by Borrower, or otherwise has been obtained by it on a non-confidential basis, or which was or becomes available to the public or otherwise part of the public domain (other than as a result of the Lender's failure or any prospective participant's or assignee's failure to abide hereby), or which was not non-public, proprietary or confidential when Borrower delivered it to the Lender or any assignee. 9.6 FURTHER ASSURANCES; POWER OF ATTORNEY. Each Borrower will, upon request of the Lender, execute and deliver such further documents and do such further acts as the Lender may reasonably request in order to fully effectuate the purposes of this Agreement. Each Borrower hereby irrevocably appoints the Lender as its true and lawful attorney-in-fact (such appointment being coupled with an interest) with full power (in the name of such Borrower or otherwise) to 12 execute and deliver such documents and do such acts as the Lender may reasonably deem necessary in order to fully effectuate the purposes of this Agreement. 9.7 MISCELLANEOUS. The invalidity or unenforceability of any provision hereof will not affect the validity or enforceability of any other provision hereof. If any provision hereof is capable of more than one interpretation, it will be interpreted, if possible, so as to render it enforceable. In order to be effective, any addition hereto or any modification or waiver of any provision or provisions hereof must be expressly consented to by the Lender in writing. "HEREOF", "HEREUNDER", "HEREIN" and words of similar import refer to this Agreement as a whole and not just the paragraph in which they appear. No delay or omission by the Lender in exercising any right or remedy hereunder will operate as a waiver thereof or of any other right or remedy, nor will any single or partial exercise thereof preclude any further exercise thereof or the exercise of any other right or remedy. The Lender may grant or deny any approval or consent contemplated hereby in its sole and absolute discretion; whenever used herein, the phrase "ACCEPTABLE TO THE LENDER" or "SATISFACTORY TO THE LENDER" means "ACCEPTABLE AND SATISFACTORY TO THE LENDER IN ITS SOLE AND ABSOLUTE DISCRETION" and "IN THE LENDER'S DISCRETION" or " THE LENDER'S SOLE DISCRETION" means "IN THE LENDER'S SOLE AND ABSOLUTE DISCRETION"; and, to be enforceable against the Lender, any consent or approval by the Lender must be in writing. 9.8 CONSTRUCTION OF THIS AGREEMENT. (a) Borrowers and the Lender agree and acknowledge that each of them, together with their respective legal counsel, have contributed substantially to the preparation and negotiation of the terms of this Agreement and each of the Exhibits to this Agreements, and, as such, this Agreement and each of the Exhibits to this Agreement will not be interpreted more favorably against one party than the other solely upon the basis of which party actually drafted this Agreement and each of the Exhibits to this Agreement. (b) This Agreement and each of the Exhibits to this Agreement are to be read in pari materia, and will be construed in such a manner as to afford the greatest possible protection and benefit for the Lender. 9.9 PARTIES IN INTEREST. All representations, covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. 9.10 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided in this Agreement, any and all remedies expressly conferred upon the Lender will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by the Lender of any one remedy will not preclude the exercise of any other remedy. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by the Borrowers in accordance with their specific terms or were otherwise breached. The parties accordingly agree that then Lender will be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court having jurisdiction, this being in addition to any other remedy that the Lender is entitled to at law or in equity. 9.11 ENTIRE AGREEMENT. This Agreement and the Exhibits to this Agreement constitute the sole and entire agreement of the parties with respect to the subject matter hereof. All Exhibits and schedules hereto are hereby incorporated herein by reference. 9.12 COUNTERPARTS. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 9.13 AMENDMENTS AND WAIVERS. This Agreement may be amended or modified, and provisions hereof may be waived, with the written consent of each of the parties. Any such amendment, modification or waiver will be binding on all 13 parties, including those not signing such amendment, modification or waiver, and such consent may be given or withheld for any reason or for no reason. 9.14 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT WOULD GIVE EFFECT TO THE LAWS OF ANOTHER JURISDICTION. 9.15 WAIVER OF JURY TRIAL. THE LENDER AND BORROWERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION (INCLUDING ANY COUNTERCLAIM) BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY EXHIBT TO THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTER INTO THIS AGREEMENT. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. TERREMARK: TERREMARK WORLDWIDE, INC. By: -------------------------------------- Name: Title: NAPA: NAP OF THE AMERICAS, INC. By: -------------------------------------- Name: Title: THE LENDER: OCEAN BANK By: -------------------------------------- Name: Title: 14 EXHIBIT A SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 30, 2003 THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT ("AGREEMENT") is entered into as of the date set forth above (the "DATE HEREOF") by and among NAP OF THE AMERICAS, INC., a Florida corporation ("NAPA"), and TERREMARK WORLDWIDE, INC., a Delaware corporation ("TWW") (each a "BORROWER", and collectively, "BORROWERS"), and OCEAN BANK, a Florida-chartered bank ("BANK"). RECITALS A. NAPA, TWW and Bank entered into that certain Amended and Restated Credit Agreement dated as of September 5, 2001 (the "FIRST AMENDED AND RESTATED CREDIT AGREEMENT") pursuant to which Bank agreed to make, and Borrower agreed to accept, a loan (the "LOAN") in the maximum principal amount of $48,000,000, subject to the terms and conditions of the First Amended and Restated Credit Agreement. B. The Loan is evidenced by, INTER ALIA, a Promissory Note dated September 5, 2001 in the original principal amount of $48,000,000 from Borrowers in favor of Bank (the "FIRST NOTE"). C. On or about August 7, 2002, Borrowers and Bank executed and delivered that certain Modification of Note and Other Loan Documents (the "FIRST NOTE MODIFICATION") pursuant to which certain terms and conditions of the First Amended and Restated Credit Agreement and the First Note were modified. D. Borrowers have requested that certain terms and conditions of the Loan be further modified and that the outstanding principal balance of the Loan be reduced by the amount of $15,000,000 through the conversion of $15,000,000 of the outstanding principal balance of the Loan into equity in TWW. E. Bank agrees to modify the terms and conditions of the Loan as set forth in this Agreement and agrees to convert $15,000,000 of the outstanding principal balance of the Loan into equity in TWW on the terms and conditions set forth in that certain Debt Conversion Agreement of even date herewith by and among NAPA, TWW and Bank (the "DEBT CONVERSION AGREEMENT"), and Borrowers accept the modification of the terms and conditions of the Loan as set forth in this Agreement and the reduction of $15,000,000 of the outstanding principal balance of the Loan through the conversion of such amount into equity in TWW on the terms and conditions set forth in the Debt Conversion Agreement. In consideration of the foregoing premises and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrowers and Bank hereby agree as follows: 1. LOAN. Giving effect to the provisions of the Debt Conversion Agreement, the outstanding principal balance of the Loan as of the date hereof is Twenty-Eight Million Nine Hundred Seventy-Four Thousand Five Hundred Fifty-Two and 64/100 Dollars ($28,974,552.64). Simultaneously with the execution 15 of this Agreement, Borrowers have paid to Bank interest accrued under the First Note in the amount of $1,603,238.90, which payment pays accrued and unpaid interest under the First Note to and including April 29, 2003. 2. NOTE. From and after the date hereof, the Loan shall be evidenced by, INTER ALIA, a Renewal Promissory Note of even date herewith in the original principal amount of $28,974,552.64 (the "RENEWAL NOTE"), which is given in renewal of and substitution for, and which amends and restates, the First Note, as modified by the First Note Modification, in its entirety. The Loan shall bear interest and shall be payable as specified in the Renewal Note. The Loan may be repaid in full or in part in accordance with the Renewal Note without premium or penalty. Amounts repaid on the Loan may not be reborrowed. Borrowers acknowledge that the outstanding principal balance of the First Note constitutes advances of Loan proceeds made by Bank to Borrowers and that Bank has no obligation to Borrowers to make any additional Advances to Borrowers. 3. LOAN TERM. The Loan shall mature on April 30, 2006, unless accelerated in accordance with the provisions of the Renewal Note or the other Loan Documents. 4. GUARANTORS. (a) The full payment and performance of the Loan and of all obligations at any time owed by Borrowers to Bank under this Agreement, the Renewal Note and the other Loan Documents (as hereinafter defined) shall continue to be unconditionally guaranteed, jointly and severally, by Manuel D. Medina ("MEDINA") and all subsidiaries of TWW (collectively, the "SUBSIDIARIES"; Medina and the Subsidiaries collectively, "GUARANTORS"), other than NAPA which continuous a co-borrower under the Loan. (b) Borrowers represent and warrant to Bank that, as of the date hereof, NAPA, Coloconnection and the following entities constitute all of the Subsidiaries which have material assets: (i) Coloconnection, Inc., a Florida corporation ("COLOCONNECTION"); (ii) TECOTA Services Corp., a Delaware corporation ("TECOTA SERVICES"); (iii) Terremark Development, Inc., a dissolved Florida corporation ("TERREMARK DEVELOPMENT"); (iv) Terremark Financial Services, Inc., a Florida corporation ("TERREMARK FINANCIAL"); (v) Terremark Fortune House #1, Inc., a Florida corporation ("TERREMARK FORTUNE HOUSE #1"); (vi) Terremark Fortune House #1, Ltd. ("TERREMARK FORTUNE HOUSE PARTNERSHIP"), a dissolved Florida limited partnership; (vii) Terremark Latin America, Inc., a Florida corporation ("TERREMARK LATIN AMERICA"); (viii) Terremark Management Services, Inc., a Florida corporation ("TERREMARK MANAGEMENT"); (ix) Terremark Northeast, Inc., a dissolved New York corporation ("TERREMARK NORTHEAST"); (x) Terremark Realty, Inc., a Florida corporation ("TERREMARK REALTY"); (xi) Terremark Technology Contractors, Inc., a Florida corporation ("TERREMARK TECHNOLOGY CONTRACTORS"); 16 (xii) Terremark Trademark Holdings, Inc., a Nevada corporation ("TERREMARK HOLDINGS"); (xiii) TerreNAP Data Centers, Inc., a Florida corporation ("TERRENAP DATA"); and (xiv) TerreNAP Services, Inc., a Florida corporation ("TERRENAP SERVICES"). (c) Upon any entity (other than a Borrower) becoming wholly owned (or virtually wholly owned) by any Borrower, Borrowers shall notify Bank of that fact and shall cause such entity to execute and deliver whatever documents Bank requires to make that entity a Guarantor under this Agreement. 5. SECURITY. The Loan and all obligations at any time owed by Borrowers to Bank under this Agreement, the Renewal Note and the Loan Documents shall continue to be secured at all times by the following and the proceeds thereof (collectively, the "COLLATERAL"): (a) Pursuant to, INTER ALIA, that certain Leasehold Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing dated September 5, 2001 from NAPA to Bank, recorded in Official Records Book 19890, Page 695, Public Records of Miami-Dade County, Florida, as modified by that certain Modification of Leasehold Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing and of Assignment of Leases and Rents and Security Deposits dated August 7, 2002, recorded in Official Records Book 20591, Page 1313, Public Records of Miami-Dade County, Florida, as further modified by that certain Second Modification of Leasehold Mortgage, Security Agreement, Assignment of Rents and Leases and Fixture Filing and of Assignment of Leases and Rents and Security Deposits of even date herewith, to be recorded in the Public Records of Miami-Dade County, Florida (collectively, the "MORTGAGE"), a perfected first mortgage and first security interest in all right, title and interest of NAPA in, to and under the following (in each case whether now owned or hereafter acquired and whether now existing or hereafter arising): (i) that certain Lease Agreement dated as of October 16, 2000, by and between Technology Center of the Americas, LLC, a Delaware limited liability company ("TECHNOLOGY CENTER"), as landlord, and NAPA, as tenant, together with the Basic Lease Information Rider thereto, and all amendments thereto, (collectively, the "NAPA LEASE"), which Lease grants and includes, inter alia: (1) the right to use and occupy the entire second floor, containing approximately 149,184 square feet of leaseable area, of the building having an address of 50 N.E. 9th Street, Miami, Florida and located on the real property described in EXHIBIT "A", attached hereto and incorporated herein by this reference (collectively, the "PROPERTY"); (2) the right to use and occupy certain portions of the roof of the Property, identified in the NAPA Lease as Tenant's Equipment Area, for the placement of certain equipment and other personal property of NAPA; (3) the right to install lines, conduits and connections from Technology Center's main fiber duct bank on the ground level of the Property to the second floor of the Property and to Tenant's Equipment Area; (4) the right to use riser and chaseway space within the Property in connection with Tenant's operations as permitted by the provisions of the NAPA Lease; and (5) such other rights as are granted to NAPA under or pursuant to the NAPA Lease (collectively, the "LEASED PREMISES"); (ii) all furniture, fixtures, furnishings and equipment and other tangible personal property located on or within, or connected with, the Leased Premises; (iii) all other tangible and intangible personal property (including, without limitation, inventory, accounts, documents, chattel paper, contracts and contract rights, instruments, certificates of deposit, letters of credit, equipment and equipment leases, software licenses and enhancements thereof, intellectual property and intellectual property rights, trade names, trade marks, service marks, and general intangibles) pertaining or related to or connected with the Property, the Leased Premises and the NAPA Lease (the foregoing being collectively referred to herein as the "NAPA FACILITY"), and all other tangible and intangible personal property of NAPA of any kind or nature whatsoever, wherever located, whether now owned or hereafter acquired; and 17 (iv) all other collateral referenced or described in the Mortgage and the other Loan Documents; (b) Pursuant to, INTER ALIA, that certain Stock Pledge and Security Agreement dated September 5, 2001 from TerreNAP Data, as the owner of all of the outstanding shares of stock issued by NAPA and Terremark Latin America, to Bank (the "TERRENAP DATA PLEDGE AGREEMENT"), a perfected first lien on and first security interest in all shares of stock now or hereafter issued by each of NAPA and Terremark Latin America; (c) Pursuant to, INTER ALIA, that certain Stock Pledge and Security Agreement dated September 5, 2001 from TWW, as the owner of all of the outstanding shares of stock issued by TerreNAP Data, TECOTA Services, Terremark Trademark, and TerreNAP Services to Bank (the "TWW PLEDGE AGREEMENT"), a perfected first lien on and first security interest in all shares of stock now or hereafter issued by each of TerreNAP Data, TECOTA Services, Terremark Trademark, and TerreNAP Services; (d) Pursuant to, INTER ALIA, that certain Stock Pledge and Security Agreement dated the date hereof from TWW, as the owner of all of the outstanding shares of stock issued by Coloconnection (the "COLOCONNECTION PLEDGE Agreement"), a perfected first lien on and first security interest in all shares of stock now or hereafter issued by Coloconnection; (e) Pursuant to, INTER ALIA, that certain Stock Pledge and Security Agreement dated September 5, 2001 from TerreNAP Services, as the owner of all of the outstanding shares of Terremark Technology Contractors, Terremark Realty, Terremark Financial, Terremark Northeast, Terremark Development, Terremark Management and Terremark Fortune House #1 (the "TERRENAP SERVICES PLEDGE AGREEMENT"), a perfected first lien on and first security interest in all shares of stock now or hereafter issued by each of Terremark Technology Contractors, Terremark Realty, Terremark Financial, Terremark Northeast, Terremark Development, Terremark Management and Terremark Fortune House #1; (f) Pursuant to, INTER ALIA, that certain Pledge and Security Agreement dated September 5, 2001 from TerreNAP Services and Terremark Fortune House #1, as owner of all of the outstanding partnership interests in Terremark Fortune House Partnership, to Bank (the "PARTNERSHIP PLEDGE AGREEMENT"), a perfected first lien on and security interest in all partnership interests now or hereafter issued by Terremark Fortune House Partnership; (g) Pursuant to that certain Assignment of Life Insurance Policy as Collateral dated September 5, 2001 from TWW in favor of Bank, (the "ASSIGNMENT OF $15,000,000 LIFE INSURANCE POLICY"), a pledge and collateral assignment of a life insurance policy in the amount of $15,000,000 owned by TWW, insuring the life of Medina (the "$15,000,000 LIFE INSURANCE POLICY"). Borrowers and Guarantors acknowledge and agree that upon the death of Medina, the proceeds of the $15,000,000 Life Insurance Policy shall be automatically applied to the outstanding principal, accrued and unpaid interest and other sums owing with respect to the Loan, in such order of priority as Lender may elect in its sole discretion, regardless of whether any default or Event of Default exists under the Loan Documents and regardless of whether such sums would otherwise be due and payable under the Loan Documents. Notwithstanding the application of such proceeds, Borrowers shall continue to be obligated to make payments of principal and interest strictly in accordance with the terms of the Loan Documents; (h) Pursuant to: (i) that certain Assignment of Life Insurance Policy as Collateral dated September 5, 2001 (the "ASSIGNMENT OF $5,000,000 LIFE INSURANCE POLICY"), a pledge and collateral assignment of a life insurance policy in the amount of $5,000,000 owned by TWW (the "$5,000,000 LIFE INSURANCE POLICY") and (ii) that certain Assignment of Life Insurance Policy or Collateral dated September 5, 2001 (the "ASSIGNMENT OF $2,000,000 LIFE INSURANCE POLICY") a pledge and collateral assignment of a life insurance policy in the amount of $2,000,000 owned by Terremark Development (the "$2,000,000 LIFE INSURANCE POLICY"), both insuring the life of Medina. The entire $5,000,000 Life Insurance Policy and the $2,000,000 Life Insurance Policy shall be pledged as collateral for: (i) that certain loan from Bank to Communications Investors Group, a Florida general partnership, evidenced by that certain Promissory Note dated March 16, 1999 in the original principal amount of $4,000,000 (the "CIG LOAN"); (ii) a line of credit from Bank to Medina evidenced by that certain Revolving 18 Promissory Note dated in March 2000 in the original principal amount of $7,500,000 (the "MEDINA LINE OF CREDIT"); and (iii) the Loan. Bank, Borrowers and Guarantors acknowledge and agree that upon the death of Medina, the proceeds of the $5,000,000 Life Insurance Policy and the $2,000,000 Life Insurance Policy: (i) shall be applied to the outstanding principal, accrued and unpaid interest and other sums owing with respect to the CIG Loan and the Medina Line of Credit, in such order of priority as Lender may elect in its sole discretion, regardless of whether any default or Event of Default exists under the applicable loan documents with respect thereto, and regardless of whether such sums would otherwise be then due and payable under such loan documents, and (ii) upon full payment of all such sums, shall be automatically applied to the outstanding principal, accrued and unpaid interest and other sums owing with respect to the Loan, in such order of priority as Lender may elect in its sole discretion, regardless of whether any default or Event of Default exists under the Loan Documents and regardless of whether such sums would otherwise be then due and payable under the Loan Documents. Notwithstanding the application of such proceeds, Borrowers shall continue to be obligated to make payments of principal and/or interest strictly in accordance with the terms of the Loan Documents; (i) Assignments of all construction contracts, architect's agreements and subcontracts and all other rights and interests of NAPA pertaining to the buildout, furnishing and equipping of the Leased Premises and the NAPA Facility (collectively, the "THIRD PARTY ASSIGNMENTS"), including, but not limited to, the following: (i) an Assignment of Construction Contract dated September 5, 2001 with respect to that certain Agreement dated March 29, 2001 (the "CONSTRUCTION CONTRACT") between NAPA and Terremark Technology Contractors, together with a consent thereto executed by Terremark Technology Contractors pursuant to which Terremark Technology Contractors agrees, inter alia, to: (1) assign to Bank, as additional collateral for the Loan, all of its rights under the Construction Contract, including rights to payment and lien rights; (2) not to accept any payments for work heretofore or hereafter furnished; and (3) fully subordinate to the lien of the Mortgage and other Loan Documents any and all of its lien rights under the Construction Contract; (ii) an Assignment of Architect's Agreement dated September 5, 2001 with respect to that certain Agreement dated January 3, 2001 (the "ARCHITECT'S AGREEMENT") between NAPA and Bermello, Ajamil & Partners, Inc. (the "ARCHITECT"), together with a consent thereto executed by the Architect (the "ARCHITECT'S CONSENT"), pursuant to which the Architect agrees, inter alia: (1) to fully subordinate to the lien of the Mortgage and other Loan Documents any and all of its lien rights under the Architect's Agreement; (2) to permit Bank the unrestricted right to use the plans and specifications prepared by the Architect, but solely in connection with the Leased Premises and/or the NAPA Facility, (3) that the list of Architect's subcontractors attached to the Architect's Consent, and the amounts due or to become due to each of them, is true, correct and complete in all respects; (iii) assignments of NAPA's rights, title and interest in, to and under any and all agreements related to work performed on the Leased Premises or otherwise upon the NAPA Facility by any other parties, including, but not limited to, Cupertino Electric, Inc. ("CUPERTINO"), Kinetics Systems, Inc. ("KINETICS") and Telcordia Technologies, Inc. ("TELCORDIA"); (j) Pursuant to that certain Amended and Restated Security Agreement dated as September 5, 2001 from TWW, NAPA and the Guarantors and Coloconnection, other than Medina, a perfected first priority lien upon and security interest in all tangible and intangible personal property of each Guarantor, other than Medina and Coloconnection, and of TWW and NAPA, whether now existing or hereafter acquired; (k) Pursuant to that certain Security Agreement dated as of the date hereof from Coloconnection, a perfected first lien upon and security interest on all tangible and intangible personal property of Coloconnection, whether now existing or hereafter acquired; 19 (l) Pursuant to, INTER ALIA, that certain Security Agreement dated September 5, 2001 from NAPA and Terremark in favor of Bank, a perfected first lien on and security interest in that certain deposit account with Bank evidenced by that certain Time Certificate of Deposit No. 010144611828 on account of TWW in the amount of $750,000.00 (the "LC DEPOSIT ACCOUNT"), which LC Deposit Account secures the reimbursement obligations of Borrowers and Coloconnection and with respect to Letter of Credit No. SB921004, issued by Bank in the amount of $750,000, with Coloconnection, as applicant, and Rainbow Property Management, LLC, as beneficiary, expiring September 29, 2002 and automatically renewable each year thereafter until September 29, 2010 (the "COLOCONNECTION LC"). Borrowers continue to absolutely and unconditionally guarantee the full and timely payment and performance by Coloconnection of its reimbursement obligations under and with respect to the Coloconnection LC. Borrowers further agree (x) to execute such additional documents as the Bank may require from time to time to evidence, secure or perfect the Bank's first lien on and security interest in the LC Deposit Account and (y) that the Borrowers are and shall continue to be liable to Bank for the full amount payable under the reimbursement agreements for Coloconnection LC, notwithstanding any release by Bank of Coloconnection with respect to its reimbursement obligation under the Coloconnection LC; and (m) Pursuant to that certain Security Agreement from NAPA and Terremark in favor of Bank of even date herewith (the "INTEREST RESERVE SECURITY AGREEMENT"), a first lien on and security interest in that certain deposit account with Bank under Account No. 010156896520 on account of TWW and NAPA in the amount of $896,761.10 (the "INTEREST RESERVE DEPOSIT ACCOUNT"), which shall be governed by the terms and conditions of Section 6 below. 6. INTEREST RESERVE DEPOSIT ACCOUNT. Pursuant to the Interest Reserve Security Agreement, Borrowers have granted a first lien on and security interest in the Interest Reserve Deposit Account in favor of Bank. The funds in the Interest Reserve Deposit Account from time to time, including any interest earned thereon, shall be disbursed from time to time by Bank to pay interest payments as they come due under the Loan, subject to the following terms and conditions: (a) Bank shall, and is hereby authorized, to withdraw funds from the Interest Reserve Deposit Account to pay, on behalf of Borrowers, interest payments as they become due and payable under the Renewal Note, without prior notice from, request from, or further authorization from Borrowers, provided, that Bank shall have no obligation to withdraw funds from the Interest Reserve Deposit Account to pay interest payments as they become due and payable under the Renewal Note in the event that: (i) Bank determines, in its sole discretion, that the remaining funds in the Interest Reserve Deposit Account are insufficient to pay in full the then due and payable interest installment or the remaining balance thereof if Borrowers timely pay a portion of an interest installment from Borrowers' own funds (ii) Bank is prohibited pursuant to any legal proceeding or action by any governmental entity from withdrawing funds from the Interest Reserve Deposit Account. (b) From and after the occurrence of an Event of Default which remains uncured, Bank shall have the right, but not the obligation, to continue to withdraw funds from the Interest Reserve Deposit Account to pay interest payments as they become due and payable under the Renewal Note, before acceleration of the maturity date of the Renewal Note or to apply all funds in the Interest Reserve Deposit Account to: (i) the outstanding principal balance of the Loan, (ii) accrued and unpaid interest and (iii) any other unpaid sums owing to Bank under the Loan Documents, in such order as Bank may elect. (c) Establishment of the Interest Reserve Deposit Account shall in no way relieve Borrowers of the obligation to pay interest owing under the Renewal Note. (d) The Interest Reserve Deposit Account shall be "blocked" and Borrowers shall have no right to withdraw funds from the Interest Reserve Deposit Account without the prior written consent of Bank. 20 7. REPRESENTATIONS AND WARRANTIES. Each Borrower represents and warrants (and as long as this Agreement is in effect or any indebtedness of a Borrower to Bank remains outstanding, shall be deemed continuously to represent and warrant) to Bank as follows: (a) Such Borrower is a corporation, duly formed, validly existing and in good standing under the laws of the State specified at the head of this Agreement. (b) The execution, delivery and performance by such Borrower of the Loan Documents to which it is a party are within such Borrower's powers, have been duly authorized by all necessary corporate or other action and do not contravene (i) such Borrower's articles or incorporation or bylaws, or (ii) law or any contractual restriction binding on or affecting such Borrower. (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by such Borrower of any Loan Document to which it is or will be a party. (d) This Agreement is, and each other Loan Document to which such Borrower is to be a party will be, legal, valid and binding obligations of such Borrower, enforceable against such Borrower in accordance with their terms. (e) The financial statements furnished Bank in connection with this Agreement fairly represent the financial condition of such Borrower as of the date thereof and the results of the operations of such Borrower for the period ended on such date, all in accordance with GAAP; and since that date there has been no material, adverse change in such condition or operations. Other than as indicated by those financial statements, such Borrower has no direct or contingent obligations or liabilities which would be material to its financial position or condition. (f) There is no pending or threatened action or proceeding affecting such Borrower before any court, governmental agency or arbitrator which may materially adversely affect the financial condition or operations of such Borrower. (g) Such Borrower has not previously operated under another name or a trade name, other than AmTec, Inc. (h) Except as otherwise specifically provided herein, Bank has a perfected first lien on and security interest in the Collateral. (i) Such Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of the Loan have been used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. (j) Such Borrower has not engaged in any activity that is illegal. (k) A true, correct and complete list of all existing material service contracts (including any contracts for the provision of security services) pertaining to or affecting the Leased Premises as of the date hereof (the "EXISTING SERVICE CONTRACTS") is set forth in EXHIBIT "B", attached hereto and incorporated herein by this reference. The Existing Service Contracts are in full force and effect and have not been modified except as may be set forth in EXHIBIT "B". There are no existing defaults under the Existing Service Contracts, and there have been no payments of any sums due thereunder made more than thirty (30) in advance days of any due date thereunder. (l) A true, correct and complete list of all existing material software license agreements pertaining to or affecting the Leased Premises as of the date hereof (the "EXISTING SOFTWARE LICENSES") is set forth in EXHIBIT "C", attached hereto and incorporated herein by this reference (to be provided by Borrowers 21 within five (5) business days from the date hereof). The Existing Software Licenses are in full force and effect and have not been modified except as may be set forth in EXHIBIT "C". There are no existing defaults under the Existing Software Licenses, and there have been no payments of any sums due thereunder made more than thirty (30) days in advance of any due date thereunder. (m) A true, correct and complete list of all Equipment Leases (as defined in the Mortgage) pertaining to or affecting the Leased Premises as of the date hereof (the "EXISTING EQUIPMENT LEASES"), including the amounts of the periodic payments due thereunder, the aggregate amount of payments due thereunder, and the value of the equipment leased thereunder, is set forth in EXHIBIT "D", attached hereto and incorporated herein by this reference. The Existing Equipment Leases are in full force and effect and have not been modified except as may be set forth in Exhibit "D". There are no existing defaults under the Existing Equipment Leases, and there have been no payments of any sums due thereunder made more than thirty (30) days in advance of any due date thereunder. (n) NAPA has entered into certain colocation agreements consisting of Permanent Service Orders and Service Orders (the "COLOCATION AGREEMENTS'), all of which incorporate by reference the terms of the form of TerreNAP Data Center Exchange Point and Colocation Agreement (the "MASTER AGREEMENT") provided to Bank. A true, correct and complete copy of the Master Agreement has previously been provided to Bank. A true, correct and complete list of all Colocation Agreements and the parties thereto as of the date hereof (the "EXISTING COLOCATION AGREEMENTS") is set forth in EXHIBIT "E", attached hereto and incorporated herein by this reference. The Existing Colocation Agreements are in full force and effect and have not been modified except as may be set forth in EXHIBIT "E". There are no existing material defaults under the Existing Colocation Agreements except as set forth in EXHIBIT "E", and there have been no payments of any sums due thereunder made more than thirty (30) days in advance of any due date thereunder. (o) Although there exists a term sheet between TWW and the NAP of the Americas, LLC, a true, correct and complete copy of which has been furnished to Bank and its counsel, neither Borrower has entered into any binding agreement with such entity. (p) A true, correct and complete copy of that certain District Cooling Service Agreement dated December 1, 2000 between FPL Thermal Systems, Inc. and NAPA (the "FPL AGREEMENT") has previously been provided to Bank. The FPL Agreement is in full force and effect and has not been modified. There are no existing defaults under the FPL Agreement. (q) That certain Exclusive Leasing Agreement dated February 23, 2001 among TECOTA Services, T-Rex Technology Centers, LLC and T-Rex Brokerage, LLC has been duly terminated and is of no further force or effect. There are no other existing management, leasing, brokerage or development agreements with respect to the Property or the Leased Premises except those referenced in the Resignation Letter. (r) TerreNAP Data owns all of the issued and outstanding shares of stock issued by NAPA and Terremark Latin America, consisting of 5,100 shares of common stock, in the case of NAPA, and 5,100 shares of common stock, in the case of Terremark Latin America. Without Bank's prior written consent in its sole and absolute discretion, no additional shares of, or interests, options, warrants or similar grants in, NAPA and Terremark Latin America shall be issued, given, granted or made. (s) TWW owns all of the issued and outstanding shares of stock issued by TerreNAP Data, TECOTA Services, Terremark Trademark and TerreNAP Services, consisting of 10,000 shares of common stock in the case of TerreNAP Data, 1,000 shares of common stock in the case of TECOTA Services, 10,000 shares of common stock in the case of Terremark Trademark and 51,000 shares of common stock in the case of TerreNAP Services. Without Bank's prior written consent in its sole and absolute discretion, Borrowers shall not permit or suffer any additional shares of, or interests, options, warrants or similar grants in, TerreNAP Data, TECOTA Services, Terremark Trademark and TerreNAP Services to be issued, given, granted or made. 22 (t) TWW owns all of the issued and outstanding shares of stock issued by Coloconnection, consisting of 5,000 shares of common stock. Without Bank's prior written consent in its sole and absolute discretion, Borrowers shall not permit or suffer any additional shares of, or interest, options, warrants or similar grants in, Coloconnection to be issued, given, granted or made. (u) TerreNAP Services owns all of the issued and outstanding shares of stock issued by Terremark Technology Contractors, Terremark Realty, Terremark Financial, Terremark Northeast, Terremark Development, Terremark Management and Terremark Fortune House #1, consisting of 50,000 shares of common stock, in the case of Terremark Technology Contractors, 50,000 shares of common stock in the case of Terremark Realty, 100 shares of common stock in the case of Terremark Financial, 5,100 shares of common stock in the case of Terremark Northeast, 50,000 shares of common stock in the case of Terremark Development, 50,000 shares of common stock in the case of Terremark Management and 100 shares of common stock in the case of Fortune House #1. Without Bank's prior written consent in its sole and absolute discretion, no additional shares of, or interest, options, warrants or similar grants in, Terremark Technology Contractors, Terremark Realty, Terremark Financial, Terremark Northeast, Terremark Development, Terremark Management or Terremark Fortune House #1 shall be issued, given, granted or made. (v) TerreNAP and Terremark Fortune House #1 own all of the partnership interests of Terremark Fortune House Partnership. Without Bank's prior written consent in its sole and absolute discretion, Borrowers shall not permit or suffer any additional partnership interest or other interest in Terremark Fortune House Partnership to be issued, given, granted or made. (w) The chief executive offices (as such term is used in Article 9 of the Uniform Commercial Code in effect in the State of Florida as of the date hereof) of each Borrower and each Guarantor are located at 2601 South Bayshore Drive, Suite 900, Miami, Florida 33133 as of the date hereof, and such chief executive offices shall not be changed to any location outside the State of Florida without prior written notice to Bank. (x) A significant portion of the proceeds of both that certain loan from Bank to Medina evidenced by that certain Promissory Note dated May 29, 2001 in the face amount of $10,000,000 and that certain loan from Bank to TWW, evidenced by that certain Revolving Promissory Note dated September 13, 2000 in the face amount of $5,000,000 were used to capitalize NAPA or pay debts of NAPA. (y) Borrowers own and have the unconditional right to use, on a non-exclusive basis, any and all Intellectual Property (as defined in the Mortgage), associated with the design and installation of the NAPA Facility and the operation thereof. (z) There is no fact which such Borrower has not disclosed to Bank in writing which materially and adversely affects nor, as far as such Borrower can now foresee, is reasonably likely to prove to materially and adversely affect, the business or financial condition of such Borrower or the ability of such Borrower to perform any Loan Document. (aa) Borrowers have used all Loan proceeds advanced by Bank prior to the date hereof for the purposes set forth in Section 8 of the First Amended and Restated Credit Agreement. (bb) No work has been performed or materials supplied within the ninety (90) day period prior to the date hereof for the improvement of the Property for which payment has not been made in full, no party has a right to file a claim of lien with respect to any portion of the Property and no portion of the Property is encumbered by a claim of lien or construction lien as of the date hereof. 8. GENERAL COVENANTS. At all times while this Agreement is in effect or any indebtedness of a Borrower to Bank remains unpaid, each Borrower and Guarantor (other than Medina, but without releasing, waiving, limiting or impairing any other obligation of Medina under his Guaranty) shall, unless Bank otherwise consents in writing: 23 (a) Comply in all material respects with all applicable laws, rules, regulations and orders, and pay, before they become delinquent, all taxes, assessments and governmental charges imposed upon it or upon any of its property. (b) Not directly or indirectly engage in any business other than those in which it is presently engaged, discontinue any of its existing lines of business or substantially alter its method of doing business. (c) Maintain and preserve all of its properties necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted. (d) Keep proper books of record and account in which full and correct entries will be made of all financial transactions and the assets and business of such Borrower or Guarantor in accordance with GAAP. (e) Maintain insurance with responsible and reputable insurance companies in such amounts and covering such risks as are usually carried by persons engaged in similar businesses and owning similar properties in the same general areas in which such Borrower or Guarantor operates, provided that such insurance shall in addition comply with the insurance requirements contained in the Mortgage and other Loan Documents. (f) At any reasonable time and from time to time, upon reasonable prior notice from Bank, permit Bank, and any agents or representatives of Bank, to inspect and make audits of any of the Collateral, to examine and make copies of and abstracts from the records and books of account of and visit the properties of, such Borrower or Guarantor, and to discuss the affairs, finances and accounts of such Borrower or Guarantor with any of its officers, subject to the confidentiality provisions of Section 31 hereof. (g) Not dissolve, liquidate, merge into or consolidate with any entity, or sell, mortgage, merge, pool, transfer or otherwise dispose of any of its properties except inventory in the ordinary course of its business and obsolete equipment which is replaced with comparable equipment of equal or greater value (if needed in such Borrower's or Guarantor's operations) and in which Bank has a first-priority security interest, provided that any such replacement of equipment shall in addition comply with the requirements contained in the Mortgage and the other Loan Documents. (h) Not create, incur or permit to exist any lien, security interest, or other charge or encumbrance, or any other type of preferential arrangement (a "LIEN") upon or with respect to any property or assets of Borrower or Guarantor (other than pursuant to the Loan Documents), and not obtain any secondary financing on the Collateral ("SECONDARY FINANCING") or otherwise encumber the Collateral, without the prior written consent of Bank, which may be withheld in the sole discretion of Bank, except only for such Secondary Financing which is deemed to be "PERMITTED SECONDARY FINANCING" pursuant to Section 9 below, and such Liens which are deemed to be "PERMITTED LIENS" pursuant to Section 9 below. (i) Not incur, create or permit to exist, or guarantee or otherwise be or become directly or indirectly liable in respect of, any Indebtedness other than: (i) Indebtedness arising out of this Agreement; (ii) Indebtedness under Permitted Secondary Financing and Permitted Liens; (iii) the Indebtedness under the Existing Equipment Leases and any other Equipment Leases permitted by the provisions of the Mortgage; (iv) liabilities incurred in the ordinary course of business; (v) Indebtedness the proceeds of which are used to pay liabilities which have arisen in the ordinary course of business and to make expenditures in the ordinary course of business; and (vi) in the case of TWW, guarantees of the lease obligations of Coloconnection. As used herein, the term "INDEBTEDNESS" means all indebtedness and obligations for borrowed money or for the deferred purchase price of property or services purchased, all obligations in respect of any letter of credit or acceptance issued or made for such Borrower's or Guarantor's account and all obligations in respect of any capital lease. 24 (j) Timely pay and perform all of Borrowers' obligations under the Subordinated Debentures (defined in Section 10 below). (k) Not make any dividends or distributions; provided, however, that prior to the occurrence of an Event of Default hereunder or after an Event of Default has been fully cured, any Guarantor or NAPA may make cash distributions or dividends to their respective shareholders or partners. (l) Not enter into any agreements for the management of the Property which would have the effect of circumventing the intent of that certain letter dated September 5, 2001 from TECOTA Services to Technology Center of the Americas, LLC ("TECHNOLOGY CENTER") (the "RESIGNATION LETTER") to cause the removal of TECOTA Services and all affiliated parties of Borrowers as manager under the Operating Agreement, Management Agreement and Development Agreement (as such terms are defined therein) and any comparable agreements upon Bank's delivery of the Resignation Letter to Technology Center pursuant to Section 13(c). (m) Upon Bank's request at any time and from time to time, execute (and cause any applicable Guarantors to execute) such additional security documents as Bank may request with respect to the Intellectual Property and cooperate with Bank in connection with the filing of any such documents with the U.S. Patent office and any other applicable federal or state offices or agencies in order to perfect security interests in the Intellectual Property. (n) Not do anything indirectly that it would be prohibited by this Section 8 from doing directly. 9. REPORTING COVENANTS. At all times while this Agreement is in effect or any indebtedness of a Borrower to Bank remains unpaid, each Borrower shall furnish to Bank the following, all in form and substance and with a degree of detail, satisfactory to Bank: (a) as soon as available and in any event within forty five (45) days after the end of each quarter of each fiscal year of TWW, a consolidated balance sheet of TWW and the Subsidiaries as of the end of such quarter and consolidated statements of income and retained earnings of TWW and the Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, each prepared and certified by the chief financial officer of TWW as true and correct; (b) as soon as available and in any event no later than ninety (90) days after the end of each fiscal year of TWW and the Subsidiaries, a consolidated balance sheet of TWW and the Subsidiaries as of the end of such fiscal year and consolidated statements of income and retained earnings of TWW and the other Subsidiaries for such fiscal year, all prepared, audited and certified by independent public accountants acceptable to Bank and certified by the chief financial officer of TWW as true and correct; (c) as soon as available and in any event no later than ninety (90) days after the end of each calendar year, financial statements of Medina reviewed by independent public accountants acceptable to Bank and certified by Medina as true and correct; (d) within ten (10) days after the Bank requests same, accounts receivable and accounts payable agings for Borrowers as of the end of the previous month and a schedule of their inventory as of the end of the previous month; (e) notice of any event which has or may have a material adverse effect upon the financial condition of such Borrower or the value or viability of any of the Collateral; (f) as soon as possible and in any event within ten (10) days after the commencement thereof or any adverse determination therein, notice of all actions, suits and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality materially affecting such Borrower or any of the Collateral; 25 (g) as soon as possible and in any event within ten (10) days after the occurrence of each Event of Default or event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, a statement the chief financial officer of such Borrower setting forth the details of such Event of Default or event and the action which such Borrower proposes to take with respect thereto; (h) promptly after the filing or receiving thereof, copies of all reports and notices which such Borrower files under the Employee Retirement Income Security Act of 1974 ("ERISA") with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which such Borrower receives from any of them; and (i) within a reasonable time, such other information respecting the condition or operations, financial or otherwise, of such Borrower (including without limitation whatever information is necessary to determine whether such Borrower is in compliance with the covenants in the Loan Documents), Guarantors or any of the Collateral as Bank may from time to time request. 10. PERMITTED SECONDARY FINANCING AND LIENS. (a) Simultaneously with the execution of this Agreement, the following documents have been executed and delivered by the party or parties identified below: (i) those certain 10% Subordinated Convertible Debentures due April 30, 2006 issued by TWW to the investor or investors identified therein of even date herewith in the aggregate principal amount of $15,000,000 (the "INITIAL SUBORDINATED DEBENTURES"), (ii) those certain Subscription Agreements of even date herewith by and between TWW and the investor or investors identified therein (the "INITIAL SUBSCRIPTION AGREEMENTS"), (iii) that certain Collateral Agent Agreement of even date herewith by and among TWW, NAPA and the Bank of New York Trust Company of Florida, NA, a national banking association ("COLLATERAL AGENT") (the "COLLATERAL AGENT AGREEMENT"), (iv) that certain Second Leasehold Mortgage and Security Agreement, Assignment of Leases and Rents and Fixture Filing of even date herewith from NAPA in favor of Collateral Agent, to be recorded in the Public Records of Miami-Dade County, Florida (the "SECOND MORTGAGE"), (v) that certain Second Assignment of Leases and Rents and Security Deposits dated of even date herewith from NAPA in favor of Collateral Agent, to be recorded in the Public Records of Miami-Dade County, Florida (the "SECOND ASSIGNMENT"), (vi) that certain Subordination Agreement of even date herewith by and between Bank and Collateral Agent, with the joinder of Borrowers (the "SUBORDINATION AGREEMENT"), and (vii) UCC-1 Financing Statements from NAPA, as debtor, in favor of Collateral Agent, as secured party (the "SECOND UCC-1 FINANCING STATEMENTS"). (b) The Initial Subordinated Debentures, the Initial Subscription Agreements, the Collateral Agent Agreement, the Second Mortgage, the Second Assignment, the Second UCC-1 Financing Statements and all other documents now or hereafter existing which evidence or secure the indebtedness evidenced by the Initial Subordinated Debentures and the Additional Subordinated Debentures (defined below) are hereinafter referred to as the "SUBORDINATED DEBENTURE LOAN DOCUMENTS". The Initial Subordinated Debentures and the Additional Subordinated Debentures (defined below) are collectively referred to herein as the "SUBORDINATED DEBENTURES". (c) The Second Mortgage and Second Assignment shall deem to be a "PERMITTED LIEN", and the Indebtedness evidenced by the Initial Subordinated Debentures secured thereby, and the indebtedness evidenced by the Additional Subordinated 26 Debentures (defined below), subject to the provisions of this Section 10, shall be deemed to be "PERMITTED SECONDARY FINANCING". (d) From and after the date hereof, TWW may issue additional 10% subordinated debentures due April 30, 2006 to one or more investors in an aggregate principal amount of not more than $10,000,000 (the "ADDITIONAL SUBORDINATED DEBENTURES"), provided, that: (i) No Event of Default then exists and no event or circumstance then exists and is continuing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or the passage of time or both unless proceeds of the Additional Subordinated Debentures are used to cure a monetary Event of Default; (ii) The terms and conditions of the Additional Secured Debentures shall be the same terms and conditions as the Initial Subordinated Debentures, provided, that the rate of interest payable thereunder shall not exceed the rate of interest provided in the Initial Subordinated Debentures, periodic payments of interest shall not be required to be made more frequently than as provided in the Initial Subordinated Debentures, payments of principal shall not be required to be made except at maturity, and the maturity date shall be April 30, 2006. (iii) The Additional Subordinated Debentures may be secured by the lien of the Second Mortgage, the Second Assignment and the Second UCC-1 Financing Statements. Borrowers shall cause Collateral Agent and the holders of the Additional Subordinated Debentures to execute and deliver documents which confirm that the Additional Subordinated Debentures are unconditionally subordinate in all respects and for all purposes to the Bank's lien on the Mortgaged Property and the Bank's rights under the Loan Documents on the same terms and conditions as set forth in the Subordination Agreement. (e) Any secondary financing meeting the requirements of this subsection shall be deemed to the "PERMITTED SECONDARY FINANCING" and any liens therefore meeting the requirements of this subsection shall be deemed to be "PERMITTED LIENS". Borrowers shall timely and fully perform all of their covenants and obligations under any Permitted Secondary Financing. (f) The cash realized from the issuance of the Initial Convertible Debentures to the amount of $15,000,000 shall be used by Borrowers solely for the following purposes: (i) Payment in cash of accrued interest due Bank under the First Note as set forth in Section 1 of this Agreement; (ii) Deposit with Bank of cash in the amount of $896,761.10 to establish the Interest Reserve Deposit Account in accordance with Section 6 of this Agreement; (iii) Payment of operating expenses (including accrued trade payables) of Borrowers; (iv) Repayment of existing loans to TWW in accordance with EXHIBIT "F" attached hereto; (v) Payments of costs and expenses in connection with the preparation, execution, delivery, filing, recording, administration of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, the fees and out-of-pocket expenses of counsel for Bank, with respect thereto and with respect to advising Bank as to its rights and its responsibilities under the Loan Documents, and all costs and expenses, including the reasonable counsel fees and expenses (including those incurred at the appellate level in bankruptcy proceedings) in connection with the enforcement of the Loan Documents or the restructuring or amendment of any of them (whether in connection with the renewal, a workout, or otherwise), any and all documentary stamp, intangible or other taxes and fees payable or 27 determined to be payable in connection with the execution, delivery, filing or recording of any of the Loan Documents, and all costs and expenses in connection with the preparation, execution, delivery, filing, recording and administration of the Initial Subordinated Debentures and Additional Subordinated Debentures and other documents to be delivered thereunder, including, without limitation, the fees and out-of-pocket expenses of counsel for the Collateral Agent, together with any and all documentary stamp, intangible or other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing or recording of any of the Initial Subordinated Debentures or Additional Subordinated Debentures; and (vi) Payment of rent and other sums, including accrued and unpaid rent as if the date hereof, as and when due under the NAPA Lease. 11. EQUIPMENT LEASES. (a) The Existing Equipment Leases shall be Permitted Liens. (b) Borrowers shall timely and fully perform all of their covenants and obligations under the Existing Equipment Leases. (c) Borrowers covenant and agree to use reasonable efforts to obtain from each lessor under any additional Equipment Leases executed after the date hereof, a written agreement, in form and content satisfactory to Bank in its sole discretion, pursuant to which such lessor: (i) unconditionally consents to Borrowers' grant of a lien and encumbrance upon, and security interest, in each such additional Equipment Lease pursuant to the Mortgage and the other Loan Documents; (ii) agrees that such lessor shall give Bank written notice of default by Borrowers under such additional Equipment Lease, and a reasonable period of time from the date of the default, but in no event less than thirty (30) days, in which to cure the default (at Bank's sole option); and (iii) agrees that in the event Bank or its designee forecloses upon the Mortgage or otherwise realizes upon or becomes the owner of any of the Collateral, such lessor shall, at Bank's request: (1) recognize Bank or its designee and the successors and assigns of Bank or its designee as the holder of the rights of the lessee under such additional Equipment Lease; and (2) accept payment and performance by each such party of the obligations of the lessee thereunder. (d) Borrowers shall not otherwise modify or terminate the Existing Equipment Leases or enter into any additional Equipment Leases except in accordance with the provisions of Section 2.17 of the Mortgage. 12. COLOCATION AGREEMENTS. (a) NAPA shall timely and fully perform all of its covenants and obligation under all Colocation Agreements. (b) So long as no Event of Default exists and no event or circumstance exists and is continuing, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both, NAPA may, without Bank's consent, enter into Colocation Agreements on commercially reasonable, market rate terms and conditions. (c) Promptly after the execution and delivery any Colocation Agreement, Borrowers shall furnish Bank with a true, correct and complete copy of same. 28 (d) Upon Bank's request at any time and from time to time, Borrowers shall furnish Bank with a true, correct and complete list of all of the Colocation Agreements then in existence, together with true, correct and complete copies of all such Colocation Agreements. 13. DEFAULT. (a) Any of the following events or conditions shall constitute an Event of Default (as used herein, the term "OBLIGOR" means and includes each Borrower and Guarantor): (i) Borrowers' failure to make any payment of principal of, or interest on, the Renewal Note or to pay any other obligation of any Borrower to Bank, at the time and in the manner required under the Renewal Note and Mortgage, but subject to any applicable notice or cure rights provided for in the Renewal Note and Mortgage; (ii) Bank's discovery that any material representation or warranty made to it by any Obligor is false or misleading in any material respect; (iii) Any Obligor's failure to perform or observe any condition or agreement contained in any Loan Document to which it is a party, but subject to any applicable notice and/or cure rights provided for in the applicable Loan Documents; (iv) The entry or issuance of any judgment, warrant, writ of attachment, tax lien, writ of garnishment or the like against or in respect of any deposit of any Borrower with Bank or any of the Collateral, to the extent same is not paid or transferred to other security acceptable to Bank in accordance with applicable law within thirty (30) days after such entry or issuance (or such shorter period as Bank may require in order to protect and preserve Bank's security); (v) The dissolution of any Obligor (unless all assets of the dissolved Obligor are acquired by either Borrower or any Guarantor, and continue to be encumbered by the Loan Documents); (vi) The institution of a bankruptcy, insolvency, reorganization or similar proceeding by or against any Obligor (and not dismissed within sixty (60) days if filed against an Obligor) in any jurisdiction, the appointment of a receiver for any Borrower's business or a substantial part of its assets or an assignment for the benefit of any Obligor's creditors; (vii) A judgment exceeding $100,000 is entered against any Obligor and not discharged or bonded within thirty (30) days; (viii) Any Obligor's failure to perform any agreement made by it with or in favor of Bank in any document (other than a Loan Document) and the continuance of such failure for thirty (30) days after notice from Bank; (ix) If for any reason other than the death of Medina, Medina ceases to be Chief Executive Officer, Chairman of the Board and President of TWW, ceases to own at least five percent (5%) of the stock of TWW or disposes of more than five percent (5%) of such stock in any thirty (30)-day period; or TWW ceases to wholly own each other Borrower and Subsidiary; (x) Any Obligor commits an illegal act; (xi) Any Loan Document ceases to be valid and binding on an Obligor that is a party to it or such Obligor so contends; (xii) Bank fails or ceases to have a perfected, first-priority lien on, security interest in or collateral assignment of (whichever is appropriate) on all or any part of the Collateral; 29 (xiii) TWW's stock fails to be listed on the American Stock Exchange, the New York Stock Exchange or the NASDAQ Small Cap or National Market System; (xiv) There occurs any material default under any Equipment Leases, Colocation Agreements, Existing Software License Agreements (or any software license agreements pertaining to the NAPA Facility and/or the Leased Premises hereafter entered into by Borrowers) and/or Existing Service Agreements (or any service agreements pertaining to the NAPA Facility and/or the Leased Premises hereafter entered into by Borrowers), which default is not cured within any applicable notice and/or cure period thereunder; (xv) There occurs any material default under any Permitted Secondary Financing, which default is not cured within any applicable notice and/or cure period thereunder; (xvi) There occurs any material default under the FPL Agreement, which default is not cured within any applicable notice and/or cure period thereunder; (xvii) Foreclosure proceedings are instituted with respect to the Second Mortgage and/or the other Subordinated Debenture Loan Documents or other liens upon any of the Collateral and/or any other Secondary Financing or Permitted Liens; (xviii) Bank makes a good faith determination that: (i) a material adverse change in any Obligor's financial condition has occurred, (ii) any Obligor's ability to perform its or his obligations under any Loan Document has been materially impaired, or (iii) Bank is insecure; (xix) Any breach of or default under the Subordination Agreement by Collateral Agent or Borrowers or the failure of any Subordinated Creditor to perform or observe any term or condition of the Subordination Agreement; or (xx) The payment by either Borrower of principal or interest to any Subordinated Creditor in an amount or at a time not expressly permitted by the provisions of the Subordination Agreement. (b) At any time after the occurrence of an Event of Default, Bank may, by notice to Borrowers, declare the Note and all unpaid principal and interest accrued thereon and all other amounts owing under the Loan Documents to be immediately due and payable, whereupon the Note, all unpaid principal, all accrued and unpaid interest and all other amounts owing to Bank shall become and be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by each Borrower; provided, however, that upon the occurrence of an Event of Default described in clause (vi) above, the Note, all unpaid principal, all accrued and unpaid interest and all such other amounts owing under the Loan Documents shall automatically become and be due and payable in full without presentment, demand, protest or notice of any kind. (c) At any time after the occurrence of an Event of Default, Bank may (in addition to exercising any and all other remedies available to Bank under this Agreement and the other Loan Documents) elect, at its sole option, to cause the Resignation Letter to be delivered to Technology Center. Nothing contained herein shall be deemed to require Bank to cause the Resignation Letter to be so delivered. Unless and until the Resignation Letter is so delivered, it shall no of no force or effect. Bank agrees to hold the Resignation Letter in escrow and not to deliver same except in accordance with the provisions of this subsection 13(c). 14. EXCULPATION; INDEMNIFICATION. (a) Bank (and its directors, officers, employees, attorneys and agents) shall not incur any liability to any Borrower (other than for its (or their) own acts or omissions amounting to gross negligence or willful misconduct as finally determined pursuant to applicable law by a United States Court of competent 30 jurisdiction) for acts or omissions arising out of or related directly or indirectly to any Loan Document (including, but not limited to, delivery of the Resignation Letter pursuant to subsection 20(c) above); and each Borrower hereby expressly waives any and all claims and actions (other than those attributable to its (or their) own acts or omissions amounting to gross negligence or willful misconduct as finally determined pursuant to applicable law by a United States Court of competent jurisdiction) against Bank (and its officers, employees, attorneys and agents) arising out of or related directly or indirectly to any and all of the foregoing acts, omissions and circumstances. In no event shall Bank be liable to any Borrower for any consequential, punitive or indirect damages, and each Borrower hereby expressly waives any and all claims and actions for any such damages. (b) Bank (and its directors, officers, employees, attorneys and agents) shall be indemnified, reimbursed, held harmless and, at the request of Bank, defended by each Borrower from and against any and all claims, liabilities, losses and expenses that may be imposed upon, incurred by, or asserted against Bank (or its directors, officers, employees, attorneys and agents) arising out of or related directly or indirectly to any Loan Document, including, but not limited to, delivery of the Resignation Letter pursuant to subsection 20(c) above (except such as are occasioned by the indemnified person's own gross negligence or willful misconduct as finally determined pursuant to applicable law by a United States Court of competent jurisdiction). 15. COST, EXPENSES AND TAXES. Borrowers shall pay (or, if appropriate, reimburse Bank for) on demand all reasonable costs and expenses in connection with the preparation, execution, delivery, filing, recording and administration of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for Bank, with respect thereto and with respect to advising Bank as to its rights and responsibilities under the Loan Documents, and all costs and expenses (including reasonable counsel fees and expenses, including those incurred at the appellate level and in bankruptcy proceedings) in connection with the enforcement of the Loan Documents or the restructuring or amendment of any of them (whether in connection with a renewal, a workout, or otherwise). In addition, Borrowers shall pay (or, if appropriate, reimburse Bank for) on demand any and all documentary stamp, intangible and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing or recording of any of the Loan Documents, or any indebtedness contemplated hereby, and shall indemnify Bank and hold it harmless from and against any and all liabilities (including penalties and interest) with respect to or resulting from any delay in paying or omission to pay such taxes and fees. Bank is hereby authorized to deduct any amount due under this Section 15 from the proceeds from any bank account of any Borrower maintained with Bank or to make an unrequested Advance to pay any such amount. 16. ADDITIONAL COSTS. If due to either (a) any change (including, without limitation, any imposition or increase of reserve requirements) in, or in the interpretation of, any law or regulation or (b) compliance by Bank with any guideline or request from or regulation of any governmental authority (whether or not having the force of law), there is any increase in the cost to Bank of making, funding or maintaining any Advance, Borrowers shall from time to time, upon Bank's demand, pay to Bank additional amounts sufficient to indemnify Bank against such increased costs (except that Borrowers shall have no obligation to indemnify Bank for increased costs due to a change in the rate of tax on the overall net income of Bank). An itemized certificate as to the amount of such increased cost, submitted to Borrowers by Bank, shall, absent manifest error, be conclusive. 17. PRIME DEPOSITORY. Borrowers covenant to and agree with Bank that, for so long as the Loan shall be outstanding, Bank shall be the prime depository for the business accounts of Borrowers and Guarantors, including, without limitation, any and all of the construction disbursement accounts relating to the Collateral. Borrowers recognize that this covenant and agreement was an important factor and material inducement to Bank in establishing the terms and conditions, including the interest rate, of the Loan. If Borrowers violate this covenant and agreement, Bank may elect to increase the rate of interest on the Loan in accordance with the provisions of the Note. 31 18. CERTAIN COLLATERAL; SETOFF. (a) As security for all of Borrowers' obligations to Bank hereunder or under the Note, each Borrower hereby grants Bank a continuing lien on and security interest in all deposit accounts with Bank in which such Borrower has any interest (whether now existing or hereafter established) and all other monies, credits and other property of such Borrower that is now or hereafter owed by or in the possession or control of Bank. (b) Upon the occurrence of an Event of Default, Bank may offset and apply to any or all of the obligations secured by the Collateral all monies, credits and other property of any nature whatsoever, and the proceeds thereof, of any Borrower or any Guarantor now or at any time hereafter in the possession of, in transit to or from, under the custody or control of, or on deposit with, Bank or its affiliates, including all escrow and reserve accounts of any Borrower or any Guarantor. 19. NOTICES. (a) All notices, requests, approvals, consents and other communications provided for hereunder (collectively, a "notice") shall be in writing, shall be addressed to the intended recipient at the address of such party set forth below, and shall be either delivered to such party by nationally recognized overnight delivery service (such as Federal Express or Emery Air Freight), by hand delivery, by Fax, by mailing to such party by certified mail, return receipt requested, postage prepaid. Any party hereto may at any time and from time to time by notice given as herein provided change the address to which future notices to such party are to be given. (b) Any party hereto giving a notice to the other pursuant to this Section shall simultaneously give a true and complete copy of such notice to each of the persons designated by the intended recipient thereof as set forth below to receive such copies. Each such copy shall be addressed to the intended recipient at the address of such person set forth below and shall be given by hand delivery, overnight delivery service, or certified mail in the same manner provided above for the giving of notices. Either party hereto may at any time and from time to time by notice given as herein provided change the identity or address of the persons designated to receive such copies or designate additional persons to receive such copies. In no event, however, shall Bank be obligated to give copies of any notice to Borrowers to more than four persons at any time. (c) No notice given by any party hereto shall be of any force or effect unless such notice is given in accordance with all of the provisions of this Section. (d) All notices shall be deemed to have been given and received (1) on the date of delivery if delivered before 5:00 p.m. on a business day; if not, on the next business day, (2) if delivered to a nationally recognized overnight courier service, one day after delivery of such notice to such service, (3) if deposited in the United States mail, three (3) days after mailing, or (4) on the date Faxed if Faxed before 5:00 P.M. on a business day, if not, on the next business day; provided, however, that, when any notice must be given under any provision of a Loan Document on or before a certain date or within a certain period or number of days, such notice shall be deemed to have been given, solely for such purpose, on the date the same was hand-delivered, delivered to such overnight courier or deposited in the United States mails. (e) Notices shall be addressed (subject to the foregoing provisions concerning change of addresses) as follows: If to Bank: Ocean Bank 780 N.W. 42nd Avenue Miami, Florida 33126 Attn: Terry Curry 32 and to: Ocean Bank 780 N.W. 42nd Avenue Miami, Florida 33126 Attn: Luis Consuegra, General Counsel and with a copy to: Shutts & Bowen LLP 201 South Biscayne Boulevard 1500 Miami Center Miami, Florida 33131 Attn: C. Richard Morgan, Esq. If to NAPA: NAP of the Americas, Inc. 2601 South Bayshore Drive, Suite 900 Miami, Florida 33133 Attn: Jose Gonzalez, Esq. Fax: (305) 856-8190 If to TWW: Terremark Worldwide, Inc. 2601 South Bayshore Drive, Suite 900 Miami, Florida 33133 Attn: Jose Gonzalez, Esq. Fax: (305) 856-8190 20. PUBLICITY. From and after the date hereof, neither Borrower shall issue news releases to newspapers, trade publications and other publications or otherwise publicly disseminate any information concerning the Loan, except as required by applicable law or if otherwise specifically contemplated by this Agreement, without the prior written consent of Bank. 21. BROKERAGE. Borrowers shall pay all brokerage commissions due and payable in connection with this Agreement and shall indemnify Bank from the claims of any brokers arising by reason of this Agreement. Bank and Borrowers represent to one another that they know of no one entitled to such a brokerage commission. 22. ASSIGNMENT. This Agreement may not be assigned by any Borrower without Bank's prior consent and any such assignment or attempted assignment without such prior written consent shall be null and void. Bank may, without any Borrower's or Guarantor's consent, assign in whole or in part, and issue participating interests in and to, this Agreement, the Advances and any other Loan Document, and, in connection therewith, may make whatever disclosures regarding Borrowers, Guarantor or the Collateral it wishes. 23. JURISDICTION. Each Borrower hereby irrevocably agrees that any action or proceeding relating hereto or any other document relating to this Agreement or other Loan Documents that is brought by such Borrower shall be tried by the courts of the State of Florida sitting in Miami-Dade County, Florida or the United States district courts sitting in such county. Each Borrower hereby irrevocably submits, in any such action or proceeding that is brought by Bank, to the non-exclusive jurisdiction of each such court, irrevocably waives the defense of an inconvenient forum with respect to any such action or proceeding, and agrees that service of process in any such action or proceeding may be made upon each Borrower by mailing a copy thereof to such Borrower at such Borrower's address set forth in Section 19 (as well as by any other lawful method). Each Borrower hereby irrevocably appoints Brian Goodkind, Esq., whose address is 2601 South Bayshore Drive, Coconut Grove, Florida 33133 as his or its agent to receive service of process in any such action or proceeding on such Borrower's behalf. Service of process on one Borrower in any such action or proceeding shall constitute service on all other Borrowers, and each Borrower irrevocably appoints each other Borrower as its agent to accept service of process on it in any such action or proceeding. 33 24. CONFIDENTIALITY. Borrowers may have furnished and may in the future furnish to Bank certain information concerning Borrowers which Borrowers have or will have advised Bank in writing is non-public, proprietary or confidential in nature ("CONFIDENTIAL INFORMATION"). Bank confirms to Borrowers that it is Bank's policy and practice to maintain in confidence all Confidential Information which is provided to it under agreements providing for the extension of credit and which is identified to it as confidential, and that it will protect the confidentiality of Confidential Information submitted to it with respect to Borrowers under this Agreement; provided, however, that (i) nothing contained herein shall prevent Bank or any assignee from disclosing Confidential Information: (1) to its affiliates and their respective directors, officers and employees and to any legal counsel, auditors, appraisers, consultants or other persons retained by it or its affiliates as professional advisors, on the condition that such information not be further disclosed except in compliance with this Section; (2) under color of legal authority, including, without limitation, to any regulatory authority having jurisdiction over it or its operations or to or under the authority of any court deemed by it to be competent jurisdiction; and (3) to any actual or potential assignee of or participant in Bank's or such assignee's rights and obligations under this Agreement, to the extent such actual or potential assignee or participant has agreed to maintain such information in confidence on the basis set forth in this section; and (ii) the terms of this section shall be inapplicable to any information furnished to it which is in its possession prior to the delivery to it of such information by Borrower, or otherwise has been obtained by it on a non-confidential basis, or which was or becomes available to the public or otherwise part of the public domain (other than as a result of Bank's failure or any prospective participant's or assignee's failure to abide hereby), or which was not non-public, proprietary or confidential when Borrower delivered it to Bank or any assignee. 25. FURTHER ASSURANCES; POWER OF ATTORNEY. Each Borrower shall, upon request of Bank, execute and deliver such further documents and do such further acts as Bank may reasonably request in order to fully effectuate the purposes of this Agreement and other Loan Documents. Without limiting the generality of the foregoing, each Borrower shall promptly do whatever Bank requests to cure any omission of or in, or error in, any of the Loan Documents. Each Borrower hereby irrevocably appoints Bank as its true and lawful attorney-in-fact (such appointment being coupled with an interest) with full power (in the name of such Borrower or otherwise) to execute and deliver such documents and do such acts as Bank may reasonably deem necessary in order to fully effectuate the purposes of this Agreement and the other Loan Documents. Each Borrower hereby authorizes Bank to execute, deliver and file any and all UCC financing statements, without the signature of either Borrower, as Bank may reasonably deem necessary in order to fully effectuate and perfect the liens and security interests granted to Bank as contemplated by this Agreement and the other Loan Documents. 26. CERTAIN DEFINITIONS. As used herein: (a) "AFFILIATE" means, with respect to a Borrower, any person or entity directly or indirectly controlling or controlled by or under common control with such Borrower. (b) "BUSINESS DAY" means any day other than a Saturday, a Sunday or a holiday on which most banks in Miami, Florida are closed. (c) "GAAP" means U.S. generally accepted accounting principles consistently applied. (d) "LOAN DOCUMENTS" means that term as defined in the Renewal Note, which definition is incorporated herein by this reference. (e) "MORTGAGE" means that term as defined in the Renewal Note, which definition is incorporated herein by this reference. 27. JOINT AND SEVERAL LIABILITY. (a) Each Borrower is accepting joint and several liability hereunder and under the other Loan Documents in consideration of the financial accommodations to be provided by Bank hereunder, for the mutual benefit, directly and indirectly, of each Borrower. 34 (b) Each Borrower, jointly and severally, hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrower with respect to the payment and performance of all the obligations with respect to the Loan, it being the intention of the parties hereto that all of the obligations with respect to the Loan shall be joint and several obligations of both Borrowers without preferences or distinction among them. (c) If and to the extent that any Borrower shall fail to make any payment with respect to any of the obligations with respect to the Loan as and when due or to perform any of the obligations with respect to the Loan in accordance with the terms thereof, then in each such event the other Borrower(s) will make such payment with respect to, or perform, such obligations. (d) The obligations with respect to the Loan of each Borrower hereunder and under the other Loan Documents constitute full recourse obligations of such Borrower enforceable against it to the full extent of its properties and assets, irrespective of the validity, regularity or enforceability of this Agreement or any other circumstances whatsoever. (e) Except as otherwise expressly provided in this Agreement, each Borrower hereby waives notice of acceptance of its joint and several liability, notice of any advance made under this Agreement, notice of any action at any time taken or omitted by Bank under or in respect of any of the obligations with respect to the Advances, and, generally, to the extent permitted by applicable law, all demands, notices and other formalities of every kind in connection with this Agreement. Each Borrower hereby assents to, and waives notice of, any extension or postponement of the time for the payment of any of the obligations with respect to the Loan, the acceptance of any payment of any of the obligations with respect to the Loan, the acceptance of any partial payment thereon, any waiver, consent or other action or acquiescence by Bank at any time or times in respect of any default by any Borrower in the performance or satisfaction of any term, covenant, condition or provision of this Agreement, any and all other indulgences whatsoever by Bank in respect of any of the obligations with respect to the Loan, and the taking, addition, substitution or release, in whole or in part, at any time or times, of any security for any of the obligations with respect to the Loan or the addition, substitution or release, in whole or in part, of any Borrower. Without limiting the generality of the foregoing, each Borrower assents to any other action or delay in acting or failure to act on the part of Bank with respect to the failure by any Borrower to comply with any of its respective obligations with respect to the Loan, including, without limitation, any failure strictly or diligently to assert any right or to pursue any remedy or to comply fully with any applicable laws and regulations which might, but for the provisions of this Section 33, afford grounds for terminating, discharging or relieving any Borrower, in whole or in part, from any of its obligations with respect to the Loan, it being the intent of each Borrower that so long as any of its obligations with respect to the Loan remain unsatisfied, the obligations with respect to the Loan of such Borrower shall not be discharged except by performance and then only to the extent of such performance. The obligations with respect to the Loan of each Borrower shall not be diminished or rendered unenforceable by any winding up, reorganization, arrangement, liquidation, or similar proceeding with respect to any Borrower or Bank. The joint and several liability of Borrowers hereunder shall continue in full force and effect notwithstanding any absorption, merger, amalgamation or any other change whatsoever in the name, membership, constitution or place of formation of any Borrower or Bank. (f) Each Borrower shall be jointly and severally liable for all obligations and liabilities with respect to any Advance regardless of whether it signed or was aware of the request therefor. 28. MISCELLANEOUS. The invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision hereof. If any provision hereof is capable of more than one interpretation, it shall be interpreted, if possible, so as to render it enforceable. In order to be effective, any addition hereto or any modification or waiver of any provision or provisions hereof must be expressly consented to by Bank in writing. "HEREOF", "HEREUNDER", "HEREIN" and words of similar import refer to this 35 Agreement as a whole and not just the paragraph in which they appear. The indemnity obligations herein shall survive repayment of the Loan and the cancellation hereof. No delay or omission by Bank in exercising any right or remedy hereunder shall operate as a waiver thereof or of any other right or remedy, nor shall any single or partial exercise thereof preclude any further exercise thereof or the exercise of any other right or remedy. Bank may grant or deny any approval or consent contemplated hereby in its sole and absolute discretion; whenever used herein, the phrase "ACCEPTABLE TO BANK" or "SATISFACTORY TO BANK" means "ACCEPTABLE AND SATISFACTORY TO BANK IN ITS SOLE AND ABSOLUTE DISCRETION" and "IN BANK'S DISCRETION" or "BANK'S SOLE DISCRETION" means "IN BANK'S SOLE AND ABSOLUTE DISCRETION"; and, to be enforceable against Bank, any consent or approval by Bank must be in writing. This Agreement is solely for the benefit of Bank and Borrowers and may not be relied on by any third party. 29. CONSTRUCTION OF THIS AGREEMENT. (a) Borrowers and Bank agree and acknowledge that each of them, together with their respective legal counsel, have contributed substantially to the preparation and negotiation of the terms of this Agreement and the other Loan Documents, and, as such, this Agreement shall not be interpreted more favorably against one party than the other solely upon the basis of which party actually drafted this Agreement and the other Loan Documents. (b) This Agreement and the other Loan Documents are to be read in pari materia, and shall be construed in such a manner as to afford the greatest possible protection and benefit for Bank. In the event of an express conflict between the terms of the Note and the terms of this Agreement or any other Loan Documents as to payment terms, the terms of the Note shall control. In the event of any other express conflict between the terms of this Agreement, and the terms of any other Loan Documents, the terms of this Agreement shall govern and control. 30. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY CONFLICTS-OF-LAW RULE OR PRINCIPLE THAT WOULD GIVE EFFECT TO THE LAWS OF ANOTHER JURISDICTION. 31. WAIVER OF JURY TRIAL. BANK AND BORROWERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION (INCLUDING ANY COUNTERCLAIM) BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, THE ADVANCES, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANK TO ENTER INTO THIS AGREEMENT. 32. AMENDMENT AND RESTATEMENT. This Agreement amends and restates and supersedes in its entirety that certain Amended and Restated Credit Agreement dated as of September 5, 2001 among Borrowers and Lender. All references in the Loan Documents to the "Credit Agreement" shall be deemed to refer to this Agreement, as same may hereafter be substituted, replaced, renewed, split, consolidated, extended, restated, or otherwise modified or amended from time to time. Signed as of the date set forth at the head of this Agreement. NAP OF THE AMERICAS, INC., a Florida corporation By: ------------------------------------------ Name: Jose Segrera Title: Vice President [CORPORATE SEAL] 36 TERREMARK WORLDWIDE, INC., a Delaware corporation By: ------------------------------------------ Name: Jose Segrera Title: Vice President [CORPORATE SEAL] OCEAN BANK, a Florida banking corporation By: ------------------------------------------ Name: ------------------------------------------ Title: ------------------------------------------ 37 CONSENT OF GUARANTOR The undersigned, as one of the Guarantors of the Loan, and as a major shareholder of Terremark Worldwide, Inc., hereby consents to terms of the Credit Agreement and agrees that: (i) all of the representations and warranties made in the Credit Agreement by Borrowers are true, correct and complete in all material respects and shall be deemed ratified, confirmed and re-affirmed by the undersigned personally; (ii) the Credit Agreement, and all of the terms, covenants and conditions set forth in the Credit Agreement, are binding on and enforceable against Borrowers; and (iii) the undersigned will comply, and will cause the other Guarantors to comply, with all of the terms, covenants and conditions set forth in the Credit Agreement. ---------------------------------- Manuel D. Medina 38 EX-21 9 g83542exv21.txt SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES Coloconnection, a Florida corporation NAP of the Americas, Inc., a Florida corporation Park West Telecommunications Investors, Inc., a Florida corporation (1) TECOTA Services Corp., a Delaware corporation (2)(3) Terremark MedNAP, Inc., a Florida corporation Terremark Trademark Holdings, Inc., a Nevada corporation TerreNAP Data Centers, Inc., a Florida corporation (4) TerreNAP Services, Inc., a Florida corporation (5) (1) Park West Telecommunications Investors, Inc. is a significant shareholder or owns a significant interest in: Technology Center of the Americas, Inc., a Florida corporation (7) Technology Center of the Americas, Ltd., a Florida limited partnership (2) TECOTA Services Corp. is the sole shareholder of: T-Rex Miami, LLC, a Delaware limited liability company (3) TECOTA Services Corp. is a minority shareholder of: Technology Center of the Americas, LLC, a Delaware limited liability corporation (4) TerreNAP Data Centers, Inc., is the sole shareholder of: Spectrum Telecommunications Corp., a Delaware corporation (6) Terremark Asia Company, Ltd., a Bermuda corporation (8) Terremark Latin America, Inc., a Florida corporation (9)(10) (5) Terremark NAP Services, Inc. is the sole shareholder of: Terremark Financial Services, Inc., a Florida corporation Terremark Fortune House #1, Inc., a Florida corporation Terremark Management Services, Inc., a Florida corporation Terremark Realty, Inc., a Florida corporation Terremark Technology Contractors, Inc., a Florida corporation (6) Spectrum Telecommunications Corp. is the sole shareholder of: Terremark Americas Group, a Delaware corporation (7) Technology Center of the Americas, Inc. owns a minority interest in: Technology Center of the Americas, Ltd., a Florida limited partnership (8) Terremark Asia Company, Ltd., a Bermuda corporation, is the sole shareholder of: Asia Connect, Ltd., a Bermuda corporation TerreNAP Data Centers (China), Ltd., a Bermuda corporation (9) Terremark Latin America, Inc. is a majority shareholder of: Terremark Latin America de Argentina, SA, an Argentine corporation Terremark Latin America (Brasil) Ltda, a Brazil corporation Terremark Latin America de Mexico, SA de CV, a Mexican corporation (10) Terremark Latin America, Inc. is a minority shareholder of: Terremark do Brasil Ltda, a Brazil corporation (11) (11) Terremark Latin America (Brasil) Ltda, a Brazil corporation, is a majority shareholder of: Terremark do Brasil Ltda, a Brazil corporation * Terremark Worldwide, Inc. owns a minority shareholder interest in: Terremark Latin America de Argentina, SA, an Argentine corporation Terremark Latin America (Brasil) Ltda, a Brazil corporation Terremark Latin America de Mexico, SA de CV, a Mexican corporation EX-99.1 10 g83542exv99w1.txt CERTIFICATION SECTION 906 - CEO EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Terremark Worldwide, Inc. (the "Company") on Form 10-K for the period ending March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Manuel D. Medina, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Dated: June 30, 2003 /s/ MANUEL D. MEDINA ----------------------- Manuel D. Medina Chief Executive Officer EX-99.2 11 g83542exv99w2.txt CERTIFICATION SECTION 906 - CFO EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Terremark Worldwide, Inc. (the "Company") on Form 10-K for the period ending March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jose A. Segrera, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Dated: June 30, 2003 /s/ JOSE A. SEGRERA ----------------------- Jose A. Segrera Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----


Common Stock, par value $0.001 per share		American Stock Exchange
(Title of Class)		(Name of Exchange on Which Registered)


			Page No.

PART I				2
	ITEM 1.	BUSINESS		2
	ITEM 2.	PROPERTIES		9
	ITEM 3.	LEGAL PROCEEDINGS		9
	ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		10
PART II				10
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS		10
	ITEM 6.	SELECTED FINANCIAL DATA		12
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		13
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		33
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		34
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		34
PART III				34
	ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT		34
	ITEM 11.	EXECUTIVE COMPENSATION		37
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		40
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS		42
	ITEM 14.	CONTROLS AND PROCEDURES		43
	ITEM 15.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		44
PART IV				44
	ITEM 16.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K		44
SIGNATURES				47
CERTIFICATIONS				48



	Prices
Fiscal Year 2003
Quarter Ended	High		Low

June 30, 2002	$	0.7300	$	0.2500
September 30, 2002		0.7700		0.3100
December 31, 2002		0.7100		0.2200
March 31, 2003		0.4900		0.2200



	Prices
Fiscal Year 2002
Quarter Ended	High		Low

June 30, 2001	$	2.3000	$	1.4000
September 30, 2001		1.6500		0.4500
December 31, 2001		0.9000		0.4700
March 31, 2002		0.7400		0.2200



		Twelve Months Ended March 31,

		2003			2002			2001			2000			1999


		(dollars in thousands except per share data)
Results of Operations:
Data center		$	11,033	(3)	$	3,216		$	253		$	—		$	—
Real estate services			3,661			12,656			39,894			15,390			44,456

	Total revenue		14,694			15,872			40,147			15,390			44,456

Data center operations expenses			11,235			11,231			1,223			—			—
Construction contract expense			2,968			7,398			20,347			555			—
Other expenses			41,718			54,615			39,950			20,868			43,832

Total expenses			55,921			73,244			61,520			21,423			43,832

(Loss) income from continuing operations			(41,227	)		(57,372	)		(21,373	)		(6,033	)		624
Loss from discontinued operations			—			—			(82,627	)		—			—

Net (loss) income		$	(41,227	)	$	(57,372	)	$	(104,000	)	$	(6,033	)	$	624

(Loss) income from continuing operations per common share		$	(0.18	)	$	(0.29	)	$	(0.11	)	$	(0.09	)	$	0.01
Loss from discontinued operations per common share			—			—		$	(0.44	)		—			—

Net (loss) income per common share		$	(0.18	)	$	(0.29	)	$	(0.55	)	$	(0.09	)	$	0.01

Financial condition:
Real estate inventory		$	—		$	—		$	—		$	11,797		$	12,888
Property and equipment, net			54,483			61,089			25,066			1,011			191
Total assets			69,602			81,024			78,069			77,998			17,598
Long term obligations(1)(2)			74,524			38,210			16,462			28,632			8,731
Stockholders’ (deficit) equity(2)			(46,461	)		(49,276	)		11,163			476			6,510


[X]	Annual report pursuant to Section 13 or 15(d) of the Securities


[ ]	Transition report pursuant to Section 13 or 15(d) of the Securities


Delaware (State or Other Jurisdiction of Incorporation or Organization)		52-1981922 (I.R.S. Employer Identification No.)


ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.



		Three Months Ended

		March 31, 2003			December 31, 2002			September 30, 2002			June 30, 2002


		(dollars in thousands except per share data)
Results of Operations:
Data center		$	2,902		$	2,557		$	2,424		$	3,150	(1)
Real estate services			84			276			1,268			2,033

	Total revenue		2,986			2,833			3,692			5,183

Data center operations expenses			2,603			2,768			2,769			3,095
Construction contract expenses			62			134			938			1,834
Other expenses			9,979			14,110			9,403			8,226

	Total expenses		12,644			17,012			13,110			13,155

Net loss		$	(9,658	)	$	(14,179	)	$	(9,418	)	$	(7,972	)

Net loss per common share		$	(0.04	)	$	(0.06	)	$	(0.04	)	$	(0.04	)


(1)	Amount includes a one time contract termination fee of $1,095.



		Three Months Ended

		March 31, 2002			December 31, 2001			September 30, 2001			June 30, 2001


		(dollars in thousands except per share data)
Data center		$	1,916		$	678		$	394		$	228
Real estate services			2,660			1,067			4,003			4,926

	Total revenue		4,576			1,745			4,397			5,154

Data center operations expenses			3,163			4,019			3,167			882
Construction contract expenses			2,383			303			1,915			2,797
Other expenses			22,482			10,028			12,651			9,454

	Total expenses		28,028			14,350			17,733			13,133

Net loss		$	(23,452	)	$	(12,605	)	$	(13,336	)	$	(7,979	)

Net loss per common share		$	(0.12	)	$	(0.06	)	$	(0.07	)	$	(0.04	)


ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.


	Results of Operations for the Year Ended March 31, 2003 as Compared to the Year Ended March 31, 2002


ITEM 2.	PROPERTIES.


ITEM 3.	LEGAL PROCEEDINGS.


ITEM 6.	SELECTED FINANCIAL DATA.


	Accounting for Income Taxes



	Year ended March 31,

Asset	2003		2002

Facility in Santa Clara, California	$	350,000	$	11,983,670
Post Shell goodwill		2,315,336		3,190,000
TECOTA promote interest		904,964		3,800,000
Equipment		450,000		—

	$	4,020,300	$	18,973,670


			March 31,			Proforma			Proforma
			2003			Adjustments			March 31, 2003

Assets
Current assets:
	Cash and cash equivalents		$	1,408,190		$	13,600,000		$	15,008,190
	Notes receivable			—			3,700,000			3,700,000
	Other current assets			523,940			900,000			1,423,940

Total current assets				1,932,130						20,132,130
Long term assets				67,669,383						67,669,383

		Total assets	$	69,601,513					$	87,801,513

		Liabilities and Stockholders’ Deficit
Current liabilities:
	Current portion of notes payable			1,464,963						1,464,963
	Construction payables			22,012,162			(21,602,343	)		409,819
	Accounts payable and other			13,011,371						13,011,371
	Interest payable			4,492,805			(2,597,657	)		1,895,148

Total current liabilities				40,981,301						16,781,301

Notes payable				56,174,938			(14,800,000	)		41,374,938
Convertible debt, net of beneficial conversion				14,005,000			15,500,000			29,505,000
Other long term debt				4,344,243						4,344,243

		Total liabilities		115,505,482						92,005,482


Redeemable convertible preferred stock				556,729						556,729


Total stockholders’ deficit				(46,460,698	)		41,700,000	(1)		(4,760,698	)

Total liabilities and stockholders’ deficit			$	69,601,513					$	87,801,513


	Capital lease
	obligations		Operating leases		Notes payable		Convertible debt		Total

2004	$	2,192,252	$	6,024,471	$	1,464,963		900,000	$	10,581,686
2005		1,021,260		6,011,946		6,898,000		2,750,000		16,681,206
2006		9,724		5,581,098		48,000		11,255,000		16,893,822
2007		11,394		5,548,701		49,222,553		—		54,782,648
2008		5,307		5,347,842		6,385		—		5,359,534
Thereafter		—		70,406,223		—		—		70,406,223

	$	3,239,937	$	98,920,281	$	57,639,901	$	14,905,000	$	174,705,119


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.


ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.


Name		Age		Principal Position

Manuel D. Medina			50	Chairman of the Board, President and Chief Executive Officer
Joseph R. Wright, Jr.			64	Vice Chairman of the Board
Guillermo Amore			65	Director
Timothy Elwes			67	Director
Fernando Fernandez-Tapias			64	Director
Jose Maria Figueres-Olsen			48	Director
Arthur L. Money			63	Director
Marvin S. Rosen			61	Director
Miguel J. Rosenfeld			53	Director
Joel A. Schleicher			50	Director
Brian K. Goodkind			45	Executive Vice President and Chief Operating Officer
Jose A. Segrera			32	Senior Vice President and Chief Financial Officer
Jose E. Gonzalez			42	Senior Vice President, General Counsel and Secretary
Key Employees
	Jamie Dos Santos		41	Senior Vice President and Chief Marketing Officer
	Sandra B. Gonzalez-Levy		53	Senior Vice President, Corporate Communications
	Marvin Wheeler		48	Senior Vice President, Worldwide Operations
	Aviva Budd		63	Senior Vice President



	Annual		Long Term
	Compensation		Compensation Awards

Name and	Fiscal	Salary	Options/
Principal Position	Year	($)	SARS (#)

Manuel D. Medina Chairman of the Board, President & Chief Executive Officer	2003 2002 2001	350,000 350,000 350,000		— 100,000 100,000
Brian K. Goodkind Executive Vice President & Chief Operating Officer	2003 2002 2001	250,000 250,000 250,000		115,000 150,000 150,000
Jose A. Segrera Executive Vice President & Chief Financial Officer	2003 2002 2001	170,000 170,000 150,000		100,000 200,000 150,000
Jose E. Gonzalez Senior Vice President & General Counsel	2003 2002 2001	185,000 175,000 175,000		75,000 200,000 150,000



										Potential Realizable
										Value At Assumed
										Annual Rates Of
										Stock Price
										Appreciation For
Individual Grants										Option Term(1)

	Number of		Percent of Total
	Securities		Options Granted			Exercise
	Underlying Options		to Employees in			Price		Expiration
Name	Granted (#)		Fiscal Year			($/Sh)		Date		5% ($)		10% ($)

Manuel D. Medina		—		—			—		—		—		—
Brian K. Goodkind		115,000		4.9	%		0.51		04/2/12		36,885		93,473
Jose A. Segrera		100,000		4.3	%		0.51		04/2/12		32,074		81,281
Jose E. Gonzalez		75,000		3.2	%		0.51		04/2/12		24,055		60,961



					Number of Securities				Value of Unexercised
					Underlying Unexercised				In-the-Money Options
	Shares				Options at Fiscal Year End				at Fiscal Year End(1)
	Acquired on		Value
Name	Exercise		Realized		Exercisable		Unexercisable		Exercisable		Unexercisable

Manuel D. Medina		—		—		200,000		—		—		—
Brian K. Goodkind		—		—		288,334		326,666		—		—
Jose A. Segrera		—		—		200,001		349,999		—		—
Jose E. Gonzalez		—		—		191,667		283,333		—		—


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.


	Amount and Nature of			Percent of
Name of Beneficial Owner	Beneficial Ownership(1)			Class

Common Stock:
Manuel D. Medina		42,561,790	(2)		13.8


ITEM 16.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.


Exhibit
Number		Exhibit Description

	2.1	Agreement for Sale of Assets by and between ITV Communications, Inc. and Netmatics, Inc., dated January 11, 1996, and Promissory Note and Security Agreement dated January 16, 1996(1)
	2.2	Agreement of Merger between AVIC Group International, Inc., a Colorado corporation, with and into AVIC Group International, Inc., a Delaware corporation dated July 10, 1996(2)
	2.3	Agreement and Plan of Merger by and between Terremark Holdings, Inc. and AmTec, Inc., dated as of November 24, 1999, as amended by that certain Amendment to Agreement and Plan of Merger, dated as of February 11, 2000(3)
	2.4	Letter Agreement dated January 12, 2001 among MP Telecom, LLC, Terremark Worldwide, Inc., Clifford J. Preminger, Thomas M. Mulroy and Manuel Medina(4)
	3.1	Certificate of Merger of Terremark Holdings, Inc. with and into AmTec, Inc.(5)
	3.2	Restated Certificate of Incorporation of the Company(5)
	3.3	Restated Bylaws of the Company(5)
	3.4	Certificate of Designations of Preferences of Series G Convertible Preferred Stock of the Company(5)
	3.5	Certificate of Designations of Preferences of Series H Convertible Preferred Stock of the Company(6)
	4.1	Specimen Stock Certificate(1)
	4.2	Form of 13% Subordinated Convertible Debenture, due December 31, 2005(7)
	4.3	Form of 13.125% Subordinated Convertible Debenture, due December 31, 2005(8)
	4.4	Form of 9% Subordinated Convertible Debenture, due April 30, 2006
	4.5	Form of Warrant for the Purchase of Common Stock(9)
	4.6	Form of 10% Subordinated Convertible Debenture, due April 30, 2006


Signature	Title	Date

/s/ MANUEL D. MEDINA Manuel D. Medina	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)	June 30, 2003

/s/ GUILLERMO AMORE Guillermo Amore	Director	June 30, 2003

/s/ TIMOTHY ELWES Timothy Elwes	Director	June 30, 2003

Fernando Fernandez-Tapias	Director

/s/ JOSÉ MARIA FIGUERES-OLSEN José Maria Figueres-Olsen	Director	June 30, 2003

/s/ HON. ARTHUR L. MONEY Hon. Arthur L. Money	Director	June 30, 2003

/s/ MARVIN S. ROSEN Marvin S. Rosen	Director	June 30, 2003

/s/ MIGUEL J. ROSENFELD Miguel J. Rosenfeld	Director	June 30, 2003

/s/ JOEL A. SCHLEICHER Joel A. Schleicher	Director	June 30, 2003

/s/ JOSEPH R. WRIGHT, JR. Joseph R. Wright, Jr.	Director	June 30, 2003

/s/ JOSÉ A. SEGRERA José A. Segrera	Executive Vice President and Chief Financial Officer (Principal Accounting Officer)	June 30, 2003



			For the twelve months ended March 31,

			2003			2002			2001

Revenues
	Data center		$	9,937,899		$	3,215,897		$	252,906
	Data center — contract termination fee			1,095,086			—			—
	Real estate sales			—			—			2,752,748
	Development, commission and construction fees			197,413			3,218,330			12,484,272
	Management fees			179,505			1,183,570			2,212,326
	Construction contracts			3,283,800			8,254,687			22,445,156

		Operating revenues		14,693,703			15,872,484			40,147,408

Expenses
	Data center operations, excluding depreciation			11,234,833			11,230,513			1,223,112
	Start up costs — data centers			—			3,383,127			6,507,517
	Cost of real estate sold			—			—			2,134,572
	Construction contract expenses, excluding depreciation			2,968,142			7,397,524			20,347,165
	General and administrative			12,507,121			15,561,042			19,929,438
	Sales and marketing			4,200,858			3,621,176			2,768,890
	Depreciation and amortization			5,092,749			7,257,151			3,257,292
	Impairment of long-lived assets			4,020,300			18,973,670			4,155,178

		Operating expenses		40,024,003			67,424,203			60,323,164

	Loss from operations			(25,330,300	)		(51,551,719	)		(20,175,756	)

Other (expenses) income
	Inducement on debt conversion			(4,871,245	)		—			—
	Interest expense			(11,007,683	)		(9,750,473	)		(1,097,683	)
	Dividend on preferred stock			(29,988	)		(26,741	)		(34,806	)
	Gain on sale of real estate held for sale			—			4,185,728			—
	Other			(124,367	)		(326,247	)		(570,749	)
	Interest income			136,278			97,237			505,743

		Total other expenses		(15,897,005	)		(5,820,496	)		(1,197,495	)

	Loss from continuing operations before income taxes			(41,227,305	)		(57,372,215	)		(21,373,251	)
Income taxes				—			—			—

Loss from continuing operations				(41,227,305	)		(57,372,215	)		(21,373,251	)

	Loss from discontinued operations, net of income taxes of $-0-			—			—			(21,499,587	)
	Loss on disposition of discontinued operations, net of income taxes of $-0-			—			—			(61,126,824	)

Net loss			$	(41,227,305	)	$	(57,372,215	)	$	(103,999,662	)

Basic and diluted net loss per common share:
	Continuing operations		$	(.18	)	$	(.29	)	$	(.11	)
	Discontinued operations			—			—			(.44	)

	Net loss		$	(.18	)	$	(.29	)	$	(.55	)

	Weighted average common shares outstanding			235,209,310			199,243,146			188,550,498



		Stockholders’ Equity


					Common Stock Par
					Value $.001
											Additional						Common			Common
		Preferred			Issued						Paid-in			Stock			Stock			Stock			Treasury			Note Receivable			Retained
		Stock			Shares			Amount			Capital			Subscriptions			Warrants			Options			Stock			Related Party			Deficit

Balance at March 31, 2000			4,176,693			70,685,845			70,686			7,954,010			—			—			—			—			—			(11,724,958	)
Effect of AmTec merger:
	conversion of preferred stock		(4,176,693	)		7,853,985			7,854			4,168,839			—			—			—			—			—			—
	assumption of AmTec equity		1			38,289,500			38,289			46,923,782			—			1,687,038			—			—			—			—
Sale of common stock			—			68,722,349			68,722			28,054,203			—			—			—			—			—			—
Common stock issued in acquisitions			—			14,412,500			14,413			37,531,045			—			—			—			—			—			—
Exercise of warrants			—			54,000			54			190,161			—			(21,640	)		—			—			—			—
Exercise of stock options			—			489,000			489			517,504			—			—			—			—			—			—
Warrants issued			—			—			—			—			—			394,000			—			—			—			—
Stock options issued			—			—			—			—			—			—			1,716,138			—			—			—
Treasury stock acquisitions			—			—			—			—			—			—			—			(2,428,125	)		—			—
Net loss			—			—			—			—			—			—			—			—			—			(103,999,662	)

Balance at March 31, 2001			1			200,507,179			200,507			125,339,544			—			2,059,398			1,716,138			(2,428,125	)		—			(115,724,620	)
Exercise of stock options			—			115,000			115			40,135			—			—			—			—			—			—
Forfeiture of stock options			—			—			—			—			—			—			(169,337	)		—			—			—
Warrants issued			—			—			—			—			—			849,015			—			—			—			—
Exercise of warrants			—			100,000			100			29,900			—			(29,000	)		—			—			—			—
Stock options issued			—			—			—			—			—			—			20,000			—			—			—
Conversion of debt			—			160,071			160			242,540			—			—			—			—			—			—
Common stock subscriptions			—			—			—			—			950,000			—			—			—			—
Note receivable-related party			—			—			—			—			—			—			—			—			(5,000,000	)		—
Net loss			—			—			—			—			—			—			—			—			—			(57,372,215	)

Balance at March 31, 2002			1			200,882,250			200,882			125,652,119			950,000			2,879,413			1,566,801			(2,428,125	)		(5,000,000	)		(173,096,835	)
Sale of common stock			—			33,148,824			33,149			21,395,161			(950,000	)		—			—			—			—			—
Retirement of treasury shares			—			(1,400,000	)		(1,400	)		(2,426,725	)		—			—			—			2,428,125			—			—
Warrants issued			—			—			—			—			—			1,221,979			—			—			—			—
Exercise of warrants			—			818,000			818			372,100			—			(364,738	)		—			—			—			—
Conversion of debt			—			22,827,790			22,828			22,311,054			—			—			—			—			—			—
Warrants expired			—			—			—			1,879,073			—			(1,879,073	)		—			—			—			—
Forfeiture of stock options			—			—			—			21,426			—			—			(21,426	)		—			—			—
Net loss			—			—			—			—			—			—			—			—			—			(41,227,305	)

Balance at March 31, 2003			1			256,276,864		$	256,277		$	169,204,208		$	—		$	1,857,581		$	1,545,375		$	—		$	(5,000,000	)	$	(214,324,140	)



						For the twelve months ended
						March 31,

						2003			2002			2001

Cash flows from operating activities:
		Net loss				$	(41,227,305	)	$	(57,372,215	)	$	(103,999,662	)
		Adjustments to reconcile net loss to net cash used in operating activities
			Depreciation and amortization				5,092,749			7,257,151			3,257,292
			Amortization of loan costs				908,321			1,097,922			132,481
			Provision for bad debt				197,774			234,767			—
			Gain on sales of real estate held for sale				—			(4,185,728	)		—
			Loss on sale of property and equipment				—			373,369			—
			Equity issued for services				313,968			—			—
			Impairment of long-lived assets				4,020,300			18,973,670			4,155,178
			Inducement on debt conversion				4,871,245			—			—
			Discontinued operations				—			—			82,626,411
			Other, net				312,252			(44,167	)		164,167
			(Increase) decrease in:
				Accounts receivable			929,468			1,014,374			(3,982,744	)
				Contracts receivable			1,333,632			3,275,080			(2,312,896	)
				Notes receivable			—			—			1,809,254
				Other assets			(123,369	)		(285,764	)		(315,198	)
				Real estate inventories			—			—			(1,063,351	)
			Increase (decrease) in:
				Accounts payable and accrued expenses			649,006			(9,214,398	)		9,125,452
				Interest payable			2,947,252			2,024,589			250,239
				Deferred revenue			155,324			531,133			284,693
				Net assets/liabilities of discontinued operations			175,521			(1,306,837	)		2,700,847
				Deferred rent			1,135,448			1,908,575			338,072

					Net cash used in continuing operations		(18,308,414	)		(35,718,479	)		(6,829,765	)
					Net cash used in discontinued operations		—			—			(22,236,555	)

					Net cash used in operating activities		(18,308,414	)		(35,718,479	)		(29,066,320	)

Cash flows from investing activities:
	Restricted cash						(11,332	)		(725,534	)		504,737
	Purchase of property and equipment						(994,892	)		(45,785,047	)		(24,412,720	)
	Cash paid in disposals						—			—			(900,000	)
	Investment in unconsolidated entities						(337,812	)		—			(4,202,004	)
	Proceeds from sale of real estate held for sale						—			17,046,385			55,781,259
	Proceeds from sale of property and equipment						—			30,000			—
	Cash acquired in acquisitions						—			—			2,368,273

					Net cash (used in) provided by investing activities		(1,344,036	)		(29,434,196	)		29,139,545

Cash flows from financing activities:
	(Payments) borrowings of construction payables						(2,948,554	)		9,290,277			16,960,452
	New borrowings						10,032,220			66,750,175			17,947,892
	Note receivable-related party						—			(5,000,000	)
	Payments on loans						(2,295,138	)		(26,550,718	)		(73,563,352	)
	Issuance of convertible debt						—			15,042,318			11,955,000
	Payments under capital lease obligations						(975,433	)		(1,162,236	)		—
	Exercise of stock options and warrants						9,180			41,250			686,568
	Sale of common stock and warrants						16,955,287			—			28,122,925
	Cash received for common stock subscriptions						—			950,000			—
	Sale of preferred stock						—			500,000			—

					Net cash provided by financing activities		20,777,562			59,861,066			2,109,485

					Net increase (decrease) in cash		1,125,112			(5,291,609	)		2,182,710
Cash and cash equivalents at beginning of year							283,078			5,574,687			3,391,977

Cash and cash equivalents at end of year						$	1,408,190		$	283,078		$	5,574,687


Leasehold improvements		5 - 20 years
Computer software		3 years
Furniture, fixture and equipment		5 - 20 years



	March 31, 2003				March 31, 2002

	Book value		Fair value		Book value		Fair value

Notes payable, including current portion	$	57,639,901	$	52,014,901	$	53,880,300	$	53,880,300
Construction payables, including accrued interest		23,009,819		13,537,162		26,250,729		26,250,729


Assets:
	Cash and cash equivalents		$	2,368,273
	Restricted cash			30,000
	Accounts receivable			3,279,956
	Investments and option agreements			12,401,179
	Reclassification of option			(8,900,000	)
	Notes receivable			344,438
	Furniture and equipment			5,720,432
	Other assets			1,647,882
	Identifiable intangible assets			17,068,558
	Goodwill			72,212,319

		Total assets acquired	$	106,173,037

Liabilities
	Notes payable		$	10,716,049
	Trade payable and other liabilities			6,256,245

		Total liabilities assumed		16,972,294
	Minority interest			475,306
Equity assumed				48,649,111
Issuance of common stock				37,545,457
Estimated merger costs and other				2,530,869

			$	106,173,037