SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d)
X of the Securities Exchange Act of 1934 for
the quarterly period ended September 30, 1998
Or
Transition Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from _________ to
Commission File Number 33-32341-D
WORLDPORT COMMUNICATIONS, INC.
(Name of Small Business Issuer as Specified in its Charter)
Delaware 84-1127336
(State or other jurisdiction of (IRS Employer ID Number)
incorporation of organization)
1825 Barrett Lakes Center,
Suite 100, Kennesaw, Georgia 30144
(Address of principal executive offices) (Zip Code)
(770) 792-8735
Registrant's telephone number
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES [ X ] NO [ ]
As of November 6, 1998, the Registrant had 18,083,152 shares of Common
Stock par value $0.0001 outstanding.
Transitional Small Business Disclosure Format
(Check one):
Yes [ ] No [ X ]
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1998 and December 31, 1997 . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30,
1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1998 and 1997 . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 17
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . 18
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 18
SIGNATURE 19
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<CAPTION>
ASSETS
------
September 30, December 31,
1998 1997
------------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,416 $ 179
Accounts receivable, net of allowance for
doubtful accounts of $726 and $15, respectively 7,842 369
Prepaid expenses and other current assets 9,513 67
--------- ---------
Total current assets 19,771 615
PROPERTY AND EQUIPMENT, net 77,685 5,032
OTHER ASSETS:
Intangibles, net 71,654 6,292
Other assets, net 10,194 1,258
--------- ---------
TOTAL ASSETS $ 179,304 $ 13,197
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 26,245 $ 1,391
Accrued expenses 12,794 1,292
Short-term note payable 539 500
Interim loan facility 107,679 --
Current portion of notes payable - related parties 175 540
Current portion of obligations under capital leases 1,627 937
Other current liabilities 613 98
--------- ---------
Total current liabilities 149,672 4,758
NOTES PAYABLE - RELATED PARTIES, net of current portion -- 1,191
OBLIGATIONS UNDER CAPITAL LEASES, net of current portion 17,482 3,006
OTHER LONG-TERM LIABILITIES 1,016 87
STOCKHOLDERS' EQUITY
Undesignated preferred stock, $0.0001 par value,
6,250,000 shares authorized, no shares issued
and outstanding -- --
Series A preferred stock, $0.0001 par value,
750,000 shares authorized, 493,889 shares
issued and outstanding in
1998 and 1997, respectively -- --
Series B preferred stock, $0.0001 par value,
3,000,000 shares authorized, 2,962,687 and no
shares issued and outstanding in
1998 and 1997, respectively -- --
Common stock, $0.0001 par value, 65,000,000
shares authorized, 18,026,485 and 16,033,333
shares issued and outstanding, in 1998 and
1997, respectively 2 2
Warrants 20,056 --
Additional paid-in capital 35,021 7,953
Amounts due from stockholders (1,921) --
Cumulative translation adjustment (4,934) --
Unamortized compensation expense (324) --
Accumulated deficit (36,766) (3,800)
--------- ---------
Total stockholders' equity 11,134 4,155
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 179,304 $ 13,197
========= =========
The accompanying notes are an integral part of
these consolidated financial statements.
</TABLE>
<TABLE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES $ 11,746 $ 1,506 $ 14,410 $ 1,695
COST OF SERVICES
8,473 1,347 10,980 1,541
-------- -------- -------- --------
Gross margin 3,273 159 3,430 154
OPERATING EXPENSES:
Selling, general and
administrative expenses 14,097 1,062 20,349 1,715
Depreciation and amortization
4,281 283 5,778 313
-------- -------- -------- --------
Operating loss (15,105) (1,186) (22,697) (1,874)
OTHER INCOME (EXPENSE):
Interest expense, net
(9,360) (56) (10,202) (6)
-------- -------- -------- --------
NET LOSS $(24,465) $ (1,242) $(32,899) $ (1,880)
======== ======== ======== ========
BASIC AND DILUTED NET LOSS PER SHARE $ (1.38) $ (0.08) $ (1.95) $ (0.15)
======== ======== ======== ========
WEIGHTED AVERAGE
SHARES OUTSTANDING
17,702 15,988 16,841 12,305
======== ======== ======== ========
The accompanying notes are an integral part of
these consolidated financial statements.
</TABLE>
<TABLE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
<CAPTION>
Nine Months Ended
September 30,
-----------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (32,899) $ (1,880)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 5,778 313
Amortization of warrants 3,882 -
Compensation charge 1,419 -
Increase in accounts receivable (2,194) -
Increase in prepaid expenses and other assets (1,485) (185)
Increase in accounts payable and accrued
Expenses and other liabilities
12,985 62
--------- ---------
Net cash used in operating activities (12,514) (1,690)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid in connection with acquisitions, net of (113,891) (1,215)
cash acquired
Issuance of notes receivable - (100)
Collection of notes receivable - 1,283
Deposits paid in conjunction with new business alliances (1,238) -
Capital expenditures (7,614) (92)
--------- ---------
Net cash used in investing activities (122,743) (124)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Interim Loan facility 120,000 -
Proceeds from issuance of notes payable - related parties - 225
Principal payments on note payable - related party (365) -
Principal payments on short-term debt - (262)
Payments on obligations under capital leases (722) (34)
Proceeds from issuance of preferred stock 12,777 368
Proceeds from issuance of common stock, net of
offering expenses 900 12
--------- ---------
Net cash provided by financing activities 132,590 309
Effect of exchange rate changes on cash
4,904 -
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,237 (1,505)
CASH AND CASH EQUIVALENTS, beginning of the period 179 1,553
--------- ---------
CASH AND CASH EQUIVALENTS, end of the period $ 2,416 $ 48
========= =========
CASH PAID DURING THE PERIOD FOR INTEREST $ 491 $ 47
========= =========
CASH PAID DURING THE PERIOD FOR INCOME TAXES $ - $ -
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Conversion of note payable for 1,680,000 shares of $ - $ 420
========= =========
Issuance of short-term debt to related party in $ - $ 175
========= =========
connection with acquisition -
========= =========
Conversion of notes payable - related parties and
accrued interest for 230,627 shares of Series B
preferred stock $ 1,236 $ -
========= =========
Issuance of 250,000 shares of Series B preferred
stock for notes receivable $ 1,017 $ -
========= =========
Stock issued for ICX and IIC acquisitions $ 8,326 $ -
========= =========
Assets acquired under capital lease $ 4,320 $ -
========= =========
The accompanying notes are an integral part of
these consolidated financial statements.
</TABLE>
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
WorldPort Communications, Inc. and subsidiaries (the "Company") is a
rapidly growing facilities-based multinational telecommunications carrier
focused on providing a broad range of international telecommunications
services to carriers, distributors and resellers, large multinational
corporations and Internet service providers ("ISPs") worldwide. The
Company positions itself as a next generation carrier's carrier, utilizing
advanced technologies on unified global switching and transmission
platforms to provide least-cost interconnectivity and high bandwidth
capacity for voice, data, video, Internet and other telecommunications
services. The Company's initial geographical focus is on high-traffic
routes within and between Europe, Latin America and Asia-Pacific.
The accompanying condensed consolidated financial statements have been
prepared by the Company without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted in this Form 10-QSB pursuant to such rules and
regulations; however, management believes that the disclosures herein are
adequate to make the information presented not misleading. The financial
statements and notes thereto included in this Form 10-QSB should be read
in conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1997.
In the opinion of the Company's management, the accompanying condensed
consolidated financial statements contain all adjustments necessary to
present fairly the Company's financial position as of September 30, 1998,
and the results of operations for the three and nine months ended
September 30, 1998 and 1997 and cash flows for the nine months ended
September 30, 1998 and 1997. The results of operations for the three and
nine months ended September 30, 1998 are not necessarily indicative of the
operating results for the full year.
Financial Condition
The Company is subject to various risks in connection with the operation
of its business including, among other things, (i) changes in external
competitive market factors, (ii) termination of certain operating and
interconnection agreements or inability to enter into additional operating
or interconnection agreements, (iii) inability to satisfy anticipated
working capital or other cash requirements, (iv) changes in or
developments under domestic or foreign laws, regulations, licensing
requirements or telecommunications standards, (v) changes in the
availability of transmission facilities, (vi) changes in the Company's
business strategy or an inability to execute its strategy due to
unanticipated changes in the market for the Company's products or
services, (vii) various competitive factors that may prevent the Company
from competing successfully in the marketplace, (viii) the Company's lack
of liquidity and its ability to raise additional capital, (ix) loss of
services of key executive officers and (x) loss of a customer which
provides significant revenues to the Company. During 1997, the Company's
first year of operations as an international telecommunications services
provider, the Company incurred losses of approximately $3.5 million. For
the nine months ended September 30, 1998, the Company incurred losses of
approximately $32.9 million and expects to continue to incur operating
losses in the near future. The Company has an accumulated deficit of
approximately $36.8 million as of September 30, 1998 as well as a working
capital deficit of approximately $129.9 million. Funding of the Company's
working capital deficit, current and future operating losses and expansion
of the Company's global network will require substantial continuing
capital investment. The Company's strategy is to fund these cash
requirements through debt facilities and additional equity financing (see
Recent Developments, Fourth Quarter Financing). There can be no assurance
that sufficient debt or equity financing will be available in the future
or that it will be available on terms acceptable to the Company,
especially in light of current financial market conditions. Failure to
obtain sufficient capital could materially affect the Company's
operations, financial condition and acquisition and operating strategies.
During June 1998 the Company obtained $120 million in interim financing
(the "Interim Loan") for purposes of completing the acquisition of EnerTel
N.V. ("EnerTel"). During 1998, the Company raised approximately $13.5
million and $1 million in connection with the sale of its Series B
convertible preferred stock and common stock, respectively (see Note 5)
and converted approximately $1.2 million in notes payable to related
parties into its Series B convertible preferred stock. In June 1998, the
Company increased its existing lease financing facility with Forsythe
MacArthur to provide up to $30 million in infrastructure financing and in
September 1998 entered into a $30 million lease financing facility with
Comdisco, Inc., subject to the Company meeting certain financial
conditions. The Company has restructured its $500,000 debt obligation to
Value Partners, Ltd (see Item 3. Defaults Upon Senior Securities).
Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
(2) LOSS PER SHARE
The Company adopted SFAS No. 128, "Earnings Per Share" in 1997. For all
periods presented, basic and diluted earnings per share are the same as
any dilutive securities had an antidilutive effect on earnings per share.
(3) ACQUISITIONS
In April 1998, the Company acquired the telecommunications assets and
operations of InterContinental Exchange, Inc. ("ICX"), a licensed provider
of international telecommunications services headquartered in the San
Francisco Bay area, in exchange for 400,000 shares of the Company's common
stock.
In June 1998, the Company acquired EnerTel., which holds a national
infrastructure license and operates a telecommunications network in The
Netherlands for consideration of 186 million Dutch guilders (approximately
$92 million) and the repayment of certain EnerTel indebtedness of
approximately $17 million. Beginning in 1996, EnerTel deployed a
nationwide backbone fiber optic network utilizing fiber optic capacity
leased from its consortium members in order to provide domestic and
international long distance services to business and residential customers
in The Netherlands. EnerTel operates a network backbone of approximately
19,000 fiber kilometers. Additionally, EnerTel has interconnection and
service agreements with KPN Telecom, Deutsche Telecom, Belgacom S.A., and
Cable & Wireless, plc, that provide EnerTel with direct termination
services in The Netherlands, Germany, Belgium, and the United Kingdom,
respectively. On September 11, 1998, the Company sold a portion of the Bel
1600 division of Enertel, which provided indirect access services to
residential subscribers, for approximately $2.8 million (the net carrying
value of the assets) as part of a strategic repositioning of Enertel to
serve carriers, ISPs and other high volume customers. This amount was
reflected as a reduction in goodwill. On October 21, 1998, the Company
sold a 15% interest in EnerTel to former shareholders of EnerTel for
approximately $15 million, which is expected to clear escrow in the fourth
quarter of 1998, subject to receipt of any required regulatory approvals.
The new minority shareholders in EnerTel are three major regional Dutch
utility and telecommunications services companies.
In July 1998, the Company acquired the assets and operations of
International InterConnect, Inc. ("IIC"), a provider of international long
distance and private line services primarily to Latin America. The
purchase consideration was 916,520 shares of the Company's common stock
(of which 38,500 are held in escrow) and $750,000, of which $500,000 has
been paid to date.
Each acquisition was accounted for under the purchase method of
accounting. The purchase price was allocated to the underlying assets
purchased and liabilities assumed based on their estimated fair market
values at acquisition date.
The following table summarizes the net assets purchased in connection with
the acquisitions and the amount attributable to cost in excess of net
assets acquired (in thousands):
IIC EnerTel ICX
--- ------- ---
Working capital $ 729 $ (541) $ (58)
Property, plant, and equipment 244 61,975 169
Other assets 251 930 28
Non-current liabilities (192) (11,696) (39)
Customer base 7,389 0 472
Goodwill 0 66,117 0
The preliminary estimate of net assets acquired represents management's
best estimate based on currently available information; however, such
estimate may be revised up to one year from the acquisition date. Customer
bases and goodwill are amortized over 5 and 20 years, respectively.
In May 1998, the Company entered into a definitive agreement for the
acquisition of all of the issued and outstanding capital stock of All
America Cables & Radio ("AACR"), for consideration of $31.5 million in
cash, 300,000 shares of common stock and the repayment of AACR
indebtedness of approximately $12 million. AACR provides international
long distance, data, leased line, microwave, satellite, telex and wireless
services in the Dominican Republic. Additionally, AACR holds a license to
provide PCS services. While, as a result of damage caused to AACR's
network facilities by Hurricane Georges, the parties allowed the terms of
the original agreement to expire, the parties are negotiating appropriate
purchase price and other terms and conditions of the transaction.
In July 1998, the Company entered into a definitive agreement
(subsequently modified in November 1998) for the acquisition of the
outstanding capital stock of Campuslink Communication Systems, Inc.
("Campuslink") for consideration of (i) $15 million in cash, (ii)
2,000,000 shares of the Company's common stock and (iii) warrants
exercisable for 1,000,000 shares of the Company's common stock at $4 per
share. Campuslink provides design, installation, and management of
integrated telecommunications systems to colleges, universities, and other
institutional campuses. The Company intends to close the acquisition
subsequent to the closing of the Fourth Quarter Financing.
(4) COMMITMENTS AND CONTINGENCIES
Employment Agreements
On September 29, 1998, the Company amended its promissory notes with two
executives who acquired 250,000 shares of Series B preferred stock at
$5.36 per share which was deemed to be the fair value of the stock at the
date of acquisition. The promissory notes (which are for the aggregate
amount of $1,017,500 and are secured by pledges of the stock purchased)
will mature August 1, 2000. As amended, all payments of principal and
interest, which accrues at an annual rate of 9%, will be due at maturity.
Interim Loan Facility
To finance the EnerTel acquisition, the Company entered into a $120
million Interim Loan Facility with a consortium of lenders effective June
23, 1998, the terms of which also included the issuance of warrants. As of
September 30, 1998 Interim Loan holders, in aggregate, are eligible to
receive warrants exercisable for 2,358,625 shares of common stock at a
price per share of $0.01. Under the terms of the facility, the Interim
Loan holders are eligible to receive warrants representing up to an
aggregate of 11% of the fully diluted common stock in the event the
Interim Loan is not repaid by December 23, 1998. The fair market value of
the warrants currently outstanding (approximately $20 million) is
reflected as a reduction in the principal amount of the notes. This amount
is being amortized to interest expense over the life of the loan (1 year).
The Interim Loan, which matures on June 23, 1999, includes certain
negative and affirmative covenants and is secured by a lien on
substantially all of the assets of the Company and certain of its
subsidiaries and a pledge of the capital stock of certain of the Company's
subsidiaries. As of November 10, 1998 the Company had increased its
borrowings under the Interim Loan facility by approximately $4.5 million.
During the third quarter of 1998, the Company contemplated an offering of
Units consisting of Senior Notes and attached Warrants, the proceeds of
which would have been used, in part, to repay the Interim Loan Facility.
Due to unfavorable changes in world financial markets beginning in August,
1998, the Company has restructured its proposed financing to include (i)
equity, (ii) conversion of certain short-term obligations (including the
Interim Loan Facility) into long-term obligations, and (iii) additional
leasing facilities, to be completed during the fourth Quarter, 1998
("Fourth Quarter Financing"). The Company seeks to convert the Interim
Loan Facility into a long-term obligation. As part of the Fourth Quarter
Financing, the Company is pursuing additional equity. Cash proceeds will
be utilized to pay the cash portion of the aforementioned pending
acquisitions as well as meet a portion of the capital expenditure
requirements associated with the Company's network build-out and working
capital needs. However, there can be no assurance that these transactions
will be consummated by the Company. See Management's Discussion and
Analysis - Liquidity and Capital Resources for further discussion.
(5) STOCKHOLDERS' EQUITY
During 1998, the Company has raised approximately $13.5 million, of which
approximately $12.8 million was received as of September 30, 1998, in a
private placement offering of its par value $0.0001 Series B convertible
preferred stock at $5.36 per share. The Series B convertible preferred
stock is convertible into shares of the Company's common stock at any time
at the option of the holder at a rate of 4 shares of common stock for each
share of preferred stock. Holders of Series B convertible preferred stock
have voting rights equal to 40 votes per share on all matters submitted to
a vote of the stockholders of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTE ON "FORWARD-LOOKING" STATEMENTS
The information set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") contains certain
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, Section 21E of the Securities Act of
1934, as amended, and the Private Securities Litigation Reform Act of
1995, including, among others (i) expected changes in the Company's
revenues and profitability (ii) prospective business opportunities and
(iii) the Company's strategy for expanding and financing its business.
Forward-looking statements are statements other than historical
information or statements of current condition. Some forward-looking
statements may be identified by use of terms such as "believes",
"anticipates", "intends" or "expects". These forward-looking statements
relate to the plans, objectives and expectations of WorldPort
Communications, Inc. and subsidiaries (the "Company") for future
operations. Although the Company believes that its expectations with
respect to the forward-looking statements are based upon reasonable
assumptions within the bounds of its knowledge of its business and
operations, in light of the risks and uncertainties inherent in all future
projections, the inclusion of forward-looking statements in this report
should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved.
The Company's revenues and results of operations could differ materially
from those projected in the forward-looking statements as a result of
numerous factors, including, but not limited to, the following: (i)
changes in external competitive market factors, (ii) termination of
certain operating or interconnection agreements or inability to enter into
additional operating or interconnection agreements, (iii) inability to
satisfy anticipated working capital or other cash requirements, (iv)
changes in or developments under domestic or foreign laws, regulations,
licensing requirements or telecommunications standards, (v) changes in the
availability of transmission facilities, (vi) changes in the Company's
business strategy or an inability to execute its strategy due to
unanticipated changes in the market for the Company's products or
services, (vii) various competitive factors that may prevent the Company
from competing successfully in the marketplace, (viii) the Company's lack
of liquidity and its ability to raise additional capital, (ix) loss of
services of key executive officers and (x) loss of a customer which
provides significant revenues to the Company. In light of these risks and
uncertainties, there can be no assurance that actual results, performance
or achievements of the Company will not differ materially from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The foregoing review of important factors
should not be construed as exhaustive. The Company undertakes no
obligation to release publicly the results of any future revisions it may
make to forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated
events.
The following discussion should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto included under Item 1
of this Form 10-QSB. In addition, reference should be made to the
Financial Statements and Notes thereto and related Management's Discussion
and Analysis of Financial Condition and Results of Operations included in
the Company's Annual Report on Form 10-KSB for the year ended December 31,
1997.
OVERVIEW
The Company is a rapidly growing facilities-based multinational
telecommunications carrier focused on providing a broad range of
international telecommunications services to carriers, distributors and
resellers, large multinational corporations and Internet service providers
("ISPs") worldwide. The Company positions itself as a next generation
carrier's carrier, utilizing advanced technologies on unified global
switching and transmission platforms to provide least-cost
interconnectivity and high bandwidth capacity for voice, data, video,
Internet and other telecommunications services. The Company's initial
geographical focus is on high-traffic routes within and between Europe,
Latin America and Asia-Pacific. The Company is currently deploying an
advanced high capacity global network consisting of (i) indefeasible
rights of use ("IRUs") it has committed to purchase on major undersea
fiber optic cable systems, (ii) international gateway switches to be
deployed through its turn-key agreement with Nortel and (iii) IP switching
and intelligent network equipment to be deployed through its turn-key
agreement with Lucent. The Company's global network will be complemented
by relationships and operating, interconnection and terminating agreements
with other carriers and strategic suppliers.
The Company primarily operates through a number of acquired subsidiaries
that operate in the United States, Europe and Latin America. The
acquisitions completed by the Company to date and those pending are
described below.
Completed Acquisitions
In February 1998, the Company commenced operations in The Netherlands
through the acquisition of all of the outstanding capital stock of
MathComp B.V. ("MathComp"). The Company changed the name of MathComp to
WorldPort Communications Europe, B.V. ("WorldPort Europe"). In connection
with this acquisition, the Company issued 150,000 shares of the common
stock and paid $250,000 in cash. The former shareholder of MathComp is
eligible to earn an additional 2,350,000 shares of common stock contingent
upon the attainment of certain future revenue and gross margin
requirements during the first and second quarters of 1999.
In April 1998, the Company acquired the telecommunications assets and
operations of ICX, a licensed provider of international telecommunications
services headquartered in the San Francisco Bay area in exchange for
400,000 shares of common stock.
In June 1998, the Company acquired ownership of EnerTel, which holds a
national infrastructure license and operates a telecommunications network
in The Netherlands, for consideration consisting of approximately $92
million and the payment of certain EnerTel indebtedness of approximately
$17 million. On October 21, 1998 the Company sold a 15% interest in
Enertel to former shareholders of Enertel for approximately $15 million,
which is expected to clear escrow in the fourth quarter of 1998, subject
to receipt of any required regulatory approvals. Beginning in 1996,
EnerTel deployed a nationwide backbone fiber optic network utilizing fiber
capacity leased from its consortium members in order to provide domestic
and international long distance services to business and residential
customers in the Netherlands. EnerTel operates a network backbone of
approximately 19,000 fiber kilometers. Additionally, EnerTel has
interconnection and service agreements with KPN Telecom, Deutsche Telecom,
Belgacom S.A., and Cable & Wireless, plc, that provide EnerTel with direct
termination services in The Netherlands, Germany, Belgium, and the United
Kingdom, respectively. During 1997, EnerTel's principal source of revenue
was indirect access services provided by its Bel 1600 division to small
and medium size business and residential subscribers. On September 11,
1998 the Company sold the Bel 1600 division of Enertel, which provided
indirect access services to residential customers, for approximately $2.8
million (its net carrying value) as part of a strategic repositioning of
Enertel to serve carriers, ISPs and other high volume customers. The
Company retains on a wholesale basis the traffic minutes generated by the
residential subscribers. The disposition is expected to improve operating
margins as a result of a reduction in related sales and marketing
expenses. In 1997, EnerTel also generated revenue from long distance
telecommunications services provided to business customers through direct
network connections as well as from leased lines and Internet access
services. During the first half of 1998, EnerTel expanded its leased lines
and Internet access services while also introducing international leased
lines and 800 services. Principal sources of expenses are access and
termination charges of KPN Telecom, leased line charges, network
maintenance and general and administrative expenses. Additionally, EnerTel
has incurred substantial marketing costs in an effort to develop its brand
name recognition.
In July 1998, the Company acquired the assets and operations of
International InterConnect, Inc. ("IIC"). The purchase consideration was
916,520 shares of the Company's common stock (of which 38,500 are held in
escrow) and $750,000, of which $500,000 has been paid to date. IIC
specializes in providing international long distance services primarily to
Latin America. IIC's customer base consists primarily of resellers,
multinational corporations, foreign embassies, and other businesses. IIC's
gross margin is equal to the incremental difference between the per minute
rate charged to it by various long distance carriers and the amount it
charges its customers per minute, depending upon a call's origination and
destination points. IIC's other principal expense is the commissions it
pays its various distributors based on sales volumes.
Pending Acquisitions
In May 1998, the Company entered into a definitive agreement for the
acquisition of all of the issued and outstanding capital stock of All
America Cables & Radio ("AACR"), for consideration of $31.5 million in
cash, 300,000 shares of common stock and the repayment of AACR
indebtedness of approximately $12 million. AACR provides international
long distance, data, leased line, microwave, satellite, telex and wireless
services in the Dominican Republic. Additionally, AACR holds a license to
provide PCS services. While, as a result of damage caused to AACR's
network facilities by Hurricane Georges, the parties allowed the terms of
the original agreement to expire, the parties are negotiating appropriate
purchase price and other terms and conditions of the transaction.
In July 1998, the Company entered into a definitive agreement for the
acquisition of all the capital stock of Campuslink for consideration of
$15 million in cash, 2,000,000 shares of common stock and warrants
exercisable for 1,000,000 shares of common stock at $4 per share.
Campuslink provides design, installation, and management of integrated
telecommunications systems to colleges, universities and private student
housing complexes. Campuslink typically funds certain infrastructure costs
in exchange for an exclusive service agreement to provide
telecommunications services to its customers. The Company's customers
include Texas Christian University, the University of Kansas and The U.S.
Military Academy at West Point. Campuslink plans to expand its customer
base geographically and has recently reorganized the business into
regional marketing areas. Campuslink generates revenues through resale of
telephone, video, and data services to residents; on-going flat
per-student technology fees assessed to the college, university, or
property owner; and one-time fees associated with special network
integration or system installation projects. Campuslink's principal
expenses relate to rental of T-1 lines, cost of network equipment on
installation projects, carrier termination charges and personnel costs.
This acquisition is expected to close in the fourth quarter of 1998. The
Campuslink acquisitions is subject to customary conditions to closing and
there can be no assurance that it will be completed on schedule, upon the
agreed terms and conditions, or at all.
STRATEGIC SUPPLIER AGREEMENTS
In July 1998 the Company entered into a memorandum of understanding with
Lucent Technologies, Inc. with respect to the development of the Company's
IP backbone using IP Switches to be deployed at the Company's
international points of presence ("POPs") in the United States and Europe.
These packet-switched, IP protocol network elements will be co-located, in
most cases, with the Company's DMS-GSP switching equipment to be deployed
pursuant to the Company's turn-key agreement with Northern Telecom, Inc.
("Nortel"). Under that agreement, Nortel will provide for the
construction, turn-key installation, in-country technical support and
maintenance of a minimum of 10 DMS-GSP Switches to be installed in various
locations worldwide. In July 1998, the Company entered into a Master
Global Telecom Facilities Management Agreement with EQUANT providing a
framework for EQUANT's provision of co-location services for certain of
the Company's switches and other network equipment as well as technical
support and maintenance for these switches and equipment and for the
Company's proposed service control points in the United States and Europe.
The Company has entered into agreements with Global Crossing for the
purchase of 7 STM-1s of capacity on the AC-1 cable systems and STM-1 level
capacity on additional undersea cable systems under development by Global
Crossing.
RECENT DEVELOPMENTS
In addition to the events described above, material developments in the
Company's business since June 30, 1998 include the following:
o Fourth Quarter Financing: The Company is pursuing additional equity
for acquisitions, network development and working capital.
o On October 21, 1998, the company sold a 15% interest in EnerTel to
former shareholders of EnerTel for approximately $15 million, which is
expected to clear escrow in the fourth quarter of 1998, subject to
receipt of any required regulatory approvals.
o Frontier Agreement: In October, 1998 the Company entered into an
agreement with Frontier Corporation whereby Frontier will provide the
Company with fiber optic capacity in the United States that may be
utilized to physically interconnect WorldPort's switching and network
facilities throughout the U.S.
o Additional Leasing Facilities: In September, 1998 the Company
entered into a $30 million Global Master Rental Agreement with
Comdisco, Inc. to be utilized for equipment purchases.
RESULTS OF OPERATIONS
During the three and nine months ended September 30, 1998, the Company
incurred losses of $25,161,000 and $33,956,000, respectively, compared to
losses of $1,242,000 and $1,880,000 during the same periods in 1997.
Included in the losses incurred during the three and nine months ended
September 30, 1998 are the operating results of EnerTel since its
acquisition by the Company, including amortization of the purchase price
premium and recording of financing costs related to the Company's
acquisition of EnerTel, the operating results of WorldPort Europe and TNC,
as well as general expenses related to the Company's worldwide business
development and financing activities. The operating results for ICX and
IIC did not have a material impact on the losses incurred by the Company
in 1998. To address and remedy historical operating losses and to increase
the competitiveness, revenues and gross margins, the Company has taken
various steps to improve each subsidiary's operating efficiency, network
capability and carrier cost structure. The Company believes these
cost-reduction and revenue-enhancing initiatives will have a positive
impact on the Company's future operating results. However, as its business
remains in the early growth stage, the Company anticipates that it will
continue to incur operating losses and cash flow deficiencies for the
foreseeable future.
Prior to its acquisition of the assets and ongoing operations of TNC in
June 1997, the Company was a development stage company that had not
generated revenues other than interest income since inception.
Revenues
Revenues for the three and nine months ended September 30, 1998 were
$11,746,000 and $14,410,000, respectively, compared to $1,506,000 and
$1,695,000 for the three and nine months ended September 30, 1997. The
increase in revenues is primarily attributed to the inclusion of the
results of operations of EnerTel subsequent to its acquisition in June
1998. EnerTel's revenues were $8,003,000 during the three months ended
September 30, 1998. Also contributing to the increase over the prior year
are the inclusion of TNC acquired in June 1997, and ICX and IIC acquired
in April and July 1998, respectively. The acquisition of WorldPort Europe
did not have an impact on revenues as WorldPort Europe is in the process
of completing the installation and testing of its network.
Gross Margin
Gross margin for the three and nine months ended September 30, 1998 was
$3,273,000 and $3,430,000, respectively, compared to $159,000 and $154,000
for the three and nine months ended September 30, 1997. The increase in
gross margin was largely attributed to the inclusion of the results of
operations of EnerTel which contributed gross margin of $2,150,000 during
the three months ended September 30, 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $14,097,000 from
$1,062,000 and to $20,349,000 from $1,715,000 for the three and nine
months ended September 30, 1998 and 1997, respectively. The increase was
due primarily to (i) inclusion of the operating results of EnerTel (ii)
increased business development and acquisition activity, (iii) the
relocation of the Company's corporate offices from Houston, Texas to
Atlanta, Georgia, (iv) the expansion of the Company's executive management
team, (v) certain non-recurring compensation charges associated with the
granting of restricted stock and certain options to certain members of the
Company's management team and (vi) the inclusion of the selling, general
and administrative expenses associated with the operations of TNC, ICX and
IIC.
Depreciation and Amortization
Depreciation and amortization expense for the three and nine months ended
September 30, 1998 was $4,281,000 and $ 5,778,000, respectively, compared
to $283,000 and $313,000 for the three and nine months ended September 30,
1997. The increase was primarily due to (i) depreciation of the assets
acquired in connection with the acquisition of EnerTel, (ii) amortization
of goodwill and other intangible assets associated with the Company's
acquisitions (iii) depreciation of additional switching and network
equipment acquired during 1998.
Interest Expense
Net interest expense for the three and nine months ended September 30,
1998 was $9,360,000 and $10,202,000, respectively, compared to net
interest expense of $56,000 and $6,000 for the three and nine months ended
September 30, 1997, respectively. The increase in interest expense is
primarily due to (i) financing costs resulting from the interim loan, (ii)
amortization of debt issuance costs related to the Interim Loan, and (iii)
the acquisition of switching equipment subject to capital lease.
LIQUIDITY AND CAPITAL RESOURCES
The Company is an emerging international telecommunications service
provider executing a global business plan that requires substantial
capital. The Company currently has a working capital deficit and has
operated at a loss since its inception. Funding of the working capital
deficit, current and future operating losses and expansion of the Company
will require substantial continuing capital investment.
As of September 30, 1998 and December 31, 1997 the Company had a working
capital deficit of $129,901,000 and $4,143,000, respectively. The working
capital deficit at September 30, 1998 is due to (i) the Interim Loan (ii)
the payment of certain liabilities assumed in conjunction with the
aforementioned acquisitions, the majority of which were trade payables and
short-term debt obligations, (iii) the acquisition of additional switching
and peripheral equipment, the majority of which is being financed pursuant
to a lease, and (iv) the operating losses of the Company. Trade
receivables increased to $7,842,000 at September 30, 1998 from $369,000 at
December 31, 1997 largely due to the acquisition of EnerTel.
Operations used $12,514,000 during the nine months ended September 30,
1998 due primarily to the (i) operating losses, (ii) increased business
development and acquisition activity, (iii) relocation of the Company's
corporate offices and (iv) expansion of the Company's executive management
team.
Investing activities used $122,743,000 during the nine months ended
September 30, 1998. Investing activities during the nine months ended
September 30, 1998 consisted primarily of cash paid in connection with the
EnerTel acquisition and increased capital spending.
Financing activities provided $132,590,000 during the nine months ended
September 30, 1998. Financing activities during the nine months ended
September 30, 1998 consisted primarily of proceeds from (i) interim
financing for purposes of completing the acquisition of EnerTel, (ii) the
issuance of approximately 2.5 million shares of the Series B convertible
preferred stock and 180,000 shares of common stock and (iii) payments on
capital leases and notes payable.
During 1998, the Company initiated a private placement offering of its
Series B convertible preferred stock at $5.36 per share. The Series B
convertible preferred stock is convertible into shares of the Company's
common stock at any time at the option of the holder at a rate of four
shares of common stock for each share of preferred stock. Holders of
Series B convertible preferred stock have voting rights equal to 40 votes
per share on all matters submitted to a vote of the stockholders of the
Company. As of September 30, 1998, the Company has received approximately
$12.8 million in proceeds from the sale of the Series B convertible
preferred stock and converted approximately $1.2 million of outstanding
debt into the Series B convertible preferred stock.
On June 23, 1998, WorldPort International, Inc., a wholly-owned subsidiary
of the Company ("WorldPort International") entered into a Credit Agreement
for the Interim Loan with Bankers Trust Company, an affiliate of BT Alex.
Brown and several additional lenders, pursuant to which WorldPort
International borrowed $120 million in order to finance the acquisition of
EnerTel and for working capital. The Interim Loan was guaranteed by the
Company and certain of its subsidiaries. The Interim Loan bears interest
at LIBOR (as defined in the credit agreement related to the Interim Loan)
plus 6% per annum increasing by 0.5% per annum at the end of each period
of three consecutive months after June 23, 1998; provided, that such
interest rate shall not exceed 16% per annum if paid in cash or 18% per
annum if capitalized. The Interim Loan also contained provisions for the
issuance of $0.01 warrants representing between 3.5% and (if the Interim
Loan is not repaid by December 23, 1998) 11%, of the fully-diluted common
stock of the Company, depending upon the date of repayment of the Interim
Loan. As of November 10, 1998, Interim Loan holders are eligible to
receive 2,362,240 warrants to purchase common stock. The fair market value
of these warrants (approximately $20 million) is reflected as a reduction
in the principal amount of the notes. This amount is being amortized to
interest expense over the life of the loan (1year). At such time as the
facility is repaid, the remaining unamortized portion of the value of the
warrants will be expensed. The Interim Loan matures on June 23, 1999. The
Interim Loan includes certain negative and affirmative covenants and is
secured by a lien on substantially all the assets of the Company and
certain of its subsidiaries and a pledge of the capital stock of certain
of the Company's subsidiaries.
The anticipated net proceeds from the Fourth Quarter Financing, the
anticipated $15 million EnerTel minority investments (proceeds of which
will be available to the Company upon regulatory approval in The
Netherlands), and the expansion of the Company's various equipment lease
facilities will be used (i) to fund the cash portions of the pending
acquisitions, (ii) for capital expenditures relating to development of
network infrastructure and for (iii) general corporate purposes, including
working capital. The Company expects that funds it anticipates raising
during the fourth quarter will provide the Company with sufficient capital
to fund its current business plan's anticipated capital expenditures and
anticipated losses. The Company anticipates that it will need to raise
additional capital through equity or debt financing transactions to take
advantage of business expansion opportunities. There can be no assurance
that the Company can complete such financing transactions, including those
currently contemplated, on favorable terms, if at all.
YEAR 2000 ISSUE
The efficient operation of the Company's business is dependent in part on
its computer software programs and operating systems. These programs and
systems are used in network trafficking, call origination and termination,
pricing, sales, billing and financial reporting, as well as various
administrative functions. Recognizing the importance and need for an
integrated information systems solution, the Company has developed an
implementation plan for upgrading its systems architecture. This plan also
addresses the functionality of its systems beyond December 31, 1999 ("Year
2000 compliance") as the majority of the internal information systems are
being replaced with new systems that the systems vendor represents will be
Year 2000 compliant, the cost of which is not considered to be Year 2000
related. The Company does not anticipate additional material expenditures
for Year 2000 compliance issues. This new systems implementation is
expected to be completed by September 30, 1999. Management believes that
the remaining Company information technology ("IT") systems and other non
IT systems are either Year 2000 compliant or will be compliant by
September 30, 1999 after applying vendor supplied upgrades to these
systems. The cost of the upgrades are not considered to be material. The
Company is in the process of obtaining documentation from its suppliers,
customers, financial institutions and others as to the status of their
Year 2000 compliance programs and the possibility of any interface
difficulties relating to Year 2000 compliance that may affect the Company.
To date, no significant concerns have been identified; however, there can
be no assurance that there will not be any Year 2000-related operating
problems or expenses that will arise with the Company's computer systems
and software or in connection with the Company's interface with the
computer systems and software of its suppliers, customers, financial
institutions and others. Because such third-party systems or software may
not be Year 2000 compliant, the Company is in the process of developing
contingency plans to address Year 2000 failures of the entities with which
the Company interfaces. The Company could be required to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business, results of operation and
financial conditions.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 130, Reporting Comprehensive Income, issued by the Financial
Accounting Standards Board, establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses,
gains, and losses) in a full set of general-purpose financial statements.
SFAS No. 130 requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. The Company adopted SFAS No.
130, effective January 1, 1998, with no material impact on the
consolidated financial statements.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued
to shareholders. SFAS No. 131 also establishes standards for related
disclosures about products and services, geographical areas, and major
customers. The adoption of SFAS No. 131 is not expected to have a material
impact on the consolidated financial statements.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities,
which is effective for fiscal years beginning after June 15, 1999. SFAS
No. 133 establishes accounting and reporting standards for derivative
instruments and transactions involving hedge accounting. The Company has
not yet determined the impact this statement will have on its consolidated
financial statements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is involved in various lawsuits or claims
arising from the normal course of business. In the opinion of management,
none of these lawsuits or claims will have a material adverse effect on
the financial statements or results of operations of the Company.
On April 17, 1998, the Company was served with a summons and complaint
from MC Liquidating Corporation f/k/a MIDCOM Communications, Inc.
("MIDCOM"). Both the Company and Telenational Communications, Inc., its
wholly-owned subsidiary are named as defendants, as are Telenational
Communications, Limited Partnership, the former owner of the TNC assets
("TCLP"), and Edmund Blankenau, a principal of TCLP and a former director
of the Company. In its complaint, filed on April 8, 1998 in the U.S.
Bankruptcy Court for the Eastern District of Michigan, Southern Division,
MIDCOM seeks payment of over $600,000 for services allegedly provided to
TCLP and the Company, together with other damages, attorney fees and
costs. The Company believes the claims are without merit and intends to
vigorously defend itself against them.
On June 2, 1998 the Company initiated an arbitration proceeding against
John W. Dalton ("Dalton"), a former director, President and Chief
Executive Officer of the Company. In that proceeding, the Company is
seeking the rescission and cancellation, on grounds of fraudulent
inducement, of 1.2 million shares of the Company's stock that were issued
to Dalton in connection with the Company's acquisition of the Wade Wallace
Company. In the same proceeding, Dalton is asserting claims against the
Company, Maroon Bells Capital Partners, Inc. ("MBCP"), Paul A. Moore
(Chairman of the Company's Board of Directors and the Company's Chief
Executive Officer), Phillip S. Magiera (a director and the Chief Financial
Officer and Secretary of the Company), Dan Wickersham (President and Chief
Operating Officer of the Company) and Theodore H. Swindells (a principal
of MBCP). Dalton's employment as President and Chief Executive Officer of
the Company was terminated effective April 6, 1998. Dalton alleges, among
other things that those parties engaged in breach of contract, tortious
interference and breach of fiduciary duty in connection with the
termination of Dalton's employment contract. Dalton had previously
asserted these claims in a lawsuit he filed in Texas state court. However,
based on a motion filed by the Company, that proceeding was abated by the
Court pending the completion of the arbitration proceeding. The Company
plans to prosecute its claims against Dalton vigorously and to vigorously
defend itself against the claims asserted by Dalton.
ITEM 2. CHANGES IN SECURITIES
In connection with the acquisition of IIC in July 1998, the Company issued
916,520 shares of its common stock to the former sole shareholder of IIC
(of which 38,500 will be held in escrow up to a period of one year). The
former IIC sole shareholder is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act and the issuance of the
shares was exempt under Section 4(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has restructured its debt obligation to Value Partners, Ltd..
According to the revised terms, on October 26,1998 the Company made an
installment payment of principal and accrued interest of $212,356. The
remaining balance will be repaid by monthly principal payments of $100,000
plus interest at 14%, with acceleration when the Enertel minority
investment proceeds are received.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
Exhibit No. Description
10.1 Global Master Rental Agreement dated as of September
23, 1998 by and between Comdisco, Inc. and WorldPort
Communications, Inc.
10.2 Third Amendment to Employment Agreement
between Phillip S. Magiera and the Company
dated September 29, 1998
10.3 Promissory Note between Phillip S. Magiera
and the Company dated September 29, 1998
10.4 Third Amendment to Employment Agreement
between Paul A. Moore and the Company dated
September 29, 1998
10.5 Promissory Note between Paul A. Moore and
the Company dated September 29, 1998
27.1 Financial Data Schedule
REPORTS ON FORM 8-K
The Company filed the following Current Reports on Form 8-K in the third
quarter:
1. A Current Report on Form 8-K, dated June 25, 1998, was filed July 10, 1998
and amended August 13, 1998. This Report described the Company's acquisition
of EnerTel. The Report included (i) the audited financial statements of
EnerTel for the years ended December 31, 1996 and 1997 and unaudited
financial statements for EnerTel for the three months ended March 31, 1998
and (ii) the unaudited consolidated pro-forma financial statements of the
Company for the year ended December 31, 1997 and the three months ended March
31, 1998.
2. A Current Report on Form 8-K, dated August 3, 1998, was filed on August 13,
1998. This Report described the Company's acquisition of IIC. The Report
included (i) the audited financial statements of IIC for the years ended
December 31, 1996 and 1997 and unaudited financial statements for IIC for the
three months ended March 31, 1998 and (ii) the unaudited consolidated
pro-forma financial statements of the Company for the year ended December 31,
1997 and the three months ended March 31, 1998.
SIGNATURE
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.
WORLDPORT COMMUNICATIONS, INC.
Date: November 10, 1998 By: /s/ Phillip S. Magiera
----------------------
Phillip S. Magiera
Chief Financial Officer and Secretary
COMDISCO, INC.
GLOBAL MASTER RENTAL AGREEMENT
GLOBAL MASTER RENTAL AGREEMENT (the "Agreement") dated as of September 23,
1998 by and between:
COMDISCO, INC., (HEREINAFTER REFERRED TO AND WORLDPORT COMMUNICATIONS, INC AS
"COMDISCO"), 6111 NORTH RIVER ROAD, (HEREINAFTER REFERRED TO AS THE ROSEMONT,
ILLINOIS 60018, USA ACTING ON "CUSTOMER") ACTING ON BEHALF OF BEHALF OF ITSELF
AND ITS AFFILIATES AS ITSELF AND ITS AFFILIATES AS HEREIN HEREIN DESCRIBED.
DESCRIBED.
WHEREAS, Comdisco and its Affiliates are engaged in the rental of equipment
in various countries where Customer and its Affiliates may wish to rent such
equipment,
WHEREAS, to facilitate the transacting of rental operations between Comdisco
or an Affiliate of Comdisco and Customer or an Affiliate of the Customer on an
ongoing basis, Comdisco and the Customer wish to enter into the present
Agreement which, together with the Equipment Schedule under which each
individual rental operation is concluded, will establish the terms and
conditions applicable to such rental operation.
THEREFORE, it is agreed as follows:
1. GLOBAL MASTER RENTAL AGREEMENT
1.1 DEFINITIONS: "Affiliates of Comdisco" shall mean those enterprises in
which Comdisco owns and/or shall own at anytime after the date hereof, directly
or indirectly, the majority of the voting stock, including without limitation
all present Affiliates of Comdisco listed in Exhibit A hereto.
"Affiliates of the Customer" shall mean those enterprises in which the
Customer, or its parent company owns and/or shall own at anytime after the date
hereof, directly or indirectly, the majority of the voting stock, or a
controlling interest, including without limitation all present Affiliates of the
Customer listed in Exhibit B hereto;
"Lessor" shall mean, with respect to any Equipment Schedule, the Affiliate of
Comdisco entering into such Equipment Schedule, or Comdisco, if Comdisco enters
into such Equipment Schedule.
"Lessee" shall mean, with respect to any Equipment Schedule, the Affiliate of
the Customer entering into such Equipment Schedule, or Customer, if Customer
enters into such Equipment Schedule.
"Rent Interval" shall mean the monthly, quarterly or such other billing
period set forth on an Equipment Schedule.
1.2 EQUIPMENT SCHEDULES: Lessor shall rent and Lessee shall take on rent the
equipment described in an Equipment Schedule executed hereunder ("Equipment")
subject to the terms and conditions of this Agreement and such Equipment
Schedule. Each such Equipment Schedule shall be governed by all of the terms and
conditions of this Agreement and by such additional terms and conditions as may
be set forth in such Equipment Schedule.
Exhibit C hereto lists the countries for which Comdisco and Customer have
agreed upon the form of Equipment Schedule. Such Equipment Schedules shall be
substantially in the form attached to Exhibit C hereto. Further forms of
Equipment Schedules for use in transactions in other countries may be added by
agreement of Comdisco and Customer from time to time. The parties agree that
each local transaction will only be validly concluded if the relevant Equipment
Schedule is executed by signatories of Lessor and Lessee involved in such
transaction, and that any such Equipment Schedule may also be supplemented or
amended by special terms or conditions agreed upon by such Lessor or Lessee for
the particular transaction. The Customer shall, without notice, be jointly and
severally liable for the due performance of the obligations of its Affiliates
under all Equipment Schedules executed hereunder, including, without limitation,
all terms and conditions negotiated by its Affiliate.
2. TERM
2.1 The term of this Agreement shall commence on the date set forth above and
shall remain in force thereafter as long as any Equipment Schedule entered into
pursuant to this Agreement remains in effect.
2.2 The rental term and Lessee's rental obligations with respect to each item
of Equipment on an Equipment Schedule shall begin on the commencement date
("Commencement Date"). The Commencement Date with respect to the type of
Equipment defined below and indicated on the applicable Equipment Schedule shall
be as follows:
a) Equipment installed and accepted by Lessee prior to the date of the
applicable Equipment Schedule ("Installed Equipment"), shall be the date Lessor
tenders payment of the Equipment purchase price;
b) Equipment supplied from Lessor's inventory ("Inventory Equipment") shall
be the date the Equipment is installed and approved for maintenance by the
manufacturer, (or an approved third party pursuant to Subsection 5.2 hereof) or
the seventh day after delivery if (i) Lessee delays the installation and
approval or (ii) the Equipment is not so approved due to defects in the
Equipment which are remediable by the manufacturer under a manufacturer's
maintenance contract but which are not remedied because Lessee has arranged for
third party maintenance pursuant to Subsection 5.2 hereof.
c) Equipment on-order ("On-Order Equipment"), shall be the date Lessee
accepts the Equipment from the Equipment vendor, which date shall be confirmed
by Lessee to Lessor as evidenced by Lessee forwarding an Acceptance Certificate
in the form provided by Lessor, within ten (10) days following such acceptance
and which date shall in no event be later than the date the Equipment is placed
in service by Lessee.
The rental term shall continue, unless renewed in accordance with the
provisions hereof, for at least the full number of months, calendar quarters or
other Rent Interval set forth in the Equipment Schedule ("Initial Term"). The
Initial Term shall commence on the first day of the Rent Interval set forth in
the Equipment Schedule next following (i) the Commencement Date for all items of
Installed Equipment and Inventory Equipment to be rented thereunder or (ii)
Lessor's receipt of Acceptance Certificates for all items of On-Order Equipment
to be rented thereunder. On the Commencement Date the Lessee will execute and
deliver to the Lessor a letter, in a form to be specified by the Lessor, which
confirms such Commencement Date. The rental term for each Equipment Schedule
shall continue until the Equipment is returned and the Equipment Schedule is
terminated by either party upon not more than twelve (12) months nor less than
six (6) months prior written notice to the other party, provided that no such
termination shall be effective prior to the expiration of the Initial Term.
2.3 If the applicable Equipment Schedule has a single Initial Term ("Single
Term"), Single Term shall be indicated on the applicable Equipment Schedule and
the terms of the following paragraph under this Subsection 2.3 shall apply to
such Equipment Schedule:
All Rental Rate Factors set forth in the applicable Equipment Schedule assume
that Acceptance Certificates for all items of On-Order Equipment to be rented
thereunder will be received by Lessor no later than the outside date set forth
on the applicable Equipment Schedule ("Outside Date"). If any Acceptance
Certificates are received by Lessor after the Outside Date, Lessor may, on or
before the start of the Initial Term for all items of Equipment, adjust the
Rental Rate Factors (and, therefore, rental rates) to maintain an assumed
economic yield which Lessor would have required for a similar transaction at
such time.
2.4 If the applicable Equipment Schedule has multiple Initial Terms
("Multiple Term"), Multiple Term shall be indicated on the applicable Equipment
Schedule and the terms of the following paragraphs under this Subsection 2.4
shall apply to such Equipment Schedule:
a) Summary Equipment Schedule
Lessor shall summarize all items of Equipment for which Acceptance
Certificates have been received in the same calendar quarter into a Summary
Equipment Schedule in the form of Exhibit 1 hereto and, notwithstanding anything
to the contrary set forth in Subsection 2.2 of the Agreement, the Initial Term
shall begin the first day of the calendar quarter thereafter. Lessee agrees to
execute and return three copies of the Summary Equipment Schedules within 10
days of receipt. Each Summary Equipment Schedule shall incorporate the terms and
conditions of the Agreement and this Equipment Schedule with respect to those
items of Equipment listed in the Summary Equipment Schedule. Upon execution by
Lessor and Lessee, the Summary Equipment Schedule shall be referred to as an
Equipment Schedule and shall constitute a separate Equipment Schedule for
purposes of the Agreement, including without limitation, Section 11 thereof. The
Initial Term for Equipment listed in Acceptance Certificates received more than
10 days after the end of a calendar quarter and having an Acceptance Date in the
calendar quarter just ended, shall begin on the first day of the calendar
quarter following receipt of Acceptance Certificates.
b) If there is a default under the applicable Equipment Schedule or there is
an adverse change in Lessee's credit standing, Lessor, at its option and upon
prior written notice to Lessee, shall be relieved of its obligations to lease
Equipment under any Equipment Schedule with respect to Inventory Equipment and
Installed Equipment with a Commencement Date occurring after the date of such
notice and On-Order Equipment for which Lessor has not received an Acceptance
Certificate from Lessee prior to the date of such notice.
c) If prior to the Commencement Date for an item of Equipment the
manufacturer announces any change in comparable existing Equipment ("Comparable
Equipment") or announces the introduction of new or improved technology
("Replacement Technology Equipment"), Lessee may elect to lease the Replacement
Technology Equipment pursuant to the applicable Equipment Schedule in lieu of
the original Equipment described in such Equipment Schedule; provided, that
purchase documents with respect to the original Equipment and the Replacement
Technology Equipment are completed to Lessor's satisfaction. If Lessee elects
not to rent the Replacement Technology Equipment, then with respect to the
original Equipment with a Commencement Date occurring after the announced first
availability date stated in either of the aforementioned announcements, it is
agreed that Lessor may adjust the Rental Rate Factor in order to maintain an
assumed economic yield which Lessor would have expected had either such
announcement been made on the date of the applicable Equipment Schedule. This
paragraph 2.4(c) shall not apply to any Equipment having a Commencement Date
prior to the announced first availability date stated in either of the
aforementioned announcements.
3. RENT
3.1 a) Lessee shall pay to Lessor as rental for the Equipment the Rent in an
amount (i) as set forth in the applicable Equipment Schedule if the Equipment is
Inventory Equipment or (ii) equal to the Rental Rate Factor set forth in the
applicable Equipment Schedule multiplied by the "Lessor's Cost", as hereinafter
defined, if the Equipment is Installed Equipment or On-Order Equipment. The Rent
shall be paid in advance on the first day of the applicable Rent Interval set
forth in the applicable Equipment Schedule (in immediately available funds in
the local currency indicated on the Equipment Schedule) to Lessor at its bank
account, details of which are set forth in the Equipment Schedule, or to such
other person and/or at such other bank account as Lessor may from time to time
designate in writing. If the Commencement Date of any Equipment Schedule shall
be other than the first day of the applicable Rent Interval, Lessee shall make
rental payments equal to the daily prorata portion of the Rent set forth in the
Equipment Schedule for each day from and including the Commencement Date through
the last day of the applicable Rent Interval prior to the beginning of the
Initial Term ("Interim Rent").
b) The Rent, and Interim Rent, if any, shall be payable without
deduction or withholding on any account whatsoever and regardless of whether an
invoice has been supplied by Lessor. If Lessee is required by law to make any
such deduction or withholding, Lessee shall pay to Lessor such additional amount
as may be necessary to enable Lessor to receive a net amount equal to the full
amount which would otherwise have been payable pursuant to any such Equipment
Schedule, unless such deduction or withholding is made by reference to Lessor's
net income. . Lessee shall cooperate with Lessor in obtaining any relevant
documentation necessary to substantiate payment of any such withholding and in
providing originals or certified copies thereof.
3.2 All Rental Rate Factors set forth in the applicable Equipment Schedule
shall be calculated using an interest rate based on the prevailing rates for
similar transactions with lessees of similar credit standing as of the date of
the applicable Equipment Schedule. If, on or before the start of the Initial
Term for all items of Equipment to be leased under the applicable Equipment
Schedule, the comparable interest rate is greater, such Rental Rate Factors may
be adjusted accordingly.
3.3 Lessor's Cost shall be an amount equal to the purchase price which Lessee
would otherwise be responsible to pay for an item of Equipment if not for this
Agreement.
3.4 Lessee shall promptly pay and discharge all taxes or other charges of
whatever nature due with respect to the ownership or use of the Equipment or the
renting thereof by Lessee or the payment of Rent or other sums payable hereunder
but excluding any taxes payable by reference to Lessor's net income.
3.5 Should Lessee fail to pay any Rent herein reserved or any sum required to
be paid by Lessee to Lessor upon the due date for payment thereof, Lessee shall
pay to Lessor additional Rent equivalent to interest thereon from the due date
until the date of payment at the rate of 3% per annum above the then prevailing
interbank offering rate provided that in no event shall such additional Rent
exceed any legal limitation.
3.6 Equipment Procurement Charges. If indicated on the applicable Equipment
Schedule, Lessor and Lessee agree that this Subsection shall apply. It is
acknowledged that certain portions of the Equipment will be delivered to Lessee
prior to the Commencement Date and that progress payments will be required to be
paid to the Equipment manufacturer prior to the Commencement Date for any item
of Equipment leased pursuant to the applicable Equipment Schedule ("Progress
Payments"). Lessee agrees that with respect to the portions of the Equipment
delivered prior to the Commencement Date, all terms and conditions of the
applicable Equipment Schedule shall be applicable except the Lessee's rental
obligations, provided, however, that Lessee agrees to pay Lessor "Equipment
Procurement Charges" equal to the daily rental rate factor set forth on the
applicable Equipment Schedule multiplied by the aggregate of the Progress
Payments paid by Lessor to the manufacturer or the Lessee relating to the
Equipment for each day from the date Progress Payments are made by Lessor until
the Commencement Date. Accrued Equipment Procurement Charges shall be payable
when invoiced. If Lessee rejects the Equipment prior to the Commencement Date in
accordance with the terms of the purchase agreement with the Equipment vendor
and such purchase agreement is terminated as a result of such rejection, then
the applicable Equipment Schedule shall also terminate. In such event or if
Lessee is in default of the applicable Equipment Schedule for failure to timely
pay Equipment Procurement Charges, then Lessee shall (i) reimburse Lessor for
any and all amounts paid by Lessor to the manufacturer or to the Lessee relating
to the purchase of the Equipment and (ii) pay all Equipment Procurement Charges
due through the date of termination, whereupon Lessor shall transfer to Lessee
all of Lessor's interest in and to the Equipment and under any purchase
agreement relating to the applicable Equipment Schedule. Section 3.1 b) shall
apply to all Equipment Procurement Charges as though they were Rent.
4. USE
Lessee shall:
4.1 keep the Equipment for its sole use and in its possession (except as
provided in 11.4 below) at the address where the Equipment has been installed or
at such other address within the country of original installation as Lessor may
from time to time be notified in writing and shall use the Equipment only for
the purposes for which it was designed in a proper manner and in accordance with
any applicable statutory regulations which may from time to time be in force and
shall take such steps as are necessary to ensure that the Equipment will be safe
and without risk to health when properly used by Lessee, its employees or other
authorized users;
4.2 ensure that the Equipment is only used by trained personnel in accordance
with the recommendations of the supplier and/or manufacturer;
4.3 allow such persons as Lessor may authorize to have access to the
Equipment at reasonable times in order to inspect its state and condition and,
if required, allow Lessor to fix and/or keep affixed upon the Equipment such
name or other plates in such place and manner as Lessor shall require to
indicate the ownership of the Equipment;
4.4 protect the Equipment against seizure and indemnify Lessor against all
losses, charges, damages and expenses suffered or incurred by Lessor by reason
thereof; and
4.5 protect Lessor's title or interest in the Equipment against all persons
claiming against or through Lessee and for this purpose take any necessary steps
to prevent title in the Equipment from passing to any freeholder or mortgagee of
the premises at which the Equipment is located.
5. INSTALLATION, MAINTENANCE AND ADDITIONS
5.1 Responsibility for all costs and risks of delivery, in-transit insurance
and installation shall be as indicated in the relevant Equipment Schedule.
Notwithstanding such indication, Lessee shall be responsible for all exceptional
costs of delivery and installation including, without limitation, the costs of
special lifting and handling equipment and building alterations. Lessee will, at
the request of Lessor or its assignees, certify the date of installation of any
Equipment rented hereunder. If Lessee should have the Equipment installed by a
third party maintenance or engineering company, Lessee assumes any and all
liability for defects in the Equipment which are remediable by manufacturer
under a manufacturer's maintenance contract but which are not so remedied
because Lessee has elected to use a third party to install the Equipment,
Lessor's approval of such third party notwithstanding (see 5.2). Lessee shall
have the manufacturer or authorized third party remedy all such defects at
Lessee's expense.
5.2 Lessee shall at all times and at its own expense keep the Equipment in
good order, repair and condition (fair wear and tear excepted) and shall enter
into and maintain throughout the rental term, a contract for the maintenance of
the Equipment with the manufacturer of the Equipment, or with a third party
maintenance company as approved by Lessor provided that, if Lessee uses a third
party maintenance company, Lessee assumes any and all liability for defects in
the Equipment which are remediable by manufacturer under a manufacturer's
maintenance contract but which are not remedied because Lessee has arranged for
a third party to provide such maintenance. Upon termination of the renting,
Lessee shall provide Lessor with the manufacturer's maintenance qualification
letter and, if necessary, Lessee shall pay any costs necessary to have the
manufacturer re-certify the Equipment for maintenance eligibility.
5.3 No additions, improvements, variations, modifications or alterations of
whatsoever kind or nature shall be made to the Equipment without the consent in
writing of Lessor (such consent not to be unreasonably withheld). Subject to
such consent, any additions to the Equipment shall first be offered for renting
by Lessor upon the terms and conditions of this Agreement and of the relevant
Equipment Schedule. If any such additions, improvements, variations,
modifications or alterations are made to the Equipment without Lessor's written
consent, then the same shall be deemed to be Lessor's property.
6. ACCEPTANCE AND WARRANTIES
6.1 Lessor will use its reasonable endeavors at the expense and request of
Lessee to extend to Lessee the benefit of any guarantees, conditions, warranties
or representations which may be given to Lessor by the manufacturer or supplier
of the Equipment or otherwise implied in favor of Lessor, provided that such
benefit shall only be extended if Lessee shall fully indemnify Lessor against
all costs, claims and expenses incurred in connection with any claim relating to
such guarantee, condition, warranty or representation.
6.2 The Equipment has been selected by Lessee with full knowledge of the
manufacturer's specifications and Lessee consequently assumes the entire
responsibility for its choice and Lessee's acceptance by certifying installation
shall be conclusive proof that the Equipment is satisfactory in every way to
Lessee.
7. LESSEE'S INDEMNITY
Throughout the rental term under any Equipment Schedule and until the
Equipment hereunder has been effectively re-delivered to Lessor, Lessee shall be
solely responsible for any loss, damage or injury to any party occasioned by the
use or possession of the Equipment or in any way relating to the Equipment.
Lessee shall indemnify and keep Lessor indemnified against all claims or
proceedings made or brought against Lessor, and all damages, losses, costs,
charges and expenses incurred by Lessor by reason of such claims or proceedings
arising out of the state, condition, presence or use of the Equipment or in any
way relating to the Equipment or arising out of the renting of the Equipment
hereunder provided that nothing in this clause shall restrict or exclude
Lessor's liability in respect of or shall entitle Lessor to be indemnified by
Lessee against any claims or proceedings in respect of any injury, death, loss
or damages caused by or resulting from the wilful default or gross negligence of
Lessor.
8. RISK OF LOSS AND INSURANCE
Throughout the rental term, unless otherwise indicated in the relevant
Equipment Schedule, the Lessee shall insure and at all times keep the Equipment
insured with reputable insurers.
Lessor and Lessee agree as follows:
a) Effective upon delivery of the Equipment to Lessee and until the Equipment
is returned to Lessor, Lessee relieves Lessor of responsibility for all risks of
physical damage to or loss or destruction of the Equipment, howsoever caused.
During the continuance of the relevant Equipment Schedule, Lessee shall, at its
own expense, cause to be carried and maintained casualty insurance with respect
to each item of Equipment designated in this Equipment Schedule in an amount at
least equal at all times to the greater of (i) the replacement value of the
Equipment, or (ii) the aggregate unpaid Rent with respect to the Equipment for
the unexpired Initial Term. Lessee shall carry public liability insurance, in
each case in amounts and against risks customarily insured against by the Lessee
on similar equipment and, in any event, in amounts and against risks comparable
to those insured against by the Lessee on equipment owned by it. All policies
with respect to such insurance shall name the Lessor as additional assured and
(together with any Beneficiary) as loss payee, and shall provide for at least 30
days' prior written notice by the underwriter or insurance company to the Lessor
in the event of cancellation or expiration. Lessee shall furnish appropriate
evidence of such insurance;
b) If any item of Equipment is lost or rendered unusable as a result of any
physical damage or destruction of such item of Equipment, Lessee shall give to
Lessor prompt notice thereof and the Agreement and the relevant Equipment
Schedule shall continue in effect without any abatement of Rent. Lessee shall
determine, within fifteen (15) days after the date of occurrence of such loss,
damage or destruction, whether such item of Equipment can be repaired. If Lessee
determines that such item of Equipment can be repaired, Lessee, at its expense,
shall cause such item of Equipment to be promptly repaired. If Lessee determines
that such item of Equipment is lost or cannot be repaired, Lessee shall promptly
notify Lessor and such Equipment shall be deemed to have suffered a "Casualty
Loss" for purposes of this Section as of the date of occurrence of such loss.
Within said 15 days, Lessee shall notify Lessor of the Equipment which has
suffered a Casualty Loss and Lessee shall, at the Lessor's option, either (i)
replace Equipment which has suffered a Casualty Loss with lien free equipment of
the same model, type and feature configuration in which case the replacement
equipment shall become the Equipment, the relevant Equipment Schedule shall
continue in full force and effect and marketable title in such Equipment shall
vest in Lessor or (ii) pay the aggregate unpaid Rent with respect to such
Equipment for the unexpired Initial Term for such Equipment ("Casualty Value").
If the Casualty Value is paid, any installment of Rent with respect to such
Equipment due prior to the date of the Casualty Loss shall remain due and
payable. After the payment of such Casualty Value and all other amounts due and
owing with respect to such Equipment, Lessee's obligation to pay further Rent
for such Equipment shall cease. Except in the case of loss or total destruction,
Lessor will be entitled to recover all Equipment for which a Casualty Value has
been paid; provided, however, that Lessee shall dispose of such Equipment for
the best price obtainable (on an "as-is, where-is," basis without representation
or warranty expressed or implied), and Lessee shall be entitled to retain all
amounts received for the Equipment up to the Casualty Value and Lessee's
reasonable costs of disposition attributable thereto, and shall remit the
excess, if any, to Lessor.
9. DEFAULT
9.1 If:
a) Lessee or Customer shall fail to pay any Rent or other sum payable under
this Agreement (and any Equipment Schedules entered into hereunder) within
fifteen (15) days of its becoming due or fail to observe or perform any of the
terms and conditions hereof or shall do or allow to be done any act or thing
which may jeopardize any of Lessor's rights in the Equipment;
b) any distress, execution or other legal process shall be levied on or
against the Equipment or any part thereof or any premises where the same may be
or Lessee shall permit any judgment against it to remain unsatisfied for
fourteen days (14); or
c) Lessee or Customer shall enter into any liquidation, shall be declared
bankrupt or otherwise enter bankruptcy, shall call any meeting of its creditors,
or shall have any receiver or administrative receiver of all or any of its
undertakings or assets appointed, or shall be deemed unable to pay its debts;
then, in each and every such case, Lessor may at any time thereafter and
notwithstanding any subsequent acceptance by Lessor of any Rent (but without
prejudice to any other rights which Lessor may have against Lessee hereunder or
any pre-existing liability of Lessee to Lessor) by notice in writing to Lessee
forthwith and for all purposes terminate renting the Equipment hereunder and
under any Equipment Schedule executed by the Lessee and thereafter Lessee shall
no longer be in possession of the Equipment with Lessor's consent.
9.2 Upon such default, Lessee shall pay to Lessor:
a) all arrears then due by way of Rent or otherwise;
b) the costs of all repairs required as at the date of termination to render
the Equipment in good order and condition (fair wear and tear excepted);
c) all costs, charges and expenses incurred by Lessor in locating and taking
possession of the Equipment including all legal fees, costs and expenses; and
d) as agreed compensation for Lessor's full financial loss, an amount equal
to the aggregate unpaid Rent with respect of the Equipment for the unexpired
balance of the Initial Term less a discount at the lower of the debt rate of the
Beneficiary (as defined in Subsection 11.1) at which the applicable Equipment
Schedule was financed or the rate of 2% per annum below the then prevailing
interbank offering rate, compounded quarterly, for accelerated payment. Lessee
confirms that the nature of the arrangement between it and Lessor is such that,
in computing the amount payable in such circumstances, Lessor shall not be
obliged to mitigate its loss by applying the sale proceeds of the Equipment in
reduction of such amount.
10. RETURN OF THE EQUIPMENT
At the end of the rental term of each Equipment Schedule executed hereunder
or upon the termination of the renting of the Equipment for whatever reason,
Lessee will at its own expense forthwith deinstall and deliver the Equipment in
good order and condition (fair wear and tear excepted) to Lessor at such place
as may be appointed by Lessor within the country in which it is then installed
if Comdisco has an affiliate in that country, or to the nearest country with a
Comdisco affiliate, and, upon the failure of Lessee to return the Equipment as
contemplated herein, Lessor may, without waiving Lessee's obligations for the
aforementioned expenses, repossess the Equipment at any time and without notice
and for this purpose shall be entitled freely to enter into and upon any
premises where the Equipment may be and whether the same is occupied by or under
the control of Lessee or otherwise.
11. ASSIGNMENT
11.1 Lessor shall be entitled to assign, sell or pledge in whole or in part
its rights related to any Equipment, to any Equipment Schedule and/or to any
amounts payable under any Equipment Schedule to one or more third parties
(collectively the "Beneficiary"). Lessee agrees that on receipt of written
notice from Lessor of such assignment, sale or pledge, if so instructed, Lessee
shall perform for the benefit of the Beneficiary those of its obligations under
any Equipment Schedule as are mentioned in such notice and, if so instructed,
Lessee shall pay all or part of the amounts payable under any Equipment Schedule
directly to the Beneficiary or its assignees. Lessee declares and certifies that
the Beneficiary shall be entitled to rely upon, and shall be considered a third
party beneficiary of, the following covenants and representations:
a) Lessee will not seek the performance by the Beneficiary of any of the
obligations of Lessor under this Agreement or any Equipment Schedule (unless
Lessor shall have assigned to the Beneficiary its obligations as lessor
hereunder or under any Equipment Schedule, in which case however Lessor shall
remain primarily liable for the performance of such obligations vis-a-vis
Lessee);
b) Lessee shall not agree to any modification or amendment of this Agreement
or of any Equipment Schedule assigned to the Beneficiary without the prior
written consent of the Beneficiary;
c) Lessee shall send to the Beneficiary a copy of any notice which is
required to be sent to Lessor; and
d) Lessee's obligations hereunder and under any assigned Equipment Schedule
shall not be subject to any abatement, reduction, defense, offset or
counterclaim available to Lessee for any reason whatsoever including, without
limitation, any defect in the Equipment or failure of Lessor to perform any of
its obligations hereunder or under any Equipment Schedule.
11.2 Upon receipt of notice of any assignment, sale or pledge, Lessee agrees
to execute and deliver to Lessor any document which may be required by a
Beneficiary in order to certify the rights and obligations of the parties under
this Agreement and any assigned Equipment Schedule and in order to perfect such
assignment, sale or pledge, including, without limitation:
a) an acknowledgement of receipt of, or a declaration of consent to, such
assignment, sale or pledge;
b) a certificate of Lessee's counsel in which he opines that Lessee is
validly bound by the terms of this Agreement and of any assigned Equipment
Schedule; and
c) a certificate of the delivery and acceptance of the related Equipment.
11.3 Lessee acknowledges that Lessor may not itself be the owner of the
Equipment rented under any Equipment Schedule and that Lessor may have rented or
leased such Equipment from a third party.
11.4 Lessee shall not sell, offer for sale, mortgage or charge the Equipment
or this Agreement or any Equipment Schedule executed hereunder nor hold itself
out as the owner of nor part with possession of the Equipment and shall not
create or allow to be created any lien or any encumbrance on the Equipment and
shall duly and punctually pay all rates and taxes, charges and impositions
payable in respect of the premises whereon any Equipment is situated. Upon not
less than sixty (60) days prior written notice to Lessor, Lessee may subrent the
Equipment to any party, or relocate the Equipment to any location, within the
country set forth in the respective Equipment Schedule, provided that (i) any
such sublessee's credit worthiness shall, in Lessor's reasonable judgment, be
equal to or better than Lessee's, and (ii) all costs of any nature whatsoever
resulting from such relocation or subrent shall be made for the sole account of
Lessee or its sublessee and any subrenting of the Equipment shall be expressly
subject and subordinate to the terms of this Agreement and the respective
Equipment Schedule. No subrenting of any Equipment shall operate to relieve
Lessee of its obligations hereunder. The Lessee hereby grants to the Lessor the
right and opportunity to submit or match the last proposal for (i) the
subrenting of the Equipment, and (ii) the financing of any equipment which is
replacing the Equipment leased pursuant to this Agreement and any Equipment
Schedule. Each of the foregoing shall be conducted in a commercially reasonable
time frame and manner.
11.5 Customer hereby agrees that its representations and obligations under
this Agreement may be assigned by Comdisco, without notice, to the Lessor under
any Equipment Schedule issued hereunder, and further assigned by such Lessor,
without notice, to the Beneficiary.
12. VALUE ADDED TAX ("VAT")
In addition to the Rent and other sums payable under this Agreement and any
Equipment Schedule, Lessee shall be responsible for and pay to Lessor any value
added tax, turnover tax, stamp tax, recording tax or similar tax thereon at the
rate in force on the due date of payment of any sums payable by Lessee under
this Agreement and any Equipment Schedule, and Lessee shall indemnify Lessor and
keep Lessor indemnified against any liability for such taxes which may be
incurred by Lessor in respect of the Equipment or its rental hereunder at the
location set forth in the Equipment Schedule
13. MISCELLANEOUS
13.1 Service of all notices under this Agreement or any Equipment Schedule
shall be sufficient if given personally or posted to the party to be served at
its address herein or in such Equipment Schedule or at such address as the party
to be served may from time to time by notice in writing inform the other to be
its address for service of notice hereunder or thereunder and, if sent by first
class post, shall be deemed to be delivered 48 hours after posting.
13.2 It is acknowledged by the parties that the manufacturer or supplier of
the Equipment is not the agent and has no authority to act as the agent of
Lessor and that Lessor shall under no circumstances be responsible for any
warranty or representation made by any manufacturer or supplier except as stated
in this Agreement or such Equipment Schedule.
13.3 Lessor hereby excludes any conditions, warranties or representations
relating to the Equipment whether express or implied and whether statutory or
otherwise.
13.4 This Agreement shall be governed and construed for all purposes in
accordance with the law agreed upon in the applicable Equipment Schedule by
Lessor and Lessee. Comdisco and Customer hereby consent to such law.
13.5 Any payment hereunder or under any Equipment Schedule by Lessee to
Lessor shall be treated as paid on the date of its receipt by Lessor.
13.6 Neither this Agreement nor any Equipment Schedule executed hereunder
shall be varied in its terms by any oral agreement or representation or
otherwise than by an instrument in writing either of even date or subsequent
hereto or thereto executed by the respective parties or by their duly authorized
representatives.
13.7 The terms and conditions of any Equipment Schedule will supersede those
of all previous agreements either written or oral between Lessor and Lessee
relating to the Equipment.
13.8 No right or remedy herein conferred upon or reserved to Lessor is
exclusive of any other right or remedy herein or by law or equity provided or
permitted but each shall be cumulative of every right or remedy given hereunder
or hereafter existing and may be enforced currently therewith or from time to
time.
13.9 No forbearance or indulgence on the part of Lessor shown or granted to
Lessee shall in any way restrict or diminish the full rights and powers of
Lessor under this Agreement or any Equipment Schedule or shall operate as a
waiver of any breach by Lessee of any of the terms and conditions of this
Agreement.
13.10 No Equipment Schedule executed hereunder shall become binding until
accepted in writing by a representative authorized in writing on Lessor's
behalf.
13.11 The printed titles given to the clauses of this Agreement are inserted
for convenience only, do not form part of this Agreement and have no effect upon
its operation and interpretation.
13.12 Customer hereby submits to the jurisdiction of the court agreed upon in
the applicable Equipment Schedule by Lessor and Lessee regarding the enforcement
of Customer's representations and obligations hereunder with respect to such
Equipment Schedule and Customer hereby appoints the Lessee in the applicable
Equipment Schedule as the Customer's agent for service of process with regard to
the foregoing.
13.13 In the event any one or more of the provisions of this Agreement and/or
any Equipment Schedule executed hereunder shall for any reason be held invalid,
illegal or unenforceable, the remaining provisions of this Agreement and/or any
such Equipment Schedule executed hereunder shall be unimpaired, and the invalid,
illegal or unenforceable provision shall be replaced by a mutually acceptable
valid, legal and enforceable provision, which comes closest to the intention of
the parties underlying the invalid, illegal or unenforceable provision.
13.14 Lessee shall obtain no title to any software or other licensed products
("Products") attached to the Equipment delivered to Lessee, and such Products
shall at all times remain the property of the owner thereof. Prior to the legal
use of any such Products, Lessee shall be responsible to obtain or cause to be
obtained a license to use such Products from the owner thereof.
13.15 Customer will, upon execution of this Agreement, and as may be
requested thereafter, provide Lessor and/or Comdisco with a secretary's
certificate of incumbency and authority and any other documents which may be
requested by Lessor and/or Comdisco.
Done in three copies this ________________ day of ____________, 19__
COMDISCO, INC. WORLDPORT COMMUNICATIONS, INC
By:___________________________________ By:________________________________
Title:__________________________________ Title:_____________________________
REV. 9/98
EXHIBIT A
To the Global Master Rental Agreement dated as of ______________, between
Comdisco, Inc. ("Comdisco") and ___________________________ ("Customer")
AFFILIATES OF COMDISCO, INC.
COMDISCO ASIA PTE LTD COMDISCO IRELAND LIMITED
9, Temasek Boulevard 30 Herbert Street
#09-01, Suntec Tower 2 Dublin 2
Singapore 038989 (Ireland)
COMDISCO AUSTRALIA PTY LTD COMDISCO JAPAN, A BRANCH OF COMDISCO
(CAN 002 997-453) GMBH & CO. LEASING AND FINANCE KG
Level 18, 111 Pacific Highway Nomura Fudosan Building 11F
North Sydney 1-8-15 Azuchi-Machi
NSW-Australia 2060 J-Chuo-Ku, Osaka 541-0052
(Japan)
COMDISCO HANDELSGESELLSCHAFT M.B.H.
Mahlerstrasse 7/22 COMDISCO DE MEXICO, S.A. DE C.V.
A-1010 Wien c/o Gardere & Wynne, Arena, Arce,
(Austria) Robles, Yarza, S.C.
Rio Panuco No. 7
Col. Cuauhtemoc
COMDISCO BELGIUM S.P.R.L. 06500 Mexico, D.F.
c/o KPMG (Mexico)
Rue Neerveld 101 - 103 Boite 3
St Lambrechts - Woluwe COMDISCO NEDERLAND B.V.
B-1200 Bruxelles Planetenbaan 15, Postbus 1681
(Belgium) NL-3606 AK Maarssen
(The Netherlands)
COMDISCO CANADA LTD.
Royal Bank Plaza, North Tower COMDISCO NEW ZEALAND
200 Bay Street, Suite 2075 Level 16, ASB Bank Centre
P.O. Box 131 Cnr Albert and Wellesley Streets
CDN-Toronto, Ontario M5J 2J3 Auckland
(Canada) (New Zealand)
COMDISCO FRANCE S.A. COMPUTER DISCOUNT CORPORATION, S.L.
176, avenue Charles de Gaulle c/o KPMG Estudio Juridico y Tributario
92522 Neuilly sur Seine Torre Europa
(France) Paseo de la Castellana, 95 (Planta 24)
E-28046 Madrid
PROMODATA S.N.C. (Spain)
176, avenue Charles de Gaulle
92522 Neuilly sur Seine COMDISCO SWEDEN AB
(France) c/o Advokatfirman Vinge
Smalandsgatan 20, Box 1703
COMDISCO DEUTSCHLAND GMBH S-11187 Stockholm
Oskar-Messter-Stra(beta)e 24 (Sweden)
D-85737 Ismaning/Munchen
(Germany) COMDISCO (SWITZERLAND) SA
Postfach 4136
COMDISCO GMBH & CO. LEASING AND FINANCE KG Baarestra(beta)E 20
Oskar-Messter-Stra(beta)e 24 CH-6304 ZUG
D-85737 Ismaning/Munchen (Switzerland)
(Germany)
COMDISCO TRADE, INC. (TAIWAN BRANCH)
COMDISCO GLOBAL INC. 14F-06 Empire Commercial Building
c/o Truman Bodden & Company No. 295 Kuang-Fu Road Section 2
P.O. Box 866 Hsinchu, Taiwan
Anderson Square Building (Republic of China)
Grand Cayman
(British West Indies) COMDISCO UNITED KINGDOM LIMITED
1000 Great West Road
Brentford
GB-Middlesex TW8 9HJ
(Great Britian)
EXHIBIT B
To the Global Master Rental Agreement dated as of _____________, between
Comdisco, Inc. ("Comdisco") and ___________________________ ("Customer")
AFFILIATES OF CUSTOMER
EXHIBIT C
To the Global Master Rental Agreement dated as of_____________, between
Comdisco, Inc. ("Comdisco") and ____________ ("Customer")
Effective as of the date of the Agreement, Comdisco and Customer
hereby agree, pursuant to Subsection 1.2, "Equipment Schedules" of the
Agreement that Equipment Schedules substantially in the forms attached
hereto and identified by country name shall be used in the countries
listed below which match the country name on the attached Equipment
Schedules.
Australia Mexico
Austria Netherlands
Belgium New Zealand
Brazil **Norway
Canada **Portugal
**Denmark Puerto Rico
**Finland Singapore
France Spain
Germany Sweden
Hong Kong Switzerland
Ireland Taiwan
***Italy United Kingdom
Japan United States
Initialed: Comdisco ______________
Customer ______________
**Leases will be written with Comdisco Nederland B.V., as Lessor
***Leases will be written with Comdisco Handelsgesellschaft M.B.H., as
Lessor
In certain instances leases for Equipment in Denmark, Finland, Ireland
and/or Portugal may be written by Comdisco GmbH & Co. Leasing and
Finance KG.
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
SUMMARY EQUIPMENT SCHEDULE NO. _______ for the Period beginning
____________________ and ending ____________________ to the Global Master Rental
Agreement dated as of ______________________________ and Equipment Schedule No.
_______ thereto between Lessor and Lessee (the "Lease").
LESSEE: LESSOR:
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES: ADDRESS FOR REMITTANCES:
ATTENTION: ATTENTION: ATTENTION:
1. EQUIPMENT: As set forth in the attached Acceptance Certificates which are a
part hereof (No. of Acceptance Certificates: _______)
2. INITIAL TERM START DATE:
3. INITIAL TERM:
4. LESSOR'S COST:
5. __________ RENT:
6. LESSEE REPRESENTATIONS: The Lessee hereby represents and warrants that:
(a) It has accepted all items of Equipment listed on the attached
Acceptance Certificates as of the date set forth therein.
(b) No default or event which with the giving of notice or lapse of time,
or both, would become a default has occurred or is continuing.
GLOBAL MASTER RENTAL AGREEMENT: This Summary Equipment Schedule is issued
pursuant to the Global Master Rental Agreement and Equipment Schedule identified
above. All of the terms, conditions, representations and warranties of the
Global Master Rental Agreement and Equipment Schedule are hereby incorporated
herein and made a part hereof as if they were expressly set forth in the Summary
Equipment Schedule and this Summary Equipment Schedule constitutes a separate
lease with respect to the Equipment described herein.
AS LESSEE AS LESSOR
BY:_________________________________ BY:________________________________
TITLE:______________________________
TITLE:_____________________________
DATE:_______________________________ DATE:______________________________
ATTACHMENT TO
SUMMARY EQUIPMENT SCHEDULE_______
RENTAL BREAKDOWN BY LOCATION
Location
Number Location Rent Tax on Rental Total Rent
ADDENDUM TO THE
GLOBAL MASTER RENTAL AGREEMENT
DATED SEPTEMBER 23, 1998, BY AND BETWEEN
COMDISCO, INC.,
AND
WORLDPORT COMMUNICATIONS, INC., AS "CUSTOMER"
(THE "AGREEMENT")
The terms and conditions of the Agreement as they pertain to this Addendum are
hereby modified and amended as follows:
A. SECTION 2, "TERM"
In Section 2.4 (b), before "adverse" insert "material".
B. SECTION 3, "RENT"
In the last sentence of Section 3.6, before "whereupon" insert "less
any amounts received by Lessor from the manufacturer or otherwise in
respect of payments made by Lessor or Lessee with respect to the
Equipment, and".
C. SECTION 4, "USE"
In Section 4.4, after "reason thereof" insert "unless such seizure is
caused by or otherwise relates to actions or inaction by Lessor".
D. SECTION 7, "LESSEE'S INDEMNITY"
To the last sentence of this section after "Lessor" add "or any third
party acting by, through or against Lessor".
To the end of this Section add the following language:
"Any amounts to be paid by Lessee to Lessor or pursuant to this Section
7 shall be reduced by an amount equal to any insurance or other
payments received by Lessor with respect to such claim made hereunder.
Lessor shall indemnify Lessee for all costs caused by or arising from
Lessor's actions."
E. SECTION 9, "DEFAULT"
In Section 9.1 (b), after "any part thereof" insert "(other than by
reasons relating to or caused by Lessor)" and after "judgment against"
delete "it" and replace it with "the Equipment".
F. SECTION 11, "ASSIGNMENT"
In Section 11.1 (b), after "consent of the Beneficiary" insert "or the
Lessor".
F. SECTION 13, "MISCELLANEOUS
In Section 13.3, after "Equipment" insert "(other than as set forth
with respect to inventory equipment in the respective Equipment
Schedule)".
In Section 13.8, after "Lessor" insert "or Lessee".
In Section 13.14, at the beginning of the sentence insert "Unless
otherwise agreed,".
In Section 13.15, after "which may be" insert "reasonably".
COMDISCO , INC. WORLDPORT COMMUNICATIONS, INC.
By: _______________________ By: _______________________
Title: ______________________ Title: _____________________
Date: _____________________ Date: _____________________
Initialled: Comdisco ______________
Customer ______________
THIRD
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Third Amendment (the "Amendment") is made and entered into as of
the 29th day of September, 1998 by and between WorldPort Communications, Inc., a
Delaware corporation ("WorldPort" or the "Company") and Mr. Phillip S. Magiera
("Executive") and amends that certain Employment Agreement dated as of January
1, 1998 between the Company and Executive (the "Employment Agreement").
WHEREAS, the parties executed an Amendment to Employment Agreement as
of March 31, 1998 (the "First Amendment") which amended Section 6(f) of the
Employment Agreement and executed a Second Amendment to Employment Agreement as
of April 1, 1998 (the "Second Amendment") which amended Section 6(a) and again
amended Section 6(f) of the Employment Agreement;
WHEREAS, the parties desire to further amend a portion of Section 6(f)
of the Employment Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. The third sentence of Section 6(f) of the Employment Agreement (as
amended by the First Amendment and the Second Amendment) is hereby amended and
restated to read in its entirety as follows:
"The promissory note shall accrue interest at an annual rate
of 9% and mature on August 1, 2000, at which time all payments of
principal and accrued interest shall be made."
2. Except as otherwise amended hereby, all terms and provisions of the
Employment Agreement, as amended previously shall continue in full force and
effect as stated therein. All capitalized terms used by not defined herein shall
have the meanings given in the Employment Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WORLDPORT COMMUNICATIONS, INC.
By:
Name:
Title:
Phillip S. Magiera
PROMISSORY NOTE
Dated as of
$532,100 April 1, 1998
FOR VALUE RECEIVED, the undersigned, Phillip S. Magiera
("Maker"), hereby promises to pay to the order of WorldPort Communications,
Inc., a Delaware corporation ("Payee"), its successors and assigns, the
principal amount of FIVE HUNDRED THIRTY-TWO THOUSAND ONE HUNDRED DOLLARS
($532,100). Interest shall accrue on the unpaid principal at a rate of nine
percent (9%) per annum. The principal amount of this Note and all accrued and
unpaid interest shall be paid on August 1, 2000.
Payment for both principal and interest is to be made in
lawful money of the United States of America by bank draft or certified check.
This Note may be prepaid in whole or in part at any time without premium or
penalty.
In addition to and not in limitation of the foregoing, Maker
hereby agrees, subject only to any limitation imposed by applicable law, to pay
all reasonable expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder of this Note in endeavoring to collect any
amounts payable hereunder which are not paid when due.
All parties hereto, whether as makers, endorsers, or
otherwise, severally waive presentment for payment, demand, protest, and notice
of dishonor.
THIS NOTE IS MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE
OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
Phillip S. Magiera
THIRD
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Third Amendment (the "Amendment") is made and entered into as of
the 29th day of September, 1998 by and between WorldPort Communications, Inc., a
Delaware corporation ("WorldPort" or the "Company") and Mr. Paul A. Moore
("Executive") and amends that certain Employment Agreement dated as of January
1, 1998 between the Company and Executive (the "Employment Agreement").
WHEREAS, the parties executed an Amendment to Employment Agreement as
of March 31, 1998 (the "First Amendment") which amended Section 6(f) of the
Employment Agreement and executed a Second Amendment to Employment Agreement as
of April 1, 1998 (the "Second Amendment") which amended Section 6(a) and again
amended Section 6(f) of the Employment Agreement;
WHEREAS, the parties desire to further amend a portion of Section 6(f)
of the Employment Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. The third sentence of Section 6(f) of the Employment Agreement (as
amended by the First Amendment and the Second Amendment) is hereby amended and
restated to read in its entirety as follows:
"The promissory note shall accrue interest at an annual rate
of 9% and mature on August 1, 2000, at which time all payments of
principal and accrued interest shall be made."
2. Except as otherwise amended hereby, all terms and provisions of the
Employment Agreement, as amended previously shall continue in full force and
effect as stated therein. All capitalized terms used by not defined herein shall
have the meanings given in the Employment Agreement
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WORLDPORT COMMUNICATIONS, INC.
By:
Name:
Title:
Paul A. Moore
PROMISSORY NOTE
Dated as of
$485,400 April 1, 1998
FOR VALUE RECEIVED, the undersigned, Paul A. Moore ("Maker"),
hereby promises to pay to the order of WorldPort Communications, Inc., a
Delaware corporation ("Payee"), its successors and assigns, the principal amount
of FOUR HUNDRED EIGHTY-FIVE THOUSAND FOUR HUNDRED DOLLARS ($485,400). Interest
shall accrue on the unpaid principal at a rate of nine percent (9%) per annum.
The principal amount of this Note and all accrued and unpaid interest shall be
paid on August 1, 2000.
Payment for both principal and interest is to be made in
lawful money of the United States of America by bank draft or certified check.
This Note may be prepaid in whole or in part at any time without premium or
penalty.
In addition to and not in limitation of the foregoing, Maker
hereby agrees, subject only to any limitation imposed by applicable law, to pay
all reasonable expenses, including reasonable attorneys' fees and legal
expenses, incurred by the holder of this Note in endeavoring to collect any
amounts payable hereunder which are not paid when due.
All parties hereto, whether as makers, endorsers, or
otherwise, severally waive presentment for payment, demand, protest, and notice
of dishonor.
THIS NOTE IS MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE
OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
Paul A. Moore
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,416
<SECURITIES> 0
<RECEIVABLES> 8,568
<ALLOWANCES> 726
<INVENTORY> 0
<CURRENT-ASSETS> 19,771
<PP&E> 80,010
<DEPRECIATION> 2,325
<TOTAL-ASSETS> 179,304
<CURRENT-LIABILITIES> 149,672
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 11,132
<TOTAL-LIABILITY-AND-EQUITY> 179,304
<SALES> 0
<TOTAL-REVENUES> 14,410
<CGS> 0
<TOTAL-COSTS> 10,980
<OTHER-EXPENSES> 5,778
<LOSS-PROVISION> 119
<INTEREST-EXPENSE> 10,202
<INCOME-PRETAX> (32,899)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,899)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,899)
<EPS-PRIMARY> (1.95)
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</TABLE>
