SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-10588
INTELLICALL, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1993841
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2155 Chenault, Suite 410
Carrollton, TX 75006
(Address of principal executive offices)
(214) 416-0022
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class November 9,1995
Common Stock $.01 par value 7,678,043
<PAGE>
INDEX
INTELLICALL, INC.
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1995
(Unaudited) and December 31, 1994...........................1
Condensed Consolidated Statements of Operations for each of
the three month periods ended September 30, 1995 and 1994
(Unaudited).................................................2
Condensed Consolidated Statements of Operations for each of
the nine month periods ended September 30, 1995 and 1994
(Unaudited).................................................3
Condensed Consolidated Statements of Cash Flows for each of
the nine month periods ended September 30, 1995 and 1994
(Unaudited).................................................4
Notes to Condensed Consolidated Financial Statements........5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K...........................11
Signatures...................................................................12
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
INTELLICALL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share information)
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 3,565 $ 2,826
Receivables, net 25,022 28,079
Receivables from related party 272 766
Inventories 13,826 12,935
Other current assets 300 122
------- -------
Total current assets 42,985 44,728
Fixed assets, net 2,366 2,415
License fees receivable, net 552 1,140
Investment in sales-type leases, net 199 1,154
Receivables from related party -- 32
Notes receivable, net 2,745 4,035
Intangible assets, net 1,041 1,108
Capitalized software costs, net 3,868 2,259
Other assets 844 1,928
-------- --------
$ 54,600 $ 58,799
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,613 $ 10,133
Other liabilities 2,478 2,505
Current portion of long-term debt 20,689 945
-------- --------
Total current liabiliabilities 33,780 13,583
Long-term debt 1,102 25,694
Deferred revenue 2,136 --
Other liabilities 200 200
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000
shares authorized; none issued -- --
Common stock, $.01 par value; 20,000,000
and 50,000,000 shares authorized,
respectively; 7,702,951 and 7,686,451
shares issued, respectively 77 77
Additional capital 47,191 47,131
Less common stock in treasury, at cost;
24,908 shares (258) (258)
Accumulated deficit (29,628) (27,628)
-------- --------
Total stockholders' equity 17,382 19,322
-------- --------
$ 54,600 $ 58,799
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
- 1 -
<PAGE>
INTELLICALL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
September 30,
-------------
1995 1994
---- ----
<S> <C> <C>
Revenues and Sales:
Service revenues $ 15,126 $ 17,845
Equipment sales 4,105 6,438
-------- --------
19,231 24,283
Cost of revenues and sales:
Service revenues 12,553 14,978
Equipment sales 4,518 9,220
-------- --------
17,071 24,198
Gross profit
Service revenues 2,573 2,867
Equipment sales (413) (2,782)
-------- --------
2,160 85
Selling, general and administrative expenses 2,407 3,042
Research and development expenses 793 759
Provision for doubtful accounts 196 1,105
-------- --------
Operating income (loss) (1,236) (4,821)
Interest income 112 178
Interest expense (734) (924)
-------- --------
Net income (loss) $ (1,858) $ (5,567)
======== ========
Income (loss) per share $ (.24) $ (.76)
======== ========
Weighted average number of common and common
equivalent shares outstanding 7,677 7,278
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
- 2 -
<PAGE>
INTELLICALL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1995 1994
---- ----
<S> <C> <C>
Revenues and Sales:
Service revenues $ 42,541 $46,460
Equipment sales 16,135 17,531
-------- --------
58,676 63,991
Cost of revenues and sales:
Service revenues 35,270 38,372
Equipment sales 15,416 20,539
-------- --------
50,686 58,911
Gross profit
Service revenues 7,271 8,088
Equipment sales 719 (3,008)
-------- --------
7,990 5,080
Selling, general and administrative expenses 6,966 9,900
Research and development expenses 1,850 2,239
Provision for doubtful accounts 582 1,647
Gain on sale of call validating assets 1,607 ---
-------- --------
Operating income (loss) 199 (8,706)
Interest income 364 862
Interest expense (2,563) (2,177)
-------- --------
Net loss $ (2,000) $(10,021)
======== ========
Loss per share $ (.26) $ (1.27)
======== ========
Weighted average number of common and common
equivalent shares outstanding 7,669 7,898
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
- 3 -
<PAGE>
INTELLICALL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------
1995 1994
---- ----
<S> <C> <C>
Operating Activities:
Net loss $ (2,000) $ (10,021)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 2,837 2,281
Provision for doubtful accounts 582 1,647
Provision for inventory losses 54 2,798
Changes in operating assets and liabilities:
(Increase) in receivables (156) (3,620)
(Increase) decrease in inventories (945) 4,424
(Increase) in other current assets (226) 306
Decrease in license fee receivable 1,974 4,620
Decrease in investment in sales type leases 1,897 1,955
Decrease (increase) in related party receivable 526 (264)
Decrease (increase) in notes receivable 829 (415)
Increase (decrease) in accounts payable 479 (3,037)
(Decrease) increase in accrued liabilities (26) 737
Increase in deferred revenues 2,136 --
Increase (decrease) in other 306 (1,468)
-------- --------
Net cash provided by operating activities 8,267 (57)
Investing activities:
Purchase of equipment (798) (467)
Capitalized software (1,850) (2,021)
-------- --------
Net cash used in investing activities (2,648) (2,488)
Financing activities:
Proceeds from borrowings on long-term debt 1,660 71,551
Principal payments on long-term debt (6,600) (67,483)
Proceeds from issuance of stock
under stock option plans 60 5
-------- --------
Net cash (used in) provided by financing activities (4,880) 4,073
Changes in cash 739 1,528
Cash at beginning of period 2,826 83
-------- --------
Cash at end of period $ 3,565 $ 1,611
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
- 4 -
<PAGE>
INTELLICALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - CERTAIN ACCOUNTING POLICIES
Basis of Presentation. The accompanying condensed consolidated financial
statements of Intellicall, Inc. (the "Company") have been prepared in accordance
with the requirements of Form 10-Q and do not include all disclosures normally
required by generally accepted accounting principles or those normally made in
annual reports on Form 10-K. In management's opinion, all adjustments necessary
for a fair presentation of the results of operations for the periods shown have
been made and are of a normal and recurring nature.
The results of operations for the nine months ended September 30, 1995 are
not necessarily indicative of the results of operations for the full year 1995.
The condensed consolidated financial statements herein should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1994.
Statement Presentation. Certain prior year amounts have been reclassified
to conform to current year presentation.
Software Development Costs. The Company capitalizes costs related to the
development of certain software products. In accordance with Statement of
Financial Accounting Standards No. 86, capitalization of costs begins when
technological feasibility has been established and ends when the product is
available for general release to customers. Amortization is computed on an
individual product basis based on the products' estimated economic life using
the straight line method.
The amounts of software development costs capitalized in the third quarter
of 1995 and 1994 were $550,000 and $600,000, respectively. The Company recorded
$216,666 and $528,666 of software amortization expense for the three and nine
months ended September 30, 1995 compared to $117,000 and $276,000 for the three
and nine months ended September 30, 1994.
Cash. Cash accounts serve as collateral under the Company's lending
agreements and, accordingly, are restricted. Additionally certain of these cash
accounts are pledged as security for letters of credit and are further
restricted.
Other. The allowance for doubtful accounts was $3.6 million at September
30, 1995, and $5.1 million at December 31, 1994.
- 5 -
<PAGE>
INTELLICALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - LONG-TERM DEBT AND LINE OF CREDIT
As of September 30, 1995 and December 31, 1994, the Company's debt
consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Variable rate Senior Bridge Notes Due 1996, Series A $16,000 $16,000
12.5% Senior Bridge Notes Due 1996, Series B 4,560 8,000
Series B debt discount (105) (195)
Collateralized note 336 1,834
Subordinated note 1,000 1,000
------- ------
Total debt 21,791 26,639
Less: Current portion of long-term debt 20,689 (945)
------- ------
Total long-term debt $ 1,102 $25,694
======= =======
</TABLE>
On August 11, 1994, the Company issued its Variable Rate Senior Bridge
Notes Due 1996, Series A ("Series A Notes") and 12.5% Senior Bridge Notes Due
1996, Series B ("Series B Notes") to Nomura Holding America Inc. ("Nomura"). The
Company issued a warrant which entitles Nomura to purchase 551,954 shares of the
Company's common stock. The notes are secured by collateral comprising
substantially all the assets of the Company and mature on August 11, 1996.
Interest on the Series A Notes accrues monthly at a rate of prime plus 2%
through December 31, 1995, and prime plus 3% thereafter. Interest on both notes
is payable quarterly. The Series A Notes may be issued from time to time
provided the aggregate amount outstanding does not exceed $16 million.
If the Series B Notes are not retired by December 31, 1995, the Company
must issue an additional warrant to Nomura which, if exercised, would increase
Nomura's ownership position in the Company by an incremental amount equal to 5%
of the sum of (a) the issued and outstanding shares of common stock of the
Company on the date such additional warrant is issued, and (b) the shares
issuable upon exercise of the warrant issued to Nomura at closing. If the Series
B Notes are not retired by June 30, 1996, the Company must issue an additional
warrant to Nomura, which if exercised, would increase Nomura's ownership in the
Company by an incremental amount equal to 5% of the sum of (a) the issued and
outstanding shares of common stock of the Company on the date such additional
warrant is issued, and (b) the shares issuable upon exercise of the warrant
issued to Nomura at closing and (c) the shares issuable upon exercise of the
warrant which may be issued to Nomura as described in the preceding sentence. If
the Company is required to issue additional warrants, the exercise price will be
the average closing price for the 10 trading days prior to the dates of issue.
All warrants issued to Nomura expire on August 11, 1999.
- 6 -
<PAGE>
INTELLICALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The note agreement with Nomura requires the Company to comply with
certain debt covenants. Such covenants require the Company to maintain certain
financial ratios and prohibit the paying of dividends. As of December 31, 1994,
Nomura waived the Company's non-compliance with one covenant and amended various
covenants covering the remaining term of the note agreement. As of September 30,
1995, Nomura waived the Company's non- compliance with certain covenants, but
has not agreed to amend the covenants covering the remaining term. As a result
of such waiver, the Company is not in default under the note agreement. Such
covenants are calculated at the end of each calendar quarter.
NOTE 3 - INVENTORY
As of September 30, 1995 and December 31, 1994, the Company's inventory
consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Raw materials $ 7,997 $ 7,192
Work-in-process 1,116 1,731
Finished goods 4,713 4,012
-------- --------
Total inventory $ 13,826 $ 12,935
======== ========
</TABLE>
NOTE 4 - SALE OF CALL VALIDATING ASSETS
On June 30, 1995, the Company received $1.7 million of proceeds from the
sale of call validating assets and $2.84 million from prepayments for future
services to be provided by the Company and for covenants not to compete. All
proceeds were used to reduce the Company's debt under Notes A and B. The Company
recorded a $1.6 million gain on the sale of assets with the balance recorded as
deferred revenues. As of September 30, 1995, the Company had $2.1 million of
long term deferred revenues.
- 7 -
<PAGE>
INTELLICALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
During the nine months ended September 30, 1995, the Company generated net
cash of $8.3 million from operations, inclusive of proceeds from the sale of
call validating assets as discussed below, and decreased long-term borrowings by
$4.9 million. The Company used a portion of the net cash generated to invest
$798,000 in capital equipment and $1.9 million in software development. During
the nine months ended September 30, 1995, the Company's net cash position
increased $739,000.
In the fourth quarter of 1995, as part of its new product strategies, the
Company plans to invest in software development costs and in various capital
expenditures at levels similar to or lower than those in 1994. Additionally, the
Company intends to continue investing in new product development and marketing
at levels similar to or lower than those in 1994. The Company anticipates that,
as a result of the second half of 1995 operating results, the Company may be
required to seek alternative sources of financing, such as sale of assets or the
issuance of new debt or equity to meet operating needs. Management believes that
its bad debt provisions are adequate and that liquidity will not be affected by
adverse trends in collection experience.
The Company's future liquidity depends largely on its ability to increase
shipments of new products, reduce inventories and expand profitability. There
can be no assurances that the Company's efforts to maintain or enhance liquidity
will be successful and, under certain circumstances, the Company may be required
to limit its operations, dispose of certain assets or take other actions as
considered necessary. See Item 1, Note 2 to Financial Statements, "Senior Note
Agreement".
The Company's senior note agreement with Nomura matures on August 11, 1996.
As noted elsewhere in this Quarterly Report, a total of $20.56 million was due
to Nomura as of September 30, 1995 and the Company failed to comply with certain
financial covenants contained in the note agreement, which non-compliance was
waived. The Company must negotiate and put in place one or more new debt
agreements to repay Nomura as the Company's operations alone will not generate
sufficient cash to repay such indebtedness. In the event the Company cannot
replace Nomura and Nomura is unwilling to extend the maturity date of its note
agreement with the Company, the Company may be required to seek alternative
sources of financing, such as the sale of assets or the issuance of new debt or
equity, or the Company may be required to limit its operations or take other
actions as considered necessary.
- 8 -
<PAGE>
INTELLICALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company is actively pursuing various financing alternatives none of
which, as of the date of this Quarterly Report, has been finalized.
Results of Operations
Service Revenues. Service revenues were $15.1 million and $42.5 million for
the three and nine months ended September 30, 1995, compared to $17.8 million
and $46.5 million for the three and nine months ended September 30, 1994. The
table below provides a detailed breakdown of service revenue by type for the
three and nine month comparative periods in 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
---------------------- ---------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
Call Traffic Revenue $11,144 $14,112 $31,820 $36,232
Long-distance Resale 1,067 1,184 2,713 3,381
Validation Services 582 1,100 2,485 3,223
Operator Services 1,925 1,394 4,845 3,550
Prepaid Calling Services 408 55 678 74
---------------------- ---------------------- --------------------- ----------------------
Total Service Revenues $15,126 $17,845 $42,541 $46,460
====================== ====================== ===================== ======================
</TABLE>
Lower service revenues of $2.7 million and $3.9 million for the three and
nine months ended September 30, 1995 compared to 1994 is linked to the following
factors. Most significantly, there was a decline in the average number of calls
made per payphone using the Company's Intelli*Star automated operator
technology. The decline in telephone calls caused a combined decrease in
bundled, unbundled and long-distance resale revenues of $3.1 million and $5.1
million for the three and nine month periods ended September 30, 1995 compared
to the same periods in 1994. This decline has been partially offset by an
increase in the number of phones using the technology. The sale of the Company's
call validating assets in June, 1995 was the principal cause of $518,000 and
$738,000 declines in validation service revenues for the third quarter and nine
months ended September 30, 1995 respectively.
Partially offsetting the declines described in the preceding paragraph was
an increase in operator services revenue for 1995. Revenues increased $531,000
and $1.3 million principally as a result of an expanded customer base. In
addition revenues from prepaid calling services increased $353,000 and $604,000
for the three and nine months ended September 30, 1995 due to the addition of
new customers.
- 9 -
<PAGE>
INTELLICALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As a result of lower service revenues gross profit from service revenue was
$2.6 million or 17.0% and $7.3 million or 17.1% for the three and nine months
ended September 30, 1995 as compared to gross profit of $2.9 million or 16.1%
and $8.1 million or 17.4% for the three and nine months ended September 30,
1994.
Equipment Sales. The Company's equipment sales were $4.1 million and $16.1
million for the three and nine months ended September 30, 1995 compared to $6.4
million and $17.5 million for the three and nine months ended September 30,
1994.
The $2.3 million and $1.4 million decline for the three and nine months
ended September 30, 1995 was principally attributable to declines in
international sales of $2.0 million and $2.4 million for the three and nine
months ended September 30, 1995. For the nine months ended September 30, 1995,
the decline in international sales was partially offset by a $700,000 increase
in regulated market sales.
The Company reported a loss on telephone and related sales of $413,000 for
the third quarter, and a gross profit of $719,000 for the nine months ended
September 30, 1995, respectively. These results compare to losses of $2.8
million and $3.0 million for the three and nine months periods ended September
30, 1994. Gross profit for the three and nine months ended September 30, 1994
was reduced by a $2.7 million provision for slow moving and obsolete inventory.
Exclusive of the 1994 provision for slow moving and obsolete inventory, the
Company had a loss of $82,000 and $308,000 for the three and nine months ended
September 30, 1994.
The loss in the third quarter of 1995 exceeded the loss in the same period
last year due principally to the lower volume of sales described above, without
a corresponding decrease in manufacturing overhead costs. The improved results
for the first nine months of 1995 compared to 1994 is attributable to increased
sales of the Company's network platform products which generally carry higher
margins than pay telephones.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $635,000 and $2.9 million for the three and
nine months ended September 30, 1995 compared to the same periods in 1994.
Third quarter expenses in 1995 improved compared to the third quarter of
1994 mainly due to lower consulting and legal fees in 1995. Compensation related
expenses declined slightly, but were affected by an accrual of approximately
$271,000 for severance and benefits due to staffing reductions.
The decline for the nine months ended September 30, 1995 resulted from
several factors. Consulting and legal fees declined $1.1 million. Compensation
and benefits declined $1.3 million from staffing reductions and normal
attrition. Operational improvements and spending controls accounted for an
improvement in expense levels of approximately $614,000.
- 10 -
<PAGE>
INTELLICALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Provision for Doubtful Accounts. The provision for doubtful accounts was
$196,000 and $582,000 for the three and nine months ended September 30, 1995
compared to $1.1 million and $1.6 million for the three and nine months ended
September 30, 1994. The lower expenses in 1995 were mainly attributable to an
$800,000 provision in the third quarter of 1994 for losses on accounts
receivable and to lower sales and revenues in 1995.
Gain on sale of Call Validating Assets. In June 1995, the Company recorded
a gain of $1.6 million in connection with the sale of certain call validating
assets.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The following exhibits are filed as a part of this Quarterly
Report on Form 10-Q.
10.1 Fourth Amendment, Limited Waiver and Consent as of
March 17, 1995 by and between Nomura Holding America,
Inc. and the Company, filed herewith.
10.2 Intellicall, Inc. 1995 Employee Stock Purchase Plan,
filed herewith.
(b) Reports on Form 8-K: None
- 11 -
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
INTELLICALL, INC.
11-14-95 /s/ William O. Hunt
-------- -------------------------------------
Dated Chairman of the Board, President and
Chief Executive Officer
11-14-95 /s/ Michael H. Barnes
-------- ------------------------------------
Dated Senior Vice President Corporate Staff
and Chief Financial Officer
(principal financial officer)
Date: November 14, 1995
- 12 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000818674
<NAME> INTELLICALL, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,565
<SECURITIES> 0
<RECEIVABLES> 28,282
<ALLOWANCES> 3,615
<INVENTORY> 13,826
<CURRENT-ASSETS> 42,985
<PP&E> 10,517
<DEPRECIATION> 8,151
<TOTAL-ASSETS> 54,600
<CURRENT-LIABILITIES> 33,780
<BONDS> 0
<COMMON> 77
0
0
<OTHER-SE> 17,305
<TOTAL-LIABILITY-AND-EQUITY> 54,600
<SALES> 4,105
<TOTAL-REVENUES> 19,231
<CGS> 4,518
<TOTAL-COSTS> 17,071
<OTHER-EXPENSES> 3,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 622
<INCOME-PRETAX> (1,858)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,858)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,858)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> 0
</TABLE>
FOURTH AMENDMENT, LIMITED WAIVER AND CONSENT
THIS FOURTH AMENDMENT, LIMITED WAIVER AND CONSENT (this "Waiver")
is made as of March 17, 1995 by and between Intellicall, Inc., a Delaware
corporation (together with its successors,assigns and transferees, the
"Company"), and Nomura Holding America Inc., a Delaware corporation (together
with its successors, assigns and transferees, the "Purchaser"). Capitalized
terms used herein without definition shall have the respective meanings ascribed
to them in that certain Note Purchase Agreement, dated as of August 11, 1994, by
and between the Company and the Purchaser, as previously amended (the "Purchase
Agreement").
R E C I T A L S
A. Pursuant to the Purchase Agreement, the Purchaser on August 11, 1994
purchased certain secured promissory notes of the Company, consisting of its
Variable Rate Senior Bridge Notes Due 1996, Series A, in an aggregate principal
amount not to exceed $16,000,000 at any one time outstanding (the "Series A
Notes"), and its 12.5% Senior Bridge Notes Due 1996, Series B, in the aggregate
principal amount of $8,000,000 (the "Series B Notes", and, collectively,
together with the Series A Notes, the "Notes").
B. The Company has entered into a Restructuring Agreement dated as of
December 31, 1994, a true and correct copy of which is attached to this Waiver
as Exhibit A (as in effect on the date hereof, the "Restructuring Agreement"),
with Murdock, Remmers & Associates, Inc., an Iowa corporation ("MRA"), pursuant
to which, subject to certain conditions, among other things, (i) the Company has
agreed to cancel and deliver to MRA the Unsecured Note and the Royalty Note
(each defined in the Restructuring Agreement), which notes were previously
executed and delivered by MRA to the Company and have been pledged to the
Purchaser as Collateral pursuant to the Company Security Agreement, and to
cancel certain equipment Lease Agreements previously executed between the
Company as lessor and MRA as lessee (the "MRA Equipment Leases"), and accrued
amounts owed thereunder to the Company by MRA, (ii) in exchange therefor, MRA
has agreed to pay to the Company the sum of $800,000 (the "Initial Payment") and
to execute and deliver to the Company an Installment Note in the principal
amount of $625,000 (the "Installment Note"), payable in five installments of
$125,000 each on April 15, 1995, July 15, 1995, October 15, 1995, January 15,
1996 and April 15, 1996, and (iii) MRA has agreed to redeem 14,706 shares of its
outstanding 10% Series A Preferred Stock held by the Company, which shares have
been pledged to the Purchaser pursuant to the Company Security Agreement (the
"Pledged Preferred Shares"), and to issue to the Company in exchange therefor
its Preferred Stock Subordinated Note due 2005 in the principal amount of
$1,000,000 (the "Subordinated Note"). The foregoing transactions and the other
transactions provided for in the Restructuring Agreement are hereinafter
collectively called the "Restructuring Transactions."
1
<PAGE>
C. The Company has requested that the Purchaser enter into this Waiver
in order to evidence the Purchaser's consent to the Restructuring Agreement and
the Restructuring Transactions (which consent is a condition precedent to the
obligations of the parties thereunder) and to facilitate the effectuation of the
Restructuring Transactions.
NOW THEREFORE, in consideration of the terms and conditions contained
herein and of other good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Limited Waiver and Consent. In condition of the representations,
warranties, covenants and agreements of the Company set forth in this Waiver,
the Purchaser hereby consents to the execution by the Company of the
Restructuring Agreement and the consummation of the Restructuring Transactions
contemplated thereby, and waives any Event of Default that may have occurred or
may occur solely by reason of the execution of such agreement or the
consummation of the Restructuring Transactions, including, without limitation,
and Event of Default arising in connection therewith under Section 10.4 of the
Purchase Agreement. The consent and waiver set forth in this Section 1 shall be
limited to the specific matters described herein and shall not be deemed to (i)
be a waiver of any other term or condition of the Purchase Agreement or (ii)
prejudice any rights not specifically waived herein which the Purchaser or any
other holder of Notes may now have or may have in the future under the Purchase
Agreement or any Related Document.
2. Disposition of Collateral; Application of Funds. The Company agrees
that (i) upon receipt of the Initial Payment, it will immediately pay a portion
thereof equal to $379,000 to the Purchaser, for application to the outstanding
principal balance of the Series A Notes in accordance with the provisions of the
Purchase Agreement as amended by this Waiver, and will pay the remaining
$421,000 to Norwest Financial Leasing, Inc. in payment of the Company's
obligations under the Norwest Purchase Agreement; and (ii) upon receipt of the
Installment Note and the Subordinated Note, it will immediately pledge and
deliver the same to the Purchaser as additional Collateral pursuant to the
provisions of the Company security Agreement, together with appropriate
assignments executed by the Company in blank. Upon receipt of such amount and
such notes and assignments, the Purchaser will thereupon release and deliver to
the Company the Unsecured Note, the Royalty Note and the Pledged Preferred
Shares, for delivery by the Company to MRA in cancellation or redemption thereof
(as the case may be) pursuant to the provisions of the Restructuring Agreement,
and will further execute and deliver to the Company any UCC-3 Termination
Statements that may be required in order to evidence the release of the
Purchaser's Liens in the MRA Equipment Leases and the equipment leased thereby.
The Company acknowledges and agrees that all notes and other instruments or
documents received by it pursuant top or in connection with the Restructuring
Agreement, and all of the Company's rights under the Restructuring Agreement and
such notes, instruments and documents, and all proceeds of any thereof,
constitute additional Collateral subject to the provisions of the Company
Security Agreement.
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3. Amendments to the Purchase Agreement. The Purchase Agreement is hereby
amended as follows:
A. Section 1.1 of the Purchase Agreement is hereby amended by inserting the
following new definitions immediately following the definition of the term
"Maturity Date") appearing therein:
"'MRA' means Murdock, Remmers & Associates, Inc., an Iowa corporation.
"'MRA Initial Payment' means the sum of $800,000 to be paid to the Company
by MRA pursuant to Section 2.3 of the MRA Restructuring Agreement.
"'MRA Installment Note' means the Unsecured Note due April 15, 1996 in the
principal amount of $625,000, issued or to be issued by MRA to the Company
pursuant to Section 2.3 of the MRA Restructuring Agreement, as from time to time
amended, modified or supplemented in accordance with its terms.
"'MRA Restructuring Agreement' means the Restructuring Agreement dates as
of December 31, 1994, between the Company and MRA,as from time to time amended,
modified or supplemented in accordance with its terms.
"'MRA Subordinated Note' means the Preferred Stock Subordinated Note due
January 31, 2005 in the principal amount of $1,000,000, issued or to be issued
by MRA to the Company pursuant to Section 3.2 of the MRA Restructuring
Agreement, as from time to time amended, modified or supplemented in accordance
with its terms."
B. Section 3.1 of the Purchase Agreement is amended by adding the following
new subsection (f) immediately following subsection (e) thereof:
"(f) Within one (1) Business Day after receipt by the Company of any
payment made at any time pursuant to or in connection with the provisions of the
MRA Restructuring Agreement or any note or other document executed in connection
therewith, including, without limitation, (i) the MRA Initial Payment (other
than a portion thereof equal to $421,000, which shall be used by the Company to
pay obligations owed to Norwest Financial leasing, Inc. under the Norwest
Purchase Agreements), (ii) any installment payment or other payment of principal
or interest paid by MRA under the MRA Installment Note, and (iii) any payment or
principal or interest made by MRA under the MRA Subordinated Note, the Company
shall pay such amount to the Purchaser, for application to the outstanding
principal balance of the Series A Notes (pro rata in accordance with the
respective outstanding principal amounts thereof), or, in the event that at the
time of such payment the outstanding principal balance of the Eries A Notes if
$0, for application to the outstanding principal balance of
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the Series B Notes (pro rata in accordance with the respective outstanding
principal amounts thereof). Each such payment shall be accompanied by an
Officer's Certificate of the Company setting forth the source and amount of such
payment and stating that it is being paid pursuant to the provisions of this
Section 3.1(f)."
C. Section 3.4 of the Purchase Agreement is amended by adding the following
new subsection (e) immediately following subsection (d) thereof:
"(e) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall not reissue all or any portion of the principal
amount of the Series A Notes which shall have been repaid pursuant to the
provisions of Section 3.1(f) hereof (i) at any time on or prior to June 30,
1995, or (ii) at any time after June 30, 1995 unless cumulative EBITDA for the
period January 1, 1995 to and including the last day of the fiscal quarter of
the Company most recently ended prior to the proposed date of any such
reissuance shall be not less than the corresponding amount shown opposite such
period below (as demonstrated in a certificate signed by the Chief Financial
Officer of the Company delivered together with the financial statements of the
Company for such fiscal quarter furnished pursuant to Section 7 hereof)":
Period from January 1, 1995
to and Including the Fiscal Required
Quarter Ended: EBITDA
--------------------------- ---------
June 30, 1995 $ 2,070,000
September 30, 1995 5,225,000
December 31, 1995 8,200,000
March 31, 1996 9,425,000
June 30, 1996 11,900,000"
4. Representations and Warranties of the Company. The Company represents
and warrants to the Purchaser that:
A. Representations in the Purchase Agreement; No Defaults. Each of the
representations and warranties made by the Company in the Purchase Agreement is
true and correct on and as of the date hereof to the same extent as if made on
and as of the date hereof except to the extent that such representations and
warranties specifically relate to an earlier date, in which case they are true
and correct as of such earlier date, and such representations and warranties are
hereby incorporated by reference as if set forth herein in full (except that the
representation contained in Section 4.21 of the Purchase Agreement is subject to
the potential infringement claim of Aerotel U.S.A., Inc. contained in its letter
to the Company dated January 13, 1995). No event has occurred and is continuing
or will result from the transactions contemplated hereby which constitutes
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<PAGE>
(or with notice or the passage of time would constitute) an Event of
Default under the Purchase Agreement as it existed before this Waiver or as it
exists after the effectiveness of this Waiver, except such as are being waived
pursuant to this Waiver.
B. Corporate Authority. The execution, delivery and performance by Company
of this Waiver (i) is within its corporate powers, (ii) has been duly authorized
by all necessary corporate action on the part of its Board of Directors and
stockholders, and (iii) does not require the consent or approval of, of any
registration, filing or declaration with, any Governmental Body or
non-governmental Person, except of the Purchaser as set forth in this Waiver.
C. Binding Effect. This Waiver is the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws relative to or affecting
the enforcement of creditors' rights generally in effect from time to time and
by general principles of equity.
5. Effect of Waiver. It is hereby agreed that from and after the date
hereof all references to the Purchase Agreement in the Related Documents shall
be references to the Purchase Agreement as heretofore amended and as further
amended by this Waiver; provided that, except as specifically provided herein,
this Waiver does not in any way affect or impair the terms, conditions and other
provisions of the Purchase Agreement or any of the other Related Documents, or
the obligations of the Company thereunder, and all terms, conditions and other
provisions of the Purchase Agreement shall remain in full force and effect
except to the extent specifically amended, modified or waived pursuant to the
provisions of this Waiver.
6. Payment Fees. The Company agrees to pay all fees, costs and expenses
incurred by the Purchaser in connection with the negotiation, preparation,
execution and delivery of this Waiver and all other documents executed pursuant
to or in connection herewith, including, without limitation, the fees and
disbursements of Sonnenschein Nath & Rosenthal, special counsel to the
Purchaser, in connection herewith.
7. Counterparts. This Waiver may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which taken together shall
be deemed to constitute one and the same instrument.
8. Governing Law. THIS WAIVER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
9. Headings. Section headings are included herein for convenience of
reference only and shall not constitute a part of this Waiver for any other
purposes.
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<PAGE>
10. Amendments and Modifications. Any term, covenant, agreement or
condition of this Waiver may, with the consent of the parties hereto, be
amended, or compliance therewith may be wived (either generally or in a
particular instance and either retroactively or prospectively), by one or more
substantially concurrent written instruments signed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Waiver as of the
day and year first written above.
INTELLICALL, INC.
03/30/95 By: /s/ Michael H. Barnes
-------- -------------------------------
Dated Chief Financial Officer
NOMURA HOLDING AMERICA, INC.
03/30/95 By: /s/ Howard Gellis
-------- ------------------------------
Dated Attorney-in-Fact
6
INTELLICALL, INC
1995 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1995 Employee Stock
Purchase Plan of Intellicall, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock, $.01 par value, of the
Company.
(d) "Company" shall mean Intellicall, Inc., a Delaware corporation.
(e) "Compensation" shall mean all base straight time gross earnings,
including payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an employee of the Company
for purposes of tax withholding under the Code whose customary employment with
the Company or any Designated Subsidiary is at least twenty (20) hours per week
and more than five (5) months in any calendar year. For purposes of the Plan,
the employment relationship shall be treated as continuing intact while the
individual is on sick leave or other leave of absence approved by the Company.
Where the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering Period.
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(i) "Exercise Date" shall mean the last day of each Offering Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(1) If the common Stock is listed on any established stock exchange or a
national market system, including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing sale price for the
Common Stock (or the mean of the closing bid and asked prices, if no sales were
reported), as quoted on such exchange (or the exchange with the greatest volume
of trading in Common Stock) or system on the date of such determination, as
reported in the Wall Street Journal or such other source as the Board deems
reliable or;
(2) If the Common Stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable or;
(3) In the absence of an established market for the Common Stock, the Fair
Market Value thereof shall be determined in good faith by the Board.
(k) "Offering Period" shall mean a period of approximately six (6) months,
commencing on the first Trading Day on or after January 1 and terminating on the
last Trading Day in the period ending the following June 30, or commencing on
the first Trading Day on or after July 1 and terminating on the last Trading Day
in the period ending the following December 31 during which an option granted
pursuant to the Plan may be exercised.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair Market
Value of a share of Common Stock on the first Trading Day on or after the
Enrollment Date or on the last Trading Day ending on the following Exercise
Date, whichever is lower.
(n) "Reserves" shall mean the sum of the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
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(p) "Trading Day" shall mean a day on which national stock exchanges and
the NASDAQ System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who has been continuously
employed by the Company for at least three (3) consecutive months and who shall
be employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant,
such Employee (or any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own capital stock of the
Company and/or hold outstanding options to purchase such stock possessing five
percent (5%) or more of the total combined voting power or value of all classes
of the capital stock of the Company or of any Subsidiary, or (ii) which permits
his or her rights to purchase stock under all employee stock purchase plans of
the Company and its Subsidiaries to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000.00) worth of stock (determined at the Fair Market
Value of the shares at the time such option is granted) for each calendar year
in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods with a new Offering Period commencing on the first Trading Day on or
after January 1 and July 1 of each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 19 hereof. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement authorizing payroll deductions in the form of Exhibit
"A" to this Plan and filing it with the Company's payroll office at least five
(5) business days prior to the applicable Enrollment Date, unless a later time
for filing the subscription agreement is set by the Board for all eligible
Employees with respect to a given Offering Period.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he or she receives on each pay day during the Offering Period, and the
aggregate of such payroll deductions during the Offering Period shall not exceed
ten percent (10%) of the participant's Compensation during said Offering Period.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and will be withheld in whole percentages only. A
participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may decrease the rate of his or her payroll
deductions during the Offering Period by completing or filing with the Company a
new subscription agreement authorizing a change in payroll deduction rate. The
Board may, in its discretion, limit the number of participation rate changes
during any Offering Period. The change in rate shall be effective with the first
full payroll period following five (5) business days after the Company's receipt
of the new subscription agreement unless the Company elects to process a given
change in participation more quickly. A participant may not increase the rate of
his or her payroll deductions during the Offering Period. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll
deductions may be decreased to 0% at such time during any Offering Period which
is scheduled to end during the current calendar year (the "Current Offering
Period") that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Offering Period which ended during
that calendar year plus all payroll deductions accumulated with respect to the
Current Offering Period equal $21,250. Payroll deductions shall recommence at
the rate provided in such participant's subscription agreement at the beginning
of the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but will not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
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7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than a
number of Shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to section 10 hereof. The
option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Offering Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a Certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit "B" to this Plan. All of the participant's payroll
deductions credited to his or her account will be paid to such participant
promptly after receipt of notice of withdrawal, and such participant's option
for the Offering Period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the Offering Period.
If a participant withdraws from an Offering Period, payroll deductions will not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in Section
2(g) hereof), for any reason, including by virtue of his or her having failed to
remain an Employee of the Company for at least twenty (20) hours per week during
an Offering Period in which the Employee is a participant, he or she will be
deemed to have elected to withdraw from the Plan, and the payroll deductions
credited to such participant's account during the Offering Period but
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<PAGE>
not yet used to exercise the option will be returned to such participant
or, in the case of his or her death, to the person or persons entitled thereto
under Section 14 hereof, and such participant's option will be automatically
terminated.
(c) A participant's withdrawal from an Offering Period will not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which shall
be made available for sale under the Plan shall be 300,000 shares, subject to
adjustment upon changes in capitalization of the Company as provided in Section
18 hereof. If on a given Exercise Date the number of shares with respect to
which options are to be exercised exceeds the number of shares then available
under the Plan, the Board shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable.
(b) A participant will have no interest or voting right in shares covered
by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Plan shall be
initially administered by the Organization and Compensation Committee of the
Board. The Board or its committee shall have full and exclusive discretionary
authority to construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan. Every
finding, decision and determination made by the Board or its committee shall, to
the full extent permitted by law, be final and binding upon all parties. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:
(1) Members of the Board who are eligible to participate in the Plan may
not vote on any matter affecting the administration of the Plan or the grant of
any option pursuant to the Plan.
(2) If a committee is established to administer the Plan, no member of the
Board who is eligible to participate in the Plan may be a member of the
committee.
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(b) Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection
(a) of this Section 13, in the event that Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be only administered by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to an Exercise Date on
which the option is exercised but prior to delivery to such participant of such
shares and cash. In addition, a participant may file for written designation of
a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
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18. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the prices per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for his option has been changed to the New Exercise Date and that his
option will be exercised automatically on the New Exercise Date, unless prior to
such date he has withdrawn from the Offering Period as provided in Section 10
hereof. For purposes of this paragraph, an option granted under the Plan shall
be deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock and the sale of assets or
merger.
Page 8
<PAGE>
19. Amendment or Termination.
(a) The Board may at any time and for any reason terminate or amend the
Plan. Except as provided in Section 18 hereof, no such termination can affect
options previously granted, provided that an Offering Period may be terminated
by the Board of Directors on any Exercise Date if the Board determines that the
termination of the Plan is in the best interests of the Company and its
shareholders. Except as provided in Section 18 hereof, no amendment may make any
change in any option theretofore granted which adversely affects the rights of
any participant. To the extent necessary to comply with Rule 16b-3 or under
Section 423 of the Code (or any successor rule or provision or any other
applicable law or regulation), the Company shall obtain shareholder approval in
such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or Directors or its approval by the shareholders of
the Company. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 19 hereof.
Page 9
<PAGE>
23. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
Page 10
<PAGE>
EXHIBIT "A"
INTELLICALL,INC
1995 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ______________________________________________ hereby elects to
participate in the Intellicall, Inc. 1995 Employee Stock Purchase Plan
(the "Employee Stock Purchase Plan") and subscribes to purchase shares
of the Company's Common Stock in accordance with this Subscription
Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ______% of my Compensation on each payday (not to exceed 10%) during
the Offering Period in accordance with the Employee Stock Purchase
Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete "Intellicall, Inc. l995 Employee
Stock Purchase Plan." I understand that my participation in the
Employee Stock Purchase Plan is in all respects subject to the terms of
the Plan. I understand that the grant of the option by the Company
under this Subscription Agreement is subject to obtaining shareholder
approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (employee or employee and spouse only):
.
6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day
of the Offering Period during which I purchased such shares), I will
be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time
such shares were delivered to me over the price which I paid for
the shares. I hereby agree to notify the Company in writing within
30 days after the date of any disposition of my shares and I will
make adequate provision for Federal, state or other tax withholding
obligations, if any,
Page A-1
<PAGE>
which arise upon the disposition of the Common Stock. The Company may,
but will not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of
Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year holding period, I understand that I will be
treated for federal income tax purposes as having received income only
at the time of such disposition, and that such income will be taxed as
ordinary income only to the extent of an amount equal to the lesser of
(1) the excess of the fair market value of the shares at the time of
such disposition over the purchase price which I paid for the shares,
or (2) 15% of the fair market value of the shares on the first day of
the Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness or this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
Name: (Please print)
(First) (Middle) (Last)
Relationship
(Address)
Name: (Please print)
(First) (Middle) (Last)
Relationship
(Address)
Employee's Social Security No.:
Employee's Address:
Page A-2
<PAGE>
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN
EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED
BY ME.
Dated:
Signature of Employee
Signature of Spouse (If beneficiary is someone
other than spouse)
Page A-3
<PAGE>
EXHIBIT "B"
INTELLICALL, INC
1995 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Intellicall,
Inc. 1995 Employee Stock Purchase Plan which began on _______________________,
19_____ (the "Enrollment Date") hereby notifies the Company that he or she
hereby withdraws from the Offering Period. He or she hereby directs the Company
to pay to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
Signature
Date:
Page B-1
