SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8K
Current Report
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of Report: June 13, 1996
GLOBAL TELEMEDIA INTERNATIONAL, INC.
f/k/a Phoenix Advanced Technology, Inc.
(Exact name of registrant as specified in its charter)
Florida 0-15818 64-0708107
(State or other jurisdiction (Commission File Number) (IRS Employer ID No.)
of incorporation or organization)
1121 Alderman Drive, Suite 200, Alpharetta, GA 30202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 770-667-6088
Item 5. Other Events.
On April 1, 1996, the Company entered into a business and financial
consulting agreement with Midplains Financial Services under which Midplains
is to provide assistance with meetings and providing financial consulting and
other business advice relative to the possible acquisition of Telenational
Communications. Under the terms of this agreement, Midplains is compensated
on the basis of 5% of the total purchase price and compensation is paid only
in the event the transaction closed within eighteen months of the date of the
Agreement.
On April 3, 1996, the Company issued a $2,500,000 convertible debenture to
MRC Enterprises, of which $250,000 has been received to date. Under the terms
of this agreement, the Company shall pay interest at a rate of 10% per annum,
payable quarterly on the 5th day after each calendar quarter on invested funds
not converted. MRC has the right to convert this debenture agreement into
shares at a conversion price equal to $1.00 per share.
On May 18, 1996, the Company reached an agreement with Neil Berman
resolving outstanding issues with Mr. Berman, including all of Berman's rights
to obtain securities of the Company, including its common stock. Under the
terms of this Agreement, the Company will issue a total of 929,406 shares of
its restricted common stock in consideration for monies previously paid for
restricted shares of the Company's common stock.
On June 6, 1996, the Company entered into a Letter of Intent with
Telenational Communications, Ltd. ("Telenational") whereby the Company proposes
to purchase assets of Telenational, including but not limited to all related
customer contracts, customer files, customer applications, letters of agency,
carrier certificates, accounts receivable related to the customer accounts,
dialers, T-1s and other equipment pending completion of all necessary due
diligence. The Company shall pay consideration of $2,000,000 in cash and
2,500,000 common shares of GTMI stock.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
(a) Agreement between Midplains Financial Services and the Company.
(b) Convertible debenture agreement between MRC Enterprises, Inc. and the
Company.
(c) Agreement between Neil Berman and the Company.
(d) Letter of Intent between Telenational Communications and the Company.
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.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
f/k/a Phoenix Advanced Technology, Inc.
(Registrant)
Date:
Roderick A. McClain, President
<PAGE>
MIDPLAINS FINANCIAL SERVICES
Regency Westpointe
10330 Regency Parkway Drive
Suite 100
Omaha, NE 68114-3761
(402) 397-2200 Ext. 253
Facsimile (402) 390-7137
April 1, 1996
Ms. Melissa Hart
Global Telemedia International, Inc.
500 Northridge Road
Atlanta, GA 30338
RE: Telenational Communications
Dear Ms. Hart:
We have discussed over the past several days the possibility of Global
Telemedia acquiring several of the divisions owned by Telenational
Communications. At the present time I am not fully aware of the circumstances
surrounding Mr. Blankenau's desire to sell those divisions of Telenational
Communications; however, Midplains Financial would be willing to attempt to
work with Global Telemedia in setting up the appropriate meetings and
providing financial consulting and other business advice relative to the
possible acquisition of Telenational Communications divisions which may be
for sale.
Midplains Financial Services has had a number of transactions with Mr.
Blankenau, who is the principal owner of Telenational Communications, over
the past ten years and is well acquainted with him. Midplains Financial
Services has no business relationship with Mr. Blankenau or any of this
corporations, however, you should be aware of the fact that the law firm with
which I am associated does represent various corporations who have had some
relationship with Mr. Blankenau and his various corporations in the past.
Also, Mr. Blankenau has done business with a financial institution that
Midplains Financial Services, as well as its partners, have a significant
financial interest.
We would be willing to provide business and financing consulting services as
well as attempt to facilitate a transaction between Global Telemedia and
Telenational Communications on the following basis:
1. We would act strictly as a consultant to Global Telemedia and would
provide no legal or other services relative to this transaction.
2. Our services would be paid only in the event the transaction closed within
eighteen months following the date of this letter. We would be compensated on
the basis of five percent (5%) of the total purchase price of any of the
divisions which may be acquired by Global Telemedia plus five percent (5%) of
any assumed liabilities. The full amount would be paid in cash at closing.
For illustration purposes the commission would be based upon the following
calculation:
Purchase price paid to the shareholders of
Telenational Communications $3,500,000
Assumption of Liabilities $1,500,000
Total $5,000,000
5% commission $ 250,000
All fees paid in connection with this matter will be considered to be fees
paid for financial consulting services and business consulting services
rendered by Midplains Financial Services. No portion of the fees are
intended to be the payment for a business brokerage commission or a real
estate commission.
If this arrangement is acceptable to you, please have Rod sign a copy of this
letter and return it to me as soon as possible. I will arrange to contact Mr.
Blankenau to determine if there is any substantial interest in discussing this
matter with Global Telemedia. I would suggest to Mr. Blankenau that if there
is some interest that he and I fly to Atlanta in the next few days to discuss
this matter in greater depth.
Very truly yours,
MIDPLAINS FINANCIAL SERVICES
Charles V. Sederstrom
The above compensation agreement is hereby approved.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
By: Roderick A. McClain
Date: April 2, 1996
April 3, 1996 $ 2,500,000.00
<PAGE>
FOR VALUE RECEIVED, the undersigned, Global TeleMedia International,
Inc., a Florida corporation, ("Maker"), hereby promises to pay to the order of
MRC Enterprises, Inc. ("Payee") the principal sum of Two Million Five Hundred
Thousand Dollars and No Cents ($2,500,000.00) with interest on the unpaid
principal amount at a rate of 10% per annum with the principal balance being
due and payable on ______ and interest due and payable as hereinafter provided.
1. Payments of Interest and Principal
a. Interest. Maker shall pay interest to Payee on the unpaid
outstanding principal balance owed to Payee hereunder at the rate of 10% per
annum. Interest shall be quarterly on the 5th day after each calendar quarter.
b. Payments. All payments made hereunder shall be applied as made
first to the payment of interest then due, and the balance of said payment
shall be applied to the payment of the principal sum.
2. Place of Payment. So long as Payee shall hold this Debenture, all
payments of principal and interest then due, and the balance of said payment,
shall be applied to the payment of the principal sum.
3. Optional Prepayment. From and after the earlier of June 30, 1996,
Maker shall have the option to prepay upon 10 days prior written notice at any
time after the average of the closing bid and ask price of the Maker's common
stock equals or exceeds $3.00 per share for twenty (20) consecutive trading
days, any portion or all of the remaining principal balance of this Debenture
without penalty or premium. All optional prepayments of principal made
pursuant to this Debenture shall be accompanied by the payment of all accrued
interest on such principal through the date of payment.
4. Conversion
a. Voluntary Conversion. Any Payee of this Debenture has the right,
at the Payee's option, at any time after April 1996, to convert this
Debenture, in accordance with the provisions of Paragraph 4(c) hereof, in
whole or in part, into fully paid and nonassessable shares of Common Stock of
the Maker. The number of shares of Common Stock into which this Debenture may
be converted ("Conversion Shares") shall be determined by dividing the
aggregate principal amount by the Conversion Price (as defined below) in
effect at the time of such conversion. The initial Conversion Price shall be
equal to $1.00 per share.
b. Mandatory Conversion. The Maker has the right from April 3, 1996
to cause the conversion of the Debenture on 10 days prior written notice at
any time after the average of the closing bid and ask price of the Maker's
common stock equals or exceeds $3.00 per share for twenty (20) consecutive
trading days in accordance with the provisions of paragraph 4(d) hereof, in
full or in part, into fully paid, non-assessable shares of the Common Stock.
The Conversion Shares shall be determined by dividing the aggregate principal
amount to be converted by the Conversion Price in effect at the time of such
notice of conversion.
c. Conversion Procedure. Before the Payee shall be entitled to
convert this Debenture into shares of Common Stock, it shall surrender this
Debenture at the office of the Maker and shall give written notice by mail,
postage prepaid, to the Maker at its principal corporate office of the
election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The maker shall, as soon as practicable thereafter, issue and deliver
at such office to the Payee of this Debenture a certificate or certificates
for the number of shares of Common Stock to which the Payee of this Debenture
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender
of this Debenture. The person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holder of such shares of Common Stock as of such date.
d. Mandatory Conversion Procedure. If this Debenture is converted
pursuant to the terms of paragraph 4(b) hereof, written notice shall be
delivered to the Payee of this Debenture at the address last shown on the
records of the Maker for the Payee or given by the Payee to the Maker for the
purposes of notice or, if no such address appears or is given, the place where
the principal executive office of the Maker is located, notifying the Payee of
the conversion to be effected, specifying the Conversion Price, the principal
amount of the Debenture to be converted, the date on which such conversion
will occur and calling upon such Payee to surrender to the Maker, in the
manner and at the place designated in the Debenture.
e. Delivery of Stock Certificates. As promptly as practical after the
conversion of this Debenture, the Maker at its expense will issue and deliver
to the Payee of this Debenture a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion.
f. Mechanics and Effect of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of this Debenture. In lieu of the Maker
issuing any fractional shares to the payee upon the conversion of this
Debenture, the Maker shall round such number of shares to be issued to the
Payee to the next highest number of shares.
5. Adjustment for Stock Splits and Subdivisions. In the event the Company
should at any time or from time to time after the date of issuance hereof fix
a record date for the effectuation of a split or subdivision of the
outstanding shares of Common Stock or the determination of holders of Common
Stock entitled to receive a dividend or other distribution payable in
additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as the "Common
Stock Equivalents") without payment of any consideration by such holder for
the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date, (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of this Debenture shall be appropriately decreased so that the number
of shares of Common Stock issuable upon conversion of this Debenture shall be
increased in proportion to such increase of outstanding shares.
If the number of shares of Common Stock outstanding any time after the
date hereof is decreased by a combination of the outstanding shares of Common
Stock, then, following the record date of such combination, the conversion
price of this Debenture shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion hereof shall be decreased in
proportion to such decrease in outstanding shares.
6. Registration Rights. Payees are entitled to one piggyback
registration rights for all of the shares of Common Stock issuable upon
conversion of the Debentures when the Company proposes to file a registration
statement under the Securities Act of 1933, as amended, with respect to an of
ering for its own account of any class of security (other than in connection
with a merger pursuant to Form S-8). The Maker shall in each case give
written notice of the proposed filing to the holder of the Debentures or
shares issued upon conversion of the Debentures acquired in the Offering at
least 30 days prior to the anticipated filing date, and such notice shall
offer such holder the opportunity to register such number of shares subject or
issued upon conversion of the Debentures as such holder may request. The
Maker will use his best efforts to cause the underwriter to permit the Payee
to include such shares on the same terms and conditions as other shares the
Maker included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such offering delivers a written opinion to
the Maker that the total number of securities which such holders the Maker
or other persons and entities entitled to include in such offering exceeds the
number which can reasonably be sold in such offering, then the securities to
be offered for the account of the holders of the shares of common stock
issuable upon conversion of the Debenture will be reduced pro rata to the
extent necessary to reduce the total number of securities to be included in
such offering to the number recommended by such managing underwriter.
The Maker will bear all expenses of such registration, except that the Payee
shall bear the fees and expenses of any counsel or other representative
attributable to the shares issued upon conversion of the Debenture (determined
on a pro rata basis).
7. Reservation of Stock Issuable upon Conversion. The Maker shall at
times reserve and keep available out of its authorized but unissued shares of
Common Stock solely for the purposes of effecting the conversion of this
Debenture such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of this Debenture.
8. Investment Intent. This Debenture is given to Payee with the
understanding that Payee is acquiring this Debenture for investment purposes
and not with a view to, for resale in connection with, or with an intent of
participating directly or indirectly in any distribution within the meaning of
the Securities Act of 1933, as amended. Payee shall not divide his
participation with others or resell, assign or otherwise dispose of all or any
part of this Debenture without the prior written consent of the Maker.
9. Issuance of the Debentures. This Debenture is one of a series of
Convertible Debentures (the "Debentures") which shall be executed by the Maker
in favor of certain Payees, in the principal amount of up to an aggregate of
$2,500,000 of Secured Promissory Debentures, and any and all renewals,
modifications, amendments and replacements thereof.
10. Miscellaneous.
(a) Waivers. No waiver of any term or condition of this Debenture
shall be construed to be a waiver of any succeeding breach of the same term or
condition. No failure or delay of Payee to exercise any power hereunder, or
to insist upon strict compliance by Maker of any obligations hereunder, and
no custom or other practice at variance with the terms hereof shall constitute
a waiver of the right of Payee to demand exact compliance with such terms.
(b) Invalid Terms. In the event any provision contained in this
Debenture shall, for any reason, be held invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Debenture, and this Debenture shall be construed
as if such invalid, illegal or unenforceable provision had never been
contained herein.
(c) Successors. This Debenture shall be binding upon Maker, its legal
representatives, successors and assigns, and inure to the benefit of Payee,
its legal representatives, successors and assigns.
(d) Controlling Law. This Debenture shall be read, construed and
governed in all respects in accordance with the laws of the State of Georgia.
(e) Amendments. Any provision in this Debenture to the contrary
notwithstanding, changes in or additions to this Debenture may be made by the
Maker, and compliance with any covenant or condition herein set forth may be
omitted, if the Maker (I) shall obtain from the holder's record of Debentures
aggregating not less than fifty-one percent (51%) of the aggregate principal
amount of the Debentures at the time outstanding their consent thereto in
writing, and (ii) shall deliver copies of such consent in writing to any such
holders of record but did not execute the same; provided, however, that no
such consent shall be effective to reduce the principal of the rate of
interest on or to bestow any date fixed for the payment of principal of or any
installment of interest on, any Debenture, without the consent of the holder
thereof, or to reduce the percentage of the principal amount of the Debentures
the consent of the holders of which shall be required under this paragraph.
(f) Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be sufficiently given if
addressed to the Maker at executive offices, and to Payee at the address
specified in the Subscription Agreement executed by Payee, posted in the U.S.
mail by certified or registered mail, return receipt requested. Any party may
change said address by giving the other party hereto notice of such change of
address. Notice given as hereinabove prescribed shall be deemed given on the
date of its deposit in the United States mail and, unless sooner received,
shall be deemed received by the party to whom it is addressed on the fifth
calendar day following the date on which said notice is deposited in the mail.
(g) Construction of Terms. Whenever the context so requires, any
gender is deemed to include any other, and the singular is deemed to include
the plural, and conversely.
(h) Time of Essence. Time is of the essence in this Debenture and
each and every provision hereof.
(i) Headings. All section and subsection headings herein, wherever
they appear, are for convenience only and shall not affect the construction of
any terms herein.
(j) No Shareholder Rights. Nothing contained in this Debenture shall
be construed as conferring upon the Payee or any other person the right to
vote or to consent or to receive notice as a shareholder in respect of
meetings of shareholders for the election of directors of the Maker or any
other matters or any other rights whatsoever as a shareholder of the Maker,
and no dividends or interest shall be payable or accrued in respect to this
Debenture or the interest represented thereby or the Conversion Shares
obtainable hereunder until, and only to the extent that, this Debenture shall
have been converted.
IN WITNESS WHEREOF, the undersigned has caused this Debenture to be
executed by its duly authorized officer and its seal affixed hereto, as of the
day and year first above written.
Global TeleMedia International, Inc.
By:
Its: President and Chief Executive Officer
ATTEST:
By:
Secretary
MRC Enterprises, Inc.
By:
Its: President and Chief Executive Officer
<PAGE>
June 6, 1996
Edmund H. Blankenau
Telenational Communications, Ltd.
7300 Woolworth Ave.
Omaha, NE 68124
Re:Letter of Intent
Dear Edmund:
Global TeleMedia International, Inc. ("GTMI") hereby submits this Letter of
Intent to Telenational Communications, Ltd., ("TCL") which shall serve as an
outline of the terms and conditions under which GTMI proposes to purchase
assets and qualified customer accounts as set forth on Exhibit _A_. If all
necessary due diligence regarding the accounts to be purchased is completed to
GTMI's satisfaction, GTMI proposes that the parties reduce their agreement to
writing in the form of a separate asset purchase agreement ("Formal Agreement)
and that the closing contemplated herein (the "Initial Closing") take place at
GTMI's corporate headquarters on a mutually agreeable date and time, but in
any event, no later than ____________, 1996. The Assets will be transferred
to GTMI free and clear of any liens, mortgages or other encumbrances, except
as specifically agreed to by GTMI.
1. The Acquisition. GTMI proposes to enter into a transaction with TCL (the
"Acquisition"), whereby GTMI will, in its sole discretion, acquire assets and
qualified customer accounts of TCL as set forth on Exhibit A including but
not limited to all related customer contracts, customer files, customer
applications, letters of agency, carrier certificates, accounts receivable
related to the customer accounts, dialers, T-1s, and other equipment currently
used by or for the customer relative to the customer accounts (collectively,
the "Assets").
2. Purchase Price. At initial closing, TCL shall transfer the Assets to GTMI
and GTMI shall pay TCL consideration (the "Purchase Price") of $2,000,000
cash payment, and 2,500,000 common shares of GTMI in the following manner:
A. At Initial Closing, 2,500,000 common shares of GTMI will be issued for
the account of TCL and placed into escrow with ATI Title as escrow agent, to
be held for the account and benefit of TCL pending resolution of GTMI due
diligence review. This amount has been predicated upon a $2.50 per share
price) It is understood that any of these shares offered for sale, shall be
subject to a right of first refusal by GTMI.
B. Upon the expiration of forty-five (45) days after Initial Closing, the
second stage of the Purchase Price (the "Second Stage Purchase Price") shall
be paid immediately to TCL, in the amount of $2,000,000, less the amounts of
any previous deposits.
3. GTMI covenants and agrees to use its best efforts to operate and increase
the Sellers business for a period of four (4) years from the Closing Date.
Buyer shall pay to Seller annually Bonus Consideration (the Bonus) equal to
six (6) times the incremental growth (as defined below) in the average of the
total monthly net revenue billed (including billings for new or additional
products related to or derived from products comprising the acquired business
as of the Closing Date) for the twelve (12) full calendar month period
following Closing and for each of the three (3) successive twelve (12) full
calendar month periods thereafter (each such period shall be referred to as a
Payout Period). Buyer shall pay each annual installment of the Bonus
Consideration within ninety (90) days after the end of each Payout Period
based on the companys audited sales results. The Bonus Consideration shall be
paid in shares of Common Stock of Buyer determined in accordance with the
calculation below:
A. The Bonus Consideration shall be paid annually in shares of Common Stock
valued at the average price for ten (10) days before theending date of the
corresponding Payout Period, and shall be calculated based on Incremental
Growth defined as follows:
B. For the first Payout Period, the Incremental Growth shall be equal to
the amount by which the average of the total monthly "net revenue billed" in
the acquired business for such Payout Period exceeds $1,250,000. The term
"net revenue billed" shall refer to the gross amount billed to end users and
or wholesale/distributor customers listed on Exhibit ___ less credits and
taxes.
C. For each successive Payout Period, the Incremental Growth shall be equal
to the amount by which the average of the total monthly net revenue billed in
the acquired business for the current Payout Period exceeds the average of the
total monthly net revenue billed in the acquired business for the immediately
preceding Payout Period.
3. Agent Obligations. GTMI shall assume and honor reasonable agent
commissions which are under contract and are active. GTMI and TCL will work
together to transition the calculation of any mutually agreed to agent
obligations for the ultimate remittance by GTMI to said active agents.
4. Non-Competes. TCL and its individual principals and key employees shall
execute noncompetition agreements which shall, for a period of five (5) years
from Initial Closing, among other things: (a) preclude them and all of
its/his officers, directors, employees or agents from soliciting, selling, or
otherwise marketing to any Customer Accounts; and (b) obligate it and all of
its officers, directors, employees and agents to indemnify GTMI with respect
to all of the foregoing covenants.
5. Due Diligence. During the period pending the closing, TCL shall afford to
GTMI and its officers and employees, accountants. counsel and other authorized
representatives, full access to and the right to inspect, review and make
copies of appropriate of its assets, properties, books, contracts,
commitments, and records, view its physical properties, communicate with key
employees, suppliers, dealers and other customers on a basis reasonable and
satisfactory to GTMI. TCL will furnish or use its best efforts to cause its
representatives to furnish promptly to GTMI such additional financial and
operating data and other documents and other information related to the
business and properties to be acquired as GTMI or its representatives may from
time to time reasonably request. TCL shall cooperate with GTMI in furnishing
or preparing such information as GTMI may require in order for GTMI to comply
with the Securities and Exchange Act of 1934, as amended, and the rules
promulgated thereunder.
6. Expenses/Brokers Fees: Except as otherwise provided herein, each party
shall bear its own legal, accounting and broker or finders_ fees, costs,
expenses of the transaction contemplated hereby, including in the case of
GTMI, any consulting fees due to Midplains Financial Services.
7. Public Announcement.
A. The signing and contents of this Letter of Intent shall remain strictly
confidential. Notwithstanding the foregoing, GTMI may, in its sole discretion
or if necessitated by applicable securities laws, publicly announce the
signing and contents of this Letter of Intent, subject to TCL's right to
review the wording of any such public announcement.
B. Within 10 business days after a mutually agreeable public announcement
released no later than June 7, 1996, GTMI shall pay to TCL $250,000 which
shall constitute a credit against the Second Stage Purchase Price, provided
first that GTMI is satisfied with its due diligence as set forth in paragraph
5, above.
8. Additional Terms and Agreements. The terms and conditions of the
acquisition are to be contained in the Formal Agreement which will be
satisfactory in all respects in form and substance to the parties and their
counsel. It is anticipated that the Asset Agreement will, among other things:
A. contain all representations, warranties and indemnifications usual and
customary in acquisitions by public companies of closely-held companies;
B. provide that consummation of the acquisition shall be conditioned upon:
(1) no material adverse event or condition occurring before the closing
date with respect to GTMI or TCL;
(2) the respective parties having:
(a) obtained all necessary or desirable consents, rulings and
approvals from the governmental or non-governmental administrative agencies
having jurisdiction; and
(b) obtained all necessary consents pursuant to existing
agreements or instructions by which each party may be bound.
(3) GTMI having been satisfied with the result of its due diligence review
of TCL.
(c) provide that the effective date of the asset transfer is June
1, 1996.
9. Precluded From Other Negotiations. Upon execution of this Letter of
Intent, through and including the date(s) on which the Formal Agreement(s)
is/are executed, TCL may not negotiate with any other person, firm or entity
("Third Party") for the acquisition by said Third Party of all or a part of
the TCL assets that are the subject of this agreement for a period of ninety
(90) days.
10. Transition Period. The parties agree that they shall use their best
efforts to effect a smooth and orderly transition of the Customer Accounts.
11. Counterparts. This Letter of Intent may be signed in counterparts, each
of which, when taken together, shall comprise an original.
12. Assignability. This Letter of Intent may be assigned by GTMI to one or
more of its subsidiaries whether current or to be established in the future.
13. Industry Terms. All terms and phrases unique to the telecommunications
industry and used within this Letter of Intent shall be defined in accordance
with everyday meaning assigned to the terms within the industry.
14. Conduct of Business Throughout the Closing. During the period pending
the closing, TCL shall conduct operations in the ordinary and usual course of
business consistent with past and current practices and shall use its best
efforts to maintain or preserve intact its business and goodwill, to retain
the services of key employees, and to maintain satisfactory relationships
with all customers having business relationships with it.
15. Non-Binding Effect. It is understood that except as set forth in the
next sentence, the provisions of Paragraphs 1 through 4 merely set forth a
statement of our mutual intentions and are not binding or enforceable
obligations to the parties hereof, but rather are intended only to serve as
a basis for proceeding to negotiate a binding and definitive Asset Purchase
Agreement with respect to the transactions outlined herein. The provisions of
Paragraphs 5 through 14, since they are intended to guide the conduct of the
parties in attempting to negotiate definitive agreements, are binding and
enforceable obligations to the parties hereto and enforceable in accordance
with their terms.
It is understood that this letter of intent is hereby modified in accordance
with Exhibit C attached hereto, dated June 6, 1996, and initialed by the
respective parties.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
By:
Roderick A. McClain
Its: President and Chief Executive Officer
Date:
Accepted and Agreed:
By:
Name:
Title
Date:
<PAGE>
EXHIBIT "C"
June 6, 1996
Via Facsimile
Mr. Edmund Blankenau
President and Chief Executive Officer
Telenational Communications
7300 Woolworth Avenue
Omaha, Nebraska 68124
Dear Edmund:
Enclosed please find the Letter of Intent dated June 6, 1996 pertaining to
GTMI's acquisition of assets of Telenational Communications Limited.
Please accept this letter as modification to said Letter of Intent
acknowledging that relative sales volumes of Telenational and GTMI will
be compared twelve months from the date of acquisition (June 1, 1997)
and adjustment of shares issued under Paragraph 2 will be made to reflect
any disparity between a quality of sales volume.
Example:
Telenational GTMI % Share
Volume Volume Difference Adjustment
$2,000,000/mo. $1,000,000/mo. 50% 1.25 million
$2,000,000/mo. $2,000,000/mo. 0% 0
$2,000,000/mo. $4,000,000/mo. 100% 0
It is understood that GTMI will assume liabilities of the kind included in
the Telenational Communications Ltd. Partnership Pro Forma Balance
Sheet dated March 31, 1996 (attached). It is further understood this Letter
of Intent is contingent upon satisfactory due diligence by both parties
within the first ten business (10) days and that Blankenau will procure
written agreement from the limited partners as required by the partnership
agreement within this ten (10) day period.
Please note that in the event GTMI does not proceed with this acquisition,
any payments under paragraph 7(b) ($250,000) shall be forfeited for the
benefit of Telenational.
I trust that this sets forth all modifications of the Letter of Intent as
previously described.
Sincerely,
GLOBAL TELEMEDIA INTERNATIONAL, INC.
Herbert S. Perman
Chief Financial Officer
Telenational Communications Ltd. Partnership
Pro Forma Balance Sheet
March 31, 1996
<PAGE>
ASSETS
[S] [C]
Current Assets:
Cash 0
Accounts Receivable 1,309,000
Current position of loans to agents 0
Dialer Inventory 0
Deposits and Prepaid Expenses 0
Balance of Proceeds Pending 0
-------------
Total Current Assets 1,309,000
Goodwill 7,166,278
-------------
Total Invest and LT Receivable 7,166,278
Property and Equipment:
Land and Building 0
Leasehold Improvements 0
Fixtures and Office Equipment 773,621
Data Processing Equipment 1,467,006
Switch and Peripheral Equipment 1,252,286
Installation Costs 408,036
Software 943,772
Vehicle 0
-------------
4,844,722
Less Accum. Depreciation (3,230,000)
-------------
Net Property and Equipment 1,614,722
-------------
Total Assets 10,090,000
=============
LIABILITIES AND PARTNER'S EQUITY
Current Liabilities:
Accounts Payable 1,700,000
Current Position - Note Payable Vendor 0
Current Portion of Capital Lease Oblig 120,000
Sales/Excise Tax Liabilities 30,000
Deferred Revenue 125,000
-------------
Total Current Liabilities 1,975,000
Long Term Liabilities:
Notes Payable - Investors 0
Notes Payable - Vendors 0
Capital Lease Obligations,net of current 465,000
Equipment Note Payable to Investor
Including Accrued Interest of 0
Revolving Credit Line - Investor 0
Accrued Interest Payable - Investor 0
-------------
Total Long Term Liabilities 465,000
-------------
Total Liabilities 2,440,000
Partner's Equity (Deficit) 7,650,000
-------------
Total Liab and Partner's Equity 10,090,000
=============
Note: All figures subject to audit review.
Midcom settlement still pending.
<PAGE>
AGREEMENT
AGREEMENT, made this 18 day of May, 1996, between NEIL BERMAN
(hereinafter referred to as "Berman") and GLOBAL TELEMEDIA INTERNATIONAL,
INC. formerly know as PHOENIX ADVANCED TECHNOLOGY, INC. (hereinafter referred
to as the "Company").
WHEREAS, Berman presently has outstanding subscription rights to purchase and
for the issuance of certain common stock in the Company as well as options and
warrants to purchase common shares of the company; and
WHEREAS, the Company recognizes Berman's entitlement to receive certain shares
and disputes Berman's entitlement to receive certain other shares; and
WHEREAS, the Company wishes to finally resolve all of Berman's rights to
obtain securities of the Company (including its common stock) other than (a)
144,050 Common Share Purchase Warrants CUSIP #718800-121, and (b) the option
to purchase 62,500 shares of common stock at $3.60 per share and the warrant
to purchase 37,500 shares of common stock at $5.00 per share (the "Purchase
Rights"), which are presently held by Berman and to obtain Berman's covenant
that he will purchase no further securities of the Company for a period of
three (3) years from the date hereof; and
WHEREAS, Berman desires to resolve all rights to purchase common shares of the
Company except in connection with the 144,050 Common Share Purchase Warrants
and the option to purchase 62,500 shares of common stock at $3.60 per share
and the warrant to purchase 37,500 shares of common stock at $5.00 per share,
and further agrees not to purchase any further shares or interest in the
Company or its subsidiaries except pursuant to such Purchase Rights for a
period of three (3) years from the date hereof.
NOW THEREFORE, in consideration of the premises and the mutual covenants and
conditions contained herein the parties agree as follows:
1. Issuance of shares. The Company will issue 929,406 common shares to
Berman within ten (10) days of the execution of this Agreement in 10,000 share
certificates. Such shares will be deemed restricted stock and shall bear the
following legend:
The securities represented by this certificate have been acquired pursuant to
an investment representation on the part of the Purchaser thereof and have not
been registered under the Securities Acts of any state in reliance on
exemptions contained therein or the inapplicability thereof, and have not been
registered under the Securities Act of 1933 (the 1993 Act) in reliance on
exemptions therefrom. Said securities shall not be sold, pledged,
hypothecated, donated, or otherwise transferred, whether or not for
consideration, by the Purchaser except on the issuance to Global TeleMedia
International, Inc. (the Company), of a favorable opinion of its counsel
and/or the submission to the Company of such other evidence as may be
reasonably satisfactory to counsel of the Company, in either case to the
effect that any such transfer shall not be in violation of the 1933 Act, as
amended, and applicable state securities law.
2. Registration and holding period. The company will use its best efforts
to file a registration statement for 200,000 of the 929,406 common shares
under the Securities Act of 1933 and will use its best efforts to cause the
registration statement to become effective at the earliest reasonable date.
The parties acknowledge that full consideration was given for the shares
on the date shown below. As a result, provided that all other requirements
of Rule 144 are met, the shares would be available for resale pursuant to
Rule 144 two (2) years from the date shown below.
Date of Full Payment of Consideration Number of Shares Purchased
10-24-94 185,000
12-06-94 80,000
03-22-95 15,290
03-24-95 25,170
03-30-95 15,260
05-01-95 38,861
05-08-95 123,153
05-12-95 446,672
------------
Total 929,406
============
Additionally, the 200,000 shares previously issued by Certificate Nos. GT0083
and GT0084 were paid for in three payments, two of which were on February 28,
1995 and one on March 22, 1995.
The company acknowledges that Berman may wish to transfer 144,000 restricted
shares to any and all of the following persons, and if Berman wishes to
transfer such shares, the Company agrees to such transfer.
David M. Berman 50,000 common shares
Yvonne Gordon 9,000 common shares
Jay H. Levy 7,000 common shares
Mark A. Lavine and Marcia Z. Lavine 4,000 common shares
Michelle Heede 74,000 common shares
3. Transfer of subscription rights, options and warrants. Berman shall
cause his father, David M. Berman, to transfer and quit-claim to the Company
all rights which me may have to purchase any of the securities of the Company
pursuant to that certain underwriter's warrant which expired on February 14,
1996, to purchase 10,000 units (the "Underwriter's Warrant"). It is the
intention of the parties that Berman shall retain no present rights to
purchase stock in the Company or any of its subsidiaries other than contained
in the Purchase Rights. Upon full execution of this Agreement, the Company
shall deliver to Berman revised original documents reflecting that the option
to purchase 62,500 shares and the warrant to purchase 37,500 shares expire on
March 28, 1998. Berman shall cause David M. Berman to execute the document
attached hereto as Exhibit A to evidence the foregoing transfer.
4. Purchase of Company securities. Except to the extent Berman exercises
his Purchase Rights, Berman shall not either directly or indirectly through
any agent, intermediary or nominee or as part of any partnership, group or
association purchase or acquire any interest in any securities of the Company
or its subsidiaries for a period of three (3) years. It is specifically
agreed by Berman that in the event this Agreement is violated the Company
shall retain, in addition to any other damages to which it may be entitled,
Berman's shares held in escrow by the Company.
As used within this entire Agreement, "Berman" refers to Neil Berman, any
trust for which he is either trustee, beneficiary or settlor, any corporation
or business entity controlled by Berman, any child or spouse of Berman and any
nominee or agent acting on behalf of Berman. The term "Berman" shall be
interpreted as broadly as possible. It is the parties' intention that Berman
shall not purchase any of the securities of the Company or any of its
subsidiaries, except as specifically permitted herein, under any circumstances.
5. Releases. Berman shall execute a release of the Company, its subsidiaries,
agents, employees, directors and officers relating to any and all liability,
rights or causes of action he may have other than under the Purchase Rights.
The Company shall execute a release in favor of Berman for any and all
liability or causes of action it may have and the rights hereunder. The
Company and Berman agree to execute the releases attached hereto as Exhibit B.
6. Proxy. Berman shall execute an irrevocable proxy in favor of Roderick
McClain for all shares owned by Berman for a period of one (1) year in the
form attached hereto.
7. Miscellaneous. This Agreement shall be interpreted according to the laws
of the State of Florida. This Agreement represents the entire Agreement of
the Parties. Berman specifically acknowledges that he has entered into this
Agreement having had an opportunity to confer with his counsel and having had
an opportunity to ask questions of and receive information from the officers
of the Company. Berman specifically acknowledges that he has had an
opportunity to read and has read the Company's Form 10-K for the years 1993,
1994 and 1995, and the Company's Form 10-Q for the first quarter of 1996.
GLOBAL TELEMEDIA INTERNATIONAL, INC.
By:__________________________________
Title: President
_______________________________________
Neil Berman
a/k/a Neil Philip Berman
