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For Immediate Release
US Interactive(R) Reaches Accord With Majority Noteholders
$80 million Note to be Restructured to Enable Conversion Over Seven Year Period
Company Retains Deutsche Banc Alex.Brown to Explore Strategic Alternatives
Philadelphia, PA - November 8, 2000 - U.S. Interactive, Inc. (Nasdaq: USIT)
announces that it has entered into binding letters of intent to restructure a
majority of the $80 million note currently due March 8, 2001 and owed to certain
former shareholders of Soft Plus, Inc. The letters of intent are with five
former shareholders of Soft Plus who hold 74% of the interests in the $80
million note, including director and CEO Mohan Uttarwar, who holds a 29%
interest in the $80 million note. The Company will offer the remaining holders
of the $80 million note the same opportunity to restructure the remaining
portion of the $80 million note. The Company also announced that it has retained
Deutsche Banc Alex.Brown to explore strategic alternatives for the Company.
According to newly appointed chairman William C. Jennings, "The restructuring of
the $80 million note would enable the Company to realize the full benefits
envisioned with the March 2000 Soft Plus / U.S. Interactive merger. As a result
of this progress on the note restructuring, as announced today in our third
quarter earnings release, our senior management team can now turn its full
attention and energy to the critical talks ahead, including executing a new
strategy focused on delivering customer driven solutions in the
telecommunications and financial services markets."
The letters of intent contemplate that each holder of an interest in the note
would receive a convertible note representing the shareholder's proportionate
interest in the $80 million note. The convertible notes would provide for a
maturity date of March 8, 2008 and interest at the rate of 6.2% per annum. The
convertible notes would be subordinate to all present and future bank and
institutional debt of the Company, and certain obligations of the Company to
landlords.
Unless sooner paid at the discretion of the Company or converted by the note
holders or the Company, at maturity all principal and accrued and unpaid
interest on the convertible notes would be satisfied by issuance of 24,000,000
shares of the Company's common stock. On the restructure date and at any time
after the first anniversary of the restructure date, each note holder would have
the option of converting all or a portion of the holder's convertible note into
shares of the Company's common stock. In any calendar year, if the Company's
common stock is at least $3.00 per share for not less than ten consecutive
trading days, the Company would have the option to convert up to $20 million in
principal amount of the convertible notes into shares of the Company's common
stock, pro rata among the note holders. The exchange ratio for converting each
convertible note is one share for each $3.33 of principal amount of the
convertible note being converted. Any such conversion would also satisfy accrued
and unpaid interest on the principal amount converted. Any portion of the $80
million note not exchanged for a convertible note will be due on March 8, 2001.
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The Company has agreed to register the shares issued upon conversion under
certain circumstances. The Company would also agree to release certain indemnity
obligations, shares escrowed, and lock-up agreements entered into in connection
with the Soft Plus merger. The Company's Board of Directors would also agree to
nominate and recommend for appointment to the Board three designees selected by
the holders of 51% of the convertible notes, until 51% of the convertible notes
have been converted to common stock; our current director and CEO Mohan Uttarwar
will be one of the persons designated so long as he is a director of the
Company.
Closing on the $80 million note restructuring is subject to certain conditions,
including, among others, a definitive agreement with the holders of the $80
million note, approval of the Company's stockholders of the issuance of the
shares issuable upon conversion or satisfaction of the convertible notes,
consent of the holders of at least 90% in interest of the principal amount of
the $80 million note, effectiveness of a registration covering the shares
issuable on the restructure date, the Company's receipt of a fairness opinion,
and retention of Mohan Uttarwar as Chief Executive Officer of the Company
subject to termination only upon a 2/3rds vote of the Board of Directors. The
letters of intent terminate on March 7, 2001, if not terminated earlier. The
Company anticipates closing on the restructuring of the $80 million note during
the first quarter of 2001.
About U.S. Interactive, Inc.
US Interactive(R) (Nasdaq: USIT) is a leading Internet professional services
company that provides businesses with customer focused Internet strategy,
infrastructure technology, marketing, and creative services. US Interactive
helps companies leverage Internet and emerging technologies, including broadband
and wireless, to transact business, communicate information and share knowledge
across employees, customers and suppliers to create thriving businesses. Founded
in 1994, US Interactive has served some of the world's leading companies
including Adidas, AIG, Asia Online, Dairy Farm International, Deloitte
Consulting, Disney Online, Sprint, Thomson Consumer Electronics and Toyota.
Forward Looking Statements
Certain statements made in this press release are not historical facts but are
"forward looking statements" and may involve risks and uncertainties that could
cause actual future results to differ materially and adversely from those
anticipated by such statements. Included among the factors that could affect the
Company's performance are the market's acceptance of the terms of the $80
million note restructuring, the satisfaction of all of the conditions to the
note restructuring, a sufficient number of noteholders agreeing to the terms
offered by the Company, as well as the recent downturn in the Internet
professional services market; the ability of the Company to meet it obligations
under, or refinance, its present indebtedness; the successful execution of the
Company's current initiatives; concerns of our clients and prospects regarding
our financial results; general economic conditions; fluctuations in operating
results; our ability to effectively manage future growth, to retain and
efficiently integrate our new executive management, and to identify, hire, train
and retain, in a highly competitive market, individuals highly skilled in the
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Internet and its rapidly changing technology; significant revenue concentration
in a limited number of clients; the lack of long-term contracts; our ability to
enter into, and retain our existing, strategic relationships; market acceptance,
rapid technological change, a decline in Internet usage, and intense competition
in our market; our ability to effectively integrate the operational, managerial
and financial aspects of prior and future acquisitions; and our ability to
obtain financing when required. For a discussion of these and other risk factors
that could affect the Company's business, see "Risk Factors" in the Company's
Prospectus dated April 12, 2000 and the information set forth in the Company's
Quarterly Report on form 10-Q.
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The US Interactive name, design and e-Roadmap are registered service marks of
U.S. Interactive, Inc. IVL Methodology, CAPTURE, and e2e Solution are service
marks of U.S. Interactive, Inc. All other company names and products are
trademarks of their respective companies.
EDITOR'S NOTE: Additional information, including other announcements, about U.S.
Interactive, Inc. is available at www.usinteractive.com.
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Public Relations Contacts:
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Priya Bhatt, U.S. Interactive, Inc., phone: 408-863-7611, e-mail:
[email protected]
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Investor Relations Contact:
Shawn Southard, U.S. Interactive, Inc., phone: 610-382-8879, e-mail:
[email protected]
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