<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1999
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.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-1127336
- ------------------------------------------------ ------------------------
(State or other jurisdiction of incorporation or (IRS Employer ID Number)
organization)
1825 Barrett Lakes Blvd.
Suite 100, Kennesaw, Georgia 30144
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(770) 792-8735
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
As of November 8, 1999, the Registrant had 27,160,014 shares of Common Stock par
value $0.0001 outstanding.
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WORLDPORT COMMUNICATIONS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1999 (unaudited) and December 31, 1998 ............................... 3
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30,
1999 and 1998 (unaudited) .......................................................... 4
Condensed Consolidated Statements of Comprehensive Income
For the Three and Nine Months Ended September 30,
1999 and 1998 (unaudited) .......................................................... 5
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1999 and 1998 (unaudited) .......................... 6
Notes to Condensed Consolidated Financial Statements (unaudited) ................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ...................................... 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk ......................... 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .................................................................. 18
Item 2. Changes in Securities and Use of Proceeds .......................................... 19
Item 6. Exhibits and Reports on Form 8-K ................................................... 20
SIGNATURE
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
ASSETS (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ....................................................... $ 1,068 $ 9,015
Accounts receivable, net of allowance for doubtful accounts
of $280 and $1,054, respectively ............................................. 1,683 11,765
Receivable from related party ................................................... -- 32,500
Prepaid expenses and other current assets ....................................... 163 3,021
Total current assets .................................................... 2,914 56,301
PROPERTY AND EQUIPMENT, net ..................................................... 901 91,226
OTHER ASSETS:
Goodwill, net ............................................................. -- 43,190
Other intangibles, net .................................................... -- 21,851
Net assets held for sale .................................................. 104,985 --
Other assets, net ......................................................... 198 7,887
--------- ---------
TOTAL ASSETS ................................................. $ 108,998 $ 220,455
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................................... $ 8,755 $ 25,335
Accrued expenses ............................................................... 8,066 19,302
Current portion of obligations under capital leases ............................ 1,674 2,631
Other current liabilities ...................................................... 193 1,952
Interim loan facility .......................................................... 134,934 110,926
Total current liabilities ............................................... 153,622 160,146
Long-term obligations under capital leases, net of current portion .................. 6,051 17,539
Note payable, net of current portion ................................................ -- 12,028
Other long-term liabilities ......................................................... 19 11,375
Total liabilities ...................................................... 159,692 201,088
MINORITY INTEREST ................................................................... -- 1,845
COMMITMENTS AND CONTINGENCIES (Note 3): ............................................. -- --
STOCKHOLDERS' (DEFICIT) 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, 0 and 493,889 shares issued and outstanding in
1999 and 1998, respectively ................................................. -- --
Series B convertible preferred stock, $0.0001 par value, 3,000,000 shares
authorized, 1,112,852 and 2,931,613 shares issued and outstanding in
1999 and 1998, respectively ................................................. -- --
Series C convertible preferred stock, $0.0001 par value, 1,450,000 shares
authorized, 1,416,030 and 1,132,824 shares issued and outstanding in
1999 and 1998, respectively ................................................. -- --
Series D convertible preferred stock, $0.0001 par value, 650,000 shares
authorized, 316,921 and 0 shares issued and outstanding in
1999 and 1998, respectively .................................................. -- --
Series E convertible preferred stock, $0.0001 par value, 145,000 shares
authorized, 141,603 and 0 shares issued and outstanding in
1999 and 1998, respectively .................................................. -- --
Common stock, $0.0001 par value, 65,000,000 shares authorized,
27,127,391 and 18,228,916 shares issued and outstanding in
1999 and 1998, respectively ................................................. 3 2
Warrants ....................................................................... 29,054 28,263
Additional paid-in capital ..................................................... 100,757 77,414
Unearned compensation expense .................................................. (365) (750)
Cumulative translation adjustment .............................................. (4,827) (6,747)
Accumulated deficit ............................................................ (175,316) (80,660)
Total stockholders' (deficit) equity ............................ (50,694) 17,522
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY ............ $ 108,998 $ 220,455
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES .............................................. $ 22,467 $ 11,746 $ 65,263 $ 14,410
COST OF SERVICES ...................................... 14,124 8,473 44,860 10,980
-------- -------- -------- --------
Gross margin ..................................... 8,343 3,273 20,403 3,430
OPERATING EXPENSES:
Selling, general and administrative expenses ..... 15,836 14,097 41,459 20,349
Depreciation and amortization .................... 6,096 4,281 17,127 5,778
Asset impairment ................................. 12,842 -- 12,842 --
-------- -------- -------- --------
Operating loss ................................... (26,431) (15,105) (51,025) (22,697)
OTHER EXPENSE:
Interest expense, net ............................ (9,666) (9,360) (44,190) (10,202)
Other expense, net ............................... (230) -- (1,286) --
-------- -------- -------- --------
LOSS BEFORE MINORITY INTEREST AND INCOME
TAXES ............................................... (36,327) (24,465) (96,501) (32,899)
MINORITY INTEREST ..................................... -- -- 1,845 --
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES .............................. (36,327) (24,465) (94,656) (32,899)
INCOME TAX PROVISION .................................. -- -- -- --
-------- -------- -------- --------
NET LOSS .............................................. $(36,327) $(24,465) $(94,656) $(32,899)
======== ======== ======== ========
NET LOSS PER SHARE, BASIC AND DILUTED ................. $ ( 1.51) $ (1.38) $ (4.26) $ (1.95)
======== ======== ======== ========
SHARES USED IN NET LOSS PER SHARE
CALCULATION, BASIC AND DILUTED..................... 24,039 17,702 22,237 16,841
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
----------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss .............................................. $ (36,327) $(24,465) $(94,656) $(32,899)
Other comprehensive income, net of tax:
Foreign currency translation adjustments ......... (1,432) -- 1,920 --
----------- -------- -------- --------
Comprehensive loss .................................... $ (37,759) $(24,465) $(92,735) $(32,899)
=========== ======== ======== --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
----- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (94,656) $ (32,899)
Adjustments to reconcile net loss to net cash
used in operating activities -
Depreciation and amortization 17,127 5,778
Asset impairment 12,842 --
Non-cash interest expense 39,027 3,882
Non-cash compensation expense 385 1,419
Minority interest (1,845) --
Change in accounts receivable (6,385) (2,194)
Change in prepaid expenses and other assets (3,394) (1,485)
Other 1,927 --
Change in accounts payable, accrued expenses and other liabilities 95 12,985
--------- ---------
Net cash used in operating activities (34,879) (12,514)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid in connection with acquisitions, net of cash acquired -- (113,891)
Deposits paid in conjunction with new business alliances -- (1,238)
Capital expenditures (16,228) (7,614)
--------- ---------
Net cash used in investing activities (16,228) (122,743)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from interim financing -- 120,000
Principal payments on note payable - related party (150) (365)
Principal payments on short-term debt (192) --
Principal payments on obligations under capital leases (5,696) (722)
Proceeds from exercise of stock options 1,798 --
Proceeds from issuance of common stock, net of offering expenses 6 900
Proceeds from issuance of preferred stock, net of offering expenses 47,500 12,777
--------- ---------
Net cash provided by financing activities 43,266 132,590
Effect of exchange rate changes on cash and cash equivalents 165 4,904
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,676) 2,237
CASH AND CASH EQUIVALENTS, beginning of the period 9,015 179
--------- ---------
CASH AND CASH EQUIVALENTS, end of the period $ 1,339 $ 2,416
========= =========
CASH PAID DURING THE PERIOD FOR INTEREST $ 2,263 $ 491
========= =========
CASH PAID DURING THE PERIOD FOR INCOME TAXES $ -- $ --
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Conversion of notes payable - related parties and accrued interest for
230,627 shares of Series B preferred stock $ -- $ 1,236
========= =========
Issuance of 250,000 shares of Series B preferred stock for notes receivable $ -- $ 1,017
========= =========
Acquisition of assets under capital lease and other financing facilities $ 38,241 $ 4,320
========= =========
Issuance of warrants in connection with Interim Loan $ 4,797 $ --
========= =========
Conversion of obligation for 316,921 shares of Series D Preferred Stock $ 1,030
=========
Stock issued in ICX and IIC acquisition $ -- $ 8,326
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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WORLDPORT COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
WorldPort Communications, Inc. (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 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 accompanying condensed consolidated financial statements have been
prepared by the Company without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-Q pursuant to
such rules and regulations; however, management believes that the
disclosures herein are adequate to make the information presented not
misleading. The financial statements and notes thereto included in this
Form 10-Q should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998.
In the opinion of the Company's management, the accompanying condensed
consolidated financial statements contain all adjustments necessary to
present fairly the Company's financial position as of September 30,
1999, and the results of operations for the three and nine months ended
September 30, 1999 and 1998 and cash flows for the nine months ended
September 30, 1999 and 1998. The results of operations for the three
and nine months ended September 30, 1999 and 1998 are not necessarily
indicative of the operating results for the full year.
Financial Condition
The Company is subject to various risks in connection with the
operation of its business including, among other things, (i) an
inability to repay the Interim Loan Facility due November 18, 1999,
(ii) changes in external competitive market factors, (iii) termination
of certain operating agreements or inability to enter into additional
operating agreements, (iv) inability to satisfy anticipated working
capital or other cash requirements, (v) changes in or developments
under domestic or foreign laws, regulations, licensing requirements or
telecommunications standards, (vi) changes in the availability of
transmission facilities, (vii) changes in the Company's business
strategy or an inability to execute its strategy due to unanticipated
changes in the market, (viii) various competitive factors that may
prevent the Company from competing successfully in the marketplace, and
(ix) the Company's lack of liquidity and its ability to raise
additional capital. The Company has incurred losses since inception,
expects to continue to incur operating losses in the near future, and
has an accumulated deficit of approximately $175.3 million as of
September 30, 1999 as well as a working capital deficit of
approximately $150.1 million. Funding of the Company's working capital
deficit, current and future operating losses and investment in
additional telecommunications assets will require substantial
continuing capital investment. The Company's strategy has been to fund
these cash requirements through debt facilities and additional equity
financing. The Company is also seeking to finance its cash requirements
through the sale of some or all of its present operating assets. On
November 11, 1999, the Company entered into a series of Definitive
Agreements with Energis Plc for the sale of its 85% shareholding in
Worldport Communications Europe Holdings, B.V., The Parent of Enertel
N.V. and Associated Assets ("Enertel") for $570 million. It is expected
that this sale will be consummated by the end of the first quarter of
the year 2000. The Company intends to apply a portion of the net
proceeds to be realized from this sale to repay all existing debt,
including the Interim Loan, trade credit and other liabilities. It is
expected that the Company will consider a new strategic focus following
this sale utilizing the remaining net proceeds.
7
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The Company's Interim Loan facility, which originally matured on June
23, 1999 and has been extended until November 18, 1999, is secured by a
lien on substantially all of the Company's assets and certain of its
subsidiaries and a pledge of the capital stock of certain of the
Company's subsidiaries. It is contemplated that the proceeds from the
sale of EnerTel will be used to repay the Interim Loan. In the event
that the Interim Loan is not repaid by its current maturity date (or
any further extended maturity date, as the case may be), the Interim
Loan holders have an agreement with the Company and certain of the
Company's stockholders pursuant to which the Company and such
stockholders will be obligated to support and use their respective best
efforts to achieve any transaction or series of transactions involving
the sale of all or any part of the Company or any subsidiary or any of
their assets which is proposed by the Interim Loan holders.
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
complete the sale of EnerTel or failure to obtain sufficient capital
will materially affect the Company's operations. 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.
In August 1999, the Company announced that it was closing its U.S.
carrier operations and initiated the process of disposing of certain
assets and subsidiaries, including Telenational Communications, Inc.
("TNC") and International InterConnect, Inc. ("IIC"). The Company is
currently negotiating the sale of these operations, but to date does
not have any definitive sale arrangements. The Company has taken an
asset impairment charge of approximately $5.4 million, $6.5 million and
$1 million in connection with the pending sale of TNC, IIC and other
U.S. based assets, respectively, to write the net investments down to
their anticipated net realizable value. Additionally, the balance sheet
accounts of EnerTel, TNC and IIC have been collapsed in the
accompanying financial statements, and are reflected as net assets held
for sale in "Other Assets". The following table summarizes the net
assets prior to collapsing the balance sheet accounts and the net
realizable asset write-down (in thousands):
<TABLE>
<CAPTION>
TNC IIC Other EnerTel Total
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Working capital $ 791 $ 504 $ -- $ (15,501) $ (14,206)
Property, plant & equipment 939 487 3,954 110,860 116,240
Other assets -- 144 -- 14,842 14,986
Non current liabilities (64) (2,853) -- (56,120) (59,037)
Intangible assets 5,050 8,524 -- 46,270 59,844
Impairment loss (5,366) (6,476) (1,000) -- (12,842)
------- ------- ------- --------- ---------
Net assets held for sale $ 1,350 $ 330 $ 2,954 $ 100,351 $ 104,985
</TABLE>
Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Loss per Share
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.
(2) SEGMENT DISCLOSURES
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
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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. Its operations can be
viewed as European and North American. Intersegment revenues are not
material. Financial data by geographic area for the three months ended
September 30, 1999 and 1998, and the nine months ended September 30,
1999 are as follows (in thousands):
Three months ended September 30, 1999:
<TABLE>
<CAPTION>
European North American (1) Total
-------- ------------------ -----
<S> <C> <C> <C>
Revenues $16,639 $ 5,828 $22,467
Depreciation and amortization 4,089 2,007 6,096
Operating loss (3,585) (22,846) (26,431)
Interest expense, net (8,843) (823) (9,666)
Net loss (12,427) (23,900) (36,327)
</TABLE>
Three months ended September 30, 1998:
<TABLE>
<CAPTION>
European North American (1) Total
-------- ------------------ -----
<S> <C> <C> <C>
Revenues $ 8,003 $ 3,743 $11,746
Depreciation and amortization 3,371 910 4,281
Operating loss (8,608) (6,497) (15,105)
Interest expense, net (9,435) 75 (9,360)
Net loss (18,044) (6,421) (24,465)
</TABLE>
Nine months ended September 30, 1999:
<TABLE>
<CAPTION>
European North American (1) Total
-------- ------------------ -----
<S> <C> <C> <C>
Revenues $49,320 $15,943 $65,263
Depreciation and amortization 12,389 4,738 17,127
Operating loss (12,544) (38,481) (51,025)
Interest expense, net (42,279) (1,911) (44,190)
Net loss (52,974) (41,682) (94,656)
</TABLE>
(1) Includes all corporate overhead costs.
The Company acquired its European operations in June 1998. Prior to
that, all of its operations were North American based.
The Company is in the process of selling certain assets and
subsidiaries. Accordingly, at September 30, 1999 the balance sheet
accounts of these assets and subsidiaries have been collapsed into net
assets held for sale (see footnote 1 for additional information).
(3) COMMITMENTS AND CONTINGENCIES
Interim Loan Facility
To finance the EnerTel acquisition, the Company entered into a $120
million Interim Loan facility with a consortium of lenders effective
June 23, 1998, the terms of which also included the issuance of
warrants.
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<PAGE> 10
The Interim Loan, which originally matured on June 23, 1999 and has
been extended until November 18, 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. In order
to secure the extension until November 18, 1999, the Company has agreed
to pay the Lenders an amendment fee of $600,000 at the maturity date.
The amendment fee has been recorded as interest expense in the
accompanying financial statements. The Interim Loan bears interest at
LIBOR (as defined in the credit agreement related to the Interim Loan)
plus 6% per annum (13.5% at September 30, 1999) 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. As of September
30, 1999, the 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 September 30, 1999, 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 September 30, 1999, the warrants issued and to
be issued in connection with the Interim Loan were valued at an
aggregate of approximately $29.1 million. It is contemplated that the
proceeds from the sale of EnerTel will be used to repay the Interim
Loan.
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 and terrestrial 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 purchase commitment over the next 3 years under this agreement.
In 1999, the Company purchased undersea cable capacity from the vendor
by converting its deposit and paying an additional $5.1 million as
down-payment, and obtaining vendor financing for the remaining $15.8
million purchase price. This vendor financing bears interest at a rate
of 11.5% and requires quarterly principal payments of $1.2 million
beginning on the earlier of the Company having received aggregate
proceeds from debt or equity issuances (other than vendor financing) of
at least $150 million, or March 1, 2000 and ending March 2002. The
Company has not yet made any principal payments on this vendor
financing. The Company intends to sell all or a portion of this
capacity in conjunction with other asset sale activities now under
consideration.
In February 1999, the Company entered into an agreement with a
telecommunication carrier to sell to such carrier transmission capacity
throughout various points of presence in Europe for approximately $8
million, payable upon acceptance of the circuits by the carrier. The
contract provides the purchaser with an indefeasible right of use of
this capacity for a period of 20 years. The Company has entered into a
separate agreement with a European telecommunications company which
gives the Company the right to purchase capacity through these points
of presence. This contract provides for indefeasible rights of use for
a period of 10 years. The Company is pursuing means to satisfy the
capacity commitment to the Company's customer for the remaining 10
years of that contract. During the second quarter of 1999, the Company
recorded revenue under the contract of $2.1 million and costs,
including an estimate of future costs for years 11-20 based on an
independent third party's estimate, of $2.5 million. This represents
management's best estimate of the present value of such future costs to
provide these services. Management will monitor this estimate and
adjust as necessary when, and if, additional information is available.
The initial transaction under the contract was negotiated in
anticipation of future profitable revenues from the customer.
Legal
The Company's common stock is now quoted and traded on the OTC Bulletin
Board under the symbol "WRDP.OB" after having been delisted from the
Nasdaq SmallCap Market as of the close of business on August 4, 1999.
Since July 14, 1999, the Company and certain of its former officers
have been named as defendants in
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multiple shareholder class action lawsuits filed in the United States
District Court for the Northern District of Georgia. The plaintiffs in
these lawsuits seek to represent a class of individuals who purchased
or otherwise acquired the Company's common stock from as early as
December 31, 1998 through June 25, 1999. Among other things, the
plaintiffs allege the defendants spoke positively about financing the
Company obtained from The Heico Companies, LLC without disclosing the
risk that the financing might cause the Company to be delisted from
Nasdaq. The plaintiffs further allege the truth was purportedly
revealed on June 28, 1999 when the Company announced that it was under
review by Nasdaq and the disclosure that the Company might be delisted
from Nasdaq adversely affected the value of the Company's common stock.
The plaintiffs allege violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934. The Company intends to defend these
lawsuits vigorously, but due to inherent uncertainties of the
litigation process and the judicial system, the Company is unable to
predict the outcome of this litigation. If the outcome of this
litigation is adverse to the Company, it would have a material adverse
effect on the Company's business, financial condition and results of
operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NOTE ON "FORWARD-LOOKING" STATEMENTS
The information set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") contains certain
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities Litigation
Reform Act of 1995, including, among others (i) expected changes in the
Company's revenues and profitability, (ii) prospective business
opportunities and (iii) the Company's strategy for financing its
business. Forward-looking statements are statements other than
historical information or statements of current condition. Some
forward-looking statements may be identified by use of terms such as
"believes", "anticipates", "intends" or "expects". These
forward-looking statements relate to the plans, objectives and
expectations of the Company for future operations. Although the Company
believes that its expectations with respect to the forward-looking
statements are based upon reasonable assumptions within the bounds of
its knowledge of its business and operations, in light of the risks and
uncertainties inherent in all future projections, the inclusion of
forward-looking statements in this report should not be regarded as a
representation by the Company or any other person that the objectives
or plans of the Company will be achieved.
The Company's revenues and results of operations could differ
materially from those projected in the forward-looking statements as a
result of numerous factors, including, but not limited to, the
following: (i) an inability to repay the Interim Loan Facility due
November 18, 1999, (ii) changes in external competitive market factors,
(iii) termination of certain operating agreements or inability to enter
into additional operating agreements, (iv) inability to satisfy
anticipated working capital or other cash requirements, (v) changes in
or developments under domestic or foreign laws, regulations, licensing
requirements or telecommunications standards, (vi) changes in the
availability of transmission facilities, (vii) changes in the Company's
business strategy or an inability to execute its strategy due to
unanticipated changes in the market, (viii) various competitive factors
that may prevent the Company from competing successfully in the
marketplace, and (ix) the Company's lack of liquidity and its ability
to raise additional capital. In light of these risks and uncertainties,
there can be no assurance that actual results, performance or
achievements of the Company will not differ materially from any future
results, performance or achievements expressed or implied by such
forward-looking statements. The foregoing review of important factors
should not be construed as exhaustive. The Company undertakes no
obligation to release publicly the results of any future revisions it
may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
The following discussion should be read in conjunction with the
Condensed Consolidated Financial Statements and Notes thereto included
under Item 1 of this Form 10-Q. In addition, reference should be made
to the Financial Statements and Notes thereto and related Management's
Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998.
OVERVIEW
The Company is a 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. In order to meet its obligations under the
Interim Loan Facility due November 18, 1999, the Company is currently
exploring the sale of some or all of its assets. On November 11, 1999,
the Company entered into a series of definitive agreements with Energis
PLC for the sale of its 85% shareholding in Worldport Communications
Europe Holdings, B.V., the Parent of Enertel N.V. and Associated Assets
("Enertel") for $570 million. It is expected that this sale will be
consummated by the end of the first quarter of the year 2000. The
Company intends to apply a portion of the net proceeds to be realized
from this sale to repay all existing debt, including the Interim Loan,
trade credit and other liabilities. It is expected that the Company
will consider a new strategic focus following this sale utilizing the
remaining net proceeds.
The Company's growth to date has occurred principally through
acquisitions, most notably its acquisition
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of EnerTel, a national provider of telecommunications services in the
Netherlands. The Company 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 the Company sold a 15% interest in the direct parent of
EnerTel to former shareholders of EnerTel for approximately $14.8
million, of which approximately $2.8 million was an equity investment
in the subsidiary and approximately $12 million was in the form of a
shareholder note. The principal on this shareholder note is payable ten
years after the Company's repayment of the Interim Loan, which financed
the Company's acquisition of EnerTel.
In addition to the Company's EnerTel operations, during 1998 the
Company acquired Intercontinental Exchange, Inc. ("ICX") and
International InterConnect, Inc. ("IIC") which serve distributors and
resellers focused on international calling card and private line
services. Formerly 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. During the first
quarter of 1999, ICX's operations were integrated with the Company's
Omaha, Nebraska based calling card operation and its traffic was
migrated to the Company's Omaha switch. The Company acquired the assets
and operations of ICX in April 1998, in exchange for 400,000 shares of
Common Stock.
In August 1998, the Company acquired the assets and operations of IIC.
The purchase consideration was 879,442 shares of Common Stock and
$750,000 in cash. Based in Rockledge, Florida, IIC specializes in
providing international long distance services primarily in Latin
America. IIC's customer base consists primarily of resellers,
multinational corporations, foreign embassies, and other businesses.
In February 1998, the Company commenced operations in the Netherlands
through the acquisition of MathComp B.V., whose name was changed to
WorldPort Communications Europe, B.V. ("WorldPort Europe"). In
connection with this acquisition, the Company 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 revenue and
gross margin requirements during the first and second quarters of 1999.
Following the acquisition of EnerTel, the Company recorded charges of
approximately $5.2 million in the fourth quarter of 1998 for the wind
down of the WorldPort Europe operations in 1999. See "Legal
Proceedings."
As of November 8, 1999, the Company had 27,160,014 shares of Common
Stock outstanding, or 59,907,057 shares on a fully diluted basis. The
number of shares outstanding on a fully-diluted basis takes into
account (i) all outstanding shares of Common Stock, (ii) all
outstanding shares of the Company's convertible preferred stock,
together with all options to acquire such stock, (iii) all outstanding
warrants to acquire the Company's Common Stock, together with such
number of additional warrants which the Company would have been
required to issue to the Interim Loan holders had the Interim Loan been
repaid on November 8, 1999 so that such holders would hold warrants
exercisable into 11% of the fully-diluted outstanding Common Stock on
such date (as contemplated by the Interim Loan facility), and (iv) all
outstanding options which had vested as of November 8, 1999 and which
had an exercise price at or below the market price on such date.
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 or terrestrial 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. In March
1999, the Company purchased undersea cable capacity from the vendor by
converting its deposit and paying an additional $5.1 million as
down-payment, and obtaining vendor financing for the remaining $15.8
million purchase price. This vendor financing bears interest at a rate
of 11.5% and requires quarterly principal payments beginning on the
earlier of the Company having received aggregate proceeds from debt or
equity issuances (other than Vendor financing) of at least $150
million, or March 1, 2000 and ending in March 2002. The Company has not
yet made any principal payments on this
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vendor financing. The Company intends to sell all or a portion of this
capacity in conjunction with other asset sale activities now under
consideration.
In February 1999, the Company entered into an agreement with a
telecommunication carrier to sell to such carrier transmission capacity
throughout various points of presence in Europe for approximately $8
million, payable upon acceptance of the circuits by the carrier. The
contract provides the purchaser with an indefeasible right of use of
this capacity for a period of 20 years. The Company has entered into a
separate agreement with a European telecommunications company which
gives the Company the right to purchase capacity through these points
of presence. This contract provides for indefeasible right of use for a
period of 10 years. The Company is pursuing means to satisfy the
capacity commitment to the Company's customer for the remaining 10
years of that contract. During the second quarter of 1999, the Company
recorded revenue under the contract of $2.1 million and costs,
including an estimate of future costs for years 11-20 based on an
independent third party's estimate, of $2.5 million. This represents
management's best estimate of the present value of such future costs to
provide these services. Management will monitor this estimate and
adjust as necessary when, and if, additional information is available.
The initial transaction under the contract was negotiated in
anticipation of future profitable revenues from the customer.
RESULTS OF OPERATIONS
During the three months and nine months ended September 30, 1999, the
Company incurred losses of $36.3 million and $94.7 million,
respectively, compared to losses of $24.5 million and $32.9 million
during the same periods in 1998. Included in the losses incurred during
the three and nine months ended September 30, 1999 are the operating
results of EnerTel, IIC and ICX, including amortization of the
purchased intangibles and recording of financing costs related to the
Company's acquisition of EnerTel, as well as general expenses related
to the Company's worldwide business development and financing
activities. The operating results for ICX and IIC did not have a
material impact on the losses incurred by the Company in 1999. To
address and remedy historical operating losses and to increase its
competitiveness, revenues and gross margins, the Company has taken
various steps to improve each subsidiary's operating efficiency,
network capability and carrier cost structure. In August 1999, the
Company took steps to terminate its U.S. wholesale carrier operations
and significantly reduce its U.S. staffing related to those wholesale
operations. It also announced plans to explore strategic alternatives,
including the sale of assets. On November 11, 1999, the Company entered
into a series of definitive agreements with Energis PLC for the sale of
its 85% shareholding in Worldport Communications Europe Holdings, B.V.,
the Parent of Enertel N.V. and Associated Assets ("Enertel") for $570
million. It is expected that this sale will be consummated by the end
of the first quarter of the year 2000. The Company intends to apply a
portion of the net proceeds to be realized from this sale to repay all
existing debt, including the Interim Loan, trade credit and other
liabilities. It is expected that the Company will consider a new
strategic focus following this sale utilizing the remaining net
proceeds. Failure to complete the sale of EnerTel or failure to obtain
sufficient capital will materially affect the Company's operations. 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.
Revenues
Revenues for the three and nine months ended September 30, 1999 were
$22.5 million and $65.3 million, respectively, compared to $11.7
million and $14.4 million for the three and nine months ended September
30, 1998. The increase in revenues is primarily attributed to the
inclusion of the results of operations of EnerTel, acquired in June
1998 and the commencement of the Company's U.S. wholesale carrier
operations during 1999. EnerTel's revenues were $15.5 million and $45.8
million, respectively, during the three and nine months ended September
30, 1999. The U.S. wholesale carrier operations, which the Company
terminated in the third quarter of 1999, contributed revenues of $3.5
million and $6.8 million during the three and nine months ended
September 30, 1999, respectively. Also contributing to the increase
over the prior year is the inclusion of IIC acquired in July 1998. This
entity contributed approximately $1.6 million and $5.3 million in total
revenues during the three and nine months ended September 30, 1999.
Results for the nine months ended September 30, 1999 also include
revenue of $2.1 million from the
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sale of transmission capacity under an agreement between the Company
and a telecommunication carrier.
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 during 1998 and the first
nine months of 1999 included growth in all EnerTel product lines
including virtual point of presence (VPOP) internet access; the
Kennisnet national data network for the Dutch school system, direct
access local, national and international switched services; and 800/900
products as well as the wholesale portion of the Bel 1600 business, a
residential services business which the Company sold in 1998.
Gross Margin
Gross margin for the three and nine months ended September 30, 1999 was
$8.3 million and $20.4 million, respectively, compared to $3.3 million
and $3.4 million for the three and nine months ended September 30,
1998. The increase in gross margin was primarily due to the inclusion
of the results of operations of EnerTel. The Company's primary costs of
sales are its cost of terminating switched minutes through third
parties, as well as its cost of access circuits used to connect its
customers in the Netherlands.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $15.8 million
from $14.1 million and to $41.5 million from $20.3 million for the
three and nine months ended September 30, 1999 and 1998, respectively.
The increase is primarily due to (i) the inclusion of the selling,
general and administrative expenses associated with the operation of
EnerTel, the U.S. wholesale carrier operations and IIC, (ii) increased
business development and expansion activity, and (iii) costs incurred
in connection with the termination of the Company's U.S. wholesale
carrier operations and the reduction in the U.S. corporate headquarters
staff.
Depreciation and Amortization
Depreciation and amortization expense for the three and nine months
ended September 30, 1999 was $6.1 million and $17.1 million,
respectively, compared to $4.3 million and $5.8 million for the three
and nine months ended September 30, 1998. The increase was due to (i)
depreciation on the assets acquired in connection with the EnerTel and
IIC acquisitions, (ii) amortization of goodwill and other intangible
assets associated with the EnerTel and IIC acquisitions, and (iii)
depreciation on additional switching and network equipment acquired
during 1998 and 1999.
Asset Impairment
In the quarter ended September 30, 1999, the Company recorded
nonrecurring charges totaling approximately $12.8 million in connection
with its decision to close and/or sell certain U.S. operations.
Included in these nonrecurring charges are charges totaling
approximately $11.8 million to write-down the Company's investment in
TNC and IIC to their estimated net realizable value and an asset
impairment charge of $1 million to reduce certain U.S. based
telecommunications equipment to their estimated resale values.
Other Income (Expense)
Interest expense, net was $9.7 million compared to $9.4 million for the
three months ended September 30, 1999 and 1998, respectively. For the
nine months ended September 30, 1999 interest expense, net was $44.2
million compared to $10.2 million during the same period in 1998. The
increase in interest expense is due primarily to the Interim Loan
issued on June 23, 1998. Interest expense also included interest for
the debt the Company assumed in connection with the EnerTel and IIC
acquisitions, and the acquisition of switching equipment subject to
capital lease.
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Other expense, net for the three and nine months ended September 30,
1999 was $.2 million and $1.3 million. This amount mainly consists of
costs incurred to exit certain commitments.
LIQUIDITY AND CAPITAL RESOURCES
The Company is an emerging international telecommunications service
provider executing a business plan that requires substantial capital.
The Company currently has a working capital deficit and has operated at
a loss since its inception. Funding of the working capital deficit,
current and future operating losses, expansion of the Company's global
network, and repayment of the Interim Loan facility will require
substantial continuing capital investment.
As of September 30, 1999 and December 31, 1998 the Company had a
working capital deficit of $150.7 million and $103.8 million,
respectively. The working capital deficit at September 30, 1999 is due
to (i) the Interim Loan, (ii) the acquisition of additional switching
and peripheral equipment and transatlantic capacity, the majority of
which is being financed pursuant to capital leases and vendor
financing, and (iii) the operating losses of the Company.
Operations used $34.9 million during the nine months ended September
30, 1999 due primarily to the (i) operating losses, and (ii) increased
business development activity.
Investing activities used $16.2 million during the nine months ended
September 30, 1999. Investing activities during the nine-month period
consisted entirely of capital spending.
Financing activities provided $43.3 million during the nine months
ended September 30, 1999. Financing activities during the nine months
ended September 30, 1999 consisted primarily of proceeds from the
issuance of 920,419 shares of the Series C convertible preferred stock
in January 1999, the exercise of an option to purchase 283,206 shares
of the Series C convertible preferred stock in July 1999, the issuance
of 141,603 shares of the Series E convertible preferred stock in July
1999, and the exercise of employee stock options, reduced by principal
payments on capital leases and notes payable.
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. The Interim Loan, which originally matured on June 23, 1999
and has been extended until November 18, 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. In order to secure the extension until November
18, 1999, the Company has agreed to pay the Lenders an amendment fee of
$600,000 at the maturity date. The amendment fee has been recorded as
interest expense in the accompanying financial statements. The Interim
Loan bears interest at LIBOR (as defined in the credit agreement
related to the Interim Loan) plus 6% per annum (13.5% at September 30,
1999) 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. As of September 30, 1999, the 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 September 30, 1999,
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 September 30, 1999, the
warrants were valued at an aggregate of approximately $29.1 million.
The Company intends to apply a portion of the net proceeds to be
realized from this sale to repay all existing debt, including the
Interim Loan, trade credit and other liabilities. It is expected that
the Company will consider a new strategic focus following this sale
utilizing the remaining net proceeds.
Funding of the Company's working capital deficit, current and future
operating losses and any investment in additional telecommunication
assets will require substantial continuing capital investment. The
Company's strategy has been to fund these cash requirements through
debt facilities and additional equity financing. The Company is also
seeking to finance its cash requirements through the sale of some or
all of
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its present operating assets. On November 11, 1999, the Company entered
into A Series of Definitive Agreements with Energis Plc for the sale of
its 85% shareholding in Worldport Communications Europe Holdings, B.V.,
The Parent of Enertel N.V. and Associated Assets ("Enertel") for $570
million. It is expected that this sale will be consummated by the end
of the first quarter of the Year 2000. The Company intends to apply a
portion of the net proceeds to be realized from this sale to repay all
existing debt, including the Interim Loan, trade credit and other
liabilities. It is expected that the Company will consider a new
strategic focus following this sale utilizing the remaining net
proceeds.
The Company's Interim Loan facility, which matures on November 18,
1999, is secured by a lien on substantially all of the Company's assets
and certain of its subsidiaries and a pledge of the capital stock of
certain of the Company's subsidiaries. In the event that the Interim
Loan is not repaid by its current maturity date (or any further
extended maturity date, as the case may be), the Interim Loan holders
have an agreement with the Company and certain of the Company's
stockholders pursuant to which the Company and such stockholders will
be obligated to support and use their respective best efforts to
achieve any transaction or series of transactions involving the sale of
all or any part of the Company or any subsidiary or any of their assets
which is proposed by the Interim Loan holders.
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
complete the sale of EnerTel or failure to obtain sufficient capital
will materially affect the Company's operations. 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.
YEAR 2000 ISSUE
The efficient operation of the Company's business is dependent in part
on computer software programs and operating systems. These programs and
systems are used in network trafficking, call origination and
termination, pricing, sales, billing and financial reporting, as well
as various administrative functions. Recognizing the importance and
need for an integrated information systems solution, the Company has
developed an implementation plan for upgrading its systems
architecture. This plan also addresses the functionality of its systems
beyond December 31, 1999 ("Year 2000 compliance"). Typically the
Company's upgrades made for additional functionality also remedy any
Year 2000 deficiencies in the related software.
The Company does 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. The Company's new systems
implementation is expected to be completed by December 15, 1999.
Management believes that the Company's remaining information technology
("IT") systems and other non IT systems are currently Year 2000
compliant or will be compliant by December 15, 1999 after applying
vendor supplied upgrades to these systems. The cost of the upgrades are
not considered to be material.
The Company has obtained documentation from its suppliers, customers,
financial institutions and others as to the status of their Year 2000
compliance programs and the possibility of any interface difficulties
relating to Year 2000 compliance that may affect the Company. While few
significant concerns were identified, each has been addressed with a
program of remediation. All programs are targeted for completion by
December 15, 1999. However, Year 2000-related operating problems or
expenses may arise in connection with the Company's computer systems
and software or in connection with the Company's interface with the
computer systems and software of its suppliers, customers, financial
institutions and others. Because such third-party systems or software
may not be Year 2000 compliant, the Company has developed contingency
plans to address Year 2000 failures of the entities with which it
interfaces. The Company could be required to incur unanticipated
expenses to remedy any problems, which could have a material adverse
effect on its business, results of operation and financial conditions.
The Company's worst case scenario does not contemplate a major business
disruption from internal systems. The Company believes that it has
exercised reasonable diligence to assess whether external
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systems and interfaces are adequately prepared.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities, which is effective for fiscal years beginning after June
15, 1999. In June 1999, the FASB issued Statement No. 137, Accounting
for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133, which amends Statement 133 to
be effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000 (that is, January 1, 2001 for companies with
calendar-year fiscal years). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and transactions
involving hedge accounting. The Company has not yet determined the
impact this statement will have on its consolidated financial
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes that its exposure to market rate fluctuations on
its investments is nominal due to the short-term nature of those
investments. To the extent the Interim Loan is outstanding, the Company
has market risk relating to such amounts because the interest rates
under the Interim Loan are variable. The Company does not believe its
exposure represents a material risk to the financial statements.
WorldPort's operations in Europe, principally in the Netherlands,
expose the Company to currency exchange rate risks. To manage the
volatility attributable to these exposures, the Company nets the
exposures to take advantage of natural offsets. Currently, the Company
does not enter into any hedging arrangements to reduce this exposure.
The Company is not aware of any facts or circumstances that would
significantly impact such exposures in the near-term. If, however,
there was a 10% sustained decline of the Dutch Guilder versus the U.S.
dollar, then the consolidated financial statements could be materially
effected as the Company's Dutch operations represented approximately
(i) 92% of the Company's total assets as of September 30, 1999, (ii)
74% and 76%, respectively, of the Company's total revenues for the
three and nine months ended September 30, 1999, and (iii) 34% and 56%,
respectively, of the Company's net loss for the three and nine months
ended September 30, 1999.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 17, 1998, the Company was served with a summons and complaint
from MC Liquidating Corporation f/k/a MIDCOM Communications, Inc.
("MIDCOM"). Both the Company and TNC, its wholly-owned subsidiary are
named as defendants, as are Telenational Communications, Limited
Partnership, the former owner of the TNC assets ("TCLP"), and Edmund
Blankenau, a principal of TCLP and one of the Company's 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 the Company, together with other damages, attorney
fees and costs. The parties are currently engaging in discovery. The
Company believes the claims are without merit and intends to vigorously
defend against them.
The Company and WorldPort Communications Europe, B.V., one of the
Company's European subsidiaries ("WorldPort Europe"), are defendants in
litigation filed in the District courts of The Hague. The cases, filed
in January 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
and its subsequent purchase of EnerTel. The litigation seeks damages in
an amount exceeding $20 million and the award of 2,350,000 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. Earlier
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claims filed by Mr. Zolfagharpour with respect to his employment
agreement with WorldPort Europe have been resolved.
Since July 14, 1999, the Company and certain of its former officers
have been named as defendants in multiple shareholder class action
lawsuits filed in the United States District Court for the Northern
District of Georgia. The plaintiffs in these lawsuits seek to represent
a class of individuals who purchased or otherwise acquired the
Company's common stock from as early as December 31, 1998 through June
25, 1999. Among other things, the plaintiffs allege the defendants
spoke positively about financing the Company obtained from The Heico
Companies, LLC without disclosing the risk that the financing might
cause the Company to be delisted from Nasdaq. The plaintiffs further
allege the truth was purportedly revealed on June 28, 1999 when the
Company announced that it was under review by Nasdaq and the disclosure
that the Company might be delisted from Nasdaq adversely affected the
value of the Company's common stock. The plaintiffs allege violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The
Company intends to defend these lawsuits vigorously, but due to
inherent uncertainties of the litigation process and the judicial
system, the Company is unable to predict the outcome of this
litigation. If the outcome of this litigation is adverse to the
Company, it would have a material adverse effect on the Company's
business, financial condition and results of operations.
From time to time, the Company is involved in various other lawsuits or
claims arising from the normal course of business. In the opinion of
management, none of these lawsuits or claims will have a material
adverse effect on the Company's financial condition or results of
operations.
ITEM 2. CHANGES IN SECURITIES
During the third quarter of 1999, the Company made the following
issuances of securities without registration under the Securities
Exchange Act of 1933, as amended ("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 December 1998, the Company entered into a Series C Preferred Stock
Purchase Agreement (the "Series C Purchase Agreement") with The Heico
Companies, LLC ("Heico"), pursuant to which Heico acquired 1,132,824
shares of Series C convertible preferred stock for an aggregate
purchase price of $40.0 million ($32.5 million was received for 920,419
shares in January 1999). Pursuant to the Series C Purchase Agreement,
Heico also received an option to purchase up to 283,206 additional
shares of Series C convertible preferred stock (the "Series C Option")
for an aggregate purchase price of $10 million.
On July 15, 1999, Heico completed an additional $15.0 million equity
investment in the Company through (i) the exercise the Series C Option
and (ii) the purchase of 141,603 shares of Series E convertible
preferred stock for an aggregate purchase price of $5.0 million. In
connection with this investment, the Company granted Heico a three-year
option to purchase 424,809 shares of Series F convertible preferred
stock for an aggregate purchase price of $15.0 million.
At Heico's option, it may convert these shares of preferred stock into
Common Stock at a conversion price of, in the case of the Series C
convertible preferred stock and the Series E convertible preferred
stock, $3.25 per share of Common Stock and, in the case of the Series F
convertible preferred stock, $4.00 per share of Common Stock.
On December 31, 1998, the Company terminated its advisory agreement
with Maroon Bells Capital partners, Inc. ("MBCP"). In connection with
this termination, among other things, the Company agreed to issue to
MBCP shares of convertible preferred stock having an aggregate
liquidation preference of $1,029,994 and convertible into Common Stock
at $3.25 per share. In July 1999, 316,921 shares of Series D
convertible preferred stock were issued to MBCP in satisfaction of this
agreement.
During the quarter ended September 30, 1999, various holders of Series
A and Series B Preferred Stock
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converted their shares into 81,944 and 1,691,184 shares, respectively,
of Common Stock in accordance with the terms of the related certificate
of designations, preferences and rights.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Settlement Agreement between the Company and Paul A. Moore, dated
July 15, 1999 *
10.2 Interim Loan Extension Letter, dated June 23, 1999
10.3 Interim Loan Extension Letter, dated July 1, 1999
10.4 Consent and Amendment No. 8 to the Credit Agreement, dated
July 8, 1999
10.5 Consent and Amendment No. 9 to the Credit Agreement, dated
August 18, 1999
3.1 Certificate of Designation S, preferences and Rights of
Series D Preferred Stock
27.1 Financial Data Schedule (for SEC use only)
</TABLE>
* Such exhibit is a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Quarterly Report on Form 10-Q.
REPORTS ON FORM 8-K
No Current Reports on Form 8-K were filed during the period covered by this
Report, on July 15, 1999 (which was reported under Item 5 - Other Events). other
than a Form 8-K filed on August 10, 1999 with respect to the issuance of certain
securities to The Heico Companies, LLC
20
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLDPORT COMMUNICATIONS, INC.
Date: November 12, 1999 By: /s/ John T. Hanson
------------------------------------
John T. Hanson
Chief Financial Officer
21
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES D CONVERTIBLE PREFERRED STOCK
OF
WORLDPORT COMMUNICATIONS, INC.
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
WorldPort Communications, Inc., a Corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof, and
pursuant to Section 151 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation") and under the provisions of Section 151 of the
General Corporation Law of the State of Delaware, on July 2, 1999, the Board of
Directors adopted the following resolution creating a series of preferred stock,
$0.0001 par value per share ("Preferred Stock"), designated as Series D
Convertible Preferred Stock:
"RESOLVED that, pursuant to the authority vested in the Board
of Directors of the Corporation in accordance with the provisions of
the Corporation's Certificate of Incorporation, a series of Preferred
Stock of the Corporation be, and it hereby is, authorized and created,
and that the designation and amount thereof and the voting powers,
preferences and relative, participating, optional or other special
rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
Section 1. Designation: Series, Amount and Ranking. The
shares of the series of Preferred Stock established hereby shall be
designated "Series D Convertible Preferred Stock" (such shares being
hereafter called the "Series D Preferred Stock"), and the number of
shares constituting such series shall be 650,000 which shares shall
have a par value of $0.0001 per share and a stated value of $3.25 per
share (the "Stated Value"). The Series D Preferred Stock shall rank on
a parity with the shares of Series A Preferred Stock, Series B
Convertible Preferred Stock and Series C Convertible Preferred Stock
and prior to the Corporation's Common Stock, as to the payment of
dividends and distribution of assets upon liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary.
Section 2. Dividends and Distributions.
(a) The Corporation shall not declare or pay or set
apart for payment any dividends or make any other
distributions on, or make any payment on account of the
purchase, redemption or other retirement of any Series B
Convertible Preferred Stock or any class of stock or series
thereof of the Corporation ranking, as to dividends or as to
distributions in the event of a liquidation, dissolution or
winding up of the Corporation, junior to the Series D
Preferred Stock, including the Corporation's Common Stock,
(collectively, "Junior Stock") unless, prior to the payment of
such dividends or other payments the Corporation first
declares and pays a dividend equal to 7% of the Stated Value
(the "Series D Preferred Dividends") to the holders of shares
of the Series D
<PAGE> 2
Preferred Stock. Notwithstanding anything to the contrary
contained herein, the foregoing shall not apply to (i) any
dividend payable solely in any shares of any Junior Stock; or
(ii) the acquisition of shares of any Junior Stock either (A)
pursuant to any employee incentive or benefit plan or
arrangement (including any employment agreement) of the
Corporation or of any subsidiary of the Corporation heretofore
or hereafter adopted or (B) in exchange solely for shares of
any other Junior Stock. The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire
any shares of capital stock of the Corporation unless the
Corporation could, pursuant to this paragraph, purchase such
shares at such time and in such manner.
(b) Series D Preferred Dividends shall be paid in
cash on or prior to the date dividends are paid on the
corporation's Junior Stock (the "Dividend Payment Date"). The
Series D Preferred Dividends are not cumulative and no
interest shall accrue with respect to the Series D Preferred
Stock.
(c) Series D Preferred Dividends shall be payable to
holders of record as they appear on the books of the
Corporation or any transfer agent on a Series D Dividend
Payment Date.
(d) No Series D Dividends shall be declared or paid
or set apart for payment unless dividends have been or
contemporaneously are declared or paid or set apart for
payment on the Series A Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible
Preferred Stock or any other series of stock ranking on a
parity with the Series D Preferred Stock as to dividends
(collectively, "Parity Stock").
Section 3. Voting Rights.
Each holder of record of Series D Preferred Stock
shall be entitled to vote on all matters submitted to a vote
of the stockholders of the corporation, voting together with
the holders of Common Stock as a single class. Each holder of
record of each share of Series D Preferred Stock shall be
entitled to one vote for each share of Series D Preferred
Stock held.
Section 4. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation, dissolution, or winding up
of the Corporation, whether voluntary or involuntary (a
"Liquidation"), before any distribution or payment shall be
made to the holders of any Junior Stock, the holders of Series
D Preferred Stock shall be entitled to be paid out of the
assets of the Corporation an amount per share of Series D
Preferred Stock equal to the sum of $3.25 plus all declared
but unpaid Series D Preferred Dividends and any Series D
Preferred Dividends required to be declared pursuant to
Section 2(a) above as a result of the Liquidation (the
"Liquidation Preference"). After the payment of the full
Liquidation Preference, the holders of the Series D Preferred
Stock shall not be entitled to any further participation in
any distribution of assets of the Corporation.
(b) Neither the merger or consolidation of the
Corporation with or into any other corporation, nor the merger
or consolidation of any other corporation with or into the
-2-
<PAGE> 3
Corporation, nor the sale, lease, exchange or other transfer
of all of or any portion of the assets of the Corporation,
shall be deemed to be a Liquidation for purposes of this
Section 4.
(c) If upon any Liquidation the Liquidation
Preference is not paid in full to all holders of Series D
Preferred Stock, the holders of Series D Preferred Stock shall
share ratably in any such distribution with all holders of
Parity Stock, in proportion to the full distributable amounts
to which holders of all such parity shares are entitled upon
such distribution of assets.
Section 5. Conversion.
(a) Optional Conversion. Subject to and in compliance
with the provisions of this Section 5, any shares of Series D
Preferred Stock may, at the option of the holder and without
any payment of consideration, be converted at any time into
fully-paid and nonassessable shares of Common Stock.
In the event that a holder of Series D Preferred
Stock desires to convert its Series D Preferred Stock into
shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the
office of the Corporation or any transfer agent for the Series
D Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert
the same. Such notice shall state the number of shares of
Series D Preferred Stock being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to
such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled and
shall promptly pay in cash or, to the extent sufficient funds
are not then legally available therefor, in Common Stock (at
the Common Stock's fair market value determined by the Board
of Directors as of the date of such conversion), any declared
but unpaid Series D Preferred Dividends on the shares of
Series D Preferred Stock being converted. Such conversion
shall be deemed to have been made at the close of business on
the date of such surrender of the certificates representing
the shares of Series D Preferred Stock to be converted, and
the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock
on such date.
(b) Mandatory Conversion. Upon the conversion of at
least 70% of the Series D Preferred Stock originally issued by
the Corporation, each outstanding share of Series D Preferred
Stock shall, without any action on the part of the Corporation
or the holders of Series D Preferred Stock, be automatically
converted into shares of Common Stock. All such outstanding
shares of Series D Preferred Stock shall be deemed converted
effective upon the date on which at least 70% of the
originally issued Series D Preferred Stock is converted, and
thereafter each certificate for Series D Preferred Stock
outstanding shall be deemed to represent the number of shares
of Common Stock into which it has been converted.
Nevertheless, each holder of Series D Preferred Stock shall
thereafter surrender its certificates for shares of Series D
Preferred Stock for conversion in accordance with Section 5(a)
above.
(c) Conversion Rate. The number of shares of Common
Stock to which a
-3-
<PAGE> 4
holder of Series D Preferred Stock shall be entitled upon
conversion (whether optional or mandatory) shall be the
product obtained by multiplying the "Series D Preferred Stock
Conversion Rate" then in effect by the number of shares of
Series D Preferred Stock being converted. The conversion rate
in effect at any time for conversion of the Series D Preferred
Stock (the "Series D Preferred Stock Conversion Rate") shall
be the quotient obtained by dividing $3.25 by the "Series D
Preferred Stock Conversion Price."
(d) Conversion Price. The conversion price (the
"Series D Preferred Stock Conversion Price") for the Series D
Preferred Stock shall initially be $3.25. The Series D
Preferred Stock Conversion Price shall be adjusted from time
to time in accordance with this Section 5. All references to
the Series D Preferred Stock Conversion Price herein shall
mean the such conversion price as so adjusted from time to
time.
(e) Series D Preferred Stock No Longer Outstanding.
Upon conversion of shares of Series D Preferred Stock, such
shares shall no longer be deemed to be outstanding and all
rights of the holders thereof as Series D Preferred
Stockholders of the Corporation shall cease.
(f) Adjustments for Stock Splits and Dividends. In
the event the Corporation shall, at any time or from time to
time while any of the shares of Series D Preferred Stock are
outstanding, (i) pay a dividend or make a distribution with
respect to Common Stock in shares of Common Stock, (ii)
subdivide or split its outstanding shares of Common Stock into
a larger number of shares, or (iii) combine its outstanding
shares of Common Stock into a smaller number of shares, in
each case whether by reclassification of shares,
recapitalization of the Corporation or otherwise, the Series D
Preferred Stock Conversion Price in effect immediately prior
thereto shall be adjusted by multiplying the Series D
Preferred Stock Conversion Price by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately before such event, and the denominator of which is
the number of shares of Common Stock outstanding immediately
after such event. Such adjustment shall become effective at
the opening of business on the Business Day next following the
record date for determination of stockholders entitled to
receive such dividend or distribution in the case of a
dividend or distribution, and shall become effective
immediately after the effective date in case of a subdivision,
split, combination or reclassification; and any shares of
Common Stock issuable in payment of a dividend shall be deemed
to have been issued immediately prior to the close of business
on the record date for such dividend.
(g) Adjustments for Merger, etc. If there shall occur
a merger or consolidation of the Corporation with or into
another entity, any merger or consolidation of another entity
into the Corporation (other than a merger or consolidation
that does not result in any conversion, exchange or
cancellation of outstanding shares of Common Stock), any sale
or transfer of all or substantially all of the assets of the
Corporation or any compulsory share exchange, that results in
the conversion or exchange of the Common Stock into, or the
right to receive, other securities or other property (whether
of the Corporation or any other entity), then the Series D
Preferred Stock will thereafter no longer be convertible into
shares of Common Stock, but instead will be convertible into
the kind and amount of securities or other property which the
holder of such shares of Series D Preferred Stock would have
owned immediately after such merger,
-4-
<PAGE> 5
consolidation, sale or share exchange if such shares of Series
D Preferred Stock had been converted into shares of Common
Stock immediately before the effective time of such merger,
consolidation, sale or share exchange. If this paragraph (g)
applies, then no adjustment in respect of the same merger,
consolidation, sale or share exchange shall be made pursuant
to the other provisions of this Section. In the event that at
any time, as a result of an adjustment made pursuant to this
paragraph (g), the Series D Preferred Stock shall become
subject to conversion into any securities other than shares of
Common Stock, thereafter the number of such other securities
so issuable upon conversion of the shares of Series D
Preferred Stock shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as
practicable to the provisions contained in this Section 5.
(h) Fractional Shares. No fractional shares of Common
Stock shall be issued upon conversion of Series D Preferred
Stock. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of
Series D Preferred Stock by a holder thereof shall be
aggregated for purposes of determining whether the conversion
would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the
Corporation shall, in lieu of issuing any fractional share,
pay cash equal to the product of such fraction multiplied by
the Common Stock's Fair Market Value on the date of
conversion. For purposes of this Section 5(h), the Fair Market
Value of the Common Stock shall be equal to the average
closing sales price of a share of the Company's Common Stock
on the Nasdaq SmallCap Market (or such other national
securities exchange or automated quotation system on which the
Common Stock is then listed or quoted) for the 10 consecutive
trading days immediately preceding the date of conversion.
(i) Reservation of Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the
shares of the Series D Preferred Stock, such number of its
shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares
of the Series D Preferred Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding
shares of the Series D Preferred Stock, the Corporation will
take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be
sufficient for such purpose.
(j) Payment of Taxes. The Corporation will pay all
taxes (other than taxes based upon income) and other
governmental charges that may be imposed with respect to the
issue or delivery of shares of Common Stock upon conversion of
shares of Series D Preferred Stock, excluding any tax or other
charge imposed in connection with any transfer involved in the
issue and delivery of shares of Common Stock in a name other
than that in which the shares of Series D Preferred Stock so
converted were registered.
Section 6. Notices.
Any notice required by the provisions hereof shall be
-5-
<PAGE> 6
in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent
by confirmed telex or facsimile, (iii) five (5) days after
having been sent by registered or certified mail, return
receipt requested, postage prepaid, or (iv) one (1) day after
deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of
receipt. All notices shall be addressed to the Corporation at
its principle office and to each holder of record at the
address of such holder appearing on the books of the
Corporation.
* * *
-6-
<PAGE> 7
IN WITNESS WHEREOF, WorldPort Communications, Inc. has caused
this Certificate of Designations, Preferences and Rights to be duly executed by
its Chairman and Chief Executive Officer and attested by its Assistant
Secretary, this 2nd day of July, 1999.
WORLDPORT COMMUNICATIONS, INC.
By:
--------------------------------------
Carl Grivner
Chairman and Chief Executive Officer
ATTEST:
- --------------------------------------
Don Featherstone, Assistant Secretary
-7-
<PAGE> 1
EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 15th day of
July 1999, by and between WorldPort Communications, Inc., a Delaware corporation
("WorldPort"), and Paul A. Moore ("Moore").
WHEREAS, Moore has served as an officer and senior executive of
WorldPort, pursuant to an Employment Agreement dated January 1, 1998, as amended
(the "Employment Agreement");
WHEREAS, Moore serves as a member of the Board of Directors of
WorldPort and certain of its subsidiaries; and
WHEREAS, WorldPort and Moore desire to confirm Moore's resignation from
employment and all officer and director positions with WorldPort and its
subsidiaries, effective as of the Effective Date (as hereinafter defined), and
the resulting termination of the Employment Agreement.
NOW, THEREFORE, in consideration of the premises, representations,
warranties, covenants, agreements and promises herein contained, the parties
agree, intending to be legally bound, as follows:
SECTION 1 RESIGNATIONS/TERMINATION OF EMPLOYMENT
1.1 Resignations. Moore hereby resigns from all positions as a director or
officer of WorldPort and any of its subsidiaries, effective as of the
Effective Date. As used herein, the "Effective Date" shall be the
closing date of that certain $15.0 million investment in Worldport by
The Heico Companies, LLC in the form approved by Worldport's Board of
Directors. Worldport agrees to use its reasonable efforts to appoint (as
promptly as practicable after the Effective Date) an independent
director to fill the vacancy on Worldport's Board of Directors caused by
Mr. Moore's resignation.
1.2 Termination of Employment. Moore and WorldPort hereby affirm and
acknowledge that, as of the Effective Date, any and all agreements and
understandings relating to Moore's employment by WorldPort are
terminated, other than the provisions of Sections 10, 11, 12, 13, 14 and
15 of the Employment Agreement, a copy of which is attached hereto as
EXHIBIT A, and this Agreement.
1.3 Return of WorldPort Property. As soon as practicable following the
Effective Date, Moore shall return to WorldPort all items belonging to
WorldPort, including, without limitation, all records and other
documents obtained by him or entrusted to him during the course of his
relationship with WorldPort.
<PAGE> 2
SECTION 2 PAYMENTS
In connection with the termination of any agreements and understandings relating
to Moore's employment by, and positions with, WorldPort and the agreements
contained herein, the parties hereto agree as follows:
(a) With respect to the balance of calender year 1999,
Worldport agrees to pay to Moore the salary and bonus payments due
under the Employment Agreement, amounting to $300,000 in the aggregate,
of which $150,000 represents salary and $150,000 represents a bonus.
Such $300,000 shall be paid in six equal monthly installments of
$50,000 each, the first installment payable on the Effective Date and
the remaining installments payable on the last day of each month
thereafter. With respect to calender year 2000, WorldPort agrees to pay
to Moore an aggregate of $450,000, payable in eleven equal monthly
installments of $25,000 each, commencing on January 31, 2000, and a
final installment of $175,000 payable on January 2, 2001;
(b) After the Effective Date, WorldPort agrees to continue to
provide Moore with such medical and disability insurance benefits as
are currently provided to Moore on the same terms, through the one-year
anniversary of the Effective Date, and after such anniversary Moore
shall be entitled to elect to continue such coverage as provided by,
and subject to the terms and conditions of, COBRA;
(c) WorldPort agrees to reimburse Moore for expenses incurred
for office rent and secretarial services from the Effective Date
through December 31, 2000 on the basis currently provided, up to a
maximum aggregate amount of $135,000, provided such expenses are
invoiced and accounted for in accordance with WorldPort's policies and
procedures, and to reimburse Moore for legal expenses aggregating
$15,000 incurred for legal services related to the negotiation and
execution of this Agreement; and
(d) WorldPort agrees to promptly reimburse Moore for all
reasonable expenses incurred by Moore in performing services under the
Employment Agreement prior to the Effective Date, provided that such
expenses are incurred and accounted for in accordance with WorldPort's
policies and procedures. Expenses aggregating approximately $18,000
have already been incurred by Moore and proper documentation has been
provided to Worldport, and Worldport agrees to promptly (and in any
event on or prior to the Effective Date) reimburse Moore for them.
SECTION 3 REPRESENTATIONS AND COVENANTS
3.1 Indemnification. From and after the Effective Date, Worldport shall
indemnify Moore in his capacity as an officer and director of Worldport
and its subsidiaries as provided in Worldport's Certificate of
Incorporation and By-laws as in effect on the Effective Date. A copy of
Article SEVEN of Worldport's Certificate of Incorporation and Articles
XII and XIII of Worldport's By-laws are attached hereto as EXHIBIT B.
2
<PAGE> 3
3.2 Public Announcement. Attached hereto as EXHIBIT C is a copy of the press
release which WorldPort intends to issue with respect to this Agreement
and the subject matter thereof. Neither WorldPort nor Moore will make
any public disclosures inconsistent with such press release.
SECTION 4 GENERAL PROVISIONS
4.1 Preferred Stock. Worldport agrees to promptly issue the shares of
non-participating preferred stock of Worldport referenced in, and in
accordance with the terms and provisions of, that certain Termination
Agreement, dated as of December 31, 1998, between Worldport and Maroon
Bells Capital Partners, Inc.
4.2 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered in person or sent
by registered or certified mail, postage prepaid, commercial overnight
courier (such as Express Mail, Federal Express, etc.) with written
verification of receipt or by telecopy to the following addresses:
If to WorldPort:
WorldPort Communications, Inc.
1825 Barrett Lakes Blvd.
Kennesaw, Georgia 30144
Attention: Chief Executive Officer
Facsimile: 770-792-0676
If to Moore:
Paul A. Moore
Any party may change its address for notice hereunder by notice to the
other party hereto.
4.3 Amendments and Waivers. This Agreement may be amended, superseded,
cancelled or renewed, and the terms and conditions hereof may be waived,
only by a written instrument signed by all parties or, in the case of a
waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
4.4 Governing Law. The provisions of this Agreement shall be construed in
accordance with the laws of the State of Illinois.
4.5 Interpretation. Each of the parties hereby acknowledges and agrees that
if any court determines that any of the terms contained herein, or parts
thereof, are invalid or unenforceable, the remainder of the Agreement
shall not thereby be affected and shall be
3
<PAGE> 4
given full effect, without regard to the invalid portions. Each of the
parties hereto further agrees that if any court determines that any of
the terms contained herein are unreasonable or unenforceable, the court
may interpret, alter, amend or modify any or all of the terms contained
herein to include as much of the scope, time period and intent as will
render such restrictions enforceable and, in its reduced form, such
terms shall then be enforceable.
4.6 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts each of which shall be deemed an original, but all of
which together constitute one and the same instrument.
4.7 Successors. This Agreement shall not be assignable by Moore without the
prior written consent of WorldPort otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of
and be binding upon the parties and their legal representatives,
successors and assigns.
4.8 Entire Transaction. This Agreement contains the entire understanding
among the parties with respect to the actions contemplated hereby and
supersede all other agreements, understandings and undertakings among
the parties on the subject matter hereof.
4.9 Dispute Resolution. All disputes, claims or controversies arising out of
or relating to this Agreement or the negotiation, validity or
performance hereto that are not resolved by mutual agreement shall be
resolved solely and exclusively by binding arbitration to be conducted
in accordance with this Section 4.9. The arbitration shall be held in
Chicago, Illinois before a single arbitrator and shall be conducted in
accordance with the rules and regulations promulgated by, the American
Arbitration Association (the "AAA") unless specifically modified herein.
The parties covenant and agree that they will participate in the
arbitration in good faith and that they will share equally its costs,
except as otherwise provided herein. The arbitrator may in his or her
discretion assess costs and expenses (including the reasonable legal
fees and expenses of the prevailing party) against any party to a
proceeding. The provisions of this Section 4.9 shall be enforceable in
any court of competent jurisdiction. The parties shall bear their own
attorneys' fees, costs and expenses in connection with the arbitration.
The parties will share equally in the fees and expenses charged by the
arbitrator. Each party consents to the jurisdiction of the courts of the
State of Illinois for the purposes of enforcing the arbitration
provisions of Section 4.9 of this Agreement. Each party further
irrevocably waives any objection to proceeding in the manner set forth
in this Section 4.9 based upon lack of personal jurisdiction or to the
laying of venue and further irrevocably and unconditionally waives and
agrees not to make a claim in any court that arbitration conducted in
accordance with this Section 4.9 has been brought in an inconvenient
forum.
Each of the parties hereto hereby consents to service of process by
registered mail at the address to which notices are to be given. Each
of the parties hereto agrees that its or his submission to jurisdiction
and its or his consent to service of process by mail is made for the
express benefit of the other parties hereto agree that its or his
submission to jurisdiction on its or his consent to service of process
by mail is made for the express benefit of the other parties hereto.
4
<PAGE> 5
4.10 Replacement Stock Certificate. Worldport agrees to use its reasonable
efforts to cause the transfer agent of its capital stock to waive any
requirement that an indemnity bond be posted by Moore as a condition to
the issuance of a replacement certificate to Moore in respect of
approximately 191,000 shares of Worldport's capital stock, subject to
Worldport's receipt of an affidavit from Moore in form and substance
satisfactory to Worldport.
5
<PAGE> 6
IN WITNESS WHEREOF, each of the parties hereto has executed or caused
this Agreement to be executed all as of the date first written above.
WORLDPORT COMMUNICATIONS, INC.
By: /s/ Carl Grivner
---------------------------------------------
Carl Grivner
Chairman, President and Chief Executive Officer
/s/ Paul Moore
------------------------------------------------
Paul A. Moore
6
<PAGE> 7
EXHIBIT C - PRESS RELEASE
(July [], 1999) - Atlanta, Georgia -- Worldport Communications, Inc. announced
today that Mr. Paul A. Moore, the former Chairman and Chief Executive Officer of
the Company, has resigned as a director of the Company, effective immediately.
Mr. Moore stated that "I have enjoyed my tenure with Worldport and feel
comfortable with the recent management hires we have made." Mr. Moore plans to
return to working full-time for Maroon Bells Capital Partners, Inc., a merchant
banking firm in which he is a partner.
[ADD INFORMATION ABOUT WORLDPORT]
This press release contains certain forward-looking statements which can
sometimes be identified by the 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,
including, but not limited to, the Company's limited operating history, history
of operating losses, substantial indebtedness and substantial capital
requirements, that could cause actual results to differ materially from those
contemplated by the statements. The Company does not undertake to publicly
update or revise its forward-looking statements even if experience or future
changes make it clear that any projected results expressed or implied therein
will not be realized. Additional information on risk factors that could
potentially affect the Company's financial results may be found in the Company's
public filings with the Securities and Exchange Commission. Certain of such
filings may be accessed through the Securities and Exchange Commission's web
site, http://www.sec.gov.
7
<PAGE> 1
EXHIBIT 10.2
As of June 23, 1999
WorldPort Communications, Inc.
WorldPort International, Inc.
1701 Barrett Lakes Blvd.
Kennesaw, Georgia 30144
Gentlemen:
Reference is made to that certain Credit Agreement, dated as of June
23, 1998 (as amended, modified, supplemented and as in effect, the "Credit
Agreement"), by and among WorldPort International, Inc., a Delaware corporation
(the "Company"), WorldPort Communications, Inc., a Delaware corporation (the
"Parent"), the lenders party thereto (the "Lenders") and Bankers Trust Company,
as administrative agent (in such capacity, the "Administrative Agent") and
collateral agent. Capitalized terms used but not otherwise defined herein shall
have the respective meanings ascribed thereto in the Credit Agreement.
In response to your request for an extension of the Maturity Date of
the Term Notes, the Administrative Agent and the Lenders have agreed to an
extension of the Maturity Date from June 23, 1999 to July 1, 1999 (the
"Extension Period"), subject to the terms and conditions hereof. During the
Extension Period, the Company and the Parent, by their signatures hereto, each
hereby acknowledges and agrees to continue to negotiate in good faith with the
Administrative Agent to finalize the terms of an amendment to the Credit
Agreement (the "Consent and Amendment No. 8"), an initial draft of which is
attached hereto as Exhibit A. Please be advised that the attached draft of
Consent and Amendment No. 8 is provided to you for discussion purposes only and
the terms and provisions thereof are subject to the approval by the Lenders. In
no event shall the enclosed draft of Consent and Amendment No. 8 be considered
or construed to be a commitment by any of the Lenders to the terms and
provisions thereof.
The agreement of the Administrative Agent and the Lenders set forth
herein are conditioned upon (i) a written agreement from Heico in favor of the
Administrative Agent and the Lenders pursuant to which Heico acknowledges that
it has reviewed the attached draft of Consent and Amendment No. 8 and will
recommend to the Parent (in Heico's capacity as shareholder of the Parent) that
the Parent and Company agree to the terms thereof and (ii) the execution and
delivery of this letter by each of the Administrative Agent, the Lenders, each
of the Lenders' participants, the Company and the Parent.
This letter 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 and the same agreement.
This letter agreement shall be construed in accordance with and
governed by the laws of the State of New York.
<PAGE> 2
Kindly indicate your acknowledgment and agreement to the foregoing by
signing this letter in the space set forth below.
Very truly yours,
BANKERS TRUST COMPANY,
as Administrative Agent
By:
----------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION,
as Lender
By:
----------------------------------------
Name:
Title:
DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
By:
----------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED TO:
WORLDPORT COMMUNICATIONS, INC.
By:
---------------------------
Name:
Title:
WORLDPORT INTERNATIONAL, INC.
By:
--------------------------
Name:
Title:
<PAGE> 3
ACKNOWLEDGED AND AGREED TO:
CIBC OPPENHEIMER CORP.,
as Participant
By:
--------------------------
Name:
Title:
<PAGE> 4
ACKNOWLEDGED AND AGREED TO:
CONTINENTAL CASUALTY COMPANY,
as Participant
By:
--------------------------
Name:
Title:
<PAGE> 5
ACKNOWLEDGED AND AGREED TO:
NORTHSTAR HIGH TOTAL RETURN FUND,
as Participant
By:
--------------------------
Name:
Title:
<PAGE> 6
ACKNOWLEDGED AND AGREED TO:
NORTHSTAR HIGH TOTAL RETURN FUND II,
as Participant
By:
--------------------------
Name:
Title:
<PAGE> 7
ACKNOWLEDGED AND AGREED TO:
SWISS BANK CORPORATION, London Branch,
as Participant
By:
--------------------------
Name:
Title:
By:
--------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.3
As of July 1, 1999
WorldPort Communications, Inc.
WorldPort International, Inc.
1701 Barrett Lakes Blvd.
Kennesaw, Georgia 30144
Gentlemen:
Reference is made to (i) that certain Credit Agreement, dated as of
June 23, 1998 (as amended, modified, supplemented and as in effect, the "Credit
Agreement"), by and among WorldPort International, Inc., a Delaware corporation
(the "Company"), WorldPort Communications, Inc., a Delaware corporation (the
"Parent"), the lenders party thereto (the "Lenders") and Bankers Trust Company,
as administrative agent (in such capacity, the "Administrative Agent") and
collateral agent and (ii) that certain Extension Letter dated as of June 23,
1999 by and among the Company, the Parent, the Administrative Agent and the
Lenders (the "Extension Letter"). Capitalized terms used but not otherwise
defined herein shall have the respective meanings ascribed thereto in the Credit
Agreement.
In response to your request for an additional extension of the Maturity
Date of the Term Notes, the Administrative Agent and the Lenders have agreed to
an additional extension of the Maturity Date from July 1, 1999 to July 8, 1999
(the "Additional Extension Period"), subject to the terms and conditions hereof.
During the Additional Extension Period, the Company and the Parent, by their
signatures hereto, each hereby acknowledges and agrees to continue to negotiate
in good faith with the Administrative Agent to finalize the terms of an
amendment to the Credit Agreement (the "Consent and Amendment No. 8"), a draft
of which is attached to the Extension Letter as Exhibit A thereto. Please be
advised that such draft of Consent and Amendment No. 8 is provided to you for
discussion purposes only and the terms and provisions thereof are subject to the
approval by the Lenders. In no event shall such draft of Consent and Amendment
No. 8 be considered or construed to be a commitment by any of the Lenders to the
terms and provisions thereof.
The agreement of the Administrative Agent and the Lenders set forth
herein are conditioned upon the execution and delivery of this letter by each of
the Administrative Agent, the Lenders, each of the Lenders' participants, the
Company and the Parent.
This letter 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 and the same agreement.
This letter agreement shall be construed in accordance with and
governed by the laws of the State of New York.
<PAGE> 2
Kindly indicate your acknowledgment and agreement to the foregoing by
signing this letter in the space set forth below.
Very truly yours,
BANKERS TRUST COMPANY,
as Administrative Agent
By:
------------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION,
as Lender
By:
------------------------------------------
Name:
Title:
DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
By:
------------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED TO:
WORLDPORT COMMUNICATIONS, INC.
By:
----------------------------
Name:
Title:
WORLDPORT INTERNATIONAL, INC.
By:
----------------------------
Name:
Title:
<PAGE> 3
ACKNOWLEDGED AND AGREED TO:
CIBC OPPENHEIMER CORP.,
as Participant
By:
----------------------------
Name:
Title:
<PAGE> 4
ACKNOWLEDGED AND AGREED TO:
Continental Casualty Company,
as Participant
By:
----------------------------
Name:
Title:
<PAGE> 5
ACKNOWLEDGED AND AGREED TO:
Northstar High Total Return Fund,
as Participant
By:
-------------------------------
Name:
Title:
<PAGE> 6
ACKNOWLEDGED AND AGREED TO:
Northstar High Total Return Fund II,
as Participant
By:
---------------------------------
Name:
Title:
<PAGE> 7
ACKNOWLEDGED AND AGREED TO:
Swiss Bank Corporation, London Branch,
as Participant
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.4
CONSENT AND AMENDMENT NO. 8
CONSENT AND AMENDMENT NO. 8, dated as of July 8, 1999 (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 and BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the
"Administrative Agent") and Collateral Agent (in such capacity, the "Collateral
Agent") and as joint creditor with the other Lenders under the Credit Agreement,
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 Administrative Agent and the
Collateral Agent;
WHEREAS, pursuant to the Credit Agreement, the Lenders made certain
term loans to the Company in the aggregate principal amount of up to
$120,000,000 (the "Term Loan"), as evidenced by the Term Notes (as defined in
the Credit Agreement);
WHEREAS, the Term Notes were originally scheduled to mature on June 23,
1999 (the "Maturity Date");
WHEREAS, the Administrative Agent and the Lenders agreed by letter
dated as of June 23, 1999 to extend the Maturity Date until July 1, 1999 and by
letter dated as of July 1, 1999 to further extend the Maturity Date until July
8, 1999, during which such extension periods the Company and the Parent were
required to negotiate in good faith with the Administrative Agent to enter into
an amendment to the Credit Agreement to further extend the Maturity Date; and
WHEREAS, the Company and the Parent have requested that, subject to the
terms and provisions hereof, the Maturity Date be extended to August 18, 1999.
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:
<PAGE> 2
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, the
Administrative Agent and the Lenders hereby consent to an extension of the
Maturity Date to August 18, 1999.
3. Amendments. Effective on the Effective Date (as herein
defined):
A. The following definitions are hereby added to Section
1.1 of the Credit Agreement in their appropriate alphabetical order:
"Consent and Amendment No. 8" means Consent and
Amendment No. 8 to this Agreement, dated as of July 8, 1999,
by and among the Company, the Parent, the Lenders party
thereto, the Administrative Agent and the Collateral Agent.
"Heico Equity Investment" shall mean the July 1999
Investment, the Optional Investment (if any), the Total Equity
Investment and the Additional Equity Investment (if any).
"July 1999 Equity Documents" shall mean those
documents and agreements in form and substance, and upon terms
and conditions, reasonably satisfactory to the Administrative
Agent and the Lenders and attached as Exhibit 1 to Consent and
Amendment No. 8, 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.
"July 1999 Investment" shall mean the purchase, if
any, by Heico or such other investor reasonably satisfactory
to the Administrative Agent and the Lenders of equity of the
Parent for a purchase price of not less than $15,000,000,
pursuant to the July 1999 Equity Documents, which equity shall
not dilute the Warrants, and the holders of the Warrants shall
be afforded anti-dilution protection in accordance with
Section 5.24.
"July 1999 Investment Proceeds" shall mean the
proceeds received by the Parent from the consummation of the
July 1999 Investment in an amount not less than
-2-
<PAGE> 3
$15,000,000 (which may include proceeds of the Additional
Equity Investment).
"Optional Investment" shall mean the additional
purchase of equity of the Parent which is made pursuant to
Section 5.22, if any.
B. Section 2.8(a)(i) of the Credit Agreement is hereby
amended by restating in its entirety the last sentence thereof to read as
follows:
"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 the Total Equity Investment, the
consummation of the Additional Equity Investment, if any, the
consummation of the July 1999 Investment, if any, and the
consummation of the Optional Investment, if any, shall not
constitute an Asset Sale for purposes of this Section
2.8(a)(i)."
C. Section 2.8(d) of the Credit Agreement is hereby
amended by restating subclause (v) therein in its entirety to 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, the consummation of the July 1999
Investment, if any, the consummation of the Optional
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."
D. Article V of the Credit Agreement is amended by
inserting the following new Sections 5.22, 5.23 and 5.24 after Section 5.21:
Section 5.22 Acceptance of Optional Investment. In
addition to the obligations of the Parent under Section 5.21,
the Parent covenants and agrees that, in the event Heico
offers to make additional investments in the Parent by
purchasing an additional amount of equity of the Parent in an
aggregate amount up to $15,000,000 (in addition to Total
Equity Investment Proceeds, the proceeds
-3-
<PAGE> 4
of equity investments in the Parent required to be sold
pursuant to Section 5.21 and the proceeds of the July 1999
Investment), which new equity shall be in the same form and
substance, and upon the same terms and conditions, as the
Total Equity Investment or otherwise reasonably acceptable to
the Lenders, the Parent shall sell such additional equity to
Heico at each such time the investor desires to purchase such
additional equity; provided, however, that all such new equity
investments shall not dilute the Warrants, and the holders of
the Warrants shall be afforded anti-dilution protection in
accordance with Section 5.24.
Section 5.23 Preparation for Sale of Business.
(i) Not later than July 9, 1999, the
Parent shall (A) have hired and formally engaged an investment
banking firm (the "Advisor") reasonably acceptable to the
Administrative Agent and the Lenders to commence preparations
for the sale of the Parent's business, including, but not
limited to, the sale of Enertel in the event that the Lenders
are entitled to exercise their rights and remedies under the
Finance Documents and (B) have delivered to the Administrative
Agent an engagement letter between the Parent and the Advisor
in connection with such engagement, in form and substance
reasonably satisfactory to the Administrative Agent, which
shall include a mandate to the Advisor that it shall take
immediate steps to commence the sale and marketing process by
August 9, 1999 and take all customary actions which would be
expected to be taken by investment bankers in their sale and
marketing efforts for companies in order to complete and
achieve the sale of the Parent and its subsidiaries
(including, without limitation, completing the offering
memorandum for such sale, preparing and coordinating due
diligence materials and commencing discussions with potential
buyers).
(ii) In conjunction with this engagement
of the Advisor required under this Section 5.23, a committee
consisting of one or more representatives of the Lenders
and/or the Administrative Agent shall be afforded the ongoing
opportunity to consult with the Advisor and representatives of
the Parent regarding the duties and scope of work of the
Advisor and to be consulted on an ongoing basis (including,
without limitation, being informed of material
-4-
<PAGE> 5
discussions and meetings among and between the Parent, Heico
and the Advisor) and given the opportunity to participate
therein.
Section 5.24 No Dilution. The Parent shall issue to
each holder of Warrants (each, a "Holder") and to each Holder
who holds Common Stock issued pursuant to any previous
exercise of Warrants additional Warrants as of each Heico
Funding Date (without duplication of any additional Warrants
which may have already been issued to such Holder in respect
of the Total Equity Investment), upon demand of such Holder
after each such date, so that the aggregate percentage of the
Fully Diluted Common Stock of the Parent represented by all
Warrants and Common Stock issued pursuant to any previous
exercise of Warrants as of such date equals eleven percent
(11%) of the Fully Diluted Common Stock of the Parent. Each
Holder will be entitled to its pro rata percentage of any
additional Warrants issued as of such Heico Funding Date,
calculated by multiplying (a) a fraction, the numerator of
which shall be the total number of Warrants (excluding any
additional Warrants) and Common Stock issued pursuant to any
previous exercise of Warrants held by such Holder as of such
Heico Funding Date and the denominator of which shall be the
total number of Warrants and Common Stock issued pursuant to
any previous exercise of Warrants held by all Holders as of
such Heico Funding Date (excluding any additional Warrants),
times (b) the aggregate number of additional Warrants to be
issued as of such Heico Funding Date in order to satisfy the
first sentence of this Section 5.24.
-5-
<PAGE> 6
For purposes of this Section 5.24, (i) the term
"Fully Diluted Common Stock" shall mean, as of the date
determined, the aggregate number of shares of issued and
outstanding Common Stock of the Parent after taking into
account the conversion of all issued and outstanding
securities convertible into Common Stock of the Parent and the
exercise of all issued and outstanding warrants and options
for Common Stock (or securities convertible into Common Stock)
of the Parent, including the Warrants (but excluding any
additional Warrants issued pursuant to this Section 5.24 which
were not outstanding prior to the Heico Funding Date for which
such calculation is being made) and (ii) the term "Heico
Funding Date" means each date on which a Heico Equity
Investment is made during the period in which Obligations are
outstanding.
E. Section 7.1(b) is amended by adding the references
",5.22, 5.23, 5.24" after the reference to "5.21" appearing
therein.
F. Section 6.21(b) of the Credit Agreement is amended by
(i) adding the phrase, "any July 1999 Equity Document"
immediately after the phrase "Heico Registration Rights
Agreement" appearing therein and (ii) adding the following to
the end thereof prior to the semi-colon:
", provided, that the Parent may amend its
certificate of incorporation for the purpose of adding one or
more Certificate(s) of Designation for the equity to be
purchased by Heico or such other investor reasonably
satisfactory to the Lenders pursuant to the Initial Heico
Investment, the Second Heico Investment (if any), the Total
Equity Investment, the Additional Equity Investment (if any),
the July 1999 Investment (if any) and the Optional Investment
(if any), which Certificate(s) of Designation shall contain
terms consistent with the terms and provisions of the Heico
Equity Documents and the July 1999 Equity Documents, as the
case may be, and may amend the by-laws of the Parent to make
modifications thereto consistent with the terms of the Heico
Equity Documents and the July 1999 Equity Documents, as the
case may be."
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:
-6-
<PAGE> 7
(a) Execution of this Agreement. Each of the Parent, the
Company, the Administrative Agent, the Collateral Agent and the Lenders
shall have executed and delivered this Agreement.
(b) Equity Proceeds. The Parent shall have received gross
proceeds of not less than $15,000,000 (the "July 1999 Investment
Proceeds") (which may include proceeds of the Additional Equity
Investment) from the purchase of equity of the Parent by Heico, which
new equity shall be in the same form and substance, and upon the same
terms and conditions, as the Total Equity Documents or otherwise
reasonably acceptable to the Administrative Agent and the Lenders (the
"July 1999 Investment"). As of the Effective Date, the July 1999
Investment shall have been consummated in accordance with the terms and
conditions of the July 1999 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 July 1999 Investment or
the performance by the Parent of its obligations under the July 1999
Equity Documents. The July 1999 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 July 1999 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 July 1999 Investment as set forth in the July 1999
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 July 1999 Investment shall have been
consummated in accordance with the July 1999 Equity Documents (without
giving effect to any amendment or modification of the July 1999 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.
(c) Representations and Warranties. The representations
and warranties of the Parent set forth in Section 5 of this Agreement
shall be true and correct in all material respects on the Effective
Date.
-7-
<PAGE> 8
(d) Hiring of CEO. The Company shall have hired Carl
Grivner as chief executive officer and the terms of his employment
agreement shall be reasonably satisfactory to the Administrative Agent
and the Lenders.
5. Representations and Warranties. The Parent hereby represents
and warrants to the Agent and the Lenders that (i) each of the July
1999 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 July 1999 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.
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
-8-
<PAGE> 9
Agreement and the other Finance Documents shall remain in full force
and effect, except as expressly modified hereby.
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. 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 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 July
1999 Investment, and the documents and instruments referred to herein,
and otherwise reviewed in connection herewith and therewith).
-9-
<PAGE> 10
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 COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
WORLDPORT INTERNATIONAL, INC.
By:
---------------------------------------
Name:
Title:
-10-
<PAGE> 11
BANKERS TRUST COMPANY,
as Administrative 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:
-11-
<PAGE> 12
ACKNOWLEDGED AND AGREED TO:
CIBC OPPENHEIMER CORP.,
as Participant
By:
-------------------------------
Name:
Title:
-12-
<PAGE> 13
ACKNOWLEDGED AND AGREED TO:
Continental Casualty Company,
as Participant
By:
--------------------------
Name:
Title:
-13-
<PAGE> 14
ACKNOWLEDGED AND AGREED TO:
Northstar High Total Return Fund,
as Participant
By:
-------------------------------
Name:
Title:
-14-
<PAGE> 15
ACKNOWLEDGED AND AGREED TO:
Northstar High Total Return Fund II,
as Participant
By:
----------------------------------
Name:
Title:
-15-
<PAGE> 16
ACKNOWLEDGED AND AGREED TO:
UNITED Bank OF SWITZERLAND, London Branch,
as Participant
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
-16-
<PAGE> 1
EXHIBIT 10.5
CONSENT AND AMENDMENT NO. 9
CONSENT AND AMENDMENT NO. 9, dated as of August 18, 1999 (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 listed on the signature pages hereto, the
Lenders (as defined in the Credit Agreement) which are a party hereto and
BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the
"Administrative Agent") and Collateral Agent (in such capacity, the "Collateral
Agent") and as joint creditor with the other Lenders under the Credit Agreement,
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 Administrative Agent and the
Collateral Agent;
WHEREAS, pursuant to the Credit Agreement, the Lenders made certain
term loans to the Company in the aggregate principal amount of $120,000,000, as
evidenced by the Term Notes (as defined in the Credit Agreement);
WHEREAS, the Term Notes were originally scheduled to mature on June 23,
1999 (the "Maturity Date");
WHEREAS, the Administrative Agent and the Lenders have heretofore
agreed to extend the Maturity Date until August 18, 1999; and
WHEREAS, the Company and the Parent have requested that, subject to the
terms and provisions hereof, the Maturity Date be extended to November 18, 1999.
<PAGE> 2
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 hereby added to Section
1.1 of the Credit Agreement in their appropriate alphabetical order:
"1999 Permitted Asset Sale" shall mean the sale, conveyance or
other transfer of those certain assets comprising the customer care
center owned by the Parent and located in Nebraska and California for
aggregate consideration consisting of cash in an amount not less than
$500,000 and other consideration consisting of forgiveness of certain
severance payments owing to the purchasers by the Parent and
termination of certain stock options held by such purchasers.
"Amendment Fee" shall mean that certain fee payable in
connection with Amendment No. 9, which fee shall be in the amounts and
shall be due and payable at the times in accordance with the provisions
of Section 4 thereof.
"Amendment No. 9" means Consent and Amendment No. 9 to this
Agreement, dated as of August 18, 1999, by and among the Company, the
Parent, the other Loan Parties listed on the signature pages thereto,
the Lenders party thereto, the Administrative Agent and the Collateral
Agent.
"Early Termination Event" shall mean the date on which any of
the following has occurred:
(i) a determination by the Administrative Agent
and the Lenders in their sole discretion that satisfactory progress is
not being made by the Company and the Parent in arranging for a
refinancing of all of the Obligations; or
-2-
<PAGE> 3
(ii) a determination by the Administrative Agent
and the Lenders in their sole discretion that satisfactory progress has
not been made by the Company and the Parent toward consummating a
transaction pursuant to which a bona fide entity (as determined by the
Administrative Agent and the Lenders) will purchase either the Parent
or specified assets, including, without limitation, the Parent's
Subsidiaries or assets thereof, in an amount, net of taxes to be paid
or payable in connection therewith and transaction costs, equal to or
in excess of all Obligations (after giving effect to all third party
obligations which also must be paid in connection with such sale); or
(iii) a determination by the Administrative Agent
and the Lenders in their sole discretion that the Parent and the
Company do not and are not likely to have sufficient liquidity to fund
the operations of the Parent, the Company and their respective
Subsidiaries through any period reasonably determined by the
Administrative Agent and the Lenders to be sufficient time to
consummate a transaction yielding proceeds sufficient to repay the
Obligations in full, taking into account the sources and uses of funds
of the Parent, Company and such Subsidiaries from the Effective Date
(as defined in Amendment No. 9) through such period.
The Administrative Agent and the Lenders shall be entitled to make any
of the determinations set forth above based on the circumstances
(including without limitation, market conditions) they deem appropriate
at the time of such determination.
B. The definition of "Asset Sale" set forth in Section
1.1 of the Credit Agreement is hereby amended by adding the following to the
end thereof:
"; provided further, however, that the immediately preceding
proviso shall not, following the consummation of the 1999
Permitted Asset Sale, apply for the 1999 fiscal year."
-3-
<PAGE> 4
C. The definition of "Maturity Date" set forth in
Section 1.1 of the Credit Agreement is hereby restated in its entirety to read
as follows:
"Maturity Date" shall mean the first to occur of (a) November
18, 1999 and (b) an Early Termination Event.
D. Section 2.8(a)(i) of the Credit Agreement is hereby
amended by restating it its entirety the last sentence thereof to read as
follows:
"Notwithstanding the foregoing provisions of this Section
2.8(a)(i), (A) 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, the consummation of the July 1999
Investment, if any, and the consummation of the Optional Investment, if
any, shall not constitute an Asset Sale for purposes of this Section
2.8(a)(i) and (B) Net Cash Proceeds not exceeding $600,000 resulting
from the 1999 Permitted Asset Sale shall not be subject to the
prepayment provision set forth herein."
E. Section 7.1 of the Credit Agreement is hereby amended
by adding the following new Section 7.1(s) immediately following Section 7.1(r),
which new Section shall read as follows:
"7.1(s) Early Termination Event. The occurrence of an Early
Termination Event."
3. 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 other Loan Parties, the Administrative Agent, the Collateral Agent
and the Lenders shall have executed and delivered this Agreement.
-4-
<PAGE> 5
b) Officer's Certificates/Board Resolutions. The
Administrative Agent shall have received a certificate of the Secretary or
Assistant Secretary of the Company and the Parent dated the Effective Date and
certifying that attached thereto is a true and correct copy of the resolutions
duly adopted by the Board of Directors of the Parent and the Company authorizing
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby (including, without limitation, payment of the Amendment
Fee), and that such resolutions have not been modified, rescinded or amended and
are in full force and effect.
c) Representations and Warranties. The representations
and warranties of the Parent set forth in Section 5 of this Agreement shall be
true and correct in all material respects on the Effective Date.
d) Payment of Certain Fees and Expenses. The receipt by
the Administrative Agent of $250,000 from the Parent and/or Company to be
applied to outstanding fees and expenses of the Administrative Agent and the
Lenders in connection with the Finance Documents.
4. Amendment Fee. In consideration of the agreements of the
Lenders set forth herein, the Parent and Company, jointly and severally, agree
to pay to the Administrative Agent, for the pro rata benefit of the Lenders (and
the Lenders' respective participants), a fee (the "Amendment Fee") in the amount
of $600,000, which Amendment Fee shall be earned on the Effective Date and shall
be immediately due and payable on the Maturity Date. Each of the Parent and the
Company hereby acknowledges that the Amendment Fee shall constitute an
Obligation and, if not paid when due, shall accrue interest at the Default Rate.
5. Representations and Warranties. Each of the Parent, Company
and each other Loan Party hereby represents and warrants to the Administrative
Agent and the Lenders that (i) this Agreement constitutes the legal, valid and
binding obligation of the Parent, Company and such Loan Party, enforceable
against the Parent, Company and such Loan Party 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
-5-
<PAGE> 6
in a proceeding in equity or at law) and (ii) all corporate action on the part
of the Parent, Company and such Loan Party, its respective directors and
shareholders necessary for the authorization, execution, delivery and
performance by the Parent, Company and such Loan Party of this Agreement, and
the consummation of the transactions contemplated thereby, has been taken.
6. Confirmation of Guarantees, Security Documents. Each of the
Parent and Company and each of the other Loan Parties party 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 Parent and Company under this Agreement in respect of the
Amendment Fee (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 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 are 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 Amendment Fee 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
the Collateral Agent, as security for the full payment of the Secured
Obligations (as defined in each such Security Document).
7. Applicable Law; Submission to Jurisdiction. THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
8. 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
-6-
<PAGE> 7
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.
9. 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.
10. 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.
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 Agent pay all reasonable out-of-pocket costs (including legal
fees), charges and expenses of the 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 this Agreement, and the
documents and instruments referred to herein, and otherwise reviewed in
connection herewith and therewith).
-7-
<PAGE> 8
12. 1999 Permitted Asset Sale. The Administrative Agent and
Lenders hereby consent to the 1999 Permitted Asset Sale (as defined in the
Credit Agreement after giving effect to this Agreement).
-8-
<PAGE> 9
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 COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
WORLDPORT INTERNATIONAL, INC.
By:
---------------------------------------
Name:
Title:
TELENATIONAL COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
IIC ACQUISITION CORP.
By:
---------------------------------------
Name:
Title:
WORLDPORT/ICX, INC.
By:
---------------------------------------
Name:
Title:
-9-
<PAGE> 10
WORLDPORT ACQUISITIONS, INC.
By:
---------------------------------------
Name:
Title:
WORLDPORT ACQUISITION CORP.
By:
---------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS (EUROPE), B.V.
By:
---------------------------------------
Name:
Title:
WORLDPORT COMMUNICATIONS EUROPE
HOLDING, B.V.
By:
---------------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Administrative Agent and Collateral
Agent
By:
---------------------------------------
Name:
Title:
BANKERS TRUST CORPORATION,
as Lender
By:
---------------------------------------
Name:
Title:
-10-
<PAGE> 11
DREYFUS PREMIER LIMITED TERM HIGH INCOME FUND
By:
------------------------------------------
Name:
Title:
-11-
<PAGE> 12
ACKNOWLEDGED AND AGREED TO:
CIBC OPPENHEIMER CORP.,
as Participant
By:
------------------------
Name:
Title:
-12-
<PAGE> 13
ACKNOWLEDGED AND AGREED TO:
Continental Casualty Company,
as Participant
By:
------------------------
Name:
Title:
-13-
<PAGE> 14
ACKNOWLEDGED AND AGREED TO:
Northstar High Total Return Fund,
as Participant
By:
------------------------------
Name:
Title:
-14-
<PAGE> 15
ACKNOWLEDGED AND AGREED TO:
Northstar High Total Return Fund II,
as Participant
By:
---------------------------------
Name:
Title:
-15-
<PAGE> 16
ACKNOWLEDGED AND AGREED TO:
UNITED Bank OF SWITZERLAND, London Branch,
as Participant
By:
---------------------------------------
Name:
Title:
By:
---------------------------------------
Name:
Title:
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF WORLDPORT COMMUNICATIONS, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,068
<SECURITIES> 0
<RECEIVABLES> 1,963
<ALLOWANCES> 280
<INVENTORY> 0
<CURRENT-ASSETS> 2,914
<PP&E> 1,237
<DEPRECIATION> 337
<TOTAL-ASSETS> 108,998
<CURRENT-LIABILITIES> 153,622
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> (50,694)
<TOTAL-LIABILITY-AND-EQUITY> 108,998
<SALES> 0
<TOTAL-REVENUES> 65,263
<CGS> 0
<TOTAL-COSTS> 44,860
<OTHER-EXPENSES> 41,459
<LOSS-PROVISION> 295
<INTEREST-EXPENSE> 44,190
<INCOME-PRETAX> (95,501)
<INCOME-TAX> 0
<INCOME-CONTINUING> (94,656)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94,656)
<EPS-BASIC> (4.26)
<EPS-DILUTED> (4.26)
</TABLE>
