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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 10, 1998
SMARTALK TELESERVICES, INC.
(Exact name of registrant as specified in its charter)
California 0-21579 95-4502740
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
5080 Tuttle Crossing Boulevard
Dublin, Ohio 43016-3566
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (614) 789-8500
No change
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
As indicated on the SmarTalk Teleservices, Inc.'s (the "Company") Form 8-K
filed with the Securities and Exchange Commission (the "Commission") on June 10,
1998, the Company acquired the outstanding shares of Worldwide Direct, Inc.
("Worldwide"). In consideration for the outstanding shares of Worldwide, the
Company issued 2,715,000 shares of Common Stock.
As previously disclosed in the Company's Form 10-Q filed with the
Commission on November 16, 1998, the Company entered into Agreement and Release
contracts (collectively, the "Agreements") with certain former stockholders (the
"Stockholders") of Worldwide. The Agreements restructure the terms relating to
the Company's acquisition of all the outstanding shares of Worldwide to provide
for the issuance of additional equity and/or debt securities based on the
occurrence of certain conditions and the release by the Stockholders of any and
all claims, known or unknown.
Pursuant to the Agreements, if the average stock price of the Company over
a specified 30-day or 45-day period set by the Company (the "Measurement Period
Stock Price") falls below a certain target price as adjusted based on the
performance of the Nasdaq Composite Index from June 10, 1998 to the end of the
specified measurement period (the "Target Price"), the Company will convey to
each Stockholder an amount equal to the difference between the Target Price per
share and Measurement Period Stock Price per share multiplied by the number of
shares of the Company's Common Stock received by each Stockholder pursuant to
the merger agreement (the "Adjustment Amount"). The Adjustment Amount, if
applicable, will also be paid to the Stockholders if a Change of Control, as
defined in the Agreements, occurs before the specified measurement period. The
Adjustment Amount can be paid, at the Company's option, by either a distribution
of the Company's Common Stock (valued at the Measurement Period Stock Price), or
the issuance of a convertible subordinated note with a principal amount equal to
the Adjustment Amount.
The Agreements also require the Company to use its best efforts to cause an
effective registration statement concerning the shares of the Company's Common
Stock issued pursuant to the Agreements and/or the merger agreement described
above to be filed with the Commission.
The foregoing is a summary of the transactions described above. Reference
is made to the exhibits filed herewith for a complete text of the documents
summarized above which exhibits are incorporated by reference herein in their
entirety.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
10.1 Form of Agreement and Release among the Company and certain Preferred
Stockholders.
10.2 Form of Agreement and Release among the Company and certain Common
Stockholders.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 10, 1998
SMARTALK TELESERVICES, INC.
(Registrant)
/s/Thaddeus Bereday
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(Signature)
Thaddeus Bereday
Vice President and General Counsel
<PAGE>
Exhibit Index
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(c) The Exhibits furnished in accordance with Item 601 of Regulation S-K
are:
10.1 Form of Agreement and Release among the Company and certain Preferred
Stockholders.
10.2 Form of Agreement and Release among the Company and certain Common
Stockholders.
AGREEMENT AND RELEASE
THIS AGREEMENT AND RELEASE (the "Agreement") is made and entered into by
and between SMARTALK TELESERVICES, INC., a California corporation (the
"Company"), and certain former stockholders of Worldwide Direct, Inc., a
Delaware corporation ("Worldwide"), who are signatories hereto (the
"Stockholders") this __th day of ______, 1998.
W I T N E S S E T H
WHEREAS, the Company and the Stockholders entered into that certain
Agreement and Plan of Reorganization by and among the Company, SmarTalk
Acquisition Corp. IV and Worldwide and the ancillary agreements, specifically
including but not limited to the Registration Rights Agreement attached as
Exhibit B thereto, referenced therein (the "Merger Agreement");
WHEREAS, with the Company's knowledge and consent the Stockholders have
offered to all other stockholders of Worldwide the opportunity to participate as
a party to this agreement; and
WHEREAS, the Company and the Stockholders wish to make certain additional
representations, warranties, covenants and agreements as set forth below;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, which covenants and agreements constitute good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby covenant and agree as
follows:
Section 1. CERTAIN DEFINED TERMS. For purposes of this Agreement, the
following terms have the meanings indicated:
A "Change of Control" shall be deemed to have taken place if: (i)
there shall be consummated any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or
pursuant to which the shares of the Company's capital stock are converted
into cash, securities or other property (other than a consolidation or
merger of the Company in which the holders of the Company's voting stock
immediately prior to the consolidation or merger shall, upon consummation
of the consolidation or merger, own at least 50% of the voting stock) or
any sale, lease, exchange or other transfer (in one transaction or a series
of transactions contemplated or arranged by any party as a single plan) of
all or substantially all of the assets of the Company; or
(ii) any person (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act or 1934, as amended (the "Exchange Act"))
shall, after the date hereof, become the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the voting power of
all of the then outstanding securities of the Company having the right
under ordinary circumstances to vote in an election of the board of
directors of the Company (including, without limitation, any securities of
the Company that any such person has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, shall be deemed beneficially owned by such person); provided,
however, that Victor Grillo, Jr. and Fletcher International, Inc. (and its
successors or assigns) are specifically excluded from this paragraph (ii).
"Common Stock Equity Adjustment" means shares of the Company's voting
common stock, no par value (the "Common Stock"), equal in value to the
Adjustment Amount (as defined) which value shall be the Measurement Period
Stock Price. No fractional shares of Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Common Stock
pursuant to this Agreement, cash adjustments shall be paid to the
Stockholders in respect of any fractional share of Common Stock that would
otherwise be issuable. The amount of such cash adjustment shall be equal to
such fractional proportion of the Adjustment Amount.
"Convertible Subordinated Note Adjustment" means convertible
subordinated notes, with terms as indicated on Exhibit A, attached hereto
(the "Convertible Subordinated Notes"), in face amount equal to the
Adjustment Amount (as defined).
"Exit Date" means the date a Change of Control of SmarTalk is publicly
announced prior to the end of the Measurement Period; if such date comes
into existence, the Exit Date shall then become the last day of the
Measurement Period for all purposes of this Agreement if the Change of
Control is consummated.
"Initial Number" means the number of shares of the Company's Common
Stock received by the Stockholders as consideration pursuant to the Merger
Agreement, which number was then divided pro rata among the Stockholders in
accordance with the terms and provisions of the Merger Agreement.
"Measurement Date" means the earlier of (a) any date between January
29, 1999 and June 15, 1999 selected by the Company by written notice to the
Stockholders on such date (which notice may be made via facsimile),
provided that the registration statement filed in connection with the
Merger Agreement is effective on such date and the succeeding 10 trading
days, or (b) the Exit Date.
"Measurement Period" means the shorter of (a) December 15, 1998 -
Measurement Date or (b) December 15, 1998 - the Exit Date.
"Measurement Period Stock Price" means the average of the per share
closing prices of the SmarTalk Common Stock as reported on the NASDAQ
National Market (or such other national securities exchange on which the
Common Stock is listed) (the "SmarTalk Share Price") for the 30 consecutive
trading days prior to and including the Measurement Date. In the event an
Exit Date occurs between the date hereof and January 29, 1999, the
Measurement Period Stock Price shall be the Change of Control price.
"Nasdaq Index" means the Nasdaq Composite Index as reported by the
Wall Street Journal or any alternate reliable source, which source shall be
mutually agreed upon by the parties to this Agreement.
"Target Price" initially means $16.00. In the event there is a change
in the Nasdaq Index from June 10, 1998 to the end of the Measurement
Period, the Target Price shall be adjusted by the same percentage as any
increase or decline in the Nasdaq Index over the course of that period
(e.g., if there is a 5% decline in the Nasdaq Index from June 10, 1998 to
the end of the Measurement Period, the Target Price shall be reduced by 5%
to be $15.20; conversely, if there is a 5% increase in the Nasdaq Index
from June 10, 1998 to the end of the Measurement Period, the Target Price
shall be increased by 5% to be $16.80).
Section 2. ADJUSTMENT BY THE COMPANY. In the event the Measurement Period
Stock Price is less than the Target Price, the Company shall, within three
business days of the Measurement Date, convey and deliver to the Stockholders an
amount equal to the dollar amount by which the Target Price exceeds the
Measurement Period Stock Price multiplied by the Initial Number (the "Adjustment
Amount"), which amount shall be paid as either a Common Stock Equity Adjustment
or (except in the case of a Change of Control) a Convertible Subordinated Note
Adjustment, at the Company's option, and divided pro rata among the
Stockholders.
Section 3. CONSIDERATION BY WORLDWIDE. Each Stockholder, jointly and
severally, for themselves and on behalf of their respective predecessors,
successors, directors, officers, employees, attorneys, insurers, agents,
partners, stockholders, affiliates, subsidiaries, parents, trustees,
administrators and assigns, does hereby release, acquit and forever discharge
the Company, its successor companies, its affiliated companies, subsidiaries and
divisions, their predecessor and successor companies, each and all of the
officers, directors, shareholders, stockholders, assigns, agents, employees,
representatives and attorneys of or for all such business entities, and all
persons acting by, through, under or in concert with any of them, each in both
their individual and corporate capacities (collectively the "Company
Releasees"), and each of them, from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts, and expenses
(including attorneys' fees and costs actually incurred), of any nature
whatsoever, known or unknown, suspected or unsuspected, fixed or contingent,
including, but by no means limited to, rights arising out of alleged violations
of the Merger Agreement, any contracts, express or implied, any covenant of good
faith and fair dealing (except fraud), express or implied, any tort, any legal
restriction on the Company's right to terminate its employees, rights arising
from the Stockholders' status as shareholders, or any federal, state or other
governmental statute, regulation or ordinance from the beginning of time to the
date of execution hereof. Nothing in this Agreement is intended to release,
discharge or affect any claims or rights of Donaldson, Lufkin & Jenrette
Securities Corporation, any shareholders of Donaldson, Lufkin & Jenrette, Inc.,
or any limited partners of the Stockholders, with respect to matters unrelated
to the Merger Agreement.
Section 4. UNKNOWN CLAIMS. Each Stockholder, jointly and severally, for
themselves and on behalf of their respective predecessors, successors,
directors, officers, employees, attorneys, insurers, agents, partners,
stockholders, affiliates, subsidiaries, parents, trustees, administrators and
assigns, expressly waives and relinquishes all rights and benefits afforded by
the laws of the State of Ohio to the extent that such laws relate to unknown
claims of creditors and understands and acknowledges the significance and
consequence of such specific waiver of all unknown claims. Thus, notwithstanding
the provisions of the laws of the State of Ohio, and for the purposes of
implementing a full and complete release and discharge of claims against each
and all of the Company Releasees, each Stockholder, jointly and severally, for
themselves and on behalf of their respective predecessors, successors,
directors, officers, employees, attorneys, insurers, agents, partners,
stockholders, affiliates, subsidiaries, parents, trustees, administrators and
assigns, expressly acknowledges that this Agreement is intended to include in
its effect, without limitation, all claims which the Stockholders do not know or
suspect to exist in their favor at the time of execution hereof, and that this
Agreement contemplates the extinguishment of any such claim or claims.
Section 5. COVENANTS.
(a) The Company shall use its best efforts to cause the registration
statement filed in connection with the Merger Agreement to become effective
as soon as reasonably practicable.
(b) In the event the Company pays to the Stockholders an Adjustment
Amount, the Company shall, within three business days of the payment of
such Adjustment Amount and at the Company's expense, file a registration
statement covering the sale or resale of the shares of Common Stock issued
pursuant to the Common Stock Equity Adjustment or the shares of Common
Stock underlying the Convertible Subordinated Note Adjustment, whichever is
applicable. In either case, the Company shall use reasonable efforts to
cause such registration statement to become effective as soon as
practicable, but in no case later than ninety days after filing, and to
remain effective for an aggregate of one year.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The
Stockholders each individually acknowledge, represent and warrant on the date
hereof and on the Measurement Date as follows:
(a) Subject to Section 5 hereof, the Stockholder understands that the
shares of Common Stock to be issued pursuant to this Agreement, if any,
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be re-offered or resold other than pursuant
to registration thereunder or an available exemption therefrom.
(b) The shares of Common Stock that each Stockholder may become
entitled to receive hereunder are being acquired for such Stockholder's own
account and not with a view towards distribution thereof within the meaning
of the Securities Act.
(c) Such Stockholder is able to bear the economic risk and lack of
liquidity inherent in holding the shares of Common Stock.
(d) No promise or inducement to enter into this Agreement has been
offered, except as herein set forth, and that this Agreement is executed
without relying upon any statement or representation by the Company or its
representatives concerning the nature and extent of any injury, damages or
legal liability. Each Stockholder has made such investigation of the facts
and law pertaining to this settlement and this Agreement, and all of the
matters pertaining thereto, as such Stockholder deems necessary.
Section 7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
acknowledges, represents and warrants on the date hereof as follows:
(a) The execution, delivery and performance of this Agreement by the
Company has been duly authorized by all corporate action and no further
consent or authorization of the Company, its Board of Directors or its
stockholders is required. This Agreement has been duly executed and
delivered by the Company and, when duly authorized, executed and delivered
by the Stockholders, will be a valid and binding agreement enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) Upon the restatement of its financial statements, which
restatement is being prepared as of the date hereof, the Company's
financial statements as filed with Securities and Exchange Commission (the
"SEC") will materially comply with the rules and regulations of the SEC.
(c) There is no material litigation currently pending against the
Company, except as disclosed in the Company's annual and quarterly reports
filed with the SEC pursuant to the Exchange Act.
(d) The representations, warranties and statements contained in this
Agreement do not contain any untrue statement of a material fact, and, when
taken together, do not omit to state a material fact required to be stated
therein or necessary in order to make such representations, warranties or
statements not misleading in light of the circumstances under which they
were made.
Section 8. NO EXPRESS OR IMPLIED WARRANTIES. Except to the extent, if any,
expressly set forth in Section 7, the Company makes no representations or
warranties and disclaims all liability and responsibility for any
representation, warranty, statement or information orally or in writing made or
communicated to the Stockholders, including, but not limited to, any opinion,
information or advice which may have been provided to the Stockholders by any
officer, director, employee, agent, consultant or representative of the Company.
Section 9. LIMITATION OF LIABILITY. In no event shall any party be liable
to any other party or third party, for any special, indirect, consequential or
punitive damages relating to or arising out of this Agreement, including, but
not limited to, damages for loss of time, inconvenience, business reputation,
lost profits or lost business opportunities to the fullest extent allowed by law
whether or not such party has been advised of the possibility of such damages.
In addition, no action shall be brought for any claim relating to or arising out
of this Agreement more than one year after the Measurement Date.
Section 10. NO ADMISSION OF LIABILITY. This Agreement shall not in any way
be construed as an admission by the Company or the Stockholders of any fault,
misfeasance, nonfeasance or liability whatsoever, or as an admission by the
Company or the Stockholders of any wrongful acts whatsoever against the other,
or against any other persons. The Company specifically disclaims any liability
or breach of obligation to the Stockholders or to any other persons.
Section 11. FURTHER ACTS AND ASSURANCES. The Stockholders shall, at any
time and from time to time and at no cost to SmarTalk, take any and all steps
necessary to carry out the purposes and intent of this Agreement.
Section 12. AMENDMENT OF MERGER AGREEMENT; EFFECTIVENESS;. In the event
this Agreement is executed and delivered by all of the Stockholders, this
Agreement shall (i) be valid and binding upon all of the Stockholders
immediately upon the execution and delivery thereof, (ii) constitute a valid and
binding obligation of all of the Stockholders, enforceable in accordance with
its terms, and (iii) automatically be deemed to amend the Merger Agreement. In
the event this Agreement is not executed and delivered by all of the
Stockholders, this Agreement shall nonetheless be valid and binding upon each
Stockholder that executes and delivers this Agreement immediately upon such
execution and delivery and shall constitute a valid and binding obligation of
each such Stockholder, enforceable in accordance with its terms.
Section 13. NO ATTORNEYS' FEES OR COSTS. Each party hereto acknowledges and
agrees that the other party shall not be required to pay any attorneys' fees or
any other costs incurred in connection with the representation of either party
in this or any other matter.
Section 14. NO REPRESENTATIONS. The Stockholders and the Company each
represents and acknowledges that in executing this Agreement neither of the
Stockholders or the Company relies or has relied upon any representation or
statement not set forth herein made by either of the parties or by any agents,
representatives, or attorneys of either party with regard to the subject matter,
basis or effect of this Agreement or otherwise.
Section 15. INDEMNIFICATION BY THE STOCKHOLDERS. As a material inducement
to the Company to enter into this Agreement, the Stockholders hereby agree
jointly and severally to indemnify and hold the Company Releasees harmless from
and against any and all losses, costs, damages, or expenses, including, without
limitation, attorneys' fees incurred by the Company Releasees arising out of any
breach of this Agreement by the Stockholders.
Section 16. INDEMNIFICATION BY THE COMPANY. As a material inducement to the
Stockholders to enter into this Agreement, the Company hereby agrees to
indemnify and hold the Stockholders harmless from and against any and all
losses, costs, damages, or expenses, including, without limitation, attorneys'
fees incurred by the Stockholders arising out of any breach of this Agreement by
the Company.
Section 17. FULL AND INDEPENDENT KNOWLEDGE. Each of the undersigned hereby
represent and agree that each has thoroughly discussed all aspects of this
Agreement with counsel, that each has carefully read and fully understands all
of the provisions of this Agreement, and that each is voluntarily entering into
this Agreement.
Section 18. OWNERSHIPS OF CLAIMS, AUTHORITY. The Stockholders represent and
agree that they have not heretofore assigned or transferred, or purported to
assign or transfer, to any person, any claim or portion thereof or interest
therein; and Stockholders agree to indemnify, defend and hold harmless each and
all of the Company Releasees against any and all claims based on, arising out
of, or in connection with any such transfer or assignment, or purported transfer
or assignment of any claims or any portion thereof or interest therein.
Section 19. SUCCESSORS. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the parties hereto and their respective
successors and assigns.
Section 20. GOVERNING LAW. This Agreement is made and entered into in the
State of Ohio, and shall in all respects be interpreted, enforced and governed
by and under the internal laws of the State of Ohio.
Section 21. VENUE. Each of the undersigned hereby consents to the in
personam jurisdiction of the state and federal courts in Franklin County, Ohio,
for purposes of any action to enforce, or for a breach of, this Agreement or the
promissory notes or the guarantees entered into in connection herewith. Each of
the undersigned hereby submits to the non-exclusive jurisdiction of any State or
Federal Court in the State of Ohio and any court hearing any appeal therefrom,
over any suit, action or proceeding against it arising out of or based upon this
Agreement (a "Related Proceeding"). Each of the undersigned hereby waives any
objection to any Related Proceeding in such courts whether on the grounds of
venue, residence or domicile or on the ground that the Related Proceeding has
been brought in an inconvenient forum.
Section 22. COUNTERPARTS; FACSIMILE EXECUTION. This Agreement may be
executed and delivered by facsimile, in which case: (i) the instrument so
executed and delivered shall be binding and effective for all purposes, and (ii)
the parties shall nevertheless exchange substitute hard copies of such facsimile
instruments as soon thereafter as practicable (but the failure to do so shall
not affect the validity of the instruments executed and delivered by facsimile).
Section 23. FULL FORCE AND EFFECT. Except as specifically modified in this
Agreement, all of the provisions of the Merger Agreement shall remain in full
force and effect and are hereby ratified by the parties.
Section 24. MISCELLANEOUS.
(a) Should any provision of this Agreement be declared or determined
by any court to be illegal or invalid, the validity of the remaining parts,
terms, or provisions shall not be affected thereby and said illegal or
invalid part, terms, or provisions shall be deemed not to be a part of this
Agreement.
(b) As used in this Agreement, the masculine, feminine or neuter
gender, and the singular or plural number, shall be deemed to include the
others whenever the context so indicates or requires.
(c) This Agreement sets forth the entire agreement between the parties
hereto and fully supersedes any and all prior agreements or understandings
between the parties hereto pertaining to the subject matter hereof.
(d) Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any person other than the parties hereto
any legal or equitable rights or remedies under or by reason of this
Agreement or any provision contained herein.
* * *
[This Space left intentionally blank]
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
---------------------------
SMARTALK TELESERVICES, INC.
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Preferred Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
AGREEMENT AND RELEASE
THIS AGREEMENT AND RELEASE (the "Agreement") is made and entered into by
and between SMARTALK TELESERVICES, INC., a California corporation (the
"Company"), and certain former stockholders of Worldwide Direct, Inc., a
Delaware corporation ("Worldwide"), who are signatories hereto (the
"Stockholders") this __th day of ______, 1998.
W I T N E S S E T H
WHEREAS, the Company and the Stockholders entered into that certain
Agreement and Plan of Reorganization by and among the Company, SmarTalk
Acquisition Corp. IV and Worldwide and the ancillary agreements, specifically
including but not limited to the Registration Rights Agreement attached as
Exhibit B thereto, referenced therein (the "Merger Agreement"); and
WHEREAS, the Company and the Stockholders wish to make certain additional
representations, warranties, covenants and agreements as set forth below;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, which covenants and agreements constitute good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby covenant and agree as
follows:
Section 1. CERTAIN DEFINED TERMS. For purposes of this Agreement, the
following terms have the meanings indicated:
A "Change of Control" shall be deemed to have taken place if: (i)
there shall be consummated any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or
pursuant to which the shares of the Company's capital stock are converted
into cash, securities or other property (other than a consolidation or
merger of the Company in which the holders of the Company's voting stock
immediately prior to the consolidation or merger shall, upon consummation
of the consolidation or merger, own at least 50% of the voting stock) or
any sale, lease, exchange or other transfer (in one transaction or a series
of transactions contemplated or arranged by any party as a single plan) of
all or substantially all of the assets of the Company; or
(ii) any person (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act or 1934, as amended (the "Exchange Act"))
shall, after the date hereof, become the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the voting power of
all of the then outstanding securities of the Company having the right
under ordinary circumstances to vote in an election of the board of
directors of the Company (including, without limitation, any securities of
the Company that any such person has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, shall be deemed beneficially owned by such person); provided,
however, that Victor Grillo, Jr. and Fletcher International, Inc. (and its
successors or assigns) are specifically excluded from this paragraph (ii).
"Common Stock Equity Adjustment" means shares of the Company's voting
common stock, no par value (the "Common Stock"), equal in value to the
Adjustment Amount (as defined) which value shall be determined by
calculating the arithmetic average of the closing sales prices per share of
the Company's Common Stock on the NASDAQ National Market (or such other
national securities exchange on which the Common Stock is listed) during
the consecutive trading period beginning and including either May 15, 1999
or that date 30 days prior to the Exit Date, if such date comes into
existence, and ending and including June 15, 1999 or the Exit Date, if such
date comes into existence. No fractional shares of Common Stock shall be
issued pursuant hereto. In lieu of the issuance of any fractional share of
Common Stock pursuant to this Agreement, cash adjustments shall be paid to
the Stockholders in respect of any fractional share of Common Stock that
would otherwise be issuable. The amount of such cash adjustment shall be
equal to such fractional proportion of the Adjustment Amount.
"Convertible Subordinated Note Adjustment" means convertible
subordinated notes, with terms as indicated on Exhibit A, attached hereto
(the "Convertible Subordinated Notes"), in face amount equal to the
Adjustment Amount (as defined).
"Exit Date" means the date a Change of Control of SmarTalk is publicly
announced prior to the end of the Measurement Period; if such date comes
into existence, the Exit Date shall then become the last day of the
Measurement Period for all purposes of this Agreement if the Change of
Control is consummated.
"Initial Number" means the number of shares of the Company's Common
Stock received by the Stockholders as consideration pursuant to the Merger
Agreement, which number was then divided pro rata among the Stockholders in
accordance with the terms and provisions of the Merger Agreement.
"Measurement Date" means the earlier of (a) June 15, 1999 or (b) the
Exit Date.
"Measurement Period" means the shorter of (a) December 15, 1998 -
June 15, 1999 or (b) December 15, 1998 - the Exit Date.
"Measurement Period Stock Price" means the greater of either (i) the
average of the per share closing prices of the SmarTalk common stock as
reported on the NASDAQ National Market (or such other national securities
exchange on which the Common Stock is listed) (the "SmarTalk Share Price")
for any 30 consecutive trading days during the Measurement Period or (ii)
the average of the SmarTalk Share Prices for any 45 trading days (selected
by SmarTalk) during the Measurement Period. In the event an Exit Date
occurs between the date hereof and January 29, 1999, the Measurement Period
Stock Price shall be the Change of Control price.
"Nasdaq Index" means the Nasdaq Composite Index as reported by the
Wall Street Journal or any alternate reliable source, which source shall be
mutually agreed upon by the parties to this Agreement.
"Target Price" initially means $16.00. In the event there is a change
in the Nasdaq Index from June 10, 1998 to the end of the Measurement
Period, the Target Price shall be adjusted by the same percentage as any
increase or decline in the Nasdaq Index over the course of that period
(e.g., if there is a 5% decline in the Nasdaq Index from June 10, 1998 to
the end of the Measurement Period, the Target Price shall be reduced by 5%
to be $15.20; conversely, if there is a 5% increase in the Nasdaq Index
from June 10, 1998 to the end of the Measurement Period, the Target Price
shall be increased by 5% to be $16.80).
Section 2. ADJUSTMENT BY THE COMPANY. In the event the Measurement Period
Stock Price is less than the Target Price, the Company shall, within three
business days of the Measurement Date, convey and deliver to the Stockholders an
amount equal to the dollar amount by which the Target Price exceeds the
Measurement Period Stock Price multiplied by the Initial Number (the "Adjustment
Amount"), which amount shall be paid as either a Common Stock Equity Adjustment
or a Convertible Subordinated Note Adjustment, at the Company's option, and
divided pro rata among the Stockholders.
Section 3. CONSIDERATION BY WORLDWIDE. Each Stockholder, jointly and
severally, for themselves and on behalf of their respective predecessors,
successors, directors, officers, employees, attorneys, insurers, agents,
partners, stockholders, affiliates, subsidiaries, parents, trustees,
administrators and assigns, does hereby release, acquit and forever discharge
the Company, its successor companies, its affiliated companies, subsidiaries and
divisions, their predecessor and successor companies, each and all of the
officers, directors, shareholders, stockholders, assigns, agents, employees,
representatives and attorneys of or for all such business entities, and all
persons acting by, through, under or in concert with any of them, each in both
their individual and corporate capacities (collectively the "Company
Releasees"), and each of them, from any and all charges, complaints, claims,
liabilities, obligations, promises, agreements, controversies, damages, actions,
causes of action, suits, rights, demands, costs, losses, debts, and expenses
(including attorneys' fees and costs actually incurred), of any nature
whatsoever, known or unknown, suspected or unsuspected, fixed or contingent,
including, but by no means limited to, rights arising out of alleged violations
of the Merger Agreement, any contracts, express or implied, any covenant of good
faith and fair dealing (except fraud), express or implied, any tort, any legal
restriction on the Company's right to terminate its employees, rights arising
from the Stockholders' status as shareholders, or any federal, state or other
governmental statute, regulation or ordinance from the beginning of time to the
date of execution hereof.
Section 4. UNKNOWN CLAIMS. Each Stockholder, jointly and severally, for
themselves and on behalf of their respective predecessors, successors,
directors, officers, employees, attorneys, insurers, agents, partners,
stockholders, affiliates, subsidiaries, parents, trustees, administrators and
assigns, expressly waives and relinquishes all rights and benefits afforded by
the laws of the State of Ohio to the extent that such laws relate to unknown
claims of creditors and understands and acknowledges the significance and
consequence of such specific waiver of all unknown claims. Thus, notwithstanding
the provisions of the laws of the State of Ohio, and for the purposes of
implementing a full and complete release and discharge of claims against each
and all of the Company Releasees, each Stockholder, jointly and severally, for
themselves and on behalf of their respective predecessors, successors,
directors, officers, employees, attorneys, insurers, agents, partners,
stockholders, affiliates, subsidiaries, parents, trustees, administrators and
assigns, expressly acknowledges that this Agreement is intended to include in
its effect, without limitation, all claims which the Stockholders do not know or
suspect to exist in their favor at the time of execution hereof, and that this
Agreement contemplates the extinguishment of any such claim or claims.
Section 5. COVENANTS.
(a) The Company shall use its best efforts to cause the registration
statement filed in connection with the Merger Agreement to become effective
as soon as reasonably practicable.
(b) In the event the Company pays to the Stockholders an Adjustment
Amount, the Company shall, within three business days of the payment of
such Adjustment Amount and at the Company's expense, file a registration
statement covering the sale or resale of the shares of Common Stock issued
pursuant to the Common Stock Equity Adjustment or the shares of Common
Stock underlying the Convertible Subordinated Note Adjustment, whichever is
applicable. In either case, the Company shall use reasonable efforts to
cause such registration statement to become effective as soon as
practicable, but in no case later than ninety days after filing.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The
Stockholders each individually acknowledge, represent and warrant on the date
hereof and on the Measurement Date as follows:
(a) Subject to Section 5 hereof, the Stockholder understands that the
shares of Common Stock to be issued pursuant to this Agreement, if any,
have not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be re-offered or resold other than pursuant
to registration thereunder or an available exemption therefrom.
(b) The shares of Common Stock that each Stockholder may become
entitled to receive hereunder are being acquired for such Stockholder's own
account and not with a view towards distribution thereof within the meaning
of the Securities Act.
(c) Such Stockholder is able to bear the economic risk and lack of
liquidity inherent in holding the shares of Common Stock.
(d) No promise or inducement to enter into this Agreement has been
offered, except as herein set forth, and that this Agreement is executed
without relying upon any statement or representation by the Company or its
representatives concerning the nature and extent of any injury, damages or
legal liability. Each Stockholder has made such investigation of the facts
and law pertaining to this settlement and this Agreement, and all of the
matters pertaining thereto, as such Stockholder deems necessary.
Section 7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
acknowledges, represents and warrants on the date hereof as follows:
(a) The execution, delivery and performance of this Agreement by the
Company has been duly authorized by all corporate action and no further
consent or authorization of the Company, its Board of Directors or its
stockholders is required. This Agreement has been duly executed and
delivered by the Company and, when duly authorized, executed and delivered
by the Stockholders, will be a valid and binding agreement enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) Upon the restatement of its financial statements, which
restatement is being prepared as of the date hereof, the Company's
financial statements as filed with Securities and Exchange Commission (the
"SEC") will materially comply with the rules and regulations of the SEC.
(c) There is no material litigation currently pending against the
Company, except as disclosed in the Company's annual and quarterly reports
filed with the SEC pursuant to the Exchange Act.
(d) The representations, warranties and statements contained in this
Agreement do not contain any untrue statement of a material fact, and, when
taken together, do not omit to state a material fact required to be stated
therein or necessary in order to make such representations, warranties or
statements not misleading in light of the circumstances under which they
were made.
Section 8. NO EXPRESS OR IMPLIED WARRANTIES. Except to the extent, if any,
expressly set forth in Section 7, the Company makes no representations or
warranties and disclaims all liability and responsibility for any
representation, warranty, statement or information orally or in writing made or
communicated to the Stockholders, including, but not limited to, any opinion,
information or advice which may have been provided to the Stockholders by any
officer, director, employee, agent, consultant or representative of the Company.
Section 9. LIMITATION OF LIABILITY. In no event shall the Company be liable
to the Stockholders, or any third party, for any special, indirect,
consequential or punitive damages relating to or arising out of this Agreement,
including, but not limited to, damages for loss of time, inconvenience, business
reputation, lost profits or lost business opportunities to the fullest extent
allowed by law whether or not such party has been advised of the possibility of
such damages. In addition, no action shall be brought for any claim relating to
or arising out of this Agreement more than one year after the Measurement Date.
Section 10. NO ADMISSION OF LIABILITY. This Agreement shall not in any way
be construed as an admission by the Company or the Stockholders of any fault,
misfeasance, nonfeasance or liability whatsoever, or as an admission by the
Company or the Stockholders of any wrongful acts whatsoever against the other,
or against any other persons. The Company specifically disclaims any liability
or breach of obligation to the Stockholders or to any other persons.
Section 11. FURTHER ACTS AND ASSURANCES. The Stockholders shall, at any
time and from time to time and at no cost to SmarTalk, take any and all steps
necessary to carry out the purposes and intent of this Agreement.
Section 12. AMENDMENT OF MERGER AGREEMENT; EFFECTIVENESS;. In the event
this Agreement is executed and delivered by all of the Stockholders, this
Agreement shall (i) be valid and binding upon all of the Stockholders
immediately upon the execution and delivery thereof, (ii) constitute a valid and
binding obligation of all of the Stockholders, enforceable in accordance with
its terms, and (iii) automatically be deemed to amend the Merger Agreement. In
the event this Agreement is not executed and delivered by all of the
Stockholders, this Agreement shall nonetheless be valid and binding upon each
Stockholder that executes and delivers this Agreement immediately upon such
execution and delivery and shall constitute a valid and binding obligation of
each such Stockholder, enforceable in accordance with its terms.
Section 13. NO ATTORNEYS' FEES OR COSTS. Each party hereto acknowledges and
agrees that the other party shall not be required to pay any attorneys' fees or
any other costs incurred in connection with the representation of either party
in this or any other matter.
Section 14. NO REPRESENTATIONS. The Stockholders and the Company each
represents and acknowledges that in executing this Agreement neither of the
Stockholders or the Company relies or has relied upon any representation or
statement not set forth herein made by either of the parties or by any agents,
representatives, or attorneys of either party with regard to the subject matter,
basis or effect of this Agreement or otherwise.
Section 15. INDEMNIFICATION BY THE STOCKHOLDERS. As a material inducement
to the Company to enter into this Agreement, the Stockholders hereby agree
jointly and severally to indemnify and hold the Company Releasees harmless from
and against any and all losses, costs, damages, or expenses, including, without
limitation, attorneys' fees incurred by the Company Releasees arising out of any
breach of this Agreement by the Stockholders.
Section 16. INDEMNIFICATION BY THE COMPANY. As a material inducement to the
Stockholders to enter into this Agreement, the Company hereby agrees to
indemnify and hold the Stockholders harmless from and against any and all
losses, costs, damages, or expenses, including, without limitation, attorneys'
fees incurred by the Stockholders arising out of any breach of this Agreement by
the Company.
Section 17. FULL AND INDEPENDENT KNOWLEDGE. Each of the undersigned hereby
represent and agree that each has thoroughly discussed all aspects of this
Agreement with counsel, that each has carefully read and fully understands all
of the provisions of this Agreement, and that each is voluntarily entering into
this Agreement.
Section 18. OWNERSHIPS OF CLAIMS, AUTHORITY. The Stockholders represent and
agree that they have not heretofore assigned or transferred, or purported to
assign or transfer, to any person, any claim or portion thereof or interest
therein; and Stockholders agree to indemnify, defend and hold harmless each and
all of the Company Releasees against any and all claims based on, arising out
of, or in connection with any such transfer or assignment, or purported transfer
or assignment of any claims or any portion thereof or interest therein.
Section 19. SUCCESSORS. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the parties hereto and their respective
successors and assigns.
Section 20. GOVERNING LAW. This Agreement is made and entered into in the
State of Ohio, and shall in all respects be interpreted, enforced and governed
by and under the internal laws of the State of Ohio.
Section 21. VENUE. Each of the undersigned hereby consents to the in
personam jurisdiction of the state and federal courts in Franklin County, Ohio,
for purposes of any action to enforce, or for a breach of, this Agreement or the
promissory notes or the guarantees entered into in connection herewith. Each of
the undersigned hereby submits to the non-exclusive jurisdiction of any State or
Federal Court in the State of Ohio and any court hearing any appeal therefrom,
over any suit, action or proceeding against it arising out of or based upon this
Agreement (a "Related Proceeding"). Each of the undersigned hereby waives any
objection to any Related Proceeding in such courts whether on the grounds of
venue, residence or domicile or on the ground that the Related Proceeding has
been brought in an inconvenient forum.
Section 22. COUNTERPARTS; FACSIMILE EXECUTION. This Agreement may be
executed and delivered by facsimile, in which case: (i) the instrument so
executed and delivered shall be binding and effective for all purposes, and (ii)
the parties shall nevertheless exchange substitute hard copies of such facsimile
instruments as soon thereafter as practicable (but the failure to do so shall
not affect the validity of the instruments executed and delivered by facsimile).
Section 23. FULL FORCE AND EFFECT. Except as specifically modified in this
Agreement, all of the provisions of the Merger Agreement shall remain in full
force and effect and are hereby ratified by the parties.
Section 24. MISCELLANEOUS.
(a) Should any provision of this Agreement be declared or determined
by any court to be illegal or invalid, the validity of the remaining parts,
terms, or provisions shall not be affected thereby and said illegal or
invalid part, terms, or provisions shall be deemed not to be a part of this
Agreement.
(b) As used in this Agreement, the masculine, feminine or neuter
gender, and the singular or plural number, shall be deemed to include the
others whenever the context so indicates or requires.
(c) This Agreement sets forth the entire agreement between the parties
hereto and fully supersedes any and all prior agreements or understandings
between the parties hereto pertaining to the subject matter hereof.
(d) Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any person other than the parties hereto
any legal or equitable rights or remedies under or by reason of this
Agreement or any provision contained herein.
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
---------------------------
SMARTALK TELESERVICES, INC.
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Common Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Common Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
<PAGE>
IN WITNESS WHEREOF, the Company and the Stockholders have executed or caused to
be executed this Agreement as of the day and year first above written.
/s/ [Common Stockholder]
-----------------------------------
STOCKHOLDER
By:
Title:
