-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FCX30N9lmVAFT+osJsbnBOlciD1KuBF+nUFAdeMceTfDaUVCn8oI0RILkMQe6m/n wA6uHyUf0FpalPaZh2VXIg== 0000784961-00-000008.txt : 20000211 0000784961-00-000008.hdr.sgml : 20000211 ACCESSION NUMBER: 0000784961-00-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VDC COMMUNICATIONS INC CENTRAL INDEX KEY: 0000784961 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 061524454 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14281 FILM NUMBER: 530538 BUSINESS ADDRESS: STREET 1: 75 HOLLY HILL LANE CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2038695100 MAIL ADDRESS: STREET 1: 75 HOLLY HILL LANE CITY: GREENWICH STATE: CT ZIP: 06831 FORMER COMPANY: FORMER CONFORMED NAME: VDC CORP LTD DATE OF NAME CHANGE: 19960117 10-Q 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 Quarter Ended December 31, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From ________ To ________ VDC COMMUNICATIONS, INC. ------------------------ (Exact name of registrant as specified in its charter) Delaware 001-14281 061524454 -------- --------- --------- (Jurisdiction of Incorporation) (Commission File No.) (IRS Employer Identification No.) 75 Holly Hill Lane Greenwich, Connecticut 06830 (Address of principal executive office) - -------------------------------------------------------------------------------- Registrant's telephone number, including area code: (203) 869-5100 (Former name, if changed since last report) Check whether the Registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1) Yes X No --------- ---------- (2) Yes X No --------- ---------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of February 8, 2000, the number of shares of registrant's common stock, par value $.0001 per share, outstanding was 21,506,919.
VDC COMMUNICATIONS, INC. INDEX ----- PART I FINANCIAL INFORMATION PAGE --------------------- ---- Item 1. Consolidated balance sheets as of June 30, 1999 And December 31, 1999 3 Consolidated statements of operations and comprehensive loss for the three and six month periods ended December 31, 1998 and 1999 4 Consolidated statements of cash flows for the six months ended December 31, 1998 and 1999 5 Notes to consolidated financial statements 6-9 Item 2. Management's discussion and analysis of financial condition and results of operations 9-17 Item 3. Quantitative and qualitative disclosures about market risk 17-18 PART II OTHER INFORMATION ----------------- Item 1. Legal Proceedings 18 Item 2. Changes in Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18-19 Item 5. Other Information 19 Item 6. Exhibits and Reports on Form 8-K 19-20
2 PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VDC COMMUNICATIONS, INC. AND SUBSIDARIES CONSOLIDATED BALANCE SHEETS
December 31, 1999 June 30, 1999 ----------------- ------------- (Unaudited) Assets Current: Cash and cash equivalents $ 1,312,534 $ 317,799 Restricted cash - 475,770 Marketable securities 57,238 90,375 Accounts receivable, net of allowance for doubtful accounts of $261,502 and at December 31, 1999 and $7,000 at June 30, 1999 1,402,099 1,251,581 Notes receivable - 249,979 Prepaid and other 177,948 0 ------- - Total current assets 2,949,819 2,385,504 Property and equipment, less accumulated depreciation 3,922,206 4,888,163 Investment in MCC 2,400,000 2,400,000 Other assets 344,886 328,394 ------- ------- Total assets $ 9,616,911 $10,002,061 =========== =========== Liabilities and Stockholders' Equity Current: Accounts payable and accrued expenses $ 2,828,843 $ 2,160,839 Note payable - officer 80,000 - Current portion of capitalized lease obligations 227,553 426,356 ------- ------- Total current liabilities 3,136,396 2,587,195 Long-term portion of capitalized lease obligations 613,107 847,334 ------- ------- Total liabilities 3,749,503 3,434,529 Commitment and Contingencies Stockholders' equity: Preferred stock, $0.0001 par value, authorized 10 million shares; issued and outstanding-none - - Common stock, $0.0001 par value, authorized 50 million shares issued - 21,506,917 and 18,311,462 at December 31, and June 30,1999, respectively 2,338 2,018 Additional paid-in capital 68,392,376 67,737,195 Accumulated deficit (62,006,581) (60,339,393) Treasury stock - at cost, 1,875,000 shares (164,175) (164,175) Stock subscriptions receivable - (344,700) Accumulated comprehensive income (loss) (356,550) (323,413) -------- -------- Total stockholders' equity 5,867,408 6,567,532 --------- --------- Total liabilities and stockholders' equity $ 9,616,911 $10,002,061 =========== ===========
See accompanying notes to consolidated financial statements. 3 VDC COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)
Three Months ended Six-months ended December 31, December 31, 1999 1998 1999 1998 ---- ---- ---- ---- Revenue $ 2,204,166 $ 527,567 $ 4,516,363 $ 728,961 Operating Expenses: Costs of services 2,277,437 944,365 4,876,294 1,285,786 Selling, general and administrative expenses 572,271 950,947 1,284,707 1,976,193 Non-cash compensation expense - - - 16,146,000 -------------------------------------------------------------- Total operating expenses 2,849,708 1,895,312 6,161,001 19,407,979 -------------------------------------------------------------- Operating loss (645,542) (1,367,745) (1,644,638) (18,679,018) Other income (expense): Loss on note restructuring - (1,198,425) - (1,598,425) Other income (expense) (46,149) (161,752) (22,550) (72,610) -------------------------------------------------------------- Total other income (expense) (46,149) (1,360,177) (22,550) (1,671,035) equity in loss of affiliate - (363,268) - (363,268) Net loss (691,691) (3,091,190) (1,667,188) (20,713,321) -------------------------------------------------------------- Other comprehensive (loss), net of tax: Unrealized (loss) on marketable securities (12,050) (57,237) (33,137) (396,175) -------------------------------------------------------------- Comprehensive loss $ (703,741) (3,148,427) (1,700,325) (21,109,496) ============================================================== Net loss per common share - basic and diluted $ (0.03) $ (0.17) $ (0.09) $ (1.15) -------------------------------------------------------------- Weighted average number of shares outstanding 20,580,990 18,420,158 19,377,286 17,984,119 --------------------------------------------------------------
See accompanying notes to consolidated financial statements. 4 VDC COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six-months ended December 31, 1999 1998 ---- ---- Cash flows from operating activities: Net loss $ (1,667,188) $(20,713,321) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 527,141 343,713 Non-cash compensation expense - 16,146,000 Equity in losses of affiliate - 363,268 Gain on disposal of fixed asset (54,878) Loss on note restructuring - 1,598,425 Provision for doubtful accounts 254,502 - Changes in operating assets and liabilities: Resticted cash 475,770 (406,720) Accounts receivable (405,020) (152,709) Other assets 5,560 198,077 Accounts payable and accrued expenses 458,996 664,303 -------------------------------- Net cash used by operating activities (405,117) (1,958,964) Cash flows from investing activities: Proceeds from return of escrow in connection with the investment in MCC - 1,019,762 Payment for purchase of subsidiary - (589,169) Investment in affiliate - (424,800) Proceeds from repayment of notes receivable 249,979 526,587 Refund of fixed asset acquisition 210,018 - Fixed asset acquisition (105,296) (1,899,002) -------------------------------- Net cash flows provided by (used) in investing activities 354,701 (1,366,622) Cash flows from financing activities: Proceeds from issuance of common stock 1,000,000 888,701 Collections on stock subscription receivables - 917,076 Repayment of note payable - (65,000) Proceeds from issuance of short-term debt 80,000 - Repayments on capital lease obligations (34,849) - -------------------------------- Net cash flows provided by financing activities 1,045,151 1,740,777 -------------------------------- Net increase (decrease) in cash and cash equivalents 994,735 (1,584,809) Cash and cash equivalents, beginning of period 317,799 2,212,111 -------------------------------- Cash and cash equivalents, end of period $ 1,312,534 $ 627,302 ================================
See accompanying notes to consolidated financial statements. 5 VDC Communications, Inc. and Subsidiaries Notes to consolidated financial statements 1. General These consolidated financial statements for the three and six month periods ended December 31, 1999 and 1998 and the related footnote information are unaudited and have been prepared on a basis substantially consistent with the audited consolidated financial statements of VDC Communications, Inc. and its subsidiaries (collectively, "VDC" or the "Company") as of and for the year ended June 30, 1999 included in the Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the "Annual Report"). These financial statements should be read in conjunction with the audited financial statements and the related notes to consolidated financial statements of the Company as of and for the year ended June 30, 1999 included in the Annual Report and the unaudited quarterly consolidated financial statements and related notes to unaudited consolidated financial statements of the Company for the three month period ended September 30, 1999 included in the Company's Form 10-Q for the quarter then ended as filed with the Securities and Exchange Commission. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) which management considers necessary to present fairly the consolidated financial position of the Company at December 31, 1999, the results of its operations for the three and six month periods ended December 31, 1999 and 1998 and its cash flows for the six months ended December 31, 1999 and 1998. The results of operations for the three and six month periods ended December 31, 1999 may not be indicative of the results expected for any succeeding quarter or for the entire year ending June 30, 2000. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Certain prior-year amounts have been reclassified to conform to the year ended June 30, 2000 financial statement presentation. Cost of services includes depreciation attributable to operating equipment of $225,135 and $483,357 during the three and six-months ended December 31, 1999, respectively. Selling, general and administrative expenses include depreciation of $29,877 and $43,784 and bad debt expense of $154,258 and $254,502 during the three and six-months ended December 31, 1999, respectively. Cost of services includes depreciation attributable to operating equipment of $87,236 during the three and six-months ended December 31, 1998. Selling, general and administrative expenses include depreciation and amortization of $153,641 and $256,477 during the three and six-months ended December 31, 1998, respectively. Loss per common share is calculated by dividing the loss attributable to common shares by the weighted average number of shares outstanding. Outstanding common stock options and warrants are not included in the loss per share calculation as their effect is anti-dilutive. 6 2. Capital Transactions In October 1999, the Company sold 666,667 shares of common stock to unrelated investors and 666,667 shares to an adult son of the Company's Chief Executive Officer at $0.75 per share. In October 1999, a condition for the release from escrow of 2 million shares of the Company's common stock to the seller of the Company's investment in Metromedia China Corporation ("MCC") was satisfied. The condition provided for the release of the escrowed shares in the event that the Company's stock price closed below $5.00 for 40 trading days during the 120 consecutive trading days subsequent to August 31, 1999. For financial statement purposes, the shares became issued and outstanding in October 1999. Since the Company had previously determined the value of its investment in MCC to be $2.4 million under FASB No. 121, the issuance of the 2 million Company shares was charged to operations for the par value of the shares (i.e. $200). 3. Option Repricing In light of the decline in market price of the Company's common stock as of October 1999, the Board of Directors believed that the outstanding stock options with an exercise price in excess of the actual market price were no longer an effective tool to encourage employee retention or to motivate high levels of performance. As a result, in October 1999, the Board of Directors approved an option repricing program under which options to acquire shares of common stock that were originally issued with exercise prices above $1.25 per share were reissued with an exercise price of $1.25 per share, the fair market value of the common stock at the repricing date. These options will continue to vest under the original terms of the option grant. Options to purchase 757,500 shares of Company common stock were affected by the repricing program including options to purchase 567,500 shares of common stock issued under the Company's 1998 Stock Incentive Plan, as amended (the "Plan") and options to purchase 190,000 shares of common stock issued outside of the Plan. An accounting pronouncement is expected to be issued regarding how to account for a change to the exercise price or the number of shares of a stock option that was being accounted for as a fixed award (that is, option repricing). The pronouncement is expected to be effective upon issuance (expected to be in the spring of 2000) but generally would cover events that occur after December 15, 1998. It is anticipated that the pronouncement will require a charge to operations for the difference between the market price of the Company's stock and the exercise price of unexercised, outstanding stock options at the end of each reporting period. 4. Investment in MCC MCC operated telecommunications joint ventures in China under the direction of its majority owner, Metromedia International Group ("MMG"). The joint ventures invested in telephony system construction and development networks being undertaken by the local partner, China Unicom. The completed systems are operated by China Unicom. VDC is a passive minority shareholder of MCC. As such, we make no representations regarding the accuracy of the information publicly provided by MMG, from which the following summary is derived: 7 In December 1999, MMG announced that its MCC joint ventures had executed definitive agreements with China Unicom setting forth terms for the termination of all cooperation projects undertaken between the joint ventures and China Unicom. MMG anticipates that MCC will ultimately receive approximately $90 million (at December 1999 exchange rates) and other distributions after the termination of the joint ventures' cooperative projects. MMG cannot currently determine the ultimate amount and time of payments that it will receive from MCC after termination of the joint ventures' cooperation with China Unicom. In addition, MMG made no assurances that it will be able to convert or repatriate in full any amount received as a result of the settlement with China Unicom or the dissolution of the joint ventures. MCC has interests in an Internet joint venture in China, Huaxia Metromedia Information Technology Co., Ltd. ("Huaxia"). Huaxia is not engaged in any cooperation with China Unicom and is not affected by the China Unicom project termination agreements. MCC intends to continue active development of Huaxia as well as to pursue additional joint ventures and other business opportunities in China's information industry sector. 5. Note Payable-Officer In September 1999, the Chairman and CEO loaned the Company $80,000. The note bears interest at 8% per annum and is due in September 2000. 6. Other Matters Approximately $1.1 million of the liabilities reflected in the Company's consolidated financial statements are attributable to a wholly-owned subsidiary of the Company (the "Subsidiary") and were accrued in connection with the Subsidiary's former operations. The Company has elected to reflect the potential liability within its financial statements despite the fact management has reason to believe that the Subsidiary may not be responsible for such potential liability and despite the fact that the Subsidiary has limited assets and would be unable to pay this liability if it were, in fact, liable for it. Moreover, due to the fact that the potential liability would be a liability of the Subsidiary, a separate legal entity, and not of VDC Communications, Inc., the parent company, management believes that the potential liability will not impact the assets of the parent or its subsidiaries, other than the Subsidiary. 7. Commitments and Contingencies Litigation In July 1999, a former customer filed suit against the Company asserting various purported misrepresentations and various purported breaches of contract. The Company does not believe that the claims asserted are either meritorious or will have a material adverse effect on the Company's assets or operations. 8. Supplemental Disclosure of Cash Flow Information For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. 8
Six-months ended December 31, 1999 1998 ---- ---- Cash paid during the quarter for: interest $82,259 $- Schedule of non-cash investing and financing activities: Equipment acquired through capital lease obligation 249,335 - Cancellation of stock subscription receivable 344,700 - Common stock placed in escrow in connection with investment in MCC - 13,962,500 Treasury stock acquired in exchange for subscription receivable - 164,175 Equipment exchanged for note - 192,379 Acquisition of subsidiary: Fair value of assets acquired - 1,290,044 Common stock issued - 700,875 ------- Cash paid $ - $589,169 --------
In December 1999, the Company sold a fixed asset with a carrying value of approximately $383,000. The consideration received was the assumption by the buyer of the related capital lease obligation of approximately $438,000. The difference has been recorded as a gain on the disposal of fixed assets. The Company received a $200,000 credit from a vendor during the six-months ended December 31, 1999. The credit will be applied against future purchases. The Company has recorded the credit as other assets with a corresponding reduction in previously acquired long distance equipment from this vendor. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 When used in this Report on Form 10-Q, the words "may," "will," "expect," "anticipate," "continue," "estimate," "intend," "could," and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 regarding events, conditions and financial trends which may affect the Company's future plans of operations, business strategy, operating results and financial position. Such statements are not guarantees of future performance and are subject to risks and uncertainties and actual results may differ materially from those included within the forward-looking statements as a result of various factors. Such risks may relate to, among others: (i) the Company's ability to operate profitably; (ii) the Company's ability to secure sufficient financing in order to fund its operations; (iii) competitive and 9 other market conditions that may adversely affect the scope of the Company's operations (iv) inherent regulatory, licensing and political risks associated with operations in foreign countries; (v) the Company's dependence on certain key personnel; and (vi) the Company's revenue dependence on a few customers. Additional factors are described in the Company's other public reports and filings with the Securities and Exchange Commission ("SEC") including Amendment No. 1 to a Registration Statement on Form S-1 (No. 333-80107). Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to publicly release the result of any revision of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events. General VDC Communications, Inc. (referred to herein as the "Company," or "we") owns telecommunications switching and ancillary equipment, leases telecommunications lines and interconnects a global network of carriers and customers providing domestic and international long distance telecommunications services. Our customers are other long distance telephone companies that resell our services to their retail customers or other telecommunications companies. In the future, we anticipate offering our services directly to retail customers in addition to our current wholesale customers. We currently employ digital switching and transmission technology. This equipment, located in New York and Los Angeles comprises our operating facilities. We believe the telecommunications industry is attractive given its current size and future growth potential. Furthermore, we believe the international telecommunications market provides greater opportunity for growth than the domestic market, due to the relatively limited capacity in certain markets and potentially greater gross margin per minute of traffic. Our objective is to become an international telecommunications company with strategic assets and transmission capability in many attractive markets worldwide. We currently provide competitive transmission capability worldwide. We constantly strive to increase our competitiveness while maintaining quality and are exploring strategies to develop our international asset base. Our current facilities are sufficient to handle significantly more traffic than we are currently experiencing. We began the development of our long-distance telecommunications business on March 6, 1998 and have since developed our infrastructure and industry relations. During pre-operating phases we focused upon: fund raising; developing a strategic business plan; purchasing telecommunications switches; developing corporate infrastructure; and developing and commencing marketing programs. Effectively, operations began when our telecommunications network was activated and our marketing efforts commenced in January 1999. During the quarter ended December 31, 1999, we continued to build our network and customer relations. In addition, we formed a Voice over Internet Protocol ("VoIP") Strategic Development Team to do market analysis and make strategic recommendations to the Board of Directors on partners, technologies and acquisition targets that complement the core VDC business. Additionally, in the quarter ended December 31, 1999, several significant events occurred including: 10 - One of our largest customers significantly increased its capacity connecting to our New York Switch. - Warrants to purchase approximately 938,000 shares of VDC common stock expired. - We completed a private placement of VDC common stock, which raised $1.0 million. - We filed a Registration Statement on Form S-1 with the Securities and Exchange Commission ("SEC"). The Registration Statement, which registers the potential sale of up to 9,939,245 shares of VDC common stock on behalf of certain VDC shareholders, was declared effective by the SEC in November 1999. - We held our Annual Meeting of Shareholders on December 10, 1999. Shareholders re-elected two board members, Mr. James Dittman and Dr. Hussein Elkholy, to second terms. Their terms last three years. Over 99% of the votes cast were in favor of their re-election. - The VDC Board of Directors appointed three officers to new positions: Clayton Moran as Chief Financial Officer, Edwin Read as Vice President, Operations and Peter Zagres as Vice President, Sales and Buying. - We ceased development of a direct telecommunications route into Asia. - We implemented significant cost-cutting measures as more fully described in "Liquidity and Capital Resources." We earn revenue from three sources. The main source is from domestic and international telecommunications long distance services which is earned based on the number of minutes billable to our customers, which are other telecommunications companies. These minutes are generally billed on a monthly basis. Bills are generally due within zero to thirty days. Our second source of revenues is derived from the rental of space and telecommunications equipment/circuits at our telecommunications facilities. This revenue is generated and billed on a month-to-month basis. Additionally, we derive minimal revenues from the management of domestic tower sites that provide transmission and receiver locations for wireless communications companies. This revenue is also generated and billed on a month-to-month basis. Revenue derived through the per-minute transmission of voice and facsimile telecommunications traffic is normally in accordance with contracts with other telecommunications companies. These contracts are often for a year or more, but can generally be amended with a few days notice. Further, these contracts generally do not provide for a fixed volume of telecommunications traffic to be sent to us and, as such, the telecommunications traffic that any one customer sends to us during any given month can vary considerably. Occasionally, however, these contracts require payments to us if a customer does not send a fixed minimum amount of telecommunications traffic to us. Costs of services is primarily comprised of costs incurred from other domestic and foreign telecommunications carriers to originate, transport and terminate calls that we send to them. The majority of our cost of service is variable, based on the number of minutes of use, with transmission and termination costs 11 being our most significant expense. In addition, our costs of services include circuit expenses, the allocable personnel and overhead associated with operations, and depreciation of telecommunications equipment. We depreciate long distance telecommunications equipment over a period of five years. Our costs also include selling, general, and administrative expenses ("SG&A"). SG&A consists primarily of personnel costs, professional fees, travel, office rental and business development related costs. We incur costs associated with international market research and due diligence regarding potential projects inside and outside of the U.S. We are the successor to our former parent, VDC Corporation Ltd., a Bermuda company ("VDC Bermuda") by virtue of a domestication merger. On November 6, 1998, VDC Bermuda merged with and into the Company (the "Domestication Merger"). The effect of the Domestication Merger was that members/stockholders of VDC Bermuda became stockholders of the Company. The primary reason for the Domestication Merger was to reorganize VDC Bermuda as a publicly traded United States corporation domesticated in the State of Delaware. The Domestication Merger reflects the completion of a series of transactions that commenced on March 6, 1998, when the Company (then a wholly-owned subsidiary of VDC Bermuda) acquired Sky King Communications, Inc., a Connecticut corporation ("Sky King Connecticut") by merger. This merger transaction was accounted for as a reverse acquisition whereby Sky King Connecticut was the acquirer for accounting purposes. Results of Operations For the Three Months Ended December 31, 1999 Compared to the Three Months Ended December 31, 1998 Revenues: Total revenues in the three months ended December 31, 1999 ("Current Quarter") increased to approximately $2.2 million from approximately $528,000 for the three months ended December 31, 1998 ("Prior Period Quarter"). Revenue of approximately $1.7 million was generated during the Current Quarter by the transmission of approximately 8.1 million minutes of telecommunications traffic domestically and internationally ("Long Distance Revenue"). We also generated revenue of approximately $282,000 from the rental of space and telecommunications equipment at our telecommunications facilities, approximately $200,000 from contractually required payments from a customer due to its failure to provide a certain minimum level of telecommunications traffic, and approximately $30,000 from site tower management. Revenue of approximately $431,000 was generated during the Prior Period Quarter by the transmission of approximately 1.3 million minutes of telecommunications traffic internationally. We also generated revenue of approximately $60,000 from the rental of space and telecommunications equipment at our telecommunications facilities and approximately $24,000 from site tower management during the Prior Period Quarter. Current Quarter Long Distance Revenues were generated from carrying traffic worldwide, whereas in the Prior Period Quarter, Long Distance Revenue was generated exclusively from a direct route into Central America, a relatively high rate region of the world. Costs of Services: Costs of services in the Current Quarter increased to approximately $2.3 million from approximately $944,000 in the Prior Period Quarter. The increase is due to increased domestic and international minutes of telecommunications traffic which we purchased from other long distance carriers 12 and increased operational expenses including salaries, depreciation, and circuit costs. Costs of services as a percentage of revenues decreased from 179% in the Prior Period Quarter to 104% in the Current Quarter. The decrease was mostly attributable to improved rates, increased traffic volume and lower fixed monthly circuit costs. Selling, general & administrative expenses ("SG&A"): SG&A expenses decreased to approximately $572,000 in the Current Quarter from approximately $951,000 in the Prior Period Quarter. This decrease was primarily the result of reductions in personnel costs and professional fees as a part of cost cutting measures implemented to increase overall efficiencies. Prior Period Quarter professional fees also included legal and accounting expenses associated with the redeployment of the Company's assets. Other income (expense): Other income (expense) was approximately $(46,000) for the three months ended December 31, 1999 compared with approximately $(1.4) million for the Prior Period Quarter. Other income (expense) in the current quarter was due to interest expense incurred on capital lease obligations offset by interest income and the gain on a sale of telecommunications equipment. Other (expense) in the Prior Period Quarter was mostly due to an approximate $1.6 million loss on note restructuring. For the Six Months Ended December 31, 1999 Compared to the Six Months Ended December 31, 1998 Revenues: Total revenues in the six months ended December 31, 1999 ("Current Period") increased to approximately $4.5 million from approximately $729,000 for the six months ended December 31, 1998 ("Prior Period"). Long Distance Revenue of approximately $3.7 million was generated during the Current Period by the transmission of approximately 18.4 million minutes of telecommunications traffic domestically and internationally. We also generated revenue of approximately $500,000 from the rental of space and telecommunications equipment at our telecommunications facilities, approximately $200,000 from the shortfall of contractual traffic termination requirements and approximately $62,000 from site tower management. Long Distance Revenue of approximately $580,000 was generated during the Prior Period by the transmission of approximately 1.7 million minutes of telecommunications traffic internationally. In the Prior Period, we also generated revenue of approximately $55,000 from the rental of space and telecommunications equipment at our telecommunications facilities, approximately $46,000 from site tower management and approximately $48,000 of non-recurring revenue. Current Period Long Distance Revenues were generated from carrying traffic worldwide, whereas in the Prior Period, Long Distance Revenue was generated exclusively from a direct route into Central America, a relatively high rate region of the world. Costs of Services: Costs of services in the Current Period increased to approximately $4.9 million from approximately $1.3 million in the Prior Period. This increase reflects increased domestic and international minutes of telecommunications traffic which we purchased from other carriers and increased operational expenses including salaries, depreciation, and circuit costs. Costs of services as a percentage of revenues decreased from 176% in the Prior Period to 108% in the Current Period. The decrease was mostly attributable to improved rates, increased traffic volume and lower fixed monthly circuit costs. Selling, general & administrative expenses ("SG&A"): SG&A expenses decreased to approximately $1.3 million in the Current Period from approximately $2 million 13 in the Prior Period. This decrease was primarily the result of reductions in personnel costs and professional fees as a part of cost cutting measures implemented to increase overall efficiencies. Prior period professional fees also included legal and accounting expenses associated with the redeployment of the Company's assets. Other income (expense): Other income (expense) was approximately $(23,000) in the current period compared with approximately $(1.7) million in the Prior Period. Other (expense) in the Current Period was mostly due to interest expense incurred on capital lease obligations offset by interest income and a gain on a sale of telecommunications equipment. Other (expense) in the Prior Period was mostly due to a loss on note restructuring. Liquidity and Capital Resources Our liquidity requirements arise primarily from cash used in operating activities, capital expenditures and payments of capital lease obligations. To date, we have financed ourselves mostly through equity financing. During the quarter ended December 31, 1999, we raised $1.0 million through the issuance of common stock and approximately $475,000 of previously restricted cash was released. Our cash position at December 31, 1999 was approximately $1.3 million. We implemented cost-cutting measures during the quarter which included the following: 1. Reduced circuit costs by over 50% by eliminating unused capacity and more fully utilizing remaining capacity. 2. Obtained a release from the vendor on an equipment lease for an asset that was not a strategic fit for our current network and would have cost approximately $16,800 per month beginning January 2000. 3. Reduced our employee base from 29 at September 14, 1999 to 20 at December 31, 1999. 4. Amended the lease with respect to our Colorado office so as to reduce Colorado office rent by approximately 40 percent. In addition, the amendment calls for a further cost reduction of approximately 20% in May 2000. Additionally, during the prior quarter, we amended our lease space in our Connecticut office which reduced Connecticut office rent by approximately 42 percent. Most cost-cutting measures were implemented, but did not have full effect, during the three months ended December 31, 1999. We, therefore, expect an increase in realized efficiencies in the upcoming quarter. In addition, we are constantly investigating ways to cut costs and further increase efficiency. However, we are currently operating at a cash deficit. Based upon current revenues, expenses, and capital lease payments, we have been operating at a cash deficit of approximately $100,000 to $125,000 per month. Although we expect this to continue in the short term, we anticipate that recent cost-cutting measures and the funds recently raised should be sufficient to sustain us in the short term. In the longer term, however, we need to increase our revenues and gross profit in order to continue operations without outside funding. Potential sources of increased revenues include: (i) the initiation of services for new customers and/or increased capacity available to existing customers and additional utilization thereof by these customers, (ii) the development and 14 operation of direct telecommunications route(s), and/or (iii) the addition of telecommunications equipment/circuit rental customers. There are no assurances, however, that these objectives will transpire. It is possible that we will need to raise funds through debt, equity, or other sources in order to sustain operations. To meet these objectives, we believe we have developed a scalable network that will continue to provide competitive telecommunications services. We intend to continue operating and marketing the network to build our customer base. Additionally, we intend to pursue new opportunities in the domestic and international telecommunications industry through: (i) reinvestment of future profits, if any; and/or (ii) mergers and acquisitions. On February 1, 2000, a major telecommunications company initiated its use of our network for termination of telecommunications traffic. The revenue run rate that we expect from this customer, and whether it will be material, is currently uncertain. We are currently considering alternatives to monetize non-core assets. Without limitation, we are considering strategic alternatives for our Colorado based switch including, but not limited to: (i) the sale of the switch; or (ii) the redeployment of the switch. We are also investigating the possibility of the sale of our site tower rental contracts. We expect that any success in monetizing these assets would improve liquidity. We are currently contemplating capital expenditures of approximately $200,000 during Fiscal 2000. Depending on the outcome of our VoIP Strategic Development Team's findings, we could, however, be investing significantly more capital and further depleting liquidity during Fiscal 2000. The capital expenditures represent telecommunications equipment that could potentially be located in foreign countries. We would expect to fund these purchases through debt and/or equity financing and cash flow from operations, if any. Net cash used in operating activities was approximately $405,000 in the Current Period. We collected approximately $4.1 million from customers while paying approximately $4.5 million to carriers, other vendors and employees. Net cash used by operating activities was approximately $2 million in the Prior Period. We collected approximately $550,000 from customers while paying approximately $2.5 million to vendors and employees. Net cash provided by investing activities was approximately $355,000 in the Current Period. Cash flows provided by investing activities included the collection of notes receivable and a sales tax refund on previously acquired switching equipment. Cash was used for fixed asset acquisitions. Net cash used by investing activities was approximately $1.4 million in the Prior Period. This was the result of capital expenditures, the acquisition of a subsidiary and an investment in an affiliate, net of collections on notes receivable and proceeds from the return of escrow in connection with the Company's investment in MCC. Cash provided by financing activities was approximately $1 million in the Current Period. This reflects proceeds from the issuance of common stock and short-term debt less repayments on capital lease obligations. Proceeds provided by financing activities of approximately $1.7 million during the Prior Period were mostly from collections on stock subscriptions receivable and issuance of common stock. 15 Acquisitions We expect to continue to explore acquisition opportunities. Generally, we would consider using our common stock for acquisitions. Such acquisitions may have a significant impact on our need for capital. In the event of a need for capital in connection with an acquisition, we would explore a range of financing options, which could include public or private debt, or equity financing. There can be no assurances that such financing will be available, or if available, will be available on favorable terms. Investment in MCC We own 2.0 million shares and warrants to purchase 4.0 million shares of MCC common stock, a private telecommunications company. MCC operated telecommunications joint ventures in China under the direction of its majority owner, Metromedia International Group ("MMG"). The joint ventures invested in telephony system construction and development networks being undertaken by the local partner, China Unicom. The completed systems are operated by China Unicom. We are a passive minority shareholder of MCC. As such, we make no representations regarding the accuracy of the information publicly provided by MMG, from which the following summary is derived: MMG's June 1999 10-Q stated that the supervisory department of the Chinese government had requested that China Unicom terminate the joint ventures. The notification requested that negotiations begin immediately regarding the amounts to be paid to the joint ventures, including return of investment made and appropriate compensation and other matters related to winding up the joint ventures' activities as a result of this notice. In December 1999, MMG announced that its MCC joint ventures had executed definitive agreements with China Unicom setting forth terms for the termination of all cooperation projects undertaken between the joint ventures and China Unicom. Under the terms of the termination agreements, MMG's joint ventures will immediately receive RMB 807.5 million in cash and they are entitled to receive an additional RMB 50 million in cash after completion of certain conditions. These amounts represent full and final payment for settlement of all matters pertaining to the termination of China Unicom's cooperation projects with the joint ventures. As part of the termination settlement, China Unicom will unconditionally own any assets pertaining to the cooperation projects in which the joint ventures held an interest. In the termination agreements, China Unicom, the joint ventures and joint ventures' shareholders waived all of their respective rights associated with the contracts underlying the cooperation projects now being terminated. MMG has stated that it anticipates that MCC will ultimately receive approximately $90 million (at December 1999 exchange rates) and other distributions after the termination of the joint ventures' cooperative projects. MMG cannot currently determine the ultimate amount and time of payments that it will receive from MCC after termination of joint ventures' cooperation with China Unicom. In addition, MMG made no assurances that it will be able to convert or repatriate in full any amount received as a result of the settlement with China Unicom or the dissolution of the joint ventures. 16 Based on representations by MMG, our understanding is that MCC has interests in an Internet joint venture in China, Huaxia Metromedia Information Technology Co., Ltd. ("Huaxia"). Huaxia is not engaged in any cooperation with China Unicom and is not affected by the China Unicom project termination agreements. MCC intends to continue active development of Huaxia as well as to pursue additional joint ventures and other business opportunities in China's information industry sector. The Year 2000 Readiness Disclosure Most of the problem dates associated with the year 2000 computer compliance issues, including January 1, 2000, have passed. To date, we have had no material problems associated with these dates. Given the smooth transition that occurred from December 31, 1999 to January 1, 2000, we do not expect any problem with the last remaining problem date, February 29, 2000. However, it is still possible that problems may occur on this date or that currently unknown computer problems exist within our systems or equipment. We have completed a contingency plan in case of any year 2000 issues and we will address these concerns as they arise. Our contingency plan provides, in part, for the following: in the case of routing difficulties, we will test and reroute to alternative options; and, in case of billing difficulties, we will utilize already identified alternative solutions for both delivery and processing of data. Prior to December 31, 1999, we completed our evaluation of the year 2000 readiness of our computer systems, software applications and telecommunications equipment. We did not, and do not currently, expect to experience any material year 2000 issues. Through our discovery process, we identified and remedied $84,000 worth of expenditures associated with updating our systems to be compliant with the year 2000. We do not expect any additional material expenditures. Our key processing systems have been implemented in the past two years. Most of the vendors of such systems have represented to us that their systems are compliant with the year 2000 issues without any modification. The failure of our computer systems and software applications to accommodate year 2000 issues, could have a material adverse effect on our business, financial condition and result of operations. Further, if the networks and systems of those on whose services we depend and with whom our networks and systems must interface are not year 2000 functional, it could have a material adverse effect on the operation of our network and, as a result, have a material adverse effect on us. We intend to continue to monitor the performance of our accounting, information and processing systems and software applications and those of our third-party constituents to identify and resolve any year 2000 issues. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is currently not exposed to material future earnings or cash flow exposures from changes in interest rates on long-term debt obligations since our long-term debt obligations are at fixed rates. We may be exposed to interest rate risk, as additional financing may be required due to the operating losses and capital expenditures associated with establishing and expanding our facilities. The interest rate that we will be able to obtain on additional 17 financing will depend on market conditions at that time, and may differ from the rates we have secured on our current debt. We do not currently anticipate entering into interest rate swap and/or similar instruments. The Company's carrying value of cash and cash equivalents, accounts receivable, accounts payable, marketable securities-available for sale, and notes payable are a reasonable approximation of their fair value. Part II - Other Information Item 1. Legal Proceedings Other than as reported in Part II - Item 1 "Legal Proceedings" of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, there have been no material developments to any of the matters that require reporting under this Item. Item 2. Changes in Securities and Use of Proceeds Recent Sales of Unregistered Securities In October 1999, the Company sold 1,333,334 shares of Company common stock to accredited investors in a non-public offering exempt from registration pursuant to Section 4(2) and Rule 506 of Regulation D of the Securities Act of 1933, as amended, as follows:
Shareholder Number of Shares Consideration ($) Adase Partners, L.P. 140,000 105,000.00 The Lucien I. Levy Revocable Living Trust 10,000 7,500.00 Frederick W. Moran (1) 666,667 500,000.25 Merl Trust 28,000 21,000.00 O.T. Finance, SA 22,000 16,500.00 Alan B. Snyder 266,667 200,000.25 Eric M. Zachs 200,000 150,000.00 ------- ---------- Total 1,333,334 1,000,000.50
(1) An adult son of Frederick A. Moran. Item 3. Defaults Upon Senior Securities Item not applicable. Item 4. Submission of Matters to a Vote of Securities Holders The Company's annual meeting of stockholders was held on December 10, 1999. The following table sets forth information regarding the number of votes for, against, withheld, or abstaining and broker non-votes, with respect to each matter presented at the meeting. 18 1. Both nominees for Class I director were elected as follows:
NOMINEES FOR WITHHOLD James B. Dittman 18,830,647 42,105 Dr. Hussein Elkholy 18,830,647 42,105
2. The selection of BDO Seidman, LLP as the Company's independent auditors for the fiscal year ending June 30, 2000 was approved as follows:
BROKER FOR AGAINST ABSTAIN NON-VOTE 18,827,315 28,862 16,575 0
Item 5. Other Information Item not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit No. Description Method of Filing ----------- ----------- ---------------- 10.1 1998 Stock Incentive Plan, as Amended (1) 10.2 Settlement, Release and Separation Agreement by and among VDC (1) Communications, Inc. and William H. Zimmerling, dated October 1, 1999 10.3 Settlement, Release and Separation Agreement by and among VDC (1) Communications, Inc. and Robert E. Warner, dated October 18, 1999 10.4 Form of Non-Qualified Stock Option Agreement (1) 10.5 Incentive Stock Option Agreement between Frederick A. Moran and (1) VDC Communications, Inc., dated October 1, 1999 10.6 Form of Incentive Stock Option Agreement (1) 10.7 Form of Incentive Stock Option Agreement (1) 10.8 Form of Securities Purchase Agreement for October 1999 (1) 19 10.9 Form of Registration Rights Agreement for October 1999 (1) 10.10 Form of Non-Qualified Stock Option Agreement for November 1999 (2) 10.11 Form of Incentive Stock Option Agreement for November 1999 (2) 10.12 Incentive Stock Option Agreement between Frederick A. Moran and (2) VDC Communications, Inc., dated November 30, 1999 10.13 Incentive Stock Option Agreement between Peter Zagres and VDC (2) Communications, Inc., dated November 30, 1999 10.14 Incentive Stock Option Agreement between Charles W. Mulloy and (2) VDC Communications, Inc., dated December 21, 1999 10.15 Release Agreement by and among Zions Credit Corporation, VDC (2) Communications, Inc., and VDC Telecommunications, Inc., dated December 6, 1999 10.16 Assumption Agreement between Zions Credit Corporation, VDC (2) Communications, Inc., VDC Telecommunications, Inc. and Wang Communications, Inc., dated December 1999 27.1 Financial Data Schedule (2)
(1) Filed as an Exhibit to Registrant's Amendment No. 1 to Registration Statement on Form S-1, filed with the SEC on November 8, 1999, and incorporated by reference herein. (2) Filed herewith. (b) Reports on Form 8-K Item not applicable. 20 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. VDC COMMUNICATIONS, INC. By:/s/ Frederick A. Moran Dated: February 10, 2000 -------------------------------------------------- Frederick A. Moran Chairman, Chief Executive Officer, and Director By:/s/ Clayton F. Moran Dated: February 10, 2000 -------------------------------------------------- Clayton F. Moran Chief Financial Officer 21
Exhibit Index Exhibit Number Page Number in (Referenced to Rule 0-3(b) Item 601 of Sequential Reg. S-K Numbering System Where Exhibit Can Be Found 10.10 Form of Non-Qualified Stock Option Agreement for November 1999 10.11 Form of Incentive Stock Option Agreement for November 1999 10.12 Incentive Stock Option Agreement between Frederick A. Moran and VDC Communications, Inc., dated November 30, 1999 10.13 Incentive Stock Option Agreement between Peter Zagres and VDC Communications, Inc., dated November 30, 1999 10.14 Incentive Stock Option Agreement between Charles W. Mulloy and VDC Communications, Inc., dated December 21, 1999 10.15 Release Agreement by and among Zions Credit Corporation, VDC Communications, Inc., and VDC Telecommunications, Inc., dated December 6, 1999 10.16 Assumption Agreement between Zions Credit Corporation, VDC Communications, Inc., VDC Telecommunications, Inc. and Wang Communications, Inc., dated December 1999 27.1 Financial Data Schedule
22 EX-10.10 2 EX-10.10 The following Form of Non-Qualified Stock Option Agreement was entered into with the following directors: James B. Dittman, Dr. Hussein Elkholy, and Dr. Leonard Hausman. Optionee VDC COMMUNICATIONS, INC. ------------------------ FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT UNDER THE VDC COMMUNICATIONS, INC. 1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan") This Agreement is made as of November 30, 1999 (the "Grant Date") by and between VDC Communications, Inc., a Delaware corporation (the "Corporation"), and the person named on Schedule A hereto (the "Optionee"). WHEREAS, Optionee is an agent of the Corporation or one of its subsidiaries and the Corporation considers it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Corporation and an incentive to advance the interests of the Corporation by granting the Optionee an option to purchase shares of common stock of the Corporation (the "Common Stock"); NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree that as of the Grant Date, the Corporation hereby grants Optionee an option to purchase from it, upon the terms and conditions set forth in the Plan and this Agreement, that number of shares of the authorized and unissued Common Stock of the Corporation as is set forth on Schedule A hereto. 1. Terms of Stock Option. The option to purchase Common Stock granted hereby is subject to the terms, conditions, and covenants set forth in the Plan as well as the following: (a) This option shall constitute a Non-Qualified Stock Option which is not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended; (b) The per share exercise price for the shares subject to this option shall be the Fair Market Value (as defined in the Plan) of the Common Stock on the Grant Date, which exercise price is set forth on Schedule A hereto; (c) This option shall vest in accordance with the vesting schedule set forth on Schedule A hereto; and (d) No portion of this option may be exercised more than ten (10) years from the Grant Date. 2. Payment of Exercise Price. The option may be exercised, in part or in whole, only by written request to the Corporation accompanied by payment of the exercise price in full either: (i) in cash for the shares with respect to which it is exercised; (ii) by delivering to the Corporation a notice of exercise with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price; (iii) in the discretion of the Plan Administrator, through the delivery to the Corporation of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the option exercise price of the shares being purchased pursuant to the exercise of the Option; provided, however, that shares of Common Stock delivered in payment of the option price must have been held by the Optionee for at least six (6) months in order to be utilized to pay the option price; (iv) in the discretion of the Plan Administrator, through an election to have shares of Common Stock otherwise issuable to the Optionee withheld to pay the exercise price of such Option; or (v) in the discretion of the Plan Administrator, through any combination of the payment procedures set forth in Subsections (i) - (iv) of this paragraph. 3. Miscellaneous. (a) This Agreement is binding upon the parties hereto and their respective heirs, personal representatives, successors and assigns. (b) This Agreement will be governed and interpreted in accordance with the laws of the State of Connecticut, and may be executed in more than one counterpart, each of which shall constitute an original document. (c) No alterations, amendments, changes or additions to this agreement will be binding upon either the Corporation or Optionee unless reduced to writing and signed by both parties. (d) All controversies or claims arising out of this Agreement shall be determined by binding arbitration, conducted at the Corporation's offices in Greenwich, Connecticut, or at such other location designated by the Corporation, before the American Arbitration Association. (e) No rule of construction requiring interpretation against the drafting party shall apply to the interpretation of this Agreement. (f) If any provision of this Agreement is held to be invalid, the remaining provisions shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the Grant Date. VDC COMMUNICATIONS, INC. By:/s/ Frederick A. Moran ---------------------- Frederick A. Moran Chief Executive Officer OPTIONEE: ------------------------- Optionee Schedule A 1. Grant Date: November 30, 1999 2. Number of Shares of Common Stock covered by the Option: 10,000 3. Exercise Price (100% of Fair Market Value of Common Stock on the Grant Date): .9375 4. The Option shall vest in accordance with the following schedule: (i) 3,333 shares shall vest on the first anniversary of the Grant Date, provided Optionee continuously serves as a member of the Corporation's Board of Directors from November 30, 1999 through November 29, 2000; (ii) 3,333 shares shall vest on the second anniversary of the Grant Date, provided Optionee continuously serves as a member of the Corporation's Board of Directors from November 30, 1999 through November 29, 2001; and (iii) 3,334 shares shall vest on the third anniversary of the Grant Date, provided Optionee continuously serves as a member of the Corporation's Board of Directors from November 30, 1999 through November 29, 2002. EX-10.11 3 EX-10.11 The following Form of Incentive Stock Option Agreement was entered into with the following executive officers:
Name / Optionee Number of Shares Underlying Options Annual Vesting Amount Clayton F. Moran 90,000 18,000 Charles W. Mulloy 50,000 10,000 Edwin B. Read 125,000 25,000 Peter Zagres 180,000 36,000
Optionee VDC COMMUNICATIONS, INC. ------------------------ FORM OF INCENTIVE STOCK OPTION AGREEMENT UNDER THE VDC COMMUNICATIONS, INC. 1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan") This Agreement is made as of November 30, 1999, (the "Grant Date") by and between VDC Communications, Inc., a Delaware corporation (the "Corporation") and (the "Optionee"). WHEREAS, Optionee is an employee of the Corporation or one of its subsidiaries and the Corporation considers it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Corporation and an incentive to advance the interests of the Corporation by granting the Optionee an option to purchase shares of common stock of the Corporation (the "Common Stock"); NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree that as of the Grant Date, the Corporation hereby grants Optionee an option to purchase from it, upon the terms and conditions set forth in the Plan (a copy of which is attached hereto) and this Agreement, that number of shares of the authorized and unissued Common Stock of the Corporation as is set forth on Schedule A hereto. 1. Terms of Stock Option. The option to purchase Common Stock granted herein is subject to the terms, conditions, and covenants set forth in the Plan as well as the following: (a) This option shall constitute an Incentive Stock Option which is intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended; (b) The per share exercise price for the shares subject to this option shall be the 100% of the Fair Market Value (as defined in the Plan) of the Common Stock on the Grant Date, which exercise price is set forth on Schedule A hereto; (c) This option shall vest in accordance with the vesting schedule set forth on Schedule A hereto; and (d) No portion of this option may be exercised more than ten (10) years from the Grant Date. 2. Payment of Exercise Price. The option may be exercised, in part or in whole, only by written request to the Corporation accompanied by payment of the exercise price in full either: (i) in cash for the shares with respect to which it is exercised; (ii) by delivering to the Corporation a notice of exercise with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price; (iii) in the discretion of the Plan Administrator, through the delivery to the Corporation of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the option exercise price of the shares being purchased pursuant to the exercise of the Option; provided, however, that shares of Common Stock delivered in payment of the option price must have been held by the Optionee for at least six (6) months in order to be utilized to pay the option price; (iv) in the discretion of the Plan Administrator, through an election to have shares of Common Stock otherwise issuable to the Optionee withheld to pay the exercise price of such Option; or (v) in the discretion of the Plan Administrator, through any combination of the payment procedures set forth in Subsections (i) - (iv) of this paragraph. 3. Miscellaneous. (a) This Agreement and the options represented hereby may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. (b) This Agreement will be governed and interpreted in accordance with the laws of the State of Connecticut, and may be executed in more than one counter0part, each of which shall constitute an original document. 2 (c) No alterations, amendments, changes or additions to this agreement will be binding upon either the Corporation or Optionee unless reduced to writing and signed by both parties. (d) All controversies or claims arising out of this Agreement shall be determined by binding arbitration, conducted at the Corporation's offices in Greenwich, Connecticut, or at such other location designated by the Corporation, before the American Arbitration Association. (e) No rule of construction requiring interpretation against the drafting party shall apply to the interpretation of this Agreement. (f) If any provision of this Agreement is held to be invalid, the remaining provisions shall remain in full force and effect. In witness whereof, the parties have executed this Agreement as of the Grant Date. CORPORATION: VDC COMMUNICATIONS, INC. By:/s/Frederick A. Moran --------------------- Frederick A. Moran Chief Executive Officer OPTIONEE: ------------------------ 3 Optionee Schedule A 1. Grant Date: November 30, 1999 2. Number of Shares of Common Stock covered by the Option: 3. Exercise Price (100% of Fair Market Value of Common Stock on the Grant Date): $.9375 4. The Option shall vest in accordance with the following schedule: (i) shares shall vest on the first anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2000; (ii) shares shall vest on the second anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2001; (iii) shares shall vest on the third anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2002; (iv) shares shall vest on the fourth anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2003; and (v) shares shall vest on the fifth anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2004. 4 EX-10.12 4 EX-10.12 1999-OP18 Frederick A. Moran Optionee VDC COMMUNICATIONS, INC. ------------------------ INCENTIVE STOCK OPTION AGREEMENT UNDER THE VDC COMMUNICATIONS, INC. 1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan") This Agreement is made as of November 30, 1999, (the "Grant Date") by and between VDC Communications, Inc., a Delaware corporation (the "Corporation") and Frederick A. Moran (the "Optionee"). WHEREAS, Optionee is an employee of the Corporation or one of its subsidiaries and the Corporation considers it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Corporation and an incentive to advance the interests of the Corporation by granting the Optionee an option to purchase shares of common stock of the Corporation (the "Common Stock"); NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree that as of the Grant Date, the Corporation hereby grants Optionee an option to purchase from it, upon the terms and conditions set forth in the Plan (a copy of which is attached hereto) and this Agreement, that number of shares of the authorized and unissued Common Stock of the Corporation as is set forth on Schedule A hereto. 1. Terms of Stock Option. The option to purchase Common Stock granted herein is subject to the terms, conditions, and covenants set forth in the Plan as well as the following: (a) This option shall constitute an Incentive Stock Option which is intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended; (b) The per share exercise price for the shares subject to this option shall be 110% of the Fair Market Value (as defined in the Plan) of the Common Stock on the Grant Date, which exercise price is set forth on Schedule A hereto; 1 (c) This option shall vest in accordance with the vesting schedule set forth on Schedule A hereto; and (d) No portion of this option may be exercised more than five (5) years from the Grant Date. 2. Payment of Exercise Price. The option may be exercised, in part or in whole, only by written request to the Corporation accompanied by payment of the exercise price in full either: (i) in cash for the shares with respect to which it is exercised; (ii) by delivering to the Corporation a notice of exercise with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price; (iii) in the discretion of the Plan Administrator, through the delivery to the Corporation of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the option exercise price of the shares being purchased pursuant to the exercise of the Option; provided, however, that shares of Common Stock delivered in payment of the option price must have been held by the Optionee for at least six (6) months in order to be utilized to pay the option price; (iv) in the discretion of the Plan Administrator, through an election to have shares of Common Stock otherwise issuable to the Optionee withheld to pay the exercise price of such Option; or (v) in the discretion of the Plan Administrator, through any combination of the payment procedures set forth in Subsections (i) - (iv) of this paragraph. 3. Miscellaneous. (a) This Agreement and the options represented hereby may not be assigned or transferred in any manner except by will or by the laws of descent and distribution. (b) This Agreement will be governed and interpreted in accordance with the laws of the State of Connecticut, and may be executed in more than one counterpart, each of which shall constitute an original document. (c) No alterations, amendments, changes or additions to this agreement will be binding upon either the Corporation or Optionee unless reduced to writing and signed by both parties. (d) All controversies or claims arising out of this Agreement shall be determined by binding arbitration, conducted at the Corporation's offices in Greenwich, Connecticut, or at such other location designated by the Corporation, before the American Arbitration Association. 2 (e) No rule of construction requiring interpretation against the drafting party shall apply to the interpretation of this Agreement. (f) If any provision of this Agreement is held to be invalid, the remaining provisions shall remain in full force and effect. In witness whereof, the parties have executed this Agreement as of the Grant Date. VDC COMMUNICATIONS, INC. By:/s/ Frederick A. Moran ---------------------- Frederick A. Moran Chief Executive Officer OPTIONEE /s/ Frederick A. Moran ---------------------- Frederick A. Moran 3 Frederick A. Moran Optionee Schedule A 1. Grant Date: November 30, 1999 2. Number of Shares of Common Stock covered by the Option: 450,000 3. Exercise Price (110% of Fair Market Value of Common Stock on the Grant Date): $1.03125 4. The Option shall vest in accordance with the following schedule: (i) 90,000 shares shall vest on the first anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2000; (ii) 90,000 shares shall vest on the second anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2001; (iii) 90,000 shares shall vest on the third anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2002; (iv) 90,000 shares shall vest on the fourth anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2003; and (v) 90,000 shares shall vest on the fifth anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from November 30, 1999 through November 29, 2004. 4 EX-10.13 5 EX-10.13 THIS AGREEMENT SUPERSEDES AND RENDERS NULL AND VOID A PRIOR INCENTIVE STOCK OPTION AGREEMENT BETWEEN THE PARTIES MADE AS OF OCTOBER 1, 1999 (NO. 1999-OP5). 1999-OP5/A Peter Zagres Optionee VDC COMMUNICATIONS, INC. ------------------------ INCENTIVE STOCK OPTION AGREEMENT UNDER THE VDC COMMUNICATIONS, INC. 1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan") This Agreement is made as of November 30, 1999, by and between VDC Communications, Inc., a Delaware corporation (the "Corporation") and Peter Zagres (the "Optionee"). WHEREAS, the parties entered into an Incentive Stock Option Agreement (the "October Option Agreement") dated October 1, 1999 (the "Grant Date") representing an option (the "October Option") to purchase 20,000 shares of Corporation common stock ("Common Stock"); WHEREAS, on November 30, 1999 the Board of Directors of the Corporation amended the vesting schedule of the October Option; and WHEREAS, the parties wish to enter into a new agreement that amends, supersedes and renders null and void the October Option Agreement and the October Option. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree that the Corporation has granted Optionee an option to purchase from it, upon the terms and conditions set forth in the Plan (a copy of which is attached hereto) and this Agreement, that number of shares of the authorized and unissued Common Stock of the Corporation as is set forth on Schedule A hereto. 1. Terms of Stock Option. The option to purchase Common Stock granted herein is subject to the terms, conditions, and covenants set forth in the Plan as well as the following: (a) This option shall constitute an Incentive Stock Option which is intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended; (b) The per share exercise price for the shares subject to this option shall be the 100% of the Fair Market Value (as defined in the Plan) of the Common Stock on the Grant Date, which exercise price is set forth on Schedule A hereto; (c) This option shall vest in accordance with the vesting schedule set forth on Schedule A hereto; and (d) No portion of this option may be exercised more than ten (10) years from the Grant Date. 2. Payment of Exercise Price. The option may be exercised, in part or in whole, only by written request to the Corporation accompanied by payment of the exercise price in full either: (i) in cash for the shares with respect to which it is exercised; (ii) by delivering to the Corporation a notice of exercise with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price; (iii) in the discretion of the Plan Administrator, through the delivery to the Corporation of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the option exercise price of the shares being purchased pursuant to the exercise of the Option; provided, however, that shares of Common Stock delivered in payment of the option price must have been held by the Optionee for at least six (6) months in order to be utilized to pay the option price; (iv) in the discretion of the Plan Administrator, through an election to have shares of Common Stock otherwise issuable to the Optionee withheld to pay the exercise price of such Option; or (v) in the discretion of the Plan Administrator, through any combination of the payment procedures set forth in Subsections (i) - (iv) of this paragraph. 3. Miscellaneous. (a) This Agreement and the options represented hereby may not be assigned or transferred in any manner except by will or by the laws of descent and distribution or pursuant to a domestic relations order. (b) This Agreement will be governed and interpreted in accordance with the laws of the State of Connecticut and may be executed in more than one counterpart, each of which shall constitute an original document. (c) No alterations, amendments, changes or additions to this agreement will be binding upon either the Corporation or Optionee unless reduced to writing and signed by both parties. 2 (d) All controversies or claims arising out of this Agreement shall be determined by binding arbitration, conducted at the Corporation's offices in Greenwich, Connecticut, or at such other location designated by the Corporation, before the American Arbitration Association. (e) No rule of construction requiring interpretation against the drafting party shall apply to the interpretation of this Agreement. (f) If any provision of this Agreement is held to be invalid, the remaining provisions shall remain in full force and effect. (g) This Agreement supersedes and renders null and void the October Option Agreement and the October Option. (h) The recitals to this Agreement constitute a part of this Agreement. In witness whereof, the parties have executed this Agreement as of the Grant Date. CORPORATION: VDC COMMUNICATIONS, INC. By:/s/ Frederick A. Moran ---------------------- Frederick A. Moran Chief Executive Officer OPTIONEE: /s/ Peter Zagres ---------------- Peter Zagres 3 Peter Zagres Optionee Schedule A 1. Grant Date: October 1, 1999 2. Number of Shares of Common Stock covered by the Option: 20,000 3. Exercise Price (100% of Fair Market Value of Common Stock on the Grant Date): $1.25 4. The Option shall vest in accordance with the following schedule: (i) 4,000 shares shall vest on March 29, 2000, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from October 1, 1999 through March 28, 2000; (ii) 4,000 shares shall vest on March 29, 2001, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from October 1, 1999 through March 28, 2001; (iii) 4,000 shares shall vest on March 29, 2002, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from October 1, 1999 through March 28, 2002; (iv) 4,000 shares shall vest on March 29, 2003, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from October 1, 1999 through March 28, 2003; and (v) 4,000 shares shall vest on March 29, 2004, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from October 1, 1999 through March 28, 2004. 4 EX-10.14 6 EX-10.14 1999-OP41 Charles W. Mulloy Optionee VDC COMMUNICATIONS, INC. ------------------------ INCENTIVE STOCK OPTION AGREEMENT UNDER THE VDC COMMUNICATIONS, INC. 1998 STOCK INCENTIVE PLAN, AS AMENDED (the "Plan") This Agreement is made as of December 21, 1999 (the "Grant Date") by and between VDC Communications, Inc., a Delaware corporation (the "Corporation") and Charles W. Mulloy (the "Optionee"). WHEREAS, Optionee is an employee of the Corporation or one of its subsidiaries and the Corporation considers it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Corporation and an incentive to advance the interests of the Corporation by granting the Optionee an option to purchase shares of common stock of the Corporation (the "Common Stock"); NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree that as of the Grant Date, the Corporation hereby grants Optionee an option to purchase from it, upon the terms and conditions set forth in the Plan (a copy of which is attached hereto) and this Agreement, that number of shares of the authorized and unissued Common Stock of the Corporation as is set forth on Schedule A hereto. 1. Terms of Stock Option. The option to purchase Common Stock granted herein is subject to the terms, conditions, and covenants set forth in the Plan as well as the following: (a) This option shall constitute an Incentive Stock Option which is intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended; (b) The per share exercise price for the shares subject to this option shall be the 100% of the Fair Market Value (as defined in the Plan) of the Common Stock on the Grant Date, which exercise price is set forth on Schedule A hereto; (c) This option shall vest in accordance with the vesting schedule set forth on Schedule A hereto; and (d) No portion of this option may be exercised more than ten (10) years from the Grant Date. (e) This option shall immediately expire and be forfeited on July 1, 2000 unless the Corporation does one of the following by June 30, 2000: (1) the Corporation acquires ipx inc.; or (2) the Corporation launches its Internet protocol telephony strategy. The determination of whether either of the two foregoing events occurs shall be in the sole discretion of the Chief Executive Officer of the Corporation. 2. Payment of Exercise Price. The option may be exercised, in part or in whole, only by written request to the Corporation accompanied by payment of the exercise price in full either: (i) in cash for the shares with respect to which it is exercised; (ii) by delivering to the Corporation a notice of exercise with an irrevocable direction to a broker-dealer registered under the Securities Exchange Act of 1934, as amended, to sell a sufficient portion of the shares and deliver the sale proceeds directly to the Corporation to pay the exercise price; (iii) in the discretion of the Plan Administrator, through the delivery to the Corporation of previously-owned shares of Common Stock having an aggregate Fair Market Value equal to the option exercise price of the shares being purchased pursuant to the exercise of the Option; provided, however, that shares of Common Stock delivered in payment of the option price must have been held by the Optionee for at least six (6) months in order to be utilized to pay the option price; (iv) in the discretion of the Plan Administrator, through an election to have shares of Common Stock otherwise issuable to the Optionee withheld to pay the exercise price of such Option; or (v) in the discretion of the Plan Administrator, through any combination of the payment procedures set forth in Subsections (i) - (iv) of this paragraph. 3. Miscellaneous. (a) This Agreement and the options represented hereby may not be assigned or transferred in any manner except by will or by the laws of descent and distribution or pursuant to a domestic relations order. (b) This Agreement will be governed and interpreted in accordance with the laws of the State of Connecticut, and may be executed in more than one counterpart, each of which shall constitute an original document. (c) No alterations, amendments, changes or additions to this Agreement will be binding upon either the Corporation or Optionee unless reduced to writing and signed by both parties. 2 (d) All controversies or claims arising out of this Agreement shall be determined by binding arbitration, conducted at the Corporation's offices in Greenwich, Connecticut, or at such other location designated by the Corporation, before the American Arbitration Association. (e) No rule of construction requiring interpretation against the drafting party shall apply to the interpretation of this Agreement. (f) If any provision of this Agreement is held to be invalid, the remaining provisions shall remain in full force and effect. In witness whereof, the parties have executed this Agreement as of the Grant Date. CORPORATION: VDC COMMUNICATIONS, INC. By: /s/Frederick A. Moran --------------------- Frederick A. Moran Chief Executive Officer OPTIONEE: /s/ Charles W. Mulloy --------------------- Charles W. Mulloy 3 Charles W. Mulloy Optionee Schedule A 1. Grant Date: December 21, 1999 2. Number of Shares of Common Stock covered by the Option: 50,000 3. Exercise Price (100% of Fair Market Value of Common Stock on the Grant Date): $1.00 4. The Option shall vest in accordance with the following schedule: (i) 10,000 shares shall vest on the first anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from December 21, 1999 through December 20, 2000; (ii) 10,000 shares shall vest on the second anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from December 21, 1999 through December 20, 2001; (iii) 10,000 shares shall vest on the third anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from December 21, 1999 through December 20, 2002; (iv) 10,000 shares shall vest on the fourth anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from December 21, 1999 through December 20, 2003; and (v) 10,000 shares shall vest on the fifth anniversary of the Grant Date, provided Optionee remains continuously employed by the Corporation, or its subsidiaries, from December 21, 1999 through December 20, 2004. 4 EX-10.15 7 EX-10.15 RELEASE AGREEMENT ----------------- THIS RELEASE AGREEMENT (the "Agreement"), is made as of December 6, 1999 by and among ZIONS CREDIT CORPORATION, VDC COMMUNICATIONS, INC. AND VDC TELECOMMUNICATIONS, INC. RECITALS: --------- WHEREAS, the parties to this Agreement wish to resolve certain matters between them. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: 1. Payment. Contemporaneously with the delivery of this Agreement to Zions Credit Corporation ("Zions"), VDC Communications, Inc. ("VDC") and VDC Telecommunications, Inc. ("VDC Telecommunications") shall deliver to Zions an aggregate of TEN DOLLARS ($10.00). 2. Release and Certain Covenants. 2.1 Zions and all of its subsidiaries, affiliates, officers, directors, shareholders, agents, attorneys, representatives, predecessors, successors and assigns, do hereby fully and forever remise, release, acquit and forever discharge VDC, VDC Telecommunications and their parent corporations, subsidiaries, affiliates, predecessors, successors, assigns, and all of their present and former officers, directors, shareholders, employees, agents, representatives, attorneys, insurers, and all of the foregoing's present and former officers, directors, partners, principals, employees, shareholders, trustees, attorneys, insurers, and their respective spouses, successors, heirs, executors, estates, administrators, representatives, attorneys and agents (collectively, the "Released Parties"), from and against all claims, causes of action, demands, or suits of any kind, known or unknown, arising out of or related in any way to the Master Finance Lease by and between Zions, VDC Corporation Ltd. and VDC Telecommunications, dated November 3, 1998 (including an Equipment Schedule by and between Zions, VDC and VDC Telecommunications dated November 3, 1998) which Zions, its subsidiaries, affiliates, officers, directors, shareholders, agents, attorneys, representatives, predecessors, successors and/or assigns had, now have, or may in the future have whatsoever, in law or in equity or otherwise. 2.2 Zions for itself and each of its subsidiaries, affiliates, officers, directors, shareholders, agents, attorneys, representatives, predecessors, successors and assigns covenants and agrees that neither it, nor any person, organization or other entity on its or their behalf, will file, charge, claim, sue or cause or permit to be filed, charged or claimed Page 1 of 3 any action for legal or equitable relief (including damages, injunctive, declaratory, monetary or other relief) involving any matter within the scope of the Release in Section 2. 2.3 Zions for itself and each of its subsidiaries, affiliates, officers, directors, shareholders, agents, attorneys, representatives, predecessors, successors and assigns covenants and agrees that neither it, nor any person, organization or other entity on its or their behalf will provide any assistance or advisory services efforts (unless required by law or compelled by legal process) to any third parties in connection with any disputes, claims or legal proceedings between such third parties and the Released Parties, or any one of them. 2.4 Zions represents and warrants that: (1) the execution, delivery and performance of this Agreement are within the powers of Zions, have been duly authorized and will not constitute or result in a breach or default under, or conflict with, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking, to which Zions is a party or by which it is bound; this Agreement constitutes the legal, valid and binding obligation of Zions, enforceable in accordance with its terms; and (2) Zions has not sold, assigned, transferred, conveyed, or otherwise disposed of any of the claims within the scope of the Release in Section 2. 2.5 Zions shall indemnify and hold harmless the Released Parties, and each one of them, from and against all damages, expenses, costs and attorneys' fees which the Released Parties, or any one of them, may suffer or incur by reason of breach of any of the provisions of this Agreement or the inaccuracy of Section 2.4 hereof. 3. Miscellaneous. 3.1 If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 3.2 This Agreement may not be changed except in writing signed by the person(s) against whose interest such change shall operate. 3.3 This Agreement shall be construed in accordance with the laws of the State of Connecticut. Zions acknowledges that it has read this Agreement and has received the advice of counsel with respect hereto. 3.4 This Agreement may be executed by facsimile signature. Page 2 of 3 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. Sworn and Subscribed to ZIONS CREDIT CORPORATION before me this 6th day of December, 1999. By:/s/Norman Weldon ------------------- Signature Norman Weldon ------------- Print Name /s/ unreadable - -------------- Notary Public VP ------------- Title Sworn and Subscribed to VDC COMMUNICATIONS, INC. before me this 6th day of December, 1999. By:/s/ Frederick A. Moran ---------------------- Frederick A. Moran Chairman & CEO /s/ Joan Moran - -------------- Notary Public Sworn and Subscribed to VDC TELECOMMUNICATIONS, INC. before me this 6th day of December, 1999 By:/s/ Frederick A. Moran ---------------------- Frederick A. Moran President /s/ Joan Moran - -------------- Notary Public Page 3 of 3 EX-10.16 8 EX-10.16 Lease No: 7750 ------------------------ Lease Date: November 3, 1998 ---------------------- Schedule No.: 1 -------------------- Schedule Date: November 3, 1998 ------------------- ASSUMPTION AGREEMENT This Assumption Agreement is made between ZIONS CREDIT CORPORATION ("Lessor"), VDC Communications, Inc. and VDC Telecommunications, Inc. as Co-Lessees ("Lessee"), and Wang Communications, Inc. dba West Comm ("Assignee"), and is ALSO considered as an amendment to Equipment Schedule No. 1 to the Master Lease No. 7750, entered into by Lessor and Lessee on November 3, 1998. WHEREAS, Lessee wishes to assign its interest in the Lease to Assignee, in consideration of the terms thereof, the parties mutually agree as follows: 1. Lessee hereby assigns and transfers to Assignee all its right, title, and interest as Lessee in the above described Lease. 2. Assignee hereby assumes all of the obligations of Lessee under said Lease and agrees to make payments of rental thereunder when due and to perform promptly all of the covenants, conditions, and stipulations contained therein. 3. This assignment shall relieve Lessee from all of its obligations under said Lease. 4. Assignee hereby assumes the following payment schedule beginning with the January 23, 2000 payment:
Due Date No. of Payments Rent Use Tax Total -------- --------------- ---- ------- ----- 23rd 30@ $16,766.10 $1,342.09 $18,118.19
Notices shall be sent to Assignee addressed as follows: Wang Communications, Inc. 4155 E. Jewell Avenue, Suite 912 Denver, CO 80222 ZIONS CREDIT CORPORATION Lessor By: /s/ Norman Weldon ----------------------------------- Norman Weldon Title: Vice President -------------------------------- Date: December 20, 1999 --------------------------------- Wang Communications, Inc. dba West Comm. VDC Communications, Inc. and VDC Assignee Telecommunications, Inc. as Co-Lessees By: /s/ Paul Wang Lessee --------------------------- By: /s/ Frederick A. Moran Paul Wang ----------------------------------- Frederick A. Moran Title: President & C.E.O. ------------------------ Title: Chairman & C.E.O./President -------------------------------- Date: December 13, 1999 ------------------------- Date: December 10, 1999 --------------------------------- IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of this day of , 19 . -------------------------------------- Secretary STATE OF COLORADO CITY & COUNTY OF DENVER The foregoing was acknowledged before me this 13th day of December, 1999, by Paul Wang. My commission expires November 18, 2000. /s/ Eloise Anne Burchett -------------------------------------- Notary Public EX-27 9 FDS --
5 This schedule contains Summary Financial information extracted from the financial statements for the three months ended December 31, 1999 and is qualified in its entirety by reference to such statements. 1000 3-MOS JUN-30-2000 DEC-31-1999 1313 57 1664 262 0 2950 4985 1062 9617 3136 841 0 0 2 5865 9617 2204 2204 2277 2277 0 255 92 (692) 0 (692) 0 0 0 (692) (0.03) (0.03)
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