EXHIBIT 10.17
ORGANIZATION AGREEMENT
This Organization Agreement is entered into this 10th day of May, 1996 by
and among Intellicall, Inc., a Delaware corporation ("Intellicall"), Triad-ILD
Partners, L.P, a Georgia limited partnership ("Triad"), ▇▇▇▇▇▇
Telecommunications LLC, a Georgia limited liability company ("▇▇▇▇▇▇") and ILD
Communications, Inc., a Delaware corporation ("ILD").
WHEREAS, Intellicall is in the business, principally through its
wholly-owned subsidiary, Intellicall Operator Services, Inc., a Delaware
corporation ("IOS"), of providing long distance and operator assisted telephone
services (the "Business"); and
WHEREAS, the parties have formed ILD as a new company for the purpose of
acquiring IOS and raising additional capital to (i) pay the cash portion of the
Consideration (as hereinafter defined) to Intellicall and (ii) fund ILD's
initial working capital requirements; and
WHEREAS, the parties desire to set forth their understanding herein
regarding the establishment of ILD, the acquisition of IOS and the initial
capitalization and funding of ILD;
NOW, THEREFORE, for and in consideration of the mutual understandings and
covenants contained herein, the parties hereto agree as follows:
ARTICLE 1
ESTABLISHMENT OF ILD
1.1 ESTABLISHMENT OF ILD. Intellicall and Triad have caused the
establishment and incorporation of ILD as a Delaware corporation. ILD has an
initial capital structure of 300,000 shares of common stock, $.01 par value (the
"Common Stock") and 200,000 shares of preferred stock, $.01 par value (the
"Preferred Stock"), which Preferred Stock shall be issued in one or more series
as contemplated in this Agreement or as determined in accordance with the
General Corporation Law of the State of Delaware.
1.2 INITIAL STOCK ISSUANCES. The initial Common Stock of ILD shall be
issued as follows:
NAME NUMBER OF SHARES
---- ----------------
Intellicall......................................... 725
Triad............................................... 183
▇▇▇▇▇▇.............................................. 92
The parties shall pay $10.00 per share for the initially issued Common
Stock, which Common Stock upon issuance will be fully paid and non-assessable.
1.3 DIRECTORS AND OFFICERS. The directors and officers of ILD as of the
Closing Date shall be as follows:
NAME OFFICE
---- ------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇.................. Director
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇....................... Director
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇........................ Director
H. ▇▇▇▇▇▇ ▇▇▇▇▇▇........................ Director
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇..................... Director
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇........................ Chairman of the Board,
Chief Executive Officer,
and President
C. Read ▇▇▇▇▇▇.......................... Secretary
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From and after the Closing Date all directors and officers of ILD shall be
elected in accordance with the Certificate of Incorporation and Bylaws of ILD
subject to any provisions related thereto in the Shareholders Agreement
described in Section 8.3.
ARTICLE 2
CAPITALIZATION OF ILD
2.1 CONTRIBUTION OF THE BUSINESS. On the Closing Date (as hereinafter
defined) and upon satisfaction of the conditions precedent set forth in
Article 7 hereof, Intellicall shall contribute, transfer, sell and assign to ILD
one hundred (100) shares of common stock of IOS constituting all of the issued
and outstanding capital stock of IOS. Immediately prior to the Closing Date
Intellicall (i) shall have transferred to IOS all of Intellicall's rights and
obligations under those certain contracts and agreements relating to the
provision by Intellicall of long distance services through Sprint Communications
Company L.P. as more specifically identified on SCHEDULE "2.1A" attached hereto
and any other contracts relating to the Business (the "Contracts"), and
(ii) shall have caused IOS to distribute to Intellicall all cash, accounts
receivable and payables arising as a result of the operation of the Business
prior to the Closing Date. Intellicall agrees that it will be responsible for
all accounts payable of IOS generated as a result of the operation of the
Business prior to the Closing Date.
Notwithstanding any provision contained herein to the contrary Intellicall
is not selling, assigning or transferring any of its right, title and interest
in and to any of Intellicall's tradenames, trademarks, servicenames,
servicemarks or copyrights.
2.2 COLLECTION OF ACCOUNTS RECEIVABLE. As contemplated in Section 2.1
Intellicall is to retain all accounts receivable arising as a result of the
operation of the Business prior to the Closing Date (herein, "Retained Accounts
Receivable") and shall be responsible for payment of all accounts payable of IOS
generated as a result of the operation of the business prior to the Closing Date
(herein, "Retained Accounts Payable").
In the event ILD or IOS collects after the Closing Date any amounts, in the
form of cash, checks, wire transfers, offsets, deductions or otherwise,
comprising Retained Accounts Receivable, ILD or IOS shall promptly remit all
such amounts to Intellicall; provided, however, ILD or IOS, as applicable, may
hold for the benefit of Intellicall any such amounts less than $1,000 until such
amounts shall aggregate $1,000 or more at which time they shall be promptly
remitted. In the event Intellicall collects after the Closing Date any amounts
of IOS or ILD not representing Retained Accounts Receivable, Intellicall agrees
to promptly remit all such amounts to IOS subject to the same dollar
considerations set forth in the preceding sentence.
In the event ILD or IOS shall receive invoices from third parties from and
after the Closing Date representing Retained Accounts Payable, ILD shall forward
such invoices to Intellicall for payment in the ordinary course of business.
2.3 CONSIDERATION. A.) The consideration (the "Consideration") to be paid
to Intellicall at the Closing shall be the following: (i) ILD will pay
Intellicall $2,000,000 in cash by wire transfer to an account designated in
writing by Intellicall; (ii) ILD will issue and deliver to Intellicall 72,500
shares of Series A Preferred Stock (the "Series A Preferred Stock") at a deemed
issue price of $72.627 per share which Series A Preferred Stock will contain the
powers, preferences and relative rights, qualifications, limitations and
restrictions as set forth on EXHIBIT "2.3A" attached hereto; (iii) ILD will
issue and deliver to Intellicall 5,000 shares of Series B Preferred Stock at a
deemed issue price of $100 per share which Series B Preferred Stock will contain
the powers, preferences and relative rights, qualifications, limitations and
restrictions as set forth on EXHIBIT "2.3B" attached hereto; and (iv) ILD will
execute and deliver to Intellicall a subordinated convertible note (the "Junior
Note") in the original principal amount of $1,000,000, such junior convertible
note to be substantially in the form attached hereto as
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EXHIBIT "2.3C". The shares of Series A Preferred Stock and Series B Preferred
Stock to be issued under this Section 2.3 will be, upon issuance, fully paid and
non-assessable.
B.) In addition to the Consideration as contemplated in subsection 2.3(a)
above, on the Closing Date ILD will pay to Intellicall such amounts as set forth
on SCHEDULE "2.3D" as reimbursements for performance bonds previously posted by
Intellicall for IOS for the operations of IOS in the states as set forth on such
SCHEDULE "2.3D".
2.4 EQUITY FINANCING ACTIVITIES. On the Closing Date and upon satisfaction
of the conditions precedent set forth in Article 8 hereof, Triad and ▇▇▇▇▇▇
shall collectively (i) purchase from ILD 27,500 shares of Series A Preferred
Stock at a purchase price of $72.627 per share or $1,997,250 in the aggregate
and (ii) loan $1,000,000 in exchange for the execution and delivery to Triad and
▇▇▇▇▇▇ of two Junior Notes in the aggregate original principal amount of
$1,000,000. The Junior Notes to be delivered to Triad and ▇▇▇▇▇▇ shall contain
the same terms and conditions as the Junior Note to be delivered to Intellicall
pursuant to Section 2.3 above. The amounts purchased and loaned, respectively,
by Triad and ▇▇▇▇▇▇ are set forth on SCHEDULE 2.4 hereto.
2.5 THIRD PARTY FINANCING ACTIVITIES. The parties anticipate that on the
Closing Date Sirrom Capital Corporation and ▇▇▇▇▇ River Ventures, L.P.
(collectively, "Sirrom") will loan $2,000,000 (the "Loan") to ILD effective as
of the Closing Date. The Loan will be on terms and conditions acceptable to
Intellicall and Triad. The proceeds of the Loan will be utilized to pay the cash
portion of the Consideration to Intellicall. The parties hereto agree to use
their collective best efforts to cause ILD to repay the Loan on or prior to
April 30, 1999.
2.6 INSTRUMENTS OF TRANSFER. The sale, conveyance, transfer, assignment
and delivery of the common stock of IOS from Intellicall to ILD, as provided in
Section 2.1 above, shall be effected by delivery to ILD on the Closing Date of
such bills of sale, endorsements, assignments, certificates or other instruments
of transfer and conveyance as counsel to Intellicall and Triad shall reasonably
deem necessary to vest in ILD good and marketable title to such common stock of
IOS. Such instruments of transfer and conveyance shall be in form reasonably
satisfactory to Intellicall and Triad and their respective counsel and shall
contain warranties as to marketable title and that such Common Stock free and
clear of all pledges, liens, options, security interests, mortgages, claims,
charges or other encumbrances of any kind whatsoever.
2.7 TRANSFER TAXES. Any and all transfer, stamp, recording and other taxes
(other than income taxes) payable upon or in connection with the sale, transfer,
conveyance, assignment and transfer of the hereunder or the instruments of
transfer in conveyance with utilized in connection therewith and the issuance
and delivery of the Series A Preferred Stock, the Series B Preferred Stock, the
junior convertible notes and the Loan shall be paid by ILD.
2.8 FURTHER ASSURANCES. After the Closing (as hereinafter defined)
Intellicall, Triad and ▇▇▇▇▇▇ shall take such other actions and execute and
deliver such other documents, and shall cause ILD to take such other actions and
execute and deliver such other documents, as may be reasonably requested by any
party hereto from time to time to effectuate, facilitate and confirm the
implementation of the agreements and covenants contemplated herein.
2.9 EXPENSES. The parties acknowledge that certain legal, accounting or
other expenses or fees have been incurred in connection with the transactions
contemplated by this Agreement. A description of certain of such expenses or
fees are set forth on SCHEDULE "2.9" hereto. Each of ILD, Intellicall, Triad and
▇▇▇▇▇▇ agree that except for the items described as "Shareholder Expenses" set
forth on SCHEDULE "2.9", all expenses and fees incident to the organization of
ILD and the transactions contemplated by this Agreement shall be paid for, or
reimbursed by, ILD in the normal course of its business.
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2.10 RECAPITALIZATION OF ILD BASED ON SIRROM WARRANTS. In connection with
the loan from Sirrom described in Section 2.5 hereof, it is contemplated that
ILD will issue to Sirrom certain warrants (the "Sirrom Warrants") for an
aggregate of 7,239 shares of Common Stock of ILD. In the event that Sirrom
Warrants are exercised on their terms by the holders thereof then Intellicall
shall return to ILD for redemption at a redemption price of $.01 per share that
number of the shares of Series A Preferred Stock which are convertible into such
number of shares of Common Stock exercised by the holders of the Sirrom Warrant
(or if such shares of Series A Preferred Stock have been converted by
Intellicall into shares of Common Stock, then the shares of Common Stock thereby
issued upon such conversion); provided, however, such number shall not exceed
7,239 shares of Common Stock. Intellicall agrees that the certificate
representing 7,239 shares of Series A Preferred Stock to be issued to
Intellicall shall bear a legend satisfactory to ILD and Intellicall representing
the redemption right contained herein.
ARTICLE 3
CLOSING
3.1 TIME AND PLACE. The closing hereunder (the "Closing") shall be held
via exchange of documents through overnight carriers and shall be deemed
effective as of May 10, 1996 at 2:00 p.m. local time (Atlanta), or at such other
time and place as the parties may agree upon in writing (the "Closing Date").
3.2 DELIVERIES OF INTELLICALL. At the Closing Intellicall will execute and
deliver or cause to be executed and delivered to ILD: (a) certificate or
certificates representing the shares of common stock of IOS endorsed over to ILD
or accompanied by duly executed stock powers; (b) a certificate of good standing
dated not more than fifteen (15) days prior to the Closing Date, with respect to
IOS; (c) a release and all appropriate UCC-3 termination statements from Nomura
America Holding Company, Inc. ("Nomura") relating to a release of Nomura's
security interest in and to the common stock of IOS; (d) all of the minute books
and similar corporate records of IOS; (e) an opinion of counsel in substantially
the form as set forth on EXHIBIT "3.2A"; (f) executed copies of all the
documents constituting Exhibits hereto which contemplate the signature of
Intellicall or IOS; and (g) such other documents and instruments as Triad and
ILD shall deem necessary to consummate the transactions contemplated hereby.
3.3 DELIVERIES OF ILD. At the Closing ILD will deliver to Intellicall
simultaneously with the delivery of the items referred to in Section 3.2 above:
(a) bank wire transfer of the cash portion of the Consideration as provided in
Section 2.3(i); (b) one or more certificates representing 72,500 shares of
Series A Preferred Stock as contemplated in Section 2.3(ii); (c) one or more
certificates representing 5,000 shares of Series B Preferred Stock as
contemplated in Section 2.3(iii); (d) one or more certificates representing 725
shares of Common Stock as contemplated in Section 1.2, (e) the Junior Note in
the original principal amount of $1,000,000 as contemplated in Section 2.3(iv);
and (f) such other documents and instruments as Intellicall shall deem necessary
to consummate the transactions contemplated hereby. Additionally, at the Closing
ILD will deliver to Triad and ▇▇▇▇▇▇ simultaneously with the delivery of the
items referred to in Section 3.2 above (x) one or more certificates representing
275 shares of Common Stock as contemplated in Section 1.2 and an aggregate of
27,500 shares of Series A Preferred Stock as contemplated in Section
2.4(i) against receipt of an aggregate of $2,000,000; and (y) one or more Junior
Notes in the aggregate principal amount of $1,000,000 as contemplated in Section
2.4(ii) against receipt of an aggregate of $1,000,000. ILD shall also deliver to
Sirrom such agreements, promissory notes, warrants, documents and instruments as
may be necessary or advisable in connection with obtaining the Loan as
contemplated in Section 2.5.
3.4 DELIVERIES OF TRIAD OR ▇▇▇▇▇▇. At the Closing Triad and ▇▇▇▇▇▇ shall
fund the payments contemplated in Sections 1.2 and 2.4 hereof and will execute
or cause to be executed and
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delivered to ILD: (a) executed copies of all the documents constituting Exhibits
hereto which contemplate the signature of Triad or ▇▇▇▇▇▇ and (b) such other
documents as Intellicall or ILD shall deem necessary to consummate the
transactions contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF INTELLICALL
Intellicall represents and warrants to Triad, ▇▇▇▇▇▇ and ILD as follows:
4.1 CORPORATE STATUS. Each of Intellicall and IOS are corporations duly
organized, validly existing and in good standing under the laws of the state of
Delaware and has all necessary corporate power and authority to carry on its
business as now conducted and to own or lease and operate its properties, and to
execute, deliver and perform its obligations hereunder. Each of Intellicall and
IOS are duly qualified to do business in all jurisdictions in which the nature
of its business or the ownership or leasing of property requires such
qualification in order to avoid any material disadvantage or liability.
4.2 AUTHORITY FOR AGREEMENT. This Agreement constitutes the valid and
legally binding obligation of Intellicall. Intellicall's execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary action on the part of the board of
directors of Intellicall and will not conflict with or result in any violation
of or default under any provisions of the certificate of incorporation or bylaws
of Intellicall and, except as set forth on SCHEDULE "4.2", will not conflict
with or result in any violation of or default with respect to any mortgage,
indenture, lease, agreement or other instrument affecting the common stock of
IOS, or to which Intellicall, or any of its affiliates, is a party, or by which
Intellicall or any of its affiliates is bound. No consent, approval, order or
authorization of, or registration, declaration or filing with, any persons or
entities, or with any governmental authority is required in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby by Intellicall or its affiliates, except (i) such approvals
or filings listed on SCHEDULE "4.2" hereto, (ii) such disclosures, filings,
statements and reports to be made by Intellicall under the Securities Exchange
Act of 1934, and (iii) such other consents, authorizations, filings, approvals
and registrations which if not obtained or made would not have a material
adverse effect on ILD or the Business or Intellicall's ability to consummate the
transactions hereunder.
4.3 PROPERTIES. Except as set forth in SCHEDULE "4.3" hereto, Intellicall
has good, valid and marketable title to the common stock of IOS subject to no
liens, encumbrances, security interests or mortgages. Except as set forth in
SCHEDULE "4.3", the legal and beneficial interests in the common stock of IOS is
owned exclusively by Intellicall. After the transfer of the Contracts as
contemplated in Section 2.1, IOS shall have all contracts and agreements with
third parties necessary for IOS to operate the Business (except to the extent of
services to be provided by Intellicall in the Operating Agreement described in
Section 7.6 hereof). The transfer of any such Contracts from Intellicall to IOS
as contemplated in Section 2.1 will not violate the terms of, or cause a default
under, any such Contracts except any such default that will not materially
affect the Business.
4.4 LITIGATION. There are no claims or judicial or administrative actions,
suits, judgments, proceedings or investigations pending or threatened against
Intellicall which might result in any material adverse change in the financial
condition, properties, assets, business or operations of Intellicall, or which
might interfere with any part of the business currently conducted by
Intellicall, or which question the validity of this Agreement or of any action
taken or to be taken pursuant to or in connection with the provisions of this
Agreement including the exhibits hereto.
4.5 BROKERS, FINDERS, ETC. All negotiations relating to this Agreement and
the transactions contemplated hereby (as they affect Intellicall and ILD) have
been carried on by Intellicall
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with representatives of Triad, ▇▇▇▇▇▇ and Sirrom without the intervention of any
person (other than as disclosed on SCHEDULE "4.5") acting on behalf of
Intellicall in such manner as to give rise to any valid claim against Triad or
ILD for any brokerage or finder's commission, fee or similar compensation.
4.6 OPERATING FEES. To the best knowledge of Intellicall, IOS has paid or
Intellicall has paid on behalf of IOS all fees and complied with all written
orders imposed on IOS by the public service commission of any state to whose
jurisdiction it is subject. IOS has paid or Intellicall has paid on behalf of
IOS all charges, fees, tariff rates, access charges and other amounts billed to
it by long distance suppliers due in the normal course of business, and, to the
best of Intellicall's knowledge, there does not exist any liability for back
billing for any such charges, other than for access charges which such long
distance suppliers are entitled to ▇▇▇▇ for but have not billed for.
4.7 NO LIABILITIES. As of the Closing, except its obligations as
co-borrower for the Loan described in Section 2.5 or in connection with certain
regulatory approvals in connection with the transactions contemplated by this
Agreement, IOS shall have no liabilities, obligations and indebtedness of any
kind and nature, including, without limitation, any obligations to trade
creditors, whether heretofore, now or hereafter owing, arising, due or payable
from IOS to any third party or and howsoever, now or hereafter owing, arising,
due or payable from IOS to any third party or and howsoever evidenced, created,
incurred, acquired or owing, whether primary, secondary, direct, contingent,
fixed, or otherwise. Without in any way limiting the generality of the
foregoing, obligations specifically include the following: (a) all obligations
or liabilities of any third party that are secured by any lien, claim,
encumbrance, or security interest upon property owned by IOS, even though IOS
has not assumed or become liable for the payment thereof; (b) any obligations or
liabilities created or arising under any lease of real or personal property, or
conditional sale under any lease of real or personal property, or conditional
sale or other title retention agreement with respect to property used and/or
acquired by IOS, even though the rights and remedies of the lessor, seller
and/or lender thereunder are limited to repossession of such property; (c) any
unfunded pension fund obligations and liabilities; and (d) any taxes.
4.8 CUSTOMERS. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, (i) the
proposed business relationship of IOS with any customer or group of customers of
the Business constituting, either individually or in the aggregate 1% of the
revenues of the Business, or (ii) the proposed business relationship of IOS with
any material supplier to the Business, including, without limitation, the long
distance suppliers, and Intellicall reasonably anticipates that all such
customers and suppliers will continue a business relationship with IOS on a
basis no less favorable to IOS than that heretofore conducted with Intellicall;
and there exists no other condition or state of facts or circumstances which
would materially adversely affect the businesses of IOS or prevent IOS from
conducting its businesses after the consummation of the transactions
contemplated by this Agreement.
4.9 INVESTMENT REPRESENTATIONS. In connection with the acquisition of the
Series A Preferred Stock, the Series B Preferred Stock and the Junior Note,
Intellicall represents and warrants that the Common Stock, the Series A
Preferred Stock, the Series B Preferred Stock and the Junior Note are being
purchased for investment purposes only and not with a view to distribution or
other transfer and will be held for its own individual account. Further, it is
understood that such Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock and the Junior Note have not been registered under the Federal
Securities Act of 1933, as amended (the "1933 Act"), or under the state
securities acts or blue sky laws and regulations of the State of Delaware or any
other State (collectively, the "State Securities Laws"), in reliance upon
exemption from registration contained in those acts. Intellicall acknowledges
that ILD's reliance upon such exemptions is based in part on the
representations, warranties, and agreements of Intellicall contained in this
Agreement. Intellicall acknowledges and agrees that it may not sell, transfer,
assign or otherwise dispose of the Common Stock, the Series A Preferred Stock,
the Series B Preferred Stock or the Junior Note unless there is in
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effect a registration statement under the 1933 Act and all applicable state
securities laws covering such transfer or unless such transfer is exempt from
the registration requirements of the 1933 Act and all applicable State
Securities Laws and subject to certain transfer restrictions in the Shareholders
Agreement described in Section 8.3.
It is further agreed and understood by Intellicall that stop-transfer
instructions will be noted on the appropriate records of ILD and that a
restrictive legend shall be affixed to the Common Stock, the Series A Preferred
Stock, the Series B Preferred Stock and the Junior Note, reading as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER ANY SECURITIES LAWS IN RELIANCE OF EXEMPTION(S) THEREFROM AND THE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH TRANSFER OR SALE IS
MADE IN COMPLIANCE WITH ALL FEDERAL AND APPLICABLE STATE SECURITIES LAWS.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE HELD SUBJECT TO, AND
THEIR TRANSFER IS RESTRICTED UNDER, THE TERMS OF A SHAREHOLDERS' AGREEMENT
DATED AS OF MAY , 1996 BY AND AMONG THE CORPORATION AND CERTAIN OF ITS
SHAREHOLDERS, A COPY OF WHICH IS ON FILE AND IS AVAILABLE FOR INSPECTION AT
THE PRINCIPAL OFFICE OF THE CORPORATION.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF TRIAD
Triad represents and warrants to Intellicall, ▇▇▇▇▇▇ and ILD as follows:
5.1 CORPORATE STATUS. Triad is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of Georgia.
Triad has full power and authority to execute and deliver this Agreement on
Triad's behalf and to perform its obligations hereunder.
5.2 AUTHORITY FOR AGREEMENT. Triad has all necessary power and authority
to execute and deliver this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the
partnership agreement, and the Board of Directors of the general partner, of
Triad. No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental authority is required in connection
with the execution and delivery of this Agreement or the consummation by Triad
of the transactions contemplated hereby or thereby.
5.3 BROKERS, FINDERS, ETC. All negotiations relating to this Agreement and
the transactions contemplated hereby (as they affect Triad and ILD) have been
carried on by Triad without the intervention of any person (other than as
disclosed on SCHEDULE "4.5") acting on behalf of Triad in such manner as to give
rise to any valid claim against Intellicall or ILD for any brokerage or finder's
commission, fee or similar compensation.
5.4 LITIGATION. There are no judicial or administrative actions, suits,
proceedings or investigations pending against Triad which question the validity
of this Agreement or of any action taken pursuant to or in connection with the
provisions of this Agreement.
5.5 INVESTMENT REPRESENTATIONS. In connection with the acquisition of the
Common Stock, the Series A Preferred Stock and the Junior Note, Triad represents
and warrants that the Common Stock, the Series A Preferred Stock and the Junior
Note are being purchased for investment purposes only and not with a view to
distribution or other transfer and will be held for its own individual account.
Further, it is understood that such Common Stock, the Series A Preferred Stock
and the Junior Note have not been registered under the Federal Securities Act of
1933, as amended
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(the "1933 Act"), or under the State Securities Laws, in reliance upon exemption
from registration contained in those acts. Triad acknowledges that ILD's
reliance upon such exemptions is based in part on the representations,
warranties, and agreements of Triad contained in this Agreement. Triad
acknowledges and agrees that it may not sell, transfer, assign or otherwise
dispose of the Common Stock, the Series A Preferred Stock or the Junior Note
unless there is in effect a registration statement under the 1933 Act and all
applicable state securities laws covering such transfer or unless such transfer
is exempt from the registration requirements of the 1933 Act and all applicable
State Securities Laws.
Triad further represents and warrants to ILD that ILD has made available to
Triad, prior to the date hereof, the opportunity to ask questions of and to
receive answers from representatives of ILD and Intellicall and to obtain any
additional information to the extent ILD or Intellicall possesses such
information or could acquire it without unreasonable effort or expense: (i)
relative to ILD and an investment in the Common Stock, the Series A Preferred
Stock and the Junior Note; and (ii) necessary to verify the accuracy of any
information, documents, books or records furnished. All such materials and
information requested by Triad, including any information requested to verify
any information furnished, has been made available and examined.
Triad further represents and warrants to ILD that Triad, together with such
other persons, if any, with whom Triad has found it necessary to consult, has
sufficient knowledge and experience in business and financial matters to
evaluate ILD, and the risk of an investment in the Series A Preferred Stock and
the Junior Note, without need for the additional information which would be
required to be included in a registration statement effective under the 1933 Act
or any other applicable State Securities Laws.
Triad further represents and warrants to ILD that Triad's investment in the
Common Stock, the Series A Preferred Stock and the Junior Note shall be in
accord with the nature and size of Triad's investments and net worth, and Triad
is and shall be financially able to bear the economic risk of its investment,
including the ability to afford holding the Series A Preferred Stock and the
Junior Note for an indefinite period or to afford a complete loss of Triad's
investment therein. Triad has sufficient liquid assets to pay the fully purchase
price of the Series A Preferred Stock and the Junior Note.
It is further agreed and understood by Triad that stop-transfer instructions
will be noted on the appropriate records of ILD and that a restrictive legend
shall be affixed to each Common Stock, the Series A Preferred Stock and the
Junior Note purchased in accordance with this Agreement, reading as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
ANY SECURITIES LAWS IN RELIANCE OF EXEMPTION(S) THEREFROM AND THE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH TRANSFER OR SALE IS
MADE IN COMPLIANCE WITH ALL FEDERAL AND APPLICABLE STATE SECURITIES LAWS.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE HELD SUBJECT TO,
AND THEIR TRANSFER IS RESTRICTED UNDER, THE TERMS OF A SHAREHOLDERS'
AGREEMENT DATED AS OF MAY , 1996 BY AND AMONG THE CORPORATION AND
CERTAIN OF ITS SHAREHOLDERS, A COPY OF WHICH IS ON FILE AND IS AVAILABLE
FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE CORPORATION.
8
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
▇▇▇▇▇▇ represents and warrants to Intellicall, Triad and ILD as follows:
6.1 CORPORATE STATUS. ▇▇▇▇▇▇ is a limited liability corporation duly
organized, validly existing and in good standing under the laws of the State of
Georgia. ▇▇▇▇▇▇ has full power and authority to execute and deliver this
Agreement on ▇▇▇▇▇▇' behalf and to perform its obligations hereunder.
6.2 AUTHORITY FOR AGREEMENT. ▇▇▇▇▇▇ has all necessary power and authority
to execute and deliver this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by the Manager
and Members of ▇▇▇▇▇▇. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental authority is required
in connection with the execution and delivery of this Agreement or the
consummation by ▇▇▇▇▇▇ of the transactions contemplated hereby or thereby.
6.3 BROKERS, FINDERS, ETC. All negotiations relating to this Agreement and
the transactions contemplated hereby (as they affect ▇▇▇▇▇▇ and ILD) have been
carried on by ▇▇▇▇▇▇ without the intervention of any person (other than as
disclosed on SCHEDULE "4.5") acting on behalf of ▇▇▇▇▇▇ in such manner as to
give rise to any valid claim against Intellicall or ILD for any brokerage or
finder's commission, fee or similar compensation.
6.4 LITIGATION. There are no judicial or administrative actions, suits,
proceedings or investigations pending against ▇▇▇▇▇▇ which question the validity
of this Agreement or of any action taken pursuant to or in connection with the
provisions of this Agreement.
6.5 INVESTMENT REPRESENTATION. In connection with the acquisition of the
Common Stock, the Series A Preferred Stock and the Junior Note, ▇▇▇▇▇▇
represents and warrants that the Common Stock, the Series A Preferred Stock and
the Junior Note are being purchased for investment purposes only and not with a
view to distribution or other transfer and will be held for its own individual
account. Further, it is understood that such Common Stock, the Series A
Preferred Stock and the Junior Note have not been registered under the Federal
Securities Act of 1933, as amended (the "1933 Act"), or under the State
Securities Laws, in reliance upon exemption from registration contained in those
acts. ▇▇▇▇▇▇ acknowledges that ILD's reliance upon such exemptions is based in
part on the representations, warranties, and agreements of ▇▇▇▇▇▇ contained in
this Agreement. ▇▇▇▇▇▇ acknowledges and agrees that it may not sell, transfer,
assign or otherwise dispose of the Common Stock, the Series A Preferred Stock or
the Junior Note unless there is in effect a registration statement under the
1933 Act and all applicable state securities laws covering such transfer or
unless such transfer is exempt from the registration requirements of the 1933
Act and all applicable State Securities Laws.
▇▇▇▇▇▇ further represents and warrants to ILD that ILD has made available to
▇▇▇▇▇▇, prior to the date hereof, the opportunity to ask questions of and to
receive answers from representatives of ILD and Intellicall and to obtain any
additional information to the extent ILD or Intellicall possesses such
information or could acquire it without unreasonable effort or expense: (i)
relative to ILD and an investment in the Common Stock, the Series A Preferred
Stock and the Junior Note; and (ii) necessary to verify the accuracy of any
information, documents, books or records furnished. All such materials and
information requested by ▇▇▇▇▇▇, including any information requested to verify
any information furnished, has been made available and examined.
▇▇▇▇▇▇ further represents and warrants to ILD that ▇▇▇▇▇▇, together with
such other persons, if any, with whom ▇▇▇▇▇▇ has found it necessary to consult,
has sufficient knowledge and experience in business and financial matters to
evaluate ILD, and the risk of an investment in the Common Stock,
9
the Series A Preferred Stock and the Junior Note, without need for the
additional information which would be required to be included in a registration
statement effective under the 1933 Act or any other applicable State Securities
Laws.
▇▇▇▇▇▇ further represents and warrants to ILD that ▇▇▇▇▇▇' investment in the
Common Stock, the Series A Preferred Stock and the Junior Note shall be in
accord with the nature and size of ▇▇▇▇▇▇' investments and net worth, and ▇▇▇▇▇▇
is and shall be financially able to bear the economic risk of its investment,
including the ability to afford holding the Series A Preferred Stock and the
Junior Note for an indefinite period or to afford a complete loss of ▇▇▇▇▇▇'
investment therein. ▇▇▇▇▇▇ has sufficient liquid assets to pay the fully
purchase price of the Series A Preferred Stock and the Junior Note.
It is further agreed and understood by ▇▇▇▇▇▇ that stop-transfer
instructions will be noted on the appropriate records of ILD and that a
restrictive legend shall be affixed to each Common Stock, the Series A Preferred
Stock and the Junior Note purchased in accordance with this Agreement, reading
as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
ANY SECURITIES LAWS IN RELIANCE OF EXEMPTION(S) THEREFROM AND THE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH TRANSFER OR SALE IS
MADE IN COMPLIANCE WITH ALL FEDERAL AND APPLICABLE STATE SECURITIES LAWS.
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE HELD SUBJECT TO,
AND THEIR TRANSFER IS RESTRICTED UNDER, THE TERMS OF A SHAREHOLDERS'
AGREEMENT DATED AS OF MAY , 1996 BY AND AMONG THE CORPORATION AND
CERTAIN OF ITS SHAREHOLDERS, A COPY OF WHICH IS ON FILE AND IS AVAILABLE
FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE CORPORATION.
ARTICLE 7
CONDITIONS PRECEDENT TO INTELLICALL'S OBLIGATIONS
All obligations of Intellicall under this Agreement are subject to the
fulfillment to the reasonable satisfaction of Intellicall prior to or at the
Closing of each of the following conditions, any of which may be waived in
writing by Intellicall:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Triad and ▇▇▇▇▇▇ in this Agreement, or in any exhibit, schedule,
statement, list or certificate furnished pursuant hereto, shall be true and
correct when made and shall be true and correct at and as of the time of the
Closing.
7.2 PERFORMANCE BY OTHERS. Triad and ▇▇▇▇▇▇ shall have performed and
complied with all agreements, conditions and covenants required by this
Agreement including the exhibits and schedules hereto to be performed or
complied with by it prior to or at the Closing.
7.3 CLAIMS, ETC. There shall not have been instituted or threatened in
writing any claim, suit, action, proceeding or investigation against or
involving Intellicall, Triad, ▇▇▇▇▇▇ or ILD, the outcome of which would, in
Intellicall's judgment, have a material and adverse effect on the common stock
of IOS or the ability of the ILD to consummate the transactions contemplated by
this Agreement or to continue as an ongoing profitable enterprise, or
threatening the legality, validity or enforceability of this Agreement.
7.4 FULFILLMENT OF FINANCING OBLIGATIONS. Triad and ▇▇▇▇▇▇ shall have
funded the amounts as contemplated by Section 2.4 of this Agreement.
Furthermore, Sirrom shall have funded the
10
Loan in the original principal amount of $2,000,000 as contemplated in Section
2.5 of this Agreement all on terms and conditions satisfactory to Intellicall.
7.5 NOMURA APPROVAL. Intellicall shall have received all necessary
approvals and consents from Nomura to consummate the terms of this Agreement.
7.6 OPERATING AGREEMENT. Intellicall and ILD shall have executed and
delivered a Operating Agreement substantially in the form attached hereto as
EXHIBIT "7.6".
7.7 REGISTRATION RIGHTS AGREEMENT. Intellicall, Triad, ▇▇▇▇▇▇ and ILD
shall have executed and delivered a Registration Rights Agreement substantially
in the form attached hereto as EXHIBIT "7.7".
ARTICLE 8
CONDITIONS PRECEDENT TO TRIAD'S AND ▇▇▇▇▇▇' OBLIGATIONS
All obligations of Triad and ▇▇▇▇▇▇ under this Agreement are subject to the
fulfillment to the reasonable satisfaction of Triad and ▇▇▇▇▇▇ prior to or at
the Closing of each of the following conditions, any of which may be waived in
writing by Triad and ▇▇▇▇▇▇:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by Intellicall in this Agreement, or in any statement, list or certificate
furnished pursuant hereto, shall be true and correct when made and shall be true
and correct at and as of the time of Closing.
8.2 PERFORMANCE OF INTELLICALL. Intellicall shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing, including, without
limitation, the documents or instruments described on Schedule 3.2.
8.3 SHAREHOLDER AGREEMENTS. Intellicall, Triad, ▇▇▇▇▇▇ and ILD will have
executed and delivered a Shareholder Agreement substantially in the form
attached hereto as EXHIBIT "8.3".
8.4 MANAGEMENT INCENTIVE STOCK OPTIONS. ILD shall have established and
adopted an employee stock option plan relating to the purchase of up to 27,500
shares of Common Stock at a purchase price of not less than $24.20 per share.
Such options will be subject to such performance objectives and other terms and
conditions as set forth on EXHIBIT "8.4" hereto.
8.5 WARRANTS. ILD shall have issued and delivered to Triad a warrant (the
"Triad Warrant") to purchase 6,000 shares of Common Stock at a purchase of
$90.00 per share, such Triad Warrant to be in the form substantially as attached
hereto as EXHIBIT "8.5".
8.6 CLAIMS, ETC. There shall not have been instituted or threatened in
writing any claim, suit, action, proceeding or investigation against or
involving Triad, Intellicall, ▇▇▇▇▇▇ or ILD, the outcome of which would, in
Triad's judgment, have a material and adverse effect on the common stock of IOS
or the ability of the ILD to consummate the transactions contemplated by this
Agreement or to continue as an ongoing profitable enterprise, or threatening the
legality, validity or enforceability of this Agreement.
8.7 LOAN. Triad and ▇▇▇▇▇▇ shall have funded the amounts as contemplated
by Section 2.4 of this Agreement. Furthermore, Sirrom shall have Loan in the
original principal amount of $2,000,000 as contemplated in Section 2.5 of this
Agreement all on terms and conditions satisfactory to Triad.
8.8 FAIRNESS OPINION. ILD shall have received a written opinion from an
independent financial appraiser that the consideration to be paid to Intellicall
for the Business is fair to ILD from a financial point of view.
11
8.9 REGISTRATION RIGHTS AGREEMENT. Intellicall, Triad, ▇▇▇▇▇▇ and ILD
shall have executed and delivered a Registration Rights Agreement substantially
in the form attached hereto as EXHIBIT "7.7".
ARTICLE 9
TERMINATION
9.1 TERMINATION BY INTELLICALL. This Agreement may be terminated and
canceled at any time prior to the Closing Date by Intellicall, upon written
notice to Triad and ▇▇▇▇▇▇, if (a) any of the representations and warranties of
Triad or ▇▇▇▇▇▇ contained herein or in any exhibit or schedule hereto shall
prove to be inaccurate or untrue in any material respect and Triad or ▇▇▇▇▇▇
fails to cure within five (5) days of the written notice thereof but in no event
later than the Closing Date; (b) any obligation, term or condition to be
performed or observed hereunder by Triad or ▇▇▇▇▇▇ has not been so performed or
observed in any material respect at or prior to the time specified herein; (c)
the conditions precedent to Intellicall's obligations hereunder as set forth in
Article 7 have not been satisfied or waived by Intellicall in writing; or
(d) if the Closing Date shall not have occurred on or before May 15, 1996.
9.2 TERMINATION BY TRIAD. This Agreement may be terminated and canceled at
any time prior to the Closing Date by Triad or ▇▇▇▇▇▇, upon written notice to
Intellicall, if (a) any of the representations and warranties of Intellicall
contained herein or in any exhibit or schedule hereto shall prove to be
inaccurate or untrue in any material respect and Intellicall fails to cure
within five (5) days of the written notice thereof but in no event later than
the Closing Date; (b) any obligation, term or condition to be performed or
observed by Intellicall hereunder has not been so performed or observed in any
material respect at or prior to the time specified herein; (c) the conditions
precedent to Triad's and ▇▇▇▇▇▇' obligations hereunder as set forth in
Article 8 have not been satisfied or waived by Triad and ▇▇▇▇▇▇ in writing; or
(d) if the Closing Date shall not have occurred on or before May 15, 1996.
9.3 TERMINATION BY AGREEMENT. This Agreement may also be terminated at any
time by mutual written agreement of Intellicall, Triad and ▇▇▇▇▇▇.
ARTICLE 10
MISCELLANEOUS
10.1 ENTIRE AGREEMENT. This Agreement, together with all the schedules and
exhibits hereto, constitutes the entire agreement among the parties hereto
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein.
10.2 AMENDMENT. This Agreement may be amended by the parties hereto at any
time, but only by an instrument in writing duly executed and delivered on behalf
of each of the parties hereto.
10.3 HEADINGS. The section headings are not to be considered part of this
Agreement and are included solely for convenience and are not intended to be
full or accurate descriptions of the contents thereof. References to sections or
articles are to portions of this Agreement unless the context requires
otherwise.
10.4 EXHIBITS, ETC. Exhibits and schedules referred to in this Agreement
are an integral part of and are incorporated in this Agreement by reference.
12
10.5 ASSIGNMENT; SUCCESSORS AND ASSIGNS. All of the terms and provisions
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
10.6 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or sent by reputable overnight courier, postage prepaid or by
certified mail, return receipt requested:
(a) if to Intellicall:
Intellicall, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
(b) if to Triad:
Triad-ILD Partners, L.P.
c/o Triad-ILD Partners, Inc.
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(c) if to ▇▇▇▇▇▇:
▇▇▇▇▇▇ Telecommunications, LLC
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
10.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
10.8 SEVERABILITY. The provisions of this Agreement are severable, and in
the event that any one or more provisions are deemed illegal or unenforceable,
the remaining provisions shall remain in full force and effect.
10.9 COUNTERPARTS. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13
IN WITNESS WHEREOF, the parties hereby have duly executed this Agreement as
of the day and year first above written.
INTELLICALL, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------------
Its: VICE PRESIDENT OF FINANCE
-----------------------------------------
TRIAD-ILD PARTNERS, L.P.
By: Triad-ILD, Inc., general partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Its: PRESIDENT OF THE GENERAL PARTNER
-----------------------------------------
▇▇▇▇▇▇ TELECOMMUNICATIONS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Its: PRESIDENT
-----------------------------------------
ILD COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Its: PRESIDENT
-----------------------------------------
14
SCHEDULES
NUMBER DESCRIPTION
--------------------- -----------
2.1A List of Contracts to be contributed to IOS by Intellicall
2.3D Performance bonds posted by Intellicall to be reimbursed by
ILD
2.4 Investments by Triad and ▇▇▇▇▇▇
2.9 Expenses
4.2 Conflicting agreements; approvals required
4.3 Liens on IOS Common Stock
15
EXHIBITS
NUMBER DESCRIPTION
--------------------- -----------
2.3A Series A Preferred Stock
2.3B Series B Preferred Stock
2.3C Form of Junior Convertible Note
3.2A Opinion of Counsel
7.6 Intellicall/ILD Operating Agreement
7.7 Registration Rights Agreement
8.3 Shareholder Agreement
8.4 Employee Stock Option Plan
8.5 Triad Warrant
16
SCHEDULE 1
EQUIPMENT
S1-1
SCHEDULE 2
VEHICLES
S2-1
SCHEDULE 3
LOCATIONS OF EQUIPMENT AND INVENTORY
S3-1