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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __ to ___
Commission file number: 000-25015
WORLDPORT COMMUNICATIONS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 84-1127336
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1825 Barrett Lakes Blvd., Suite 100, Kennesaw, Georgia 30144
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(Address of principal executive offices)
Registrant's telephone number, including area code: (770) 792-8735
Securities registered pursuant to Section 12(b) of the Act:
Names of each exchange
Title of Each Class on which registered
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, $0.0001 Par Value
--------------------------------
(Title of class)
Indicate by check mark whether the Registrant (l) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 1, 1999, 18,930,365 shares of Registrant's Common Stock were
outstanding.
The aggregate market value of the Registrant's Common Stock held by
nonaffiliates on March 1, 1999 was approximately $158,569,660.
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PART I
ITEM 1. BUSINESS.
INTRODUCTION
WorldPort Communications, Inc. (together with its subsidiaries, "we,"
the "Company," and "WorldPort") is a rapidly growing facilities-based global
telecommunications carrier offering voice, data and other telecommunications
services to carriers, Internet service providers ("ISPs"), medium and large
corporations and distributors and resellers. The core of our operations and the
source for a significant portion of our revenues is our EnerTel subsidiary, the
leading second network operator in the Netherlands. EnerTel's switch-based fiber
backbone network consists of three fiber optic rings extending over 1,200
kilometers linking most of the largest cities in the Netherlands, and together
with EnerTel's interconnection agreements, passing approximately 70% of the 5.5
million domestic households and substantially all the domestic and multinational
business community in the Netherlands. We are expanding and developing EnerTel's
network to enhance its capacity and reach within the Netherlands. In order to
leverage EnerTel's network as a European hub to access select markets, we have
obtained the right to purchase indefeasible rights of use ("IRUs") which will
provide interconnection to 18 cities in five Western European countries.
Additionally, we have acquired IRUs on AC-1, an undersea cable connecting North
America and Europe, to link EnerTel's switches in Amsterdam and Rotterdam and
our DMS GSP international gateway switch in London with our U.S. DMS GSP
international gateway switches in New York and Miami. As a result, we will have
a unified switch network that will allow us to provide On-Net services to our
clients in the Netherlands, our European hub, five other Western European
countries and the United States. For the three months ended December 31, 1998,
and, on a pro forma basis (giving effect to our acquisitions of EnerTel and
International InterConnect, Inc.), the year ended December 31, 1998, we had
revenues of $14.2 million and $40.6 million, respectively.
EnerTel was founded by nine regional electric utilities and N.V.
Casema, the Netherlands' largest cable television company, who collectively were
granted a national infrastructure license to build, own and operate a nationwide
telecommunications network. EnerTel's network is connected directly to KPN
Telecom (Netherlands), Deutsche Telekom (Germany), Belgacom (Belgium), Cable &
Wireless (UK) and Telecom Italia (Italy). In addition, EnerTel's network has
access to undersea cables connecting the Netherlands to North America. EnerTel's
network utilizes synchronous digital hierarchy ("SDH") technology and currently
includes two Siemens switching facilities, located in Amsterdam and Rotterdam,
as well as an IRU for capacity on UK-NETH 14, an undersea fiber optic cable
connecting the United Kingdom and the Netherlands. EnerTel commenced operations
in 1997 and currently serves 133 medium and large sized corporate customers, 45
of the Netherlands' ISPs (including 21 of the Netherlands' 35 national ISPs) and
10 carriers, distributors and resellers. We also have entered into contracts
with an additional 26 carriers, distributors and resellers, with service
expected to begin during the second quarter of 1999. For the three months ended
December 31, 1998, and the year ended December 31, 1998, EnerTel had revenues of
$10.3 million and $18.3 million, respectively.
The telecommunications services market in the Netherlands is
experiencing significant growth, with a market size of $8.4 billion in 1997
expected to grow to $9.1 billion by 2000 according to Espicom Business
Intelligence. This growth is being driven by (i) the rapid growth in demand for
broadband and data services, including the Internet and corporate intranets and
(ii) the emergence of the Netherlands as a major European telecommunications
hub. At the end of 1998 there were approximately 1.4 million Internet users in
the Netherlands. According to Datamonitor, an industry research group, the
number of Internet users in the Netherlands is expected to grow to 3.6 million
by 2003. We believe that EnerTel is positioned to capture a significant share of
the Netherlands' wholesale telecommunications market due to our scaleable
state-of-the-art fiber optic network, broad range of products and services,
competitive pricing, established customer relationships and experience in
serving the needs of data intensive customers. For the six months ended December
31, 1998, EnerTel carried approximately 496 million minutes of traffic,
including approximately 443 million minutes of Internet traffic in the
Netherlands.
In response to customer demand (principally from carriers and ISPs) for
telecommunication services
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beyond the Netherlands and for expanded product offerings, we are extending our
On-Net reach into Western Europe and the United States. In addition, we now
offer internationally our switched services, private lines, and 800/900 services
which we previously offered only in the Netherlands and have expanded our
product offerings to include colocation, switch partitioning and switchless
resale both in the Netherlands and throughout Europe and the United States.
In connection with our expansion into Europe, we have recently entered
an agreement which will allow us to purchase IRUs which will connect EnerTel's
Netherlands-based network with 18 cities, throughout five countries in Western
Europe, including Brussels, Frankfurt, London, Paris and Madrid and we have
developed direct connections and bilateral interconnection agreements that
provide On-Net termination services in Germany, Belgium, France, Italy and the
United Kingdom. We believe this expansion will position us to further penetrate
the European international long distance market, which is the largest in the
world, accounting for approximately 35 billion minutes or approximately 43% of
all worldwide minutes originated in 1997.
To provide our European customers with access to North America, we have
acquired IRUs for STM-1s of capacity, and committed to purchase IRUs for
additional STM-1s of capacity, on undersea fiber-optic cables which connect
EnerTel's network with North America and have installed international gateway
switches in London and New York and are in the process of installing one in
Miami. Through this network, we can provide our customers with connections
between Europe and North America, which together originate approximately 75% of
the world's international telecommunications traffic. We have contracts with
over 35 carrier customers for use of our international switches.
In addition to our EnerTel operations, we also provide, through our
non-European subsidiaries, international pre-paid calling cards, international
credit card billed calling cards, international call back/direct access, and
international operator services to carriers, business customers and resellers
and distributors in the United States, Europe, Latin America and Asia-Pacific.
For the three months ended December 31, 1998, and the year ended December 31,
1998, our revenues from these operations totaled $3.9 million and $10.3 million,
respectively.
For a summary of our operations according to our two separate
geographic regions, see Note 10 to our Consolidated Financial Statements
included elsewhere in this Report.
MILESTONES
Since acquiring EnerTel in June 1998, we have achieved the following:
- NETWORK DEVELOPMENTS
- Upgraded port capacity of our Amsterdam and Rotterdam
Siemens switches
- Expanded our Netherlands fiber optic network from
1,100 kilometers to over 1,200 kilometers and
upgraded capacity on approximately 58% of the network
with DWDM technology
- Sold the Bel 1600 division of EnerTel (which had
provided indirect access services to small and medium
size business and residential subscribers) as part of
our strategic repositioning of EnerTel to serve
carriers, ISPs and other high volume customers; we
retain on a wholesale basis the traffic minutes
generated by the residential subscribers
- DEVELOPMENT OF EUROPEAN HUB
- Obtained the right to purchase IRUs which can connect
EnerTel's network with 18 cities, throughout five
countries in Western Europe, including Brussels,
Frankfurt, London, Paris and Madrid
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- Installed international gateway switches in London,
New York and Miami
- Extended our EnerTel network to Beverwijk, the
Netherlands where we are connecting to AC-1 through
leased line capacity
- Developed a direct connection and bilateral
interconnect agreement that provides On-Net
termination services in Italy (Telecom Italia)
- CUSTOMER GROWTH
- Increased traffic on EnerTel's On-Net network from
approximately 42 million monthly minutes in May 1998
to approximately 113 million monthly minutes in
December 1998
- Increased EnerTel's monthly revenue by 114% from
approximately $2.1 million per month in May 1998 to
approximately $4.5 million per month in December 1998
- Signed new customer contracts including new contracts
with 15 carriers, 21 ISPs, and 103 corporate
customers
BUSINESS STRATEGY
Our strategy is to be a leading global provider of transmission and
termination services to carriers, ISPs, large multinational corporations and
distributors and resellers. We believe that this "carriers' carrier" approach
commands higher profits than providing retail services. The key elements of our
strategy are as follows:
- - ENHANCE POSITION AS PREMIER SECOND NETWORK OPERATOR IN THE NETHERLANDS.
We believe that EnerTel is positioned to capture a significant share of
the wholesale telecommunications market in the Netherlands due to its
scaleable state-of-the-art fiber optic network, broad range of products
and services, competitive pricing, established customer relationships,
and experience in serving the needs of data intensive customers. For
the six months ended December 31, 1998, EnerTel carried approximately
496 million minutes of traffic, including approximately 443 million
minutes of Internet traffic. To continue capturing market share, we are
enhancing our network's capabilities by installing in Amsterdam a
switch dedicated to international traffic and further upgrading
capacity using advancements in DWDM. We also plan to upgrade our
network operations center.
- - LEVERAGE "HUB AND SPOKE" FOOTPRINT VIA OUR NETHERLANDS EUROPEAN HUB. We
intend to continue to leverage the assets of EnerTel, further
developing EnerTel as a European gateway for international traffic. We
believe that the Netherlands has emerged as a major European hub, with
two key transatlantic cables, AC-1 and TAT-14, utilizing it as a
landing point for continental Europe. We believe that EnerTel's
existing network (which included over $85.2 million of property, plant
and equipment at December 31, 1998 and significant right of way
agreements) together with (i) the IRUs we have the right to purchase in
five countries in Western Europe, (ii) our direct connections and
bilateral interconnection agreements that provide On-Net termination
services in Germany, Belgium, France, Italy and the United Kingdom and
(iii) the IRUs which we have acquired or committed to acquire on
undersea fiber-optic cables which connect the Netherlands to North
America, provide us with a significant time-to-market advantage over
others desiring to replicate our "hub" approach.
- - DIFFERENTIATE THROUGH BROAD PORTFOLIO OF VALUE-ADDED PRODUCT AND
SERVICE OFFERINGS. We have developed a broad range of voice, data,
video and Internet products and services which we offer to customers
both within the Netherlands and throughout Western Europe. Such
services include our switched services, dedicated services, switch
partitioning, telehousing and colocation opportunities, and switchless
resale services that we offer carriers, ISPs and business customers. We
believe that this broad product portfolio differentiates us from
competitors, many of whom offer some, but not all, such products and
services. We intend to continue to enhance and develop our voice, data,
video and Internet products and services and will also continue to
offer customers additional services such as international calling
cards. Moreover, we are developing our network with advanced technology
to provide seamless transmission of voice and data across multiple
protocols such as
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IP, asynchronous transfer mode ("ATM") and frame relay. To advance our
IP capabilities, we are currently conducting one of the first
commercial trials of Lucent's PacketStar 6400 IP switches in both New
York and London. The Lucent PacketStar may enable us to be one of the
first carriers to offer, on a commercial scale, a fast, high-quality IP
transmission alternative to bypass highly congested segments of the
traditional Internet by routing a customer's traffic over our network.
- - CAPITALIZE ON POSITION AS A LOW COST PROVIDER. As a facilities-based
carrier, we believe that selectively expanding our On-Net reach and
continuing to develop our interconnection and bilateral agreements will
allow us to maintain a low cost structure for transmission and
termination services relative to our competitors. We operate our fiber
network in the Netherlands as well as switches in Amsterdam, Rotterdam,
London, New York and Miami, and have signed long term lease agreements
or IRUs with other carriers and bilateral interconnection agreements on
their networks. We believe that these assets, including our ability to
provide an alternative to the Netherlands' former national monopoly
telephone company ("PTT") and leverage our bilateral agreements, create
a unique On-Net network. In addition, we will utilize IP in selected
applications to reduce our cost basis for international voice transport
and lower our cost of access.
- - CONTINUE TO DEVELOP SALES FORCE AND DISTRIBUTION CHANNELS. We are
continuing to develop our global sales, marketing and support force.
Our sales force currently consists of 18 direct sales people and
approximately 190 wholesale resellers and 285 agents. Our direct sales
people have extensive experience in the telecommunications industry, at
entities which include Frontier, MCI WorldCom, Cable & Wireless, Qwest
Communications and Sprint. As we continue to develop our On-Net network
in Europe and with access to North America, our sales professionals are
increasingly able to sell our international portfolio of end-to-end
products and services to customers based in these markets.
- - PURSUE STRATEGIC ACQUISITIONS. We plan to continue to identify and
pursue strategic acquisitions that provide us with one or more of the
following: (i) network facilities that extend our On-Net reach, (ii)
public telecommunications operator ("PTO") and other licenses,
interconnection agreements, and/or operating agreements on key routes,
(iii) proprietary circuits or IRUs, (iv) large customer bases in
targeted markets and (v) complementary business strategies or products.
RECENT DEVELOPMENTS
- - Heico Equity Investment. In January 1999, The Heico Companies, LLC
("Heico"), a privately owned holding company, completed a $40 million
investment in our Series C Convertible Preferred Stock. We have also
granted to Heico an option to acquire additional shares of Series C
Convertible Preferred Stock for an aggregate purchase price of $10
million. By virtue of its stock purchase, and coupled with additional
voting rights which it received pursuant to a Shareholder Agreement,
Heico currently controls, with respect to certain matters, including
acquisitions, incurrence of debt and the issuance or sale of equity
securities, approximately 50.1% of our outstanding votes. In addition,
Heico's designees comprise one-half of the members of our Board of
Directors and we amended our Bylaws to provide that at least one of
Heico's designees and, except in certain limited situations, one of the
directors who was not designated by Heico, must approve any action put
before the Board of Directors in order for such to be properly approved
by the Board of Directors.
- - All America Cables & Radio. In May 1998, we entered into an agreement
for the acquisition of All America Cables & Radio ("AACR"), a
telecommunications services provider in the Dominican Republic. As a
result of damage caused to AACR's facilities and business by Hurricane
Georges in September 1998, the original agreement terminated. Although
we had subsequent discussions with AACR, we recently decided not to
pursue the acquisition. We will continue to sell our products and
services in Latin America through our network of distributors and
resellers.
- - Sale of European Capacity. On February 19, 1999, WorldPort signed an
agreement with a U.S. carrier for the sale of intra-European STM-1
IRUs, for total sale proceeds of $8 million to be recognized during
1999. In
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conjunction with the signing of the IRU sale agreement, WorldPort and
the carrier also executed a letter of intent regarding the sale,
exchange and lease of communications services and the expansion of the
reach of their networks (through possible interconnection, colocation
and switch partitioning arrangements). The aggregate value of the
transactions contemplated by the letter of intent will depend on
conditions but may range up to $55 million.
- - Purchase of European Capacity. In March 1999, pursuant to a capacity
purchase agreement with Esprit Telecom UK Limited which we entered into
in January 1999, we placed orders with Esprit for the purchase of IRUs
for 4 STM-1s of capacity on the Esprit network in Europe, providing
links between London, Paris, Frankfurt and Amsterdam.
NETWORK
ON-NET MECHANICS
A long distance telephone call generally consists of three segments:
origination, transport and termination.
We use the term "On-Net" to refer to the portion of a call that travels
over our network infrastructure and originates or terminates through either
local interconnects or bilateral agreements. Our gross margins increase to the
extent that we put a greater portion of the call minutes On-Net. In the
Netherlands, we are able to originate calls On-Net via either our own leased
lines or our local interconnect agreements, bypassing KPN, the incumbent
provider. We then terminate the call internationally from our Netherlands
switches either (i) via our own network to another country where we terminate
through a local interconnect agreement , (ii) through a bilateral carrier
agreement, or (iii) through a third party carrier. Generally, we are able to
obtain a higher margin when we terminate through a local interconnect agreement
rather than through a third-party carrier.
Origination
A typical international long distance call originates on a local
exchange network or private line and is carried to the international gateway
switch of a telecommunications provider. The call is then transported along a
fiber optic cable or a satellite connection to an international gateway switch
in the terminating country and finally to another local exchange network or
private line where the call is terminated. A domestic long distance call is
similar to an international long distance call, but typically involves only one
telecommunications provider, which transports the call on fiber, microwave radio
or via a satellite connection within the country of origination and termination.
Generally, only a small number of carriers are licensed to provide
telecommunications services in a foreign country and, in many countries, only
the PTT is licensed to provide certain services. Any carrier that desires to
transport switched calls to or from a particular country must, in addition to
obtaining a license or other permission (if required), enter into bilateral
agreements or other arrangements with the PTT or another international carrier
in that country or lease capacity from a carrier that already has such
arrangements.
Transport
The transport of telephone calls is accomplished via land-based cables
or undersea cables, which are usually fiber optic, or by microwave radios or
satellites. A carrier can obtain access on cable systems through IRUs or leases.
Any carrier may generally lease circuits on a cable from another carrier.
Satellite circuits are also obtained on a leased basis.
Traditionally, international telecommunications traffic is exchanged
under interconnection agreements between international carriers
("correspondents") which own IRUs or lease satellite or fiber capacity between
two countries. Interconnection agreements provide for the termination of traffic
in, and, if such agreements are bilaterial agreements, return of traffic to, the
carriers' respective countries at negotiated accounting rates. Bilateral
agreements typically provide that carriers will return to their correspondents a
percentage of the minutes received from such correspondents ("return traffic").
In addition, interconnection agreements provide for network
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coordination and accounting and settlement procedures between the carriers.
A carrier which does not have an interconnection agreement with a
carrier in a particular country is able to provide international service to that
country by reselling minutes from a carrier which does. Until recently, in many
foreign countries there was only one interconnection agreement in place between
that country's PTT and a foreign based international carrier as a result of
monopolies held by such PTTs. Interconnection agreements are expected to become
increasingly available as international markets deregulate and new carriers that
are seeking business partners emerge in countries previously subject to a PTT
monopoly or other limited competition market.
For a telecommunications provider without interconnection agreements or
its own international network, the profitability of originating international
traffic is a function of, among other things, the difference between its billing
rates and the rates it must pay another carrier to transport and terminate such
traffic.
For a company with bilateral agreements (which provide for return
traffic), the profitability of originating international traffic will be a
function of, among other things, the volume of its originating traffic and its
billing rates, as well as the relative volume of its originating and return
traffic minutes. Under the settlement process, a carrier which originates more
traffic then it receives, will, on a net basis, make payments to the
corresponding carrier, while a carrier which receives more traffic than it
originates will receive payments from the corresponding carrier. If the incoming
and outgoing flows of traffic are equal in the number of minutes transmitted,
there is no net settlement payment to either carrier. Therefore, in addition to
all of the other factors that can influence the profitability of a
telecommunications carrier, profitability can also be somewhat dependent on the
carrier's relative flows of incoming and outgoing traffic.
Return traffic can be more profitable than outgoing traffic when there
is a significant disparity in the cost of terminating traffic between the two
countries that are party to a bilateral agreement. The receipt of more
profitable return traffic reduces the aggregate cost to a carrier to transport
traffic pursuant to a bilateral agreement, and carriers with significant levels
of return traffic can price their international transport and termination
services at a discount to the settlement cost and recover the discount on the
return traffic.
Termination
The termination of an international call occurs after the call has been
transported to an international carrier in the destination country. The
international carrier then transports the call to a local exchange network where
it is then terminated by the PTT or an alternative to the PTT, such as EnerTel,
which then bypasses the PTT.
NETWORK ASSETS
The EnerTel backbone network in the Netherlands consists of three fiber
optic rings, complemented by interconnection agreements with the local access
networks of regional utility companies throughout the Netherlands, including
EnerTel's former shareholders. The network backbone links most of the
Netherlands' largest cities and, together with these regional utility company
interconnection agreements, passes approximately 70% of the 5.5 million Dutch
households and substantially all the Dutch and multinational business community.
EnerTel holds a 20-year lease expiring in 2016 for the backbone network with
each of its former shareholders. In February 1994 those shareholders, comprised
of nine Dutch regional utility companies and Casema N.V., the largest cable
television operator in the Netherlands, constructed the three fiber optic ring
network. Each route in this network consists of between 12 and 24 fibers.
Pursuant to the nine lease agreements between EnerTel and each of the former
shareholders, EnerTel has leased use of the fibers contained in those rings. In
addition, pursuant to the backbone lease agreements, EnerTel can add additional
fibers to the network when necessary. Each lease covers that portion of the
network owned by such former shareholder and provides that each of the former
shareholders is responsible for the maintenance and repair of the portion of the
network leased by them to EnerTel. EnerTel pays for such repair and maintenance
based on the cost thereof to the applicable owner. We believe that our existing
network, which included over $85.2 million of property, plant and equipment at
December 31, 1998 and significant right of way agreements, provides us with a
time-to-market advantage over new providers desiring to replicate our
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EnerTel network.
The EnerTel network utilizes SDH technology and, in addition to the
three fiber optic rings extending over 1,200 kilometers, includes two Siemens
switching facilities, located in Amsterdam and Rotterdam with over 1,400 port
facilities, as well as an IRU for 21 E-1s of capacity on UK-NETH 14, an undersea
fiber optic cable connecting the United Kingdom and the Netherlands. We have
recently completed the installation of DWDM technology on approximately 58% of
the EnerTel network in order to provide additional capacity for
intra-Netherlands and cross-border connectivity to Atlantic undersea cable
systems. We are also in the process of installing a DMS GSP international
gateway switch in Amsterdam.
In addition, in connection with the expansion of our network into
Europe, we have recently obtained the right to purchase IRUs which will connect
EnerTel's Netherlands-based network with 18 cities, throughout five countries in
Western Europe, including Brussels, Frankfurt, London, Paris and Madrid and we
have developed direct connections and bilateral interconnection agreements that
provide On-Net termination services in Germany, Belgium, France, Italy and the
United Kingdom.
Moreover, to provide our European customers with access to North
America, we have further expanded our network by (i) acquiring IRUs for STM-1s
on AC-1 which will provide EnerTel's network with access to North America and
(ii) installing DMS GSP international gateway switches in London, New York and
Miami. In addition, we are currently conducting one of the first commercial
trials of Lucent's PacketStar 6400 IP switches in both New York and London. The
Lucent PacketStar may enable us to be one of the first carriers to offer
"Internet by-pass" (a fast, high-quality transmission alternative to highly
congested segments of the traditional Internet) on a commercial scale by routing
a customer's traffic over our network.
In 1996, EnerTel was granted one of two licenses to install and
operate, as an alternative to the Netherlands' PTT, a public nation-wide fixed
telecommunications network. Under a new telecommunications law recently enacted
in the Netherlands, all telecommunications licenses, including EnerTel's public
nation-wide infrastructure license, were automatically converted into a
registration. At the time it received its nation-wide license, EnerTel was
subject to four statutory licensing conditions. The current network meets the
requirements of the first two of these conditions. The third license condition
required the EnerTel network, by November 20, 2000, to (i) cover all
municipalities of over 80,000 inhabitants, (ii) have at least one point of
presence in municipalities of over 25,000 inhabitants and (iii) have at least
one point of presence on industry premises of over 30 hectares. The fourth
license condition required EnerTel to have full infrastructure coverage in the
Netherlands for the purpose of providing leased lines to anyone in the
Netherlands by November 20, 2001. EnerTel believes that, as a result of the new
telecommunications law in the Netherlands, it is no longer subject to these
statutory licensing conditions or, alternatively, that such conditions are no
longer enforceable. While EnerTel believes that its conclusions in this regard
are well founded, there can be no assurance that the Netherlands' government may
not attempt to enforce the conditions in the future.
BILATERAL AND INTERCONNECTION AGREEMENTS
In order to complement our On-Net assets and broaden our reach in and
to markets, we have entered into or are negotiating interconnection agreements,
certain of which are bilateral agreements. The following table sets forth the
parties, countries of origination and termination, and brief descriptions of our
significant existing bilateral and interconnection relationships:
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BILATERAL AND INTERCONNECTION RELATIONSHIPS
<TABLE>
<CAPTION>
PARTY COUNTRIES SERVED NATURE OF AGREEMENT
- ----- ---------------- -------------------
<S> <C> <C>
KPN Telecom The Netherlands Interconnection between the EnerTel network and KPN
Telecom providing origination and termination throughout
the Netherlands.
Regional utility The Netherlands Interconnection between the EnerTel network and the
companies networks of the regional utility companies providing
origination and termination.
Deutsche Telekom Germany/The Netherlands Interconnection between the EnerTel network and Deutsche
Telekom for switched services.
Belgacom Belgium/The Netherlands Bilateral agreement; interconnection between the EnerTel
network and Belgacom covering switched services (switch
termination, 800/900 and private lines).
Cable & Wireless United Kingdom/The Bilateral agreement; interconnection between the EnerTel
Netherlands network and Cable & Wireless covering switched services
(switch termination, 800/900 and private lines).
Telecom Italia Italy and Mediterranean Bilateral agreement; interconnection between the EnerTel
Basin network and Telecom Italia covering switched services
(switch termination, 800/900 and private lines).
</TABLE>
NETWORK OPERATIONS AND INFORMATION SYSTEMS
We currently maintain a network operations center in Zwolle,
Netherlands (the "NOC") to oversee the EnerTel Network. The NOC provides network
element management, monitoring and maintenance, network registration and trouble
management, customer service (multilingual) and customer technical support
(multilingual). In conjunction with our European expansion, we expect to upgrade
this NOC during 1999 to provide these services to our network as it is developed
throughout Europe and to add the following functions:
- Umbrella Surveillance;
- C7 Management;
- Service Control Points ("SCPs") Database Management; and
- Remote Diagnostics.
In addition, Nortel provides first level project management and
maintenance support for our international gateway switches in London, New York
and Miami, pursuant to a turn-key installation and maintenance agreement. We
directly monitor and maintain all other components of our network.
We also utilize proprietary information systems to monitor and manage
our international distributors. These information systems provide us with call
records, network utilization and performance data, billing and invoicing
information, and customer provisioning and support functions. In some cases, our
international distributors also have access to a portion of these databases in
order to perform customer support at a local level for our worldwide customers.
We have also developed a web-based corporate intranet which we use for secure
internal communications and for coordinating all of our administrative,
financial, and operational management on a global basis.
BILLING SYSTEMS
Like all telecommunications carriers, we are dependent on effective
billing and management information systems to monitor and control cash flows and
network costs. EnerTel's switch mediation systems and provisioning systems are
provided by Comptel, and its inter-operator billing systems are provided by
Prospero. EnerTel utilizes a billing system supplied by Saville Systems. The
Saville system is a browser-based billing system that provides call
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rating, invoicing, fraud detection and security. We plan to expand the licenses
for the billing system to include our operations beyond the Netherlands.
Outside of the Netherlands, we use our proprietary information system
for general billing and invoicing, as well as for call rating and recording and
billing and invoicing information associated with our carrier expansion outside
the Netherlands. Billing for switched services is provided through a combination
of internal systems and outsourced services and billing for international
private lines, dedicated circuits and global enhanced services is performed
internally.
Our dedicated circuit customers typically pay a flat monthly fee based
on the amount of bandwidth purchased, the distance of the transport required and
other factors. Our calling card and other long distance services are either (i)
prepaid in advance, (ii) invoiced for payment or (iii) paid for by regular
debits that we make from the customer's credit card or bank draft accounts. In
some cases, we require customers to post deposits, letters of credit or other
financial instruments in order to reduce our exposure to bad debts and
non-payment.
SALES AND MARKETING
We have developed a global sales, marketing and service organization to
market our portfolio of telecommunications products to carriers and corporate
customers worldwide. In particular, in Europe and the United States we have
recruited proven sales professionals with well-developed business relationships
in the international long distance industry. Our global sales force currently
consists of 18 direct sales people, and approximately 190 wholesale resellers
and 285 agents. Our direct sales people have extensive experience in the
telecommunications industry, at entities which include Frontier, MCI WorldCom,
Cable & Wireless, Qwest Communications and Sprint. Our sales and marketing
strategy consists primarily of direct sales to carriers, ISPs, information
service providers, corporations, and systems integrators. We also use indirect
sales through various sales channels, including private branch exchange ("PBX")
manufacturers and resellers. For the medium sized corporate market, we primarily
rely on indirect sales through PBX and other resellers.
We utilize our independent sales agents and distributors to achieve
early market entry in international markets. We believe that the use of these
qualified local, third-party sales agents and distributors is a cost effective
means to establish or expand sales operations in new markets. To enhance our
sales and marketing efforts, we also are a member of various telecommunications
industry associations, including the European Competitive Telecommunications
Association (ECTA), the Telecommunications Reseller Association (TRA) and
CompTel. In addition, we are a corporate sponsor of Internet2, a project of the
University Corporation for Advanced Internet Development.
PRODUCTS
We offer a broad range of voice, data, video and Internet products and
services to customers both within the Netherlands and throughout Europe. Such
services include our switched services, dedicated services, switch partitioning,
virtual points of presence, telehousing and colocation opportunities, and
switchless resale services that we offer carriers, ISPs and business customers.
We believe that this broad product portfolio differentiates us from most
competitors who offer some, but not all, of such products and services. In
addition we offer these customers additional services such as international
calling cards and international operator services.
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<PAGE> 11
The following is a summary of the products we currently offer in
Europe:
<TABLE>
<CAPTION>
Target Market
-----------------------------------------
Carrier ISP Business
------- --- --------
<S> <C> <C> <C>
Dedicated Services - Leased Lines X X X
Dedicated Services - IRU Sales X X X
Dedicated Services - Direct Access X
Colocation/Virtual Switching X X
Switched Voice Products X
Switched Voice - 800/900 X X X
VPOP X X X
Switchless Resales/Carrier Select Hosting X X
International Calling Cards X X
Callback Services X
ATM Services X
Voice/Fax Over IP (to be introduced in 1999) X X X
World IP Port (to be introduced in 1999) X X X
IP VPN (to be introduced in 1999) X X X
</TABLE>
We also offer leased lines, IRU sales, colocation/virtual switching,
switched voice, international calling cards, callback services and voice over IP
products and services in the United States and plan to introduce fax over IP and
World IP Port products in the United States in 1999. In Latin America and Asia,
we offer international calling card, debit card and call back based products.
Dedicated Services
Our network design and network access agreements enable us to offer
leased or sold (IRU) bandwidth in most cities in Europe and the United States.
In addition, leased line services will include our planned offering of
tail-circuit services to trans-Atlantic undersea cable customers which will
provide connections between the landing point and the carrier's leased lines or
switches within the applicable country. We primarily provide dedicated
international bandwidth in increments such as DS-3 and E-1 between our major
points of presence in Europe and the United States, where we have installed
DMS-GSP switches and entered into capacity purchase agreements with other
network providers. In addition, EnerTel provides digital leased lines within the
Netherlands for carriers and corporations in increments of E-1 (2 Mbs), E-3 (34
Mbs) and STM-1 (55 Mbs). Each STM-1 of capacity on our network is the equivalent
of three DS-3s or 63 E-1s. As of December 31, 1998, we served 800 Mbs of
dedicated service capacity and had another 600 Mbs of capacity contracted for on
our network.
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<PAGE> 12
EnerTel provides 30-channel digital trunk lines for large businesses,
which are based on Euro-ISDN specifications. ISDN-30 services enable customers
to access the EnerTel network directly from PBXs and other customer premises
equipment, thereby enabling EnerTel to compete with KPN Telecom for direct
access switched services. Through the PBX connection, EnerTel believes it can
capture a large portion of its business customers' national and international
long distance traffic. EnerTel utilizes its own network facilities,
interconnection agreements and international operating agreements to provide
domestic and international termination of customer calls on a least cost routing
basis.
Colocation/Virtual Switching
Our colocation, switch room leasing and management, and switch
partitioning products enable us to provide carrier customers with a turn-key
network service package at the same time that we generate additional
transmission traffic for our switched voice, dedicated and data services. We
provide these products and services at our international switching locations in
New York, Amsterdam and London. In addition, we expect to offer such services at
additional regional locations where we establish network points of presence.
Switched Voice Products
We offer carriers, resellers and corporate customers switched
termination services for voice and fax telecommunications traffic traveling to
points worldwide. Our network design enables us to offer international
transmission services on a switched basis worldwide. Through undersea cable
ownership, interconnection agreements, and network development in certain
European markets, we have developed a number of international routes where our
market pricing for switched termination services is expected to be highly
competitive. In December 1998 we switched approximately 143 million minutes, 24
million of which were international switched minutes (originating principally in
and around Western Europe). As of February 17, 1999, we had pre-sold or signed
contracts representing at least 39 million minutes per month (based on customer
estimates) in international long distance traffic.
Switched Voice - 800/900 Services
EnerTel offers toll-free and premium services for both third party
information service providers as well as for corporate, carrier and ISP
customers.
Virtual Point of Presence (VPOP)
EnerTel utilizes its nationwide network to offer virtual Internet
dial-in service for ISPs, large corporate customers and resellers. Customers
utilizing this service can access the Internet through an ISP via the EnerTel
network through a single access number that can be dialed from nearly every
local calling area in the Netherlands. VPOP services have grown substantially
for EnerTel over the past year as a result of the rapid growth in utilization of
the Internet. EnerTel now provides its VPOP service to 45 of the Netherlands'
ISPs (including 21 of the Netherlands' 35 national ISPs).
Switchless Resales/Carrier Select Hosting
EnerTel provides wholesale network transmission services for resellers
in the Netherlands who provide residential and small and medium sized business
customers with calling services via proprietary access codes. EnerTel initiated
this business to continue to provide the transmission services for the
residential distribution business which it sold in 1998. EnerTel plans to expand
this product line by offering it to additional carriers and resellers in the
Netherlands.
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<PAGE> 13
International Calling Cards
Our international calling card products are marketed to carriers and to
business customers in Europe, the United States, Latin America and Asia,
primarily through international distributors and sales agents. We offer
international pre-paid calling cards, international credit card billed calling
cards, and international call back/direct access.
Our calling card customers access our network for domestic or
international long distance services by dialing a local access number or a
domestic or international toll-free number which connects the customer to our
network. The customer then dials an access code or personal identification
number (PIN) and, upon account verification, is able to dial a domestic or
international long distance call. In some cases customers utilize dialing
devices which automatically dial the accessed identification numbers.
Callback Services
Callback access enables a long distance customer to access a network
from locations where there are no in-country facilities or resale agreements.
The customer accesses the network from the customer's home or office by dialing
a long distance telephone number. The customer will receive a "call back" from
such number and can then use the network to connect to a desired location.
ATM Services
Our ATM products will enable corporate customers to interconnect their
offices for data and telecom traffic. Using ATM as an interconnection protocol,
a high capacity connection is delivered to the customer premises providing the
customer with bandwidth-on-demand. Compared to standard leased circuits, the
customer is able to better manage its network costs by purchasing on a usage,
rather than monthly, basis. We plan to introduce ATM services in 1999.
Voice/Fax Over IP
We are developing our network with advanced technology to provide
seamless transmission of voice and data across multiple protocols such as IP,
ATM and frame relay. To advance our IP capabilities, we are currently conducting
one of the first commercial trials of Lucent's PacketStar 6400 IP switches in
both New York and London. The Lucent PacketStar may enable us to be one of the
first carriers to offer, on a commercial scale, a fast, high-quality
transmission alternative to bypass the traditional Internet by routing a
customer's traffic over our network.
Based on the success of these IP switches, we intend to offer our Voice
Over IP and Fax Over IP products which will convert traditional circuit-switched
voice and fax transmissions into packets of data and route that data over an IP
network like the Internet or a private network. We will then convert that data
back to voice or fax on the other end for delivery to the called party. The
Voice Over IP product will be sold as a wholesale product that is complementary
to our switched voice services. We plan to introduce Voice and Fax Over IP
products in 1999.
World IP Port
World IP Port service is a new product which we intend to roll out in
1999. The product is an IP packet backbone transport service with full
connectivity to the global Internet. The product will be offered to ISPs and
carriers who wish to route traffic over our global multi-megabit backbone to the
networks with which we maintain direct connections. We believe that our
intercontinental network and direct peering agreements with other major backbone
network providers will provide customers with highly reliable, high speed
connectivity to major Internet hubs in the U.S. and Europe.
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<PAGE> 14
IP VPN
We intend to provide corporate and carrier customers with Internet
Protocol Virtual Private Network (IP VAN) services that can be used to provide
reliable, secure connections between their offices and customers. These products
will be sold in connection increments ranging from 2MB to 155MB, on a flat fee
or volume usage basis. We intend to offer several levels of quality of service,
depending on customer requirements. This product is expected to be rolled-out in
1999.
CUSTOMERS
We currently serve 45 of the Netherlands' ISPs (including 21 of the
Netherlands' 35 national ISPs), 133 medium and large sized corporate customers
and 10 carriers, distributors and resellers. We have also entered into contracts
with an additional 26 carriers, distributors and resellers, with services
expected to commence during the second quarter of 1999.
We are subject to significant concentrations of credit risk, which
consist primarily of trade accounts receivable. We sell a significant portion of
our services to other carriers and resellers and, consequently, maintain
significant receivable balances with certain customers. If the financial
condition and operations of these customers deteriorate below critical levels,
our operating results could be adversely affected. For the year ended December
31, 1998, one customer, United TeleKabel Holding, N.V., accounted for
approximately 15% of our total revenues.
Carriers
We categorize our carrier customers as follows: (i) Tier I and Tier II
carriers, including United States-based long distance carriers, (ii) PTTs, and
(iii) emerging alternative carriers, such as competitive local exchange carriers
and PTOs. We expect the number of potential carrier customers to increase
significantly as deregulation permits the start-up of alternative carriers and
encourages traditional operators to expand their services beyond their national
borders. The carrier customers we target typically operate their own networks in
domestic markets, and operate some infrastructure on international routes. We
expect that carriers will use our global network on international routes where
they do not have their own network infrastructure, where they require additional
"overflow" network capacity and where we are able to offer pricing or service
advantages.
Internet Service Providers
We currently serve 45 ISPs in the Netherlands that provide us with
national Internet traffic volumes exceeding 115 million minutes per month. ISPs
generally require high capacity bandwidth transport from their markets back to
the major Internet backbones in the United States. We currently provide our
Netherlands ISP customers with such transport to the Internet exchange in
Amsterdam. We believe ISPs will require increasing bandwidth within their own
continental markets as the Internet further develops, and ISPs and Internet
backbone providers ("IBPs") are potential primary users of our international
leased line and international Internet access and termination products.
In addition, in January 1999, EnerTel entered into an agreement to
participate as one of a select number of carriers in the GTE Internetworking,
Inc. ("GTEI") Alliance Program for international distribution of Internet access
products. Under this agreement, we may, at our option, provide Internet backbone
and virtual point-of-presence services over the global GTEI network. This
alliance program extends the global reach of our VPOP and Internet access
products for ISPs and corporate customers.
Corporations, Other Businesses and Institutional Customers
Corporate and other business customers' demand for high bandwidth
international telecommunications services is growing rapidly as a result of
economic globalization and the increasing utilization of bandwidth intensive
communications applications such as the Internet, intranets, videoconferencing,
and other multimedia
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<PAGE> 15
services. We believe that our services will appeal to large corporations because
of our responsiveness, competitive pricing, scalable bandwidth products, quality
of service and global network capability. Institutional customers are expected
to utilize us for direct network services, as well as domestic and international
long distance telecommunications services.
International Distributors and Resellers of Telecommunications Services
International distributors and resellers of telecommunications services
are just beginning to develop their operations in Europe in a process similar to
that which occurred in the United States in the years following the break-up of
AT&T in 1984. We believe our products will be attractive to distributors and
resellers who do not have their own international networks, or who only operate
switches in certain markets. We believe such distributors and resellers will
provide us with access to the large traffic volumes generated by retail customer
bases including small and medium businesses and residential customers.
COMPETITION
The international and national telecommunications markets in which we
operate are highly competitive. Until recently, telecommunications markets in
the Netherlands and throughout Europe have been dominated by the national PTTs.
Since the implementation of a series of European Community and World Trade
Organization directives beginning in 1990, the Netherlands and other western
European countries have started to liberalize their respective
telecommunications markets, thus permitting alternative telecommunications
providers to enter the market. Liberalization has coincided with technological
innovation to create an increasingly competitive market, characterized by
still-dominant PTTs as well as an increasing number of new market entrants. In
the Netherlands, we compete primarily with KPN Telecom. As the former monopolist
PTT provider of telecommunications services, KPN Telecom has an established
market presence, a fully-built network and financial and other resources that
are substantially greater than ours. In addition, various new providers of
telecommunications services have entered the market, targeting various segments.
Companies such as Telfort B.V. (a company which was formed by British Telecom
and Nederlandse Spoorwegen N.V., the Netherlands railroad company, and which
received the other nationwide telecommunications license which was issued in the
Netherlands) as well as Global One Communications, MCI WorldCom, Esprit Telecom
plc., COLT Telecom and VersaTel, compete with KPN Telecom and EnerTel in the
Netherlands for contracts with large multinational companies. Competition in the
Netherlands, as well as the European long distance telecommunications industry
in general, is driven by numerous factors, including price, customer service,
type and quality of services and customer relationships.
In other foreign markets, we compete with dominant national telephone
companies, and other major incumbent carriers. In addition, we compete with
other emerging U.S. and international carriers attempting to enter these markets
and with local resellers and marketers of long distance services. In the United
States, we compete against a wide variety of market participants ranging from
dominant Tier I carriers, large Tier II facilities-based carriers, switched and
switchless resellers of long distance services and hundreds of other marketers
and distributors of long distance, calling card and other telecommunications
services.
In the markets where we operate, we face competition from companies
with resources greater than ours and with longer operating histories in the
local market. To compete effectively, we must do so on the basis of factors such
as: (i) network design and costs, (ii) effective utilization of emerging
technologies such as IP, (iii) competitive pricing and rates, (iv) quality of
service, (v) ease and convenience of access, (vi) customer service and support,
(vii) quality of local distributors and sales agents, (viii) understanding of
the marketplace, (ix) ability to attract and retain qualified employees and (x)
customer acquisition and retention.
COMPANY BACKGROUND
WorldPort was originally organized as a Colorado corporation under the
name Sage Resources, Inc. in January 1989 to evaluate, structure and complete
mergers with, or acquisitions of, other companies. We remained inactive until
1996 when our domicile was changed to Delaware and our name was changed to
WorldPort
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<PAGE> 16
Communications, Inc.
We primarily operate through a number of acquired subsidiaries that
operate in Europe, the United States, Latin America and Asia. In addition to our
acquisition of EnerTel, the significant acquisitions we have completed since our
formation are described below:
- - In June 1997, our wholly-owned subsidiary, Telenational
Communications, Inc. ("TNC") acquired substantially all of the
telecommunications assets and operations of Telenational
Communications Limited Partnership, a Nebraska limited partnership.
The purchased assets included telecommunications switches and other
network equipment, customer and vendor contracts, an FCC section 214
common carrier license and an operator services center. The FCC
section 214 common carrier license gives us the authority to resell
both international switched and private line services of authorized
carriers.
- - In April 1998, our wholly-owned subsidiary, WorldPort/ICX, Inc.
("ICX") acquired the telecommunications assets and operations of
Intercontinental Exchange, a licensed provider of international
telecommunications services headquartered in the San Francisco Bay
area.
- - In August 1998, we acquired the operations of International
InterConnect, Inc. ("IIC"), a Florida-based corporation specializing
in international long distance services which are marketed through
international distributors primarily in Latin America to multinational
corporations, foreign embassies, businesses and other high volume
customers. The telecommunications assets of IIC which we acquired
include network switching equipment, international private lines and
other leased circuits between the United States and countries in Latin
America, and other telecommunications equipment.
Through our non-European subsidiaries, we provide international
pre-paid and credit card billed calling card products and international call
back/direct access to carriers and business customers in the United States,
Europe, Latin America and Asia-Pacific. In particular, IIC specializes in
providing international long distance services, which are marketed through
international distributors primarily in Latin America. IIC's end-user customer
base consists primarily of multinational corporations, foreign embassies,
businesses, and other high volume customers. Through ICX, we operate a
trans-Pacific leased circuit and a network node located in Japan. ICX has a
customer base of international distributors serving customers in Japan
(including a U.S. military base), Singapore, Thailand, New Zealand and
Indonesia, as well as international distributors in Latin America, India, Africa
and Europe. TNC provides calling card and call back services, primarily to
customers in Europe, and its network (through its switching and operator
services center in Omaha, Nebraska) now switches the traffic generated by ICX.
For the three months ended December 31, 1998, and the year ended December 31,
1998, our revenues from these operations totaled $3.9 million and $10.3 million,
respectively.
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EMPLOYEES
As of January 31, 1999, we had 264 full-time employees and 18 part-time
employees in the following categories:
<TABLE>
<CAPTION>
Management and
Technical Sales and Marketing Administration
--------- ------------------- --------------
<S> <C> <C> <C>
Europe
Full-time employees 71 35 34
Part-time employees 6 3 3
United States
Full-time employees 33 27 64
Part-time employees -- -- 6
--- -- ---
Total .................. 110 65 107
</TABLE>
We have never experienced a work stoppage, and none of our employees
are represented by a labor union or covered by a collective bargaining
agreement. We consider our employee relations to be excellent.
GOVERNMENT REGULATION
Our networks and telecommunications services are subject to significant
United States and foreign laws, regulations, treaties, agency actions and court
decisions. National and local laws and regulations governing the provision of
telecommunications services differ significantly among the countries in which we
currently operate and intend to operate. The interpretation and enforcement of
these laws and regulations can be unpredictable, is often subject to informal
views of government officials and ministries that regulate telecommunications in
each country and could limit our ability to provide certain telecommunications
services in certain markets. Future regulatory, judicial and legislative changes
could have a material adverse effect on our operations. In addition, domestic or
international regulators or third parties could raise material issues with
regard to our compliance or noncompliance with applicable laws and regulations,
possibly having a material adverse effect on our business, financial condition
and results of operation.
INTERNATIONAL REGULATION
GENERAL. In some countries where we operate or plan to operate, local
laws or regulations limit the ability of telecommunications companies to provide
basic international telecommunications services in competition with state-owned
or state-sanctioned monopoly carriers. Future regulatory, judicial, legislative
or political changes may not permit us to offer to residents of such countries
all or any of our services. Further, regulators or third parties could raise
material issues regarding our compliance with applicable laws or regulations,
possibly having a material adverse effect on our business, financial condition
and results of operations. If we are unable to provide the services that we
presently provide or intend to provide or to use our existing or contemplated
transmission methods due to our inability to obtain or retain the requisite
governmental approvals for such services or transmission methods, or for any
other reason related to regulatory compliance or lack thereof, such developments
could have a material adverse effect on our business, financial condition and
results of operations.
A summary discussion of the regulatory frameworks in certain countries
in which we operate or have targeted for penetration is set forth below. This
discussion is intended to provide a general outline of the more relevant
regulations and current regulatory postures of the various jurisdictions and is
not intended as a comprehensive discussion of such regulations or regulatory
postures. Local laws and regulations differ significantly among the
jurisdictions in which we operate, and, within such jurisdictions, the
interpretation and enforcement of such laws and regulations can be
unpredictable.
THE NETHERLANDS. Originally, under the former Netherlands
telecommunications legislation, KPN Telecom held an exclusive
concession to install and operate a nation-wide fixed
telecommunications infrastructure. On
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<PAGE> 18
November 20, 1996 two other companies, EnerTel and Telfort (a joint
venture of British Telecom and Netherlands' Railways) pursuant to the
Cable Based Infrastructure Licensing Act, were each granted a license
to install and operate, as an alternative to KPN Telecom's
infrastructure, a public nation-wide fixed telecommunications network.
As public nation-wide infrastructure license holders, KPN Telecom,
EnerTel and Telfort were subject to four statutory licensing
conditions. EnerTel's current network meets the requirements of the
first two of these conditions. The third license condition required the
EnerTel network, by November 20, 2000, to (i) cover all municipalities
of over 80,000 inhabitants, (ii) have at least one point of presence in
municipalities of over 25,000 inhabitants and (iii) have at least one
point of presence on industry premises of over 30 hectares. The fourth
license condition required EnerTel to have full infrastructure coverage
in the Netherlands for the purpose of providing leased lines to anyone
in the Netherlands by November 20, 2001. EnerTel believes that, as a
result of the new telecommunications law in the Netherlands (described
below) it is no longer subject to these statutory licensing conditions
or, alternatively, that such conditions are no longer enforceable.
While EnerTel believes that its conclusions in this regard are well
founded, there can be no assurance that the Netherlands' government may
not attempt to enforce the conditions in the future.
The European Union's ("EU's") policy of full liberalization of
its telecommunications markets (including the Netherlands) became
effective on January 1, 1998. In order to fully comply with these EU
obligations a new Telecommunications Act entered into force in the
Netherlands on December 15, 1998. Under this new Telecommunications
Act, with the exception of the use of network frequencies, all
licensing requirements were abolished (including those pursuant to
which EnerTel obtained its license) and replaced by a registration
requirement. Registration requirements apply to the provision of public
telecommunications services, the installation or operation of leased
lines, the installation or operation of broadcasting networks, and the
provision of conditional access to these networks. Under the new law,
EnerTel's public nation-wide infrastructure license was automatically
converted into a registration.
The new law provides statutory rights of way and retention of
cable ownership for all operators of public telecommunications
networks. Also, this law provides for interconnection obligations for
all public telecommunications network operators, Netherlands and
foreign-based, that control access to end-users. Operators having
significant market power (i.e., over 25% market share) are required to
provide interconnection on a non-discriminatory basis and at
transparent, itemized, and cost-based prices. Similar obligations exist
for special access and leased lines.
The new Telecommunications Act further provides for the
determination of number plans by the Minister and number allocation to
registered parties, ONP-provisions, various forms of number
portability, designation of a universal service obligation, and
specific financing requirements.
Since August 1997, most of the supervisory, enforcement,
licensing, registration, and interconnection dispute settlement powers
are with Onafhankelijke Post en Telecommunicatie Autoriteit (OPTA), an
independent supervisory and regulatory body.
EUROPEAN UNION. The EU consists of the following member
states: Austria, Belgium, Denmark, Finland, France, Germany, Greece,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden
and the United Kingdom. EU member states are required to implement
directives issued by the European Commission ("EC") and the European
Council by passing national legislation. If an EU member state fails to
effect such directives with national or, as the case may be, regional
or local, legislation and/or fails to render the provisions of such
directives effective within its territory, the EC may take action
against the EU member state, including in proceedings before the
European Court of Justice, to enforce the directives. Private parties
may also, in certain cases, bring actions against EU member states for
failure to implement such legislation.
The EC and European Council have issued a number of key
directives establishing basic principles for the liberalization of the
EU telecommunications market. The general framework for this
liberalized environment has been set out in the EC's Services Directive
(the "Services Directive") and its subsequent amendments, including, in
particular, the Full Competition Directive, which was adopted in March
1996 (the "Full
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Competition Directive"). This basic framework has been advanced by a
series of harmonization directives, which include the so-called Open
Network Provision directives, as well as two additional directives
adopted in 1997, the Licensing Directive of April 1997 and the
Interconnection Directive of June 1997, which address the achievement
of universal service.
The Services Directive directed EU member nations to permit
the competitive provision of all telecommunications services with the
exception of the direct transport and switching of speech in real-time
between switched network termination points ("Voice Telephony") (and
not including value-added services and voice services within closed
user groups) and certain other services that have been gradually
liberalized through subsequent amendments to the Services Directive.
Historically, European countries have prohibited Voice Telephony by
foreign carriers. The EC has taken a narrow view of the services
classified as Voice Telephony, declaring that member states may not
maintain monopolies or special operating rights on voice services that
(i) confer new value-added benefits on users (e.g., alternative billing
methods); (ii) are provided through dedicated customer access (e.g.,
leased lines); or (iii) are limited to a group having legal, economic
or professional ties.
The Full Competition Directive amended the Services Directive
to set January 1, 1998 as the date by which all EU member countries
were required to remove all remaining restrictions on the provision of
telecommunications services and telecommunications infrastructure,
including Voice Telephony. Certain limited derogations from compliance
with this timetable have been granted.
The Licensing Directive sets forth rules for the procedures
associated with the granting of national authorizations for the
provision of telecommunications services and for the establishment and
operation of any infrastructure for the provision of telecommunications
services. It distinguishes between "general authorizations," which
should typically be easier to obtain because they do not require an
explicit decision by the national regulatory authority, and "individual
licenses." Individual licenses may only be imposed where the licensee
is to acquire access to scarce resources (for example, radio spectrum)
or is to be subject to particular obligations or benefits from
particular rights. Accordingly, EU member countries may impose
individual license requirements for the establishment of
facilities-based networks and for the provision of Voice Telephony,
among other things. Consequently, our development of a European network
may require that we be subject to an individual licensing system rather
than to a general authorization in the majority of EU member countries.
The Interconnection Directive sets forth the regulatory
framework for securing in the EU the interconnection of
telecommunications networks. The Interconnection Directive requires EU
member countries to remove restrictions preventing negotiation of
interconnection agreements, ensure that interconnection requirements
are non-discriminatory and transparent and ensure adequate and
efficient interconnection for public telecommunications networks and
publicly available telecommunications services. Numerous EU member
countries have chosen to apply the provisions of the Interconnection
Directive within their jurisdictions in such a way as to give more
favorable treatment to facilities-based providers and network operators
than to switch-based carriers and resellers.
The Interconnection Directive is due to be amended in the near
future to require EU member countries, except those for whom
derogations exist, to offer carrier pre-selection to their customers by
January 1, 2000, and to introduce number portability for subscribers on
the public switched telephone network by January 1, 2000. Carrier
pre-selection is required to be made available only by operators that
enjoy significant market power within the market for interconnection
over the fixed network.
Each EU member country in which we currently conduct our
business may apply these Directives in a different fashion and has a
different regulatory regime, and such differences are expected to
endure. The requirements for us to obtain necessary approvals for
operation vary considerably from country to country.
UNITED KINGDOM. The Telecommunications Act of 1984 (the "UK
Act") provides a licensing and
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<PAGE> 20
regulatory framework for telecommunications activities in the United
Kingdom. The Secretary of State of Trade and Industry at the Department
of Trade and Industry (the "Secretary of Trade") is responsible for
granting licenses under the UK Act and for overseeing
telecommunications policy. At the same time, the Director General of
Telecommunications (the "Director General") is responsible for, among
other things, enforcing the terms of such licenses. The Director
General will recommend the grant of a license to operate a
telecommunications network to any applicant that the Director General
believes has a reasonable business plan, the necessary financial
resources and where there are no overriding considerations against the
grant of license.
Since 1992, the United Kingdom has permitted competition in
the provision of international services over leased lines where all
calls originate over the public switched telephone network ("PSTN") on
certain specified routes. The government revoked all ISR Licenses in
December 1997, and all holders were required to re-apply to the
Secretary of Trade to be registered under the new International Simple
Voice Resale License ("ISVR"), which authorizes the provision of
international simple voice resale. International voice calls that pass
over the PSTN at one end only can be provided under a
Telecommunications Class License. In addition, in December 1996, the
United Kingdom introduced the International Facilities License ("IFL"),
which authorizes holders to provider international telecommunications
services over their own international infrastructure.
UNITED STATES REGULATION
OVERVIEW. Our provision of international service to, from and through
the United States generally is subject to the provisions of the Communications
Act of 1934, as amended (the "Communications Act"), and the 1996
Telecommunications Act (the "1996 Act") and to regulation by the FCC. Section
214 of the Communications Act requires a company to make application to and
receive authorization from the FCC prior to leasing international capacity,
acquiring international facilities, purchasing switched minutes or providing
international service to the public. In this regard, we offer telecommunications
service pursuant to a FCC authorization under Section 214 ("Section 214
Authorization"). In addition, the FCC rules require prior Commission approval
before transferring control of or assigning FCC licenses and impose various
reporting and filing requirements upon companies providing international
services under an FCC authorization. We must file reports and contracts with the
FCC and must pay regulatory fees that are continually subject to change. We are
also subject to the specific FCC policies and rules discussed below. In
addition, by its own actions or in response to a third party's filing, the FCC
could determine that our services, termination agreements, agreements with
foreign carriers or reports do not or did not comply with the FCC rules. If this
were to occur, the FCC could order us to terminate non-compliant arrangements,
fine us or revoke our FCC authorizations. Any of these actions could have a
material adverse effect upon our business, operating results and financial
condition.
INTERNATIONAL TRAFFIC. Under the World Trade Organization Basic Telecom
Agreement (the "WTO Agreement"), concluded on February 15, 1997, sixty-nine
nations comprising 95% of the global market for basic telecommunications
services agreed to permit competition from foreign carriers. In addition,
fifty-nine of these countries have subscribed to specific procompetitive
regulatory principles. The WTO Agreement became effective on February 5, 1998
and is expected to be implemented by the signatory countries by 2002. We believe
that the WTO Agreement will increase opportunities for us and our competitors.
However, the precise scope and timing of the implementation of the WTO Agreement
remain uncertain and there can be no assurance that the WTO Agreement will
result in beneficial regulatory liberalization.
THE FCC'S POLICIES ON CALL-BACK SERVICE. We offer service by means of
call-reorigination or call-back pursuant to our FCC authorization under Section
214 and certain relevant FCC decisions. A small and diminishing percentage of
our revenues are generated in this way. Call-back service allows a customer in a
foreign country to use foreign facilities to dial a telephone number in the
United States and receive dial tone at a switch at the reseller's United States
location, which the customer can then use to place a call via an outbound
switched service of a United States carrier. The through calls are then billed
at the United States-tariffed rates. The FCC has determined that international
call-reorigination or call-back service using uncompleted call signaling does
not violate United States or international law. The FCC held, however, that
United States call-back providers are not authorized to provide service to
customers in countries that expressly have declared it to be illegal. Further,
United States companies
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<PAGE> 21
providing such services must comply with the laws of the countries in which they
operate as a condition of their Section 214 authorizations. The FCC reserves the
right to condition, modify or revoke any Section 214 authorization and impose
fines for violations of the Communications Act or FCC regulations, rules or
policies promulgated thereunder or for violations of the clear and explicit
telecommunications laws of other countries that are unable to enforce their laws
against United States carriers. FCC policy provides that foreign governments
that satisfy certain conditions may request FCC assistance in enforcing their
laws. Thus, the FCC has stated that it would be prepared to receive
documentation from any government that seeks to put United States carriers on
notice that call-back using uncompleted call signaling has been declared
expressly illegal in its territory and that it would consider enforcement action
against companies based in the United States that provide international
call-back service using uncompleted call signaling. There can be no assurance
that the FCC will not take action to limit the provision of call-back services.
Enforcement action could include an order to cease providing call-back services
in certain countries, the imposition of one or more restrictions upon us,
monetary fines, or, ultimately, the revocation of our Section 214 authorization
and could have a material adverse effect upon our business, financial condition
and results of operation.
THE FCC'S PRIVATE LINE RESALE POLICY. The FCC's international private
line resale policy has traditionally limited the conditions under which a
carrier may connect international private lines ("IPL") to the PSTN at one or
both ends to provide switched services, commonly known as International Simple
Resale ("ISR"). The FCC historically has required that, when a carrier seeks to
reroute switched telephone traffic over IPLs interconnected to the PSTN at
either end, the carrier must obtain separate Section 214 authorization by
demonstrating that the destination country affords resale opportunities
"equivalent" to those available under United States law. In November 1997, the
FCC adopted a new order (the "Foreign Participation Order"), which became
effective in February 1998, eliminating the equivalency test with respect to
applications to provide switched resale services over private lines between the
United States and WTO member countries. Thus, pursuant to their Section 214
authorization, carriers are authorized to provide switched services to member
WTO countries over international private lines. A carrier's provision of
switched services over either facilities-based or resold IPLs, however, remains
subject to the conditions set forth in the FCC's International Settlements
Policy described below. Petitions for reconsideration of the Foreign
Participation Order are pending at the FCC.
THE FCC'S INTERNATIONAL SETTLEMENTS POLICY. We also are required to
conduct our international facilities-based and resale businesses in compliance
with the FCC's international settlements policy (the "ISP"). The ISP governs the
international settlement rates that United States carriers pay foreign carriers
to terminate international telecommunications traffic originating in the United
States. The FCC adopted new rules regarding ISP rates that became effective on
January 1, 1998 (the "International Settlement Rates Order"). The international
accounting rate system allows a United States facilities-based carrier to
negotiate an "accounting rate" with a foreign carrier for handling each minute
of international telephone service. Each carrier's portion of the accounting
rate (usually one half) is referred to as the settlement rate. The new
International Settlement Rates Order generally requires United States
facilities-based carriers to negotiate settlement rates with their foreign
correspondent at no greater than FCC established "benchmark" prices.
Historically, international settlement rates have vastly exceeded the costs of
carrying telecommunications traffic. In addition, the International Settlement
Rates Order imposes new conditions upon certain carriers. First, the FCC
conditioned facilities-based authorizations for service on a route on which a
carrier has a foreign affiliate upon the foreign affiliate offering all other
United States carriers a settlement at or below the relevant benchmark rate.
Second, the FCC conditioned any authorization to provide switched services over
either facilities-based or resold international private lines upon the condition
that at least fifty percent of the facilities-based international telephone
service traffic on the subject route is settled at or below the relevant
benchmark rate. This condition applies whether or not the licensee has a foreign
affiliate on the route in question. Under the Foreign Participation Order
described above, however, if the subject route does not comply with the
benchmark requirement, a carrier can receive authorization by demonstrating that
the foreign country provides "equivalent" resale opportunities. Accordingly, we
are permitted to resell private lines for the provision of switched services to
any country that either has been found by the FCC to comply with the benchmarks
or has been determined to be equivalent. The United States Court of Appeal for
the District of Columbia Circuit recently affirmed the International Settlement
Rates Order in all respects. The Order, however, could be appealed further, and
we cannot predict the outcome of an additional appeal or its possible impact on
our operations.
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<PAGE> 22
THE FCC'S POLICIES ON TRANSIT AND REFILE. The FCC in 1995 was asked to
limit or prohibit the practice whereby a carrier routes, through its facilities
in a third country, traffic originating in one country and destined for another
country. The FCC has permitted third country calling where all countries
involved consent to the routing arrangements (referred to as "transiting").
Under certain arrangements referred to as "refiling," the carrier in the
destination country does not consent to receiving traffic from the originating
country and does not realize the traffic it receives from the third country is
actually originating from a different country. The 1995 petition to prohibit
refiling was withdrawn, and, accordingly, the FCC has never issued a ruling as
to whether refiling arrangements are inconsistent with federal law. It is
possible that the FCC could determine that refiling violates United States
and/or international law, which could have a material adverse effect on our
business, financial condition and results of operations.
THE FCC'S TARIFF REQUIREMENTS FOR INTERNATIONAL LONG DISTANCE SERVICES.
We are required to file with the FCC a tariff containing the rates, terms and
conditions applicable to its international telecommunications services. We also
are required to file with the FCC any agreements with customers containing
rates, terms and conditions for international telecommunications services if
those rates, terms and conditions are different than those contained in our
filed tariff. If we charge rates other than those set forth in or otherwise
violate our filed tariff or a filed customer agreement or fail to file with the
FCC carrier-to-carrier agreements, the FCC or a third party could bring an
action against us, which could result in a fine, a judgment or other penalties,
which could have a material adverse effect on our business, financial condition
and results of operations.
RECENT AND POTENTIAL FCC ACTIONS. Regulatory action that may be taken
in the future by the FCC may intensify competition, impose additional operating
costs, disrupt transmission arrangements or otherwise require us to modify our
operations. The FCC recently adopted certain changes in its rules designed to
permit alternative arrangements outside of its ISP as a means of encouraging
competition and achieving lower, cost-based accounting and collection rates as
more facilities-based competition is permitted in foreign markets. Specifically,
the FCC has decided to allow United States carriers, subject to certain
competitive safeguards, to propose methods to pay for international call
termination that deviate from traditional bilateral accounting rates and the
ISP. In addition, the International Settlement Rates Order established lower
benchmarks that United States carriers will pay foreign carriers for the
termination of international services. Although these rule changes may provide
us with more flexibility to respond more rapidly to changes in the global
telecommunications market, they also will provide the same flexibility to our
competitors.
ITEM 2. PROPERTIES
Our principal offices are located in the Atlanta, Georgia area and are
leased pursuant to an agreement which expires in June 2003. We also lease
approximately 11,000 square feet of office and operating space in Omaha,
Nebraska for our U.S. operating center pursuant to an agreement which expires in
June 2001 and approximately 69,000 square feet of office and operating space in
Rockledge, Florida pursuant to an agreement which expires in August 2008.
EnerTel leases office and operational space in Rotterdam and other cities in the
Netherlands, pursuant to leases expiring at various dates from 1999 to 2006.
We own telecommunications switching and peripheral equipment located in
various sites in Europe and the United States. Certain of our property and
equipment is subject to liens securing payment of portions of our indebtedness.
You should see Note 6 to the Consolidated Financial Statements included
elsewhere herein for information with respect to lease obligations on these
properties.
We believe that our property and equipment are well maintained and
adequate to support our current needs, although substantial investments are
expected to be made in additional property and equipment for expansion and in
connection with corporate development activities.
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<PAGE> 23
ITEM 3. LEGAL PROCEEDINGS
On April 17, 1998, we were served with a summons and complaint from MC
Liquidating Corporation f/k/a MIDCOM Communications, Inc. ("MIDCOM"). Both we
and TNC, our 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 one of our former
directors. 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 us, together with
other damages, attorney fees and costs. We believe the claims are without merit
and intend to vigorously defend against them.
On June 2, 1998 we initiated an arbitration proceeding against John W.
Dalton ("Dalton"), a former director, and our former President and Chief
Executive Officer. In that proceeding, we are seeking the rescission and
cancellation of 1.2 million shares of our Common Stock that were issued to
Dalton in connection with our acquisition of a company formerly owned by Dalton.
In the same proceeding, Dalton is asserting claims against us, Maroon Bells
Capital Partners, Inc. ("MBCP"), Paul A. Moore (our Chairman and Chief Executive
Officer), Phillip S. Magiera (a director and our Chief Financial Officer and
Secretary), Dan Wickersham (our former President and Chief Operating Officer)
and Theodore H. Swindells (a principal of MBCP). Dalton's employment was
terminated by notice dated 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 we filed, that proceeding
was dismissed by the Texas court in favor of arbitration. We plan to prosecute
our claims against Dalton vigorously and to vigorously defend against the claims
asserted by Dalton.
We and WorldPort Communications Europe, B.V., one of our European
subsidiaries ("WorldPort Europe"), are defendants in litigation filed in the
Sub-District and District courts of The Hague, located in Rotterdam,
Netherlands. The cases, filed in January and February, 1999, by Mr. Bahman
Zolfagharpour, allege that we breached agreements with Mr. Zolfagharpour in
connection with our purchase of MathComp B.V. (now WorldPort Europe) from Mr.
Zolfagharpour, our subsequent purchase of EnerTel, and Mr. Zolfagharpour's
employment agreement with WorldPort Europe. The litigation seeks dissolution of
the employment agreement and the non-competition clause of the agreement,
damages in an amount exceeding $20 million, and the award of 2,500,000 shares of
our common stock to Mr. Zolfagharpour. We believe that the litigation is wholly
without merit and intend to defend the case vigorously.
From time to time, we are involved in various other lawsuits or claims
arising from the normal course of business. In the opinion of management, none
of such other lawsuits or claims will have a material adverse effect on our
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable
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<PAGE> 24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock has traded on the Nasdaq SmallCap Market under the
symbol "WRDP" since November 23, 1998. From June 17, 1997 until November 23,
1998, our Common Stock traded on the OTC Bulletin Board operated by The National
Association of Securities Dealers, Inc. Prior to June 17, 1997, there was no
public market for our Common Stock. The table below sets forth the high and low
sales prices for our Common Stock (as reported on the Nasdaq SmallCap Market
since November 23, 1998 and on the OTC from June 17, 1997 to November 23, 1998)
during the periods indicated. The OTC quotations reflect high and low bid
information and reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
-----------------------
HIGH LOW
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
Second Quarter (from June 17, 1997) ...... $ 3.625 $ 2.000
Third Quarter ............................ 4.750 3.250
Fourth Quarter ........................... 7.375 4.500
YEAR ENDED DECEMBER 31, 1998:
First Quarter ............................ 7.620 6.500
Second Quarter ........................... 14.500 6.750
Third Quarter ............................ 17.500 8.750
Fourth Quarter (through November 20, 1998) 11.125 6.750
Fourth Quarter (since November 23, 1998) . 10.875 7.500
</TABLE>
As of March 1, 1999, there were approximately 160 stockholders of
record of our Common Stock.
We have never declared or paid any cash dividends on our capital stock,
although our Series A Preferred Stock has been accruing dividends since
issuance. In addition, our current credit facility prevents the payment of cash
dividends under certain circumstances. We currently intend to retain future
earnings, if any, to finance the growth and development of our business and,
therefore, do not anticipate paying any cash dividends in the future.
In 1998, in addition to the stock issuances which we have previously
described in our Forms 10-QSB, we made the following issuances of securities
without registration under the Securities Act of 1934, as amended (the
"Securities Act"). All such issuances were made to "accredited investors" as
defined in the Securities Act and its regulations and were exempt from
registration under Section 4(2) of the Securities Act.
- In the first six months of 1998, we issued an aggregate of
460,655 shares of our Series B Preferred Stock to accredited
investors, including our Chief Executive Officer and Chief
Financial Officer, for a purchase price of $5.36 per share.
The Series B Convertible Preferred Stock is convertible into
shares of our Common Stock at any time at the option of the
holder at a rate of four shares of Common Stock for each share
of Series B 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.
- In April 1998, we issued 20,000 shares of Common Stock in
connection with our acquisition of a United Kingdom company.
- In June 1998, we issued 80,000 shares of Common Stock to a
marketing consultant pursuant to a services agreement in
exchange for services rendered.
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<PAGE> 25
- In June 1998, we issued 57,380 shares of Common Stock in a
private placement, for a purchase price of $1.34 per share.
- In 1998, we issued an aggregate of 273,548 shares of Common
Stock upon conversion of 68,387 shares of our Series B
Convertible Preferred Stock.
- On December 31, 1998, we sold to The Heico Companies, LLC
("Heico") 212,405 shares of our Series C Convertible Preferred
Stock for an aggregate purchase price of $7.5 million. In such
transaction, Heico also (i) committed to acquire an additional
920,419 shares of Series C Preferred Stock for an aggregate
purchase price of $32.5 million (which it subsequently
acquired in January 1999) and (ii) received an option to
acquire up to 283,206 shares of Series C Stock for an
aggregate purchase price of $10.0 million. See, "Certain
Relationships and Related Transactions." Heico may, at its
option and without any payment of consideration, convert each
of its shares of Series C Preferred Stock into 10.865 shares
of our Common Stock (the number of shares of Common Stock into
which the Series C Stock is convertible is subject to
adjustment in certain circumstances, such as stock splits,
stock dividends and recapitalizations). Since the sale of our
Series C Convertible Preferred Stock was in accordance with
Rule 506 of Regulation D under the Securities Act of 1933, as
amended (the "Act"), it was exempt from registration under the
Act.
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<PAGE> 26
ITEM 6. SELECTED FINANCIAL DATA
The selected statements of operations data for the period from
inception (January 6, 1989) to December 31, 1995 and each of the years ended
December 31, 1996, 1997 and 1998 and the selected balance sheet data for the
periods then ended have been derived from our Consolidated Financial Statements
audited by Arthur Andersen LLP, included elsewhere herein. You should read the
following selected financial data in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and our
Consolidated Financial Statements and Notes thereto, included elsewhere in this
Report.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(JANUARY 6,
1989) TO YEARS ENDED DECEMBER 31
DECEMBER 31, -------------------------------------
1995 1996 1997(1) 1998(2)
----- ------- -------- --------
(IN THOUSANDS, EXCEPT RATIO AND PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ............................................. $ -- $ -- $ 2,776 $ 28,591
Cost of services ..................................... -- -- 2,605 21,187
------ ------- -------- --------
Gross margin ......................................... 171 7,404
Other operating expenses:
Selling, general and administrative ............. 43 270 2,723 39,147
Depreciation and amortization ................... -- -- 818 11,069
Asset impairment ................................ -- -- -- 4,842
------ ------- -------- --------
Operating loss ....................................... (43) (270) (3,370) (47,654)
--------
Other:
Interest income (expense), net ....................... 7 10 (128) (24,570)
Other ................................................ -- -- 6 (5,451)
------ ------- -------- --------
Loss before minority interest and income tax provision (36) (260) (3,492) (77,675)
Minority interest .................................... -- -- -- 903
------ ------- -------- --------
Loss before income tax provision ..................... (36) (260) (3,492) (76,772)
Income tax provision ................................. -- -- -- --
------ ------- -------- --------
Net loss ............................................. $ (36) $ (260) $ (3,492) $(76,772)
======= ======= ======== ========
Basic and diluted net loss per common share .......... $(0.60) $ (0.11) $ (0.26) $ (4.47)
====== ======= ======== ========
Weighted average common shares ....................... 60 2,358 13,245 17,158
------ ------- -------- --------
OTHER OPERATING DATA:
EBITDA(3) ....................................... $ (43) $ (270) $ (2,552) $(31,743)
Ratio of earnings to fixed charges(4) ........... N/A -- -- --
Capital expenditures ............................ -- -- 771 8,822
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------
1995 1996 1997 1998
---- ------ -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) . $15 $2,787 $ (4,143) $(103,845)
Property and equipment, net 0 0 5,032 91,226
Total assets .............. 15 2,889 13,197 220,455
Long-term obligations ..... 0 420 4,197 29,567
Stockholders' equity ...... 15 2,367 4,155 17,522
</TABLE>
- ---------
(1) Includes the financial results of Telenational Communications, Inc. and
Wade Wallace, Inc. from June 20, 1997 and July 3, 1997, the respective
dates of their acquisition.
(2) Includes the financial results of EnerTel and IIC from June 23, 1998
and August 1, 1998, the respective dates of their acquisition.
(3) EBITDA represents net loss adjusted for interest, income taxes,
depreciation and amortization. EBITDA is provided because it is a
measure commonly used in our industry. EBITDA is not a measurement of
financial performance under GAAP and should not be considered an
alternative to net income as a measure of performance or to cash flow
as a measure of liquidity.
(4) For the years ended December 31, 1996, 1997 and 1998, earnings were
insufficient to cover fixed charges by approximately $0.3 million, $3.5
million, and $77.7 million, respectively. Earnings consist of income
before income taxes plus fixed charges (exclusive of interest
capitalized). Fixed charges consist of interest charges and
amortization of debt issuance costs, whether expensed or capitalized,
and the portion of rent under operating leases representing interest.
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<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction
with "Selected Financial Data," the Consolidated Financial Statements and Notes
thereto, and the other financial data appearing elsewhere in this Report.
OVERVIEW
We are a rapidly growing facilities-based global telecommunications
carrier offering voice, data and other telecommunications services to carriers,
ISPs, medium and larger corporations and distributors and resellers.
Our growth to date has occurred principally through acquisitions, most
notably our acquisition of EnerTel. We acquired EnerTel in June 1998, for
consideration consisting of approximately $92 million and the payment of certain
EnerTel indebtedness of approximately $17 million. In November 1998 we sold a
15% interest in the direct parent of EnerTel to former shareholders of EnerTel
for approximately $14.8 million, including approximately $2.8 million in cash
and approximately $12 million in a shareholder note. The principal on this
shareholder note is payable ten years after our repayment of the Interim Loan,
which financed our acquisition of EnerTel. During 1997 and a portion of 1998,
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. In October 1998, we sold the Bel 1600 division of EnerTel 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. As a condition to the sale we retained, on a wholesale basis, the
traffic minutes generated by the residential subscribers. Of our 1998 revenue,
approximately $2.7 million was related to the Bel 1600 division, prior to sale,
and approximately $1.8 million was related to our carrying Bel 1600 traffic on a
wholesale basis after the sale.
In addition to our EnerTel operations, during 1998 we acquired IIC
(August 1998) and ICX (April 1998) which serve distributors and resellers
focused on international calling card and private line services. We believe that
these operations help us to expand our name recognition and traffic volumes in
emerging markets. Based in the San Francisco Bay area, ICX provides
telecommunication services principally through a network of agents and
distributors in Japan and other Asian countries. We acquired the assets and
operations of ICX in April 1998, in exchange for 400,000 shares of Common Stock
(of which 200,000 shares are held pursuant to an escrow agreement for a period
of eighteen months following the closing subject to the attainment of certain
future revenue requirements and to indemnify us for any breach of certain
representations and warranties).
In August 1998, we acquired the assets and operations of International
InterConnect, Inc. ("IIC"). The purchase consideration was 916,520 shares of
Common Stock (of which 38,500 are held in escrow) and $750,000. 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.
In February 1998, we commenced operations in the Netherlands through
the acquisition of MathComp B.V., whose name we changed to WorldPort
Communications Europe, B.V. ("WorldPort Europe"). In connection with this
acquisition, we issued 150,000 shares of Common Stock and paid $250,000 in cash.
The former shareholder of WorldPort Europe 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. Following the acquisition of EnerTel, we have taken reserves
of approximately $5.2 million for the wind down of those operations in 1999. See
"Legal Proceedings."
In June 1997, our subsidiary, Telenational Communications, Inc. ("TNC")
completed the acquisition (the "TNC Acquisition") of substantially all of the
telecommunications assets and operations of Telenational Communications Limited
Partnership, a Nebraska limited partnership. The results of operations of TNC
are included in our consolidated financial statements from the date of
acquisition. The assets were purchased in exchange for (i) 3,750,000 shares of
our Common Stock and (ii) our assumption of certain indebtedness up to a maximum
of $4.6 million. The purchased assets include telecommunications switches and
other network equipment, customer and vendor contracts, an FCC section 214
common carrier license and an operator services center in
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<PAGE> 28
Omaha, Nebraska. The FCC section 214 common carrier license gives us the
authority to resell both international switched and private line services of
authorized carriers.
In July 1997, we merged The Wallace Wade Company ("WWC"), a Texas
corporation, into a wholly-owned subsidiary (the "WWC Acquisition"). WWC was a
telecommunications marketing consulting firm which produced and implemented
marketing strategies for clients ranging from small companies to large corporate
clients. Our former President and Chief Executive Officer was the sole
shareholder of WWC. In connection with the WWC acquisition, we delivered (i)
1,200,000 shares of Common Stock, (ii) $75,000 in cash and (iii) a promissory
note in the amount of $175,000. See "Legal Proceedings." WWC's operating
revenues and expenses did not have a material impact on our operating revenues
and expenses in fiscal 1997 or 1998. In 1998 we wrote-down the assets of WWC
which is no longer part of our strategic plan.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenues
Revenues increased to $28.6 million from $2.8 million for the years
ended December 31, 1998 and 1997, respectively. The increase in revenues was
primarily due to the inclusion of the results of operations of newly acquired
entities. Of our 1998 revenues, EnerTel contributed $18.3 million, ICX $3.4
million, and IIC $3.2 million.
EnerTel primarily generates revenue from the transmission of both
domestic and international switched minutes in the Netherlands. EnerTel also
derives revenues from the fixed monthly rental of private line circuits. The
growth in EnerTel's revenues in 1998 included growth in all EnerTel product
lines including virtual point of presence (VPOP) internet access; direct access
local, national and international switched services; and 800/900 products as
well as the wholesale portion of the former Bel 1600 business. In 1998, the VPOP
business represented 36% of EnerTel revenues. In addition, our calling card and
private line operations represented approximately $10.3 million in 1998
revenues, generated through the sale of switched minutes.
Gross Margin
Gross margin increased to $7.4 million from $0.2 million for the years
ended December 31, 1998 and 1997, respectively. The increase in gross margin was
primarily due to the inclusion of the results of operations of ICX, EnerTel, and
IIC subsequent to the closing of those acquisitions in April, June and August
1998, respectively. Our primary costs of sales in 1998 were our cost of
terminating switched minutes through third parties, as well as our cost of
access circuits used to connect our customers in the Netherlands. Our cost of
services and resulting gross margin reflects our variable costs only, and do not
reflect the depreciation of network assets.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $39.1 million
from $2.7 million for the years ended December 31, 1998 and 1997, respectively.
The increase was primarily due to (i) the inclusion of the selling, general and
administrative expenses associated with the operation of EnerTel and IIC
subsequent to the closing of those acquisitions in June and August 1998,
respectively (approximately $17.1 million), (ii) increased business development
and expansion activity (i.e. professional fees, travel and other costs of
approximately $6.7 million), and (iii) growth in our U.S. operations, marketing
and corporate staff (approximately $5.7 million). Since our acquisition of
EnerTel, we have substantially reorganized its staffing, resulting in certain
severance payments and hiring expenses.
Selling, general and administrative expenses in 1998 also include
approximately $4.3 million in one time reserves taken in relation to the
discontinuance of operations of WorldPort Europe and our refocusing of the
operations of EnerTel.
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Depreciation and Amortization
Depreciation and amortization expense increased to $15.9 million from
$0.8 million for the years ended December 31, 1998 and 1997, respectively. The
increase was due to (i) depreciation on the assets acquired in connection with
the EnerTel and IIC acquisitions (approximately $3.7 million), (ii) amortization
of goodwill and other intangible assets associated with the EnerTel and IIC
acquisitions (approximately $2.5 million) and (iii) depreciation on additional
switching and peripheral equipment acquired during 1998 (approximately $2.7
million). In 1998, we also wrote off $4.8 million related to certain assets that
were deemed to be impaired under SFAS 121 as a result of our shift in business
focus during 1998. This write-off principally related to the write-down of
certain switching and network equipment that we operated prior to the EnerTel
acquisition and the write down of certain assets related to WWC, acquired in
1997, which is no longer part of our strategic plan.
Other Income (Expense)
Interest expense, net increased to $24.6 million from $0.1 million for
the years ended December 31, 1998 and 1997, respectively. The increase in
interest expense is due primarily to the Interim Loan, which accounted for $22.1
million of interest expense in 1998. Interest expense also included interest for
(i) the debt we assumed in connection with the EnerTel and IIC acquisitions,
(ii) the acquisition of switching equipment subject to capital lease and (iii)
borrowings pursuant to certain short-term promissory notes for working capital
purposes.
Other expense, net increased to $5.5 million from $6,000 for the years
ended December 31, 1998 and 1997, respectively, primarily as a result of costs
incurred with our unsuccessful financing activities during 1998 as well as
certain proposed investments that did not materialize.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenues
Revenues increased to $2,776 from $0 for the years ended December 31,
1997 and 1996, respectively. The increase in revenues was due solely to the
inclusion of the results of operations of the TNC assets subsequent to the
closing of the TNC Acquisition on June 20, 1997.
Gross Margin
Gross margin increased to $171 from $0 for the years ended December 31,
1997 and 1996, respectively. The increase in gross margin was due solely to the
inclusion of the results of operations of the TNC assets subsequent to the
closing of the TNC Acquisition on June 20, 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $2,723 from
$270 for the years ended December 31, 1997 and 1996, respectively. The increase
was primarily due to (i) increased business development and acquisition
activity, (ii) the establishment and staffing of our corporate offices and (iii)
the inclusion of the selling, general and administrative expenses associated
with the operation of the TNC assets subsequent to the closing of the TNC
Acquisition on June 20, 1997.
Depreciation and Amortization
Depreciation and amortization expense increased to $818 from $0 for the
years ended December 31, 1997 and 1996, respectively. The increase was due to
(i) depreciation on the assets acquired in connection with the TNC Acquisition,
(ii) amortization of goodwill and other intangible assets associated with the
TNC Acquisition and the WWC Acquisition and (iii) depreciation on additional
switching and peripheral equipment acquired during 1997.
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Other Income (Expense)
Interest expense, net increased to $128 from $10 for the years ended
December 31, 1997 and 1996, respectively. The increase in interest expense is
due to (i) the debt we assumed in connection with the TNC Acquisition, (ii) the
acquisition of switching equipment subject to capital lease and (iii) borrowings
pursuant to certain short-term promissory notes for working capital purposes.
LIQUIDITY AND CAPITAL RESOURCES
On June 23, 1998, WorldPort International, Inc., one of our
wholly-owned subsidiaries ("WorldPort International") entered into a Credit
Agreement for the Interim Loan with Bankers Trust Company 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 is guaranteed by certain of our 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 contains provisions for the issuance of $0.01
warrants representing 11% of the fully-diluted Common Stock (which percentage
will be calculated on the day we repay the Interim Loan). As of December 31,
1998, Interim Loan holders had received warrants to purchase up to 4,069,904
shares of Common Stock. In addition to the warrants which the Interim Loan
holders had received as of December 31, 1998, such holders are entitled to
receive additional warrants on the date the Interim Loan is repaid in full, so
that all warrants issued to such holders represent 11% of the Company's
fully-diluted outstanding Common Stock on the date of such repayment. As of
December 31, 1998, the fair market value of these warrants (approximately $28
million) is reflected as a reduction in the principal amount of the Interim
Loan. This amount is being amortized to interest expense over the life of the
Interim Loan (1 year). At such time as the Interim Loan 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 our assets,
the assets of certain of our subsidiaries and a pledge of the capital stock of
certain of our subsidiaries.
We have operated at a loss since inception and expect to continue to
incur operating losses in the near future. We had an accumulated deficit of
approximately $80.7 million as of December 31, 1998. This deficit included an
operating loss of $47.7 million including approximately $15.9 million in
depreciation and amortization. Our loss also included $24.6 million in interest
expense, primarily related to the Interim Loan. At December 31, 1998, we had a
working capital deficit of approximately $103.8 million including the $110.9
million Interim Loan balance, net of warrants.
Our operations used $19.3 million during the year ended December 31,
1998 due primarily to our net loss (approximately $76.8 million) which included
non-cash charges of approximately $41.1 million, principally depreciation and
amortization ($15.9 million) and interest ($23.1 million). Further, our net
working capital change was $17.3 million, principally due to an increase in
payables and accrued liabilities related to our expanded operations.
Investing activities used $119.5 million during the year ended December
31, 1998. Such activities consisted primarily of $107.8 million in cash paid in
connection with the EnerTel acquisition and increased capital spending.
Financing activities provided $147.1 million during the year ended
December 31, 1998. These activities consisted primarily of (i) our sale of
Series B Preferred Stock in the first half of 1998 in exchange for approximately
$12.3 million in cash and the conversion of $1.2 million in outstanding debt,
(ii) our sale of Common Stock for $0.9 million in March 1998, (iii) our $114.7
million in borrowings under the Interim Loan in June, 1998 net of $5.3 million
of offering expenses, (iv) the sale of a minority interest in the parent of
EnerTel for $2.8 million in equity and $12.0 million in a shareholder note in
October 1998, and (v) the December 1998 sale of Series C Preferred Stock for an
aggregate $40 million of which $32.5 million was received in January 1999. In
addition we made
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certain payments on capital leases and notes payable of $8.8 million.
In addition to our operating expense requirements, our business will
require us to make significant capital expenditures during the next few years.
We currently have commitments to spend at least $66.0 million on IRUs and
approximately $20.0 million on switching equipment over the next three years (of
which approximately $10.2 million has been spent to date). Our current operating
and capital lease requirements including equipment leases and office rent are in
excess of $11.5 million per annum. We also have commitments to various service
providers and vendors for approximately $8.7 million in 1999.
Funding of our working capital deficit, current and future operating
losses and execution of our global growth plans will require substantial
continuing capital investment.
We intend to fund these capital requirements through debt facilities or
additional equity financing. In addition, we currently have approximately $48
million in equipment lease facilities. Although we have been able to arrange
debt facilities and equity financing to date, there can be no assurance that
sufficient debt or equity financing will continue to be available in the future
or that it will be available on terms acceptable to the Company. If such
financing is not obtained, we will have to alter our current business plan and
seek alternate financing. Further, substantial additional debt or equity
financing may be needed for us to achieve our short-term and long-term business
objectives. Failure to obtain sufficient capital could materially affect our
acquisition and operating strategies.
YEAR 2000 ISSUE
The efficient operation of our business is dependent in part on our
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, we have developed an implementation plan for upgrading our systems
architecture. This plan also addresses the functionality of our systems beyond
December 31, 1999 ("Year 2000 compliance"). Typically our upgrades made for
additional functionality also remedy any Year 2000 deficiencies in the related
software. However, we do not consider the cost of such upgrades to be year 2000
related, as we have not accelerated any upgrades to remedy a Year 2000
deficiency.
We do not anticipate additional material expenditures for Year 2000
compliance issues. As WorldPort is a relatively new company, commencing
operations in late 1997, Year 2000 compliance has been a requirement in all
system related procurement. In circumstances where acquired subsidiaries'
systems are not compliant, remediation via upgrades or system change-out is
on-going. Our new systems implementation is expected to be completed by
September 30, 1999. Management believes that our remaining 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.
We have completed the inventory phase of Year 2000 evaluation and
determined which systems and services might be vulnerable. From the results of
this inventory, we have prioritized the action plan.
We are in the process of obtaining documentation from our 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 us. While few significant concerns were
identified, each has been addressed with a program of remediation. All programs
are targeted for completion by September 1, 1999. However, Year 2000-related
operating problems or expenses may arise in connection with our computer systems
and software or in connection with our interface with the computer systems and
software of our suppliers, customers, financial institutions and others. Because
such third-party systems or software may not be Year 2000 compliant, we are in
the process of developing contingency plans to address Year 2000 failures of the
entities with which we interface We could be required to incur unanticipated
expenses to remedy any problems, which could have a material adverse effect on
our business, results of operation and financial conditions.
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Our worst case scenario does not contemplate a major business
disruption from internal systems. We believe that we have exercised reasonable
diligence to assess whether external systems and interfaces are adequately
prepared.
INTRODUCTION OF THE EURO
On January 1, 1999, eleven of the fifteen member countries of the
European Union established a fixed conversion rate between their existing
currencies("legal currencies") and one common currency--the Euro. The Euro began
trading on world currency exchanges and may be used in business transactions. On
January 1, 2002, new Euro-denominated bills and coins will be issued, and legal
currencies will be completely withdrawn from circulation by June 30 of that
year. Our management has been actively assessing its computer systems and
overall fiscal and operational activities to ensure Euro readiness. We have
started adapting its computers, financial and operating systems and equipment to
accommodate Euro-denominated transactions. Our management is also reviewing
marketing and operational policies and procedures to ensure its ability to
continue to successfully conduct all aspects of our business in this new, price
transparent market. Additionally, the Euro will have an impact on currency
exchange rates and hence our currency exchange risk which we cannot accurately
predict. Our management, however, believes that the Euro conversion will not
have a material adverse impact on its financial condition or results of
operations.
MARKET RISK
We believe that our exposure to market rate fluctuations on our
investments is nominal due to the short-term nature of those investments. To the
extent the Interim Loan is outstanding, we have market risk relating to such
amounts because the interest rates under the Interim Loan are variable. We do
not believe our exposure represents a material risk to the financial statements.
Our operations in Europe, principally in the Netherlands, expose us to
currency exchange rates risks. To manage the volatility attributable to these
exposures, we nets the exposures to take advantage of natural offsets.
Currently, we do not enter into any hedging arrangements to reduce this
exposure. We are not aware of any facts or circumstances that would
significantly impact such exposures in the near-term. If, however, there was a
10 percent sustained decline of the Dutch Gilder versus the U.S. dollar, then
the consolidated financial statements could be materially effected as our Dutch
operations represented approximately 72% of our total assets as of December 31,
1998 and 64% and 58% of our total revenues and net loss for the year ended
December 31, 1998, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
The FASB has issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities, which must be adopted by the year 2000. This
statement establishes accounting and reporting standards for derivative
instruments - including certain derivative instruments embedded in other
contracts - and for hedging activities. Adoption of this statement is not
expected to have a material impact on our financial statements.
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued a new Statement of Position, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. This statement requires
capitalization of certain costs of internal-use software. We adopted this
statement in January 1999, and have not yet determined its impact on our
financial statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS; RISK FACTORS
Certain statements in the foregoing "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Report, include "forward-looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended and Section 21E of the Exchange Act of
1934, as amended.
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We intend the forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements provided by such laws. All statements
regarding our expected financial position and operating results, our business
strategy and our financing plans are forward-looking statements. These
statements can sometimes be identified by our use of forward-looking words such
as "may," "will," "anticipate," "plan," "estimate," "expect" or "intend." These
statements are subject to known and unknown risks, uncertainties and other
factors that could cause the actual results to differ materially from those
contemplated by the statements. The forward-looking information is based on
various factors and was derived using numerous assumptions.
Although we believe that our expectations that are expressed in such
forward-looking statements are reasonable, we cannot promise that our
expectations will turn out to be correct. Our actual results could be materially
different from and worse than our expectations. In addition to the risks and
uncertainties of ordinary business operations, our forward-looking statements
contained in this Annual Report on Form 10-K are also subject to the following
risks and uncertainties:
Limited Operating History; History of Operating Losses
Since we were inactive prior to 1997, we have a limited operating
history. Therefore, our prospects should be evaluated with regard to the risks
encountered by a company in an early stage of development, particularly in light
of the uncertainties relating to the intensely competitive market in which we
operate.
We sustained operating and net losses in 1997 and 1998. For the
following periods, we reported net losses of:
<TABLE>
<CAPTION>
Period Net Loss
- ------ --------
<S> <C>
Year Ended December 31, 1997 ......... $ 3.5 million
Year Ended December 31, 1998 ......... $76.8 million
Pro Forma Year Ended December 31, 1998 $89.5 million
</TABLE>
At December 31, 1998, we had an accumulated deficit of approximately
$80.7 million. We also reported EBITDA of approximately negative $2.6 million
for the year ended December 31, 1997 and approximately negative $31.7 million
for the year ended December 31, 1998. Our business requires substantial funds
for capital expenditures, expansion of our assets and operating expenses and,
possibly, acquisitions. We expect to continue to generate operating losses and
net losses for at least the next two fiscal years. There can be no assurance
that we will achieve profitability or positive cash flow in the future. If we
cannot achieve and sustain operating profitability or positive cash flow from
operations, we may not be able to meet our debt service obligations or working
capital requirements, and in that event we would be in default under our
indebtedness. Such default would permit the holders of such indebtedness to
accelerate the maturity of such indebtedness and could cause defaults under
other indebtedness. A significant portion of our indebtedness may then become
immediately due and payable. We are not certain whether we would have, or be
able to obtain, sufficient funds to make these accelerated payments. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Substantial Indebtedness
We have a significant amount of indebtedness. At December 31, 1998, we
had $143.1 million of consolidated outstanding debt and our total consolidated
debt, as a percentage of capitalization, was 88%. For the year ended December
31, 1998, our earnings were insufficient to cover fixed charges by $77.7
million. We may incur additional indebtedness in the future, although we will be
limited in the amount we could incur by our existing and future debt agreements.
Our high level of indebtedness could adversely affect us in a number of
ways, such as:
- limiting our ability to internally fund or obtain additional
financing to fund our growth strategy, working capital,
capital expenditures, debt service requirements or other
purposes;
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- limiting our ability to use operating cash flow in other areas
of our business because we must dedicate a substantial portion
of these funds to make principal payments and fund debt
service;
- limiting our ability in planning for, or reacting to, to
changing market conditions, changes in our industry and
economic downturns; and
- reducing the cash flow available from our subsidiaries to
service our debt payments.
Ability to Service Indebtedness
Our ability to satisfy our debt obligations depends upon our operating
performance and our ability to obtain additional debt or equity financing. We
may not be able to generate sufficient cash flow to service required interest
and principal payments on or to redeem any of our indebtedness when such
indebtedness becomes due.
Prevailing economic conditions and financial, business and other
factors, many of which are beyond our control, will affect our ability to make
these payments. If in the future we can not generate sufficient cash from
operations to meet our obligations, we will need to refinance, obtain additional
financing or sell assets. There can be no assurance that our business will
generate cash flow, or that we will be able to obtain funding, sufficient to
satisfy our debt service requirements.
If we are unable to generate sufficient cash flow or otherwise obtain
funds necessary to make required payments, or if we otherwise fail to comply
with the various covenants under our indebtedness, we would be in default under
the terms thereof. Such default would permit the holders of such indebtedness to
accelerate the maturity of such indebtedness and could cause defaults under
other indebtedness. A significant portion of our indebtedness may then become
immediately due and payable. We are not certain whether we would have, or be
able to obtain, sufficient funds to make these accelerated payments. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Substantial Capital Requirements; Uncertainty of Additional Financing
We need substantial capital to develop and expand our network
facilities, fund operating losses and to provide for working capital. Our
ability to raise additional capital will depend on, among other things, our
financial condition at the time, the restrictions in our existing debt
agreements and other factors, including market conditions, that are beyond our
control. There can be no assurance that we can complete such financing or that
the terms thereof would be favorable to us. Any such inability to obtain
additional funds on acceptable terms may require us to reduce the scope or pace
of our expansion, which would have a material adverse effect on our financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Restrictions in Debt Agreements on Our Operations
The operating and financial restrictions and covenants in our existing
debt agreements and any future financing agreements may adversely affect our
ability to finance future operations or capital needs or to engage in other
business activities. A breach of any of these restrictions or covenants could
cause a default under such debt. A significant portion of our indebtedness may
then become immediately due and payable. We are not certain whether we would
have, or be able to obtain, sufficient funds to make these accelerated payments.
Risk of Default Under Existing Financing Agreements
We have entered into financing agreements with Comdisco and
Forsythe/McArthur, as well as Atlantic Crossing, Ltd., in connection with our
purchase of telecommunications assets. These assets primarily consist of
switches used to construct and operate our network and IRUs on the AC-1 system.
These agreements permit such lenders, upon the occurrence of certain events of
default, to demand the entire unpaid balance of amounts loaned to us for the
purchase of switches and IRUs and to foreclose on the equipment purchased or
eliminate our access to the cable systems. In addition, we have or will assume
various lease obligations through our acquisitions. These
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<PAGE> 35
obligations primarily relate to the purchase of, and are secured by,
telecommunications assets. Under the terms of the lease agreements, the
respective lessors may, in the event of default, require accelerated payment of
any unpaid balance of amounts outstanding and foreclose on the equipment
purchased. The telecommunications assets purchased under the various financing
and lease agreements are essential to the successful operations of the acquired
companies. Foreclosure and repossession of these assets or elimination of our
access to certain cable systems would have a material adverse impact on our
operations.
Deployment and Operation of Our Network
Our success is dependent upon our ability to deploy and operate our
planned network in a timely and cost-effective manner. In particular, our
ability to increase revenues will be dependent on our ability to expand the
capacity and reach of our network which will consist of transmission
infrastructure (such as undersea and land-based fiber optic cables) and
switching equipment and facilities (such as switches, gateways, routers and
network operations centers).
The continued expansion, operation and development of the network will
depend on our ability to:
- attract new customers in existing and targeted markets;
- increase revenues received from existing customers;
- attract and retain experienced network and operations
personnel;
- obtain one or more switch sites in selected locations;
- obtain interconnectivity to the local public switched
telecommunications network ("PSTN") and other carriers'
networks and obtain satisfactory and cost-effective ownership
interests and lease rights from, and establish interconnection
arrangements with, competitors that own transmission lines (in
certain cases, international transmission lines may be
available only from a PTT);
- obtain any necessary licenses permitting network termination
and origination of traffic;
- acquire additional rights to fiber optic capacity; and
- enter targeted new markets.
In addition, to expand our network, we will incur additional fixed
operating costs that will exceed the revenues attributable to the transmission
capacity funded by such costs until we generate additional traffic volume. We
may not be able to expand our network in a cost effective manner, operate the
network efficiently or generate customer traffic volumes sufficient to operate
the network at a profit.
Risk of Non-Completion of Cable Systems or Installation of Switches; Impact on
Business Plan
We intend to make substantial investments in our network
infrastructure, including several undersea and land-based fiber optic cable
systems, some of which are currently being built and offered for sale. Our
investment in these systems will generally be in the form of IRUs. With respect
to these fiber optic systems, we are exposed to operating risk based upon the
timely completion of construction and commencement of operations on the cables,
and the actual demand for transmission capacity (which could differ materially
from our forecasts). In addition, in many instances, we have not entered into
definitive agreements for capacity needed to complete our planned network and
may not be able to do so on favorable terms, if at all.
In the event that completion of all or part of our network is delayed,
adequate capacity is otherwise unavailable, or demand for transmission capacity
is less than projected, our anticipated cash flow, income from operations and
net income could be materially and adversely impacted. Additionally, deviations
of actual results from our business plan could result in insufficient or
excessive network capacity and disproportionately high fixed expenses.
In June 1998 we entered into agreements with a subsidiary of Nortel for
the purchase, turn-key installation and maintenance of DMS-GSP switches
(committing to acquire at least $20 million of such equipment). The timely
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<PAGE> 36
deployment of these switches is an important aspect of our ability to generate
revenue. If Nortel cannot deliver and successfully install these switches or if
delivery and installation is substantially delayed, our results of operations
would be materially and adversely impacted. In addition, deployment of the
DMS-GSP Switches requires suitable space in secure facilities, including
appropriate power supplies and environmental controls, and trained in-house or
third-party technical staff for installation, testing and on-going maintenance.
We will be dependent on the successful performance by Nortel, our ability to
identify appropriate sites for these facilities, and the abilities of our
executive and operational management to install and maintain network facilities.
To advance our IP capabilities, we are currently conducting one of the first
commercial trials of Lucent's PacketStar 6400 IP switches in both New York and
London. Our failure to adequately, cost effectively or timely install our
DMS-GSP switches, IP switches or other switches in targeted locations or our
failure or the failure of our various contract providers to adequately maintain
our switches would have a material adverse effect on our business, results of
operations and financial condition.
Dependence on Interconnection and Other Off-Network Agreements
Our network operations and our ability to satisfy our regulatory
obligations to maintain EnerTel's network currently depend to a substantial
degree on telecommunications transmission infrastructure owned by other
carriers. As a result, we depend upon securing and maintaining transmission
agreements with local PTOs and other facilities-based carriers worldwide on a
timely basis and at favorable rates. Our reliance upon these interconnection
agreements subjects us to the following risks, each of which could have a
material adverse affect on our business, results of operations and financial
condition:
- the failure of a PTO to provide access on competitive terms;
or
- unanticipated price fluctuations and service restrictions or
cancellations.
In addition, we may not be able to enter into necessary or desired additional
operating or interconnection agreements in the future on terms which would allow
us to increase our revenues on a profitable basis.
Additionally, at the time it received its nation-wide license, EnerTel
was subject to four statutory licensing conditions which ultimately required
EnerTel to have full infrastructure coverage in the Netherlands for the purpose
of providing leased lines to anyone in the Netherlands by November 20, 2001.
EnerTel's current network meets the requirements of the first two of these
conditions. EnerTel believes that, as a result of the new telecommunications law
in the Netherlands, it is no longer subject to these statutory licensing
conditions or, alternatively, that such conditions are no longer enforceable.
While EnerTel believes that its conclusions in this regard are well founded,
there can be no assurance that the Netherlands' government may not attempt to
enforce the conditions in the future.
Risk of Network Failure
Our success is largely dependent upon our ability to deliver high
quality, uninterrupted telecommunications services. This, in turn, is dependent
to a large extent on our ability to protect our software and hardware against
damage and malfunction. Any failure of our network or other systems or hardware
that causes interruptions in our operations could have a material adverse
effect. As we expand our network and the volume of call traffic grows, there
will be increased demands on hardware, circuit capacity and traffic management
systems. As a result, we may experience system failures.
Our operations are also dependent on our ability to expand our network
successfully and integrate new and emerging technologies and equipment into our
network. This use of emerging technologies and new equipment could increase the
risk of system failure. Significant or prolonged system failures of, or
difficulties for customers in accessing and maintaining connection with, our
network could damage our reputation and result in customer attrition and
financial losses.
We may from time to time experience general problems affecting the
quality of the voice and data transmission of some calls transmitted over our
network due to our anticipated expansion, which could result in
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<PAGE> 37
poor quality transmission and interruptions in service. To provide redundancy in
the event of technical difficulties with our network and to the extent we
purchase transit and termination capacity from other carriers, we rely upon
other carriers' networks. Whenever we are required to route traffic over a
non-primary choice carrier due to technical difficulties or capacity shortages
with our network or the primary choice carrier, those calls will be more costly
to us and can result in lower transmission quality. Any failure to operate,
expand, manage or maintain our network properly could result in customers
diverting all or a portion of their calls to other carriers. This could have a
material adverse effect on our business, financial condition and results of
operations.
Risk of Potential Acquisitions
From time to time we pursue selected acquisitions. Our ability to
engage in acquisitions will be dependent upon our ability to identify attractive
acquisition candidates and, if necessary, obtain financing on satisfactory
terms. The challenges of acquisitions include:
- potential distraction to management:
- integrating the acquired business's financial, computer,
payroll and other systems into our own;
- implementing additional controls and information systems
appropriate to a growing company;
- unanticipated liabilities or contingencies from the acquired
company;
- reduced earnings due to increased goodwill amortization,
increased interest costs and costs related to integration; and
- retaining key personnel and customers of acquired companies.
If we are unsuccessful in meeting the challenges arising out of our growth, our
business, financial condition and results of operations could be materially and
adversely affected.
Management of Growth
Our strategy of continuing our growth and expansion has placed, and is
expected to continue to place, a significant strain on our management,
operational and financial resources and increased demands on our systems and
controls. Our ability to manage our growth successfully will require us to:
- further expand our network infrastructure, information systems
and controls, and
- expand, train and manage our employees effectively.
In addition, as we increase our level of service and expand our global
network, there will be additional demands on our customer service support and
sales, marketing and administrative resources. We may not be able to manage
successfully our operations or the quality of our services. If our management is
unable to manage growth effectively or maintain the quality of its service, our
business, financial condition and results of operations could be materially and
adversely affected.
Dependence on Billing, Customer Services and Information Systems; Risk of Fraud
and Bad Debt
Sophisticated information and processing systems are vital to our
growth and our ability to monitor costs, bill customers, provision customer
orders and achieve operating efficiencies. Our current billing and information
systems have generally met our needs due in part to the low volume of customer
billing. As our operations continue to expand, the need for sophisticated
information processing systems will increase significantly. Our plans for the
development and implementation of our billing systems rely, for the most part,
on the delivery of products and services by third party vendors. We could be
materially adversely affected by:
- the failure of these vendors to deliver proposed products and
services in a timely and effective manner
-36-
<PAGE> 38
and at acceptable costs,
- our failure to adequately identify all of our information and
processing needs,
- the failure of our related processing or information systems
or
- our failure to upgrade systems as necessary.
Although we have experienced limited problems relating to the
fraudulent use of our access codes and the failure of certain of our customers
to make full payment for services rendered, we do not believe that our
experiences with such problems are substantially different from what is
generally experienced in the telecommunications industry. Our revenue for any
given period may be adversely affected by significant fraud since revenue is
recorded upon the completion of a call but may be subsequently reversed if we
are unable to bill for that call. In addition, where we use third party service
providers to complete calls, we remain liable for any charges that result from
the fraudulent use of our facilities. We believe we make provisions for
non-payment at adequate levels. Any significant increase in the levels of fraud
and bad debt could have a material adverse impact on our cash flow, financial
condition and results of operations.
Competition
The international telecommunications industry is intensely competitive
and subject to rapid change precipitated by advances in technology and changes
in regulation (such as the implementation of the U.S. Telecommunications Act of
1996, deregulation legislation of the European Union and the World Trade
Organization, and other legislation and deregulation in various foreign target
markets). We compete with a variety of other telecommunications providers in
each of our markets, including PTOs in each country in which we operate.
In Europe, liberalization in the telecommunications market has
coincided with technological advancements to create an increasingly competitive
market, characterized by still-dominant PTTs as well as an increasing number of
new market entrants. We believe that competition for telecommunications services
in the Netherlands and surrounding nations will continue to increase as a result
of continuing liberalization of the telecommunications industry. PTTs generally
have significant competitive advantages (including cost advantages) due to their
control over domestic transmission lines and connection to such lines. In
addition, customers in most of these markets are not accustomed to alternative
service providers and may be reluctant to switch from the dominant PTTs to new
and relatively unproven competitors such as EnerTel. In addition, we rely on
PTTs for timely access to their transmission infrastructure lines. Moreover,
these PTTs generally have certain competitive advantages due to their close ties
with national regulatory authorities, which have, in certain instances, shown
reluctance to adopt policies and grant regulatory approvals that would result in
increased competition for the local PTT. The reluctance of some national
regulators to accept liberalizing policies, grant regulatory approvals and
enforce access to PTT networks may have a material adverse effect on our
competitive position. In the Netherlands, we compete primarily with KPN, the
national PTT, and other alternative providers which have greater market
presence, network coverage, brand name recognition, customer loyalty, and
financial and other resources. In addition, throughout Europe, we face strong
competition from, among others Telfort, B.V., Global One Communications, MCI
WorldCom, Esprit Telecom Group plc, COLT Telecom, VersaTel Telecom B.V., BT,
Cable & Wireless, as well as other resellers, microwave and satellite carriers,
mobile wireless telecommunications providers, cable television companies,
utilities and other competitive local telecommunications providers. Many of our
competitors have significantly greater financial, managerial and operational
resources and more experience than we have. Competition in the Netherlands, as
well as the European long distance telecommunications industry in general, is
driven by numerous factors, including price, customer service, type and quality
of services and customer relationships.
In the United States, we compete against a wide variety of market
participants ranging from Tier I carriers, large Tier II facilities-based
carriers, switched and switchless resellers of long distance services and
hundreds of other marketers and distributors of long distance, calling card and
other telecommunications services. International telecommunications providers
such as us compete on the basis of price, customer service, network coverage,
transmission quality and capacity and scope of service offerings. Many of our
competitors enjoy economies of scale that can result in a lower cost structure
for termination and network costs, which could cause significant pricing
-37-
<PAGE> 39
pressures within the international communications industry. In recent years,
prices for international long distance services have decreased substantially,
and are expected to continue to decrease, in most of the markets in which we
currently compete. If increases in telecommunications usage do not result or are
insufficient to offset the effects of such price decreases, our business
operations and financial condition could be adversely affected. We may not be
able to compete successfully in the future.
Risks Related to Technological Change
We are at risk from fundamental changes in the way telecommunications
services are marketed and delivered. Our service strategy assumes that
technology such as frame relay, IP and ATM protocols, and fiber optic
telecommunications infrastructures, will become primary protocols and transport
infrastructure for data communications services. Further technological changes,
including changes related to the emerging wireline and wireless transmission and
switching technologies, could have a material adverse effect on our business,
results of operations, and financial condition. Our pursuit of necessary
technological advances may require substantial time and expense, and we may not
succeed in adapting our telecommunications services business to alternate access
devices, conduits and protocols. In addition, the potential to greatly expand
the capacity of existing and new fiber optic cables, which could result in
increased supply and lower prices, could have a material adverse effect on our
business, results of operations and financial condition.
The market for our telecommunications services is characterized by
rapidly changing technology, evolving industry standards, emerging competition
and frequent new product and service introductions. In particular, several of
the undersea cables on which we expect to purchase IRUs are designed to employ
DWDM which allows information to be transmitted more efficiently than current
transmission protocols. However, no other undersea fiber optic cable system
currently employs DWDM and the viability of DWDM on a large scale fiber optic
cable is unproven. If the use of DWDM is unsuccessful, the operation of these
undersea fiber optic cable systems could be substantially delayed. This would
materially and adversely impact our cash flows, income from operations and net
income.
Year 2000 Technology Risks
We face certain risks arising from Year 2000 issues. See "Management's
Discussions and Analysis for Financial Condition and Results of Operations--Year
2000 Issue" for a discussion of certain risks relating to Year 2000 issues.
Regulatory Restrictions
Regulation of the telecommunications industry is changing rapidly, both
in Europe and the United States. As an international telecommunications company,
we are subject to varying degrees of regulation in each of the jurisdictions in
which we provide our services. Laws and regulations differ significantly among
the jurisdictions in which we operate. There can be no assurance that future
regulatory, judicial and legislative changes will not have a material adverse
effect on our operations or that domestic or international regulators or third
parties will not raise material issues with regard to our compliance with
applicable regulations. In addition, while EnerTel believes that, as a result of
the new telecommunications law in the Netherlands, it is no longer subject to
the statutory licensing conditions that were imposed at the time it received its
nation-wide license or, alternatively, that such conditions are no longer
enforceable, there can be no assurance that the Netherlands' government may not
attempt to enforce the conditions in the future.
Risks Associated with International Operations
A key component of our strategy is our expansion in international
markets. Our international expansion will require us to comply with multiple
regulatory and taxation regimes. In addition, laws or administrative practices
relating to taxation, foreign exchange or other matters within countries in
which we operate or plan to operate may change. Moreover, operating
internationally exposes us to risks such as:
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<PAGE> 40
- difficulty collecting accounts receivable,
- political instability,
- fluctuations in currency exchange rates,
- foreign exchange controls which restrict or prohibit
repatriation of funds,
- technology export and import restrictions or prohibitions,
- delays with customs or government agencies,
- seasonal reductions in business activity during the summer
months in Europe and certain other parts of the world, and
- potentially adverse tax consequences resulting from operating
in multiple jurisdictions with different tax laws.
Control by Heico and Management; Certain Antitakeover Matters
In addition to the shares of our Common Stock and Series A Preferred
Stock which are currently outstanding and entitle the holders thereof to one
vote per share, we also have outstanding shares of our Series B Convertible
Preferred Stock and shares of our Series C Convertible Preferred Stock, each of
which entitle the holders thereof to 40 votes per share. As of March 1, 1999,
primarily as a result of its ownership of shares of Series C Preferred Stock,
Heico held directly approximately 30% of our outstanding votes. Further, by
virtue of a Shareholder Agreement we entered into with Heico and certain of our
stockholders (including Messrs. Moore and Magiera, who are executive officers
and directors), together with its direct stock ownership, at March 1, 1999,
Heico controlled, with respect to certain matters, including acquisitions,
incurrence of debt and the issuance or sale of equity securities, approximately
54% of our outstanding votes.
In addition, as of March 1, 1999, our executive officers and directors
as a group had an approximately 56% voting interest in our capital stock.
Included in the shares owned by our executive officers and directors as a group
is the direct voting interest which is held by Heico as well as certain shares,
which are not held by executive officers and directors, over which Heico
exercises certain voting rights pursuant to the Shareholder Agreement. Messrs.
Heisley, Meadows and Gies, together with Ms. Stoeckel, all members of our Board
of Directors, have an interest in, or are employed by, Heico. Also included in
the shares owned by our executive officer and directors as a group is a 17%
voting interest which is held by Anderlit Ltd. Mr. Moore, our Chairman and Chief
Executive Officer, and Mr. Magiera, our Chief Financial Officer and a member of
our Board of Directors are each investors in Anderlit, and Mr. Moore has
received from Anderlit an irrevocable proxy to vote all of the Series B
Preferred Stock owned by Anderlit.
As a result of its voting interest, Heico and/or our directors and
executive officers as a group have the power to control the vote regarding such
matters as the election of our directors, amendments to our charter, other
fundamental corporate transactions such as mergers, asset sales, and the sale
of our business, and to otherwise influence the direction of our business and
affairs. Additionally, as stockholders of the company and through their ability
to control the election of directors, Heico and/or our executive directors as a
group may authorize actions that could have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider in its best interest, including an attempt that might result in
the receipt of a premium over the market price for the shares held by such
stockholder. Such actions may include creating additional classes of stock with
disparate voting rights; creating a classified Board of Directors with
staggered terms; prohibiting the stockholders to take any action by a written
consent or requiring advance notice for stockholder proposals and director
nominations.
Risk of Concentrations of Credit; Importance of Carrier and Other Wholesale
Customers
We are subject to significant concentrations of credit risk, which
consist primarily of trade accounts receivable. We sell a significant portion
of our services to other carriers and resellers and, consequently, maintain
significant receivable balances with certain customers. If the financial
condition and operations of these customers
-39-
<PAGE> 41
deteriorate below critical levels, our operating results could be adversely
affected. For the year ended December 31, 1998, one customer accounted for 15%
of our total revenues.
Many carrier customers, particularly smaller carrier customers, can be
extremely price sensitive. Furthermore, there are numerous examples of small
carriers obtaining service and credit terms from other carriers, reselling this
service to customers at a loss in order to quickly build revenue and then
refusing to pay the carrier bills when they come due. In the deregulating
markets in Europe, these risks are particularly acute. Therefore, we could be
exposed to a material credit risk over a very short period of time. We maintain
a reserve for doubtful accounts receivable and periodically write off specific
accounts receivable. We believe that our credit criteria enable us to reduce our
exposure to these risks. However, we cannot be certain that our criteria will
afford adequate protection against these risks.
Price Competition
Prices for international long distance calls are determined in part by
international settlement rates, which are the rates that a carrier (often a PTT)
charges to terminate an international call in its home country. These rates were
traditionally set at arbitrary, artificially high levels that enabled many
carriers to enjoy high gross margins on international calls. International
settlement rates have been declining for the last several years and an
increasing number of calls are being placed outside the international settlement
rate system, resulting in drastically lower prices. Industry observers believe
that the combined effects of deregulation, excess transmission capacity,
advances in technology and the negligible marginal cost to a carrier that owns
its own switches and transmission facilities of carrying an international call,
are gradually causing the collapse of the international settlement rate system.
Practices such as "refile" (where traffic originating from a particular country
is rerouted through another country with a lower settlement rate), off
settlement rate terminations (where a local carrier agrees to terminate an
international call at rates below the settlement rates) and transit (where a
carrier agrees to terminate another carrier's traffic to a particular country at
a negotiated price other than the settlement rate) are becoming increasingly
common.
Settlement rates also are being reduced as result of regulatory
initiatives. Lower settlement rates are scheduled to be in effect for
substantially all countries over the next several years. Lower settlement rates
will reduce our per call revenue, which could have a material adverse effect on
our business, financial condition or results of operations.
The increased use of voice services over the Internet is also expected
to result in a further reduction in prices. Competition from Internet telephony
is expected to come from both Internet service providers and telephone
companies. For example, AT&T and MCI WorldCom have begun to offer voice
telecommunications services over the Internet at substantially reduced prices.
While the provision of voice telephony over the Internet historically has been
characterized by lower standards of quality, technological improvements may
result in Internet-based voice telephony becoming a strong competitor to voice
services that are typically offered by carriers today.
In the United States, providers of Internet telephony also benefit from
an inherent cost advantage because their traffic is considered data, rather than
voice telephony. This allows them to avoid paying access fees to regional bell
operating companies and the local telephone companies, while providers of
traditional long distance services are required to pay such fees.
Dependence on Key Personnel
Our success depends, in large part, upon the continuing contributions
of our key technical, marketing, sales and management personnel. During 1998, we
relied on consultants to staff a number of key technical positions. The loss of
services of several key people within a short period of time could have a
material adverse affect upon our business, financial condition and results of
operations. Our future success also depends upon our continuing ability to
attract and retain other highly qualified personnel. Competition for such
personnel is intense, and our inability to attract and retain additional key
employees could have a material adverse affect on our business,
-40-
<PAGE> 42
financial conditions and result of operations. There can be no assurance that we
will continue to employ such key personnel or that we will be able to attract
and retain qualified personnel in the future.
-41-
<PAGE> 43
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We believe that our exposure to market rate fluctuations on our
investments is nominal due to the short-term nature of those investments. To the
extent the Interim Loan is outstanding, we have market risk relating to such
amounts because the interest rates under the Interim Loan are variable. We do
not believe our exposure represents a material risk to the financial statements.
Our operations in Europe, principally in the Netherlands, expose us to
currency exchange rates risks. To manage the volatility attributable to these
exposures, we nets the exposures to take advantage of natural offsets.
Currently, we do not enter into any hedging arrangements to reduce this
exposure. We are not aware of any facts or circumstances that would
significantly impact such exposures in the near-term. If, however, there was a
10 percent sustained decline of the Dutch Gilder versus the U.S. dollar, then
the consolidated financial statements could be materially effected as our Dutch
operations represented approximately 72% of our total assets as of December 31,
1998 and 64% and 58% of our total revenues and net loss for the year ended
December 31, 1998, respectively.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial information is included in this Report:
<TABLE>
<S> <C>
Report of Independent Public Accountants ............................................................ 43
Consolidated Balance Sheets--December 31, 1998 and 1997 ............................................. 44
Consolidated Statements of Operations for the years ended December 31, 1998, 1997, and 1996 ......... 45
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997, and 1996 46
Consolidated Statements of Comprehensive Loss for the years ended December 31, 1998, 1997, and 1996 . 47
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997, and 1996 ......... 48
Notes to Consolidated Financial Statements .......................................................... 49
</TABLE>
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<PAGE> 44
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To WorldPort Communications, Inc.:
We have audited the accompanying consolidated balance sheets of WorldPort
Communications, Inc. (a Delaware corporation) and subsidiaries, as of December
31, 1998 and 1997, and the related consolidated statements of operations,
stockholders' equity, comprehensive loss, and cash flows for each of the three
years ended December 31, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of WorldPort
Communications, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years
ended December 31, 1998, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts, including goodwill, or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 22, 1999
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<PAGE> 45
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1998 1997
--------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ...................................................................... $ 9,015 $ 179
Accounts receivable, net of allowance for doubtful accounts
of $1,054 and $15, respectively ........................................ 11,765 369
Subscription receivable ................................................... 32,500 --
Prepaid expenses and other current assets ................................. 3,021 67
--------- --------
Total current assets .............................................. 56,301 615
========= ========
PROPERTY AND EQUIPMENT, net ............................................... 91,226 5,032
--------- --------
OTHER ASSETS:
Goodwill, net ....................................................... 43,190 5,094
Other intangibles, net .............................................. 21,851 1,198
Other assets, net ................................................... 7,887 1,258
--------- --------
TOTAL ASSETS ........................................... 220,455 13,197
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ......................................................... $ 25,335 $ 1,391
Accrued expenses ......................................................... 19,302 1,292
Current portion of notes payable - related parties ....................... -- 540
Current portion of obligations under capital leases ...................... 2,631 937
Other current liabilities ................................................ 1,952 598
Interim loan facility .................................................... 110,926 --
--------- --------
Total current liabilities ................................. 160,146 4,758
========= ========
Notes payable - related parties, net of current portion ....................... -- 1,191
Long-term obligations under capital leases, net of current portion ............ 17,539 3,006
Note payable .................................................................. 12,028 0
Other long-term liabilities ................................................... 11,375 87
--------- --------
Total Liabilities .................................... 201,088 9,042
--------- --------
MINORITY INTEREST ............................................................. 1,845 --
--------- --------
COMMITMENTS AND CONTINGENCIES (Note 5):
STOCKHOLDERS' EQUITY:
Undesignated preferred stock, $0.0001 par value, 4,800,000 shares
authorized, no shares issued and outstanding .......................... -- --
Series A convertible preferred stock, $0.0001 par value, 750,000 shares
authorized, 493,889 shares issued and outstanding in
1998 and 1997, respectively ........................................... -- --
Series B convertible preferred stock, $0.0001 par value, 3,000,000 shares
authorized, 2,931,613 and no shares issued and outstanding in
1998 and 1997, respectively ........................................... -- --
Series C convertible preferred stock, $0.0001 par value, 1,450,000 shares
authorized, 1,132,824 and no shares issued and outstanding in
1998 and 1997, respectively ........................................... -- --
Common stock, $0.0001 par value, 65,000,000 shares authorized,
18,228,916 and 16,033,333 shares issued and outstanding in
1998 and 1997, respectively ........................................... 2 2
Warrants ................................................................. 28,263
Additional paid-in capital ............................................... 77,414 7,953
Unearned compensation expense ............................................ (750) --
Cumulative translation adjustment ........................................ (6,747) --
Accumulated deficit ...................................................... (80,660) (3,800)
--------- --------
Total stockholders' equity ................................ 17,522 4,155
--------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................ $ 220,455 $ 13,197
========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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<PAGE> 46
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Year Ended
-------------------------------------
1998 1997 1996
-------- -------- -------
<S> <C> <C> <C>
REVENUES ........................................ $ 28,591 $ 2,776 $ --
COST OF SERVICES ................................ 21,187 2,605
-------- -------- -------
Gross margin ............................... 7,404 171 --
-------- -------- -------
OPERATING EXPENSES:
Selling, general and administrative expenses 39,147 2,723 270
Depreciation and amortization .............. 11,069 818 --
Asset impairment .......................... 4,842 -- --
-------- -------- -------
Operating loss ............................. (47,654) (3,370) (270)
-------- -------- -------
OTHER (EXPENSE) INCOME:
Interest (expense) income, net ............. (24,570) (128) 10
Other (expense) income ..................... (5,451) 6 --
-------- -------- -------
(30,021) (122) 10
-------- -------- -------
LOSS BEFORE MINORITY INTEREST AND INCOME
TAXES ......................................... (77,675) (3,492) (260)
MINORITY INTEREST ............................... 903 -- --
-------- -------- -------
LOSS BEFORE INCOME TAXES ........................ (76,772) (3,492) (260)
INCOME TAX PROVISION ............................ -- -- --
-------- -------- -------
NET LOSS ........................................ $(76,772) $ (3,492) $ (260)
======== ======== =======
NET LOSS PER SHARE,
BASIC AND DILUTED ............................ $ (4.47) $ (0.26) $ (0.11)
======== ======== =======
SHARES USED IN NET LOSS PER SHARE
CALCULATION, BASIC AND DILUTED .............. 17,158 13,245 2,358
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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<PAGE> 47
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Additional Cumulative Unearned
Preferred Common Paid-in- Accumulated Translation Compensation
Stock Stock Capital Deficit Warrants Adjustment Expense Total
----- ----- ------- ------- -------- ---------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 .... $-- $-- $ 50 $ (37) -- -- -- $ 13
Issuance of common stock ...... -- 1 109 -- -- -- -- 110
Issuance of common stock
in connection with
exercise
of stock options ......... -- -- 4 -- -- -- -- 4
Issuance of common stock
For services ............. -- -- 32 -- -- -- -- 32
Issuance of common stock in
Connection with
conversion of
Promissory note payable .. -- -- 80 -- -- -- -- 80
Issuance of common stock ...... -- -- 2,388 -- -- -- -- 2,388
Net loss ...................... -- -- -- (260) -- -- -- (260)
--- -- ------- -------- ------- ------- ----- --------
Balance, December 31, 1996 .... -- 1 2,663 (297) 2,367
Issuance of common stock,
Net of offering costs .... -- -- 10 -- -- -- -- 10
Issuance of common stock in
connection with
conversion of
promissory note payable .. -- -- 420 -- -- -- -- 420
Issuance of common stock in
connection with
acquisitions ............. -- 1 3,862 -- -- -- -- 3,863
Issuance of Series A preferred
stock, net of offering
costs .................... -- -- 998 -- -- -- -- 998
Dividends on Series A
preferred stock .......... -- -- -- (11) -- -- -- (11)
Net loss ...................... -- -- -- (3,492) -- -- -- (3,492)
--- -- ------- -------- ------- ------- ----- --------
Balance, December 31, 1997 .... -- 2 7,953 (3,800) -- -- -- 4,155
--- -- ------- -------- ------- ------- ----- --------
Issuance of Series B preferred
stock .................... -- -- 14,702 -- -- -- -- 14,702
Issuance of common stock in
connection with
acquisitions ............. -- -- 8,162 -- -- -- -- 8,162
Sale of common stock .......... -- -- 900 -- -- -- -- 900
Exercise of stock options ..... -- -- 188 -- -- -- -- 188
Issuance of Series C preferred
stock .................... -- -- 40,000 -- -- -- -- 40,000
Conversion of payables to
equity ................... -- -- 2,652 -- -- -- -- 2,652
Issuance of warrants .......... -- -- -- -- 28,263 -- -- 28,263
Cumulative translation
adjustment ............... -- -- -- -- -- (6,747) -- (6,747)
Issuance of stock and stock
options under compensation
agreements ............... -- -- 2,857 -- -- -- (750) 2,107
Dividend on Series A preferred
stock .................... -- -- -- (88) -- -- -- (88)
Net loss ...................... -- -- -- (76,772) -- -- -- (76,772)
--- -- ------- -------- ------- ------- ----- --------
Balance, December 31, 1998 .... $-- $2 $77,414 $(80,660) $28,263 $(6,747) $(750) $ 17,522
=== == ======= ======== ======= ======= ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
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<PAGE> 48
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- ------- -----
<S> <C> <C> <C>
Net loss .................................... $(76,772) $(3,492) $(260)
Other comprehensive income, net of tax:
Foreign currency translation adjustments (6,747) 0 0
-------- ------- -----
Comprehensive loss .......................... $(83,519) $(3,492) $(260)
======== ======= =====
</TABLE>
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<PAGE> 49
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
1998 1997 1996
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ................................................................................. $ (76,772) $(3,492) $ (260)
Adjustments to reconcile net loss to net cash
Used by operating activities, net of the effects of acquisitions
Depreciation and amortization ................................................... 11,069 818 --
Asset impairment ................................................................ 4,842 -- --
Non cash interest expense ....................................................... 23,052 -- --
Non cash compensation expense ................................................... 2,107 -- --
Minority interest ............................................................... (903)
Change in accounts receivable ................................................... (6,148) 185 --
Change in prepaid expenses and other assets ..................................... 5,177 (624) (34)
Change in accounts payable and accrued expenses and other liabilities ........... 18,831 209 96
Other ........................................................................... (586) -- --
--------- ------- -------
Net cash used in operating activities ................................ (19,331) (2,904) (198)
--------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid in connection with acquisitions, net of cash acquired ................. (107,832) (1,230) --
Deposits paid in conjunction with new business alliances ........................ (2,854) --
Change in notes receivable ...................................................... -- 1,300 (1,300)
Capital expenditures ............................................................ (8,822) (771) --
--------- ------- -------
Net cash used in investing activities ................................ (119,508) (701) (1,300)
--------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Interim Loan ...................................................... 114,700 -- --
Sale of minority interest ....................................................... 2,748 -- --
Proceeds from shareholder loan .................................................. 12,028 -- --
Proceeds from short-term borrowings ............................................. 4,528 -- --
Principal payments on short-term debt ........................................... (4,528) (262) --
Principal payments on obligations under capital leases .......................... (3,849) (70) --
Principal payments on notes payable - related parties ........................... (540) -- --
Proceeds from issuance of notes payable - related parties ....................... -- 1,556 500
Exercise of stock options ....................................................... 188 -- --
Proceeds from issuance of preferred stock, net of offering expenses ............. 20,966 997 --
Proceeds from issuance of common stock, net of offering expenses ................ 900 10 2,535
--------- ------- -------
Net cash provided by financing activities ............................ 147,141 2,231 3,035
--------- ------- -------
Effect of exchange rate on cash and cash equivalents ..................................... 534 -- --
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................................... 8,836 (1,374) 1,537
CASH AND CASH EQUIVALENTS, beginning of period ........................................... 179 1,553 16
--------- ------- -------
CASH AND CASH EQUIVALENTS, end of period ................................................. $ 9,015 $ 179 $ 1,553
========= ======= =======
CASH PAID DURING THE PERIOD FOR INTEREST ................................................. $ 808 $ 73 $ --
========= ======= =======
CASH PAID DURING THE PERIOD FOR TAXES .................................................... $ -- $ -- $ --
========= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of note payable--related party and accrued interest for 230,627 shares
of Series B Preferred Stock ................................................ $ 1,236 $ -- $ --
--------- ======= =======
Stock issued for acquisitions .................................................. $ 8,162 $ -- $ --
--------- ======= =======
Conversion of note payable for 1,680,000 shares of common stock ............ $ -- $ 420 $ --
========= ======= =======
Acquisition of property and equipment under capital lease ...................... $ 8,403 $ 3,559 $ --
========= ======= =======
Stock issued under subscription receivable ..................................... $ 32,500 $ -- $ --
========= ======= =======
Non-cash settlement of MBCP fee with the Company ............................... $ 2,652 $ -- $ --
========= ======= =======
Issuance of warrants in connection with Interim Loan ........................... $ 28,263 $ -- $ --
========= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-48-
<PAGE> 50
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
WorldPort Communications, Inc. (together with its subsidiaries, the
"Company"), previously known as Sage Resources, Inc., was organized as
a Colorado corporation on January 6, 1989, to evaluate, structure and
complete mergers with, or acquisitions of other entities. In October
1996, the Company changed its domicile to Delaware and changed to its
current name. The Company is a rapidly growing facilities-based global
telecommunications carrier offering voice, data and other
telecommunications services to carriers, Internet service providers
("ISPs"), medium and large corporations and distributors and resellers.
The Company has grown principally through acquisitions as described in
Note 2.
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 agreements or inability to enter into additional operating
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, (vii) various competitive factors that may
prevent the Company from competing successfully in the marketplace, and
(viii) the Company's lack of liquidity and its ability to raise
additional capital. The Company has an accumulated deficit of
approximately $80,660 as of December 31, 1998 as well as a working
capital deficit of approximately $103,845 and expects to continue to
incur operating losses in the near future. Funding of the Company's
working capital deficit, current and future operating losses and
expansion of the Company will require substantial continuing capital
investment.
The Company's strategy is to fund these cash requirements through debt
facilities and additional equity financing. During 1998 the Company
obtained the following financing:
- $120.0 million in interim financing (the "Interim Loan")
- $13.5 million in connection with the sale of its Series B
Convertible Preferred Stock
- $ 40.0 million in connection with the sale of its Series C
Convertible Preferred Stock (of which $32.5 million was
received subsequent to year end)
- $ 14.8 million from the sale of a 15% interest in its
subsidiary EnerTel
- $ 1 million in connection with the sale of its common stock
Additionally, the Company was able to convert approximately $1.2
million in notes payable to related parties into its Series B
Convertible Preferred Stock. The Company also increased its lease
financing facilities to provide up to $67 million in infrastructure
financing, subject to certain terms and conditions.
Although the Company has been able to arrange debt facilities or equity
financing to date, there can be no assurance that sufficient debt or
equity financing will continue to be available in the future or that it
will be available on terms acceptable to the Company. Failure to obtain
sufficient capital could materially affect the Company's operations and
expansion strategies. As a result of the aforementioned factors and
related uncertainties, there is substantial doubt about the Company's
ability to continue as a going concern.
-49-
<PAGE> 51
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Use of Estimates
The Company's financial statements are prepared in accordance with
generally accepted accounting principles ("GAAP"). Financial statements
prepared in accordance with GAAP require the use of management
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements. Additionally, management
estimates affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand and all liquid investments with an original maturity of
three months or less when purchased.
Intangible Assets
Goodwill represents the excess of the cost of the acquired businesses
over the fair market value of their identifiable net assets. Other
intangible assets primarily represent licenses, customer bases, and
customer contracts. Amortization is provided using the straight-line
method over the expected lives of the assets as follows:
<TABLE>
<S> <C>
Customer base 3-5 years
Customer contracts 3-5 years
Goodwill 10-20 years
Licenses 10 years
</TABLE>
Amortization expense for the years ended December 31, 1998, 1997, and
1996 was $3,989, $397, and $0, respectively. See Note 2 for further
discussion.
The Company periodically reviews its long-lived assets to determine if
they have been other than temporarily impaired. See Note 3 for
discussion of writedown of certain long-term assets. Following this
writedown, management believes its long-lived assets are appropriately
valued in the accompanying financial statements
Revenue Recognition
The Company recognizes revenues as services are provided. Payments
received in advance are recorded as deferred revenues until such
related services are provided.
Concentration of Credit Risk
The Company is subject to significant concentrations of credit risk,
which consist primarily of trade
-50-
<PAGE> 52
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
accounts receivable. The Company sells a significant portion of its
services to other carriers and resellers and, consequently, maintains
significant receivable balances with certain customers. If the
financial condition and operations of these customers deteriorate below
critical levels, the Company's operating results could be adversely
affected. For the year ended December 31, 1998, one customer accounted
for 15% of total company revenues. For the year ended December 31,
1997, three customers accounted for approximately 91% of total Company
revenues.
Net Loss Per Share
The Company adopted Statement of Financial Accounting Standard ("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.
Accounting for Stock-Based Compensation
SFAS No. 123, "Accounting for Stock-Based Compensation", allows the
Company to adopt either of two methods for accounting for stock
options. The Company has elected to account for its stock-based
compensation plans under Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB No. 25"). In
accordance with SFAS No. 123, certain pro forma disclosures are
provided in Note 8.
Foreign Currency
The assets and liabilities of foreign subsidiaries are translated at
year-end rates of exchange, and income statement items are translated
at the average rates prevailing during the year. The resulting
translation adjustment is recorded as a component of stockholders'
equity. Exchange gains and losses on intercompany balances of a
long-term investment nature are also recorded as a component of
stockholders' equity. All other exchange gains and losses are recorded
in income on a current basis.
The Company does not currently use any derivative instruments to hedge
its foreign currency exposure. Accordingly, the Company is not subject
to any additional foreign currency market risk other than normal
fluctuations in exchange rates.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income". SFAS No. 130 requires the
presentation of comprehensive income in an entity's financial
statements. Comprehensive income represents all changes in equity of an
entity during the reporting period, including net income and charges
directly to equity which are excluded from net income (such as
additional minimum pension liability changes, currency translation
adjustments, unrealized gains and losses on available for sale
securities, etc.). The Company adopted SFAS No. 130 during the year
ended December 31, 1998.
Certain Reclassifications
Certain reclassifications have been made to amounts previously reported
to conform to current period presentation.
-51-
<PAGE> 53
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(2) ACQUISITIONS
1998 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 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 or arrangements 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. On October 21, 1998,
the Company entered into an agreement to sell a 15% interest in
WorldPort Europe, the parent of EnerTel. The transaction closed on
November 20, 1998 for consideration of a cash infusion comprising $2.8
million in equity and a $12.0 million shareholder loan. See Note 5 for
further discussion on debt and capital lease obligations. The new
minority shareholders in WorldPort Europe are three major regional
Dutch utility and telecommunications services companies who were former
shareholders of EnerTel.
In August 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.
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. In the fourth quarter of 1998, a
comprehensive independent appraisal of the assets acquired from EnerTel
was completed. Certain adjustments were made to the initial purchase
price allocation to reflect the results of this appraisal.
The following table summarizes the net assets purchased in connection
with the acquisitions and the amount attributable to goodwill (in
thousands):
-52-
<PAGE> 54
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
IIC EnerTel ICX
--- ------- ---
<S> <C> <C> <C>
Working capital $ 629 $ (541) $ (221)
Property, plant, and equipment 243 78,975 169
Other assets 209 930 28
Non-current liabilities (2,785) (19,221) (39)
Customer base 7,442 2,500 635
License -- 19,000 --
Goodwill 2,785 35,142 --
</TABLE>
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.
1997 Acquisitions
On June 20, 1997, the Company completed the acquisition of
substantially all of the telecommunications assets and operations of
Telenational Communications Limited Partnership ("TNC") , a reseller of
international switched and private line services in exchange for (i)
3,750,000 shares of the Company's common stock and (ii) the assumption
by the Company of certain working capital obligations and indebtedness
of TNC up to a maximum of $4.6 million.
On July 3, 1997, the Company acquired Wallace Wade Corporation ("WWC"),
a telecommunications marketing consulting firm in exchange for: (i)
1,200,000 shares of the Company's common stock, (ii) $75 cash and (iii)
a promissory note in the amount of $175. See Note 6 for further
discussion.
Both acquisitions were accounted for using the purchase method of
accounting and are subject to certain purchase price adjustments as
discussed above. The allocation of purchase price to the assets
acquired and liabilities assumed in the transaction were assigned and
recorded based on their fair values.
The fair value of assets acquired and liabilities assumed in connection
with the 1997 Acquisitions is summarized as follows:
<TABLE>
<CAPTION>
TNC WWC
--- ---
<S> <C> <C>
Working capital $ (3,169) $ (15)
Property and equipment 1,121 3
Other long-term assets 189 -
Contracts -- 1,313
Goodwill 5,850 --
</TABLE>
Pro Forma
The unaudited pro forma consolidated results of operations of the
Company, as though the 1998 and 1997 Acquisitions took place on January
1, 1997, are as follows:
-53-
<PAGE> 55
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
December 31,
-----------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues $ 40,561 $ 14,752
========== =========
Net loss $ (89,495) $ (65,099)
========== ==========
Net loss per share, basic and diluted $ (4.96) $ (3.90)
========== ==========
</TABLE>
The pro forma financial information does not purport to represent what
the consolidated results of operations would have been if the
acquisitions had in fact occurred on these dates, nor does it purport
to indicate the Company's future consolidated financial position or
future consolidated results of operations. The pro forma adjustments
are based on currently available information and certain assumptions
that the Company's management believes to be reasonable.
(3) ASSET IMPAIRMENT
Following its acquisition of EnerTel, the Company shifted its focus to
becoming a facilities-based global telecommunications carrier with an
emphasis on European operations. In connection with this shift in
strategy and the resulting changes in asset deployment, management
conducted a comprehensive evaluation of its existing assets to
determine whether they were impaired under the provisions of SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." ("SFAS No. 121"). As a result of
this evaluation, management determined that assets acquired in 1997
from WWC were impaired as defined by SFAS No. 121. A charge of
approximately $898 was recorded to reduce these assets (principally
goodwill) to their net realizable value. In addition, the Company
determined that certain switching and other network equipment it
previously operated would no longer be utilized following the EnerTel
acquisition. A charge of approximately $3,944 was recorded to write
this equipment down to its net realizable value.
(4) PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Expenditures for additions,
improvements and renewals, which add significant value to the asset or
extend the life of the asset, are capitalized. Expenditures for
maintenance and repairs are charged to expense as incurred. The Company
provides for depreciation of property and equipment using the
straight-line method based on the estimated useful lives of the assets
ranging from three to twenty years.
Following is a summary of property and equipment at December 31, 1998
and 1997:
-54-
<PAGE> 56
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Switching and network equipment $ 87,792 $ 1,280
Work-in progress 9,643 3,561
Leasehold improvements 453 318
Office and computer equipment 737 159
Furniture, fixtures and other 321 135
--------- --------
Total property and equipment 98,946 5,453
Less: accumulated depreciation and amortization (7,720) (421)
--------- --------
Property and equipment, net $ 91,226 $ 5,032
========= ========
</TABLE>
Depreciation expense charged to operations was $7,080, $421 and $0 for
the years ended December 31, 1998, 1997, and 1996, respectively.
(5) DEBT AND CAPITAL LEASE OBLIGATIONS
The Company's current and long-term debt as of December 31, 1998 and
1997 consists of the following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Interim Loan, due June 23, 1999, secured, variable interest rate, net of
unamortized discounts of $17,075 $ 110,926 $ --
Note payable affiliate, due December 31, 1997, secured, 10% interest rate -- 1,731
EnerTel Minority Shareholder loan, due ten years after the repayment of the
Interim Loan, variable interest rate 12,028 --
--------- -------
Total 122,954 1,731
Less current portion (110,926) (540)
--------- -------
Long-term, net of current portion $ 12,028 $ 1,191
--------- -------
</TABLE>
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 December 31, 1998 Interim Loan holders, in aggregate,
have received warrants exercisable for 4,069,904 shares of common stock
at a price per share of $0.01. In addition to the warrants which the
Interim Loan holders had received as of December 31, 1998, such holders
are entitled to receive additional warrants on the date the Interim
Loan is repaid in full, so that all warrants issued to such holders
represent 11% of the Company's fully-diluted outstanding Common Stock
on the date of such repayment. As of December 31, 1998, the warrants
were valued at an aggregate of $28,263 and this amount 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.
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.
-55-
<PAGE> 57
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
In September 1997, the Company entered into an arrangement with MBCP
(see Note 8) whereby MBCP would arrange for the Company to borrow from
MBCP and certain of its affiliated entities under certain promissory
notes (the "Bridge Notes"). The Bridge Notes bore interest at 10% per
annum. During 1998, $1,191 of the Bridge Notes and accrued interest
were converted into 230,627 shares of the Company's Series B
Convertible Preferred Stock. The remaining Bridge Notes were repaid in
cash.
On October 20, 1998, the Company entered into a loan agreement with the
purchasers of a minority interest in EnerTel in the principal amount of
approximately $12,028 (the "Minority Shareholder Loan). The Minority
Shareholder Loan bears interest at the LIBOR rate plus 6.5% per annum,
increasing by 0.5% per annum every three months until the Interim Loan
is repaid (as of December 31, 1998, the Minority Shareholder Loan bore
interest at 12.7% per annum). After the repayment of the Interim Loan,
the Minority Shareholder Loan shall bear interest equal to the LIBOR
rate plus 0.5% per annum. The interest payable during the first five
years after the repayment of the Interim Loan shall accrue and be
payable at maturity. The interest payable during the second five years
after repayment of the Interim Loan shall be payable semi-annually in
arrears. The Minority Shareholder Loan is secured by a pledge of 15% of
the shares of EnerTel N.V., which pledge shall be released upon the
repayment of the Interim Loan. The Minority Shareholder Loan matures 10
years after the repayment of the Interim Loan.
The carrying value of the aforementioned debt (before unamortized
discount) approximates market value.
Vendor Financing
As of December 31, 1998, the Company had four credit facilities with
vendors under which it could borrow up to $67 million bearing interest
at rates between 7.5% and 13%, subject to meeting certain financial
criteria. These facilities have 3-10 year terms and in some cases offer
purchase provisions at the end of the term ranging from one dollar to
fair market value. The Company has approximately $19,060 outstanding
under these facilities at December 31, 1998 which are recorded as
capital leases (Note 6). These facilities are secured by the equipment
and contain certain restrictive covenants.
Additional Financing
In conjunction with unsuccessful financing activities and acquisitions,
the Company incurred $4,373 in costs which have been recorded as a
charge against income in Other Expenses in the accompanying statement
of operations.
(6) COMMITMENTS AND CONTINGENCIES
Service Commitments
The Company has entered into various agreements to purchase services
from various telecommunications carriers. The following table
summarizes the Company's minimum commitments under these agreements (in
thousands):
<TABLE>
<CAPTION>
Year Ending December 31
-----------------------
<S> <C>
1999 $ 8,650
2000 10,952
2001 6,000
2002 6,000
2003 8,000
------------
Total $ 39,602
============
</TABLE>
-56-
<PAGE> 58
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Capacity Commitments
The Company has entered into agreements with a vendor for the purchase
of STM-1's of capacity on the AC-1 cable system or STM-1 level capacity
on additional undersea cable systems under development by this vendor.
In 1998, the Company made a deposit of $2 million with this vendor
which will be applied against the Company's aggregate $66 million
commitment over the next 3 years under this agreement.
The Company has entered into agreements with a vendor for the
construction, turn-key installation, in-country technical support and
maintenance of DMS-GSP switches to be installed worldwide. The Company
has an aggregate $20 million commitment over the next three years (of
which approximately $10.2 million has been spent to date).
Leases
The Company and its subsidiaries lease office and network facilities
under various noncancelable operating and capital lease agreements.
Future minimum commitments under the leases as of December 31, 1998 are
as follows:
<TABLE>
<CAPTION>
Year Ending December 31 Operating Capital
----------------------- --------- -------
<S> <C> <C>
1999 $ 7,196 $ 4,188
2000 7,498 4,188
2001 4,391 2,918
2002 3,653 2,043
2003 and thereafter 4,197 12,868
----------- ---------
Minimum future lease payments $ 26,935 26,205
===========
Less portion related to interest (6,035)
---------
Present value of future minimum lease obligations 20,170
Less current portion (2,631)
---------
Non-current portion $ 17,539
=========
</TABLE>
Total rental expense for operating leases for the years ended December
31, 1998, 1997, and 1996 was $1,272, $90 and $0, respectively.
Legal
The Company and WorldPort Communications Europe, B.V., one of its
European subsidiaries ("WorldPort Europe"), are defendants in
litigation filed in the Sub-District and District courts of The Hague,
located in Rotterdam, Netherlands. The cases, filed in January and
February, 1999, by Mr. Bahman Zolfagharpour, allege that the Company
breached agreements with Mr. Zolfagharpour in connection with its
purchase of MathComp B.V. (now WorldPort Europe) from Mr.
Zolfagharpour, its subsequent purchase of EnerTel, and Mr.
Zolfagharpour's employment agreement with the WorldPort Europe. The
litigation seeks
-57-
<PAGE> 59
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
dissolution of the employment agreement and the non-competition clause
of the agreement, damages in an amount exceeding $20 million, and the
award of 2,500,000 shares of the Company's common stock to Mr.
Zolfagharpour. The Company believes that the litigation is wholly
without merit and intends to defend the case vigorously.
On June 2, 1998 the Company initiated an arbitration proceeding against
John W. Dalton ("Dalton"), a former director, and its former President
and Chief Executive Officer. In that proceeding, the Company is seeking
the rescission and cancellation of 1.2 million shares of Common Stock
that were issued to Dalton in connection with the acquisition of a
company formerly owned by Dalton. In the same proceeding, Dalton is
asserting claims against the Company, Maroon Bells Capital Partners,
Inc. ("MBCP"), Paul A. Moore (the Company's current Chairman and Chief
Executive Officer), Phillip S. Magiera (a director and the Company's
Chief Financial Officer and Secretary), Dan Wickersham (the Company's
former President and Chief Operating Officer) and Theodore H. Swindells
(a principal of MBCP). Dalton's employment was terminated by notice
dated 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 filed in Texas state court. However, based on a motion the
Company filed, that proceeding was dismissed by the Texas court in
favor of arbitration. The Company plans to prosecute its claims against
Dalton vigorously and to vigorously defend against the claims asserted
by Dalton.
In addition to the aforementioned claims, the Company is involved in
various other lawsuits or claims arising in the normal course of
business. In the opinion of management, none of these lawsuits or
claims will have a material adverse effect on the consolidated
financial position or results of operations of the Company.
(7) STOCKHOLDERS' EQUITY
The Company is authorized to issue 65,000,000 shares of Common Stock,
$.0001 par value per share and 10,000,000 shares of Preferred Stock,
$.0001 par value per share.
Common Stock
In March 1997, the Company completed a private placement offering of
3,333,333 shares of common stock for net proceeds of $2,388. In April
1998, the Company sold 180,000 shares for net proceeds of $900.
Series A Preferred Stock
The Company has designated 750,000 shares of its preferred stock to be
Series A Preferred Stock ("Series A") with a par value of $0.0001 and a
stated value of $2.25. The Series A is cumulative and bears dividends
at the rate of 8% per annum, payable in cash or shares of the Company's
common stock at the option of the Company. The Series A is convertible
at any time, at the option of the holder, and will be mandatorily
converted upon the occurrence of certain events, into an equal number
of shares of the Company's common stock and such holders have the same
voting rights as those of the common stock. In 1997, the Company issued
493,889 shares of Series A Preferred Stock for total net proceeds of
$997.
Series B Preferred Stock Offering
The Company has designated 3,000,000 shares of its preferred stock to
be Series B Preferred Stock
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<PAGE> 60
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
("Series B") with a par value of $0.0001 and a stated value of $5.36.
The Series B is non-cumulative and bears dividends at the rate of 7%
per annum, payable in cash or shares of the Company's common stock at
the option of the Company. The Series B is convertible at any time, at
the option of the holder, and will be mandatorily converted upon the
occurrence of certain events, at a rate of 4 shares of common stock for
each share of preferred stock. Holders of Series B have voting rights
equal to 40 votes per share on all matters submitted to a vote of the
stockholders of the Company.
During the first half of 1998, the Company received approximately $12.4
million in cash proceeds from the sale of the Series B Convertible
Preferred Stock and converted approximately $1.2 million of Bridge
Notes and accrued interest into the Series B Convertible Preferred
Stock in exchange for 2,539,345 shares of the Company's Series B
Convertible Preferred Stock.
Series C Preferred Stock
The Company has designated 1,450,000 shares of its preferred stock to
be Series C Preferred Stock ("Series C") with a par value of $0.0001
per share and a stated value of $35.31 per share. The Series C is
non-cumulative and bears dividends at the rate of 7% per annum, payable
in cash or shares of the Company's common stock at the option of the
Company. The Series C is convertible at any time, at the option of the
holder, and will be mandatorily converted upon the occurrence of
certain events, into 10.865 shares of the Company's common stock for
each share of Series C stock. Holders of Series C have voting rights
equal to 40 votes per share on all matters submitted to a vote of the
stockholders of the Company.
In December 1998, the Company entered into a Series C Preferred Stock
Purchase Agreement (the "Purchase Agreement") with an investor,
pursuant to which the investor acquired 212,405 shares of Series C for
an aggregate purchase price of $7,500. Pursuant to the Purchase
Agreement, the investor also (i) committed to acquire an additional
920,419 shares of Series C for an aggregate purchase price of $32,500
and (ii) received an option to acquire up to 283,206 shares of Series C
for an aggregate purchase price of $10,000. This option expires upon
the repayment or refinancing of the Interim Loan. The investor's
commitment to acquire the additional 920,419 shares was subject to
customary conditions, including regulatory approvals, which were
obtained in January 1999. The investor acquired such shares in January
1999.
As a holder of the Series C Stock, the investor is entitled to vote on
all matters submitted to a vote of the stockholders of the Company,
voting together with the holders of Common Stock as a single class. In
addition to the votes that the investor obtained through its stock
purchase, the investor has also obtained certain additional rights.
Those rights include, with respect to the Common Stock issued upon
conversion or exercise of the Series C Stock, certain demand and
piggyback registration rights.
Pursuant to the Purchase Agreement, on December 31, 1998, the Company
increased the size of its Board of Directors to eight members and
appointed four individuals designated by the investor to serve as
directors. WorldPort has also agreed to cause the investor's designees
to comprise at least one-half of the boards of directors of each of its
subsidiaries. In addition, WorldPort amended its Bylaws to provide that
at least one of the investor's designees and, except in certain limited
situations, one of the directors who was not designated by the investor
must approve any action put before the Board of Directors in order for
such to be properly approved by the Board of Directors.
Additionally, in connection with the investor's purchase of Series C
Stock, on December 31, 1998, the investor, the Company, and its
Chairman and Chief Executive Officer, its Chief Financial Officer, the
remaining MBCP stockholder, and MBCP (collectively, the "Stockholders")
also entered into a
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<PAGE> 61
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Shareholder Agreement. Pursuant to the Shareholder Agreement, the
Stockholders (i) agreed not to vote certain of their shares of capital
stock of the Company in favor of certain financing proposals or other
items without the investor's consent and (ii) granted to the investor a
proxy with respect to such capital stock for the investor's use in
limited matters. Pursuant to the Shareholder Agreement, the investor
and the Stockholders have also agreed to certain restrictions on the
transfer of certain of their shares of the Company's capital stock.
Long-term Incentive Plan
The Company adopted an incentive stock option plan for employees and
consultants in September 1996. The Company has reserved 7,500,000
shares of common stock for issuance pursuant to the plan. As of
December 31, 1998, there were 5,751,000 outstanding options under the
plan at exercise prices ranging from $0.08 to $14.19 per share which
vest over a period ranging from one to three years. Options granted to
consultants are valued using the Black-Scholes models and recorded as
compensation expense over the period of service to which they related.
Such amounts were not material for any of the periods presented.
Stock Options
A summary of the status of the Company's stock option plan at December
31, 1998 is as follows (in thousands):
<TABLE>
<CAPTION>
Shares Weighted Average Price
------- ----------------------
<S> <C> <C>
Outstanding at December 31, 1996 75 $ 0.08
Granted 1,100 1.74
Forfeited (250) 1.25
-------
Outstanding at December 31, 1997 925 1.27
Granted 5,216 7.53
Exercised (92) 2.06
Forfeited (298) 1.81
-------
Outstanding at December 31, 1998 5,751 6.91
-------
</TABLE>
The remaining weighted average contractual life of the options
outstanding at December 31, 1998 is 9.4 years and the weighted average
price of the 3,151,667 exercisable options at December 31, 1998 is
$6.62.
The following table sets forth the exercise price range, number of
shares, weighted average exercise price, and remaining contractual
lives of options issued by year:
<TABLE>
<CAPTION>
Weighted
Average
Remaining Weighted
Contractual Weighted Exercisable Average
Year Range of Outstanding as Life Exercise As of Exercise
Granted Exercise prices of 12/31 (in years) Price 12/31 Price
------- --------------- ----------- ---------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
1996 $0.08 75,000 7.78 $0.08 75,000 $0.08
1997 $0.75 - $2.25 850,000 8.50 $1.22 511,667 $1.17
1998 $1.00 - $14.19 4,826,000 9.44 $7.53 2,565,000 $7.77
</TABLE>
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<PAGE> 62
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
Had compensation cost for stock options been determined under SFAS No.
123, the Company's net loss and net loss per share would have been the
following pro forma amounts:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Net loss
As reported $(76,772) $(3,492) $(260)
Pro forma (90,072) (3,731) (314)
Net loss per share
As reported (4.47) (0.26) (0.11)
Pro forma (5.25) (0.28) (0.13)
</TABLE>
Under SFAS No. 123, the fair value of each option grant was estimated
on the date of grant using the Black-Scholes option pricing model. The
following weighted average assumptions were used for grants in 1998,
1997 and 1996, respectively: risk-free interest rates of 5.3%, 6.8%,
and 6.7%; dividend rates of $0; expected lives of 10 years; expected
volatility of 77.4% for 1998 and 58.1% respectively, for 1997, and
1996.
The Black-Scholes option pricing model and other existing models were
developed for use in estimating the fair value of traded options that
have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of and are highly sensitive
to subjective assumptions including the expected stock price
volatility. The Company's employee stock options have characteristics
significantly different from those of traded options, and changes in
the subjective input assumptions can materially affect the fair value
estimate.
Employee Benefit Plan
The Company's subsidiary, EnerTel, is required by Dutch law to
contribute a certain percentage of its employees' salary, based on the
employees' ages, to a fund managed by a third-party for retirement
purposes. The Company has no obligation other than to make the
contributions as defined by the law. The Company recorded compensation
expense of approximately $500 related to contributions made from
acquisition through December 31, 1998.
(8) RELATED PARTY TRANSACTIONS
Advisory Agreements
On March 7, 1997, the Company and Maroon Bells Capital Partners
("MBCP") entered into a twelve month advisory agreement for services to
be rendered in conjunction with potential acquisitions and financings.
On February 4, 1998, the Company amended the Advisory Agreement with
MBCP to ensure the continuity of services during its expansion phase by
renewing the Advisory Agreement for an additional twenty-four months
with an expiration of March 7, 2000. Under terms of the amendment, the
Company agreed to grant MBCP five-year options to purchase 250,000
shares of the Company's common stock at an exercise price of $2.00 per
share. At the time of grant, the options were valued in accordance with
SFAS No. 123 and the related amount, $1,045, is recorded as a component
of selling, general and administrative expense in the accompanying
statement of operations. All other transactions with MBCP were not
material.
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<PAGE> 63
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The Advisory Agreement was terminated on December 31, 1998 pursuant to
a termination agreement between the Company and MBCP. Under the
termination agreement, the Company paid to MBCP $200, agreed to issue
to MBCP shares of a new series of its preferred Stock with an aggregate
liquidation value of $1.0 million, and assigned to MBCP promissory
notes receivable from Messrs. Moore, Magiera and Swindells, which notes
had an aggregate amount outstanding of $1.6 million (including accrued
interest). Such payments reflected payment in full for all services
rendered, expenses incurred and retainer payments owing to MBCP in
1998. The accompanying balance sheet reflects the impact of this
settlement.
Series B Convertible Preferred Stock Purchase
In March 1998, Anderlit, Ltd., a privately-owned investment fund
("Anderlit"), purchased 746,269 shares of the Company's Series B
Convertible Preferred Stock for an aggregate purchase price of $4,000.
Anderlit is an investment fund investing in a portfolio of emerging
telecommunications companies. The Company's Chief Executive Officer and
Chief Financial Officer are investors in Anderlit and the Company's
Chief Executive Officer has received from Anderlit an irrevocable proxy
to vote all of the Company's Series B Preferred Stock owned by
Anderlit.
Affiliated Sales
As discussed in Note 2, the Company divested itself of its Bel 1600
unit. The Company holds a minority interest (20%) in the company to
which these assets were transferred. During 1998, the Company had sales
of approximately $4.3 million to this new entity. In management's
opinion, these sales are at market rates.
Other Related Party Transactions
A director of the Company, is a partner at a law firm which provides
the principal on-going legal services to the Company.
(9) TAXES
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The significant components of the Company's deferred tax
assets and liabilities as of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
------------ -----------
<S> <C> <C>
Deferred tax assets and (liabilities) -
Net operating loss carryforwards $ 41,529 $ 1,293
Interim Loan Warrants (20,175) --
Intangible assets (1,903) (51)
Other 1,736 49
------------ -----------
Total deferred tax assets 21,187 1,291
Less: Valuation allowance (31,497) (1,291)
------------ -----------
Net deferred tax liability $ (10,310) $ --
============ ===========
</TABLE>
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<PAGE> 64
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The Company has incurred losses since inception. As the Company is
unable to conclude that it is more likely than not that it will be able
to realize the benefit of its deferred tax assets, it has provided a
full valuation allowance against the net amount of such assets. The
deferred tax liability at December 31, 1998 represents net deferred tax
liabilities in those jurisdictions in which net operating loss
carryforwards and other deferred tax assets are insufficient to fully
offset deferred tax liabilities.
At December 31, 1998, the Company had net operating loss carryforwards
of approximately $50 million for U.S. income tax purposes and
approximately $78 million for foreign tax purposes. The U.S.
carryforwards primarily expire in 2018. The foreign carryforwards do
not expire.
Section 382 of the Internal Revenue Code limits the utilization of net
operating loss carryforwards when there are changes in ownership
greater than 50%, as defined. The Company has not yet made a
determination of whether a change in control under Section 382 has
occurred. If such a change has occurred, the timing of the Company's
utilization of its U.S. NOL carryforwards could be impacted.
A reconciliation from the federal statutory rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate (34)% (34)% (34)%
Amortization of goodwill 5 0 0
State taxes (4) (4) (4)
Other (2) 0 0
Valuation Allowance 35 38 38
--- --- ---
Total 0% 0% 0%
=== === ===
</TABLE>
(10) SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information". SFAS No. 131 requires the
reporting of profit and loss, specific revenue and expense items and
assets for reportable segments. It also requires the reconciliation of
total segment revenues, total segment profit or loss, total segment
assets, and other amounts disclosed for segments to the corresponding
amounts in the general purpose financial statements. The Company
adopted SFAS No. 131 during the year ended December 31, 1998.
The Company views itself as participating in one business segment--
facilities-based global telecommunications carrier. Its operations can
be viewed as European and North American. Intersegment revenues are not
material. Financial data by geographic area for 1998 are as follows:
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<PAGE> 65
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
European North American Total
-------- -------------- -----
<S> <C> <C> <C>
Revenues $ 18,307 $ 10,284 $ 28,591
Depreciation and amortization 8,311 7,599 15,911
Operating loss (20,675) (26,979) (47,654)
Interest expense, net (23,928) (642) (24,570)
Net loss (43,699) (33,073) (76,772)
Total assets 158,088 62,367 220,455
Capital expenditures 5,339 3,483 8,822
Intangible assets 49,896 15,145 65,041
</TABLE>
Prior to 1998, all operations were North American based.
-64-
<PAGE> 66
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Upon recommendation of the Audit Committee of our Board of Directors
and upon approval of such recommendation by our Board of Directors, we replaced
Schumacher & Associates, Inc. ("Schumacher") as our independent public
accounting firm on June 30, 1997. Effective July 1, 1997, we engaged Arthur
Andersen LLP as our independent public accountants. The prior accountant's
report of Schumacher on our financial statements for the years ended December
31, 1996 and 1995, respectively, and for the period from January 6, 1989 (date
of inception) to December 31, 1996 was not qualified or modified in any manner
and contained no disclaimer of opinion or adverse opinion. No disagreements
exist between us and Schumacher on any matter of accounting principle or
practice, financial statement disclosure or auditing scope or procedure related
to our financial statements for the years ended December 31, 1996 and 1995,
respectively, and for the period from January 6, 1989 (date of inception) to
December 31, 1996 or for the interim period beginning January 1, 1997 through
June 30, 1997, the date of replacement.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth our directors and executive officers and
their ages as of December 31, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Paul A. Moore.............................. 43 Chairman of the Board of Directors and Chief Executive Officer
Phillip S. Magiera......................... 44 Chief Financial Officer and Director
Daniel G. Lazarek.......................... 33 Executive Vice President
Stephen Courter............................ 44 Regional Vice President--Europe
David Hickey............................... 38 General Manager--Europe
Donald C. Hilbert, Jr...................... 38 Controller
Michael E. Heisley, Sr..................... 61 Director
Stanley H. Meadows......................... 54 Director
Emily Heisley Stoeckel..................... 35 Director
Larry W. Gies.............................. 57 Director
Peter A. Howley............................ 58 Director
Robert L. McCann........................... 51 Director
</TABLE>
PAUL A. MOORE has been our Chairman of the Board of Directors and Chief
Executive Officer since January 1998. From June 1996 to January 1998, Mr. Moore
provided us with advisory services. Since 1993, Mr. Moore has been a Principal
of MBCP, an international merchant banking firm which invests in, and provides
corporate finance and advisory services to, emerging companies in the
telecommunications industry. Mr. Moore has over 15 years experience in mergers,
acquisitions and investments in the telecommunications industry. For eight years
prior to co-founding MBCP, Mr. Moore was President of Anderson Pacific, a
private firm specializing in
65
<PAGE> 67
telecommunications industry investments. Prior to that, Mr. Moore served in
various operational capacities, including Director of Franchising and Vice
President of New Business Development for Centel.
PHILLIP S. MAGIERA has been our Chief Financial Officer since January
1998 and a member of our Board of Directors since February 1997. From June 1996
to January 1998, Mr. Magiera provided us with advisory services. In addition,
Mr. Magiera has been a Principal of MBCP since October 1995. Mr. Magiera,
founder of Applied Telecommunications Technologies, Inc. ("ATTI"), was the
President of ATTI from August 1991 until October 1995. For ATTI, he managed $111
million of investments in over 35 emerging telecommunications services providers
and manufacturers involved in technologies such as cellular service, competitive
access and Internet access. Prior to founding ATTI, Mr. Magiera served as Vice
President of Fidelity Ventures, Inc., a wholly-owned subsidiary of Fidelity
Investments, where he originated and managed investments in telecommunications
and financial service companies.
DANIEL G. LAZAREK has been our Executive Vice President since March,
1998. From October 1994 to January 1998, Mr. Lazarek served as Vice President,
Sales and Service for Citizens Communications. From July 1987 to September 1994,
Mr. Lazarek served in various sales and management positions for Frontier
Corporation, a major long distance reseller, most recently as Marketing and
Business Development Director--U.S. Telephone Operations.
STEPHEN COURTER joined us in June 1998 as Regional Vice
President--Europe. From December 1995 to June 1998 Mr. Courter served as Vice
President--Finance for Global One. At Global One, Mr. Courter managed financial
operations in 20 European countries and managed a staff of over 100. From July
1991 to November 1995, he served as Director of International Finance for Sprint
International, where he supervised a worldwide staff of over 50 financial
managers and technicians. From August 1987 to July 1991, Mr. Courter served as
Director of Finance and Network Systems for Telenet. Prior to that he served as
Finance Manager for IBM Corporation.
DAVID HICKEY joined us in June 1998 as General Manager--Europe. From
1986 to June 1998 Mr. Hickey served as a telecommunications consultant and
founding director of Datanet, an independent international telecommunications
consulting firm based in Ireland advising corporate clients, including us,
carriers and government agencies.
DONALD C. HILBERT, JR. joined us in May 1998 as Controller. From April
1992 to May 1998, Mr. Hilbert served as a Senior Manager - Mergers and
Acquisitions for BellSouth Corporation. From May 1984 to April 1992, Mr. Hilbert
served as a certified public accountant with Arthur Andersen & Co.
MICHAEL E. HEISLEY, SR. has been a member of our Board of Directors
since December 31, 1998. Mr. Heisley has been the Manager and President of Heico
since its formation in 1988 and also serves as the Chief Executive Officer of
various of Heico's subsidiaries. Mr. Heisley is a director of Robertson-Ceco
Corporation and Tom's Foods Inc.
STANLEY H. MEADOWS has been a member of our Board of Directors since
December 31, 1998. Mr. Meadows has been General Counsel of Heico since February
1998 and is a partner at the law firm of McDermott, Will & Emery, where he has
practiced since 1970. Mr. Meadows is a director of Robertson-Ceco Corporation
and Tom's Foods, Inc.
EMILY HEISLEY STOECKEL has been a member of our Board of Directors
since December 31, 1998. Since 1995, Ms. Stoeckel has been Managing Director of
Heico Acquisitions, Inc., where she served as Vice President from 1992 to 1995.
Ms. Stoeckel is also a director of Tom's Foods, Inc.
LARRY W. GIES has been a member of our Board of Directors since
December 31, 1998. Mr. Gies has been the Executive Vice President, Chief
Financial Officer and Secretary of Heico since March 31, 1997. Mr. Gies also has
served as an executive officer of various of Heico's subsidiaries, including
Heico Holding, Inc., since June 1989, and Pettibone, L.L.C. and its
subsidiaries, since March 31, 1997.
66
<PAGE> 68
PETER A. HOWLEY has been a member of our Board of Directors since
August 1997. From May, 1994 to the present, Mr. Howley has been a private
investor, advisor and a board member of several early stage companies. From 1985
until April 1994, Mr. Howley served as Chairman, Chief Executive Officer and
President of Centex Telemanagement, Inc., a U.S. company specializing in the
outsourcing of telecommunications management for small to medium-sized
businesses. Mr. Howley also currently serves on the boards of FaxSAV
Corporation, and Exodus Communications, Inc. Mr. Howley has served on the NASDAQ
Corporate Advisory Board and the American Business Conference.
ROBERT L. MCCANN has been a member of our Board of Directors since June
1998. Mr. McCann is a Senior Vice President of ACNielsen Company where he has
served since February 1994 and where he is responsible for corporate direction,
acquisitions, alliances and industry analysis. Mr. McCann also retains overall
global responsibility for the management of ACNielsen's largest client
partnership with the Phillip Morris Company and subsidiaries, Kraft Foods and
Miller Brewing. Prior to joining ACNielsen, from November 1989 to January 1994,
Mr. McCann was a division president with Information Resources Inc. and earlier
worked at SAMI/Burke, a subsidiary of Time, Inc. Mr. McCann's previous work
includes experience as a Partner with Booz Allen & Hamilton.
DIRECTORS - TERM OF OFFICE
Each member of our Board of Directors is elected annually. All officers
serve at the pleasure of the Board of Directors. There are no family
relationships among any of our directors or officers, except that Emily Heisley
Stoeckel, a director, is the daughter of Michael E. Heisley, Sr., a director. In
addition, Messrs. Heisley, Meadows and Gies, and Ms. Stoeckel, have an interest
in, or are employed by, Heico, one of our principal stockholders.
BOARD COMMITTEES
Our Board of Directors has established three standing committees: the
Audit Committee, the Compensation Committee and the Executive Committee. The
Audit Committee selects our auditors and oversees the review and auditing of our
financial performance. The Compensation Committee reviews the compensation paid
by us to our key executives to ensure that such compensation is appropriate
given such executive's duties, responsibilities and contributions to us. The
Executive Committee has the authority to take all actions which the Board of
Directors as a whole would be able to take, except as limited by applicable law.
Messrs. Gies, McCann and Magiera currently comprise the Audit Committee, Messrs.
McCann and Meadows currently comprise the Compensation Committee and Messrs.
Moore and Meadows currently comprise the Executive Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that certain of our officers, our directors, and persons who own more
than ten percent of our outstanding stock, file reports of ownership and changes
in ownership with the Securities and Exchange Commission. During 1998, to our
knowledge, all Section 16(a) filing requirements applicable to its officers,
directors, and greater than ten percent beneficial owners were complied with,
except that (A) Mr. Moore did not timely report (i) the December 1998 sale, by
MBCP, of 150,000 shares of Common Stock at a sales price of $1.34 per share,
(ii) the distribution on December 31, 1998, by MBCP, of 125,000 shares of Common
Stock to Mr. Magiera as a bonus for services rendered to MBCP, or (iii) Mr.
Moore's gift, in December 1998, of 6,700 shares of Common Stock to a charity and
(B) Mr. Magiera did not timely report his receipt, on December 31, 1998, of
125,000 shares of Common Stock, as a bonus for services rendered to MBCP.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table sets forth information
concerning cash and non-cash compensation we paid during the fiscal years ended
December 31, 1996, 1997 and 1998 to our Chief Executive Officer and certain
other executive officers (the "Named Executive Officers"). None of our other
executive officers
67
<PAGE> 69
received compensation for services in all capacities to our company in excess of
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------------
Annual Compensation Awards
----------------------------------------------- ------
Other Securities
Annual Restricted Underlying
Name and Compen- Stock Options/
Principal Position Year Salary($) Bonus($) sation($) Award(s)($) SARs(#)
- ------------------------ ----- ---------- -------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Moore 1998 $300,000 $150,000 -- -- 580,000
Chief Executive Officer 1997 -- -- -- -- --
1996 -- -- -- $ 10,000(1) --
Phillip S. Magiera 1998 240,000 120,000 -- -- 325,000
Chief Financial Officer 1997 -- -- -- -- 80,000
1996 -- -- -- 10,000(2) --
Daniel Wickersham 1998 175,000 60,000 -- 1,386,000(4) 700,000
Vice President (3) 1997 -- -- -- -- --
1996 -- -- -- -- --
Daniel Lazarek 1998 165,000 83,625 30,700(5) -- 500,000
Executive Vice President 1997 -- -- -- -- --
1996 -- -- -- -- --
</TABLE>
(1) At December 31, 1998, Mr. Moore held all 200,000 shares granted to him
in 1996. Such shares are fully vested and had a value of $1,937,600 at
December 31, 1998. Mr. Moore will receive any dividends paid with
respect to such shares.
(2) At December 31, 1998, Mr. Magiera held all 200,000 shares granted to
him in 1996. Such shares are fully vested and had a value of $1,937,600
at December 31, 1998. Mr. Magiera will receive any dividends paid with
respect to such shares.
(3) Mr. Wickersham served as our President from March 1998 to December 28,
1998.
(4) At December 31, 1998, Mr. Wickersham held all 200,000 shares granted to
him in 1998. Such shares are fully vested and had a value of $1,937,600
at December 31, 1998. Mr. Wickersham will receive any dividends paid
with respect to such shares.
(5) Includes moving expenses paid to Mr. Lazarek ($27,500) and a car
allowance ($3,200).
The following table sets forth information concerning grants of stock options
during the fiscal year ended December 31, 1998 to each Named Executive Officer.
We granted no stock appreciation rights in 1998.
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<PAGE> 70
STOCK OPTIONS GRANTED IN FISCAL 1998
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock Price
Individual Grants Appreciation for Option Term(1)
----------------------------------------------------------------- -----------------------------------
% of Total
Options
Number of Granted to
Securities Employees Market Price
Underlying in Exercise of Common
Options Fiscal Price Stock at Date Expiration
Name Granted(#) 1998(2) Per Share of Grant Date(3) 0% ($) 5%($) 10%($)
- --------------------- ---------- ------- --------- ----------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul A. Moore 80,000(4) 1.5% $ 4.00 $7.25 1/1/08 $ 260,000 $ 624,759 $ 1,184,000
Chief Executive 500,000(4) 9.6% $ 11.90 $13.63 7/1/08 865,000 5,150,917 11,725,000
Officer
Phillip S. Magiera 25,000(4) 0.5% $ 4.00 $7.25 1/1/08 81,250 195,237 370,000
Chief Financial 300,000(4) 5.8% $ 11.90 $13.63 7/1/08 519,000 3,090,550 7,035,000
Officer
Daniel Wickersham 100,000(4) 1.9% $ 1.75 $6.93 3/2/08 518,000 953,824 1,622,000
Vice President 150,000(5) 2.9% $ 3.00 $6.93 3/2/08 589,500 1,243,236 2,245,500
150,000(6) 2.9% $ 4.50 $6.93 3/2/08 364,500 1,018,236 2,020,500
300,000(4) 5.8% $ 11.90 $13.63 3/2/08 517,500 3,088,107 7,032,000
Daniel Lazarek 75,000(4) 1.4% $ 1.00 $6.87 3/23/08 440,250 746,288 1,261,500
Executive Vice 225,000(7) 4.3% $ 2.25 $6.87 3/23/08 1,039,500 2,011,614 3,503,250
President 200,000(4) 3.8% $ 11.90 $13.63 7/1/08 346,000 2,060,367 4,690,000
</TABLE>
- ------------------------
(1) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated by assuming the
stock price on the date of grant appreciates at the indicated annual rate
compounded annually for the entire term of the option and that the option
is exercised and sold on the last day of its term for the appreciated stock
price.
(2) Based on 5,216,000 total options granted to employees, including Named
Executive Officers, in 1998.
(3) The term of all options granted is ten years.
(4) Options were fully vested as of the date of grant.
(5) Options vest on March 2, 1999.
(6) Options vest on March 2, 2000.
(7) One-third of the options vest on each of the first, second and third
anniversaries of the date of grant (March 23, 1998).
The following table sets forth information concerning the aggregate value of all
unexercised stock options outstanding as of December 31, 1998 for each Named
Executive Officer. No Named Executive Officer exercised any options during the
fiscal year ended December 31, 1998.
69
<PAGE> 71
AGGREGATE DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options(#) Options($)(1)
------------------------------ ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul A. Moore 80,000 -- $454,960 --
Chief Executive Officer 50,000 -- -- --
Phillip S. Magiera 80,000 -- $714,960 --
Chief Financial Officer 25,000 -- 142,175 --
300,000 -- -- --
Daniel Wickersham 100,000 150,000 $793,700 $1,003,050
Vice President 300,000 150,000 -- 778,050
Daniel Lazarek 75,000 225,000 $651,525 $1,673,325
Executive Vice President 200,000 -- -- --
</TABLE>
- ------------------------------------
(1) Value is calculated by subtracting the exercise price per share for each
option from the fair market value of the underlying common stock at December 31,
1998 and multiplying by the number of shares subject to the option.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of our Board of Directors was formed in
March 1997 and from that time until June 1998, Mr. Magiera and Edward Mooney, a
former member of our Board of Directors who resigned in June 1998, served as its
members. Mr. Mooney served as our President from September 1996 to April 1997
and became an employee of WorldPort in October 1998. Mr. Magiera was appointed
our Chief Financial Officer in December 1997 and is a principal of MBCP. See
"Certain Transactions." In July 1998, Mr. McCann was appointed as the sole
member of our Compensation Committee.
COMPENSATION OF DIRECTORS
In 1998, all of our new directors received options exercisable for 80,000
shares of Common Stock and all existing directors received options exercisable
for 25,000 shares of Common Stock; all such options were exercisable immediately
upon grant. Such options granted to Messrs. Howley, Moore and Magiera were
issued on January 1, 1998 and have an exercise price of $4.00. Such options
granted to Mr. McCann were issued on June 11, 1998 and have an exercise price of
$5.00.
EMPLOYMENT AGREEMENTS
In January 1998, we entered into a two-year employment agreement with
Mr. Paul A. Moore whereby Mr. Moore agreed to serve as an executive of our
company. Pursuant to the terms of his employment agreement, as amended, Mr.
Moore earns a base salary of $300,000 during each year of his employment
agreement. Mr. Moore is also eligible to earn an annual bonus of up to 50% of
his base salary based on criteria to be established by the Board of Directors.
Pursuant to his employment agreement, Mr. Moore was issued 125,000 shares of our
Series B Convertible Preferred Stock at a purchase price of $5.36 per share.
$184,600 of the purchase price was paid by Mr. Moore in cash and $485,400 was
paid by delivery of a promissory note which bore interest at a rate of 11% per
annum, matured on June 1, 2000 and provided for monthly payments of principal
and interest. In connection with the termination of the Advisory Agreement
between us and MBCP, this note was assigned to MBCP as payment, in part, for
fees we owed to MBCP. See "Certain Transactions." In July 1998, Mr. Moore was
granted an option to purchase an aggregate of 500,000 shares of our Common
Stock. Such options have an exercise price of $11.90 per
70
<PAGE> 72
share and vested fully in July 1998.
In January 1998, we entered into a two-year employment agreement with
Mr. Phillip S. Magiera whereby Mr. Magiera agreed to serve as an executive of
our company. Pursuant to the terms of his employment agreement, Mr. Magiera
earns a base salary of $240,000 during each year of his employment agreement.
Mr. Magiera is also eligible to earn an annual bonus of up to 50% of his base
salary based on criteria to be established by the Board of Directors. Pursuant
to his employment agreement, Mr. Magiera was issued 125,000 shares of our Series
B Convertible Preferred Stock at a purchase price of $5.36 per share; $137,900
of the purchase price was paid by Mr. Magiera in cash and $532,100 was paid by
delivery of a promissory note which bore interest at a rate of 11% per annum,
matured on June 1, 2000 and provided for monthly payments of principal and
interest. In connection with the termination of the Advisory Agreement between
us and MBCP, this note was assigned to MBCP as payment, in part, for fees we
owed to MBCP. See "Certain Transactions." In July 1998, Mr. Magiera was granted
an option to purchase an aggregate of 300,000 shares of our Common Stock. Such
options have an exercise price of $11.90 per share and vested fully in July
1998.
In March 1998, we entered into an employment agreement with Mr.
Wickersham whereby Mr. Wickersham agreed to serve as our President and Chief
Operating Officer. Pursuant to the terms of his employment agreement, Mr.
Wickersham received a signing bonus of $60,000, earns a base salary of $175,000
per year and is eligible to earn performance incentive bonuses up to 50% of his
base salary based on criteria to be established by the Board of Directors. In
addition, Mr. Wickersham was granted 200,000 shares of our Common Stock and an
option to purchase an additional 400,000 shares of our Common Stock at prices
ranging from $1.75-$4.50 per share. These options vest based on the following
schedule: 100,000 as of March 2, 1998, 150,000 as of March 2, 1999 and 150,000
as of March 2, 2000. Upon a change of control of WorldPort, this option will
immediately vest. In addition to such options, in July 1998, Mr. Wickersham was
granted an option to purchase an additional 300,000 shares of our Common Stock.
This option has an exercise price of $11.90 per share and vested fully in July
1998. If Mr. Wickersham's employment with WorldPort is terminated without cause,
he will be entitled to receive a severance payment equal to 50% of his annual
salary. In December 1998, Mr. Wickersham resigned as our President and Chief
Operating Officer and now serves as a Senior Vice President of Strategic
Business Development.
In March 1998, we entered into an employment agreement with Mr. Lazarek
whereby Mr. Lazarek agreed to serve as our Vice President of Global Sales and
Marketing. Pursuant to the terms of his employment agreement, Mr. Lazarek
received a signing bonus of $25,000, earns a base salary of $150,000 per year
and is eligible to earn performance incentive bonuses up to 50% of his base
salary based on criteria to be established by our President. In addition, Mr.
Lazarek was granted an option to purchase an 300,000 shares of our Common Stock.
The option to purchase 75,000 such shares have an exercise price of $1.00 per
share and are fully vested. The option to purchase the remaining 225,000 shares
of Common Stock have an exercise price of $2.25 per share and vest in increments
of 1/3, 1/3, 1/3 over a three year period beginning March 23, 1999. Upon a
change of control of WorldPort, all options granted pursuant to the employment
agreement will vest immediately. In addition to such options, in July 1998, Mr.
Lazarek was granted an option to purchase an additional 200,000 shares of our
Common Stock. This option has an exercise price of $11.90 per share and vested
fully in July 1998. Mr. Lazarek currently serves as our Executive Vice
President.
LONG-TERM INCENTIVE PLAN
Our Amended and Restated Long-Term Incentive Plan (the "Incentive
Plan") was initially adopted in 1996 as a means to promote our success and
enhance our value through (i) linking the personal interests of our directors,
key employees and consultants to those of the shareholders, (ii) providing
directors and employees with an incentive for outstanding performance and (iii)
providing us flexibility in our ability to attract and retain the services of
our directors, employees and contractors.
The Incentive Stock Plan is administered by the Compensation Committee
of the Board of Directors (the "Committee"), whose members must qualify as
non-employee directors within the meaning of the Commission's regulations. The
Committee is authorized to determine, among other things, the individuals to
whom, and the times at which, options and other benefits are to be granted, the
number of shares subject to each option, the applicable
71
<PAGE> 73
vesting schedule and the exercise price. The Incentive Plan provides that, upon
a "Change of Control" (as defined in the Incentive Plan), all outstanding
options and other awards in the nature of rights that may be exercised which
have been granted pursuant to the Incentive Plan shall become fully exercisable
and all restrictions on all awards granted thereunder shall lapse.
The Board of Directors has the power to amend the Incentive Plan from
time to time. Shareholder approval of an amendment is only required to the
extent that it is required by law or regulatory authority.
As of December 31, 1998, we had outstanding options to acquire a total
of 5,751,000 shares of Common Stock (of which 3,151,667 were vested) with
exercise prices ranging from $0.08 to $14.19 per share under the Incentive Plan.
72
<PAGE> 74
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK
The following table sets forth certain information as of March 1, 1999
(except as otherwise indicated) regarding the beneficial ownership of our Common
Stock by (i) all individuals known to beneficially own 5% or more of our Common
Stock, (ii) each of our Named Executive Officers and directors and (iii) all of
our executive officers and directors as a group, in each case to the best of our
knowledge. Except as otherwise indicated, we believe that the beneficial owners
of Common Stock listed below have sole investment and voting power with respect
to such shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENT
BENEFICIAL OWNER AND NATURE OF BENEFICIAL OWNERSHIP(1) OF SHARES OF CLASS(2)
- ------------------------------------------------------ --------- -----------
<S> <C> <C>
The Heico Companies, LLC(3)...................................................... 15,970,331 41.1%
Michael E. Heisley, Sr.(4)....................................................... 15,970,331 41.1%
Paul A. Moore(5)................................................................. 5,689,121 24.4%
Anderlit, Ltd.(6)................................................................ 2,985,076 13.6%
United Overseas Bank(7).......................................................... 1,670,000 8.8%
Theodore H. Swindells(8)......................................................... 1,636,572 8.3%
Phillip S. Magiera(9)............................................................ 1,580,000 8.0%
John W. Dalton(10)............................................................... 1,365,000 7.1%
GWK Unified Holdings. LLC(11).................................................... 1,176,998 5.9%
Stanley H. Meadows............................................................... 64,584 *
Emily Heisley Stoeckel........................................................... -- --
Larry W. Gies.................................................................... -- --
Peter A. Howley(12).............................................................. 164,628 *
Robert L. McCann(13)............................................................. 117,500 *
Daniel M. Wickersham(14)........................................................ 750,000 3.9%
Executive officers and directors as a group (12 people)(15)...................... 23,776,399 63.8%
- ---------------
</TABLE>
* Less than 1%.
(1) Unless otherwise indicated, the address of the stockholders named is
that of our principal offices.
(2) Based on 18,930,365 shares of Common Stock outstanding as of March 1,
1999 and, with respect to each individual or group, such number of
shares of Common Stock as are issuable upon conversion of convertible
securities or exercise of options owned by such individual or group, in
each case if such are convertible or exercisable within 60 days.
(3) Includes (i) 12,308,133 shares issuable upon conversion of 1,132,824
shares of our Series C Preferred Stock, (ii) 3,077,033 shares issuable
upon conversion of 283,206 shares of our Series C Preferred Stock which
may be acquired pursuant to an option exercisable within 60 days, and
(iii) 285,165 shares for which Heico holds a proxy entitling it to vote
in certain circumstances. The address of this stockholder is 5600 Three
First National Plaza, Chicago, Illinois 60602.
(4) Includes all shares owned by The Heico Companies, LLC, an entity which
Mr. Heisley controls.
(5) Includes (i) all shares owned by Anderlit, Ltd., (ii) all shares
beneficially owned by Maroon Bells Capital Partners, Inc. ("MBCP")
(which includes 250,000 shares which may be acquired pursuant to an
option which is exercisable within 60 days and 84,540 shares issuable
upon conversion of 21,135 shares of our Series C Preferred Stock),
(iii) 19,072 shares issuable upon conversion of 4,768 shares of our
Series B Preferred Stock which are owned by Moore Investments, (iv)
500,000 shares issuable upon conversion of 125,000 shares of our Series
B Preferred Stock and (v) 580,000 shares which may be acquired pursuant
to options which are exercisable within 60 days. Mr. Moore holds an
irrevocable proxy to vote all shares owned by Anderlit. Mr. Moore is a
principal of MBCP and the controlling stockholder of Moore Investments.
(6) Represents shares issuable upon conversion of 746,269 shares of our
Series B Preferred Stock. The stockholder's address is Palm Chambers
No. 3, P.O. Box 3152, Road Town, Tortola, British Virgin Islands.
(7) Based upon number of shares purchased from us in December 1996. The
stockholder's address is 11 Quai des
73
<PAGE> 75
Bergues, 1211 Geneve 1, Switzerland.
(8) Includes (i) all shares beneficially owned by MBCP, (ii) 442,620 shares
issuable upon conversion of 110,655 shares our Series B Preferred
Stock, and (iii) 50,000 shares owned by Mr. Swindell's children. Mr.
Swindells is a principal of MBCP. Mr. Swindells' address is 100
California Street, Suite 1160, San Francisco, California 94111.
(9) Includes (i) 500,000 shares issuable upon conversion of 125,000 shares
of our Series B Preferred Stock, (ii) 405,000 shares which may be
acquired pursuant to options which are exercisable within 60 days and
(iii) 125,000 shares owned by Mr. Magiera's children.
(10) Includes 165,000 shares which may be acquired pursuant to options which
are exercisable within 60 days. The address of this stockholder is 326
Fifth Avenue, Sealy, Texas 77474. See "Business--Legal Proceedings."
(11) Based on a Schedule 13G filed July 27, 1998. Includes 1,149,700 shares
issuable upon conversion of 287,425 shares of our Series B Preferred
Stock. The stockholder's address is 1999 Avenue of the Stars, Suite
2340, Los Angeles, California 90067.
(12) Includes 90,000 shares which may be acquired pursuant to options which
are exercisable within 60 days and 74,628 shares issuable upon
conversion of 18,657 shares of our Series B Preferred Stock.
(13) Includes 80,000 shares which may be acquired pursuant to options which
are exercisable within 60 days.
(14) Mr. Wickersham served as our President from March 1998 to December 28,
1998 and is currently a Senior Vice President, Strategic Business
Development. Includes 550,000 shares which may be acquired pursuant to
options which are exercisable within 60 days.
(15) Includes (i) all shares beneficially owned by Heico, (ii) all shares
beneficially owned by Anderlit, (iii) all shares beneficially owned by
MBCP (which includes 250,000 shares which may be acquired pursuant to
an option which is exercisable within 60 days and 84,540 shares
issuable upon conversion of 21,135 shares of our Series C Preferred
Stock)) and (iv) 1,630,000 additional shares, which may be acquired
pursuant to options which are exercisable within 60 days.
74
<PAGE> 76
SERIES A PREFERRED STOCK
The following table sets forth certain information as of March 1, 1999
regarding the beneficial ownership of our Series A Preferred Stock by (i) all
individuals known to beneficially own 5% or more of our Series A Preferred
Stock, (ii) each of our Named Executive Officers and directors and (iii) all of
our executive officers and directors as a group. Except as otherwise indicated,
we believe that the beneficial owners of Series A Preferred Stock listed below
have sole investment and voting power with respect to such shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER AND NATURE OF BENEFICIAL OWNERSHIP(1) SHARES OF CLASS(2)
- ------------------------------------------------------- ------ -----------
<S> <C> <C>
Caisse Centrale des Banques Populaires(3)........................................ 230,000 46.6%
Robert Hemm IRA(4)............................................................... 100,000 20.2%
Boston International Partners, L. P.(5).......................................... 81,945 16.6%
Boston International Partners, L. P. II(5)....................................... 81,944 16.6%
Peter A. Howley.................................................................. -- --
Phillip S. Magiera............................................................... -- --
Robert L. McCann................................................................. -- --
Paul A. Moore.................................................................... -- --
Michael E. Heisley, Sr........................................................... -- --
Stanley H. Meadows............................................................... -- --
Emily Heisley Stoeckel........................................................... -- --
Larry W. Gies.................................................................... -- --
Daniel M. Wickersham(6)..........................................................
Executive officers and directors as a group (12 people) ......................... -- --
</TABLE>
- ---------------
(1) Unless otherwise indicated, the address of the stockholders named is
that of our principal offices.
(2) Based on 493,889 shares of our Series A Preferred Stock outstanding as
of March 1, 1999.
(3) The stockholders' address is 10/12 Avenue Winston Churchill, 94677
Charenton Le Pont CEDEX, France.
(4) The stockholder's address is c/o Morgan Stanley & Co. Incorporated,
1221 Avenue of the Americas, New York, New York 10020.
(5) The stockholder's address is 84 State Street, Boston, Massachusetts
02109.
(6) Mr. Wickersham served as our President from March 1998 to December 28,
1998 and is currently a Senior Vice President, Strategic Business
Development.
75
<PAGE> 77
SERIES B PREFERRED STOCK
The following table sets forth certain information as of March 1, 1999
regarding the beneficial ownership of our Series B Preferred Stock by (i) all
individuals known to beneficially own 5% or more of our Series B Preferred
Stock, and (ii) each of our Named Executive Officers and directors and (iii) all
of our executive officers and directors as a group. Except as otherwise
indicated, we believe that the beneficial owners of Series B Preferred Stock
listed below have sole investment and voting power with respect to such shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER AND NATURE OF BENEFICIAL OWNERSHIP(1) SHARES OF CLASS(2)
- ------------------------------------------------------- ------ -----------
<S> <C> <C>
The Heico Companies, LLC (3)..................................................... 1,132,827 40.4%
Michael E. Heisley, Sr. (4)...................................................... 1,132,827 40.4%
Paul A. Moore(5)................................................................. 897,172 32.0%
Anderlit, Ltd.(6)................................................................ 746,269 26.6%
GWK Unified Holdings, L.L.C.(7).................................................. 279,698 10.0%
Woodlands Limited(8)............................................................. 143,912 5.1%
Phillip S. Magiera............................................................... 125,000 4.5%
Stanley H. Meadows............................................................... -- --
Emily Heisley Stoeckel........................................................... -- --
Larry W. Gies.................................................................... -- --
Peter A. Howley.................................................................. 18,657 *
Robert L. McCann................................................................. -- --
Daniel M. Wickersham(9).......................................................... -- --
Executive officers and directors as a group (12 people)(3)....................... 1,151,484 41.0%
- ---------------
</TABLE>
*Less than 1%.
(1) Unless otherwise indicated, the address of the stockholders named is
that of our principal offices.
(2) Based on 2,806,717 shares of our Series B Preferred Stock outstanding
as of March 1, 1999.
(3) Represents shares beneficially owned by Paul A. Moore, Phillip S.
Magiera, Theodore H. Swindells and MBCP. Heico has entered into a
shareholder agreement with such stockholders which, among other things,
gives Heico a proxy to vote such shares in certain circumstances. See
"Certain Transactions--Heico Equity Investment." The address of this
stockholder is 5600 Three First National Plaza, Chicago, Illinois
60602.
(4) Includes all shares beneficially owned by Heico, an entity which Mr.
Heisley controls.
(5) Includes (i) all shares beneficially owned by Anderlit, (ii) 21,135
shares beneficially owned by MBCP and (iii) 4,768 shares held in the
name of Moore Investments. Mr. Moore holds an irrevocable proxy to vote
all of the shares owned by Anderlit. Mr. Moore is a principal of MBCP
and controlling stockholder of Moore Investments.
(6) The stockholder's address is Palm Chambers No. 3, P. O. Box 3152, Road
Town, Tortola, British Virgin Islands.
(7) Based on a Schedule 13G filed July 27, 1998. The stockholder's address
is 1999 Avenue of the Stars, Suite 2340, Los Angeles, California 90067.
(8) The stockholder's address is Africa House, Woodborne Road, Douglas,
Isle of Mann, British Isles, IM991AW.
(9) Mr. Wickersham served as our President from March 1998 to December 28,
1998 and is currently a Senior Vice President, Strategic Business
Development.
76
<PAGE> 78
SERIES C PREFERRED STOCK
The following table sets forth certain information as of March 1, 1999
regarding the beneficial ownership of our Series C Preferred Stock by (i) all
individuals known to beneficially own 5% or more of our Series C Preferred
Stock, (ii) each of our Named Executive Officers and directors and (iii) all of
our executive officers and directors as a group. Except as otherwise indicated,
we believe that the beneficial owners of Series C Preferred Stock listed below
have sole investment and voting power with respect to such shares.
<TABLE>
<CAPTION>
AMOUNT
NAME AND ADDRESS OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER AND NATURE OF BENEFICIAL OWNERSHIP (1) OWNERSHIP OF CLASS(2)
- -------------------------------------------------------- --------- -----------
<S> <C> <C>
The Heico Companies, LLC (3)..................................................... 1,416,030 100%
Michael E. Heisley, Sr.(4)....................................................... 1,416,030 100%
Paul A. Moore.................................................................... -- --
Phillip S. Magiera............................................................... -- --
Stanley H. Meadows............................................................... -- --
Emily Heisley Stoeckel........................................................... -- --
Larry W. Gies.................................................................... -- --
Peter A. Howley.................................................................. -- --
Robert L. McCann................................................................. -- --
Daniel M. Wickersham(5).......................................................... -- --
Executive officers and directors as a group (12 people) (3)...................... 1,416,090 100%
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, the address of the stockholders named is
that of our principal offices.
(2) Based on 1,132,824 shares of our Series C Preferred Stock outstanding
as of March 1, 1999 and 283,206 shares which may be acquired upon
exercise of a currently exercisable option.
(3) Includes 283,206 shares which may be acquired pursuant to an option
exercisable within 60 days. The address of this stockholder is 5600
Three First National Plaza, Chicago, Illinois 60602.
(4) Includes all shares owned by Heico, an entity which Mr. Heisley
controls.
(5) Mr. Wickersham served as our President from March 1998 to December 28,
1998 and is currently a Senior Vice President, Strategic Business
Development.
77
<PAGE> 79
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MBCP
Two of our current directors and executive officers (Messrs. Moore and
Magiera) are principals of MBCP. We and MBCP have been parties to the
transactions identified below.
Stock Purchase Agreement
On June 26, 1996 MBCP, its principals and certain non-affiliated
investors entered into a stock purchase agreement to purchase newly-issued
shares of our Common Stock representing approximately 98.5% of our outstanding
shares as of the date of the agreement for $110,000 in cash. Prior to the stock
purchase agreement, we had no operations and no assets or liabilities.
Consulting Agreements
In July 1996, we entered into consulting agreements with Paul Moore,
Theodore Swindells, Phillip Magiera, Edward Mooney and Jonathan Hicks (the
"Consultants"). Messrs. Moore, Swindells and Magiera are principals of MBCP and
Messrs. Hicks and Mooney were, at the time, employees of MBCP. Pursuant to the
consulting agreements, a total of 650,000 shares of our Common Stock were earned
by the Consultants for services rendered to us. On February 8, 1997, we filed a
form S-8 registration statement with the Commission to register these 650,000
shares. The consulting agreements were terminated in accordance with their terms
in September 1996.
Maroon Bells Capital Partners, Inc.'s Loan
On July 1, 1996, MBCP loaned to us $500,000 (the "MBCP Loan"). The MBCP
Loan was collateralized by a note receivable then held by us (the "Com Tech
Note"). On October 15, 1996, $80,000 of the MBCP Loan, which had been assigned
to two non-affiliated offshore entities, was converted into shares of our Common
Stock, resulting in the issuance of 1,000,000 shares of our Common Stock to such
entities. The remaining $420,000 principal amount due to MBCP was due and
payable on November 1, 1996. On March 7, 1997, we entered into a Stock Issuance
and Indemnification Agreement with MBCP whereby MBCP agreed to (i) cancel the
$420,000 outstanding principal of the MBCP Loan and all accrued, but unpaid,
interest as of that date in exchange for 1,680,000 shares our Common Stock, (ii)
indemnify us for an amount up to $460,000 in the event that we were unsuccessful
in securing repayment of the Com Tech Note, and (iii) divide equally with us any
proceeds, assets or other consideration in excess of $540,000 received by us as
a result of the enforcement of the Com Tech Note. The Com Tech Note was repaid
in full in 1997 and no amount of such repayment was received by MBCP.
In September 1997, we entered into an arrangement with MBCP whereby
MBCP arranged for us to borrow up to $5.0 million from MBCP and certain other
entities unrelated to MBCP pursuant to certain promissory notes (the "Bridge
Notes"). The Bridge Notes bore interest at 10% per annum, matured on December
31, 1997 and were convertible into equity in us on terms to be negotiated in
good faith. During the first quarter of 1998, approximately $1.2 million of the
Bridge Notes, including $110,000 of Bridge Notes held by MBCP, and accrued
interest were converted into an aggregate of 230,627 shares of our Series B
Preferred Stock at a conversion price of $5.36 per share. The remaining portion,
or $340,000, of the Bridge Notes were repaid in cash.
Advisory Agreements
On October 31, 1996, we entered into an advisory agreement with an
affiliate of MBCP. The agreement provided, among other things, that the
affiliate would assist us in identification of potential merger or acquisition
candidates, and assist in the development and implementation of a corporate
financial strategy for which we would pay an advisory fee of up to $360,000,
when and if such services were completed in a manner satisfactory to us, payable
no later than June 30, 1997. In 1997, we paid an aggregate of $150,000 for all
services rendered under the
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advisory agreement. The advisory agreement terminated in 1997.
On March 7, 1997, we entered into a twelve (12) month agreement (the
"Advisory Agreement") with MBCP wherein MBCP agreed to provide certain services
to us in exchange for (i) a monthly retainer of $10,000 and (ii) certain success
fees payable when and if MBCP successfully assisted us in certain transactions
including, but not limited to, mergers and acquisitions. As part of the Advisory
Agreement, we agreed to reimburse MBCP for certain travel and out-of-pocket
expenses incurred by MBCP on our behalf. On February 4, 1998, we renewed the
Advisory Agreement for an additional twenty-four months with an expiration of
March 7, 2000. Under the terms of the renewal, we granted MBCP a five-year
option to purchase 250,000 shares of our Common Stock at an exercise price of
$2.00 per share. We incurred approximately $290,000 in fees payable to MBCP
pursuant to the Advisory Agreement for services rendered and expenses incurred
in 1997. In addition, MBCP received $110,000 in 1997 in the form of Bridge Notes
as payment for fees incurred pursuant to the Advisory Agreement. As noted above,
in the first quarter of 1998 the principal and accrued interest of such Bridge
Notes were converted by MBCP into an aggregate of 21,135 shares of our Series B
Preferred Stock.
The Advisory Agreement was terminated on December 31, 1998 pursuant to
a termination agreement between us and MBCP. Under the termination agreement, we
paid to MBCP $214,000, agreed to issue to MBCP shares of a new series of our
preferred stock with an aggregate liquidation value of $1,029,994, and assigned
to MBCP promissory notes receivable from Messrs. Moore, Magiera and Swindells,
which notes had an aggregate amount outstanding of $1,621,920 (including accrued
interest). Such payments reflected payment in full for all services rendered,
expenses incurred and retainer payments owing to MBCP in 1998.
HEICO EQUITY INVESTMENT
In January 1999, Heico completed a $40 million equity investment in our
company pursuant to the Series C Preferred Stock Purchase Agreement (the
"Purchase Agreement"), dated December 31, 1998. Pursuant to the Purchase
Agreement, Heico acquired an aggregate of 1,132,824 shares of our Series C
Convertible Preferred Stock (the "Series C Stock") for an aggregate purchase
price of $40 million. Pursuant to the Purchase Agreement, Heico also received an
option to acquire up to 283,206 shares of Series C Stock for an aggregate
purchase price of $10 million. This option will expire upon our repayment or
refinancing of the Interim Loan.
As a holder of the Series C Stock, Heico is entitled to vote on all
matters submitted to a vote of our stockholders, voting together with the
holders of Common Stock as a single class. Heico is entitled to forty (40) votes
per share of Series C Stock. In addition to the votes that Heico obtained
through its stock purchase, Heico has also obtained certain additional rights.
Those rights include, with respect to the Common Stock issued upon conversion of
the Series C Stock, certain demand and piggyback registration rights.
Pursuant to the Purchase Agreement, on December 31, 1998, we increased
the size of our Board of Directors to eight members and appointed four
individuals designated by Heico to serve as directors. We have also agreed to
cause Heico's designees to comprise at least one-half of the boards of directors
of each of our subsidiaries. In addition, we amended our Bylaws to provide that
at least one of Heico's designees and, except in certain limited situations, one
of the directors who was not designated by Heico, must approve any action put
before the Board of Directors in order for such to be properly approved by the
Board of Directors.
Additionally, in connection with Heico's purchase of Series C Stock, on
December 31, 1998, we entered into a Shareholder Agreement with Heico and Paul
A. Moore (our Chairman and Chief Executive Officer), Phillip S. Magiera (our
Chief Financial Officer), Theodore H. Swindells and MBCP (collectively, the
"Stockholders"). Pursuant to the Shareholder Agreement, the Stockholders (i)
agreed not to vote certain of their shares of our capital stock in favor of
certain financing proposals or other items without Heico's consent and (ii)
granted to Heico a proxy with respect to such capital stock for Heico's use in
limited matters. Pursuant to the Shareholder Agreement, Heico and the
Stockholders have also agreed to certain restrictions on the transfer of certain
of their shares of our capital stock.
As a result of its stock purchase alone, Heico currently holds directly
approximately 25.0% of the
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outstanding votes. Further, by virtue of the Shareholder Agreement, together
with its stock purchase, Heico currently controls, with respect to certain
matters, including acquisitions, incurrence of debt and the issuance or sale of
equity securities, approximately 50.1% our outstanding votes.
Heico may, at its option and without any payment of consideration,
convert its shares of Series C Stock into shares of our Common Stock at a
conversion price of $3.25 per share of Common Stock, receiving 10.865 shares of
Common Stock for each share of Series C Stock. The number of shares of Common
Stock into which the Series C Stock is convertible is subject to adjustment in
certain circumstances, such as stock splits, stock dividends and
recapitalizations.
OTHER RELATED PARTY TRANSACTIONS
In March 1998, Anderlit, Ltd., a privately-owned investment fund
("Anderlit"), purchased 746,269 shares of our Series B Preferred Stock for an
aggregate purchase price of $4,000,000. Anderlit invests in a portfolio of
emerging telecommunications companies. Messrs. Moore and Magiera are investors
in Anderlit, and Mr. Moore has received from Anderlit an irrevocable proxy to
vote all of our Series B Preferred Stock owned by Anderlit.
Pursuant to their employment agreements, as amended, each of Messrs.
Moore and Magiera acquired shares of our Series B Preferred Stock. In connection
with such acquisitions, Mr. Moore delivered a promissory note in the principal
amount of $485,400 and Mr. Magiera delivered a promissory note in the principal
amount of $532,100. Such promissory notes bore interest at a rate of 11% per
annum, had a maturity of June 1, 2000 and provided for monthly payments of
principal and interest. In connection with the termination of the Advisory
Agreement between us and MBCP, these notes were assigned to MBCP as payment, in
part, of fees we owed to MBCP.
We have entered into agreements to purchase IRUs on the undersea cable
systems constructed (or to be constructed) by Global Crossing, Ltd. and its
affiliates. These agreements include financing arrangements with Atlantic
Crossing, Ltd., a subsidiary of Global Crossing, pursuant to which we have
agreed to pay to Atlantic Crossing approximately $21.1 million (plus interest
payments of approximately $3.6 million) over the next three years. In addition,
we have agreed to acquire an additional $44.4 million of capacity on such
undersea cable systems over the next three years. In 1998, we made approximately
$2.0 million in payments to Atlantic Crossing pursuant to these agreements. Mr.
Gary Winnick, who serves as a Co-Chairman of the Board of Global Crossing and
indirectly, controls more than 29% of Global Crossing's common stock, indirectly
owns approximately 5.9% of our Common Stock.
On July 3, 1997 we completed a merger of an entity formerly owned by
John W. Dalton, our former President and Chief Executive Officer, into our
wholly-owned subsidiary. In connection with such merger, we agreed to deliver to
Mr. Dalton, (i) 1,200,000 shares of Common Stock, (ii) $75,000 and (iii) a
promissory note in the amount of $175,000. See "Legal Proceedings" for
information regarding a complaint filed by Mr. Dalton against us and certain of
our directors and officers.
In connection with our acquisition of the assets of Telenational
Communications Limited Partnership ("TCLP"), we executed an eighteen-month
consulting agreement with Mr. Edmund H. Blankenau, the CEO of the General
Partner of TCLP who, until June 1998 was also a member of our Board of
Directors. The agreement, which expired December 31, 1998, provided for monthly
compensation in the amount of $7,000 plus reasonable expense reimbursement and
incentive compensation for completed acquisitions and business opportunities
determined on a case-by-case basis. We incurred an aggregate of $42,000 and
$98,000 to Mr. Blankenau pursuant to the consulting agreement in 1997 and 1998,
respectively. We also lease our facilities in Omaha, Nebraska from a partnership
in which Mr. Blankenau is a partner. The four-year lease agreement, which
commenced July 1, 1997, provides for monthly payments in the amount of $8,992.
The Company incurred an aggregate of approximately $54,000 and $187,000 to Mr.
Blankenau pursuant to the lease in 1997 and 1998, respectively.
Stanley H. Meadows, one of our directors, is a partner of McDermott,
Will & Emery, a law firm which provides us with ongoing legal services.
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In October 1998, we transferred the Bel 1600 division of EnerTel to a
newly formed subsidiary and sold an 80% interest in such subsidiary for
approximately $2.8 million (the net carrying value of the Bel 1600 division). We
continue to hold a minority interest (20%) in the entity to which these assets
were transferred. During 1998, we had sales of approximately $4.3 million,
representing approximately 15% of our total revenues, to this new entity. In
management's opinion, these sales were made at market rates.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)1. FINANCIAL STATEMENTS
Report of Independent Public Accountants
Consolidated Balance Sheets-- December 31, 1998 and 1997
Consolidated Statements of Operations for the years ended December 31,
1998, 1997, and 1996
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1997, and 1996 Consolidated Statements of
Comprehensive Income for the years ended December 31, 1998, 1997, and
1996
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is submitted as part of this
report:
(i) Report of Independent Public Accountants
(ii) Schedule II - Valuation and Qualification Accounts
All other schedules are not submitted because they are not applicable or
are not required under Regulation S-X or because the required information
is included in the financial statements or notes thereto.
3. EXHIBITS
The exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index hereto.
(B) REPORTS ON FORM 8-K
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
WorldPort Communications, Inc.
/s/ Paul A. Moore
---------------------------------------
Paul A. Moore
Chairman of the Board of Directors
and Chief Executive Officer
Dated: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Paul A. Moore
- ------------------------------------------- Chairman of the Board of Directors and March 31, 1999
Paul A. Moore Chief Executive Officer (Principal
Executive Officer)
/s/ Phillip S. Magiera
- ------------------------------------------- Chief Financial Officer and Director March 30, 1999
Phillip S. Magiera (Principal Financial Officer)
/s/ Donald C. Hilbert, Jr.
- ------------------------------------------- Controller (Principal Accounting Officer) March 30, 1999
Donald C. Hilbert, Jr.
/s/ Peter A. Howley
- ------------------------------------------- Director March 30, 1999
Peter A. Howley
- ------------------------------------------- Director March , 1999
Robert L. McCann
/s/ Michael E. Heisley, Sr.
- ------------------------------------------- Director March 31, 1999
Michael E. Heisley, Sr.
/s/ Stanley H. Meadows
- ------------------------------------------- Director March 31, 1999
Stanley H. Meadows
/s/
- -------------------------------------------- Director March , 1999
Emily Heisley Stoeckel
/s/ Larry W. Gies
- -------------------------------------------- Director March 31, 1999
Larry W. Gies
</TABLE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of WORLDPORT COMMUNICATIONS, INC. AND
SUBSIDIARIES included in this Form 10-K and have issued our report thereon
dated February 22, 1999. Our audits were made for the purpose of forming an
opinion on the basic financial statements taken as a whole. The schedule listed
in the index is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 22, 1999
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<PAGE> 85
WORLDPORT COMMUNICATIONS, INC.
AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFICATION ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT ------------------------------------------------------------- BALANCE AT
BEGINNING CHARGED TO CHARGED TO END OF
DESCRIPTION OF PERIOD INCOME OTHER ACCOUNTS DEDUCTIONS PERIOD
- ----------- --------- ------ -------------- ---------- ------
<S> <C> <C> <C> <C> <C>
Provision for uncollect-
ible accounts
1996............. $ 0 $ 0 $ 0 $ 0 $ 0
1997............. $ 0 $ 15 $ 0 $ 0 $ 15
1998............. $15 $482 $646 (1) $89 (2) $1,054
</TABLE>
- --------------------
Notes:
(1) Represents acquired reserves related to the acquisitions and amounts
charged to other accounts.
(2) Represents write-off of accounts considered to be uncollectible, less
recoveries of amounts previously written off.
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EXHIBIT INDEX
<TABLE>
<S> <C>
3.1 Certificate of Incorporation for the Company, as amended, previously
filed with Form 10-K for the fiscal year ended December 31, 1998, and
incorporated herein by reference.
3.1(a) Certificate of Designation, Preferences and Rights of Series B
Convertible Preferred Stock of the Company dated March 6, 1998,
previously filed with Form 10-Q for the fiscal quarter ended March 31,
1998, and incorporated herein by reference.
3.1(b) Certification of Designations, Preferences and Rights of Series C
Convertible Preferred Stock of WorldPort Communications, Inc.,
incorporated by reference to Exhibit 4.1 to WorldPort's Form 8-K, dated
December 31, 1998.
3.2 Bylaws of the Company, as amended.
10.1 Master Equipment Lease Agreement by and between the Company and
Forsythe/McArthur Associates, Inc. dated October 31, 1997, previously
filed with Form 10-QSB for the fiscal quarter ended September 30, 1997,
and incorporated herein by reference.
10.1(a) Lease Schedule A by and between the Company and Forsythe/McArthur
Associates, Inc. dated October 30, 1997, previously filed with Form 10-
QSB for the fiscal quarter ended September 30, 1997, and incorporated
herein by reference.
10.2 Employment Agreement by and between Phillip S. Magiera and the Company
dated January 1, 1998, previously filed with Form 10-Q for the fiscal
quarter ended March 31, 1998, and incorporated herein by reference.
10.2(a) Amendment No. 1, dated as of March 31, 1998, to the Employment
Agreement by and between Phillip S. Magiera and the Company dated
January 1, 1998, previously filed with Form 10-Q for the fiscal quarter
ended March 31, 1998, and incorporated herein by reference.
10.2(b) Second Amendment To Employment Agreement between Phillip S. Magiera and
the Company dated April 1, 1998, previously filed with Form 10-Q for
the fiscal quarter ended June 30, 1998, and incorporated herein by
reference.
10.2(c) Pledge Agreement made by Phillip S. Magiera and the Company dated April
1, 1998, previously filed with Form 10-Q for the fiscal quarter ended
June 30, 1998, and incorporated herein by reference.
10.2(d) Third Amendment to Employment Agreement between Phillip S. Magiera and
the Company dated September 29, 1998, previously filed with Form 10-Q
for the fiscal quarter ended June 30, 1998, and incorporated herein by
reference.
10.2(e) Promissory Note between Phillip S. Magiera and the Company dated
September 29, 1998, previously filed with Form 10-Q for the fiscal
quarter ended June 30, 1998, and incorporated herein by reference.
10.2(f) Fourth Amendment to Employment Agreement between Phillip S. Magiera and
the Company dated December 31, 1998
10.3 Employment Agreement by and between Paul A. Moore and the Company dated
January 1, 1998, previously filed with Form 10-Q for the fiscal quarter
ended March 31, 1998, and incorporated herein by reference.
10.3(a) Amendment No. 1, dated as of March 31, 1998, to the Employment
Agreement by and between Paul A. Moore and the Company dated January 1,
1998, previously filed with Form 10-Q for the fiscal quarter ended
March 31, 1998, and incorporated herein by reference.
10.3(b) Second Amendment To Employment Agreement between Paul A. Moore and the
Company dated April 1, 1998, previously filed with Form 10-Q for the
fiscal quarter ended June 30, 1998, and incorporated herein by
reference.
10.3(c) Pledge Agreement made by Paul A. Moore and the Company dated April 1,
1998, previously filed with
</TABLE>
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<PAGE> 87
<TABLE>
<S> <C>
Form 10-Q for the fiscal quarter ended June 30, 1998, and incorporated
herein by reference.
10.3(d) Third Amendment to Employment Agreement between Paul A. Moore and the
Company dated September 29, 1998, previously filed with Form 10-Q for
the fiscal quarter ended June 30, 1998, and incorporated herein by
reference.
10.3(e) Promissory Note between Paul A. Moore and the Company dated September
29, 1998, previously filed with Form 10-Q for the fiscal quarter ended
June 30, 1998, and incorporated herein by reference.
10.3(f) Fourth Amendment to Employment Agreement between Paul A. Moore and the
Company dated December 31, 1998.
10.4 Employment Agreement by and between Daniel G. Lazarek and the Company
dated February 16, 1998, previously filed with Form 10-Q for the fiscal
quarter ended March 31, 1998, and incorporated herein by reference.
10.5 Employment Agreement by and between Daniel M. Wickersham and the
Company dated February 18, 1998, previously filed with Form 10-Q for
the fiscal quarter ended March 31, 1998, and incorporated herein by
reference.
10.6 Sale and Transfer of Shares in the Capital of MathComp B. V. dated
February 13, 1998, previously filed with Form 10-Q for the fiscal
quarter ended March 31, 1998, and incorporated herein by reference.
10.7 Master Purchase Agreement between the Company and Northern Telecom
Inc., dated June 3, 1998, previously filed with Form 10-Q/A for the
fiscal quarter ended June 30, 1998, and incorporated herein by
reference.
10.8 Master Services Agreement between the Company and Northern Telecom Inc.
dated June 3, 1998, previously filed with Form 10-Q/A for the fiscal
quarter ended June 30, 1998, and incorporated herein by reference.
10.9 Atlantic Crossing/AC-1 Submarine Cable System Capacity Purchase
Agreement between Global Telesystems Ltd and the Company dated April 7,
1998, previously filed with Form 10-Q/A for the fiscal quarter ended
June 30, 1998, and incorporated herein by reference.
10.9(a)* Amended and Restated Addendum to AC-1 Capacity Purchase Agreement and
Inland Capacity Purchase Agreements between Atlantic Crossing Ltd
(formerly known as Global Telesystems Ltd), the Company and the
subsidiary grantors, dated March 9, 1999.
10.10 Credit Agreement the Company and The Financial Institutions Party
Hereto as Lenders and Bankers Trust Company as Administrative Agent and
Collateral Agent dated June 23, 1998, previously filed with Form 10-Q
for the fiscal quarter ended June 30, 1998, and incorporated herein by
reference.
10.10(a) Consent and Amendment to Credit Agreement, dated as of October 19, 1998
10.10(b) Consent and Amendment No. 2 to Credit Agreement, dated as of October
21, 1998
10.10(c) Consent and Amendment No. 3 to Credit Agreement, dated as of October
30, 1998
10.10(d) Consent and Amendment No. 4 to Credit Agreement, dated as of November
9, 1998
10.10(e) Amendment No. 5 to Credit Agreement, dated as of December 16, 1998
10.10(f) Amendment No. 6 to Credit Agreement, dated as of December 23, 1998
10.10(g) Consent and Amendment No. 7 to Credit Agreement, dated as of December
31, 1998
10.11 Global Master Rental Agreement dated as of September 23, 1998 by and
between Comdisco, Inc. and WorldPort Communications, Inc., previously
filed with Form 10-Q for the fiscal quarter ended June 30, 1998, and
incorporated herein by reference.
10.12 Series C Preferred Stock Purchase Agreement, dated December 31, 1998,
by and between The Heico
</TABLE>
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<TABLE>
<S> <C>
Companies, LLC and WorldPort Communications, Inc., incorporated by
reference to Exhibit 2.1 to WorldPort's Form 8-K, dated December 31,
1998.
10.13 Shareholder Agreement, dated December 31, 1998, by and among The Heico
Companies, LLC, WorldPort Communications, Inc., Paul A. Moore, Phillip
S. Magiera, Theodore H. Swindells and Maroon Bells Capital Partners,
Inc., incorporated by reference to Exhibit 2.2 to WorldPort's Form 8-K,
dated December 31, 1998.
10.13(a) Amendment to Shareholder Agreement, dated January 25, 1999, by and
among The Heico Companies, LLC, WorldPort Communications, Inc., Paul A.
Moore, Phillip S. Magiera, Theodore H. Swindells and Maroon Bells
Capital Partners, Inc., incorporated by reference to Exhibit 2.2 to
WorldPort's Form 8-K/A, dated December 31, 1998.
10.14 Registration Rights Agreement, dated December 31, 1998, by and between
The Heico Companies, LLC and the Company, incorporated by reference to
Exhibit 2.3 to WorldPort's Form 8-K, dated December 31, 1998.
10.15 Termination Agreement, dated December 31, 1998, by and between the
Company and Maroon Bells Capital Partners, Inc.
10.16* Co-Location Service Order Form, Standard Terms and Conditions, and
Addenda thereto, between the Company and Level 3 Communications, LLC,
dated November 13, 1998.
10.17 WorldPort Communications, Inc. Amended and Restated Long-Term Incentive
Plan, as amended
12.1 Statement Regarding Computation of Ratio of Earnings to Fixed Charges.
16.1 Letter of Schumacher & Associates, Inc., Independent Certified Public
Accountant, previously filed with Form 8-K dated July 7, 1997, and
incorporated herein by reference.
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP
27.1 Financial Data Schedule
</TABLE>
*Confidential Treatment has been requested for portions of these exhibits.
87
<PAGE> 1
EXHIBIT 3.2
Conformed to reflect all amendments
through December 31, 1998
B Y L A W S
O F
WORLDPORT COMMUNICATIONS, INC.
A Delaware Corporation
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - Offices ............................................................................... 1
Section 1.01. Offices ................................................................... 1
ARTICLE II - Shares ............................................................................... 1
Section 2.01. Shares .................................................................... 1
ARTICLE III - Preemptive Rights ................................................................... 1
Section 3.01. Preemptive Rights ......................................................... 1
ARTICLE IV - Perpetual Existence .................................................................. 2
Section 4.01. Perpetual Existence ....................................................... 2
ARTICLE V - Non-Liability of Shareholders ......................................................... 2
Section 5.01. Non-Liability of Shareholders ............................................. 2
ARTICLE VI - Indemnification ...................................................................... 2
Section 6.01. Indemnification ........................................................... 2
ARTICLE VII - Meeting of Shareholders ............................................................. 2
Section 7.01. Place of Meeting .......................................................... 2
Section 7.02. Annual Meeting ............................................................ 2
Section 7.03. Special Meetings .......................................................... 2
Section 7.04. Notice of Meetings ........................................................ 3
Section 7.05. Quorum, Manner of Acting and Adjournment .................................. 3
Section 7.06. Organization .............................................................. 3
Section 7.07. Notice of Business ........................................................ 3
Section 7.08. Voting; Proxies ........................................................... 4
Section 7.09. Voting Lists .............................................................. 5
Section 7.10. Consent of Shareholders in Lieu of Meeting ................................ 5
ARTICLE VIII - Board of Directors ................................................................. 5
Section 8.01. Powers .................................................................... 5
Section 8.02. Number, Term of Office and Qualification .................................. 6
Section 8.03. Nomination of Directors ................................................... 6
Section 8.04. Vacancies ................................................................. 7
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Section 8.05. Resignations .............................................................. 7
Section 8.06. Organization .............................................................. 7
Section 8.07. Place of Meeting .......................................................... 8
Section 8.08. Organization Meeting ...................................................... 8
Section 8.09. Regular Meetings .......................................................... 8
Section 8.10. Special Meetings .......................................................... 8
Section 8.11. Quorum, Manner of Acting and Adjournment .................................. 8
Section 8.12. Action by Unanimous Written Consent ....................................... 9
Section 8.13. Interested Directors or Officers .......................................... 9
Section 8.14. Compensation .............................................................. 9
Section 8.15. Committees ................................................................ 9
ARTICLE IX - Notices - Waivers - Meetings .........................................................10
Section 9.01. What Constitutes Notice ...................................................10
Section 9.02. Waivers of Notice .........................................................10
Section 9.03. Conference Telephone Meetings .............................................10
ARTICLE X - Officers ..............................................................................11
Section 10.01. Number, Qualifications and Designation ...................................11
Section 10.02. Election and Term of Office ..............................................11
Section 10.03. Subordinate Officers, Committees and Agents ..............................11
Section 10.04. Resignations .............................................................11
Section 10.05. Removal ..................................................................11
Section 10.06. Vacancies ................................................................11
Section 10.07. General Powers ...........................................................11
Section 10.08. The President ............................................................12
Section 10.09. The Chairman .............................................................12
Section 10.10. The Vice Presidents ......................................................12
Section 10.11. The Secretary ............................................................12
Section 10.12. The Treasurer ............................................................12
Section 10.13. Officer's Bonds ..........................................................13
Section 10.14. Compensation .............................................................13
ARTICLE XI - Certificates of Stock, Transfer, Etc .................................................13
Section 11.01. Issuance .................................................................13
Section 11.02. Transfer .................................................................13
Section 11.03. Stock Certificates .......................................................13
Section 11.04. Lost, Stolen, Destroyed, or Mutilated Certificates .......................13
Section 11.05. Record Holder of Shares ..................................................14
Section 11.06. Determination of Shareholders of Record ..................................14
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE XII - Indemnification of Directors, Officers, Etc .........................................15
Section 12.01. Directors and Officers; Third Part Actions ...............................15
Section 12.02. Directors and Officers; Derivative Actions ...............................15
Section 12.03. Employees and Agents .....................................................15
Section 12.04. Procedure for Effecting Indemnification ..................................16
Section 12.05. Advancing Expenses .......................................................16
Section 12.06. Scope of Article .........................................................17
ARTICLE XIII - Insurance ..........................................................................17
Section 13.01. Insurance Against Liability Asserted Against Directors, Officers, Etc ....17
ARTICLE XIV - Miscellaneous .......................................................................17
Section 14.01. Corporate Seal ...........................................................17
Section 14.02. Checks ...................................................................17
Section 14.03. Contracts ................................................................17
Section 14.04. Inspection ...............................................................17
Section 14.05. Fiscal Year ..............................................................18
ARTICLE XV - Amendments ...........................................................................18
Section 15.01. Amendments ...............................................................18
</TABLE>
4
<PAGE> 5
BYLAWS
OF
WORLDPORT COMMUNICATIONS, INC.
ARTICLE I
Offices
Section 1.01. Offices. The corporation may have offices at such
places within or without the State of Delaware as the Board of Directors may
from time to time determine or the business of the corporation may require,
provided that the corporation maintains a registered office within the State of
Delaware.
ARTICLE II
Shares
Section 2.01. Shares. The Board of Directors shall have authority
to authorize the issuance, from time to time without any vote or other action by
the shareholders, of any or all shares of stock of the corporation of any class
at any time authorized, and any securities convertible into or exchangeable for
any such shares, in each case to such persons and for such consideration, and on
such terms as the Board of Directors from time to time in its discretion
lawfully may determine. Shares so issued, for which the consideration has been
paid to the corporation, shall be fully paid stock and the holders of such stock
shall not be liable for any further call or assessment thereon.
ARTICLE III
Preemptive Rights
Section 3.01. Preemptive Rights. No common shareholder of this
corporation shall by reason of such shareholder holding common shares of any
class have any preemptive or preferential rights of purchase to subscribe to any
shares of any class of this corporation, now or hereafter to be authorized, or
any notes, debentures, bonds or other securities convertible into or carrying
options or warrants to purchase shares of any class, now or hereafter to be
authorized, whether or not the issuance of any such shares, or such notes,
debentures, bonds or other securities, would adversely affect the dividend or
voting rights of such shareholder, other than such rights, if any, as the Board
of Directors, in its discretion from time to time, may grant and at such price
as the Board of Directors in its discretion may fix; and the Board of Directors
may issue shares of any class of this corporation, or any notes, debentures,
bonds, or other securities convertible into or carrying options or warrants to
purchase shares of any class, without offering any such shares of any class,
either in whole or in part, to the existing shareholders of any class.
<PAGE> 6
ARTICLE IV
Perpetual Existence
Section 4.01. Perpetual Existence. The corporation is to have
perpetual existence.
ARTICLE V
Non-Liability of Shareholders
Section 5.01. Non-Liability of Shareholders. The private
property of the shareholders shall not be subject to the payment of corporate
debts to any extent whatsoever.
ARTICLE VI
Indemnification
Section 6.01. Indemnification. The corporation shall have power to
indemnify any person, including present or former directors, officers, trustees,
employees or agents of the corporation or any person who is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, to
the extent permitted by the General Corporation Law of Delaware and/or the
Bylaws of the corporation. Such indemnification shall be in addition to all
other rights to which those indemnified may be entitled under any statute,
bylaw, agreement, vote of shareholders or otherwise.
ARTICLE VII
Meeting of Shareholders
Section 7.01. Place of Meeting. All meetings of the shareholders
of the Corporation shall be held in Wilmington, Delaware, or at such other place
within or without the State of Delaware as shall be designated by the Board of
Directors in the notice of such meeting.
Section 7.02. Annual Meeting. The Board of Directors may fix the
date and time of the annual meeting of the shareholders, but if no such date and
time is fixed by the Board of Directors, the meeting for any calendar year shall
be held on the second Tuesday of June, if not a legal holiday, and if a legal
holiday, then on the next succeeding day which is not a legal holiday. At the
annual meeting, the shareholders then entitled to vote shall elect by written
ballot directors and shall transact such other business as may properly be
brought before the meeting.
Section 7.03. Special Meetings. Except as provided in the
corporation's Certificate of Incorporation, special meetings of the shareholders
of the corporation for any purpose or purposes for which meetings may lawfully
be called, may be called at any time for any purpose or purposes by the Board of
Directors or by any person or committee expressly so authorized by the Board of
Directors and by no other person or persons. At any time, upon written request
of any
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person or persons who have duly called a special meeting, which written request
shall state the purpose or purposes of the meeting, it shall be the duty of the
Secretary to fix the date of the meeting to be held at such date and time as the
Secretary may fix, not less than ten (10) nor more than sixty (60) days after
the receipt of the request, and to give due notice thereof. If the Secretary
shall neglect or refuse to fix the time and date of such meeting and give notice
thereof, the person or persons calling the meeting may do so.
Section 7.04. Notice of Meetings. Written notice of the place,
date and hour of every meeting of the shareholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each shareholder of record entitled to vote at the
meeting. Every notice of a special meeting shall state the purpose or purposes
thereof.
Section 7.05. Quorum, Manner of Acting and Adjournment. The
holders of a majority of the stock issued and outstanding (not including
treasury stock) and entitled to vote at a meeting of the shareholders, present
in person or represented by proxy, shall constitute a quorum at all meetings of
the shareholders for the transaction of business except as otherwise provided by
statute, by the Certificate of Incorporation or by these Bylaws. If, however, a
quorum shall not be present or represented at any meeting of the shareholders,
the shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At any such adjourned meeting, at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting. When a quorum is present
at any meeting, the vote of the holders of the majority of the stock having
voting power present in person or represented by proxy shall decide any
questions brought before such meeting, unless the question is one upon which, by
express provision of the applicable statute, the Certificate of Incorporation or
these Bylaws, a different vote is required, in which case such express provision
shall govern and control the decision of such question. Except upon those
questions governed by the aforesaid express provisions, the shareholders present
in person or by proxy at a duly organized meeting can continue to do business
until adjournment, notwithstanding withdrawal of enough shareholders to leave
less than a quorum.
Section 7.06. Organization. At every meeting of the shareholders,
the President, or in the case of vacancy in office or absence of the President,
such person as may be designated by the Board of Directors, shall act as
Chairman of such meeting, and the Secretary, or, in the Secretary's absence, an
assistant secretary, or in the absence of both the Secretary and the assistant
secretaries, a person appointed by the Chairman of the Meeting shall act as
Secretary.
Section 7.07. Notice of Business. No business may be transacted
at an annual meeting of shareholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized committee thereof),
or (c) otherwise properly brought before the annual meeting by any shareholder
of the Corporation (i) who is a shareholder
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of record on the date of the giving of the notice provided for herein, and on
the record date for the determination of shareholders entitled to vote at such
annual meeting, and (ii) who complies with the notice procedures set forth
below.
In addition to any other applicable requirements, for business to be
properly brought before an annual Meeting by a shareholder, such shareholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of shareholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the shareholder to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure of the
date of the annual meeting was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
Annual Meeting, (ii) the name and record address of such shareholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such shareholder, (iv) a description of
all arrangements or understandings between such shareholder and any other person
or persons (including their names) in connection with the proposal of such
business by such shareholder and any material interest of such shareholder in
such business, and (v) a representation that such shareholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of shareholders
except business brought before the annual meeting in accordance with the
procedures set forth herein; provided, however, that, once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this paragraph shall be deemed to preclude discussion by any
shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 7.08. Voting; Proxies. Each shareholder shall at every
meeting of the shareholders be entitled to one vote in person or by proxy for
each share of common stock and the number of votes per share as designated in
the designation of rights adopted with respect to each share of preferred stock
registered in such shareholder's name on the books of the corporation on the
record date for such meeting. All elections of directors shall be by written
ballot, unless waived by the shareholders present or unless action is taken
pursuant to Section 7.09 of the Bylaws. The vote upon any other matter need not
be by ballot. No proxy shall be voted after three (3) years from its date,
unless the proxy provides for a longer period. Every proxy shall be executed in
writing by the shareholder or by such shareholder's duly authorized
attorney-in-fact and
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filed with the Secretary of the corporation. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or any
provisions in the proxy to the contrary, but the revocation of a proxy shall not
be effective until notice thereof has been given to the Secretary of the
corporation. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of such
death or incapacity is given to the Secretary of the corporation.
Section 7.09. Voting Lists. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten (10) days before
every meeting of shareholders, a complete list of the shareholders entitled to
vote at the meeting. The list shall be arranged in alphabetical order showing
the address of each shareholder and the number of shares registered in the name
of each shareholder. Such list shall be open to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any shareholder who is present.
Section 7.10. Consent of Shareholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required by
law to be taken at any annual or special meeting of shareholders of the
corporation, or any action which may be taken at any annual or special meeting
of such shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those shareholders who
have not consented in writing.
ARTICLE VIII
Board of Directors
Section 8.01. Powers. The management of the corporation shall be
under the direction of the Board of Directors; and all powers of the
corporation, except those specifically reserved or granted to the shareholders
by statute, the Certificate of Incorporation or these Bylaws, are hereby granted
to and vested in the Board of Directors.
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Section 8.02. Number, Term of Office and Qualification. The Board
of Directors shall consist of such number of directors, not less than three (3)
or more than nine (9), as may be determined from time to time by the Board of
Directors subject to the provisions of the Certificate of Incorporation. The
term of each director shall be for one year from the date of such director's
election; however, each director shall serve until such director's successor
shall have been duly elected and qualified, unless such director shall resign,
become disqualified, disabled or shall otherwise be removed. At each annual
election, the directors chosen to succeed those whose terms then expire shall be
for the same term as the directors they succeed.
Section 8.03. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the corporation, except as may be otherwise provided in
the Certificate of Incorporation, or otherwise, with respect to the right of
holders of preferred stock to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the Board of
Directors, or at any Special Meeting of shareholders called for the purpose of
electing directors, may be made (a) by or at the direction of the Board of
Directors (or any duly authorized committee thereof), or (b) by any shareholder
of the corporation (i) who is a shareholder of record on the date of the giving
of the notice provided for herein and on the record date for the determination
of shareholders entitled to vote at such meeting, and (ii) who complied with the
notice procedures set forth in this paragraph 8.03.
In addition to any other applicable requirements, for a nomination to
be made by a shareholder, such shareholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
To be timely, a shareholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
(a) in the case of an annual Meeting, not less than sixty (60) days nor more
than ninety (90) days prior to the anniversary date of the immediately preceding
Annual Meeting of shareholders; provided, however, that in the event that the
Annual Meeting is called for a date that is not within thirty (30) days before
or after such anniversary date, notice by the shareholder in order to be timely
must be so received not later than the close of business on the tenth (10th) day
following the date on which such notice of the date of the Annual Meeting was
mailed or such public disclosure of the date of the Annual Meeting was made,
whichever first occurs; and (b) in the case of a Special Meeting of shareholders
called for the purpose of electing directors, not later than the close of
business on the tenth (10th) day following the day on which notice of the date
of the Special Meeting was mailed or public disclosure of the date on the
Special Meeting was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary
must set forth (a) as to each person whom the shareholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person, and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the
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"Exchange Act"), and the rules and regulations promulgated thereunder; and (b)
as to the shareholder giving the notice (i) the name and record address of such
shareholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such shareholder,
(iii) the description of all arrangements or understandings between such
shareholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
shareholder, (iv) a representation that such shareholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice,
and (v) any other information relating to such shareholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee consenting to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
paragraph 8.03. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 8.04. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the director so chosen shall hold office until
such director's successor shall have been duly elected and qualified unless such
director shall resign, become disqualified, disabled or shall otherwise be
removed. If there are no directors in office, then an election of directors may
be held in the manner provided by statute. If, at the time of filling any
vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole Board of Directors (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any shareholder or shareholders holding at least ten percent
(10%) of the total number of the shares at the time outstanding having the right
to vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
Section 8.05. Resignations. Any director of the corporation may
resign at any time by giving written notice to the Chairman of the Board or the
Secretary of the corporation. Such resignation shall take effect at the date of
the receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 8.06. Organization. At every meeting of the Board of
Directors, the Chairman of the Board, if there be one, or, in the case of a
vacancy in the office or absence of the Chairman of the Board, one of the
following officers present in the order stated: the President; the Vice
President; or a Chairman chosen by a majority of the directors present, shall
preside, and the Secretary, or, in the Secretary's absence, an Assistant
Secretary, or in the absence of the Secretary and the Assistant Secretaries, any
person appointed by the Chairman of the meeting, shall act as Secretary.
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Section 8.07. Place of Meeting. The Board of Directors may hold its
meetings, both regular and special, at such place or places within or without
the State of Delaware as the Chairman of the Board or the Board of Directors may
from time to time determine, or as may be designated in the notice calling the
meeting.
Section 8.08. Organization Meeting. Immediately after each annual
election of directors or other meeting at which the entire Board of Directors is
elected, the newly elected Board of Directors shall meet for the purpose of
organization, election of officers, and the transaction of other business, at
the place where said election of directors was held. Notice of such meeting need
not be given. Such organization meeting may be held at any other time or place
which shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the directors.
Section 8.09. Regular Meetings. Regular meetings of the Board of
Directors shall be held without notice at such time and at such place as shall
be determined from time to time by the Board of Directors. Notice of any regular
meeting shall be given in the manner prescribed for special meetings of the
Board of Directors.
Section 8.10. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board of
Directors, the President or on the written request of three (3) or more of the
directors. Notice of each such meeting shall be given to each director in
writing, or by telephone personally, at least twenty-four (24) hours before the
time at which the meeting is to be held. Each such notice shall state the time
and place of the meeting to be so held.
Section 8.11. Quorum, Manner of Acting and Adjournment. At all
meetings of the Board of Directors, a majority of the total number of directors
shall constitute a quorum for the transaction of business. Except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation, the affirmative vote of a majority of the number of directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, provided, however, that so long as The Heico Companies, LLC or its
successors or permitted assigns ("Heico") continues to own at least 30% of the
total number of shares of the corporation's Series C Preferred Stock which the
Corporation issues to Heico, such majority includes at least one member of the
Board of Directors who is designated by Heico and one member of the Board of
Directors who is not so designated by Heico (a "Non-Heico Designee"), provided,
further, however, that in the event that Heico has submitted to the Corporation
the resignations contemplated by Section 3(d) of that certain Shareholder
Agreement, dated December 31, 1998, among the Corporation, Heico, Maroon Bells
Capital Partners, Inc., Paul A. Moore, Phillip S. Magiera and Theodore H.
Swindells (the "Shareholder Agreement"), such majority need not include a
Non-Heico Designee for all matters to be approved by the Board in accordance
with Section 3(d) of the Shareholder Agreement. If a quorum shall not be present
at any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
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Section 8.12. Action by Unanimous Written Consent. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee as the case may be.
Section 8.13. Interested Directors or Officers. No contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board or committee thereof
which authorized the contract or transaction, or solely because such director's
or officer's votes are counted for such purpose, if:
(1) The material facts as to such director's or officer's
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; or
(2) The material facts as to such director's or officer's
relationship or interest and as to the contract or transaction are disclosed or
are known to the shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the shareholders;
or
(3) The contract or transaction is fair as to the corporation as
of the time it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the shareholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
Section 8.14. Compensation. Each director who is not also an
employee of the corporation or any subsidiary thereof shall be paid such
compensation for such director's services and shall be reimbursed for such
expenses as may be fixed by the Board of Directors.
Section 8.15. Committees. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, each committee to consist of one or more of the directors of
the corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent provided in a resolution of the Board of Directors passed as
aforesaid, shall have and may exercise all the powers and authority of the Board
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of Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers which
may require it, but no such committee shall have the power or authority in
reference to the following matters: (i) approving or adopting, or recommending
to the stockholders of the corporation, any action or matter expressly required
by the Delaware General Corporation Law to be submitted to the stockholders for
approval or (ii) adopting, amending or repealing any Bylaw of the corporation.
Unless the Board of Directors otherwise provides, each committee may adopt,
amend and repeal rules for the conduct of its business. In the absence of a
provision by the Board of Directors or a provision in the rules of such
committee to the contrary, a majority of the entire authorized number of members
of such committee shall constitute a quorum for the transaction of business, the
vote of a majority of the members present at a meeting at the time of such vote
if a quorum is present shall be the act of such committee, and in other respects
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business.
ARTICLE IX
Notices - Waivers - Meetings
Section 9.01. What Constitutes Notice. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, written notice is required to be given to any director or shareholder,
such notice may be given to such person, either personally or by sending a copy
thereof through the mail, by telegraph, by private delivery service, or by
facsimile transmission, charges prepaid, to such person's address appearing on
the books of the corporation. If the notice is sent by mail, by telegraph or by
private delivery service, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with a telegraph
office or private delivery service for transmission to such person. If the
notice is sent by facsimile transmission, it shall be deemed to have been given
upon transmission, if transmission occurs before 12:00 noon at the place of
receipt, and upon the day following transmission, if transmission occurs after
12:00 noon.
Section 9.02. Waivers of Notice. Whenever any written notice is
required to be given under the provisions of the Certificate of Incorporation,
these Bylaws, or by statute, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the shareholders, directors, or members of a committee of directors need be
specified in any written waiver of notice of such meeting. Attendance of a
person, either in person or by proxy, at any meeting, shall constitute a waiver
of notice of such meeting, except when a person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully called or
convened.
Section 9.03. Conference Telephone Meetings. One or more directors
may participate in a meeting of the Board, or of a committee of the Board, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section shall constitute presence in
person at such meeting.
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ARTICLE X
Officers
Section 10.01. Number, Qualifications and Designation. The officers
of the corporation shall be chosen by the Board of Directors and shall be a
President, one or more Vice Presidents, a Secretary, a Treasurer, and such other
officers as may be elected in accordance with the provisions of Section 10.03 of
this Article. One person may hold more than one office. Officers may be, but
need not be, directors or shareholders of the corporation.
Section 10.02. Election and Term of Office. The officers of the
corporation, except those elected by delegated authority pursuant to Section
10.03 of this Article, shall be elected annually by the Board of Directors, and
each such officer shall hold such officer's office until such officer's
successor shall have been elected and qualified, or until such officer's earlier
resignation or removal.
Section 10.03. Subordinate Officers, Committees and Agents. The
Board of Directors may from time to time, elect such other officers, employees
or other agents as it deems necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as are provided in
these Bylaws, or as the Board of Directors may from time to time determine. The
Board of Directors may delegate to any officer or committee the power to elect
subordinate officers and to retain or appoint employees or other agents, or
committees thereof, and to prescribe the authority and duties of such
subordinate officers, committees, employees or other agents.
Section 10.04. Resignations. Any officer or agent may resign at any
time by giving written notice to the Board of Directors, or to the President or
the Secretary of the corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 10.05. Removal. Any officer, committee, employee or other
agent of the corporation may be removed, either for or without cause, by the
Board of Directors or other authority which elected or appointed such officer,
committee or other agent whenever in the judgment of such authority the best
interests of the corporation will be served thereby.
Section 10.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, shall be filled by
the Board of Directors or by the officer or committee to which the power to fill
such officer has been delegated pursuant to Section 10.03 of this Article, as
the case may be, and if the office is one for which these Bylaws prescribe a
term, shall be filled for the unexpired portion of the term.
Section 10.07. General Powers. All officers of the corporation, as
between themselves and the corporation, shall, respectively, have such authority
and perform such duties in the management of the property and affairs of the
corporation as may be determined by these
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Bylaws, or in the absence of controlling provisions in the Bylaws, as may be
provided by resolution of the Board of Directors.
Section 10.08. The President. The President shall, subject to the
control of the Board of Directors, have general and active supervision of the
affairs, business, officers and employees of the corporation. The President
shall have authority to sign, execute, and acknowledge, in the name of the
corporation deeds, mortgages, bonds, contracts or other instruments, authorized
by the Board of Directors, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or these Bylaws,
to some other officer or agent of the corporation. The President shall, from
time to time, in the President's discretion or at the order of the Board, submit
to the Board reports of the operations and affairs of the corporation. The
President shall also perform such other duties and have such other powers as may
be assigned to the President from time to time by the Board of Directors.
Section 10.09. The Chairman. The Chairman of the Board shall
preside at all meetings of the shareholders and of the Board of Directors, and
shall perform such other duties as may from time to time be assigned to the
Chairman by the Board of Directors.
Section 10.10. The Vice Presidents. The corporation may have one
or more Vice Presidents, having such duties as from time to time may be
determined by the Board of Directors or by the President.
Section 10.11. The Secretary. The Secretary shall keep full minutes
of all meetings of the shareholders and of the Board of Directors; shall be ex
officio Secretary of the Board of Directors; shall attend all meetings of the
shareholders and of the Board of Directors; shall record all the votes of the
shareholders and of the directors and the minutes of the meetings of the
shareholders and of the Board of Directors and of committees of the Board in a
book or books to be kept for that purpose. The Secretary shall give, or cause to
be given, notices of all meetings of the shareholders of the corporation and of
the Board of Directors; shall be the custodian of the seal of the corporation
and see that it is affixed to all documents to be executed on behalf of the
company under its seal; shall have responsibility for the custody and
safekeeping of all permanent records and other documents of the corporation;
and, in general, shall perform all duties incident to the office of Secretary
and such other duties as may be prescribed by the Board of Directors or by the
President, under whose supervision the Secretary shall be. The Board of
Directors may elect one or more Assistant Secretaries to perform such duties as
shall from time to time be assigned to them by the Board of Directors or the
President.
Section 10.12. The Treasurer. The Treasurer shall have or provide
for the custody of all funds, securities and other property of the corporation;
shall collect and receive or provide for the collection or receipt of money
earned by or in any manner due to or received by the corporation; shall deposit
or cause to be deposited all said moneys in such banks or other depositories as
the Board of Directors may from time to time designate; shall make disbursements
of corporate funds upon appropriate vouchers; shall keep full and accurate
accounts of transactions of the Treasurer's office in books belonging to the
corporation; shall, whenever so required by the Board of Directors, render an
accounting showing the Treasurer's transactions as Treasurer, and the financial
condition of the corporation; and, in general, shall discharge any other
12
<PAGE> 17
duties as may from time to time be assigned to the Treasurer by the Board of
Directors. The Board of Directors may elect one or more Assistant Treasurers to
perform the duties of the Treasurer as shall from time to time be assigned to
them by the Board of Directors or the Treasurer.
Section 10.13. Officer's Bonds. Any officer shall give a bond for
the faithful discharge of such officer's duties in such sum, if any, and with
such surety or sureties as the Board of Directors shall require. The corporation
may obtain such bonds at its expense as the Board of Directors shall require.
Section 10.14. Compensation. The compensation of the officers and
agents of the corporation be fixed from time to time by the Board of Directors
or by such committee as may be designated by the Board of Directors to fix
salaries or other compensation of officers.
ARTICLE XI
Certificates of Stock, Transfer, Etc.
Section 11.01. Issuance. The certificate for stock of the
corporation shall be numbered and registered in the stock ledger and transfer
books or equivalent records of the corporation as they are issued. They shall be
signed by the President, or a Vice President, and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall bear
the corporate seal, which may be a facsimile, engraved or printed. Any of or all
the signatures upon such certificate may be a facsimile, engraved or printed if
such certificate of stock is signed or countersigned by a transfer agent or by a
registrar. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon any share certificate shall have
ceased to be such officer, transfer agent or registrar before the certificate is
issued, it may be issued with the same effect as if such officer, transfer agent
or registrar were such officer, transfer agent or registrar at the date of its
issue.
Section 11.02. Transfer. Transfers of shares of stock of the
corporation shall be made on the books of the corporation upon surrender of the
certificates therefor, endorsed by the person named in the certificate or by
attorney lawfully constituted in writing. No transfer shall be made inconsistent
with the provisions of the Uniform Commercial Code, Article 8 of Title 5A of the
Delaware Code, and its amendments and supplements.
Section 11.03. Stock Certificates. Stock certificates of the
corporation shall be in such form as provided by statute and approved by the
Board of Directors. The stock record books and the blank stock certificate books
shall be kept by the Secretary or by any agency designated by the Board of
Directors for that purpose.
Section 11.04. Lost, Stolen, Destroyed, or Mutilated Certificates.
The Board of Directors may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of the fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or such owner's legal representative, to
give the corporation a bond in such sum as it may direct as indemnity against
any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
13
<PAGE> 18
Section 11.05. Record Holder of Shares. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on it books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
Section 11.06. Determination of Shareholders of Record. In order
that the corporation may determine the shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed:
(1) The record date for determining shareholders
entitled to notice of or to vote at a meeting of shareholders shall be
at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held.
(2) The record date for determining shareholders for any
other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Only such shareholders as shall be shareholders on the record date fixed or
determined as aforesaid shall be entitled to notice of or to vote at such
meeting or adjournment, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action. A determination of shareholders of record entitled to
notice of or to vote at a meeting of shareholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
14
<PAGE> 19
ARTICLE XII
Indemnification of Directors, Officers, Etc.
Section 12.01. Directors and Officers; Third Party Actions. To the
fullest extent of Delaware law, the corporation shall indemnify any director or
officer of the corporation who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact such director or
officer is or was an authorized representative of the corporation (which, for
the purposes of this Article and Article XIII of these Bylaws, shall mean a
director, officer, employee or agent of the corporation, or a person who is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise) for, from and against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such director or officer in connection with such action, suit or proceeding
if such director or officer acted in good faith and in a manner such director or
officer reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such director's or officer's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such director or officer reasonably believed to be
in, or not opposed to, the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that such
director's or officer's conduct was unlawful.
Section 12.02. Directors and Officers; Derivative Actions. The
corporation shall indemnify any director or officer of the corporation who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such director or officer is or
was an authorized representative of the corporation, for, from and against
expenses (including attorneys' fees) actually and reasonably incurred by such
director or officer in connection with the defense or settlement of such action
or suit if such director or officer acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of such director's or
officer's duty to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other courts shall deem proper.
Section 12.03. Employees and Agents. To the extent that an
authorized representative of the company who neither was nor is a director or
officer of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 12.01 and
12.02 of this Article or in defense of any claim, issue or matter therein, he
shall be indemnified by the corporation for, from and against expenses
(including attorneys' fees)
15
<PAGE> 20
actually and reasonably incurred by such authorized representative in connection
therewith. Such an authorized representative may, at the discretion of the Board
of Directors, be indemnified by the corporation in any other circumstances to
any extent if the corporation would be required by Sections 12.01 and 12.02 of
this Article to indemnify such person in such circumstances to such extent if
such authorized representative were or had been a director or officer of the
corporation.
Section 12.04. Procedure for Effecting Indemnification.
Indemnification under Section 12.01, 12.02 or 12.03 of this Article shall be
made when ordered by a court and shall be made in a specific case upon a
determination that indemnification of the authorized representative is required
or proper in the circumstances because such authorized representative has met
the applicable standard of conduct set forth in Sections 12.01 or 12.02 of this
Article. Such determination shall be made:
(1) By the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to such action,
suit or proceeding, or
(2) If such a quorum is not obtainable, or, even if
obtainable a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or
(3) By the shareholders.
If a claim under this Article XII is not paid in full by the corporation within
ninety (90) days after a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any action, suit or
proceeding in advance of its final disposition where the required undertaking
has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible for the corporation to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be on the corporation. Neither the failure of the corporation (including
its Board of Directors, independent legal counsel or its shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because such
claimant had met the applicable standard of conduct, nor an actual determination
by the corporation (including its Board of Directors, independent legal counsel,
or its shareholders) that the claimant has not met such applicable standard of
conduct shall be a defense to the action or create a presumption that claimant
had not met the applicable standard of conduct.
Section 12.05. Advancing Expenses. Expenses (including attorneys'
fees) incurred in defending a civil or criminal action, suit or proceeding shall
be paid by the corporation in advance of the final disposition of such action,
suit or proceeding, as authorized by the Board of Directors in a specific case
or if requested by the Board of Directors, upon a written opinion of independent
legal counsel, upon receipt of an undertaking by or on behalf of an authorized
representative to repay such amount unless it shall ultimately be determined
that such authorized representative is entitled to be indemnified by the
corporation as required in this Article or authorized by law.
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<PAGE> 21
Section 12.06. Scope of Article. Each person who shall act as an
authorized representative of the corporation, shall be deemed to be doing so in
reliance upon such rights of indemnification as are provided in this Article.
The indemnification provided by the Article shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under any
agreement, vote of shareholders or disinterested directors, statute or
otherwise, both as to action in such authorized representative's official
capacity and as to action in another capacity while holding such office or
position, and shall continue as to a person who has ceased to be an authorized
representative of the corporation and shall insure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE XIII
Insurance
Section 13.01. Insurance Against Liability Asserted Against
Directors, Officers, Etc. The corporation, whenever so authorized by the Board
of Directors, may purchase and maintain insurance on behalf of any authorized
representative, as said term is defined in Section 12.01 of these Bylaws,
against any liability asserted against such authorized representative and
incurred by such authorized representative in such capacity, or arising out of
such authorized representative's status as such, whether or not the corporation
would be authorized or required to indemnify such authorized representative by
law or Article XII of these Bylaws.
ARTICLE XIV
Miscellaneous
Section 14.01. Corporate Seal. The corporate seal of the corporation
shall have inscribed thereon the name of the corporation, the year of its
incorporation and the words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or otherwise
reproduced.
Section 14.02. Checks. All checks, notes, bills of exchange or other
orders in writing shall be signed by such person or persons as the Board of
Directors, or officer or officers authorized by resolution of the Board of
Directors may, from time to time, designate.
Section 14.03. Contracts. Except as otherwise provided in these
Bylaws, the Board of Directors may authorize any officer or officers including
the President and any Vice President, or any agent or agents, to enter into any
contract or to execute or deliver any instrument on behalf of the corporation
and such authority may be general or confined to specific instances.
Section 14.04. Inspection. The books, accounts and records of the
corporation may be kept (subject to any provision in the Delaware General
Corporation Law) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors and shall be open for
inspection in person by any member of the Board of Directors at all times.
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<PAGE> 22
Section 14.05. Fiscal Year. The fiscal year of the corporation
shall be determined by the Board of Directors.
ARTICLE XV
Amendments
Section 15.01. Amendments. These Bylaws may be amended or
repealed, and new Bylaws adopted, by the Board of Directors.
18
<PAGE> 1
EXHIBIT 10.2(f)
FOURTH
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Fourth Amendment (the "Amendment") is made and entered into as of
the ___ day of December, 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 have executed a First Amendment to Employment
Agreement on March 31, 1998, a Second Amendment to Employment Agreement on April
1, 1998, and a Third Amendment to Employment Agreement on September 29, 1998;
WHEREAS, the parties desire to further amend the Employment Agreement,
by amending Sections 4 and 8(d)(iii) and (iv) thereof;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Section 4 of the Employment Agreement is hereby amended and
restated to read in its entirety as follows:
"The Executive shall serve in such capacities as may be
reasonably assigned to the Executive by the Board. In connection with
any such capacities, the Executive shall have such senior executive
duties, responsibilities and authority as may from time to time be
reasonably assigned to the Executive by the Board. The Executive shall
devote substantially all the Executive's working time and efforts to
the business and affairs of the Company."
2. Section 8(d)(iii) of the Employment Agreement is hereby
amended and restated to read in its entirety as follows:
"The refusal by the Executive to perform the
Executive's duties or responsibilities and, after notice from the
Company to the Executive, the Executive's continuing refusal to perform
his duties or responsibilities during the 48-hour period following the
giving of such notice;"
3. Section 8(d)(iv) of the Employment Agreement is hereby
amended and restated to read in its entirety as follows:
"The performance by the Executive of his duties or
responsibilities in a manner constituting gross negligence."
4. 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 but not defined herein
shall have the meanings given in the Employment Agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
WORLDPORT COMMUNICATIONS, INC.
By:
---------------------------------
Name: Paul A. Moore
Title: Chief Executive Officer
------------------------------------
Phillip S. Magiera
-2-
<PAGE> 1
EXHIBIT 10.3(f)
FOURTH
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Fourth Amendment (the "Amendment") is made and entered into as of
the ___ day of December, 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 have executed a First Amendment to Employment
Agreement on March 31, 1998, a Second Amendment to Employment Agreement on April
1, 1998, and a Third Amendment to Employment Agreement on September 29, 1998;
WHEREAS, the parties desire to further amend the Employment Agreement,
by amending Sections 4 and 8(d)(iii) and (iv) thereof;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Section 4 of the Employment Agreement is hereby amended and
restated to read in its entirety as follows:
"The Executive shall serve in such capacities as may be
reasonably assigned to the Executive by the Board. In connection with
any such capacities, the Executive shall have such senior executive
duties, responsibilities and authority as may from time to time be
reasonably assigned to the Executive by the Board. The Executive shall
devote substantially all the Executive's working time and efforts to
the business and affairs of the Company."
2. Section 8(d)(iii) of the Employment Agreement is hereby
amended and restated to read in its entirety as follows:
"The refusal by the Executive to perform the
Executive's duties or responsibilities and, after notice from the
Company to the Executive, the Executive's continuing refusal to perform
his duties or responsibilities during the 48-hour period following the
giving of such notice;"
3. Section 8(d)(iv) of the Employment Agreement is hereby
amended and restated to read in its entirety as follows:
"The performance by the Executive of his duties or
responsibilities in a manner constituting gross negligence."
4. 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 but not defined herein
shall have the meanings given in the Employment Agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
WORLDPORT COMMUNICATIONS, INC.
By:
-------------------------------------
Name: Phillip S. Magiera
Title: Chief Financial Officer
-------------------------------------
Paul A. Moore
<PAGE> 1
EXHIBIT 10.9(a)
CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.
PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE
DENOTED BY ["ECONOMIC TERMS OMITTED"], ["CAPACITY TERMS OMITTED"] OR
["OTHER COMPETITIVE TERMS OMITTED"]. MATERIAL OMITTED HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
AMENDED AND RESTATED ADDENDUM
TO
AC-1 CAPACITY PURCHASE AGREEMENT
AND
INLAND CAPACITY PURCHASE AGREEMENTS
WITH
WORLDPORT COMMUNICATIONS, INC.
This Amended and Restated Addendum (this "Addendum") amends and
restates in its entirety the Addendum dated as of December 7, 1998 to the
Capacity Purchase Agreement and the Inland Capacity Purchase Agreements referred
to below and is dated as of March 9, 1999 and is entered into among Atlantic
Crossing Ltd., formerly known as Global Telesystems Ltd. (the "Grantor"),
Worldport Communications, Inc. (the "Purchaser") and the Subsidiary Grantors set
forth on the signature pages hereto (the "Subsidiary Grantors").
W I T N E S S E T H:
WHEREAS, Grantor and Purchaser entered into the Capacity Purchase
Agreement, dated as of April 7, 1998 (as amended, supplemented or otherwise
modified prior to the date hereof, the "Existing Capacity Purchase Agreement";
and as amended by this Addendum and as the same may be further amended,
supplemented or otherwise modified from time to time, the "Capacity Purchase
Agreement");
WHEREAS, in accordance with the terms of the Capacity Purchase
Agreement, Purchaser has agreed to purchase the Purchased Capacity, representing
a minimum of ["CAPACITY TERMS OMITTED"] STM-1s on Segment S-1;
WHEREAS, Purchaser has entered into (a) an Indefeasible Right of Use
Agreement in Inland Capacity (United Kingdom), dated as of April 7, 1998 (as
amended, supplemented or otherwise modified from time to time, the "UK Inland
Agreement"), with GT U.K. Ltd., pursuant to which the Purchaser has agreed to
purchase a minimum of ["CAPACITY TERMS OMITTED"] STM-1s of Inland Capacity (as
defined therein, the "UK Inland Capacity") and (b) an Indefeasible Right of Use
Agreement in Inland Capacity (United States), dated as of April 7, 1998 (as
amended, supplemented or otherwise modified from time to time, the "US Inland
Agreement"; and together with the UK Inland Agreement and the Capacity Purchase
Agreement, the "Agreements"), with GT Landing Corp., pursuant to which the
Purchaser has agreed to purchase a minimum of ["CAPACITY TERMS OMITTED"] STM-1s
of Inland Capacity (as defined therein, the "US Inland Capacity"; and together
with UK Inland Capacity, the "Inland Capacity");
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 2
WHEREAS, the Purchaser desires to have the immediate use of ["CAPACITY
TERMS OMITTED"] STM-1s of the Purchased Capacity (the "Subject Subsea
Capacity"), the immediate use of ["CAPACITY TERMS OMITTED"] STM-1 of UK Inland
Capacity (the "Subject UK Inland Capacity") and ["CAPACITY TERMS OMITTED"]
STM-1s of US Inland Capacity (the "Subject US Inland Capacity"; the Subject
Subsea Capacity, Subject UK Inland Capacity and Subject US Inland capacity are
collectively referred to herein as the "Subject Capacity") and Grantor, together
with the Subsidiary Grantors, are willing to provide such immediate use, subject
to the terms and conditions set forth herein;
WHEREAS, the Purchaser also desires to (i) redesignate ["CAPACITY TERMS
OMITTED"] of the STM-1s of Purchased Capacity from Segment S-1 to Segment S-4;
and (ii) amend the number of STM-1s to be purchased under the UK Inland
Agreement from ["CAPACITY TERMS OMITTED"] STM-1s to ["CAPACITY TERMS OMITTED"]
STM-1s and the Grantor, together with the Subsidiary Grantors, are willing to
agree to such redesignation and such amendment, subject to the terms and
conditions set forth herein (the definition of "Purchased Capacity" is hereby
amended to refer to ["CAPACITY TERMS OMITTED"] STM-1s of Segment S-1 Purchased
Capacity and ["CAPACITY TERMS OMITTED"] STM-1s of Segment S-4 Purchased Capacity
and the definition of "UK Inland Capacity" shall be deemed amended to refer to
["CAPACITY TERMS OMITTED"] STM-1s of UK Inland Capacity and not ["CAPACITY TERMS
OMITTED"] STM-1s); and
WHEREAS, the parties wish to modify the agreements with respect to the
Purchased Capacity other than the Subject Capacity.
NOW, THEREFORE, the Parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to them in the Capacity Purchase
Agreement.
2. Payment for Subject Subsea Capacity. (a) The purchase price for the
Subject Subsea Capacity set forth in the Capacity Purchase Agreement is
["ECONOMIC TERMS OMITTED"] for the ["CAPACITY TERMS OMITTED"] STM-1 and
["ECONOMIC TERMS OMITTED"] for the subsequent ["CAPACITY TERMS OMITTED"] STM-1s
or ["ECONOMIC TERMS OMITTED"] in the aggregate (the "Initial Subsea Subject
Payment"). In addition, the Purchaser desires that ["CAPACITY TERMS OMITTED"]
STM-1s of Subject Subsea Capacity be designated Segment S-4 and ["CAPACITY TERMS
OMITTED"] STM-1 of Subject Subsea Capacity be designated Segment S-1. The
Purchase Price is therefore ["ECONOMIC TERMS OMITTED"] more per STM-1, or
["ECONOMIC TERMS OMITTED"] more in the aggregate (such amounts, together with
the Initial Subsea Subject Payment, are hereinafter referred to as the "Subsea
Subject Payment"). The Subsea Subject Payment equals ["ECONOMIC TERMS OMITTED"].
(b) The Initial Payment of ["ECONOMIC TERMS OMITTED"] and the second
payment of ["ECONOMIC TERMS OMITTED"] in December 1998 made by the Purchaser to
the Grantor (for the benefit of the Grantor and the benefit of the Subsidiary
Grantors), pursuant
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 3
to the Capacity Purchase Agreement, shall be allocated, to the purchase of the
["CAPACITY TERMS OMITTED"] STM-1s of Purchased Capacity set forth in paragraph
2, in the manner set out in Schedule 1-A. An additional payment of ["ECONOMIC
TERMS OMITTED"] shall be made by Purchaser on the date hereof pursuant to the
Capacity Purchase Agreement and this Addendum and shall be allocated (together
with the Initial Payment and the Second Payment) to the purchase of such
["CAPACITY TERMS OMITTED"] STM-1s and to the Subsea Subject Payment in the
manner set out in Schedule 1-A. Additional payments shall be made in accordance
with Schedule 1-A (for the benefit of the Grantor and the benefit of the
Subsidiary Grantors as set forth therein) until the full amount of the Subsea
Subject Payment shall have been paid in full, together with interest thereon as
set forth in paragraph (c) below.
(c) Interest shall accrue on the unpaid portion of the Subsea Subject
Payment from the date hereof at a rate per annum equal to["ECONOMIC TERMS
OMITTED"].
3. Payment for Subject UK Inland Capacity. (a) The purchase price for
the Subject UK Inland Capacity set forth in the UK Inland Agreement is
["ECONOMIC TERMS OMITTED"] for the ["CAPACITY TERMS OMITTED"] STM-1 (the "UK
Inland Subject Payment").
(b) The Initial Payment of ["ECONOMIC TERMS OMITTED"] made by the
Purchaser to GT U.K. Ltd., pursuant to the UK Inland Agreement, shall be
allocated in the manner set out in Schedule 1-B. An additional payment of
["ECONOMIC TERMS OMITTED"] shall be made by the Purchaser on the date hereof,
pursuant to the UK Inland Agreement and this Addendum and shall be allocated to
the purchase of ["CAPACITY TERMS OMITTED"] STM-1, in the manner set out in
Schedule 1-B. Additional payments shall be made in accordance with Schedule 1-B
until the full amount of the UK Inland Subject Payment shall have been paid in
full, together with interest thereon as set forth in paragraph (c) below.
(c) Interest shall accrue on the unpaid portion of UK Inland Subject
Payment from the date hereof at a rate per annum equal to ["ECONOMIC TERMS
OMITTED"].
4. Payment for Subject US Inland Capacity. (a) The purchase price for
the Subject US Inland Capacity set forth in the US Inland Agreement is
["ECONOMIC TERMS OMITTED"] per STM-1 or ["ECONOMIC TERMS OMITTED"] in the
aggregate (the "US Inland Subject Payment").
(b) The Initial Payment of ["ECONOMIC TERMS OMITTED"] made by the
Purchaser to GT Landing Corp., pursuant to the US Inland Agreement, shall be
allocated in the manner set out in Schedule 1-C. An additional payment of
["ECONOMIC TERMS OMITTED"] shall be made by the Purchaser on the date hereof,
pursuant to the US Inland Agreement and this Addendum, shall be allocated, to
the purchase of such ["CAPACITY TERMS OMITTED"] STM-1s, in the manner set out in
Schedule 1-C. Additional payments shall be made in accordance with Schedule 1-C
until the full amount of the US Inland Subject Payment shall have been paid in
full, together with interest thereon as set forth in paragraph (c) below.
(c) Interest shall accrue on the unpaid portion of US Inland Subject
Payment from the date hereof at a rate per annum equal to ["ECONOMIC TERMS
OMITTED"].
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 4
5. Taxes. (a) Notwithstanding anything herein to the contrary, the
Purchaser agrees that all payments of the amounts set forth on Schedule 1-A, 1-B
and 1-C to this Agreement shall be made without any deduction or withholding for
or on account of any tax, duty or other charge of whatever nature imposed by any
governmental authority (for purposes of this Section 2(d), "Taxes"), provided
that the term "Taxes" shall not include net income taxes imposed upon the
Grantor and/or the Subsidiary Grantors. If the Purchaser is required to make any
such deduction or withholding on all or part of such payments then, in all
events, the Purchaser shall increase the payments so that after deduction or
withholding of such Taxes, the net amount received by the Grantor (for the
benefit of the Grantor and the benefit of the Subsidiary Grantors) will not be
less than the Grantor would have received had no such deduction or withholding
been required. If any taxing or governmental authority assets that the Purchaser
should have deducted or withheld with respect to all or a portion of the
payments, the Purchaser hereby agrees to indemnify the Grantor and the
Subsidiary Grantors for such Taxes and hold the Grantor harmless on an after-tax
basis from and against any Taxes, interest or penalties levied or asserted in
connection therewith.
(b) The Parties agree to cooperate in good faith to structure payments
hereunder so that the interest component thereof should not be subject to
withholding taxes under current law (at the time the first installment payments
are made hereunder) in the reasonable opinion of the Grantor and the Purchaser.
(c) Notwithstanding anything to the contrary herein, the right to
receipt of installment payments under Section 2 hereof shall be transferable
only upon surrender for cancellation of this Addendum, and the issuance of a new
Addendum registered in the name of the transferee. In addition, the Purchaser
shall maintain a register in which it shall record the name of the Grantor and
the Subsidiary Grantors or any transferee, and no transfer shall be valid unless
so registered.
6. Retained Interest. (a) Unless and until the Purchaser has paid the
Grantor all of the payments in full in accordance with the terms of this
Addendum, title to the IRUs in the Subject Subsea Capacity, the Subject UK
Inland Capacity and the Subject US Inland Capacity shall not pass to the
Purchaser and payment of such payments shall be secured by Grantor retaining
title to such IRUs until the Subject Payments are fully paid.
(b) Purchaser shall cooperate to allow Grantor to take all such actions
and make all such filings and recordings as are reasonably requested by Grantor
to establish, perfect and protect Grantor's interest in such IRUs. Purchaser
hereby represents and warrants that its chief executive office is located at the
address listed below its signature. The Purchaser agrees to promptly notify
Grantor of any change in such location.
(c) If the Purchaser shall fail to pay any portion of the Subject
Payments to Grantor when due, then upon fifteen (15) days prior written notice
to the Purchaser, if such payment has not been fully paid, the Grantor (i) may
suspend all service provided to Purchaser hereunder and under the Right of Use
Agreement (including suspending Purchaser's right to use the Purchased
Capacity), until such payment default or other breach has been cured (including
payment of default interest, if any) and (ii) shall be entitled to pursue any
and all rights and legal and
<PAGE> 5
equitable remedies (including its rights and remedies to enforce the Purchaser's
obligations under this Agreement).
7. Other Purchased Capacity. (a) Notwithstanding any provisions to the
contrary in the Capacity Purchase Agreement or the Inland Capacity Purchase
Agreements, the obligations of the Purchaser thereunder to purchase capacity and
the obligations of Grantor and Subsidiary Grantors to sell capacity to the
Purchaser, shall be restated to constitute an agreement to purchase ["ECONOMIC
TERMS OMITTED"] of capacity on any of the assets of Grantor or the Subsidiary
Grantors (including without limitation, Atlantic Crossing, Pan-American
Crossing, Pan-European Crossing and Global Access Limited terrestrial assets) as
designated by the Purchaser. The Purchaser agrees that such purchases will be
timed as follows: (i) not less than ["ECONOMIC TERMS OMITTED"] of capacity
purchased by December 31, 2000 (ii) not less than ["ECONOMIC TERMS OMITTED"] (on
a cumulative basis) of capacity purchased by December 31, 2001, and (iii) not
less than ["ECONOMIC TERMS OMITTED"] (on a cumulative basis) of capacity
purchased by December 31, 2002.
(b) For these purposes, the price for any capacity purchased by the
Purchaser will be equal to ["ECONOMIC TERMS OMITTED"] of the published
["ECONOMIC TERMS OMITTED"] price for the particular route (whether subsea or
inland) at the time the capacity is activated at the Purchaser's request.
Grantor and Subsidiary Grantors agree that the capacity purchase price for the
New York-London and New York-Amsterdam routes (on a telehouse to telehouse
basis) will not exceed ["ECONOMIC TERMS OMITTED"] per STM-1 beginning in the
fourth quarter of 1999. The Purchaser shall have the option to enter into an
agreement to purchase an additional ["ECONOMIC TERMS OMITTED"] of capacity on or
before December 31, 2003, in which event, prices for all capacity purchased by
the Purchaser other than the Subject Capacity will be equal to ["ECONOMIC TERMS
OMITTED"] of the published ["ECONOMIC TERMS OMITTED"] price for the particular
route at the time the capacity is activated at the Purchaser's request.
8. Resale Restrictions. Notwithstanding any provisions to the contrary
in the Capacity Purchase Agreement or the Inland Capacity Purchase Agreements,
the Purchaser may, with respect to any of the capacity purchased thereunder, do
any of the following:
["OTHER COMPETITIVE TERMS OMITTED"]
9. Future Purchases. The Parties hereto agree that after the Purchaser
has provisioned and fully paid for all of the Purchased Capacity under the
Agreements, then with respect to any future capacity to be purchased from the
Grantor (the "Future Transaction"), the purchase of capacity purchased under the
Capacity Purchase Agreement (the "Original Capacity") shall be deemed a part of
the capacity to be purchased under the Future Transaction. To the extent the
average price per STM-1 paid for the Original Capacity exceeds the average price
per STM-1 owing under the Future Transaction, the Purchaser shall be entitled to
a credit equal to such difference, to be applied only against the STM-1
purchases made after the Original Capacity has been activated and paid for, such
credit to be applied evenly to each such additional STM-1, purchased pursuant to
the Future Transaction.
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 6
10. Redesignation and Amendment. The Parties hereto confirm the
amendment of the Capacity Purchase Agreement to redesignate ["CAPACITY TERMS
OMITTED"] of the STM-1s of Purchased Capacity under the Capacity Purchase
Agreement from Segment S-1 to Segment S-4, and that the UK Inland Agreement is
hereby amended to read the number of STM-1s to be purchased under the UK Inland
Agreement from ["CAPACITY TERMS OMITTED"] STM-1s to ["CAPACITY TERMS OMITTED"]
STM-1s.
11. Publicity and Confidentiality. In addition to the publicity and
confidentiality provisions contained in the Agreements and, notwithstanding
anything to the contrary contained in the Agreements, the Purchaser hereby
agrees not to disclose, in whole or in part, (a) the provisions of this
Addendum, (b) until such time as the Subsea Subject Payment, the UK Inland
Subject Payment and the US Inland Subject Payment have been paid in full, the
fact that the Grantor and the Subsidiary Grantors have activated an IRU in the
Subject Subsea Capacity, Subject UK Inland Capacity and/or the Subject US Inland
Capacity and (c) that the Parties have entered into this Addendum, in each case
to any person, other than (x) to its officers, directors, employees, agents or
representatives that need to know such information and (y) only with respect to
the fact that the Purchaser has an IRU in the Subject Subsea Capacity, Subject
UK Inland Capacity and Subject US Inland Capacity, to customers of the Purchaser
who the Purchaser has transferred rights to in respect of such capacity and (z)
as required by applicable law or regulation after providing opportunity to the
other party to consent, which consent shall not be unreasonably withheld or
delayed.
(a) This Addendum shall be deemed to be an amendment to, part of, and
subject to the other provisions contained in, each of the Agreements, and,
except as expressly modified hereby, the Agreements shall remain in full force
and effect without alteration or modification.
(b) If the terms of this Addendum otherwise provide for a rate of
interest in excess of that permitted under applicable law, the interest rate
payable by the Purchaser hereunder shall be reduced to the maximum rate per
annum permitted by applicable law.
12. Governing Law. This Addendum shall be governed by and construed in
accordance with the laws of the State of New York.
ATLANTIC CROSSING LTD.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
WORLDPORT COMMUNICATIONS, INC.
By:
-----------------------------------------
Name:
---------------------------------------
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 7
Title:
--------------------------------------
Address:
------------------------------------
------------------------------------
------------------------------------
SUBSIDIARY GRANTORS:
GT LANDING CORP.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
GT U.K. LTD.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
GLOBAL TELESYSTEMS GmbH
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
GT NETHERLANDS B.V.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE> 8
SCHEDULE 1-A
SUBSEA CAPACITY
INSTALLMENT PAYMENTS
["CAPACITY TERMS OMITTED"] ["ECONOMIC TERMS
OMITTED"]
["CAPACITY TERMS OMITTED"] ["ECONOMIC TERMS
OMITTED"]
["CAPACITY TERMS OMITTED"] ["ECONOMIC TERMS
OMITTED"]
Total Price ["ECONOMIC TERMS
OMITTED"]
<TABLE>
<CAPTION>
Payment Terms
Principal Interest Total
Date Payment Payment Payment
- ---- ------- ------- -------
<S> <C> <C> <C>
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
Initial Payment (April 7, 1998) OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC
Second Payment (December 1998) OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
Activation Payment (March 1999) OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 1999 OMITTED"]* TERMS OMITTED"] TERMS OMITTED"]*
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
March 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
March 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
</TABLE>
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
["ECONOMIC TERMS ["ECONOMIC TERMS ["ECONOMIC TERMS
March 2002 OMITTED"] OMITTED"] OMITTED"]
["ECONOMIC ["ECONOMIC ["ECONOMIC
Total TERMS OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
</TABLE>
* Principal payments to commence upon the earlier of (i) Purchaser having
received aggregate proceeds from debt or equity issuances (other than vendor
financing) of at least ["ECONOMIC TERMS OMITTED"]or (ii) ["ECONOMIC TERMS
OMITTED"].
Each of the payments listed above is made for the account of Atlantic Crossing
Ltd., GT Landing Corp., GT U.K. Ltd., Global Telesystems GmbH, and GT
Netherlands B.V. in accordance with the following percentages:
Atlantic Crossing Ltd. 83.17%
GT Landing Corp. 5.12%
GT U.K. Ltd. 4.56%
Global Telesystems GmbH 4.6%
GT Netherlands B.V. 2.6%
Worldport Communications, Inc.
By:
---------------------------------------
Name:
-------------------------------------
Date:
-------------------------------------
Each principal payment shall be allocated ["CAPACITY TERMS OMITTED"]. In
addition, interest shall be separately payable on each Payment Date above in
accordance with paragraph 2(c) of the Addendum.
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 10
SCHEDULE 1-B
INLAND CAPACITY
UK BACKHAUL
INSTALLMENT PAYMENTS
["CAPACITY TERMS OMITTED"] ["ECONOMIC TERMS
OMITTED"]
<TABLE>
<CAPTION>
Payment Terms
Principal Interest Total
Date Payment Payment Payment
- ---- ------- ------- -------
<S> <C> <C> <C>
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
Initial Payment (April 7, 1998) OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
Activation Payment (March 1999) OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]*
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
March 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
March 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC TERMS ["ECONOMIC TERMS
March 2002 OMITTED"] OMITTED"] OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
Total OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
</TABLE>
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 11
* Principal payments to commence upon the earlier of (i) Purchaser having
received aggregate proceeds from debt or equity issuances (other than vendor
financing) of at least ["ECONOMIC TERMS OMITTED"] or (ii) ["ECONOMIC TERMS
OMITTED"].
Worldport Communications, Inc.
By:
-----------------------------------------
Name:
---------------------------------------
Date:
---------------------------------------
In addition, interest shall be separately payable on each Payment Date above in
accordance with the terms of paragraph 3(c) of the Addendum.
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 12
SCHEDULE 1-C
INLAND CAPACITY
US BACKHAUL
INSTALLMENT PAYMENTS
["CAPACITY TERMS OMITTED"] ["ECONOMIC TERMS
OMITTED"]
["CAPACITY TERMS OMITTED"] ["ECONOMIC TERMS
OMITTED"]
["CAPACITY TERMS OMITTED"] ["ECONOMIC TERMS
OMITTED"]
Total Price ["ECONOMIC TERMS
OMITTED"]
<TABLE>
<CAPTION>
Payment Terms
Principal Interest Total
Date Payment Payment Payment
- ---- ------- ------- -------
<S> <C> <C> <C>
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
Initial Payment (April 7, 1998) OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
Activation Payment (March 1999) OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]*
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 1999 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
March 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 2000 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
March 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
June 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
September 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
December 2001 OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
</TABLE>
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 13
<TABLE>
<S> <C> <C> <C>
["ECONOMIC TERMS ["ECONOMIC TERMS ["ECONOMIC TERMS
March 2002 OMITTED"] OMITTED"] OMITTED"]
["ECONOMIC TERMS ["ECONOMIC ["ECONOMIC
Total OMITTED"] TERMS OMITTED"] TERMS OMITTED"]
</TABLE>
* Principal payments to commence upon the earlier of (i) Purchaser having
received aggregate proceeds from debt or equity issuances (other than vendor
financing) of at least ["ECONOMIC TERMS OMITTED"] or (ii) ["ECONOMIC TERMS
OMITTED"].
Worldport Communications, Inc.
By:
----------------------------------------------
Name:
--------------------------------------------
Date:
--------------------------------------------
Each principal payment shall be allocated ["CAPACITY TERMS OMITTED"]. In
addition, interest shall be separately payable on each Payment Date above in
accordance with the terms of paragraph 4(c) of the Addendum.
"INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST"
<PAGE> 1
EXHIBIT 10.10(a)
CONSENT AND AMENDMENT
CONSENT AND AMENDMENT, dated as of October 19, 1998 (this
"Agreement"), by and among WORLDPORT INTERNATIONAL, INC., a Delaware
corporation (the "Company"), WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (the "Parent"), the Lenders (as defined in the Credit Agreement)
which are a party hereto (including Bankers Trust Corporation, in its
individual capacity) and BANKERS TRUST COMPANY, as Administrative Agent (in
such capacity, the "Agent") and Collateral Agent (in such capacity, the
"Collateral Agent") and as joint creditor with the other Lenders under the
Credit Agreement, each as defined below.
W I T N E S S E T H:
WHEREAS, the Company and the Parent are parties to a Credit Agreement
dated as of June 23, 1998 (as in effect, the "Credit Agreement") with the
Lenders, the Agent and the Collateral Agent;
WHEREAS, the Parent and the Existing Dutch Holding Company (as defined
below) are parties to the Minority Shareholder Agreement (as defined in the
Credit Agreement), pursuant to which the Minority Shareholders originally
agreed, subject to the terms and provisions set forth therein, to purchase 20%
of the equity of WorldPort Communications (Europe), B.V., a Netherlands
corporation (the "Existing Dutch Holding Company");
WHEREAS, the Existing Dutch Holding Company currently owns all of the
issued and outstanding shares (the "Enertel Shares") of EnerTel, N.V., a
Netherlands corporation ("Enertel");
WHEREAS, one of the Minority Shareholders has requested, and has been
granted, a release from its obligation to consummate its purchase of 5% of the
equity of the Existing Dutch Holding Company;
WHEREAS, the Minority Shareholders desire that the Minority
Shareholder Investment (as defined below) be made in a newly formed holding
company to be organized in the Netherlands ("Newco") which, at the time of the
Minority Shareholder Investment, shall own the
<PAGE> 2
Enertel Shares and an intercompany note owed by Enertel to it (the "Enertel
Note") and certain contract rights related to the ownership of the Enertel
Shares and, as its sole liabilities two intercompany notes (the "Holding
Company Notes") owed to the Company and obligations under the Finance
Documents;
WHEREAS, the remaining Minority Shareholders, the Company, Newco and
Enertel desire to execute and deliver the "Shareholders Agreement" (the
"Shareholders Agreement") referred to in the Minority Shareholder Agreement,
the execution and delivery of which is a condition to the purchase by such
other Minority Shareholders of 15% of the equity of Newco (the purchase of such
15%, the "Minority Shareholder Investment");
WHEREAS, in order to facilitate the Minority Shareholder Investment,
the Parent and the Company have requested the Administrative Agent and Lenders
to consent to (i) the formation of Newco, (ii) the transfer of the Enertel
Shares and Enertel Note to Newco, (iii) an assumption by Newco of the Holding
Company Notes owed to the Company, (iv) the execution and delivery by Newco
and/or the Company, as applicable, of the documents pledging the Enertel
Shares, the Enertel Note and the Holding Company Notes to the Collateral Agent
(the transactions referred to in subclauses (i) through (iv), the "Enertel
Transfer Transaction"), (v) the making of the Minority Shareholders Investment
into Newco rather than the Existing Dutch Holding Company (the "Newco
Investment") and (vi) a portion of the proceeds of the Minority Investment
being distributed to the Parent, subject to the terms and provisions set forth
herein;
WHEREAS, the transfer of title of the Newco Shares to the Minority
Shareholders pursuant to the Minority Shareholder Investment is, as set forth
in the Shareholders Agreement and Minority Shareholder Agreement, subject to
certain Dutch regulatory requirements (the "Required Regulatory Approvals");
WHEREAS, pending the receipt of the Required Regulatory Approvals, the
funds to be paid by the Minority Shareholders for the Minority Shareholder
Investment are to be paid, simultaneously with the execution and delivery of
the Shareholders Agreement, pursuant to the escrow arrangement set forth in the
Payment and Transfer Agreement by and between the Company, the Minority
Shareholders party thereto and the other parties thereto, in the form attached
as Exhibit 1 hereto (the "Escrow Agreement"), which funds are to be released to
Newco and the Company upon receipt of Required Regulatory Approval pursuant to
the terms and conditions set forth in the Escrow Agreement;
- 2 -
<PAGE> 3
WHEREAS, the Parent and the Company have requested that the
Administrative Agent and Lenders, in accordance with the terms of the Credit
Agreement, consent to the Enertel Transfer Transaction and the Newco
Investment, subject to the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement.
2. Consent. Subject to Section 3 of this Agreement:
A. The Administrative Agent and the Lenders hereby
grant their consent to the Enertel Transfer Transaction subject to the terms
and conditions hereof.
B. The Administrative Agent and the Lenders hereby
grant their consent to the Company's and Newco's execution of the Shareholders
Agreement in the form attached hereto as Exhibit 2 (the "Shareholder
Agreement") and to the Newco Investment (in accordance with the terms and
provisions of the Minority Shareholder Agreement and Shareholder Agreement).
C. The Administrative Agent and the Lenders grant their
consent to the execution by the Newco of the Loan Agreement with the Minority
Shareholders in the form attached hereto as Exhibit 3 (the "Minority
Shareholder Loan Agreement").
3. Conditions Precedent. The foregoing consents under Sections
3(A), 3(B) and 3(C) of this Agreement are subject to satisfaction of the
following conditions precedent:
A. Execution and delivery by the Existing Dutch Holding
Company, the Company and Newco of appropriate Transfers of Contract (the
"Transfers of Contract"), in each case in form and substance satisfactory to
the Administrative Agent and Collateral Agent in order to consummate the
Enertel Transfer Transaction and cause, among other things, the Enertel Shares,
the Holding Company Notes and the Enertel Note to be pledged to the Collateral
Agent for the benefit of the Lenders;
- 3 -
<PAGE> 4
B. Execution and delivery by (i) the Company of a
Pledge Agreement (the "New Dutch Pledge Agreement"), in form and substance
satisfactory to the Administrative Agent and Collateral Agent, pledging all of
the shares of Newco to the Collateral Agent, (ii) the Company of a Pledge of
Loan Receivables Agreement, in form and substance satisfactory to the
Administrative Agent and Collateral Agent (the "New Company Pledge of Loan
Receivables Agreement") and (iii) Newco of a Pledge of Loan Receivables
Agreement, in form and substance satisfactory to the Administrative Agent and
Collateral Agent (together with the New Company Pledge of Loan Receivables
Agreement, collectively the "New Pledge of Receivables Agreements"; the New
Dutch Pledge Agreement and the New Pledge of Receivables Agreements, together
with the documents described in (A) above, collectively, the "New Finance
Documents");
C. An opinion of DeBrauw Blackstone Westbroek, Dutch
counsel to the Company and Newco and McDermott, Will & Emery, special counsel
to the Company in each case covering such matters as may be requested and
otherwise in form and substance satisfactory to the Administrative Agent and
Collateral Agent.
D. Evidence satisfactory to the Collateral Agent that
the Holding Company Notes of the Existing Dutch Holding Company shall have been
assumed (pursuant to the Transfer of Contract in form and substance
satisfactory to the Administrative Agent) by Newco, which note shall have been
pledged to the Collateral Agent under the New Finance Documents.
E. An executed amendment to the articles of association
of Newco (the "Newco Amendment") to permit the transfer of voting rights in its
shares, in form and substance satisfactory to the Administrative Agent, shall
have been filed with and approved by the Ministry of Justice in the Netherlands
and executed and shall be in full force and effect.
F. All corporate matters, including the articles and
other governance documents, resolutions approving the Enertel Transfer
Transaction, shareholders meetings (if any) shall be effective and be in form
and substance satisfactory to the Administrative Agent and the Administrative
Agent shall have received a copy of the articles of association of Newco, as
amended certified as of a recent date by the relevant Dutch civil notary (the
"Newco Articles").
G. The Administrative Agent shall be reasonably
satisfied that Newco and the Company have complied with, and will continue to
comply with, all Requirements of Law in connection with their respective
execution, delivery and performance of the New Finance
- 4 -
<PAGE> 5
Documents and the transactions contemplated thereby and the consummation of the
Enertel Transfer Transaction.
H. As of the date of the Enertel Transfer Transaction
and Newco Investment, (x) no action, suit, litigation, proceeding,
investigation, inquiry or dispute by or before any court, Governmental
Authority or any arbitrator shall be pending against or affecting (i) Newco or
the Enertel Transfer Transaction or the Minority Shareholder Investment or
threatened against or affecting, Newco, the Enertel Transfer Transaction or the
Minority Shareholder Investment which could reasonably be expected to have a
Material Adverse Effect (other than Required Regulatory Approvals relating to
the Minority Shareholders Investment) or (ii) the New Finance Documents or any
of the transactions contemplated thereby and (y) there shall not have been any
Requirement of Law (other than Required Regulatory Approvals relating to the
Minority Shareholders Investment) or injunction applicable to the Enertel
Transfer Transaction or the New Finance Documents or any of the transactions
contemplated thereby which have been enacted, promulgated, entered or enforced
by any Governmental Authority, nor shall there be pending any action or
proceeding before any such Governmental Authority which is reasonably likely
to, in each case, prohibit, restrict, delay or otherwise materially affect the
Enertel Transfer Transaction or the Minority Shareholder Investment.
I. The Administrative Agent shall have received
certified copies of the Shareholders Agreement, with all Exhibits and
attachments thereto, all of which are in form and substance satisfactory to the
Administrative Agent.
J. The Administrative Agent shall have received
evidence that all consents and filings necessary for any of the transactions
contemplated by the New Finance Documents and their validity and/or
enforceability have been obtained or made and are in full force and effect.
K. The Administrative Agent shall have received all
shares of stock in the Company's shareholding in the collateral pledged under
the New Finance Documents and stock transfer forms in respect of the same
executed in blank on behalf of such Person, as the case may be (except for the
number and class of shares and the name of the transferor) and left undated.
L. The representations and warranties of the Company
and the Parent set forth in paragraph 5 of this Agreement and those contained
in the New Finance Documents shall
- 5 -
<PAGE> 6
be true and correct on such date both before and after giving effect to the
consummation of the Enertel Transfer Transaction.
M. All necessary governmental (domestic and foreign),
regulatory and third party approvals and/or consents in connection with the
Enertel Transfer Transaction and the other transactions contemplated by this
Agreement and the New Finance Documents and otherwise referred to herein or
therein shall have been obtained and remain in effect, and all applicable
waiting periods shall have expired without any action being taken by any
competent authority which restrains or prevents such transactions or imposes,
in the reasonable judgment of the Administrative Agent, materially adverse
conditions upon the consummation of such transactions. Any applicable law
regulating the Enertel Transfer Transaction shall have been complied with or
shall have been reasonably determined by the Administrative Agent to be invalid
or inapplicable to the Enertel Transfer Transaction.
N. Concurrently with the effectiveness of this
Agreement, the Minority Shareholders shall have entered into the Shareholders
Agreement and shall have funded the proceeds of the purchase price and the
loans contemplated by the Escrow Agreement in respect of the Minority
Shareholder Investment to the Notary referred to in the Escrow Agreement to be
held in escrow pursuant to the Escrow Agreement.
O. The Minority Shareholders, the Company and the New
Dutch Holding Company shall have executed and delivered to the Agent the Letter
Agreement in the form attached as Exhibit 4 hereto.
4. Amendments. Effective on the Effective Date (as
herein defined):
A. The parties hereto agree that,
simultaneously with the consummation of the Enertel Transfer
Transaction, all references in the Credit Agreement (including those
incorporated therein pursuant to this Agreement) to the Dutch Holding
Company shall mean and refer to Newco, and all references to the Dutch
Pledge Agreement and the Pledge of Receivables Agreements shall
include (but not be limited to) the New Dutch Pledge Agreements and
the New Pledge of Receivables Agreements, respectively, and all
references to Finance Documents shall include the New Finance
Documents and Transfer of Contracts.
- 6 -
<PAGE> 7
B. The following definitions are
added to Section 1.01 of the Credit Agreement in their appropriate
alphabetical order:
"Consent and Amendment" means that Consent and
Amendment to this Agreement, dated as of October 19, 1998,
among the Company, the Parent, the Lenders party thereto, the
Administrative Agent and the Collateral Agent.
"Escrow Agreement" shall mean the Payment and
Transfer Agreement dated October 20, 1998, among the Company,
the Minority Shareholders party thereto and the other parties
thereto, in the form attached as Exhibit 1 to the Consent and
Amendment.
"Escrowed Proceeds" shall mean the aggregate
proceeds representing the purchase price for the purchase of
at least 15% of the equity of the Dutch Holding Company and
the Minority Shareholders Loans in an aggregate amount of
27,920,000 Dutch Guilders, in each case which have been
deposited with the Notary referred to in the Escrow
Agreement.
"Minority Shareholder Investment" shall mean the
purchase by the Minority Shareholders of equity in the Dutch
Holding Company on terms and provisions set forth in the
Minority Shareholder Agreement and Shareholders Agreement
(except that only an amount equal to 15% of the equity of the
Dutch Holding Company is to be so purchased).
"Minority Shareholder Loans" shall mean the loans
made to the Dutch Holding Company by the Minority
Shareholders in accordance with the provisions of the
Shareholder Agreement, Minority Shareholder Agreement and
Shareholder Loan Agreement.
"Shareholder Agreement" means the Shareholders
Agreement attached as Exhibit 2 to the Consent and Amendment.
"Shareholder Loan Agreement" means the Loan
Agreement, dated October 20, 1998, by and between the
Company, the Dutch Holding Company and the Minority
Shareholders party thereto.
- 7 -
<PAGE> 8
"Substitute Minority Investment" shall have the
meaning specified in Section 5.16(c).
C. Section 5 of the Credit Agreement
is amended by adding new Sections 5.15 and 5.16 after Section 5.14,
which new Sections shall read as follows:
Section 5.15 Additional Reporting Requirements.
In addition to the requirements of Section 5.12, the Parent
and the Company will deliver to the Administrative Agent by
Monday of each week, (i) a cash report of the Parent and the
Company and each of its operating Subsidiaries (including,
without limitation, EnerTel), which report shall detail
actual receipts and disbursements of cash of the Parent, the
Borrower and each of its operating Subsidiaries (including,
without limitation, EnerTel) for the immediately prior week
and a budget and forecast for such members of the Group for
each of the next four (4) weeks, all prepared in detail
satisfactory to the Administrative Agent and (ii) a current
aging of payables of the Parent, the Company and each of its
operating subsidiaries (including, without limitation,
EnerTel), in detail reasonably satisfactory to the
Administrative Agent.
Section 5.16 Cash Infusions. (a) The Parent and
the Company covenant and agree that (i) no later than October
20, 1998, they shall have arranged for, and received (or
other members of the Group acceptable to the Administrative
Agent shall have received) the cash proceeds of a cash
infusion in an aggregate amount of not less than $500,000,
and (ii) no later than October 23, 1998, they shall have
arranged for, and received (or other members of the Group
acceptable to the Administrative Agent shall have received),
the cash proceeds of an amount, in addition to that received
pursuant to subclause (i) of this Section 5.16(a), of not
less than $700,000, in each case in form and, substance and
upon terms and conditions, and from Persons, reasonably
satisfactory to the Administrative Agreement.
(b) The Parent and the Company covenant and agree that
(i) no later than October 23, 1998, they shall have entered
into commitments from Persons reasonably acceptable to the
Administrative Agent to provide a cash infusion to the Group
in an aggregate amount which, when added with the amount of
proceeds received pursuant to Section 5.16(a), equal not less
than $4,500,000,
- 8 -
<PAGE> 9
provided that the form, substance, terms and provisions
thereof shall be reasonably satisfactory to the
Administrative Agent and (ii) no later than November 9, 1998,
they (or other members of the Group acceptable to the
Administrative Agent) shall have received the full amount of
the proceeds committed pursuant to the commitments referred
to in subclause (i) of this Section 5.16(b) in cash in
respect thereof, the form, substance, terms and provisions of
such infusion to be reasonably satisfactory to the
Administrative Agent.
(c) The Parent and the Company covenant and agree that,
no later than December 3, 1998, either (i) they shall have
received (or other members of the Group reasonably acceptable
to the Administrative Agent shall have received) an aggregate
amount which, when added to the amount of cash proceeds
received pursuant to Sections 5.16(a) and 5.16(b), shall
equal not less than $14,500,000, provided that, (A) in the
event such proceeds constitute loans, the form, substance,
terms and conditions of such loans shall be exactly the same
(including the provision of "drag-along" rights in favor of
the Administrative Agent and Collateral Agent as provided in
the Letter Agreement referred to in Section 3(O) of the
Consent and Amendment), as determined by the Administrative
Agent, as the terms of the Minority Shareholder Loans,
provided that such Person providing such proceeds shall be
reasonably acceptable to the Administrative Agent and the
Minority Shareholders shall have released the Company, the
Dutch Holding Company and Enertel from all obligations under
the Minority Shareholder Agreement, the Shareholder Agreement
and all other documents and agreements relating to the
Minority Shareholder Investment (and the Administrative Agent
and Collateral Agent shall thereafter have no obligations to
the Minority Shareholders), with the effect that none of the
Minority Shareholders will be entitled to purchase any equity
in the Dutch Holding Company or Enertel (such transaction
referred to in this subclause (i)(A), the "Substitute
Minority Investment"), or (B) if such proceeds constitute
proceeds of equity issuances, the form, substance, terms and
conditions of which shall be reasonably satisfactory to the
Administrative Agent or (ii) the Dutch Holding Company and
the Company shall have received the aggregate amount of all
of the Escrowed Proceeds, which proceeds shall have been
contributed simultaneously with the receipt thereof in
accordance with the provisions of Section 6.22.
- 9 -
<PAGE> 10
(d) The Parent and Company covenant and agree that, no
later than December 19, 1998 (i) they will have received cash
proceeds from issuances of equity by the Parent to Persons
reasonably acceptable to the Administrative Agent in an
aggregate amount which, when added to the amount of proceeds
received pursuant to Sections 5.16(a), 5.16(b) and 5.16(c)(i)
(but in any event excluding any amount of Escrowed Proceeds
and any amount constituting the proceeds of the Substitute
Minority Investment), equals an amount not less than
$40,000,000, the form, substance, terms and conditions of
which issuances shall be reasonably satisfactory to the
Administrative Agent, (ii) they will have received an amount
of capital from Persons reasonably acceptable to the
Administrative Agent, in addition to that required by
subclause (i) of this Section 5.16(d) (but in any event
excluding any amount of Escrowed Proceeds and any amount
constituting the proceeds of the Substitute Minority
Investment), in an amount not less than $20,000,000, the
form, substance, terms and conditions of which shall be
reasonably satisfactory to the Administrative Agent, and
(iii) either (A) the aggregate amount of all of the Escrowed
Proceeds shall have been received by the Dutch Holding
Company and the Company (which proceeds shall have been
contributed simultaneously with the receipt thereof in
accordance with the provisions of Section 6.22) or the
aggregate amount of the proceeds of the Substitute Minority
Investment shall have been made (which proceeds shall have
been contributed simultaneously with the receipt thereof in
accordance with Section 6.22), or (B) they will have received
additional cash proceeds from issuances of equity by the
Parent, to Persons reasonably acceptable to the
Administrative Agent, in addition to the amounts required by
Sections 5.16(d)(i) and 5.16(d)(ii) in an amount not less
than $14,500,000, the form, substance, terms and conditions
of which shall be reasonably satisfactory to the
Administrative Agent.
D. Section 6.21(b) of the Credit
Agreement is amended by adding the phrase "the Escrow Agreement, the
Shareholder Loan Agreement, the Shareholders Agreement" after the
phrase "Finance Document" appearing therein.
E. The Credit Agreement is amended by
adding a new Section 6.22 and 6.23 thereto immediately following
Section 6.21, which new sections shall read as follows:
- 10 -
<PAGE> 11
Section 6.22. Proceeds of Minority Shareholders
Investment:
Notwithstanding anything to the contrary set forth
in the Credit Agreement or any other Finance Document, (i)
the Company agrees that it shall contribute the proceeds
received or which it is entitled to in respect of the
Minority Shareholder Investment (including the Escrowed
Proceeds) promptly upon release of the Escrowed Proceeds to
the Dutch Holding Company, and cause the Dutch Holding
Company to promptly contribute such proceeds to Enertel, and
shall cause the Dutch Holding Company to promptly contribute
the proceeds which the Dutch Holding Company receives or is
entitled to receive in respect of the Minority Shareholder
Loans, or the proceeds of the Substitute Minority Investment,
as the case may be, to EnerTel and (ii) the Parent and the
Company agree that they will not, and will ensure that none
of their Subsidiaries will, distribute or disburse (whether
by dividend, advance, loan, contribution or otherwise) any of
the proceeds received in respect of the Minority Shareholder
Investment (including the Minority Shareholder Loans) or the
proceeds of the Substitute Minority Investment to the Parent
or any of its Subsidiaries, provided that (A) the Company and
the Dutch Holding Company may make the distributions
contemplated by subclause (i) of this Section 6.22, (B) the
proceeds of the Minority Shareholder Loans and the proceeds
of the Substitute Minority Investment, as the case may be,
may be distributed to Enertel and (C) provided no Default or
Event of Default has occurred and is continuing or would
result therefrom, an aggregate amount not in excess of 35% of
the amounts received pursuant to Section 5.16(c) may be
distributed to the Parent. Notwithstanding the foregoing, the
proceeds received from the infusions pursuant to Sections
5.16(a) and 5.16(b) may be retained by the Parent or
distributed to the Parent.
Section 6.23. Escrowed Proceeds. In addition to
the terms and provisions of Section 6.5, the Parent and
Company will not, and will not permit any of their
Subsidiaries to create, incur, assume or suffer to exist any
Lien upon or with respect to the Escrowed Proceeds, the
account in which such Escrowed Proceeds are held or otherwise
on any of their rights to the Escrowed Proceeds.
- 11 -
<PAGE> 12
F. Section 7.1(b) of the Credit
Agreement is amended by deleting the phrase "2.15, 5.13(a), 5.15 or
Article VI" therefrom and substituting the phrase "2.15, 5.12(a),
5.14, 5.15, 5.16 or Article VI" therefor.
G. Section 7.1 of the Credit Agreement
is hereby amended by adding new Sections 7.1(p), 7.1(q) and 7.1(r)
immediately following Section 7.1(o) which shall read as follows:
"(p) Release of Escrowed Proceeds; Regulatory
Approval Requirements.
(i) If any Required Governmental Approval (as defined in
the Consent and Amendment) by the Dutch Government required
for the consummation of the Minority Shareholder Investment
for a purchase of equity in the Dutch Holding Company
contemplated by the Shareholders Agreement is denied by the
applicable Dutch Governmental Authority or if the applicable
Dutch Governmental Authority indicates its intention to deny
such Governmental Approval; or
(ii) If all applications and filings necessary for the
approval of the applicable Dutch Governmental Authorities
required under Dutch law for the purchase by the Minority
Shareholders of 15% of the equity in the Dutch Holding
Company as contemplated by the Shareholders Agreement are not
made by October 23, 1998; or
(iii) If all Governmental Approvals by the Dutch
Government required for the consummation of the Minority
Shareholder Investment are not received by, and applicable
licenses (if any) in connection with such purchase are not
obtained by, in each case, December 19, 1998.
7.1(q) Action on Minority Shareholder Pledge. If
for any reason any of the Minority Shareholders exercises any
of their respective rights or remedies in respect of any of
the shares of
- 12 -
<PAGE> 13
EnerTel which have been pledged to the Minority Shareholders
in connection with the Shareholder Loans.
7.1(r) Minority Shareholder Investment. If for any
reason the Minority Shareholder Investment is rescinded.
5. The Company and the Parent hereby represent and
warrant that (i) that neither the Company, the Parent nor any of their
Subsidiaries have created, incurred, assumed or have suffered to exist any Lien
upon or with respect to the Escrowed Proceeds, the account in which such
Escrowed Proceeds are held or otherwise on any of their rights to the Escrowed
Proceeds and (ii) the representations and warranties set forth in Sections
4.1(a), (b), (c), (d), (e), (f), (r), (x) and (aa) of the Credit Agreement
(after giving effect to the provisions hereof) shall be true and correct in all
material respects as of the date of the Enertel Transfer Transaction and Newco
Investment as if made on such date .
6. Applicable Law; Submission to Jurisdiction. THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
7. No Novation. This Agreement shall not extinguish the
obligations for the payment of money outstanding under the Credit Agreement or
any Note or discharge or release the Lien or priority of any security
agreement, any pledge agreement or any other security therefor or discharge any
obligation under any guaranty. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Credit
Agreement or instruments securing the same, which shall remain in full force
and effect, except as modified hereby or by instruments executed concurrently
herewith. Nothing expressed or implied in this Agreement, the Credit Agreement,
or any other document contemplated hereby or thereby shall be construed as a
release or other discharge of the Company, the Parent or any Guarantor under
the Credit Agreement or any Pledgor or Grantor under any Security Document from
any of its obligations and liabilities as a "Company", "Parent", "Guarantor",
"Pledgor" or "Grantor" under the Credit Agreement or the Security Documents or
any other Finance Document. Whenever the term "Credit Agreement" is used in any
of the Finance Documents it shall mean and refer to the Credit Agreement as
modified pursuant hereto. Each of the Credit Agreement and the other Finance
Documents shall remain in full force and effect, except as expressly modified
hereby.
- 13 -
<PAGE> 14
8. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract.
9. Headings. The headings of this Agreement are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
10. Effectiveness. This Agreement shall become effective
as of the date (the "Effective Date") when copies hereof which, when taken
together, bear the signatures of each of the Company, the Parent, the
Administrative Agent, the Collateral Agent, the Majority Lenders and the other
Loan Parties which are a party hereto have been received by the Administrative
Agent.
11. Payment of Expenses. In furtherance of the
provisions of Section 9.1 of the Credit Agreement, the Parent and Company shall
jointly and severally, whether or not the transactions hereby contemplated are
consummated, upon demand of the Administrative Agent pay all reasonable
out-of-pocket costs (including legal fees), charges and expenses of the
Administrative Agent and Collateral Agent in connection with the negotiation,
preparation, execution and delivery of this Agreement (including, without
limitation, all such out-of-pocket costs (including legal fees), charges and
expenses in connection with matters relating to the Minority Shareholder
Investment, the EnerTel Transaction and the formation of Newco) and the
documents and instruments referred to herein, and otherwise reviewed in
connection herewith and therewith.
- 14 -
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
WORLDPORT INTERNATIONAL, INC.
by
------------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS, INC.
by
------------------------------------------
Name:
Title:
<PAGE> 16
BANKERS TRUST COMPANY
as Administrative Agent and Collateral Agent
by
------------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION
as Lender
by
------------------------------------------
Name:
Title:
<PAGE> 17
DREYFUS PREMIER LIMITED TERM HIGH
INCOME FUND
by
------------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.10(b)
CONSENT AND AMENDMENT NO. 2
CONSENT AND AMENDMENT NO. 2, dated as of October 21, 1998 (this
"Agreement"), by and among WORLDPORT INTERNATIONAL, INC., a Delaware
corporation (the "Company"), WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (the "Parent"), the Lenders (as defined in the Credit Agreement)
which are a party hereto (including Bankers Trust Corporation, in its
individual capacity) and BANKERS TRUST COMPANY, as Administrative Agent (in
such capacity, the "Agent") and Collateral Agent (in such capacity, the
"Collateral Agent") and as joint creditor with the other Lenders under the
Credit Agreement, each as defined below.
W I T N E S S E T H:
WHEREAS, the Company and the Parent are parties to a Credit Agreement
dated as of June 23, 1998 (as in effect, the "Credit Agreement") with the
Lenders, the Agent and the Collateral Agent;
WHEREAS, the Parent and the Company have requested that the Agent and
the Lenders consent to the incurrence by the Company of a loan from Bankers
Trust Corporation in an aggregate principal amount of $1,000,000, which loan
shall (i) be guaranteed by each member of the Group, (ii) be secured by a Lien
granted by each member of the Group in the Collateral, (iii) rank senior to the
Obligations under the Credit Agreement and (iv) be governed by the letter
agreement, note and other documents set forth in Exhibit A (the "Additional
Loan");
WHEREAS, the Parent and the Company have requested that the Agent and
the Lenders, in accordance with the terms of the Credit Agreement, consent to
the incurrence by the Company of the Additional Loan, the guarantee thereof by
the Group and the Lien securing the Additional Loan, subject to the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement.
<PAGE> 2
2. Consent and Waiver. (a) The Agent and the Lenders hereby
grant their consent to the incurrence of the Additional Loan to be provided by
Bankers Trust Corporation, to the guarantee thereof by the Group and to the
granting of a Lien in the Collateral by the Group to secure the Obligations in
respect of the Additional Loan, which Lien shall rank senior to the lien
securing the Obligations..
(b) The Agent and the Lenders hereby waive the
provisions of Section 5.16(a) and 5.16(b)(i) of the Credit Agreement, provided
that such waiver of Section 5.16(b)(i) shall not constitute or be deemed a
waiver of Section 5.16(b)(ii), which Section 5.16(b)(ii) shall remain in full
force and effect as if no waiver of Section 5.16(b)(i) was made.
3. Amendments. Effective on the Effective Date (as herein
defined):
A. The following definitions are added to Section 1.01
of the Credit Agreement in their appropriate alphabetical order:
"Short-Term Note" means that certain promissory note of the
Borrower to Bankers Trust Corporation dated October 21, 1998,
in an aggregate principal amount of $1,000,000, maturing
October 28, 1998.
"Short-Term Note Letter Agreement" means the Letter Agreement
among Bankers Trust Company, Bankers Trust Corporation, the
Company, the Parent and the other Loan Parties which are a
party thereto.
B. The definition of "Finance Documents" set forth in
Section 1.1 of the Credit Agreement is amended by adding the phrase
"the Short-Term Note, the Short-Term Note Letter Agreement and the
other Documents (as defined in the Short-Term Note Letter Agreement)"
after the phrase "each Assignment and Assumption Agreement" appearing
therein.
4. The Company and the Parent hereby represent and warrant that
the representations and warranties set forth in Article IV of the Credit
Agreement and each other Finance Document shall be true and correct in all
material respects as of the date hereof as if made on such date.
5. Applicable Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
- 2 -
<PAGE> 3
6. No Novation. This Agreement shall not extinguish the
obligations for the payment of money outstanding under the Credit Agreement or
any Note or discharge or release the Lien or priority of any security
agreement, any pledge agreement or any other security therefor or discharge any
obligation under any guaranty. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Credit
Agreement or instruments securing the same, which shall remain in full force
and effect, except as modified hereby or by instruments executed concurrently
herewith. Nothing expressed or implied in this Agreement, the Credit Agreement,
or any other document contemplated hereby or thereby shall be construed as a
release or other discharge of the Company, the Parent or any Guarantor under
the Credit Agreement or any Pledgor or Grantor under any Security Document from
any of its obligations and liabilities as a "Company", "Parent", "Guarantor",
"Pledgor" or "Grantor" under the Credit Agreement or the Security Documents or
any other Finance Document. Whenever the term "Credit Agreement" is used in any
of the Finance Documents it shall mean and refer to the Credit Agreement as
modified pursuant hereto. Each of the Credit Agreement and the other Finance
Documents shall remain in full force and effect, except as expressly modified
hereby.
7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
8. Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
9. Effectiveness. This Agreement shall become effective as of
the date (the "Effective Date") when copies hereof which, when taken together,
bear the signatures of each of the Company, the Parent, the Agent, the
Collateral Agent, the Majority Lenders and the other Loan Parties which are a
party hereto have been received by the Agent.
10. Payment of Expenses. In furtherance of the provisions of
Section 9.1 of the Credit Agreement, the Parent and Company shall jointly and
severally, whether or not the transactions hereby contemplated are consummated,
upon demand of the Agent pay all reasonable out-of-pocket costs (including
legal fees), charges and expenses of the Agent and Collateral Agent in
connection with the negotiation, preparation, execution and delivery of this
Agreement (including, without limitation, all such out-of-pocket costs
(including legal fees),
- 3 -
<PAGE> 4
charges and expenses in connection with matters relating to the Demand Note and
Demand Letter Agreement) and the documents and instruments referred to herein,
and otherwise reviewed in connection herewith and therewith.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
WORLDPORT INTERNATIONAL, INC.
by
---------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS, INC.
by
---------------------------------------
Name:
Title:
<PAGE> 6
BANKERS TRUST COMPANY
as Agent and Collateral Agent
by
---------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION
as Lender
by
---------------------------------------
Name:
Title:
- 2 -
<PAGE> 7
DREYFUS PREMIER LIMITED TERM HIGH
INCOME FUND
by
---------------------------------------
Name:
Title:
- 3 -
<PAGE> 1
EXHIBIT 10.10(c)
CONSENT AND AMENDMENT NO. 3
CONSENT AND AMENDMENT NO. 3, dated as of October 30, 1998 (this
"Agreement"), by and among WORLDPORT INTERNATIONAL, INC., a Delaware
corporation (the "Company"), WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (the "Parent"), the Lenders (as defined in the Credit Agreement)
which are a party hereto (including Bankers Trust Corporation, in its
individual capacity) and BANKERS TRUST COMPANY, as Administrative Agent (in
such capacity, the "Agent") and Collateral Agent (in such capacity, the
"Collateral Agent") and as joint creditor with the other Lenders under the
Credit Agreement, each as defined below.
W I T N E S S E T H:
WHEREAS, the Company and the Parent are parties to a Credit Agreement
dated as of June 23, 1998 (as in effect, the "Credit Agreement") with the
Lenders, the Agent and the Collateral Agent;
WHEREAS, on October 21, 1998, said parties entered into a Consent and
Amendment No. 2 to the Credit Agreement wherein the Agent and the Lenders
consented to the incurrence by the Company of a secured loan from Bankers Trust
Corporation in an aggregate principal amount of $1,000,000 (the "Additional
Loan");
WHEREAS, the Parent and the Company have requested that the Agent and
the Lenders consent to the incurrence by the Company of a loan from Bankers
Trust Corporation in an aggregate principal amount of $2,500,000 (the "Second
Additional Loan"), which loan shall (i) be guaranteed by each member of the
Group, (ii) be secured by a Lien granted by each member of the Group in the
Collateral, (iii) rank senior to the Obligations under the Credit Agreement and
(iv) be governed by the letter agreement, note and other documents set forth in
Exhibit A;
WHEREAS, the proceeds of the Second Additional Loan will be used,
among other things, to repay in full the Additional Loan, together with all
accrued interest thereof;
WHEREAS, the Parent and the Company have requested that the Agent and
the Lenders, in accordance with the terms of the Credit Agreement, consent to
the incurrence by the Company
<PAGE> 2
of the Second Additional Loan, the guarantee thereof by the Group and the Lien
securing the Second Additional Loan, subject to the terms and conditions set
forth herein.
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement.
2. Consent. The Agent and the Lenders hereby grant their consent
to the incurrence of the Second Additional Loan to be provided by Bankers Trust
Corporation, to the guarantee thereof by the Group and to the granting of a
Lien in the Collateral by the Group to secure the Obligations in respect of the
Second Additional Loan, which Lien shall rank senior to the lien securing the
Obligations.
3. Amendments. Effective on the Effective Date (as herein
defined):
A. The following definitions are added to Section 1.01
of the Credit Agreement in their appropriate alphabetical order:
"Second Short-Term Note" means that certain promissory note
of the Borrower to Bankers Trust Corporation dated October
30, 1998, in an aggregate principal amount of $2,500,000,
maturing November 6, 1998.
"Second Short-Term Note Letter Agreement" means the Letter
Agreement dated October 30, 1998 among Bankers Trust Company,
Bankers Trust Corporation, the Company, the Parent, the other
Loan Parties and other parties which are a party thereto.
B. The definition of "Finance Documents" set forth in
Section 1.1 of the Credit Agreement is amended by adding the phrase
"the Second Short-Term Note, the Second Short-Term Note Letter
Agreement and the other Documents (as defined in the Second Short-Term
Note Letter Agreement)" after the phrase "each Assignment and
Assumption Agreement" appearing therein.
- 2 -
<PAGE> 3
C. Section 7.1(a) of the Credit Agreement is amended by
adding the word "or" at the end of subclause (ii) thereof and adding a
new subclause (iii) which shall read as follows:
(iii) An "Event of Default" shall have occurred under and
as defined in the Second Short-Term Note Letter Agreement.
4. The Company and the Parent hereby represent and warrant that
the representations and warranties set forth in Article IV of the Credit
Agreement and each other Finance Document shall be true and correct in all
material respects as of the date hereof as if made on such date.
5. Applicable Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
6. No Novation. This Agreement shall not extinguish the
obligations for the payment of money outstanding under the Credit Agreement or
any Note or discharge or release the Lien or priority of any security
agreement, any pledge agreement or any other security therefor or discharge any
obligation under any guaranty. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Credit
Agreement or instruments securing the same, which shall remain in full force
and effect, except as modified hereby or by instruments executed concurrently
herewith. Nothing expressed or implied in this Agreement, the Credit Agreement,
or any other document contemplated hereby or thereby shall be construed as a
release or other discharge of the Company, the Parent or any Guarantor under
the Credit Agreement or any Pledgor or Grantor under any Security Document from
any of its obligations and liabilities as a "Company", "Parent", "Guarantor",
"Pledgor" or "Grantor" under the Credit Agreement or the Security Documents or
any other Finance Document. Whenever the term "Credit Agreement" is used in any
of the Finance Documents it shall mean and refer to the Credit Agreement as
modified pursuant hereto. Each of the Credit Agreement and the other Finance
Documents shall remain in full force and effect, except as expressly modified
hereby.
7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
- 3 -
<PAGE> 4
8. Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
9. Effectiveness. This Agreement shall become effective as of
the date (the "Effective Date") when copies hereof which, when taken together,
bear the signatures of each of the Company, the Parent, the Agent, the
Collateral Agent, the Majority Lenders and the other Loan Parties which are a
party hereto have been received by the Agent.
10. Payment of Expenses. In furtherance of the provisions of
Section 9.1 of the Credit Agreement, the Parent and Company shall jointly and
severally, whether or not the transactions hereby contemplated are consummated,
upon demand of the Agent pay all reasonable out-of-pocket costs (including
legal fees), charges and expenses of the Agent and Collateral Agent in
connection with the negotiation, preparation, execution and delivery of this
Agreement (including, without limitation, all such out-of-pocket costs
(including legal fees), charges and expenses in connection with matters
relating to the Second Short-Term Note and Second Short-Term Note Letter
Agreement) and the documents and instruments referred to herein, and otherwise
reviewed in connection herewith and therewith.
- 4 -
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
WORLDPORT INTERNATIONAL, INC.
By:
----------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
Title:
<PAGE> 6
BANKERS TRUST COMPANY
as Agent and Collateral Agent
By:
-----------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION
as Lender
By:
-----------------------------------------
Name:
Title:
<PAGE> 7
DREYFUS PREMIER LIMITED TERM HIGH
INCOME FUND
By:
-----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.10(d)
CONSENT AND AMENDMENT NO. 4
CONSENT AND AMENDMENT NO. 4, dated as of November 9, 1998 (this
"Agreement"), by and among WORLDPORT INTERNATIONAL, INC., a Delaware
corporation (the "Company"), WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (the "Parent"), the other Loan Parties (as defined in the Credit
Agreement referred to below) the Lenders (as defined in the Credit Agreement)
which are a party hereto (including Bankers Trust Corporation, in its
individual capacity) and BANKERS TRUST COMPANY, as Administrative Agent (in
such capacity, the "Agent") and Collateral Agent (in such capacity, the
"Collateral Agent") and as joint creditor with the other Lenders under the
Credit Agreement, each as defined below.
W I T N E S S E T H:
WHEREAS, the Company and the Parent are parties to a Credit Agreement
dated as of June 23, 1998 (as in effect, the "Credit Agreement") with the
Lenders, the Agent and the Collateral Agent;
WHEREAS, Bankers Trust Corporation, a Lender under the Credit
Agreement, previously extended a loan to the Company in the aggregate principal
amount of $2,500,000 (the "October 30, 1998 Loan") pursuant to Consent and
Amendment No. 3 and the Second Short Term Note Letter Agreement (as defined in
the Credit Agreement), a portion of the proceeds of which were used to repay in
full a certain loan to the Company in the aggregate principal amount of
$1,000,000 made on October 21, 1998;
WHEREAS, the Parent and the Company have requested that the Lenders
agree to make additional term loans (the "Additional Loans") in an aggregate
principal amount of $4,500,000, which Additional Loans shall (i) be guaranteed
by each member of the Group to the extent permissible under applicable law,
(ii) be secured by a Lien granted by each member of the Group in the Collateral
and (iii) rank senior to the other Obligations under the Credit Agreement;
WHEREAS, proceeds of the Additional Loans will be used, among other
things, to repay in full the October 30, 1998 Loan;
- 1 -
<PAGE> 2
WHEREAS, the Parent and the Company have covenanted and agreed to
issue equity securities upon the terms and as provided in Section 5.16(d) of
the Credit Agreement (the "New Equity Securities");
WHEREAS, as a condition to the making of the Additional Loans and
Additional Senior Notes (as defined herein), the Agent and the Lenders have
required that the Parent and Company agree that the Lenders shall have the
right to convert the Additional Loans and the Additional Senior Note into New
Equity Securities, subject to the terms set forth herein;
WHEREAS, Bankers Trust Corporation will be the initial sole Lender of
the Additional Loans (the "Initial Lender");
WHEREAS, Dreyfus Premier Limited Term High Income Fund, the holder of
the Senior Note issued by the Company under the Credit Agreement (the "Note
Purchaser"), desires to purchase an amount equal to 10% of the Additional Loans
provided to the Company by the Initial Lender but the Note Purchaser cannot
purchase the Additional Loans in their current form;
WHEREAS, the Initial Lender desires to exchange a portion of its
Additional Loans to an Additional Senior Note (as defined in the Credit
Agreement as amended hereby);
WHEREAS, the Parent and the Company have requested that the Agent and
the Lenders, in accordance with the terms of the Credit Agreement provide the
Additional Loans, subject to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement.
2. Amendments. Effective on the Effective Date (as herein
defined):
A. The following definitions are added to Section 1.01
of the Credit Agreement in their appropriate alphabetical order:
"Additional Commitment" shall mean, with respect to any
Lender, such Lender's undertaking to make Additional Loans
hereunder subject to the terms and conditions hereof, in an
aggregate outstanding principal amount as of the Second
Closing Date not to exceed the amount set forth next to the
name of such Lender
- 2 -
<PAGE> 3
on Schedule 1 to Consent and Amendment No. 4 and, thereafter,
subject to reduction pursuant to the Credit Agreement. Upon
the assignment of any Lender's obligations under the terms of
the Credit Agreement the amount of such Lender's undertaking
shall be adjusted accordingly. The aggregate principal amount
of all Additional Commitments shall not exceed US$4,500,000.
"Additional EnerTel Guaranty shall mean the Guaranty by
EnerTel delivered pursuant to Section 4 of Consent and
Amendment No. 4
"Additional Loan" shall have the meaning set forth in Section
2.1.
"Additional Loan Commitment Termination Date" means November
20, 1998.
"Additional Note" means that certain promissory note of the
Borrower to Bankers Trust Corporation dated November 13,
1998, in an aggregate principal amount of $4,500,000,
maturing June 23, 1999, together with any replacement or
substitution therefor.
"Additional Senior Note" shall have the meaning set forth
therefor in Section 2.18.
"Consent and Amendment No. 4" means that certain Consent and
Amendment No. 4 dated as of November 9, 1998 among the
Company, the Parent, the other Loan Parties, the Lenders and
the Agent and Collateral Agent.
"New Equity" means any class of equity securities of the
Parent or any security or other instrument into which such
equity security may be exchanged or converted into, which
does not, and could not reasonably be expected to, adversely
affect creditor rights in favor of the Agent, Collateral
Agent or Lenders, or such other security which is on terms
reasonably satisfactory to the Agent, Collateral Agent and
Lenders. Capital raised on the terms detailed on the
"Proposed EnerTel Debt Investment" term sheet attached as
Schedule I to Consent and Amendment No. 4 shall qualify as
reasonably satisfactory to the Lenders.
"New Equity Securities" shall have the meaning set forth
therefor in Consent and Amendment No. 4.
"October 30, 1998 Loan" shall have the meaning set forth
therefor in Consent and Amendment No. 4.
"Original Loan" means the Term Loan made by the Lenders to
the Company on June 23, 1998.
"Original Note" means that certain note issued to evidence
the Original Loan.
- 3 -
<PAGE> 4
"Original Senior Note" means that certain Senior Note issued
to the Note Purchaser on July 10, 1998 pursuant to the Credit
Agreement.
"Registration Rights Agreement" shall mean a Registration
Rights Agreement substantially similar to Exhibit A attached
to Consent and Amendment No. 4 among the Parent, the Agent,
the Lenders and the Note Purchaser.
"Second Closing Date" means the date on which all of the
conditions set forth in Section 3.3 have been satisfied or
waived and on which proceeds of the initial Additional Loan
is made.
"Senior Notes" mean, collectively, the Original Senior Note
and Additional Senior Note.
B. The definition of "Finance Documents" set forth in
Section 1.1 of the Credit Agreement is amended by adding the phrase
"the Additional Note, the Additional Senior Note, the Additional
EnerTel Guaranty, the Letter Agreement delivered pursuant to Section
4(k) of Consent Amendment No. 4" after the phrase "each Assignment and
Assumption Agreement" appearing therein.
C. All references to "Loan" set forth in the Credit
Agreement shall be deemed to include the Additional Loan (including
amounts thereof evidenced by the Additional Senior Note). All
references to "Note" set forth in the Credit Agreement shall be deemed
to include the Additional Note.
D. The definition of Note Purchaser shall be amended by
replacing it with the following:
"Note Purchaser" shall mean the holder of the Senior Note
issued by the Company in accordance with Section 2.16 and the
Additional Senior Note issued by the Company in accordance with
Section 2.18, together with any other holder of the Senior Note and/or
Additional Senior Note.
E. Section 2.1 of the Credit Agreement is amended by
adding a new subsection (c) thereto which shall read as follows:
(c) (i) Subject to and upon the terms and conditions of
this Agreement, each Lender severally and not jointly agrees to make
additional term loans (each an "Additional Loan") to the Company from
the Second Closing Date to the Additional Loan Commitment Termination
Date in a sum not to exceed such Lender's Additional Commitment,
provided that the aggregate principal amount of the Additional Loans
shall not exceed $4,500,000 (plus interest capitalized with respect to
the Additional Loan after the Second Closing Date or such lower amount
as contemplated by this Agreement). Subject to the terms set forth in
this Agreement, an amount of Additional Loans equal to $3,500,000
shall be provided on the Second Closing Date and any other Additional
Loans shall be made in one additional borrowing in an aggregate
principal amount of
- 4 -
<PAGE> 5
$1,000,000, such additional borrowing of Additional Loans to be made
during the calendar week following the Second Closing Date.
(ii) The Additional Loans shall rank senior to the Term
Loan with respect to payments of interest and principal.
(iii) The Additional Loan Commitment (including any
unutilized portion) shall expire on the Additional Loan Commitment
Termination Date.
F. For purposes of Section 2.2 and 2.3, all references
to "Term Loans" shall be deemed to refer to Loans.
G. Section 2.5(a) is restated in its entirety as
follows:
(a) Voluntary. The Company may repay, in whole
or in part, the outstanding principal amount of the Loans at
any time and from time to time on the following terms and
conditions:
(i) the Company shall give the
Administrative Agent and the Note Purchaser prior to 12:00
Noon (New York time) at least one Business Days' prior
written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay the Loans and the amount of
such prepayment to be prepaid, which notice the
Administrative Agent shall promptly transmit to each of the
Lenders. If the Additional Note and Additional Senior Loan
have been repaid in full, together with accrued interest, the
Company may give the Administrative Agent and the Note
Purchaser prior to 12:00 Noon (New York time) at least one
Business Days' prior written notice (or telephonic notice
promptly confirmed in writing) of its intent to prepay the
Term Loan and Original Senior Note and the amount of such
prepayment to be prepaid, which notice the Administrative
Agent shall promptly transmit to each of the Lenders
(ii) any prepayment shall be made first
of the Additional Loan and Additional Senior Note and shall
be made on a pro rata basis among the Additional Loan and the
Additional Senior Note, and with respect to the Additional
Loan, shall be applied pro rata among the Lenders that made
such Additional Loan; after repayment in full of the
Additional Loan, any prepayment shall be made on a pro rata
basis between the Term Loan and the Original Senior Note, and
with respect to each prepayment of the Term Loan, shall be
applied pro rata among the Lenders that made such Term Loan;
(iii) all notice of voluntary
prepayments, once given to the Administrative Agent and Note
Purchaser, shall be irrevocable; and
(iv) once prepaid, any Loan (and the
amount so repaid under any Note and Senior Note) may not be
reborrowed.
- 5 -
<PAGE> 6
H. Section 2.5(b) is restated in its entirety as follows:
(b) Mandatory Repayments of Additional Loan, Term Loan
and Senior Notes. All Loans shall mature on the Maturity Date and
shall be repaid in full by the Company on such date, without premium
or penalty or further action on the part of any Lender, Note
Purchaser, the Administrative Agent or the Collateral Agent. Once
repaid the Loans (and the amount so repaid under the Notes and Senior
Notes) may not be reborrowed."
I. Section 2.7(a) is amended and restated as follows:
(a) Term Loans and Additional Loans. The Company shall
pay interest on the unpaid principal amount of the Term Loan and
Additional Loans from the date on the which the Term Loan or each
Additional Loan is made until such Term Loan or Additional Loan has
been repaid in full, payable in arrears on each Quarterly Payment
Date, upon each prepayment (on the amount prepaid), at the time of
each principal repayment (on the amount so repaid), at maturity and
after maturity on demand, in all cases at a per annum rate equal to
the LIBO Rate plus the Applicable Margin, which per annum rate shall
change simultaneously with each change in the LIBO Rate or as
otherwise required by this Section 2.7.
J. Section 2.8(a)(i) is amended and restated as
follows:
(a)(i) Prepayments from Asset Sales. Upon receipt by the
Parent, the Company or any of their Subsidiaries of Cash Proceeds of
any Asset Sale occurring after the Closing Date, the Company shall
prepay (A) first, the Additional Loan (including any amounts
outstanding under the Additional Senior Note) (together with accrued
interest) and (B) second, the Term Loan (including any amounts
outstanding under the Senior Note), with the Net Cash Proceeds
received from such Asset Sale, in the case of Asset Sales pursuant to
clause (a) of the definition thereof, concurrently with the
consummation of such Asset Sale, and with respect to all other Asset
Sales, on a date not later than the Business Day next succeeding the
earlier of (1) the 30th day after consummation of such Asset Sale
unless prior to such date, the Parent, the Company or any such
Subsidiary has entered into a firm order or commitment for the
purchase of an asset or assets which shall be used in the Business and
(2) the 90th day after the consummation of such Asset Sale if and to
the extent that such Net Cash Proceeds are not applied by the Parent,
the Company or any of their Subsidiaries to the replacement of such
asset or assets with an asset or assets useful in the Business. In
each case, such new asset shall be subject to the Security Interest of
the Security Documents to the same extent as the asset subject to such
Asset Sale or otherwise owned by a Loan Party or other member of the
Group whose stock is pledged by a member of the Group pursuant to a
Pledge Agreement. Concurrently, with the consummation of an Asset
Sale, the Company shall deliver to the Agent an Officer's Certificate
demonstrating the derivation of Net Cash Proceeds from the gross sales
price of such Asset Sale.
K. Section 2.8(a)(ii) is amended by inserting the
following sentence to the end thereof:
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<PAGE> 7
"Such payments shall be applied first to the Additional Loan
(including any amounts outstanding under the Additional Senior Note)
(in each case together with accrued interest) and second to the Term
Loan (including any amounts outstanding under the Senior Note) (in
each case, together with accrued interest)."
L. Section 2.8(a)(iii) is amended by replacing the
phrase "Term Loan" in the second line thereof with the phrase "Loan"
and adding the following sentenced to the end thereof: "Such payments
shall be applied first to the Additional Loan (including any amounts
outstanding under the Additional Senior Note) (in each case together
with accrued interest) and second to the Term Loan (including any
amounts outstanding under the Senior Note) (in each case, together
with accrued interest)."
M. Section 2.8(e) is amended by replacing it with the
following:
(e)(i) All prepayments of the Additional Notes and the
Additional Senior Note shall be paid to the Lenders and Note
Purchaser, respectively, on a pro rata basis according to the sum of
the aggregate outstanding principal amount of the Additional Loans
owed to the Lenders and amounts owing under the Additional Senior Note
to the Note Purchaser according to the aggregate outstanding principal
amount of the Additional Senior Note.
(ii) All prepayments of the Term Loan and Senior Note
shall be paid to the Lenders and Note Purchaser, respectively, on a
pro rata basis according to the sum of the aggregate outstanding
principal amount of the Term Loan owed to the Lenders and amounts
owing under the Senior Note to the Note Purchaser according to the
aggregate outstanding principal amount of the Senior Note.
N. Section 2.9 (e) is amended by:
(i) insert new paragraphs with the headings "Third" and
"Fourth" as follows:
Third: to the indefeasible payment of all accrued interest on
the Additional Loan and the Additional Senior Note;
Fourth: to the indefeasible payment of the amounts of
Obligations then due and unpaid under this Agreement with respect to
the Additional Loans and the Additional Senior Notes for principal, in
respect of which or for the benefit of which such money has been paid
or collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Additional Notes for
principal;
and (ii) renumbering the current paragraphs "Third," "Fourth"
and "Fifth" as "Fifth," "Sixth" and "Seventh" respectively.
- 7 -
<PAGE> 8
O. Section 2.10 is amended by inserting a new paragraph
at the end as follows:
The Company agrees to use the proceeds of the Additional
Loans as follows: first, proceeds shall be used to repay in full all
outstanding amounts in respect of the October 30, 1998 Loan and
second, the Company shall contribute directly or indirectly an amount
not less than 50% of the proceeds of the Additional Loan to EnerTel to
be used solely for EnerTel's working capital needs and, to the extent
permitted in Section 6.24, otherwise shall be used and distributed to
Parent to be used for working capital purposes of Parent and its
Subsidiaries.
P. Article II of the Credit Agreement is hereby amended
by inserting a new Section 2.18 and 2.19 therein which shall read as
follows:
Section 2.18 Exchange of Loan. The Note Purchaser agrees
that, upon the request of Bankers Trust Corporation, it shall
purchase an amount equal to ten percent (10%) of the
principal amount of Additional Loans made by Bankers Trust
Corporation (inclusive of the October 21, 1998 Loan),
provided that such purchase shall be consummated through an
exchange of such purchased amount of Additional Loans with
the issuance of an Additional Senior Note pursuant to the
terms hereof. The Company will, upon request (the "Exchange
Request") of the Initial Lender, execute and deliver to the
Initial Lender (or the Note Purchaser as it shall request) a
note in the form substantially similar to the Senior Note
(the "Additional Senior Note") bearing interest at the rate
equal to the rate set forth for the Term Loans pursuant to
Sections 2.7(a), 2.7(b) and 2.7(c), which Additional Senior
Note shall be dated the date of issuance of such Additional
Senior Note, shall be payable to the order of such holder,
shall mature on the Maturity Date and shall be in the same
principal amount of the Additional Loan being exchanged. The
Exchange Request shall specify the principal amount of the
Additional Note to be exchanged pursuant to this Section
2.18. Upon issuance by the Company of the Additional Senior
Note under this Section 2.18 in exchange for the portion of
the Additional Loan so exchanged, the Company shall, upon
request of the Initial Lender, issue a new Additional Note to
the Initial Lender corresponding to the aggregate principal
amount of the Additional Loan held by it in substitution for
the Additional Note originally issued on the Second Closing
Date. An Exchange Request shall be deemed to have been given
pursuant to the execution and delivery by the Company of
Consent and Amendment No. 4. Notwithstanding anything on the
contrary set forth herein, the Note Purchaser agrees to
purchase a pro rata portion of all Additional Loans from the
Initial Lender upon notice from the Initial Lender.
Section 2.19 (a) Direct Payment. Notwithstanding anything to
the contrary in this Agreement or the Senior Note or
Additional Senior Notes, the Company will pay or cause to be
paid all amounts payable with respect to any Additional
Senior Notes held by each holder that is an institutional
holder (and each nominee
- 8 -
<PAGE> 9
thereof) and which has given written notice to the Company
requesting that the provisions of this subsection 2.19(a)
shall apply (without any presentment of such Additional
Senior Notes and without any notation of such payment being
made thereon) by crediting before 11:00 a.m. (New York time)
at the place of receipt, on the date payment is due, by
Federal funds bank wire transfer of Dollars, the account of
such holder (and each such nominee) in any bank in the United
States as may be designated in writing by such holder, or in
such other manner or to such other address in the United
States as may be designated in writing by such holder. The
listing of an address for payments on account of the
Additional Senior Notes on the signature page to Consent of
Amendment No. 4 with respect to any holder (and each nominee
thereof) shall constitute notice by such holder pursuant to
this subsection 2.19(a).
(b) Maintenance of Office. The Company will maintain an
office or agency at the address set forth in Section 9.3,
where notices, presentations and demands in respect of this
Agreement or the Additional Senior Notes may be made upon it.
Such office will be maintained at such address until such
time as the Company will notify the holders of the Additional
Senior Notes of any change of location of such office, which
will in any event be located in the United States of America.
(c) Delivery Expenses. If any holder that is an
institutional holder (or any nominee thereof) surrenders any
Additional Senior Note or Senior Notes to the Company
pursuant to this Agreement, the Company will pay the cost of
delivering to or from the home office of such holder from or
to the Company, insured to the satisfaction of such holder,
the surrendered Additional Senior Note or Additional Senior
Notes and any Additional Senior Note or Additional Senior
Notes issued in substitution or replacement for the
surrendered Senior Note or Senior Notes.
(d) Taxes. Without duplication of any amounts payable in
respect of the Senior Notes under Section 2.11, the Company
will pay all stamp, transfer and issue taxes and all other
levies, fees and impositions (including any interest or
penalty for nonpayment or delay in payment, but excluding any
income taxes) which may be payable or determined to be
payable in connection with the transactions contemplated by
this Agreement or in connection with any modification,
amendment or alteration of the Additional Senior Notes, and
the Company will save each holder harmless without limitation
as to time against any and all liabilities with respect to
all such stamp, transfer and issue taxes and all other
levies, fees and impositions (including any interest or
penalty for nonpayment or delay in payment). The obligations
of the Company under this subsection 2.19(d) shall survive
the payment or prepayment of the Senior Notes and the
termination of this Agreement.
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<PAGE> 10
(e) Ownership, Transfer or Exchange of Additional Senior
Notes
The Additional Senior Notes are issuable only in
fully registered form. The Company will keep at its office or
agency maintained as provided in subsection 2.19(b) a
register in which the Company shall provide for registration
and registration of transfer of the Additional Senior Notes.
Subject to the provisions of subsection 9.3(g), any
holder of an Additional Senior Note may at its option either
in person or by duly authorized attorney surrender the same
at said office or agency for exchange, accompanied if
surrendered for registration of transfer by a written
instrument of transfer duly executed by such holder or
attorney. In case such holder shall so request a transfer or
an exchange of its Additional Senior Note, the Company shall,
without expense to such holder, deliver to or upon the order
of such holder one or more Additional Senior Notes in the
same aggregate unpaid principal amount as the Additional
Senior Note so surrendered, each dated the date of, or, if
later, the date to which interest has been paid on, such
surrendered Additional Senior Note, in the principal amount
of $100,000 or any multiple of $1,000 in excess thereof, as
requested by such holder (provided that if such aggregate
unpaid principal amount is less than $100,000, the Company
will deliver one Additional Senior Note in exchange for the
Additional Senior Note so surrendered), and registered in
such name or names as shall be specified in writing by such
holder. Every Additional Senior Note so made and delivered
upon exchange for the surrendered Additional Senior Note
shall be in the form of the Additional Senior Note,
appropriately modified to reflect the terms of such
Additional Note so delivered.
Prior to due presentment of any Additional Senior
Note for registration of transfer, the Company may deem and
treat the registered holder thereof as the absolute owner of
such Additional Senior Note for the purpose of receiving
payment of or on account of the principal of and premium, if
any, and interest on such Additional Senior Note, and for the
purpose of any notice, waiver or consent hereunder, and
payment of such Additional Senior Note shall be made only to
such holder or its designees.
(f) Loss, Theft, Destruction or Mutilation of Additional
Senior Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction
or mutilation of any Additional Senior Note, and, in the case
of any such loss, theft or destruction, upon receipt of an
indemnity bond reasonably satisfactory to the Company or, in
the case of any such mutilation, upon surrender and
cancellation of such Additional Senior Note, the Company
will, at its expense, make and deliver, in lieu of such lost,
stolen, destroyed or mutilated Additional Senior Note, a new
Additional Senior Note of like tenor and unpaid principal
amount and dated the date of, or, if later, the date to which
interest has been paid on, the lost, stolen, destroyed or
mutilated Additional Senior Note.
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<PAGE> 11
(g) Additional Senior Notes held by Company, etc. Solely
for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of
Additional Senior Notes then outstanding approved or
consented to any amendment, waiver or consent to be given
under this Agreement or the Additional Senior Notes, or have
directed the taking of any action provided herein or in the
Additional Senior Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal
amount of Additional Senior Notes then outstanding,
Additional Senior Notes directly or indirectly owned by the
Company or any of its Affiliated shall be deemed not to be
outstanding.
Q. Article III of the Credit Agreement is hereby
amended by inserting a new Section 3.3 as follows:
3.3 Conditions Precedent to Additional Loans.
The obligation of each Lender to fund the Additional
Loans is subject to the satisfaction or waiver, on or before such
Additional Loan is made, of the following conditions precedent:
(a) The Consent and Amendment No. 4 shall have
become and continue to be effective in accordance with its terms.
(b) The representations and warranties of the
Parent and the Company contained in the Credit Agreement shall be true
and correct as if given on the date of such Additional Loan.
(c) No Default or Event of Default shall have
occurred and be continuing either before or after giving effect to the
making of such Additional Loan.
(d) The Agent shall have received a Notice of
Loan pursuant to Section 2.2.
Each borrowing of an Additional Loan shall be deemed to
constitute a representation and warranty by the Parent and the Company
on the date of such borrowing as to the matters specified in (b) and
(c) of this Section 3.3.
R. Article V is amended by inserting the following
Sections 5.17, 5.18, 5.19 and 5.20 and after Section 5.16:
5.17 Conversion Rights. (a)(i) At any time after
satisfaction of the provisions of Section 5.16(d), at the request of
any Lender or Note Purchaser (the "Conversion Request") the Parent
agrees that it will convert all or a portion of the Additional Loan
(together with accrued interest) or the Additional Senior Note
(together with accrued interest) into additional New Equity Securities
(the "Converted New Equity
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<PAGE> 12
Securities"), with the same terms, rights and privileges as the New
Equity Securities sold to Persons as described in Section 5.16(d)
("New Equity Investors") and at a conversion rate determined by
dividing the portion of the Additional Loan or Additional Senior Note
to be converted by the price paid per New Equity Security by the New
Equity Security investors. The Conversion Request shall specify the
principal amount of the Additional Note or the Additional Senior Note
to be exchanged pursuant to this Section 5.17, and if more than one
class of securities has been issued, the specific class of securities
into which the Additional Loan or Additional Senior Note shall be
converted. Upon the exchange of outstanding Additional Notes or
Additional Senior Notes for New Equity Securities which are
convertible into shares of Common Stock of Parent, the Lenders shall
receive warrants pursuant to the warrant agreement in the form
attached hereto as Exhibit B to purchase the number of shares of
Common Stock of the Parent equal to the number of shares of Common
Stock of the Parent into which such New Equity Securities are
convertible (including accrued dividends) for $.01 per share (the
"Warrants"). Parent hereby agrees to negotiate in good faith the
definitive terms of the Registration Rights Agreement and any other
agreement related to the transactions contemplated by this Section
5.17 on terms reasonably satisfactory to Parent, Agent and Lenders.
Notwithstanding the foregoing provisions of Section 5.17(i), if the
Additional Loans and Additional Senior Note and accrued interest are
repaid in full with the proceeds of the issuance of New Equity and the
Additional Loan Commitment is terminated prior to November 21, 1998,
the Company's obligation to convert any portion of the Additional Loan
or Additional Senior Note shall cease and be of no further effect,
provided that if all or any portion of the Additional Loans and
Additional Senior Note and accrued interest are repaid on or after
November 21, 1998 (such amount so repaid (including accrued interest),
the "Repayment Amount") then the Lenders and Note Purchasers shall
have the right to purchase Converted Additional Equity Securities in
an amount not in excess of the Repayment Amount upon the same terms as
set forth above (including, without limitation, with Warrants and with
registration rights) with respect to Additional Loans and Additional
Senior Notes, as if such Additional Loans and Additional Senior Notes
had not been so repaid. Notwithstanding anything to the contrary set
forth herein, to the extent the Additional Loan or Additional Senior
Notes are converted into Converted New Equity Securities or the
Lenders or Note Purchasers purchase Converted New Equity Securities as
set forth above, the Parent and the Company agree that the proceeds
from any sale of all or a portion of the Parent or any of its
Subsidiaries which are to be distributed to any holders of equity of
Parent shall be first distributed to the Lenders in an amount equal to
the outstanding aggregate principal amount of Converted New Equity
Securities, together with a compounded rate of return of 12% per annum
compounded semi-annually from the date of any conversion(s), prior to
any distribution of such proceeds to any such holder of equity.
(ii) Upon the issuance of Converted New Equity Securities
under this Section 5.17 in exchange for the portion of the Additional
Loan or Additional Senior Note so
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<PAGE> 13
exchanged, the Company shall, upon request of the Initial Lender,
issue a new Additional Note or Additional Senior Note to the Initial
Lender corresponding to the aggregate principal amount of the
Additional Loan or Additional Senior Note held by it in substitution
for the Additional Note originally issued on or after the Second
Closing Date.
(b) If the New Equity Securities have not been issued by
November 13, 1999, the Company covenants and agrees that upon the
request of the Lenders specifying the aggregate amount of Additional
Loans or Additional Senior Note to be exchanged, the Company will
exchange all or a portion of the Additional Loans or Additional Senior
Note, including accrued interest thereon, for such number of shares of
Common Stock of WorldPort equal to the principal amount of Additional
Loans plus accrued interest or Additional Senior Note plus accrued
interest to be exchanged divided by $2.00. If, and as often as, there
is any change in the Common Stock or the Preferred Stock by way of a
stock split, stock dividend, combination or reclassification, or
recapitalization, or by any other means, appropriate adjustment shall
be made in the provisions hereof so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so
changed.
(c) The Agent, Lenders and Note Purchaser will have the
registration rights specified in the Registration Rights Term Sheet
attached as Exhibit A hereto with respect to New Equity Securities
issued pursuant to Section 5.17 hereof and the Common Stock issued
pursuant to Section 5.17(b) hereof.
(d) Each of the Lender's participants will be afforded
the rights set forth in this Section 5.17.
Section 5.18. Best Efforts of Insiders in Connection with
Sale.
Upon the default by the Company in the due observance or
performance of the covenants or agreements in Section 5.16(c) and
5.16(d) of the Credit Agreement, the Parent and each of Paul A. Moore,
Philip S. Magiera, Theodore H. Swindells and Maroon Bells Partners,
Inc. (the "Insiders") shall be support and use their best efforts to
achieve any transaction involving the sale of all or any part of the
Parent's assets which is proposed by the Lenders. Notwithstanding the
foregoing provisions of this Section 5.18 of the Credit Agreement, if
the Additional Loans and Additional Senior Notes, together with
accrued interest, are repaid in full with the proceeds of the issuance
of New Equity and the Additional Loan Commitment is terminated prior
to November 21, 1998, the obligations of the Insiders with respect to
this Section 5.18 shall cease and be of no further effect.
Section 5.19. Access to Records.
The Parent and the Company agree that they shall, and shall
cause each of their Subsidiaries to, permit any representative, or
consultant retained by, the Agent, the
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<PAGE> 14
Collateral Agent or the Lenders to visit and inspect the properties
and all financial records of the Parent, the Company and any of their
respective Subsidiaries at reasonable times and as often as reasonably
requested and to make extracts from and copies of such financial
records, and to permit any representatives designated by, or
consultants retained by, the Agent, the Collateral Agent or the
Lenders to discuss at such reasonable times and at such intervals as
may reasonably requested the affairs, finances and condition of the
Parent, the Company or any of their respective Subsidiaries or any
properties of the Parent, the Company or any of their respective
Subsidiaries with the officers thereof and independent accountants
therefor, in each case at the cost and expense of the Parent and the
Company.
Section 5.20. Legal Opinion.
By November 20, 1998, Parent shall deliver to the
Administrative Agent a favorable opinion of DeBrauw Blackstone
Westbroek, special Netherlands counsel to the Parent and the Company,
in a form which shall be mutually agreed upon, but including,
specifically, opinions stating that the Lien under the Dutch Security
Documents secure the Additional Loans and Additional Senior Notes and
that no consent of the Minority Shareholders is necessary in
connection with the transactions contemplated hereby (including,
without limitation, with respect to the distribution of proceeds of
the Additional Loans to the Dutch Holding Company and EnerTel) or, if
required, such consent has been obtained and is in full force and
effect.
S. The Credit Agreement is amended by adding a new
Section 6.24 thereto immediately following Section 6.23, which new
section shall read as follows:
Section 6.24. Proceeds of Additional Loans.
Notwithstanding anything to the contrary set forth in the
Credit Agreement or any other Finance Document, (i) the Company agrees
that it shall contribute at least 50% of the proceeds of the
Additional Loans (after repayment of the October 30, 1998 Loan) to the
Dutch Holding Company, and cause the Dutch Holding Company to promptly
contribute such proceeds to EnerTel, and (ii) the Parent and the
Company agree that they will not, and will ensure that none of their
Subsidiaries will, distribute or disburse (whether by dividend,
advance, loan, contribution or otherwise) any of the proceeds received
in respect of the Additional Loans to the Parent or any of its
Subsidiaries, provided that (A) the Company and the Dutch Holding
Company may make the distributions contemplated by subclause (i) of
this Section 6.24, (B) the proceeds of the Additional Loans may be
distributed to EnerTel, and (C) provided no Default or Event of
Default has occurred and is continuing or would result therefrom, an
aggregate amount not in excess of 50% of the Additional Loans may be
distributed to the Parent.
T. Section 7.1(b) is restated as follows:
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<PAGE> 15
(b) Breach of Certain Covenants. The Company
defaults in the due observance or performances of any
covenant, or condition or agreement in Section 2.15, 5.13(a),
5.15, 5.17, 5.18, 5.20 or in Article VI.
U. Amendment to Section 9.3. Section 9.3 of the Credit
Agreement is amended by adding a new subclause (h) thereto which shall
read as follows: (h) Notwithstanding anything to the contrary set
forth in this Agreement, any transferee of an Additional Senior Note,
by its acceptance of an Additional Senior Note registered in its name
(or the name of its nominee), or by its acceptance of a beneficial
interest therein, shall be deemed to have made the representations set
forth Paragraph 7 of Consent and Agreement No. 3 and to have agreed to
be bound by the provisions of the Finance Documents. Any transferor of
an Additional Senior Note or a beneficial interest therein shall
notify any prospective purchaser that such transferor may be relying
on the exemption from Section 5 of the Securities Act of 1933 (as
amended) provided by Rule 144A.
3. The Company and the Parent hereby represent and warrant that
the representations and warranties set forth in Article IV of the Credit
Agreement and each other Finance Document are true and correct in all material
respects as of the date hereof as if made on such date.
4. Conditions to Effectiveness of Agreement.
The effectiveness of this Agreement (such date of effectiveness, the
"Effective Date") and the obligation of each Lender to fund the Additional
Loans on or after the Second Closing Date (as defined in the Credit Agreement
as amended by this Agreement) is subject to the satisfaction or waiver of the
following conditions precedent:
(a) Finance Documents. The Administrative Agent shall
have received each of this Agreement, the Additional Note and the Additional
Enertel Guaranty, each duly executed by the Parent, the Company and such
Subsidiary, as applicable and the Lenders.
(b) Notes. The Administrative Agent shall have received
an appropriately completed and duly executed Note payable to the order of each
Lender.
(c) No Litigation or Other Proceeding. As of the
Effective Date, (x) no action, suit, litigation, proceeding investigation,
inquiry or dispute by or before any court, Governmental Authority or any
arbitrator shall be pending against or affecting (i) the Parent, the Company or
any of their Subsidiaries or threatened against or affecting the Parent, the
Company or any of their Subsidiaries which could reasonably be expected to have
a Material Adverse Effect or (ii) the Finance Documents or any of the
transactions contemplated thereby and (y) there shall not have been any
Requirement of Law or injunction applicable to the Finance Documents or any of
the transactions contemplated thereby which have been enacted, promulgated,
entered or enforced by any Governmental Authority, nor shall there be pending
any action or proceeding before any such Governmental Authority which is
reasonably likely to transaction contemplated hereby, in each case, prohibit,
restrict, delay or otherwise materially affect the transactions contemplated
hereby.
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<PAGE> 16
(d) Officer's Certificate. The Administrative Agent
shall have received a certificate, dated the Effective Date and signed by a
Financial Officer of the Company, confirming compliance with the conditions
precedent set forth in paragraphs (h), and (i) of this Section 4 as of the
Effective Date.
(e) No Adverse Change or Development, Etc. (i) Nothing
shall have occurred since the Effective Date, the Lenders shall have become
aware of no facts or conditions not otherwise known to the Lenders on the
Effective Date, which could reasonably be expected to have a Material Adverse
Effect; (ii) trading in securities generally on the New York or American Stock
Exchange shall not have been suspended and minimum or maximum prices shall not
have been established on any such exchange; (iii) a banking moratorium shall
not have been declared by New York or United States authorities; (iv) there
shall not have been (A) an outbreak or escalation of hostilities between the
United States and any foreign power or (B) an outbreak or escalation of any
other insurrection or armed conflict involving the United States or any other
national or international calamity or emergency, or (C) any material change in
the financial markets of the United States which, in each case, in the
reasonable judgment of the Lenders would materially and adversely affect the
ability of the Lenders to syndicate the Additional Loan or makes it
impracticable or inadvisable to proceed with the Additional Loan or any of the
other transactions contemplated hereby.
(f) Representations and Warranties. The representations
and warranties of the Loan Parties contained in any Finance Document shall be
true and correct on such date both before and after giving effect to the
effectiveness of the Agreement.
(g) No Default or Event of Default. No Default or Event
of Default shall have occurred and be continuing either before or after giving
effect to the making of such Additional Loan on the Effective Date.
(h) Legal Opinions. The Administrative Agent shall have
received a favorable opinion of McDermott, Will & Emery, special New York and
U.S. counsel to the Parent and the Company, in a form which shall be mutually
agreed upon.
(i) Corporate Documents. The Administrative Agent shall
have received (i) a copy of the certificate or articles of incorporation or
articles of association, as applicable, including all amendments thereto (or
the equivalent thereof), of each Loan Party, certified as of a recent date by
the Secretary of State of the state of its organization, and a certificate as
to the good standing of the Parent and the Company as of a recent date, from
such Secretary of State or a certificate from an officer of such Loan Party to
the effect that no changes have been made to such organizational documents
since those delivered on the Closing Date; (ii) a certificate of the Secretary
or Assistant Secretary of each Loan Party dated the Closing Date and certifying
(A) that attached thereto is a true and complete copy of the by-laws of such
Loan Party as in effect on the Closing Date and at all times since a date prior
to the date of the resolutions described in clause (B) below or a certification
that there have been no changes since delivered on the Closing Date, (B) that
attached thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors of such Loan Party authorizing the execution, delivery and
performance of the Finance Documents to which such Person is a party and, in
the case of the Company, the
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<PAGE> 17
borrowings hereunder, and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (C) that the certificate
or articles of incorporation of such Loan Party have not been amended since the
date of the last amendment thereto shown on the certificate of good standing
furnished pursuant to clause (i) above, and (D) as to the incumbency and
specimen signature of each officer executing any Finance Document or any other
document delivered in connection herewith on behalf of such Loan Party; (iii) a
certificate of another officer as to the incumbency and specimen signature of
the Secretary or Assistant Secretary executing the certificate pursuant to (ii)
above; and (iv) such other documents as the Lenders or the Administrative Agent
may reasonably request.
(j) Guaranty. EnerTel shall have executed and delivered
a Guaranty in form and substance satisfactory to the Agent.
(k) Agreement with Maroon Bells Partners and others.
Each of Paul A. Moore, Philip S. Mageira, Theodore H. Swindells and Maroon Bell
Partners, Inc. shall have executed and delivered to the Agent, for the benefit
of the Lenders, an agreement covering the agreements set forth in Section 5.18
of the Credit Agreement (as amended hereby), which agreement shall be in form
and substance satisfactory to the Agent.
5. Amendments to Security Agreement.
Section 6.02 of the Security Agreement is amended by changing
the reference to paragraph SECOND to THIRD, inserting a new paragraph SECOND to
read as follows, and changing the current paragraph references "THIRD" and
"FOURTH" to "FOURTH" and "FIFTH", respectively:
"SECOND, to the payment in full of the Obligations
owed to the Lenders in respect of the Additional Loan made by
them and outstanding (together with all accrued interest and
capitalized interest in respect thereof) and to the Note
Purchaser in respect of the Additional Senior Note held by it
and outstanding (together with all accrued interest and
capitalized interest in respect thereof), in each case pro
rata as among the Lenders and Note Purchaser, in accordance
with the amount of such Obligations owed to them."
6. Amendment to the Pledge Agreement. Section 13 of the Pledge
Agreement is amended by changing the reference to paragraph SECOND to THIRD,
inserting a new paragraph SECOND to read as follows, and changing the current
paragraph reference "THIRD" and "FOURTH" to "FOURTH" and "FIFTH", respectively:
"SECOND, to the payment in full of the Secured
Obligations owed to the Lenders in respect of the Additional
Loan (including all accrued interest and capitalized interest
in respect thereof) made by them and outstanding and owed to
the Note Purchaser in respect of the Additional Senior Note
(including all accrued interest and capitalized interest in
respect thereof) held it
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<PAGE> 18
and outstanding, in each case pro rata as among the Lenders
and Note Purchasers in accordance with the amount of such
Obligations owed to them."
7. Representations Of The Note Purchaser.
(a) Purchase for Investment. The Note Purchaser,
represents that it has received all information necessary to make its
investment decision with respect to its purchase of the Additional Senior Note
and as it may have otherwise requested and that it is purchasing the Additional
Senior Note for its own account or for one or more separate accounts maintained
by it or for the account of one or more pension or trust funds and not with a
view to the distribution thereof except in accordance with the Securities Act,
provided that the disposition of such Note Purchaser's property shall at all
times be within its control. The Note Purchaser understands that the Additional
Senior Notes have not been registered under the Securities Act and may be
resold only if registered pursuant to the provisions of the Securities Act or
if an exemption from registration is available, except under circumstances
where neither such registration nor such an exemption is required by law, and
that the Company is not required to register the Senior Note under the
Securities Act. The Note Purchaser represents that it is not an "affiliate" (as
defined in Rule 144 under the Securities Act) of the Company, it is not acting
on behalf of the Company and it is a "Qualified Institutional Buyer" within the
meaning of Rule 144A promulgated under the Securities Act or an institutional
"Accredited Investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
promulgated under the Securities Act. Such acquisition will be for its own
account or for the account of another Qualified Institutional Buyer.
(b) Source of Funds. The Note Purchaser represents that
at least one of the following statements is an accurate representation as to
each source of funds (a "Source") to be used by it to pay the purchase price of
the Additional Senior Notes to be purchased by it:
(i) if such Note Purchaser is an insurance
company, the Source does not include Plan assets allocated to any separate
account maintained by such Note Purchaser in which any employee benefit plan
(or its related trust) has any interest, other than a separate account that is
maintained solely in connection with such Note Purchaser's fixed contractual
obligations under which the amounts payable, or credited, to such plan and to
any participant or beneficiary of such plan (including any annuitant) are not
affected in any manner by the investment performance of the separate account;
or
(ii) the Source is either (A) an insurance
company pooled separate account, within the meaning of Prohibited Transaction
Exemption ("PTE") 90-1 (issued January 29, 1990), or (B) a bank collective
investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991)
and, except as such Note Purchaser has disclosed to the Company in writing
pursuant to this paragraph (b), no employee benefit plan or group of plans
maintained by the same employer or employee organization beneficially owns more
than 10% of all assets allocated to such pooled separate account or collective
investment fund; or
(iii) the Source constitutes assets of an
"investment fund" (within the meaning of Part V of the QPAM Exemption) managed
by a "qualified professional asset
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<PAGE> 19
manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no
employee benefit plan's assets that are included in such investment fund, when
combined with the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the meaning of
Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee
organization and managed by such QPAM, exceed 20% of the total client assets
managed by such QPAM, the conditions of Part 1(c) and (g) of the QPAM Exemption
are satisfied, neither the QPAM nor a person controlling or controlled by the
QPAM, (applying the definition of "control" in Section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity of
such QPAM and (ii) the names of all employee benefit plans whose assets are
included in such investment fund have been disclosed to the Company in writing
pursuant to this paragraph (iii); or
(iv) the Source is a governmental plan; or
(v) the Source is one or more employee benefit
plans, or a separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in writing
pursuant to this paragraph (v); or
(vi) the Source does not include Plan assets of
any employee benefit plan, other than exempt from the coverage of ERISA.
The Note Purchaser further (A) confirms to the
Initial Lender that it has received a copy of the Credit Agreement and each of
the other Finance Documents, which have in each case been requested by it,
together with copies of any financial statements requested by it, and that it
has, independently and without reliance on the Initial Lender, the
Administrative Agent, the Collateral Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and become a Note
Purchaser; (B) agrees that it will, independently and without reliance upon the
Initial Lender, the Administrative Agent, the Collateral Agent or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement and any other Finance Documents; and (C)
appoints the Collateral Agent to act in the capacity set forth in the Credit
Agreement.
As used in this Section 7, the terms "employee benefit plan",
"governmental plan", "party in interest" and "separate account" shall have the
respective meanings assigned to such terms in Section 3 of ERISA.
8. Confirmation of Guarantees, Security Documents. Each of the
Parent and Company and each of the other Loan Parties hereto hereby
acknowledges, ratifies and confirms that, (a) pursuant to the Parent Guaranty
and the Subsidiary Guaranty to which it is a party, such Loan Party guarantees
all obligations of the Borrower under the Additional Loans, Additional Note and
the Additional Senior Note (such obligations being hereinafter referred to as
the "Guaranteed Obligations"), (b) each of the Guaranteed Obligations shall
constitute Guaranteed Obligations under and as defined in each Guaranty, (c)
each of the Guarantees and Security
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<PAGE> 20
Documents to which it is a party is and shall continue to be in full force and
effect in accordance with its terms and the Liens granted thereunder shall
secure and shall continue to secure the Obligations and the Secured Obligations
(as such terms may be defined in the Security Documents) including, the
Guaranteed Obligations; and (d) the Liens granted to the Collateral Agent for
its benefit and the benefit of the Lenders pursuant to the Security Documents
to which it is a party are and shall continue to be, valid and perfected Liens
in the Collateral covered thereby and the Obligations and Secured Obligations
as defined in the Security Documents shall be deemed to include the Additional
Note, the Additional Senior Note and the Additional Loans, together with all
accrued interest thereon and all other obligations and each of the Company, the
Parent and each other Loan Party hereby confirms and regrants a Lien on all of
the Collateral under each Security Document to which such Grantor is a party to
Bankers Trust Company, as collateral agent, as security for the full payment of
the Secured Obligations (as defined in each such Security Document), the
Additional Loans, the Additional Notes and the Additional Senior Note, together
with all accrued interest therein and other obligations hereunder.
9. Applicable Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
10. No Novation. This Agreement shall not extinguish the
obligations for the payment of money outstanding under the Credit Agreement or
any Note or discharge or release the Lien or priority of any security
agreement, any pledge agreement or any other security therefor or discharge any
obligation under any guaranty. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Credit
Agreement or instruments securing the same, which shall remain in full force
and effect, except as modified hereby or by instruments executed concurrently
herewith. Nothing expressed or implied in this Agreement, the Credit Agreement,
or any other document contemplated hereby or thereby shall be construed as a
release or other discharge of the Company, the Parent or any Guarantor under
the Credit Agreement or any Pledgor or Grantor under any Security Document from
any of its obligations and liabilities as a "Company", "Parent", "Guarantor",
"Pledgor" or "Grantor" under the Credit Agreement or the Security Documents or
any other Finance Document. Whenever the term "Credit Agreement" is used in any
of the Finance Documents it shall mean and refer to the Credit Agreement as
modified pursuant hereto. Each of the Credit Agreement and the other Finance
Documents shall remain in full force and effect, except as expressly modified
hereby.
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
12. Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
13. Effectiveness. This Agreement shall become effective as of
the date (the "Effective Date") when copies hereof which, when taken together,
bear the signatures of each of
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<PAGE> 21
the Company, the Parent, the Agent, the Collateral Agent, the Majority Lenders
and the other Loan Parties which are a party hereto have been received by the
Agent.
14. Payment of Expenses. In furtherance of the provisions of
Section 9.1 of the Credit Agreement, the Parent and Company shall jointly and
severally, whether or not the transactions hereby contemplated are consummated,
upon demand of the Agent pay all reasonable out-of-pocket costs (including
legal fees), charges and expenses of the Agent and Collateral Agent in
connection with the negotiation, preparation, execution and delivery of this
Agreement (including, without limit, all such out-of-pocket cost (including
legal fees), charges and expenses in connection with and relating to each
Finance Document) and the documents and instruments referred to herein, and
otherwise reviewed in connection herewith and therewith.
- 21 -
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
WORLDPORT INTERNATIONAL, INC.
by
-----------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS, INC.
by
-----------------------------------------
Name:
Title:
TELENATIONAL COMMUNICATIONS, INC.
by
-----------------------------------------
Name:
Title:
IIC ACQUISITION CORP.
by
-----------------------------------------
Name:
Title:
WORLDPORT/ICX, INC.
by
-----------------------------------------
Name:
Title:
<PAGE> 23
WORLDPORT ACQUISITIONS, INC.
by
-----------------------------------------
Name:
Title:
WORLDPORT ACQUISITION CORP.
by
-----------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS
(EUROPE) HOLDING B.V.
by:
-----------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS
EUROPE B.V.
by:
-----------------------------------------
Name:
Title:
ENERTEL N.V.
by:
-----------------------------------------
Name:
Title:
<PAGE> 24
BANKERS TRUST COMPANY
as Agent and Collateral Agent
by
-----------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION
as Lender
by
-----------------------------------------
Name:
Title:
DREYFUS PREMIER LIMITED TERM HIGH
INCOME FUND
by
-----------------------------------------
Name:
Title:
<PAGE> 25
SCHEDULE I
Additional Loan Commitments
Bankers Trust Corporation $4,500,000
<PAGE> 1
EXHIBIT 10.10(e)
AMENDMENT NO. 5
AMENDMENT NO. 5, dated as of December 16, 1998 (this "Agreement"), by
and among WORLDPORT INTERNATIONAL, INC., a Delaware corporation (the
"Company"), WORLDPORT COMMUNICATIONS, INC., a Delaware corporation (the
"Parent"), the Lenders (as defined in the Credit Agreement) which are a party
hereto (including Bankers Trust Corporation, in its individual capacity) and
BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the "Agent")
and Collateral Agent (in such capacity, the "Collateral Agent") and as joint
creditor with the other Lenders under the Credit Agreement, each as defined
below.
W I T N E S S E T H:
WHEREAS, the Company and the Parent are parties to a Credit Agreement
dated as of June 23, 1998 (as in effect, the "Credit Agreement") with the
Lenders, the Agent and the Collateral Agent;
WHEREAS, the Company and the Parent have agreed to raise a certain
amount of capital pursuant to, and in accordance with, the terms set forth in
the Credit Agreement by December 19, 1998 (the "Target Date");
WHEREAS, the Parent and the Company have requested that the Agent and
the Lenders extend the Target Date to December 23, 1998;
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement.
<PAGE> 2
2. Amendment. Section 5.16(d) of the Credit Agreement is amended
by deleting the reference to the date "December 19, 1998" appearing therein and
substituting the date "December 23, 1998" therefor.
3. Applicable Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
4. No Novation. This Agreement shall not extinguish the
obligations for the payment of money outstanding under the Credit Agreement or
any Note or discharge or release the Lien or priority of any security
agreement, any pledge agreement or any other security therefor or discharge any
obligation under any guaranty. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Credit
Agreement or instruments securing the same, which shall remain in full force
and effect, except as modified hereby or by instruments executed concurrently
herewith. Nothing expressed or implied in this Agreement, the Credit Agreement,
or any other document contemplated hereby or thereby shall be construed as a
release or other discharge of the Company, the Parent or any Guarantor under
the Credit Agreement or any Pledgor or Grantor under any Security Document from
any of its obligations and liabilities as a "Company", "Parent", "Guarantor",
"Pledgor" or "Grantor" under the Credit Agreement or the Security Documents or
any other Finance Document. Whenever the term "Credit Agreement" is used in any
of the Finance Documents it shall mean and refer to the Credit Agreement as
modified pursuant hereto. Each of the Credit Agreement and the other Finance
Documents shall remain in full force and effect, except as expressly modified
hereby.
5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
6. Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
- 2 -
<PAGE> 3
7. Effectiveness. This Agreement shall become effective as of
the date when copies hereof which, when taken together, bear the signatures of
each of the Company, the Parent, the Agent, the Collateral Agent and the
Majority Lenders have been received by the Agent.
8. Payment of Expenses. In furtherance of the provisions of
Section 9.1 of the Credit Agreement, the Parent and Company shall jointly and
severally, whether or not the transactions hereby contemplated are consummated,
upon demand of the Agent pay all reasonable out-of-pocket costs (including
legal fees), charges and expenses of the Agent and Collateral Agent in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the documents and instruments referred to herein, and otherwise
reviewed in connection herewith and therewith.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
WORLDPORT INTERNATIONAL, INC.
by
-----------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS, INC.
by
-----------------------------------------
Name:
Title:
<PAGE> 5
BANKERS TRUST COMPANY
as Agent and Collateral Agent
by
-----------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION
as Lender
by
-----------------------------------------
Name:
Title:
<PAGE> 6
DREYFUS PREMIER LIMITED TERM HIGH
INCOME FUND
by
-----------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.10(f)
AMENDMENT NO. 6
AMENDMENT NO. 6, dated as of December 23, 1998 (this "Agreement"), by
and among WORLDPORT INTERNATIONAL, INC., a Delaware corporation (the
"Company"), WORLDPORT COMMUNICATIONS, INC., a Delaware corporation (the
"Parent"), the Lenders (as defined in the Credit Agreement) which are a party
hereto (including Bankers Trust Corporation, in its individual capacity) and
BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the "Agent")
and Collateral Agent (in such capacity, the "Collateral Agent") and as joint
creditor with the other Lenders under the Credit Agreement, each as defined
below.
W I T N E S S E T H:
WHEREAS, the Company and the Parent are parties to a Credit Agreement
dated as of June 23, 1998 (as in effect, the "Credit Agreement") with the
Lenders, the Agent and the Collateral Agent;
WHEREAS, the Company and the Parent have agreed to raise a certain
amount of capital pursuant to, and in accordance with, the terms set forth in
the Credit Agreement by December 23, 1998 (the "Target Date");
WHEREAS, the Parent and the Company have requested that the Agent and
the Lenders extend the Target Date to December 29, 1998;
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement.
<PAGE> 2
2. Amendment. Section 5.16(d) of the Credit Agreement is amended
by deleting the reference to the date "December 23, 1998" appearing therein and
substituting the date "December 29, 1998" therefor.
3. Applicable Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
4. No Novation. This Agreement shall not extinguish the
obligations for the payment of money outstanding under the Credit Agreement or
any Note or discharge or release the Lien or priority of any security
agreement, any pledge agreement or any other security therefor or discharge any
obligation under any guaranty. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Credit
Agreement or instruments securing the same, which shall remain in full force
and effect, except as modified hereby or by instruments executed concurrently
herewith. Nothing expressed or implied in this Agreement, the Credit Agreement,
or any other document contemplated hereby or thereby shall be construed as a
release or other discharge of the Company, the Parent or any Guarantor under
the Credit Agreement or any Pledgor or Grantor under any Security Document from
any of its obligations and liabilities as a "Company", "Parent", "Guarantor",
"Pledgor" or "Grantor" under the Credit Agreement or the Security Documents or
any other Finance Document. Whenever the term "Credit Agreement" is used in any
of the Finance Documents it shall mean and refer to the Credit Agreement as
modified pursuant hereto. Each of the Credit Agreement and the other Finance
Documents shall remain in full force and effect, except as expressly modified
hereby.
5. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
6. Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
- 2 -
<PAGE> 3
7. Effectiveness. This Agreement shall become effective as of
the date when copies hereof which, when taken together, bear the signatures of
each of the Company, the Parent, the Agent, the Collateral Agent and the
Majority Lenders have been received by the Agent.
8. Payment of Expenses. In furtherance of the provisions of
Section 9.1 of the Credit Agreement, the Parent and Company shall jointly and
severally, whether or not the transactions hereby contemplated are consummated,
upon demand of the Agent pay all reasonable out-of-pocket costs (including
legal fees), charges and expenses of the Agent and Collateral Agent in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the documents and instruments referred to herein, and otherwise
reviewed in connection herewith and therewith.
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
WORLDPORT INTERNATIONAL, INC.
by
-----------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS, INC.
by
------------------------------------------
Name:
Title:
<PAGE> 5
BANKERS TRUST COMPANY
as Agent and Collateral Agent
by
-----------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION
as Lender
by
-----------------------------------------
Name:
Title:
- 5 -
<PAGE> 6
DREYFUS PREMIER LIMITED TERM HIGH
INCOME FUND
by
-----------------------------------------
Name:
Title:
- 6 -
<PAGE> 1
EXHIBIT 10.10(g)
CONSENT AND AMENDMENT NO. 7
CONSENT AND AMENDMENT NO. 7, dated as of December 31, 1998 (this
"Agreement"), by and among WORLDPORT INTERNATIONAL, INC., a Delaware
corporation (the "Company"), WORLDPORT COMMUNICATIONS, INC., a Delaware
corporation (the "Parent"), the Lenders (as defined in the Credit Agreement)
which are a party hereto (including Bankers Trust Corporation, in its
individual capacity) and BANKERS TRUST COMPANY, as Administrative Agent (in
such capacity, the "Agent") and Collateral Agent (in such capacity, the
"Collateral Agent") and as joint creditor with the other Lenders under the
Credit Agreement, each as defined below.
W I T N E S S E T H:
WHEREAS, the Company and the Parent are parties to a Credit Agreement
dated as of June 23, 1998 (as amended, modified, supplemented and as in effect,
the "Credit Agreement") with the Lenders, the Agent and the Collateral Agent;
WHEREAS, the Parent and the Company have agreed, pursuant to the terms
of the Credit Agreement, that the Parent will have issued a certain amount of
equity, and received the proceeds thereof, by December 29, 1998;
WHEREAS, the Parent and the Company intend that the Parent receive
proceeds of $7,500,000 (the "Initial Heico Investment Proceeds") from the
purchase by The Heico Companies, LLC ("Heico") of equity of the Parent on
December 31, 1998, subject to the consent of the Agent and the Majority Lenders
(the "Initial Heico Investment");
WHEREAS, the Parent and the Company have informed the Administrative
Agent and the Lenders that, upon receipt of regulatory approvals and
satisfaction of customary conditions, Heico (i) is prepared to, and has
committed to, purchase, and the Parent is prepared to issue, additional equity
of the Parent in an aggregate amount, together with the Initial Heico
Investment, and, if any, the Second Heico Investment (as defined below) for a
purchase price of $40,000,000 (collectively, the "Total Equity Investment") and
(ii) may purchase an additional amount of equity of the Parent for aggregate
proceeds of up to $10,000,000 (the "Additional Equity Investment");
<PAGE> 2
WHEREAS, subsequent to the Initial Heico Investment but prior to
consummation of the Total Equity Investment, the Parent may desire to issue,
and Heico may desire to purchase, an additional amount of equity of the Parent
(in excess of the Initial Heico Investment) (such additional amount, the
"Second Heico Investment");
WHEREAS, the Initial Heico Investment, the Second Heico Investment (if
any), the Total Equity Investment and any Additional Equity Investment are to
be consummated pursuant to the documents and agreements attached hereto as
Exhibit 1 (together with all other documents and agreements executed and
delivered in connection therewith, in each case as amended, modified or
supplemented from time to time in accordance with, and subject to the terms of,
the Credit Agreement, the "Heico Equity Documents");
WHEREAS, the Parent and the Company have requested that the Agent and
the Lenders waive the provision set forth in the Credit Agreement requiring
that the proceeds of the Initial Heico Investment, the proceeds of the Second
Heico Investment (if any), the proceeds of the Total Equity Investment and the
proceeds of any Additional Equity Investment (if any) be applied to the
mandatory prepayment of the Loans;
WHEREAS, upon consummation of the Total Equity Investment, the Parent
and the Company, and/or one or more of their respective Subsidiaries, desires
the flexibility under the Credit Agreement to incur additional Indebtedness in
the nature of equipment financing and vendor financing (the "Additional
Indebtedness");
WHEREAS, upon consummation of the Total Equity Investment, the Parent
desires to acquire All American Cable and Radio, Inc., a Dominican Republic
corporation, ("AACR"), subject to the terms set forth herein;
WHEREAS, the Parent, together with Paul A. Moore, Philip S. Mageira,
Theodore H. Swindells and Maroon Bells Partners, Inc. (collectively, the
"Insiders"), entered into a certain letter agreement dated November 13, 1998
(the "Insider Letter Agreement"), pursuant to which the Parent and the Insiders
agreed to take certain actions, as more specifically detailed therein;
WHEREAS, the Parent and the Insiders have requested that, subject to
certain conditions, as set forth herein, the obligations of the Parent and the
Insiders be suspended for a certain period of time;
- 2 -
<PAGE> 3
WHEREAS, pursuant to Section 5.17 of the Credit Agreement, the Lenders
were given certain rights to purchase equity securities of the Parent in
certain circumstances (the "Purchase Option");
WHEREAS, subject to the consummation of the Total Equity Investment,
the Parent and the Company have requested that the Lenders terminate their
rights in respect of the Purchase Option and the Lenders have agreed to
terminate such rights upon consummation of the Total Equity Investment;
WHEREAS, the Parent and the Company have requested that, subject to
the terms and provisions hereof, including, without limitation, the receipt of
the proceeds from the Initial Heico Investment, that the date prior to which
the Parent is required to consummate the Total Equity Investment under Section
5.16 of the Credit Agreement be extended to January 25, 1999 and, upon
consummation of the Total Equity Investment, that Section 5.16 be deemed
satisfied;
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree to the following:
1. Defined Terms. Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Credit Agreement.
2. Consent. Subject to Section 4 of this Agreement:
A. The Administrative Agent and the Lenders hereby
acknowledge that Heico is acceptable to the Administrative Agent and the
Lenders as a Person purchasing equity of the Parent under Section 5.16(d) of
the Credit Agreement.
B. The Administrative Agent and Lenders acknowledge
that the form, substance, terms and conditions of the Initial Heico Investment
which is made expressly pursuant to the Heico Equity Documents attached hereto
as Exhibit 1 are acceptable and that the form, substance, terms and conditions
of the Second Heico Investment, the Total Equity Investment and any Additional
Equity Investment, in each case if made pursuant to the Heico Equity Documents,
are acceptable.
- 3 -
<PAGE> 4
C. The Agent and the Lenders hereby consent to the
acquisition by the Parent or one of its Subsidiaries of all of the stock of
AACR, provided that such consent under this Section 2C is subject to the
following:
(i) The terms and conditions of the AACR
Acquisition (including, without limitation, all agreements and
documents in connection therewith) shall be in form and substance
reasonably satisfactory to the Agent.
(ii) The aggregate purchase price of the AACR
Acquisition shall not exceed $31,500,00 plus the assumption of
liabilities not to exceed $12,000,000 in the aggregate.
(iii) The Agent and the Lenders shall have
received all information requested relating to the proposed AACR
Acquisition, and shall have confirmed that, after giving effect to
expenditures made and to be made for working capital requirements of
AACR and capital expenditures of AACR, in each case as such
requirements and capital expenditures are reflected in such information
and projections, AACR shall have demonstrated a positive cash flow for
calendar year 1998 (exclusive of non-recurring charges and
extraordinary events) and the projections for calendar year 1999 shall
demonstrate a positive cash flow for AACR during such year.
D. The Agent and Lenders acknowledge that the Global
Master Rental Agreement between Comdisco and the Parent dated September 25,
1998 (the "Master Rental Agreement"), together with the commitment letter from
Comdisco committing to provide up to $30 million of lease financing covered by
such Master Rental Agreement, which Master Rental Agreement and commitment
letter are attached hereto as Exhibit 3, constitute an Additional Financing
Commitment under the Credit Agreement and satisfies the requirement for
Additional Financing Commitments set forth in Section 5.16(d) of the Credit
Agreement, as amended pursuant to this Agreement.
3. Amendments. Effective on the Effective Date (as
herein defined):
A. The following definitions are
added to Section 1.1 of the Credit Agreement in their appropriate
alphabetical order:
"Additional Equity Investment" shall mean the
additional purchase by Heico of equity of the Parent which is
made pursuant to Section 5.21, if any.
- 4 -
<PAGE> 5
"Additional Financing" shall mean the Indebtedness
permitted pursuant to Section 6.7(j).
"Additional Financing Commitments" shall mean
binding commitments from lenders providing Additional
Financing, which commitments shall be in form and substance
(including without limitation, the terms and conditions
thereof) satisfactory to the Administrative Agent.
"Consent and Amendment No. 7" means Consent and
Amendment No. 7 to this Agreement, dated as of December 31,
1998, among the Company, the Parent, the Lenders party
thereto, the Administrative Agent and the Collateral Agent.
"Heico" shall mean The Heico Companies, LLC.
"Heico Equity Documents" shall mean those documents
and agreements attached as Exhibit 1 to Consent and Amendment
No. 7, together with all other documents and agreements
executed and delivered in connection therewith, in each case
as amended, modified or supplemented from time to time in
accordance with, and subject to the terms of, this Agreement.
"Heico Registration Rights Agreement" shall mean the
Registration Rights Agreement, dated as of December 31, 1998,
between the Parent and Heico, as amended, modified or
supplemented from time to time in accordance with, and
subject to the terms of, this Agreement.
"Heico Shareholder Agreement" shall mean the
Shareholder Agreement, dated as of December 31, 1998, among
the Parent, Heico, Maroon Bells Capital Partners, Inc., Paul
A. Moore, Phillip S. Mageira and Theodore H. Swindells, as
amended, modified or supplemented from time to time in
accordance with, and subject to the terms of, this Agreement.
"Heico Stock Purchase Agreement" shall mean the
Series C Preferred Stock Purchase Agreement, dated as of
December 31, 1998, by and between the Parent and Heico, as
amended, modified or supplemented from time to time in
accordance with, and subject to the terms of, this Agreement.
- 5 -
<PAGE> 6
"Initial Heico Investment" shall mean the purchase
by Heico of equity of the Parent for a purchase price of
$7,500,000, pursuant to the Heico Equity Documents.
"Initial Heico Investment Proceeds" shall mean an
amount equal to $7,500,000 received by the Parent from the
consummation of the Initial Heico Investment.
"Second Heico Investment" shall mean the purchase,
if any, by Heico of an additional amount of equity of the
Parent, in addition to the Initial Heico Investment, which
additional purchase shall, if made, be made pursuant to the
Heico Equity Documents.
"Total Equity Investment" shall mean the purchase by
Heico of equity of the Parent for an aggregate purchase price
of $40,000,000 (inclusive of the Initial Heico Investment and
the Second Heico Investment (if any) pursuant to the Heico
Equity Documents.
"Total Equity Investment Proceeds" shall mean
proceeds received by the Parent from the consummation of the
Total Equity Investment in an amount not less than
$40,000,000.
B. Section 2.8(a)(i) of the Credit
Agreement is hereby amended by adding the following sentence to the
end thereof:
"Notwithstanding the foregoing provisions of this
Section 2.8(a)(i), the consummation of the Initial Heico
Investment, the consummation of the Second Heico Investment,
if any, the consummation of Total Equity Investment and the
consummation of the Additional Equity Investment, if any,
shall not constitute an Asset Sale for purposes of this
Section 2.8(a)(i)."
C. Section 2.8 (a)(ii) of the Credit
Agreement is hereby restated in its entirety to read as follows:
"(ii) Prepayments from Issuances of Take-Out
Securities and Other Indebtedness. Concurrently with the
receipt by the Parent, the Company or any of their
Subsidiaries of proceeds from the issuance of Take-Out
Securities and,
- 6 -
<PAGE> 7
except for issuances of Indebtedness permitted pursuant to
Sections 6.7(c) and 6.7(j) and for Permitted Financings, any
other Indebtedness, the Company shall prepay the Loan and
Senior Note in a principal amount equal to the lesser of the
proceeds thereof (net of expenses payable by the Parent, the
Company or any such Subsidiary to any Person other than an
Affiliate of the Company in connection with the issuances
thereof) or the aggregate principal amount of the Notes then
outstanding."
D. Section 2.8(d) of the Credit
Agreement is hereby amended by adding the following new subclause (v)
to the end thereof, which shall read as follows:
"(v) Notwithstanding the foregoing provisions of
this Section 2.8(d), a Change of Control shall not be deemed
to have occurred as a result of the consummation of the
Initial Heico Investment, the consummation of the Second
Heico Investment, if any, the consummation of the Total
Equity Investment, the consummation of the Additional Equity
Investment, if any, and the appointment and/or election of
the Board of Directors of the Parent and its Subsidiaries
contemplated by the Heico Equity Documents."
E. Section 5.16(d) of the Credit
Agreement is amended by adding the following sentences to the end
thereof:
"Notwithstanding the foregoing, the date set forth
in the first line of this Section 5.16(d) shall be extended
to January 25, 1999 if, and only if, the Initial Heico
Investment is made, and the Initial Heico Investment Proceeds
are received by the Parent, in each case on or prior to
January 5, 1999. The Initial Heico Investment Proceeds, the
proceeds of the Second Heico Investment, if any, and the
proceeds of the Total Equity Investment shall be applied
against the amount of cash proceeds required to be received
by the Parent pursuant to Section 5.16(d)(i). Upon
consummation of the Total Equity Investment and the execution
and delivery of one or more Additional Financing Commitments
providing for Additional Financing of at least $20,000,000,
Section 5.16 shall be deemed satisfied."
F. Section 6.7 of the Credit
Agreement is amended by deleting the word "and" appearing after clause
(h) therein; adding the word "and" after the semi-
- 7 -
<PAGE> 8
colon at the end of clause (i) therein, and adding a new subclause (j)
thereto which shall read as follows:
(j) on and after consummation of the Total
Equity Investment and receipt by the Parent of the Total
Equity Investment Proceeds, in addition to Permitting
Financings, equipment financings for the sole purpose of
enabling the Parent, the Company or any of their respective
Subsidiaries to finance the acquisition of equipment or to
refinance existing indebtedness constituting Permitted
Financing incurred for the acquisition of equipment and
indebtedness incurred for the financing of Indefeasible
Rights of Use of telephonic voice and/or date transmission
capacity ("IRU"), provided that (A) such financing is secured
solely by a security interest in the equipment or the IRU, as
the case may be, purchased from the proceeds of such
financing at the time of acquisition thereof and the proceeds
of such equipment or IRU, as the case may be, (B) the amount
of Indebtedness incurred for the acquisition of such
equipment or IRU, as the case may be, does not exceed the
fair value of the assets securing such Indebtedness at the
time of acquisition thereof, (C) all such financing shall be
evidenced pursuant to documentation in form and substance
(including, without limitation, the terms and conditions
thereof) reasonably satisfactory to the Administrative Agent
and (D) the aggregate amount of all such Indebtedness from
such equipment financing pursuant to this subclause (j),
together with all other Permitted Financings (including,
without limitation, all commitments for Permitted Financings
and Additional Financing Commitments, in each case whether or
not drawn), shall not exceed an aggregate amount of
$91,000,000.
G. Section 6.5(k) of the Credit
Agreement is amended by restating clause (k) in its entirety
to read as follows:
(k) on and after consummation of the Total
Equity Investment and receipt by the Parent of the Total
Equity Investment Proceeds Liens pursuant to a Permitted
Financing and Liens pursuant to Additional Financings,
provided, in each case, that (i) such Lien was created solely
for the purpose of securing Indebtedness pursuant to a
Permitted Financing or Additional Financing, as the case may
be, representing, or incurred to finance, the cost of the
respective property so acquired, (ii) such Lien shall not
extend nor cover any property of the
- 8 -
<PAGE> 9
Parent, Borrower, or any of their Subsidiaries other than the
respective property so acquired and the proceeds and products
thereof and (iii) the principal amount of Indebtedness
secured by any such Lien shall at no time exceed 100% of the
fair value of the respective property at the time it was so
acquired; and
H. Article V of the Credit Agreement
is amended by inserting the following new Section 5.21 after Section
5.20:
Section 5.21 Acceptance of Additional Equity.
The Parent covenants and agrees that, in the event Heico
desires from time to time to make additional investments in
the Parent by purchasing an additional amount of equity of
the Parent (in addition to the Total Equity Investment) of an
amount up to $10,000,000, which new equity shall be in form
and substance, and upon the same terms and conditions, as the
Total Equity Investment, the Parent shall sell such
additional equity to Heico at such time Heico desires to
purchase such additional equity.
I. Section 7.1(b) is amended by
adding the reference ",5.21" after the reference to "5.20" appearing
therein.
J. Section 6.21(b) of the Credit
Agreement is amended by (i) adding the phrase ", any Heico Equity
Document (including, without limitation, the Heico Stock Purchase
Agreement, the Heico Shareholder Agreement and the Heico Registration
Rights Agreement)" immediately after the phrase Minority Shareholder
Agreement" appearing therein and (ii) adding the following to end
thereof prior to the semi-colon:
", provided, that the Parent may amend its
certificate of incorporation for the purpose of adding a
Certificate of Designation for the equity to be purchased by
Heico pursuant to the Initial Heico Investment, the Second
Heico Investment (if any), the Total Equity Investment and
any Additional Equity Investment, which Certificate of
Designation shall contain terms consistent with the terms and
provisions of the Heico Equity Documents and may amend the
by-laws of the Parent to make modifications thereto
consistent with the terms of the Heico Equity Documents."
- 9 -
<PAGE> 10
4. Conditions to Effectiveness.
The effectiveness of this Agreement (such date of effectiveness, the
"Effective Date") is subject to the satisfaction of the following conditions
precedent:
(a) Execution of this Agreement. Each of the Parent, the
Company, the Agent, the Collateral Agent and the Lenders shall have
executed and delivered this Agreement.
(b) Equity Documents. The Administrative Agent shall
have received executed copies of the Heico Equity Documents in the
form set forth as Exhibit 1 hereto.
(c) Officers' Certificate. The Agent shall have received
a certificate, dated the Effective Date, and signed by both the Chief
Executive Officer and Chief Financial Officer of the Parent and the
Company, which certificate shall be in the form of Exhibit 2 hereto
(the "Officers' Certificate").
(d) Consummation of Initial Heico Investment. As of the
Effective Date, the Initial Heico Investment shall have been
consummated in accordance with the terms and conditions of the Heico
Equity Documents and all applicable laws. As of the Effective Date,
there does not exist any judgment, order, or injunction prohibiting
the consummation of the Initial Heico Investment or the performance by
the Parent of its obligations under the Heico Equity Documents. The
Heico Equity Documents (and the transactions contemplated thereby)
shall have been duly approved by the boards of directors and, if
required by applicable law, the stockholders of the parties thereto,
and all Heico Equity Documents shall have been duly executed and
delivered by the parties thereto and shall be in full force and
effect. Other than the effectiveness of this Agreement, each of the
conditions precedent to the obligation of the parties to consummate
the Initial Heico Investment as set forth in the Heico Equity
Documents shall have been satisfied to the reasonable satisfaction of
the Administrative Agent, or waived with the consent (which consent
shall not be unreasonably withheld or delayed) of the Administrative
Agent and the Initial Heico Investment shall have been consummated in
accordance with the Heico Equity Documents (without giving effect to
any amendment or modification of the Heico Equity Documents or waiver
with respect thereto unless consented to by the Administrative Agent
(which consent shall not be unreasonably withheld or delayed)) and all
applicable laws, rules and regulations.
- 10 -
<PAGE> 11
(e) Representations and Warranties. The representations
and warranties of the Parent set forth in Section 7 of this Agreement
shall be true and correct in all material respects on such date.
(f) Heico Side Letter. Heico shall have delivered a
letter, in form and substance reasonably satisfactory to the Agent,
acknowledging that Heico will take actions which are necessary to
authorize the Parent and any of the Insiders to perform their respect
obligations under the Insider Side Letter and Section 5.18 of the
Credit Agreement.
5. Waiver of Defaults/Events of Default. Based on the
certifications to the Agent and the Lenders set forth in the Officers'
Certificate, the Agent and the Lenders, subject to the terms set forth in this
Section 5, hereby waive any Default or Event of Default existing on the
Effective Date arising from any event or condition in existence prior to the
Effective Date; provided, however, that (i) in the event the certification set
forth in the Officers' Certificate, or any information or fact contained
therein, is, with actual knowledge of any officer of the Parent and Company
executing such Officers' Certificate, incorrect, then, notwithstanding the
foregoing, any Default or Event of Default which was waived pursuant to this
Section 5 shall be reinstated and shall not be deemed waived and the Agent,
Lenders and Collateral Agent shall be entitled to all of their rights and
remedies under the Finance Documents in respect thereof and (ii) the waiver set
forth herein shall not extend to any event or condition, or Default or Event of
Default, arising on and after the Effective Date.
6. Suspension of Insider Letter Agreement and Section 5.18 of
the Credit Agreement. Subject to (i) the consummation of the Initial Heico
Investment and the receipt of the Initial Heico Investment Proceeds by January
5, 1999 and (ii) receipt of the letter referred to in Section 4(f) of this
Agreement, the Agent and the Lenders agree that the obligations of the Insiders
under the Insider Letter Agreement and Section 5.18 of the Credit Agreement
shall be suspended until January 25, 1999 and, if the Total Equity Investment
is made and the Total Equity Investment Proceeds are received by the Parent by
such date, thereafter until the earlier of (A) June 23, 1999 and (B) the
occurrence of an Event of Default (the "Suspension Period") and, upon repayment
of the Obligations in full, agree that such Insider Letter Agreement shall
terminate and the Insiders shall be released from any and all obligations
thereunder and under Section 5.18 of the Credit Agreement. Notwithstanding the
foregoing or any provision of the Insider Letter Agreement, such obligations of
the Insiders shall be reinstated and be in full force
- 11 -
<PAGE> 12
and effect at the end of the Suspension Period notwithstanding the satisfaction
of the terms and provisions of Section 5.16, until all Obligations have been
repaid in full.
7. Termination of Purchase Option. Subject to the consummation
of the Total Equity Investment and receipt by the Parent of the Total Equity
Investment Proceeds, the terms and provisions of Section 5.17 will be
terminated and of no force and effect.
8. Representations and Warranties. The Parent hereby represents
and warrants to the Agent and the Lenders that (i) each of the Heico Equity
Documents constitutes the legal, valid and binding obligation of the Parent,
enforceable against the Parent in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereinafter in effect affecting the
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law) and (ii) all corporate action on the part of the Parent, its directors and
shareholders necessary for the authorization, execution, delivery and
performance by the Parent of the Heico Equity Documents, and the consummation
of the transactions contemplated thereby, and for the authorization, issuance
and delivery of the equity to be issued pursuant thereto, has been taken.
9. Applicable Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
10. No Novation. This Agreement shall not extinguish the
obligations for the payment of money outstanding under the Credit Agreement or
any Note or discharge or release the Lien or priority of any security
agreement, any pledge agreement or any other security therefor or discharge any
obligation under any guaranty. Nothing herein contained shall be construed as a
substitution or novation of the Obligations outstanding under the Credit
Agreement or instruments securing the same, which shall remain in full force
and effect, except as modified hereby or by instruments executed concurrently
herewith. Nothing expressed or implied in this Agreement, the Credit Agreement,
or any other document contemplated hereby or thereby shall be construed as a
release or other discharge of the Company, the Parent or any Guarantor under
the Credit Agreement or any Pledgor or Grantor under any Security Document from
any of its obligations and liabilities as a "Company", "Parent", "Guarantor",
"Pledgor" or "Grantor" under the Credit Agreement or the Security Documents or
any other Finance Document. Whenever the term "Credit Agreement" is used in any
of the Finance Documents it
- 12 -
<PAGE> 13
shall mean and refer to the Credit Agreement as modified pursuant hereto. Each
of the Credit Agreement and the other Finance Documents shall remain in full
force and effect, except as expressly modified hereby.
11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract.
12. Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
13. Payment of Expenses. In furtherance of the provisions of
Section 9.1 of the Credit Agreement, the Parent and Company shall jointly and
severally, whether or not the transactions hereby contemplated are consummated,
upon demand of the Administrative Agent pay all reasonable out-of-pocket costs
(including legal fees), charges and expenses of the Administrative Agent and
Collateral Agent in connection with the negotiation, preparation, execution and
delivery of this Agreement (including, without limitation, all such
out-of-pocket costs (including legal fees), charges and expenses in connection
with matters relating to the Initial Heico Investment, the Second Heico
Investment, the Total Equity Investment, the Additional Financing, the
Additional Commitments, and the documents and instruments referred to herein,
and otherwise reviewed in connection herewith and therewith).
- 13 -
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the date and year
first above written.
WORLDPORT INTERNATIONAL, INC.
by
-----------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS, INC.
by
-----------------------------------------
Name:
Title:
<PAGE> 15
BANKERS TRUST COMPANY
as Administrative Agent and Collateral Agent
by
------------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION
as Lender
by
------------------------------------------
Name:
Title:
<PAGE> 16
DREYFUS PREMIER LIMITED TERM HIGH
INCOME FUND
by
-----------------------------------------
Name:
Title:
<PAGE> 17
EXHIBIT 1
Heico Equity Documents
<PAGE> 18
EXHIBIT 2
FORM OF OFFICERS' CERTIFICATE
OFFICERS' CERTIFICATE
WORLDPORT COMMUNICATIONS, INC.
WORLDPORT INTERNATIONAL, INC.
This Officers' Certificate is delivered to Bankers Trust Company, as
Administrative Agent (in such capacity, the "Agent") and collateral agent (in
such capacity, the "Collateral Agent") and the financing institutions
(collectively, the "Lenders"), which are a party to the Credit Agreement, dated
as of June 23, 1998 (as in effect, the "Credit Agreement") by and among
WorldPort Communications, Inc., a Delaware corporation ("WorldPort") WorldPort
International, Inc., a Delaware corporation (the "Borrower"), the Lenders, the
Administrative Agent and the Collateral Agent, pursuant to, and as required by,
Section 4(d) of Consent and Amendment No. 7, dated as of December __, 1998, to
the Credit Agreement. Unless otherwise defined herein, capitalized terms used
herein have the meanings provided in the Credit Agreement.
The undersigned, Paul A. Moore, Chief Executive Officer of WorldPort
and the Borrower, and Phillip S. Mageira, Chief Financial Officer of WorldPort
and the Borrower, hereby certify to the Agent, Collateral Agent and Lenders as
follows:
<PAGE> 19
1. The undersigned are duly elected and acting officers of
WorldPort and the Borrower with the offices referred to above, and
acknowledge that the Agent, the Collateral Agent and the Lenders are
relying on the certifications herein in connection with Consent and
Amendment No. 7.
2. Except as specifically described on Schedule 1 hereto, no
Default or Event of Default has occurred and is continuing on the date
hereof.
IN WITNESS WHEREOF, the undersigned have duly executed this Officers'
Certificate as of this ____ day of December, 1998.
WORLDPORT COMMUNICATIONS, INC.
By:
---------------------------------------
Paul A. Moore
Chief Executive Officer
By:
---------------------------------------
Phillip S. Mageira
Chief Financial Officer
WORLDPORT INTERNATIONAL, INC.
By:
---------------------------------------
Paul A. Moore
Chief Executive Officer
By:
---------------------------------------
Phillip S. Mageira
Chief Financial Officer
- 3 -
<PAGE> 20
Schedule 1
Description of Defaults and
Events of Default
<PAGE> 1
EXHIBIT 10.15
WORLDPORT COMMUNICATIONS, INC.
1825 Barret Lakes Blvd.
Atlanta, Georgia 30144
December 31, 1998
Maroon Bells Capital Partners, Inc.
100 California Street, Suite 1160
San Francisco, CA 94111
Gentlemen:
This letter confirms our agreement with respect to the termination of
the Maroon Bells Capital Partners, Inc. Advisory Agreement for WorldPort
Communications, Inc., dated March 7, 1997, as amended (the "Advisory
Agreement").
WorldPort Communications, Inc. ("WorldPort") and Maroon Bells Capital
Partners, Inc. ("MBCP") hereby agree that all of the terms and agreements in
the Advisory Agreement, other than the provisions in paragraphs VI and VII of
the Advisory Agreement which shall survive, shall be terminated and of no
further force and effect as of January 1, 1999. WorldPort and MBCP agree that
all amounts due to MBCP pursuant to the Advisory Agreement, whether in the form
of retainer, fees, expense reimbursement, or otherwise, aggregate not more than
$2,865,914 and shall be fully satisfied by this agreement of WorldPort to
deliver to MBCP, the following:
(i) up to $214,000 in cash as payment for unpaid retainer
payments and reimbursement of expenses incurred on behalf of WorldPort prior to
the date hereof, all as supported by appropriate documentation, payable within
ten days after WorldPort's receipt of $40 million of gross proceeds from equity
financing on or after the date of this agreement;
(ii) the assignment to MBCP or its assigns of all rights to
principal and interest payments and other rights under (a) the Promissory Note
of Paul A. Moore, dated June 1, 1998, in the original principal amount of
$485,400, under which $518,314 (including accrued interest) is outstanding, and
the Pledge Agreement related thereto, (b) the Promissory Note of Phillip S.
Magiera, dated June 1, 1998, in the original principal amount of $532,100,
under which $568,181 (including accrued interest) is outstanding, and the
Pledge Agreement related thereto, and (c) the indebtedness of Theodore
Swindells, dated June 1998, under which $535,425 (including accrued interest)
is outstanding; and
(iii) shares of non-participating preferred stock of WorldPort,
which will carry one vote per share, have an aggregate liquidation value of
$1,029,994 and be convertible into Common Stock of WorldPort at $ 3.25 per
share, to be issued not later than January 25, 1999.
<PAGE> 2
Except as set forth above, WorldPort has no further obligations to
MBCP under the Advisory Agreement.
Please acknowledge that this letter accurately and fully reflects our
agreement with respect to the Advisory Agreement by executing and delivering
the enclosed copy of this letter.
WORLDPORT COMMUNICATIONS, INC.
By:
----------------------------------------
Agreed and Accepted:
MAROON BELLS CAPITAL PARTNERS, INC.
By:
------------------------------------
<PAGE> 1
EXHIBIT 10.16
CONFIDENTIAL TREATMENT REQUESTED FOR PORTIONS OF THIS DOCUMENT.
PORTIONS FOR WHICH CONFIDENTIAL TREATMENT IS REQUESTED ARE DENOTED BY
["ECONOMIC TERMS OMITTED"]. MATERIAL OMITTED HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CO-LOCATION
SERVICE ORDER FORM
CUSTOMER INFORMATION
Customer Name: WorldPort Communications, Inc.
---------------------------------------------------------------
Customer Address: Street: 1825 Barrett Lakes Blvd City: Kennesaw
------------------------------------- ----------------
State: GA Zip: 30144
------------------------------- -------------------
Phone: (770) 792-735 Fax: (770) 792-0676 E-Mail:wrdp.com
-------------------------------------------------------------
Billing Address: Street: Same City: State: Zip:
------ ------------ ------ ---------
Customer Contact: Patricia Griggs
-------------------------------------------------------------
Street: Same City: State: Zip:
---------- ------------------- -- -----------
Phone: (770) 792-5812 Fax: (770) 792-0676 E-Mail:[email protected]
---------------------------------------------------------------
Your signature on this Service Order acknowledges that you understand and accept
the terms and conditions set forth below, that you are duly authorized to
execute this Service Order on Customer's behalf, and that Customer agrees to be
bound by the provisions hereof (including terms contained in the Standard Terms
and Conditions).
CUSTOMER ACCEPTANCE
- -----------------------------
Authorized Customer Signature
- --------------------------
Date
- --------------------------
Typed or Printed Name
- --------------------------
Title
LEVEL 3 ACCEPTANCE
- ----------------------------
Authorized Level 3 Signature
- ----------------------------
<PAGE> 2
Date
- -------------------------
Typed or Printed Name
- --------------------------
Title
COLLOCATION TERMS AND CONDITIONS:
1. This Service Order is entered into pursuant to the terms of the Standard
Terms and Conditions for Delivery of Products or Services ("Standard Terms and
Conditions") issued by Level 3 Communications, LLC ("Level 3"), a current copy
of which has been made available for Customer's review (either electronically or
in hard copy). The Standard Terms and Conditions are hereby incorporated into
the terms hereof.
2. Customer is hereby granted the right to occupy the space ("Space") identified
in "Customer Order Forms." Each Customer Order Form, when submitted and accepted
by Level 3, shall be incorporated into and become a part of this Service Order.
Customer may submit multiple Customer Order Forms requesting use of different
Space, each of which shall be governed by the terms of this Service Order
(including the Standard Terms and Conditions). Customer Order Forms may be
submitted in any fashion specified by Level 3 (including, but not limited to,
electronic submission).
3. Customer shall be permitted to use the Space only for placement and
maintenance of communications equipment which shall be interconnected to the
network services offered by Level 3. Customer may use the Space to cross connect
to the facilities of other communications carrier if and only if Level 3 cannot
or will not provide such services to Customer on commercially reasonable terms.
4. During the term for use of the Space set forth in each Customer Order Form,
Customer shall commit to use, order and pay for Level 3 network communications
services (not including monthly recurring fees charges for the use of the Space
with monthly recurring charges of at least ["ECONOMIC TERMS OMITTED"] for each
cabinet (["ECONOMIC TERMS OMITTED"] for each half cabinet) of Space ordered by
Customer. Customer shall achieve the minimum service level no later than six (6)
months after submission and acceptance of each Customer Order Form. Level 3 may
terminate use of the Space in the event Customer does not satisfy this minimum
service commitment.
5. Level 3 shall perform such janitorial services environmental systems,
maintenance, power plant maintenance and other actions as are reasonably
required to maintain the facility in which the Space is located in good
condition which is suitable for the placement of communications equipment.
Customer shall maintain the Space in orderly and safe condition, and shall
return the Space to Level 3 at the conclusion of the term set forth in the
Customer Order Form in the same condition (reasonable war and tear expected) as
when such Space was delivered to Customer.
[INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST]
<PAGE> 3
6. The term of use of the Space shall begin on the later to occur of the date
requested by Customer or the date that Level completes the build-out of the
space. Customer's use of the Space beyond the initial term shall be on a
month-to-month basis, unless Customer and Level 3 have agreed in writing to a
renewal of the right to use such Space.
7. Level 3 shall use reasonable efforts to complete the build-out and make the
Space available to Customer on or before the date requested by Customer. In the
event that Level 3 fails to complete the build-out within sixty (60) days of the
date requested by Customer, then Customer may terminate its right to use such
Space and receive a refund of any fees paid for the use or build-out of such
Space.
8. Level 3 shall have the right to terminate customer's use of the Space in
the event that (a) Level 3's right to use the facility within which the Space is
located terminates or expires for any Reason; (b) Customer has violated the
material terms hereof (including the Standard Terms and Conditions Or any
Service Order submitted thereunder); (c) Customer makes any material alterations
to the Space without first obtaining the written consent of Level 3' (d)
Customer allows personnel or contractors to enter the Space who have not been
approved by Level 3 in advance; or (e) Customer violates any posted or otherwise
communicated rules relating to use of or access to the Space. Level 3 shall use
reasonable efforts to notify Customer of any events that may result in
termination of the use of the Space
9. Customer shall pay all monthly recurring fees, cross-connect fees, power
charges and nonrecurring fees specified in each Customer Order Form.
10. Level 3 reserves the right at its own expense to change the location or
configuration of the Space provided, however, that Level 3 shall not arbitrarily
or discriminatorily require such changes. Level 3 and Customer shall work in
good faith to minimize any disruption in Customer's service that may be caused
by such changes in location or configuration of the Space.
11. Customer shall procure and maintain the following insurance coverage's
during the term of its use of Space: (a) Comprehensive General Liability
Insurance in an amount not less than one million dollars per occurrence for
personal injury and property damage; (b) Employers' Liability Insurance in an
amount not less than five hundred thousand dollars; (c) Workers' Compensation
Insurance in an amount not less than the prescribed statutory limits. Level 3
shall be named as an additional insured on such policies. Customer shall furnish
to Level 3 certificates of insurance respecting the foregoing coverages upon
request of Level 3.
12. The liability of Level 3 for damages arising our of the furnishing of
Services or Products, including but not limited to mistakes, omissions,
interruptions, delays, tortuous conduct or errors, or other defects arising out
of the failure to furnish Services or Products, whether caused by acts of
commission or omission, shall be limited to the charges paid by customer for the
use o the pace hereunder. The extension of such refunds shall e the sole remedy
of Customer and the sole liability of Level 3. Level 3 shall in no event be
liable for any indirect, l incidental, special, consequential, exemplary or
punitive damages (including but not limited to damages for lost profits or lost
revenues). Customer may suffer, whether or not caused by the international acts
or omissions or
<PAGE> 4
negligence of Level 3's employees or agents, and regardless of whether Level 3
have been informed of the possibility or likelihood of such damages.
<PAGE> 5
ADDENDUM TO CO-LOCATION SERVICE ORDER FORM
This Addendum to Co-Location Service Order Form (the "Addendum")
modifies the Co-Location Service Order Form (the "Service Order") between
WorldPort Communications, Inc. ("Customer") and Level 3 Communications, LLC
("Level 3") dated __November 13, ______, 1998 ("Effective Date"). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Service Order. The terms and conditions contained in this Addendum modify the
terms and conditions set forth in the Service Order in the following respects:
1. IDENTIFICATION OF SPACE. The "Space" shall consist of up to 3,000 square feet
of floor space in Level 3's gateway facility in New York, NY.
2. TERM. Section 1 of the Service Order is hereby amended by adding the
following:
"The term of this Service Order shall commence on the Effective Date
and end five (5) years from the date that Level 3 makes the Space
available for use. The term for Customer's use of the Space shall
commence on the date that Level 3 makes the Space available for user
and shall end five (5) years thereafter. Thereafter, this Service Order
(and Customer's use of Space) will continue on a month to month basis
until either party gives the other party thirty (30) days prior written
notice of its intent to terminate or until the parties finalize another
agreement."
3. SECTION 3 OF SERVICE ORDER. Section 3 of the Service Order is hereby
deleted and replaced with the following:
"3. Customer shall be permitted to use the space only for placement and
maintenance of communications equipment. Customer will procure access
capacity (from Level 3 or from other carriers, as provided below) and
place the required interconnection equipment within the Space. Customer
will purchase access capacity to the Space from Level 3 if Level 3
offers such access capacity on terms better than or equal to terms
offered by other carriers and Customer has no strategic or commercial
reasons for purchasing access capacity from another carrier. Except as
otherwise agreed by Level 3 in writing, charges for access circuits to
and from locations within Level 3's "Standard Service Area" or "SSA"
are as set forth in Exhibit A."
4. SECTION 4 OF SERVICE ORDER. Section 4 of the Service Order Form
is hereby deleted and replaced with the following:
"4. During the five year term for use of the Space, Customer shall
commit to use, order and pay for Level 3 network communications
services (not including monthly fees charged for use of the Space) with
monthly recurring charges which shall at least equal the following
amounts (collectively, the "Monthly Minimum Commitment"):
<PAGE> 6
(a) between six (6) months after the commencement of
Customer's use of Space and twelve (12) months after the commencement
of Customer's use of Space, the Monthly Minimum Commitment shall be
["ECONOMIC TERMS OMITTED"]; and
(b) thereafter and for the balance of the five year term for
use of the Space, the Monthly Minimum Commitment shall be ["ECONOMIC
TERMS OMITTED"].
Customer shall be liable for shortfall charges equal to the difference
between the Monthly Minimum Commitment and Customer's actual invoiced
amount for Level 3 network communications services in any month where
the Monthly Minimum Commitment is not satisfied. In the event that
Customer fails to pay the Monthly Minimum Commitment, plus any
shortfall charges applicable, for any month during the term, Level 3
may terminate use of the Space."
5. SECTION 6 OF SERVICE ORDER. Section 6 of the Service Order shall be
deleted in its entirety.
6. SECTION 7 OF SERVICE ORDER. Section 7 of the Service Order shall be
deleted and replaced with the following:
"7. Level 3 shall make the Space available for User's
installation of equipment on or before December 1, 1998. In the event that Level
3 fails to make the Space available to Customer or fails to provide other
Services and Products within five (5) business days of such date, then Customer
may without liability, immediately terminate this Service Order and receive a
refund of any fees or charges paid to Level 3 prior to termination. Customer
acknowledges that Level 3 intends to make the Space available to Customer in
advance of the completion by Level 3 of construction of the private room that
will be occupied by Customer, and that Level 3 anticipates that it will complete
such construction within 60 days after the date for occupancy of the Space
referenced above. During such period of time, Customer's equipment will not be
separately secured from the facility occupied by Level 3, and Level 3 shall not
be responsible for any damage to or loss of equipment which occurs
notwithstanding Level 3's compliance with its procedures for access to the
gateway facility."
7. SECTION 8 OF SERVICE ORDER. Subparagraph (b) of Section 8 of the
Service Order is hereby amended to read as follows:
"(b) Customer has violated a material term hereof (including
the Standard Terms and Conditions or any Service Order
submitted thereunder)".
[INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST]
<PAGE> 7
8. SECTION 8 OF SERVICE ORDER. The last sentence of Section 8 of the
Service Order is hereby deleted and replaced with the following:
"Except as may be required to conform to applicable law or to
protect Level 3's gateway facility or the equipment located therein, Level 3
shall provide at least thirty (30) days prior written notice of its intent to
terminate the Service Order under this section."
9. SECTION 12 OF SERVICE ORDER. The first sentence of Section 12 of the
Service Order is hereby amended to read as follows:
"The liability of Level 3 for damages arising out of the provision of
the Space, including but not limited to mistakes, omissions,
interruptions, delays, tortious conduct or errors, or other defects,
whether caused by acts of commission or omission, shall be limited to
the balance of the monthly recurring charges for use of the Space for
the remaining term of the use of the Space."
10. PRICING. The pricing for the Space (monthly recurring charges and
nonrecurring charges) to be provided hereunder is set forth in Exhibit A,
attached hereto and incorporated herein by this reference. In addition, the
pricing for certain Level 3 network communications services (which will be
ordered by Customer under a separate service order for private line services) is
set forth in Exhibit A. The pricing for private line services set forth in
Exhibit A shall be applicable for the first two (2) years after Customer's
commencement of the use of the Space. Provided that Customer is then satisfying
the Monthly Minimum Commitment set forth herein, Level 3 agrees to meet and
negotiate in good faith reduced rates for the private line services to be
delivered after such two (2) year period so that the prices to be paid by
Customer for such services are consistent with the prices paid by other
customers of Level 3 at such time under similar terms and conditions.
11. SITE PREPARATION. Level 3 shall be responsible for performing work
necessary for the preparation of the Space. Prior to commencement of such site
preparation, Level 3 shall provide Customer with an estimate of the costs of
performing such site preparation. After completion of such work, Level 3 shall
deliver an invoice to Customer and Customer shall be responsible for payment
thereof. The amount invoiced for the performance of the site preparation shall
(unless changes have been ordered by Customer) be reasonably consistent with the
amount set forth in the estimate. Customer shall be responsible for the
installation of equipment (a list of the equipment to be installed within the
Space is attached hereto and labeled as the "Initial Configuration" and the
"Final Configuration") within the Space. Customer shall, prior to commencement
of such installation work, provide Level 3 with reasonably detailed plans,
specifications and drawings for the equipment installation to be performed by
Customer. Installation work shall not begin until after Level 3 provides written
approval of such plans, specifications and drawings, such approval not to be
unreasonably withheld, conditioned or delayed. Customer shall complete the
installation in a timely fashion and in compliance with any approved plans,
specifications and drawings.
<PAGE> 8
CUSTOMER ACCEPTANCE LEVEL 3 ACCEPTANCE
By: /s/ Daniel M. Wickersham By: /s/ Joseph J. De Petro
----------------------------------- ----------------------------------
Its: President - Ch. Optg. Off. Its: Vice President Wholesale Services
----------------------------------
Date: 13 November 1998 Date: 13 November 1998
---------------------------------- ---------------------------------
<PAGE> 9
EXHIBIT A
PRICING FOR SPACE AND SERVICES
A. Charges for Use of Space.
>> Monthly Recurring Charge: ["ECONOMIC TERMS OMITTED"] per square foot of
Space (["ECONOMIC TERMS OMITTED"] per month for a 3,000 square foot
Space in a gateway facility).
>> Power Charges: ["ECONOMIC TERMS OMITTED"] per month per amp at 48 volt
(DC only).
B. Charges for Delivery of Certain Network Communications Services.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------- ---------------------------------------
MONTHLY RECURRING NONRECURRING (INSTALLATION)
CHARGE CHARGE
- ----------------------------------------------------------------------- ---------------------------------------
<S> <C> <C> <C>
DS-3 Private Line Service ["ECONOMIC TERMS OMITTED"] per ["ECONOMIC TERMS OMITTED"]
DS-0mile per DS-3
OC-3 Private Line Service ["ECONOMIC TERMS OMITTED"] per ["ECONOMIC TERMS OMITTED"] per OC-3
DS-0mile per OC-3
DS-3 Access Service* ["ECONOMIC TERMS OMITTED"] per ["ECONOMIC TERMS OMITTED"] per DS-3
DS-3
Cross Connects ["ECONOMIC TERMS OMITTED"] per DS-3 None
DS-3
equivalent
- ----------------------------------------------------------------------- ---------------------------------------
</TABLE>
*From the Level 3 gateway facility to a location within Level 3's "Standard
Service Area" or "SSA."
Private Line Services must be ordered for a minimum term of one year. Mileage
for DS-3 and OC-3 circuits is measured on a V&H ("air miles") basis. Pricing is
applicable only to Private Line Services available on Level 3's owned or leased
network. Orders for Private Line Service will be governed by the terms of Level
3's standard service order form, which shall be executed at the time Customer
submits its first order for such Services.
Notwithstanding the foregoing pricing, the minimum Monthly Recurring Charge for
any DS-3 circuit (other than an access circuit) shall be ["ECONOMIC TERMS
OMITTED"] and the minimum Monthly Recurring Charge for any OC-3 circuit shall be
["ECONOMIC TERMS OMITTED"].
International private line services shall be priced on an individual case basis.
[INFORMATION ON THIS PAGE SUBJECT TO CONFIDENTIAL TREATMENT REQUEST]
<PAGE> 10
STANDARD TERMS AND CONDITIONS
FOR DELIVERY OF PRODUCTS OR SERVICES
These Standard Terms and Conditions for Delivery of Products or
Services (the "Standard Terms and Conditions") shall be applicable to Service
Orders executed by Level 3 Communications, LLC ("Level 3") and Customer, and
these Standard Terms and Conditions shall be incorporated into each Service
Order.
DEFINITIONS
Confidential Information: Licensed Software, and all source code, source
documentation, inventions, know-how, and ideas, updates and any documentation
and information related to the Licensed Software, and any non-public information
regarding the business of the other party provided to either party by the other
party where such information is marked or otherwise communicated as being
"proprietary" or "confidential" or the like.
Customer: The person, firm or corporation which orders Service and is
responsible for the payment of charges and compliance with these Standard Terms
and Conditions.
End User: A person, firm or corporation which is designated by the Customer and
approved by Level 3 as a user of Level 3's Service furnished to Customer
hereunder.
Licensed Software: Computer software, in object code format only, the use of
which is required for use of Products or Services ordered by Customer hereunder.
Premises: The space occupied by a Customer or End User in a building or
buildings or contiguous property (except railroad rights of way, etc.) not
separated by a highway.
Products: The equipment or materials to be sold, licensed or leased to Customer
pursuant to a Service Order.
Service: Any communications service offered by Level 3 pursuant to a Service
Order.
Service Order: The request for Level 3 Services submitted by the Customer in the
format devised by Level 3. The submission of a Service Order by the Customer and
acceptance thereof by Level 3 initiates the respective obligations of the
parties as set forth therein and pursuant to these Standard Terms and
Conditions.
Term Service Order: A Service Order between Level 3 and a Customer for the
delivery of Services or Products for a stated minimum duration and/or containing
a minimum level of consumption.
SECTION 1. SERVICE ORDERS
1.1 Submission of Service Orders Customer may submit to Level 3 Service Orders
for the provision
<PAGE> 11
of Products and/or Services desired to be ordered by Customer.
Each Service Order shall be submitted on a form designated by Level 3. The
Service Orders shall set forth the Services and Products ordered (and, if
Products are ordered, whether such Products shall be sold to, leased by or
licensed to Customer), the locations for delivery of same, the prices to be
charged for same, any applicable term and/or minimum volume commitments and
other terms and conditions as the parties may determine.
1.2 Undertaking of Level 3 Level 3 undertakes to furnish Services and Products
in accordance with these Standard Terms and Conditions, and any Service Orders
executed by Customer and Level 3. All title to equipment or materials used to
deliver the Services (except such Products as are sold to Customer under a
Service Order) shall be and remain with Level 3.
SECTION 2. TERMINATION AND TERMINATION CHARGES
2.1 Cancellation of Service Order Prior to Initiation of Service Customer may
cancel a Service Order prior to initiation of Service or prior to the delivery
of Products, provided, however, that Customer may be responsible for the
cancellation charges set forth in these Standard Terms and Conditions (or in any
applicable Term Service Order).
2.2 Cancellation of Service Order After Initiation of Service Subject to
cancellation charges referenced herein, Customer may have Service delivery
discontinued upon thirty (30) days written notice to Level 3. Customer shall be
liable for payment of all invoices for Services furnished until the effective
date for cancellation.
2.3 Termination Liability In the event that Customer discontinues Service or
Products prior to the end of an agreed term with respect to which a Term Service
Order has been executed, or in the event that Level 3 terminates delivery of
such Service or Products due to a failure by Customer to comply with the terms
hereof (or of any Term Service Order), Customer shall pay a termination charge
in an amount determined by Level 3. The termination charge shall be no greater
than the sum of: (a) the monthly recurring charges or minimum monthly commitment
made in the Service Order that would have been due through the end of the agreed
term for the cancelled Service or Products, (b) a recapture of any nonrecurring
charges that had been waived by Level 3 upon installation of the cancelled
Service or Product, (c) a recapture of any discounts provided to Customer in
connection with the ordering of the Service or Product, and (d) reimbursement
for all expenses (including capital expenses) incurred by Level 3 in installing
any facilities required to deliver the cancelled Services or Products.
SECTION 3. BILLING AND PAYMENT
3.1 Payment and Rendering of Bills Level 3 shall bill all charges incurred by
and credits due to Customer on a monthly basis (unless otherwise agreed by Level
3 and Customer). Customer may direct Level 3 to deliver bills in any of the
following formats: 1) a paper format (which shall be the format for the billing
in the event Customer does not direct Level 3 otherwise), 2) a paper format bill
summary with a magnetic tape to provide the detailed information of the bill, 3)
magnetic tape only, 4) computer disc, or 5) electronic transmission. Level 3
shall bill in advance charges for all Services and Products to be provided
during the ensuing month except for charges which are dependent upon usage of
Service
<PAGE> 12
or Products (which charges shall be billed in arrears). Adjustments for the
quantities of Service or Products established or discontinued in any billing
period will be prorated to the number of days based on a 30-day month. Level 3
will, upon request and if available, furnish such detailed information as may
reasonably be required for verification of the bill.
3.2 Payment of Bills All bills are due thirty (30) days from the date of
issuance of the bill. If any portion of the payment is received by Level 3 after
the payment due date as set forth above, or if any portion of the payment is
received by Level 3 in funds which are not immediately available to Level 3,
then interest on the unpaid balance shall be due at a rate of 1.5% per month
(0.049315% per day), or the highest rate allowed by law, whichever is less.
Interest will be applied for the number of days from the payment due date to and
including the date that Customer actually makes payment to Level 3.
3.3 Taxes and Fees Customer shall be responsible for payment of all sales, use,
gross receipts, excise, access, bypass, franchise or other local, state and
Federal taxes, fees, charges, or surcharges, however designated, imposed on or
based upon the provision, sale or use of the Services or Products delivered by
Level 3. Such taxes shall be separately stated on Customer's bill. Any state or
local tax, fee, charge, or surcharge shall be payable only for Services or
Products that are subject to such imposition.
3.4 Disputed Bills In the event that Customer disputes any portion of the
charges contained in a bill, Customer must pay the undisputed portion of the
invoice in full and submit a documented claim for the disputed amount. All
claims must be submitted to Level 3 within 60 days of receipt of billing for
those Services. If Customer does not submit a claim within such period and in
the manner stated above, Customer waives all rights to dispute such charges.
Unless disputed, the invoice shall be deemed to be correct and payable in full
by Customer.
3.5 Deposits Level 3 may, in order to safeguard its interests, require any
Customer to make a deposit as a condition to Level 3's acceptance of any Service
Order submitted by Customer, which deposit shall be held by Level 3 as a
guarantee of the payment of rates and charges. A deposit may not exceed the
actual or estimated rates and charges for the Service or Product for a two month
period. At such time as the provision of Service or Products to Customer are
terminated, the amount of the deposit will be credited to Customer's account and
any credit balance which may remain will be refunded. In case of a cash deposit,
for the period the deposit is held by Level 3, simple annual interest will be
applied to the deposit for the number of days from the date the deposit is
received by Level 3 to and including the date such deposit is credited to
Customer's account or the date the deposit is refunded by Level 3. Deposits held
will accrue interest at the greater rate of 3% per annum or the rate mandated by
applicable law.
3.6 Fraudulent Use of Services Customer shall be solely responsible for all
charges incurred respecting the Services or Products, even if such charges were
incurred through or as a result of fraudulent or unauthorized use of the
Services or Products.
SECTION 4. CANCELLATION OF SERVICE ORDERS
4.1 Cancellation of Service Order by Level 3
<PAGE> 13
A. For nonpayment: Level 3 may, upon three (3) days written notice to Customer,
discontinue Service or the delivery of Products without incurring any liability
when there is an unpaid balance for Service or Products that is overdue.
B. For returned checks: A Customer whose check or draft is returned unpaid for
any reason shall be subject to discontinuance of Service or Products immediately
and without advance written notice from Level 3.
C. For any violation of law or of any of the provisions governing the furnishing
of Service or Products: Any Service Order shall be subject to cancellation,
without notice, for any violation of any law, rule, regulation or policy of any
government authority having jurisdiction over Service or Products, or for
"spamming" in violation of Level 3's then-current policies, or by reason of any
order or decision of a court or other government authority having jurisdiction
which prohibits Level 3 from furnishing such Service or Product.
D. For other causes: A Customer shall be subject to discontinuance of Service or
Products, without notice, in the event of a breach of a Service Order, suspected
fraud or other unlawful use of the Service or Product, or fraud or
misrepresentation in any submission of information required in a Service Order
or any other information submitted to Level 3.
E. For any Customer filing of bankruptcy or reorganization or failing to
discharge an involuntary petition therefor within the time permitted by law:
Level 3 may immediately discontinue or suspend delivery of Service or Products
without incurring any liability.
4.2 Effect of Cancellation Upon Level 3's discontinuance of Service to Customer
under any of the foregoing subparagraphs, Level 3 may, in addition to all other
remedies that may be available to Level 3 at law or in equity or under any other
provision of a Service Order, assess and collect from Customer a termination
charge for the Services or Products which have been cancelled or discontinued
(as set forth in Section 2.3 hereof).
4.3 Resumption of Service or Delivery of Products If Service or the delivery of
a Product has been discontinued hereunder, and Customer requests that Service or
the delivery of Products be restored, Level 3 shall have the sole and absolute
discretion to restore such Services or Products only after satisfaction of such
conditions as Level 3 determines to be required for its protection. Nonrecurring
charges apply to restored Services or Products.
SECTION 5. DELIVERY OF SERVICES
5.1 Level 3 Service Obligation All Service along the facilities between the
point identified as Level 3's origination point and the point identified as
Level 3's termination point will be furnished by Level 3, its agents or
contractors.
5.2 Level 3 Access to Premises Customer shall allow Level 3 continuous and
reasonable access and
<PAGE> 14
right-of-way to the Premises to the extent reasonably determined by Level 3 to
be appropriate to the provision of Services or Products, or the maintenance of
equipment, facilities and systems relating to the Services or Products. Level 3
shall notify Customer 2 business days in advance of any regularly scheduled
maintenance that will require access to the Premises.
5.3 Service Commencement Dates Level 3 may undertake in any Service Order to use
reasonable efforts to make Services or Products available to a Customer on or
before a particular date, subject to the provisions of and compliance by
Customer with these Standard Terms and Conditions. Level 3 does not guarantee
availability by any such date and shall not be liable for any delays in
commencing Service or delivering Products to any Customer.
5.4 Level 3 Facilities Level 3 undertakes to use reasonable efforts to maintain
only the facilities and equipment required to deliver Services and Products to
Customer. Customers and End Users may not, nor may they permit others to,
rearrange, disconnect, remove, attempt to repair, or otherwise tamper with any
of the facilities or equipment installed by Level 3, except upon the written
consent of Level 3. Equipment provided or installed at the Premises by Level 3
for use in connection with the Services shall not be used for any purpose other
than that for which Level 3 provided it. In the event that a Customer, End User
or third party attempts to operate or maintain any Level 3-owned equipment
without first obtaining Level 3's written approval, in addition to any other
remedies of Level 3 for a breach by Customer of Customer's obligations
hereunder, Customer shall pay Level 3 for any damage to Level 3-owned equipment
caused thereby. Level 3 shall, in the event that such damages are incurred,
deliver to Customer a written invoice therefor. In no event shall Level 3 be
liable to Customer or any other person for interruption of Service or for any
other loss, cost or damage caused or related to improper use or maintenance of
Level 3-owned equipment.
5.5 Title and Power Title to all facilities (except such equipment and/or
facilities as are sold to a Customer), including terminal equipment, shall
remain with Level 3. The electric power consumed by such equipment on the
Premises of Customer shall be provided by and maintained at the expense of
Customer.
5.6 Customer Provided Equipment Level 3 shall not be responsible for the
operation or maintenance of any Customer provided communications equipment.
Customer shall be responsible for maintaining equipment required to provide
answer supervision in accordance with Subpart D of Part 68 of the Federal
Communications Commissions' Rules and Regulations. Level 3 may install certain
Customer provided communications equipment upon installation of Service; unless
otherwise agreed by Level 3 in writing, Level 3 shall not thereafter be
responsible for the operation or maintenance of such equipment. Level 3 shall
not be responsible for:
A. The transmission of signals by Customer provided equipment or for the quality
of, or defects in, such transmission; or
B. The reception of signals by Customer provided equipment.
5.7 Service Charges Customer shall be responsible for the payment of service
charges for visits by
<PAGE> 15
Level 3's agents or employees to the Premises when the Service difficulty or
trouble report results from the use of equipment or facilities by Customer or
End Users.
5.8 Removal of Equipment Customer agrees to allow Level 3 to remove all Level
3-owned equipment from the Premises:
A. after termination, interruption or suspension of the Service Order in
connection with which the equipment was used; and
B. for repair, replacement or otherwise as Level 3 may determine is necessary or
desirable.
At the time of such removal, such equipment shall be in the same condition as
when delivered to Customer or installed in Customer's premises, normal wear and
tear only excepted. Customer shall reimburse Level 3 for the replacement cost of
any equipment which is not in the same condition as when delivered to Customer.
5.9 Services and Products Subject to Availability The furnishing of Service and
Products under these Standard Terms and Conditions is subject to the
availability on a continuing basis of all the necessary facilities and is
limited to the capacity of Level 3's facilities, as well as facilities Level 3
may obtain from other carriers to furnish Service and/or Products from time to
time as required at the sole discretion of Level 3. Nothing in these Standard
Terms and Conditions shall be construed to obligate Customer to submit, or Level
3 to accept, Service Orders.
5.10 No Liability for Failure to Transmit Messages Level 3 does not undertake to
transmit messages, but offers the use of its Service and Products when
available, and, as more fully set forth elsewhere in these Standard Terms and
Conditions and any applicable Service Orders, shall not be liable for errors in
transmission or for failure to establish connections.
SECTION 6. OBLIGATIONS AND LIABILITY LIMITATION
6.1 Obligations of the Customer Customer shall be responsible for:
A. The payment of all charges applicable to the Products and Services (including
charges incurred as a result of fraud or unauthorized use of the Products or
Services).
B. Damage or loss of Level 3's facilities or equipment caused by the acts or
omissions of Customer or End User or the non-compliance by Customer or End User
with the provisions of these Standard Terms and Conditions; or by fire or theft
or other casualty on the premises of Customer or End User (unless caused by the
negligence or willful misconduct of the employees or agents of Level 3);
C. Providing the level of power, heating and air conditioning necessary to
maintain the proper environment on the Premises;
D. Providing a safe place to work and complying with all laws and regulations
regarding the working conditions on the Premises.
<PAGE> 16
E. Making Level 3 facilities and equipment available periodically for
maintenance purposes at a time agreeable to Level 3 and Customer.
F. Keeping Level 3's equipment and facilities located on Premises free and clear
of any liens or encumbrances.
6.2 Liability of Level 3 The liability of Level 3 for damages arising out of the
furnishing of Services or Products, including but not limited to mistakes,
omissions, interruptions, delays, tortious conduct or errors, or other defects,
representations, use of Services or Products or arising out of the failure to
furnish Services or Products, whether caused by acts of commission or omission,
shall be limited to the extension of credit allowances or refunds of sums paid
under each applicable Service Order. The extension of such credit allowances or
refunds shall be the sole remedy of Customer or any End User and the sole
liability of Level 3. Level 3 shall in no event be liable for any indirect,
incidental, special, consequential, exemplary or punitive damages (including but
not limited to damages for lost profits or lost revenues) a Customer may suffer,
whether or not caused by the intentional acts or omissions or negligence of
Level 3's employees or agents, and regardless of whether Level 3 has been
informed of the possibility or likelihood of such damages.
6.3 Disclaimer of Warranties LEVEL 3 MAKES NO WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR
OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
USE, EXCEPT THOSE EXPRESSLY SET FORTH HEREIN.
SECTION 7. SOFTWARE TERMS
7.1 License If and to the extent that Customer requires the use of Licensed
Software in order to use the Services or Products supplied under any Service
Order, then Customer shall have a nonexclusive, nontransferable license to use
such Licensed Software only and solely to the extent required to permit delivery
of the Services or use of the Products. Customer shall in no event be entitled
to claim title to or any ownership interest in any Licensed Software (or any
derivations or improvements thereto), and Customer shall execute any
documentation reasonably required by Level 3 to memorialize Level 3's existing
and continued ownership of Licensed Software.
7.2 Restrictions Customer agrees that it shall not:
A. copy the Licensed Software except as allowed and permitted by the express
written consent of Level 3;
B. reverse engineer, decompile or disassemble the Licensed Software;
C. sell, lease, license or sublicense the Licensed Software; or
D. create, write or develop any derivative software or any other software
program based on the
<PAGE> 17
Licensed Software or any Confidential Information of Level 3.
SECTION 8. CONFIDENTIAL INFORMATION
8.1 Disclosure and Use The Confidential Information disclosed by either party
constitutes the confidential and proprietary information of the disclosing party
and that the receiving party shall retain in strict confidence and not disclose
to any third party (except as authorized by these Standard Terms and Conditions)
without the disclosing party's express written consent to any and all such
information. Each party agrees to treat all proprietary information of the other
in the same manner as it treats its own proprietary information, but in no case
will the degree of care be less than reasonable care.
8.2 Restricted Use. Each party agrees: (A) to use Confidential Information only
for the purposes of these Standard Terms and Conditions or as otherwise
expressly permitted by these Standard Terms and Conditions; (B) not to make
copies of this Confidential Information or any part thereof except for purposes
of these Standard Terms and Conditions or as otherwise expressly permitted by
these Standard Terms and Conditions; and (C) to reproduce and maintain on any
copies of any Confidential Information such proprietary legends or notices
(whether of disclosing party or a third party) as are contained in or on the
original or as the disclosing party may otherwise reasonably request.
8.3 Exceptions. Notwithstanding the foregoing, each party's confidentiality
obligations hereunder shall not apply to information which: (a) is already known
to the receiving party; (b) becomes publicly available without fault of the
receiving party; (c) is rightfully obtained by the receiving party from a third
party without restriction as to disclosure, or is approved for release by
written authorization of the disclosing party; (d) is shown by written record to
be developed independently by either party without use of the other party's
Confidential Information; (e) is shown by written record to have been known or
available to either party without restriction as to disclosure at the time of
either party's receipt of such information; or (f) is required to be disclosed
by law.
8.4 Remedies. The parties agree that, notwithstanding any other section of these
Standard Terms and Conditions, the non-breaching party shall be entitled to seek
equitable relief to protect its interests, including but not limited to
preliminary and permanent injunctive relief. Nothing stated herein shall be
construed to limit any other remedies available to the parties.
8.5 Survival. The obligations of confidentiality and limitation of use shall
survive the termination of these Standard Terms and Conditions.
SECTION 9. GENERAL TERMS
9.1 Force Majeure Level 3 shall not be liable for, nor shall any credit
allowance be extended for, any failure of performance or equipment due to causes
beyond its control, including but not limited to: acts of God, fire, flood or
other catastrophes; any law, order, regulation, direction, action, or request of
the United States Government, or of any other government, including state and
local governments having or claiming jurisdiction over Level 3, or of any
department, agency commission, bureau, corporation, or other instrumentality of
any one or more of these federal, state, or local governments, or any civil
<PAGE> 18
or military authority, national emergencies, insurrections, riots, wars,
unavailability of rights-of-way or materials, or strikes, lock-outs, work
stoppages, or other labor difficulties.
9.2 Assignment or Transfer Customer may not transfer or assign the use of
Services or Products without the express prior written consent of Level 3, and
then only when such transfer or assignment can be accomplished without
interruption of the use or location of Service or Products. These Standard Terms
and Conditions shall apply to all such permitted transferees or assignees.
Customer shall, unless otherwise expressly agreed by Level 3 in writing, remain
liable for the payment of all charges due under each Service Order.
9.3 Notices Any notice Level 3 may give to a Customer shall be deemed properly
given when delivered, if delivered in person, or when sent via facsimile,
overnight courier, electronic mail or when deposited with the U.S. Postal
Service, to the address listed on each Service Order. Customer shall notify
Level 3 of any changes to the Customer information contained herein.
9.4 Indemnification Customer shall indemnify, defend and hold Level 3 harmless
from claims, loss, damage, expense (including attorney's fees and court costs),
or liability (including liability for patent infringement) arising from (1) any
claims made against Level 3 by any End User in connection with the delivery or
consumption of Services or Products, (2) use of facilities furnished by Level 3
in a manner inconsistent with the terms hereof or in a manner that Level 3 did
not contemplate and over which Level 3 exercises no control and (3) all other
claims, loss, damage, expense (including attorneys fees and court costs), or
liability arising out of any commission or omission by Customer and End User in
connection with the Services or Products.
9.5 Application of Tariffs Level 3 may elect or be required by law to file with
the appropriate regulatory agency tariffs respecting the delivery of certain
Services or Products. In the event and to the extent that such tariffs have been
or are filed respecting Services or Products ordered by Customer, then the terms
set forth in the applicable tariff shall govern Level 3's delivery of, and
Customer's consumption or use of, such Services or Products.
9.6 Contents of Communications Level 3 shall have no liability or responsibility
for the content of any communications transmitted via the Services or Products
by Customer or any End User, and Customer shall hold Level 3 harmless from any
and all claims (including claims by governmental entities seeking to impose
penal sanctions) related to such content.
9.7 Entire Understanding These Standard Terms and Conditions, including any
Service Orders executed hereunder (and any tariff applicable to the delivery of
Services or Products), constitutes the entire understanding of the parties
related to the subject matter hereof. These Standard Terms and Conditions may be
amended by Level 3 at any time, and Customer agrees to be bound by the amended
Standard Terms and Conditions from and after the effective date of such
amendment.
<PAGE> 19
ADDENDUM TO STANDARD TERMS AND CONDITIONS FOR DELIVERY OF PRODUCTS OR SERVICES
This Addendum to Standard Terms and Conditions for Delivery or Products
or Services (the "Addendum") modifies the Standard Terms and Conditions for
Delivery or Products or Services (the "Standard Terms and Conditions") between
WorldPort Communications, Inc. ("Customer") and Level 3 Communications, LLC
("Level 3") dated _November 13________________________, 1998 ("Effective Date").
Capitalized terms used but not defined herein shall have the meanings set forth
in the Standard Terms and Conditions. The terms and conditions contained in this
Addendum modify the terms and conditions set forth in the Standard Terms and
Conditions in the following respects:
1. The words "and approved by Level 3" are hereby deleted from the
definition of "End User."
2. Section 2.3 of the Standard Terms and Conditions is hereby deleted and
replaced with the following:
"2.3 Termination Liability In the event that Customer, without cause,
discontinues or terminates a Service Order prior to the end of its
term, Customer shall pay a termination charge equal to the recurring
charges for that Service Order for the period remaining in the term of
the Service Order."
3. A new Section 2.4 shall be added to the Standard Terms and Conditions
as follows:
"2.4 Termination or Cancellation by Customer for Cause Customer may
terminate or cancel a Service Order without liability upon thirty (30)
days prior written notice to Level 3 in the event Level 3:
(a) fails to maintain or provide environmental conditions or
security (consistent with industry standards) in the Space; or
(b) breaches a material provision of this Standard Terms and
Conditions or the Service Order to which it applies; or
(c) fails to make or the Space available within the time specified
in Section 3 of the Addendum to Co-Location Service Order; or;
(d) violates any law, rule, regulation, order or policy of any
government authority having jurisdiction over its provision of
the Space; or
(e) provides fraudulent or misrepresentative information in
connection herewith.
In addition, notwithstanding the provisions of any Service Order for
Private Line Services, in the event that and only after Level 3's
leased and owned network facilities are 100% SONET protected, Customer
shall have the right to terminate a circuit or circuits without penalty
by delivery of written notice to Level 3 if (other than as caused by
scheduled maintenance or a force majeure event (including cable cuts)
as specified in Section 9.1 of the Standard Terms and Conditions)
either: (i) there are more than two (2) outages on such circuit in each
of two (2) consecutive calendar months, or (ii) circuit
<PAGE> 20
availability falls below 99.8% (on a circuit by circuit basis) during
any two (2) consecutive calendar months.
In the event Customer terminates or cancels a Service Order under this
section, the Monthly Minimum Commitment shall be reduced on a pro-rata
basis.
4. Section 4.1 shall be amended by adding the following:
"Level 3 may terminate the Service within thirty (30) days prior
written notice (or such shorter period of time as may be required to
comply with law or to protect the security of Level 3's facilities or
the equipment located therein) upon the occurrence of any of the
following:"
5. Section 4.1(A) is amended by deleting the words "upon three (3) days
prior written notice to Customer".
6. Section 4.1 C. shall be amended by deleting the phrase "or for
"spamming" in violation of Level 3's then-current policies".
7. The last sentence of Section 5.3 is hereby amended to read as follows:
"Other than as set forth in the Addendum to Co-Location Service Order Form,
Level 3 does not guaranty availability by any such date and shall not be liable
for any delays in commencing Service or delivering Products to any Customer.
However, if Level 3 does not deliver Service or Products by the target delivery
date as communicated to Customer by Level 3 upon Level 3's acceptance of the
Service Order, the Monthly Minimum Commitment shall be reduced by the charge for
that circuit for the duration of the delay of availability."
8. Section 5.4 of the Standard Terms and Conditions are hereby amended by
substituting the following for the first sentence:
"Level 3 will maintain the facilities and equipment required to deliver
the Services, Products or use of the Space in good working order and
consistent with industry standards."
9. Section 5.9 is amended by deleting the first sentence and adding the
following to the end of the Section:
"However, if Level 3 rejects Service Orders for Private Line Services
which could be delivered over Level 3's network more than two (2) times
in any three (3) month period, then the Monthly Minimum Commitment
shall be reduced by an amount equal to the charges for the Service
Order rejected."
10. Section 9.2 of the Standard Terms and Conditions is hereby deleted and
replaced with the following:
<PAGE> 21
"Customer may not transfer or assign the use of the Space without the
express prior written consent of Level 3 (which consent shall not be
unreasonably withheld). These Standard Terms and Conditions shall apply
to all such permitted transferees or assignees. Customer shall remain
liable for the payment of all charges due under each Service Order
unless Level 3 has consented in writing to the assignment of such
Service Order."
9. The last sentence of Section 9.7 is hereby deleted.
10. PUBLICITY. Neither party shall, without the prior written consent of
the other party, issue any press release with respect to this Agreement, or use
the name, tradename, servicemark, or trademark of the other, or disclose the
existence or terms of this Agreement in any promotional or advertising material
without the prior written consent of the other.
CUSTOMER ACCEPTANCE LEVEL 3 ACCEPTANCE
By: /s/ Daniel M. Wickersham By: /s/ Joseph J. De Petro
-------------------------------- ----------------------------------
Its: President - Ch. Optg. Off. Its: Vice President Wholesale Services
------------------------------ ----------------------------------
Date: 13 November 1998 Date: 13 November 1998
------------------------------ ----------------------------------
<PAGE> 1
EXHIBIT 10.17
WORLDPORT COMMUNICATIONS, INC.
AMENDED AND RESTATED
LONG-TERM INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Purpose.................................................................................................1
2. Effective Date..........................................................................................1
3. Definitions and Construction............................................................................1
4. Administration..........................................................................................4
5. Shares Subject to the Plan..............................................................................5
6. Eligibility.............................................................................................6
7. Stock Options...........................................................................................6
8. Stock Appreciation Rights...............................................................................8
9. Performance Shares......................................................................................8
10. Restricted Stock Awards.................................................................................9
11. Dividend Equivalents....................................................................................9
12. Other Stock-Based Awards................................................................................9
13. Provisions Applicable to Awards........................................................................10
14. Adjustment Provisions..................................................................................11
15. Amendment, Modification and Termination................................................................13
16. General Provisions.....................................................................................13
</TABLE>
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<PAGE> 3
WORLDPORT COMMUNICATIONS, INC.
AMENDED AND RESTATED
LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of the WorldPort Communications,
Inc. Long-Term Incentive Plan (the "Plan") is to promote the success, and
enhance the value, of WorldPort Communications, Inc. (the "Company") by linking
the personal interests of its directors, officers, employees and key consultants
to those of Company shareholders and by providing such individuals with an
incentive for outstanding performance. The Plan is further intended to provide
flexibility to the Company in its ability to motivate, attract, and retain the
services of individuals upon whose judgment, interest, and special effort the
successful conduct of the Company's operation is largely dependent. Accordingly,
the Plan permits the grant of incentive awards from time to time to its
directors and selected officers, key employees and outside consultants.
2. Effective Date. The Plan is effective as of October
1, 1996 (the "Effective Date").
3. Definitions and Construction. When a word or phrase
appears in this Plan with the initial letter capitalized, and the word or phrase
does not commence a sentence, the work or phrase shall generally be given the
meaning ascribed to it in this paragraph or paragraphs 1(a) or 2(a) unless a
clearly different meaning is required by the context. The following words and
phrases shall have the following meanings:
(a) "Award" means an Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, Dividend Equivalent
Award, or Other Stock-Based Award, or any other right or interest
relating to Stock or cash, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement,
contract, option form, or other instrument or document evidencing an
Award.
(c) "Board" means the Board of directors of the Company.
(d) "Change of Control" means and includes each of the
following:
(i) A change of control of the Company of a
nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of the 1934 Act regardless of
whether the Company is subject to such reporting requirement;
(ii) A change of control of the company through
a transaction or series of transactions, such that any person
(as that term is used in Section 13(d) and 14(d) of the 1934
Act), excluding affiliates of the Company as of the Effective
Date, is or becomes
<PAGE> 4
the beneficial owner (as that term is used in Section 13(d) of
the 1934 Act) directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities;
(iii) Any consolidation or liquidation of the
Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of Stock
would be converted into cash, securities or other property,
other than a merger of the company in which the holders of the
shares of Stock immediately before the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger;
(iv) The shareholders of the Company approve any
plan or proposal for the liquidation or dissolution of the
Company; or
(v) Substantially all of the assets of the
Company are sold or otherwise transferred to parties that are
not within a "controlled group of corporations" (as defined in
Section 1563 of the Code) in which the Company is a member.
The foregoing events shall not be deemed to be a Change of Control if
the transaction or transactions causing such change shall have been
approved by the affirmative vote of at least a majority of the members
of the Board in office as of the Effective Date ("Incumbents"), those
serving on the Board pursuant to nomination or appointment thereto by a
majority of Incumbents ("Successors"), and those serving on the Board
pursuant to nomination or appointment thereto by a majority of a Board
composed of Incumbents and/or Successors.
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(f) "Committee" means the committee of the Board
described in paragraph 4.
(g) "Disability" shall mean any illness or other physical
or mental condition of a Participant which renders the Participant incapable of
performing his customary and usual duties for the Company, or any medically
determinable illness or other physical or mental condition resulting from a
bodily injury, disease or mental disorder which in the judgment of the Committee
is permanent and continuous in nature. The Committee may require such medical or
other evidence as it deems necessary to judge the nature and permanency of the
Participant's condition.
(h) "Dividend Equivalent" means a right granted to a
Participant under paragraph 11.
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<PAGE> 5
(i) "Fair Market Value" means with respect to Stock or
any other property, the fair market value of such Stock or other
property determined by such methods or procedures as may be established
from time to time by the Committee. Unless otherwise determined by the
Committee, the Fair Market Value of the Stock as of any date shall be
the closing price for the Stock as reported on the Nasdaq National
Market System (or on any national securities exchange on which the
Stock is then listed) for that date or, if no closing price is so
reported for that date, the closing price on the next preceding date
for which a closing price was reported.
(j) "Incentive Stock Option" means an Option that is
intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
(k) "Non-Qualified Stock Option" means an Option that is
not intended to be an Incentive Stock Option.
(l) "Option" means a right granted to a Participant
under paragraph 7 of the Plan to purchase Stock at a specified price
during specified time periods. An Option may be either an Incentive
Stock Option or a Non-Qualified Stock Option.
(m) "Other Stock-Based Award" means a right, granted to
a Participant under paragraph 12, that relates to or is valued by
reference to Stock or other Awards relating to Stock.
(n) "Participant" means a person who, as a director,
officer, key employee or outside consultant of the Company or any
Subsidiary, has been granted an Award under the Plan.
(o) "Performance Share" means a right granted to a
Participant under paragraph 9, to receive cash, Stock, or other Awards,
the payment of which is contingent upon achieving certain performance
goals established by the Committee.
(p) "Plan" means the WorldPort Communications, Inc.
Long-Term Incentive Plan, as amended from time to time.
(q) "Restricted Stock Award" means Stock granted to a
Participant under paragraph 10 that is subject to certain restrictions
and to risk of forfeiture.
(r) "Retirement" means a Participant's termination of
employment with the Company after attaining any normal or early
retirement age specified in any pension, profit sharing or other
retirement program sponsored by the Company.
(s) "Stock" means the common stock of the Company and
such other securities of the Company that may be substituted for Stock
pursuant to paragraph 12.
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<PAGE> 6
(t) "Stock Appreciation Right" or "SAR" means a right
granted to a Participant under paragraph 8 to receive a payment equal
to the difference between the Fair Market Value of a share of Stock as
of the date of exercise of the SAR over the grant price of the SAR, all
as determined pursuant to paragraph 8.
(u) "Subsidiary" means any corporation of which a
majority of the outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Company.
4. Administration.
(a) Committee. The Plan will be administered by the
Compensation Committee (the "Committee") appointed by the Board of Directors of
the Company from among its members provided, however, that as long as shares of
the Stock are registered under the Securities Exchange Act of 1934, members of
the Committee must qualify as non-employee directors within the meaning of
Securities and Exchange Commission Regulation ss. 240.16b-3.
(b) Action by the Committee. A majority of the Committee
shall constitute a quorum. The acts of a majority of the members present at any
meeting at which a quorum is present and acts approved in writing by a majority
of the Committee in lieu of a meeting shall be deemed the acts of the Committee.
Each member of the Committee is entitled to, in good faith, rely or act upon any
report or other information furnished to that member by any officer or other
employee of the Company or any Subsidiary, the Company's independent certified
public accountants, or any executive compensation consultant or other
professional retained by the Company to assist in the administration of the
Plan.
(c) Authority of Committee. The Committee has the
exclusive power, authority and discretion to:
(i) Designate Participants;
(ii) Determine the type or types of Awards to be granted
to each Participant;
(iii) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(iv) Determine the terms and conditions of any Award
granted under the Plan including but not limited to, the exercise
price, grant price, or purchase price, any restrictions or limitations
on the Award, any schedule for lapse of forfeiture restrictions or
restrictions on the exercisability of an Award, and accelerations or
waivers thereof, based in each case on such considerations as the
Committee in its sole discretion determines;
(v) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash,
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<PAGE> 7
Stock, other Awards, or other property, or an Award may be cancelled,
forfeited, or surrendered;
(vi) Prescribe the form of each Award Agreement, which
need not be identical for each Participant;
(vii) Decide all other matters that must be determined in
connection with an Award;
(viii) Establish, adopt or revise any rules and regulations
as it may deem necessary or advisable to administer the Plan; and
(ix) Make all other decisions and determinations that may
be required under the Plan or as the Committee deems necessary or
advisable to administer the Plan.
(d) Decision Binding. The Committee's interpretation of
the Plan, any Awards granted under the Plan, any Award Agreement and
all decisions and determinations by the Committee with respect to the
Plan are final, binding, and conclusive on all parties.
5. Shares Subject to the Plan.
(a) Number of Shares. Subject to adjustment provided in
paragraph 14(a) the aggregate number of shares of Stock reserved and available
for Awards or which may be used to provide a basis of measurement for or to
determine the value of an Award (such as with a Stock Appreciation Right or
Performance Share Award) shall be 7,500,000.
(b) Lapsed Awards. To the extent that an Award
terminates, expires or lapses for any reason, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan and
shares subject to SARs or other Awards settled in cash will be available for the
grant of an Award under the Plan.
(c) Stock Distributed. Any Stock distributed pursuant to
an Award may consist, in whole or in part, of authorized and unissued Stock,
treasury Stock or Stock purchased on the open market.
(d) Limitation on Number of Shares Subject to Awards.
Notwithstanding any provision in the Plan to the contrary, the maximum number of
shares of Stock with respect to one or more Awards that may be granted to any
one Participant in any one fiscal year shall be 1,000,000.
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<PAGE> 8
6. Eligibility. Awards may be granted only to
individuals who are directors, officers, key employees or outside consultants of
the Company or a Subsidiary, as determined by the Committee.
7. Stock Options.
(a) General. The Committee is authorized to grant
Options to Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
under an Option shall be determined by the Committee, provided that the
exercise price for any Option shall not be less than the Fair Market
Value as of the date of grant or, with respect to Non-Qualified Stock
Options, a price which reflects a reasonable discount from the Fair
Market Value, as determined by the Committee;
(ii) Time and Conditions of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of
an Option may be exercised;
(iii) Payment. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants. Without limiting the power and discretion conferred on
the Committee pursuant to the preceding sentence, the Committee may, in
the exercise of its discretion, but need not, allow a Participant to
pay the Option price by directing the Company to withhold from the
shares of Stock that would otherwise be issued upon exercise of the
Option that number of shares having a Fair Market Value on the exercise
date equal to the Option price, all as determined pursuant to rules and
procedures established by the Committee;
(iv) Evidence of Grant. All Options shall be evidenced
by a written Award Agreement between the Company and the Participant.
The Award Agreement shall include such provisions as may be specified
by the Committee.
(b) Incentive Stock Options. The terms of any Incentive
Stock Options granted under the Plan must comply with the following additional
rules:
(i) Exercise Price. The exercise price per share of
Stock shall be set by the Committee, provided that the exercise price
for any Incentive Stock Option may not be less than the Fair Market
Value as of the date of the grant;
(ii) Exercise. In no event, may any Incentive Stock
Option be exercisable for more than ten years from the date of its
grant;
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<PAGE> 9
(iii) Lapse of Option. An Incentive Stock Option shall
lapse under the following circumstances:
(1) The Incentive Stock Option shall lapse ten
years after its is granted, unless an earlier time is set in the Award
Agreement;
(2) The Incentive Stock Option shall lapse three
months after the Participant's termination of employment, if
the termination of employment was attributable to (a)
Disability, (b) Retirement, or (c) for any other reason,
provided that the Committee has approved, in writing, the
continuation of any Incentive Stock Option outstanding on the
date of the Participant's termination of employment;
(3) If the Participant separates from employment
other than as provided in paragraph 7(b)(iii)(2), the
Incentive Stock Option shall lapse at the time of the
Participant's termination of employment;
(4) If the Participant dies before the Option
lapses pursuant to paragraph 7(b)(iii)(1), 7(b)(iii)(2) or
7(b)(iii)(3), above, the Incentive Stock Option shall lapse,
unless it is previously exercised, on the earlier of (a) the
date on which the Option would have lapsed had the Participant
lived and had his employment status (i.e., whether the
Participant was employed by the Company on the date of his
death or had previously terminated employment) remained
unchanged; or (b) 15 months after the date of the
Participant's death. Upon the Participant's death, any
exercisable Incentive Stock Options may be exercised by the
Participant's legal representative or representatives, by the
person or persons entitled to do so under the Participant's
last will and testament, or, if the Participant shall fail to
make testamentary disposition of such Incentive Stock Option
or shall die intestate, by the person or persons entitled to
receive said Incentive Stock Option under the applicable laws
of descent and distribution.
(c) Individual Dollar Limitation. The aggregate Fair
Market Value (determined as of the time an Award is made) of all shares of Stock
with respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
(d) Ten Percent Owners. An Incentive Stock Option shall
be granted to any individual who, at the date of grant, owns stock possessing
more than ten percent of the total combined voting power of all classes of Stock
of the company only if such Option is granted at a price that is not less than
110% of Fair Market Value on the date of grant and the Option is exercisable for
no more than five years from the date of grant.
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<PAGE> 10
(e) Expiration of Incentive Stock Options. No Award of an
Incentive Stock Option may be made pursuant to this Plan after October 1, 2008.
(f) Right to Exercise. During a Participant's lifetime,
an Incentive Stock Option may be exercised only by the Participant.
8. Stock Appreciation Rights.
(a) Grant of SARs. The Committee is authorized to grant
SARs to Participants on the following terms and conditions:
(i) Right to Payment. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of one share of
Stock on the date of exercise; over
(2) The grant price of the Stock Appreciation
Right as determined by the Committee, which shall not be less
than the Fair Market Value of one share of Stock on the date
of grant in the case of any SAR related to any Incentive Stock
Option.
(b) Other Terms. All awards of Stock Appreciation Rights
shall be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and any
other terms and conditions of any Stock Appreciation Right shall be determined
by the Committee at the time of the grant of the Award and shall be reflected in
the Award Agreement.
9. Performance Shares.
(a) Grant of Performance Shares. The Committee is
authorized to grant Performance Shares to Participants on such terms and
conditions as may be selected by the Committee. The Committee shall have the
complete discretion to determine the number of Performance Shares granted to
each Participant. All Awards of Performance Shares shall be evidenced by an
Award Agreement;
(b) Right to Payment. A grant of Performance Shares
gives the Participant rights, valued as determined by the Committee, and payable
to, or exercisable by, the Participant to whom the Performance Shares are
granted, in whole or in part, as the Committee shall establish at grant or
thereafter. The Committee shall set performance goals and other terms or
conditions to payment of the Performance Shares in its discretion which,
depending on the extent to which they are met, will determine the number and
value of Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant, provided that the time period during which
the performance goals must be met shall, in all cases, exceed six months;
-8-
<PAGE> 11
(c) Other Terms. Performance Shares may be payable in
cash, Stock, or other property, and have such other terms and conditions as
determined by the Committee and reflected in the Award Agreement.
10. Restricted Stock Awards.
(a) Grant of Restricted Stock. The Committee is
authorized to make Awards of Restricted Stock to Participants in such amounts
and subject to such terms and conditions as may be selected by the Committee.
All awards of Restricted Stock shall be evidenced by a Restricted Stock Award
Agreement.
(b) Issuance and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability and other restrictions as the
Committee may impose (including, without limitation, limitations on the right to
vote Restricted Stock or the right to receive dividends on the Restricted
Stock). These restrictions may lapse separately or in combination at such times,
under such circumstances, in such installments, or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter;
(c) Forfeiture. Except as otherwise determined by the
Committee at the time of the grant of the Award or thereafter, upon termination
of employment during the applicable restriction period, Restricted Stock that is
at that time subject to restrictions shall be forfeited and reacquired by the
Company, provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock;
(d) Certificates for Restricted Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the committee shall
determine. If certificates representing shares of Restricted Stock are
registered in the name of the Participant, certificates must bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, and the Company shall retain physical possession of the
certificate until such time as all applicable restrictions lapse.
11. Dividend Equivalents. The Committee is authorized to
grant Dividend Equivalents to Participants subject to such terms and conditions
as may be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Option Award or SAR
Award, as determined by the Committee. The Committee may provide that Dividend
Equivalents be paid or distributed when accrued or be deemed to have been
reinvested in additional shares of Stock, or otherwise reinvested.
12. Other Stock-Based Awards. The Committee is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that are payable in, value in whole or in part by
reference to, or otherwise based on or related to shares of Stock, as deemed by
the Committee to be consistent with the purposes of the Plan, including without
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<PAGE> 12
limitation shares of Stock awarded purely as a "bonus" and not subject to any
restrictions or conditions, convertible or exchangeable debt securities, other
rights convertible or exchangeable into shares of Stock, and Awards valued by
reference to book value of shares of Stock or the value of securities of or the
performance of specified Subsidiaries. The Committee shall determine the terms
and conditions of such Awards.
13. Provisions Applicable to Awards.
(a) Stand-Alone, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution for, any
other Award granted under the Plan, if an Award is granted in substitution for
another Award, the Committee may require the surrender of such other Award in
consideration of the grant of the new Award. Awards granted in addition to or in
tandem with other Awards may be granted either at the same time as or at a
different time from the grant of such other Awards;
(b) Exchange Provisions. The Committee may at any time
offer to exchange or buy out any previously granted Award for a payment in cash,
Stock, or another Award (subject to paragraph 13(a), based on the terms and
conditions the Committee determines and communicates to the Participant at the
time the offer is made;
(c) Term of Award. The term of each Award shall be for
the period as determined by the Committee, provided that in no event shall the
term of any Incentive Stock Option or a Stock Appreciation Right granted in
tandem with the Incentive Stock Option exceed a period of ten years from the
date of its grant;
(d) Form of Payment for Awards. Subject to the terms of
the Plan and any applicable law or Award Agreement, payments or transfers to be
made by the Company or a Subsidiary on the grant or exercise of an Award may be
made in such forms as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee;
(e) Limits on Transfer. No right or interest of a
Participant in any Award may be pledged, encumbered, or hypothecated to or in
favor of any party other than the Company or a subsidiary, or shall be subject
to any lien, obligation, or liability of such Participant to any other party
other than the Company or a Subsidiary. Except as otherwise provided below, no
Award shall be assignable or transferable by a Participant other than by will or
the laws of descent and distribution or, except in the case of an Incentive
Stock Option, pursuant to a court order that would otherwise satisfy the
requirements to be a domestic relations order as defined in Section 414(p)(1)(B)
of the Code, if the order satisfies Section 414(p)(1)(A) of the Code
notwithstanding that such an order relates to the transfer of a stock option
rather than an interest in an employee benefit pension plan. In the Award
Agreement for any Award other than an Award that includes an Incentive Stock
Option, the Committee may allow a Participant to Assign or otherwise transfer
all or a portion of the rights represented by the Award to specified individuals
or classes
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<PAGE> 13
of individuals, or to a trust benefiting such individuals or classes of
individuals, subject to such restrictions, limitations, or conditions, or
conditions as the Committee deems to be appropriate;
(f) Beneficiaries. Notwithstanding paragraph 13(e), a
Participant may, in the manner determined by the Committee, designate a
beneficiary to exercise rights of the Participant and to receive any
distribution with respect to any Award upon the Participant's death. A
beneficiary, legal guardian, legal representative, or other person claiming any
rights under the Plan is subject to all terms and conditions of the Plan and any
Award Agreement applicable the participant, except to the extent the Plan and
any Award Agreement otherwise provide, and to any additional restrictions deemed
necessary or appropriate by the Committee. If the Participant is married, a
designation of a person other than the Participant's spouse as his beneficiary
with respect to more than 50 percent of the Participant's interest in the Award
shall not be effective without the written consent of the Participant's spouse.
If no beneficiary has been designated or survives the Participant, payment shall
be made to the person entitled thereto under the Participant's will or the laws
of descent and distribution. Subject to the foregoing, a beneficiary designation
may be changed or revoked by a participant at any time provided the change or
revocation is filed with the Committee;
(g) Stock Certificates. All Stock certificates delivered
under the Plan are subject to any stop-transfer orders and other restrictions as
the Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock;
(h) Tender Offers. In the event of a public tender for
all or any portion of the Stock, or in the event that a proposal to merge,
consolidate, or otherwise combine with another company is submitted for
shareholder approval, the Committee may in its sole discretion declare
previously granted Options to be immediately exercisable. To the extent that
this provision causes Incentive Stock Options to exceed the dollar limitations
set forth in paragraph 7(c), the excess Options shall be deemed to be
Non-Qualified Stock Options;
(i) Acceleration Upon a Change of Control. If a Change
of Control occurs, all outstanding Options, Stock Appreciation Rights, and other
Awards in the nature of rights that may be exercised shall become fully
exercisable and all restrictions on outstanding Awards shall lapse.
14. Adjustment Provisions.
(a) If the Company shall at any time change the number
of issued shares of Stock without new consideration to the Company (such as by
stock dividend, stock split, recapitalization, reorganization, exchange of
shares, liquidation, combination or other change in corporate structure
affecting the Stock), the total number of shares available for Awards under this
Plan shall be appropriately adjusted and the number of shares covered by each
outstanding Award and the reference price or Fair Market Value for each
outstanding Award shall be adjusted so that the net value of such Award shall
not be changed.
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<PAGE> 14
(b) In the case of any sale of assets, merger,
consolidation, combination or other corporate reorganization or restructuring of
the Company with or into another corporation which results in the outstanding
Stock being converted into or exchanged for different securities, cash or other
property, or any combination thereof (an "Acquisition"), subject to the
provisions of this Plan and any limitation applicable to the Award:
(1) any Participant to whom a Stock Option has
been granted shall have the right thereafter and during the
term of the Stock Option, to receive upon exercise thereof the
Acquisition Consideration (as defined below) receivable upon
the Acquisition by a holder of the number of shares of Stock
which might have been obtained upon exercise of the Stock
Option or portion thereof, as the case may be, immediately
prior to the Acquisition; and
(2) any Participant to whom an SAR has been
granted shall have the right thereafter and during the term of
such right to receive upon exercise thereof the difference on
the exercise date between the aggregate Fair Market Value of
the Acquisition Consideration receivable upon such acquisition
by a holder of the number of shares of Stock which are covered
by such right and the aggregate reference price of such right.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of one share of Stock upon consummation of an Acquisition.
(c) Upon a dissolution or liquidation of the Company or
a merger, sale or consolidation in which the Company is not the surviving or
resulting corporation, the Committee may, in its sole discretion give each
Participant the right to exercise Awards prior to the occurrence of such event
or over such period as the Committee, in its sole and absolute discretion, shall
determine. To the extent that this provision causes Incentive Stock Options to
exceed the dollar limitation set forth in paragraph 7(c), the excess Options
shall be deemed to be Non-Qualified Stock Options.
(d) Notwithstanding any other provision of this Plan,
the Committee may authorize the issuance, continuation or assumption of Awards
or provide for other equitable adjustments after changes in the Stock resulting
from any other merger, consolidation, sale of assets, acquisition of property or
stock, recapitalization, reorganization or similar occurrence upon such terms
and conditions as it may deem equitable and appropriate.
(e) In the event that another corporation or business
entity is being acquired by the Company, and the Company assumes outstanding
employee stock options and/or stock appreciation rights and/or the obligation to
make future grants of options, rights or other stock based awards to employees
of the acquired entity, the aggregate number of shares of Stock available for
Awards under this Plan shall be increased accordingly.
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<PAGE> 15
15. Amendment, Modification and Termination. The terms
and conditions applicable to any Award may be amended or modified by mutual
agreement between the Company and the Participant or such other persons as may
then have an interest therein. Also, by mutual agreement between the Company and
a Participant hereunder, under this Plan or under any other present or future
plan of the Company, Awards may be granted to such Participant in substitution
and exchange for, and in cancellation of, any Awards previously granted such
Participant under this Plan, or any other present or future plan of the Company.
The Board of Directors may amend the Plan from time to time or terminate the
Plan at any time. However, no action authorized by this paragraph 15 shall
reduce the amount of any existing Award or change the terms and conditions
thereof without the participant's consent. No amendment of the Plan shall be
made without approval of the stockholders of the Company if such approval is
required by law or regulatory authority.
16. General Provisions.
(a) No Rights to Awards. No Participant or employee
shall have any claim to be granted any Award under the Plan, and neither the
Company nor the Committee is obligated to treat Participants and employees
uniformly;
(b) No Stockholders Rights. No Award gives the
Participant any of the rights of a shareholder of the Company unless and until
shares of Stock are in fact issued to such person in connection with such Award;
(c) Withholding. The Company or any Subsidiary shall
have the authority and the right to deduct or withhold, or require a Participant
to remit to the Company, an amount sufficient to satisfy Federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of this Plan.
With respect to withholding required upon any taxable event under the Plan,
Participants may elect, subject to the Committee's approval, to satisfy the
withholding requirement, in whole or in part, by having the Company or any
Subsidiary withhold shares of Stock having a Fair Market Value on the date of
withholding equal to the amount to be withheld for tax purposes in accordance
with such procedures as the Committee establishes. The Committee may, at the
time any Award is granted, require that any and all applicable tax withholding
requirements be satisfied by the withholding of shares of Stock as set forth
above;
(d) No Right to Employment. Nothing in the Plan or any
Award Agreement shall interfere with or limit in any way the right of the
Company or any Subsidiary to terminate any Participant's employment at any time,
nor confer upon any Participant any right to continue in the employ of the
Company or any Subsidiary;
(e) Unfunded Status of Awards. The Plan is intended to
be an "unfunded" plan for incentive and deferred compensation. With respect to
any payments not yet made to a Participant pursuant to an Award, nothing
contained in the Plan or any Award Agreement shall give the Participant any
rights that are greater than those of a general creditor of the Company or any
Subsidiary;
-13-
<PAGE> 16
(f) Indemnification. To the extent allowable under
applicable law, each member of the Committee or of the Board shall be
indemnified and held harmless by the Company from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such member in
connection with or resulting from any claim, action, suit, or proceeding to
which he or she may be a party or in which he or she may be involved by reason
of any action or failure to act under the Plan and against and from any and all
amounts paid by him or her in satisfaction of judgment in such action, suit, or
proceeding against him or her provided he or she gives the Company an
opportunity, at its own expense, to handle and defend the same before he or she
undertakes to handle and defend it on his or her own behalf. The foregoing right
of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Articles of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless;
(g) Relationship to Other Benefits. No payment under the
Plan shall be taken into account in determining any benefits under any pension,
retirement, savings, profit sharing, group insurance, welfare or other benefit
plan of the Company or any Subsidiary;
(h) Expenses. The expenses of administering the Plan
shall be borne by the Company and its Subsidiaries;
(i) Titles and Headings. The titles and headings of the
paragraphs in the Plan are for convenience of reference only, and in the event
of any conflict, the text of the Plan, rather than such titles or headings,
shall control;
(j) Fractional Shares. No fractional shares of stock
shall be issued and the Committee shall determine, in its discretion, whether
cash shall be given in lieu of fractional shares or whether such fractional
shares shall be eliminated by rounding up;
(k) Securities Law Compliance. With respect to any
person who is, on the relevant date, obligated to file reports under Section 16
of the 1934 Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be void to the extent permitted by law and voidable as deemed advisable
by the Committee;
(l) Government and Other Regulations. The obligation of
the Company to make payment of awards in Stock or otherwise shall be subject to
all applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The company shall be under no obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
the shares of Stock paid under the Plan. If the shares paid under the Plan may
in certain circumstances be exempt from registration under the 1933 Act, the
Company may restrict the transfer of such shares in such manner as it deems
advisable to ensure the availability of any such exemption;
-14-
<PAGE> 17
(m) Governing Law. The Plan and all Award Agreements
shall be construed in accordance with and governed by the laws of the State of
Delaware.
-15-
<PAGE> 1
WORLDPORT COMMUNICATIONS, INC. EXHIBIT 12.1
Statement Re: Computation of Ratio of Earnings to Fixed Charges
(In thousands)
<TABLE>
<CAPTION>
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
FIXED CHARGES:
Interest expense (including (24) (193) (24,570)
amortization of debt issuance costs)
Capitalized interest -- -- --
Interest element of rent expense -- (30) (420)
(24) (223) (24,990)
====== ======= =======
EARNINGS:
Consolidated net loss (260) (3,492) (76,772)
Add back:
Minority interest -- -- (903)
Provision (benefit) for income taxes -- -- --
Fixed charges excluding cap interest (24) (223) (24,990)
(236) (3,269) (52,685)
====== ======= =======
COVERAGE (DEFICIENCY) (260) (3,492) (77,675)
====== ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
<TABLE>
<CAPTION>
SUBSIDIARY STATE/JURISDICTION NAME(S) UNDER WHICH CONDUCTING BUSINESS
- ---------- ------------------ ---------------------------------------
<S> <C> <C>
WorldPort Communications, Inc. Delaware WorldPort Communications, Inc.
WorldPort Communications
WorldPort
Telenational Communications, Inc. Delaware Telenational Communications, Inc.
TCI, TNC, Telenational
WorldPort/ICX, Inc. Delaware Intercontinental Exchange
ICX
International Interconnect, Inc. Delaware International Interconnect, Inc.
WorldPort IIC, IIC
WorldPort International, Inc. Delaware N/A
WorldPort Acquisitions, Inc. Delaware N/A
WorldPort Acquisitions, Corp. Delaware N/A
WorldPort Communications Europe Holding BV Netherlands N/A
WorldPort Distributions NV Netherlands N/A
WorldPort Communications (Europe) BV Netherlands N/A
EnerTel NV Netherlands EnerTel NV
EnerTel
WorldPort EnerTel
WorldPort Ltd United Kingdom WorldPort Ltd
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports included in this Form 10-K, into the Company's
previously filed Form S-8 Registration Statement No. 333-63555.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WORLDPORT COMMUNICATIONS, INC. FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 9,015
<SECURITIES> 0
<RECEIVABLES> 12,819
<ALLOWANCES> 1,054
<INVENTORY> 0
<CURRENT-ASSETS> 56,301
<PP&E> 98,946
<DEPRECIATION> 7,720
<TOTAL-ASSETS> 220,455
<CURRENT-LIABILITIES> 160,145
<BONDS> 0
0
0
<COMMON> 2
<OTHER-SE> 17,520
<TOTAL-LIABILITY-AND-EQUITY> 220,455
<SALES> 0
<TOTAL-REVENUES> 28,591
<CGS> 0
<TOTAL-COSTS> 21,187
<OTHER-EXPENSES> 11,069
<LOSS-PROVISION> 482
<INTEREST-EXPENSE> 24,570
<INCOME-PRETAX> (77,675)
<INCOME-TAX> 0
<INCOME-CONTINUING> (76,772)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (76,772)
<EPS-PRIMARY> (4.47)
<EPS-DILUTED> (4.47)
</TABLE>
