------------------------------------------------------------------------
------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
TRESCOM INTERNATIONAL, INC.
(Exact name of Registrant as Specified in its Charter)
Commission File Number: 0-27594
FLORIDA 65-0454571
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification
No.)
200 East Broward Boulevard
Fort Lauderdale, Florida 33301
(Address of Principal Executive Offices) (Zip Code)
(954) 763-4000
(Registrant's Telephone Number, Including Area Code)
________________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check 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. / X / Yes
/ / No
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Class Outstanding
----- -----------
Common Stock, par value $0.0419 11,620,907 shares
per share. as of August 12,
1996.
------------------------------------------------------------------------
-----------------------------------------------------------------------
<PAGE>
TRESCOM INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION Page No.
------------------------------
ITEM 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996
(Unaudited) and December 31, 1995 . . . . . . . . . . . . 2
Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 1996 (Unaudited)
and the Three and Six Months Ended June 30, 1995
(Unaudited) . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Shareholders' Equity
at June 30, 1996 (Unaudited) . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1996 (Unaudited) and the Six Months
Ended June 30, 1995 (Unaudited) . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements (Unaudited). 7-15
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 16
PART II. OTHER INFORMATION
---------------------------
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . .19
ITEM 2. Changes in Securities . . . . . . . . . . . . . . . . . .19
ITEM 3. Default Upon Senior Securities . . . . . . . . . . . . .19
ITEM 4. Submission of Matters to a Vote of Security-Holders . . .19
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . .20
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 20
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
TRESCOM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
1995 1996
---------------------------
(Unaudited)
(In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,052 $ 8,902
Accounts receivable, net allowance
for doubtful accounts of $4,140
and $5,587, respectively 17,054 26,166
Other current assets 1,302 2,173
------------------------
Total current assets 20,408 37,241
Property and equipment, at cost:
Transmission and communications equipment 14,001 16,561
Furniture, fixtures and other 3,494 5,175
------------------------
17,495 21,736
Less accumulated depreciation and
amortization (2,716) (3,945)
------------------------
14,779 17,791
Other assets:
Customer bases, net of accumulated
amortization of $6,612 and $1,037,
respectively 3,092 2,817
Excess of cost over net assets of businesses
acquired, net of accumulated amortization
of $1,371 and $1,866, respectively 33,313 32,817
Other 1,038 401
-------------------------
Total assets $ 72,630 $ 91,067
=========================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRESCOM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, June 30,
1995 1996
---------------------------
(Unaudited)
(In thousands, except share
and per share data)
<S> <C> <C>
Current liabilities:
Accounts payable $ 1,613 $ 3,430
Accrued network costs 11,585 16,047
Other accrued expenses 3,459 3,456
Long-term obligations due within one year 25,290 120
Notes payable to shareholder 8,179 --
Other current liabilities 294 237
-------------------------
Total current liabilities 50,420 23,290
Long term obligations (Note 3) 702 650
Shareholders' equity
Redeemable preferred stock, $.01 par value,
1,000,000 shares authorized including
accrued undeclared dividends
(Note 4 and 8)
Series A, 180,617 shares authorized,
issued and outstanding; no shares
authorized, issued and outstanding 21,807 --
Series B, 200,000 shares authorized;
104,444 shares issued and outstanding;
no shares authorized, issued and
outstanding 11,620 --
Series C, 151,421 shares authorized,
issued and outstanding; no shares
authorized, issued and outstanding 16,750 --
Common stock, $.0419 par value; 50,000,000
shares authorized, 2,386,663 shares issued
and outstanding; 11,529,187 shares issued
and outstanding 100 484
Deferred compensation (657) (1,385)
Additional paid-in capital 4,124 104,795
Accumulated deficit (32,236) (36,767)
-------------------------
Total shareholders' equity 21,508 67,127
-------------------------
Total liabilities and shareholders' equity $ 72,630 $ 91,067
=========================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRESCOM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
-------- -------- -------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $ 33,521 $ 25,956 $ 65,852 $ 46,878
Cost of services 26,131 18,163 50,258 34,672
-------------------------------------------
Gross profit 7,390 7,793 15,594 12,206
Selling, general and
administrative 6,903 6,427 14,313 12,968
Depreciation and amortization 1,089 846 2,257 1,699
Settlement with a major customer --- --- --- 4,069
-------------------------------------------
Income (loss) from operations (602) 520 (976) (6,530)
Interest (income) expense, net (165) 569 911 1,147
Other expense, net --- --- 1 ---
-------------------------------------------
Net loss before extraordinary
items (437) (49) (1,888) (7,677)
Extraordinary items --- --- 1,956 ---
-------------------------------------------
Net loss $ (437) $ (49) $ (3,844) $ (7,677)
===========================================
Per Share Data:
Loss per share of common stock
and common stock equivalents
before extraordinary items $(0.04) $(0.01) $(0.17) $(1.03)
Extraordinary items per share --- --- $(0.17) ---
-------------------------------------------
Loss per share of common stock and
common stock equivalents after
extraordinary items $(0.04) $(0.01) $(0.34) $(1.03)
===========================================
Weighted average number of common
stock and common stock
equivalents outstanding 12,157 7,489 11,205 7,489
===========================================
</TABLE>
See accompanying notes to consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
TRESCOM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
(In thousands, except share and per share data)
Redeemable Preferred Stock
-----------------------------------------
Accrued Stock
Undeclared Sub-
Shares Amount Dividends scriptions
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 436,482 $43,648 $6,529 $---
--------------------------------------
Conversion of Redeemable Preferred
Stock to Common Stock (436,482) (43,648) --- ---
Accrued dividends on Redeemable
Preferred Stock --- --- 687 ---
Conversion of accrued dividends on
Redeemable Preferred Stock to
Common Stock --- --- (7,216) ---
Initial public offering of Common Stock --- --- --- ---
Costs associated with initial public
offering of Common Stock --- --- --- ---
Grant of stock options --- --- --- ---
Exercise of stock options --- --- --- ---
Net loss --- --- --- ---
--------------------------------------
Balance at March 31, 1996 --- $--- $--- $---
Grant of stock options --- --- --- ---
Exercise of stock options --- --- --- ---
Forfeiture of stock options --- --- --- ---
Costs associated with initial public
offering of Common Stock --- --- --- ---
Net loss --- --- --- ---
--------------------------------------
Balance at June 30, 1996 --- $--- $--- $---
======================================
</TABLE>
<TABLE>
<CAPTION>
Common Stock
--------------------------------
Additional
Paid-in
Shares Amount Capital
---------- ------ ----------
<S> <C> <C> <C>
Balance at December 31, 1995 2,386,663 $100 $4,124
------------------------------
Conversion of Redeemable Preferred
Stock to Common Stock 3,911,129 164 43,484
Accrued dividends on Redeemable
Preferred Stock --- --- ---
Conversion of accrued dividends on
Redeemable Preferred Stock to
Common Stock 646,482 27 7,189
Initial public offering of Common Stock 4,545,455 190 50,537
Costs associated with initial public
offering of Common Stock --- --- (1,739)
Grant of stock options --- --- 1,701
Exercise of stock options 39,458 2 13
Net loss --- --- ---
------------------------------
Balance at March 31, 1996 11,529,187 $483 $105,309
Grant of stock options --- --- ---
Exercise of stock options 14,108 1 8
Forfeiture of stock options --- --- (236)
Costs associated with initial public
offering of Common Stock --- --- (286)
Net loss --- --- ---
------------------------------
Balance at June 30, 1996 11,550,648 $484 $104,795
</TABLE>
<TABLE>
<CAPTION>
Total
Deferred Accumulated Shareholders'
Compensation Deficit Equity
------------ ----------- ------------
<S> <C> <C> <C>
Balance at December 31, 1995 $(657) $(32,236) $21,508
--------------------------------
Conversion of Redeemable Preferred
Stock to Common Stock --- --- ---
Accrued dividends on Redeemable
Preferred Stock --- (687) ---
Conversion of accrued dividends on
Redeemable Preferred Stock to
Common Stock --- --- ---
Initial public offering of Common
Stock --- --- 50,727
Costs associated with initial public
offering of Common Stock --- --- (1,739)
Grant of stock options (1,029) --- 672
Exercise of stock options --- --- 15
Net loss --- (3,407) (3,407)
--------------------------------
Balance at March 31, 1996 $(1,686) $(36,330) $67,776
Grant of stock options --- --- ---
Exercise of stock options 65 --- 74
Forfeiture of stock options 236 --- ---
Costs associated with initial
public offering of Common Stock --- --- (286)
Net loss --- (437) (437)
---------------------------------
Balance at June 30, 1996 $(1,385) $(36,767) $67,127
=================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRESCOM INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
-------------------------
1995 1996
-------- --------
(In thousands)
<S> <C> <C>
Cash flows used in operating activities:
Net loss $ (7,677) $ (3,844)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 1,699 2,257
Non-cash interest expense on swap agreement --- 362
Non-cash interest expense on note to shareholder --- 297
Non-cash compensation --- 737
Extraordinary item: early retirement of revolving
credit facility --- 431
Extraordinary item: early retirement of note to
shareholder --- 1,524
Changes in operating assets and liabilities, net:
Accounts and notes receivable (2,620) (9,191)
Other current assets (700) (1,545)
Accounts payable (1,605) 1,818
Accrued network costs 9,186 4,462
Other accrued expenses (1,493) (365)
Other current liabilities 88 (57)
----------------------
Net cash used in operating activities (3,122) (3,114)
Cash flows used in investing activities:
Purchases of property, plant and equipment (3,489) (4,242)
Expenditures for line installations (232) (52)
----------------------
Net cash used in investing activities (3,721) (4,294)
Cash flows from financing activities:
Net proceeds from the issuance of common stock --- 50,727
Costs relating to initial public offering --- (1,279)
Proceeds from stock subscriptions 9,000 ---
Repayment of revolving credit facility --- (24,173)
Repayment of seller's note --- (1,000)
Repayment of notes payable to shareholder --- (10,000)
Proceeds from stock option exercise --- 24
Repayment of debt (26) ---
Principal payments on capital lease obligations (179) (41)
----------------------
Net cash provided by financing activities 8,795 14,258
----------------------
Net change in cash 1,952 6,850
Cash and cash equivalents at beginning of period (382) 2,052
----------------------
Cash and cash equivalents at end of period $ 1,570 $ 8,902
======================
Interest paid $ 456 $ 64
======================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
1. Business
Organization and Basis of Presentation
TresCom International, Inc. (the "Company") was incorporated in
Florida on December 8, 1993 as TeraCom Communications, Inc. Effective
June 30, 1994, the Company changed its name to TresCom International,
Inc. The Company was considered a development stage enterprise from its
inception until February 22, 1994, the date revenues were first
generated. During the development stage, the Company incurred a net
loss of $319.
The Company is a facilities based long distance
telecommunications carrier focused on international long distance
traffic originating in the United States. The Company offers
telecommunications services, including long distance, calling cards,
prepaid debit cards, international toll-free calling and bilingual
operator services.
The Company has a limited operating history and has sustained net
losses since its inception. In addition, the Company had a working
capital deficiency of approximately $33,012 at December 31, 1995 but had
a working capital surplus of approximately $13,951 at June 30, 1996. The
Company generated negative cash flows from operations of $16,433 during
the year ended December 31, 1995 and $602 and $976 for the three and six
months ended June 30, 1996, respectively. Further, since its formation,
the Company has experienced growth and its operations have required
substantial additional capital. The Company's growth has placed and will
continue to place, significant demands on the Company's financial and
other resources. In connection with these demands, the Company
successfully completed an initial public offering of its Common Stock,
par value $.0419 per share (the "Common Stock") in February 1996 (the
"Initial Public Offering") for net proceeds of approximately $48,600 as
described in Note 8.
The 1995 Annual Report on Form 10-K for the Company and
subsidiaries includes a summary of significant accounting policies and
should be read in conjunction with this Quarterly Report on Form 10-Q.
The consolidated financial statements at June 30, 1996 and the quarter
then ended are unaudited and the balance sheet at December 31, 1995 is
derived from audited financial statements. These financial statements do
not include all disclosures required by generally accepted accounting
principles. In the opinion of management, all material adjustments
necessary to present fairly the results of operations for such periods
have been included. All such adjustments are of a normal recurring
nature. Results of operations for any interim period are not necessarily
indicative of the results of operations for the entire fiscal year.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated
in consolidation.
<PAGE>
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Cash
equivalents are recorded at cost, which approximates fair value.
Property and Equipment
Property and equipment is recorded at cost. Depreciation and
amortization is provided for financial reporting purposes using the
straight-line method over the following estimated useful lives:
Transmission and communications equipment 3 to 10 years
Furniture, fixtures and other 3 to 7 years
The costs of software and software upgrades purchased for
internal use are capitalized.
Advertising
The Company expenses advertising costs as incurred, except for
direct-response advertising, which is capitalized and amortized over its
expected period of future benefits. Direct-response advertising consists
of fees paid to various telemarketing entities and agents. The
capitalized costs are amortized over a nine-month period beginning in
the month revenues associated with those costs are first generated.
At June 30, 1996, advertising costs totaling $695 were recorded
as assets. Advertising expense for the year ended December 31, 1995 was
$1,431 and advertising expense for the three and six months ended June
30, 1996 were $414 and $724, respectively.
Other Assets
The excess of costs over net assets of businesses acquired
represents the excess of the consideration paid over the fair value of
the net assets and is amortized on a straight-line basis over 35 years.
Customer bases are recorded on the estimated value of customer bases
acquired in the acquisition of businesses and are amortized on a
straight-line basis over seven years.
Periodically, the Company assesses the appropriateness of the
asset valuations and the amortization periods based on the present value
of the current and anticipated future cash flows and projected
profitability of the acquired business.
Legal expenses and other direct costs incurred in connection with
obtaining financial agreements are deferred and amortized over the life
of the financial agreements. Such costs amounted to $533 during the year
ended December 31, 1995. Subsequent to the Company's Initial Public
Offering, all existing financial agreements were paid off in their
entirety. Accordingly, any remaining unamortized portion of the costs
were expensed in the first quarter of 1996. Of the expense incurred
relating to these costs, $148 was ordinary and $431 was extraordinary.
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
Revenues
Revenues from long distance telecommunications services are
recognized when the services are provided.
Cost of Services
Cost of services include payments to local exchange carriers
("LECs"), interexchange carriers and post, telegraph and telephone
organizations primarily for access and transport charges.
Concentrations of Credit Risk and Major Customers
The Company derives a majority of its operating revenues from
commercial customers in Florida, New York, St. Thomas and Puerto Rico.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts
receivable. The Company's allowance for doubtful accounts is based upon
management's estimates and historical experience. In situations where
the Company deems appropriate, prepayment and/or cash deposits are
required for the provision of services.
Income Taxes
The Company accounts for income taxes under the liability method.
Under the liability method, deferred income taxes are recorded to
reflect the net tax effects of the temporary differences between the
carrying amounts of assets and liabilities for financial reporting and
the amounts used for income tax purposes.
Per Share Data
The computation of fully diluted pro forma net loss per share of
Common Stock was antidilutive; therefore, the amounts reported for
primary and fully diluted are the same.
Pro forma net loss per share was computed by dividing net loss by
the weighted average number of shares of Common Stock outstanding after
giving retroactive effect to the conversion, in February 1996, of all
the Company's Series A Preferred Stock, $.01 par value per share (the
"Series A Preferred Stock"), Series B Preferred Stock, $.01 par value
per share (the "Series B Preferred Stock") and Series C Preferred Stock,
$.01 par value per share (the "Series C Preferred Stock"), and related
accrued and unpaid dividends thereon, into Common Stock in connection
with the consummation of the Company's Initial Public Offering, plus
cheap stock as defined below. Pursuant to Securities and Exchange
Commission Staff
<PAGE>
Accounting Bulletin No. 83, common stock, common stock equivalents and
other potentially dilutive securities (including preferred stock) issued
at prices below the assumed initial public offering price per share
("cheap stock") during the twelve month period immediately preceding the
initial filing date of the Company's Registration Statement for its
Initial Public Offering have been included as outstanding for all
periods presented (using the treasury stock method at the assumed
Initial Public Offering price) even though the effect is to reduce loss
per share. Pro forma net loss per share was $0.0359 and $0.3431 for the
three and six months ended June 30, 1996, respectively. Historical
losses per share have not been presented because such amounts are not
deemed meaningful due to the significant change in the Company's capital
structure which occurred in connection with its Initial Public Offering.
New Accounting Pronouncements
In 1996, the Company adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The Company is now evaluating the carrying value of its long-lived
assets and identifiable intangibles, including goodwill, in accordance
with SFAS 121 in light of events or changes in circumstances which
indicate that the carrying amount of such assets may not be recoverable.
In 1996, the Company also adopted the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." The Company does not expect
the effect of adopting these statements to be material.
3. Long-Term Obligations
A summary of long-term obligations is as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
--------------------------
<S> <C> <C>
Credit facility $24,173 $ ---
Note payable to former shareholder of business
acquired, bearing 5% simple interest, due
February 1996 1,000 ---
Loans payable to the Small Business
Administration, bearing interest at 4%, due
in monthly principal and interest payments of
$3 through February 2015, collateralized by
a security agreement covering certain assets 432 424
Capital leases bearing interest at rates ranging
from 9% to 18% and payable in monthly
installments ranging from $2 to $5 383 344
Other 4 2
----------------------
25,992 770
----------------------
Less amounts due within one year 25,290 120
----------------------
$ 702 $650
======================
</TABLE>
<PAGE>
In November 1994, a wholly-owned subsidiary of the Company
obtained from a bank a revolving credit facility (the "Credit Facility")
with an aggregate commitment of $27,000, which expired on June 30, 1996.
Outstanding advances under the Credit Facility accrued interest at the
Eurodollar Rate (as defined), plus certain specified percentages,
depending on the Company's leverage ratio. At December 31, 1995, the
rate was 10.375%. The Company was required to pay a quarterly commitment
fee of .5% of the annualized average daily unused amount of the line of
credit.
Under the terms of the Credit Facility, the Company was required
to maintain at least 50% of its debt on a fixed rate basis and, as a
result, entered into an interest rate swap agreement and interest rate
cap agreement (the "Instruments") with a commercial bank to convert
variable interest rate payments to fixed payments. At June 30, 1996, the
notional principal amount of the swap agreement was $6,400 and the
notional principal amount of the interest rate cap was $13,600. The
Instruments effectively change the Company's interest rate exposure on
$20,000 of variable rate notes due in June 1996 from variable to a fixed
rate of 9%. The Instruments mature in January 1998. The Company is
exposed to credit loss in the event of nonperformance by the other party
to the Instruments. The Instruments are cross-collateralized to the
Credit Facility. The estimated fair value (i.e., the net present value
of the amount the Company will be required to pay the counterpart over
the remaining term of the agreement) of the Instruments, based upon the
quoted market price provided by the financial institution, which is a
party to the Instruments, is $562 and $390 at December 31, 1995 and June
30, 1996, respectively. Generally, the net fair value of the Instruments
would decrease with an increase in interest rates and would increase as
a result of a decrease in interest rates.
On February 16, 1996, the Company repaid all outstanding amounts
borrowed under the Credit Facility. As a result, the Instruments are no
longer being utilized for hedging purposes. During the first quarter of
1996, the Company recorded a charge to interest expense in the
approximate amount of $500 to reflect, as a liability, the current net
settlement value of the Instruments.
In October and November 1995, the Company borrowed $7,000 and
$3,000, respectively, under one-year notes bearing interest at 12%
compounded quarterly from a major shareholder of the Company. In
connection with these notes, the Company issued a warrant to purchase
358,034 shares of the Company's Common Stock at an exercise price of
$.42 per share. The warrants are exercisable immediately and expire on
October 2, 2007. Of the $10,000 in borrowings, approximately $2,400 has
been allocated to the value of the warrants. On February 14, 1996, the
Company repaid the entire balance relating to the notes and the
warrants. Extraordinary interest expense in the amount of $1,524 was
recognized in the first quarter of 1996.
<PAGE>
Principal payments on all obligations are:
For the nine months ended December 31, 1996 $ 59
1997 126
1998 138
1999 68
2000 18
2001 19
Thereafter 333
----
$761
====
4. Capitalization
Preferred Stock
The Board of Directors of the Company is authorized to issue up
to 1,000,000 shares of Preferred Stock, $.01 par value per share, in one
or more series and to fix the powers, voting rights, designations and
preferences of each series. During 1994, the Board of Directors
authorized two series of Preferred Stock: 179,420 shares of Series A
Preferred Stock and 200,000 shares of Series B Preferred Stock. Both
provided for 10% cumulative dividends per annum, compounded semi-
annually.
On August 9, 1995, the Board of Directors authorized 151,421
shares of Series C Preferred Stock. In addition, the Board of Directors
authorized an additional 1,197 shares of Series A Preferred Stock. The
dividend rate on Series A Preferred Stock was increased to 12% beginning
August 1, 1995, with dividend accruals compounded quarterly beginning
October 15, 1995. The dividend rate on the Series C Preferred Stock
provided for 12% cumulative dividends per annum, compounded quarterly,
computed retroactively from February 23, 1995.
The Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock required mandatory redemption of preference value plus
dividends upon the earlier of the closing of an underwritten public
offering of shares of Common Stock or in three equal annual installments
beginning February 1, 2002, in the case of Series A Preferred Stock and
Series C Preferred Stock, or February 1, 2003, in the case of Series B
Preferred Stock. Under certain circumstances outside the control of the
Company, upon the effective date of an initial public offering, the
holders of Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock were required to exchange their shares for shares of
Common Stock; the number of shares of Common Stock calculated based on
the redemption value of the Preferred Stock dividend by the Initial
Public Offering price less underwriting discounts and commissions. The
Company was entitled to redeem, at its option, Series A Preferred Stock
and Series C Preferred Stock in whole or Series B Preferred Stock in
whole or in part at the redemption price. The Preferred Stock had a
preference value of $100 per share for purposes of calculating dividends
and redemption value.
<PAGE>
On February 5, 1996, the terms of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock were amended such
that mandatory redemption was not required. In connection with the
Initial Public Offering, on February 7, 1996, the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock were
converted into 4,557,895 shares of Common Stock.
On February 13, 1996, the Company effected a reverse stock split
of Common Stock at a ratio of approximately 4.19-to-1. The share and per
share amounts in the financial statements have been adjusted for the
reverse stock split.
Stock Option Plan
The Company has a stock option plan under which a total of
936,432 options to purchase shares of Common Stock may be granted to
officers, key employees, consultants and directors. The Stock Option
Plan allows the granting of incentive stock options, which may not have
an exercise price below the greater of par value or the market value on
the date of grant, and non-qualified stock options, which have no
restrictions as to exercise price other than the exercise price cannot
be below par value. All options must be exercised no later than 10 years
from the date of grant. No option may be granted under the plan after
February 22, 2004.
The following table summarizes all option activity for the year
ended December 31, 1995 and the quarter ended June 30, 1996.
Number of
options
issued
-----------
Outstanding as of December 31, 1994 110,840
Canceled 110,840
Granted 484,955
Forfeited 12,749
-------
Outstanding as of December 31, 1995 472,206
Canceled 222,460
Granted 80,179
Forfeited 53,566
-------
Outstanding as of June 30, 1996 562,120
=======
At December 31, 1995, March 31, 1996 and June 30, 1996, of the
options outstanding 112,094, 484,988 and 456,516, respectively, were
non-contingent options and 360,112, 117,930 and 105,604, respectively,
were contingent options. As a result of the Company's Initial Public
Offering, contingent options now vest in a manner identical to non-
contingent options. Consequently, nearly all options granted in 1995
vest as to 20% on the first anniversary
<PAGE>
of the date of hire and 20% on each anniversary thereafter. All options
granted by the Company in the first quarter of 1996 vest as to 20% on
the first anniversary of the date of grant and as to an additional 20%
on each anniversary thereafter. The Company did not grant any options
during the second quarter of 1996. All options expire on the tenth
anniversary of the grant date, unless sooner terminated under the terms
of the Stock Option Plan.
As of June 30, 1996, the Company had 185,001 options outstanding
at an exercise price of $.42 per share, 327,119 options outstanding at
an exercise price of $12.00 per share and 50,000 options outstanding at
an exercise price of $17.625 per share. All options were granted at fair
market value on the date of grant. Non-cash compensation expense was
recorded over the vesting period of the non-contingent options.
Accordingly, $139 and $737 of non-cash compensation expense was recorded
in the year ended December 31, 1995 and the six months ended June 30,
1996, respectively.
At December 31, 1995 and June 30, 1996, 17,587 and 45,144
options, respectively, were exercisable.
5. Commitments and Contingencies
The Company is involved in various claims and possible actions
arising out of the normal course of its business. Although the ultimate
outcome of these claims cannot be ascertained at this time, it is the
opinion of the Company, based on the knowledge of facts and advice of
counsel, that the resolution of such claims and actions will not have a
material adverse effect on the Company's financial condition or results
of operations.
The Company has entered into agreements where it either owns
portions of or has the indefeasible right to use transmission cables.
These agreements require the Company to fund portions of the
construction, operation and maintenance costs. At June 30, 1996, the
Company has firm construction commitments under both types of agreements
of approximately $375. Construction costs are capitalized and
depreciated over ten years after the transmission cable becomes
operational. The capitalized costs of transmission cables at June 30,
1996 are $2,995. The Company has projected maintenance costs of $360
for transmission cables during the remaining six months of 1996.
6. Financial Instruments
The carrying amounts reflected in the consolidated balance sheets
for cash, accounts receivable, Credit Facility and amounts payable for
business acquired approximate the respective fair values due to the
short maturities of these instruments. The fair values for long-term
obligations are as follows:
Carrying Fair
Value Value
----------------------
June 30, 1996
Notes payable to former shareholders $--- $---
Notes payable to shareholder --- ---
Loans payable to the Small Business
Administration 424 309
Interest rate swap 362 362
<PAGE>
December 31, 1995
Notes payable to former shareholders 1,000 995
Notes payable to shareholder 8,179 10,000
Loans payable to the Small Business
Administration 432 316
Interest rate swap --- 562
7. Related Party Transactions
The Company buys network services from and provides network
services to LCI International, Inc. ("LCI"). At December 31, 1995, the
net amount due to LCI was $772. At June 30, 1996, the net amount due
from LCI was $898. During 1995 and the first six months of 1996, $5,086
and $5,781 of services were provided and $7,822 and $3,404 were used,
respectively. At June 30, 1996, and affiliate of a major shareholder of
the Company owned in excess of 20% of LCI.
8. Initial Public Offering
On February 13, 1996, the Company sold 4,545,455 shares of its
Common Stock at $12 per share in the Initial Public Offering. The net
proceeds of this sale were approximately $48,600. The net proceeds were
used to retire debt and accrued interest of approximately $35,800.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company's revenues are a function of switched minutes of use
and rate structure, which in turn are a function of the Company's
customer and service mix. The long distance telecommunications industry
has experienced increasing volume and decreasing rates for several
years, although in recent years the rate of price decline has moderated
considerably. The Company's cost of services consists primarily of
expenses incurred for origination, termination and transmission of calls
through LECs and transmission through other long distance carriers.
Operating Information
The following table should be read in conjunction with the
unaudited Consolidated Financial Statements and related notes thereto.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
-------- -------- -------- --------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues $33,521 $25,956 $65,852 $46,878
Cost of services 26,131 18,163 50,258 34,672
----------------------------------------
Gross profit 7,390 7,793 15,594 12,206
Selling, general and administrative 6,903 6,427 14,313 12,968
Depreciation and amortization 1,089 846 2,257 1,699
Settlement with a major customer --- --- --- 4,069
----------------------------------------
Operating (income) loss (602) 520 (976) (6,530)
Interest expense, net (165) 569 911 1,147
Other expense, net --- --- 1 ---
----------------------------------------
Net loss before extraordinary items (437) (49) (1,888) (7,677)
Extraordinary items --- --- 1,956 ---
----------------------------------------
Net loss $ (437) $ (49) $(3,844) $(7,677)
========================================
Per Share Data:
Loss per share of common stock and
common stock equivalents before
extraordinary items $(0.04) $(0.01) $(0.17) $(1.03)
Extraordinary items per share --- --- (0.17) ---
------ ------ ------ ------
Loss per share of common stock and
common stock equivalents after
extraordinary items $(0.04) $(0.01) $(0.34) $(1.03)
====== ====== ====== ======
</TABLE>
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
AS COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 (All dollar
amounts in thousands except per share amounts)
REVENUES. Total revenues increased 29.1%, or $7.6 million, from
$26.0 million to $33.5 million and 40.5%, or $19.0 million, from $46.9
million to $65.9 million for the three and six months ended June 30,
1996, respectively. The revenue growth in such periods was due to a
continued increase in minutes of use. Minutes of use grew 33.4%, or
28.4 million, from 73.2 million minutes to 113.6 million minutes, and
35.0%, or 55.4 million minutes, from 158.3 million minutes to 213.7
million minutes for the three and six months ended June 30, 1996,
respectively. The increase in revenue for the three months ended June
30, 1996 was primarily driven by growth in retail sales. Total retail
sales volume was in excess of $10.0 million, a 24.4% growth from the
first quarter of 1996.
COST OF SERVICES. Cost of services increased 43.9%, or $8.0
million from $18.2 million to $26.1 million and 45.0%, or $15.6 million,
from $34.7 million to $50.3 million for the three and six months ended
June 30, 1996, respectively. This increase was due to increased volumes
resulting from new business and, to a lesser extent, growth from
existing customers.
GROSS PROFIT. Gross profit decreased 5.2%, or $0.4 million, from
$7.8 million to $7.4 million and increased 27.8%, or $3.4 million, from
$12.2 million to $15.6 million for the three and six months ended June
30, 1996, respectively. These changes were brought on by the combined
impact of pricing trends in the Company's wholesale segment, changes in
geographic revenue mix and higher costs associated with re-routing South
American traffic during the quarter. Gross margin, as a percentage of
revenues, decreased to 22.0% for the three months ended June 30, 1996 as
a result of the factors listed above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general
and administrative expense increased 7.4%, or $0.5 million, from $6.4
million to $6.9 million and 10.4%, or $1.3 million, from $13.0 million
to $14.3 million for the three and six months ended June 30, 1996,
respectively. The increased selling, general and administrative expense
was due to the variable costs associated with higher revenue and
increased sales and marketing expense.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and
amortization expense increased 28.7%, or $0.2 million, from $0.8 million
to $1.1 million and 32.8%, or $0.6 million, from $1.7 million to $2.3
million for the three and six months ended June 30, 1996, respectively.
This increase was due to the depreciation of assets purchased to support
the Company's network and corporate infrastructure.
SETTLEMENT WITH A MAJOR CUSTOMER. The six months ended June 30,
1995 included a charge of $4.1 million attributable to one customer
which provided calling center services.
NET INCOME (LOSS). Net loss remained constant during the three
months ended June 30, 1996 compared to the corresponding period in the
prior year and decreased 49.9%, or $3.8 million, from $(7.7) million to
$(3.8) million for the six months ended June 30, 1996. Included in the
net loss amount for the first six months of 1996 is $2.0 million of non-
recurring extraordinary items related to the early extinguishment of
debt. Net loss before extraordinary items decreased by 75.4%, or $5.9
million, from $(7.6) million to $(1.8) million for the six months ended
June 30, 1996.
<PAGE>
Liquidity and Capital Resources
The Company's liquidity requirements arise from working capital
needs, primarily the acquisition and maintenance of switching capacity,
cost of services and interest and, on a historical basis, principal
payments on outstanding indebtedness. The Company is a holding company,
the principal assets of which are the capital stock of TresCom U.S.A.,
Inc., Global Telephone Holdings, Inc., TresCom Network Services ("TNS")
and The St. Thomas and San Juan Telephone Company and has no independent
means of generating revenues. As a holding company, the Company's
internal sources of funds to meet its cash needs, including payment of
expenses, are dividends and other permitted payments from its direct and
indirect subsidiaries. Historically, the Company's working capital
requirements have been funded primarily from the private placement of
equity securities, bank borrowings and loans from stockholders.
During the first quarter of 1996, the Company successfully
completed changes to its capital structure which significantly improved
its financial position. In February 1996, the Company sold 4,545,455
shares of its Common Stock in an Initial Public Offering which generated
approximately $48.6 million in net proceeds. Concurrent with the
Initial Public Offering, the Company converted all outstanding shares of
its Preferred Stock, and accrued and unpaid dividends thereon, into
shares of Common Stock. The Company used the net proceeds from its
Initial Public Offering, in part, to repay all of its short-term and
long-term debt obligations. The net impact of these changes in the
Company's financial position will be a reduction in interest expense and
amortization of deferred financing fees in excess of $4.0 million on an
annual basis.
On February 16, 1996, TNS repaid all amounts outstanding under
the Credit Facility, which had an aggregate commitment of $24.2 million
and no longer has available borrowings under such facility. Borrowings
under the Credit Facility accrued interest at the Eurodollar Rate plus
certain specified percentages, depending on the Company's leverage
ratio. Prior to repayment on February 16, 1996, TNS had borrowed $24.2
million, which was used to fund the acquisition of Total
Telecommunications Incorporated, to refinance existing indebtedness of
the Company and to provide working capital and to fund general corporate
purposes of the Company. The Credit Facility was secured by security
interests in substantially all of the present and future property,
assets and rights of the Company and its subsidiaries. The Credit
Facility was also guaranteed by the Company and certain of its
subsidiaries. Under the terms of the Credit Facility, TNS and the
Company's other subsidiaries were restricted from declaring, making or
paying any distributions to the Company except in certain limited
circumstances. The Credit Facility expired on June 30, 1996.
In addition, under the terms of the Credit Facility, the Company
was required to maintain at least 50% of its debt on a fixed rate basis
and, as a result, entered into the Instruments. Those Instruments
effectively changed the Company's interest rate exposure on $20 million
of variable rate notes due June 1996 from variable to a fixed rate of
9%. The Instruments are cross-collateralized to the Credit Facility.
Since the Company repaid all outstanding amounts borrowed under the
Credit Facility on February 16, 1996, the Instruments are no longer
being utilized for hedging purposes. As a result, during the first six
months of 1996, the Company recorded a charge to interest expense in the
approximate amount of $.4 million to reflect, as a liability, the
current net settlement value of the Instruments. This liability
generally will decrease as interest rates increase and increase as
interest rates decrease. The Company may elect to settle this liability
through a cash payment during 1996.
Capitalization
There were no significant changes to the Company's capitalization
structure during the three months ended June 30, 1996.
Capital Requirements
During the first six months of 1996, the Company had capital
expenditures of $4.2 million. The Company's expected capital expenditure
requirements for the remainder of 1996 are $6.0 million, of which $5.5
million relates to expansion of switched facilities and continued
investment in undersea fiber optic cables. The Company intends to fund
a portion of its capital expenditures for the remainder of 1996 with
additional asset financing. The Company expects that cash generated by
operations and the remaining net proceeds from the Initial Public
Offering will be sufficient to fund the remainder of its working capital
needs and planned capital expenditures for the foreseeable future.
<PAGE>
Impact of Seasonality
The Company's long distance revenue is subject to seasonal
variations, primarily because most of the Company's revenue is generated
by commercial customers. Use of long distance services by commercial
customers is typically lower in the fourth quarter due to holidays and
on weekends throughout the year.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
-----------------
See Note 5 to the Notes to Consolidated Financial Statements.
Item 2. Changes in Securities.
---------------------
None
Item 3. Default Upon Senior Securities.
------------------------------
None
Item 4. Submission of Matters to a Vote of Security-Holders.
---------------------------------------------------
The Company held its Annual Meeting of Shareholders on
June 5, 1996. Proposals presented for a shareholder vote were (i) the
election of two Class I Directors, and (ii) the ratification of the
appointment of Ernst & Young LLP as independent auditors for the Company
for fiscal year 1996.
Each of the incumbent Class I directors nominated by the
Company were elected with the following voting results:
For Withheld
----------- --------
Douglas Karp 10,286,210 66,729
Wesley T. O'Brien 10,286,639 66,300
The appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal year 1996 was approved with the
following voting results:
Broker
For Against Abstain Non-Votes
--------- ------- ------- ---------
10,352,339 600 --- ---
Item 5. Other Information.
-----------------
None
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
--------
10.1 Severance Agreement between the Company and Scott
Drake.
10.2 Severance Agreement between the Company and
Norman Klugman.
27. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports of Form 8-K were filed by the Company
during the quarter ended June 30, 1996.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Dated: August 14, 1996
TRESCOM INTERNATIONAL, INC.
--------------------------------
(Registrant)
/s/ Wesley T. O'Brien
--------------------------------
Wesley T. O'Brien
President and Chief Executive Officer
/s/ William A. Paquin
--------------------------------
William A. Paquin
Chief Financial Officer and
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description Page
----------- ----------- -------------
10.1 Severance Agreement between the
Company and Scott Drake.
10.2 Severance Agreement between the
Company and Norman Klugman.
27. Financial Data Schedule
April 26, 1996
Mr. Scott Drake
22738 Horseshoe Way
Fort Lauderdale, Florida 33428
Dear Scott:
The purpose of this letter is to set forth the agreement (this
"Agreement") between you and TresCom International, Inc. and its
subsidiaries ("TresCom") regarding your resignation from TresCom. As we
have discussed, TresCom desires to obtain your (i) agreement not to
compete with TresCom for a specified period; (ii) release of any claims
against TresCom; and (iii) agreement to maintain the confidentiality of
business information of TresCom which you have become aware of during
the course of your employment with TresCom. You have agreed to the
foregoing as consideration for TresCom's commitment to provide to you
the severance benefits set forth in paragraphs 2, 3 and 4 hereof. Based
on these considerations, you have agreed with TresCom as follows:
1. Resignation. Effective as of April 23, 1996, your
resignation as an officer of TresCom is accepted and effective as of May
31, 1996, your resignation as an employee of TresCom is accepted.
2. Continued Base Cash Compensation and Other Payments.
(a) TresCom will continue to pay your base salary at an annual rate of
$150,000 through April 30, 1997 in accordance with TresCom's standard
payroll practices and subject to any applicable withholding
requirements. Such payment is inclusive of accrued and unused vacation
for 1995 and 1996. The period from June 1, 1996 through October 31,
1996 is hereafter referred to as the "Consulting Period" and the period
from November 1, 1996 through April 30, 1997 is hereafter referred to as
the "Severance Period."
(b) Upon execution of this Agreement, TresCom will
reimburse you for all unpaid business expenses incurred by you prior to
the date of this Agreement in connection with the performance of your
job upon presentation of appropriate documentation in accordance with
TresCom's customary procedures and policies applicable to its senior
executives.
(c) Prior to May 31, 1996, TresCom will transfer to you,
for no additional consideration, by bill of sale or other appropriate
instrument, ownership of the portable personal computer and related
accessories and commercially available software provided to you by
TresCom in connection with your employment. TresCom shall have the
right to inspect the computer prior to May 31, 1996 and remove therefrom
any software which is not commercially available and data files which it
determines, in its sole judgment, to contain business information.
(d) TresCom will pay directly to the provider of services
or reimburse you for up to $10,000 of expenses incurred by you in
connection with the negotiation of this Agreement and your seeking new
employment. TresCom shall only be obligated to pay for expenses for
which a written bill from the provider and/or receipts are submitted to
TresCom.
3. Stock. (a) You currently hold fully vested and
exercisable options to purchase up to 4,587 shares of TresCom's common
stock, $0.0419 par value (the "Common Stock") at $.42 per share. On the
Effective Date (as defined in Section 18 hereof), TresCom will
accelerate the vesting of options to purchase an additional 12,163
shares of Common Stock at $0.42 (such options together with the 4,587
options being hereinafter collectively referred to as the "Options").
The Options and the shares of Common Stock purchasable upon exercise of
the Options will be subject to all of the terms and conditions of the
Stock Option Agreement between you and TresCom, dated August 11 , 1995
(the "Option Agreement"). All other options granted to you pursuant to
the Option Agreement and all options granted to you pursuant to the
Stock Option Agreement between you and TresCom, dated February 7, 1996
are forfeited because your employment has terminated prior to the
vesting thereof.
(b) On the Effective Date, you will exercise all vested
options in full by delivering to TresCom a check in the amount of
$7,035.00 in payment in full of the exercise price and a fully executed
Exercise Notice in the form attached hereto as Exhibit A. On the
Effective Date, TresCom will deliver to you, against the delivery
described in the preceding sentence, one or more certificates,
representing 16,750 shares of Common Stock. Such certificate or
certificates shall contain any legends required by the Federal
securities laws, which legends will be removed by TresCom following
satisfaction of any applicable requirements. TresCom hereby waives its
right to repurchase shares of Common Stock from you, pursuant to
paragraph 3 of the Option Agreement.
(c) TresCom and you agree that the Options were designated
as "incentive options" as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), are intended to satisfy the
conditions of such Code section, and to the extent such Options satisfy
such Code requirements, TresCom will continue to treat the Options as
such.
(d) You acknowledge that you are subject to an agreement
with Morgan Stanley & Co. Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation and the Robinson-Humphrey Company, Inc., as
representatives (the "Representatives") for the several underwriters of
TresCom's initial public offering, limiting your right to sell, pledge
or otherwise transfer shares of Common Stock during the 180-day period
ending August 5, 1996. TresCom agrees to use its best efforts to
obtain, prior to the Effective Date, the written consent from the
Representatives to the pledge during such period of any or all of the
shares of Common Stock owned by you.
4. Employee Benefits. You will continue to participate in
TresCom's employee benefit plans at TresCom's expense during the
Consulting Period and the Severance Period as if you remained an active
employee of TresCom during such periods; provided, however, that if you
become eligible to participate in the life, health, or disability
insurance program of any other employer, you shall cease to be eligible
to participate in the corresponding TresCom benefit program. Upon
termination of TresCom health benefits, you may elect COBRA coverage for
up to an 18 month period, at your own expense. More information on
COBRA benefits will be provided to you within 14 days following
termination of TresCom health benefits.
5. Mutual Release. You hereby release and discharge
TresCom, its affiliates and their respective partners, directors,
officers, employees and agents (collectively, "Releasees") from any and
all claims, actions, causes of action, damages, liabilities, promises,
debts, compensation, losses, obligations, costs or expenses of any kind
or nature, whether known or unknown, which you ever had, now have or
hereafter may have, against each or any of the Releasees, including, but
not limited to those arising from or related to your employment
relationship with TresCom or the termination of such employment, any
alleged violation of any covenant of good faith and fair dealing
relative to your employment or any applicable labor or employer-employee
statute, regulation or ordinance, whether federal, state or local
(including, by way of specificity but not of limitation, the Federal Age
Discrimination in Employment Act). TresCom hereby releases and
discharges you from any and all claims, actions, causes of action,
damages, liabilities, promises, debts, compensation, losses,
obligations, costs or expenses of any kind or nature, whether known or
unknown, which TresCom ever had, now has or hereafter may have, against
you, including, but not limited to, those arising from your employment
relationship with TresCom or the termination of such employment.
Notwithstanding the foregoing, nothing in this Agreement shall be deemed
to release (i) TresCom from: (a) any indemnification obligations it may
have to you arising out of your duties as an officer of TresCom; (b) any
obligation to provide you with compensation and benefits specifically
conferred or affirmed by this Agreement, and to the extent so conferred
or affirmed any TresCom employee plan in which you are specifically
entitled to continue to participate pursuant to this Agreement; (c) any
obligation arising under the Option Agreement; or (d) any other
obligation arising under this Agreement; or (ii) you from any obligation
arising under this Agreement. With respect to clause (i)(a), TresCom
expressly acknowledges (i) its obligations, as set forth in TresCom's
Third Amended and Restated Articles of Incorporation, to indemnify you
to the fullest extent permitted by Florida law, and (ii) that you are
entitled to the benefits of the TresCom Directors and Officers liability
insurance policy, in accordance with the terms and conditions of that
policy.
6. Protection of Reputation. During the Consulting
Period, the Severance Period and for a period of two years after the end
of the Severance Period, neither party hereto will take any action which
is intended, or would reasonably be expected, to harm the other party or
his or its reputation or which would reasonably be expected to lead to
unwanted or unfavorable publicity to the other party; provided, however,
the foregoing limitation shall not apply to (a) compliance with any
legal process or subpoena or (b) statements in response to authorized
inquiry from a court or regulatory body.
7. Nondisclosure. You and TresCom agree that the terms
and conditions of this Agreement are confidential and that each will
not, without the express prior written consent of the other party, in
any manner publish, publicize, disclose or otherwise make known or
permit or cause to be made known such terms and conditions to anyone
(other than such party's prospective or current lenders or such party's
financial and legal advisors, who shall agree to be bound by this
paragraph prior to disclosure of the terms or conditions hereof to such
persons), except as required by law, or in any proceeding to enforce the
terms of this Agreement.
8. Confidentiality. You acknowledge that you have been
provided access to information of TresCom (including, but not limited
to, trade and industry secrets, customer lists, sales records,
operational systems, investment, market and other company strategies and
other proprietary commercial information) which constitutes valuable,
special and unique property of TresCom. You agree that you will not, at
any time or for any reason or purpose whatsoever, make use of, divulge
or otherwise disclose, directly or indirectly, any of such information
to any person or use any of such information for the personal gain of
yourself or any other person without TresCom's express prior written
authorization; provided, however, that the foregoing limitation shall
not apply to (a) compliance with any legal process or subpoena or (b)
statements in response to authorized inquiry from a court or regulatory
body.
9. Noncompetition. You agree that prior to and during the
Consulting Period, you will not, without the express prior written
consent of TresCom, directly or indirectly (whether as a sole
proprietor, partner, venturer, stockholder, director, officer, employee,
or in any other capacity as principal or agent or through any person,
corporation, partnership, entity or employee acting as nominee or agent)
conduct or engage in or be interested in or associated with any person,
firm, association, syndicate, partnership, company, corporation or other
entity which conducts or engages in the long distance telephone business
in any geographic area in which TresCom is then so engaged in business
or proposes to engage in business in accordance with its then-current
strategic plan, nor shall you interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between TresCom and
any customer, supplier, lessor, lessee or employee of TresCom. TresCom
agrees that the foregoing shall not be interpreted to restrict you from
directly or indirectly conducting or engaging in or having an interest
in or association with any person, firm, association, syndicate,
partnership, company, corporation or other entity which conducts or
engages solely in the payphone and/or prepaid telephone card business.
10. Access. During the Consulting Period, you will make
yourself available three days a week, for a maximum of 16 hours per
week, for consultation with TresCom's management for the purpose of
effecting the transition of your duties to other TresCom personnel.
TresCom will use its best efforts to provide you with three days advance
notice of dates on which your consultation services will be required.
11. Remedies. If either party breaches its obligations
under paragraphs 6, 7 or 8 of this Agreement or if you breach your
obligations under paragraphs 9 and 10, the non-breaching party, in
addition to and not in lieu of any other rights and remedies it may have
at law or in equity, shall have the right to (i) obtain injunctive
relief, it being acknowledged and agreed by both parties that any such
breach would cause irreparable and continuing injury to the non-
breaching party and that money damages alone would not provide an
adequate remedy to such non-breaching party and (ii) declare (by written
notice to the breaching party) and enforce the forfeiture of any amount
payable to the non-breaching party pursuant to this Agreement that has
not been paid as of the date of such declaration. TresCom agrees that
if it breaches any of the provisions of paragraphs 2, 3, and 4
(including, with respect to any obligation to make a cash payment, the
failure to make such payment within five business days of the date such
payment is due hereunder), then, in addition to and not in lieu of any
other rights or remedies you may have at law or in equity, you shall
have the right to be reimbursed by TresCom for your fees and expenses
(including, without limitation, attorney's fees and expenses) incurred
in respect of the enforcement of your rights hereunder.
12. No Waiver. No delay or failure by either party to
this Agreement to exercise any right under this Agreement and no partial
or single exercise of that right shall constitute a waiver of that or
any other right. No waiver shall be valid unless in writing and signed
by you or an authorized officer of TresCom, as the case may be, and any
waiver by either party of a breach of any provision hereof shall not be
construed as a waiver of any subsequent breach or violation thereof.
13. Severability. If any provision of this Agreement
shall hereafter be held to be invalid, unenforceable or illegal in whole
or in part, in any jurisdiction under any circumstances for any reason,
(i) such provision shall be reformed to the minimum extent necessary to
cause such provision to be valid, enforceable and legal while preserving
the intent of the parties as expressed in, and the benefits to the
parties provided by, this Agreement or (ii) if such provision cannot be
so reformed, such provision shall be severed from this Agreement and an
equitable adjustment shall be made to this Agreement (including, without
limitation, addition of necessary further provisions to this Agreement)
so as to give effect to the intent as so expressed and the benefits so
provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction
or under any other circumstances. Neither such holding nor such
reformation or severance shall affect or impair the legality, validity
or enforceability of any other provision of this Agreement.
14. Governing Law; Submission to Jurisdiction. THE VALIDITY,
INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF FLORIDA (WITHOUT GIVING EFFECT TO
THE LAWS, RULES AND PRINCIPLES OF THE STATE OF FLORIDA REGARDING
CONFLICTS OF LAWS). You and TresCom agree that any action, proceeding or
claim arising out of, or relating in any way to, this Agreement shall be
brought and enforced in the courts of the State of Florida, and
irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. You and TresCom hereby irrevocably waive any objection to
such jurisdiction or inconvenient forum.
15. Miscellaneous. This letter, together with the Option
Agreement, as amended hereby, sets forth the complete agreement between
you and TresCom with respect to the subject matter hereof and supersedes
all prior or concurrent understandings, whether written or oral, with
respect to the subject matter hereof. This Agreement may not be amended
except by a written agreement signed by you and a duly authorized
officer of TresCom. This Agreement shall be binding upon and inure to
the benefit of each of you and TresCom and your heirs, legal
administrators and assigns and TresCom's successors and assigns.
16. Representations. You represent and warrant to TresCom
that TresCom's consolidated financial statements for the fiscal quarter
ended March 31, 1996 have been prepared in accordance with generally
accepted accounting principles, consistently applied.
17. Opportunity to Review. You acknowledge and agree that
you have been given a reasonable period, up to and including 21 days, to
review and sign this Agreement, and if you sign this Agreement prior to
the expiration of 21 days, you do so knowingly and voluntarily, and you
acknowledge and agree that you could have requested more time to review
and sign this Agreement, that you did not want to or need such further
time and that you did not request it.
18. Right to Revoke This Agreement. You acknowledge that you
signed this Agreement on the date set forth above. In accordance with
applicable law, you may revoke this Agreement at any time during the
seven day period after you sign this Agreement. Such revocation may be
made by delivering a written notice of revocation to TresCom during such
seven day period. This Agreement will not be effective or enforceable
until the date on which the revocation period has expired (the
"Effective Date"). TresCom agrees that you may at your election take
vacation time from the business day following the date you sign this
Agreement until the Effective Date or, if earlier, the date you revoke
this Agreement. Notwithstanding the foregoing, you agree that you will
be available at TresCom's headquarters on May 8, 1996, for the purpose
of participating, to the extent requested by TresCom, in TresCom's
scheduled conference call with financial analysts. In the event that
such call shall be rescheduled, you also agree to be available on such
new date. TresCom shall provide you with at least 12 hours advance
notice of any new date.
PLEASE READ THIS AGREEMENT CAREFULLY. BY EXECUTING THIS
AGREEMENT, YOU WILL HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A
LAWSUIT OR MAKE ANY LEGAL CLAIM, KNOWN OR UNKNOWN, AGAINST TRESCOM BASED
ON ANY ACTIONS TAKEN BY TRESCOM, ITS EMPLOYEES OR AGENTS ARISING FROM OR
RELATED TO YOUR EMPLOYMENT WITH TRESCOM OR THE TERMINATION OF SUCH
EMPLOYMENT, UP TO THE DATE OF THE EXECUTION OF THIS AGREEMENT. WE
RECOMMEND THAT YOU RETAIN LEGAL COUNSEL TO ADVISE YOU WITH RESPECT TO
THE TERMS OF THIS AGREEMENT AND THE TERMINATION OF YOUR EMPLOYMENT WITH
TRESCOM.
If you agree that this letter appropriately sets forth the
terms of your severance agreement, please sign the enclosed duplicate
copy of this letter and return it to the undersigned.
Sincerely yours,
TresCom International, Inc.
By: /s/Wesley T. O'Brien
Title: President and Chief
Executive Officer
Agreed as of the date first written above
/s/Scott Drake
Scott Drake
June 28, 1996
Mr. Norman Klugman
7075 Queenferry Circle
Boca Raton, Florida 33496
Dear Norman:
The purpose of this letter is to set forth the agreement (this
"Agreement") between you and TresCom International, Inc. and its
subsidiaries ("TresCom") regarding your resignation from TresCom as an
officer and employee. As we have discussed, TresCom desires to obtain
your (i) agreement not to compete with TresCom for a specified period;
(ii) release of any claims against TresCom; and (iii) agreement to
maintain the confidentiality of business information of TresCom which
you have become aware of during the course of your employment with
TresCom and will become aware of as a continuing director and Chairman
of TresCom's Board of Directors. You have agreed to the foregoing as
consideration for TresCom's commitment to provide to you the severance
benefits set forth in paragraphs 2, 3 and 4 hereof. Based on these
considerations, you have agreed with TresCom as follows:
1. Resignation. Effective as of June 30, 1996, your
resignation as an officer and employee of TresCom is accepted. Your
resignation as an officer and employee of TresCom will not affect your
position as a director of TresCom and Chairman of TresCom's Board of
Directors (Chairman of the Board will no longer be an officership but
will instead be a Board position) which you hereby agree to resign from
effective as of December 31, 1996.
2. Continued Base Cash Compensation and Other Payments. (a)
TresCom will continue to pay your base salary at an annual rate of
$195,000 through June 30, 1997 in accordance with TresCom's standard
payroll practices and subject to any applicable withholding
requirements. Such payment is inclusive of any accrued and unused
vacation time which you may have. The period from July 1, 1996 through
June 30, 1997 is hereafter referred to as the "Severance Period."
(b) Upon execution of this Agreement, TresCom will reimburse
you for all unpaid business expenses incurred by you prior to the date
of this Agreement in connection with the performance of your job as an
officer of TresCom upon presentation of appropriate documentation in
accordance with TresCom's customary procedures and policies applicable
to its senior executives. Furthermore, TresCom will continue to
reimburse you for all business expenses incurred by you during your
service as Chairman of the Board of Directors in accordance with
TresCom's customary procedures and policies.
(c) TresCom will pay directly to the provider of services or
reimburse you for up to $10,000 of expenses incurred by you in
connection with the negotiation of this Agreement. TresCom shall only
be obligated to pay or reimburse for expenses for which a written bill
from the provider or receipts are submitted to TresCom.
3. Stock. (a) You currently hold 45,497 unvested options to
purchase shares of TresCom's common stock, $0.0419 par value (the
"Common Stock") at $.42 per share (the "Options"). On the Effective
Date (as defined in Section 16 hereof), TresCom will accelerate the
vesting of all such Options. The Options and the shares of Common Stock
purchasable upon exercise of the Options will be subject to all of the
terms and conditions of the Stock Option Agreement between you and
TresCom, dated August 11, 1995 (the "Option Agreement"), and subject to
the conditions of paragraph 3(b) of this Agreement. All options granted
to you pursuant to the Stock Option Agreement between you and TresCom,
dated February 7, 1996, are forfeited because your employment has
terminated prior to the vesting thereof. You agree to exercise in full
the vested options described in this paragraph within ten days following
the Effective Date by delivery to TresCom of a check in the amount of
$19,108.74 in payment in full of the exercise price. Upon such
delivery, TresCom will deliver to you at least two certificates
representing an aggregate of 45,497 shares of Common Stock.
(b) TresCom and you agree that 30,331 of the shares of Common Stock
issued pursuant to paragraph 3(a) will be subject to repurchase by
TresCom until June 30, 1997 (the "Repurchase Termination Date") in the
event that you fail to comply in all material respects with the
covenants contained in paragraphs 6, 7, 8 and 9 hereof. TresCom and you
further agree that the certificates representing such 30,331 shares of
Common Stock shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO REPURCHASE PURSUANT TO THE TERMS OF A LETTER AGREEMENT,
DATED JUNE 26, 1996, BETWEEN TRESCOM INTERNATIONAL, INC. AND
NORMAN KLUGMAN.
Assuming that TresCom has not alleged a violation of the covenants
contained in paragraphs 6, 7, 8 and 9 hereof, upon your request at any
time after the Repurchase Termination Date TresCom will exchange all
certificates bearing such legend with certificates of like tenor without
such legend. In the event that shares of Common Stock are repurchased,
TresCom will repay to you, within five business days of a determination
to repurchase, the aggregate purchase price paid by you for such shares
of Common Stock.
In the event of an alleged violation of paragraphs 6, 7, 8 and 9
hereof which occurs on or prior to the Repurchase Termination Date and
of which you have received notification from TresCom within five
business days, all certificates bearing the above legend shall remain
legended until the issue has been resolved at which time the legend will
be removed, if resolved in your favor, or the shares represented by such
certificates repurchased, if resolved in TresCom's favor.
(c) TresCom and you agree that the Options were designated as
"incentive options" as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), are intended to satisfy the
conditions of such Code section, and to the extent such Options satisfy
such Code requirements, TresCom will continue to treat the Options as
such.
4. Employee Benefits. You will continue to participate in
TresCom's employee benefit plans at TresCom's expense during the
Severance Period as if you remained an active employee of TresCom during
such period; provided, however, that if you become eligible to
participate in the life, health, or disability insurance program of any
other employer, you shall cease to be eligible to participate in the
corresponding TresCom benefit program. Upon termination of TresCom
health benefits, you may elect COBRA coverage for up to an 18 month
period, at your own expense. More information on COBRA benefits will be
provided to you within 14 days following termination of TresCom health
benefits.
5. Mutual Release. You hereby release and discharge TresCom,
its affiliates and their respective partners, directors, officers,
employees and agents (collectively, "Releasees") from any and all
claims, actions, causes of action, damages, liabilities, promises,
debts, compensation, losses, obligations, costs or expenses of any kind
or nature, whether known or unknown, which you ever had, now have or
hereafter may have, against each or any of the Releasees, including, but
not limited to those arising from or related to your employment
relationship with TresCom or the termination of such employment, any
alleged violation of any covenant of good faith and fair dealing
relative to your employment or any applicable labor or employer-employee
statute, regulation or ordinance, whether federal, state or local
(including, by way of specificity but not of limitation, the Age
Discrimination Act of 1967, as amended, the Employee Retirement Income
Security Act of 1974, as amended, the Americans With Disabilities Act,
the Older Workers Benefit Protection Act of 1990, as amended, the
Florida Civil Rights Act of 1992, as amended, the Retaliation Provision
of the Florida Workers Compensation Act, as amended, and the common law
of the State of Florida). TresCom hereby releases and discharges you
from any and all claims, actions, causes of action, damages,
liabilities, promises, debts, compensation, losses, obligations, costs
or expenses of any kind or nature, whether known or unknown, which
TresCom ever had, now has or hereafter may have, against you, including,
but not limited to, those arising from your employment relationship with
TresCom or the termination of such employment. Notwithstanding the
foregoing, nothing in this Agreement shall be deemed to release (i)
TresCom from: (a) any indemnification obligations it may have to you
arising out of your duties as an officer or director of TresCom; (b) any
obligation to provide you with compensation and benefits specifically
conferred or affirmed by this Agreement, and to the extent so conferred
or affirmed any TresCom employee plan in which you are specifically
entitled to continue to participate pursuant to this Agreement; (c) any
obligation arising under the Option Agreement; or (d) any other
obligation arising under this Agreement; or (ii) you from any obligation
arising under this Agreement. With respect to clause (i)(a), TresCom
expressly acknowledges (i) its obligations, as set forth in TresCom's
Third Amended and Restated Articles of Incorporation, to indemnify you
to the fullest extent permitted by Florida law, (ii) its obligations
arising under the Indemnification Agreement dated June 5, 1996, between
you and TresCom (the "Indemnification Agreement"), and (iii) that you
are entitled to the benefits of the TresCom Directors and Officers
liability insurance policy, in accordance with the terms and conditions
of that policy.
6. Protection of Reputation. For a period of two years
following the date of this Agreement, neither party hereto will take any
action which is intended, or would reasonably be expected, to harm the
other party or his or its reputation or which would reasonably be
expected to lead to unwanted or unfavorable publicity to the other
party; provided, however, the foregoing limitation shall not apply to
(a) compliance with any legal process or subpoena or (b) statements in
response to authorized inquiry from a court or regulatory body.
7. Nondisclosure. You and TresCom agree that the terms and
conditions of this Agreement are confidential and that each will not,
without the express prior written consent of the other party, in any
manner publish, publicize, disclose or otherwise make known or permit or
cause to be made known such terms and conditions to anyone (other than
such party's prospective or current lenders or such party's financial
and legal advisors, who shall agree to be bound by this paragraph prior
to disclosure of the terms or conditions hereof to such persons), except
as required by law, or in any proceeding to enforce the terms of this
Agreement.
8. Confidentiality. You acknowledge that you have been, and
that in your capacity as a continuing director and Chairman of TresCom's
Board of Directors will continue to be, provided access to information
of TresCom (including, but not limited to, trade and industry secrets,
customer lists, sales records, operational systems, investment, market
and other company strategies and other proprietary commercial
information) which constitutes valuable, special and unique property of
TresCom. You agree that you will not, at any time or for any reason or
purpose whatsoever, make use of, divulge or otherwise disclose, directly
or indirectly, any of such information to any person or use any of such
information for the personal gain of yourself or any other person
without TresCom's express prior written authorization; provided,
however, that the foregoing limitation shall not apply to (a) compliance
with any legal process or subpoena or (b) statements in response to
authorized inquiry from a court or regulatory body.
9. Noncompetition. You agree that prior to the Repurchase
Termination Date, you will not, without the express prior written
consent of TresCom, directly or indirectly (whether as a sole
proprietor, partner, venturer, stockholder, director, officer, employee,
or in any other capacity as principal or agent or through any person,
corporation, partnership, entity or employee acting as nominee or agent)
conduct or engage in or be interested in or associated with any person,
firm, association, syndicate, partnership, company, corporation or other
entity which conducts or engages in the long distance telephone business
in any geographic area in which TresCom is then so engaged in business
or proposes to engage in business in accordance with its then-current
strategic plan, nor shall you interfere with, disrupt or attempt to
disrupt the relationship, contractual or otherwise, between TresCom and
any customer, supplier, lessor, lessee or employee of TresCom.
10. Remedies. If either party breaches its obligations under
paragraphs 6, 7 or 8 of this Agreement or if you breach your obligations
under paragraph 9, the non-breaching party, in addition to and not in
lieu of any other rights and remedies it may have at law or in equity,
shall have the right to (i) obtain injunctive relief, it being
acknowledged and agreed by both parties that any such breach would cause
irreparable and continuing injury to the non-breaching party and that
money damages alone would not provide an adequate remedy to such non-
breaching party, and (ii) declare (by written notice to the breaching
party) and enforce the forfeiture of (x) any amount payable to the non-
breaching party pursuant to this Agreement that has not been paid as of
the date of such declaration, or (y) stock options/stock granted
pursuant to paragraph 3(b) hereof. TresCom agrees that if it breaches
any of the provisions of paragraphs 2, 3, and 4 (including, with respect
to any obligation to make a cash payment, the failure to make such
payment within five business days of the date such payment is due
hereunder), then, in addition to and not in lieu of any other rights or
remedies you may have at law or in equity, you shall have the right to
be reimbursed by TresCom for your fees and expenses (including, without
limitation, attorney's fees and expenses) incurred in respect of the
enforcement of your rights hereunder.
11. No Waiver. No delay or failure by either party to this
Agreement to exercise any right under this Agreement and no partial or
single exercise of that right shall constitute a waiver of that or any
other right. No waiver shall be valid unless in writing and signed by
you or an authorized officer of TresCom, as the case may be, and any
waiver by either party of a breach of any provision hereof shall not be
construed as a waiver of any subsequent breach or violation thereof.
12. Severability. If any provision of this Agreement shall
hereafter be held to be invalid, unenforceable or illegal in whole or in
part, in any jurisdiction under any circumstances for any reason, (i)
such provision shall be reformed to the minimum extent necessary to
cause such provision to be valid, enforceable and legal while preserving
the intent of the parties as expressed in, and the benefits to the
parties provided by, this Agreement or (ii) if such provision cannot be
so reformed, such provision shall be severed from this Agreement and an
equitable adjustment shall be made to this Agreement (including, without
limitation, addition of necessary further provisions to this Agreement)
so as to give effect to the intent as so expressed and the benefits so
provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction
or under any other circumstances. Neither such holding nor such
reformation or severance shall affect or impair the legality, validity
or enforceability of any other provision of this Agreement.
13. Governing Law; Submission to Jurisdiction. THE VALIDITY,
INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF FLORIDA (WITHOUT GIVING EFFECT TO
THE LAWS, RULES AND PRINCIPLES OF THE STATE OF FLORIDA REGARDING
CONFLICTS OF LAWS). You and TresCom agree that any action, proceeding or
claim arising out of, or relating in any way to, this Agreement shall be
brought and enforced in the courts of the State of Florida, and
irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. You and TresCom hereby irrevocably waive any objection to
such jurisdiction or inconvenient forum.
14. Miscellaneous. This letter, together with the Option
Agreement, as amended hereby, and the Indemnification Agreement sets
forth the complete agreement between you and TresCom with respect to the
subject matter hereof and supersedes the Employment Agreement between
TresCom and you, dated February 22, 1994, as amended as of August 11,
1995, and all other prior or concurrent understandings, whether written
or oral, with respect to the subject matter hereof. This Agreement may
not be amended except by a written agreement signed by you and a duly
authorized officer of TresCom. This Agreement shall be binding upon and
inure to the benefit of each of you and TresCom and your heirs, legal
administrators and assigns and TresCom's successors and assigns.
15. Opportunity to Review. You acknowledge and agree that you
have been given a reasonable period, up to and including 21 days, to
review and sign this Agreement, and if you sign this Agreement prior to
the expiration of 21 days, you do so knowingly and voluntarily, and you
acknowledge and agree that you could have requested more time to review
and sign this Agreement, that you did not want to or need such further
time and that you did not request it.
16. Right to Revoke This Agreement. You acknowledge that you
signed this Agreement on the date set forth above. In accordance with
applicable law, you may revoke this Agreement at any time during the
seven day period after you sign this Agreement. Such revocation may be
made by delivering a written notice of revocation to TresCom during such
seven day period. This Agreement will not be effective or enforceable
until the date on which the revocation period has expired (the
"Effective Date").
PLEASE READ THIS AGREEMENT CAREFULLY. BY EXECUTING THIS AGREEMENT,
YOU WILL HAVE WAIVED ANY RIGHT YOU MAY HAVE TO BRING A LAWSUIT OR MAKE
ANY LEGAL CLAIM, KNOWN OR UNKNOWN, AGAINST TRESCOM BASED ON ANY ACTIONS
TAKEN BY TRESCOM, ITS EMPLOYEES OR AGENTS ARISING FROM OR RELATED TO
YOUR EMPLOYMENT WITH TRESCOM OR THE TERMINATION OF SUCH EMPLOYMENT, UP
TO THE DATE OF THE EXECUTION OF THIS AGREEMENT. WE RECOMMEND THAT YOU
RETAIN LEGAL COUNSEL TO ADVISE YOU WITH RESPECT TO THE TERMS OF THIS
AGREEMENT AND THE TERMINATION OF YOUR EMPLOYMENT WITH TRESCOM.
If you agree that this letter appropriately sets forth the terms of
your severance agreement, please sign the enclosed duplicate copy of
this letter and return it to the undersigned.
Sincerely yours,
TresCom International, Inc.
By: /s/Wesley T. O'Brien
Title: President and Chief
Executive Officer
Agreed as of the date first written above
/s/ Norman Klugman
Norman Klugman
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF TRESCOM INTERNATIONAL, INC. AT JUNE 30,
1996, AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 8,902
<SECURITIES> 0
<RECEIVABLES> 31,752
<ALLOWANCES> 5,587
<INVENTORY> 0
<CURRENT-ASSETS> 37,240
<PP&E> 21,736
<DEPRECIATION> 3,945
<TOTAL-ASSETS> 91,067
<CURRENT-LIABILITIES> 23,290
<BONDS> 650
0
0
<COMMON> 484
<OTHER-SE> 66,643
<TOTAL-LIABILITY-AND-EQUITY> 91,067
<SALES> 65,852
<TOTAL-REVENUES> 65,852
<CGS> 50,259
<TOTAL-COSTS> 11,542
<OTHER-EXPENSES> 2,259
<LOSS-PROVISION> 2,771
<INTEREST-EXPENSE> 910
<INCOME-PRETAX> (1,888)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,888)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,956
<CHANGES> 0
<NET-INCOME> (3,844)
<EPS-PRIMARY> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
