<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
Intellicall, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
16,426,420
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
.90625
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
14,886,443
------------------------------------------------------------------------
(5) Total fee paid:
2,978.00
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
INTELLICALL, INC.
2155 CHENAULT, SUITE 410
CARROLLTON, TEXAS 75006
(972) 416-0022
November 13, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders (the "Meeting") of Intellicall, Inc., a Delaware corporation
("Intellicall"), to be held at 10:00 a.m., Dallas, Texas time, on December 14,
2000 at the Addison Conference and Theater Center, 15650 Addison Road,
Addison, Texas 75248. All stockholders of record as of November 6, 2000, are
entitled to vote at the Meeting. I urge you to be present in person or
represented by proxy at the Meeting.
The attached Notice of Annual Meeting and Proxy Statement fully
describe the formal business to be transacted at the Meeting, which includes
the approval of the issuance of shares, and options to purchase shares, of
Common Stock of Intellicall pursuant to an Agreement and Plan of Merger
between Intellicall, Wireless WebConnect!, Inc. and a wholly-owned subsidiary
of Intellicall; amendments to the Intellicall Certificate of Incorporation to
change the name to Wireless WebConnect!, Inc. and to increase the number of
authorized shares of Common Stock to 60,000,000; an amendment to the
Intellicall 1991 Stock Option Plan to increase the aggregate shares
authorized to 9,495,000 and to modify the terms of options issuable to
nonemployee directors; the election of eight directors; and such other
matters as may properly come before the Meeting or any adjournment thereof.
Intellicall's Board of Directors believes that a favorable vote on
each of the matters to be considered at the Meeting is in the best interest of
Intellicall and its stockholders and unanimously recommends a vote "FOR" each
such matter. Accordingly, we urge you to review the attached material
carefully and to return the enclosed Proxy promptly.
Directors and officers of Intellicall will be present to help host
the Meeting and to respond to any questions that our stockholders may have. I
hope that you will be able to attend. Even if you expect to attend the
Meeting, please complete, sign, date and return your proxy in the enclosed
envelope without delay. If you attend the Meeting, you may vote in person
even if you have previously mailed your proxy. However, if your shares are
held of record by a broker, bank or other nominee and you wish to vote at the
Meeting, you must obtain from the record holder a proxy issued in your name.
On behalf of your Board of Directors, thank you for your support.
Sincerely,
/s/ William O. Hunt
-------------------------------------
William O. Hunt
Chairman of the Board of Directors
<PAGE>
INTELLICALL, INC.
2155 CHENAULT, SUITE 410
CARROLLTON, TEXAS 75006
(972) 416-0022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
December 14, 2000
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Intellicall, Inc. ("Intellicall") will be held at 10:00 a.m.,
Dallas time, on December 14, 2000, at the Addison Conference and Theater
Center, 15650 Addison Road, Addison, Texas 75248, for the purpose of
considering and acting upon:
1. The approval of the issuance of 16,426,420 shares, and options to
purchase 1.5 million shares, of Common Stock of Intellicall, par value $0.01
per share, pursuant to an Agreement and Plan of Merger by and among
Intellicall, Wireless WebConnect!, Inc. and a wholly-owned subsidiary of
Intellicall;
2. A proposal to amend the certificate of incorporation to change
Intellicall's name to Wireless WebConnect!, Inc;
3. A proposal to amend the certificate of incorporation to increase
the number of authorized shares of Common Stock to 60,000,000;
4. A proposal to amend the Intellicall 1991 Stock Option Plan to
increase the aggregate shares of Common Stock authorized for issuance
thereunder from 2,254,400 to 9,495,000 and to modify the terms of options
issuable to nonemployee directors;
5. The election of eight members of the Board of Directors; and
6. Such other matters as may properly come before the Meeting or any
adjournments thereof.
The close of business on November 6, 2000, has been fixed as the
record date for determining stockholders entitled to notice of and to vote at
the Meeting or any adjournments thereof. For a period of at least 10 days
prior to the Meeting, a complete list of stockholders entitled to vote at the
Meeting will be open for examination by any stockholder during ordinary
business hours at the offices of Intellicall, Inc., at 2155 Chenault, Suite
410, Carrollton, Texas 75006. Information concerning the matters to be acted
upon at the Meeting is set forth in the accompanying Proxy Statement.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE
(WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES). EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
<PAGE>
MEETING. HOWEVER, IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR
OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
By Order of the Board of Directors
/s/ William O. Hunt
-------------------------------------
William O. Hunt
Chairman of the Board of Directors
Dallas, Texas
November 13, 2000
<PAGE>
INTELLICALL, INC.
2155 CHENAULT, SUITE 410
CARROLLTON, TEXAS 75006
972-416-0022
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 14, 2000
This Proxy Statement is being first mailed on or about November 13,
2000, to stockholders of Intellicall, Inc., a Delaware corporation
("Intellicall"), by the Board of Directors to solicit proxies for use at the
Annual Meeting of Stockholders to be held at 10:00 a.m. Dallas, Texas time,
on Thursday, December 14, 2000 at the Addison Conference and Theater Center,
15650 Addison Road, Addison, Texas 75248, or at such other time and place to
which the Meeting may be adjourned (the "Meeting").
The purpose of the Meeting is to consider and act upon: (1) the
approval of the issuance of 16,426,420 shares of common stock of Intellicall,
par value $.01 per share (the "Common Stock"), and options to purchase 1.5
million shares of Common Stock (together the "Issuance"), pursuant to an
Agreement and Plan of Merger, as amended, (the "Merger Agreement") between
Intellicall, a wholly-owned subsidiary of Intellicall and Wireless
WebConnect!, Inc. ("WWC"); (2) the approval of an amendment to Intellicall's
certificate of incorporation to change its name to Wireless WebConnect!, Inc.
(the "Name Change"); (3) the approval of an amendment to Intellicall's
certificate of incorporation to increase the number of authorized shares of
Common Stock to 60,000,000 (the "Increase"); (4) the approval of an amendment
to Intellicall's 1991 Stock Option Plan (the "Plan") to increase the
aggregate shares of Common Stock authorized for issuance thereunder from
2,254,400 to 9,495,000 and to modify the terms of options issuable to
nonemployee directors (the "Plan Amendment"); (5) the election of eight
members of the Board of Directors; and (6) such other matters as may properly
come before the Meeting or any adjournments thereof.
All shares represented by valid proxies, unless the stockholder
otherwise specifies, will be voted: (1) FOR the Issuance; (2) FOR the Name
Change; (3) FOR the Increase; (4) FOR the Plan Amendment; (5) FOR each of the
nominated directors; and (6) at the discretion of the proxy holders with
regard to any other matter that may properly come before the Meeting or any
adjournments thereof.
Where a stockholder has appropriately specified how a proxy is to be
voted, it will be voted accordingly. A proxy may be revoked by providing
written notice of such revocation to our stock transfer agent, ChaseMellon
Shareholder Services, 2323 Bryan Street, Suite 2300, Dallas, Texas 75201,
Attention: David Cary, which notice must be received by December 12, 2000. If
notice of revocation is not received before December 12, 2000, a stockholder
may nevertheless revoke a proxy by attending the Meeting and voting in person;
however, if your shares are held of record by a broker, bank or other nominee
and you wish to vote at the Meeting, you must obtain from the record holder a
proxy issued in your name.
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<PAGE>
SUMMARY TERM SHEET
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT WITH RESPECT TO PROPOSAL NO. 1 REGARDING THE ISSUANCE OF SHARES OF
INTELLICALL COMMON STOCK AND OPTIONS TO PURCHASE INTELLICALL COMMON STOCK
PURSUANT TO THE AGREEMENT AND PLAN OF MERGER, AS AMENDED, BY AND AMONG
INTELLICALL, WIRELESS WEBCONNECT!, INC. AND A WHOLLY-OWNED SUBSIDIARY OF
INTELLICALL. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE ISSUANCE FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD READ CAREFULLY THIS
ENTIRE DOCUMENT AND THE OTHER DOCUMENTS WE HAVE REFERRED YOU TO, INCLUDING
THE AGREEMENT AND PLAN OF MERGER WHICH IS ATTACHED HERETO AS APPENDIX A AND
AMENDMENT NO. 1 TO THE MERGER AGREEMENT WHICH IS ATTACHED HERETO AS APPENDIX
B (THE "MERGER AGREEMENT AMENDMENT"). SEE "WHERE YOU CAN FIND MORE
INFORMATION."
THE COMPANIES
INTELLICALL, INC.
2155 Chenault, Suite 410
Carrollton, Texas 75006
(972) 416-0022
Intellicall designs and manufactures public access
telecommunications systems. It is the intent of Intellicall to seek strategic
alternatives to exit the pay phone business, including the sale of that
business. Intellicall does not currently have an agreement to sell its pay
phone business.
WIRELESS WEBCONNECT!, INC.
620 Lakeview Drive
Clearwater, Florida 33756
(727) 445-1500
Wireless WebConnect!, Inc. is a reseller of high-speed, mobile
wireless internet service for mobile professionals and secure wireless access
to corporate computer networks through Virtual Private Networking, or VPN
services.
WWC ACQUISITION, INC.
2155 Chenault, Suite 410
Carrollton, Texas 75006
(972) 416-0022
WWC Acquisition, Inc. is a Florida corporation recently formed by
Intellicall for use in the merger. This is the only business of WWC Acquisition,
Inc.
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<PAGE>
RECORD DATE AND VOTING SECURITIES (PAGE 7)
The record date for determining stockholders entitled to vote at the
meeting is the close of business on November 6, 2000.
QUORUM AND VOTING (PAGE 7)
The affirmative vote of a majority of the shares of Intellicall
common stock present or represented by proxy at the Meeting, assuming a
quorum is present, is required to approve the issuance of shares of
Intellicall Common Stock and options to purchase Intellicall Common Stock
with respect to the merger.
At the Intellicall annual meeting, Intellicall stockholders will be
asked to:
- APPROVE THE ISSUANCE OF INTELLICALL COMMON STOCK AND
OPTIONS TO PURCHASE INTELLICALL COMMON STOCK IN CONNECTION
WITH THE MERGER WITH WIRELESS WEBCONNECT!, INC.;
- APPROVE THE AMENDMENT TO INTELLICALL'S CERTIFICATE OF
INCORPORATION TO CHANGE ITS NAME TO WIRELESS WEBCONNECT!,
INC.;
- APPROVE THE AMENDMENT TO INTELLICALL'S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES TO
60 MILLION;
- AMEND INTELLICALL'S 1991 STOCK OPTION PLAN; AND
- ELECT EIGHT (8) MEMBERS TO THE INTELLICALL BOARD OF
DIRECTORS.
DISSENTERS' RIGHTS (PAGE 7)
Under Delaware law, the Intellicall stockholders do not have any right
to an appraisal of the value of their shares in connection with the issuance
of shares and options in the merger.
THE MERGER (PAGE 9)
The Merger Agreement is attached as APPENDIX A and the Merger
Agreement Amendment is attached as APPENDIX B to this Proxy Statement. We
encourage you to read the Merger Agreement, as amended, which is the legal
document that governs the merger.
REASONS FOR THE MERGER (PAGE 11)
The Intellicall board believes that the issuance of Intellicall Common
Stock in exchange for the WWC common stock is in the best interests of
Intellicall and its stockholders. In reaching its decision to approve the
issuance, the Intellicall board considered a number of factors including the
following:
- THE MERGER WILL PLACE INTELLICALL IN THE WIRELESS INTERNET
MARKET, WHICH REPRESENTS SUBSTANTIAL GROWTH OPPORTUNITIES.
- THE COMBINED EXPERIENCE AND FINANCIAL RESOURCES WILL ALLOW FOR
RAPID SALES DEPLOYMENT AND EXPANSION OF THE CUSTOMER BASE OF
WWC.
- OPPORTUNITIES WILL BE CREATED WITH THE EXPANSION OF THE
CUSTOMER BASE TO BRING A BROADER RANGE OF SERVICE AND VALUE
ADDED PRODUCT.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AGREEMENT (PAGE 12)
Some of Intellicalls directors and officers have interests in the
Issuance that are different from, or are in addition to, their interests as
stockholders in Intellicall. The members of the Board knew about these
additional interests, and considered them, when they approved the Merger
Agreement. These interests include provisions in the Merger Agreement
regarding directors' and officers' indemnification and employment agreements,
issuances of options and cash bonuses upon completion of the merger.
ACCOUNTING TREATMENT (PAGE 12)
The business combination will be considered a "reverse acquisition"
and will be accounted for under the provisions of Accounting Principles Board
Opinion Number 16 ("APB 16"), Accounting for Business Combinations as a
purchase business combination. WWC will be considered the "accounting
acquirer" and Intellicall will be considered the "legal acquirer" since the
former WWC shareholders will control Intellicall through their holdings of
approximately 56% of the combined outstanding shares of Intellicall Common
Stock, will have control over the Board of Directors of Intellicall and after
the merger is effective the former employees of WWC who become employees of
Intellicall will be eligible to receive options to acquire in the aggregate
1.5 million additional shares of Intellicall Common Stock. If Intellicall's
remaining business operations are sold prior to the combination or if a
decision is made to discontinue such operations, the combination would be
accounted for as an acquisition of assets (primarily cash) rather than of a
business and no goodwill would be recorded.
U.S. FEDERAL INCOME TAX CONSEQUENCES (PAGE 12)
The merger is structured as a tax-free reorganization so that neither
Intellicall, the stockholders of Intellicall or Wireless WebConnect!, Inc.
3
<PAGE>
will recognize any gain or loss for federal income tax purposes in the
merger. The merger is conditioned on receipt of a legal opinion from
Intellicall's counsel stating that the merger is a tax-free reorganization.
CONVERSION OF SHARES--EXCHANGE RATIO (PAGE 14)
When the merger closes, each Wireless WebConnect!, Inc., common
shareholder will receive 1,642.642 shares of Intellicall common stock in
exchange for each share of Wireless WebConnect!, Inc. common stock.
Calculated at the market price of Intellicall common stock as of the close of
business on August 28, 2000 of $.8125 per share, the Wireless WebConnect!,
Inc. shareholders will receive an aggregate of approximately $13,346,466
worth of Intellicall common stock. Each holder otherwise entitled to receive
fractional shares will have the fractional share rounded up to the next whole
share.
Intellicall will issue approximately 16,426,420 shares of
Intellicall Common Stock to Wireless WebConnect!, Inc. shareholders in the
merger. These shares will represent approximately 56% of the outstanding
Intellicall Common Stock after the merger. This information is based on the
number of shares of Intellicall and Wireless WebConnect!, Inc. common stock
outstanding on August 28, 2000, and does not take into account shares
issuable upon the exercise of stock options, warrants or convertible
securities.
CONDITIONS PRECEDENT TO THE MERGER (PAGE 18)
The completion of the merger depends upon meeting or waiver of a number
of conditions, including the following:
- OBTAINING THE APPROVAL OF THE STOCKHOLDERS OF INTELLICALL;
- OBTAINING THE APPROVAL OF THE COMMON STOCK FOR LISTING ON THE
AMERICAN STOCK EXCHANGE;
- OBTAINING ANY GOVERNMENTAL OR REGULATORY
NOTICES OR APPROVALS; AND
4
<PAGE>
- THE ABSENCE OF ANY GOVERNMENTAL ACTIONS OR INJUNCTION WHICH
HAVE THE EFFECT OF PROHIBITING CONSUMMATION OF THE MERGER.
Certain of the conditions to the merger may be waived by the company
entitled to assert the condition.
TERMINATION OF THE MERGER AGREEMENT (PAGE 20)
Either Intellicall or Wireless WebConnect!, Inc. can terminate the
merger agreement if both companies agree or if any of the following occurs:
- A MATERIAL BREACH OF A REPRESENTATION, WARRANTY OR COVENANT OF
EITHER INTELLICALL OR WIRELESS WEBCONNECT!, INC.;
- IF EITHER BOARD OF DIRECTORS HAVE WITHDRAWN, MODIFIED OR
CHANGED ITS APPROVAL OR RECOMMENDATION OF THE ISSUANCE OF
COMMON STOCK;
- IF THE DOCUMENTS OR FINANCIAL STATEMENTS REQUIRED TO BE
DELIVERED BY EITHER ONE ARE NOT REASONABLY SATISFACTORY; OR
- THE MERGER IS NOT CONSUMMATED ON OR BEFORE THE OUTSIDE DATE
(AS DEFINED IN THE MERGER AGREEMENT, AND WHICH IS DECEMBER 31,
2000 AS OF THE DATE OF THIS PROXY STATEMENT).
Additionally, Intellicall has the right to terminate if the issuance
of Intellicall Common Stock or the increase in the authorized shares of
Intellicall Common Stock are not approved by the Intellicall stockholders.
LISTING OF INTELLICALL COMMON STOCK
Intellicall Common Stock is currently listed on the American Stock
Exchange. Intellicall intends to list the shares of its common stock to be
issued in the merger on the American Stock Exchange.
SELECTED HISTORICAL FINANCIAL INFORMATION (PAGES 26 and 44)
Intellicall and Wireless WebConnect!, Inc. are providing certain
selected financial information to assist you in your analysis of the merger.
This information is only a summary and you should read it in conjunction with
the historical financial statements of Intellicall and the related notes
contained in the Annual Report on Form 10-K/A accompanying this Proxy
Statement. This summary information should also be read in conjunction with
the historical financial statements of Wireless WebConnect!, Inc. and the
related notes thereto contained in this document. Results of operations for
unaudited
5
<PAGE>
interim periods are not necessarily indicative of the results that may occur
for any other interim period or any annual period.
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY TERM SHEET.......................................................................2
RECORD DATE AND VOTING SECURITIES........................................................7
QUORUM AND VOTING........................................................................7
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS...............................7
PROPOSAL NO. 1 APPROVAL OF THE MERGER AGREEMENT..........................................8
THE MERGER...............................................................................9
History of the Merger..................................................................9
Reasons For The Merger................................................................11
Interest Of Certain Persons In The Merger Agreement...................................12
Accounting Treatment Of The Merger....................................................12
Regulatory Approvals..................................................................12
Certain Federal Income Tax Consequences...............................................12
SUMMARY OF THE MERGER AGREEMENT.........................................................13
The Merger............................................................................14
Effective Time Of The Merger..........................................................14
Conversion Of Shares -- Exchange Ratio................................................14
Creation Of Escrow....................................................................14
Representations And Warranties........................................................15
Other Agreements And Covenants........................................................16
ASSETS, LIABILITIES, BUSINESS OR PROSPECTS..............................................18
Closing And Closing Date..............................................................18
Conditions Precedent..................................................................18
Registration Rights...................................................................19
Indemnification.......................................................................19
Appointment Of Directors..............................................................20
Termination...........................................................................20
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND BALANCE SHEET
OF THE SURVIVING CORPORATION............................................................21
Proforma Combined Condensed Statement of Operations for the Six Months
Ended June 30, 2000...................................................................21
Proforma Combined Condensed Statement of Operations for the Year Ended
December 31, 1999.....................................................................22
Proforma Combined Balance Sheet for the Six Months Ended June 30, 2000..................23
Notes to Pro Forma Consolidated Statements of Operations and Balance Sheet..............24
COMPARATIVE PER SHARE DATA..............................................................25
Per Share Common Stock Data...........................................................25
DESCRIPTION OF INTELLICALL..............................................................26
Selected Historical Financial Information of Intellicall..............................26
Six Months Ended June 30, 2000 Compared with Six Months Ended June 30, 1999...........26
Liquidity and Capital Resources.......................................................30
Changes in Certifying Accountant......................................................33
Intellicall Management................................................................34
Section 16(a) Beneficial Ownership Reporting Compliance...............................35
Committees and Meetings of the Board of Directors.....................................35
Compensation Committee Interlock, and Insider Participation...........................36
ORGANIZATION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION............................................................................36
CEO Compensation......................................................................37
Executive Compensation................................................................37
Option Grants in Last Fiscal Year.....................................................38
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values.....38
Director Compensation.................................................................39
Indemnification Arrangements..........................................................39
1991 Stock Option Plan................................................................39
Stock Performance Chart...............................................................40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
INTELLICALL.............................................................................41
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF INTELLICALL...........................43
DESCRIPTION OF WIRELESS WEBCONNECT!, INC................................................44
SELECTED HISTORICAL FINANCIAL DATA OF WWC...............................................44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF WIRELESS WEBCONNECT!, INC.................................................46
Overview..............................................................................46
Six months ended June 30, 1999 Compared to the six months ended December 30, 2000.....46
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.................46
Year ended December 31, 1998 Compared to Year Ended December 31, 1997.................47
Liquidity and Capital Resources.......................................................47
Market Price, Dividends and Stockholder Matters.......................................47
PROPOSAL NO. 2 AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME TO WIRELESS WEBCONNECT!, INC.......................................................48
PROPOSAL NO. 3 AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.........................................48
PROPOSAL NO. 4 AMENDMENT OF THE PLAN....................................................49
General...............................................................................49
The Amendment.........................................................................50
Administration of the 1991 Plan.......................................................50
Eligibility...........................................................................50
Grant, Term, and Restrictions on Awards...............................................50
Purchase Price for Incentive Options..................................................51
Termination of Awards.................................................................51
Certain Events........................................................................52
6
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Amendments............................................................................52
Options Granted in 1999...............................................................52
Federal Income Tax Consequences.......................................................53
PROPOSAL NO. 5 ELECTION OF DIRECTORS....................................................54
WHERE YOU CAN FIND MORE INFORMATION.....................................................56
STOCKHOLDER PROPOSALS...................................................................56
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS........................................56
OTHER BUSINESS..........................................................................56
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.......................................56
MISCELLANEOUS...........................................................................56
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES........................F-1
AGREEMENT AND PLAN OF MERGER...........................................................A-1
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER........................................B-1
INTELLICALL, INC. 1991 STOCK OPTION PLAN...............................................C-1
AUDIT COMMITTE CHARTER.................................................................D-1
</TABLE>
RECORD DATE AND VOTING SECURITIES
The record date for determining the stockholders entitled to vote at
the Meeting is the close of business on November 6, 2000 (the "Record Date"),
at which time we had issued and outstanding [13,081,889] shares of Common
Stock. Common Stock is our only class of outstanding voting securities.
QUORUM AND VOTING
The presence at the Meeting, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of Common Stock is necessary to
constitute a quorum to transact business. Each share represented at the Meeting
in person or by proxy will be counted toward a quorum. In deciding all questions
and other matters, a holder of Common Stock on the Record Date shall be entitled
to cast one vote for each share of Common Stock registered in such holder's
name.
Nominees, such as banks and brokers (hereinafter referred to as
"brokers") who hold shares in street name, have the discretionary authority
to vote on certain routine matters on which they have not received
instructions from beneficial owners. However, brokers do not have
discretionary authority and may not vote shares held for customers on
approval of certain other matters without specific instructions from such
customers. "Broker non-votes" on any such proposal (where a broker submits a
proxy but does not have discretionary authority to vote a customer's shares
on such proposal) will not be included in the vote totals on that proposal.
The approval of the Issuance with respect to the merger requires the
affirmative vote of a majority of the shares of Intellicall Common Stock
represented in person or by proxy at the Meeting, entitled to vote thereon,
provided a quorum is present. Brokers do not have discretionary authority
to vote on the Issuance. Abstentions and broker non-votes will be counted as
shares present for purposes of determining the presence of a quorum but will
have the same effect as a vote against such proposal.
The approval of the Name Change and the Increase each require the
affirmative vote of a majority of the shares of Intellicall Common Stock
issued and outstanding and entitled to vote thereon, provided a quorum is
present. Brokers have discretionary authority to vote on the Name Change and
the Increase. Abstentions on such proposal may be specified and will be
counted as shares present for purposes of determining a quorum but will have
the same effect as a vote against such proposal.
The approval of the Plan Amendment requires the affirmative vote of
a majority of the shares of Intellicall Common Stock represented in person or
by proxy at the Meeting, entitled to vote thereon, provided a quorum is
present. Brokers do not have discretionary authority to vote on the Plan
Amendment. Abstentions and broker non-votes will be counted as shares
present for purposes of determining the presence of a quorum but will have
the same effect as a vote against such proposal.
The election of a nominee to serve as a director requires the
affirmative vote of a plurality of the shares of Intellicall Common Stock
represented in person or by proxy at the Meeting, entitled to vote thereon,
provided a quorum is present. Votes may be cast in favor or withheld with
respect to each nominee. Votes that are withheld will be counted toward a
quorum, but will be excluded entirely from the tabulation for such proposal
and, therefore, will not affect the outcome of the vote on this proposal.
Brokers have discretionary authority to vote for nominees.
The holders of Intellicall Common Stock are not entitled to
dissenters' appraisal rights under the DGCL with respect to any of the
proposals set forth in this Proxy Statement.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
This Proxy Statement and the documents incorporated by reference
into this Proxy Statement contain forward-looking statements within the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995
with respect to Intellicall's and WWC's financial condition, results of
operations and business, and on the expected impact of the merger on
Intellicall's financial performance. Words such as "anticipates," "expects,"
"intends," "plans," "believes," "seeks," "estimates" and similar expressions
identify forward-looking statements. These forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties
that could cause actual results to differ materially from the results
contemplated by the forward-looking statements.
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PROPOSAL NO. 1
APPROVAL OF ISSUANCE OF COMMON STOCK
On August 29, 2000, Intellicall, WWC and WWC Acquisition, Inc., a
wholly-owned subsidiary of Intellicall ("Merger Sub") entered into the Merger
Agreement, whereby Merger Sub will merge with and into WWC. WWC will survive
the merger and will be a wholly-owned subsidiary of Intellicall. Holders of
WWC Common Stock will be entitled to receive shares of Intellicall Common
Stock in the merger. Intellicall will issue an aggregate of 16,426,420 shares
of Common Stock to the holders, who will then own collectively approximately
56% of the issued and outstanding shares of Common Stock. Based on that price
per share, the value of the transaction is approximately $13.3 million. In
addition, after the merger is closed, Intellicall has agreed that the former
WWC employees who become Intellicall employees will be eligible to receive
options to purchase an aggregate of 1.5 million shares of Common Stock (the
"Options"). On August 28, 2000, the last trading day before the Merger
Agreement was signed, the closing price per share of Common Stock was $0.8125.
The Issuance, which includes the issuance of the shares of Common
Stock in connection with the merger and the related options, is subject to the
approval of the stockholders of Intellicall.
This section of the Proxy Statement describes aspects of the Merger
Agreement and the proposed merger. The discussion of the merger in this
document and the discussion of the principal terms of the Merger Agreement
are qualified in their entirety by the terms of the Merger Agreement and the
Merger Agreement Amendment, copies of which are attached to this Proxy
Statement in APPENDIX A and APPENDIX B, respectively. All references to the
Merger Agreement are deemed to include the Merger Agreement Amendment.
Capitalized terms used and not otherwise defined in this portion of the Proxy
Statement have the respective meaning ascribed to such terms in the Merger
Agreement.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE ISSUANCE.
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THE MERGER
HISTORY OF THE MERGER
On or about July 11, 2000, Houlihan Lokey Howard & Zukin contacted
John McDonald, President and Chief Executive Officer of Intellicall, relating
to an opportunity in the wireless Internet area. During this call, Mr.
McDonald received a brief history of WWC and its current activities and
business plan. The Chief Executive Officer of WWC, G.T. Finn, contacted Mr.
McDonald the following day, and invited him to visit WWC to determine if
there was any interest in a possible strategic relationship.
Mr. McDonald determined there was value in at least having an
introductory meeting to better understand WWC's business model and determine
if there could be a future strategic fit. Mr. McDonald discussed this with
Bill Hunt, Intellicall's Chairman of the Board of Directors (the "Board"),
and both agreed to meet with WWC on July 18, 2000, in San Jose, California.
Messrs. McDonald and Hunt visited WWC and also met with the network service
provider, Metricom, Inc., for which WWC is a reseller. Both concluded this
was a very interesting business model, and would keep it in mind as
Intellicall moved ahead with its strategic realignment. In attendance at the
meeting were Mr. G.T. Finn, Mike Campbell, Sr. Vice President of WWC, Bob
Cefoil of RC&A Group, investment banker for WWC, and Tracy Albert from
Houlihan Lokey, investment banker for Intellicall.
On the afternoon of July 20, 2000, Mr. McDonald called a special
telephonic board meeting to inform the Board of the inquiry regarding WWC and
subsequent introductory meeting with WWC. The Board agreed that Intellicall
should aggressively pursue additional discussions with WWC to determine if an
opportunity existed.
During the period from July 20 through July 25, 2000, Intellicall
performed preliminary due diligence with respect to WWC and Metricom, and
participated in several telephone conversations and exchanged informational
material with the companies. Toward the end of this period, the Board
discussed a strategic relationship, including the possibility of a merger.
The parties also discussed in general terms, how a merger would be
structured. During these discussions, it was agreed that the parties should
immediately meet to discuss details of a merger. All parties agreed to meet
at Intellicall's offices on July 26, 2000.
Attending the July 26, 2000 meeting were Mr. Finn, Mr. Campbell,
Philip Jepsen, Vice President Operations for WWC, Mr. Cefoil, Mr. McDonald,
Mr. Hunt, Mr. Boyd, Chief Financial Officer of Intellicall, and Mr. Albert.
At this meeting the parties continued their discussion relating to a merger.
The parties reached general
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agreement on a structure for the merger; as well as discussed operational and
sales plans and other possible strategic opportunities. At the close of the
meeting, all parties agreed there were compelling reasons to proceed and
agreed to begin developing a definitive agreement. The parties also agreed to
begin to exchange initial due diligence material.
On August 1, 2000 the parties met at Intellicall's offices to
finalize several matters relating to the structure of the merger and a more
definitive agreement. In attendance were Mr. Campbell, Steven Hayes, attorney
for WWC, Mr. Cefoil, Mr. McDonald, Mr. Hunt, Mr. Boyd, Richard Dahlson,
attorney for Intellicall, and Mr. Albert. Valuation, organization, operating,
financial, sales and other matters were discussed. General agreement was
reached on all matters relating to the structure of the merger and definitive
agreement. It was agreed the parties would immediately complete development
of a merger agreement and continue the exchange of due diligence material.
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From August 2 through August 23, 2000, negotiations continued with
respect to the merger agreement and due diligence continued. On August 23,
2000, the merger agreement was essentially complete and was sent to the Board
members for review, comments and questions.
On August 29, 2000 a special telephonic board meeting was held. At
this meeting the Board unanimously voted to approve the Merger Agreement and
the transactions contemplated thereby and recommended that the Issuance be
submitted to the stockholders for vote. The Merger Agreement was executed by
the parties on August 29, 2000.
REASONS FOR THE MERGER
Intellicall's business plan has been to initiate a strategic move to
create opportunity for growth. This was necessary due to the rapid decline in
Intellicall's traditional business. A primary focus of Intellicall's strategy
was to enter into a business field with sustained growth potential. The Board
has determined that the terms of the Merger Agreement are fair to and in the
best interests of Intellicall and its stockholders. Several potential
benefits were identified in reaching this decision.
- THE MERGER WILL PLACE INTELLICALL IN THE WIRELESS INTERNET
MARKET, WHICH REPRESENTS SUBSTANTIAL GROWTH OPPORTUNITIES.
- THE COMBINED EXPERIENCE AND FINANCIAL RESOURCES WILL ALLOW FOR
RAPID SALES DEPLOYMENT AND EXPANSION OF THE CUSTOMER BASE OF
WWC.
- WITH THE EXPANSION OF THE CUSTOMER BASE, INTELLICALL
EXPECTS OPPORTUNITIES WILL BE CREATED TO BRING A BROADER RANGE
OF SERVICE AND VALUE ADDED PRODUCT. INTELLICALL INTENDS THIS
WILL BE ACCOMPLISHED VIA STRATEGIC PARTNERSHIPS AND
ACQUISITIONS.
It is recognized that the potential benefits of the merger may not
be realized, and that there are certain risks associated with any acquisition
and merger including:
- difficulty of assimilating acquired operations and
personnel of the companies;
- Potential disruption of business as a result of customer
or employee
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uncertainty; and
- Possibility the merger may not be completed and the
public's negative response.
INTERESTS OF CERTAIN PERSONS IN THE MERGER AGREEMENT
Some of Intellicalls directors and officers have interests in the
Issuance that are different from, or are in addition to, their interests as
stockholders in Intellicall. The members of the Board knew about these
additional interests, and considered them, when they approved the Merger
Agreement. These interests include provisions in the Merger Agreement
regarding directors' and officers' indemnification and employment agreements,
issuances of options and cash bonuses upon completion of the merger.
ACCOUNTING TREATMENT OF THE MERGER
The business combination will be considered a "reverse acquisition"
and will be accounted for under the provisions of Accounting Principles Board
Opinion Number 16 ("APB 16"), Accounting for Business Combinations as a
purchase business combination. WWC will be considered the "accounting
acquirer" and Intellicall will be considered the "legal acquirer" since the
former WWC shareholders will control Intellicall through their holdings of
approximately 56% of the combined outstanding shares of Intellicall Common
Stock, will have control over the Board of Directors of Intellicall and after
the Merger is effective the former employees of WWC who become employees of
Intellicall will be eligible to receive options to acquire in the aggregate
1.5 million additional shares of Intellicall Common Stock. If Intellicall's
remaining business operations are sold prior to the combination or if a
decision is made to discontinue such operations, the combination would be
accounted for as an acquisition of assets (primarily cash) rather than of a
business and no goodwill would be recorded.
REGULATORY APPROVALS
At any time before or after the completion of the merger, the Antitrust
Division of the Justice Department, the Federal Trade Commission or another
third party could seek to enjoin or rescind the merger on antitrust grounds. In
addition, at any time before or after the completion of the merger, any state
could take action under state antitrust laws that it deems necessary or
desirable in the public interest. We believe that the merger will not violate
any antitrust laws, that no federal or state regulatory requirements must be
complied with and that no federal or state regulatory approval must be obtained
in connection with the merger. However, we cannot assure you that there will be
no challenge to the merger on antitrust grounds, or if such a challenge is made,
what the result will be.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences
of the merger, based on the Internal Revenue Code of 1986, as amended (the
"Code"), the corresponding Treasury Regulations, administrative rulings and
court decisions, all as in effect as of the date of this Proxy Statement and all
of which are subject to change at any time, possibly with retroactive effect.
This summary does not address any applicable foreign, state or local laws.
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The merger is intended to qualify as a tax-free reorganization under
Section 368 of the Code, with the following consequences:
- NEITHER INTELLICALL NOR ITS STOCKHOLDERS WILL RECOGNIZE GAIN
OR LOSS FOR FEDERAL INCOME TAX PURPOSES SOLELY AS A RESULT OF
THE MERGER;
- WWC WILL NOT RECOGNIZE GAIN OR LOSS SOLELY AS A RESULT OF THE
MERGER; AND
- THE PARTIES ARE NOT REQUESTING A RULING FROM THE INTERNAL
REVENUE SERVICE IN CONNECTION WITH THE MERGER. IT IS A
CONDITION TO INTELLICALL'S OBLIGATIONS UNDER THE MERGER
AGREEMENT TO DELIVER A LEGAL OPINION FROM ITS COUNSEL,
CONFIRMING THAT, BASED ON CERTAIN ASSUMPTIONS AND SUBJECT TO
CERTAIN QUALIFICATIONS, THE MERGER WILL CONSTITUTE A
REORGANIZATION WITHIN THE MEANING OF SECTION 368(a) OF THE
CODE.
SUMMARY OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement and the Merger Agreement Amendment, copies of which are attached as
APPENDIX A and APPENDIX B, respectively, to this Proxy Statement. The summary
is qualified in its entirety by the terms of the Merger Agreement and the
Merger Agreement Amendment. Capitalized terms used and not otherwise defined
in this portion of this Proxy Statement have the respective meanings ascribed
to such terms in the Merger Agreement.
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THE MERGER
According to the terms of the Merger Agreement, at the effective
time of the merger, a wholly owned subsidiary of Intellicall, WWC
Acquisition, Inc. ("Merger Sub"), will be merged with WWC. WWC will be the
surviving corporation and will become a wholly owned subsidiary of
Intellicall.
EFFECTIVE TIME OF THE MERGER
The closing of the transactions contemplated by the Merger Agreement
will take place as soon as practicable after the date of the Merger Agreement.
The closing cannot take place until after the stockholders of Intellicall
approve the merger. See "The Merger Agreement -- Conditions to the Obligations
of the Company, Parent and Merger Sub" for a description of the conditions
that Intellicall, Merger Sub and WWC must satisfy prior to
completion of the merger.
As soon as practicable after the closing, a plan of merger will be
filed with the Secretary of State of the State of Florida, as provided in the
Florida Business Corporation Act. The time at which the plan of merger is filed
in Florida is referred to as the "effective time" of the merger.
CONVERSION OF SHARES -- EXCHANGE RATIO
Intellicall will issue a total of 16,426,420 shares of Common Stock
in the merger. As a result of the merger, each share of WWC's Common Stock
will be automatically converted into 1,642.642 shares of Common Stock (the
"Exchange Ratio"). The Exchange Ratio is based on 10,000 shares of WWC Common
Stock outstanding at the time of the merger. After the merger is completed,
former holders of WWC Common Stock will own approximately 56% of
Intellicall's issued and outstanding Common Stock and after the merger is
effective the former employees of WWC who become employees of Intellicall
will be eligible to receive options to acquire in the aggregate an additional
1.5 million shares of Common Stock. The Common Stock is not entitled to
preemptive rights.
CREATION OF ESCROW
The WWC stockholders have authorized the creation of an escrow with
respect to indemnification matters. At the closing of the merger, 1,642,642
(10%) of the 16,426,420 shares of Common Stock to be issued to the WWC
stockholders will be placed in escrow. The Escrow Agreement will govern the
terms under which shares of Common Stock issued to WWC stockholders in the
merger may be returned to Intellicall in the event of certain breaches of
representations and warranties by WWC and the WWC stockholders.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties by
WWC relating to, among other things:
- ORGANIZATION, AUTHORITY AND OWNERSHIP;
- THE ABSENCE OF A BREACH OR ANY VIOLATIONS OF WWC'S ARTICLES OF
INCORPORATION, BYLAWS, AGREEMENTS AND APPLICABLE LAW;
- CONSENTS AND APPROVALS;
- CAPITALIZATION;
- FINANCIAL STATEMENTS, ASSETS, LIABILITIES AND OBLIGATIONS;
- ABSENCE OF CERTAIN CHANGES OR EVENTS;
- ABSENCE OF UNDISCLOSED LIABILITIES;
- COMPLIANCE WITH LAWS;
- TAXES;
- ABSENCE OF LITIGATION;
- TITLE TO PROPERTY, INCLUDING REAL AND PERSONAL PROPERTY;
- INTELLECTUAL PROPERTY;
- EMPLOYEE BENEFIT PLANS;
- MATERIAL CONTRACTS AND AGREEMENTS;
- LABOR MATTERS;
- ENVIRONMENTAL MATTERS;
- INSURANCE;
- VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT;
- CERTAIN BUSINESS PRACTICES;
- CUSTOMERS AND SUPPLIERS;
- BANK ACCOUNTS;
- YEAR 2000 ISSUES;
- ACCURACY OF THE INFORMATION IN THE PROXY STATEMENT; AND
- BROKERS AND FINDERS.
The Merger Agreement contains certain representations and warranties by
the
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shareholders of WWC relating to, among other things:
- AUTHORITY AND THEIR OWNERSHIP OF WWC COMMON STOCK;
- THE ABSENCE OF A BREACH OR OF VIOLATIONS OF ANY ORGANIZATIONAL
DOCUMENT OR APPLICABLE LAW;
- CONSENTS AND APPROVALS;
- BROKERS AND FINDERS; AND
- REPRESENTATION THAT THE INVESTMENT IS EXEMPT FROM
REGISTRATION.
The Merger Agreement contains certain representations and warranties by
Intellicall and Merger Sub relating to, among other things:
- ORGANIZATION AND AUTHORITY;
- THE ABSENCE OF A BREACH OR OF VIOLATIONS OF EITHER
INTELLICALL'S CERTIFICATE OF INCORPORATION OR MERGER SUB'S
ARTICLES OF INCORPORATION, BYLAWS, AGREEMENTS AND
APPLICABLE LAW;
- CONSENTS AND APPROVALS;
- CAPITALIZATION;
- SEC REPORTS AND FINANCIAL STATEMENTS;
- ABSENCE OF CERTAIN CHANGES;
- TITLE TO PROPERTY;
- BROKERS;
- EMPLOYEE BENEFIT PLANS;
- LABOR MATTERS; AND
- ENVIRONMENTAL MATTERS.
OTHER AGREEMENTS AND COVENANTS
Intellicall and WWC have agreed that prior to the closing of the merger
each of them will, among other things:
- USE ITS BEST EFFORTS TO CAUSE THE CONSUMMATION OF THE MERGER;
- OPERATE ITS BUSINESS IN THE USUAL AND ORDINARY COURSE;
- USE ALL REASONABLE EFFORTS TO PRESERVE SUBSTANTIALLY INTACT
ITS BUSINESS ORGANIZATION AND KEEP ITS MATERIAL PROPERTIES IN
AS GOOD REPAIR AND CONDITION AS AT PRESENT;
- PROVIDE REASONABLE ACCESS TO EACH OTHER TO ALL OFFICES,
FACILITIES AND BOOKS;
- USE ITS BEST EFFORTS TO SECURE ALL NECESSARY APPROVALS AND
CONSENTS OF THIRD PARTIES TO THE MERGER AGREEMENT;
- DELIVER ITS DISCLOSURE SCHEDULE AND ALL DILIGENCE MATERIALS ON
OR PRIOR TO THE FIFTH BUSINESS DAY FOLLOWING THE DATE OF THE
MERGER AGREEMENT;
- NOT ADOPT ANY AMENDMENTS TO ITS ORGANIZATIONAL DOCUMENTS
ALTERING THE TERMS OF THE COMMON STOCK OR ADVERSELY IMPACTING
THE
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CONSUMMATION OF THE MERGER;
- NOT DECLARE, SET ASIDE OR PAY ANY DIVIDEND OR OTHER
DISTRIBUTION IN RESPECT OF ITS CAPITAL STOCK, REDEEM OR
OTHERWISE ACQUIRE ANY OF ITS SECURITIES;
- NOT ISSUE, SELL, DELIVER OR AGREE OR COMMIT TO DO SO WITH
RESPECT TO ANY STOCK OF ANY CLASS OR AMEND ANY OF THE TERMS OF
SUCH SECURITIES OR AGREEMENTS CONTRARY TO THE MERGER
AGREEMENT;
- NOT ACQUIRE, SELL, LEASE OR DISPOSE OF ANY MATERIAL ASSETS;
- NOT CREATE, INCUR OR ASSUME ANY MATERIAL LONG-TERM DEBT;
- NOT MORTGAGE, PLEDGE OR SUBJECT ANY OF ITS MATERIAL PROPERTIES
OR ASSETS TO ANY LIEN, LEASE SECURITY INTEREST OR OTHER
ENCUMBRANCE;
- NOT INCREASE THE OFFICER OR DIRECTOR COMPENSATION TABLE;
- NOT EFFECT ANY REORGANIZATION OR RECAPITALIZATION OR SPLIT,
COMBINE OR CLASSIFY ANY OF ITS CAPITAL STOCK;
- NOT CHANGE ANY OF ITS ACCOUNTING METHODS;
- NOT TAKE, OR AGREE IN WRITING OR OTHERWISE TAKE ANY ACTIONS
THAT WOULD MAKE ANY REPRESENTATION OR WARRANTY UNTRUE, BE
INCONSISTENT WITH THE MERGER AGREEMENT, OR RESULT IN ANY OF
THE CONDITIONS OF THE MERGER AGREEMENT NOT BEING SATISFIED;
- NOT TAKE ANY ACTION THAT WOULD CAUSE THE MERGER TO FAIL TO
QUALIFY AS A TAX FREE REORGANIZATION UNDER THE CODE; AND
- NOT AGREE OR COMMIT TO TAKE ANY ACTION PROHIBITED BY THE
MERGER AGREEMENT.
Intellicall agreed that prior to the closing of the merger it will,
among other things:
- USE ITS BEST EFFORTS TO OBTAIN THE APPROVAL OF THE AMEX FOR
THE LISTING OF THE COMMON STOCK TO BE ISSUED IN CONNECTION
WITH THE MERGER; AND
- TAKE ALL ACTION NECESSARY TO CAUSE THE NUMBER OF MEMBERS
CONSTITUTING THE WHOLE BOARD OF DIRECTORS TO BE SEVEN AND TO
ELECT G.T. FINN, WILLIAM O. HUNT, JOHN MCDONALD, MIKE
CAMPBELL, NEIL BYRNE AND THREE OTHER DESIGNEES AGREED TO IN
WRITING BY INTELLICALL AND WWC.
WWC agreed that prior to the closing of the merger it will, among other things:
- CONDUCT ITS BUSINESS ONLY IN THE ORDINARY COURSE CONSISTENT
WITH PAST PRACTICE;
- USE ITS REASONABLE BEST EFFORTS TO PRESERVE ITS BUSINESS AND
RETAIN ITS CUSTOMERS, SUPPLIERS, CREDITORS, OFFICERS AND
EMPLOYEES;
- PERMIT INTELLICALL TO HAVE FULL ACCESS TO THE BUSINESS AND
ASSETS OF WWC; AND
- NOTIFY INTELLICALL OF ANY MATERIAL CHANGE IN ITS CONDITION,
OPERATIONS,
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ASSETS, LIABILITIES, BUSINESS OR PROSPECTS.
WWC agreed that prior to the closing of the merger it will not, among other
things:
- MAKE CERTAIN CHANGES IN EMPLOYEE COMPENSATION, POLICIES AND
BENEFIT PLANS;
- CANCEL OR MODIFY ANY CONTRACT WITHOUT INTELLICALL'S CONSENT
EXCEPT IN THE ORDINARY COURSE OF BUSINESS;
- INCUR INDEBTEDNESS OTHER THAN IN THE ORDINARY COURSE OF
BUSINESS, ACQUIRE OR DISPOSE OF CERTAIN ASSETS, PREPAY OR
DISCHARGE INDEBTEDNESS, DISCHARGE OR SATISFY CERTAIN LIENS OR
PAY OR PERFORM CERTAIN LIABILITIES;
- ENTER INTO ANY MORTGAGES OR PERMIT ANY LIENS EXCEPT IN THE
ORDINARY COURSE OF BUSINESS;
- PARTICIPATE IN NEGOTIATIONS WITH ANY THIRD PARTY REGARDING THE
SALE OF WWC
- DECLARE OR PAY ANY DIVIDENDS;
- MAKE ANY OFFERINGS, GRANTS OR ISSUANCES OF ITS CAPITAL STOCK
OR OTHER SECURITIES;
- AMEND ITS ARTICLES OF INCORPORATION OR BYLAWS;
- ADOPT A PLAN OR AGREEMENT OF LIQUIDATION, DISSOLUTION, MERGER,
CONSOLIDATION, RESTRUCTURING, RECAPITALIZATION OR OTHER
REORGANIZATION;
- SPLIT, COMBINE, RECLASSIFY OR TAKE SIMILAR ACTION WITH RESPECT
TO ITS CAPITAL STOCK; AND
- CHANGE ANY TAX ELECTION OR TAKE ACTION THAT WOULD INCREASE ITS
TAX LIABILITY OR REDUCE ITS TAX ASSETS.
CLOSING AND CLOSING DATE
As soon as practicable after the satisfaction or waiver of the
conditions in the Merger Agreement and prior to the filing of the certificate of
merger and articles of merger, a closing will take place at the offices of
Jackson Walker L.L.P, 901 Main Street, Suite 6000, Dallas, Texas or at such
other location as the parties may agree in writing. The date on which the
closing occurs is referred to as the "Closing Date."
CONDITIONS PRECEDENT
Intellicall's and WWC's obligations under the Merger Agreement are
subject, among other things, to the following:
- OBTAINING APPROVAL OF THE STOCKHOLDERS OF INTELLICALL FOR THE
ISSUANCE OF THE COMMON STOCK;
- OBTAINING APPROVAL OF THE COMMON STOCK FOR LISTING ON THE
AMEX;
- OBTAINING ANY GOVERNMENTAL OR REGULATORY NOTICES OR APPROVALS;
AND
- THE ABSENCE OF ANY GOVERNMENTAL ACTIONS OR INJUNCTION (OR
THREAT OF AN
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INJUNCTION) WHICH HAVE THE EFFECT OF PROHIBITING CONSUMMATION
OF THE MERGER.
In addition to the mutual conditions described above, Intellicall's and
the Merger Sub's obligations under the Merger Agreement are subject to the
following:
- THE RECEIPT OF INTELLICALL AND MERGER SUB OF A CERTIFICATE OF
THE PRESIDENT OR CHIEF FINANCIAL OFFICER OF WWC CERTIFYING
THAT EACH OF THE REPRESENTATIONS AND WARRANTIES MADE BY WWC
AND ITS SHAREHOLDERS IS TRUE AND CORRECT AS OF THE CLOSING
DATE;
- WWC AND ITS SHAREHOLDERS HAVE PERFORMED OR COMPLIED IN ALL
MATERIAL RESPECTS WITH THE AGREEMENTS AND COVENANTS REQUIRED
BY THIS MERGER AGREEMENT PRIOR TO THE CLOSING DATE, AND THE
RECEIPT OF A CERTIFICATE OF THE PRESIDENT OR CHIEF FINANCIAL
OFFICER OF WWC CERTIFYING THE PERFORMANCE; AND
- THERE CANNOT HAVE BEEN ANY CHANGE THAT IS MATERIALLY ADVERSE
TO THE FINANCIAL CONDITION, OPERATIONS OR CURRENT BUSINESS OF
WWC.
In addition to the mutual conditions described above, WWC's obligations
under the Merger Agreement are subject to the following:
- THE SHARES OF COMMON STOCK TO BE ISSUED UNDER THE MERGER
AGREEMENT SHALL HAVE BEEN APPROVED FOR LISTING ON THE AMEX;
AND
- WWC SHALL HAVE RECEIVED A LEGAL OPINION FROM INTELLCALL'S TAX
COUNSEL TO THE EFFECT THAT THE MERGER WILL CONSTITUTE A TAX
FREE REORGANIZATION UNDER SECTION 368(a) OF THE CODE.
REGISTRATION RIGHTS
Intellicall has agreed to grant certain piggyback registration
rights to the stockholders of WWC receiving Common Stock in the merger. If
Intellicall proposes to file a registration statement for any of the Common
Stock (except in connection with employee benefit plans or a Rule 145
transaction), then the holders of the Common Stock issued in the merger may
request Intellicall to register their shares on the same registration
statement. In that event, Intellicall must use all reasonable efforts to do
so, subject to certain limitations.
INDEMNIFICATION
WWC's shareholders have jointly and severally agreed to indemnify
Intellicall and Merger Sub and their respective directors, officers, agents,
attorneys and affiliates harmless from and against among other things, all
losses, claims and obligations, asserted against the indemnitees by reason of or
resulting from a breach of any representation, warranty or covenant of WWC or
its shareholders contained in the Merger Agreement. The WWC shareholders'
liability with respect to any such indemnification is limited to $3.7
million, except in the case of fraud.
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APPOINTMENT OF DIRECTORS
As part of the merger, Intellicall agreed to cause G.T. Finn,
William O. Hunt, John McDonald, Mike Campbell, Neil Byrne and three other
designees to be elected as Directors. Additionally, Intellicall agreed to
take all action necessary to elect John McDonald as Chairman and Chief
Executive Officer of Intellicall, G.T. Finn as President and Phil Boyd as
Chief Financial Officer.
TERMINATION
The Merger Agreement may be terminated by either Intellicall or WWC if
the closing of the Merger Agreement has not occurred by December 31, 2000.
Intellicall or WWC may terminate and abandon the Merger Agreement at any time
prior to the closing, whether before or after the approval of stockholders of
Intellicall and WWC by mutual written consent of duly authorized by each Board
of Directors to the Merger Agreement.
Intellicall may terminate upon:
- A MATERIAL BREACH OF A REPRESENTATION, WARRANTY OR COVENANT OF
THE WWC; OR
- IF THE BOARD OF DIRECTORS HAVE WITHDRAWN, MODIFIED OR CHANGED
ITS APPROVAL OR RECOMMENDATION OF THE ISSUANCE OF COMMON
STOCK.
Additionally, WWC may terminate the Merger Agreement if:
- A MATERIAL BREACH OF A REPRESENTATION, WARRANTY OR COVENANT OF
INTELLICALL; OR
- IF THE BOARD OF DIRECTORS HAVE WITHDRAWN, MODIFIED OR CHANGED
ITS APPROVAL OR RECOMMENDATION OF THE MERGER.
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UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
AND
BALANCE SHEET OF THE SURVIVING CORPORATION
The following pro forma financial statements combine the historical
information of Intellicall and WWC and the related pro forma adjustments to
give effect to the merger which are based on estimates and assumptions
explained in further detail in Note 1 to these statements. The pro forma
statements of operations for the year ended December 31, 1999 and for the six
months ended June 30, 2000 reflect the consolidated operations of Intellicall
and WWC as if the merger had been consummated as of January 1, 1999. The pro
forma balance sheet as of June 30, 2000 is presented as if the merger had
been consummated on that date.
The business combination will be considered a "reverse acquisition"
and will be accounted for under the provisions of Accounting Principles Board
Opinion Number 16 ("APB 16"), Accounting for Business Combinations as a
purchase business combination. WWC will be considered the "accounting
acquirer" and Intellicall will be considered the "legal acquirer" since the
former WWC shareholders will control Intellicall through their holdings of
approximately 56% of the combined outstanding shares of Intellicall Common
Stock, will have control over the Board of Directors of Intellicall and after
the Merger is effective the former employees of WWC who become employees of
Intellicall will be eligible to receive options to acquire in the aggregate
1.5 million additional shares of Intellicall Common Stock. If Intellicall's
remaining business operations are sold prior to the combination or if a
decision is made to discontinue such operations, the combination would be
accounted for as an acquisition of assets (primarily cash) rather than of a
business and no goodwill would be recorded.
The statements of operations and balance sheet are provided for
comparative purposes only and should be read in conjunction with the
historical consolidated financial statements of Intellicall included in the
Annual Report on Form 10-K/A delivered with this Proxy Statement and the
historical statements of revenues and direct operating expenses of WWC
included elsewhere in this Proxy Statement. The pro forma information
presented is not necessarily indicative of the combined financial results as
they may be in the future or as they might have been for the periods
indicated had the merger been consummated as of January 1, 1999.
<TABLE>
<CAPTION>
Proforma Combined Condensed Statement of Operations for the Six Months Ended
June 30, 2000
(in thousands, except per share data)
Intellicall WWC Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Equipment sales.............. $ 2,029 $ 0 $ 2,029
Service Revenue.............. 0 739 739
Cost of sales and revenues... 2,101 28 2,129
---------------- ---------- ----------- ---------
Gross profit (loss).......... (72) 711 639
Selling, general and
administrative expenses...... 3,488 503 $ 0 3,991
Provision for doubtful
accounts..................... 359 0 359
Amortization of goodwill..... 525(b) 525
---------------- ---------- ----------- ---------
21
<PAGE>
Operating income (loss)
from continuing operations... (3,919) 208 (525) (4,236)
Gain on sale of Stock........ 13,895 13,895
Loss on investment........... 0 0 0
Other income................. 57 0 57
Interest income.............. 94 0 94
Interest expense............. (709) 0 (709)
Equity in the loss of
unconsolidated subsidiary.... (51) 0 (51)
---------------- ---------- ----------- ---------
Income from continuing
operations................... 9,367 208 (525) 9,050
Income tax benefit (expense). $ (3,599) $ 12 $ (3,587)
---------------- ---------- ----------- ---------
Net loss from continuing
operations................... $ 5,768 $ 220 (525) $ 5,463
Basic net income per share
from continuing operations... $ 0.44 $ 21.97 $ 0.19
Diluted net income per share
from continuing operations... $ 0.41 $ 21.97 $ 0.18
Weighted average number
of shares outstanding........
Basic........................ 13,056 10 16,416 (a) 29,482
Diluted...................... 14,428 10 16,416 (a) 30,854
</TABLE>
<TABLE>
<CAPTION>
Proforma Combined Condensed Statement of Operations for the Year Ended
December 31, 1999
(in thousands, except per share data)
Intellicall WWC Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Equipment sales.............. $ 11,131 $ 0 $ 11,131
Service Revenue.............. 0 1,853 1,853
Cost of sales and revenues... 13,174 133 13,307
---------------- --------- ---------
Gross profit (loss).......... (2,043) 1,720 (323)
Selling, general and
administrative expenses...... 6,005 1,686 7,691
Provision for doubtful
accounts..................... 592 0 592
Research and development
expenses..................... 907 0 907
Amortization expense......... 0 0 1,050(b) 1,050
---------------- --------- ----------- ---------
Operating income (loss) from
continuing operations........ (9,547) 34 (1,050) (10,563)
Gain on sale of assets....... 1,431 0 1,431
Loss on investment........... (338) 0 (338)
Other income................. 346 0 346
Interest income.............. 0 0 0
Interest expense............. (1,717) 0 (1,717)
22
<PAGE>
Equity in the loss of
unconsolidated subsidiary.... (982) 0 (982)
---------------- ---------- ----------- ---------
Income (loss) from continuing
operations................... (10,807) 34 (1,050) (11,823)
Income tax benefit........... 1,500 0 1,500
---------------- ---------- ----------- ---------
Net income (loss) from
continuing operations........ $ (9,307) $ 34 (1,050) $ (10,323)
Basic and diluted net loss
per share from continuing
operations................... $ (0.76) N/A $ (0.36)
Weighted average number
of basic and diluted shares
outstanding outstanding...... 12,132 16,426 (a) 28,558
</TABLE>
<TABLE>
<CAPTION>
Proforma Combined Balance Sheet for the Six Months Ended
June 30, 2000
(in thousands, except per share data)
Intellicall WWC Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Current assets...............
Cash and cash equivalents.... $ 4,991 $ 319 $ $ 5,310
Receivables, net of
allowance for doubtful....... 1,105 0 1,105
Inventories, net............. 2,664 0 2,664
Receivables from related
party, net................... 175 175
Other current assets......... 226 12 238
---------------- ----------- ------------ -----------
Total current assets......... 9,161 331 9,492
Fixed assets, net............ 740 43 783
Other assets, net............ 706 706
Goodwill..................... 10,505(b) 10,505
Assets of discontinued
operations................... 420 0 420
---------------- ----------- ------------ -----------
Total Assets................. 11,027 374 10,505 21,906
Current liabilities..........
Accounts payable............. 1,094 15 1,109
Accrued liabilities.......... 437 9 446
Deferred Tax Liability....... 2,038 0 2,038
---------------- ----------- ------------ -----------
Total current liabilities.... 3,569 24 3,593
23
<PAGE>
Long-term debt............... $ 1,880 $ 0 $ 0 $ 1,880
Other liabilities............ $ 50 $ 0 $ 50
Liabilities of discontinued
operations................... $ 78 $ 0 $ 78
---------------- ----------- ------------ -----------
Total liabilities............ $ 5,577 $ 24 $ 0 $ 5,601
Stockholders' equity
Preferred stock..............
Common stock................. $ 131 $ 0 $ 164 (c) $ 295
Additional paid-in capital... $ 61,603 $ 374 $ (45,685)(d) $ 16,292
Less Common Stock in
treasury, at cost............ $ (258) $ 0 $ 0 $ (258)
Accumulated deficit.......... $ (56,026) $ (24) $ 56,026 (e) $ (24)
---------------- ----------- ------------ -----------
Total stockholders' equity... $ 5,450 $ 350 $ 10,505 $ 16,305
---------------- ----------- ------------ -----------
Total liabilities and
stockholders' equity......... $ 11,027 $ 374 $ 10,505 $ 21,906
</TABLE>
Intellicall, Inc.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
AND BALANCE SHEET
PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma consolidated statements of
operations reflect the following adjustments:
(a) Represents additional Common Shares of Intellicall issued to WWC
shareholders.
(b) Goodwill is recorded for the difference between the fair value of
the 16,426,420 shares of Common Stock of Intellicall and
outstanding warrants to purchase Intellicall Common Stock, based
on the closing price of Intellicall's Common Stock for the three
days prior, the day of and three days after the Merger agreement
was effected, and the fair value of the tangible net assets of
Intellicall. The goodwill will be amortized over 10 years. No
value has been assigned to the outstanding stock options of
Intellicall as the calculated fair value is de minimis due to the
option strike prices being significantly out of the money. If
Intellicall's remaining business operations are sold prior to the
combination or if a decision is made to discontinue such
operations, the combination would be accounted for as an
acquisition of assets (primarily cash) rather than of a
business and no goodwill would be recorded.
(c) Par value of additional Company shares issued to WWC shareholders
(16,426,400 Common Shares at $.01 par value).
24
<PAGE>
(d) Adjustment to restate Additional Paid in Capital.
<TABLE>
<S> <C>
Fair value of Intellicall stock issued to WWC shareholders
and Intellicall warrants outstanding...................... $ 15,955
Less par value of Common Stock.............................. (295)
Treasury stock remaining.................................... 258
Additional paid in capital of WWC........................... 374
--------
Resulting additional paid in capital, post merger........... 16,292
Less additional paid in capital, pre-merger
Intellicall............................................ (61,603)
WWC.................................................... (374)
--------
Net adjustment to additional paid in capital................ $(45,685)
</TABLE>
If Intellicall sells its remaining operations before the merger is
consummated, the stock issued to effect the combination would be valued at
the fair market value of the assets received from Intellicall (primarily
cash) which would reduce stockholders equity by approximately $10.5 million
from the presentation shown above.
(e) Adjustment to eliminate Intellicall's accumulated deficit to
reflect a combination and a reverse acquisition by WWC of
Intellicall
COMPARATIVE PER SHARE DATA
Set forth below are the comparative net income and book value per
common share data of each of Intellical and WWC and the Surviving Corporation
on a pro forma combined basis giving effect to the merger assuming it had
occurred as of January 1, 1999, in each case giving effect to the merger as a
purchase by WWC of all of the assets and liabilities of Intellicall, all on
the basis described in the unaudited pro forma financial information and
notes thereto included elsewhere in this Proxy Statement. Neither company
paid any dividends to their shareholders during the periods presented.
The information set forth below should be read in conjunction with
the respective audited and unaudited financial statements and related notes
of Intellicall and WWC included elsewhere in this Proxy Statement.
PER SHARE COMMON STOCK
DATA
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
----------------- ---------------
<S> <C> <C>
Historical - Intellicall:
Basic Net Income (Loss) Per Share from
Continuing Operations $ (0.76) $ 0.44
Diluted Net Income (Loss) Per Share from
Continuing Operations (0.76) 0.41
Basic and Diluted Net Income (Loss) Per Share
from Discontinued Operations (0.06) 0.00
Basic and diluted net loss per share from
extraordinary items 0.00 (0.01)
Basic Net Income (Loss) Per Share (0.82) 0.43
Diluted Net Income (Loss) Per Share (0.82) 0.40
Historical - WWC:
Basic and Diluted Net Income Per Share from
Continuing Operations N/A 21.97
Basic and Diluted Net Income Per Share from
Discontinued Operations N/A 0.00
Basic and Diluted Net Income Per Share N/A 21.97
Pro Forma Combined Net (Loss)
Basic Net Income (Loss) Per Share from
Continuing Operations (0.36) 0.19
Diluted Net Income (Loss) Per Share from
Continuing Operations $ (0.36) $ 0.18
June 30, 2000
---------------
Book Value per Share:
Historical Intellicall - Basic $ 0.42
Historical Intellicall - Diluted $ 0.38
Historical WWC $ 34.97
Proforma Combined per Share - Basic $ 0.55
Proforma Combined per Share - Diluted $ 0.53
</TABLE>
25
<PAGE>
DESCRIPTION OF INTELLICALL
This Proxy Statement is accompanied by an Annual Report on Form
10-K/A and contains information that may be important to you. Certain
information from Intellicall's Annual Report on Form 10-K/A is incorporated
by reference into this Proxy Statement. See "Incorporation of Certain
Information by Reference" set forth elsewhere in this Proxy Statement for a
list of the specific information being incorporated by reference.
Additionally, the unaudited financial statements of Intellicall for the
period ended June 30, 2000 are set forth elsewhere in this Proxy Statement.
Intellicall designs and manufactures public access telecommunications
systems. It is the intent of Intellicall to seek strategic alternatives to
exit the pay phone business, including the sale of that business. Intellicall
does not currently have an agreement to sell its pay phone business.
Selected Historical Financial Information of Intellicall
The following table highlights selected financial information of
Intellicall for the periods and at the dates indicated but does not
necessarily include all of the financial information that is important to you.
Intellicall's statements of operations data for each of the years in the
five-year period ended December 31, 1999 and its balance sheet data as of
December 31, 1995, 1996, 1997, 1998 and 1999 are derived from Intellicall's
financial statements which have been audited. The selected financial
information should be read in conjunction with the consolidated financial
statements and related notes included in the Annual Report on Form 10-K/A
being delivered to the stockholders with this Proxy Statement. Intellicall's
historical results are not necessarily indicative of Intellicall's operating
results to be expected in the future.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------- ----------------------
1995(1) 1996(1) 1997(1) 1998(1) 1999(1) 1999 2000
------------ --------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales and Revenues:
Equipment sales .................... $ 19,944 $ 15,884 $ 19,313 $ 13,859 $ 11,131 $ 6,380 $ 2,029
Service revenues ................... 14,142 30,679 60,450 -- -- -- --
Total ......................... 34,086 46,563 79,763 13,859 11,131 6,380 2,029
Cost of Sales and Revenues:
Equipment sales .................... 21,454 17,690 21,929 11,600 13,174 5,922 2,101
Service revenues ................... 10,650 27,049 52,523 -- -- -- --
Total ......................... 32,104 44,739 74,452 11,600 13,174 5,922 2,101
Gross profit (loss) ................ 1,982 1,824 5,311 2,259 (2,043) 458 (72)
Selling, general and administrative (6,058) (7,861) (12,616) (7,363) (6,005) 3,453 2,920
expenses.........................
Provision for doubtful accounts .... (820) (364) (1,006) (876) (592) 85 359
Research and development expenses .. (2,350) (608) (741) (1,587) (907) 498 568
Operating loss from continuing ..... (7,246) (7,009) (9,052) (7,567) (9,547) (3,578) (3,919)
operations.......................
Gain on sale of assets ............. 1,607 572 -- 7,389 1,431 -- 13,895
Loss on investments ................ -- -- -- -- (338) -- --
Other income ....................... 440 710 695 538 346 285 151
Interest expense ................... (3,310) (2,918) (2,660) (1,539) (1,717) (1,006) (709)
Subsidiary Loss .................... -- -- -- (762) (982) (621) --
Minority interest .................. -- (113) (382) -- -- -- (51)
Income (loss) before income taxes ..
from continuing operations ...... (8,509) (8,758) (11,399) (1,941) (10,807) (4,920) 9,367
Income tax benefit ................. -- 1,303 -- -- 1,500 -- --
Income tax expense ................. -- -- (277) -- -- -- (3,599)
Net Income (loss) from continuing (8,509) (7,455) (11,676) (1,941) (9,307) (4,920) 5,768
operations..........................
Income (loss) from discontinued 2,370 2,460 585 85 (681) (368) --
operations.......................
Net income (loss) before extraordinary
items $ (6,139) $ (4,995) $(11,091) $ (1,856) $ (9,988) $ (5,288) $ 5,768
Extraordinary items early
extinguishment of debt, net of -- -- -- -- -- -- (97)
$61 tax benefit..................
Net income (loss) .................. (6,139) (4,995) (11,091) (1,856) (9,988) (5,288) 5,671
Basic net loss per share from
continuing operations ........... $ (1.11) $ (0.93) $ (1.26) $ (0.20) $ (0.76) $ (0.41) $ 0.44
Diluted net loss per share from
continuing operations ........... $ (1.11) $ (0.93) $ (1.26) $ (0.20) $ (0.76) $ (0.41) $ 0.41
Basic and diluted net income (loss)
per share from discontinued
operations ...................... $ 0.31 $ 0.31 $ 0.06 $ 0.01 $ (0.06) $ (0.03) --
Basic and diluted net loss per
share form extraordinary items .. -- -- -- -- -- -- (0.01)
Weighted average number of basic
shares outstanding .............. 7,672 8,024 9,268 9,927 12,132 12,049 13,056
Weighted average number of diluted
shares outstanding .............. 7,672 8,024 9,265 9,927 12,132 12,049 14,428
BALANCE SHEET DATA:
Working capital (CA-CL) ............ $ (469) $ 10,832 $ (4,379) $ 4,363 $ 3,114 $ 3,923 $ 5,592
Total assets ....................... 48,644 45,254 84,789 24,884 12,117 15,885 11,027
Accounts payable and accrued ....... 4,990 7,665 26,293 3,137 2,408 4,534 1,531
liabilities
Short-term borrowings .............. 15,474 85 4,928 3,811 2,630 -- --
Long-term debt ..................... 8,620 19,312 21,217 7,312 6,557 9,213 1,880
Accumulated deficit ................ (33,767) (38,762) (49,853) (51,709) (61,697) (56,996) (56,026)
Total stockholders' equity (deficit) $ 13,243 $ 12,669 $ 9,951 $ 8,526 $ (338) $ 921 $ 5,450
</TABLE>
--------
(1) Certain prior year amounts have been reclassified to conform to current
year presentation.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999
EQUIPMENT SALES. Equipment sales for the quarter ended June 30, 2000
were $1.1 million compared to $1.5 million for the same period last year. $.2
million of the $.4 million decrease is principally due to an overall reduction
in demand for payphones and their related parts. The remaining $.2 million of
the $.4 million decrease is due to a reduced demand for switching hardware and
software. Equipment sales for the six months ended June 30, 2000 were $2.0
million compared to $6.4 million for the same period last year. $4.2 million
of the $4.4 million decrease is mainly a result of a reduction of shipments
into the Canadian market and an overall reduction in demand for payphones and
their related parts. The remaining $.2 million of the $4.4 million decrease is
due to a reduced demand for switching hardware and software.
GROSS PROFIT (LOSS). Gross profit for the quarter ended June 30, 2000
was $.05 million compared to a gross loss of $.1 million the same period last
year. The $.15 million increase is primarily due to an overall reduction in
work force and the elimination of costs associated with capitalized software
and goodwill, which were written off during the fourth quarter of 1999. Gross
loss for the six months ended June 30, 2000 was $.1 million compared to a
gross profit of $.5 million for the same period last year. The $.6 million
decline in gross profit is primarily due to the down turn in sales as noted
above, which led to a significant reduction in production. Fixed costs
associated with excess capacity in the McAllen manufacturing facility resulted
in an increase in cost of goods sold relative to sales, thereby reducing gross
profit for the period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") for the quarter ended June 30, 2000 were $1.5
million compared to $1.6 million for the same period last year. SG&A expenses
for the six months ended June 30, 2000 were $2.9 million compared to $3.4
million for the same period last year. The $.1 million and $.5 million decline
are mainly due to cost cutting measures undertaken by Intellicall, including a
reduction in personnel in the corporate
26
<PAGE>
and administrative areas. Similarly, Intellicall experienced a general
reduction in other costs as management focused on decreasing Intellicall's
cost to meet current operating requirements, including outsourcing Human
Resources and certain MIS functions, as well as reducing travel and
advertising expenses.
PROVISION FOR DOUBTFUL ACCOUNTS. Provision for doubtful accounts
expense for the quarter ended June 30, 2000 was $.34 million compared to $.33
million for the same period last year. The $.01 million increase is
predominately a result of Intellicall increasing reserves for bad debt during
the quarter ended June 30, 2000, partially offset by an increase in reserves
for bad debt during the quarter ended June 30, 1999 to offset a
reclassification of provision for doubtful accounts expense between the
equipment segment and the billing services segment during the first quarter of
1999. Provision for doubtful accounts expense for the six months ended June
30, 2000 was $.36 compared to $.09 million for the same period last year. The
$.27 million increase is primarily due Intellicall increase reserves for bad
debt during the six months ended June 30, 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
for the quarter ended June 30, 2000 were $.2 million compared to $.3 million
for the same period last year. The $.1 million decrease is mainly a result of
a reduction of salaries due to a reduction in head count and other costs
associated with research and development. Research and development expenses
for the six months ended June 30, 2000 was $.6 million compared to $.5 million
for the same period last year. The $.1 million increase is mainly due to
Intellicall's decision to discontinue capitalizing software development, which
increases the expense reported on the income statement. This increase is
partially offset by a reduction of salaries due to a reduction in head count
and other costs associated with research and development.
GAIN ON SALE OF ASSETS. On January 4, 2000 Intellicall was notified
by ILD of its intention to redeem Intellicall's interest in ILD's Series B
convertible preferred stock. ILD is to redeem 5,000 shares for $100 per share
plus accrued and unpaid dividends. As of June 30, 2000, ILD had remitted $.3
million to Intellicall, redeeming 1,975 shares of the Series B convertible
preferred stock and became current on all accrued and unpaid dividends. As a
result, Intellicall recorded a gain on the sale of the 1,975 shares of $.1
million. Proceeds from the sale were used for general operating purposes (See
Note 1 to the unaudited financial statements).
On April 11, 2000 Intellicall sold to Banca del Gottardo
Intellicall's remaining ownership in ILD, exclusive of 6,239 shares of Series
A convertible preferred stock Intellicall is required to hold pursuant to the
ILD Organization Agreement (See Note 8 to the unaudited financial statements).
As a result, Intellicall recorded a gain on the sale of $13.8 million.
Proceeds from the sale were used to retire a significant portion of
Intellicall's debt (See Note 4 to the unaudited Financial Statements) and for
general operating purposes.
INTEREST INCOME. Interest income for the quarter ended June 30, 2000
was $.07 million compared to $.06 million for the same period last year. The
$.01 million increase is primarily a result of investing the proceeds from the
ILD stock sold to Banca del
27
<PAGE>
Gottardo. Interest income for the six months ended June 30, 2000 was $.09
million compared to $.12 million for the same period last year. The $.03
decrease is primarily a result of Intellicall discontinuing to accrue interest
income on certain notes receivable that are no longer serviced by the debtor.
INTEREST EXPENSE. Interest expense for the quarter ended June 30,
2000 was $.4 million compared to $.5 million for the same period last year.
The $.1 million decrease is mainly a result of Intellicall retiring the
remaining $2.6 million 8.0% convertible subordinated notes due December 31,
2000, $4.8 million of the 8.0% convertible subordinated notes due November 22,
2001 and the $.5 million note to Bank of America due February 11, 2001 during
the quarter ended June 30, 2000 (See Note 4 to the unaudited Financial
Statements). Interest expense for the six months ended June 30, 2000 was $.7
million compared to $1.0 million for the same period last year. The $.3
million decrease is predominately a result of Intellicall expensing debt costs
relating to the retirement of the Finova obligations of $.2 million. The
remaining $.1 million decrease is related to Intellicall paying less interest
to RFC Capital Corporation on fewer sold receivables and the retirement of
Intellicall's notes payable during the quarter ended June 30, 2000 as
mentioned above (See Note 4 to the unaudited financial statements).
EQUITY IN GAIN/LOSS OF UNCONSOLIDATED SUBSIDIARY. For the quarters
ended June 30, 2000 and 1999, Intellicall reported a zero and $.26 million
loss on the equity investment in ILD. For the six months ended June 30, 2000,
Intellicall reported a $.05 million loss on the equity investment in ILD
compared to $.6 million for the same period last year. The gain and losses
represents Intellicall's proportionate share, based on ownership, of ILD's net
loss for the periods.
On April 11, 2000 Intellicall sold to Banca del Gottardo
Intellicall's remaining ownership in ILD, exclusive of 6,239 shares of Series
A convertible preferred stock Intellicall is required to hold pursuant to the
ILD Organization. As a result, Intellicall's ownership in ILD, as of April 11,
2000, decreased to 2.7%. Accordingly, Intellicall discontinued reporting its
investment in ILD on the equity method under the caption "Investment in
Unconsolidated Subsidiary" and has prospectively reported its investment in
ILD with its other investments under the caption "Other Assets" as of the
quarter ended June 30, 2000. Accordingly, Intellicall no longer reports a
portion of the gains and losses from ILD in its financial statements (See
Notes 1 and 8 to the unaudited financial statements).
DISCONTINUED OPERATIONS. On September 22, 1999 Intellicall elected to
discontinue its billing services operations effective October 21, 1999 (See
Note 5 to the unaudited Financial Statements). The billing services segment of
Intellicall's business was determined to be unprofitable after taking into
account the administrative and support costs for the segment. Intellicall's
billing services system is a combination of hardware and software that
performs, without human intervention, all the functions necessary for
completing an operator assisted payphone call (i.e., collect, calling card and
credit card calls) and a range of other payphone services and features. As a
result of this
28
<PAGE>
action the net results of the billing services operations are reported on the
statements of operations under the caption "Income (loss) from discontinued
operations. "Net revenues related to the discontinued billing services
operations were zero and $3 million for the quarters ended June 30, 2000 and
1999 and zero and $6.1 million for the six months ended June 30, 2000 and
1999. Net loss related to the discontinued billing services operations were
zero and $.1 million for the quarters ended June 30, 2000 and 1999 and zero
and $.4 million for the six months ended June 30, 2000 and 1999.
29
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In recent years, Intellicall has financed its net losses, capital
expenditures and capitalized research and development costs through a
combination of asset sales, reductions in working capital and external
financing. In 1998, Intellicall generated $8.5 million of cash from asset
sales, proceeds of which were used in part to reduce outstanding borrowings
under Intellicall's previous line of credit. Assets sold in 1998 included
Intellicall's prepaid calling card operations and a portion of its holdings in
ILD. On January 27, 1999, Intellicall closed and commenced funding under a
Receivables Sale Agreement (the "RFC Agreement") with RFC Capital Corporation,
or RFC, pursuant to which RFC has agreed to purchase from Intellicall certain
telecommunication receivables generated by Intellicall in the ordinary course
of its business. The RFC Agreement calls for RFC to purchase eligible
receivables from Intellicall from time to time upon presentation thereof for a
purchase price equal to the net value of such receivables. Net value is
designed to yield RFC an effective interest rate of prime plus 2.75%, plus
allow RFC to retain a holdback of 5% of the face amount of the receivables,
net of collections, against future collection risk.
Under the RFC Agreement, Intellicall performs certain servicing,
administrative and collection functions with respect to the receivables sold
to RFC. Also, pursuant to the terms of the RFC Agreement, Intellicall has
granted to RFC a security interest in and to Intellicall's receivables not
sold to RFC and Intellicall's customer base relating to the generation of such
accounts receivable. The initial term of the RFC Agreement expires on December
21, 2000.
Proceeds from the sale of receivables have been used by Intellicall
to retire all of its obligations to Finova Capital Corporation, or Finova, and
for other working capital purposes. In terminating its relationship with
Finova, and entering into the arrangement with RFC, Intellicall has retained
the right to use all of its assets which are not otherwise sold to RFC,
including its ILD holdings, in secured lending arrangements, should it become
desirable and possible to do so.
Intellicall reported a net loss from continuing operations of $10.8
million in 1999. This loss included non-cash charges of $7.1 million for
depreciation and amortization, provisions for doubtful accounts, inventory
losses and the minority interest of losses reported by ILD. Adding
depreciation and amortization of $5.2 million and interest charges of $1.7
million to the net loss results in a loss before interest, taxes, depreciation
and amortization of approximately $3.9 million. Net changes in operating
assets and liabilities during 1999 provided a source of cash of $4.9 million.
Accounts receivable declined $2.8 million for the period primarily resulting
from lower equipment and service sales, while inventories decreased $1.8
million as a result of reduced inventory purchases and improved inventory
management.
30
<PAGE>
Intellicall reported a net loss from continuing operations of $2.2
million during the six months ended June 30, 2000. This loss included non-cash
charges of $.4 million for depreciation and amortization, provisions for
doubtful accounts, provisions for inventory losses and the equity in loss of
an unconsolidated subsidiary, ILD. Adding depreciation and amortization of $.2
million and interest charges of $.3 million to the net loss results in a loss
before interest, taxes, depreciation and amortization of approximately $1.7
million. Net changes in operating assets and liabilities during the quarter
ended March 31, 2000 provided a source of cash of $1.0 million. Inventories
decreased $.3 million and accounts payable decreased $.4 as a result of
reduced inventory purchases and improved inventory management.
Cash flows from investing activities include capitalized equipment
purchases of $.1 million, software development costs of $1.0 million and
receipts of $1.3 million from the sale of 5,000 shares of ILD Series A
Convertible Preferred Stock to First Avenue. Cash flows from investing
activities also include receipts of $.2 million from ILD representing the
redemption of 1,487 shares of ILD's Series B preferred convertible stock.
Cash flows from financing activities include the $2.8 million
repayment on the line of credit from Finova, additional net borrowings of $2.0
million from Banca del Gottardo, the repayment of a $1.0 million convertible
subordinated note due to T.J. Berthel Investments, L.P. and $.9 million in
proceeds from the sale of Common stock, also to Banca del Gottardo. Cash flows
from financing activities also include a $.5 million revolving promissory note
with Bank of America and a $1.0 million prepayment from Banca del Gottardo
toward the ILD stock sale.
At March 31, 1999, Intellicall was required to retire the $1.0
million convertible subordinated note due to T.J. Berthel Investments, L.P. On
April 9, 1999, Intellicall obtained bridge financing of $1.0 million from
Banca del Gottardo for the purpose of satisfying all obligations to T.J.
Berthel Investments.
On June 11, 1999, Intellicall completed the sale of a $2.0 million of
7.0% convertible subordinated note, due June 11, 2004, to Banca del Gottardo.
$1.0 million of the net proceeds from the sale of the note was used to repay
the bridge financing, with the balance utilized for working capital. The note
was issued with warrants to purchase 200,000 shares of Intellicall's Common
Stock at $1.55 per share. The note was convertible through June 11, 2004 into
1,290,323 shares of Intellicall's Common Stock at a price of $1.55 per share.
Interest is payable semi-annually beginning December 1999. In connection with
issuing the note, Intellicall has collateralized this note with 35,000 shares
of ILD Series A preferred stock.
On October 21, 1999, Intellicall sold to First Avenue 5,000 shares of
ILD Series A convertible preferred stock. First Avenue is an unrelated third
party. Intellicall sold the shares for $250.00 each, for a total of $1.3
million of which $1.1 million was recognized as a gain. The transaction
lowered Intellicall's ownership percentage in ILD to 31.0% as of October 21,
1999. Proceeds from the sale were used to fund operations.
On October 21, 1999, Intellicall received notice from Banca del
Gottardo of its intent to "put" to Intellicall the balance of the 8%
convertible subordinate notes due
31
<PAGE>
December 31, 2000. The agreement relating to such convertible debt includes a
put option, giving Banca del Gottardo the right to tender for payment for the
outstanding balance of the notes on December 31, 1999. The current outstanding
balance of the note is $2.6 million. On December 30, 1999, Intellicall issued
warrants to purchase 200,000 shares of its Common Stock at a price of $1.00
per share to Banca del Gottardo. In consideration of the warrants, Banca del
Gottardo amended the December 29, 1995 note to postpone the put on the notes
from December 31, 1999 to June 30, 2000.
On December 30, 1999, Intellicall sold 1 million shares of Common
Stock to Banca del Gottardo for $0.85 per share. The purchase price
represented a 15% discount to the closing price of Intellicall's Common Stock
upon the agreed upon date of December 22, 1999. Proceeds from the sale were
utilized for working capital purposes.
On January 4, 2000, Intellicall was notified by ILD of its intention
to redeem Intellicall's interest in ILD's Series B preferred convertible
stock. ILD is to redeem 5,000 shares for $100 per share plus accrued and
unpaid dividends by April 11, 2000. As of March 31, 2000, ILD had remitted $.2
million to Intellicall, redeeming 1,487 shares of the Series B preferred
convertible stock and became current on all accrued and unpaid dividends.
Proceeds from the sale were used for general operating purposes.
On February 11, 2000, Intellicall signed a $.5 million revolving
promissory note with Bank of America, N.A., due February 11, 2001. Interest is
payable monthly at its prime rate commencing on March 11, 2000, with the
principal of the note guaranteed by William O. Hunt, Chairman of the Board of
Intellicall. Intellicall may repay and re-borrow under the terms of the note
at any time, up to a maximum aggregate outstanding balance equal to the
principal amount of the note. Proceeds of the note will be used for working
capital purposes. As of March 31, 2000, the current outstanding balance on the
note was $.5 million. On May 1, 2000, Intellicall paid off the $.5 million
note.
On April 11, 2000, Intellicall sold to Banca del Gottardo its
remaining ownership in ILD, exclusive of 6,239 shares of Series A preferred
convertible stock Intellicall is required to hold pursuant to the ILD
organization agreement. Intellicall's ownership in ILD includes approximately
58,772 shares of ILD Series A preferred convertible stock, 725 shares of ILD
Common Stock and 11,111 shares of ILD Common Stock obtainable upon conversion
of the $1.0 million subordinated convertible note due from ILD to Intellicall,
dated May 10, 1996. Pursuant to the sale to Banca del Gottardo, Intellicall
informed ILD as of March 10, 2000 of its election to convert the entire
principal balance of the Note into 11,111 shares of ILD Common Stock.
The terms of the ILD stock sale included the purchase of
Intellicall's ownership in ILD (70,608 combined shares of Series A and common
shares) for $220 per share or $15.5 million, with Intellicall maintaining the
option for 12 months to repurchase the shares at $250 per share. 100% of the
purchase price was paid in US Dollars at the closing of the sale. This offer
was communicated to ILD and ILD shareholders in accordance with the ILD
Shareholders' Agreement referencing ILD's and ILD shareholders' rights to
match the offer and exercise certain co-sale rights. See Note 8 to the
financial statements.
32
<PAGE>
On April 27, 2000, Intellicall received the remaining proceeds from the
sale of the ILD stock to Banca del Gottardo. A portion of the proceeds were used
to retire the remaining $2.6 million 8.0% convertible subordinated notes due
December 31, 2000 and $4.8 million of the 8.0% convertible subordinated notes
due November 22, 2001, both due to Banca del Gottardo. Additionally, On May 1,
2000, Intellicall retired the $.5 million note due to Bank of America. The
remaining proceeds will be used for general operating purposes and to fund
expansion into new markets subsequent to the merger with WWC.
Intellicall's management believes that the proceeds from the sale of
Intellicall's ownership in ILD will enable Intellicall to finance its
operations for the year ending December 31, 2000. Beyond 2000, Intellicall's
ability to obtain further funds from external sources will depend in part on
its ability to generate operating profits, or to substantially reduce its
operating losses, through the execution of its current business plan and the
implementation of the new business strategy related to the planned merger with
WWC. Although Intellicall's management believes that Intellicall's sales will
grow in 2000 and that profitability will improve with sales, there can be no
assurance that the events necessary for such sales growth will occur as or
when expected, or that future sales growth will be sufficiently large or
profitable to permit Intellicall to finance its activities without recourse to
continuing sales of assets or external funding sources. There can be no
assurance that under such conditions, external funds would be available or, if
available, would not potentially dilute shareholders' interests or returns.
CHANGES IN CERTIFYING ACCOUNTANT.
On September 8, 2000, Intellicall dismissed PricewaterhouseCoopers,
LLP ("PWC") as its principal independent accountants. The decision to dismiss
PWC was approved by Intellicall's Board as well as the Audit Committee of the
Board. PWC's report on Intellical's financial statements for each of the
fiscal years ended December 31, 1999 and 1998 did not contain an adverse
opinion or disclaimer of opinion. Neither were such reports qualified or
modified as to uncertainty, audit scope or accounting principles.
33
<PAGE>
During Intellicall's past two fiscal years and the periods following
December 31, 1999, there were no disagreements between Intellicall and PWC on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which if not resolved to the
satisfaction of PWC would have caused it to make reference to the subject
matter(s) of the disagreement(s) in connection with its reports.
On October 2, 2000 Intellicall retained Deloitte & Touche LLP to
serve as Intellicall's principal independent accountants. During Intellicall's
past two fiscal years and the periods following December 31, 1999, Intellicall
did not consult Deloitte & Touche LLP regarding the application of accounting
principles to a specified transaction or the type of audit opinion that might
be rendered on Intellicall's financial statements.
INTELLICALL MANAGEMENT
The following table sets forth certain information as of October 1,
2000 regarding Intellicall's executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John J. McDonald, Jr................ 50 President, Chief Executive Officer and Director
R. Phillip Boyd..................... 42 Chief Financial Officer and Secretary
William O. Hunt..................... 66 Chairman of the Board of Directors
B. Michael Adler.................... 53 Director
Lewis E. Brazelton III(1)(2)........ 59 Director
Richard B. Curran(1)(2)............. 64 Director
Arthur Chavoya(1)(2)................ 52 Director
</TABLE>
------------------
(1) Member of the Organization and Compensation Committee.
(2) Member of the Audit Committee.
JOHN J. MCDONALD, JR. was appointed President and Chief Executive
Officer in May 1998. Prior to that time, he was Chief Operating Officer from
July 1997 and Senior Vice President - Sales and Marketing from February 1997.
From June 1994 to January 1997, Mr. McDonald was Senior Vice President of
Intercom, Inc. Prior to Intercom he was Vice President, Business
Communications, of Ericsson Business Communications.
R. PHILLIP BOYD has been Chief Financial Officer and Secretary of
Intellicall since October 1998. Prior to such time, Mr. Boyd was Vice
President of Business Planning after joining Intellicall in November 1997 as
Executive Director of Finance. From November 1989 to August 1997, Mr. Boyd
served in various executive capacities with Kemper National Services, Inc. in
Ft. Lauderdale, Florida. Mr. Boyd is a Certified Management Accountant and a
CPA.
WILLIAM O. HUNT joined Intellicall in December 1992 as Chairman of
the Board, Chief Executive Officer and President. In May, 1998 Mr. Hunt
resigned his position as Chief Executive Officer and President. From June
1986 to July 1992, he was Chairman of the Board and Chief Executive Officer
of Alliance Telecommunications Corporation, a wireless telecommunications
company. Mr. Hunt serves on the boards of American Homestar Corporation,
Internet America, Inc. and Mobility Electronics, Inc.
B. MICHAEL ADLER is a founder of Intellicall and was Vice Chairman of
the Board of Directors of Intellicall from December 1992 until November 1993.
Prior to that time he was Chairman of the Board of Directors from
Intellicall's inception in November 1984. He served as Chief Executive Officer
of Intellicall from November 1984 to January 1988. From November 1984 to April
1987, he was also Intellicall's President. For the last five years, Mr. Adler
has been Chairman of the Board of The Payphone Company Limited, a Sri Lankan
company, and Chief Executive Officer of WorldQuest Networks,
34
<PAGE>
L.L.C., a Delaware limited liability company.
LEWIS E. BRAZELTON III has been a director of Intellicall since 1992
and has been Senior Vice President of Dain Rauscher, Inc., an investment
banking company, for more than the last five years.
RICHARD B. CURRAN has been a director of Intellicall since 1992 and
is a consultant and has been an investor in a number of privately held
companies since 1989 in which he has also served in either director
capacities or senior management positions. Mr. Curran is also President and
Executive Director of Folkers Foundation for Biomedical & Clinical Research.
ARTHUR CHAVOYA has been a director of Intellicall since 1997 and is
President of The Chavoya Group, Inc., a management consulting firm. From
September 1996 to October 1997, Mr. Chavoya was President and Chief Executive
Officer of Aegis Communications Group, Inc., a provider of inbound and
outbound telemarketing services. Prior to September 1996 Mr. Chavoya spent
ten years at Electronic Data Systems in a number of executive positions
culminating in the presidency of EDS' Global Travel Services Industry
strategic business unit.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Intellicall's officers,
directors and persons who own more than 10% of a registered class of
Intellicall's equity securities to file initial reports of ownership and
reports of changes in ownership with the SEC and the American Stock Exchange.
Such persons are required by SEC regulation to furnish Intellicall with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it
with respect to fiscal year 1999, or written representations from certain
reporting persons, Intellicall believes that all filing requirements
applicable to its officers, directors and persons who own more than 10% of a
registered class of Intellicall's equity securities have been complied with.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established two committees, the
Organization and Compensation Committee and the Audit Committee. The
Organization and Compensation Committee, or the Compensation Committee,
composed of Messrs. Brazelton, Chavoya and Curran, met two times (in addition
to actions undertaken by unanimous consent) during the fiscal year ended
December 31, 1999. This committee reviews and approves salaries and bonuses
of executive officers and administers Intellicall's stock option and purchase
plans.
The Audit Committee, which was composed of Messrs. Brazelton,
Chavoya and Curran, met two times during the fiscal year ended December 31,
1999. This committee recommends to the Board of Directors the appointment of
independent auditors, reviews the plan and scope of audits, reviews
Intellicall's significant accounting policies and internal control and has
general responsibility for related matters. Intellicall adopted an Audit
Committee Charter on October 2, 2000, a copy of which is attached hereto as
EXHIBIT D.
Intellicall does not have a standing nominating committee of the
Board of Directors.
35
<PAGE>
The Board of Directors held nine meetings, either in person or by
telephonic conference, during the fiscal year ended December 31, 1999. None of
Intellicall's directors attended fewer than 75% of the meetings of (i) the
Board of Directors and (ii) the committees on which they served, during their
tenure in calendar year 1999.
COMPENSATION COMMITTEE INTERLOCK, AND INSIDER PARTICIPATION
Neither Messrs. Brazelton, Curran or Chavoya, who are members of
Intellicall's Compensation Committee, has at any time been an officer or
employee of Intellicall. None of Intellicall's executive officers serve as a
member of the board of directors or compensation committee of any entity which
has one or more executive officers serving as a member of Intellicall's board
of directors or compensation committee. For a description of the transactions
between Intellicall and a member of the compensation committee and entities
affiliated with any compensation committee member, see "Certain Relationships
and Related Transactions of Intellicall."
ORGANIZATION AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
Intellicall's executive compensation plans have been designed to
attract, retain and reward high caliber executives who will formulate and
execute Intellicall's business plans in a manner that will provide
Intellicall's stockholders with a higher than average return on Intellicall's
Common Stock while ensuring that Intellicall's compensation levels are fair
and appropriate to both its executives and stockholders. With these goals in
mind, Intellicall's compensation plans and policies have been designed to have
total compensation linked significantly with the operating performance of
Intellicall. Although the Compensation Committee recognizes that the
improvement of operating performance of Intellicall and higher stock prices do
not necessarily move in tandem over the short term, the Compensation Committee
believes that the two criteria will correlate over the long term.
The Compensation Committee does not expect to pay above-average base
salaries to its executive officers, but does expect to utilize
performance-oriented and equity-based compensation to reward positive
performance and results. For the fiscal year 1999 Intellicall paid a bonus of
$25,000 to Mr. Boyd, Intellicall's Chief Financial Officer.
The Compensation Committee also supports the position that stock
ownership by Intellicall's executive officers, encouraged by equity-based
compensation plans, aligns the interests of the executive officers with
Intellicall's stockholders. By using equity-based compensation over a period
of time, Intellicall's executive officers should become larger holders of
Intellicall stock. This is intended to strengthen their identification with
Intellicall's stockholders and make increasing stockholder value an even more
important focus for Intellicall's management group. In addition, the
Compensation Committee believes that the use of equity-based compensation
combined with a focus on Intellicall's
36
<PAGE>
operating performance will create a balance of these two long-term objectives.
CEO COMPENSATION
John J. McDonald, Jr. is Intellicall's President and Chief Executive
Officer. Mr. McDonald's compensation package was established by the
Compensation Committee and the Board of Directors in May 1998. The
Compensation Committee and the Board were advised by an independent
compensation consulting firm. In accordance with Mr. McDonald's stated goal of
building stockholder value and consistent with the Compensation Committee's
compensation philosophy described above, a compensation package involving a
lower base salary, participation in a performance-based bonus plan and a stock
option grant was agreed upon.
Mr. McDonald's base salary in 1998 was set at $285,000 and it was
agreed that he would participate in a bonus plan. Based upon the advice of its
independent compensation consultant, the Compensation Committee concluded that
Mr. McDonald's proposed salary and bonus arrangements were reasonable and were
well within the range of similar arrangements made by comparable companies.
In 1998 Mr. McDonald was granted options to purchase 180,000 shares
of Intellicall's Common Stock under Intellicall's 1991 Stock Option Plan. The
options vest in accordance with Intellicall's standard vesting schedule under
the 1991 Incentive Stock Option Plan. The Compensation Committee concluded
that this stock option grant was justified given Mr. McDonald's qualifications
and Intellicall's need to install a new chief executive who could build
stockholder value.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the
compensation to (i) Intellicall's chief executive officer at December 31,
1999 and (ii) Intellicall's other most highly compensated executive officer
during 1999 (collectively, the "Named Executive Officers"), for services
rendered during the fiscal years ended December 31, 1999, 1998 and 1997.
Intellicall did not have any other executive officers with salaries in excess
of $100,000 during 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
-----------------------------------------------------------------------------------
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION AWARDS
------------------------------------------------ -------------------------------
SECURITIES
OTHER ANNUAL STOCK UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) AWARDS ($) OPTIONS (#)
---------------------------- -------- ----------- ---------- ------------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
John J. McDonald, Jr.... 1999 $285,000 $ --- $2,137 $ ---- ----
President, Chief 1998 $260,156 $71,250 $2,500 $180,000 ----
Executive Officer and 1997 $185,896 ---- $2,375 ---- ----
Director after May 1998,
Senior Vice President
Sales & Marketing before
May 1998
37
<PAGE>
R. Phillip Boyd....... 1999 $130,000 $25,000 $1,000 ---- ----
Chief Financial Officer 1998 ---- ---- ----
and Secretary from 1997 ---- ----
October 1998, Vice
President of Business
Planning
</TABLE>
(1) In accordance with the rules of the Securities and Exchange Commission, the
compensation described in this table does not include medical, group life
insurance or other benefits which are available generally to all of our
salaried employees and certain perquisites and other personal benefits
received which do not exceed the lesser of $50,000 or 10% of any officer's
salary and bonus disclosed in this table.
(2) All "Other Compensation" consists of Intellicall's matching payments
pursuant to its 401(k) Plan.
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers during
the year ended December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides summary information regarding the stock
options exercised during 1999 and the stock options held as of December 31, 1999
by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999 (1)
------------------------------------ -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
John J. McDonald, Jr........... 255,000 45,000 ---- ----
R. Phillip Boyd ............... 23,750 6,250 ---- ----
</TABLE>
------------------
38
<PAGE>
(1) Market value of underlying securities at December 31, 1999 less the
exercise price.
DIRECTOR COMPENSATION
During 1999 each member of the Board of Directors who was not an
officer or employee of Intellicall received an annual $13,500 director's
retainer for serving on the board. Additionally each director was paid a fee
of $675 for each directors meeting he attended and a $675 fee for each
committee meeting he attended other than committee meetings held on the same
day as a directors meeting. Directors were also reimbursed for expenses
relating to attendance at meetings.
INDEMNIFICATION ARRANGEMENTS
Intellicall's bylaws provide for the indemnification of its executive
officers and directors, and the advancement to them of expenses in connection
with proceedings and claims, to the fullest extent permitted by the Delaware
General Corporation Law. Intellicall has also entered into indemnification
agreements with its executive officers and directors that contractually
provide for indemnification and expense advancement and include related
provisions meant to facilitate the indemnitees' receipt of such benefits.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to Intellicall's directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise,
Intellicall has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than our payment of expenses
incurred or paid by one of Intellicall's directors, officers or controlling
persons in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, Intellicall will, unless in the opinion of
Intellicall's counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by Intellicall is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
1991 STOCK OPTION PLAN
For a description of Intellicall's 1991 Stock Option Plan and
certain proposed amendments thereto, see "Proposal No. 4 - Amendment of the
Plan" set forth elsewhere in this Proxy Statement.
39
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN. Intellicall's Board of Directors
adopted the 1995 Employee Stock Purchase Plan for employees of Intellicall and
its subsidiaries. Intellicall's stockholders approved the plan in 1996. Up to
300,000 shares of Common Stock are authorized to be issued under the Employee
Stock Purchase Plan. The purpose of the Employee Stock Purchase Plan is to
provide employees of Intellicall and its designated subsidiaries with an
opportunity to purchase Intellicall Common Stock at a discount through
accumulated payroll deductions. The Employee Stock Purchase Plan is also
intended to motivate such persons to exert their best efforts on behalf of
Intellicall.
The Employee Stock Purchase Plan is administered by the Compensation
Committee of the Board of Directors. Participating employees are entitled to
enroll during one or both of two six month offering periods during each
calendar year. Eligible employees may elect to have payroll deductions made on
each payday during each offering period in an amount not exceeding ten percent
(10%) of the compensation which he or she receives on each such payday. At the
end of each offering period the accumulated payroll deductions are utilized to
purchase shares of Common Stock from Intellicall pursuant to the exercise of
options granted at the beginning of each offering period. The purchase price
for the shares purchased with the payroll deductions is equal to eighty-five
percent (85%) of the fair market value of a share of Common Stock on the first
trading day or the last trading day of each offering period, whichever is
lower.
At October 1, 2000 Intellicall and its subsidiaries had approximately
48 employees who are eligible to participate in the Employee Stock Purchase
Plan, of which one employee is actually participating in the Employee Stock
Purchase Plan.
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the
cumulative total stockholder return on Intellicall's Common Stock during the
five years ended December 31, 1999, with the cumulative total return of (i)
Standard & Poors 500 Stock Index, (ii) the Standard & Poors Small Cap 600
Index and (iii) the Standard & Poors Telephone Manufacturers Index. The
comparison assumes $100 was invested on December 31, 1994 in Intellicall's
Common Stock and in each of the other indices and assumes reinvestment of
dividends. Intellicall paid no dividends during the five year period.
40
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG INTELLICALL,
S&P 500 INDEX, S&P SMALL CAP 600 INDEX, AND
S&P TELEPHONE MANUFACTURER'S INDEX.
<TABLE>
<CAPTION>
S&P
Measurement Period S&P Small Cap 600 Telephone Manufacturer's
(Fiscal Year Covered) Intellicall 500 Index Index Composite Index
--------------------- ----------- --------- ----- ---------------
<S> <C> <C> <C> <C>
Measurement Pt-12/31/94 $100 $100 $100 $100
FYE 12/31/95 $100 $138 $130 $151
FYE 12/31/96 $157 $169 $158 $152
FYE 12/31/97 $137 $226 $198 $212
FYE 12/31/98 $ 58 $290 $195 $312
FYE 12/31/99 $ 30 $351 $220 $330
</TABLE>
** Assumes $100 invested on December 31, 1994 in Intellicall Common Stock, the
S&P 500 Index, the S&P Smallcap 600, and the S&P Telephone Index
* Total return assumes re-investment of dividends
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF INTELLICALL
The following table sets forth, as of October 1, 2000, the number and
percentage of outstanding shares of Common Stock beneficially owned by:
- EACH OF THE NAMED EXECUTIVE OFFICERS;
- EACH PERSON KNOWN BY INTELLICALL TO BE THE BENEFICIAL OWNER
OF MORE THAN 5% OF INTELLICALL'S COMMON STOCK,
- EACH DIRECTOR AND EACH PERSON NOMINATED TO BE ELECTED A
DIRECTOR OF INTELLICALL; AND
- ALL OFFICERS AND DIRECTORS AS A GROUP.
Unless otherwise noted, the persons named below have sole voting and
investment power with respect to the shares shown as beneficially owned by
them.
41
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
NAME AND ADDRESS OF COMMON STOCK PERCENTAGE
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OF CLASS
--------------------------------------------- ------------------------- -------------------
<S> <C> <C>
William O. Hunt(3) 962,000 7.0%
2155 Chenault, Suite 450
Carrollton, Texas 75006
Banca Del Gottardo(4) 4,578,658 35.1%
viale S. Franscini 8
6901 Lugano
Switzerland
B. Michael Adler(5) 646,813 4.9%
2155 Chenault, Suite 450
Carrollton, Texas 75006
Lewis E. Brazelton III(6) 116,373 *
Arthur Chavoya(7) 30,000 *
Richard B. Curran(8) 86,250 *
John J. McDonald, Jr.(9) 873,800 6.4%
R. Phillip Boyd (10) 27,250 *
All officers and directors as a group (13 2,742,486 21.0%
persons)(11)
</TABLE>
------------------
* less than one percent
1. The persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned
by them, subject to community property laws, where applicable, and the
information contained in the footnotes to the table.
2. Includes shares issuable upon the conversion of subordinated debt
or shares issuable upon exercise of options or warrants that have or will vest
within 60 days.
3. Includes 175,825 shares as to which Mr. Hunt has shared voting and
investment power and 670,000 shares of Common Stock issuable upon exercise of
options.
4. Includes 2,604,473 shares of Common Stock issuable upon
conversion of subordinated debt and exercise of a warrants.
5. Includes (i) 37,000 shares held in the name of Adler Computer
Systems, Inc., a company wholly owned by Mr. Adler and (ii) 170,000 shares of
Common Stock issuable upon exercise of options.
42
<PAGE>
6. Includes 5,091 shares owned by Mr. Brazelton's wife, as to which
Mr. Brazelton disclaims beneficial ownership, and 30,000 shares of Common
Stock issuable upon exercise of options.
7. Includes 30,000 shares of Common Stock issuable upon exercise of
options.
8. Includes 36,250 shares held by Mr. Curran's wife and a trust of
which Mr. Curran's wife is a beneficiary, as to which Mr. Curran disclaims
beneficial ownership, and 30,000 shares of Common Stock issuable upon exercise
of options.
9. Includes 300,000 shares of Common Stock issuable upon exercise of
options and 565,000 shares of Common Stock issuable upon exercise of options
that vest upon approval of the Issuance.
10. Includes 23,750 shares of Common Stock issuable upon exercise of
options.
11. Includes 1,185,000 shares of Common Stock issuable upon exercise
of options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF INTELLICALL
As of December 31, 1998, The Payphone Company, Ltd., or Payphone,
owed Intellicall $269,887 for trade receivables. In December 1998,
Intellicall's management completed the establishment of a full reserve for
such amount. B. Michael Adler was a director of Payphone and of Intellicall.
Mr. Adler and other members of Mr. Adler's family own the majority of
Payphone's stock.
On February 15, 1994, Intellicall issued a $1 million, 10%
convertible subordinated note to T.J. Berthel Investments, L.P., an affiliate
of Thomas J. Berthel, who previously served as a director of Intellicall. An
amended and restated note was issued on August 9, 1994. Interest is payable
quarterly and the entire principal amount matured and was paid in full on
March 31, 1999.
On February 11, 2000, Intellicall signed a $.5 million revolving
promissory note with Bank of America, N.A., due February 11, 2001. Interest
is payable monthly at its prime rate commencing on March 11, 2000 with the
principal of the note guaranteed by Mr. William O. Hunt, Chairman of the
Board of Intellicall, and B&G Partnership, Ltd, an affiliate of Mr. Hunt.
Intellicall may repay and re-borrow under the terms of the note at any time,
up to a maximum aggregate outstanding balance equal to the principal amount
of the note. Proceeds of the note were used for working capital purposes. On
May 1, 2000, Intellicall paid off the $.5 million note.
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<PAGE>
DESCRIPTION OF WIRELESS WEBCONNECT!, INC.
SELECTED HISTORICAL FINANCIAL DATA OF WWC
The following table highlights selected financial information of WWC
for the periods and at the dates indicated but does not necessarily include
all of the financial information that is important to you. WWC's Statement of
Operations Data for all of the years in the three-year period ended December
31, 1999 and its balance sheet data as of December 31, 1998, and 1999 are
derived from WWC's financial statements that have been audited by Deloitte &
Touche LLP, independent auditors. The selected financial information should be
read in conjunction with the financial statements and notes included elsewhere
in this Proxy Statement. WWC's historical results are not necessarily
indicative of WWC's operating results to be expected in the future.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1996 1997 1998 1999 1999 2000
--------------------------------------------- -------------------
(UNAUDITED) (UNAUDITED)
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $1,000 $1,384 $1,402 $1,853 $996 $ 739
Net income 116 59 120 34 130 220
Income Per Common Share (a) (a) (a) (a) (a) $21.97
(UNAUDITED) (UNAUDITED)
Balance Sheet Data:
Total Assets 177 197 240 231 354 374
Owners' Equity $ 116 $ 101 $ 206 $ 174 $286 $ 350
</TABLE>
(a) Income per common share is not presented for the periods the entity
operated as a partnership.
WWC BUSINESS
WWC is a reseller of high-speed, mobile wireless internet service
for mobile professionals and secure wireless access to corporate computer
networks through VPN (Virtual Private Networking) services. WWC acquires,
services and supplies mobile professional customers with fast, wireless data
access. WWC has developed a subscriber acquisition model that includes
coordinating the activities of marketing and public relations, inbound and
outbound call centers, outside sales programs, e-commerce and customer
retention activities, including technical support, customer service and
marketing.
WWC was founded in 1991 under the name Business Tel to integrate the
disciplines of public relations, marketing, inbound and outbound call
centers, inside and outside sales and customer retention activities to round
out a full-service subscriber acquisition model. WWC started out in the long
distance reselling industry where it established sales offices for a publicly
held company in numerous major United States markets and supported them via a
centralized 100-person call center operation.
In 1995 WWC became a strategic partner with Metricom, Inc. in
locating subscribers to use Metricom's Ricochet 28.8 kpbs wireless data
network. WWC has worked directly with Metricom and the Ricochet service for
the last five years and signed up over 50% of the Ricochet 28.8 kbps
subscriber base.
In support of Metricom's Ricochet service, WWC has established and
managed inbound and outbound call centers, retail stores, airport booths,
government sales
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programs and sales teams targeting subscribers in Fortune 1000 companies,
small to medium sized businesses, small-office/home-office (SOHO), government
agencies and the educational market. WWC has established sales offices in all
Ricochet 28.8 kbps metropolitan service areas, including Seattle, Washington
D.C., San Francisco and the Silicon Valley.
In June 2000, WWC entered into an agreement with Metricom to become
a Ricochet Authorized Service Provider, and now provides 128 kbps Ricochet
high-speed wireless mobile access under the brand name Ricochet WebConnect!,
its anchor service. WWC used its acquisition model to support Metricom's
launch of 128 kbps Ricochet in San Diego and Atlanta in July 2000 and will
continue to support the offering as it rolls out nationwide. In addition to
retailing Ricochet service and hardware, WWC is a full service provider of
customer, network and administrative support and care for its wireless
subscribers.
Metricom informed its Ricochet 28.8 kbps subscriber base in
September 2000 that it had contracted with WWC to be the exclusive provider
of the Ricochet 28.8 kbps service to Metricom's existing customers, allowing
customers the choice of continuing with their original Ricochet 28.8 kbps
service or advancing to the new 128 kbps high-speed service. WWC is now
expanding rapidly as a wireless Internet service provider with Ricochet
WebConnect! as its core service offering.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF WWC
You should read the following discussion of WWC's financial condition and
results of operations in conjunction with the WWC financial statements and
the notes thereto included elsewhere in this Proxy Statement. The results
shown in this Proxy Statement are not necessarily indicative of the results
WWC will achieve in any future periods.
Overview
WWC provides wireless services for mobile professionals. WWC's revenue is
primarily generated from the resale of wireless Internet data services and
mobile Internet connection devices used by subscribers. WWC began
subscribing mobile professionals for wireless data services in July 1995.
Since WWC's inception WWC has internally funded the continued activity of
signing up mobile professionals for wireless Internet services. Recently WWC
invested to expand its call center, sales offices, marketing activities and
delivery capabilities. WWC's plan is to continue investing in these
activities and expand its customer base by identifying and providing cutting
edge wireless services to mobile professionals throughout the United States.
With the introduction of new wireless services in major US markets WWC
expects to incur significant operating losses for at least the next several
quarters. WWC's profitability will be dependent upon revenue generated from
a growing customer base by following its business plan.
WWC's revenue is primarily generated from the sales of wireless devices
(modems) and the resale of wireless subscriber services provided by Metricom,
Inc. Prior to the launch of Metricom's Ricochet 128k wireless Internet
service ("R2") in July 2000, WWC's revenue was generated primarily from
commissions paid for subscribers acquired by WWC for Metricom. This revenue
accounted for 99% of WWC's revenue in 1997, 94% of WWC's revenue in 1998 and
91% in 1999. Upon the introduction of the R2 offering from Metricom in July
2000, WWC became a national wireless Internet service provider/reseller,
wherein WWC provides comprehensive customer interface and support including
subscription services, modem sales and technical support. These changes
allow WWC to better service the end user and own the customers WWC subscribes.
WWC's R2 offering enables WWC's customers to receive 128k or better mobile
wireless Internet service with unlimited usage and no roaming charges for
$74.95 per month. This service includes full web access and email adding up
to full desktop replication but with no phone lines within the coverage area.
Annual rates provide a free month of service with no activation fee when paid
in advance. Monthly subscribers pay $74.95 monthly with a $30 activation
fee. All customers will be given a 30 day money back guarantee excluding the
activation fee. Once 30 days are passed the subscriber terms include an
annual commitment. Additionally, all customers will have the option to
purchase the wireless modem of their choice with an average cost of $299.
These devices are modems that work on any platform and soon will include a
PCMCIA card for use on laptops and virtually other handheld computers.
WWC's subscriber acquisition costs consist primarily of the establishment and
running of sales offices, call centers, marketing, and management expenses.
Modem devices are purchased from third party manufacturers and there may be a
need to subsidize these devices in order to stay competitive. WWC's delivery
expenses include technical delivery and support personnel, equipment and
maintenance, bandwidth, systems, automation and content development and the
management of these activities. In 2000 and 2001, WWC expects its sales and
marketing expense to increase substantially as a percentage of its annual
revenues. WWC's general and administrative expenses consist primarily of cash
compensation and related costs for general corporate, business development
and technology development personnel, along with rent and other related costs.
Six months ended June 30, 1999 Compared to the six months ended December 30,
2000
Commissions and related revenue. Commission and related revenue decreased
from $929,741 for the six months ended June 30, 1999 to $705,513 for the six
months ended June 30, 2000. This decrease was due primarily to temporary
cessation in April 2000 of marketing and selling the original Ricochet 28.8
mobile wireless Internet service ("R1") in order to prepare for the launch of
the new 128k Mobile wireless Internet service ("R2") set to launch in July
2000.
Services revenue. Services revenue decreased from $65,688 for the six months
ended June 30, 1999 to $33,000 for the six months ended June 30, 2000. This
decrease was due primarily to temporary cessation in April 2000 of marketing
R1 in order to prepare for the launch of R2 set to launch in July 2000.
Cost of services revenue. Costs of services revenue decreased from $54,897
for the six months ended June 30, 1999 to $28,000 for the six months ended
June 30, 2000. This decrease was due primarily to fewer US government
customers being serviced under WWC's government reseller contract for the six
months ended June 30, 2000.
Selling, general and administrative. Selling, general and administrative
expenses decreased from $811,064 for the six months ended June 30, 1999 to
$503,226 for the six months ended June 30, 2000. This decrease was due
primarily to temporary cessation in April 2000 of marketing and selling R1
in order to prepare for the launch of R2.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Commissions and related revenue. Commission and related revenue increased
from $1,311,633 for the year ended December 31, 1998 to $1,678,566 for the
year ended December 31, 1999. This was due primarily to an increase in the
number of subscribers signed-up in the year ended December 31, 1999. The
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<PAGE>
subscribers signed up increased from 3,447 for the year ended December 31,
1998 to 4,016 for the year ended December 31, 1999. This increase was due
primarily to expanded sales and marketing efforts.
Services revenue. Services revenue increased from $88,205 for the year ended
December 31, 1998 to $157,660 for the year ended December 31, 1999. This
increase was due primarily to an increase in services provided to the US
government as part of WWC's government reseller contract during the year ended
December 31, 1999.
Cost of services revenue. Costs of services revenue increased from $74,029
for the year ended December 31, 1998 to $133,467 for the year ended December
31, 1999. This increase was due primarily to an increase in services provided
to the US government as part of WWC's government reseller contract during the
year ended December 31, 1999.
Selling, general and administrative. Selling, general and administrative
expenses increased from $1,207,742 for the year ended December 31, 1998 to
$1,685,944 for the year ended December 31, 1999. This increase was due
primarily to an increase in advertising costs and salaries and commissions
paid to additional personnel performing sales and marketing activities for
the year ended December 31, 1999. Prior to May 2000, WWC was organized as a
partnership, thus no tax expense or benefit was recognized.
Year ended December 31, 1998 Compared to Year Ended December 31, 1997
Commissions and related revenue. Commission and related revenue decreased
from $1,364,162 for the year ended December 31, 1997 to $1,311,633 for the
year ended December 31, 1998. This was due primarily to a commission
structure change. The number of subscribers signed-up did increase from 2,860
for the year ended December 31, 1997 to 3,258 for the year ended December 31,
1998. This increase was due primarily to expanded sales and marketing efforts.
Services revenue. Services revenue increased from $17,628 for the year ended
December 31, 1997 to $88,205 for the year ended December 31, 1998. This
increase was due primarily to an increase in services provided to the US
government as part of WWC's governmental reseller contract during the year
ended December 31, 1998.
Cost of services revenue. Costs of services revenue increased from $15,009 for
the year ended December 31, 1997 to $74,029 for the year ended December 31,
1998. This increase was due primarily to an increase in services provided to
the US government as part of WWC's governmental reseller contract during the
year ended December 31, 1998.
Selling, general and administrative. Selling, general and administrative
expenses decreased from $1,309,932 for the year ended December 31, 1997 to
$1,207,742 for the year ended December 31, 1998. This decrease was due
primarily to a decrease in expenses related to call center activities for the
year ended December 31, 1998.
Liquidity and Capital Resources
Since WWC's inception, WWC has financed its operations solely through revenue
generated by the business. Cash provided by operations has increased from
$30,000 in 1998 to $74,000 in 1999. This increase in cash is primarily
attributable to changes in working capital accounts including increases in
accounts payable and accrued expenses. Distributions were made to the owners
of the business of approximately $15,000 and $82,000 for 1998 and 1999,
respectively.
On August 29, 2000, WWC signed a promissory note with Intellicall. In the
amount of $1.5 million bearing interest at 8%. Funding of the note is
subject to certain conditions before scheduled disbursements are provided,
including pre-approval by Intellicall of the use of funds. As of September
30, 2000, $250,000 has been released to WWC under the provisions of the note
agreement. Proceeds of the note have been used to expand sales activities,
purchase equipment and systems and meet general operating expenses of WWC.
Under the terms of the agreement, upon the completion of the merger, all
accrued interest and outstanding principle are forgiven.
The successful expansion of the business into emerging markets is dependent
on the WWC's ability to fund operations internally and/or procure adequate
external financing in a timely basis. Currently, WWC has no other external
sources of working capital funds. If WWC's plans or assumptions change or
are inaccurate, WWC may be required to seek additional capital or seek
capital sooner than anticipated. In the event additional financing is not
available, WWC will be required to significantly reduce its expenses and/or
retract its expansion plans.
Assuming the Merger is consummated, WWC will be able to utilize the
significant working capital of Intellicall in order to further its expansion
plans. Additionally, as a public entity, WWC may better be able to raise
additional capital to expand its business.
MARKET PRICE, DIVIDENDS AND STOCKHOLDER MATTERS
There is no public market for the Common Stock of WWC. As of the date
of this Proxy Statement there are six holders of the Common Stock of WWC.
The Issuance will have the effects set forth in the column entitled
"Percentage of Class" on Intellicall's 5% or more stockholders, each director
and nominee and director's and officer's as a group and Intellicall's present
commitment to each of the above with respect to the issuance of common stock.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF CLASS
NAME AND ADDRESS OF COMMON STOCK ------------------------------------------
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) BEFORE ISSUANCE AFTER ISSUANCE
--------------------------------------------- ------------------------- ------------------- ------------------
<S> <C> <C> <C>
William O. Hunt 962,000 7.0% 3.2%
Banca Del Gottardo 4,578,658 35.1% 15.5%
B. Michael Adler 646,813 4.9% 2.2%
Lewis E. Brazelton III 116,373 * *
Arthur Chavoya 30,000 * *
Richard B. Curran 86,250 * *
John J. McDonald, Jr. 828,800 6.4% 3.0%
R. Phillip Boyd 27,250 *
G. T. Finn -- *
Mike Campbell -- *
Neil Byrne -- *
[Nominee to be determined]
[Nominee to be determined]
[Nominee to be determined]
All officers and directors as a group (13 2,742,486 21.0% 9.3%
persons)
</TABLE>
------------------
* less than one percent
1. The persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned
by them, subject to community property laws, where applicable, and the
information contained in the footnotes to the table.
2. Includes shares issuable upon the conversion of subordinated debt
or shares issuable upon exercise of options or warrants that have or will vest
within 60 days.
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<PAGE>
PROPOSAL NO. 2
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME TO WIRELESS WEBCONNECT!, INC.
In connection with the transactions contemplated by the Merger
Agreement, the Board has adopted resolutions approving certain amendments to
the Certificate of Incorporation. The Amended Certificate of Incorporation,
assuming approval of the Issuance by the stockholders at the Meeting, will
be filed with the Secretary of State of the State of Delaware as soon as
practicable after the date of the Meeting. Without any further action on the
part of Intellicall or the stockholders, the amendment described below will
become effective on the date of such filing:
The Board of Directors has adopted a resolution approving an amendment
to the Articles of Incorporation to change Intellicall's name to "Wireless
WebConnect!, Inc."
SUBJECT TO THE APPROVAL OF THE STOCKHOLDERS OF THE ISSUANCE AS
SET FORTH UNDER PROPOSAL NO. 1 ABOVE, THE BOARD RECOMMENDS THAT THE STOCKHOLDERS
VOTE FOR THE PROPOSAL TO CHANGE THE NAME OF INTELLICALL TO "WIRELESS
WEBCONNECT!, INC."
PROPOSAL NO. 3
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
In connection with the transactions contemplated by the Merger
Agreement, including the Issuance of 16,426,420 shares of Common Stock and
Intellicall's agreement that after the Merger has closed the former WWC
employees who become Intellicall employees will be eligible to receive
options to purchase up to an aggregate of 1.5 million shares of Common Stock,
and the proposal in this Proxy Statement to increase the shares authorized
under the 1991 Stock Option Plan, the Board has unanimously approved, subject
to approval by the stockholders, a proposal
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<PAGE>
to amend the certificate of incorporation to increase the number of shares of
Common Stock authorized and available for issuance from 20,000,000 to
60,000,000. In addition to providing a sufficient number of shares for the
Issuance, the Board believes that the Increase would benefit Intellicall by
providing greater flexibility to facilitate an acquisition strategy, to
provide stock-related employee benefits, to effect stock splits of the
outstanding Common Stock, and to provide flexibility for raising additional
capital to fund a growth strategy and other general corporate needs. Although
Intellicall is not currently reviewing any specific acquisition
opportunities, there may be future acquisitions and the Increase would allow
Intellicall to issue Common Stock in other future acquisitions. As of the
Record Date, Intellicall had issued and outstanding [13,081,889] shares of
Common Stock and [1,830,890] shares of Common Stock reserved for issuance
under its 1991 Stock Option Plan.
The Amended Certificate of Incorporation, assuming approval by the
stockholders at the Meeting, will be filed with the Secretary of State of the
State of Delaware as soon as practicable after the date of the Meeting.
Without any further action on the part of Intellicall or the stockholders,
the amendment will become effective on the date of such filing.
If the Increase is approved at the Meeting, other than approval of
the Issuance under Proposal No. 1, generally, no stockholder approval would
be necessary for the issuance of all or any portion of the additional shares
of Common Stock unless required by law or any rule or regulations to which
the Company is subject.
Depending upon the consideration per share received by Intellicall
for any subsequent issuance of Common Stock, such issuance could have a
dilutive effect on those stockholders who paid a higher consideration per
share for their stock. Also, future issuances will increase the number of
outstanding shares of Common Stock, thereby decreasing the percentage
ownership in Intellicall (for voting, distributions and all other purposes)
represented by existing shares of Common Stock. The availability for issuance
of the additional shares of Common Stock and any issuance thereof, or both
may be viewed as having the effect of discouraging an unsolicited attempt by
another person or entity to acquire control of Intellicall. Intellicall's
Certificate of Incorporation also contains a provision limiting the number of
directors to nine and provides for the issuance of preferred stock over
which the Board retains the right to determine voting rights. These
provisions may have an anti-takeover effect. The present proposal with respect
to the Increase is not a part of a plan by Intellicall's management to adopt
a series of anti-takeover measures, and management does not presently intend
to propose other anti-takeover measures in future proxy solicitations.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO
INCREASE THE AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL NO. 4
AMENDMENT OF THE PLAN
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The Board has adopted a resolution to amend the 1991 Stock Option
Plan to increase the aggregate number of shares of Common Stock that may be
issued thereunder to 9,495,000, which would provide shares available for the
issuance of up to 6,995,000 incentive stock options, 2,000,000 nonqualified
stock options and 500,000 nonemployee directors stock options. This proposed
Plan Amendment will provide enough authorized shares to grant up to an
aggregate of 1.5 million options to purchase Common Stock after the merger
described in Proposal No. 1 to the former employees of WWC who become
employees of Intellicall. The proposed Plan Amendment will also provide
flexibility to issue additional grants in the future. The Board has also
adopted resolutions to (i) change the automatic grants to nonemployee
directors upon initial election to the Board from February 1 to the date of
election to the Board and to provide for automatic annual grants on the date
of the Annual Meeting and (ii) to increase the initial grant to nonemployee
directors from an option to purchase 20,000 shares to an option to purchase
25,000 shares of common stock and to provide for automatic annual grants of
options to purchase 12,500 shares of common stock. The foregoing proposed
amendments to the 1991 Stock Option Plan are referred to herein as the Plan
Amendment. No other amendments to the 1991 Stock Option Plan are currently
contemplated.
The description in this Proxy Statement of the 1991 Stock Option Plan
is included solely as a summary, does not purport to be complete, and is
qualified in its entirety by the full text of the 1991 Stock Option Plan, as
amended to reflect the proposed changes, attached hereto as APPENDIX C.
GENERAL
The 1991 Stock Option Plan is an arrangement under which certain
individuals may be granted awards (the "Awards") for incentive stock options,
non-qualified stock options and directors' options. The purpose of the 1991
Stock Option Plan is to provide incentives to officers, directors and
employees of Intellicall, to attract individuals with a high degree of
training, experience, expertise and ability, to provide an opportunity to
such individuals to acquire a proprietary interest in the success of
Intellicall, to increase their interest in Intellicall's welfare, to align
their interests with those of Intellicall's stockholders and to encourage
them to remain with Intellicall.
ADMINISTRATION OF THE 1991 PLAN
The Option Plan is administered by the Compensation Committee
composed of non-employee directors of Intellicall who meet the requirements
of "disinterested person" in Section 16b of the Securities Exchange Act of
1934.
ELIGIBILITY
Awards may be granted under the 1991 Stock Option Plan to employees
of Intellicall, including officers and directors, and, in accordance with the
nondiscretionary formula mentioned above, non-employee directors of
Intellicall. However, only employees of Intellicall are entitled to receive
incentive stock option Awards. The Compensation Committee, in its discretion
as outlined in the 1991 Stock Option Plan, determines which individuals are
eligible to receive Awards under the 1991 Stock Option Plan.
The approximate number of individuals who were eligible to
participate in the 1991 Stock Option Plan as officers or employees of as of
October 1, 2000 was 48.
GRANT, TERM, AND RESTRICTIONS ON AWARDS
Awards granted under the 1991 Stock Option Plan may include incentive
stock
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<PAGE>
options, which are qualified under Section 422A of the Internal Revenue Code
of 1986 (the "Code"), non-qualified stock options, which are not qualified
under section 422A of the Code, and directors' options.
In the event Common Stock purchased upon exercise of incentive
options is disposed within a two year period after the options are granted
under the 1991 Stock Option Plan or within one year after the option is
exercised, the optionee is required to so notify Intellicall and deliver to
Intellicall the amount of any applicable withholding taxes. In either such
event, the options lose their status as incentive options under Section 422A
of the Code and are treated as non-qualified options under the 1991 Stock
Option Plan. The maximum value of incentive options that can become first
exercisable in any one year can be no more than $100,000.
Each Award is to be granted under an agreement (an "Agreement")
between Intellicall and the individual receiving the Award. Each Agreement
specifies the exercise periods of options. Intellicall receives no
consideration upon the grant of an Award. The rights under the Agreement are
not transferable by the individual receiving an Award except under the laws
of descent and distribution. During the lifetime of the individual receiving
an Award, only the individual or his legal representative may exercise the
Award.
PURCHASE PRICE FOR INCENTIVE OPTIONS
The purchase price for each share of Common Stock subject to an
incentive option granted under the 1991 Stock Option Plan may not be less than
the greater of the par value of such share and 100% of the fair market value of
such share on the date that the incentive option is granted (110% in the case of
an incentive option granted to a person who owns more than ten percent of the
total combined voting power of all classes of stock of Intellicall). The
purchase price of Common Stock may be paid by cash, check, or shares of Common
Stock which have been held for at least six months.
On September 28, 2000, the closing sales price of Intellicall's Common
Stock as reported on AMEX was $0.8125.
TERMINATION OF AWARDS
Awards of incentive options granted under the 1991 Stock Option Plan
generally terminate with respect to any portion of the incentive option not
previously exercised by an individual after ten years from the date that the
incentive option is granted (five years in the case of an incentive option
granted to a person who owns more than ten percent of the total combined
voting power of all classes of stock of Intellicall), unless the option
terminates sooner by reason of termination of employment, disability, or
death. The unexercised or restricted portion of an Award shall terminate
immediately if an individual's employment is terminated for cause. If
termination of employment is voluntary or by Intellicall for reasons other
than cause, such portion of the Award shall terminate three months after
employment terminates. The unexercised or restricted portion of an Award will
terminate twelve months after the occurrence of the disability or death of an
individual.
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<PAGE>
CERTAIN EVENTS
The 1991 Stock Option Plan contains antidilution provisions
applicable in the event of any change in the number of outstanding shares of
Common Stock of Intellicall or any change in the character or rights of the
Common Stock which occurs by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, stock dividend, stock split or reverse
stock split, combination or exchange of shares or other similar events. In any
such event, appropriate adjustments will be made in the maximum number of
shares which may be issued under the 1991 Stock Option Plan and the number of
shares under and exercise price of outstanding Awards.
In addition, in the case of (i) a dissolution or liquidation of
Intellicall or (ii) a merger or consolidation of Intellicall the 1991 Stock
Option Plan and all options granted thereunder shall continue in effect and
each holder of an option shall be entitled to receive in respect of each share
of Common Stock subject to an outstanding Award, upon exercise of such Award,
the same number and kind of stock, securities, cash, property or other
consideration that each holder of Common Stock was entitled to receive in such
transaction in respect of a share of Common Stock.
In the event of a Change in Control of Intellicall (as defined in the
1991 Stock Option Plan), all outstanding Awards shall become immediately and
fully exercisable. Upon the consummation of the merger, a Change of Control
will be deemed to have occured because the former WWC stockholders will hold
approximately 56% of the outstanding Common Stock.
AMENDMENTS
The Board or the Compensation Committee may at any time, without the
consent of the holders of Awards, alter, amend, revise, suspend, or
discontinue the 1991 Stock Option Plan, provided that such action shall not
adversely affect Awards previously granted. Any amendments to the 1991 Stock
Option Plan that would (i) materially increase the benefits accruing to
individuals participating in the 1991 Stock Option Plan, (ii) materially
increase the number of shares of Common Stock subject to the 1991 Stock Option
Plan, or (iii) materially modify the requirements as to eligibility for
participation in the 1991 Stock Option Plan must be approved by the holders of
a majority of shares of Common Stock represented and entitled to vote thereon
at a meeting of the stockholders of Intellicall.
OPTIONS GRANTED
As of October 1, 2000, options to purchase 1,869,320 shares of Common
Stock had been granted under the 1991 Stock Option Plan, of which options to
purchase 423,340 shares of Common Stock had been exercised, options to
purchase 1,436,980 shares of Common Stock remained outstanding and had not
yet been exercised and options to purchase 394,000 shares remained available
for grant. Assuming, the Issuance is approved by the Intellicall stockholders,
all outstanding options under the 1991 Stock Option Plan will immediately
vest and become exercisable due to the occurance of a Change of Control
created by the merger.
As of October 1, 2000, 48 Intellicall employees were eligible to
participate in the 1991 Stock Option Plan. Only one employee, Wynn Goolsby
received options to purchase 6,500 shares of Common Stock at an aggregate
value of $19,500 during fiscal 1999. As a group the non-employee directors of
Intellicall received no options to purchase Common Stock during 1999. If the
1991 Stock Option Plan, as amended by this Proposal, had been in place during
fiscal 1999, the nonemployee directors as a group would have received options
to purchase 37,500 shares of Common Stock (12,500 per nonemployee director).
All other grants under the 1991 Stock Option Plan are not determinable because
only nonemployee directors receive automatic grants. The last reported sales
price of the Common Stock on Amex as of September 28, 2000 was $0.8125.
52
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
An optionee who receives an incentive stock option under the 1991
Stock Option Plan will ordinarily not recognize any income for federal income
tax purposes as a result of the receipt or exercise of such option. However,
the exercise of an incentive stock option will give rise to an increase in the
optionee's alternative minimum taxable income for purposes of the alternative
minimum tax in an amount equal to the excess of the fair market value of the
Common Stock at the time the optionee's rights to the stock are freely
transferable or are not subject to a substantial risk of forfeiture over the
exercise price. Intellicall will not be entitled to a compensation deduction
for federal income tax purposes with respect to either the grant of an
incentive stock option under the 1991 Stock Option Plan or the exercise of
such an option by the optionee. If the optionee does not dispose of the shares
of Common Stock acquired through the exercise of the incentive stock option
within two years of the date of the grant of such option, and within one year
after the exercise date, and if the optionee is employed by Intellicall (or
certain related entities) from the time the option is granted until three
months before its exercise, any gain or loss recognized upon the disposition
will constitute a long-term capital gain or loss, and Intellicall will not be
entitled to a deduction. If an optionee disposes of the shares prior to the
expiration of such holding periods (a "disqualified disposition"), the
optionee will recognize, at the time of such disposition, ordinary income
equal to the difference between the exercise price and the lower of (i) the
fair market value of the shares subject to the option on the date of exercise
or (ii) the amount realized by the optionee on the sale of such shares, any
remaining gain shall be taxed as a capital gain. In the event of a
disqualified disposition, Intellicall will be entitled to a deduction in an
amount equal to the income recognized by the optionee.
If an optionee pays the exercise price of an incentive stock option
solely with Common Stock, and if the shares surrendered are (i) shares not
received pursuant to the exercise of an incentive stock option and not subject
to a substantial risk of forfeiture or (ii) the result of the optionee's
exercise of another incentive stock option, the exercise of which satisfied
the above stated holding period requirements, the optionee will not recognize
income and the basis and holding period of the surrendered Common Stock shall
be transferred to that number of new shares equal to the number of old shares
surrendered. If more shares are received than were surrendered, the additional
shares' basis will be zero. If these conditions are not met, the payment of
the exercise price with shares of Common Stock may be treated as a
disqualified disposition or otherwise taxable disposition.
53
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL
OF THE AMENDMENT. SINCE THE AMENDMENT WILL INCREASE THE NUMBER OF OPTIONS
THAT MAY BE GRANTED TO ALL DIRECTORS AND EXECUTIVE OFFICERS OF INTELLICALL,
CERTAIN OF THE DIRECTORS AND EXECUTIVE OFFICERS OF INTELLICALL HAVE AN
INTEREST IN, AND MAY BENEFIT FROM, THE ADOPTION OF THE PLAN AMENDMENT.
PROPOSAL NO. 5
ELECTION OF DIRECTORS
There are eight directors to be elected for terms expiring at
Intellicall's Annual Meeting of Stockholders in 2001 or when their successors
have been elected and qualified. It is intended that the names of the persons
indicated below will be placed in nomination and that the persons named in
the Proxy will vote for their election. Each of the nominees has indicated
his willingness to serve as a member of the Board if elected; however, in
case any nominee shall become unavailable for election to the Board for any
reason not presently known or contemplated, the Proxy holders have
discretionary authority to vote the Proxy for a substitute nominee or
nominees. Proxies cannot be voted for more than eight nominees. The following
sets forth information as of the Record Date as to the nominees for election
at the Meeting, including their ages, present principal occupations, other
business experience during the last five years, membership on committees of
the Board and directorships in other publicly-held companies.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
William O. Hunt 66 Chairman of the Board
John McDonald 50 President, Chief Executive
Officer and Director
Mike Campbell 45 Nominee
G.T. Finn 53 Nominee
Neil Byrne 38 Nominee
[to be determined] -- Nominee
[to be determined] -- Nominee
[to be determined] -- Nominee
</TABLE>
54
<PAGE>
NEIL BYRNE has been WWC's Senior Vice President of New Office
Establishment from August 1997 until the present. Prior to that, from November
1996 until August 1997, Mr. Byrne served as the Senior Vice President of New
Business Development. He also served as a Regional Sales Manager of WWC from
October 1995 until November 1996.
MIKE CAMPBELL is the Senior Vice President of Administration of WWC,
and has served in that capacity since February 1998. From August 1997 until
February 1998, he was Senior Vice President of New Business Development for
WWC. Prior to that, from October 1995 until July 1997, he worked as a
Regional Sales Manager for WWC.
GERALD T. FINN founded WWC, which was formerly known as Business Tel,
in 1991 and has served as Chairman of the Board, Chief Executive Officer and
President since its inception.
WILLIAM O. HUNT joined Intellicall in December 1992 as Chairman of
the Board, Chief Executive Officer and President. In May, 1998 Mr. Hunt
resigned his position as Chief Executive Officer and President. From June
1986 to July 1992, he was Chairman of the Board and Chief Executive Officer
of Alliance Telecommunications Corporation, a wireless telecommunications
company. Mr. Hunt serves on the boards of American Homestar Corporation,
Internet America, Inc. and Mobility Electronics, Inc.
JOHN J. MCDONALD, JR. was appointed President and Chief Executive
Officer in May 1998. Prior to that time, he was Chief Operating Officer of
Intellicall from July 1997 and Senior Vice President - Sales and Marketing
from February 1997. From June 1994 to January 1997, Mr. McDonald was Senior
Vice President of Intercom, Inc. Prior to that he was Vice President,
Business Communications, of Ericsson Business Communications.
[bios of nominees to be determined]
CHANGES TO THE INTELLICALL BOARD IF THE INTELLICALL STOCKHOLDERS DO NOT
APPROVE THE ISSUANCE.
In the event the Intellicall stockholders do not approve the
Issuance in connection with the merger, Messrs. Finn, Campbell, Byrne,____,
_____and____. have agreed to resign from the Intellicall Board immediately
following the Meeting. The Intellicall Board will then appoint to the Board
Mr. Lewis E. Brazelton III, Mr. Richard B. Curran, Mr. Arthur Chavoya and Mr.
B. Michael Adler, each of whom are current members of the Board, The
biographies of Messrs. Brazelton, Curran, Chavoya and Adler are set forth
under "Proposal No. 1 - Approval of Issuance of Common Stock -- Intellicall
Management."
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF
EACH OF THE EIGHT NOMINEES.
55
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Intellicall files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information
Intellicall files at the Securities and Exchange Commission's public
reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms. Our
Securities and Exchange Commission filings are also available to the public
from commercial document retrieval services and at the Internet Website
maintained by the Securities and Exchange Commission at http://www.sec.gov.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for
stockholder action at our annual meetings consistent with Rule 14a-8
promulgated under the Exchange Act. Any proposal which a shareholder intends
to present at the 2000 annual meeting must be received by Intellicall at its
principal executive office no later than August 16, 2001 in order to be
included in the proxy material for the Meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
Intellicall's principal auditors for the fiscal year 2000 are
Deloitte & Touche LLP. A representative of Deloitte & Touche LLP will be
present at the Meeting and will have the opportunity to make any desired
statement and will be available to respond to appropriate questions.
Intellicall's principal auditors for the fiscal year 1999 were
PricewaterhouseCoopers LLC. See "Proposal No. 1 - Approval of Issuance of
Common Stock - Changes in Certifying Accounts" for a description of the
dismissal of PricewaterhouseCoopers LLP and the appointment of Deloitte &
Touche LLP.
OTHER BUSINESS
The Board of Directors knows of no matter other than those described
herein that will be presented for consideration at the Meeting. However,
should any other matters properly come before the Meeting or any adjournment
thereof, it is the intention of the persons named in the accompanying Proxy to
vote on such matters in accordance with their best judgment in the interest of
Intellicall.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The information contained in the items set forth below are
incorporated herein by reference to Intellicall's Annual Report on Form
10-K/A and made a part hereof. A copy of the Annual Report on Form 10-K/A is
being delivered to stockholders along with this Proxy Statement. Other than
as set forth below, no other portion of the Annual Report on Form 10-K/A is
deemed to be part of this Proxy Statement.
(a) Item 1. Business;
(b) Item 2. Properties;
(c) Item 3. Legal Proceedings;
(d) Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters;
(e) Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations; and
(f) Item 8. Financial Statements and Supplementary Data.
MISCELLANEOUS
All costs incurred in the solicitation of Proxies will be borne by
Intellicall. Intellicall estimates those costs to be $25,000. In addition to
solicitation by mail, officers and employees of Intellicall may solicit
Proxies by telephone, telegraph or personally, without additional
compensation. Intellicall may also make arrangements with brokerage houses
and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of shares of Common Stock
held of record by such persons, and Intellicall may reimburse such brokerage
houses and other custodians, nominees and fiduciaries for their out-of-pocket
expenses incurred in connection therewith.
Accompanying this Proxy Statement is a copy of Intellicall's Annual
Report on Form 10-K/A for the fiscal year ended December 31, 1999.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT TO VOTE ON THE MATTERS PROPOSED HEREIN. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THE PROXY STATEMENT IS ACCURATE AS OF ANY DATE
OTHER THAN THE DATE HEREOF, AND THE MAILING OF THIS PROXY STATEMENT TO
INTELLICALL STOCKHOLDERS
56
<PAGE>
SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
By Order of the Board of Directors
/s/ William O. Hunt
------------------------------------
William O. Hunt
Chairman of the Board of Directors
57
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<S> <C> <C>
Financial Statements of INTELLICALL, INC.
Balance Sheets at June 30, 2000 (Unaudited) and December 31, 1999................................F-2
Statements of Operations for each of the three month periods
ended June 30, 2000 and 1999 (Unaudited)........................................................F-4
Statements of Operations for each of the six month periods
ended June 30, 2000 and 1999 (Unaudited)........................................................F-5
Statements of Cash Flows for each of the six month periods
ended June 30, 2000 and 1999 (Unaudited)........................................................F-6
Notes to Financial Statements (Unaudited)........................................................F-7
Financial Statements of WIRELESS WEBCONNECT!, INC.
Independent Auditors' Report.....................................................................F-15
Balance Sheets as of December 31, 1998 and 1999 and June 30, 2000 (unaudited)....................F-16
Statements of Income for the years ended December 31, 1997, 1998 and 1999 and
the six months ended June 30, 1999 (unaudited) and 2000 (unaudited)............................F-17
Statements of Changes in Owners' Equity for the years ended December 31, 1997, 1998 and 1999
and six months ended June 30, 1999 (unaudited) and 2000 (unaudited)............................F-18
Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999 and
the six months ended June 30, 1999 (unaudited) and 2000 (unaudited)............................F-19
Notes to Financial Statements....................................................................F-20
</TABLE>
F-1
<PAGE>
INTELLICALL, INC.
UNAUDITED BALANCE SHEETS
ASSETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- --------
<S> <C> <C>
Current assets
Cash and cash equivalents ......................... $ 4,991 $ 694
Receivables, net of allowance for doubtful accounts
of $1,068 and $764 ............................... 1,105 1,455
Inventories, net .................................. 2,664 3,088
Receivables from related party, net ............... 175 1,258
Deferred tax asset ................................ -- 1,500
Other current assets .............................. 226 157
-------- --------
Total current assets ............................ 9,161 8,152
Fixed assets, net ................................... 740 980
Investment in unconsolidated subsidiary ............. -- 1,835
Other assets, net ................................... 706 637
Assets of discontinued operations ................... 420 513
-------- --------
Total Assets ...................................... $ 11,027 $ 12,117
-------- --------
See notes to financial statements.
F-2
<PAGE>
INTELLICALL, INC.
UNAUDITED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands, except share information)
June 30, December 31,
2000 1999
-------- --------
Current liabilities
Accounts payable .................................. $ 1,094 $ 1,798
Accrued liabilities ............................... 437 610
Current portion of long-term debt ................. -- 2,630
Deferred tax liability ............................ 2,038 --
-------- --------
Total current liabilities ......................... 3,569 5,038
Long-term debt ...................................... 1,880 6,557
Deferred gain on sale of assets ..................... -- 730
Other liabilities ................................... 50 50
Liabilities of discontinued operations .............. 78 80
-------- --------
Total liabilities ................................. 5,577 12,455
-------- --------
Commitments and contingent liabilities .............. -- --
Stockholders' equity (deficit)
Common stock, $.01 par value; 20,000,000 shares
Authorized; 13,080,894 and 13,080,175 shares issued,
Respectively ..................................... 131 131
Additional paid-in capital ........................ 61,603 61,486
Less common stock in treasury, at cost;
24,908 shares .................................... (258) (258)
Accumulated deficit ............................... (56,026) (61,697)
-------- --------
Total stockholders' equity (deficit) ............. 5,450 (338)
-------- --------
$ 11,027 $ 12,117
-------- --------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
INTELLICALL, INC.
UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
2000 1999
-------- --------
<S> <C> <C>
Equipment sales ............................................. $ 1,100 $ 1,549
Cost of sales ............................................... 1,049 1,653
-------- --------
Gross profit (loss) ......................................... 51 (104)
Selling, general and administrative expenses ................ 1,452 1,648
Provision for doubtful accounts ............................. 340 331
Research and development expenses ........................... 240 274
-------- --------
Operating loss from continuing operations ................... (1,981) (2,357)
Gain on sale of stock ....................................... 13,784 --
Other income ................................................ 31 156
Interest income ............................................. 67 59
Interest expense ............................................ (374) (537)
Equity in the earnings (loss) of unconsolidated subsidiary .. -- (263)
-------- --------
Income (loss) from continuing operations before income taxes 11,527 (2,942)
Income tax expense .......................................... (3,599) --
-------- --------
Income (loss) from continuing operations .................... 7,928 (2,942)
Loss from discontinued operations ........................... -- (117)
-------- --------
Income (loss) before extraordinary items .................... 7,928 (3,059)
Extraordinary items - early extinguishment of debt,
net of $61 tax benefit ...................................... (97) --
-------- --------
Net income (loss) available to common shareholders .......... $ 7,831 $ (3,059)
======== ========
Basic net income (loss) per share from
continuing operations ....................................... $ 0.61 $ (0.24)
======== ========
Diluted net income (loss) per share from
continuing operations ....................................... $ 0.56 $ (0.24)
======== ========
Basic and diluted net loss per share from
discontinued operations ..................................... $ -- $ (0.01)
======== ========
Basic and diluted net loss per share from extraordinary items $ (0.01) $ --
======== ========
Basic net income (loss) per share ........................... $ 0.60 $ (0.25)
======== ========
Diluted net income (loss) per share ......................... $ 0.55 $ (0.25)
======== ========
Weighted average number of basic shares outstanding ......... 13,056 12,049
======== ========
Weighted average number of diluted shares outstanding ....... 14,386 12,049
======== ========
See notes to financial statements.
F-4
<PAGE>
INTELLICALL, INC.
UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Six Months Ended
June 30,
2000 1999
-------- --------
Equipment sales ............................................. $ 2,029 $ 6,380
Cost of sales ............................................... 2,101 5,922
-------- --------
Gross profit (loss) ......................................... (72) 458
Selling, general and administrative expenses ................ 2,920 3,453
Provision for doubtful accounts ............................. 359 85
Research and development expenses ........................... 568 498
-------- --------
Operating loss from continuing operations ................... (3,919) (3,578)
Gain on sale of stock ....................................... 13,895 --
Other income ................................................ 57 165
Interest income ............................................. 94 120
Interest expense ............................................ (709) (1,006)
Equity in the earnings (loss) of unconsolidated subsidiary .. (51) (621)
-------- --------
Income (loss) from continuing operations before income taxes 9,367 (4,920)
Income tax expense .......................................... (3,599) --
-------- --------
Income (loss) from continuing operations .................... 5,768 (4,920)
Loss from discontinued operations ........................... -- (368)
-------- --------
Income (loss) before extraordinary items .................... 5,768 (5,288)
Extraordinary items - early extinguishment of debt,
Net of $61 tax benefit ...................................... (97) --
-------- --------
Net income (loss) available to common shareholders .......... $ 5,671 $ (5,288)
======== ========
Basic net income (loss) per share from continuing
operations .................................................. $ 0.44 $ (0.41)
======== ========
Diluted net income (loss) per share from continuing
operations .................................................. $ 0.41 $ (0.41)
======== ========
Basic and diluted net loss per share from discontinued
operations .................................................. $ -- $ (0.03)
======== ========
Basic and diluted net loss per share from extraordinary items $ (0.01) $ --
======== ========
Basic net income (loss) per share ........................... $ 0.43 $ (0.44)
======== ========
Basic and diluted net income (loss) per share ............... $ 0.40 $ (0.44)
======== ========
Weighted average number of basic shares outstanding ......... 13,056 12,049
======== ========
Weighted average number of diluted shares outstanding ....... 14,428 12,049
======== ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
INTELLICALL, INC.
UNAUDITED STATEMENTS OF CASH FLOWS (in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from continuing operating activities:
Net income (loss) from continuing operations .......................... $ 5,671 $ (4,920)
Adjustments to reconcile net loss from continuing operations to net
Cash provided by operating activities:
Gain on sale of stock ................................................ (13,895) --
Depreciation and amortization ........................................ 619 1,060
Provision for doubtful accounts ...................................... 359 86
Provision for inventory losses ....................................... 200 (152)
Equity in loss of unconsolidated subsidiary .......................... 51 621
Changes in operating assets and liabilities:
Receivables ......................................................... (10) 2,793
Inventories ......................................................... 224 258
Receivables from related party, net ................................. 83 338
Other current assets ................................................ (69) 28
Notes receivable .................................................... -- 163
Accounts payable .................................................... (704) 1,114
Accrued income taxes ................................................ 3,538 --
Accrued liabilities ................................................. (173) (297)
Other ............................................................... 9 (108)
-------- --------
Net cash (used in) provided by continuing operating activities ..... (4,097) 984
Cash flows from investing activities:
Capital expenditures .................................................. -- (96)
Capitalized software .................................................. -- (565)
Cash received on sale of stock ........................................ 15,732 --
-------- --------
Net cash provided by (used in) investing activities ................ 15,732 (661)
Cash flows from financing activities:
(Repayments) borrowings on notes payable .............................. (7,430) 1,000
Net repayments on line of credit ...................................... -- (2,811)
-------- --------
Net cash used in financing activities .............................. (7,430) (1,811)
Net cash flows from discontinued operations ............................ 92 1,482
-------- --------
Net increase (decrease) in cash and cash equivalents ................... 4,297 (6)
Cash and cash equivalents at beginning of period ....................... 694 16
-------- --------
Cash and cash equivalents at end of period ............................. $ 4,991 $ 10
Supplemental cash flow information:
Interest paid ......................................................... $ 360 $ 491
Supplemental non cash flow information:
Conversion of debt to equity .......................................... $ -- $ 510
</TABLE>
See notes to financial statements.
F-6
<PAGE>
INTELLICALL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 1 - BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements, in the opinion of the
Company's management, contain all material, normal and recurring adjustments
necessary to present accurately the financial condition of the Company and the
results of its operations for the periods indicated. The results of operations
for the interim periods reported are not necessarily indicative of the results
to be experienced for the entire year.
These unaudited financial statements should be read in conjunction with
the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999. Significant
accounting policies followed by the Company were disclosed in the notes to the
Company's Annual Report on Form 10-K. The year-end balance sheet data included
within was derived from the audited financial statements, but does not include
all of the disclosures required by generally accepted accounting principles.
BUSINESS: Intellicall, Inc. ("Intellicall" or the "Company") designs,
engineers, manufactures and sells pay telephones and retrofit kits, parts and
intelligent network platforms in the United States and internationally.
CREATION OF ILD TELECOMMUNICATIONS, INC. ("ILD"): On May 10, 1996, the
Company entered into an agreement with certain investor groups to create ILD,
a new long-distance re-sale and operator services company. At that time the
Company transferred ownership in its wholly owned subsidiary, Intellicall
Operator Services, Inc. ("IOS"), to ILD.
As of June 30, 2000 and December 31, 1999, the Company's ownership
percentage in ILD was 2.7% and 30.0%.
On January 4, 2000 the Company was notified by ILD of its intention to
redeem Intellicall's interest in ILD's Series B preferred convertible stock.
ILD is to redeem 5,000 shares for $100 per share plus accrued and unpaid
dividends. As of June 30, 2000, ILD had remitted $.3 million to the Company,
redeeming 1,975 shares of the Series B preferred convertible stock and became
current on all accrued and unpaid dividends. As a result of the transaction,
the Company recorded a $.1 million gain on the sale of the stock to ILD.
Proceeds from the sale were used for general operating purposes.
On April 11, 2000 the Company sold to Banca del Gottardo the Company's
remaining ownership in ILD, exclusive of 6,239 shares of Series A preferred
convertible stock the Company is required to hold pursuant to the ILD
Organization Agreement (See NOTE 8). As a result, the Company's ownership in
ILD, as of April 11, 2000, decreased to 2.7%. Accordingly, the Company
discontinued reporting its investment in ILD on the equity method under the
caption "Investment in Unconsolidated Subsidiary" as was required under the
Accounting Principles Board Opinion 18 ("APB 18") "The Equity Method of
Accounting for Investments in Common Stock." As of April 11, 2000 the Company
no longer reports a portion of gains and losses from ILD in its financial
statements.
F-7
<PAGE>
INTELLICALL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
Additionally, the Company has prospectively reported its investment in ILD
with its other investments under the caption "Other Assets" as of the quarter
ended June 30, 2000.
SOFTWARE DEVELOPMENT COSTS: Effective January 1, 2000 and as a result of
the impairment charge on capitalized software costs recorded by the Company on
December 31, 1999, the Company decided to expense as incurred all future costs
related to the development of software products for payphone equipment.
The amounts of software development costs capitalized for the quarters
ended June 30, 2000 and 1999 were zero and $.3 million. The Company recorded
zero and $.2 million of software amortization expense for the quarters ended
June 30, 2000 and 1999. $.1 million of software development costs were
expensed as incurred during the three months ended June 30, 2000.
The amounts of software development costs capitalized for the six months
ended June 30, 2000 and 1999 were zero and $.6 million. The Company recorded
zero and $.4 million of software amortization expense for the six months ended
June 30, 2000 and 1999. $.2 million of software development costs were
expensed as incurred during the six months ended June 30, 2000.
RECLASSIFICATIONS: Certain prior year amounts have been reclassified to
conform with the current year presentation.
NOTE 2 - INVENTORIES
The components of inventories are (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Raw materials ............................ $ 3,350 $ 3,362
Work in process .......................... 94 133
Finished goods ........................... 786 1,003
------------ ------------
4,230 4,498
Less reserves for obsolescence............ (1,566) (1,410)
------------ ------------
Net inventory ............................ $ 2,664 $ 3,088
============ ============
</TABLE>
F-8
<PAGE>
INTELLICALL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 3 - FIXED ASSETS
The components of fixed assets are (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
Office equipment ................... $ 3,404 $ 3,404
Tooling and other equipment ........ 5,001 5,001
------------ ------------
8,405 8,405
Less accumulated depreciation....... (7,665) (7,425)
------------ ------------
$ 740 $ 980
============ ============
</TABLE>
NOTE 4 - LONG-TERM DEBT
The Company's debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
<S> <C> <C>
8% Convertible subordinated notes, due 2000 -- 2,630
8% Convertible subordinated notes, due 2001 200 5,000
7% Convertible subordinated notes, due 2004 2,000 2,000
------------ ------------
2,200 9,630
Less: Unamortized debt discount (320) (443)
------------ ------------
1,880 9,187
Less: Current portion of long-term debt -- (2,630)
------------ ------------
Total long-term debt $ 1,880 $ 6,557
------------ ------------
</TABLE>
On February 11, 2000 the Company signed a $.5 million revolving
promissory note with Bank of America due February 11, 2001. Interest is
payable monthly at Prime commencing on March 11, 2000 with the principal of
the note guaranteed by Bill Hunt, Chairman of the Board of Intellicall. The
Company may repay and re-borrow under the terms of the note at any time, up to
a maximum aggregate outstanding balance equal to the principal amount of the
note. Proceeds of the note were
F-9
<PAGE>
INTELLICALL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
used for working capital purposes. On May 1, 2000 the Company used a portion
of the proceeds from the sale of its ownership in ILD (See NOTE 8) to retire
the $.5 million note to Bank of America.
On April 27, 2000 the Company used a portion of the proceeds from the
sale of its ownership in ILD (See NOTE 8) to retire the remaining $2.6 million
8.0% convertible subordinated notes due December 31, 2000 and $4.8 million of
the 8.0% convertible subordinated notes due November 22, 2001, both due to
Banca del Gottardo. The Company incurred a $.1 million expense, net of $.06
million income tax benefit, relating to the extinguishment of the $2.6 million
8.0% convertible subordinated notes due December 31, 2000, which has been
reported in its statements of operations and statements of cash flow under
the caption "Extraordinary items - early extinguishment of debt." This
expense resulted from the Company paying to Banca del Gottardo a 6.0% premium
on the outstanding principle balance of the note upon its retirement as
required by the note agreement.
NOTE 5 - DISCONTINUED OPERATIONS
On September 22, 1999 the Company elected to discontinue its billing
services operations effective October 21, 1999. The billing services segment
of the Company's business was determined to be unprofitable after taking into
account the administrative and support costs for the segment. The Company's
billing services system is a combination of hardware and software that
performs, without human intervention, all the functions necessary for
completing an operator assisted payphone call (i.e., collect, calling card and
credit card calls) and a range of other payphone services and features. During
the quarters ended June 30, 2000 and 1999, the Company reported a loss from
discontinued operations of zero and $.1 million. As a result of this action,
the Company's revenues and operating expenses for the periods presented herein
reflect only the equipment operations with the net results of the billing
services operations reported on its statements of operations under the caption
"Income (loss) from discontinued operations." Net revenues related to the
discontinued billing services operations were zero and $3.0 million for the
quarters ended June 30, 2000 and 1999, and zero and $6.1 million for the six
months ended June 30, 2000 and 1999.
NOTE 6 - BUSINESS COMBINATION
On January 18, 2000, Intellicall entered into a definitive agreement to
acquire, through the exchange of common stock of Intellicall, Heads Up
Technologies, Inc. ("Heads Up") of Carrollton, Texas. Heads Up designs,
manufactures and markets interactive digital products for the aviation, mass
transit and entertainment industries. Heads Up sells computerized products to
nearly 1,250 customers in more than 10 countries. Pursuant to the merger
agreement, Intellicall and Heads Up agreed to an exchange ratio of
approximately 1.3 shares of Intellicall common stock for each share of Heads
Up common stock.
On July 24, 2000 the executives of the Company and Heads Up mutually
announced the cancellation of the merger between the two companies. The
business opportunities presented by the
F-10
<PAGE>
INTELLICALL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
merger, including anticipated cost reductions and the ability to expand in
new markets, did not justify the cost of combining the two companies.
NOTE 7 - NEW CONTRACT
On June 30, 2000 the Company entered into an agreement with Homisco, Inc.
("Homisco") whereby, the Company granted Homisco a non-exclusive,
non-transferable license to use the N-Genius hardware and software products.
The Company will receive a 15.0% royalty on gross revenues attributed to the
N-Genius products sold by Homisco. Additionally, Homisco has assumed future
warranty liabilities on any N-Genius systems currently under warranty.
NOTE 8 - SALE OF ILD STOCK
On April 11, 2000 the Company sold to Banca del Gottardo the Company's
remaining ownership in ILD, exclusive of 6,239 shares of Series A preferred
convertible stock the Company is required to hold pursuant to the ILD
Organization Agreement. The Company's ownership in ILD included approximately
58,772 shares of ILD Series A convertible stock, 725 shares of ILD Common
stock and 11,111 shares of ILD Common stock obtainable upon conversion of the
$1.0 million subordinated convertible note (the "Note") due from ILD to
Intellicall, dated May 10, 1996. Pursuant to the sale to Banca del Gottardo,
Intellicall, as of March 10, 2000, elected to convert the entire principal
balance of the Note into 11,111 shares of ILD Common stock.
The terms of the offer included the purchase of the ownership of ILD
(70,608 combined shares of Series A and Common shares) for $220 per share or
$15.5 million, with the Company maintaining the option for 12 months to
repurchase the shares at $250 per share. The Company also has a right of first
refusal, should Banca del Gottardo transfer or sell the ILD stock to a third
party. The Company recorded a gain on the sale of $13.8 million. As a result
of the ILD stock sale to Banca del Gottardo, the Company's ownership in ILD
decreased to 2.7%. Accordingly, the Company discontinued reporting its
investment in ILD on the equity method of accounting and no longer reports a
portion of gains and losses from ILD in its financial statements (See NOTE 1).
The Company received $1.0 million on March 13, 2000 from Banca del
Gottardo as an advance payment toward the ILD stock sale. On April 27, 2000,
the Company received the remaining proceeds from Banca del Gottardo.
Proceeds of the stock sale have been used to pay off all of the $2.6
million, 8% convertible subordinated noted due December 31, 2000, $4.8 million
of the $5.0 million, 8% convertible subordinated noted due November 22, 2001,
and the $.5 million revolving promissory note due February 11, 2001 (See NOTE
4). The remainder of the proceeds will be used for working capital purposes.
On July 11, 2000 the Company issued warrants to purchase 100,000 shares
of the Company's
F-11
<PAGE>
INTELLICALL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
common stock at $1.25 per share and warrants to purchase 100,000 shares of the
Company's common stock at $1.00 per share to Banca del Gottardo. These
warrants were issued in lieu of transaction fees for the sale of the Company's
interest in ILD to Banca del Gottardo and subsequent retirement
of the $2.6 million 8% convertible, subordinated notes due December 31, 2000
and $4.8 million of the $5.0 million 8% convertible, subordinated notes due
November 22, 2000 (See NOTE 4). Although the issuance of the warrants was
finalized on July 11, 2000, it was contemplated during the second quarter as
part of the sale of the Company's interest in ILD. As such, the Company
recorded the fair value of the warrants as additional paid in capital in the
second quarter.
NOTE 9 - INCOME TAXES
The Company provided for income taxes on a current year-to-date basis,
based on the effective tax rate expected to be applicable for the full fiscal
year. As a result, the Company recorded an income tax expense of $3.6 million.
F-12
<PAGE>
INTELLICALL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 10 - BASIC AND DILUTED NET LOSS PER SHARE
Basic and diluted net loss per share has been computed in accordance with
the Statement of Financial Standards No. 128 "Earnings per Share" ("FAS 128")
and is based on the weighted average number of common shares outstanding for
the quarters and six months ended June 30, 2000 and 1999. Diluted net loss per
share gives effect to all dilutive potential common shares that were
outstanding during the period.
The weighted average basic and diluted common shares outstanding are as
follows (in thousands):
<TABLE>
<CAPTION>
Quarter ended
June 30, 2000 June 30, 1999
Basic Diluted Basic Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
CONTINUING OPERATIONS
Income (loss) from continuing operations ........................................... 7,928 7,928 (2,942) (2,942)
Interest charges applicable to convertible debt .................................... -- 24 -- --
------- ------- ------- -------
Income (loss) from continuing operations-available ................................. 7,928 7,952 (2,942) (2,942)
AVERAGE EQUIVALENT SHARES
Weighted average shares outstanding ................................................ 13,056 13,056 12,049 12,049
Convertible debt ................................................................... -- 1,330 -- --
------- ------- ------- -------
Total average shares equivalent .................................................... 13,056 14,386 12,049 12,049
</TABLE>
F-13
<PAGE>
INTELLICALL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
June 30, 2000 June 30, 1999
Basic Diluted Basic Diluted
------- ------- ------- -------
<S> <C> <C> <C> <C>
CONTINUING OPERATIONS
Income (loss) from continuing operations ........................................... 5,768 5,768 (4,920) (4,920)
Interest charges applicable to the convertible debt ................................ -- 48 -- --
------- ------- ------- -------
Income (loss) from continuing operations-available ................................. 5,768 5,816 (4,920) (4,920)
AVERAGE EQUIVALENT SHARES
Weighted average shares outstanding ................................................ 13,056 13,056 12,049 12,049
Warrants to purchase common shares ................................................. -- 42 -- --
Convertible debt ................................................................... -- 1,330 -- --
------- ------- ------- -------
Total average shares equivalent .................................................... 13,056 14,428 12,049 12,049
</TABLE>
Excluded from the diluted earnings per share calculation for the quarter
and six months ended June 30, 2000 are options to purchase 1,551,480 shares of
the Company's common stock. Additionally, warrants to purchase 1,809,623 and
1,509,623 shares of the Company's common stock as of the quarter and year to
date ended June 30, 2000 were excluded from the diluted earnings per share
calculation. These options and warrants were excluded because they have an
antidilutive effect as their exercise price exceeds the average market price of
the Company's common stock.
NOTE 11 - WORKING CAPITAL FUNDING
Beyond 2000, the Company's ability to obtain further funds from external
sources will depend in part on its ability to generate operating profits, or
to substantially reduce its operating losses, through the execution of its
current business plan and the implementation of the new business strategy
related to the planned Merger with WWC. Although management of the Company
believes that the Company's sales will grow in 2000 and that profitability
will improve with sales, there can be no assurance that the events necessary
for such sales growth will occur as or when expected, or that future sales
growth will be sufficiently large or profitable to permit the Company to
finance its activities without recourse to continuing sales of assets or
external funding sources. There can be no assurance that under such
conditions, external funds would be available or, if available, would not
potentially dilute shareholders' interests or returns.
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Wireless WebConnect!, Inc.
We have audited the accompanying balance sheets of Wireless WebConnect!, Inc.
(formerly known as Business Tel, a California partnership) as of December 31,
1999 and 1998, and the related statements of income, owners' equity, and cash
flows for each of the years in the three year period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the years
in the three year period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
September 20, 2000
Dallas, Texas
F-15
<PAGE>
WIRELESS WEBCONNECT!, INC. (FORMERLY KNOWN AS BUSINESS TEL)
BALANCE SHEETS
JUNE 30, 2000 (UNAUDITED), DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
---------- -------------------
ASSETS 2000 1999 1998
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $319,283 $ 44,587 $ 63,848
Accounts receivable, net of 121,150 125,356
allowance of $0 for all periods -
Prepaid expenses and other current assets 12,416 17,595 -
-------- -------- --------
Total current assets 331,699 183,332 189,204
PROPERTY AND EQUIPMENT - Net (Note 2) 42,543 47,215 50,554
-------- -------- --------
TOTAL $374,242 $230,547 $239,758
======== ======== ========
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,767 $ 52,825 $ -
Accrued expenses 8,740 4,089 34,073
-------- -------- --------
Total current liabilities 24,507 56,914 34,073
COMMITMENTS AND CONTINGENCIES (Note 4)
OWNERS' EQUITY:
Common stock, 10,000 shares authorized,
issued and outstanding, no par value,
at June 30, 2000 - - -
Paid-in capital 373,836 - -
Retained deficit (24,101) - -
Partners' capital - 173,633 205,685
-------- -------- --------
Total owners' equity 349,735 173,633 205,685
-------- -------- --------
TOTAL $374,242 $230,547 $239,758
======== ======== ========
</TABLE>
See accompanying notes to the financial statements
F-16
<PAGE>
WIRELESS WEBCONNECT!, INC. (FORMERLY KNOWN AS BUSINESS TEL)
STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED) AND
YEARS ENDED DECEMBER, 31, 1999, 1998 AND 1997
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
--------------------- ----------------------------------
2000 1999 1999 1998 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Commissions and related $ 705,513 $929,741 $1,678,566 $1,311,633 $1,364,162
Services 33,000 65,688 157,660 88,205 17,628
Other - 367 16,835 1,684 1,963
---------- -------- ---------- ---------- ----------
Total revenues 738,513 995,796 1,853,061 1,401,522 1,383,753
---------- -------- ---------- ---------- ----------
OPERATING EXPENSES:
Cost of services revenues 28,000 54,897 133,467 74,029 15,009
Selling, general and
administratrive 503,226 811,064 1,685,944 1,207,742 1,309,932
---------- -------- ---------- ---------- ----------
Total operating expenses 531,226 865,961 1,819,411 1,281,771 1,324,941
---------- -------- ---------- ---------- ----------
OPERATING INCOME 207,287 129,835 33,650 119,751 58,812
INCOME TAX BENEFIT 12,416 - - - -
---------- -------- ---------- ---------- ----------
NET INCOME $ 219,703 $129,835 $ 33,650 $ 119,751 $ 58,812
========== ======== ========== ========== ==========
</TABLE>
See accompanying notes to the financial statements
F-17
<PAGE>
<TABLE>
<CAPTION>
WIRELESS WEBCONNECT!, INC. (FORMERLY KNOWN AS BUSINESS TEL)
STATEMENTS OF CHANGES IN OWNERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
---------------------------------------------------------------------------------------------------------------------------
COMMON STOCK RETAINED PARTNERS'
SHARES AMOUNT PAID-IN CAPITAL DEFICIT CAPITAL TOTAL
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997 $115,500 $115,500
Distributions to partners (73,363) (73,363)
Net income 58,812 58,812
-------- --------
BALANCE AT DECEMBER 31, 1997 100,949 100,949
Distributions to partners (15,015) (15,015)
Net income 119,751 119,751
-------- --------
BALANCE AT DECEMBER 31, 1998 205,685 205,685
Distributions to partners (65,702) (65,702)
Net income 33,650 33,650
-------- --------
BALANCE AT DECEMBER 31, 1999 173,633 173,633
-------- --------
Net income - January 1, 2000 to
May 29, 2000 (unaudited) 243,804 243,804
Distributions (unaudited) (43,601) (43,601)
Contribution by partners of
partnership net assets
to corporation (unaudited) 10,000 $ - $373,836 (373,836) 0
Net loss - May 30, 2000 to June 30, 2000
(unaudited) 0 - 0 $(24,101) 0 (24,101)
------- ------ -------- -------- -------- --------
BALANCE AT JUNE 30, 2000 (unaudited) 10,000 $ - $373,836 $(24,101) $ $349,735
======= ====== ======== ======== ======== ========
See accompanying notes to the financial statements
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
WIRELESS WEBCONNECT!, INC. (FORMERLY KNOWN AS BUSINESS TEL)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000, AND 1999 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
-------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
----------------------- ------------------------------------------
2000 1999 1999 1998 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 219,703 $129,835 $ 33,650 $ 119,751 $ 58,812
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 7,676 7,626 15,252 11,604 7,010
Changes in operating assets and liabilities:
Accounts receivable 121,150 (18,075) 4,206 (43,015) 12,074
Prepaid expenses and other current assets 5,179 (17,595)
- -
Accounts payable and accrued expenses (32,407) 33,994 22,841 (58,609) 31,336
--------- -------- --------- --------- ---------
Net cash provided by operating activities 321,301 153,380 58,354 29,731 109,232
---------- -------- --------- ---------- ---------
INVESTING ACTIVITIES:
Additions to property and equipment (3,004) 6,597 (11,913) (30,695) (17,811)
--------- -------- --------- --------- ---------
Net cash used in investing activities (3,004) 6,597 (11,913) (30,695) (17,811)
FINANCING ACTIVITIES:
Distributions to partners (43,601) (50,000) (65,702) (15,015) (73,363)
Advances from/(repayments to) partners - - (2,939) 2,939
--------- -------- --------- --------- ---------
Net cash used in financing activities (43,601) (50,000) (65,702) (17,954) (70,424)
--------- -------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH 274,696 96,783 (19,261) (18,918) 20,997
CASH, BEGINNING OF PERIOD 44,587 63,847 63,848 82,766 61,769
--------- -------- --------- --------- ---------
CASH, END OF PERIOD $ 319,283 $160,631 $ 44,587 $ 63,848 $ 82,766
========= ======== ========= ========= =========
</TABLE>
See accompanying notes to the financial statements
F-19
<PAGE>
WIRELESS WEBCONNECT!, INC.
(FORMERLY KNOWN AS BUSINESS TEL)
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
-------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS - Wireless WebConnect!, Inc., (the "Company") was
originally formed in 1996 as Business Tel, a California Partnership. The
Company provides customer acquisition services to Metricom, Inc. ("Metricom")
for Metricom's Ricochet wireless internet access services and is a reseller of
Metricom's services to selected customers.
On May 30, 2000, the Company was incorporated by the partners contributing
their respective interests in the net assets of the partnership to a newly
formed Florida corporation, Wireless WebConnect!, Inc., in exchange for all of
the corporation's issued and outstanding common stock.
Effective September, 2000, the Company, along with other competitors, will be
marketing and selling Metricom's 128.8 kbps wireless internet access service.
Additionally, the Company has contracted with Metricom to be the exclusive
provider of 28.8 kbps service to Metricom's existing customers in certain
geographic service areas. A portion of these customers were previously
acquired for Metricom by the Company. The Company has formed strategic
relationships with Metricom and an internet service provider who together
will provide mobile computer users high speed wireless communications
services that will be resold by the Company.
The Company operates in a highly competitive environment subject to rapid
technological change and emergence of new technology. Although management
believes its services are transferable to emerging technologies, rapid changes
in technology could have an adverse financial impact on the Company. The
Company is highly dependent on Metricom for wireless communication services
and the further deployment of the wireless internet access network.
USE OF ESTIMATES -The preparation of financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives of the related assets ranging from five to seven years. Expenditures for
maintenance and repairs are charged to expense as incurred.
LONG-LIVED ASSETS - The Company periodically reviews the values assigned to
long-lived assets, such as prpoerty and equipment, to determine if any
impairments have occurred. Provisions for asset impairment are based on
discounted cash flow projections in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" and such assets
are written down to their estimated fair values.
F-20
<PAGE>
REVENUE RECOGNITION - The Company derives commission revenue from Metricom for
the sale of Metricom's wireless internet services. Commission revenues were
recognized as customer contracts were delivered to Metricom. Revenues on
wireless internet access services resold are recognized as the services are
provided and the products are delivered. Management of the Company believes
that the Company's accounting policies comply with Staff Accounting Bulletin
101, "Revenue Recognition in Financial Statements."
INCOME TAXES - As a partnership, the partners were taxed on their
proportionate share of the Partnership's income. Therefore, no provision or
liability for federal or state income taxes has been included in these
financial statements, until the Company was incorporated in May 2000. Upon
incorporation, the Company is subject to federal and state income taxes.
Deferred tax assets and liabilities, if any, are recognized for the future tax
consequences attributable to differences between the carrying amount of
existing assets and liabilities for financial reporting purposes and amounts
used for income tax purposes. Deferred tax assets and liabilites are measured
using enacted tax rates expected to apply to taxable income in years in which
those temporary differences are expected to reverse.
CONCENTRATIONS OF CREDIT RISK AND REVENUES - Financial instruments that
potentially subject the Company to a concentration of credit risk consist of
accounts receivable. The Company performs periodic credit evaluations of its
customers but generally does not require collateral. All of the Company's
commissions and related revenues were earned from Metricom during the six
months ended June 30, 2000 (unaudited), and the years ended December 31, 1999
and 1998, and approximately 95% were earned from Metricom during the year
ended December 31, 1997.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of the Company's
financial instruments, which include cash, accounts receivable, accounts
payable, and accrued expenses approximate their fair values due to their
relative short time to maturity.
COMPREHENSIVE INCOME - The Company has no components of other comprehensive
income. Accordingly, comprehensive is the same as net income for the six
months ended June 30, 2000, and for each of the years ended December 31, 1999,
1998 and 1997.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 1998, the FASB issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivatives and Hedging
Activities ("SFAS 133"), which establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded
in other contracts (collectively referred to as derivatives) and for hedging
activities. SFAS 133, as amended, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. As the Company does not currently
intend to engage in derivatives or hedging transactions, the Company does not
anticipate any effect on its results of operations, financial position or cash
flows upon the adoption of SFAS 133.
F-21
<PAGE>
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
June 30, ------------------------
2000 1999 1998
---------------------------------------
<S> <C> <C> <C>
(unaudited)
Computer equipment $ 48,222 $ 45,218 $ 38,696
Office furniture and other 36,228 36,228 30,837
---------------------------------------
84,450 81,446 69,533
Accumulated depreciation (41,907) (34,231) (18,979)
---------------------------------------
$ 42,543 $ 47,215 $ 50,554
=======================================
</TABLE>
Depreciation expense totaled $7,676, $15,252, $11,604 and $7,010 for the six
months ended June 30, 2000 (unaudited), and for the years ended December 31,
1999, 1998 and 1997 respectively.
3. PARTNERS' CAPITAL
In addition to distributions, the partners (and subsequent to the
incorporation of the Company, shareholders) received salaries and other
payments which are included in selling, general and administrative expenses
totaling $124,841, $352,321, $213,005 and $368,746 for the six months ended
June 30, 2000 (unaudited) and the years ended December 31, 1999, 1998 and
1997, respectively.
4. COMMITMENTS AND CONTINGENCIES
At December 31, 1999, the Company was the lessee under month-to-month lease
agreements for office space and equipment. For the six month period ended June
30, 2000 (unaudited) and the years ended December 31, 1999, 1998 and 1997,
rent expense totaled approximately $17,000, $37,000, $40,600 and $26,400,
respectively.
5. SUBSEQUENT EVENTS
In July and August 2000, the Company entered into three lease agreements for
office space which will require total rental payments of $18,130 for the
remainder of 2000 and $15,722 for 2001.
On August 30, 2000, the Company's shareholders entered into an Agreement and
Plan of Merger with Intellicall, Inc. ("Intellicall") and its wholly owned
subsidiary WWC Acquisition, Inc. whereby the Company's shareholders will
exchange all of their shares of the Company for 16,426,420 shares of
Intellicall common stock. After the combination, the Company's
shareholders will own approximately 56% of the outstanding stock of
Intellicall. The transaction is expected to close by December 31, 2000.
The business combination will be considered a "reverse acquisition" and will
be accounted for under the provisions of Accounting Principles Board Opinion
Number 16 ("APB 16"), Accounting for Business Combinations. The merger will
be accounted for as a purchase business combination. WWC will be considered
the "accounting acquirer" and Intellicall will be considered the "legal
acquirer" since the former WWC shareholders will control Intellicall through
their holdings of approximately 56% of the combined outstanding shares of
Intellicall Common Stock, will have control over the Board of Directors of
Intellicall and after the Merger is effective the former employees of WWC who
become employees of Intellicall will be eligible to receive options to
acquire in the aggregate 1.5 million additional shares of Intellicall Common
Stock. If Intellicall's remaining business operations are sold prior to the
combination or if a decision is made to discontinue such operations, the
combination would be accounted for as an acquisition of assets (primarily
cash) rather than of a business and no goodwill would be recorded.
F-22
<PAGE>
Appendix A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTELLICALL, INC.
WWC ACQUISITION, INC.
WIRELESS WEBCONNECT!, INC.
AND
THE SHAREHOLDERS OF WIRELESS WEBCONNECT!, INC.
DATED AS OF AUGUST 29, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. THE MERGER............................................................2
SECTION 1.1 THE MERGER........................................................2
SECTION 1.2 EFFECTIVE TIME OF THE MERGER......................................2
SECTION 1.3 CONVERSION AND CANCELLATION OF SECURITIES.........................2
SECTION 1.4 EXCHANGE AND SURRENDER OF CERTIFICATES............................3
ARTICLE II. LOAN..................................................................4
SECTION 2.1 LOAN FROM PARENT TO THE COMPANY...................................4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................5
SECTION 3.1 ORGANIZATION; AUTHORITY; AND OWNERSHIP............................5
SECTION 3.2 NO BREACH.........................................................5
SECTION 3.3 CONSENTS AND APPROVALS............................................6
SECTION 3.4 CAPITALIZATION....................................................6
SECTION 3.5 FINANCIAL STATEMENTS..............................................6
SECTION 3.6 ABSENCE OF CERTAIN CHANGES........................................7
SECTION 3.7 ABSENCE OF THE UNDISCLOSED LIABILITIES............................7
SECTION 3.8 COMPLIANCE WITH LAW...............................................7
SECTION 3.9 TAXES.............................................................7
SECTION 3.10 ABSENCE OF LITIGATION.............................................8
SECTION 3.11 TITLE TO PROPERTY.................................................8
SECTION 3.12 INTELLECTUAL PROPERTY.............................................9
SECTION 3.13 EMPLOYEE BENEFIT PLANS...........................................10
SECTION 3.14 MATERIAL CONTRACTS...............................................12
SECTION 3.15 LABOR MATTERS....................................................14
SECTION 3.16 ENVIRONMENTAL MATTERS............................................15
SECTION 3.17 INSURANCE........................................................16
SECTION 3.18 VOTE REQUIRED....................................................16
SECTION 3.19 CERTAIN BUSINESS PRACTICES.......................................16
SECTION 3.20 CUSTOMERS AND SUPPLIERS..........................................16
SECTION 3.21 BANK ACCOUNTS....................................................16
SECTION 3.22 YEAR 2000 ISSUES.................................................17
SECTION 3.23 PROXY STATEMENT AND OTHER INFORMATION............................17
SECTION 3.24 BROKERS AND FINDERS..............................................17
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS...................17
SECTION 4.1 AUTHORITY AND OWNERSHIP..........................................17
SECTION 4.2 NO BREACH........................................................18
(i)
<PAGE>
SECTION 4.3 CONSENTS AND APPROVALS...........................................18
SECTION 4.4 BROKERS AND FINDERS..............................................18
SECTION 4.5 INVESTMENT REPRESENTATION........................................18
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB...............................................19
SECTION 5.1 ORGANIZATION AND AUTHORITY.......................................19
SECTION 5.2 NO BREACH........................................................20
SECTION 5.3 CONSENTS AND APPROVALS...........................................20
SECTION 5.4 CAPITALIZATION...................................................20
SECTION 5.5 SEC REPORTS; FINANCIAL STATEMENTS................................21
SECTION 5.6 ABSENCE OF CERTAIN CHANGES.......................................21
SECTION 5.7 TITLE TO PROPERTY................................................21
SECTION 5.8 BROKERS..........................................................22
SECTION 5.9 EMPLOYEE BENEFIT PLANS...........................................22
SECTION 5.10 LABOR MATTERS....................................................24
SECTION 5.11 ENVIRONMENTAL MATTERS............................................25
ARTICLE VI. OTHER AGREEMENTS.....................................................26
SECTION 6.1 ELECTION OF NEW PARENT DIRECTORS AND OFFICERS....................26
SECTION 6.2 CONDUCT OF BUSINESS PENDING MERGER...............................26
SECTION 6.3 ACCESS TO INFORMATION............................................28
SECTION 6.4 PREPARATION OF PROXY STATEMENT...................................29
SECTION 6.5 AMEX EXCHANGE LISTING............................................29
SECTION 6.6 REASONABLE BEST EFFORTS..........................................29
SECTION 6.7 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY............................30
SECTION 6.8 NOTIFICATION.....................................................30
SECTION 6.9 NO SOLICITATION..................................................30
SECTION 6.10 REGULATORY AND OTHER AUTHORIZATIONS..............................31
SECTION 6.11 FURTHER ASSURANCES...............................................32
SECTION 6.12 ASSUMED OPTIONS..................................................32
SECTION 6.13 LETTER FROM ACCOUNTANTS..........................................33
SECTION 6.14 EMPLOYEE BENEFITS................................................33
SECTION 6.15 PIGGYBACK REGISTRATION RIGHTS....................................33
SECTION 6.16 DELIVERY OF CERTAIN DOCUMENTS....................................35
ARTICLE VII. CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING.....................35
SECTION 7.1 CLOSING AND CLOSING DATE.........................................35
SECTION 7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY,
PARENT AND MERGER SUB...........................................35
SECTION 7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB....36
SECTION 7.4 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY..............37
(ii)
<PAGE>
ARTICLE VIII. TERMINATION..........................................................38
SECTION 8.1 TERMINATION......................................................38
SECTION 8.2 EFFECT OF TERMINATION............................................40
SECTION 8.3 FEES AND EXPENSES................................................40
ARTICLE IX. INDEMNIFICATION......................................................40
SECTION 9.1 INDEMNIFICATION BY SHAREHOLDERS..................................41
SECTION 9.2 CONDITIONS OF INDEMNIFICATION....................................41
ARTICLE X. MISCELLANEOUS........................................................42
SECTION 10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION..............................................42
SECTION 10.2 AMENDMENT........................................................42
SECTION 10.3 WAIVER...........................................................43
SECTION 10.4 ENTIRE AGREEMENT.................................................43
SECTION 10.5 NOTICES..........................................................43
SECTION 10.6 GOVERNING LAW....................................................44
SECTION 10.7 DESCRIPTIVE HEADINGS.............................................44
SECTION 10.8 PARTIES IN INTEREST..............................................44
SECTION 10.9 COUNTERPARTS.....................................................44
SECTION 10.10 CERTAIN DEFINITIONS..............................................45
SECTION 10.11 BINDING EFFECT, ASSIGNMENT.......................................45
SECTION 10.12 SEVERABILITY.....................................................45
SECTION 10.13 SPECIFIC PERFORMANCE.............................................46
SECTION 10.14 LEGAL FEES; COSTS................................................46
SECTION 10.15 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE............46
SECTION 10.16 SHAREHOLDER RELEASES; CONSENT....................................46
</TABLE>
(iii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT"), dated as of
August 29, 2000, is made by and among Wireless WebConnect!, Inc., a Florida
corporation (the "COMPANY"), each of the shareholders of the Company, all of
whom are set forth on EXHIBIT A (the "Shareholders"), Intellicall, Inc., a
Delaware corporation (the "PARENT"), and WWC Acquisition, Inc., a Florida
corporation and wholly-owned subsidiary of Parent ("MERGER SUB").
W I T N E S S E T H:
WHEREAS, Merger Sub will merge with and into the Company (the
"MERGER") pursuant to the Florida Business Corporation Act (the "FBCA") and
upon the terms and subject to the conditions set forth in this Agreement, and
pursuant thereto each outstanding share of Common Stock of the Company, par
value $.01 per share (the "COMPANY COMMON STOCK"), not owned directly or
indirectly by the Company or Parent or their respective subsidiaries will be
converted into the number of shares of Common Stock of Parent, par value $.01
per share (the "PARENT COMMON STOCK"), to be determined in the manner set
forth herein;
WHEREAS, the Board of Directors of the Company has determined that
the Merger is fair to, and in the best interests of, the Company and its
shareholders and has approved this Agreement and the transactions
contemplated hereby and recommended approval of this Agreement by the
Shareholders and the Shareholders have approved this Agreement and the
transactions contemplated hereby;
WHEREAS, the Board of Directors of Parent has determined that the
Merger is fair to, and in the best interests of, Parent and its stockholders
and has approved this Agreement and the transactions contemplated hereby and
recommended approval by the stockholders of Parent of the issuance of Parent
Common Stock in connection with this Agreement;
WHEREAS, the Board of Directors of Merger Sub has approved this
Agreement and Parent, as the sole stockholder of Merger Sub, will approve
this Agreement promptly after the execution hereof by the parties hereto; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of section 368(a) of
the United States Internal Revenue Code of 1986, as amended (the "CODE");
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions set forth below, the parties
hereto, intending to be legally bound, hereby agree as follows:
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ARTICLE I.
THE MERGER
Section 1.1 THE MERGER.
(a) Subject to the terms and conditions
hereof and in accordance with the FBCA, at the Effective Time (as defined in
Section 1.2): (i) Merger Sub shall be merged with and into the Company and
the separate existence of Merger Sub shall cease; (ii) the Company, as the
surviving corporation in the Merger (the "SURVIVING CORPORATION"), (A) shall
be a wholly-owned subsidiary of Parent, (B) shall continue its corporate
existence under the laws of the State of Florida, and (C) shall succeed to
all rights, assets, liabilities and obligations of Merger Sub and the Company
in accordance with the FBCA; (iii) the Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall remain
the articles of incorporation of the Surviving Corporation; (iv) the bylaws
of the Company, as in effect immediately prior to the Effective Time, shall
remain the bylaws of the Surviving Corporation; (v) the directors of the
Merger Sub immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, each to hold office in accordance with the
articles of incorporation and bylaws of the Surviving Corporation, and (vi)
the officers of the Merger Sub immediately prior to the Effective Time shall
be the officers of the Surviving Corporation, each to hold office in
accordance with the bylaws of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified. From
and after the Effective Time, the Merger shall have all the effects provided
by applicable law.
(b) At the Effective Time: (i) the Articles
of Incorporation of Parent shall be amended to change the name of Parent to
Wireless WebConnect!, Inc. and increase the authorized shares of Parent
Common Stock.
Section 1.2 EFFECTIVE TIME OF THE MERGER. As soon as practicable
after the Closing Date (as defined in Section 7.1 hereof) the parties shall
cause the Merger to be consummated by filing Articles of Merger (the
"ARTICLES OF MERGER") with the Secretary of State of Florida, in such form as
required by, and executed in accordance with the relevant provisions of, the
FBCA, (the date and time of such filing, or such later date or time agreed
upon by Parent and the Company and set forth therein, being called the
"EFFECTIVE TIME").
Section 1.3 CONVERSION AND CANCELLATION OF SECURITIES.
(a) At the Effective Time, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock described in
Section 1.3(b) hereof) shall, by virtue of the Merger and without any action
on the part of the holder thereof, be converted into the number of shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock held by a Shareholder multiplied by 1,642.642 (the "Exchange
Ratio"). Set forth across from the name of each Shareholder on EXHIBIT A, is
the number of shares of Company Common Stock owned by each Shareholder
immediately before the Merger and the number of shares of Parent Common Stock
to be owned immediately after the Merger.
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(b) At the Effective Time, each share of
Company Common Stock held in the treasury of the Company and each share of
Company Common Stock owned by Parent or any direct or indirect wholly-owned
subsidiary of the Company or Parent immediately prior to the Effective Time,
shall by virtue of the Merger and without any action on the part of the
holder thereof, be automatically canceled and retired and cease to exist, and
no cash, securities or other property shall be payable in respect thereof.
(c) At the Effective Time, each share of
Merger Sub common stock, par value $.01 per share ("MERGER SUB COMMON
STOCK"), validly issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action by the holder
thereof, be converted into one validly issued, fully paid and nonassessable
share of Common Stock, par value $.01 per share, of the Surviving Corporation
("SURVIVING CORPORATION COMMON STOCK").
(d) Notwithstanding the foregoing, if between
the date of this Agreement and the Effective Time, the outstanding shares of
Parent Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination
or exchange of shares, the Exchange Ratio shall be correspondingly adjusted
to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
Section 1.4 EXCHANGE AND SURRENDER OF CERTIFICATES.
(a) As soon as practicable after the
Effective Time, upon the proper surrender of certificates previously
representing shares of Company Common Stock (the "Certificates") to Parent,
together with a properly completed and duly executed letter of transmittal
and such other documents as may be reasonably required by Parent, subject to
Section 1.4(h) the Shareholder shall be entitled to receive in exchange
therefor certificates representing the shares of Parent Common Stock that
Shareholder has the right to receive pursuant to the terms hereof (together
with any dividend or distribution with respect thereto made after the
Effective Time), and the Certificates so surrendered shall be canceled.
(b) Except as specified in Section 1.4(f),
after the Effective Time, each outstanding Certificate which theretofore
represented shares of Company Common Stock shall, until surrendered for
exchange in accordance with this Section 1.4, be deemed for all purposes to
evidence ownership of the number of full shares of Parent Common Stock into
which the shares of Company Common Stock (which, prior to the Effective Time,
were represented thereby) shall have been so converted.
(c) At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of shares of Company
Common Stock shall thereafter be made.
(d) None of Parent, Merger Sub, the Company
or the Surviving Corporation will be liable to any holder of shares of
Company Common Stock for any shares of Parent Common Stock, dividends or
distributions with respect thereto delivered to a state abandoned
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<PAGE>
property administrator or other public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) If any Certificates shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificates to be lost, stolen or destroyed, and
delivery of such bond or other indemnity as Parent may reasonably request,
Parent will deliver in exchange for such lost, stolen or destroyed
Certificates one or more certificates representing the Parent Common Stock
deliverable in respect thereof, as determined in accordance with the terms
hereof.
(f) No dividend or other distribution
declared or made with respect to the Parent Common Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock issuable upon
surrender thereof until the holder of such Certificate shall surrender such
Certificate in accordance with Section 1.4(a). Subject to the effect of
applicable law, following surrender of any such Certificate there shall be
paid, without interest, to the record holder of each certificate representing
whole shares of Parent Common Stock issued in exchange therefor: (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender of such Certificate and a payment
date subsequent to such surrender payable with respect to such whole shares
of Parent Common Stock.
(g) Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
to any former holder of Company Common Stock such amounts as Parent is
required to deduct and withhold with respect to the making of such payment
under the Code, or any other provision of federal, state, local or foreign
tax law. To the extent that amounts are so withheld by Parent, the withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the former holder of the Company Common Stock Shares in respect of
which such deduction and withholding was made by Parent.
(h) Notwithstanding anything to the contrary
in this Agreement, Parent shall withhold in the aggregate 1,642,642 of the
shares (10%) of Parent Common Stock to be issued to the Shareholders pursuant
to this Agreement (the "Escrowed Shares"), which shall be held pursuant to
the terms of the Escrow Agreement in the form attached hereto as EXHIBIT B
(the "Escrow Agreement").
ARTICLE II.
LOAN
Section 2.1 LOAN FROM PARENT TO THE COMPANY. Upon the execution and
delivery of this Agreement: (i) Parent shall execute and deliver to the
Company that certain Promissory Note attached hereto as EXHIBIT C (the
"Note"); and (ii) Parent and the Company shall execute and deliver that
certain related Security Agreement, the form of which is attached hereto as
EXHIBIT D (the "Security Agreement") and all related financing statements.
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<PAGE>
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent as follows:
Section 3.1 ORGANIZATION; AUTHORITY; AND OWNERSHIP.
(a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Florida, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary,
other than where the failure to be so duly qualified and in good standing
would not have a Company Material Adverse Effect. (The term "COMPANY MATERIAL
ADVERSE EFFECT" as used in this Agreement shall mean any change or effect
that, individually or when taken together with all other such changes or
effects, would be materially adverse to the financial condition, operations
or current business of the Company, excluding, however, all changes or
effects caused by general economic or industry-wide conditions or resulting
from any change in law or GAAP (as defined in Section 3.5).) The Company has
delivered true and complete copies of its articles of incorporation and
bylaws to Parent. The Company has all requisite corporate power and authority
to execute and deliver this Agreement, Note and Security Agreement
(collectively, the "Other Documents") and to consummate the transactions
contemplated hereby and thereby. All necessary action, corporate or
otherwise, required to have been taken by or on behalf of it by applicable
law, its articles of incorporation or otherwise to authorize (i) the
approval, execution and delivery on its behalf of this Agreement and Other
Documents and (ii) its performance of its obligations under this Agreement
and Other Documents and the consummation of the transactions contemplated
hereby and thereby have been taken. This Agreement and Other Documents
constitute the Company's valid and binding agreement, enforceable against the
Company in accordance with its terms, except (A) as the same may be limited
by applicable bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors' rights, including without
limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfer, and (B) for the limitations imposed by
general principles of equity.
(b) The Company does not have any
subsidiaries (as that term is defined in Section 10.10). Except as disclosed
in SECTION 3.1(b) OF THE COMPANY DISCLOSURE SCHEDULE, the Company does not
directly or indirectly own any interest in any other corporation,
partnership, joint venture or other business association or entity.
Section 3.2 NO BREACH. Assuming the consents described in SECTION
3.3 OF THE COMPANY DISCLOSURE SCHEDULE are obtained, the execution and
delivery of this Agreement and Other Documents do not, and the consummation
of the transactions contemplated hereby and thereby will not, (i) violate or
conflict with the Company's articles of incorporation or bylaws or (ii)
constitute a breach or default (or an event that with notice or lapse of time
or both would become a breach or default) or give rise to any lien, third
party right of termination, cancellation, material modification or
acceleration under any agreement, understanding or undertaking to which the
Company or any
A-5
<PAGE>
subsidiary is a party or by which it is bound, or (iii) constitute a
violation of any law, rule or regulation to which the Company is subject.
Section 3.3 CONSENTS AND APPROVALS. Except as set forth in SECTION
3.3 OF THE COMPANY DISCLOSURE SCHEDULE, neither the execution and delivery by
the Company of this Agreement or the Other Documents nor the consummation by
the Company of the transactions contemplated hereby or thereby will require
the Company to obtain any consent, approval, authorization or permit of, or
to make any filing with or give any notification to, any governmental or
regulatory authority, any lender or lessor or any other person or entity.
Section 3.4 CAPITALIZATION.
(a) The Company's authorized capital stock
consists of 10,000 shares of Company Common Stock, of which 10,000 were
issued and outstanding as of June 30, 2000 (with zero shares held in
treasury). Since June 30, 2000, no shares of Company Common Stock were
issued. As of June 30, 2000, except for the option plan set forth in SECTION
3.13(j) OF THE COMPANY DISCLOSURE SCHEDULE, there were no outstanding options
and warrants to purchase shares of Company Common Stock and no warrants or
option were issued after June 30, 2000. Each of the issued shares of capital
stock of the Company is duly authorized, validly issued and fully paid and
nonassessable, and has not been issued in violation of (nor are any of the
authorized shares of capital stock of, or other equity interests in, the
Company subject to) any preemptive or similar rights created by statute, the
articles of incorporation or bylaws of the Company, or any agreement to which
the Company is a party or is bound. Except for such stock options and
warrants, there are no existing options, warrants, calls, subscriptions, or
other rights or other agreements or commitments obligating the Company to
issue, transfer or sell any shares of capital stock of the Company. There are
no voting trusts or other agreements or understandings to which the Company
is a party with respect to the capital stock of the Company.
(b) No bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into or
exchangeable or exercisable for securities having the right to vote) on any
matters on which shareholders may vote is issued or outstanding.
Section 3.5 FINANCIAL STATEMENTS. The Company will deliver to Parent
true and complete copies of (i) Business Tel, a predecessor of the Company
("Predecessor") balance sheets as of December 31, 1998 and 1999, (ii)
Business Tel's statements of operations, stockholders' equity and cash flows
for each of the three fiscal years in the period ended December 31, 1999 and
(iii) the notes thereto, within five (5) business days of the date of this
Agreement. Such financial statements will be prepared in accordance with
United States generally accepted accounting principles applied on a
consistent basis with prior periods ("GAAP") and present fairly Business
Tel's and the Company's financial position and the results of its operations
and cash flows as of the relevant dates thereof and for the periods covered
thereby. The Company has also delivered to Parent true and complete copies of
(i) Predecessor's and its balance sheets as of June 30, 1999 and June 30,
2000, respectively, (ii) Predecessor's and its consolidated statements of
operations, stockholder's equity and cash flows for the six months ended June
30, 1999 and 2000, respectively, and (iii) the notes thereto. Such unaudited
financial statements were prepared in accordance with GAAP, and present
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<PAGE>
fairly the Company's financial position and the results of its operations and
cash flows as of the relevant dates thereof and for the periods covered
thereby, subject to year-end adjustments.
Section 3.6 ABSENCE OF CERTAIN CHANGES. Except as otherwise
disclosed in SECTION 3.6 OF THE COMPANY DISCLOSURE STATEMENT, since December
31, 1999 there have not been any events or conditions of any character that,
individually or in the aggregate, have or would reasonably be expected to
have a Company Material Adverse Effect. During the period from December 31,
1999 to the date of this Agreement, the Company has not engaged in any
conduct that is proscribed during the period from the date of this Agreement
to the Effective Time by clauses (i) through (x) of Section 6.2(b).
Section 3.7 ABSENCE OF THE UNDISCLOSED LIABILITIES. Except as set
forth in SECTION 3.7 OF THE COMPANY DISCLOSURE SCHEDULE, there exist no
indebtedness, liabilities or obligations of the Company whether accrued,
contingent or otherwise, which would be required under GAAP to be reflected
or disclosed on a financial statement of the Company other than (i) that
reflected or reserved against in the balance sheet dated as of June 30, 2000,
delivered to Parent or (ii) that have or will occur after June 30, 2000, in
the ordinary course of business and are of the types and in the material
amounts as set forth in the June 30, 2000 balance sheet.
Section 3.8 COMPLIANCE WITH LAW. The Company holds all licenses,
franchises, certificates, consents, permits and authorizations from all
governmental authorities necessary for the lawful conduct of its business.
The Company has not violated, nor is it in violation of, any such licenses,
franchises, certificates, consents, permits or authorizations or, any
applicable statutes, laws, ordinances, rules and regulations (including,
without limitation, any of the foregoing related to occupational safety,
environmental protection, unfair competition, labor practices or corrupt
practices) of any governmental authorities except where such violations do
not, and insofar as reasonably can be foreseen will not, have a Company
Material Adverse Effect, and the Company has not received any notice from a
governmental or regulatory authority within three years of the date hereof of
any such violation.
Section 3.9 TAXES.
(a) All Tax Returns required to be filed
before the date hereof by the Company with respect to any of its income,
properties or operations, are in all material respects true, complete and
correct and have been duly filed in a timely manner, and all taxes shown as
due on such Tax Returns have been paid, except where the failure to so file
or pay would not have a Company Material Adverse Effect. For purposes of this
Agreement, "TAX RETURN" means any return, report, statement, information
statement and the like required to be filed with any authority with respect
to any tax imposed by any governmental authority; "TAX" means any tax of any
nature whatsoever, levy, assessment, tariff, duty, deficiency, or other fee,
any amount that is required to be withheld or collected and remitted to any
Governmental Entity pursuant to applicable law, and any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Entity or
payable pursuant to any tax-sharing agreement or other contract relating to
the sharing or payment of any Tax; and "GOVERNMENTAL ENTITY" means any (i)
national, state, county, city, district, or other jurisdiction of
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<PAGE>
any nature; (ii) federal, state, local, municipal, foreign, or other
government; (iii) governmental or quasi-governmental authority of any nature;
(iv) multinational organization or body; or (v) body exercising, or entitled
to exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
(b) The amount of the Company's liability for
unpaid Taxes does not in the aggregate, exceed the Company's current
liability accrual for Taxes.
(c) To the Company's knowledge, (i) there are
no claims, investigations or assessments pending or threatened against the
Company for any alleged deficiency in taxes, (ii) there is no audit or
investigation currently being conducted that could cause the Company to be
liable for any taxes, which in any case would have a Company Material Adverse
Effect; and (iii) and no Governmental Entity has proposed in writing any
adjustment relating to any Tax Return that has not been adequately provided
for or satisfied.
(d) The Company has complied in all material
respects with all Tax withholding provisions of applicable federal, state and
local laws and have paid over to the proper governmental authorities all
amounts required to be so withheld or paid over before the date hereof,
except where the failure to so withhold or pay would not have a Company
Material Adverse Effect.
(e) The Company has never been a member of an
affiliated group as defined in Code Section 1504 nor has the Company ever
been a party to any tax-sharing agreement with any entity, or assumed the
liability of any other person for the payment of any Taxes.
(f) The Company has not filed a consent
pursuant to Section 341(f) of the Code (or any corresponding provision of
state, local or foreign income tax law). The Company has not made any
payments, is not obligated to make any payments, nor is a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G.
Section 3.10 ABSENCE OF LITIGATION. There are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of the
Company, threatened against the Company, or any properties or rights of the
Company, before any court, arbitrator or administrative, governmental or
regulatory authority or body, domestic or foreign.
Section 3.11 TITLE TO PROPERTY.
(a) REAL PROPERTY. A description of all
interests in real property owned by the Company (collectively, the "Company
Real Property") is set forth in SECTION 3.11(a) OF THE COMPANY DISCLOSURE
SCHEDULE. Except as set forth in SECTION 3.11(a) OF THE COMPANY DISCLOSURE
SCHEDULE, the Company has good, valid and marketable title to all the Company
Real Property. The Company Real Property and the leased real property
referred to in Section 3.11(c) constitute the only real property used in the
conduct of the business of the Company.
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(b) PERSONAL PROPERTY. Except as set forth in
SECTION 3.11(b) OF THE COMPANY DISCLOSURE SCHEDULE, the Company has good,
valid and marketable title to all tangible and intangible personal property
owned by it (collectively, the "Company Personal Property"). The Company
Personal Property and the leased personal property referred to in Section
3.11(c) constitute the only personal property used in the conduct of the
business of the Company.
(c) LEASES. A list and brief description of
all leases of real and personal property to which the Company is a party,
either as lessor or lessee, are set forth in SECTION 3.11(c) OF THE COMPANY
DISCLOSURE SCHEDULE. All such leases are valid and enforceable in accordance
with their respective terms except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally
or the availability of equitable remedies.
(d) RIGHT TO USE ASSETS. The Company owns,
leases or otherwise possesses a right to use all assets used in the conduct
of the business of the Company, which will not be impaired by the
consummation of the transactions contemplated hereby.
Section 3.12 INTELLECTUAL PROPERTY.
(a) OWNERSHIP. The Company owns all patents,
trade-marks, service marks and copyrights, if any, necessary to conduct its
business, or possesses adequate licenses or other rights, if any, therefor,
without conflict with the rights of others. Set forth in SECTION 3.12(a) OF THE
COMPANY DISCLOSURE SCHEDULE is a true and correct description of the following
(the "Company Proprietary Rights"):
(i) all trade-marks, trade-names,
service marks and other trade designations, including common law
rights, registrations and applications therefor, and all patents,
copyrights and applications currently owned, in whole or in part, by
the Company with respect to the business of the Company, and all
licenses, royalties, assignments and other similar agreements relating
to the foregoing to which the Company is a party (including expiration
date if applicable); and
(ii) all agreements relating to
technology, know-how or processes that the Company is licensed or
authorized to use by others, or which it licenses or authorizes others
to use.
(b) CONFLICTING RIGHTS OF THIRD PARTIES. The
Company has the sole and exclusive right to use the Company Proprietary
Rights without infringing or violating the rights of any third parties. Use
of the Company Proprietary Rights does not require the consent of any other
person and the Company Proprietary Rights are freely transferable. No claim
has been asserted by any person to the ownership of or right to use any
Company Proprietary Right or challenging or questioning the validity or
effectiveness of any license or agreement constituting a part of any Company
Proprietary Right, and the Company does not know of any valid basis for any
such claim. Each of the Company Proprietary Rights is valid and subsisting,
has not been cancelled, abandoned or otherwise terminated and, if applicable,
has been duly issued or filed.
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(c) CLAIMS OF OTHER PERSONS. The Company has
no knowledge of any claim that, or inquiry as to whether, any product,
activity or operation of the Company infringes upon or involves, or has
resulted in the infringement of, any proprietary right of any other person,
company or other entity; and no proceedings have been instituted, are pending
or are threatened that challenge the rights of the Company with respect
thereto. The Company has not given and is not bound by any agreement of
indemnification for any Company Proprietary Right as to any property
manufactured, used or sold by it.
Section 3.13 EMPLOYEE BENEFIT PLANS.
(a) SECTION 3.13(a) OF THE COMPANY DISCLOSURE
SCHEDULE lists all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar fringe or employee
benefit plans, programs or arrangements, and any current or former employment
or executive compensation or severance agreements, written or otherwise, for
the benefit of, or relating to, any employee of the Company, any trade or
business (whether or not incorporated) which is a member of a controlled
group including the Company or which is under common control with the Company
(a "COMPANY ERISA AFFILIATE") within the meaning of section 414 of the Code,
as well as each plan with respect to which the Company or a Company ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or
was terminated) or Section 4212(c) of ERISA (together, the "COMPANY BENEFIT
PLANS"), excluding former agreements under which the Company has no unpaid
obligations. Copies of each of the following, to the extent applicable, have
been made available to Parent with respect to each Company Benefit Plan: the
most recent annual report (Form 5500) filed with the Internal Revenue Service
(the "IRS"), the plan document, the trust agreement, the most recent summary
plan description if required by ERISA, the most recent actuarial report or
valuation relating to each Company Benefit Plan subject to Title IV of ERISA,
and the most recent determination letter issued by the IRS with respect to
any Company Benefit Plan intended to be qualified under section 401 of the
Code.
(b) With respect to each Company Benefit
Plan, no event has occurred and, to the knowledge of the Company, there
exists no condition or set of circumstances in connection with which the
Company could be subject to any liability under the terms of such Company
Benefit Plan, ERISA, the Code, or any other applicable law.
(c) Each Company Benefit Plan intended to be
qualified under section 401 of the Code (i) satisfies in form the
requirements of such section except to the extent amendments are not required
by law to be made until a date after the Effective Time, (ii) has received a
favorable determination letter from the IRS regarding such qualified status,
and (iii) has not, since receipt of the most recent favorable determination
letter, been amended in a way that would adversely affect its qualified
status.
(d) There are no actions, suits, or claims
pending (other than routine claims for benefits) or, to the knowledge of the
Company, threatened against, or with respect to, any Company Benefit Plan.
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(e) To the knowledge of the Company, there is
no matter pending (other than routine qualification determination filings)
with respect to any Company Benefit Plans before the IRS, the U.S. Department
of Labor, the Pension Benefit Guaranty Corporation (the "PBGC") or any other
governmental authority.
(f) All material contributions required to be
made to Company Benefit Plans pursuant to their terms and the provisions of
ERISA, the Code, or any other applicable law have been timely made.
(g) As to each Company Benefit Plan subject
to Title IV of ERISA, (i) there has been no event or condition which presents
a significant risk of plan termination, (ii) no accumulated funding
deficiency, whether or not waived, within the meaning of Section 302 of ERISA
or section 412 of the Code has been incurred, (iii) no reportable event
within the meaning of Section 4043 of ERISA (for which the disclosure
requirements of Regulation section 4043.1 et seq., promulgated by the PBGC,
have not been waived) has occurred within six years prior to the date of this
Agreement, (iv) no notice of intent to terminate such Company Benefit Plan
has been given under Section 4041 of ERISA, (v) no proceeding has been
instituted under Section 4042 of ERISA to terminate such Company Benefit
Plan, (vi) no liability to the PBGC has been incurred (other than with
respect to required premium payments), (vii) no withdrawal liability, within
the meaning of Section 4201 of ERISA, has been incurred, which withdrawal
liability has not been satisfied, and (viii) the assets of the Company
Benefit Plan equal or exceed the actuarial present value of the benefit
liabilities, within the meaning of Section 4041 of ERISA, under the Company
Benefit Plan, based upon reasonable actuarial assumptions and the asset
valuation principles established by the PBGC for the termination of such
plans.
(h) No Company Benefit Plan provides retiree
medical or retiree life insurance benefits to any person.
(i) Neither the Company nor any Company ERISA
Affiliate contributes or has an obligation to contribute, and has not within
six years prior to the date of this Agreement contributed or had an
obligation to contribute to, a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(j) SECTION 3.13(j) OF THE COMPANY DISCLOSURE
SCHEDULE sets forth a true and complete list, as of the date of this
Agreement, of each current or former employee, officer or director of the
Company who holds any option to purchase Company Common Stock (collectively,
the "COMPANY STOCK OPTIONS"), together with the number of shares of Company
Common Stock which are subject to such option, the date of grant of such
option, the extent to which such option is vested (or will become vested
within six months after the date hereof, or as a result of, the Merger), the
option price of such option (to the extent determined as of the date hereof),
whether such option is intended to qualify as an incentive stock option
within the meaning of Section 422(b) of the Code (an "ISO"), and the
expiration date of such option. SECTION 3.13(j) OF THE COMPANY DISCLOSURE
SCHEDULE also sets forth the total number of such ISOs and such nonqualified
options. The Company has furnished Parent with complete copies of the plans
(collectively, the "COMPANY OPTION PLANS") pursuant to which the Company
Stock Options were issued.
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(k) The Company has made available to Parent:
(i) copies of all employment agreements with officers of the Company; (ii) a
schedule listing all officers of the Company who have executed a
non-competition agreement with the Company; (iii) copies (or descriptions) of
all severance agreements, programs and policies of the Company with or
relating to its employees, except programs and policies required to be
maintained by law; and (iv) copies of all plans, programs, agreements and
other arrangements of the Company with or relating to its employees which
contain change in control provisions.
(l) Except as set forth in SECTION 3.13(l) OF
THE COMPANY DISCLOSURE STATEMENT, the consummation of the transactions will not
(i) entitle any employees of the Company to severance pay or (ii) accelerate the
time of payment or vesting or trigger any payment or funding (through a grantor
trust or otherwise) of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the Company
Benefit Plans.
Section 3.14 MATERIAL CONTRACTS.
(a) SECTION 3.14(a) OF THE COMPANY DISCLOSURE
SCHEDULE contains a complete and accurate list, and the Company has delivered to
Parent true and complete copies, of the following (each a "Company Material
Contract"):
(i) partnership or joint venture
agreement;
(ii) deed of trust or other security
agreement;
(iii) guaranty or suretyship,
indemnification or contribution agreement or performance bond;
(iv) employment, consulting or
compensation agreement or arrangement, including the election or
retention in office of any director or officer;
(v) labor or collective bargaining
agreement;
(vi) debt instrument, loan agreement or
other obligation relating to indebtedness for borrowed money or money
lent or to be lent to another;
(vii) deed or other document evidencing
an interest in or contract to purchase or sell real property;
(viii) agreement with dealers or sales or
commission agents, public relations or advertising agencies,
accountants or attorneys;
(ix) lease of real or personal property,
whether as lessor, lessee, sublessor or sublessee;
(x) agreement between the Company and
any affiliate of the Company;
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(xi) agreement relating to any material
matter or transaction in which an interest is held by a person or
entity that is an affiliate of the Company;
(xii) any agreement for the acquisition
of services, supplies, equipment or other personal property by or to
the Company and involving more than $5,000 in the aggregate;
(xiii) powers of attorney;
(xiv) contracts containing noncompetition
covenants;
(xv) any other contract or arrangement
that involves either an unperformed commitment in excess of $5,000 or
that terminates more than 30 days after the date hereof;
(xvi) agreement providing for the
purchase from a supplier of all or substantially all of the
requirements of the Company of a particular product or service; or
(xvii) any other agreement or commitment
not made in the ordinary course of business or that is material to the
business or financial condition of the Company.
True, correct and complete copies of the written Company Material Contracts, and
true, correct and complete written descriptions of the oral Company Material
Contracts, have heretofore been delivered or made available to Parent. There are
no existing defaults, events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute defaults by the Company, and no penalties have been incurred nor are
amendments pending, with respect to the Company Material Contracts, except as
described in SECTION 3.14(a) OF THE COMPANY DISCLOSURE SCHEDULE. The Company
Material Contracts are in full force and effect and are valid and enforceable
obligations of the parties thereto in accordance with their respective terms,
and no defenses, off-sets or counterclaims have been asserted or, to the best
knowledge of the Company, may be made by any party thereto, nor has the Company
waived any rights thereunder, except as described in SECTION 3.14(a) OF THE
COMPANY DISCLOSURE SCHEDULE. The Company has not received notice of any default
with respect to any Company Material Contracts.
(b) NO CANCELLATION OR TERMINATION OF
COMMITMENT. Except as contemplated hereby, the Company has not received notice
of any plan or intention of any other party to any Company Material Contracts to
exercise any right to cancel or terminate any Company Material Contracts or
agreement, and the Company does not know of any fact that would justify the
exercise of such a right. The Company does not currently contemplate, or has
reason to believe any other person or entity currently contemplates, any
amendment or change to any Commitment. Except as listed in SECTION 3.14(b) OF
THE COMPANY DISCLOSURE SCHEDULE, none of the customers or suppliers of the
Company has refused, or communicated that it will or may refuse, to purchase or
supply goods or services, as the case may be, or has communicated that it will
or may substantially reduce the amounts of goods or services that it is willing
to purchase from, or sell to, the Company.
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Section 3.15 LABOR MATTERS.
(a) CASH COMPENSATION. SECTION 3.15(a) OF THE
COMPANY DISCLOSURE SCHEDULE (a) contains a complete and accurate list of the
names, titles and cash compensation, including without limitation wages,
salaries, bonuses (discretionary and formula) and other cash compensation
(the "Company Cash Compensation") of all employees of the Company. In
addition, SECTION 3.15(a) OF THE COMPANY DISCLOSURE SCHEDULE (a) contains a
complete and accurate description of (i) all increases in Cash Compensation
of employees of the Company during the current and immediately preceding
fiscal years of the Company and (ii) any promised increases in Company Cash
Compensation of employees of the Company that have not yet been effected.
(b) COMPENSATION PLANS. SECTION 3.15(b) OF
THE COMPANY DISCLOSURE SCHEDULE contains a complete and accurate list of all
compensation plans, arrangements or practices (the "Company Compensation
Plans") sponsored by the Company or to which the Company contributes on
behalf of its employees, other than Company Benefit Plans listed in SECTION
3.13(a) OF THE COMPANY DISCLOSURE SCHEDULE. The Company Compensation Plans
include without limitation plans, arrangements or practices that provide for
severance pay, deferred compensation, incentive, bonus or performance awards,
and stock ownership or stock options. The Company has provided Parent with a
copy of each written Company Compensation Plan and a written description of
each unwritten Company Compensation Plan. Each of the Company Compensation
Plans can be terminated or amended at will by the Company.
(c) EMPLOYMENT AGREEMENTS. SECTION 3.15(c) OF
THE COMPANY DISCLOSURE SCHEDULE contains a complete and accurate list of all
employment agreements (the "Company Employment Agreements") to which the
Company is a party with respect to its employees. The Company Employment
Agreements include without limitation employee leasing agreements, employee
services agreements and noncompetition agreements. The Company has provided
Parent a copy of each written Company Employment Agreement and a written
description of each unwritten Company Employment Agreement.
(d) EMPLOYEE POLICIES AND PROCEDURES. SECTION
3.15(d) OF THE COMPANY DISCLOSURE SCHEDULE contains a complete and accurate
list of all employee manuals, policies, procedures and work-related rules
(the "Company Employee Policies and Procedures") that apply to employees of
the Company. The Company has provided Parent a copy of all written Company
Employee Policies and Procedures and a written description of all unwritten
Company Employee Policies and Procedures. Each of the Company Employee
Policies and Procedures can be amended or terminated at will by the Company.
(e) UNWRITTEN AMENDMENTS. No unwritten
amendments have been made, whether by oral communication, pattern of conduct
or otherwise, with respect to any Company Compensation Plans, Company
Employment Agreements or Company Employee Policies and Procedures.
(f) LABOR COMPLIANCE. Except as set forth in
SECTION 3.15(f) OF THE COMPANY DISCLOSURE SCHEDULE, the Company (i) has been
and is in compliance with all laws, rules,
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regulations and ordinances respecting employment and employment practices,
terms and conditions of employment and wages and hours, and (ii) is not
liable for any arrears of wages or penalties for failure to comply with any
of the foregoing.
(g) The Company has not engaged in any unfair
labor practice or discriminated on the basis of race, color, religion, sex,
national origin, age or handicap in its employment conditions or practices.
(h) There are no (i) unfair labor practice
charges or complaints or racial, color, religious, sexual, national origin,
age or handicap discrimination charges or complaints pending or threatened
against the Company before any federal, state or local court, board,
department, commission or agency nor does any basis therefor exist or (ii)
existing or threatened labor strikes, disputes, grievances, controversies or
other labor troubles affecting the Company, nor does any basis therefor exist.
(i) UNIONS. The Company has never been a
party to any agreement with any union, labor organization or collective
bargaining unit. No employee of the Company is represented by any union,
labor organization or collective bargaining unit. To the best knowledge of
the Company, the employees of the Company have no intention to and have not
threatened to organize or join a union, labor organization or collective
bargaining unit.
(j) ALIENS. All employees of the Company are
citizens of, or are authorized to be employed in, the United States.
Section 3.16 ENVIRONMENTAL MATTERS. The Company (i) has obtained all
applicable permits, licenses and other authorizations which are required
under foreign, federal, state or local laws relating to pollution or
protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials or wastes into ambient air, surface water,
ground water or land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants or hazardous or toxic materials or wastes by the
Company (or its agents); (ii) is in compliance with all terms and conditions
of such required permits, licenses and authorizations, and also are in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained
in such laws or contained in any regulation, code, plan, order, decree,
judgment, notice or demand letter issued, entered, promulgated or approved
thereunder; (iii) is not aware of nor has received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which
is reasonably likely to interfere with or prevent continued compliance with
or which would give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding, based on
or resulting from the Company's (or any of its agents') manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling or the emission, discharge or release into the environment, of any
pollutant, contaminant, or hazardous or toxic material or waste; and (iv) has
taken all actions necessary under applicable requirements of foreign,
federal, state or local laws, rules or regulations to register any products
or materials required to be registered by the Company (or any of its agents)
thereunder.
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Section 3.17 INSURANCE. The Company maintains general liability and
other business insurance that the Company believes to be reasonably prudent
for its business. A list and brief description of all insurance policies of
the Company are set forth in SECTION 3.17 OF THE COMPANY DISCLOSURE
SCHEDULES. All of such policies are valid and enforceable policies. Such
insurance shall be outstanding and duly in force without interruption up to
and including the Closing Date. True, complete and correct copies of all such
policies have been provided to Parent on or prior to the date hereof.
Section 3.18 VOTE REQUIRED. The affirmative vote of a majority of
the outstanding Common Stock is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement and
the Merger.
Section 3.19 CERTAIN BUSINESS PRACTICES. None of the Company or any
directors, officers, agents or employees of the Company has (a) used any
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended (the "FCPA"), (c)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (d) made any other unlawful payment.
Section 3.20 CUSTOMERS AND SUPPLIERS. SECTION 3.20 OF THE COMPANY
DISCLOSURE SCHEDULE sets forth the 20 most significant third-party suppliers
to, and the 20 most significant third-party customers of, the Company (in
terms of payments to or by such person) during the twelve-month period ending
on June 30, 1999. To the knowledge of the Company, there is no present intent
of any significant customer or supplier of the Company to discontinue or
substantially alter its relationship with the Company or do so upon
consummation of the Merger.
Section 3.21 BANK ACCOUNTS. SECTION 3.21 OF THE COMPANY DISCLOSURE
SCHEDULE sets forth each bank, savings institution and other financial
institution with which the Company has an account or safe deposit box and the
names of all persons authorized to draw thereon or have access thereto.
Section 3.22 YEAR 2000 ISSUES. Except for matters which,
individually and in the aggregate, would not have a Material Adverse Effect
on the Company, all proprietary and third-party licensed computer systems,
including computer hardware and software, owned, leased or licensed by the
Company and computer software incorporated in products manufactured by the
Company (a) can accurately and without interruption recognize and manipulate
date information relating to dates prior to, on and after January 1, 2000 and
(b) can accurately and without interruption interact with other year 2000
compliant computer systems and computer software in a way that does not
compromise their ability to correctly recognize the advent of the year 2000
or to accurately and without interruption recognize and manipulate date
information relating to dates prior to, on or after January 1, 2000. The
Company has not experienced any year 2000 related problems to date and it
does not anticipate that it will have to incur any costs in the future to
achieve year 2000 compliance of its computer systems, hardware, software, or
products.
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Section 3.23 PROXY STATEMENT AND OTHER INFORMATION. None of the
information related to Company which is supplied by the Company for inclusion
in the Proxy Statement described in Section 6.4(a) hereof will, at the time
the Proxy Statement is mailed or at the time of the meeting of shareholders
to which the Proxy Statement relates, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 3.24 BROKERS AND FINDERS. Except for RC&A Group, Inc. and
Kaufman Bros., L.P., neither the Company nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated herein.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, as to itself, represent and warrant to Parent as follows:
Section 4.1 AUTHORITY AND OWNERSHIP.
(a) Such Shareholder has all requisite power
and authority to execute and deliver this Agreement and the Escrow Agreement
and to consummate the transactions contemplated hereby. All necessary action
required to have been taken by or on behalf of such Shareholder by applicable
law or otherwise to authorize (i) the approval, execution and delivery on its
behalf of this Agreement and the Escrow Agreement and (ii) its performance of
its obligations under this Agreement and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby have been
taken. This Agreement and the Escrow Agreement constitutes such Shareholder's
valid and binding agreement, enforceable against such Shareholder in
accordance with its terms, except (A) as the same may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors' rights, including without
limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfer, and (B) for the limitations imposed by
general principles of equity.
(b) OWNERSHIP OF COMPANY COMMON STOCK. Such
Shareholder owns, beneficially and of record, good and marketable title to
the Company Common Stock listed opposite its name on EXHIBIT A, free and
clear of all security interests, liens, adverse claims, encumbrances,
equities, proxies, options, voting agreements, shareholders' agreements or
restrictions.
Section 4.2 NO BREACH. The execution and delivery of this Agreement
and the Escrow Agreement do not, and the consummation of the transactions
contemplated hereby or thereby will not, (i) violate or conflict with and
organizational or governance document of such Shareholder or (ii) constitute
a breach or default (or an event that with notice or lapse of time or both
would become a breach or default) or give rise to any lien, third party right
of termination, cancellation, material modification or acceleration under any
agreement, understanding or undertaking to which such Shareholder is a party
or by which it is bound, or (iii) constitute a violation of any law, rule or
regulation to which such Shareholders is subject.
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Section 4.3 CONSENTS AND APPROVALS. Neither the execution and
delivery by such Shareholder of this Agreement or the Escrow Agreement nor
the consummation by such Shareholder of the transactions contemplated hereby
or thereby will require such Shareholder to obtain any consent, approval,
authorization or permit of, or to make any filing with or give any
notification to, any governmental or regulatory authority, any lender or
lessor or any other person or entity.
Section 4.4 BROKERS AND FINDERS. Such Shareholder has not employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated
herein.
Section 4.5 INVESTMENT REPRESENTATION. In connection with the
receipt of the Parent Common Stock, such Shareholder has been advised that
the issuance of the Parent Common Stock has not been registered with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), and the Parent Common Stock is being issued
to the Shareholders in reliance upon an exemption from such registration. In
that regard, such Shareholder is sophisticated in financial matters and is
able to evaluate the risks and benefits relating to the acquisition of the
Parent Common Stock. The Parent Common Stock is to be acquired for such
Shareholder's own account and not with a view to, or intention of,
distribution thereof in violation of the Securities Act, or any applicable
state securities laws, and the Parent Common Stock will not be disposed of by
such Shareholder in contravention of the Securities Act or any applicable
state securities laws. Such Shareholder understands that Parent is under no
obligation to register the sale, transfer or other disposition of the Parent
Common Stock by such Shareholder or on such Shareholder's behalf under the
Securities Act or any state securities law, and such Shareholder is able to
bear the economic risk of his investment in the Parent Common Stock for an
indefinite period of time because the Parent Common Stock has not been
registered under the Securities Act and, therefore, cannot be sold unless
subsequently registered under the Securities Act or an exemption from such
registration is available.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each, jointly and severally, represents and
warrants to the Company as follows:
Section 5.1 ORGANIZATION AND AUTHORITY.
(a) Each of Parent and the Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, in the case of Parent, and Florida in the case
of Merger Sub, has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary,
other than where the failure to be so duly qualified and in good standing
would not have a Parent Material Adverse Effect. (The term "PARENT MATERIAL
ADVERSE EFFECT" as used in this Agreement shall mean any change or effect
that, individually or when taken together with all such other changes
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or effects, would be materially adverse to the financial condition,
operations or current business of Parent, excluding, however, all changes or
effects caused by general economic or industry-wide conditions or resulting
from any change in law or GAAP.) Parent and Merger Sub have all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. All necessary action,
corporate or otherwise, required to have been taken by or on behalf of it by
applicable law, its charter document or otherwise to authorize (i) the
approval, execution and delivery on its behalf of this Agreement and (ii) its
performance of its obligations under this Agreement and the consummation of
the transactions contemplated hereby has been taken by Parent and Merger Sub,
except that the transactions must be approved by their stockholders. This
Agreement constitutes Parent's and Merger Subs' valid and binding agreement,
enforceable against each in accordance with its terms, except (A) as the same
may be limited by applicable bankruptcy, insolvency, moratorium or similar
laws of general application relating to or affecting creditors' rights,
including without limitation, the effect of statutory or other laws regarding
fraudulent conveyances and preferential transfers, and (B) for the
limitations imposed by general principles of equity.
(b) Except as disclosed in SECTION 5.1(b) OF
THE PARENT DISCLOSURE SCHEDULE, Parent does not directly or indirectly own
any interest in any other corporation, partnership, joint venture or other
business association or entity which is material to Parent.
Section 5.2 NO BREACH. The execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby will
not, (i) violate or conflict with its certificate of incorporation or bylaws
or (ii) constitute a breach or default (or an event that with notice or lapse
of time or both would become a breach or default) or give rise to any lien,
third party right of termination, cancellation, material modification or
acceleration under any agreement, understanding or undertaking to which it is
a party or by which Parent is bound, except where such breach, default, lien,
third party right, cancellation, modification or acceleration would not have
a Parent Material Adverse Effect, or (iii) constitute a violation of any law,
rule or regulation to which Parent is subject.
Section 5.3 CONSENTS AND APPROVALS. Neither the execution and
delivery of this Agreement by it nor its consummation of the transactions
contemplated hereby will require Parent or Merger Sub to obtain any consent,
approval, authorization or permit of, or to make any filing with or give any
notification to, any governmental or regulatory authority, except (i) for
filings required under the Securities Exchange Act of 1934 (the "EXCHANGE
ACT"), and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent it from performing its obligations under this Agreement without
having a Parent Material Adverse Effect.
Section 5.4 CAPITALIZATION.
(a) Parent's authorized capital stock
consists of (i) 20,000,000 shares of Parent Common Stock, of which 13,080,894
were issued and outstanding as of June 30, 2000, and (ii) 1,000,000 shares of
Preferred Stock, par value $.01 per share, of which no shares were issued and
outstanding as of June 30, 2000. Since June 30, 2000, no shares of Parent
Common Stock have
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been issued. No other shares of Parent Common Stock have been issued, except
upon exercise of employee stock options or upon conversion of shares of
Preferred Stock or pursuant to Parent's Employee Stock Purchase Plan and no
additional shares of Preferred Stock have been issued. As of June 30, 2000,
there were outstanding options to purchase 1,497,980 shares of Parent Common
Stock and no options have been granted after June 30, 2000, except for
options granted to employees in the ordinary course of business consistent
with past practice. As of the date of this Agreement, warrants to purchase
1,809,623 shares of Parent Common Stock are issued outstanding. In addition,
as of June 30, 2000 there were issued and outstanding convertible debt of
Parent to purchase up to 1,330,323 shares of Parent Common Stock. Each of the
issued shares of capital stock of, or other equity interests in, of Parent is
duly authorized, validly issued and, in the case of shares of capital stock,
fully paid and nonassessable, and have not been issued in violation of (nor
are any of the authorized shares of capital stock of, or other equity
interests in, Parent subject to) any preemptive or similar rights created by
statute, the certificate of incorporation or bylaws of Parent, or any
agreement to which Parent is a party or is bound.
(b) Except as disclosed in SECTION 5.4 OF THE
PARENT DISCLOSURE SCHEDULE, no bonds, debentures, notes or other indebtedness
of Parent having the right to vote (or convertible into or exchangeable or
exercisable for securities having the right to vote) on any matters on which
stockholders may vote is issued or outstanding.
(c) Merger Sub's authorized capital stock
consists of 1,000 shares of Merger Sub Common Stock, all of which have been
issued to Parent and are outstanding.
Section 5.5 SEC REPORTS; FINANCIAL STATEMENTS. Parent has filed all
required forms, reports and documents with the Securities and Exchange
Commission ("SEC") pursuant to the Exchange Act since December 31, 1999
(collectively, the "PARENT'S SEC REPORTS"). The audited financial statements
of Parent contained, or incorporated by reference, in Parent's Annual Report
on Form 10-K for the year ended December 31, 1999, which consist of (i)
consolidated balance sheets as of December 31, 1998 and 1999 (ii)
consolidated statements of income, stockholders' equity and cash flows for
each of the three fiscal years in the period ended December 31, 1999, and
(iii) the notes thereto, certified by PriceWaterhouseCoopers LLP ("PARENT'S
AUDITORS"), whose report thereon is included therewith, were prepared in
accordance with GAAP and present fairly Parent's financial condition and the
results of its operations as of the relevant dates thereof and for the
periods covered thereby. The unaudited financial statements of Parent
contained in its Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1999 (the "PARENT 10-Q"), which consists of condensed consolidated
balance sheets as of March 31, 1999 and March 31, 2000, condensed
consolidated statements of income, stockholder's equity and cash flows for
the three months ended March 31, 1999 and 2000, and notes thereto, were
prepared in accordance with GAAP, and present fairly Parent's financial
condition and the results of its operations as of the relevant dates thereof
and for the period covered thereby, subject to year-end adjustments.
Section 5.6 ABSENCE OF CERTAIN CHANGES.
(a) Except as otherwise disclosed in Parent's
SEC Reports (without further amendment) or SECTION 5.6 OF THE PARENT
DISCLOSURE SCHEDULE, since March 31, 2000 there
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have not been any events or conditions of any character that, individually or
in the aggregate, have or would reasonably be expected to have a Parent
Material Adverse Effect.
(b) During the period from March 31, 2000 to
the date of this Agreement, Parent has not engaged in any conduct that is
proscribed during the period from the date of this Agreement to the Effective
Time by clauses (i) through (x) of Section 6.2(b).
Section 5.7 TITLE TO PROPERTY. Parent has defensible title to all of
its properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby
or which would not have a Parent Material Adverse Effect. To Parent's
knowledge, all leases pursuant to which Parent leases from others real or
personal property are valid and effective in accordance with their respective
terms, and there is not, to the knowledge of Parent, under any of such
leases, any existing default or event of default (or event which with notice
or lapse of time, or both, would constitute a material default or event of
default and in respect of which the Parent has not taken adequate steps to
prevent such a default from occurring) except where the lack of such validity
and effectiveness, or the existence of such default or event of default would
not have a Parent Material Adverse Effect.
Section 5.8 BROKERS. Except for Houlihan, Lokey, Howard & Zukin,
neither Parent, the Merger Sub nor any of their officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated herein.
Section 5.9 EMPLOYEE BENEFIT PLANS.
(a) SECTION 5.9(a) OF THE PARENT DISCLOSURE
SCHEDULE lists all employee benefit plans (as defined in Section 3(3) of
ERISA) and all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, programs or arrangements, and any current or former
employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of Parent, any
trade or business (whether or not incorporated) which is a member of a
controlled group including Parent or which is under common control with
Parent (a "PARENT ERISA AFFILIATE") within the meaning of section 414 of the
Code, as well as each plan with respect to which the Parent or a Parent ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or
was terminated) or Section 4212(c) of ERISA (together, the "PARENT BENEFIT
PLANS"), excluding former agreements under which Parent has no unpaid
obligations. Copies of each of the following, to the extent applicable, have
been made available to the Company with respect to each Parent Benefit Plan:
the most recent annual report (Form 5500) filed with the IRS, the plan
document, the trust agreement, the most recent summary plan description if
required by ERISA, the most recent actuarial report or valuation relating to
each Parent Benefit Plan subject to Title IV of ERISA, and the most recent
determination letter issued by the IRS with respect to any Parent Benefit
Plan intended to be qualified under section 401 of the Code.
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(b) With respect to each Parent Benefit Plan,
no event has occurred and, to the knowledge of Parent, there exists no
condition or set of circumstances in connection with which Parent could be
subject to any liability under the terms of such Parent Benefit Plan, ERISA,
the Code, or any other applicable law.
(c) Each Parent Benefit Plan intended to be
qualified under section 401 of the Code (i) satisfies in form the
requirements of such section except to the extent amendments are not required
by law to be made until a date after the Effective Time, (ii) has received a
favorable determination letter from the IRS regarding such qualified status,
and (iii) has not, since receipt of the most recent favorable determination
letter, been amended in a way that would adversely affect its qualified
status.
(d) There are no actions, suits, or claims
pending (other than routine claims for benefits) or, to the knowledge of
Parent, threatened against, or with respect to, any Parent Benefit Plan.
(e) To the knowledge of Parent, there is no
matter pending (other than routine qualification determination filings) with
respect to any Parent Benefit Plans before the IRS, the U.S. Department of
Labor, the PBGC or any other governmental authority.
(f) All material contributions required to be
made to Parent Benefit Plans pursuant to their terms and the provisions of
ERISA, the Code, or any other applicable law have been timely made.
(g) As to each Parent Benefit Plan subject to
Title IV of ERISA, (i) there has been no event or condition which presents a
significant risk of plan termination, (ii) no accumulated funding deficiency,
whether or not waived, within the meaning of Section 302 of ERISA or section
412 of the Code has been incurred, (iii) no reportable event within the
meaning of Section 4043 of ERISA (for which the disclosure requirements of
Regulation section 4043.1 et seq., promulgated by the PBGC, have not been
waived) has occurred within six years prior to the date of this Agreement,
(iv) no notice of intent to terminate such Parent Benefit Plan has been given
under Section 4041 of ERISA, (v) no proceeding has been instituted under
Section 4042 of ERISA to terminate such Parent Benefit Plan, (vi) no
liability to the PBGC has been incurred (other than with respect to required
premium payments), (vii) no withdrawal liability, within the meaning of
Section 4201 of ERISA, has been incurred, which withdrawal liability has not
been satisfied, and (viii) the assets of the Parent Benefit Plan equal or
exceed the actuarial present value of the benefit liabilities, within the
meaning of Section 4041 of ERISA, under the Parent Benefit Plan, based upon
reasonable actuarial assumptions and the asset valuation principles
established by the PBGC for the termination of such plans.
(h) No Parent Benefit Plan provides retiree
medical or retiree life insurance benefits to any person.
(i) Neither the Parent nor any Parent ERISA
Affiliate contributes or has an obligation to contribute, and has not within
six years prior to the date of this Agreement
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contributed or had an obligation to contribute to, a multiemployer plan
within the meaning of Section 3(37) of ERISA.
(j) SECTION 5.9(j) OF THE PARENT DISCLOSURE
SCHEDULE sets forth a true and complete list, as of the date of this
Agreement, of each current or former employee, officer or director of Parent
who holds any option to purchase Parent Common Stock (collectively, the
"PARENT STOCK OPTIONS"), together with the number of shares of Parent Common
Stock which are subject to such option, the date of grant of such option, the
extent to which such option is vested (or will become vested within six
months after the date hereof, or as a result of, the Merger), the option
price of such option (to the extent determined as of the date hereof),
whether such option is an ISO, and the expiration date of such option.
SECTION 5.9(j) OF THE PARENT DISCLOSURE SCHEDULE also sets forth the total
number of such ISOs and such nonqualified options. Parent has furnished the
Company with complete copies of the plans (collectively, the "PARENT OPTION
PLANS") pursuant to which the Parent Stock Options were issued.
(k) Parent has made available to the Company:
(i) copies of all employment agreements with officers of Parent; (ii) a
schedule listing all officers of Parent who have executed a non-competition
agreement with Parent; (iii) copies (or descriptions) of all severance
agreements, programs and policies of Parent with or relating to its
employees, except programs and policies required to be maintained by law; and
(iv) copies of all plans, programs, agreements and other arrangements of
Parent with or relating to its employees which contain change in control
provisions.
(l) Except as set forth in SECTION 5.9(l) OF
THE PARENT DISCLOSURE STATEMENT, the consummation of the transactions will
not (i) entitle any employees of Parent to severance pay or (ii) accelerate
the time of payment or vesting or trigger any payment or funding (through a
grantor trust or otherwise) of compensation or benefits under, increase the
amount payable or trigger any other material obligation pursuant to, any of
the Parent Benefit Plans.
Section 5.10 LABOR MATTERS.
(a) CASH COMPENSATION. SECTION 5.10(a) OF THE
PARENT DISCLOSURE SCHEDULE (a) contains a complete and accurate list of the
names, titles and cash compensation, including without limitation wages,
salaries, bonuses (discretionary and formula) and other cash compensation
(the "Parent Cash Compensation") of all employees of Parent. In addition,
SECTION 5.10(a) OF THE PARENT DISCLOSURE SCHEDULE (a) contains a complete and
accurate description of (i) all increases in Cash Compensation of employees
of Parent during the current and immediately preceding fiscal years of Parent
and (ii) any promised increases in Parent Cash Compensation of employees of
Parent that have not yet been effected.
(b) COMPENSATION PLANS. SECTION 5.10(b) OF
THE PARENT DISCLOSURE SCHEDULE contains a complete and accurate list of all
compensation plans, arrangements or practices (the "Parent Compensation
Plans") sponsored by Parent or to which Parent contributes on behalf of its
employees, other than Parent Benefit Plans listed in SECTION 5.9(a) OF THE
PARENT DISCLOSURE SCHEDULE. The Parent Compensation Plans include without
limitation plans, arrangements or
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practices that provide for severance pay, deferred compensation, incentive,
bonus or performance awards, and stock ownership or stock options. Parent has
provided the Company with a copy of each written Parent Compensation Plan and a
written description of each unwritten Parent Compensation Plan. Each of the
Parent Compensation Plans can be terminated or amended at will by Parent.
(c) EMPLOYMENT AGREEMENTS. SECTION 5.10(c) OF
THE PARENT DISCLOSURE SCHEDULE contains a complete and accurate list of all
employment agreements (the "Parent Employment Agreements") to which Parent is a
party with respect to its employees. The Parent Employment Agreements include
without limitation employee leasing agreements, employee services agreements and
noncompetition agreements. Parent has provided the Company a copy of each
written Parent Employment Agreement and a written description of each unwritten
Parent Employment Agreement.
(d) EMPLOYEE POLICIES AND PROCEDURES. SECTION
5.10(d) OF THE PARENT DISCLOSURE SCHEDULE contains a complete and accurate list
of all employee manuals, policies, procedures and work-related rules (the
"Parent Employee Policies and Procedures") that apply to employees of Parent.
Parent has provided the Company a copy of all written Parent Employee Policies
and Procedures and a written description of all unwritten Parent Employee
Policies and Procedures. Each of the Parent Employee Policies and Procedures can
be amended or terminated at will by Parent.
(e) UNWRITTEN AMENDMENTS. No unwritten
amendments have been made, whether by oral communication, pattern of conduct or
otherwise, with respect to any Parent Compensation Plans, Parent Employment
Agreements or Parent Employee Policies and Procedures.
(f) LABOR COMPLIANCE. Except as set forth in
SECTION 5.10(f) OF THE PARENT DISCLOSURE SCHEDULE, Parent (i) has been and is in
compliance with all laws, rules, regulations and ordinances respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and (ii) is not liable for any arrears of wages or penalties
for failure to comply with any of the foregoing.
(g) Parent has not engaged in any unfair labor
practice or discriminated on the basis of race, color, religion, sex, national
origin, age or handicap in its employment conditions or practices.
(h) There are no (i) unfair labor practice
charges or complaints or racial, color, religious, sexual, national origin, age
or handicap discrimination charges or complaints pending or threatened against
Parent before any federal, state or local court, board, department, commission
or agency nor does any basis therefor exist or (ii) existing or threatened labor
strikes, disputes, grievances, controversies or other labor troubles affecting
Parent, nor does any basis therefor exist.
(i) UNIONS. Parent has never been a party to any
agreement with any union, labor organization or collective bargaining unit. No
employee of Parent is represented by any union, labor organization or collective
bargaining unit. To the best knowledge of Parent, the
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employees of Parent have no intention to and have not threatened to organize
or join a union, labor organization or collective bargaining unit.
(j) ALIENS. All employees of Parent are
citizens of, or are authorized to be employed in, the United States.
Section 5.11 ENVIRONMENTAL MATTERS. Parent (i) has obtained all
applicable permits, licenses and other authorizations which are required under
foreign, federal, state or local laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, or hazardous or toxic materials
or wastes into ambient air, surface water, ground water or land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or hazardous or
toxic materials or wastes by Parent (or its agents); (ii) is in compliance with
all terms and conditions of such required permits, licenses and authorizations,
and also are in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; (iii) is not aware of nor has received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance with or
which would give rise to any common law or statutory liability, or otherwise
form the basis of any claim, action, suit or proceeding, based on or resulting
from Parent's (or any of its agents') manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling or the emission,
discharge or release into the environment, of any pollutant, contaminant, or
hazardous or toxic material or waste; and (iv) has taken all actions necessary
under applicable requirements of foreign, federal, state or local laws, rules or
regulations to register any products or materials required to be registered by
Parent (or any of its agents) thereunder.
ARTICLE VI.
OTHER AGREEMENTS
Section 6.1 ELECTION OF NEW PARENT DIRECTORS AND OFFICERS. Subject to
occurrence of the Merger, Parent shall take all action necessary under its
bylaws or otherwise to cause the number of members constituting the whole Board
of Directors of Parent to be seven (7) and to elect G.T. Finn, William O. Hunt,
John McDonald, Mike Campbell, Philip Jepsen and two (2) other designees agreed
to in writing by Parent and WWC to Parent's Board of Directors, effective the
Effective Time; provided, however, if Banco Del Gottardo exercises its right to
designate two (2) additional persons to Parent's Board of Directors, and such
persons are not agreeable to Mr. Finn, then Mr. Finn shall have the right to
designate two (2) additional persons to Parent's Board of Directors. Such
persons shall hold office until the next annual meeting of Parent's stockholders
and until their successors shall have been elected and qualified. Subject to the
occurrence of the Merger, Parent shall take all action necessary to elect John
McDonald as Chairman and Chief Executive Officer of Parent, G.T. Finn as
President of Parent and Phil Boyd as Chief Financial Officer of Parent. On or
before the
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Effective Date, Parent will take all necessary steps to amend its bylaws, if
necessary, to allow eleven members of Parent's Board of Directors.
Section 6.2 CONDUCT OF BUSINESS PENDING MERGER.
(a) From the date of this Agreement until the
Effective Time, unless otherwise contemplated by this Agreement or consented to
in writing by the other party or set forth in SECTION 6.2 OF THE COMPANY
DISCLOSURE SCHEDULE, each of the Company and Parent shall:
(i) operate its business in all
material respects in the usual and ordinary course consistent with past
practice; and
(ii) use all commercially reasonable
efforts to preserve substantially intact its business organization,
maintain and keep its material properties and assets in as good repair
and condition as at present, ordinary wear and tear excepted, retain
the services of its respective key employees and maintain its
relationships with its material customers and suppliers.
(b) Except as contemplated by this Agreement or
otherwise consented to in writing by the other party, from the date of this
Agreement until the Effective Time, each of the Company and Parent shall not do
any of the following:
(i) adopt any amendments to its
certificate or articles of incorporation which would alter the terms of
the Company Common Stock or Parent Common Stock or would have an
adverse impact on the consummation of the transactions contemplated by
this Agreement;
(ii) declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock, or, except as
provided in the terms of Parent's Preferred Stock, redeem or otherwise
acquire any of its securities;
(iii) issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities
or amend any of the terms of any such securities or agreements
outstanding on the date hereof; PROVIDED, HOWEVER, the Company or
Parent may issue shares of Company Common Stock or Parent Common Stock,
respectively, upon the exercise of employee stock options issued
pursuant to the Company's option plan described in Section 3.3(j) of
the Company Disclosure Schedule, Parent's Employee Stock Purchase Plan
or Parent's Preferred Stock outstanding on the date hereof or upon the
exercise of warrants outstanding on the date of this Agreement;
(iv) (A) create, incur or assume any
long-term debt (including obligations in respect of capital leases but
excluding any intercompany indebtedness) that
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is material to the Company or Parent, as the case may be, (B) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any person
other than the Company or Parent that is material to the Company or
Parent, as the case may be, or (C) make any loans, advances or capital
contributions to, or investments in, any person other than the Company
or Parent, which loans, advances or capital contributions are material
to the Company or Parent, as the case may be;
(v) acquire, sell, lease or dispose of
any assets that are material to the Company or Parent, as the case may
be, other than sales that are in the ordinary and usual course of
business consistent with past practice;
(vi) mortgage, pledge or subject to any
lien, lease, security interest or other charge or encumbrance any of
its properties or assets, tangible or intangible, material to the
Company or Parent, as the case may be;
(vii) (A) increase the compensation
payable to or to become payable to any director or officer, except for
increases in salary or wages payable or to become payable in the
ordinary course of business and consistent with past practice or (B)
grant any severance or termination pay (other than pursuant to
agreements in effect on the date of this Agreement) to, or enter into
or amend any benefit plan (except for administrative or technical
amendments necessary to comply with applicable law) or any employment
or severance agreement with, any director, officer or employee;
(viii) (A) effect any reorganization or
recapitalization or (B) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of
its capital stock;
(ix) change any of its methods of
accounting in effect at June 30, 2000, except as may be required by law
or GAAP; or
(x) take, or agree in writing or
otherwise to take, any of the foregoing actions or any actions that
would (A) make any representation or warranty of the Company or Parent,
as the case may be, contained in this Agreement untrue or incorrect as
of the date when made or as of the Closing Date, (B) result in any of
the conditions of this Agreement not being satisfied or (C) be
inconsistent with the terms of this Agreement or the transactions
contemplated hereby.
Notwithstanding anything to the contrary set forth above, Parent shall be
entitled to sell or otherwise dispose of, or discontinue in any manner, its
operating business.
Section 6.3 ACCESS TO INFORMATION.
(a) Between the date of this Agreement and the
Effective Time, the Company will (i) give Parent and its authorized
representatives reasonable access, during regular business hours upon reasonable
notice, to all offices and other facilitates and to all of its books and
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records, (ii) permit Parent to make such reasonable inspections as it may
require, and (iii) cause its officers and those of its subsidiaries to
furnish Parent with such financial and operating data and other information
with respect to the business and properties of the Company as Parent may from
time to time reasonably request and as the Company may have on hand or be
able to produce without hardship.
(b) Between the date of this Agreement and
the Effective Time, Parent will (i) give the Company and its authorized
representatives reasonable access, during regular business hours upon
reasonable notice, to all offices and other facilitates and to all of its
books and records, (ii) permit the Company to make such reasonable
inspections as it may require and (iii) cause its officers to furnish the
Company with such financial and operating data and other information with
respect to the business and properties of Parent as the Company may from time
to time reasonably request and as Parent may have on hand or be able to
produce without hardship.
(c) Notwithstanding the foregoing provisions
of this Section 6.3, neither party shall be required to grant access or
furnish information to the other party to the extent that such access or the
furnishing of such information is prohibited by law or by confidentiality
agreements with third parties in effect on the date hereof.
(d) Each party to this Agreement shall hold
in confidence all nonpublic information received from the other party to this
Agreement until such time as such information is otherwise publicly available
and, if this Agreement is terminated, each party will deliver to the other
party all documents, work papers and other materials (including copies)
obtained by such party or on its behalf from the other party as a result of
this Agreement or in connection herewith, whether so obtained before or after
the execution hereof.
Section 6.4 PREPARATION OF PROXY STATEMENT.
(a) Parent shall prepare and file with the
SEC at such appropriate time as determined by Parent, a proxy statement
relating to the stockholders' meeting of Parent to be held in connection with
the Merger, as amended or from time to time (as so amended the "PROXY
STATEMENT"). Parent and the Company shall cooperate with each other in the
preparation of the Proxy Statement and any amendment thereto, and each shall
notify the other of the receipt of any comments of the SEC with respect to
the Proxy Statement or for additional information, and shall provide to the
other promptly copies of all correspondence between Parent or the Company, as
the case may be, and the SEC with respect to the Proxy Statement. Each of
Parent and the Company agrees to use all commercially reasonable efforts,
after consultation with each other, to respond promptly to all such comments
of and requests by the SEC and to cause the final Proxy Statement to be filed
with the SEC and to be mailed to the holders of Parent Common Stock entitled
to vote at the meeting of the stockholders of Parent at the earliest
practicable time.
(b) Notwithstanding the preceding provisions
of this Section 6.4, as a condition (which shall be for the benefit of both
the Company and Parent) to the recommendation of the Board of Directors of
the Company or Parent to their stockholders, the holding of a stockholders'
meeting and the mailing of the Proxy Statement, (i) Parent must receive (A)
the
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opinion of Houlihan, Lokey, Howard & Zukin to the effect that the Merger is
fair to Parent and its stockholders from a financial point of view, and (B)
the letters of [the Company's auditors] referred to in Section 6.13, and
(ii) neither of such opinion or letters shall have been withdrawn, revoked or
modified.
Section 6.5 AMEX EXCHANGE LISTING. Parent shall use all commercially
reasonable efforts to obtain, prior to the Effective Time, approval for
listing of Parent Common Stock to be issued pursuant to the Merger on the
AMEX upon official notice of issuance.
Section 6.6 REASONABLE BEST EFFORTS. Subject to the fiduciary duties
of the Company's and Parent's Board of Directors, each of the parties hereto
agrees to use all commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
in the most expeditious manner practicable, including, but not limited to,
the satisfaction of all conditions to the Merger.
Section 6.7 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Except as may be
required by applicable law, no party hereto shall make any public
announcements or otherwise communicate with any news media or any other party
with respect to this Agreement or any of the transactions contemplated hereby
without prior consultation with the other parties as to the timing and
contents of any such announcement or communications as may be reasonable
under the circumstances; PROVIDED, HOWEVER, that nothing contained herein
shall prevent any party from (i) promptly making all filings with
governmental authorities as may, in its judgment, be required or advisable in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby or (ii) disclosing the
terms of this Agreement to such party's legal counsel, financial advisors or
accountants in furtherance of the transactions contemplated by this
Agreement. The press release announcing the execution and delivery of this
Agreement shall be a joint press release of the Company and Parent.
Section 6.8 NOTIFICATION. Each party hereto shall, in the event of,
or promptly after obtaining knowledge of the occurrence or threatened
occurrence of, any fact or circumstance that would cause or constitute a
material breach of any of its representations and warranties set forth
herein, give notice thereof to the other parties and shall use its reasonable
best efforts to prevent or promptly to remedy such breach.
Section 6.9 NO SOLICITATION.
(a) Subject to Section 6.9(c), Parent shall
not (and Parent shall use all commercially reasonable efforts to cause its
officers, directors, employees, representatives and agents, including, but
not limited to, investment bankers, attorneys and accountants, not to),
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, provide any information to, or enter into
any agreement with, any person (other than the Company, any of its affiliates
or representatives) concerning any merger, business combination, tender
offer, exchange offer, sale of assets (other than as expressly permitted by
Section 6.2), sale of shares of capital stock or debt securities or similar
transactions involving Parent or any division or operating or principal
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business unit of Parent, excluding Parent's current operating business (a
"PARENT ACQUISITION PROPOSAL"). Parent will immediately cease any existing
activities, discussions or negotiations with any parties (other than the
Company) conducted heretofore with respect to any of the foregoing.
(b) Subject to Section 6.9(c), the Company
shall not (and shall use its reasonable best efforts to cause its officers,
directors, employees, representatives and agents, including, but not limited
to, investment bankers, attorneys and accountants, not to), directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, provide any information to, or enter into any agreement
with, any person (other than Parent, any of its affiliates or
representatives) concerning any merger, business combination, tender offer,
exchange offer, sale of assets (other than as expressly permitted by Section
6.2), sale of shares of capital stock or debt securities or similar
transactions involving the Company or any division or operating or principal
business unit of the Company (a "COMPANY ACQUISITION PROPOSAL"). The Company
will immediately cease any existing activities, discussions or negotiations
with any parties (other than Parent) conducted heretofore with respect to any
of the foregoing.
(c) Notwithstanding the provisions of Section
6.9(a) and (b), prior to the approval by its stockholders of the transactions
contemplated by this Agreement, Parent or the Company, as the case may be,
may, directly or indirectly, provide access to furnish information concerning
its business, properties or assets to any person pursuant to appropriate
confidentiality agreements, and may negotiate and participate in discussions
and negotiations with such person, if (i) such person has submitted an
unsolicited bona fide written proposal to the Board of Directors of Parent or
the Company, as the case may be, relating to any such transaction, (ii) such
proposal provides for the acquisition for cash and/or publicly traded
securities of all of the outstanding Parent Common Stock or Company Common
Stock, (iii) the Board of Directors of Parent or the Company, as the case may
be, determines in good faith, after consultation with its independent
financial advisor, that such proposal is more favorable to the holders of
Parent Common Stock or Company Common Stock than the Merger and is fully
financed or reasonably capable of being financed or otherwise consummated,
and (iv) the Board of Directors of Parent or the Company, as the case may be,
determines in good faith, after consultation with independent legal counsel,
that the failure to provide such information or access or to engage in such
discussions or negotiations would be inconsistent with their fiduciary duties
to Parent's or the Company's stockholders under applicable law. A proposal
meeting all of the criteria in the preceding sentence is referred to as a
"SUPERIOR PROPOSAL". Parent or the Company will immediately notify the other
party of Parent Acquisition Proposal, or Company Acquisition Proposal,
respectively, and will keep the other party fully apprised of all
developments with respect to any such Acquisition Proposal. Subject to the
last sentence of this Section 6.9(c) and notwithstanding anything to the
contrary contained in this Agreement, except in connection with the valid
termination of this Agreement pursuant to Section 8.1(b)(ii) or 8.1(c)(ii)
hereof, neither the Board of Directors of Parent or the Company nor any
committee thereof shall (i) approve or recommend, or propose to approve or
recommend, any Parent Acquisition Proposal or Company Acquisition Proposal
respectively, (ii) enter into any agreement (other than a confidentiality
agreement) with respect to any Parent Acquisition Proposal or Company
Acquisition Proposal or (iii) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to the other party, the approval or
recommendation by its Board of Directors or a committee
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thereof of the Merger, this Agreement or the issuance of Parent Common Stock
to be issued pursuant to the Merger. Nothing contained in this Section shall
prohibit Parent or its Board of Directors from taking and disclosing to their
stockholders a position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
Section 6.10 REGULATORY AND OTHER AUTHORIZATIONS
(a) Each party hereto agrees to use its
reasonable best efforts to obtain all authorizations, consents, orders and
approvals of federal, state, local and foreign regulatory bodies and
officials and non-governmental third parties that may be or become necessary
for (i) its execution and delivery of, and the performance of its obligations
pursuant to, this Agreement and (ii) the ownership of the Surviving
Corporation by Parent, and each party will cooperate fully with the other
parties in promptly seeking to obtain all such authorizations, consents,
orders and approvals.
(b) In connection with and without limiting
the foregoing, the Company and Parent shall (i) take all action necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Merger, this Agreement or any of the other
transaction contemplated hereby and (ii) if any state takeover statute or
similar statute or regulation becomes applicable to the Merger, this
Agreement or any of the other transactions contemplated hereby, take all
action necessary to ensure that the Merger and the other transactions
contemplated hereby may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger and the other transactions
contemplated by this Agreement.
Section 6.11 FURTHER ASSURANCES. Each of the parties hereto shall
execute such documents and other instruments and take such further actions as
may be reasonably required or desirable to carry out the provisions hereof
and consummate the transactions contemplated hereby or, at and after the
Effective Time, to evidence the consummation of the transactions contemplated
by this Agreement. Upon the terms and subject to the conditions hereof, each
of the parties hereto shall take or cause to be taken all actions and to do
or cause to be done all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and to obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings.
Section 6.12 ASSUMED OPTIONS.
(a) Parent shall assume, effective at the
Effective Time, each Company Option Plan and each Company Stock Option that
remains unexercised in whole or in part as of the Effective Time and
substitute shares of Parent Common Stock for the shares of Company Common
Stock purchasable under each such assumed option ("ASSUMED OPTION"), which
assumption and substitution shall be effected as follows:
(i) the Assumed Option shall have the
same terms and conditions as the Company Stock Option being assumed,
subject to Section 6.12(a)(ii) and (iii) below;
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(ii) the number of shares of Parent
Common Stock purchasable under the Assumed Option shall be equal to the
number of shares of Parent Common Stock that the holder of the Company
Stock Option being assumed would have received (without regard to any
vesting schedule) upon consummation of the Merger had such Company
Stock Option been exercised in full immediately prior to consummation
of the Merger; and
(iii) the per share exercise price of
such Assumed Option shall be an amount (rounded to the nearest cent)
equal to the per share exercise price of the Company Stock Option being
assumed divided by the number of shares of Parent Common Stock issuable
in the Merger for each share of Company Common Stock.
If the foregoing calculation results in an Assumed Option being exercisable for
a fraction of a share of Parent Common Stock, then the number of shares of
Parent Common Stock subject to such Assumed Option shall be rounded down to the
nearest whole number of shares, and the total exercise price for the Assumed
Option shall be reduced by the exercise price of the fractional share.
(b) Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of the Assumed Options.
Section 6.13 LETTER FROM ACCOUNTANTS.(a) The Company shall use
reasonable best efforts to cause to be delivered to the Company and Parent two
letters from [the Company's auditors], one dated no earlier than three business
days prior to the date on which the Proxy Statement is mailed to Parent's
stockholders and one dated no earlier than three business days prior to the
Closing Date, each addressed to the Boards of Directors of the Company and
Parent concerning the Company, in form reasonably satisfactory to Parent and
customary in scope for comfort letters delivered by independent public
accountants in connection with registration statements containing a prospectus
similar to the Proxy Statement.
Section 6.14 EMPLOYEE BENEFITS. Parent hereby agrees to provide to
officers and employees of the Company who become or remain regular (full-time)
employees of Parent or any of its subsidiaries ("Continuing Employees") employee
benefits, no less favorable than those provided by Parent to their similarly
situated officers and employees. Any employee of the Company who becomes a
participant in any employee benefit plan, program, policy or arrangement of
Parent or any of its subsidiaries after the Effective Time shall be given credit
under such plan, program, policy or arrangement for all service with the Company
prior to becoming such a participant for purposes of eligibility and vesting. In
addition, Parent agrees to assume any employee agreement between Company and its
employees who become Continuing Employees.
Section 6.15 PIGGYBACK REGISTRATION RIGHTS.
(a) If Parent at any time proposes to register
any of its equity securities under the Securities Act on any form other than
Form S-4 or Form S-8 (or any similar or successor form then in effect), whether
or not for sale for its own account, and if the registration form proposed to be
used may be used for the registration of Parent Common Stock, the Company will
in each such
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case give prompt written notice (and in any event at least 10 business days'
prior written notice prior to the filing of such registration statement) to
the Shareholders of Parent's intention to do so, such notice to specify the
securities to be registered, the proposed numbers and amounts thereof and the
date not less than 20 days thereafter by which Parent must receive the
Shareholders' written indication of whether the Shareholders wish to include
their Parent Common Stock in such registration statement and advising the
Shareholders of their rights under this Section 6.15. Upon the written
request of any Shareholder made on or before the date specified in such
notice (which request shall specify the number of shares of Parent Common
Stock intended to be disposed of by such Shareholder), Parent will, to the
extent permitted under subsection (d) below, use its best efforts to cause
all such shares of Parent Common Stock, which the Shareholders have so
requested the registration thereof, to be registered under the Securities Act
(with the securities that Parent at the time proposes to register), to the
extent requisite to permit the sale or other disposition (in accordance with
the intended methods thereof as aforesaid) by the Shareholders of the shares
of Parent Common Stock to be so registered.
(b) Notwithstanding anything to the contrary
in this Section 6.15, Parent shall have the right to discontinue any
registration under this Section 6.15 at any time prior to the effective date
of such registration if the registration of other securities giving rise to
such registration under this Section 6.15 is discontinued.
(c) In the case of a registration under
subsection (a) above, if Parent determines to enter into an underwriting
agreement in connection therewith, all shares of Parent Common Stock to be
included in such registration shall be subject to such underwriting agreement
and no person may participate in such registration unless such person agrees
to sell such person's securities on the basis provided in such underwriting
agreement and completes and/or executes all questionnaires, indemnities, and
other reasonable documents which must be executed under the terms of such
underwriting agreement.
(d) If Parent's managing underwriter shall
advise Parent and the Shareholders in writing that the inclusion in any
registration pursuant hereto of some or all of (i) the shares of Parent
Common Stock sought to be registered by the Shareholders, and (ii) the
securities of Parent sought to be registered, creates a substantial risk that
the proceeds or price per unit that will be derived from such registration
will be reduced or that the number of securities to be registered is too
large a number to be reasonably sold, (i) first, the number of securities of
Parent (or securities of other persons exercising "demand rights") sought to
be registered shall be included in such registration, and (ii) next, the
number of shares of Parent Common Stock and other securities of persons
exercising "piggyback rights" shall be included in such registration to the
extent permitted by the Company's managing underwriter (if the offering is
underwritten) with the number of shares of Parent Common Stock and such other
securities being registered being based on the respective rights of each
party and the decision of Parent.
(e) If a registration hereunder shall be in
connection with an underwritten public offering, the participating
Shareholders shall be deemed to have agreed by acquisition of their shares of
Parent Common Stock not to effect any public sale or distribution, including
any sale
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pursuant to Rule 144 under the Securities Act, of any shares of Parent Common
Stock and to use their best efforts not to effect any such public sale or
distribution of any other equity security of Parent or of any security
convertible into or exchangeable or exercisable for any equity security of
Parent (other than as part of such underwritten public offering) within 20
days before or 90 days after the effective date of such registration
statement. In such event, such participating Shareholders agree, if
requested, to sign a customary market stand-off letter with Parent's managing
underwriter, and to comply with applicable rules and regulations of the
Securities Exchange Commission.
(f) If and to the extent that any Shareholder
sells or otherwise disposes of shares of Parent Common Stock in any
transaction that does not require registration under the Securities Act
(other than a transaction exempt under Rule 144), the rights of such
Shareholder hereunder with respect to such shares of Parent Common Stock will
be assignable to the transferee of such shares of Parent Common Stock;
provided, however, that such transferee agrees in writing to be bound by all
the terms and conditions of this Section 6.15.
Section 6.16 DELIVERY OF CERTAIN DOCUMENTS. On or prior to the fifth
business day following the date of this Agreement: (i) Parent shall deliver
to the Company the Parent Disclosure Schedule and all diligence materials
reasonably requested by the Company and not previously delivered to the
Company (collectively, the "Parent Deliveries"); and (ii) the Company shall
deliver to Parent EXHIBIT A, the Company Disclosure Schedule and all
diligence materials reasonably requested by Parent and not previously
delivered to Parent (collectively, the "Company Deliveries").
ARTICLE VII.
CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
Section 7.1 CLOSING AND CLOSING DATE. As soon as practicable after
the satisfaction or waiver of the conditions set forth herein and prior to
the filing of the Certificate of Merger and Articles of Merger, a closing of
the transactions contemplated hereby (the "CLOSING") shall take place at the
offices of Jackson Walker L.L.P., 901 Main Street, Suite 6000, Dallas, Texas
or at such other location as the parties may agree in writing. The date on
which the Closing occurs is referred to as the "CLOSING DATE."
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, PARENT AND
MERGER SUB. The respective obligations of the Company, on the one hand, and
Parent and Merger Sub, on the other hand, to consummate the transactions
contemplated hereby are subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived
in writing by the parties hereto, in whole or in part, to the extent
permitted by applicable law:
(a) the issuance of Parent Common Stock
pursuant to the Merger, the change of Parent's name and the increase in the
number of authorized shares of Parents' Common Stock shall have been approved
by the stockholders of Parent as contemplated hereby;
(b) the shares of Parent Common Stock to be
issued in the Merger shall have been approved for listing on the AMEX upon
official notice of issuance;
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(c) any governmental or regulatory notices or
approvals, including blue sky approvals, required with respect to the
transactions contemplated hereby shall have been either filed or received; and
(d) no federal, state or foreign governmental
authority or other agency or commission or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute or
rule, regulation, injunction or other order (whether temporary, preliminary
or permanent) which remains in effect and which has the effect of making the
transactions contemplated hereby illegal or otherwise prohibiting the
transactions contemplated by this Agreement, or which questions the validity
or the legality of the transactions contemplated hereby and which could
reasonably be expected to materially and adversely affect the value of the
business of the Company or Parent.
Section 7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND
MERGER SUB. The obligations of Parent and Merger Sub to effect the Merger and
the other transactions contemplated hereby are also subject to the
satisfaction at or prior to the Closing Date of the following conditions, any
or all of which may be waived in writing by Parent, in whole or in part, to
the extent permitted by applicable law:
(a) each of the representations and
warranties of the Company and Shareholders contained in this Agreement shall
be true and correct (except to the extent that the breach thereof shall not
constitute a Company Material Adverse Effect) as of the Closing Date as
though made on and as of the Closing Date (except to the extent such
representations and warranties specifically relate to an earlier date, in
which case such representations and warranties shall be true and correct as
of such earlier date), and Parent and Merger Sub shall have received a
certificate of the President or Chief Financial Officer of the Company and
each of the Shareholders, dated the Closing Date, to such effect;
(b) the Company and Shareholders shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
on or prior to the Closing Date, and Parent and Merger Sub shall have
received a certificate of the President or the Chief Financial Officer of the
Company and each of the Shareholders, dated the Closing Date, to that effect;
(c) since the date of this Agreement, there
shall not have been the occurrence of a Company Material Adverse Effect;
(d) Jackson Walker L.L.P. shall have
delivered to Parent its written opinion (which may be based upon certain
representations of management of the Company and Parent and others and upon
certain assumptions) as of the date that the Proxy Statement is first mailed
to Parent's stockholders substantially to the effect that (i) the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code
and (ii) Parent, Merger Sub and the Company will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, and such
opinion shall not have been withdrawn, rescinded, revoked or modified in any
material respect;
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(e) the condition set forth in the last
sentence of Section 6.4(b) above shall have been satisfied as provided
therein;
(f) The holders of shares of Parent Common
Stock and the holders of shares of Company Common Stock shall not have
exercised dissenters' or appraisal rights;
(g) Shareholders shall have executed and
delivered the Escrow Agreement and such agreement shall constitute the legal,
valid and binding obligations of the parties thereto; and
(h) The Company and Shareholders shall have
executed the Security Agreement and all related financing statements,
documents and agreements.
Section 7.4 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions
contemplated hereby are also subject to the satisfaction at or prior to the
Closing Date of the following conditions, any or all of which may be waived
in writing by the Company, in whole or in part, to the extent permitted by
applicable law:
(a) each of the representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct (except to the extent that the breach thereof shall not
constitute a Parent Material Adverse Effect) as of the Closing Date as though
made on and as of the Closing Date (except to the extent such representations
and warranties specifically relate to an earlier date, in which case such
representations and warranties shall be true and correct as of such earlier
date), and the Company shall have received a certificate of the President or
the Chief Financial Officer of each of Parent and Merger Sub, dated the
Closing Date, to such effect;
(b) Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
on or prior to the Closing Date, and the Company shall have received a
certificate of the President or the Chief Financial Officer of each of Parent
and Merger Sub, dated the Closing Date, to that effect;
(c) Since the date of this Agreement, there
shall not have occurred a Parent Material Adverse Effect;
(d) Jackson Walker L.L.P. shall have
delivered to the Company its written opinion (which may be based upon certain
representations of management of the Company and Parent and others and upon
certain assumptions) as of the date that the Proxy Statement is first mailed
to the Company's shareholders substantially to the effect that (i) the Merger
will constitute a reorganization within the meaning of section 368(a) of the
Code, (ii) Parent, Merger Sub and the Company will each be a party to that
reorganization within the meaning of section 368(b) of the Code, and (iii) no
gain or loss for U.S. federal income tax purposes will be recognized by the
holders of Company Common Stock upon receipt of shares of Parent Common Stock
in the Merger, except with respect to any cash received in lieu of a
fractional share interest in Parent Common Stock, and such opinion shall not
have been withdrawn or modified in any material respect;
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(e) The bylaws of Parent shall have been
amended, effective as of the Effective Time, in compliance with Section 6.1
of this Agreement; and
(f) The Company shall have obtained the
consent or approval of each person set forth in SECTION 3.3 OF THE COMPANY
DISCLOSURE SCHEDULE.
ARTICLE VIII.
TERMINATION
Section 8.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after approval of this Agreement by the
Company's or Parent's stockholders:
(a) by mutual written consent duly authorized
by the Boards of Directors of the Company and Parent;
(b) by Parent:
(i) upon a material breach of any
representation, warranty, covenant or agreement on the part of the
Company set forth in this Agreement, or if any representation or
warranty of the Company shall have become untrue, in either case such
that the conditions set forth in Section 7.3(a) or Section 7.3(b) of
this Agreement, as the case may be, would be incapable of being
satisfied by November 30, 2000 (the "OUTSIDE DATE"); PROVIDED, HOWEVER,
that in any case a willful material breach shall be deemed to cause
such conditions to be incapable of being satisfied for purposes of this
Section 8.1(b);
(ii) if, prior to the Effective Time,
the Board of Directors of Parent (or any committee thereof) shall have
withdrawn, or modified or changed in a manner adverse to the Company,
its approval or recommendation of the issuance of shares of Parent
Common Stock pursuant to the Merger in order to approve and permit
Parent to execute a definitive agreement providing for a Superior
Proposal; provided that (A) at least 5 business days prior to
terminating this Agreement pursuant to this Section 8.1(b)(ii) Parent
has provided the Company with written notice advising the Company that
the Board of Directors of Parent has received a Superior Proposal that
it intends to accept, specifying the material terms and conditions of
such Superior Proposal and identifying the person making such Superior
Proposal, (B) Parent shall have caused its financial and legal advisors
to negotiate in good faith with the Company to make such adjustments in
the terms and conditions of this Agreement as would enable Parent to
proceed with the transactions contemplated herein on such adjusted
terms, (C) simultaneously with any termination of this Agreement
pursuant to Section 8.1(b)(ii), Parent shall pay to the Company the
Termination Fee (as defined in Section 8.3(c)) and (D) Parent may not
terminate this Agreement pursuant to this Section 8.1(b)(ii) if Parent
is in material breach of this Agreement; or
(iii) if the Company Deliveries or
financial statements to be delivered to Parent pursuant to Section 3.5
above are not reasonably satisfactory to Parent,
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and Parent is unable to reach agreement with the Company as to any
requested changes, additions or modifications within fifteen days
following the expiration of the five-day period set forth in Section
6.16 or Section 3.5 above, respectively.
(c) by the Company:
(i) upon a material breach of any
representation, warranty, covenant or agreement on the part of Parent
or Merger Sub set forth in this Agreement, or if any representation or
warranty of Parent shall have become untrue, in either case such that
the conditions set forth in Section 7.4(a) or Section 7.4(b) of this
Agreement, as the case may be, would be incapable of being satisfied by
the Outside Date; PROVIDED, HOWEVER, that in any case, a willful breach
shall be deemed to cause such conditions to be incapable of being
satisfied for purposes of this Section 8.1(c);
(ii) if, prior to the Effective Time,
the Board of Directors of the Company (or any committee thereof) shall
have withdrawn, or modified or changed in a manner adverse to Parent,
its approval or recommendation of the Merger in order to approve and
permit the Company to execute a definitive agreement providing for a
Superior Proposal; provided that (A) at least 5 business days prior to
terminating this Agreement pursuant to this Section 8.1(c)(ii) the
Company has provided Parent with written notice advising Parent that
the Board of Directors of the Company has received a Superior Proposal
that it intends to accept, specifying the material terms and conditions
of such Superior Proposal and identifying the person making such
Superior Proposal, (B) the Company shall have caused its financial and
legal advisors to negotiate in good faith with Parent to make such
adjustments in the terms and conditions of this Agreement as would
enable Parent to proceed with the transactions contemplated herein on
such adjusted terms; (C) simultaneously with any termination of this
Agreement pursuant to this Section 8.1(c)(ii), the Company shall pay to
Parent the Termination Fee (as defined in Section 8.3(c)) and (D) the
Company may not terminate this Agreement pursuant to this Section
8.1(c)(ii) if the Company is in material breach of this Agreement; or
(iii) if the Parent Deliveries are not
reasonably satisfactory to the Company, and the Company is unable to
reach agreement with Parent as to any requested changes, additions or
modifications within fifteen days following the expiration of the
five-day period set forth in Section 6.16 above.
(d) by either Parent or the Company if the
Merger shall not have been consummated on or before the Outside Date; or
(e) by Parent if the issuance of Parent
Common Stock in connection with the Merger or the increase in the number of
authorized shares of Parent Common Stock shall fail to receive the requisite
vote for approval by the stockholders of Parent at Parent's stockholders'
meeting referred to in Section 6.4.
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The right of any party hereto to terminate this Agreement pursuant
to this Section 8.1 shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto or
any of their respective officers, directors, representatives or agents,
whether prior to or after the execution of this Agreement.
Section 8.2 EFFECT OF TERMINATION. In the event of the termination
of this Agreement pursuant to Section 8.1 hereof, this Agreement, except as
provided in Sections 8.3 and 10.14, shall forthwith become null and void and
have no effect, without any liability on the part of any party or its
directors, officers or stockholders except as set forth in Sections 8.3 and
10.14.
Section 8.3 FEES AND EXPENSES.
(a) Subject to Section 8.3(c), all Expenses
(as defined in paragraph (b) of this Section 8.3) incurred by the parties
hereto shall be (i) borne solely and entirely by the party which has incurred
such Expenses; PROVIDED, HOWEVER, that (i) the allocable share of Parent and
Merger Sub as a group and the Company for all Expenses related to printing
and mailing the Proxy Statement shall be three-fourths by Parent and
one-fourth by the Company; (ii) that Parent may, at its option, pay any
Expenses of the Company, and (iii) Parent shall pay all SEC filing fees.
(b) "EXPENSES" as used in this Agreement
shall include all out-of-pocket expenses (including, without limitation, all
fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on
its behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the preparation,
printing, filing and mailing of the Proxy Statement, the solicitation of
stockholder approvals and all other matters related to the consummation of
the transactions contemplated hereby.
(c) If Parent shall terminate this Agreement
pursuant to Section 8.1(b)(ii) or the Company shall terminate the Agreement
pursuant to Section 8.1(c)(ii), the party terminating this Agreement shall
pay to the other party (not later than five business days after such
termination of this Agreement) an amount equal to the reasonable Expenses of
such other party (the "TERMINATION FEE").
(d) Parent and the Company agree that the
agreements contained in Section 8.3(c) are an integral part of the
transactions contemplated by this Agreement and constitute liquidated damages
and not a penalty. If one party fails to promptly pay to the other any
amounts due under such Section 8.3(c), the defaulting party shall pay the
costs and expenses (including legal fees and expenses) in connection with any
action, including the filing of any lawsuit or other legal action, taken to
collect payment, together with interest on any unpaid amounts at the publicly
announced prime or base rate of THE WALL STREET JOURNAL - SOUTHWEST EDITION
from the date such amount was required to be paid.
ARTICLE IX.
INDEMNIFICATION
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Section 9.1 INDEMNIFICATION BY SHAREHOLDERS. Subject to the terms
and conditions of this Article, Shareholders jointly and severally agree to
indemnify, defend and hold Purchaser and Merger Sub and their respective
directors, officers, agents, attorneys and affiliates harmless from and
against all losses, claims, obligations, demands, assessments, penalties,
liabilities, costs, damages, attorneys' fees and expenses (collectively,
"Damages"), asserted against or incurred by such indemnitees by reason of or
resulting from a breach of any representation, warranty or covenant of the
Company or Shareholders contained herein, in any exhibit, schedule,
certificate or financial statement delivered hereunder, or in any agreement
executed in connection with the transactions contemplated hereby; provided,
however, that (i) no claim shall be made for indemnification under this
Article IX until, and such claims may be made only to the extent that, the
dollar amount of all such Damages exceed $75,000, individually or in the
aggregate (the "Basket"); (ii) indemnification for breaches of
representations and warranties contained in Article IV of this Agreement or
any covenant made by a Shareholder shall be solely from the Shareholder
breaching such Article IV or such covenant; and (iii) the liability of the
Shareholders for Damages shall not exceed $3.7 million in the aggregate,
except in the case of fraud.
Section 9.2 CONDITIONS OF INDEMNIFICATION.The obligations and
liabilities of Shareholders (the "indemnifying party") to Parent or Merger
Sub (the "party to be indemnified") under Section 9.1 with respect to claims
resulting from the assertion of liability by third parties ("Third Party
Claims") shall be subject to the following terms and conditions:
(a) Within 20 days (or such earlier time as
might be required to avoid prejudicing the indemnifying party's position)
after receipt of notice of commencement of any action evidenced by service of
process or other legal pleading, the party to be indemnified shall give the
indemnifying party written notice thereof together with a copy of such claim,
process or other legal pleading, and the indemnifying party shall have the
right to undertake the defense thereof by representatives of its own choosing
and at its own expense; provided that the party to be indemnified may
participate in the defense with counsel of its own choice, the fees and
expenses of which counsel shall be paid by the party to be indemnified unless
(i) the indemnifying party has agreed to pay such fees and expenses, (ii) the
indemnifying party has failed to assume the defense of such action or (iii)
the named parties to any such action (including any impleaded parties)
include both the indemnifying party and the party to be indemnified and the
party to be indemnified has been advised by counsel that there may be one or
more legal defenses available to it that are different from or additional to
those available to the indemnifying party (in which case, if the party to be
indemnified informs the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the party to be indemnified, it being understood,
however, that the indemnifying party shall not, in connection with any one
such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the party to be indemnified,
which firm shall be designated in writing by the party to be indemnified).
A-40
<PAGE>
(b) In the event that the indemnifying party,
by the 30th day after receipt of notice of any such claim (or, if earlier, by
the 10th day preceding the day on which an answer or other pleading must be
served in order to prevent judgment by default in favor of the person
asserting such claim), does not elect to defend against such claim, the party
to be indemnified will (upon further notice to the indemnifying party) have
the right to undertake the defense, compromise or settlement of such claim on
behalf of and for the account and risk of the indemnifying party and at the
indemnifying party's expense, subject to the right of the indemnifying party
to assume the defense of such claims at any time prior to settlement,
compromise or final determination thereof.
(c) Notwithstanding the foregoing, the
indemnifying party shall not settle any claim without the consent of the
party to be indemnified unless such settlement involves only the payment of
money and the claimant provides to the party to be indemnified a release from
all liability in respect of such claim. If the settlement of the claim
involves more than the payment of money, the indemnifying party shall not
settle the claim without the prior consent of the party to be indemnified.
(d) The party to be indemnified and the
indemnifying party will each cooperate with all reasonable requests of the
other.
ARTICLE X.
MISCELLANEOUS
Section 10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION. The representations and warranties of the Company and the
Shareholders contained herein shall survive the Closing until the earlier of:
(i) March 1, 2002; or (ii) thirty (30) days following the date of delivery to
the entire Board of Directors of Parent of a consolidated audited statement
of operations, stockholders' equity and cash flow of Parent for fiscal year
2001, ending December 31, 2001 (the "Indemnification Period"). The
indemnification obligations of the Shareholders under Section 9.1 above shall
survive the Closing until the expiration of the Indemnification Period;
provided, however, that if prior to the expiration of the Indemnification
Period the indemnifying party shall have been notified of a claim for
indemnity under Section 9.1 and such claim shall not have been finally
resolved or disposed of at the end of the Indemnification Period, then the
Indemnification Period shall be extended, for such claim only, until such
time as such claim is finally resolved or disposed of. The representations
and warranties of the Purchaser and Merger Sub contained herein shall not
survive beyond the Effective Time. This Section 10.1 shall not limit any
covenant or agreement of the parties hereto which by its terms requires
performance after the Effective Time.
Section 10.2 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; PROVIDED, HOWEVER, that
after approval of this Agreement by the stockholders of the Company or
Parent, (i) no amendment, which under applicable law may not be made without
the approval of the shareholders of the Company, may be made without such
approval, and (ii) no amendment, which under the applicable rules of the AMEX
or applicable law, may not be made without the approval of the stockholders
of Parent, may be made without such approval. This Agreement may not be
amended except by an instrument in writing signed by all parties hereto.
A-41
<PAGE>
Section 10.3 WAIVER. At any time prior to the Effective Time, either
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance by the other party with any of the agreements or covenants
contained herein. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by the party or parties to be bound
thereby. For purposes of this Section 10.3, Parent and Merger Sub shall be
deemed to be one party.
Section 10.4 ENTIRE AGREEMENT. This Agreement (together with the
Exhibits, the Company Disclosure Statement and Parent Disclosure Statement)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the
subject matter hereof.
Section 10.5 NOTICES. All notices and other communications hereunder
shall be in writing and shall be given by personal delivery, mailed by
registered or certified mail (postage prepaid, return receipt requested),
sent by a nationally recognized overnight courier service or sent by
electronic submission to the parties at the following addresses (or at such
other address for a party as is specified by like change of address):
IF TO PARENT OR MERGER SUB:
Intellicall Inc.
2155 Chenault, Suite 410
Carrollton, TX 75006-5023
Telecopy: 972-416-9454
Attention: John McDonald
WITH A COPY TO:
Richard F. Dahlson, Esq.
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, TX 75202
Telecopy: 214-953-6187
IF TO THE COMPANY:
Wireless WebConnect!, Inc.
620 Lakeview Drive
Clearwater, Florida 33756
Attention: G. T. Finn
WITH A COPY TO:
A-42
<PAGE>
Steven L. Hayes, Esq.
1015 Oneonta Drive
Los Angeles, California 90065
Telecopy: 323-255-7412
IF TO THE SHAREHOLDERS:
to the addresses set forth opposite each
Shareholder on EXHIBIT A
Notice shall be deemed received (a) on the business day following the date on
which it is deposited with a nationally recognized and reputable overnight
courier service, (b) on the date on which it is delivered personally, (c)
when sent by facsimile with confirmation of receipt received by sender, or
(d) on the third business day following the date on which it is deposited in
the U. S. mail.
Section 10.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware regardless of
the laws that might otherwise govern under principles of conflicts of laws
applicable thereto.
Section 10.7 DESCRIPTIVE HEADINGS. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
Section 10.8 PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
Section 10.9 COUNTERPARTS. This Agreement may be executed in
counterparts, by original or facsimile signatures, each of which shall be
deemed to be an original, but all of which shall constitute one and the same
agreement.
Section 10.10 CERTAIN DEFINITIONS. For the purposes of this
Agreement, the term:
(a) "affiliate" means a person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
(b) "business day" means any day other than a
day on which banks in the State of Texas are authorized or obligated to close;
(c) "knowledge" or "known" shall mean, with
respect to any matter in question, if an executive officer of the Company or
Parent, as the case may be, has actual knowledge of such matter or should
have had knowledge with the exercise of due diligence;
A-43
<PAGE>
(d) "person" means an individual,
corporation, partnership, association, trust, unincorporated organization or
other entity; and
(e) "subsidiary" or "subsidiaries" of the
Company, Parent, the Surviving Corporation or any other person, means any
corporation, partnership, joint venture or other legal entity of which the
Company, Parent, the Surviving Corporation or any such other person, as the
case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity. References herein to the shares of capital
stock of any subsidiary not organized as a corporation shall be deemed to
relate to the equity interests in such subsidiary, however denominated.
When used in this Agreement, the plural includes the singular, and
vice versa, a neuter pronoun includes the masculine and feminine, and,
whether expressly stated or not, the term "including" means including without
limitation.
Section 10.11 BINDING EFFECT, ASSIGNMENT. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
legal representatives and successors. This Agreement may not be assigned by
any party hereto.
Section 10.12 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
Section 10.13 SPECIFIC PERFORMANCE. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and
covenants hereunder, including its failure to take all actions as are
necessary on its part to the consummation of the Merger, will cause
irreparable injury to the other parties for which damages, even if available,
will not be an adequate remedy. Accordingly, each party hereby consents to
the issuance of injunctive relief by any court of competent jurisdiction to
compel performance of such party's obligations and to the granting by any
court of the remedy of specific performance of its obligations hereunder.
Section 10.14 LEGAL FEES; COSTS. If any party hereto institutes any
action or proceeding, whether before a court or arbitrator, prior to the
Effective Date, to enforce any provision of this Agreement, the prevailing
party therein shall be entitled to receive from the losing party reasonable
attorneys' fees and costs incurred in such action or proceeding, whether or
not such action or proceeding is prosecuted to judgment.
A-44
<PAGE>
Section 10.15 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
to, and not exclusive of, any rights or remedies otherwise available.
Section 10.16 SHAREHOLDER RELEASES; CONSENT. Effective as of the
Effective Date, each Shareholder (i) hereby irrevocably waives, releases, and
discharges the Company and each affiliate of the Company and its subsidiaries
from any and all liabilities and obligations to such Shareholder of any kind
or nature whatsoever, whether as a stockholder, officer, director or employee
of the Company, any of its subsidiaries or otherwise, existing as of the
Effective Time (except for those set forth in continuing employment
agreements, salary and benefits, and other ordinary course of business items
such as expense reimbursements) including without limitation liabilities or
obligations relating to rights of contribution or indemnification, in each
case whether absolute or contingent, liquidated or unliquidated, and whether
arising at law or in equity, and each Shareholder hereby agrees that he will
not seek to recover any amounts in connection therewith or thereunder from
the Company, or any of its subsidiaries, and (ii) hereby agrees that any and
all agreements to which such Shareholder is a party and which relate to
Shareholder's ownership or voting of Company Common Stock or options to
acquire Company Common Stock (other than this Agreement) or the right to
designate directors are terminated and of no further force or effect. By
executing and delivering this Agreement the Sellers irrevocably consent
pursuant to Section 394 of the FBCA to this Agreement, the Merger, and all of
the transactions contemplated by this Agreement, such consent to have the
same effect as a vote by the Shareholders at a meeting duly called and held
for the purpose of acting on proposals to approve this Agreement, the Merger,
and the other transactions contemplated by this Agreement.
A-45
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by one of its officers thereunto duly authorized,
effective as of the day and year first above written.
INTELLICALL, INC.
By: /s/ John McDonald
-------------------------------------------
Name: John McDonald
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
WWC ACQUISITION, INC.
By: /s/ John McDonald
-------------------------------------------
Name: John McDonald
---------------------------------------
Title: President
--------------------------------------
WIRELESS WEBCONNECT!, INC.
By: /s/ G.T. Finn
-------------------------------------------
Name: G.T. Finn
---------------------------------------
Title: President
--------------------------------------
/s/ G.T. Finn
-------------------------------------
G. T. Finn
/s/ Michael Campbell
-------------------------------------
Michael Campbell
/s/ Neil Byrne
-------------------------------------
Neil Byrne
/s/ Philip Jepsen
-------------------------------------
Philip Jepsen
/s/ Raylnn Finn
-------------------------------------
Raylnn Finn
/s/ Mary Campbell
-------------------------------------
Mary Campbell
A-46
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Shares of Parent
Name of Shares of Company Common Stock to be
Shareholder Address Common Stock Owned Issued in the Merger
----------- ------- ------------------ --------------------
<S> <C> <C> <C>
G. T. Finn 1733 Laurie Lane 3100 5,092,190
Belleair, FL 33756
Michael Campbell 1238 S. Missouri Ave., #116 2100 3,449,548
Clearwater, FL 33756
Neil Byrne 2635 Fillmore Street, #202 2100 3,449,548
San Francisco, CA 94115
Philip Jepsen 1121 Haley Lane 700 1,149,850
Dunedin, FL 34698-6121
Ralynn Finn 1733 Laurie Lane 1000 1,642,642
Belleair, FL 33756
Mary Campbell 1238 S. Missouri Ave., #116 1000 1,642,642
Clearwater, FL 33756
------ ----------
TOTAL 10,000 16,426,420
====== ==========
</TABLE>
AA-1
<PAGE>
Appendix B
AMENDMENT NO. 1 TO AGREEMENT
AND PLAN OF MERGER
THIS AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is
executed as of October 13, 2000, by and among Wireless WebConnect!, Inc., a
Florida corporation, (the "Company"), Intellicall, Inc., a Delaware corporation
(the "Parent"), and WWC Acquisition, Inc., a Florida corporation and
wholly-owned subsidiary of Parent ("Merger Sub").
RECITALS:
A. The Company, Parent, and Merger Sub are parties to that certain
Agreement and Plan of Merger, dated as of August 29, 2000 (the "AGREEMENT").
B. The Company, Parent, and Merger Sub desire to amend the Agreement to the
extent provided below.
C. NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and for good and valuable consideration, the adequacy, receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby agree as
follows:
AMENDMENTS
1. AMENDMENT TO SECTION 8.1(b)(i). Section 8.1(b)(i) of the Agreement shall
be amended and replaced in its entirety by the
following:
(i) upon a material breach of any representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 7.3(a) or Section
7.3(b) of this Agreement, as the case may be, would be incapable of being
satisfied by December 31, 2000 (the "OUTSIDE DATE"); PROVIDED, HOWEVER,
that in any case a willful material breach shall be deemed to cause such
conditions to be incapable of being satisfied for purposes of this Section
8.1(b);
2. AMENDMENT TO SECTION 6.1. Section 6.1 of the Agreement shall be amended
and replaced in its entirety by the following:
Section 6.1 ELECTION OF NEW PARENT DIRECTORS AND OFFICERS. Subject to
occurrence of the Merger, Parent shall take all action necessary under its
bylaws or otherwise to cause the number of members constituting the whole
Board of Directors of Parent to be eight (8) and to nominate G.T. Finn,
William O. Hunt, John McDonald, Mike Campbell, Neil Byrne and three (3)
other designees agreed to in writing by Parent
B-1
<PAGE>
and WWC to Parent's Board of Directors at the meeting of Intellicall
stockholders held with respect to the matters contained in the Proxy
Statement (defined below); provided, however, if Banco Del Gottardo
exercises its right to designate two (2) additional persons to Parent's
Board of Directors, and such persons are not agreeable to Mr. Finn, then
Mr. Finn shall have the right to designate two (2) additional persons to
Parent's Board of Directors. Such persons shall hold office until the next
annual meeting of Parent's stockholders and until their successors shall
have been elected and qualified. Subject to the occurrence of the Merger,
Parent shall take all action necessary to elect John McDonald as Chairman
and Chief Executive Officer of Parent, G.T. Finn as President of Parent and
Phil Boyd as Chief Financial Officer of Parent. On or before the Effective
Date, Parent will take all necessary steps to amend its bylaws, if
necessary, to allow twelve members of Parent's Board of Directors.
AMENDMENT TO SECTION 6.12. Section 6.12 of the Agreement shall be amended
and replaced in its entirety by the following:
Section 6.12. OPTIONS. Parent and the Company agree that effective at
the Effective Time, a pool of 1.5 million options shall be available for
grant under Parent's 1991 Stock Option Plan to the former employees of the
Company who become employees of the Parent in the Merger. Such former
employees of the Company shall receive credit for time served as an
employee of the Company with respect to the employee's eligibility to
participate in the 1991 Stock Option Plan.
MISCELLANEOUS
1. CONTINUING EFFECT. Except as modified and amended hereby, the Agreement
is and shall remain in force and effect in accordance with its terms.
2. COUNTERPARTS. This Amendment may be executed in several counterparts,
all of which are identical, each of which shall be deemed an original, and all
of which counterparts together shall constitute one and the same instrument.
3. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under principles of conflicts of laws applicable thereto.
B-2
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed on its behalf by one of its officers thereunto duly authorized,
effective as of the day and year first above written.
WIRELESS WEBCONNECT!, INC.
By: /s/ G.T. Finn
-------------------------------
Name: G.T. Finn
--------------------------
Title: President
-------------------------
INTELLICALL, INC.
By: /s/ John J. McDonald
-------------------------------
Name: John J. McDonald
--------------------------
Title: President & CEO
-------------------------
WWC ACQUISITION, INC.
By: /s/ John J. McDonald
-------------------------------
Name: John J. McDonald
--------------------------
Title: President
-------------------------
B-3
<PAGE>
Appendix C
AS AMENDED OCTOBER 2, 2000
INTELLICALL, INC.
1991 STOCK OPTION PLAN
WHEREAS, the Company previously adopted the Intellicall, Inc.
Incentive Stock Option Plan, the Intellicall, Inc. Non-Qualified Stock Option
Plan and the Intellicall, Inc. Directors' Stock Option Plan (collectively,
the "Plans"), and
WHEREAS, the Plans were previously approved by shareholders in
accordance with Rule 16b-3 promulgated under the Securities Exchange Act of
1934, and
WHEREAS, the Company previously adopted an amendment to administer
the Plans as a single Plan in compliance with Rule 16b-3; and
WHEREAS, the Company previously restated the Plans in their entirety
in a single document; and
WHEREAS, the Company now wishes to increase the total number of
Shares issuable under the plan to 9,495,000 to provide that shares are
available for the issuance of up to 6,995,000 incentive stock options,
2,000,000 nonqualified stock options and 500,000 nonemployee directors stock
options Shares available for issuance of up to 6,995,000 Incentive Stock
Options; and
WHEREAS, the Company now wishes to amend Section 5 of the Plan to
change the number and timing of Director Options for Nonemployee Directors;
1. PURPOSE. The purpose of this Plan is to strengthen
Intellicall, Inc. by providing an incentive to its key employees and
directors thereby encouraging them. to devote their abilities and industry to
the success, of the Company's business enterprise. It is intended that this
purpose be achieved by extending to any employees and directors of the
Company an added long-term incentive for high levels of performance and
unusual efforts through the grant of options to purchase shares of the
Company's common stock under the Intellicall, Inc. 1991 Stock Option plan.
2. DEFINITIONS. For purposes of the Plan:
(a) "Agreement" means the written agreement between
the Company and an Optionee evidencing the grant of an Option and setting
forth the terms and conditions thereof.
(b) "Board" means the Board of Directors of the
Company.
(c) "Cause" means (i) intentional failure to perform
reasonably assigned duties, (ii) dishonesty or willful misconduct in the
performance of an Optionee's duties, (iii) any act of (A) fraud or
intentional misrepresentation, or (B) embezzlement, misappropriation or
conversion of assets or opportunities of the Company or (iv) willful
violation of any law, rule or regulation in connection with the performance
of an Optionee's duties (other than traffic violations or similar offenses).
(d) "Change in Capitalization" means any increase or
reduction in the number of Shares, or any change (including, but not limited
to, a change in value) in the Shares or exchange of Shares for a different
number or kind of shares or other securities of the Company, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
stock dividend, stock split or reverse stock split, combination or exchange
of shares or other similar events.
1991 STOCK OPTION PLAN
C-1
<PAGE>
(e) A "Change in Control" shall be deemed to have
occurred when the first of the following events occurs:
(i) when the Company acquires actual
knowledge that any person or group (as such term are used in Sections 13(d)
and 14(d) (2) of the Exchange Act), other than an employee benefit plan
established or maintained by the Company or any of its subsidiaries or the
current largest stockholder, is or becomes the beneficial owner (as defined
under Rule l3d-3 of the Exchange Act) directly or indirectly, of securities
of the Company reporting 30 percent or more of the combined voting power of
the Company's then outstanding securities entitled generally to vote for the
election of the Company's directors; (ii) upon the approval by the Company's
stockholders of (A) a merger or consolidation of the Company with or into
another Corporation (other than a merger or consolidation in which the
Company is the surviving corporation and which does not result in any capital
reorganization or reclassification or other change in the Company's then
outstanding shares of common stock), (B) a sale or disposition of all or
substantially all of the Company's assets of (C) a plan of liquidation or
dissolution of the Company; or (iii) if, at any time, two-thirds of the
members of the Board are not "Continuing Directors." For this purpose
"Continuing Directors" shall mean the members of the Board of Directors as of
May 1, 1991, and any individual who becomes a member of the Board thereafter
if his or her election or nomination for election as a director was approved
by a vote or at least two-thirds of the Continuing Directors then in office.
(f) "Code" means the Internal Revenue Code of 1986, as
amended.
(g) "Committee" means a committee consisting of at
least two (2) Disinterested Directors appointed by the Board to administer
the Plan and to perform the functions set forth herein.
(h) "Company" means Intellicall, Inc., a Delaware
corporation.
(i) "Director Option" means an Option granted to a
Nonemployee Director pursuant to Section 5.
(j) "Disability" means a physical or mental infirmity
which impairs the Optionee's ability to perform substantially his or her
duties for a period of one hundred eighty (180) consecutive days.
(k) "Disinterested Director" means a director of the
Company who is "disinterested" within the meaning of Rule l6b-3 under the
Exchange Act.
(l) "Eligible Employee" means any officer or other key
employee of the Company or a Subsidiary designated by the Committee as
eligible to receive Options subject to the conditions set forth herein.
(m) "Employee Options" means an Option granted to an
Eligible Employee pursuant to Section 6.
(n) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
1991 STOCK OPTION PLAN
C-2
<PAGE>
(o) "Fair Market Value" on any date means the closing
price of the Shares on such date on the principal national securities
exchange on which such Shares are listed or admitted to trading, or if such
Shares are not so listed or admitted to trading, the arithmetic mean of the
per Share closing bid price and per Share closing asked price on such date as
quoted on the National Association of Securities Dealers Automated Quotation
System or such then market in which such prices are regularly quoted, or, if
there have been no published bid or asked quotations with respect to Shares
on such date, the Fair Market Value shall be the value established by the
Board in good faith and in accordance with Section 422 of the Code.
(p) "Incentive Stock Option" means an Option
satisfying the requirements of Section 422 of the Code and designated by the
Committee as an Incentive Stock Option.
(q) "Nonqualified Stock Option" means an Option which
is not an Incentive Stock Option.
(r) "Nonemployee Director" means a director of the
Company who is not an employee of the Company or any Subsidiary.
(s) "Option" means an Employee Option, a Director
Option, or either or both of them.
(t) "Optionee" means a person to whom an Option has
been granted under the Plan.
(u) "Parent" means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with respect
to the Company.
(v) "Plan" means the Intellicall, Inc. 1991 Stock
Option Plan.
(w) "Shares" means the common stock, par value $.01
per share, of the Company.
(x) "Subsidiary" means any corporation which is a
subsidiary corporation (within the meaning of Section 424(f) of the Code)
with respect to the Company.
(y) "Successor Corporation" means a corporation, or a
parent or subsidiary thereof within the meaning of section 424(a) of the
Code, which issues or assumes a stock option in a transaction to which
Section 424(a) of the Code applies.
(z) "Ten-Percent Stockholder" means an Eligible
Employee, who, at the time an Incentive Stock Option is to be granted to him
or her, owns (within the meaning of Section 422(b) (6) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company, or of a Parent or a Subsidiary.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee
which shall hold meetings at such times as may be necessary for the proper
administration of the Plan. The
1991 STOCK OPTION PLAN
C-3
<PAGE>
Committee shall keep minutes of its meetings. A quorum shall consist of not
less than two members of the Committee and a majority of a quorum may
authorize any action. Any decision or determination reduced to writing and
signed by a majority of all of the members shall be as fully effective as if
made by a majority vote at a meeting duty called and held. Each member of the
Committee shall be a Disinterested Director. No member of the Committee shall
be liable for any action, failure to act, determination or interpretation
made in good faith with respect to this Plan or any transaction hereunder,
except for liability arising from his or her own willful misfeasance, gross
negligence or reckless disregard of his or her duties. The Company hereby
agrees to indemnify each member of the Committee for all costs and expenses
and, to the extent permitted by applicable law, any liability incurred in
connection with defending against, responding to, negotiation for the
settlement of or otherwise dealing with any claim, cause of action or dispute
of any kind arising in connection with any actions in administering this Plan
or in authorizing or denying authorization to any transaction hereunder.
(b) Subject to the express terms and conditions set
forth herein, the Committee shall have the power from time to time to
determine those Eligible Employees to whom Employee Options shall be granted
under the Plan and the number of Incentive Stock Options and/or Nonqualified
Stock Options to be granted to each Eligible Employee and to prescribe the
terms and conditions (which need not be identical) of each Employee Option,
including the purchase price per Share subject to each Employee Option, and
make any amendment or modification to any Agreement consistent with the terms
of the Plan;
(c) Subject to the express terms and conditions set
forth herein, the Committee shall have the power from time to time:
(1) to construe and interpret the Plan and
the Options granted thereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not limited
to, correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the
extent it shall deem necessary or advisable to make the Plan fully effective,
and all decisions and determinations by the Committee in the exercise of this
power shall be final, binding and conclusive upon the Company, its
Subsidiaries, the Optionees and all other persons having any interest therein;
(2) to determine the duration and purposes
for leaves of absence which may be granted to an Optionee on an individual
basis without constituting a termination of employment or service for
purposes of the Plan;
(3) to exercise its discretion with respect
to the powers and rights granted to it as set forth in the Plan;
(4) generally, to exercise such powers and to
perform such acts as are deemed necessary or advisable to promote the best
interests of the Company with respect to the Plan.
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4. STOCK SUBJECT TO PROGRAM.
(a) The maximum number of Shares that may be made the
subject of Options granted under the Plan is as follows: 6,995,000 Shares with
respect to Incentive Stock Options; 2,000,000 Shares with respect to
Nonqualified Stock Options; and 500,000 Shares with respect to Director
Options (or, in each case, the number and kind of shares of stock or other
securities to which such Shares are adjusted upon a Change in Capitalization
pursuant to Section 8) and the Company shall reserve for the purposes of the
Plan, out of its authorized but unissued Shares or out of Shares held in the
Company's treasury, or partly out of each, such number of Shares as shall be
determined by the Board.
(b) Whenever any outstanding Option or portion thereof
expires, is cancelled or is otherwise terminated for any reason (other than
upon the surrender of the Option pursuant to Section 7(e) hereof), the Shares
allocable to the cancelled or otherwise terminated Option or portion thereof
may again be the subject of Options granted hereunder.
5. OPTIONS GRANT FOR NONEMPLOYEE DIRECTORS.
(a) GRANT. Each person who first becomes a Nonemployee
Director shall receive a grant of Director Options in respect of (i) 25,000
Shares on the date such Nonemployee Director first becomes a Nonemployee
Director (the "Election Date") and (ii) 12,500 Shares thereafter on the date
of the Company's Annual Meeting each year such Nonemployee Director remains a
Nonemployee Director. The purchase price therefor of each Director Option
shall be as provided in this Section 5 and such Director Options shall be
exercisable, in whole or in part, immediately upon the date of grant (the
"Grant"). Such Director Options shall be evidenced by an Agreement containing
such other terms and conditions not inconsistent with the provisions of this
Plan as determined by the Board.
(b) PURCHASE PRICE. The purchase price for Shares
under each Director Option shall be at least equal to 100% of the Fair Market
Value of a Share on the date the Director Option is granted.
(c) DURATION. Director Options shall be for a term of
ten (10) years.
(d) AMENDMENT. The provisions in this Section 5 shall
not be amended more than once every six months, other than to comport with
changes in the Code or the rules and regulations thereunder.
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6. OPTION GRANTS FOR ELIGIBLE EMPLOYEES.
(a) GRANT. Subject to the provisions of the Plan and
to Section 4 (a) above, the Committee shall have full and final authority to
select those Eligible Employees who will receive Employee Options, the terms
and conditions of which shall be set forth in an Agreement; PROVIDED,
HOWEVER, that no Eligible Employee shall receive any Incentive Stock Options
unless he is an employee of the Company, a Parent or a Subsidiary at the time
the Incentive Stock Option is granted.
(b) PURCHASE PRICE. The purchase price or the manner
in which the purchase price is to be determined for Shares under each
Employee Option shall be determined by the Committee and set forth in the
Agreement, provided that the purchase price per Share under each Employee
Option shall not be less than 100% of the Fair Market Value of a Share on the
date the Employee Option is granted (110% in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder).
(c) DURATION. Employee Options granted hereunder shall
be for such term as the Committee shall determine, provided that no Employee
Option shall be exercisable after the expiration of ten (10) years from the
date it is granted (five (5) years in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder). The Committee may, subsequent to the
granting of any Employee Option, extend the term thereof but in no event
shall the term as so extended exceed the maximum term provided for in the
preceding sentence.
(d) MODIFICATION OR SUBSTITUTION. The Committee may,
in its discretion, modify outstanding Employee Options or accept the
surrender or outstanding Employee Options (to the extent not exercised) and
grant new Options in substitution for them. Notwithstanding the foregoing, no
modification of an Employee Option shall adversely alter or impair any rights
or obligations under the Employee Option without the Optionee's consent.
7. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
(a) NON-TRANSFERABILITY. No Option granted hereunder
shall be transferable by the Optionee to whom granted otherwise than by will
or the laws of descent and distribution, and an Option may be exercised
during the lifetime of such Optionee only by the Optionee or his or her
guardian or legal representative. The terms of such Option shall be final,
binding and conclusive upon the beneficiaries, executors, administrators,
heirs and successors of the Optionee.
(b) VESTING AND METHOD OF EXERCISE.
(1) Subject to Section 7(e) hereof, each
Option shall become exercisable in the manner, including installments (which
need not be equal), and at such times as may be designated by the Committee
and set forth in the Agreement. To the extent not exercised, installment
shall accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the date the Option expires;
provided, however, that the Agreement may provide for the forfeiture of
vested and non-vested Options upon the occurrence
1991 STOCK OPTION PLAN
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of specified events. The Committee may accelerate the exercisability of any
Option or portion thereof at any time.
(2) The exercise of an Option shall be made
only by a written notice delivered in person or by mail to the Secretary of
the Company at the Company's principal executive office, specifying the
number of Shares to be purchased and accompanied by payment therefor and
otherwise in accordance with the Agreement pursuant to which the Option was
granted. The purchase price for any Shares purchased pursuant to the exercise
of an Option shall be paid in full upon such exercise, by any one or a
combination of the following: (i) cash or (ii) transferring Shares to the
Company upon such terms and conditions as determined by the Committee. The
written notice pursuant to this Section 7(b)(2) may also provide instructions
from the Optionee to the Company that upon receipt of the purchase price in
cash from the Optionee's broker or dealer, designated as such on the written
notice, in payment for any Shares purchased pursuant to the exercise of an
Option, the Company shall issue such Shares directly to the designated broker
or dealer. Any Shares transferred to the Company as payment of the purchase
price under an Option shall be valued at their Fair Market Value on the day
preceding the date of exercise of such Option. If requested by the Committee,
the Optionee shall deliver the Agreement evidencing the option to the
Secretary of the Company who shall endorse thereon a notation of such
exercise and return such Agreement to the Optionee. No fractional Shares (or
cash in lieu thereof) shall be issued upon exercise of an Option and the
number of Shares that may be purchased upon exercise shall be rounded to the
nearest number of whole Shares.
(c) RIGHTS OF OPTIONEES. No Optionee shall be deemed
for any purpose to be the owner of any Shares subject to any Option unless
and until (i) the Option shall have been exercised pursuant to the terms
thereof, (ii) the Company shall have issued and delivered the Shares to the
Optionee and (iii) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon, the Optionee
shall have fall voting, dividend and other ownership rights with respect to
such Shares.
(d) TERMINATION OF EMPLOYMENT OR SERVICE. Unless
otherwise provided in the Agreement evidencing the Option, an Option shall
terminate upon or following an Optionee's termination of employment with the
Company and its Subsidiaries or service as a director of the Company and its
Subsidiaries as follows:
(1) if an Optionee's employment or service as
a director terminates for any reason other than death, Disability or Cause,
the Optionee may at any time within three (3) months after his or her
termination of employment or service as a director, exercise an Option to the
extent, and only to the extent, that the Option or portion thereof was
exercisable on the date of termination;
(2) in the event the Optionee's employment or
service as a director terminates as a result of Disability, the optionee may
at any time within one (1) year after such termination exercise such Option
to the extent, and only to the extent, the Option or portion thereof was
exercisable at the date of such termination;
(3) if an Optionee's employment or service as
a director terminates for Cause, the Option shall terminate immediately and
no rights thereunder may be exercised;
1991 STOCK OPTION PLAN
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(4) if an Optionee dies while a director or
an employee of the Company or any Subsidiary or within three months after
termination as described in clause (1) of this Section 7(d) or within one (1)
year after termination as a result of Disability as described in clause (2)
of this Section 7(d), the Option may be exercised at any time within one (1)
year after the Optionee's death by the person or persons to whom such rights
under the Option shall pass by will or by the laws of descent and
distribution; PROVIDED, HOWEVER, that an Option may be exercised to the
extent, and only to the extent, dig the Option or portion thereof was
exercisable on the date of death or earlier termination.
Notwithstanding the foregoing, (i) in no event may any Option be
exercised by anyone after the expiration of the term of the Option and (ii) a
termination of service as a director shall not be deemed to occur so long as
the director continues to serve the Company as either a director or director
emeritus.
(e) EFFECT OF CHANGE IN CONTROL.
Notwithstanding anything contained in the Plan or
an Agreement to the contrary, in the event of a Change in Control, all
Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) Subject to Section 9, in the event of a Change in
Capitalization, the maximum number and class of Shares or other stock or
securities with respect to which Options may be granted under the Plan, the
number and class of Shares or other stock or securities which are subject to
outstanding Options granted under the Plan, and the purchase price therefor,
if applicable shall be appropriately and equitable adjusted.
(b) Any such adjustment in the Shares or other stock
or securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h) (3) of the Code and
only to the extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a change in Capitalization, an
Optionee shall be entitled to exercise an Option with respect to new,
additional or different shares of stock or securities, such new, additional
or different shares shall thereupon be subject to all of the conditions which
were applicable to the Shares subject to the Option, as the case may be,
prior to such Change in Capitalization.
9. EFFECT OF CERTAIN TRANSACTIONS.
Subject to Section 7(e), in the event of (i) the
liquidation or dissolution of the Company or (ii) a merger or consolidation
of the Company (a "Transaction"), the Plan and the Options issued hereunder
shall continue in effect in accordance with their respective terms and each
Optionee shall be entitled to receive in respect of each Share subject to any
outstanding Options, as the case may be, upon exercise of any Option, the
same number and kind of stock, securities, cash, property, or other
consideration that each holder of a Share was entitled to receive in the
Transaction in respect of a Share. In the event that, after a Transaction,
there
1991 STOCK OPTION PLAN
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occurs any change of a type described in Section 2(d) hereof with respect to
the shares of the surviving or resulting corporation, then adjustments
similar to, and subject to the same conditions as, those in Section 8 hereof
shall be made by the Committee.
10. TERMINATION AND AMENDMENT OF THE PLAN.
(a) The Plan shall terminate on the day preceding the
tenth anniversary of the date of its adoption by the Board and no Option may
be granted thereafter. The Board may sooner terminate or amend the Plan at
any time and from time to time; PROVIDED, HOWEVER, that to the extent
necessary under Section 16(b) of the Exchange Act and the rules and
regulations promulgated thereunder or other applicable law, no amendment
shall be effective unless approved by the stockholders of the Company in
accordance with applicable law and regulations at an annual or special
meeting held within twelve (12) months after the date of adoption of such
amendment.
(b) Except as provided in Sections 8 and 9 hereof,
rights and obligations under any Option granted before any amendment or
termination of the Plan shall not be adversely altered or impaired by such
amendment or termination, except with the consent of the Optionee, nor shall
any amendment or termination deprive any Optionee of any Shares which he may
have acquired through or as a result of the Plan.
11. NON-EXCLUSIVITY OF THE PLAN. The Adoption of the Plan by
the Board shall not be construed as amending, modifying or rescinding any
previously approved incentive arrangement or as creating any limitations on
the power of the Board to adopt such other incentive arrangements as it may
deem desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
12. LIMITATION OF LIABILITY. As illustrative of the limitations
of liability of the Company, but not intended to be exhaustive thereof,
nothing in the Plan shall be construed to:
(a) give any person any right to be granted an Option
other than at the sole discretion of the Committee;
(b) give any person any rights whatsoever with respect
to Shares except as specifically provided in the Plan;
(c) limit in any way the right of the Company to
terminate the employment of any person at any time; or
(d) be evidence of any agreement or understanding,
expressed or implied, that the Company will employ any person at any
particular rate of compensation or for any particular period of time.
13. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
(a) This Plan and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the laws of
the State of Texas.
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(b) The obligation of the Company to sell or deliver
Shares with respect to Optionee granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable federal
and state securities laws, and the obtaining of all such approvals by
governmental agencies as may be deemed necessary or appropriate by the
Committee.
(c) The Plan is intended to comply with Rule 16b-3
promulgated under the Exchange Act and the Committee shall interpret and
administer the provisions of the Plan or any Agreement in a manner consistent
therewith. Any provisions inconsistent with such Rule shall be inoperative
and shall not affect the validity of the Plan.
(d) The Board may make such changes as may be
necessary or appropriate to comply with the rules and regulations of any
government authority, or to obtain for Eligible Employees granted Incentive
Stock Options the tax benefits under the applicable provisions of the Code
and regulations promulgated thereunder.
(e) Each Option is subject to the requirement that, if
at any time the Committee determines, in its discretion, that the listing,
registration or qualification of Shares issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
the issuance of Shares, no Options shall be granted or payment made or Shares
issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.
(f) Notwithstanding anything contained in the Plan to
the contrary, in the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended, and is not otherwise exempt from such
registration, such Shares shall be restricted against transfer to the extent
required by the Securities Act of 1933, as amended, and rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to the Plan, as a condition precedent to receipt of such
Shares upon exercise of an Option, to represent and warrant to the Company in
writing that the Shares acquired by such individual are acquired without a
view to any distribution thereof and will not be sold or transferred other
than pursuant to an effective registration thereof under said Act or pursuant
to an exemption applicable under the Securities Act of 1933, as amended, or
the rules and regulations promulgated thereunder. The certificates evidencing
any of such Shares shall be appropriately amended to reflect their status as
restricted securities as aforesaid.
14. MISCELLANEOUS.
(a) MULTIPLE AGREEMENTS. The terms of each Option may
differ from other Options granted under the Plan at the same time, or at some
other time. The Committee may also grant more than one Option to a given
Eligible Employee during the term of the Plan, either in addition to, or in
substitution for, one or more Options previously granted to that Eligible
Employee.
1991 STOCK OPTION PLAN
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(b) WITHHOLDING OF TAXES.
(1) The Company shall have the right to
deduct from any distribution of cash to any Optionee, an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld (the "Withholding Taxes") with respect to any Option. If
an Optionee is entitled to receive Shares upon exercise of an Option, the
Optionee shall pay the Withholding Taxes to the Company prior to the
issuance, or release from escrow, of such Shares. In satisfaction of the
Withholding Taxes to the company, the Optionee may make a written election
(the "Tax Election"), which may be accepted or rejected in the discretion of
the Committee, to have withheld a portion of the Shares issuable to him or
her upon exercise of the Option having an aggregate Fair Market Value, on the
date preceding the date of exercise, equal to the Withholding Taxes, provided
that in respect of an Optionee who may be subject to liability under Section
16(b) of the Exchange Act either (i) (A) the Optionee makes the Tax Election
at least six (6) months after the date the Option was granted, (B) the Option
is exercised during the ten day period beginning on the third business day
and ending on the twelfth business day following the release for publication
of the Company's quarterly or annual statements of earnings (a "Window
Period") and (C) the Tax Election is made during the window Period in which
the Option is exercised or prior to such Window Period and subsequent to the
immediately preceding Window Period or (ii) (A) the Tax Election is made at
least six (6) months prior to the date the Option is exercised and (B) the
Tax Election is irrevocable with respect to the exercise of all Options which
are exercised prior to the expiration of six (6) months following an election
to revoke the Tax Election. Notwithstanding the foregoing, the Committee may,
by the adoption of rules or otherwise, (i) modify the provisions in the
preceding sentence or impose such other restrictions or limitations on Tax
Elections as may be necessary to ensure that the Tax Elections will be exempt
transactions under Section 16(b) of the Exchange Act, and (ii) permit Tax
Elections to be made at such other times and subject to such other conditions
as the Committee determines will constitute exempt transactions under Section
l6b of the Exchange Act.
(2) If an Optionee makes a disposition,
within the meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any Share or Shares issued to such Optionee pursuant to the
exercise of an Incentive Stock Option within the two-year period commencing
on the day after the date of the grant or within the one-year period
commencing on the day after the date of transfer of such Share or Shares to
the Optionee pursuant to such exercise, the Optionee shall, within ten (10)
days of such disposition, notify the Company thereof, by delivery of written
notice to the Company at its principal executive office, and immediately
deliver to the Company the amount of Withholding Taxes.
15. EFFECTIVE DATE. The effective date of the Plan shall be the
date of its adoption by the Board.
1991 STOCK OPTION PLAN
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Appendix D
AUDIT COMMITTEE CHARTER
The Board of Directors (the "Board") of Intellicall, Inc., a Delaware
corporation (the "Company"), approves and adopts the following Audit Committee
Charter to specify the composition, roles and responsibilities of the Audit
Committee. As used in this Charter, (i) "Company" includes the Company and its
subsidiaries unless the context otherwise requires, (ii) "AMEX" means the
American Stock Exchange (iii) "SEC" means the Securities and Exchange
Commission.
PURPOSE
The function of the Audit Committee is to assist the Board in fulfilling
its oversight responsibilities with respect to the accounting, financial
reporting and related matters described below.
COMPOSITION
The Audit Committee shall consist of not less than three members,
comprised solely of independent directors, each of whom shall not have:
- been employed by the Company or its affiliates in the current or
past three years;
- accepted any compensation from the Company or its affiliates in
excess of $60,000 during the previous fiscal year, except for board
service, retirement plan benefits or non-discretionary compensation;
- an immediate family member who is, or has been in the past three
years, employed by the Company or its affiliates as an executive
officer;
- been a partner, controlling shareholder or an executive officer of
any for-profit business to which the Company made, or from which it
received, payments, other than those which arise solely from
investments in the Company's securities, that exceed five percent of
the Company's consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the past three years; or
- been employed as an executive of another entity where any of the
Company's executives serve on such entity's compensation committee.
[AMEX Section 121(A)]
In addition, each member of the Audit Committee shall be able to read
and understand fundamental financial statements, including the Company's balance
sheet, income statement and cash flow statement, or will become able to do so
within a reasonable period of time after his or her appointment to the Audit
Committee. Moreover, at least one member of the Audit Committee shall have past
employment experience in finance or accounting, requisite professional
certification in accounting or any comparable experience or background which
results in financial sophistication, including being or having been a chief
executive officer, chief financial officer or other senior officer with
financial oversight responsibilities. [AMEX Section 121(B)(b)(i)] The
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qualifications required of Audit Committee members shall be interpreted in
conformity with Sections 121(A) and 121(B)(b) of the American Stock Exchange
Guide.
The Chairman of the Audit Committee shall be designated by the Board;
provided that if a Chairman is not designated by the Board or present at a
meeting, the Audit Committee may designate a Chairman by majority vote of the
Audit Committee members then in office.
ROLES AND RESPONSIBILITIES
RELATIONSHIP WITH THE OUTSIDE AUDITORS
The Company's outside auditors are ultimately responsible to the Board
and the Audit Committee, as representatives of the Company's shareholders. [AMEX
Section 121(B)(a)(iii)]
The Board and the Audit Committee, as the Company's shareholders
representatives, have the ultimate authority and responsibility to select,
evaluate and, where appropriate, replace the outside auditors (or to nominate
the outside auditors to be proposed for shareholder approval in any proxy
statement). [AMEX Section 121(B)(a)(ii) and (iii)] The Audit Committee also has
the authority and responsibility to evaluate and make recommendations to the
Board regarding the selection and replacement of outside auditors (or the
nomination of the outside auditors to be proposed for stockholder approval in
any proxy statement). [AMEX Section 121(B)(a)(ii) and (iii)]
The Audit Committee has the further authority and responsibility to
review the fees charged by the outside auditors, the scope of their engagement
and proposed audit approach and to recommend such review or auditing steps as
the Audit Committee may consider desirable.
The Audit Committee shall review and confirm the independence of the
outside auditors by requiring that the outside auditors submit to the Audit
Committee on a periodic basis a formal written statement delineating all
relationships between the outside auditors and its related entities and the
Company and its related entities, engaging in a dialogue with the outside
auditors with respect to any disclosed relationships or services that may impact
their objectivity and independence and taking, or recommending, that the Board
take appropriate action to oversee the independence of the outside auditors.
[AMEX Section 121(B)(a)(ii)] In addition to disclosing all relationships between
the outside auditors and its affiliates and the Company and its affiliates, the
outside auditors' formal written statement shall also contain a confirmation
that, in the outside auditors' professional judgment, it is independent of the
Company within the meaning of the federal securities laws. [AMEX Section
121(B)(a)(ii) and Independence Standards Board Standard No. 1]
Management is responsible for preparing the Company's financial
statements. The Company's outside auditors are responsible for auditing the
financial statements. The activities of the Audit Committee are in no way
designed to supersede or alter these traditional responsibilities.
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INTERNAL CONTROLS
In consultation with management and the outside auditors, the Audit
Committee shall consider the Company's significant financial risk exposures and
the steps management has taken to monitor, control and report such exposures.
The Audit Committee shall consider the extent to which internal control
recommendations made by outside auditors have been implemented by management.
The Audit Committee shall request that the outside auditors keep the
Audit Committee informed about fraud, illegal acts and deficiencies in internal
controls that come to their attention and such other matters as the outside
auditors conclude should be brought to the attention of the Audit Committee.
FINANCIAL REPORTING
GENERAL
The Audit Committee shall review with management and the outside
auditors significant accounting and reporting issues applicable to the Company,
including recent professional and regulatory pronouncements, and their impact on
the financial statements.
ANNUAL FINANCIAL STATEMENTS
The Audit Committee shall meet with management and the outside auditors
to review the annual financial statements and the results of the annual audit
prior to the release to the public of the results of operations for each fiscal
year. [SEC SK Section 306(a)(1)]
The Audit Committee shall review the annual financial statements prior
to release to the public or filing with the SEC. [SEC SK Section 306(a)(1)]
The Audit Committee shall consider management's handling of proposed
audit adjustments identified by the outside auditors.
The Audit Committee shall discuss with management and the outside
auditors any significant changes to the Company's accounting principles, the
degree of aggressiveness or conservatism of the accounting principles and
underlying estimates used in the preparation of the Company's financial
statements, and any items required to be communicated by the outside auditors in
accordance with Statement of Auditing Standards ("SAS") No. 61. [SEC SK Section
306(a)(2) and note 29 to SEC Release 34-42266]
Based on the review and discussions with management and outside auditors
contemplated by this Charter, the Audit Committee shall recommend to the Board
whether the audited annual financial statements be included in the Company's
Form 10-K Annual Report. [SEC SK Section 306(b)(4)]
INTERIM FINANCIAL STATEMENTS
The Audit Committee shall meet with management and the outside auditors
to review the interim financial statements and the results of the auditors'
review thereof prior to the release to the public of the results for each
quarter.
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The Audit Committee shall review the quarterly financial statements
prior to release to the public or filing with the SEC.
COMPLIANCE WITH LAWS AND REGULATIONS
The Audit Committee shall review the effectiveness of the system for
monitoring compliance with laws and regulations and the results of management's
investigation of and follow-up (including disciplinary action) on any fraudulent
acts or accounting irregularities.
COMPLIANCE WITH CODES OF CONDUCT
The Audit Committee shall review the program for monitoring compliance
with the codes of conduct.
OTHER RESPONSIBILITIES
The Audit Committee may meet with the outside auditors, management and
any employee seeking to meet with the Audit Committee about any matter within
its purview in separate executive sessions to discuss any matters that the
Committee or these persons believe should be discussed privately.
The Audit Committee shall review, with the Company's counsel, any legal
matters that could have a significant impact on the Company's financial
statements.
The Audit Committee shall perform other oversight functions as requested
by the Board.
CHARTER SCOPE
The Audit Committee shall review and reassess the adequacy of this
Charter at least annually. [AMEX Section 121(B)(a)]
The Audit Committee shall submit this Charter to the Board for approval,
and have the Charter published at least every three years in accordance with the
rules of the SEC from time to time in effect. [SEC Schedule 14A Item
7(e)(iv)(A)]
REPORTING RESPONSIBILITIES
The Audit Committee shall regularly update the Board about Audit
Committee activities and make appropriate recommendations.
The Audit Committee shall annually prepare a report to stockholders as
required by SEC rules for inclusion in the Company's proxy statement. [SEC SK
Section 306; SEC Schedule 14A Item 7(e)(3)]
MEETINGS
The Audit Committee shall meet at least four times annually and may meet
more frequently as circumstances dictate.
Meetings of the Audit Committee may be in person or by conference call
in accordance with the Bylaws of the Company.
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Meetings of the Audit Committee shall be held at such time and place,
and upon such notice, as the Chairman of the Audit Committee may from time to
time determine.
The Chairman of the Audit Committee shall develop the agenda for each
meeting and in doing so may consult with management and the outside auditors.
Except as specifically provided in this Charter, the provisions of the
Bylaws of the Company with respect to committees of the Board shall apply to the
Audit Committee.
AUTHORITY
The Audit Committee shall have the authority to conduct any
investigation appropriate to fulfilling its responsibilities and shall have
direct access to the outside auditors as well as anyone in the Company.
The Audit Committee shall have the ability to retain, at the Company's
expense, such special legal, accounting or other consultants or experts it deems
necessary in the performance of its duties.
The Audit Committee may from time to time delegate to its Chairman or
any of its members the responsibility for any particular matters.
D-5
<PAGE>
Proxy Card
INTELLICALL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Intellicall, Inc. (the "Company") to be held at the
Addison Conference and Theatre Centre, 15650 Addison Road, Addison, Texas
75248, on Thursday, December 14, 2000, at 10:00 a.m., Dallas time, and the
Proxy Statement in connection therewith and (2) appoints William O. Hunt and
John J. McDonald, Jr., and each of them, the undersigned's proxy with full
power of substitution for and in the name, place and steady of the
undersigned, to vote upon and act with respect to all of the shares of Common
Stock of the Company standing in the name of the undersigned, or with respect
to which the undersigned is entitled to vote and act, at the meeting and at
any adjournment thereof.
This proxy will be voted as specified on the reverse side. If no
specification is made, this proxy will be voted (i) FOR the approval of the
issuance (the "Issuance") of shares of common stock of Intellicall, par value
$.01 per share (the "Common Stock") and the issuance of options to purchase
Common Stock, pursuant to an Agreement and Plan of Merger between Intellicall,
a wholly-owned subsidiary of Intellicall and Wireless WebConnect!, Inc.; (ii)
FOR the approval of the amendment to Intellicall's certificate of
incorporation to change its name to Wireless WebConnect!, Inc. (the "Name
Change"); (iii) FOR the approval of an amendment to Intellicall's certificate
of incorporation to increase the number of authorized shares of Common Stock
to 60,000,000 (the "Increase"); (iv) FOR the approval of the amendment to
Intellicall's 1991 Stock Option Plan to increase the shares of Common Stock
authorized for issuance thereunder and to modify the terms of options issuable
to nonemployee directors (the "Plan Amendment"); (v) FOR the election of eight
members of the Board of Directors; and (vi) such other matters as may properly
come before the Meeting and any adjournments thereof.
The undersigned hereby revokes any proxy heretofore given to vote or act
with respect to the Common Stock of the Company and hereby ratifies and
confirms all that the proxies, their substitutes, or any of them may lawfully
do by virtue hereof.
If more than one of the proxies named shall be present in person or by
substitute at the meeting or at any adjournment thereof, the majority of the
proxies so present and voting, either in person or by substitute, shall
exercise all of the powers hereby given.
PLEASE DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
(CONTINUED AND TO BE DATED AND SIGNED ON THE OTHER SIDE.)
FOLD AND DETACH HERE
<PAGE>
<TABLE>
<S> <C>
Please mark
THE UNDERSIGNED DIRECTS THAT THIS PROXY BE VOTED AS FOLLOWS: your vote as
indicated in
this example X
------
1. APPROVAL OF THE ISSUANCE 2. APPROVAL OF THE NAME CHANGE
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
3. APPROVAL OF THE INCREASE 4. APPROVAL OF THE PLAN AMENDMENT
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
5. ELECTION OF DIRECTORS WILLIAM O. HUNT, G.T. FINN, MIKE CAMPBELL,
FOR all nominees WITHHOLD NEIL BYRNE, JOHN J. MCDONALD, JR., [three
listed to the right AUTHORITY nominees to be determined]
(except as marked to vote for all nominees (INSTRUCTION: To withhold authority to vote for
to the contrary) listed to this right any individual nominee, write that nominee's name
on the line provided below.)
-------------------------------------------------
6. IN THE DISCRETION OF THE PROXIES, ON ANY OTHER MATTER WHICH MAY
PROPERLY COME BEFORE THE MEETING.
Please date this proxy and sign your
name exactly as it appears hereon.
Where there is more than one owner,
each should sign. When signing as an
attorney, administrator, executor,
guardian or trustee, please add your
title as such. If executed by a
corporation, the proxy should be
signed by a duly authorized officer.
Dated: ,2000
--------------------------
-------------------------------------
Signature of Stockholder
-------------------------------------
Signature of Stockholder
PLEASE MARK, DATE, SIGN AND MAIL YOUR
PROXY PROMPTLY IN THE ENVELOPE
PROVIDED.
</TABLE>
FOLD AND DETACH HERE
