FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 15, 1997
INTELLICALL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-10588 75-1993841
(Commission (IRS Employer
File Number) Identification No.)
2155 Chenault, Suite 410, Carrollton, Texas 75006
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 416-0022
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NONE
(Former name or former address, if changed since last report).
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Item 2. Acquisition or Disposition of Assets.
On December 15, 1997 (the "Closing Date"), ILD Teleservices, Inc.
("ILD"), a majority-owned subsidiary of the Registrant, merged (the "Merger")
with Interlink Telecommunications, Inc. ("Interlink") pursuant to the terms of a
Merger Agreement dated December 15, 1997 (the "Merger Agreement").
Interlink has a variety of businesses as follows: (i) provision of
operator services to private and local exchange carrier payphones and to the
hospitality and correctional markets; (ii) marketing and sale of long distance
prepaid calling services; and (iii) marketing and sale of prepaid local dial
tone services.
The purchase price (herein so called) paid to the shareholders of
Interlink pursuant to the Merger was $12,100,000 paid as follows: (i) ILD paid
$2,000,000 cash on the Closing Date; (ii) ILD executed and delivered its
promissory note in the original principal amount of $2,700,000; (iii) ILD
executed and delivered its promissory note in the original principal amount of
$1,300,000; (iv) ILD issued 16,117 shares of its common stock valued at $273 per
share or $4,400,000 in the aggregate; and (v) ILD issued 5,666.67 shares of its
Series B-3 Preferred Stock valued at $300 or $1,700,000 in the aggregate.
The cash portion of the Purchase Price was financed through advances
made by ILD's senior secured lender, NationsBank, N.A.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
To be filed by amendment.
(c) Exhibits.
The following exhibits are filed as a part of this Form 8-K
Current Report:
10.1 Merger Agreement dated December 15, 1997 by and among
Interlink Telecommunications, Inc., Reginald P. McFarland and ILD
Teleservices, Inc.
10.2 Promissory Note in the original principal amount of
$2,700,000 issued by ILD Teleservices, Inc. payable to Reginald
P. McFarland.
10.3 Promissory Note in the original principal amount of
$1,300,000 issued by ILD Teleservices, Inc. payable to Reginald
P. McFarland.
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SIGNATURES
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.
INTELLICALL, INC.
/s/ William O. Hunt
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Date: December 15, 1997 William O. Hunt,
Chief Executive Officer
THIS MERGER AGREEMENT is dated as of December 15, 1997 by and among ILD
TELESERVICES, INC., a Delaware corporation ("ILD"), on the one hand; and
INTERLINK TELECOMMUNICATIONS, INC., a Georgia corporation ("Interlink");
INTERLINK TELECOMMUNICATIONS OF FLORIDA, INC., a Georgia corporation
("Interlink-Fla.") (Interlink and Interlink-Fla. may be individually referred to
as an "Interlink Co." and collectively referred to as "Interlink Cos.") and
REGINALD P. MCFARLAND, a Georgia resident (the "Shareholder"), on the other
hand, with reference to the following.
W I T N E S S E T H:
WHEREAS, the Interlink Cos. conduct telecommunications operations, and the
Shareholder is the owner of all of the issued and outstanding capital stock of
the Interlink Cos.; and
WHEREAS, the parties wish to provide for the merger of the Interlink Cos.
with and into ILD, as well as to provide for certain additional matters
described herein, subject to the terms and conditions of this Agreement
(including the definitions contained in Section 8.7 hereof).
NOW, THEREFORE, in consideration of the respective premises and the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
MERGER OF INTERLINK COS. WITH AND INTO ILD
1.1 The Merger. Subject to the terms and conditions hereof, the parties
hereto agree that the Interlink Cos. shall be merged with and into ILD by virtue
of the Merger and the separate existence of each Interlink Co. shall thereupon
cease. ILD shall be the surviving corporation in the Merger and shall continue
to be governed by the laws of the State of Delaware, and the separate corporate
existence of ILD with all its purposes, rights, privileges, powers, immunities,
and franchises shall continue unaffected by the Merger. Subject to the terms and
conditions hereof, the parties hereto shall take all actions necessary in
accordance with applicable law and the respective charter documents of ILD and
the Interlink Cos. to cause the Merger to be consummated.
1.2 Effective Time of the Merger. The Merger shall become effective upon
the filing of a Certificate of Merger in substantially the form as Exhibit H
hereto with both the Secretary of State of Delaware (in accordance with the
applicable provisions of the Delaware Code) and the Secretary of State of
Georgia (in accordance with the applicable provisions of the Georgia Code). For
purposes hereof, the time at which the Merger shall become effective shall be
referred to as the "Effective Time".
1.3 Tax-Free Reorganization. The parties intend that the Merger qualify as
a reorganization within the meeting of Section 368(a)(1)(A) of the Code. ILD
shall not take any
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action that would cause the Merger to fail to qualify as a reorganization within
the meaning of Section 368(a)(1)(A) of the Code.
1.4 All Necessary Action. From time to time after the Effective Time,
as and when requested by ILD, the Shareholder shall execute and deliver all such
documents and assurances and to take and do, in the name and on behalf of either
Interlink Co. or otherwise, all such other actions as may be reasonably
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets of the Interlink
Cos. in ILD or otherwise to carry out this Agreement, including without
limitation, removing the name "Interlink" from that of any other entity owned by
the Shareholder. The Shareholder shall assist ILD officials in the delivery of
access rights to any source codes forming part of the Intellectual Property (as
described in Section 3.8 hereof).
1.5 Effect of Merger.
1.5.1 Upon the Effective Time, the certificates which theretofore
represent issued and outstanding shares of capital stock of the Interlink Cos.
shall cease to represent any rights with respect thereto, and subject to the
Delaware Code and the Georgia Code, shall only represent the right to receive
the Merger Consideration described in Article II hereof. The Shareholder hereby
covenants that he shall not assert appraisal rights under the Georgia Code and
shall tender his certificates representing outstanding shares of capital stock
of either Interlink Co. in connection with the Merger subject to the terms and
conditions of this Agreement.
1.5.2 The Certificate of Incorporation of ILD in effect immediately
prior to the Effective Time (subject to Section 6.2 (g) hereof) shall be the
Certificate of Incorporation of ILD as of the Effective Time, until duly amended
in accordance with its terms and the Delaware Code. The corporate name of ILD
shall remain "ILD Teleservices, Inc."
1.5.3 The bylaws of ILD in effect immediately prior to the Effective
Time shall be the bylaws of ILD as of the Effective Time, until duly amended in
accordance with their terms and the Delaware Code.
1.5.4. The officers and directors of ILD immediately prior to Effective
Time shall be and remain the officers and directors of ILD as of the Effective
Time until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation and removal in accordance with ILD's
Certificate of Incorporation and bylaws.
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ARTICLE II
MERGER CONSIDERATION.
2.1 Terms and Conditions of the Merger.
2.1.1 At the Effective Time, by virtue of the Merger, each share of
Interlink Stock shall be retired and converted into its pro rata share (based on
the percentage determined by dividing such one share by the total number of
outstanding shares of Interlink Stock) of the following:
(1) Two Million Dollars ($2,000,000) in cash in immediately
available funds (which at the option of the Shareholder, may be by
cashier's check or by wire transfer); (2) Two Million Seven Hundred
Thousand Dollars ($2,700,000) in the form of a subordinated promissory
note from ILD in substantially the form attached as Exhibit A-1; (3)
6,117 Shares of common stock of ILD determined by dividing Four
Million Four Hundred Thousand Dollars ($4,400,000) by a deemed per
share price of $273; (4) One Million Dollars ($1,000,000) in the form
of a subordinated promissory note from ILD in substantially the form
attached as Exhibit A-2; and (5) 6,666.67 shares of Series B-3
Preferred Stock of ILD, which stock shall have the rights and
preferences shown in Exhibit B attached hereto which rights and
preferences include a stated value of $300 per share, shall bear an
annual dividend rate of six percent (6%) payable quarterly, and shall
be subject to a put right at any time after the expiration of five
years from the issue date.
2.1.2 At the Effective Time, by virtue of the Merger, each share of
Interlink-Fla. Stock shall be retired and converted into its pro rata share
(based on the percentage determined by dividing such one share by the total
number of outstanding shares of Interlink-Fla. Stock) of Ten Dollars ($10.00).
2.2 Exchange Procedure. The secretary for each of Interlink and
Interlink-Fla. shall deliver to ILD at the Closing a shareholder ledger,
certified under oath, showing the number of shares of capital stock of the
respective Interlink Co. held by any shareholders of either of the Interlink
Cos., and the numbered certificates represented thereby. At the Closing, ILD
shall deliver to the Shareholder, as set forth in Section 2.1, cash, notes and
stock certificates (which may include fractional shares) sufficient in the
aggregate to pay the Merger Consideration and the Shareholder shall thereupon
surrender his certificates of shares of capital stock of the Interlink Cos.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INTERLINK COS.
AND THE SHAREHOLDER
Each of Interlink, Interlink-Fla. and the Shareholder, jointly and
severally, represent and warrant to ILD as follows:
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3.1 Organization, Corporate Power and Authorization. Each Interlink Co.
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Georgia, and has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its business
as currently conducted. Except as set forth on Schedule 3.1, each Interlink Co.
is duly qualified and in good standing to do business in each jurisdiction in
which the character of the property owned, leased or operated by it and the
nature of the business conducted by it makes such qualification or licensing
necessary. Schedule 3.1 hereto contains a complete and accurate list of the
jurisdictions of qualification of the Interlink Cos. Each Interlink Co. has all
requisite right, power and capacity to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by each Interlink Co. of this Agreement have been duly
authorized by all requisite corporate action on the part of such Interlink Co.
This Agreement has been duly and validly executed and delivered by each
Interlink Co. and constitutes the valid and binding obligation of each such
Interlink Co., enforceable in accordance with its terms, subject, as to
enforcement of remedies, to general equity principles and to applicable
bankruptcy, insolvency, and similar laws and moratorium laws from time to time
in effect. Correct and complete copies of the Articles of Incorporation and
bylaws of each Interlink Co. are attached as part of Schedule 3.1, and such
copies reflect all amendments made thereto at any time prior to the date of this
Agreement.
3.2 Ownership of the Shares, Subsidiaries. The authorized capital stock
for each Interlink Co. consists solely of 500 shares of common stock, no par
value per share. Schedule 3.2 hereto contains a complete and correct list as the
date hereof of the name of all shareholders of each Interlink Co. and the number
of issued and outstanding shares of capital stock of either Interlink Co. owned
of record by each shareholder. All such shares of capital stock of the Interlink
Cos. reflected on such schedule are validly issued, fully paid and
non-assessable, and are free and clear of any liens, restrictions, claims,
equities, charges, options, rights of first refusal, or encumbrances, with no
defects of title whatsoever. Other than the shareholders shown on Schedule 3.2,
no other person or entity owns any shares of capital stock of either Interlink
Co. or any rights to the revenues (except for commissions due in the ordinary
course of business) or profits thereof. Except as set forth on Schedule 3.2,
there are no outstanding rights, subscriptions, options, warrants, calls,
commitments or agreements relating to any capital stock or other security of
either Interlink Co., and there is no authorized or outstanding instrument or
security of any kind convertible into or exchangeable for any such capital stock
or other security. There are no restrictions on the transfer pertaining to the
capital stock of either Interlink Co. or the ownership thereof other than those
imposed by securities laws or the Georgia Code. Neither of the Interlink Cos.
has any subsidiaries or holds any stock or equity interests in any other
corporation, partnership, limited liability company or other entity. The
Shareholder does not hold any equity interests in any privately-held entity in
the telecommunications business other than Stratacom, Inc.
3.3 Consents and Approvals. Schedule 3.3 attached hereto contains a
complete and correct list of all consents, waivers or approvals required for the
Interlink Cos. or the Shareholder to consummate this Agreement whether resulting
from a requirement under, or possible occurrence of default or breach of: (i)
any provision of law, statute, rule or regulation to which either Interlink
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Co. is subject, including without limitation, the rules and regulations of state
public service commissions, (ii) any term or condition of any charter provision
or bylaw of either Interlink Co. or any shareholder agreement in effect among
the shareholders of either Interlink Co., or (iii) any lease, contract,
mortgage, note, billing and collection agreement, operator services agreement,
vending arrangement for prepaid calling cards, or other agreement or instrument
to which either Interlink Co. is a party or to which either Interlink Co. or any
of its properties is subject.
3.4 Title and Condition of Properties. Schedule 3.4 attached hereto
contains a complete list of all items of real property and material items of
tangible personal property used by, or otherwise owned by, the Interlink Cos. in
their businesses and operations, reflecting in each instance, whether such
property is owned or leased. The Interlink Cos. have good and marketable title
to the assets owned by them, free and clear of any mortgage, pledge, security
interest, lien, title retention agreement or other charge or encumbrance of any
kind except as otherwise set forth on Schedule 3.4. No items of personal
property have been disposed, sold or transferred by either Interlink Co. since
June 15, 1997 except in the ordinary course of business. Except for the property
separately listed under the heading "Excluded Personal Property" on Schedule
3.4, there are no items of personal property used in the business and operations
of the Interlink Cos. which are not owned by the Interlink Cos. or held by
either of them under a written license or lease. Schedule 3.4 also separately
contains a list of spare parts inventory, grouped in general categories.
3.4.1 Except for the spare parts inventory reflected on Schedule 3.4 or
as otherwise disclosed therein, each item of network switching and call
processing equipment, computer hardware, dialing boards or other
telecommunications hardware used in the business of the Interlink Cos. is in
good operating condition and repair, subject only to ordinary wear and tear, and
is suitable for use in the business of the Interlink Cos. as currently
conducted. Except as otherwise disclosed on Schedule 3.4, the Interlink Cos.
conduct their own maintenance on the network switching equipment used in the
business of the Interlink Cos., and none of such equipment is, as of the date
hereof under repair, or in possession of vendor or outsourced maintenance
contractor.
3.4.2. Schedule 3.4.2 separately contains a list of the vending
machines or retail outlets from which prepaid calling cards of the Interlink
Cos. are dispensed, whether such machines are owned or leased by the Interlink
Cos., and the location of such machines or retail outlets. Except as disclosed
in Schedule 3.4.2, each vending machine used in the business of the Interlink
Co. is in good operating condition and repair, subject only to ordinary wear and
tear, and is suitable for use in the business of the Interlink Cos. as currently
conducted. The Interlink Cos. maintain the vending machines and, except as
otherwise disclosed on Schedule 3.4.2, none of such machines are, as of the date
hereof, under repair, or in possession of vendor or outsourced maintenance
contractor. Except as disclosed on Schedule 3.4.2, none of the cards in the
vending machines or at the retail outlets as of the date hereof are owned by any
person or entity other than either Interlink Co. There has not been any damage,
printing or encoding problems, or other circumstances which has rendered more
than $5,000 in retail value of the prepaid calling cards inoperable or obsolete
in the last 24 months. The prepaid calling card inventory shall consist of items
of a quality useable or saleable in the ordinary course of business.
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3.4.3. Schedule 3.4.3 separately discloses an accounts receivables
aging for the Interlink Cos. as of November 15, 1997. The accounts receivable
shown thereon shall in all respects be true and genuine and represent bona fide
obligations of the respective persons or parties shown to be owing the same, and
shall be collected in the normal course of business subject to (i) reserves
consistent with the reserves set forth in the Interlink Audited Financial
Statements described in Section 3.11 or (ii) holdbacks by OAN Services, Inc.
3.5. No Violations of Law; Licenses and Permits. Except with respect to
the ongoing regulatory compliance activities listed on Schedule 3.5, each
Interlink Co. is in compliance with laws, statutes, ordinances, rules and
regulations of the Federal Communications Commission or state public service
commissions applicable to the operation of their businesses and operations as a
telecommunication service provider or with respect to which compliance is a
condition to engaging in business as a telecommunication service provider.
Except with respect to the ongoing regulatory compliance activities listed on
Schedule 3.5, each Interlink Co. is in compliance in all material respects with
other laws, statutes, ordinances, rules and regulations applicable to the
operation of its businesses and operations, including without limitation, laws
and regulations relating to antitrust compliance, pollution and environmental
control, equal employment opportunity, ERISA, and employee safety. Except with
respect to the ongoing regulatory compliance activities listed on Schedule 3.5,
the facilities used by the Interlink Cos. comply with, conform to and obey all
requirements specified in any hazard insurance policy covering such facilities,
and the local zoning classifications permit the use of such facilities for the
purposes and in the manner that the business is being conducted. Except with
respect to the ongoing regulatory compliance activities listed on Schedule 3.5,
the Interlink Cos. have all licenses, permits or other authorizations of
governmental authorities necessary for the conduct of their business and
operations as currently conducted, and all such licenses or permits are
described on Schedule 3.5. The business of each Interlink Co. has been operated
in compliance with all tariffs, rules and regulations applicable to local
exchange carriers and inter-exchange carriers except with respect to any
noncompliance which will not have an economic impact (either in fines, remedial
action or filings, or in lost revenue) exceeding $25,000.
3.6. Litigation. Except as set forth on Schedule 3.6, there is no
claim, suit, action, governmental investigation or litigation, or legal,
administrative, arbitration or other proceeding, of any kind pending or, to the
knowledge of the Shareholder, overtly threatened against, relating to or
involving either Interlink Co. or the Shareholder (whether as plaintiff or
defendant) at law or in equity, before or by any governmental department,
commission, board, bureau, agency, or instrumentality, nor does the Shareholder
know of any ground for any such claim, suit, action, investigation, litigation
or proceeding.
3.7. Leases and Contracts. Schedule 3.7 contains a true and complete
list of (i) all agreements, leases or arrangements for vending machines or
written customer contracts to which either Interlink Co. or the Shareholder is a
party and (ii) other written contracts, agreements, leases, or other instruments
to which either Interlink Co. or the Shareholder is a party which will have
resulted, or is likely to result, in an expenditure by the Interlink Cos. of
more than $10,000 in calender year 1997, in each case with information as to the
term of the agreement (the items disclosed, or that
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should have been disclosed, on such schedule are referred to as "Contracts").
The Interlink Cos. have delivered to ILD or its counsel true and complete copies
of all written Contracts (unless otherwise noted in the correspondence
delivering such Contracts or, in the case of subscriber agreements for the local
telephone business, sales representative agreements with sales representatives,
standard agent agreements with agents, non-exclusive consultant agreements with
consultants, and public pay telephone agreements with customers, a form of the
agreement along with a current list of the parties thereto other than an
Interlink Co). Except as otherwise provided on Schedule 3.7, each of the
Contracts is valid and in full force and effect, and neither Interlink Co. nor,
to the knowledge of the Shareholder, the other party thereto, is in default
thereunder. Also set forth on Schedule 3.7 are the customers of the Interlink
Cos. which have averaged more than $5,000 in gross revenues to the Interlink
Cos. for the first ten calender months of 1997. Neither of the Interlink Cos.
has received notice that any of the customers to the Contracts intends to cancel
or terminate the same, nor does either Interlink Co. have knowledge of any
pending or threatened bankruptcy, insolvency or similar proceeding with respect
to any party to the Contracts. Neither the Interlink Cos. nor the Shareholder
has any knowledge that any of the customers of the Interlink Cos. which average
more than $5,000 in gross revenues per month in 1997 will terminate, or seek to
alter or modify, its existing relationship with the Interlink Cos., whether in
the normal course of business or upon the consummation of the transactions
contemplated by this Agreement. Except as provided in Schedule 3.3, no consent
of any person is needed in order that each such Contract shall continue in full
force and effect in accordance with its terms without penalty, acceleration or
rights of early termination by reason of the consummation of the Merger.
3.7.1 The billing and collections agreement between Interlink, Harris
Corporation, and OAN Services, Inc. dated as of August 14, 1993 is terminable at
will by Interlink upon written notice to OAN Services, Inc. and Harris
Corporation. The Interlink Cos. have qualified for the prepayment program
offered by OAN Services, Inc. and such program is in effect as of the date
hereof.
3.7.2 The vending machines for prepaid calling cards are in the locations
shown on Schedule 3.4.2 and agreements of the Interlink Cos. for the sale of
prepaid calling cards (whether out of machines or in retail outlets) constitute
valid, legal and binding agreements with the parties in possession of such
locations, and neither of the Interlink Cos. nor the Shareholder know of any
reason why such agreements will not continue in full force and effect after the
Effective Time in accordance with the terms of the agreements. Copies of written
site contracts for the sale of prepaid vending cards have been delivered to ILD
as contemplated in Section 3.7 above. Also provided on Schedule 3.10 is a
summary of the commission structure payable to the owner/lessor for each
location. . 3.7.3. There are, as of the date hereof, approximately six months
remaining on the lease on the principal office of the Interlink Cos. in
Marietta, Georgia (the "Interlink Premises Lease"). The use of the premises as
currently conducted is in compliance with all terms of the Interlink Premises
Lease and Interlink has not received any notices of defaults under such
Interlink Premises Lease nor is aware of disputes between Interlink and the
landlord under the Interlink Premises Lease in the 24 months prior to the date
hereof except as set forth on Schedule 3.7.3.
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3.7.4 Except as set forth on Schedule 3.7.4, the Interlink Cos. have
delivered to ILD true and correct copies of all policies of fire, casualty,
general liability, use and occupancy, and other forms of insurance covering
their properties, assets and business. The general liability is on a claims made
basis. Neither Interlink Co. has received notice of default under, or intended
cancellation or nonrenewal of, any policies of insurance which insure the
properties, business or liability of the Interlink Cos., nor has either
Interlink Co. been refused any insurance for coverage by an insurance carrier to
which it has applied for insurance. Schedule 3.7.4 separately discloses any
claims made under the insurance policies of the Interlink Cos. in the 24 months
of operation prior to the date hereof.
3.8. Intellectual Property. Schedule 3.8 hereto contains a complete
list and brief description of all patents, patent applications, copyrights,
source codes, trademarks, trademarks applications, service marks, designs,
proprietary processes or other intellectual property owned or licensed by the
Interlink Cos. and used in their business and operations (collectively, the
"Intellectual Property"). All Intellectual Property developed, enhanced,
modified or exploited by the Interlink Cos. or the Shareholder in the conduct of
the business of the Interlink Cos. is beneficially owned or licensed by either
Interlink Co., and to the extent that an Interlink Co. has registered with the
U.S. Patent and Trademark Office any Intellectual Property, then such Interlink
Co. has undertaken all necessary renewals and paid all required fees to perfect
its ownership rights in such Intellectual Property. Neither Interlink nor the
Shareholder has undertaken any action to diminish or otherwise adversely affect
the Intellectual Property. Neither Interlink Co. nor the Shareholder has
knowledge of any existing infringing use by any third party of the Intellectual
Property. The use of the Intellectual Property by either Interlink Co., whether
directly by it in its operations or through its operations with the Harris
Corporation in the vending machines for the prepaid calling cards, has not
infringed any intellectual property rights of any third parties, including
without limitation, other persons who have developed and exploited vending
systems for prepaid calling cards. No past or present shareholder, consultant,
officer, director or employee of either Interlink Co. has any ownership rights
to any of the Intellectual Property, including, without limitation, the network
software or customer reporting system used in the business and operations of the
Interlink Cos. With respect to any Intellectual Property used by the Interlink
Cos. under a license: (i) the license agreement is described on Schedule 3.7
(except a listing of the software is sufficient for any "pre- wrapped,
off-the-shelf" software), (ii) the rights of the Interlink Cos. to the
Intellectual Property thereunder is, subject to the rights of any licensor
thereof, free and clear of any liens and encumbrances, and (iii) the license
agreement permits the use of the Intellectual Property licensed thereby in the
manner currently used by the Interlink Cos. To Shareholder's knowledge, and
except for the payments required in connection with the Intellectual Property,
neither Interlink Co. is obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner or licensee of, or
other claimant to, any patent, trademark, service mark, trade name, copyright or
other intangible asset, with respect to the use thereof or in connection with
the conduct of their business or otherwise.
3.9. Taxes. Except as set forth on Schedule 3.9, each Interlink Co. has
timely filed, or caused to be timely filed, all Taxes required to be paid or
withheld by such Interlink Co. There is not
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and there will not be any liability of ILD for any Taxes arising out of or
affecting the assets of the Interlink Cos. relating to a period prior to the
Closing Date other than such Taxes for which adequate reserves are expressly set
forth on the Interlink Audited Financial Statements described in Section 3.11
below and excise, sales, payroll and other Taxes arising since the date thereof
in the normal course of business. There are no claims or assessments pending
against either Interlink Co. for any alleged deficiency in any Tax, and the
Shareholder does not know of any threatened Tax claims or assessments against
either Interlink Co. There are no outstanding requests by either Interlink Co.
for any extension of time within which to file any return or within which to pay
any Taxes shown to be due on any return. As of the date of this Agreement, no
taxing authority is conducting or has notified either Interlink Co. or the
Shareholder that it intends to conduct an audit of any prior tax period of
either Interlink Co. or the Shareholder. All income tax liabilities of either
Interlink Co., if any, arising from the termination of the "S" corporation
status under the Code shall be borne by the Shareholder as the sole shareholder
of such Interlink Co.
3.10. Employee Matters. Schedule 3.10 hereto contains a true and
complete list of all employees of either Interlink Co. with the job title,
current salary or wage per hour, age, sex, and date of commencement noted for
each such employee. Except as disclosed on such schedule, none of such employees
have been subject to any formal disciplinary proceedings within the last 12
months. Neither Interlink Co. nor the Shareholder are aware of any labor strike,
dispute, work stoppages or slowdowns occurring or threatened against the
Interlink Cos. in the last 3 years and there are no present circumstances which
are likely to give rise to any such dispute or stoppage. Except as specified on
Schedule 3.10, neither Interlink Co. has any employment agreement or other
contract with any of its employees not terminable at will nor any bonus or
commission arrangements with any of its employees, consultants or joint venture
partners. Neither Interlink Co. is subject to, nor has any obligation under, any
employment, consulting or collective bargaining contracts, deferred
compensation, pension (as defined in Section 3(2) of ERISA), profit-sharing,
bonus, stock option, stock appreciation, stock purchase or other non-qualified
benefit or compensation commitments, benefit plans, arrangements or plans,
including any welfare plans (as defined in Section 3(1) of ERISA), fringe
benefit arrangements, or multi-employer plans (as defined in Section 337A of
ERISA) of or pertaining to the present or former employees of the Interlink Cos.
ILD shall not incur any liability associated with the employee benefit plans of
the Interlink Cos. except to be expressly reserved on the Interlink Audited
Financial Statements. As of the date of this Agreement, there is no unfair labor
practice complaint against either Interlink Co. pending or, to the knowledge of
the Shareholder, threatened before the National Labor Relations Board. Except as
set forth on Schedule 3.10, neither Interlink Co. nor the Shareholder know of
any current health problems (other than pregnancies) of the current Interlink
employees (or their spouses or dependents) which is likely to cause in any
single case more than $10,000 in medical expenses in the 6 months following the
Closing.
3.11 Financial Information.
3.11.1 The Interlink Cos. had monthly consolidated revenues (as defined in
accordance with generally accepted accounting principles) exceeding the
respective figures specified below for each
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of the months of July, August, September and October 1997:
Operator Services Revenue $160,000
Debit Card $390,000
One Plus $ 60,000
3.11.2 Attached as Schedule 3.11 are audited financial statements of
the Interlink Cos. as of September 30, 1997 with the report of Smith & Howard
(the "Interlink Audited Financial Statements"). The Interlink Audited Financial
Statements have been prepared in accordance with generally accepted accounting
principles, and present fairly the assets, liabilities and financial condition
of the Interlink Cos. as of September 30, 1997, and disclose all liabilities of
the Interlink Cos., whether absolute, contingent, accrued or otherwise, existing
as of the date thereof which are required to be reflected in financial
statements prepared in accordance with generally accepted accounting principles.
Neither Interlink Co. has incurred any liability or obligation related to its
operations (whether accrued, contingent or otherwise) since the date of the
Interlink Audited Financial Statements which, as measured as of the date hereof
and as of the Closing Date, will cause the liabilities and obligations of the
Interlink Cos. which are set forth on the balance sheet in the Interlink Audited
Financial Statements to be exceeded by more than $25,000 except for the
liabilities of the Interlink Cos. separately disclosed on Schedule 3.11 as
"Post-Audit Liabilities". The Shareholder has disclosed all information known to
him to its auditors relevant for the proper accounting of revenues and
liabilities of the Interlink Cos.
3.12 Absence of Certain Changes and Events. Except as set forth in
Schedule 3.12, since June 15, 1997: (i) each Interlink Co. has conducted its
business only in the ordinary course; (ii) there has not been any material
adverse change in the business, financial condition, operations, assets or
prospects of the Interlink Cos.; (iii) no Interlink Co. has made any dividends,
distributions or redemptions on its capital stock; (iv) no Interlink Co. has
increased the salary or wages of any employee or officer of the Interlink Cos.
more than 20% of that salary or wages existing as of June 15, 1997; (v) there
has not been any damage, destruction, or loss, whether covered by insurance or
not materially adversely affecting the properties or business of the Interlink
Cos.; (vi) there has not been any sale or transfer by either Interlink Co. of
any tangible or intangible asset other than in the ordinary course of business,
any mortgage or pledge or the creation of any security interest, lien, or
encumbrance on any such asset, or any lease of property, including equipment,
other than tax liens with respect to taxes not yet due and contract rights of
customers in inventory; (vii) no Interlink Co. has incurred any lapse of any
trademark, assumed name, trade name, service mark, copyright or license or any
application with respect to the foregoing; (viii) no Interlink Co. has permitted
any discharge or satisfaction of any lien or encumbrance or the payment of any
liability other than current liabilities in the ordinary course of business;
(ix) neither Interlink Co. has made any loan, advance, or guaranty to or for the
benefit of any person except the creation of accounts receivable in the ordinary
course of business; or (x) there has not been an agreement by either Interlink
Co. to do any of the foregoing.
3.13 Bank Accounts. Schedule 3.13 sets forth a complete and
accurate list of each bank account.
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or financial institution in which either Interlink Co. has an account or safe
deposit box (giving the address and account numbers) and the names of the
persons authorized to draw thereon or to have access thereto.
3.14. No Omissions or Misleading Information. No statement of the
Interlink Cos. or the Shareholder contained herein or in any certificate,
schedule, exhibit or other instrument furnished to ILD pursuant to the
provisions hereof contains or will contain any false or misleading statement of
material fact or omits or will omit any material fact required to be stated to
make any of the statements therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ILD
ILD represents and warrants to the Shareholder, Interlink and
Interlink-Fla. as follows:
4.1 Organization. ILD is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, and has all requisite power and
authority and all material licenses, permits, and authorizations necessary to
carry on and conduct its business as it is now being conducted and to own or
lease its properties and assets, and is duly qualified and in good standing to
do business in each jurisdiction in which the character of the property owned,
leased or operated by it and the nature of the business conducted by it makes
such qualification or licensing necessary. ILD has all requisite right, power
and capacity to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by ILD, the performance by ILD of its covenants and agreements
hereunder, and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of ILD. This
Agreement has been duly and validly executed and delivered by ILD and
constitutes its valid and binding obligation, enforceable in accordance with its
terms, subject, as to enforcement of remedies, to general equity principles and
to applicable bankruptcy, insolvency and similar laws and moratorium laws from
time to time in effect. Copies of ILD's Second Restated and Amended Certificate
of Incorporation and bylaws are attached as Schedule 4.1 hereof and such copies
reflect all amendments made thereto at any time prior to the date of this
Agreement and such copies are correct and complete.
4.2 Capitalization of ILD. Schedule 4.2 hereto contains a complete and
correct list of all authorized capital stock of ILD, the name of all
shareholders of ILD and the number of issued and outstanding shares of capital
stock of ILD owned of record by each shareholder (on a Fully-Diluted Basis). All
of the outstanding shares of capital stock of ILD reflected on Schedule 4.2 are
validly issued, fully paid and non-assessable, and are free and clear of any
liens, restrictions, claims, equities, charges, options, rights of first
refusal, or encumbrances, with no defects of title whatsoever (except for
restrictions under that certain Restated and Amended Shareholders Agreement
dated as of August 31, 1997 and except that shares held by Intellicall, Inc.
have been pledged to its senior lender). Other than the agreements separately
disclosed on Schedule 4.2, no other person or entity owns any shares
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of capital stock of ILD nor are there any shareholders agreement, voting trust
agreements or registration rights agreements to which ILD is a party, or the
knowledge of ILD after due inquiry, any of its shareholders are a party. No
stockholder of ILD has exercised any registration rights with respect to the
capital stock of ILD held by such stockholder. Except as set forth on Schedule
4.2, there are no outstanding rights, subscriptions, options, warrants, calls,
commitments or agreements relating to any capital stock or other security of ILD
or any subsidiary of ILD, and there is no authorized or outstanding instrument
or security of any kind convertible into or exchangeable for any such capital
stock or other security of ILD or any subsidiary of ILD. There is no outstanding
preferred stock of ILD which has greater or equal priority, either as to
preference in liquidation, winding up or dissolution or as to dividend rights,
than the Series B-3 preferred stock to be issued to Shareholder as part of the
Merger Consideration other than the Series B preferred stock and the Series B-2
preferred stock which is pari passu to the Series B-3 preferred stock. The
registration rights to be afforded the Shareholder pursuant to the Registration
Rights Agreement referenced in Section 5.8.3 hereof are at least as favorable as
registration rights held by any other shareholder of ILD other than the limited
mandatory registration rights provided in section 1(b) of such agreement. All
dividends which may be payable on preferred stock of ILD have been paid in full.
Neither ILD nor IOS have any treasury shares of capital stock. IOS is the only
subsidiary of ILD and all 1,000 shares of the issued and outstanding stock of
IOS is owned by ILD, has been validly issued, fully paid and non-assessable, and
are free and clear of any liens, restrictions, claims, equities, charges,
options, rights of first refusal, or encumbrances, with no defects of title
whatsoever. ILD does not hold any equity interests in any other corporation,
partnership, limited liability company or other entity. There are no preemptive
rights applicable to the sale or issuance of capital stock by ILD.
4.3 Consents and Approvals. Schedule 4.3 attached hereto contains a
complete and correct list of all consents, waivers or approvals required for ILD
to consummate this Agreement whether resulting from a requirement under, or
possible occurrence of default or breach of: (i) any provision of law, statute,
rule or regulation to which ILD is subject, including without limitation, the
rules and regulations of state public service commissions, (ii) any term or
condition of any charter or bylaw of ILD or any shareholder agreement in effect
among the shareholders of ILD, or (iii) any lease, contract, mortgage, note,
billing and collection agreement, operator services agreement, or other
arrangement or instrument to which ILD is a party or to which ILD or any of
their respective properties is subject.
4.4 ILD Shares Issued to Interlink. The shares of capital stock of ILD
constituting part of the Merger Consideration, when issued and delivered to the
Shareholder in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable shares of the
respective class to which such are issued, and shall be free of any liens or
encumbrances whatsoever (other than liens or encumbrances resulting from the
actions of the Shareholder). The issuance, sale and delivery of shares of
capital stock by ILD as part of the Merger Consideration is not subject to any
preemptive rights of stockholders of ILD or to any right of first refusal or
other similar right in favor of any person. The common stock of ILD to be issued
to the Shareholder as part of the Merger Consideration will constitute 6.409% of
all the common stock of ILD issued and outstanding as of the Effective Time on a
Fully-Diluted Basis.
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4.5 Financial Information. The audited financial statements of ILD as
of December 31, 1996, the unaudited balance sheet of ILD as of September 30,
1997 and unaudited income statements of ILD as of October 31, 1997
(collectively, the "ILD Financial Statements"), are attached hereto as Schedule
4.5 hereto. The ILD Financial Statements have been prepared in accordance with
generally accepted accounting principles, consistently applied and in a manner
substantially consistent with prior financial statements of ILD, and present
fairly the assets, liabilities and financial condition of ILD as of the
respective dates thereof and the related results of operations and changes in
financial position for the periods then ended (except the unaudited statements
do not have any notes thereto and are subject to normal year end audit
adjustments which will not adversely deviate in any material respect from the
unaudited statements), and disclose all liabilities of ILD, whether absolute,
contingent, accrued or otherwise, existing as of the dates thereof which is
required to be reflected in financial statements prepared in accordance with
generally accepted accounting principles. Except as set forth in ILD Financial
Statements, or in Schedule 4.5 attached hereto, ILD had no obligations or
liabilities, absolute, contingent, accrued or unaccrued which would be required
to be disclosed on a balance sheet as of the date hereof or on the Closing Date
prepared in accordance with generally accepted accounting principles,
consistently applied, other than liabilities in the ordinary course of business.
4.6 No Violations of Law; Licenses and Permits. Except with respect to
the ongoing regulatory compliance activities listed on Schedule 4.6, ILD is in
compliance with laws, statutes, ordinances, rules and regulations of the Federal
Communications Commission or state public service commissions applicable to the
operation of their businesses and operations as a telecommunication service
provider or with respect to which compliance is a condition to engaging in
business as a telecommunication service provider. Except with respect to the
ongoing regulatory compliance activities listed on Schedule 4.6, ILD is in
compliance in all material respects with other laws, statutes, ordinances, rules
and regulations applicable to the operation of its businesses and operations,
including without limitation, laws and regulations relating to antitrust
compliance, pollution and environmental control, equal employment opportunity,
ERISA, and employee safety. The facilities used by ILD comply with, conform to
and obey all requirements specified in any hazard insurance policy covering such
facilities, and the local zoning classifications permit the use of such
facilities for the purposes and in the manner that the business is being
conducted. Except with respect to the ongoing regulatory compliance activities
listed on Schedule 4.6, ILD has all licenses, permits or other authorizations of
governmental authorities necessary for the conduct of its business and
operations as currently conducted, and all such licenses or permits are
described on Schedule 4.6. The business of ILD has been operated in compliance
with all tariffs, rules and regulations applicable to local exchange carriers
and inter-exchange carriers except with respect to any noncompliance which will
not have an economic impact (either in fines, remedial action or filings, or in
lost revenue) exceeding $25,000.
4.7 Absence of Certain Changes and Events. Except as set forth in
Schedule 4.7, since June 15, 1997: (i) ILD has conducted its business only in
the ordinary course; (ii) there has not been any material adverse change in the
business, financial condition, operations, assets or prospects of ILD; (iii) ILD
has not made any dividends, distributions or redemptions on its capital stock;
(iv)
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ILD has not increased the salary or wages of any employee or officer of ILD more
than 20% of that salary or wages existing as of June 15, 1997; (v) there has not
been any damage, destruction, or loss, whether covered by insurance or not
materially adversely affecting the properties or business of ILD; (vi) there has
not been any sale or transfer by ILD of any tangible or intangible asset other
than in the ordinary course of business, any mortgage or pledge or the creation
of any security interest, lien, or encumbrance on any such asset, or any lease
of property, including equipment, other than tax liens with respect to taxes not
yet due and contract rights of customers in inventory; (vii) ILD has not
incurred any lapse of any trademark, assumed name, trade name, service mark,
copyright or license or any application with respect to the foregoing; (viii)
ILD has not permitted any discharge or satisfaction of any lien or encumbrance
or the payment of any liability other than current liabilities in the ordinary
course of business; (ix) ILD has not made any loan, advance, or guaranty to or
for the benefit of any person except the creation of accounts receivable in the
ordinary course of business; or (x) there has not been an agreement by ILD to do
any of the foregoing.
4.8 Litigation. Except as set forth on Schedule 4.8, there is no claim,
suit, action, governmental investigation or litigation, or legal,
administrative, arbitration or other proceeding, of any kind pending or, to the
knowledge of ILD, overtly threatened against, relating to or involving ILD
(whether as plaintiff or defendant) at law or in equity, before or by any
governmental department, commission, board, bureau, agency, or instrumentality,
nor does ILD know of any ground for any such claim, suit, action, investigation,
litigation or proceeding.
4.9 Taxes. ILD has timely filed, or caused to be timely filed, all
Taxes required to be paid or withheld by ILD. There is not and there will not be
any liability of ILD for any Taxes arising out of or affecting the assets of ILD
relating to a period prior to the Closing other than such Taxes for which
adequate reserves are expressly set forth on the ILD Financial Statements
described in Section 4.5 above and taxes arising since the date thereof in the
normal course of business. There are no claims or assessments pending against
ILD for any alleged deficiency in any Tax, and ILD does not know of any
threatened Tax claims or assessments against ILD. There are no outstanding
requests by ILD for any extension of time within which to file any return or
within which to pay any Taxes shown to be due on any return. As of the date of
this Agreement, no taxing authority is conducting or has threatened or notified
ILD that it intends to conduct an audit of any prior tax period of ILD.
4.10 Intellectual Property. Schedule 4.10 hereto contains a list and
brief description of all patents, patent applications, copyrights, source codes,
trademarks, trademarks applications, service marks, designs, proprietary
processes or other intellectual property owned or licensed by ILD and used in
its business and operations (collectively, the "ILD Intellectual Property"). All
ILD Intellectual Property developed, enhanced, modified or exploited by ILD is
beneficially owned or licensed by ILD, and to the extent that ILD has registered
with the U.S. Patent and Trademark Office any ILD Intellectual Property, ILD has
undertaken all necessary applications or renewals and paid all required fees to
perfect its ownership rights in the ILD Intellectual Property. ILD has not
undertaken any action to diminish or otherwise adversely affect the ILD
Intellectual Property. ILD has no knowledge of any existing infringing use by
any third party of the ILD Intellectual Property. The use of the ILD
Intellectual Property by ILD has not infringed any intellectual property rights
of any third parties.
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No past or present shareholder, consultant, officer, director or employee of ILD
has any ownership rights to any of the ILD Intellectual Property, including,
without limitation, the network software used in the business and operations of
ILD. With respect to any Intellectual Property used by ILD under a license: (i)
the license agreement is described on Schedule 4.10 (except a listing of the
software is sufficient for any "pre-wrapped, off-the-shelf" software), (ii) the
rights of such ILD to the Intellectual Property thereunder is, subject to the
rights of any licensor thereof, free and clear of any liens and encumbrances,
and (iii) the license agreement permits the use of the ILD Intellectual Property
licensed thereby in the manner currently used by ILD. To ILD's knowledge, and
except for the payments required in connection with the ILD Intellectual
Property, ILD is not obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner or licensee of, or
other claimant to, any patent, trademark, service mark, trade name, copyright or
other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
4.11. No Omissions or Misleading Information. No statement of ILD
contained herein or in any certificate, schedule, exhibit or other instrument
furnished to the Interlink Cos. or the Shareholder pursuant to the provisions
hereof contains or will contain any false or misleading statement of material
fact or omits or will omit any material fact required to be stated to make any
of the statements therein not misleading.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1 Mutual Access.
5.1.1 Until the Closing, at the request of ILD, the Interlink Cos. will
give the officers, attorneys, accountants and other authorized representatives
of ILD access, during normal business hours and upon reasonable notice, to all
of the offices, facilities, properties and personnel of the Interlink Cos. The
Interlink Cos. shall furnish the representatives of ILD during such period with
all such information as such representatives may reasonably request and cause
the employees, accountants and attorneys of the Interlink Cos. to cooperate
fully with such representatives in connection with such review and examination
and to make full disclosure to ILD of all material facts affecting the Interlink
Cos. Any investigation shall be conducted in such a manner so as not to
interfere unreasonably with the operation or business of the Interlink Cos.
5.1.2 Until the Closing, at the request of the Interlink Cos., ILD will
give the officers, attorneys, accountants and other authorized representatives
of the Interlink Cos. access, during normal business hours and upon reasonable
notice, to all of the offices, facilities, properties and personnel of ILD. ILD
shall furnish the representatives of the Interlink Cos. during such period with
all such information as such representatives may reasonably request and cause
the employees, accountants and attorneys of ILD to cooperate fully with such
representatives in connection with such review and examination and to make full
disclosure to the Interlink Cos. of all material facts affecting
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ILD. Any investigation shall be conducted in such a manner so as not to
interfere unreasonably with the operation or business of ILD.
5.2 Interim Operations
5.2.1 Interim Operations of the Interlink Cos. Except as contemplated
hereby, during the period from the date of this Agreement to the Effective Time,
each Interlink Co. will conduct its business only in the ordinary course, and
neither Interlink Co. will, unless ILD gives its prior written approval: (i)
undertake any action that would be or result in a violation of the
representation in Section 3.12, (ii) amend or otherwise change either of its
Articles of Incorporation or bylaws, as each such document is in effect on the
date hereof; (iii) issue or sell, or authorize for issuance or sale, additional
shares of any class of capital stock; (iv) sell or agree to sell any material
assets, except in the ordinary course of business; or (v) authorize or make a
capital expenditure exceeding $50,000.
5.2.2 Interim Operations of ILD Except as contemplated hereby, during the
period from the date of this Agreement to the Effective Time, ILD will conduct
its business only in the ordinary course, and ILD will not, unless the Interlink
Cos. give their prior written approval: (i) undertake any action that would be
or result in a violation of the representation in Section 4.7, (ii) amend or
otherwise change its Second Amended and Restated Certificate of Incorporation or
bylaws, as each such document is in effect on the date hereof, except as
contemplated by Section 6.2(g) ; (iii) issue or sell, or authorize for issuance
or sale, additional shares of any class of capital stock or issue or sell, or
agree to issue or sell, any instrument or security convertible into any share of
capital stock of ILD; or (iv) sell or agree to sell any material assets, except
in the ordinary course of business.
5.3 Meetings of Shareholders. Each Interlink Co. will take all action
necessary in accordance with applicable law, its Articles of Incorporation and
bylaws, to convene a meeting of holders of capital stock whose vote is entitled
or required as promptly as practicable to consider and vote upon the approval of
this Agreement. The Shareholder covenants to vote in favor of the Merger.
5.4 Regulatory Filings; Other Action. ILD, the Interlink Cos. and the
Shareholder each acknowledge and agree that, due to exigent business and
operational reasons, the Merger will be consummated prior to the receipt of
formal approvals that may be necessitated by various states as specified on
Schedule 3.3 but that the Merger is in the public interest to: (i) bolster the
capital structure, management staff and customer service operations of the
Interlink Cos. and (ii) insure that uninterrupted service is available to the
existing customers of the Interlink Cos. ILD shall be responsible for all
regulatory filings, actions and expenses incurred after the Effective Time in
connection with the consummation of the transactions hereby, and in connection
therewith, ILD shall use its best efforts to promptly file after the date hereof
in all jurisdictions that require it requests for approval for change of
ownership or control of the Interlink Cos.' regulatory permits or applications
listed on Schedule 3.3. The Shareholder and the Interlink Cos. shall cooperate
with ILD and IOS in such efforts (provided that the fees and expenses of the
Interlink Cos.' counsel in assisting ILD in regulatory efforts after the
Effective Date shall be borne by ILD). Subject to the terms and conditions
herein provided, each Interlink Co. and the Shareholder shall: (a) use all
reasonable efforts
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to promptly take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate under applicable laws
and regulations, rules or orders to consummate and make effective the
transactions contemplated by this Agreement, and (b) use all reasonable efforts
to obtain all other consents, waivers and approvals listed on Schedule 3.3
hereto prior to the Closing. Subject to the terms and conditions herein
provided, ILD shall: (a) use all reasonable efforts to promptly take, or cause
to be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate under applicable laws and regulations, rules or
orders to consummate and make effective the transactions contemplated by this
Agreement, and (b) use all reasonable efforts to obtain the consents, waivers
and approvals listed on Schedule 4.3 hereto prior to the Closing.
5.5 Notification of Certain Matters. Prior to the Effective Time,
neither of the Interlink Cos. nor the Shareholder shall, directly or indirectly,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in or enter into any negotiations or
discussions concerning, any acquisition, business combination or purchase of all
or a portion of the assets (except in the ordinary course of business) of, or
any equity interest in, the Interlink Cos., other than as contemplated by this
Agreement. The Interlink Cos. will notify ILD immediately if any such inquiries
or proposals were received by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated; and the Interlink
Cos. shall instruct any officer, director, agent or affiliate of the Interlink
Cos. to refrain from doing any of the above. The Interlink Cos. shall also give
prompt notice to ILD of: (a) any notice of, or other communication relating to,
a default or event which, with notice or lapse of time or both, would become a
default, received by the Interlink Cos. subsequent to the date of this Agreement
and prior to the Closing Date, under any Contract; (b) any material adverse
changes in the financial conditions, properties, businesses or results of
operations of the Interlink Cos. or the occurrence of any event which, so far as
reasonably can be foreseen at the time of its occurrence, would result in any
such change. Likewise, ILD shall give prompt notice to the Interlink Cos. of:
(a) any notice of, or other communication relating to, a default or event which,
with notice or lapse of time or both, would become a default, received by ILD
subsequent to the date of this Agreement and prior to the Closing Date, under
any of its loan agreements, material contracts, or vendor relations; (b) any
material adverse change in the financial condition, properties, businesses or
results of operations of ILD or the occurrence of any event which, so far as
reasonably can be foreseen at the time of its occurrence, would result in any
such change.
5.6 Publicity. The Interlink Cos., the Shareholder and ILD shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby.
5.7 Expenses. ILD and the Interlink Cos. shall each pay its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereunder; provided, however, in the event the closing occurs, the Shareholder
shall bear any fees and expenses incurred by the Interlink Cos. or the
Shareholder (excluding any legal fees for regulatory compliance but including
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fees and expenses for the tax opinion, the audit or for legal services) incurred
in connection with this transaction which exceed in the aggregate $100,000.
5.8 Agreements Regarding the ILD Shares.
5.8.1 The Shareholder acknowledges that the capital stock or notes forming
part of the Merger Consideration have not been registered under any state
securities laws, or under the Securities Act of 1933, as amended (the "Federal
Act") and agree that he will not transfer any of capital stock or the Notes
received as part of the Merger Consideration, or any interest therein, except
pursuant to an effective registration statement under the applicable state
securities laws and the Federal Act or in a transaction which is exempt under
any such applicable state securities laws and the Federal Act, or make any
transfer which will cause the distribution of capital stock or notes by ILD to
be unlawful or violative of any statute or regulation.
5.8.2 The Shareholder and ILD shall enter into at Closing a shareholders
agreement in the form of Exhibit C hereto.
5.8.3 The Shareholder and ILD shall enter into at Closing a Registration
Rights Agreement in the form of Exhibit D hereto.
5.8.4 ILD shall file with the Secretary of State of Delaware on or prior to
the Closing Date certificate of designations, preferences and other rights for
the Series B-3 preferred stock of ILD in the form of Exhibit B hereto.
5.9 Shareholder Notes. The Interlink Cos. shall cause any indebtedness owed
to the Interlink Cos. by the Shareholder to be written off or paid prior to the
Effective Time, and the Shareholder shall be financially responsible for any
payroll taxes owed by the Interlink Cos. in connection therewith.
5.10 Consulting Agreement. ILD shall enter into at Closing a consulting
agreement in substantially the form of Exhibit E hereto.
5.11 Employment of McFarland; Non-Competition. ILD and the Shareholder
shall enter into at Closing an employment agreement in substantially the form of
Exhibit F hereto. In addition, the Shareholder shall enter into at Closing a
Non-Competition Agreement in substantially the form as Exhibit G attached
hereto.
5.12 Release. The Shareholder shall use reasonable efforts to obtain a
general release from Evanver Schmidt in customary form in favor of the Interlink
Cos.
5.13 Acknowledgment from Programmers. The Interlink Cos. and the
Shareholder shall use their best efforts to obtain an acknowledgment from the
contracted computer programmers who assisted in the formulation of the
Intellectual Property of the Interlink Cos. that such programmer
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was "work for hire" and that the Interlink Cos. possess full and absolute
title to any and all software code or enhancements forming part of the
Intellectual Property generated by such programmers.
ARTICLE VI
CLOSING MATTERS
6.1 Conditions to the Obligations of ILD. The obligations of ILD to
consummate the Merger shall be subject to the satisfaction or waiver, on or
before the Closing Date, of the following conditions:
(a) Representations and Warranties to be True and Correct;
Bring-down Certificate. The representations and warranties contained
in Articles III hereof (as supplemented by the schedules) shall be
true and correct on and as of the Closing Date with the same effect as
though such representations and warranties have been made on and as of
such date (except as to such representations and warranties that speak
as to a different date), and the Interlink Cos. and the Shareholder
shall have complied in all material respects with the covenants and
agreements to be performed by it or him hereunder on or before the
Closing, and the Interlink Cos. and the Shareholder shall have
certified to such effect to ILD in writing; provided, however, that
ILD acknowledges and agrees that should such certificate include any
supplements, alterations or amendments to the representations or
warranties contained in Article III hereof or the disclosure schedules
thereto, then ILD shall either (i) accept such supplements,
alterations or amendments and consummate the Merger transaction
whereby the representations and warranties in Article III shall be so
amended, altered or supplemented or (ii) not accept such supplements,
alterations or amendments and terminate this Agreement whereupon no
party shall have any further lability to the other.
(b) Opinion of Counsel. ILD shall have received from Gerry,
Friend & Sapronov, LLP, counsel for the Interlink Cos. , an opinion
dated as of the Closing Date, as to the matters described in Section
3.1, 3.2, 3.3 (knowledge), 3.5 (knowledge) and 3.6 (knowledge).
(c) Supporting Documents. On or prior to the Closing Date, ILD
shall have received copies of the Articles of Incorporation of each
Interlink Co., and all amendments thereto, certified as of a recent
date by the Secretary of State of the State of Georgia; good standing
certificates from the Secretary of State of Georgia; and a certificate
of the secretary or an assistant secretary of each Interlink Co. as to
incumbency, resolutions and bylaws in form and substance to the
reasonable satisfaction of ILD and its counsel.
(d) Required Consents and Waivers. ILD shall have received the
approvals, consents and waivers set forth on Schedule 4.3, including
the consent of NationsBank, N.A. as its senior secured lender, and
copies from the Interlink Cos. of the consents and waivers set forth
on Schedule 3.3. (other than the regulatory approvals or actions).
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(e) Documents Satisfactory in Form and Substance. Executed
originals of the documents set forth as exhibits hereto to which
either Interlink Co. or the Shareholder is a party, and all other
agreements, certificates, opinions and other documents delivered by
the the Interlink Cos. or the Shareholders hereunder shall be in form
and substance satisfactory to counsel for ILD, in the exercise of such
counsel's reasonable judgment.
(f) No Material Adverse Change. There shall not have been any
material adverse change since the date hereof in any of the assets,
business, financial condition, results of operations or prospects of
the Interlink Cos.
6.2 Conditions to the Obligations of the Interlink Cos. and the Shareholder
. The obligations of the Interlink Cos. and the Shareholder to consummate the
Merger shall be subject to the satisfaction or waiver, on or before the Closing
Date, of the following conditions:
(a) Representations and Warranties to be True and Correct;
Bring-down Certificate. The representations and warranties contained
in Articles IV hereof (as supplemented by the schedules) shall be true
and correct on and as of the Closing Date with the same effect as
though such representations and warranties have been made on and as of
such date (except as to such representations and warranties that speak
as to a different date), and ILD shall have complied in all material
respects with the covenants and agreements to be performed by it
hereunder on or before the Closing, and ILD shall have certified to
such effect to the Interlink Cos. and the Shareholder in writing;
provided, however, that the Interlink Cos. and the Shareholder
acknowledge and agree that should such certificate include any
supplements, alterations or amendments to the representations or
warranties contained in Article IV hereof or the disclosure schedules
thereto, then the Interlink Cos. and the Shareholder shall either (i)
accept such supplements, alterations or amendments and consummate the
Merger transaction whereby the representations and warranties in
Article IV shall be so amended, altered or supplemented or (ii) not
accept such supplements, alterations or amendments and terminate this
Agreement whereupon no party shall have any further lability to the
other.
(b) Opinion of Counsel. The Shareholder shall have received from
Cashin, Morton & Mullins, counsel to ILD, an opinion, dated as of the
Closing Date, as to the matters in Sections 4.1, 4.2, 4.3 (knowledge),
4.4, 4.6 (knowledge), and 4.8 (knowledge).
(c) Supporting Documents. On or prior to the Closing Date, the
Interlink Cos. and the Shareholder shall have received copies of the
Certificate of Incorporation of ILD, and all amendments thereto,
certified as of a recent date by the Secretary of State of the State
of Delaware; a good standing certificate from the Secretary of State
of Delaware; and a certificate of the secretary or an assistant
secretary of ILD as to incumbency, resolutions and bylaws in form and
substance to the reasonably satisfaction of the Interlink Cos., the
Shareholder and their counsel.
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(d) Documents Satisfactory in Form and Substance. Executed
originals of the documents set forth as exhibits hereto to which ILD
is a party and all other agreements, certificates, opinions, and other
documents delivered by ILD hereunder shall be in form and substance
reasonably satisfactory to counsel for the Interlink Cos. and the
Shareholder, in the exercise of such counsel's reasonable judgment.
(e) Required Consents and Waivers. The Interlink Cos. shall have
received copies of all required approvals, consents and waivers,
including those set forth on Schedule 3.3 (other than regulatory
approvals or consents); provided, however, , in the case of any
consent to the transfer of an Contract or other asset of the Interlink
Cos., if not otherwise waived by ILD, as well as copies from ILD of
the consents and waivers set forth on Schedule 4.3.
(f) Tax Opinion. The Shareholder shall have received a tax
opinion from Smith & Howard, in form and substance reasonably
acceptable to the Shareholder, that the Merger qualifies as a
reorganization within the meeting of Section 368(a)(1)(A) of the Code.
(g) Amendment of ILD's Certificate of Incorporation. The Series
B-3 preferred stock designations in the form of Exhibit B hereto shall
have been filed with the Secretary of State of Delaware.
(h) No Material Adverse Change. There shall not have been any
material adverse change since the date hereof in any of the assets,
business, financial condition, results of operations or prospects of
ILD.
6.3 Closing and Closing Date; Termination of Agreement. The closing of the
transactions contemplated hereby (the "Closing") shall occur on or before
December 15, 1997, or as soon thereafter as all closing conditions are satisfied
or waived (the actual date, the "Closing Date"). The parties shall use their
best effort to close as soon as practical after the date hereof.
6.4 Termination of Agreement. This Agreement may only be terminated as
follows:
(a) by the mutual written consent of the parties, by ILD pursuant
to Section 6.1(a) hereof, or by the Interlink Cos. or the Shareholder
pursuant to Section 6.2 (a) ; or
(b) or after January 15, 1998 if any of the conditions set forth
in Section 6.1 have not been fulfilled or waived, unless such
fulfillment has been frustrated or made impossible by any act or
failure to act of ILD; or
(c) or after January 15, 1998 if any of the conditions set forth
in Section 6.2 have not been fulfilled or waived, unless such
fulfillment has been frustrated or made impossible by any act or
failure to act of any of them; or
(d) by either party after March 31, 1997;
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provided, however, that in the event of (b), (c) or (d), such termination shall
not extinguish any rights or actions of a party for breaches, if any, by the
other parties of this Agreement; and provided, further, that nothing herein
shall limit a party in seeking specific performance of this Agreement. Upon
termination, each party shall pay the costs and expenses previously incurred by
it in connection with this Agreement.
6.5 Deliveries at Closing.
6.5.1 At the Closing, the Interlink Cos. or the Shareholder shall deliver
to ILD the following:
(i) certificates representing Interlink Stock and
Interlink-Fla. Stock;
(ii) the certificate of the Interlink Cos. and the
Shareholder described in Section 6.1(a);
(iii) copies of all consents, approvals, acknowledgments and
waivers described in Section 3.3 which have been obtained as of
the Closing;
(iv) an officer's certificate with the following
attachments: (a) copies of resolutions of the Board of Directors
and shareholders of each Interlink Co. approving the transactions
set forth in this Agreement, (b) certificate of compliance of
each Interlink Co. as of the most recent practicable date, from
the appropriate governmental authority of the jurisdiction of its
incorporation; and (c) certificates of incumbency for the
officers of the Interlink Cos. who are executing this Agreement
and the other documents contemplated hereunder;
(v) a shareholders agreement executed by the Shareholder in
substantially the form as Exhibit C;
(vi) a stock registration agreement executed by the
Shareholder in substantially the form as Exhibit D;
(vii) a consulting agreement executed by Stratacom, Inc. in
substantially the form as Exhibit E;
(viii) an Employment Agreement executed by the Shareholder
in substantially the form as Exhibit F;
(ix) Non-Competition Agreement executed by the Shareholder
in substantially the form of Exhibit G;
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(x) If necessary, a Certificate of Merger executed by an
officer of each Interlink Co. in substantially the form of
Exhibit H;
(xi) A copy of the tax opinion referenced in Section 6.2(f)
(if not otherwise waived by the Shareholder);
(xii) signature cards for the bank accounts or safety
deposit boxes described on Schedule 3.13;
(xiii) opinion of counsel described in Section 6.1(b);
(xiv) means of access to the assets of Interlink of the
Purchased Assets where located; and
(xv) such other documents, instruments or agreements from
Interlink or the Shareholder, at or prior to the Closing, as ILD
or its counsel may reasonably require.
6.5.2 At the Closing, ILD shall deliver to the Interlink Cos. and the
Shareholder the following:
(i) the Merger Consideration;
(ii) the certificate of ILD described in Section 6.2(a);
(iii) copies of all consents, approvals, acknowledgments and
waivers described in Section 4.3 which have been obtained as of
the Closing;
(iv) an officer's certificate with the following
attachments: (a) copies of resolutions of the Board of Directors
and, if necessary, the shareholders of ILD approving the
transactions set forth in this Agreement, (b) certificate of
compliance of ILD as of the most recent practicable date, from
the appropriate governmental authority of the jurisdiction of its
incorporation; and (c) certificates of incumbency for the
officers of ILD who are executing this Agreement and the other
documents contemplated hereunder;
(v) a shareholders agreement executed by ILD and other
shareholders of ILD referenced therein in substantially the form
as Exhibit C;
(vi) a stock registration agreement executed by ILD and the
other shareholders of ILD referenced therein in substantially the
form as Exhibit D;
(vii) a consulting agreement executed by ILD in
substantially the form as Exhibit E;
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(viii) an Employment Agreement executed by ILD in
substantially the form as Exhibit F;
(ix) Non-Competetion Agreement executed by ILD in
substantially the form of Exhibit G;
(x) a Certificate of Merger executed by an officer of ILD in
substantially the form of Exhibit H;
(xi) Evidence of the filing of the Series B-3 preferred
stock designations attached as Exhibit B;
(xii) opinion of counsel described in Section 6.2(b); and
(xiii) such other documents, instruments or agreements from
ILD, at or prior to the Closing, as Interlink, the Shareholder or
their counsel may reasonably require.
ARTICLE VII
INDEMNIFICATION
7.1. Indemnification by Shareholder. All representations, warranties,
covenants, agreements, and obligations made or undertaken by the Interlink Cos.
or the Shareholder in this Agreement or and or in any document or instrument
executed and delivered pursuant hereto are material, have been relied on by ILD
and shall not merge in the performance of any obligation by any party hereto.
The Shareholder shall defend and indemnify ILD and hold ILD harmless from,
against and in respect of any and all claims, losses (including diminution in
value of an asset), liabilities and damages (including, without limitation,
attorneys' fees, interest, penalties, court costs and accounting fees) incurred
by ILD ("ILD Losses") which arise out of or result from:
(a) Any inaccuracy in or breach of any representation,
warranty, covenant or agreement made by the Interlink Cos. or the
Shareholder under this Agreement or contained in any certificate
or document executed by or on behalf of the Interlink Cos. or the
Shareholder and delivered to ILD under or in connection with this
Agreement or the transactions contemplated herein;
(b) Any liability of ILD for any Taxes arising out of or
affecting the assets of the Interlink Cos. relating to a period
prior to the Closing other than such Taxes for which adequate
reserves are expressly set forth on the Interlink Audited
Financial Statements described in Section 3.11 above and excise,
sales, payroll and other Taxes arising since the date thereof in
the normal course of business;
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(c) Any tort claim by a third party against either Interlink
Co. arising from circumstances occurring prior to Closing to the
extent not covered by insurance proceeds or unless otherwise set
forth on Schedule 3.6; and
(d) Any claim by any person or entity claiming that such
person or entity held any security of either Interlink Co.
(whether capital stock or any instrument convertible into capital
stock) or rights to revenues (except for commissions due in the
ordinary course of business) or profits of the Interlink Cos. as
of the Effective Time.
7.1.1 For purposes of this Section 7.1, the representations and
warranties contained in Article III of this Agreement shall survive the Merger
for a period of fourteen months (except for sections 3.1, 3.2, and 3.9 which
shall survive or the period of the applicable statute of limitations); provided,
however, that no such termination of any such representation or warranty shall
terminate, limit or otherwise affect any claim(s) made by any party hereto for
breach of such representation and warranty which claim was made prior to the
date of such termination; and provided, further, that ILD shall be entitled to
indemnification hereunder for matters arising under Section 7.1 (a) or (c) above
only at such time as the aggregate amount of all of such ILD Losses exceeds
$75,000 and then only to the extent of the excess over such amount (the "Minimum
Aggregate Liability Amount"). Should the Merger be consummated, the
indemnification procedures set forth in this Section 7.1 shall be the sole and
exclusive remedy of ILD for any breaches of representations, warranties and
covenants of the Interlink Cos. and the Shareholder hereunder.
7.1.2 In the event that ILD undertakes an initial public offering of
its capital stock pursuant to an effective registration statement under the
Securities Act of 1933, as amended, and applicable state securities laws, so
that ILD receives at least $15,000,000 in proceeds from the sale of its capital
stock, then the indemnification obligations of the Shareholder pursuant to this
Article VII shall be limited to the principal amount of the promissory note
described in Section 2.1(4) hereunder as of such date and from time to time
thereafter; provided, however, that such limitation shall not serve to limit or
otherwise affect any claim(s) made by ILD for breach of such representation and
warranty which claim was made prior to the date of such initial public offering.
7.1.3 As part of its indemnification rights hereunder, ILD shall be
entitled to (i) withhold from the payments under the Note described in Section
2.1(4), the amount of ILD Losses which it has sustained or which it reasonably
believes may be sustained in accordance with this Section 7.1 provided in a
written notice to the Shareholder and (ii) offset from such withheld amount any
amount ultimately determined to be due and owing to ILD by way of
indemnification pursuant to this Section 7.1, and ILD shall not be liable for
any amounts so set off. If the withholding of payments then due under this
section has been based on a reasonable belief of such a future claim, ILD shall
pay said amount withheld (plus interest at the rate of nine percent) which has
not been offset pursuant to the preceding sentence, within the earlier of (i)
the resolution of the claim or (ii) six months of the giving of the written
notification of such claim to the Shareholder, unless a lawsuit, arbitration or
administrative proceeding based on such claim shall have been commenced within
said period. If such a lawsuit, arbitration or administrative proceeding has
commenced within said six-month period, ILD
25
<PAGE>
shall pay within thirty days after a final determination under such lawsuit,
arbitration or administrative proceeding, the difference, if any, (plus interest
at the rate of nine percent) between said withheld amount and the amount of ILD
Losses, if the withheld amount is larger.
7.2. Indemnification by ILD. All representations, warranties,
covenants, agreements, and obligations made or undertaken by ILD in this
Agreement or and or in any document or instrument executed and delivered
pursuant hereto are material, have been relied on by the Interlink Cos. and the
Shareholder and shall not merge in the performance of any obligation by any
party hereto. ILD shall defend and indemnify the Interlink Cos. and the
Shareholder, and hold each Interlink Co. and the Shareholder harmless from,
against and in respect of any and all losses (including diminution in value of
the Merger Consideration), liabilities and damages (including, without
limitation, attorneys' fees, interest, penalties, court costs and accounting
fees) incurred by the Shareholder or the Interlink Cos. (the "Shareholder
Losses") which arise out of or result from:
(a) Any inaccuracy in or breach of any representation,
warranty, covenant or agreement made by ILD under this Agreement
or contained in any certificate or document executed by or on
behalf of ILD and delivered to the Interlink Cos. or the
Shareholder under or in connection with this Agreement or the
transactions contemplated herein; and
(b) Any claim by a third party against the Shareholder
arising from circumstances at ILD (as successor to the Interlink
Cos.) occurring subsequent to Closing to the extent not covered
by insurance
For purposes of this Section 7.2, the representations and warranties
contained in Article IV of this Agreement shall survive the Merger for a period
the earlier of (i) fourteen months (except for sections 4.1, 4.2, 4.4 and 4.8
which shall survive for the period of the applicable statute of limitations) or
(ii) the date ILD undertakes an initial public offering of its capital stock
pursuant to an effective registration statement under the Securities Act of
1933, as amended, and applicable state securities laws, such that ILD receives
at least $15,000,000 in proceeds from the sale of its capital stock of an
initial public offering of the capital stock of ILD; provided, however, that no
such termination of any such representation or warranty shall terminate, limit
or otherwise affect any claim(s) made by any party hereto for breach of such
representation and warranty which claim was made prior to the date of such
termination; and provided, further, that the Interlink Cos. and the Shareholder
shall be entitled to indemnification hereunder for matters arising under Section
7.2 above only at such time as the aggregate amount of all of Shareholder Losses
exceeds the Minimum Aggregate Liability Amount and then only to the extent of
the excess over such amount. Should the Merger be consummated, the
indemnification procedures set forth in this Section 7.2 shall be the sole and
exclusive remedy of the Shareholder for any breaches of representations,
warranties and covenants of ILD hereunder.
ARTICLE VIII
MISCELLANEOUS
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8.1 Entire Agreement. This Agreement (including the Schedules and Exhibits)
constitutes the sole understanding of the parties with respect to the subject
matter hereof; provided, however, that this provision is not intended to
abrogate any other written agreements between the parties executed with or after
this Agreement. No amendment, modification or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
8.2. Parties Bound By Agreement; Successors and Assigns. The terms,
conditions and obligations of this Agreement shall inure to the benefit of and
be binding on the parties hereto and the respective successors and assigns
thereof.
8.3. Formalities of Agreement and Signatures. The titles, table of contents
and headings of the Sections and paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction hereof This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument. Any of the terms or
conditions of this Agreement may be waived in writing at any time by the party
which is entitled to the benefit thereof. No waiver of any of the provisions of
this Agreement shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar).
8.4. Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or sent by facsimile (with confirmed
transmission), registered or certified mail or by any express mail or courier
service, postage or fees prepaid,
if to ILD to:
14651 Dallas Parkway, Suite 905
Dallas, Texas 75240
Fax: (972) 503-1919
Attn: Dennis Stoutenburgh
AND
13000 Sawgrass Village Circle
Suite 5
Ponte Vedra Beach, Florida 32082
Fax: (904) 285-3616
Attn: Michael Lewis
with a copy to:
Cashin, Morton & Mullins
Two Midtown Plaza, Suite 1900
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1360 Peachtree Street, N.E.
Atlanta, Georgia 30309
Fax: (404) 870-1529
Attention: C. Read Morton, Jr., Esq.
if to the Interlink Cos. or the Shareholder:
c/o Mr.Reginald P. McFarland
407 Highway 229
Social Circle, Ga . 30025
with a copy to:
GERRY, FRIEND & SAPRONOV, LLP
Three Ravinia Drive
Suite 1450
Atlanta, Georgia 30346
Fax: (770) 395-0000
Attn: William Friend, Esq.
or at such other address or facsimile number for a party as shall be specified
by like notice. Any notice which is delivered personally in the manner provided
herein shall be deemed to have been duly given to the party to whom it is
directed upon actual receipt by such party (or its agent for notice hereunder).
Any notice which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the fourth
business day after the day it is so placed in the mail. Any notice given by
facsimile shall be conclusively presumed to have been duly given to the party to
which it is sent at the close of business, local time of the recipient, on the
next following business day after the day it is sent by confirmed facsimile.
8.5. Good Faith; Further Assurances; Cooperation. The parties to this
Agreement shall in good faith undertake to perform their obligations in this
Agreement to satisfy all conditions and to cause the transactions contemplated
by this Agreement to be carried out promptly in accordance with the terms of
this Agreement. Upon the execution of this Agreement and thereafter, each party
shall do such things as may be reasonably requested by another party hereto in
order more effectively to consummate or to document the transactions
contemplated by this Agreement. The parties shall cooperate fully with each
other and their respective counsel and accountant or designees in connection
with any steps required to be taken under this Agreement.
8.6 Brokers. Interstate/Johnson Lane has acted as financial advisor for ILD
in this transaction and are to be paid a fee by ILD. Interstate/Johnson Lane has
not acted as financial advisor or broker for the Interink Cos. or the
Shareholder in this transaction. ILD represents and
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warrants to the Interlink Cos. and the Shareholder that except for such entity,
ILD has not retained the services of any broker, finder or investment banker in
connection with this Agreement or the transactions contemplated hereby and ILD
shall indemnify and hold the Interlink Co. and the Shareholder harmless from and
against any and all claims, liabilities or obligations that may result from any
brokers engaged by ILD. Neither the Interlink Cos. nor the Shareholder has
retained the services of a broker, finder or investment bankers in connection
with this Agreement or the transactions contemplated hereby and the Shareholder
shall indemnify and hold ILD harmless from and against any and all claims,
liabilities or obligations that may result from any broker engaged by, or
claiming through, the Interlink Cos. or the Shareholder.
8.7 Definitions. As used herein, the following capitalized terms shall have
the following meanings:
"Agreement" shall mean this Merger Agreement as finally executed and dated.
"Certificates" shall mean share certificate representing issued and outstanding
shares of capital stock of Interlink and Interlink-Fla.
"Certificate of Merger" shall mean the certificate of merger in substantially
the form as Exhibit H to the Agreement. "Closing" or "Closing Date" shall have
the meanings set forth in Section 6.3 of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Contracts" shall have the meaning set forth in Section 3.7 of this Agreement.
"Delaware Code" shall mean the Delaware General Corporation Law in effect as of
the Effective Time.
"Effective Time" shall mean the date of the filing of the duly executed
Certificate of Merger with both the Secretary of State of Delaware and the
Secretary of State of Georgia.
"ERISA" shall mean the Employment Retirement Income Security Act, as amended.
"Federal Act" shall mean the Securities Act of 1933, as amended.
"Fully-Diluted Basis" means the aggregate number of shares of common stock
that have been or can be issued by the corporation assuming that all conditions
precedent to the issuance of shares of common stock under any instrument or
security convertible into, exchangeable for, or with option rights to,
shares of such common stock would have been satisfied and such common stock
would have been issued to the maximum extent possible.
"Georgia Code" shall mean the Georgia Business Corporations Code in effect
as of the Effective Time.
"ILD" shall mean ILD Teleservices, Inc., a Delaware corporation.
"ILD Financial Statements" shall have the meaning set forth in Section 4.5 of
the Agreement.
"ILD Intellectual Property" shall have the meaning set forth in Section 4.10
of this Agreement.
"ILD Losses" shall have the meaning set forth in Section 7.1.
"Intellectual Property" shall have the meaning set forth in Section 3.8 of this
Agreement.
"Interlink" shall mean Interlink Telecommunications, Inc., a Georgia
corporation.
"Interlink Audited Financial Statements" shall mean Interlink's
audited financial statements as of September 30, 1997 with the report of Smith &
Howard thereon.
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"Interlink Stock" shall mean the capital stock of Interlink issued and
outstanding immediately prior to the Effective Time other than treasury
shares.
"Interlink-Fla. Stock" shall mean the capital stock of Interlink-Fla. issued and
outstanding immediately prior to the Effective Time other than treasury shares.
"Interlink Premises Lease" shall have the meaning set forth in Section 3.7.3 of
this Agreement.
"IOS" shall mean Intellicall Operator Services, Inc., a Delaware corporation
which is an wholly-owned subsidiary of ILD.
"Merger" shall mean the merger of the Interlink Cos. with and into ILD as of
the Effective Time.
"Merger Consideration" shall mean the items (1) through (5) inclusive set forth
in Section 2.1.1 of this Agreement as well as the $10.00 set forth in Section
2.1.2.
"Shareholder" shall mean Reginald P. McFarland, a Georgia resident.
"Shareholder Losses" shall have the meaning set forth in Section 7.2
"Tax" or "Taxes" shall mean federal, state, local and foreign income, gross
receipts, sales, use, property, production, payroll, franchise, withholding,
employment, social security, license, excise, transfer, gains, and other taxes
of any nature whatsoever, including any related penalties, interest and
liabilities.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
[REST OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, each of ILD, Interlink, Interlink-Fla. and the
Shareholder have executed this Agreement as of the day and year first above
written.
("Interlink")
INTERLINK TELECOMMUNICATIONS,
INC.
By:__________________________________
Name: Reginald. P. McFarland
Its: President
("Interlink-Fla")
INTERLINK TELECOMMUNICATIONS-
FLA., INC.
By:__________________________________
Name: Reginald P. McFarland
Title: President
("Shareholder")
------------------------------------
REGINALD P. MCFARLAND
("ILD")
ILD TELESERVICES, INC.
By:_________________________________
Name: Dennis J. Stoutenburgh
Title: President
LEGEND: THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS AND
CONDITIONS OF THAT CERTAIN AGREEMENT OF SUBORDINATION, DATED AS
OF DECEMBER 15, 1997, BY REGINALD P. MCFARLAND IN FAVOR OF
NATIONSBANK, N.A.
PROMISSORY NOTE
$2,700.000.00 Atlanta, Georgia December 15, 1997
FOR VALUE RECEIVED, ILD TELESERVICES, INC., a Delaware corporation (hereinafter
referred to as "Maker"), promises to pay to the order of REGINALD P. MCFARLAND,
a Georgia resident (together with any subsequent holder of this Promissory Note,
hereinafter referred to as "Holder"), the sum of Two Million Seven Hundred
Thousand Dollars ($2,700,000.00), payable to Holder as follows: (A) One Million
Eight Hundred Thousand Dollars ($1,800,000.00) shall be due and payable on
December 31, 1997 and (B) Nine Hundred Thousand Dollars ($900,000.00) shall be
due and payable on March 31, 1998. All payments shall be made to Holder at his
address specified below, or at such other place (including by wire transfer) as
Holder may from time to time designate in writing.
This Promissory Note is made and delivered in Atlanta, Georgia and is one of two
Promissory Notes referred to in the Merger Agreement (the "Agreement"), dated
December 15, 1997, among Maker, Interlink Telecommunications, Inc., Interlink
Telecommunications of Florida, Inc. and Reginald P. McFarland. If Maker shall:
(A) default in any payment required hereunder on the date when due, and shall
fail to cure such default within three (3) business days after receipt of
written demand for cure by Holder (which notice shall also be delivered to Ms.
Angela P. Leake, NationsBank Business Credit, 600 Peachtree Street, N.E., 13th
Floor, Atlanta, Georgia 30308), (B) file a voluntary petition in bankruptcy, be
adjudicated as a bankrupt or insolvent, file any petition or answer seeking or
acquiescing in any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for Maker under any Federal, state or
other statute relating to bankruptcy, insolvency or other similar relief for
debtors, or shall seek, consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Maker or of all or any substantial part of
the assets of Maker, or shall make a general assignment for the benefit of
creditors, or shall admit in writing the inability to pay its debts generally as
they become due, and Maker shall fail to negate the effect of any such action or
proceeding not initiated by maker (whether by dismissal of proceedings,
discharge of trustees or receiver or otherwise) within sixty (60) days from and
after the occurrence thereof, (C) default under (after giving effect to any
notice requirement and applicable cure period) that certain Promissory Note from
Maker to Holder in the principal amount of $1,000,000.00 dated concurrent
herewith, or (D) default under (after giving effect to any notice requirement
and applicable cure period) that certain Consulting Agreement between Maker and
Stratacom, Inc. dated concurrent herewith, then
<PAGE>
Holder, at its option, shall be entitled to accelerate any and all of the
indebtedness evidenced by this Promissory Note and the same shall become
immediately due and payable, and to cumulatively exercise all other rights and
privileges provided by law.
Time is of the essence with respect to this Promissory Note, and except as
otherwise provided herein, demand, protest, notice of demand and non-payment and
all other notices whatsoever, are hereby waived by Maker. In the event the
indebtedness evidenced by this Promissory Note shall not be paid when a payment
is due, thereafter the unpaid balance of this Note shall bear interest at the
rate of fifteen percent (15%) per annum (computed on the basis of a year of 360
days) until the past due portion of the indebtedness is paid. Any accrual of
interest in accordance with the foregoing sentence shall not be affected or
limited by the terms of the Subordination Agreement referenced in the Legend to
this Promissory Note. Should this Promissory Note, or any part of the
indebtedness evidenced by this Promissory Note, be collected by or through an
attorney-at-law, Holder shall be entitled to collect reasonable attorneys' fees
and all other reasonable costs and expenses of collection from Maker.
If delivered personally, the date on which a notice or demand hereunder is
delivered shall be the date of receipt or delivery, and if delivered by mail,
such notice or demand shall be sent by registered or certified mail, return
receipt requested, postage prepaid, and shall be deemed to have been delivered
or received on the fifth day following the deposit of such notice or demand in
the United States mails. Notices and demands made hereunder shall be addressed
to Holder at its address set forth below and to Maker c/o ILD Teleservices,
Inc., 14651 Dallas Parkway, Suite 905, Dallas, Texas 75240.
This Promissory Note shall be governed by and construed in accordance with the
laws of the State of Georgia. At the election of Holder, this Note may be
divided into multiple notes.
2
<PAGE>
IN WITNESS WHEREOF, Maker has caused this Promissory Note to be executed and its
seal affixed hereunto by its duly authorized officers the day and year first
above written.
ATTEST: ILD TELESERVICES, INC.
- ---------------------- ------------------------
C. Read Morton, Jr. Dennis J. Stoutenburgh
Secretary President
[Corporate Seal]
ADDRESS TO WHICH PAYMENTS SHOULD BE SENT:
- ----------------------------------
- ----------------------------------
3 A:\PROMIA1.F
LEGEND: THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS AND
CONDITIONS OF THAT CERTAIN AGREEMENT OF SUBORDINATION, DATED AS
OF DECEMBER 15, 1997, BY REGINALD P. MCFARLAND IN FAVOR OF
NATIONSBANK, N.A.
PROMISSORY NOTE
This Promissory Note may not be sold, transferred or assigned unless (i) a
Registration Statement under the Federal Securities Act of 1933, as amended, and
any applicable "Blue Sky" laws is then in effect with respect to this Promissory
Note; (ii) an opinion satisfactory to Maker has been obtained from counsel
satisfactory to Maker to the effect that an exemption from registration under
said Act and "Blue Sky" laws is available with respect to the proposed transfer
and that no such registration is required; or (iii) a no-action letter has been
obtained with respect to such transfer from the Staff of the Securities and
Exchange Commission and applicable state securities commissions.
Promissory Note
$1,000,000.00 Atlanta, Georgia December 15, 1997
FOR VALUE RECEIVED, ILD TELESERVICES, INC., a Delaware corporation (hereinafter
referred to as "Maker"), promises to pay to the order of REGINALD .P. MCFARLAND,
a Georgia resident (together with any subsequent holder of this Promissory Note,
hereinafter referred to as "Holder"), the principal sum of One Million Dollars
($1,000,000.00), together with interest accrued thereon at the annual rate of
nine percent (computed on the basis of a year of 360 days and the actual number
of days elapsed). Payments of all interest accrued hereunder shall be payable to
Holder quarterly beginning with a stub interest payment on December 31, 1997 and
continuing on each March 31, June 30, September 30 and December 31 thereafter
while this Promissory Note is outstanding. Equal payments of principal on this
Promissory Note of Two Hundred Fifty Thousand Dollars ($250,000.00) each shall
be made to Holder on September 30, 1998, December 31, 1998, March 31, 1999, and
June 30, 1999. All payments shall be made to Holder at his address specified
below, or at such other place (including by wire transfer) as Holder may from
time to time designate in writing.
This Promissory Note is made and delivered in Atlanta, Georgia and is one of two
Promissory Notes referred to in the Merger Agreement (the "Agreement"), dated
December 15, 1997, among Maker, Interlink Telecommunications, Inc., Interlink
Telecommunications of Florida, Inc. and Reginald P. McFarland, and is subject to
the terms and conditions thereof, including, but not limited to, the right to
offset payments as described in Section 7.1.3 of the Agreement. Any amounts so
set off shall be attributed to the payments due under this Promissory Note in
their order of maturity starting with the earliest, and the provisions
concerning withholding of payment and the payments of amounts over withheld
shall apply. Under no circumstance will the withholding of payments permitted to
be withheld under the provisions of Section 7.1.3 of the Agreement constitute a
default under this Promissory Note, regardless of whether it is ultimately
determined that the amount withheld is greater than the amount finally set off.
<PAGE>
If Maker shall: (A) default in any payment required hereunder on the date when
due, and shall fail to cure such default within three (3) business days after
receipt of written demand for cure by Holder (which notice shall also be
delivered to Ms. Angela P. Leake, NationsBank Business Credit, 600 Peachtree
Street, N.E., 13th Floor, Atlanta, Georgia 30308), (B) file a voluntary petition
in bankruptcy, be adjudicated as a bankrupt or insolvent, file any petition or
answer seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for Maker under any
Federal, state or other statute relating to bankruptcy, insolvency or other
similar relief for debtors, or shall seek, consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of Maker or of all or any
substantial part of the assets of Maker, or shall make a general assignment for
the benefit of creditors, or shall admit in writing the inability to pay its
debts generally as they become due, and Maker shall fail to negate the effect of
any such action or proceeding not initiated by maker (whether by dismissal of
proceedings, discharge of trustees or receiver or otherwise) within sixty (60)
days from and after the occurrence thereof, (C) default under (after giving
effect to any notice requirement and applicable cure period) that certain
Promissory Note from Maker to Holder in the principal amount of $2,700,000.00
dated concurrent herewith, or (D) default under (after giving effect to any
notice requirement and applicable cure period) that certain Consulting Agreement
between Maker and Stratacom, Inc. dated concurrent herewith, then Holder, at its
option, shall be entitled to accelerate any and all of the indebtedness
evidenced by this Promissory Note and the same shall become immediately due and
payable, and to cumulatively exercise all other rights and privileges provided
by law.
Maker hereby reserves the right to prepay the principal indebtedness evidenced
by this Promissory Note in whole or in party, at any time without penalty,
premium or payment of unearned interest and Maker shall not be liable hereunder
for any further interest on any amounts so prepaid. Any partial prepayment shall
be attributed to the payments due under this Promissory Note in their inverse
order of maturity.
Time is of the essence with respect to this Promissory Note, and except as
otherwise provided herein, demand, protest, notice of demand and non-payment and
all other notices whatsoever, are hereby waived by Maker. In the event the
indebtedness evidenced by this Promissory Note shall not be paid when a payment
is due, thereafter the unpaid balance, principal of such indebtedness shall bear
interest at the rate of fifteen percent (15%) per annum (computed on the basis
of a year of 360 days) until the past due portion of the indebtedness (inclusive
of all accrued interest) is paid. Any accrual of interest in accordance with the
foregoing sentence shall not be affected or limited by the terms of the
Subordination Agreement referenced in the Legend to this Promissory Note. Should
this Promissory Note, or any part of the indebtedness evidenced by this
Promissory Note, be collected by or through an attorney-at-law, Holder shall be
entitled to collect reasonable attorneys' fees and all other reasonable costs
and expenses of collection from Maker.
If delivered personally, the date on which a notice or demand hereunder is
delivered shall be the date of receipt or delivery, and if delivered by mail,
such notice or demand shall be sent by registered or certified mail, return
receipt requested, postage prepaid, and shall be deemed to have been delivered
or received on the fifth day following the deposit of such notice or demand in
the United States mails. Notices and demands made hereunder shall be addressed
to Holder at its address set forth hereinabove and to Maker c/o ILD
Teleservices, Inc., 14651 Dallas Parkway, Suite 905, Dallas, Texas, 75240.
This Promissory Note shall be governed by and construed in accordance with the
laws of the State of Georgia.
2
<PAGE>
IN WITNESS WHEREOF, Maker has caused this Promissory Note to be executed and its
seal affixed hereunto by its duly authorized officers the day and year first
above written.
ATTEST: ILD TELESERVICES, INC.
- ---------------------- ------------------------
C. Read Morton, Jr. Dennis J. Stoutenburgh
Secretary President
[Corporate Seal]
ADDRESS TO WHICH PAYMENTS SHOULD BE SENT:
- ----------------------------------
- ----------------------------------
A:\PROMISS.F
3
