As filed with the Securities and Exchange Commission on May 30, 1996.
Registration No. 33-85998
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2
TO
REGISTRATION STATEMENT ON FORM SB-2
ON
FORM S-3
Under
THE SECURITIES ACT OF 1933
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-358527
(State of Incorporation) (I.R.S. Employer
Identification Number)
40 Elmont Road
Elmont, New York 11003
(516) 326-1940
(Address and telephone number of principal executive offices)
Shelly Finkel
Chairman of the Board
Global Telecommunication Solutions, Inc.
40 Elmont Road
Elmont, New York 11003
(516) 326-1940
(Name, address and telephone number of agent for service)
Copies to:
David Alan Miller, Esq.
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
(212) 818-8800
(212) 818-8881 - Telecopy
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: |X|
ii
<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
---------------------------
CROSS REFERENCE SHEET
---------------------------
Form S-3
Item Number and Heading Caption or Location in
Prospectus
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus Inside Front Cover Page
3. Summary Information and Risk Factors Prospectus Summary;
Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page;
Selling Stockholders and
Plan of Distribution
6. Dilution Not Applicable
7. Selling Security Holders Selling Stockholders and
Plan of Distibution
8. Plan of Distribution Outside Front Cover Page;
Selling Stockholders and
Plan of Distribution
9. Description of Securities to be Registered Not Applicable
10.Interest of Named Experts and Counsel Experts
11.Material Changes Prospectus Summary
12.Incorporation of Certain
Information by Reference Incorporation of Certain
Documents by Reference
13.Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities Not Applicable
iii
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 30, 1996
PROSPECTUS
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
3,241,678 Shares of Common Stock and
383,000 Redeemable Common Stock Purchase Warrants
This Prospectus relates to the issuance by Global Telecommunication
Solutions, Inc. ("Company") of up to 2,941,678 shares of Common Stock, par value
$.01 per share, upon the exercise of outstanding Redeemable Common Stock
Purchase Warrants ("Warrants"). Each Warrant entitles the holder thereof to
purchase one share of Common Stock for $4.00, subject to adjustment in certain
circumstances, at any time through and including December 14, 1999. The Warrants
are redeemable by the Company, with the consent of Whale Securities Co., L.P.,
the underwriter ("Whale" or "Underwriter") of its initial public offering
("IPO") consummated in December 1994, upon notice of not less than 30 days, at a
price of $.10 per Warrant, provided the closing bid quotation of the Common
Stock on all 20 trading days ending on the third day prior to the day on which
the Company gives notice has been at least 187.5% of the then effective exercise
price of the Warrants (currently $7.50, subject to adjustment). See "Description
of Securities."
This Prospectus also relates to the offer and sale by (i) Mr. Norton
Herrick ("Herrick") of up to 233,000 of the aforementioned Warrants ("Herrick's
Warrants") and (ii) the Underwriter and its designees of up to 150,000 shares of
Common Stock ("Underwriter's Stock") and/or 150,000 Warrants ("Underwriter's
Warrants") issuable to the Underwriter and its designees upon exercise of a
certain option ("Underwriter's Option") granted to the Underwriter in connection
with the IPO. The Underwriter's Option is exercisable at any time through
December 14, 1999 to purchase each share of Common Stock for $8.05 and/or each
Underwriter's Warrant for $.161. Herrick and the Underwriter and its designees
will be referred to herein as the "Selling Securityholders" and Herrick's
Warrants, the Underwriter's Stock and the Underwriter's Warrants will be
collectively referred to herein as the "Selling Securityholders' Securities."
This Prospectus also relates to the issuance by the Company of up to
150,000 shares of Common Stock upon the exercise of the Underwriter's Warrants.
The Company will not derive any proceeds from the sale by the Selling
Securityholders of any of the Selling Securityholders' Securities. See "Selling
Securityholders." The Company will derive net proceeds of approximately
$11,700,000 upon exercise of all of the Warrants, including Herrick's Warrants
and the Underwriter's Warrants, after payment of costs of this offering
($50,000) and the 5% warrant solicitation fee payable to the Underwriter
($618,336, assuming that such fee is payable with respect to all such Warrants).
Additionally, the Company will receive $1,231,650 upon exercise, in full, of the
Underwriter's Option. All proceeds derived by the Company will be used for
working capital and general corporate purposes.
The principal market for trading of the Common Stock and the Warrants
is the Nasdaq SmallCap Market under the symbols GTST and GTSTW, respectively. On
May 23, 1996, the last sale price for the Common Stock was $6-1/8 and for the
Warrants was $2-13/16 as reported by the Nasdaq SmallCap Market.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ___________, 1996.
<PAGE>
No person is authorized in connection with any offering made hereby to give any
information or to make any representation not contained in this Prospectus, and
if given or made, such information or representation must not be relied upon as
having been authorized by the Company. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than the
Common Stock offered hereby, nor does it constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
<TABLE>
TABLE OF CONTENTS
Page
<S> <C>
TABLE OF CONTENTS......................................................................................................... 2
AVAILABLE INFORMATION..................................................................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................................................................... 3
PROSPECTUS SUMMARY........................................................................................................ 4
RISK FACTORS.............................................................................................................. 8
USE OF PROCEEDS........................................................................................................... 15
SELLING SECURITYHOLDERS................................................................................................... 15
PLAN OF DISTRIBUTION...................................................................................................... 16
LEGAL MATTERS............................................................................................................. 17
EXPERTS ................................................................................................................. 17
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed with the Commission may be
inspected and copied at the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at 500 West Madison Street, Chicago, Illinois 60661, and
Seven World Trade Center, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at prescribed
rates by writing to the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Common Stock and Warrants are listed on The Boston Stock Exchange and
information concerning the Company can be inspected and copied at The Boston
Stock Exchange, Inc., One Boston Place, Boston, Massachusetts 02108.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 filed by the Company with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), as Post-Effective Amendment No. 2 to the
Company's Registration Statement on Form SB-2 (No.33-85998) (herein, together
with all amendments and exhibits, referred to as the "Registration Statement").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and its Common Stock and Warrants, reference is hereby
made to the Registration Statement. Statements contained herein concerning the
provisions of any document are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which are on file with the Commission
(Exchange Act File No. 1-13478) are incorporated in this Prospectus by reference
and made a part hereof:
(a) Annual Report on Form 10-KSB of the Company for the year ended December
31, 1995;
(b) Current Report of the Company on Form 8-K for merger filed on March 15,
1996, and amendment thereto on Form 8-K/A, filed on May 10, 1996; and
(c) Quarterly Report on Form 10-QSB of the Company for the three months
ended March 31, 1996.
The Company's Registration Statement on Form 8-A (which contains
descriptions of the Company's Common Stock and Warrants), which was declared
effective by the Securities and Exchange Commission on December 14, 1994, is
also incorporated in this Prospectus by reference and made a part hereof.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this Offering shall be deemed to be
incorporated by reference in this Prospectus and shall be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated by reference in this Prospectus and filed with the Commission prior
to the date of this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein, or
in any other subsequently filed document which is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Written or telephone requests
should be directed to the Company at 40 Elmont Road, Elmont, New York 11003,
Attention: Investor Relations (telephone number: (516) 326-1940).
3
<PAGE>
PROSPECTUS SUMMARY
The information set forth below is qualified in its entirety by the
information set forth in those documents incorporated herein by reference.
The Company
General
Global Telecommunication Solutions, Inc. ("Company" or "GTS") designs,
develops and markets prepaid phone cards featuring licensed, promotional and
standard graphics. The Company markets its prepaid phone cards as a convenient
alternative to credit calling cards and conventional coin or collect long
distance calls. The Company also provides card user access to long distance
service through its switching facilities and long distance network arrangements.
The Company's phone cards are designed to promote a high level of consumer
awareness and appeal by combining creative graphic designs and widely-recognized
concepts, characters and/or images with long distance service features and
ancillary advertising and promotional benefits, such as broadcast messaging,
voice mail, foreign language instruction, customized information and
advertising, celebrity and character voices and customized greetings.
Recent Events
Acquisition of Global Link
The Company acquired Global Link Teleco Corporation ("Global Link") by
merging (the "Merger") the Company's wholly-owned subsidiary, Link Acquisition
Corp., with and into Global Link, with Global Link surviving the Merger as a
wholly-owned subsidiary of the Company. The Merger was effective March 1, 1996.
Global Link is engaged in the marketing and selling of prepaid phone cards
through its retail phone centers in the New York City metropolitan area and in
South Miami Beach, Florida, and a diverse wholesale distribution network.
Global Link markets its prepaid phone cards through various wholesale
distributors and retailers, including supermarkets, convenience stores, travel
agents and tour wholesalers, to consumers seeking economical and convenient long
distance services and to international travelers for use in the United States
and abroad. Global Link also markets its prepaid phone cards to corporations
seeking phone cards for promotional use, internal use or sale to the
corporations' customers.
Global Link's retail phone centers are brightly lit environments
located in urban shopping areas having a high volume of pedestrian traffic. Each
retail phone center has a street level store front offering high and easy
accessibility. These retail phone centers provide two primary functions: (i) to
sell Global Link's phone cards and (ii) to enable the customers to place
telephone calls and pay for those calls with the phone card. Other services,
including money transfers, mailbox rentals, photocopying, may also be provided
at some of Global Link's retail phone centers. Such other services, however, do
not and are not expected to constitute a material part of the retail phone
centers' business. Global Link currently operates 12 retail phone centers in
Brooklyn and Queens, New York and South Miami Beach, Florida.
The following pro forma combined statement of operations
(unaudited) combines on a purchase basis of accounting, the statements of
operations of the Company and Global Link for the three months ended March 31,
1996. The pro forma statement of operations gives effect to the acquisition of
Global Link as if it occurred at the beginning of the year.
The pro forma combined statement of operations is not necessarily
indicative of future operating results and should not be used as a forecast of
future operations. This pro forma combined financial statement should be read in
conjunction with the notes to the pro forma combined financial statements and
the historical financial statements of both companies.
<TABLE>
Global
Telecommunication Global Link Pro Forma
Solutions, Inc. Teleco Corp. Adjustments Pro Forma
<S> <C> <C> <C> <C>
Net sales........................... $ 594,862 $2,095,878 -- $2,690,740
Cost of sales....................... (570,208) (1,368,753) -- (1,938,961)
Gross profit............... 24,654 727,125 -- 751,779
Operating expenses.................. 990,400 1,514,684 225,643(a) 2,730,727
Operating loss...................... (965,746) (787,559) (225,643) (1,978,948)
Other income (expense):
Interest income................... 19,581 255 -- 19,836
Interest expense.................. -- (136,702) 94,597(b) (42,105)
Other............................. -- 4,200 -- 4,200
Loss before income taxes... (946,165) (919,806) (131,046) 1,997,017
Provision for income taxes.......... -- -- -- --
Net loss for period........ (946,165) (919,806) (131,046) 1,997,017
Net loss per share.................. $(.41)
Weighted average common shares
outstanding....................... $4,912,801(c)
_________________________________
<FN>
(1) Basis of Presentation
The acquisition of Global Link is accounted for as a purchase and, in accordance with
generally accepted accounting principles, the purchase price is allocated to the assets and
liabilities of Global Link based on their fair values at the date of acquisition.
(2) Pro Forma Adjustments and Assumptions
The pro forma combined financial statements of the Company and Global Link give effect to
the following pro forma adjustments and assumptions:
(a) To record the amortization of goodwill on a straight-line basis over 15 years and to
eliminate amortization of the predecessor's goodwill.
(b) To eliminate interest expense on amounts due to Peoples which were adjusted as a
result of an agreement pursuant to which Peoples accepted $1,060,000 ($550,000 of
which was paid on the merger date and $500,000 plus interest at the rate of 8% per
annum, which is payable on June 28, 1996) and 52,805 shares of the Company's Common Stock
in full satisfaction of all amounts due Peoples other than $954,630
of accounts payable.
(c) Represents the weighted average common shares outstanding during 1995, plus
1,771,123 shares of the Company's Common Stock issued in connection with the
merger.
</FN>
</TABLE>
Private Placement
In May 1996, the Company consummated a private placement ("May 1996
Private Placement") from which the Company derived gross proceeds of $3,000,000
through the sale of 30 Units, each consisting of 20,000 shares of Common Stock
and 40,000 common stock purchase warrants ("Warrants"). The Warrants are
identical to the publicly-traded Warrants of the Company listed on the Nasdaq
SmallCap Market under the symbol "GTSTW" and on the Boston Stock Exchange under
the symbol "GTLW." The
4
<PAGE>
Company has agreed, however, that, notwithstanding the terms of its
publicly-traded Warrants, the Warrants sold in the May 1996 Private Placement
are not redeemable by the Company until (i) registered for public sale under the
Act and (ii) transferred by the original purchasers thereof. It is anticipatd
that the proceeds of the May 1996 Private Placement will be used for working
capital and general corporate purposes.
Whale served as the placement agent in connection with the May 1996
Private Placement and received a commission equal to 10% of the gross proceeds
from the sale of the Units (except that there was no commission paid with
respect to 2-1/2 Units sold to certain purchasers) and a $15,000 nonaccountable
expense allowance. Whale also received warrants ("Placement Agent Warrants") to
purchase three Units, exercisable for a period of five years at a price of
$100,000 per Unit.
The Company has agreed to prepare and file with the Securities and
Exchange Commission, no later than June 30, 1996, and to use its best efforts to
cause to become effective, by September 30, 1996, a registration statement
covering the shares of Common Stock and Warrants and the shares of Common Stock
underlying such Warrants sold in the May 1996 Private Placement (collectively,
the "Registrable Securities"). Once such registration is effective, the Company
also has agreed to use its best efforts to maintain the effectiveness of the
registration statement until the earlier of (i) the date that all of the
Registrable Securities have been publicly sold, or (ii) the date that the
holders thereof may freely trade the Registrable Securities without registration
under the Act, under Rule 144(k) or otherwise. The Company shall bear all fees
and expenses incurred in the preparation and filing of the registration
statement.
Market Overview
The markets for prepaid phone cards have grown in recent years.
Advances in long distance telephone services, coupled with the convenience and
features of prepaid phone cards, have resulted in demand for and increasing use
of phone cards for various business and personal reasons. The number of prepaid
phone cards sold as collectors' items in worldwide markets has also increased
and prepaid phone cards have become popular with large corporations for internal
use and in connection with marketing, advertising and promotional activities.
Although the markets for prepaid phone cards in Europe and Japan have matured,
markets in the United States are emerging and are largely undeveloped. According
to industry sources, domestic prepaid phone card sales were approximately $75
million in 1993 and grew to approximately $500 million in 1995.
5
<PAGE>
Two types of prepaid phone card technologies are currently used in the
United States. Most domestic prepaid phone cards, including the Company's cards,
utilize a remote memory technology, which permits users to place domestic and
international calls from any touch-tone phone by calling a toll-free 800 number
and entering a PIN number printed on the back of the card. By contrast, "smart"
card technology utilizes computer chips, magnetic strips or optical readers
incorporated into the cards which must be swiped or inserted through a
specially-designed device incorporated into the telephone. Smart card technology
requires the replacement of standard telephones with telephones that have
mechanisms capable of reading such cards. Smart card technology is currently in
widespread commercial use in Europe and Japan and has been introduced in the
United States on a limited basis. The Company plans to incorporate smart card
technology into its phone cards if and when performance issues make it a viable
alternative to remote memory technology.
Strategy
The Company is pursuing a growth strategy to capitalize on its early
entrance into the emerging and expanding markets for prepaid phone cards in the
United States and Canada, and on the marketability of the licensed concepts
featured on many of the Company's cards. Significant components of the Company's
strategy include: (i) increasing demand for phone cards by expanding retail
distribution to enhance market penetration and utilizing popular concepts,
images and graphics licensed to the Company on its prepaid phone cards to
heighten consumer interest; (ii) encouraging corporations to use the Company's
phone cards for internal use and in connection with their marketing, advertising
and promotional activities; (iii) expanding the Company's international network
of distributors to market the Company's phone cards overseas; (iv) creating and
marketing interactive applications which can be accessed by using the Company's
phone cards; (v) pursuing the acquisition of companies that fit within the
Company's business strategy and which can, through economies of scale, improve
the Company's operating margins; and (vi) maintaining the Company's retail phone
center operations. The Company also intends to continue development of
multi-functional debit card applications for entities such as colleges, sporting
arenas and theme parks which can be used by consumers to make small item
purchases offered at and sold by such entities, as well as for placing long
distance telephone calls. The Company seeks to develop the components of its
strategy both internally and, where appropriate, through joint venture
arrangements. There can be no assurance that the Company's strategy will be
successful.
Corporate Background
GTS and Global Link were incorporated under the laws of the State of
Delaware in December 1992 and March 1994, respectively. The Company's principal
executive offices are located at 40 Elmont Road, Elmont, New York 11003 and its
telephone number is (516) 326-1940. Global Link's offices are located at 5697
Rising Sun Avenue, Philadelphia, Pennsylvania 19120 and its telephone number is
(215) 342- 7700.
The Offering
Securities offered by the Company........... 3,091,678 shares of Common Stock(1)
Securities offered by
Selling Securityholders..................... 383,000 Warrants
150,000 shares of Common Stock
Risk Factors............................... An investment in the securities
offered hereby involves a high
degree of risk. See "Risk
Factors."
6
<PAGE>
Nasdaq SmallCap Market Symbols................ Common Stock: GTST
Warrants: GTSTW
Boston Stock Exchange Symbols................. Common Stock: GTL
Warrants: GTLW
Use of Proceeds............................... The Company will derive net
proceeds of approximately
$11,700,000 upon exercise of all
of the Warrants, including
Herrick's Warrants and
the Underwriter's Warrants, and
$1,231,650 upon exercise of the
Underwriter's Option. The
Company intends to use any such
proceeds for working capital
and general corporate purposes.
The Company will not derive any
proceeds from the sale by the
Selling Securityholders of any
of the Selling Securityholders'
Securities. See "Use of
Proceeds."
(1) Represents shares issuable upon exercise of the outstanding Warrants,
including Herrick's Warrants, and the shares issuable upon exercise of the
Underwriter's Warrants. See "Selling Securityholders."
Outstanding Securities
Common Stock. As of May 23, 1996, there were 5,512,801shares of Common
Stock outstanding. Upon the completion of this offering, assuming the exercise
of the Underwriter's Option and all of the Warrants, but without giving effect
to the exercise of other outstanding warrants and options, there will be
9,954,479 shares of Common Stock outstanding.
Warrants. As of May 23, 1996, there were outstanding 4,141,678
Warrants, each of which entitles the holder thereof to purchase one share of
Common Stock for $4.00 through December 14, 1999. Additionally, the Company may
issue up to 150,000 Warrants upon exercise of the Underwriter's Option. The
Company may call the Warrants for redemption, with the consent of the
Underwriter, at $.10 per Warrant in whole or in part at any time prior to
expiration upon not less than 30 days' prior written notice, if the closing bid
quotation of the Common Stock, as quoted by the Nasdaq SmallCap Market, on all
20 trading days ending on the third day prior to the day on which the Company
gives notice, has been at least 187.5% of the then effective exercise price of
the Warrants (currently $7.50, subject to adjustment).
7
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk. Each prospective investor should carefully consider the following risk
factors before making an investment decision.
Limited Operating History and Revenues; Significant and Continuing Losses;
Accumulated and Working Capital Deficits. The Company was organized in December
1992 and Global Link was incorporated in March 1994. Accordingly, the Company
has a limited operating history upon which an evaluation of its future
performance and prospects can be made. The Company's prospects must be
considered in light of the risks, expenses, delays, problems and difficulties
frequently encountered in the establishment of a new business in an emerging and
evolving industry characterized by intense competition. Since inception, the
Company has generated limited revenues and has incurred significant losses,
including losses of $1,946,526 and $2,970,121, respectively, for the years ended
December 31, 1994 and 1995 and Global Link has generated only limited revenues
and has incurred significant losses since its inception, including losses of
$548,340 and $4,563,401 for the years ended December 31, 1994 and 1995. Assuming
the Company's acquisition of Global Link occured on January 1, 1995, on an
unaudited combined pro forma basis, giving effect to the financial results of
Global Link, the Company would have incurred a net loss of $7,765,915 for the
year ended December 31, 1995. For the three months ended March 31, 1996,
assuming that the acquisition occurred on January 1, 1996, on an
unaudited combined pro forma basis, the Company would have incurred a net
loss of $1,997,000. Inasmuch as the Company will continue to have a high level
of operating expenses and will be required to make significant up-front
expenditures in connection with its continuing expansion (including salaries of
executive, creative, sales, marketing and other personnel), the Company
anticipates that losses will continue until such time, if ever, as the Company
is able to generate sufficient revenues to finance its operations and the costs
of continuing expansion. There can be no assurance that the Company will
be able to generate significant revenues or achieve profitable operations.
Moreover, as of March 31, 1996, the Company had an accumulated deficit of
$6,674,053 and a working capital deficit of $5,919,880.
Recent Acquisition of Global Link. The Company only recently acquired
Global Link and has not fully integrated Global Link's operations into the
Company's operations. Although the Company anticipates that its acquisition of
Global Link will improve economies of scale, the Company will be required to
expend a significant amount of time and resources to integrate such operations.
In addition, as a result of the Merger, the Company significantly increased the
size and scope of its operations. Management has no experience in managing an
entity with operations as diverse and expansive as the Company's. There can be
no assurance that the Company will be able to successfully integrate Global
Link's operations into the Company's operations or for the Company to achieve
increased economies of scale.
Significant Outstanding Indebtedness; Security Interests. In connection
with the acquisition of Global Link, the Company assumed significant
indebtedness of Global Link, including $2,800,000 aggregate principal amount of
certain outstanding debentures of Global Link ("Debentures"), payments due from
Global Link to Peoples Telephone Company, Inc. ("Peoples") of $1,050,000,
approximately $955,000 of other indebtedness owed to Peoples, Global Link's
accounts payable and accrued expenses which aggregated $3,478,000 at March 31,
1996, and Global Link's deferred revenues of $2,125,000 at March 31, 1996. Such
indebtedness and deferred revenue is in addition to the approximately $2,330,000
of accounts payable and accrued expenses and deferred revenues of $3,313,000 of
the Company as of March 31, 1996. The Debentures are secured by a lien on
substantially all of the assets of Global Link. In the event of a violation or
other default by Global Link of its obligations under the Debentures or the
securities purchase agreement relating to such Debentures, the holders of the
Debentures could declare the Debentures to be due and payable and, in certain
cases, foreclose on Global Link's assets. Moreover, to the extent that Global
Link's assets continue to secure the Debentures, such assets will not be
available to secure additional indebtedness, which may adversely affect the
Company's ability to borrow in the future.
New Industry; Uncertainty of Market Acceptance. The prepaid phone card
industry is an emerging business characterized by an increasing and substantial
number of new market entrants who have introduced or are developing an array of
new products and services. Each of these entrants is
8
<PAGE>
seeking to position its products and services as the preferred method for
accessing long distance telephone services, including providing enhanced service
features and ancillary advertising and promotional benefits. As is typically the
case in an emerging industry, demand and market acceptance for newly introduced
products and services are subject to a high level of uncertainty. The Company
has limited marketing experience and limited financial, personnel and other
resources to undertake extensive marketing activities. The Company's success
depends in large part on its ability to attract large corporations to advertise
and promote their products and services using the Company's prepaid phone cards,
and also will be dependent on the level of acceptance and usage by consumers.
Because demand by large corporations, advertisers and marketers, retailers and
consumers may be interrelated, any lack or lessening of demand by any one of
these could adversely affect market acceptance for the Company's products and
services. In light of the relatively small, undeveloped and emerging markets for
prepaid phone cards, there can be no assurance that substantial markets will
develop for prepaid phone cards or that the Company will be able to meet its
current marketing objectives, succeed in positioning its cards and services as a
preferred method for accessing long distance telephone service or achieve
significant market acceptance for its products.
Risks Associated with Marketing Strategy and Rapid Expansion. Although
the Company is pursuing a strategy of growth and seeks to expand its
distribution capabilities to achieve greater penetration in new and emerging
markets, the Company has achieved only limited growth to date. The success of
the Company's expansion is dependent on, among other things, the Company's
ability to establish additional distribution arrangements targeting several
market segments, including retail, promotional and corporate markets; hire and
retain skilled management, financial, marketing, creative and other personnel;
and successfully manage growth (including monitoring operations, controlling
costs and maintaining effective quality, inventory and service controls). The
Company is substantially dependent on the efforts of its distributors' marketing
efforts and the popularity and sales of their products. Although the Company
believes its marketing and distribution relationships are satisfactory, these
arrangements are generally not embodied in written agreements having specific
terms and can be terminated at any time. The Company also may seek to expand its
operations through the possible acquisition of companies in businesses which the
Company believes are compatible with its business. There can be no assurance
that the Company will be able to successfully implement its business strategy or
otherwise expand its operations, or that the Company will ultimately effect any
acquisition or successfully integrate into its operations any business which it
may acquire.
Possible Need for Additional Financing. The Company has been and will
be dependent on the proceeds of its IPO and the May 1996 Private Placement to
implement its plan of expansion and to finance its working capital requirements.
The Company anticipates, based on currently proposed plans and assumptions
relating to its operations (including the costs associated with its proposed
expansion), that the proceeds of the May 1996 Private Placement, together with
projected cash flow from operations, will be sufficient to satisfy its
anticipated cash requirements during 1996. In the event that the Company's plans
change or its assumptions change or prove to be inaccurate or if cash flow
proves to be insufficient to fund the Company's operations after 1996 (due to
unanticipated expenses, delays, problems, difficulties or otherwise), the
Company would be required to seek additional financing or curtail its expansion
activities. The Company may determine, depending upon the opportunities
available to it, to seek additional debt or equity financing to fund the cost of
continuing expansion. To the extent that the Company finances an acquisition
with a combination of cash and equity securities, any such issuance of equity
securities would result in dilution to the interests of the Company's
stockholders. Additionally, to the extent that the Company incurs indebtedness
or issues debt securities in connection with any acquisition, the Company will
be subject to risks associated with incurring substantial indebtedness,
including the risks that interest rates may fluctuate and cash flow may be
insufficient to pay principal and interest on any such indebtedness. The Company
has no current arrangements with respect to, or sources of, additional
financing, and it is not anticipated that existing stockholders will provide any
portion of the Company's future financing requirements. There can be no
assurance that the Company will achieve cash flow from operations sufficient to
satisfy its working capital requirements, or at all, or that additional
financing will be available to the Company on commercially reasonable terms, or
at all.
9
<PAGE>
Dependence on Third-Party License Arrangements; Certain License
Limitations; NonRecurring Revenues. To date, a substantial portion of the
Company's revenues have been derived from sales of prepaid phone cards featuring
the graphics of a limited number of licensors pursuant to short-term,
non-exclusive license agreements, a decline in the sale of which would have a
material adverse effect on the Company. Sales of phone cards featuring licensed
graphics accounted for approximately 46.7% and 37.3%, respectively, of the
Company's revenues for the years ended December 31, 1994 and 1995. Sales of
cards featuring graphics licensed from Marvel Entertainment Group, Inc.
accounted for approximately 19% of the Company's revenues for the year ended
December 31, 1995. These license agreements generally require the Company to
make advance payments and pay guaranteed minimum royalties. Failure by the
Company to satisfy its obligations under license agreements may result in
modification of the terms, or termination, of the relevant agreement, which
could have a material adverse effect on the Company. The Company's success may
depend upon its licensors' ability to maintain the marketability and consumer
recognition of names, images, likenesses, characters, logos and emblems, and on
the Company's ability to identify and obtain additional licenses for currently
popular graphics upon termination of existing licenses or in the absence of
continuing sales under existing licenses. There can be no assurance that the
Company will have the ability to satisfy all of its obligations under the
license agreements, that any such license agreements will be renewed or result
in profitable operations or that the Company will be able to obtain additional
license agreements on favorable terms. In addition, for the years ended December
31, 1994 and 1995, approximately 10.2% and 25.2%, respectively, of the Company's
revenues were derived from sales of promotional cards to a limited number of
customers, all of which sales are non-recurring in nature. There can be no
assurance that the Company will not remain largely dependent on non-recurring
sales of promotional cards to a limited customer base for a significant portion
of its revenues.
Intense Competition. The Company faces intense competition in the
marketing and sale of its products and services. The Company's prepaid phone
cards and long distance services compete for consumer recognition with other
prepaid phone cards, credit calling cards and long distance telephone services
which have achieved significant international, national and regional consumer
loyalty. Many of these products and services are marketed by companies which are
well-established, have reputations for success in the development and sale of
products and services and have significantly greater financial, marketing,
distribution, personnel and other resources than the Company, thereby permitting
such companies to implement extensive advertising and promotional campaigns,
both generally and in response to efforts by additional competitors to enter
into new markets and introduce new products and services. Certain of these
competitors, including American Telephone & Telegraph Company ("AT&T"), MCI
Telecommunications Corporation ("MCI") and Sprint Corporation ("Sprint"),
dominate the telecommunications industry and have the financial resources to
enable them to withstand substantial price competition, which is expected to
increase significantly. These and other large telephone companies, as well as
retailers and companies engaged in the marketing of collectibles, have also
entered or have announced their intention to enter into the prepaid phone card
segment of the industry. In addition, because the prepaid phone card segment of
the industry has no substantial barriers to entry, competition from smaller
competitors in the Company's target markets is also expected to continue to
increase significantly. Since most of the Company's licenses are non-exclusive
and certain of its licenses are limited in scope, the Company's licensors may
also license the same or other graphics to the Company's competitors, which
could adversely affect the marketability of the Company's licensed graphic
cards. Moreover, to the extent that the Company's cards are marketed as
promotional or collectors' items, such cards will also compete with other
products produced as promotional giveaways and sold as collectibles. There can
be no assurance that the Company will be able to compete successfully in its
markets.
Consumer Preferences and Industry Trends; Possible Technological and
Product Obsolescence. The telecommunications industry is characterized by
frequent introduction of new products and services, and is subject to changing
consumer preferences and industry trends, which may adversely affect the
Company's ability to plan for future design, development and marketing of its
products and services. Additionally, the Company's current licensing
arrangements consist principally of comic book characters and sports-related
images, which are subject to relatively frequent and rapid changes in consumer
tastes and preferences. The markets for the telecommunications products and
services are also
10
<PAGE>
characterized by rapidly changing technology and evolving industry standards,
often resulting in product obsolescence or short product life cycles. The
proliferation of new telecommunications technologies, including personal
communication services, cellular telephone products and services and prepaid
phone cards employing alternative technologies, may reduce demand for prepaid
phone cards generally as well as for phone cards employing the Company's remote
memory technology. NYNEX Corporation, a leading regional telephone company, has
installed telephone equipment in New York City employing "smart" card
technology. Such technology could be perceived as a more convenient method of
accessing long distance service than remote memory technology. The proliferation
and widespread commercial use of telephone equipment employing such technology
could materially adversely affect demand for the Company's prepaid phone cards.
The Company's success will depend on the Company's ability to anticipate and
respond to these and other factors affecting the industry, including new
products and services which may be introduced. There can be no assurance that
the Company will be able to anticipate and respond to changing consumer
preferences and industry trends or that competitors will not develop and
commercialize new technologies or products that render the Company's products
and services obsolete or less marketable.
Dependence on Third-Party Long Distance Carriers; Possible Service
Interruptions and Equipment Failures; Unauthorized Access to Services. The
Company is currently dependent on a limited number of domestic and international
long distance carriers to provide access to long distance telephone service on a
cost-effective basis. The Company has entered into interconnect agreements or
arrangements with long distance carriers, pursuant to which the Company leases
phone lines and transmission facilities necessary to transmit consumer calls.
Although the Company believes that it currently has sufficient access to
transmission facilities and long distance networks on favorable terms and
believes that its relationships with its carriers are satisfactory, any increase
in the rates charged by carriers would materially adversely affect the Company's
operating margins. Failure to obtain continuing access to such facilities and
networks would also have a material adverse effect on the Company, including
possibly requiring the Company to significantly curtail or cease its operations.
In addition, the Company's operations require that its switching facilities and
its carriers' long distance networks operate on a continuous basis. It is not
atypical for telephone carriers and switching facilities to experience service
interruptions and equipment failures which could last for a significant period
of time. It is possible that the Company's switching facilities and its
carriers' long distance networks may from time to time experience service
interruptions or equipment failures. Service interruptions and equipment
failures resulting in material delays would adversely affect consumer confidence
as well as the Company's business operations and reputation. The Company and
Global Link have in the past experienced unauthorized access to their switching
services by unauthorized disclosure of a pin number and unauthorized activation
of prepaid phone cards, respectively, which have resulted in the Company and
Global Link being unable to recover the long distance service and switching
charges associated with such calls. Continued unauthorized access to the
Company's services could have a material adverse effect on the Company's
operations.
Regulatory Factors. Long distance telecommunications services are
subject to regulation by the Federal Communications Commission (the "FCC") and
by state regulatory authorities. Among other things, these regulatory
authorities impose regulations governing the rates, terms and conditions for
interstate and intrastate telecommunications services. Changes in existing laws
and regulations, particularly the Communications Act of 1996, which allows for
all providers of telecommunications services to participate in all aspects of
the telecommunications market, may have a significant impact on the Company's
activities and on the Company's operating results. The Company believes that it
is in substantial compliance with all material laws, rules and regulations
governing its operations and has obtained, or is in the process of obtaining,
all licenses, tariffs and approvals necessary for the conduct of its business.
There can be no assurance, however, that the Company will be able to obtain
required licenses or approvals in the future or that the FCC or state regulatory
authorities will not require the Company to comply with more stringent
regulatory requirements. Conformance of the Company's operations with of new
statutes and regulations and expansion of the Company's operations into new
geographic markets could require the Company to alter methods of operation, at
costs which could be substantial, or otherwise limit the types of services
offered by the Company. There can be no assurance that the Company will be able
to comply with additional applicable laws, regulations and licensing
requirements. The Company is also subject to
11
<PAGE>
Federal Trade Commission regulation and other federal and state laws relating to
the promotion, advertising, labeling and packaging of its products.
Possible Inability to Recognize Deferred Revenue; Possibility of Phone
Cards Expiring Unsold. The sale of long distance telephone service through
prepaid phone cards may be subject to "escheat" laws in various states. These
laws generally provide that payments or deposits received in advance or in
anticipation of the provision of utility (including telephone) services that
remain unclaimed for a specific period of time after the termination of such
services are deemed "abandoned property" and must be submitted to the state.
Although the Company is not aware of any case in which such laws have been
applied to the sale of prepaid phone cards, and does not believe that such laws
are applicable, in the event that such laws are deemed applicable, the Company
may be unable to recognize a portion of its deferred revenue remaining upon the
expiration of phone cards with unused calling time. In such event, the Company
may be required to deliver such amounts to certain states in accordance with
these laws, which could have a material adverse effect on the Company. In
addition, substantially all of the Company's prepaid phone cards have an
expiration date (generally 12 to 18 months after issuance or 12 months after
last use). To the extent that the Company is unable to sell any phone cards
prior to their expiration date, the Company will no longer be able to sell such
phone cards and will be required to write off the printing and production costs
associated with such cards.
Locations of Retail Phone Centers. The Company currently operates
twelve retail phone centers located in the New York City metropolitan area and
in South Miami Beach, Florida. The Company has no experience in opening or
operating phone centers in other areas. The Company's retail phone centers are
located primarily in low-income, urban areas, some of which may have high crime
rates. Although the Company believes that it has taken sufficient steps to
provide adequate security at its retail phone center locations, including the
installation of bullet-proof barriers at customer service counters, armored car
collection of cash receipts, on-site lock boxes and brightly lit, street visible
store layouts, there can be no assurance that incidents of crime will not
interfere with the Company's operations at such locations.
Taxes. The sale of long distance services through the use of prepaid
phone cards has been deemed a taxable event by the Internal Revenue Service (the
"IRS") and most state taxing authorities. The IRS has established a task force
to determine the application of the 3% federal telecommunications excise tax
(the "Telecommunications Excise Tax") to the sale and provision of long distance
services through prepaid phone cards. To date, the IRS has not established a
clear policy on the application of the Telecommunications Excise Tax to the sale
and provision of long distance services through prepaid phone cards. While the
Company reasonably believes it is accurately accruing for the expense for the
Telecommunications Excise Tax on its financial statements, there can be no
assurance that the IRS will concur with the Company's method of determining the
Telecommunications Excise Tax payable. Additionally, the Company believes that
the sale of long distance services through prepaid phone cards is also subject
to state sales and use taxes. However, most state taxing authorities have not
established clear policies on the application of the sales and use taxes to the
provision of long distance services through prepaid phone cards. While the
Company reasonably believes it is accurately accruing for the expense on its
financial statements, there can be no assurance that a state taxing authority
will concur with the Company's method of determining the sales and use taxes
payable.
Dependence on Key Personnel. The success of the Company is largely
dependent on the personal efforts of Shelly Finkel, its Chairman of the Board,
Gary Wasserson, its Chief Executive Officer and other key personnel. Although
the Company has entered into employment agreements with Messrs. Finkel and
Wasserson, the loss of their services would have a material adverse effect on
the Company's business and prospects. The Company's employment agreement with
Mr. Finkel requires him to devote only 50% of his business time to the Company's
affairs. In addition, in order to successfully implement and manage its proposed
expansion, the Company will be dependent upon, among other things, the
successful recruiting of qualified management, marketing, sales and creative
personnel with experience in business activities conducted by the Company.
Competition for the type of qualified individuals sought by the Company is
intense and there can be no assurance that the Company will be able to retain
existing
12
<PAGE>
employees or that it will be able to find, attract and retain additional
qualified personnel on acceptable terms.
Continuing Control by Management. Two groups of stockholders of the
Company have entered into the a voting agreement pursuant to which each group
has agreed to vote for the other group's designees as directors of the Company.
Such stockholders, in the aggregate, own approximately 47.6% of the Company's
outstanding shares of Common Stock, without giving effect to the exercise of any
outstanding Warrants, options or convertible securities. Accordingly, such
stockholders, acting together, are in a position to effectively control the
Company, including the election of all or a majority of the directors of the
Company.
No Dividends. The Company has never paid cash dividends on its Common
Stock and does not expect to pay cash dividends in the foreseeable future.
Tax Loss Carryforwards. At December 31, 1995, Global Link had net
operating loss carryforwards ("NOLs") aggregating approximately $4,985,000 to
offset future taxable income. Under Section 382 of the Internal Revenue Code of
1986, as amended (the "Code"), utilization of prior NOLs is limited after an
ownership change, as defined in such Section 382, to an amount equal to the
value of the loss corporation's outstanding stock immediately before the date of
the ownership change, multiplied by the federal long-term tax-exempt rate in
effect during the month that the ownership change occurred. As a result of the
Merger, Global Link may be subject to limitations on the use of its NOLs as
provided under Section 382. Accordingly, there can be no assurance that a
significant amount of Global Link's existing NOLs will be available to the
Company. In the event that the Company achieves profitability, as to which there
can be no assurance, such limitation would have the effect of increasing the
Company's tax liability and reducing the net income and available cash resources
of the Company in the future.
Litigation. The Company is involved from time to time in litigation
incidental to its business. Such litigation can be expensive and time consuming
to prosecute or defend and could have the effect of causing the Company's
customers to delay or cancel purchase orders until such lawsuits are resolved.
Although the Company believes that none of its pending litigation matters,
individually or in the aggregate, will have a material adverse effect on the
Company's operating results or financial condition, there can be no assurance of
this.
Possible Delisting of Securities from Nasdaq System; Risks Associated
with Low-Priced Stocks. The Company's Common Stock and publicly-traded Warrants
are currently listed on Nasdaq. However, in order to continue to be listed on
Nasdaq, a company must maintain $2,000,000 in total assets, a $200,000 market
value of the public float and $1,000,000 in total capital and surplus. In
addition, continued inclusion requires two market makers and a minimum bid price
of $1.00 per share; provided, however, that if a company falls below such
minimum bid price, it will remain eligible for continued inclusion on Nasdaq if
the market value of the public float is at least $1,000,000 and the company has
$2,000,000 in capital and surplus. The failure to meet these maintenance
criteria in the future may result in the delisting of the Company's securities
from Nasdaq and trading, if any, in the company securities would thereafter be
conducted in the non-Nasdaq over-the-counter market. As a result of such
delisting, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, the Company's securities. In
addition, if the Common Stock was to become delisted from trading on Nasdaq and
the trading price of the Common Stock was to fall below $5.00 per share, trading
in the Common Stock would also be subject to the requirements of certain rules
promulgated under the Exchange Act, which require additional disclosure by
broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith, and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
institutions). For these types of transactions, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. The
13
<PAGE>
additional burdens imposed upon broker-dealers by such requirements may
discourage them from effecting transactions in the Common Stock and Warrants,
which could severely limit the liquidity of the Common Stock and Warrants and
the ability of purchasers in this offering to sell the Common Stock and Warrants
in the secondary market.
Shares Eligible for Future Sale. Substantially all of the Company's
outstanding shares of Common Stock and Warrants have been or will be registered
for sale under the Act or are eligible for sale under an exemption therefrom.
The possibility that substantial amounts of Common Stock or Warrants may be sold
in the public market may adversely affect prevailing market prices for the
Common Stock or the Warrants and could impair the Company's ability to raise
capital through the sale of its equity securities. The Company is obligated to
file a registration prior to June 30, 1996 with respect to (i) the shares of
Common Stock issued or issuable in connection with the acquisition of Global
Link, including shares issuable upon conversion of the debentures of Global Link
(906,682 shares) and the exercise of certain warrants owned by the holders of
such debentures (56,000 shares) and the shares of additional Common Stock issued
to Peoples Telephone Company, Inc. (52,805 shares), and (ii) the 600,000 shares
of Common Stock and 1,200,000 Warrants issued in the May 1996 Private Placement
(and the 1,200,000 shares of Common Stock issuable upon exercise of such
Warrants.
Outstanding Warrants, Options and Convertible Debentures; Potential
Adverse Effect on Market Price of Common Stock and Warrants. The Company has
4,141,678 Warrants outstanding, exercisable at a price of $4.00 per share.
Additionally, the Company has reserved an aggregate of 2,735,108 shares of
Common Stock for issuance upon exercise of other outstanding warrants, options
and conversion of the Debentures. To the extent that outstanding options and
warrants are exercised or Debentures are converted, dilution of the percentage
ownership of the Company's stockholders will occur, and any sales in the public
market of the Common Stock underlying such options, warrants and Debentures may
adversely affect prevailing market prices for the Common Stock and the Warrants.
Moreover, the terms upon which the Company will be able to obtain additional
equity capital may be adversely affected since the holders of outstanding
options and warrants can be expected to exercise them at a time when the Company
would, in all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than those provided in the outstanding options and
warrants.
Possible Inability to Exercise Warrants. The Company intends to qualify
the sale of the Common Stock issuable upon exercise of the Warrants in a limited
number of states. Although certain exemptions in the securities laws of certain
states might permit Warrants to be transferred to purchasers in states other
than those in which the Warrants were initially qualified, the Company will be
prevented from issuing Common Stock in such other states upon the exercise of
the Warrants unless an exemption from qualification is available or unless the
issuance of Common Stock upon exercise of the Warrants is qualified. The Company
is under no obligation to seek, and may decide not to seek or may not be able to
obtain, qualification of the issuance of such Common Stock in all of the states
in which the ultimate purchasers of the Warrants reside. In such a case, the
Warrants held will expire and have no value if such Warrants cannot be sold.
Potential Adverse Effect of Redemption of Warrants. The Warrants may be
redeemed by the Company, with the consent of the Underwriter, at any time upon
notice of not less than 30 days, at a price of $.10 per Warrant, provided the
closing bid quotation of the Common Stock on all 20 trading days ending on the
third day prior to the day on which the Company gives notice has been at least
187.5% of the then effective exercise price of the Warrants (currently $7.50,
subject to adjustment). Redemption of the Warrants could force the holders to
exercise the Warrants and pay the exercise price at a time when it may be
disadvantageous for the holders to do so, to sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants or to
accept the redemption price, which is likely to be substantially less than the
market value of the Warrants at the time of redemption.
Authorization and Discretionary Issuance of Preferred Stock. The
Company's Certificate of Incorporation authorizes the issuance of "blank check"
preferred stock with such designations, rights and preferences as may be
determined from time to time by the Board of Directors. Accordingly, the Board
14
<PAGE>
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Company's Common Stock. In the event of issuance, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
present intention to issue any shares of its preferred stock, there can be no
assurance that the Company will not do so in the future.
USE OF PROCEEDS
The Company will derive net proceeds of approximately $11,700,000 upon
exercise of all of the Warrants, including Herrick's Warrants and the
Underwriter's Warrants, after payment of costs of this offering and the 5%
warrant solicitation fee payable to the Underwriter (assuming that such fee is
payable with respect to all of such Warrants). Additionally, the Company will
receive $1,231,650 upon exercise, in full, of the Underwriter's Option. The
Company intends to use any such proceeds for working capital and general
corporate purposes. The Company will not derive any proceeds from the sale by
the Selling Securityholders of any of the Selling Securityholders' Securities.
SELLING SECURITYHOLDERS
The Company has agreed to register the resale of the Selling
Securityholders' Securities and to pay all expenses in connection therewith. An
aggregate of 383,000 Warrants and 150,000 shares of Common Stock may be offered
and sold pursuant to this Prospectus by the Selling Securityholders. None of the
Selling Securityholders has ever held any position or office with the Company or
had any other material relationship with the Company, except as described below
in the footnotes. The Company will not receive any of the proceeds from the sale
of the Selling Securityholders' Securities by the Selling Securityholders. The
following table sets forth certain information with respect to the Selling
Securityholders:
<TABLE>
Beneficial Percentage
Beneficial Ownership Percentage Beneficial Common Beneficial Beneficial
Ownership Warrants of Beneficial Ownership Stock Ownership Ownership
of Warrants Being Warrants Ownership of Common Being of Common After Sale
Selling Prior to Registered After After Sale Stock Prior Registered Stock After (Common
Securityholder Sale(1) For Sale Sale(2) (Warrants)(2) to Sale(3) For Sale Sale Stock)
<C> <C> <C> <C> <C> <C> <C> <C> <C>
Norton Herrick(4).... 243,000 233,000 10,000 * 343,000 0 110,000 3.5%
William G. Walters(5) 41,597 41,597 -- -- 83,194 41,597 0 1.3%
Elliot J. Smith(5)... 29,298 29,298 -- -- 58,596 29,298 0 *
Estate of Howard D.
Harlow(5)........... 10,713 10,713 -- -- 21,426 10,713 0 *
James D. Whitten(5).. 1,035 1,035 -- -- 2,070 1,035 0 *
Nicholas Anari(5).... 1,051 1,051 -- -- 2,102 1,051 0 *
Cynthia
Buckwalter(5)........ 480 480 -- -- 960 480 0 *
Whale Securities
Co.,
L.P.(5)(6).......... 185,826 65,826 120,000 2.9% 411,652 65,826 280,000(7) 4.8%
- -----------------------
<FN>
* Less than 1%.
15
<PAGE>
(1) To the best of the Company's knowledge, except as otherwise set forth
below, all of such securities are beneficially owned and sole
investment and voting power is held by the persons indicated. In
accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner of a security for purposes of the Rule if he
or she has or shares voting power or investment power with respect to
the security or has the right to acquire ownership within sixty days.
As used herein, "voting power" is the power to vote or direct the
voting of securities voting rights and "investment power" is the power
to dispose of or direct the disposition of securities.
(2) Assumes all of the Warrants are sold by the Selling Securityholders.
(3) Includes the shares of Common Stock underlying the Warrants.
(4) Mr. Herrick participated in the Company's bridge financing conducted in July 1994. See "Certain
Transactions."
(5) Messrs. Walters, Smith, Harlow, Whitten and Anari and Ms. Buckwalter
were (and in some cases are) officers and/or partners of Whale and,
together with Whale, own the 150,000 Warrants being registered for
resale by Whale and its designees.
(6) Includes shares underlying 100,000 warrants issued to Whale in
consideration of certain investment banking services rendered to the
Company, the 65,826 Warrants being registered fort resale on behalf of
Whale, and 120,000 Warrants issued to Whale in connection with the May
1996 Private Placement. Does not include shares held in Whale's trading
account. All of the Warrants to purchase such shares are held in the
name of Whale Securities Co., L.P. for the account of its equity owners
and certain of its employees, pending transferability of such warrants
pursuant to the rules of the National Association of Securities
Dealers, Inc. See "Plan of Distribution" for a description of certain
fees paid and securities issued to Whale by the Company.
(7) Also gives effect to sale of Warrants registered for resale on
behalf of Whale.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Selling Securityholders' Securities may be offered and sold from
time to time as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices related to the
then-current market price, or in negotiated transactions. The Selling
Securityholders' Securities may be sold by one or more of the following methods,
without limitation: (i) a block trade in which a broker or dealer so engaged
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (ii) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (iii) ordinary brokerage transactions and
transactions in which the broker solicits purchases; and (iv) transactions
between sellers and purchasers without a broker/dealer. In effecting sales,
brokers or dealers engaged by the Selling Securityholders may arrange for other
brokers or dealers to participate. Such brokers or dealers (which may include
Whale) may receive commissions or discounts from Selling Securityholders in
amounts to be negotiated. Such brokers and dealers and any other participating
brokers and dealers may be deemed to be "underwriters" within the meaning of the
Securities Act, in connection with such sales.
All costs, expenses and fees in connection with the registration of the
securities offered hereby will be borne by the Company. Brokerage commissions,
if any, attributable to the sale of such securities will be borne by the Selling
Securityholders.
The Company has agreed, in connection with the exercise of the Warrants
pursuant to solicitation, to pay to Whale for bona fide services provided a fee
of 5% of the exercise price for each Warrant exercised, provided, however, that
Whale will not be entitled to receive such compensation in Warrant exercise
transactions in which (i) the market price of the Common Stock at the time of
the exercise is lower than the exercise price of the Warrants; (ii) the Warrants
are held in any discretionary account; (iii) disclosure of compensation
arrangements is not made, in addition to the disclosure provided in this
Prospectus, in documents provided to holders of Warrants at the time of
exercise; (iv) the holder of the Warrants has not confirmed in writing that
Whale solicited such
16
<PAGE>
exercise; or (v) the transaction was in violation of Rule 10b-6 promulgated
under the Exchange Act. In addition to soliciting, either orally or in writing,
the exercise of the Warrants, such services may also include disseminating
information, either orally or in writing, to the holders of the Warrants about
the Company or the market for the Company's securities, and assisting in the
processing of the exercise of the Warrants.
Pursuant to the placement agreement entered into by Whale and the
Company in connection with the May 1996 Private Placement, the Company paid to
Whale, as placement agent, a placement agent fee equal to 10% of the aggregate
purchase price of the Units sold ($3,000,000), except with respect to the
portion of such purchase price attributable to 2-1/2 Units purchased by certain
purchasers ($250,000). In addition, the Company paid Whale a $15,000
nonaccountable expense allowance. Additionally, simultaneously with payment for
and delivery of the Units at the closing of the May 1996 Private Placement, the
Company issued to Whale and certain of its designees Placement Agent Warrants to
purchase 3 Units at a price of $100,000 per Unit exercisable for a five-year
period through May 2001. The Company also agreed to indemnify Whale against
certain liabilities in connection with the Offering under the Act.
Whale acted as the underwriter in connection with the Company's IPO, in
which the Company raised approximately $7,650,000 of gross proceeds. In
connection with the IPO, the Company paid the Whale 10% commissions and a 3%
nonaccountable expense allowance, granted Whale the Underwriter's Option to
purchase 150,000 shares of Common Stock and 150,000 Warrants, and granted Whale
certain other rights.
In April 1995, the Company issued to a designee of Whale five-year
warrants to purchase 50,000 shares of Common Stock at $5.00 per share in
consideration of Whale agreeing to give the Company the right of first refusal
to pursue any prospective acquisition target in the phone card industry that
Whale identifies prior to February 1998. In October 1995, the Company issued to
another designee of Whale five-year warrants to purchase 50,000 shares of Common
Stock at $5.00 per share. In January 1996, the Company entered into a one-year
consulting agreement with Whale pursuant to which Whale will assist the Company
in developing, studying and evaluating financing and merger and acquisition
proposals. In consideration of such services, the Company issued Whale and its
designees five-year warrants to purchase 200,000 shares of Common Stock at
$5.125 per share. The Company also paid a fee of $100,000 to Whale in
consideration of Whale's assistance in connection with the Company's evaluation
of the acquisition of Global Link and agreed to pay Whale certain other
compensation in the event another acquisition is consummated.
LEGAL MATTERS
The legality of the securities being offered hereby has been passed
upon by Graubard Mollen & Miller, New York, New York, general counsel to the
Company.
EXPERTS
The consolidated financial statements of Global Telecommunication
Solutions, Inc. and subsidiaries as of December 31, 1995 and 1994, and for the
years then ended have been incorporated by reference herein from the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1995 in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, included therein and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of Global Link Teleco Corporation as of December
31, 1995 and for the year then ended have been incorporated by reference herein
from the Company's current Report on 8-K, filed March 15, 1996, and as
thereafter amended on May 10, 1996, in reliance upon the report of KPMG Peat
Marwick LLP, independent public accountants, included therein and upon
authority of said firm as experts in accounting and auditing.
The Financial Statements of Global Link Teleco Corporation as of December
31, 1994 and for the period from inception (March 28, 1994) to December 31, 1994
have been incorporated by reference herein from the Company's Current
Report on 8-K, filed March 15, 1996, and as thereafter amended on May
10, 1996, in reliance upon the report of Price Waterhouse LLP, independent
public accountants, included therein and upon authority of said firm as experts
in accounting and auditing.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Common Stock offered hereby, other than underwriting discounts and commissions:
<TABLE>
<S> <C>
Legal fees and expenses................................................................................ 25,000.00
Accounting fees and expenses........................................................................... 6,000.00
Blue Sky Fees and Expenses............................................................................. 10,000.00
Miscellaneous.......................................................................................... 9,000.00
Total........................................................................................ $50,000.00
</TABLE>
ITEM 15. Indemnification of Directors and Officers
The Company's Certificate of Incorporation provides that all directors,
officers, employees and agents of the Registrant shall be entitled to be
indemnified by the Company to the fullest extent permitted by law.
Section 145 of the Delaware General Corporation Law concerning
indemnification of officers, directors, employees and agents is set forth below.
"Section 145. Indemnification of officers, directors, employees and
agents; insurance.
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgement in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation unless and only
II-1
<PAGE>
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under sections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses incurred by an officer or director in defending a civil or
criminal action, suite or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer, to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses incurred by other
employees and agents may be so paid upon such terms and conditions, if any, as
the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its
II-2
<PAGE>
participants or beneficiaries; and a person who acted in good faith an in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers, and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission 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
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in a successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to the court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
ITEM 16. Exhibits
The following exhibits noted with an asterisk (*), are hereby
incorporated by reference from the Company's Registration Statement on Form SB-2
(No. 33-85998) declared effective by the Securities and Exchange Commission on
December 14, 1994 and amended on August 8, 1995, by double asterisk (**), are
hereby incorporated by reference from the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994, and triple asterisk (***), are hereby
incorporated by reference from the Company's Current Report on Form 8-K, filed
with the Securities and Exchange Commission on March 15, 1996.
Exhibit
Number Description
1.1* Underwriting Agreement between the Company and Whale
Securities Co., L.P., the underwriter of the
Company's initial public offering in December 1994.
3.1* Certificate of Incorporation
3.2* Amendment to Certificate of Incorporation
3.3* By-Laws
3.4*** Certificate of Merger of Merger Sub into Global Link
4.1* Form of Common Stock Certificate
4.2* Form of Warrant Certificate
4.3* Warrant Agreement
4.4* Underwriter's Warrant
4.5* Stock Option Agreement between the Company and Shelly
Finkel
4.6* Stock Option Agreement between the Company and Paul
Silverstein
II-3
<PAGE>
Exhibit
Number Description
4.7* Stock Option Agreement between the Company and James
Koplik (originally exhibit no. 4.10 to the Company's
Registration Statement on Form SB-2 (No. 33-85998)
4.8** Stock Option Agreement between the Company and John
McCabe
4.9 Form of Placement Agent Warrant for May 1996 Private
Placement (filed herewith)
10.1* Sublease for 342 Madison Avenue, New York, New York
10.2* Sublease for additional space at 342 Madison Avenue,
New York, New York
10.3* Employment Agreement between the Company and Shelly
Finkel
10.4* Employment Agreement between the Company and Paul
Silverstein
10.5* Employment Agreement between the Company and Maria
Bruzzese
10.6* 1994 Performance Equity Plan
10.7* Service Agreement between the Company and MCI
Telecommunications Corporation (originally exhibit
No. 10.17 to the Company's Registration Statement
on Form SB-2 (No. 33-85998))
10.8* Service Agreement between the Company and Sprint
Corporation (originally exhibit no. 10.18 to the
Company's Registration Statement on Form SB-2
(No. 33-85998))
10.9* Service Agreement between Independent Properties
Sales Corporation ("IPSC") and Metromedia
Communications Corporation ("Metromedia," which was
later acquired by WorldCom) (originally exhibit no.
10.19 to the Company's Registration Statement on
Form SB-2 (No. 33-85998))
10.10* Consent between IPSC and Metromedia allowing the
assignment to the Company of IPSC's right to receive
services from Metromedia.
10.11** Employment Agreement between the Company and John
McCabe
10.12** Consulting Agreement between the Company and Barry
Rubenstein
10.13** Consulting Agreement between the Company and Eli
Oxenhorn
10.14*** Merger Agreement by and among the Company,
Merger Sub and Global Link
10.15*** Directors Voting Agreement
10.16*** Peoples Agreement, together with the Company's
Guaranty of Peoples Second Payment
10.17*** Ancillary Agreement between Global Link and Peoples
regarding payment of the Peoples Accounts Receivable,
together with Holding Corp's Guaranty of such
payment
II-4
<PAGE>
Exhibit
Number Description
10.18*** Amended and Restated Securities Purchase Agreement
10.19*** The Company's Guaranty of Debentures
10.20*** Employment Agreement between the Company and
Gary Wasserson
10.21*** Employment Agreement between the Company and David
Tobin
10.22*** Stock Option Agreement between the Company and Gary
Wasserson
10.23*** Stock Option Agreement between the Company and David
Tobin
10.24* Sublease for space at 40 Elmont Road, Elmont, New
York (originally exhibit no. 10.14 to Post-Effective
Amendment No. 1 to the Company's Registration
Statement on Form SB-2 (No. 33-85998))
10.25 Form of Registration Rights Agreement for May 1996
Private Placement (filed herewith)
10.26 Agency Agreement between the Company and
Whale for May 1996 Private Placement
(filed hereunder)
10.27 Warrant Agreement for Placement Agent Warrant
23.1 Consent KPMG Peat Marwick LLP
23.2 Consent of Price Waterhouse LLP
ITEM 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment of this registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement of
any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
II-5
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant 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, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of New York, State of New York on May 23, 1996.
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
Shelly Finkel, Chairman of
the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Shelly Finkel and/or John McCabe his true
and lawful attorneys-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, including post-effective amendments, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said attorneys-in-fact and agents, each acting alone, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
Signature Title Date
<C> <C> <C>
/s/ Shelly Finkel Chairman of the Board May 23, 1996
Shelly Finkel
/s/ Gary Wasserson Chief Executive Officer May 23, 1996
Gary Wasserson and Director
/s/ Alan Kaufman Director May 23, 1996
Alan Kaufman
/s/ Jack Tobin Director May 23, 1996
Jack Tobin
/s/ John McCabe President and Director May 23, 1996
John McCabe
Vice President and May __, 1996
Paul Silverstein Director
/s/ Donald Ptalis Director May 23, 1996
Donald Ptalis
/s/ Maria Bruzzese Chief Financial Officer May 23, 1996
Maria Bruzzese (and principal accounting
officer)
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<PAGE>
</TABLE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREE-
MENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, May 10, 2001
No. WG-1 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Whale Securities Co.,
L.P. or registered assigns, is the registered holder of Warrants to purchase, at
any time from May 10, 1996 until 5:00 P.M. New York City time on May 10, 2001
("Expiration Date"), up to 60,000 fully-paid and non-assessable shares of common
stock, $.01 par value ("Common Stock"), of Global Telecommunication Solutions,
Inc., a Delaware corporation (the "Company"), and 120,000 Common Stock Purchase
Warrant(s), each Common Stock Purchase Warrant entitling the holder thereof to
purchase one share of Common Stock (collectively, the "Underlying Warrants"), at
the initial exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $5.00 per one share of Common Stock and two Underlying
Warrants upon surrender of this Warrant Certificate and payment of the Exercise
Price at an office or agency of the Company, but subject to the conditions set
forth herein and in the warrant agreement dated as of May 10, 1996 between the
Company and Whale Securities Co. L.P. (the "Warrant Agreement"). This Warrant
Certificate is exercisable only on the basis of one share of Common stock and
two Underlying Warrants. Payment of the Exercise Price may be made in cash, or
by certified or official bank check in New York Clearing House funds payable to
the order of the Company, or any combination of cash or check or pursuant to the
"cashless exercise" provision set forth in Section 3 of the Warrant Agreement.
<PAGE>
Each Underlying Warrant issuable upon the exercise of a
Warrant is initially exercisable until December 14, 1999, for one fully-paid and
non-assessable share of Common Stock at an initial exercise price of $4.00 per
share. The Underlying Warrants shall have the same terms and provisions as the
warrants issued to investors pursuant to the Company's Confidential Private
Offering Memorandum dated March 25, 1996, which are governed by the Warrant
Agreement dated December 21, 1994 by and among the Company, Whale Securities
Co., L.P. and Continental Stock Transfer & Trust Company (the "Public Warrant
Agreement"). The Public Warrant Agreement is hereby incorporated by reference in
and made a part of this instrument and is hereby referred to (except as
otherwise provided in the Warrant Agreement) for a description of the rights,
limitations of rights, manner of exercise, anti-dilution provisions and other
provisions with respect to the Underlying Warrants, provided, however, the
Underlying Warrants are not redeemable by the Company prior to a sale of the
Underlying Warrants by the Whale Securities Co., L.P.
or its designees.
No Warrant may be exercised after 5:00 P.M., New York City
time, on the Expiration Date, at which time all Warrants evidenced hereby,
unless exercised prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to in a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning the registered
holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this
Warrant Certificate at an office or agency of the Company, a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued to the transferee(s) in
exchange for this Warrant Certificate, subject to the limitations provided
herein and in the Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
<PAGE>
Upon the exercise of less than all of the Warrants evidenced
by this Certificate, the Company shall forthwith issue to the holder hereof a
new Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof
as the absolute owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone), for the purpose
of any exercise hereof, and of any distribution to the holder(s) hereof, and for
all other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined
in the Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: May 10, 1996 GLOBAL TELECOMMUNICATION
SOLUTIONS, INC.
[SEAL] By:__________________________
Name:
Title:
Attest:
- ----------------------
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _________ Units and
herewith tenders in payment for such Units cash or a check payable to the order
of Global Telecommunication Solutions, Inc. in the amount of $ , all in
accordance with the terms hereof. The undersigned requests that a certificate
for such Units be registered in the name of
, whose address is ,
and that such Certificate be delivered to ,
whose address is _____________.
Dated: Signature:
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
--------------------------------
--------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such
holder desires to transfer the Warrant
Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________, Attorney, to
transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
- -------------------------------
- -------------------------------
(Insert Social Security or Other
Identifying Number of Assignee)
<PAGE>
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the __ day of _________ 1996, between
the person whose name and address appears on the signature page hereto
(individually, a "Holder" or, collectively with the holders of the Units issued
in the Offering, each as defined below, the "Holders") and Global
Telecommunication Solutions, Inc. a Delaware corporation having an office at
5697 Rising Sun Avenue, Philadelphia, Pennsylvania 19120 (the "Company").
WHEREAS, simultaneously with the execution and delivery of
this Agreement, the Holders are purchasing from the Company an aggregate of up
to thirty (30) units (the "Units") each Unit consisting of (i) sixteen thousand
six hundred sixty seven (16,667) shares (the "Shares") of the Company's common
stock, par value $.01 per share (the "Common Stock"), and (ii) thirty three
thousand three hundred thirty four (33,334) warrants (the "Warrants") each
Warrant to purchase one share (collectively the "Warrant Shares") of Common
Stock, at any time until December 14, 1999; and
WHEREAS, the Company desires to grant to the Holder the
registration rights set forth herein with respect to the Shares, the Warrants
and the Warrant Shares;
NOW, THEREFORE, the parties hereto mutually agree as follows:
1. Registrable Securities. As used herein the term
"Registrable Security" means each of the Shares, the Warrants, the Warrant
Shares and the Additional Securities (as hereinafter defined), if any, as
adjusted pursuant to the provisions of the Warrant; provided, however, that with
respect to any particular Registrable Security, such security shall cease to be
a Registrable Security when, as of the date of determination, (i) it has been
effectively registered under the Securities Act of 1933, as amended (the "Act")
and disposed of pursuant thereto, (ii) registration under the Act is no longer
required for the immediate public distribution of such security, or (iii) it has
ceased to be outstanding. The term "Registrable Securities" means any and/or all
of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Article 1.
2. Automatic Registration.
(a) The Company shall prepare and file with the Securities and Exchange
Commission (the "Commission"), at the
<PAGE>
sole expense of the Company, a registration statement (the "Registration
Statement") which includes all of the Registrable Securities, so as to permit a
public offering and sale of the Registrable Securities. The Company will file
the Registration Statement on or before June 30, 1996 and will use its best
efforts to cause the Registration Statement to be declared effective by the
Commission on or before September 30, 1996.
(b) Once effective, the Company, subject to the proviso at the end of this
sentence, will be required to maintain the effectiveness of the Registration
Statement until the earlier of (i) the date that all of the Registrable
Securities have been publicly sold, or (ii) the date that all holders of
Registrable Securities receive an opinion of counsel to the Company that all of
the Registrable Securities may be freely traded without registration under the
Act, under Rule 144 promulgated under the Act or otherwise; provided that the
Company shall be entitled to suspend effectiveness of the Registration Statement
for reasonable periods of time (not to exceed an aggregate of 90 days in any
calendar year) in connection with mergers, acquisitions and material corporate
transactions.
(c) Notwithstanding the foregoing, (i) the obligations of the Company
hereunder with respect to the Holder's Registrable Securities are subject to the
Holder's furnishing to the Company such appropriate information concerning the
Holder, the Holder's Registrable Securities and the terms of the Holder's
offering of such Registrable Securities as the Company may reasonably request in
writing and (ii) the Company will not be obligated to register any Registrable
Securities unless such registration is then permitted by law and the policy of
the Commission.
3. Covenants of the Company With Respect to
Registration. The Company covenants and agrees as follows:
(a) If any stop order shall be issued by the Commission in connection
therewith, the Company shall use its reasonable efforts to obtain the removal of
such order. Following the effective date of a Registration Statement, the
Company shall, upon the request of the Holder, forthwith supply such reasonable
number of copies of the Registration Statement, preliminary prospectus and
prospectus meeting the requirements of the Act, and other documents necessary or
incidental to the public offering of the Registrable Securities, as shall be
reasonably requested by the Holder to permit the Holder to make a public
distribution of the Holder's Registrable Securities.
(b) The Company shall pay all costs, fees and expenses in connection with
the Registration Statement filed pursuant to Article 2 hereof, including,
without limitation, the
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<PAGE>
Company's legal and accounting fees, printing expenses, and blue sky fees and
expenses; provided, however, that the Holder shall be solely responsible for the
fees of any counsel retained by the Holder in connection with such registration
and any transfer taxes or underwriting discounts, commissions or fees applicable
to the Registrable Securities sold by the Holder pursuant thereto.
(c) Nothing contained in this Agreement
shall be construed as requiring any Holder to exercise his Warrants prior to the
initial filing of any Registration Statement or the effectiveness thereof.
4. Additional Terms.
(a) The Company shall indemnify and hold harmless
the Holder and each underwriter, within the meaning of the Act, who may purchase
from or sell for the Holder, any Registrable Securities, from and against any
and all losses, claims, damages and liabilities caused by any untrue statement
of a material fact contained in the Registration Statement, any post-effective
amendment to Registration Statements, or any prospectus included therein or
caused by any omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission based upon information furnished or required to be
furnished in writing to the Company by the Holder or underwriter expressly for
use therein, which indemnification shall include each person, if any, who
controls either the Holder or underwriter within the meaning of the Act and each
officer, director, employee and agent of the Holder and underwriter; provided,
however, that the indemnification in this Section 5(a) with respect to any
prospectus shall not inure to the benefit of the Holder or underwriter (or to
the benefit of any person controlling the Holder or underwriter) on account of
any such loss, claim, damage or liability arising from the sale of Registrable
Securities by the Holder or underwriter, if a copy of a subsequent prospectus
correcting the untrue statement or omission in such earlier prospectus was
provided to the Holder or underwriter by the Company prior to the subject sale
and the subsequent prospectus was not delivered or sent by the Holder or
underwriter to the purchaser prior to such sale; and provided further, that the
Company shall not be obligated to so indemnify the Holder or any such
underwriter or other person referred to above unless the Holder or underwriter
or other person, as the case may be, shall at the same time indemnify the
Company, its directors, each officer signing the Registration Statement and each
person, if any, who controls the Company within the meaning of the Act, from and
against any and all losses, claims, damages and liabilities caused by any untrue
statement of a material fact
-3-
<PAGE>
contained in the Registration Statement or any prospectus required to be filed
or furnished by reason of this Agreement or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission based upon
information furnished or required to be furnished in writing to the Company by
the Holder or underwriter expressly for use therein.
(b) If for any reason the indemnification
provided for in the preceding section is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss,
claim, damage, liability or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations.
(c) Neither the filing of a Registration
Statement by the Company pursuant to this Agreement nor the making of any
request for prospectuses by the Holder shall impose upon the Holder any
obligation to sell the Holder's Registrable Securities.
(d) The Holder, upon receipt of notice from the
Company that an event has occurred which requires a post-effective amendment to
the Registration Statement or a supplement to the prospectus included therein,
shall promptly discontinue the sale of Registrable Securities until the Holder
receives a copy of a supplemented or amended prospectus from the Company, which
the Company shall provide as soon as practicable after such notice.
(e) If the Company fails to keep the Registration Statement continuously
effective during the requisite period (except as set forth in Section 2(b),
above), then the Company shall use its best efforts to update the Registration
Statement or file a new registration statement covering the Registrable
Securities remaining unsold, subject to the terms and provisions hereof.
(f) If the Company fails to file the Registration Statement by June 30,
1996, the Company shall, on the first day of each month, commencing on July 1,
1996 and terminating on the earlier of the date the Registration Statement is
filed and
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<PAGE>
February 2, 1998, issue a number of additional shares of Common Stock and
warrants, identical to the Warrants (collectively, the "Additional Securities"),
to the Holder as is equal to 5% of the number of Shares and Warrants issued to
such Holder in the Offering (subject to adjustment for stock splits, stock
dividends or recapitalizations).
5. Governing Law.
(a) The Registrable Securities will be, if and when issued, delivered in
New York. This Agreement shall be deemed to have been made and delivered in the
State of New York and shall be governed as to validity, interpretation,
construction, effect and in all other respects by the internal substantive laws
of the State of New York, without giving effect to the choice of law rules
thereof.
(b) The Company and the Holder each (i) agrees that any legal suit, action
or proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (ii) waives
any objection which the Company or such Holder may have now or hereafter to the
venue of any such suit, action or proceeding, and (iii) irrevocably consents to
the jurisdiction of the New York State Supreme Court, County of New York and the
United States District Court for the Southern District of New York in any such
suit, action or proceeding. The Company and the Holder each further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the New York State Supreme Court, County of
New York or in the United States District Court for the Southern District of New
York and agrees that service of process upon the Company or the Holder mailed by
certified mail to their respective addresses shall be deemed in every respect
effective service of process upon the Company or the Holder, as the case may be,
in any suit, action or proceeding.
6. Amendment. This Agreement may only be amended by a
written instrument executed by the Company and the Holder.
7. Entire Agreement. This Agreement constitutes the
entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to
the subject matter hereof.
8. Execution in Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same document.
-5-
<PAGE>
9. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed duly given when
delivered by hand or mailed by registered or certified mail, postage prepaid,
return receipt requested, as follows:
If to the Holder, to his or her address set forth on the
signature page of this Agreement.
If to the Company, to the address set forth on the first page
of this Agreement.
10. Binding Effect; Benefits. The Holder may not assign his or
her rights hereunder. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective heirs, legal
representatives and successors. Nothing herein contained, express or implied, is
intended to confer upon any person other than the parties hereto and their
respective heirs, legal representatives and successors, any rights or remedies
under or by reason of this Agreement.
11. Headings. The headings contained herein are for
the sole purpose of convenience of reference, and shall not in
any way limit or affect the meaning or interpretation of any of
the terms or provisions of this Agreement.
12. Severability. Any provision of this Agreement which is
held by a court of competent jurisdiction to be prohibited or unenforceable in
any jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
IN WITNESS WHEREOF, this Agreement has been
executed and delivered by the parties hereto as of the date first
above written.
GLOBAL TELECOMMUNICATION SOLUTION, INC.
By: ___________________________________
Name:
Title:
HOLDER:
-----------------------------------
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<PAGE>
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19102
Whale Securities Co., L.P.
650 Fifth Avenue
New York, New York 10019
Gentlemen:
Global Telecommunication Solutions, Inc., a Delaware
corporation (the "Company"), hereby confirms its agreement with
you (the "Placement Agent") as follows:
Description of Transaction. The Company will offer for sale
to a limited number of persons meeting certain criteria for
"accredited investor" status (as more fully described in the
Company's Confidential Private Placement Memorandum dated March
25, 1996, and the exhibits annexed thereto (collectively and as
it may be supplemented from time to time, the "Memorandum")), a
minimum of twenty (20) units and a maximum of thirty (30) units
(the "Units"), each Unit consisting of (a) 20,000 shares (the
"Shares"), of common stock, par value $.01 per share (the "Common
Stock"), of the Company and (b) warrants (the "Warrants") to
purchase 40,000 Common Stock exercisable commencing on the date
of issuance until December 14, 1999, at a price of Four Dollars
($4.00) per share. The purchase price for the Units shall be
$100,000 per Unit. Unless the content requires otherwise, the
terms "Shares" and "Warrants" shall include the shares of Common
Stock and Warrants, respectively, which may be issuable pursuant
to Section 4(e) of the Registration Rights Agreement (as
hereinafter defined). The Units, the Shares, the Warrants and
the shares of Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") are more fully described in the
Memorandum; capitalized words not defined herein shall have the
meaning set forth in the Memorandum.
Appointment of the Placement Agent. The Company
hereby appoints the Placement Agent as its exclusive agent to
offer and sell the Units on a "best efforts, 20 Unit minimum/30
Unit maximum" basis to accredited investors, as set forth in
Section 3(d) below. The Placement Agent, on the basis of the
representations, warranties, covenants and agreements of the
Company, and subject to the conditions contained herein, accepts
such appointment and agrees to use its best efforts to sell the
Units. It is understood that the Placement Agent has no
commitment to sell the Units other than to use its best efforts.
Purchase, Sale and Delivery of Units. On the basis
of the representations and warranties contained herein, and
subject to the terms and conditions set forth herein, the parties
agree that:
Regulation D Offering. Neither the offer nor
the sale of the Units to subscribers (the "Subscribers") has
been or will be registered with the Securities and Exchange
Commission. The Units will be offered and sold to
Subscribers in reliance upon the exemption from registration
provided by Regulation D ("Reg D") adopted under the
Securities Act of 1933, as amended (the "Act"), will only be
sold to "accredited investors" as such term is defined under
Reg D and will be made within the limitations of Rule
502(d); the Units will be offered for sale only in states in
which the Units have been qualified or registered for sale
or are exempt from such qualification or registration; and
the Company will provide the Placement Agent for delivery to
all offerees and purchasers and their representatives, if
any, any information, documents and instruments which the
Placement Agent and Company deem necessary to comply with
the rules, regulations and judicial and administrative
interpretations respecting compliance with applicable state
and federal statutes and regulations.
Subscription for Units. Subscription for
Units shall occur by execution and delivery by the Sub-
scriber of a Subscription Agreement (the "Subscription
Agreement") in the form annexed to the Memorandum together
with such other documents and instruments as are set forth
in the Memorandum.
Segregation of Funds. Each Subscriber for
the Units shall tender a check payable to "Whale Securities
Co., L.P., as Placement Agent for Global Telecommunication
Solutions, Inc." or wire transfer funds in respect of the
purchase price of the Units subscribed for, which funds
shall be held in a non-interest bearing special bank account
(the "Special Account") in such commercial bank in the City
of New York as the Placement Agent shall determine (the
"Bank").
Closing; Termination of Offering. An initial
closing (the "Initial Closing") shall occur as soon as
practicable after a minimum of twenty (20) Units have been
subscribed for, provided that such Initial Closing occurs
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prior to April 15, 1996 (unless extended by the mutual
consent of the Company and the Placement Agent to a date not
later than May 15, 1996). Thereafter, the offering may
continue, up to a maximum of thirty (30) Units. All
additional sales must be completed not later than the close
of business on April 15, 1996 (unless extended by the mutual
consent of the Company and the Placement Agent to a date not
later than May 15, 1996). The date on which the Initial
Closing occurs is hereinafter called the "Initial Closing
Date." The date on which the subsequent closing or closings
occur is hereinafter called the "Additional Closing Date,"
the last of which Additional Closing Dates shall be referred
to herein as the "Final Closing Date." The Initial Closing
Date and Additional Closing Date(s) are sometimes
hereinafter referred to collectively as the "Closing Date."
The Company shall deliver to the Placement Agent on the
Closing Date, on behalf of the Subscribers, the certificates
representing the Shares and the Warrants included in the
Units being purchased by the Subscribers pursuant to Section
1 of this Agreement against payment therefor, after
deducting the amounts set forth in Section 4 below. If on
or before April 15, 1996 (unless extended by the mutual
consent of the Company and the Placement Agent to a date not
later than May 15, 1996) the minimum number of Units are not
subscribed for, the offering shall be terminated and all
amounts contained in the Special Account will be returned to
the Subscribers without interest thereon or deduction
therefrom. In the event of such termination of the offering
of the Units, all terms of this Agreement shall be
automatically terminated and neither party shall have any
further obligation to the other party under this Agreement
other than the Company's obligation to pay expenses as set
forth herein.
Compensation of Placement Agent. As compensation
for its services rendered as Placement Agent under this Agree-
ment, the Placement Agent shall receive the following:
A sales commission equal to ten (10%) percent
of the aggregate Gross Proceeds (as hereinafter defined) of
the Units, payable by deducting the sales commission from
the Gross Proceeds received for the Units closing on the
Initial Closing Date and Additional Closing Date(s), as the
case may be. "Gross Proceeds" is defined as the total price
paid by Subscribers for the Units, excluding for the purpose
of this Section 4(a), Gross Proceeds from the sale of Units
to the persons set forth on Schedule 4(a) hereto;
A nonaccountable expense allowance equal to
$15,000, which has already been paid;
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On the Initial Closing Date and each
Additional Closing Date, warrants (the "Placement Agent
Warrants"), to purchase ten percent (10%) of the number of
Shares and Warrants sold on such Closing Date, at a price of
$5.00 per one share and two Warrants; and
On the Initial Closing Date and each
Additional Closing Date, the Company shall pay to the
Placement Agent's counsel, the state registration,
qualification and filing fees payable in connection with
qualifying the Units under the "Blue Sky" laws of the states
reasonably specified by the Placement Agent (less any fees
paid on account) and the fees (up to $5,000, which has
already been paid) and disbursements of such counsel in
connection with such registration, qualification or filing.
Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the
Placement Agent that:
Memorandum. The Company has prepared a
Memorandum (which includes its related exhibits and which
may be supplemented from time to time), which contains
information, accurate as of the date specified therein, of
the kind specified by applicable statutes and regulations,
including without limitation:
Terms of the offering;
A description of the Units, Shares,
Warrants and Warrant Shares;
A description of the business conducted by
the Company;
The financial condition of the Company;
Past activities of the Company;
Commissions and compensation to be paid to
the Placement Agent in connection with the offering;
Disclosure of certain material contracts,
agreements or other business arrangements, which affect
or are related to the business conducted and to be
conducted by the Company;
Information regarding the Company, its
management, material obligations, liabilities, pending
or threatened lawsuits or proceedings, and recent
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material adverse changes in its financial condition;
and
Any appropriate legends and such other
information or material as the Placement Agent may deem
necessary or desirable to be included therein.
The Memorandum as of its date and at all times subse-
quent thereto up to and including the Closing Date does not and
will not include any untrue statement of a material fact, or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading; provided,
however, that, the Placement Agent acknowledges that only summary
information is provided with respect to Global Link Teleco
Corporation's ("Global Link") business operations and financial
condition.
Additional Information. The Company has
provided, and shall provide to the Placement Agent, such
information, documents and instruments as may be required
under Section 4(2) of the Act and Reg D for an offer made to
accredited investors.
Organization; Good Standing. The Company is
a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full
corporate power and authority, and with all licenses,
permits, certifications, registrations, approvals, orders,
authorizations, consents and franchises (collectively,
"Permits") to own or lease and operate its properties and to
conduct its business as described in the Memorandum, except
where the failure to obtain any such Permits would not have
a material adverse effect on the financial condition,
results of operations, business or properties of the Company
and the Subsidiary taken as a whole ("Material Adverse
Effect"). The Company has no subsidiaries other than Global
Telecommunication Solutions (Canada), Inc., GTS Marketing,
Inc. and Global Link, each a corporation duly organized and
validly existing under the laws of its jurisdiction of
incorporation (collectively, the "Subsidiaries"). Unless
the context otherwise requires, all references to the
"Company" in this Agreement shall include the Subsidiaries.
The Company and each of the Subsidiaries are each duly
qualified to do business as a foreign corporation and are
each in good standing in all jurisdictions wherein such
qualification is necessary and where failure so to qualify
could have a Material Adverse Effect. Each Subsidiary has
the corporate power and authority to own or lease and
operate its properties and to conduct its business as
-5-
described in the Memorandum. The Company owns all of the
capital stock of each Subsidiary free and clear of all
liens, security interests and other encumbrances of any
nature whatsoever, except as set forth in the Memorandum.
There are no options or warrants for the purchase of, or
other rights to purchase, or outstanding voting securities
convertible into or exchangeable for, any capital stock or
other securities of any Subsidiary.
Governmental Authority. Except for the filing
of Form D under the Act, an additional listing application
with NASDAQ applying for inclusion of the Shares, Warrants
and Warrant Shares on NASDAQ and the filing of the
registration statement as required by the Registration
Rights Agreement and other than as may be required under
applicable state securities or Blue Sky laws, no Permit of
any court or governmental agency or body, is required for
the valid authorization, issuance, sale and delivery of the
Shares, the Warrants, the Warrant Shares, the Placement
Agent Warrants and the Placement Agent Warrant Securities
(as hereinafter defined) to the Placement Agent and/or the
Subscribers and the consummation by the Company of the
transactions contemplated by this Agreement, except for such
filings and Permits, the failure of which to obtain would
not, singly or in the aggregate, have a material adverse
effect on the transactions contemplated hereby or on the
Subscribers; provided, however, that no representation or
warranty is being made with respect to the NASD's rules and
regulations regarding the receipt of compensation by members
in connection with a public offering, as such rules and
regulations may relate to the Placement Agent's receipt of
the Placement Agent Warrants.
Corporate Authorization. The Company has full
corporate power and authority to execute, deliver and
perform this Agreement, the Subscription Agreements, the
Registration Rights Agreements between the Company and each
of the Subscribers (the "Registration Rights Agreements"),
the Warrants and the Placement Agent Warrants, and to
consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement,
the Subscription Agreements, the Registration Rights
Agreements, the Warrants and the Placement Agent Warrants,
the consummation by the Company of the transactions herein
and therein contemplated and the compliance by the Company
with the terms of this Agreement, the Subscription
Agreements, the Registration Rights Agreements, the Warrants
and the Placement Agent Warrants and the issuance and sale
of the Units and the Placement Agent Warrants, have been
duly authorized by all necessary corporate action, and each
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of this Agreement, the Subscription Agreements, the
Registration Rights Agreements and the Warrants has been
duly executed and delivered by the Company. Each of this
Agreement, the Subscription Agreements, the Registration
Rights Agreements, the Warrants and the Placement Agent
Warrants is a valid and binding obligation of the Company,
enforceable in accordance with its respective terms,
subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other
laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies and
except that enforceability of the indemnification provisions
and the contribution provisions set forth herein may be
limited by the federal securities laws of the United States
or state securities laws or public policy underlying such
laws. The execution, delivery and performance of this
Agreement, the Subscription Agreements, the Registration
Rights Agreements, the Warrants and the Placement Agent
Warrants by the Company, the consummation by the Company of
the transactions herein and therein contemplated in the
manner described by the Memorandum and the compliance by the
Company with the terms of this Agreement, the Subscription
Agreements, the Registration Rights Agreements, the Warrants
and the Placement Agent Warrants, do not, and will not, with
or without the giving of notice or the lapse of time, or
both, (i)result in any violation of the Articles of
Incorporation or By-Laws of the Company, (ii) result in a
breach of or conflict with any of the terms or provisions
of, or constitute a default under, or result in the
modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the
Company pursuant to, any indenture, mortgage, note,
contract, commitment or other agreement or instrument to
which the Company is a party or by which the Company or any
of its properties or assets are or may be bound or affected,
except for any breach, conflict or default which would not,
singly or in the aggregate, have a Material Adverse Effect;
(iii) violate any existing applicable law, rule, regulation,
judgment, order or decree of any governmental agency or
court, domestic or foreign, having jurisdiction over the
Company or any of its properties or its business, except for
any violation, which would not, singly or in the aggregate,
have a Material Adverse Effect; or (iv)have any material
adverse effect on any Permit or the ability of the Company
to make use thereof, except for those which would not,
singly or in the aggregate, have a Material Adverse Effect.
Capitalization. The Company had, at the date
or dates indicated in the Memorandum, a duly authorized and
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outstanding capitalization as set forth in the Memorandum
under the caption "Capitalization." The outstanding shares
of Common Stock have been duly authorized and validly
issued. All such outstanding shares of Common Stock are
fully paid and nonassessable. The outstanding options and
warrants to purchase shares of Common Stock constitute the
valid and binding obligations of the Company, enforceable in
accordance with their terms. None of such outstanding
shares of Common Stock or options or warrants to purchase
shares of Common Stock has been issued in violation of the
preemptive rights of any securityholder of the Company.
None of the holders of such outstanding shares of Common
Stock or options or warrants to purchase Common Stock is
subject to personal liability solely by reason of being such
a holder. The offers and sales of such outstanding shares
of Common Stock and options and warrants to purchase Common
Stock were at all relevant times either registered under the
Act and the applicable state securities or Blue Sky laws, or
exempt from such registration requirements. The authorized
shares of Common Stock and Preferred Stock conform in all
material respects to the descriptions thereof contained in
the Memorandum. Except as set forth in the Memorandum, on
the Closing Date there will be no outstanding options or
warrants for the purchase of, or other outstanding rights to
purchase, Common Stock or securities convertible into shares
of Common Stock.
Authorization of Shares and Warrant Shares.
The issuance and sale of the Shares and the Warrant Shares
have been duly authorized, and when the Shares and the
Warrant Shares have been issued and duly delivered against
payment therefor as contemplated by this Agreement or by the
Warrants, as the case may be, the Shares and the Warrant
Shares will be validly issued, fully paid and nonassessable,
and the holders thereof will not be subject to personal
liability solely by reason of being such holders. The
Shares and the Warrant Shares will not be subject to
preemptive rights of any security holder of the Company.
Authorization of Placement Agent Warrant
Securities. The issuance and sale of the Shares and the
Warrant Shares included in the Placement Agent Warrants (the
"Placement Agent Warrant Securities") have been duly
authorized, and when the Placement Agent Warrant Securities
have been issued and duly delivered against payment therefor
as contemplated by the Placement Agent Warrant Agreement,
the Placement Agent Warrant Securities will be validly
issued, fully paid and nonassessable, and the holders
thereof will not be subject to personal liability solely by
reason of being such holders; provided, however, that no
-8-
representation or warranty is being made with respect to the
NASD's rules and regulations regarding the receipt of
compensation by members in connection with a public
offering, as such rules and regulations may relate to the
Placement Agent's receipt of the Placement Agent Warrants.
The Placement Agent Warrant Securities will not be subject
to preemptive rights of any security holder of the Company.
Noncontravention. Neither the Company nor the
Subsidiary is in violation of, or in default under, (i) any
term or provision of its Certificate of Incorporation or By-
Laws, as amended; (ii) any term or provision, or any
financial covenants, of any indenture, mortgage, contract,
commitment or other agreement or instrument to which it is a
party or by which it or any of its properties or business is
or may be bound or affected, except for any violation or
default which would not, singly or in the aggregate, have a
Material Adverse Effect; or (iii) any existing applicable
law, rule, regulation, judgment, order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the Company or the Subsidiary or any of
their respective properties or businesses, except for any
violation or default which would not, singly or in the
aggregate, have a Material Adverse Effect. The Company and
each Subsidiary owns, possesses or has obtained (or, with
respect to matters relating to the FCC and comparable state
and local regulatory authorities, has obtained or is in the
process of obtaining and has no reason to believe that it
will not obtain) all Permits necessary to own or lease, as
the case may be, and to operate this respective properties
and to conduct their respective businesses or operations as
currently conducted, except for such Permits, the failure to
obtain which will not, singly or in the aggregate, have a
Material Adverse Effect and all such Permits are outstanding
and in good standing (except for those Permits relating to
the FCC and comparable state and local regulatory matters
which the Company is in the process of obtaining and has no
reason to believe that it will not obtain), and there are no
proceedings pending or, to the best of the Company's knowl-
edge, threatened, nor, to its knowledge is there any basis
therefor, seeking to cancel, terminate or limit such
Permits.
Litigation. Except as set forth in the Memo-
randum, there are no claims, actions, suits, proceedings,
arbitrations, investigations or inquiries before any govern-
mental agency, court or tribunal, domestic or foreign, or
before any private arbitration tribunal, pending, or, to the
best of the Company's knowledge, threatened, against the
Company or any Subsidiary or involving the properties or
-9-
business of the Company or any Subsidiary, which, if deter-
mined adversely to the Company or any Subsidiary, would,
individually or in the aggregate, result in any Material
Adverse Effect, or which question the validity of the
capital stock of the Company, the capital stock of any
Subsidiary or this Agreement, or of any action taken or to
be taken by the Company pursuant to, or in connection with,
this Agreement; nor, to the best of the Company's knowledge,
is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. There
are no outstanding orders, judgments or decrees of any
court, governmental agency or other tribunal naming the
Company or any Subsidiary and enjoining the Company or any
Subsidiary from taking, or requiring the Company or any
Subsidiary to take, any action, or to which the Company or
any Subsidiary or their respective properties or business is
bound or subject.
Financial Statements. KPMG Peat Marwick LLP
the accountants who have rendered a report with respect to
the financial statements for the year ended December 31,
1994 and 1995 included in the Company's Prospectus dated
August 11, 1995 and the Company's Annual Report on Form 10-
KSB for the year ended December 31, 1995 (each included as
Exhibits to the Memorandum), respectively, are independent
certified public accountants within the meaning of the Act
and regulations promulgated under the Act (the "Regula-
tions"). The financial statements and schedules and notes
thereto included in the Memorandum are correct and present
fairly the financial position of the Company as of the dates
thereof, and the results of operations and changes in
financial position of the Company for the periods indicated
therein (subject, in the case of unaudited financial
statements, to normal, recurring and certain other
adjustments), all in conformity with generally accepted
accounting principles applied ("GAAP") on a consistent basis
throughout the periods involved, except as otherwise stated
in the Memorandum and, provided, however that the Company
makes no representation or warranty as to the summary pro
forma financial information set forth on page 6 of the
Memorandum, except that such information was prepared by the
Company based upon what, in its opinion, was the best
information available to it at that time.
Liabilities. Except as and to the extent
reflected or reserved against in the financial statements of
the Company and the financial statements of the Global Link
included in the Memorandum, neither the Company as at
December 31, 1995 nor Global Link as at September 30, 1995,
had any material liabilities, debts, obligations or claims
-10-
asserted against it, whether accrued, absolute, contingent
or otherwise, and whether due or to become due, including,
but not limited to, liabilities on account of taxes, other
governmental charges or lawsuits brought subsequent to such
date, which would be required to be reflected or reserved
against in such financial statements by GAAP, except for
those which would not, singly or in the aggregate, have a
Material Adverse Effect. Except as disclosed in the
Memorandum, subsequent to September 30, 1995, neither the
Company nor any Subsidiary has incurred liabilities or debts
or obligations of any nature whatsoever other than those
incurred in the ordinary course of its business and, except
for those which would not have a Material Adverse Effect.
Taxes. Except as set forth on Schedule 5(m),
each of the Company and each Subsidiary has filed all
federal tax returns and all state and municipal and local
tax returns (whether relating to income, sales, franchise,
withholding, real or personal property or other types of
taxes) required to be filed or has duly obtained extensions
of time for the filing thereof, and has paid all taxes shown
on such returns and all assessments received by it to the
extent that the same have become due; and the provisions for
income taxes payable, if any, shown on the consolidated
financial statements contained in the Memorandum are
sufficient for all accrued and unpaid foreign and domestic
taxes, whether or not disputed, and for all periods to and
including the dates of such consolidated financial
statements. Each of the tax returns heretofore filed by the
Company and the Subsidiary correctly and accurately reflects
in all material respects the amount of its tax liability
thereunder. Each of the Company and the Subsidiary has
withheld, collected and paid all other material levies,
assessments, license fees and taxes to the extent required
and, with respect to payments, to the extent that the same
have become due and payable. Except as disclosed in writing
to the Placement Agent, neither the Company nor the
Subsidiary has executed or filed with any taxing authority,
foreign or domestic, any agreement extending the period for
assessment or collection of any income taxes and is not a
party to any pending action or proceeding by any foreign or
domestic governmental agency for assessment or collection of
taxes; and no claims for assessment or collection of taxes
have been asserted against the Company or the Subsidiary.
Properties. Each of the Company and the
Subsidiary has good and marketable title in fee simple to
all real property and good title to all personal property
(tangible and intangible) owned by it, free and clear of all
security interests, charges, mortgages, liens, encumbrances
-11-
and defects, except such as are described in the Memorandum
or such as do not materially affect the value or transfera-
bility of such property and do not interfere with the use of
such property made, or proposed to be made, by the Company
or the Subsidiary. The leases, licenses or other contracts
or instruments under which the Company or the Subsidiary
leases, holds or is entitled to use any property, real or
personal, are valid, subsisting and enforceable only with
such exceptions as are set forth in the Memorandum or are
not material and do not interfere with the use of such
property made, or proposed to be made, by the Company or the
Subsidiary, and, except as set forth in the Memorandum, all
rentals, royalties or other payments accruing thereunder
which became due prior to the date of this Agreement have
been duly paid, and neither the Company nor the Subsidiary
nor, to the best of the Company's knowledge, any other party
is in default thereunder and, to the best of the Company's
knowledge, no event has occurred which, with the passage of
time or the giving of notice, or both, would constitute a
default thereunder, except, in each case, for non-payments
or defaults which, singly or in the aggregate, would not
have a Material Adverse Effect. Neither the Company nor the
Subsidiary has received notice of any violation of any
applicable law, ordinance, regulation, order or requirement
relating to its owned or leased properties. Each of the
Company and the Subsidiary has adequately insured its
properties against loss or damage by fire or other casualty
and maintains, in adequate amounts, such other insurance as
is usually maintained by companies engaged in the same or
similar businesses located in its geographical area.
Contracts. Each contract or other instrument
(however characterized or described) to which the Company or
any Subsidiary is a party or by which their respective
properties or businesses is or may be bound or affected and
to which reference is made in the Memorandum has been duly
and validly executed, is in full force and effect in all
material respects and is enforceable against the parties
thereto in accordance with its terms, except as set forth in
the Memorandum, and none of such contracts or instruments
has been assigned by the Company or the Subsidiary and
neither the Company nor any of the Subsidiary nor, to the
best of the Company's knowledge, any other party is in
default thereunder, except for such defaults which, singly
or in the aggregate, would not have a Material Adverse
Effect, and, to the best of the Company's knowledge, no
event has occurred which, with the lapse of time or the
giving of notice, or both, would constitute a default there-
under, except for such defaults which, singly or in the
aggregate, would not have a Material Adverse Effect.
-12-
None of the material provisions of such contracts
or instruments violates any existing applicable law, rule,
regulation, judgment/order or decree of any governmental
agency or court having jurisdiction over the Company or of
the Subsidiary or any of their respective assets or
businesses.
Employment Agreements. The employment and
confidentiality and non-competition agreements between the
Company and each Subsidiary and their respective officers,
described in the Memorandum are binding and enforceable
obligations upon the respective parties thereto in
accordance with their respective terms, except (i) as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally, (ii) as
enforceability of any indemnification provision may be
limited under the federal and state securities laws and
(iii) subject to principles of equity.
Benefit Plans. Except as set forth in the
Memorandum, the Company has no employee benefit plans
(including, without limitation, profit sharing and welfare
benefit plans) or deferred compensation arrangements that
are subject to the provisions of the Employee Retirement
Income Security act of 1974.
Contributions. The Company has not, directly
or indirectly, at any time (i) made any contributions to any
candidate for political office, or failed to disclose fully
any such contribution in violation of law or (ii) made any
payment to any state, federal or foreign governmental offi-
cer or official, or other person charged with similar public
or quasi-public duties, other than payments or contributions
required or allowed by applicable law. The Company's in-
ternal accounting controls and procedures are sufficient to
cause the Company to comply in all material respects with
the Foreign Corruption Practices Act of 1977, as amended.
Reg D Qualification; Offering Documents.
Subject to the truth and accuracy of the Placement Agent's
representations and warranties in this Agreement and the
Subscribers' representations and warranties in the
Subscription Agreements, the offer and sale of the Units by
the Company has satisfied and on each Closing Date will have
satisfied, all of the requirements of Reg D and the Company
is not disqualified from the exemption under Rule 505
contained in Reg D by virtue of the disqualifications
contained in Rule 505(b)(2)(iii), or the exemption under Reg
D by virtue of the disqualification contained in Rule 507.
-13-
The Memorandum conform in all material respects with the
requirements of Reg D.
Finder's Fee. The Company has not incurred
any liability for any finder's fees or similar payments
(excluding payments to the Placement Agent) in connection
with the transactions herein contemplated.
Intangibles. Each of the Company and each
Subsidiary owns or possesses adequate and enforceable rights
to use all patents, patent applications, trademarks, service
marks, copyrights, rights, trade secrets, confidential
information, processes and formulations used or proposed to
be used in the conduct of its business as described in the
Memorandum (collectively the "Intangibles"), except when the
failure to possess such rights would have a Material Adverse
Effect; to the best of the Company's knowledge neither the
Company nor any Subsidiary has infringed or is infringing
upon the rights of others with respect to the Intangibles,
and neither the Company nor any Subsidiary has received any
notice that it has or may have infringed or is infringing
upon the rights of others with respect to the Intangibles,
and neither the Company nor any Subsidiary has received any
notice of conflict with the asserted rights of others with
respect to the Intangibles (except for such infringements or
conflicts which, singly or in the aggregate, would not have
a Material Adverse Effect) results of operations and neither
the Company nor any Subsidiary knows of any basis therefor;
and, to the best of the Company's knowledge, no others have
infringed upon the Intangibles.
Labor Relations. To the best of the Company's
knowledge, no labor problem exists with any of the Company's
employees or is imminent which could adversely affect the
Company.
Insurance. The Company has adequately insured
its properties against loss or damage by fire or other
casualty and maintains, in adequate amounts, such other
insurance, including but not limited to, liability
insurance, as is usually maintained by companies engaged in
the same or similar businesses.
No Adverse Change. Since the respective dates
as of which information is given in the Memorandum and the
Company's and the Subsidiary's latest financial statements,
the Company has not incurred any material liability or
obligation, direct or contingent, or entered into any
material transaction, whether or not in the ordinary course
of business, and has not sustained any material loss or
-14-
interference with its business from fire, storm, explosion,
flood or other casualty, whether or not covered by
insurance, or from any labor dispute or court or
governmental action, order or decree, other than continuing
losses from operations subsequent to the dates of such
financial statements; and since the respective dates as of
which information is given in the Memorandum, there have not
been, and prior to the Closing Date there will not be, any
material changes in the capital stock or any material
increases in the long-term debt of the Company or any
material adverse change in or affecting the general affairs,
management, financial condition, stockholders' equity (other
than as a result of continuing losses from operations),
results of operations or prospects of the Company, otherwise
than as set forth or contemplated in the Memorandum.
The Company satisfies the requirements of
the National Association of Securities Dealers, Inc. for the
continued inclusion of the Common Stock and the Warrants in
the Nasdaq Small-Cap Market.
Any certificate signed by an officer of the Com-
pany and of the Subsidiary and delivered to the Placement
Agent, or to counsel for the Placement Agent, shall be
deemed to be a representation and warranty by the Company to
the Placement Agent as to the matters covered thereby.
Covenants.
Memorandum. The Company will furnish the
Placement Agent, without charge, during the offering, as
many copies of the Memorandum (and any amended or supple-
mental Memorandum) as the Placement Agent may reasonably
request. If during the offering period any event occurs as
the result of which the Memorandum, as then amended or
supplemented, would include an untrue statement of a ma-
terial fact, or omit to state a material fact necessary in
order to make the statements made in light of the circum-
stances in which they were made not misleading, or if it
shall be necessary to amend or supplement the Memorandum to
comply with applicable law, the Company will forthwith
notify the Placement Agent thereof, and furnish to the
Placement Agent in such quantities as may be reasonably re-
quested, an amendment or amended or supplemented Memorandum
which corrects such statements or omissions or causes the
Memorandum to comply with applicable law.
State Securities Registration. The Company
will provide Placement Agent's counsel with all information
which such counsel determines to be necessary and otherwise
-15-
cooperate with such counsel, to permit such counsel to take
all necessary action and file all necessary forms and docu-
ments in order to qualify or register the Units for sale
under the securities laws of the states in which offers or
sales will be made or to take any necessary action and file
any necessary forms which are required to obtain an exemp-
tion from such qualification or registration in such juris-
dictions. The Company will promptly advise the Placement
Agent:
If any securities regulator of any
state shall make a request or suggestion of or to the
Company of any amendment to the Memorandum or any
registration materials or for any additional informa-
tion, including the nature and substance thereof; and
Of the issuance of a stop order
suspending the qualification of the Units for sale in
any state, including the initiation or threatening of
any proceeding for such purpose, and the Company will
use its best efforts to prevent the issuance of such a
stop order, or if such an order shall be issued, to
obtain the withdrawal thereof at the earliest prac-
ticable date.
The Company will provide the Placement Agent for delivery to
all offerees and purchasers and their representatives any
additional information, documents and instruments which the
Placement Agent shall deem necessary to comply with the rules,
regulations and judicial and administrative interpretations in
those states and jurisdictions where the Units are to be offered
for sale or sold. Upon the request of the Placement Agent or its
counsel, the Company will file all post-offering forms, documents
or materials and take all other actions required by states in
which the Units have been offered or sold. The Placement Agent
will not make offers or sales of the Units in any jurisdiction in
which the Units have not been qualified or registered, or are not
exempt from such qualification or registration.
Reg D Compliance. The Company and the Placement
Agent will comply in all respects with the terms and conditions
of Reg D and applicable state securities laws with respect to the
offering and the sale of the Units only to "accredited investors"
as set forth in the Memorandum.
Restriction on Issuance of Securities. During the
period commencing on the date hereof and terminating at the time
of the Final Closing Date or termination of the proposed
offering, the Company will not, without the prior written consent
of the Placement Agent, issue additional shares of Common Stock
-16-
or issue or grant warrants, options or other securities of the
Company for the purchase of, exchangeable for or convertible into
shares of Common Stock, other than options granted pursuant to
the Company's stock option plan with exercise prices equal to or
greater than the fair market value of the Common Stock on the
date of issuance.
No Anti-Dilution Adjustment. The issuance of the
securities comprising the Units will not give any holder of any
of the Company's outstanding options, warrants, or other
convertible securities or rights to purchase shares of Common
Stock, the right to purchase any additional shares of Common
Stock and/or the right to purchase shares at a reduced price.
Restrictions on Regulation S Offerings. For a
period of three years from the Initial Closing Date, the Company
will not offer or sell any of its securities pursuant to
Regulation S promulgated under the Act, without the prior written
consent of the Placement Agent.
Notices of Issuances. For a period of three years
following the Initial Closing Date, the Company will provide to
the Placement Agent two business day's written notice prior to
any issuance by the Company or its subsidiaries of any equity
securities or securities exchangeable for or convertible into
equity securities of the Company, except for (i) shares of Common
Stock issuable upon exercise of currently outstanding options and
warrants or conversion of currently outstanding convertible
securities and (ii) options available for future grant pursuant
to any stock option plan in effect on the Initial Closing Date.
Registration Rights. The Company will include in
the Registration Statement (as defined in the Registration Rights
Agreement) all of the shares of Common Stock issuable upon
exercise of the warrants described in the last paragraph under
the caption "Terms of the Offering - Plan of Distribution" in the
Memorandum to the extent required by the terms of such warrants.
Representations, Warranties and Covenants of the
Placement Agent. The Placement Agent represents, warrants and
covenants that:
(a) Neither the Placement Agent nor any,
principal, officer, director or agent thereof is disqualified
from the exemption under Rule 505 contained in Reg D by virtue of
the disqualifications contained in Rule 505(b)(2)(iii).
(b) The Placement Agent is registered as a broker-
dealer under Section 15 of the Securities Exchange Act of 1934.
-17-
(c) The Placement Agent is a member in good
standing of the NASD.
(d) Sales of Units by the Placement Agent will be
made only in such jurisdictions (i) in which the Placement Agent
is a registered broker-dealer or where an applicable exemption
from such registration exists and (ii) the offering and sale of
Units is registered under, or is exempt from, applicable
registration requirements.
(e) Offers and sales of Units by the Placement
Agent will be made in compliance with the provisions of Rule
502(c) of Reg D and the Placement Agent will furnish to each
investor a copy of the Memorandum prior to accepting any payments
for Units. The Placement Agent will not provide prospective
investors with any materials other than the Memorandum.
(f) There are no actions, proceedings, claims or
hearings or any kind or nature existing or pending (or, to the
best knowledge of the Placement Agent, threatened) or, to the
best knowledge of the Placement Agent, any investigations or
inquiries, before or by any court or other governmental authority
against the Placement Agent, or involving the properties of the
Placement Agent, or which challenges the validity or
enforceability of this Agreement or the transactions contemplated
by this Agreement.
Conditions to Placement Agent's Obligations.
The obligations of the Placement Agent hereunder will be subject
to the accuracy of the representations and warranties of the
Company herein contained as of the date hereof and as of each
Closing Date, to the performance by the Company of its obliga-
tions hereunder and to the following additional conditions:
Due Qualification or Exemption. (A) The
offering contemplated by this Agreement will become
qualified or be exempt from qualification under the securi-
ties laws of the several states pursuant to Section 6(b)
above not later than the Initial Closing Date, and (B) at
the Closing Date no stop order suspending the sale of the
Units shall have been issued, and no proceeding for that
purpose shall have been initiated or threatened;
No Material Misstatements. The Place-
ment Agent will not have notified the Company that the Blue
Sky qualification materials or the Memorandum, or any
supplement thereto, contains an untrue statement of a fact
which in its opinion is material, or omits to state a fact,
which in its opinion is material and is required to be
-18-
stated therein, or is necessary to make the statements
therein not misleading;
Compliance with Agreements. The
Company will have complied with all agreements and satisfied
all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date;
Corporate Action. The Company will
have taken all necessary corporate action, including, with-
out limitation, obtaining the approval of the Company's
board of directors, for the execution and delivery of this
Agreement, the performance by the Company of its obligations
hereunder and the commencement of the offering contemplated
hereby;
Certificate of Officer. At the Initial
Closing Date and any Additional Closing Date, the Company
will have delivered a certificate of its President or Chief
Executive Officer to the effect set forth in the preamble
and subparagraphs (ii), (iii) and (iv) of this paragraph
(a);
Opinion of Counsel. On each Closing
Date, the Placement Agent will have received from Graubard,
Mollen & Miller, counsel to the Company ("Company Counsel")
Helen Hall, special FCC counsel to the Company, and/or
Kluger, Peretz, Kaplan & Berlin, P.A., special intellectual
property counsel to the Company, signed opinions, dated as
of such Closing Date, substantially in the form attached as
Exhibit A hereto.
Conditions of the Company's Obligations. The
obligations of the Company hereunder will be subject to the
accuracy of the representations and warranties of the Placement
Agent contained herein as of the date hereof and as of the
Closing Date, to the performance by the Placement Agent of its
obligations hereunder and to the following additional conditions:
Approval of Investors. The Company
shall have approved, which approval shall not be
unreasonably withheld, each purchaser of Units;
Absence of Certain Events. No stop
order suspending the sale of the Units will have been
issued, and no proceeding for that purpose will have been
initiated or threatened; and
No Material Misstatements. The
Company will not have notified the Placement Agent that the
-19-
Blue Sky qualification materials, or the Memorandum, or any
amendment or supplement thereto, contains an untrue
statement of a fact, which in its opinion is material, or
omits to state a fact, which in its opinion is material and
is required to be stated therein or is necessary to make the
statements therein not misleading, in each case only with
respect to information contained therein concerning the
Placement Agent.
Expenses of Sale. In addition to those items
referred to in subsections 4(a) and 4(b) hereof, the Company will
pay or cause to be paid all costs and expenses incident to the
proposed sale of Units, whether or not the offering contemplated
hereby is consummated, including, without limitation, the fees,
disbursements and expenses of (a)its counsel and accountants,
(b) preparing, printing, or otherwise reproducing the Memorandum
and other appropriate documents, and any amendments or
supplements thereto (all in such quantities as the Placement
Agent may require), (c) registering or qualifying the Units for
offer and sale in the applicable states, as specified by the
Placement Agent, or obtaining exemptions therefrom, and the fees,
expenses and disbursements of the Placement Agent, including
those fees (up to $5,000, which has already been paid), which has
already been paid, expenses and disbursements of Placement
Agent's counsel in connection therewith, (d) all taxes, if any,
on the issuance of the Units, and (e) all other expenses incurred
by the Company relating to the offering of the Units.
Indemnification and Contribution.
Indemnification by the Company. The Company
agrees to indemnify and hold harmless the Placement Agent
and each person, if any, who controls the Placement Agent
within the meaning of the Act or the Exchange Act against
any losses, claims, damages or liabilities, joint or
several, to which the Placement Agent or such controlling
person may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of a
material fact contained (A) in the Memorandum, or (B) in any
blue sky application or other document executed by the
Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or
other jurisdiction in order to qualify any or all of the
Units under the securities laws thereof (any such applica-
tion, document or information being hereinafter called a
"Blue Sky Application"), or (ii) the omission or alleged
omission to state in the Memorandum or in any Blue Sky
Application a material fact required to be stated therein or
-20-
necessary to make the statements therein not misleading; and
will reimburse the Placement Agent and each such controlling
person for any legal or other expenses reasonably incurred
by the Placement Agent or such controlling person in
connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that
the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information
furnished to the Company by the Placement Agent specifically
for use with reference to the Placement Agent in the
preparation of the Memorandum or any such Blue Sky
Application.
Indemnification by the Placement Agent. The
Placement Agent agrees to indemnify and hold harmless the
Company and each person, if any, who controls the Company
within the meaning of the Act and the Exchange Act against
any losses, claims, damages or liabilities, joint or
several, to which the Company or such controlling person may
become subject, under the Act or otherwise insofar as such
losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material
fact contained (A) in the Memorandum, or (B) in any Blue Sky
Application, or (ii) the omission or alleged omission to
state in the Memorandum or in any Blue Sky Application a
material fact required to be stated therein or necessary to
make the statements therein not misleading; in each case to
the extent but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with
written information furnished to the Company by the
Placement Agent specifically for use with reference to the
Placement Agent in the preparation of the Memorandum or any
such Blue Sky Application.
Procedure. Promptly after receipt by an
indemnified party under this Section 10 of notice of the
commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against any
indemnifying party under this Section 10, notify in writing
the indemnifying party of the commencement thereof; and the
omission so to notify the indemnifying party will relieve it
from any liability under this Section 10 as to the
particular item for which indemnification is then being
sought, but not from any other liability which it may have
to any indemnified party. In case any such action is
-21-
brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein,
and to the extent that it may wish, jointly with any other
indemnifying party, similarly notified, to assume the
defense thereof, with counsel who shall be to the reasonable
satisfaction of such indemnified party, and after notice
from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under
this Section 10 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of
investigation; provided, however, that if, in the reasonable
judgment of the indemnified party, it is advisable for the
indemnified party to be represented by separate counsel, the
indemnified party shall have the right to employ a single
counsel to represent the indemnified parties who may be
subject to liability arising out of any claim in respect of
which indemnity may be sought by the indemnified parties
thereof against the indemnifying party, in which event the
fees and expenses of such separate counsel shall be borne by
the indemnifying party. Any such indemnifying party shall
not be liable to any such indemnified party on account of
any settlement of any claim or action effected without the
consent of such indemnifying party which consent shall not
be unreasonably withheld.
Contribution. If the indemnification provided
for in this Section 10 is unavailable to any indemnified
party in respect to any losses, claims, damages, liabilities
or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, will
contribute to the amount paid or payable by such indemnified
party, as a result of such losses, claims, damages, liabili-
ties or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the
one hand, and the Placement Agent on the other hand, from
the offering of the Units, or (ii) if the allocation pro-
vided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above
but also the relative fault of the Company on the one hand,
and of the Placement Agent on the other hand, in connection
with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses as well as
any other relevant equitable considerations. The relative
benefits received by the Company on the one hand, and the
Placement Agent on the other hand, shall be deemed to be in
the same proportion as the total proceeds from the offering
-22-
(net of sales commissions, but before deducting expenses)
received by the Company, bear to the commissions received by
the Placement Agent. The relative fault of the Company on
the one hand, and the Placement Agent on the other hand,
will be determined with reference to, among other things,
whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to
information supplied by the Company, and its relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount
payable by a party as a result of the losses, claims,
damages, liabilities or expenses referred to above will be
deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with inves-
tigating or defending any action or claim.
Equitable Considerations. The Company and
the Placement Agent agree that it would not be just and
equitable if contribution pursuant to this Section 10 were
determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable
considerations referred to in the immediately preceding
paragraph.
Representations and Agreements to Survive Deli-
very. All representations, warranties and agreements of the
Company and of the Placement Agent herein will survive the
delivery and execution hereof and the closings hereunder, and
shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Placement Agent or
any person who controls the Placement Agent within the meaning of
the Act, or by the Company or any person who controls the Company
within the meaning of the Act, and will survive delivery of the
Securities constituting the Units hereunder and any termination
of this Agreement.
Termination by Placement Agent. The Placement
Agent will have the right to terminate this Agreement by giving
written notice as herein specified, at any time, at or prior to
the Initial Closing Date or any Additional Closing Date:
If the Company shall have failed, refused, or
been unable at or prior to the date of termination of this
Agreement, to perform any of its material obligations
hereunder;
If any other material condition of the
Placement Agent's obligations hereunder is not fulfilled; or
-23-
There has occurred an event materially or
adversely affecting the value of the Units.
If the Placement Agent elects to terminate this Agree-
ment pursuant to subsection 12(a), (b) or (c) hereof, the Company
will be notified promptly by telephone, telecopier or telegram,
and such notification will be confirmed by notice as provided for
in Section 13 hereof.
Notwithstanding the foregoing, nothing contained
in this Section 12 shall imply that the Placement Agent has
undertaken any commitment to sell the Units other than to use its
best efforts.
Notices. Any notice hereunder shall be in writing
and shall be effective when delivered in person, or mailed by
certified or registered mail, postage prepaid, return receipt
requested, to the appropriate party or parties, at the following
addresses: if to the Placement Agent, to Whale Securities Co.,
L.P., Attention: William G. Walters, Chairman, with a copy to
Tenzer Greenblatt LLP, 405 Lexington Avenue, New York, New York
10174, Attention: Robert J. Mittman, Esq.; if to the Company, to
Global Telecommunication Solutions, Inc., 5697 Rising Sun Avenue,
Philadelphia, Pennsylvania 19102, Attention: David Tobin, General
Counsel, with a copy to Graubard, Mollen & Miller, 660 Third
Avenue, New York, New York 10016, Attention: David A. Miller,
Esq.; or, in each case, to such other address as the parties may
hereinafter designate by like notice.
Parties. This Agreement will inure to the benefit
of and be binding upon the Placement Agent, the Company and their
respective successors and assigns. This Agreement is intended to
be, and is for the sole and exclusive benefit of the parties
hereto and the persons described in subsections 10(a) and 10(b)
hereof, and their respective successors and assigns, and for the
benefit of no other person, and no other person will have any
legal or equitable right, remedy or claim under, or in respect of
this Agreement. No purchaser of any of the Units will be con-
strued as successor or assign merely by reason of such purchase.
Amendment and/or Modification. Neither this
Agreement, nor any term or provision hereof, may be changed,
waived, discharged, amended, modified or terminated orally, or in
any manner other than by an instrument in writing signed by each
of the parties hereto.
Further Assurances. Each party to this Agreement
will perform any and all acts and execute any and all documents
as may be necessary and proper under the circumstances in order
-24-
to accomplish the intents and purposes of this Agreement and to
carry out its provisions.
Validity. In case any term of this Agreement will
be held invalid, illegal or unenforceable, in whole or in part,
the validity of any of the other terms of this Agreement will not
in any way be affected thereby.
Waiver of Breach. The failure of any party hereto
to insist upon strict performance of any of the covenants and
agreements herein contained, or to exercise any option or right
herein conferred in any one or more instances, will not be
construed to be a waiver or relinquishment of any such option or
right, or of any other covenants or agreements, and the same will
be and remain in full force and effect.
Entire Agreement. This Agreement contains the
entire agreement and understanding of the parties with respect to
the entire subject matter hereof, and there are no representa-
tions, inducements, promises or agreements, oral or otherwise,
not embodied herein. Any and all prior discussions, negotia-
tions, commitments and understanding relating thereto, including
without limitation, that certain letter of intent dated May 12,
1995 between the Company and the Placement Agent, are superseded
hereby. There are no conditions precedent to the effectiveness
of this Agreement other than as stated herein, and there are no
related collateral agreements existing between the parties that
are not referred to herein.
Counterparts. This Agreement may be executed in
counterparts and each of such counterparts will for all purposes
be deemed to be an original, and such counterparts will together
constitute one and the same instrument.
Law. This Agreement will be deemed to have been
made and delivered in New York City and will be governed as to
validity, interpretation, construction, effect and in all other
respects by the internal laws of the State of New York. The
Company (a) agrees that any legal suit, action or proceeding
arising out of or relating to this letter will be instituted
exclusively in New York State Supreme Court, County of New York,
or in the United States District Court for the Southern District
of New York, (b) waives any objection which the Company may have
now or hereafter to the venue of any such suit, action or pro-
ceeding, and (c) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York and the United
States District Court for the Southern District of New York in
any such suit, action or proceeding. The Company further agrees
to accept and acknowledge service of any and all process which
may be served in any such suit, action or proceeding in the New
-25-
York State Supreme Court, County of New York or in the United
States District Court for the Southern District of New York and
agrees that service of process upon the Company mailed by certi-
fied mail to the Company's address will be deemed in every
respect effective service of process upon the Company, in any
suit, action or proceeding.
If the foregoing correctly sets forth our understand-
ing, please so indicate in the space provided below for that
purpose, whereupon this letter will constitute a binding
agreement between us.
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By:
Name:
Title:
CONFIRMED AND ACCEPTED:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By:
Name:
Title:
-26-
EXHIBIT A
(A) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of Delaware, with
full corporate power and authority to own or lease and operate
its properties and to conduct its business as described in the
Memorandum. The Company has no subsidiary other than the
Subsidiaries, each a corporation duly organized and validly
existing under the laws of its jurisdiction of incorporation.
Unless the context otherwise requires, all references to the
"Company" in this opinion shall include the Subsidiaries. Each
of the Company and each Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in all
jurisdictions wherein such qualification is necessary and the
failure to so qualify could have a Material Adverse Effect.
Each Subsidiary has the corporate power and authority to own or
lease and operate its properties and to conduct its business as
described in the Memorandum. Based solely upon our review of the
stock records of the Subsidiaries, the Company owns all of the
outstanding capital stock of the Subsidiary free and clear of all
liens, security interests and other encumbrances of any nature
whatsoever, except as set forth in the Memorandum.
(B) The Company has full corporate and authority to
execute, deliver and perform the Placement Agent Agreement, the
Registration Rights Agreements, the Subscription Agreements, the
Warrants and the Placement Agent Warrants and to consummate the
transactions contemplated thereby. The execution, delivery and
performance of the Placement Agent Agreement, the Registration
Rights Agreements, the Subscription Agreements, the Warrants and
the Placement Agent Warrants by the Company, the consummation by
the Company of the transactions therein contemplated, the
compliance by the Company with the terms of the Placement Agent
Agreement, the Registration Rights Agreements, the Subscription
Agreements, the Warrants and the Placement Agent Warrants and the
issuance and sale of the Units and the Placement Agent Warrants
have been duly authorized by all necessary corporate action, and
each of the Placement Agent Agreement, the Registration Rights
Agreements, the Subscription Agreements, the Warrants and the
Placement Agent Warrants have been duly executed and delivered by
the Company. Each of the Placement Agent Agreement, the
Registration Rights Agreements and the Subscription Agreements
(assuming for the purposes of this opinion that each is valid and
binding upon the other party thereto), the Warrants and the
Placement Agent Warrants is the valid and binding obligation of
the Company, enforceable in accordance with its terms, subject,
as to enforcement of remedies, to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws
-27-
affecting the rights of creditors generally and the discretion of
courts in granting equitable remedies, except that enforceability
of the indemnification provisions and the contribution provisions
set forth in the Placement Agent Agreement may be limited by the
federal securities laws of the United States or public policy
underlying such laws and provided that Company Counsel need not
express any opinion as to the enforceability of Section 6(g) of
the Placement Agent Agreement. The Units, the Shares and the
Warrants conform in all material respects to the descriptions
thereof contained in the Memorandum, provided, however, that
Company Counsel expresses no opinion as to the applicability of
the NASD's rules and regulations regarding the receipt of
compensation by members in connection with a public offering, as
such rules and regulations may relate to the Placement Agent's
receipt of the Placement Agent Warrants.
(C) The execution, delivery and performance of the
Placement Agent Agreement, the Registration Rights Agreements,
the Subscription Agreements, the Warrants and the Placement Agent
Warrants by the Company, the consummation by the Company of the
transactions therein contemplated and the compliance by the
Company with the terms of the Placement Agent Agreement, the
Registration Rights Agreements, the Subscription Agreements, the
Warrants and the Placement Agent Warrants do not, and will not,
with or without the giving of notice or the lapse of time, or
both, (1) result in a violation of the Certificate of
Incorporation or By-Laws, as amended, of the Company or the
Subsidiary; (2) result in a breach of or conflict with any terms
or provisions of, or constitute a default under, or result in the
modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company pursuant to,
any indenture, mortgage, note, contract, commitment or other
agreement or instrument known to Company Counsel to which the
Company is a party or by which the Company or any of its
properties or assets are or may be bound or affected, except for
any such breach, default or conflict which would not, singly or
in the aggregate, have a Material Adverse Effect; (3) violate any
existing applicable law, rule, regulation, judgment, or, to
Company Counsel's knowledge, any order or decree of any
governmental agency or court, domestic or foreign, having
jurisdiction over the Company or any of its properties or
businesses, except for any violations which would not, singly or
in the aggregate, have a Material Adverse Effect; or (4) have any
Material Adverse Effect on any permit, certification,
registration, approval, consent, license or franchise necessary
for the Company to own or lease and operate any of its properties
and to conduct its business or the ability of the Company to make
use thereof.
-28-
(D) To Company Counsel's knowledge, no authorization,
approval, consent, order, registration, license or permit of any
court or governmental agency or body (other than (i) under the
Act (including the filing of a Form D thereunder), the
Regulations promulgated thereunder and applicable state
securities or Blue Sky laws, (ii) the filing of an additional
listing application with NASDAQ for inclusion of the Shares,
Warrants and Warrant Shares on NASDAQ) and (iii) the filing of
the registration statement required by the Registration Rights
Agreement, is required for the valid authorization, issuance,
sale and delivery of the securities comprising the Units to the
Subscribers therefor and the consummation by the Company of the
transactions contemplated by the Placement Agent Agreement, the
Registration Rights Agreements, the Subscription Agreements, the
Warrants and the Placement Agent Warrants.
(E) To Company Counsel's knowledge, no stop order relating
to the offering contemplated by the Memorandum and no proceedings
for that purpose have been instituted or are pending, threatened
or contemplated under applicable securities laws.
(F) The descriptions in the Memorandum of statutes,
regulations, government classifications, contracts, instruments
and other documents have been reviewed by Company Counsel, and,
based upon such review, are accurate in all material respects.
(G) The outstanding shares of Common Stock have been duly
authorized and validly issued. All such outstanding shares of
Common Stock are fully paid and nonassessable. The outstanding
options and warrants to purchase shares of Common Stock
constitute the valid and binding obligations of the Company,
enforceable in accordance with their terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification
provision may be limited under the federal and state securities
laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. None of such
outstanding shares of Common Stock, Preferred Stock or options or
warrants to purchase shares of Common Stock, has been issued in
violation of the preemptive rights of any security holder of the
Company pursuant to the Company's Certificate of Incorporation or
By-Laws or Delaware law nor, to Company Counsel's knowledge, in
violation of any contractual pre-emptive rights. None of the
holders of such outstanding shares of Common Stock or options or
warrants to purchase shares of Common Stock is subject to
personal liability solely by reason of being such a holder. The
offers and sales of such outstanding shares of Common Stock and
-29-
options and warrants to purchase shares of Common Stock were at
all relevant times either registered under the applicable
securities laws of the United States and the applicable state
securities or Blue Sky laws or exempt from such registration
requirements. The authorized shares of Common Stock and
Preferred Stock conform to the description thereof contained in
the Memorandum and, to the best of Company Counsel's knowledge,
there are no outstanding options, warrants or other rights
granted by the Company to purchase shares of Common Stock or
other securities, other than as described in the Memorandum.
(H) The issuance and sale of the Units, the Shares and the
Warrants have been duly authorized and, when issued and duly
delivered against full payment therefor as contemplated by the
Placement Agent Agreement or Warrants, as the case may be, the
Shares and the Warrant Shares will be validly issued, fully paid
and nonassessable, and the holders thereof will not be subject to
personal liability solely by reason of being such holders. The
Shares and the Warrant Shares will not be subject to the
preemptive rights of any securityholder of the Company pursuant
to the Company's Certificate of Incorporation or By-Laws or
Delaware law nor, to Company Counsel's knowledge, in violation of
any contractual pre-emptive rights. The certificates
representing the Shares and the Warrant Shares when issued and
delivered by the transfer agent will be in proper legal form.
(I) The issuance and sale of the Warrants, the Placement
Agent's Warrants and the Underlying Warrants have been duly
authorized and, when paid for, issued and delivered pursuant to
the terms of Warrants or the Placement Agent's Warrants, as the
case may be, the Warrants, the Placement Agent's Warrants and the
Underlying Warrants will constitute the valid and binding
obligations of the Company, enforceable in accordance with their
terms, to issue and sell the Warrant Shares and/or the Underlying
Warrants and Underlying Shares, except (i) as such enforceability
may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification provision may be limited
under the federal and state securities laws, and (iii) that the
remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to
the discretion of the court before which any proceeding therefor
may be brought, and provided, however that Company Counsel
expresses no opinion as to the applicability of the NASD's rules
and regulations regarding the receipt of compensation by members
in connection with a public offering, as such rules and
regulations may relate to the Placement Agent's receipt of the
Placement Agent Warrants.
-30-
(J) Upon delivery of the securities comprising the Units to
the Subscribers against full payment therefor as provided in the
Placement Agent Agreement, the Subscribers (assuming they are
bona fide purchasers within the meaning of the Uniform Commercial
Code) will acquire good title to the securities free and clear of
all liens, encumbrances, equities, security interests and claims,
other then such liens, encumbrances, equities, security interests
or claims placed on the securities by the Subscriber therefor.
(K) The issuance and sale of the Placement Agents, the
Shares (the "Placement Agent Warrant Shares") and the Warrants
(the "Underlying Warrants") and the shares of Common Stock
issuable upon exercise of the Underlying Warrants (the
"Underlying Shares") included in the Placement Agent Warrants,
have been duly authorized and, when issued and duly delivered
against full payment therefor as contemplated by the Placement
Agent Warrant Agreement, the Placement Agent Warrant Shares and
the Underlying Shares will be validly issued, fully paid and
nonassessable, and the holders thereof will not be subject to
personal liability solely by reason of being such holders. The
Placement Agent Warrant Shares and the Underlying Shares will not
be subject to the preemptive rights of any securityholder of the
Company pursuant to the Company's Certificate of Incorporation or
By-Laws or Delaware law nor, to Company Counsel's knowledge, in
violation of any contractual pre-emptive rights. The
certificates representing the Placement Agent Warrant Shares and
the Underlying Shares when issued and delivered by the transfer
agent will be in proper legal form.
(L) Upon delivery of the securities comprising the
Placement Agent Warrants the Placement Agent (assuming it is a
bona fide purchaser within the meaning of the Uniform Commercial
Code) will acquire good title to the securities free and clear of
all liens, encumbrances, equities, security interests and claims,
other then such liens, encumbrances, equities, security interests
or claims placed on the securities by the Placement Agent
therefor.
(M) To Company Counsel's knowledge, after due
investigation, there are no claims, actions, suits, proceedings,
arbitrations, investigations or inquiries before any governmental
agency, court or tribunal, foreign or domestic, or before any
private arbitration tribunal, pending or threatened against the
Company, or involving its properties or business, other than as
described in the Memorandum and other than litigation incident to
the kind of business conducted by the Company which, individually
and in the aggregate, is not material.
(N) To Company Counsel's knowledge, after due
investigation, the Company has not infringed and is not
-31-
infringing upon, and counsel has received no notice to the effect
that the Company has infringed upon, the patents, patent
applications, trademarks, service marks, copyrights, trade
secrets, confidential information, processes and formulations
used or proposed to be used in the conduct of their businesses as
described in the Memorandum (collectively, the "Intangibles") of
others, and, to Company Counsel's knowledge, the Company has not
received any notice of conflict with the asserted rights of
others with respect to the Intangibles which might, singly or in
the aggregate, materially adversely affect its business, results
of operations or financial condition and such counsel is not
aware of any licenses with respect to the Intangibles which are
required to be obtained by the Company; and to the best of
Company Counsel's knowledge, no other party has infringed or is
infringing upon the Company's Intangibles and the Company has not
delivered to any other party any notice of conflict with its
assert rights with respect to its Intangibles.
(O) Company Counsel has inspected the questionnaires
delivered to and completed by Subscribers in connection with
their proposed investment in the Units. Assuming the truth and
accuracy of the representations and warranties of (i) the
Subscribers in the Subscription Agreements and (ii) the Placement
Agent and the Company in the Placement Agent Agreement, the
offering contemplated by the Placement Agent Agreement has been
made in compliance with Regulation D adopted under the Act.
(P) To Company Counsel's knowledge, the issuance of the
securities comprising the Units will not give any holder of the
Company's outstanding options, warrants or other convertible
securities or rights to purchase shares of Common Stock, the
right to purchase any additional shares of Common Stock and/or
the right to purchase shares at a reduced price.
Company Counsel has participated in reviews and discussions
in connection with the preparation of the Memorandum, and, in the
course of such reviews and discussions, no facts came to its
attention which lead it to believe that the Memorandum (except as
to the financial statements as to which Company Counsel need not
express an opinion), on the Closing Date, contained any untrue
statement of a material fact, or omitted to state any material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, except that (i) the description
of Global Link's business under the captions "Executive Summary -
Global Link" is merely a summary and a more detailed description
of Global Link's business is not described in the Memorandum; and
(ii) the most recent financial information provided for Global
Link is as of September 30, 1995; provided however, that Company
Counsel has no actual acknowledge of other information that could
-32-
reasonably be expected to be material to an investor or that is
inconsistent with the disclosure contained in the Memorandum.
In rendering its opinion, Company Counsel may rely upon the
certificates of government officials and officers of the Company
as to matters of fact; provided that Company Counsel shall state
that they have no reason to believe, and do not believe, that
they are not justified in relying upon such opinions or such
certificates of government officials and officers of the Company
as to matters of fact, as the case may be.
-33-
SCHEDULE 5(M)
1. Global Link has not filed federal excise tax
returns nor paid federal excise taxes in connection with the
operation of its prepaid calling card business.
2. Global Link has not filed any sales and use tax
returns with any state or local authorities nor paid any state or
local sales and use taxes in connection with the operation of its
prepaid calling card business. GTS has not filed such returns or
paid such taxes in certain states.
3. Global Link has not filed Federal Form 1120 with
the United States Internal Revenue Service nor has Global Link
filed any corporate tax returns with any states in which Global
Link operates.
4. Delaware claims that there is a deficiency in
Global Link's Delaware franchise taxes for 1995. Global Link
claims they owe approximately $40,000 less than what the state
alleges is owed.
The foregoing failures to file appropriate forms or pay
taxes will not have a Material Adverse Effect since the Company
has reserved for substantially all of any taxes it believes it
may owe.
-34-
WARRANT AGREEMENT dated as of __________, 1996 between
Global Telecommunication Solutions, a Delaware corporation (the
"Company"), and Whale Securities Co., L.P. (hereinafter referred
to as the "Placement Agent").
W I T N E S E T H:
WHEREAS, the Placement Agent has agreed, pursuant to
the agreement (the "Placement Agent Agreement") dated March 25,
1996 between the Placement Agent and the Company, to act, on a
"best efforts" basis, as the placement agent in connection with
the Company's proposed private placement (the "Private
Placement") of a minimum of 20 Units and a maximum of 30 Units at
an offering price of $100,000 per Unit;
WHEREAS, the Company proposes to issue to the Placement
Agent warrants (the "Warrants"), to purchase up to 10% of the
number of shares (the "Shares") of Common Stock, par value $.01
per share (the "Common Stock"), and Common Stock Purchase
Warrants (the "Underlying Warrants") (each as hereinafter defined
in Article 1 hereof) sold in the Private Placement; and
WHEREAS, the Warrants issued pursuant to this Agreement
are being issued by the Company to the Placement Agent or its
designees, in consideration for, and as part of the Placement
Agent compensation in connection with, the Placement Agent acting
as the Placement Agent pursuant to the Placement Agent Agreement;
NOW, THEREFORE, in consideration of the premises, the
agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
. Grant. The Placement Agent, and/or its designees,
who are hereby granted the right to purchase, at any time from
_____________, 1996 until 5:00 P.M., New York time, on _________,
2000 (the "Warrant Exercise Term"), up to 60,000 Shares and up to
120,000 Underlying Warrants at an initial exercise price (subject
to adjustment as provided in Article 6 hereof) of $6.00 per one
Share and two Underlying Warrants. The Warrants are exercisable
only on the basis of one share and two warrants (a "Placement
Agent Unit"). The Underlying Warrants are each exercisable to
purchase one fully-paid and non-assessable share of Common Stock
at a price of $4.00 per share (the "Underlying Warrant Shares").
The Underlying Warrants are exercisable until 5:00 P.M., New York
City time on December 14, 1999. The Underlying Warrants are in
all respects identical to the warrants being sold to the
investors in the Private Placement pursuant to the terms and
provisions of the Placement Agent Agreement.
. Warrant Certificates. The warrant certificates
(the "Warrant Certificates") delivered and to be delivered pur-
suant to this Agreement shall be in the form set forth in Exhibit
A attached hereto and made a part hereof, with such appropriate
insertions, omissions, substitutions and other variations as
required or permitted by this Agreement.
-2-
. Exercise of Warrant.
Cash Exercise. The Warrants initially are
exercisable at a price of $5.00 per Placement Agent Unit, payable
in cash or by check to the order of the Company, or any
combination of cash or check, subject to adjustment as provided
in Section 8 hereof. Upon surrender of the Warrant Certificate
with the annexed Form of Election to Purchase duly executed,
together with payment of the Exercise Price (as hereinafter
defined) for the Placement Agent Units purchased, at the
Company's principal executive offices in Elmont, New York
(currently located at 40 Elmont Road, Elmont, New York 11003) the
registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive after clearance of the
funds representing the Exercise Price a certificate or
certificates for the Shares so purchased and a certificate or
certificates for the Underlying Warrants so purchased. The
purchase rights represented by each Warrant Certificate are exer-
cisable at the option of the Holder hereof, in whole or in part
(but not as to fractional Shares or fractional Underlying
Warrants). In the case of the purchase of less than all the
Shares and Underlying Warrants purchasable under any Warrant
Certificate, the Company shall cancel said Warrant Certificate
upon the surrender thereof and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Shares
and Underlying Warrants purchasable thereunder.
-3-
Cashless Exercise. At any time during the
Warrant Exercise Term, the Holder may, at its option, exchange
this Warrant, in whole or in part (a "Warrant Exchange"), into
the number of shares of Common Stock and Underlying Warrants
determined in accordance with this Section 3.2, by surrendering
this Warrant at the principal office of the Company or at the
office of its transfer agent, accompanied by a notice stating
such Holder's intent to effect such exchange, the number of Units
to be exchanged and the date on which the Holder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The
Warrant Exchange shall take place on the date specified in the
Notice of Exchange or, if later, the date the Notice of Exchange
is received by the Company (the "Exchange Date"). Certificates
for the shares of Common Stock and Underlying Warrants issuable
upon such Warrant Exchange and, if applicable, a new warrant of
like tenor evidencing the balance of the Units remaining subject
to this Warrant, shall be issued as of the Exchange Date and
delivered to the Holder within three (3) days following the
Exchange Date. In connection with any Warrant Exchange, this
Warrant shall represent the right to subscribe for and acquire
(i) the number (the "Common Number") of shares of Common Stock
(rounded to the next highest integer) equal to the sum of (A) the
number of Shares to be exchanged (which may be no greater than
the number of shares purchasable under the Warrant), as specified
by the Holder in its Notice of Exchange (the "Total Share
-4-
Number") less (B) the number of Shares equal to the quotient
obtained by dividing (I) the product of the Total Share Number
and the existing Exercise Price (as hereinafter defined) by (II)
the current market value of a share of Common Stock, plus (ii)
the number of Underlying Warrants equal to two times the Common
Number.
. Issuance of Certificates.
Upon the exercise of the Warrants, the issuance of
certificates for the Shares purchased and certificates for the
Underlying Warrants purchased, and upon the exercise of the
Underlying Warrants, the issuance of certificates for the
Underlying Warrant Shares purchased shall be made forthwith (and
in any event within three business days thereafter) without
charge to the Holder thereof including, without limitation, any
tax which may be payable in respect of the issuance thereof
(other than income and similar taxes which may become payable by
the Holder), and such certificates shall (subject to the
provisions of Article 5 hereof) be issued in the name of, or in
such names as may be directed by, the Holder thereof; provided,
however, that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the
issuance and delivery of any such certificates in a name other
than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the
-5-
Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates
representing the Shares and the Underlying Warrants shall be
executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chairman or Vice Chairman
of the Board of Directors or President or Vice President of the
Company under its corporate seal reproduced thereon, attested to
by the manual or facsimile signature of the present or any future
Secretary or Assistant Secretary of the Company. Warrant
Certificates and certificates representing the Underlying
Warrants shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
Upon exercise, in part or in whole, of the Warrants,
certificates representing the Shares and the Underlying Warrants
purchased, and upon exercise, in whole or in part, of the
Underlying Warrants, certificates representing the Underlying
Warrant Shares purchased (collectively, the "Warrant
Securities"), shall bear a legend substantially similar to the
following:
"The securities represented by this
certificate have not been registered under
the Securities Act of 1933, as amended (the
"Act"), and may not be offered or sold except
(i) pursuant to an effective registration
statement under the Act or (ii) pursuant to
an exemption from the Act's registration
requirements either pursuant to Rule 144
under the Act or otherwise, upon the delivery
-6-
by the holder to the Company of an opinion of
counsel, reasonably satisfactory to counsel
to the Company, stating that an exemption
from registration under such Act is
available."
. Restriction on Transfer of Warrants.
The Holder of a Warrant Certificate, by its acceptance
thereof, covenants and agrees that the Warrants are being
acquired as an investment and not with a view to the distribution
thereof.8
. Price.
Initial and Adjusted Exercise Price. The
initial exercise price of each Warrant shall be $6.00 per
Placement Agent Unit. The adjusted exercise price shall be the
price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the
provisions of Section 8 hereof.
Exercise Price. The term "Exercise Price"
herein shall mean the initial exercise price or the adjusted
exercise price, depending upon the context.
. Registration Rights.
Registrable Securities. As used herein the
term "Registrable Security" means each of the Shares, the
Underlying Warrants and the Underlying Warrant Shares, as
adjusted pursuant to the provisions of the Underlying Warrant;
provided, however, that with respect to any particular
Registrable Security, such security shall cease to be a
-7-
Registrable Security when, as of the date of determination, (i)
it has been effectively registered under the Securities Act of
1933, as amended (the "Act") and disposed of pursuant thereto,
(ii) registration under the Act is no longer required for the
immediate public distribution of such security, or (iii) it has
ceased to be outstanding. The term "Registrable Securities"
means any and/or all of the securities falling within the
foregoing definition of a "Registrable Security." In the event
of any merger, reorganization, consolidation, recapitalization or
other change in corporate structure affecting the Common Stock,
such adjustment shall be made in the definition of "Registrable
Security" as is appropriate in order to prevent any dilution or
enlargement of the rights granted pursuant to this Section 7.
Automatic Registration.
(a) The Company shall prepare and file with
the Securities and Exchange Commission (the "Commission"), at the
sole expense of the Company, a registration statement (the
"Registration Statement") which includes all of the Registrable
Securities, so as to permit a public offering and sale of the
Registrable Securities. The Company will file the Registration
Statement on or before June 30, 1996 and will use its best
efforts to cause the Registration Statement to be declared
effective by the Commission on or before September 30, 1996.
(b) Once effective, the Company, subject to
the proviso at the end of this sentence, will be required to
-8-
maintain the effectiveness of the Registration Statement until
the earlier of (i) the date that all of the Registrable
Securities have been publicly sold, or (ii) the date that the
Placement Agent receives an opinion of counsel to the Company
that all of the Registrable Securities may be freely traded
without registration under the Act, under Rule 144 promulgated
under the Act or otherwise; provided that the Company shall be
entitled to suspend effectiveness of the Registration Statement
for reasonable periods of time (not to exceed an aggregate of 90
days in any calendar year) in connection with mergers,
acquisitions and material corporate transactions.
(c) Notwithstanding the foregoing,
(i) the obligations of the Company hereunder with respect to the Holder's
Registrable Securities are subject to the Holder's furnishing to
the Company (in writing, if requested) such appropriate
information concerning the Holder, the Holder's Registrable
Securities and the terms of the Holder's offering of such
Registrable Securities as the Company may reasonably request in
writing and (ii) the Company will not be obligated to register
any Registrable Securities unless such registration is then
permitted by law and the policy of the Commission
.
Covenants of the Company With Respect to
Registration. The Company covenants and agrees as follows:
If any stop order shall be issued by the
Commission in connection therewith, the Company shall use its
-9-
reasonable efforts to obtain the removal of such order.
Following the effective date of a Registration Statement, the
Company shall, upon the request of the Holder, forthwith supply
such reasonable number of copies of the Registration Statement,
preliminary prospectus and prospectus meeting the requirements of
the Act, and other documents necessary or incidental to the
public offering of the Registrable Securities, as shall be
reasonably requested by the Holder to permit the Holder to make a
public distribution of the Holder's Registrable Securities.
The Company shall pay all costs, fees
and expenses in connection with the Registration Statement filed
pursuant to Section 7.2 hereof, including, without limitation,
the Company's legal and accounting fees, printing expenses, and
blue sky fees and expenses; provided, however, that the Holder
shall be solely responsible for the fees of any counsel retained
by the Holder in connection with such registration and any
transfer taxes or underwriting discounts, commissions or fees
applicable to the Registrable Securities sold by the Holder
pursuant thereto.
Nothing contained in this Agreement
shall be construed as requiring any Holder to exercise his
Warrants prior to the initial filing of any Registration State-
ment or the effectiveness thereof.
-10-
Additional Terms.
The Company shall indemnify and hold harmless
the Holder and each underwriter, within the meaning of the Act,
who may purchase from or sell for the Holder, any Registrable
Securities, from and against any and all losses, claims, damages
and liabilities caused by any untrue statement of a material fact
contained in the Registration Statement, any post-effective
amendment to Registration Statements, or any prospectus included
therein or caused by any omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue
statement or omission based upon information furnished or
required to be furnished in writing to the Company by the Holder
or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls either the Holder
or underwriter within the meaning of the Act and each officer,
director, employee and agent of the Holder and underwriter;
provided, however, that the indemnification in this Section
7.4(a) with respect to any prospectus shall not inure to the
benefit of the Holder or underwriter (or to the benefit of any
person controlling the Holder or underwriter) on account of any
such loss, claim, damage or liability arising from the sale of
Registrable Securities by the Holder or underwriter, if a copy of
a subsequent prospectus correcting the untrue statement or
-11-
omission in such earlier prospectus was provided to the Holder or
underwriter by the Company prior to the subject sale and the
subsequent prospectus was not delivered or sent by the Holder or
underwriter to the purchaser prior to such sale; and provided
further, that the Company shall not be obligated to so indemnify
the Holder or any such underwriter or other person referred to
above unless the Holder or underwriter or other person, as the
case may be, shall at the same time indemnify the Company, its
directors, each officer signing the Registration Statement and
each person, if any, who controls the Company within the meaning
of the Act, from and against any and all losses, claims, damages
and liabilities caused by any untrue statement of a material fact
contained in the Registration Statement or any prospectus
required to be filed or furnished by reason of this Agreement or
caused by any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein
not misleading, insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission based
upon information furnished or required to be furnished in writing
to the Company by the Holder or underwriter expressly for use
therein.
If for any reason the indemnification
provided for in the preceding section is held by a court of
competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, claim, damage, liability or expense
-12-
referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute
to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative
benefits received by the indemnified party and the indemnifying
party, but also the relative fault of the indemnified party and
the indemnifying party, as well as any other relevant equitable
considerations.
Neither the filing of a Registration
Statement by the Company pursuant to this Agreement nor the
making of any request for prospectuses by the Holder shall impose
upon the Holder any obligation to sell the Holder's Registrable
Securities.
The Holder, upon receipt of notice from the
Company that an event has occurred which requires a post-
effective amendment to the Registration Statement or a supplement
to the prospectus included therein, shall promptly discontinue
the sale of Registrable Securities until the Holder receives a
copy of a supplemented or amended prospectus from the Company,
which the Company shall provide as soon as practicable after such
notice.
If the Company fails to keep the Registration
Statement continuously effective during the requisite period
(except as set forth in Section 7.2(b), above), then the Company
-13-
shall use its best efforts to update the Registration Statement
or file a new registration statement covering the Registrable
Securities remaining unsold, subject to the terms and provisions
hereof.
. Adjustments of Exercise Price and Number of
Placement Agent Units.
Computation of Adjusted Price. In case the
Company shall at any time after the date hereof pay a dividend in
shares of Common Stock or make a distribution in shares of Common
Stock, then upon such dividend or distribution the Exercise Price
in effect immediately prior to such dividend or distribution
shall forthwith be reduced to a price determined by dividing:
an amount equal to the total
number of shares of Common Stock outstanding immediately prior to such
dividend or distribution multiplied by the Exercise Price in ef-
fect immediately prior to such dividend or distribution, by
the total number of shares of Common Stock outstanding immediately after
such issuance or sale.
For the purposes of any computation to be
made in accordance with the provisions of this Section 8.1, the
Common Stock issuable by way of dividend or other distribution on
any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the date following
the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution.
-14-
Subdivision and Combination. In case the
Company shall at any time subdivide or combine the outstanding
shares of Common Stock, the Exercise Price shall forthwith be
proportionately decreased in the case of subdivision or increased
in the case of combination.
Adjustment in Number of Placement Agent
Units. Upon each adjustment of the Exercise Price pursuant to
the provisions of this Section 8, the number of Placement Agent
Units issuable upon the exercise of each Warrant shall be
adjusted to the nearest full Unit by multiplying a number equal
to the Exercise Price in effect immediately prior to such
adjustment by the number of Placement Agent Units issuable upon
exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price,
provided, however, that if an event occurs that results in an
adjustment of the number and/or price of the shares of Common
Stock issuable upon exercise of the warrants issued in connection
with the Private Placement, pursuant to Section 5 of the
Underlying Warrant Certificate (as hereinafter defined),
resulting in automatic adjustment in the number and/or price of
the Underlying Warrant Shares pursuant to Section 8.5 hereof,
then the adjustment in the number of Placement Agent Units
provided for in this Section 8.3 shall not, in such instance,
result in any further adjustment in the aggregate number of
-15-
shares of Common Stock ultimately issuable upon exercise of the
Underlying Warrants.
Reclassification, Consolidation, Merger,
etc. In case of any reclassification or change of the out-
standing shares of Common Stock (other than a change in par value
to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in
which the Company is the surviving corporation and which does not
result in any reclassification or change of the outstanding
shares of Common Stock, except a change as a result of a subdivi-
ion or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another
corporation of the property of the Company as an entirety, the
Holders shall thereafter have the right to purchase the kind and
number of shares of stock and other securities and property
receivable upon such reclassification, change, consolidation,
merger, sale or conveyance by a Holder of the number of shares of
Common Stock which the holder of such Warrant shall then be
entitled to purchase (including upon exercise of the Underlying
Warrants); such adjustments shall apply with respect to all such
changes occurring between the date of this Warrant Agreement and
the date of exercise of such Warrant.
-16-
Adjustment of Underlying Warrants Exercise
Price and Securities on Exercise of Underlying Warrants. With
respect to any of the Underlying Warrants, whether or not the
Warrants have been exercised and whether or not the Warrants are
issued and outstanding, the exercise price for, and the number
of, Underlying Warrant Shares shall be automatically adjusted in
accordance with Section 9 of the Warrant Agreement dated as of
December 21, 1994 by and among the Company, the Placement Agent
and Continental Stock Transfer & Trust Company, upon the
occurrence of any of the events described therein. Thereafter,
the Underlying Warrants shall be exercisable at such adjusted
exercise price and for such adjusted number of Underlying Warrant
Shares.
Dividends and Other Distributions with
Respect to Outstanding Securities. Subject to the provisions of
this Section 8, in case the Company shall, at any time prior to
the exercise of the Warrants, make any distribution of its assets
to holders of its Common Stock as a liquidating or a partial
liquidating dividend, then, subject to the following sentence,
the Holder who exercises Warrants after the record date for the
determination of those holders of Common Stock entitled to such
distribution of assets as a liquidating or partial liquidating
dividend shall be entitled to receive for the Warrant Price per
Warrant, in addition to each share of Common Stock, the amount of
such distribution (or, at the option of the Company, a sum equal
-17-
to the value of any such assets at the time of such distribution
as determined by the Board of Directors of the Company in good
faith), which would have been payable to such Holder had he been
the holder of record of the Common Stock receivable upon exercise
of the Warrant and the Underlying Warrants on the record date for
the determination of those entitled to such distribution. In
case of the dissolution, liquidation or winding up of the
Company, all rights under the Warrants shall terminate on a date
fixed by the Company, such date to be no earlier than ten (10)
days prior to the effectiveness of such dissolution, liquidation
or winding up and not later than five (5) days prior to such
effectiveness. Notice of such termination of purchase rights
shall be given to the last registered holder of the Warrants, as
the same shall appear on the books of the Company, by registered
mail at least thirty (30) days prior to such termination date.
Subscription Rights for Shares of Common
Stock or Other Securities. In case the Company shall, at any
time prior to the expiration of the Warrants and prior to the
exercise thereof, offer to the holders of its Common Stock any
rights to subscribe for additional shares of any class of the
Company, then the Company shall give written notice thereof to
the last registered holder thereof not less than thirty (30) days
prior to the date on which the books of the Company are closed or
a record date is fixed for the determination of the stockholders
entitled to such subscription rights. Such notice shall specify
-18-
the date as to which the books shall be closed or record date
fixed with respect to such offer of subscription and the right of
the holder thereof to participate in such offer of subscription
shall terminate if the Warrant shall not be exercised on or
before the date of such closing of the books or such record date.
Redemption of Underlying Warrants. Prior to
the sale of the Underlying Warrants by the Placement Agent or its
designees (a transfer of all or a portion of this Warrant by the
Placement Agent to an officer, director, employee or other
designee without consideration, shall not be deemed a sale for
purposes of this Section 8.8), the Underlying Warrants cannot be
redeemed by the Company under any circumstances.
Exchange of Warrant Certificates. Each Warrant Certificate is
exchangeable without expense, upon the surrender hereof by the registered Holder
at the principal executive office of the Company, for a new Warrant
Certificate of like tenor and date representing in the aggregate
the right to purchase the same number of Shares and Underlying
Warrants in such denominations as shall be designated by the
Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of any Warrant Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to
it, and reimbursement to the Company of all reasonable expenses
-19-
incidental thereto, and upon surrender and cancellation of the
Warrants, if mutilated, the Company will make and deliver a new
Warrant Certificate of like tenor, in lieu thereof.
.Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of Shares or fractions of Underlying
Warrants upon the exercise of the Warrants, nor shall it be
required to issue scrip or pay cash in lieu of fractional
interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the
nearest whole number of Shares and Underlying Warrants.
.Reservation and Listing of Securities.
The Company shall at all times reserve and keep
available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants and
the Underlying Warrants, such number of shares of Common Stock as
shall be issuable upon the exercise thereof. The Company
covenants and agrees that, upon exercise of the Warrants and
payment of the Exercise Price therefor, all Shares issuable upon
such exercise shall be duly and validly issued, fully paid, non-
assessable and not subject to the preemptive rights of any share-
holder. The Company further covenants and agrees that upon exer-
cise of the Underlying Warrants and payment of the respective
Underlying Warrant exercise price therefor, all Underlying
Warrant Shares issuable upon such exercises shall be duly and
-20-
validly issued, fully paid, non-assessable and not subject to the
preemptive rights of any shareholder. As long as the Warrants
shall be outstanding, the Company shall use its reasonable best
efforts to cause all shares of Common Stock issuable upon the
exercise of the Warrants and the Underlying Warrants and all
Underlying Warrants underlying the Warrants to be listed on or
quoted by NASDAQ or listed on the stock exchange or quotation
system on which the Common Stock is principally traded.
.Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed
as conferring upon the Holder or Holders the right to vote or to
consent or to receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any
other matter, or as having any rights whatsoever as a shareholder
of the Company. If, however, at any time prior to the expiration
of the Warrants and their exercise, any of the following events
shall occur:
the Company shall take a record of the
holders of its shares of Common Stock for the purpose
of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books
of the Company; or
-21-
the Company shall offer to all the holders
of its Common Stock any additional shares of capital
stock of the Company or securities convertible into or
exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe
therefor; or
a dissolution, liquidation or winding up of
the Company (other than in connection with a consoli-
dation or merger) or a sale of all or substantially all
of its property, assets and business as an entirety
shall be proposed;
reclassification or change of the
outstanding shares of Common Stock (other than a change in par
value to no par value, or from no par value to par
value, or as a result of a subdivision or combination),
consolidation of the Company with, or merger of the
Company into, another corporation (other than a
consolidation or merger in which the Company is the
surviving corporation and which does not result in any
reclassification or change of the outstanding shares of
Common Stock, except a change as a result of a subdivi-
sion or combination of such shares or a change in par
value, as aforesaid), or a sale or conveyance to
another corporation of the property of the Company as
an entirety is proposed; or
-22-
The Company or an affiliate of the
Company shall propose to issue any rights to subscribe
for shares of Common Stock or any other securities of
the Company or of such affiliate to all the
shareholders of the Company;
then, in any one or more of said events, the Company shall give
written notice to the Holder or Holders of such event at least
fifteen (15) days prior to the date fixed as a record date or the
date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible
or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such
record date or the date of closing the transfer books, as the
case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or
distribution, or the issuance of any convertible or exchangeable
securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
.Underlying Warrants.
The form of the certificates representing the
Underlying Warrants (and the form of election to purchase shares
of Common Stock upon the exercise of the Underlying Warrants and
the form of assignment printed on the reverse thereof) shall be
-23-
as set forth in Exhibit "B" hereto (the "Underlying Warrant
Certificate"). The terms and provisions of the Underlying
Warrants shall be as set forth in the Warrant Agreement dated
December 21, 1994 by and among the Company, the Placement Agent
and Continental Stock Transfer & Trust Company; provided,
however, that the Underlying Warrants may not be redeemed by the
Company, except in accordance with Section 8.8 hereof.
.Notices.
All notices, requests, consents and other communica-
tions hereunder shall be in writing and shall be deemed to have
been duly made when delivered, or mailed by registered or certi-
fied mail, return receipt requested:
If to a registered Holder of the Warrants,
to the address of such Holder as shown on the books of
the Company; or
If to the Company, to the address set forth
in Section 3 of this Agreement or to such other address
as the Company may designate by notice to the Holders.
Supplements and Amendments.
The Company and the Placement Agent may from time to
time supplement or amend this Agreement without the approval of
any Holders of the Warrants and/or Warrant Securities in order to
cure any ambiguity, to correct or supplement any provision
contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to
-24-
matters or questions arising hereunder which the Company and the
Placement Agent may deem necessary or desirable and which the
Company and the Placement Agent deem not to adversely affect the
interests of the Holders of Warrant Certificates.
.Successors.
All the covenants and provisions of this Agreement by
or for the benefit of the Company and the Holders inure to the
benefit of their respective successors and assigns hereunder
.Termination.
This Agreement shall terminate at the close of business
on _________, 2003. Notwithstanding the foregoing, this Agree-
ment will terminate on any earlier date when all Warrants and
Underlying Warrants have been exercised and all Warrant
Securities have been resold to the public; provided, however,
that the provisions of Section 7 shall survive such termination
until the close of business on __________, 2006.
.Governing Law.
This Agreement and each Warrant Certificate issued
hereunder shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be construed in
accordance with the laws of said State.
Benefits of This Agreement.
Nothing in this Agreement shall be construed to give to
any person or corporation other than the Company and the
Placement Agent and any other registered holder or holders of the
-25-
Warrant Certificates or Warrant Securities any legal or equitable
right, remedy or claim under this Agreement; and this Agreement
shall be for the sole and exclusive benefit of the Company and
the Placement Agent and any other holder or holders of the
Warrant Certificates or Warrant Securities.
.Counterparts.
This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above
written.
GLOBAL TELECOMMUNICATIONS SOLUTIONS, INC.
By:______________________________________
Name:
Title:
Attest:
_______________________
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By:________________________________
Name:
Title:
-26-
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER
SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE
EXTENT APPLICABLE, PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY
SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE
COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO
COUNSEL FOR THE COMPANY, STATING THAT AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREE-
MENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, _________, 2000
No. W- _______ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that
___________________________ or registered assigns, is the regis-
tered holder of _______ Warrants to purchase, at any time from
___________, 1996 until 5:00 P.M. New York City time on
__________, 2000 ("Expiration Date"), up to ___________ fully-
paid and non-assessable share(s) of common stock, $.01 par value
("Common Stock"), of Global Telecommunication Solutions, Inc., a
Delaware corporation (the "Company"), and ______ Common Stock
Purchase Warrant(s), each Common Stock Purchase Warrant entitling
the holder thereof to purchase one share of Common Stock
(collectively, the "Underlying Warrants"), at the initial
exercise price, subject to adjustment in certain events (the
"Exercise Price"), of $5.00 per one share of Common Stock and two
Underlying Warrants upon surrender of this Warrant Certificate
and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in
the warrant agreement dated as of _____________, 1996 between the
Company and Whale Securities Co. L.P. (the "Warrant Agreement").
This Warrant Certificate is exercisable only on the basis of one
share of Common stock and two Underlying Warrants. Payment of
the Exercise Price may be made in cash, or by certified or
official bank check in New York Clearing House funds payable to
the order of the Company, or any combination of cash or check or
pursuant to the "cashless exercise" provision set forth in
Section 3 of the Warrant Agreement.
Each Underlying Warrant issuable upon the exercise of a
Warrant is initially exercisable until December 14, 1999, for one
fully-paid and non-assessable share of Common Stock at an initial
exercise price of $4.00 per share. The Underlying Warrants shall
have the same terms and provisions as the warrants issued to
investors pursuant to the Company's Confidential Private Offering
Memorandum dated March 25, 1996, which are governed by the
Warrant Agreement dated December 21, 1994 by and among the
Company, Whale Securities Co., L.P. and Continental Stock
Transfer & Trust Company (the "Public Warrant Agreement"). The
Public Warrant Agreement is hereby incorporated by reference in
and made a part of this instrument and is hereby referred to
(except as otherwise provided in the Warrant Agreement) for a
description of the rights, limitations of rights, manner of
exercise, anti-dilution provisions and other provisions with
respect to the Underlying Warrants, provided, however, the
Underlying Warrants are not redeemable by the Company prior to a
sale of the Underlying Warrants by the Whale Securities Co., L.P.
or its designees.
No Warrant may be exercised after 5:00 P.M., New York
City time, on the Expiration Date, at which time all Warrants
evidenced hereby, unless exercised prior thereto, shall there-
after be void.
The Warrants evidenced by this Warrant Certificate are
part of a duly authorized issue of Warrants issued pursuant to
the Warrant Agreement, which Warrant Agreement is hereby incorpo-
rated by reference in and made a part of this instrument and is
hereby referred to in a description of the rights, limitation of
rights, obligations, duties and immunities thereunder of the
Company and the holders (the words "holders" or "holder" meaning
the registered holders or registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence
of certain events, the Exercise Price and the type and/or number
of the Company's securities issuable thereupon may, subject to
certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant Certi-
ficate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of
the Warrants; provided, however, that the failure of the Company
to issue such new Warrant Certificates shall not in any way
change, alter, or otherwise impair, the rights of the holder as
set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of
this Warrant Certificate at an office or agency of the Company, a
new Warrant Certificate or Warrant Certificates of like tenor and
evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for this Warrant Certi-
ficate, subject to the limitations provided herein and in the
Warrant Agreement, without any charge except for any tax, or
other governmental charge imposed in connection therewith.
Upon the exercise of less than all of the Warrants
evidenced by this Certificate, the Company shall forthwith issue
to the holder hereof a new Warrant Certificate representing such
number of unexercised Warrants.
The Company may deem and treat the registered holder(s)
hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing
hereon made by anyone), for the purpose of any exercise hereof,
and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any
notice to the contrary.
All terms used in this Warrant Certificate which are
defined in the Warrant Agreement shall have the meanings assigned
to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated: _________, 1996 GLOBAL TELECOMMUNICATION
SOLUTIONS, INC.
[SEAL] By:__________________________
Title:
Attest:
______________________
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise
the right, represented by this Warrant Certificate, to purchase
_________ Units and herewith tenders in payment for such Units
cash or a check payable to the order of Global Telecommunication
Solutions, Inc. in the amount of $ , all in accordance
with the terms hereof. The undersigned requests that a
certificate for such Units be registered in the name of
, whose address is ,
and that such Certificate be delivered to ,
whose address is _____________.
Dated: Signature:
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
________________________________
________________________________
(Insert Social Security or Other
Identifying Number of Holder)
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate.
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint _______________, Attorney, to transfer the within Warrant
Certificate on the books of the within-named Company, with full
power of substitution.
Dated: Signature:
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
_______________________________
_______________________________
(Insert Social Security or Other
Identifying Number of Assignee)
The Board of Directors
Global Telecommunication Solutions, Inc.
We consent to the use of our reports incorporated herein by reference and
to the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
May 29, 1996
The Board of Directors
Global Telecommunication Solutions, Inc.
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on From S-3 of Global
Telecommunication Solutions, Inc. of our report dated December 12, 1995, except
as to the merger described in Note 12, which is as of February 29, 1996, with
respect to the financial statements of Global Link Teleco Corp., included in
Global Telecommunication Solutions, Inc.'s Form 8-K/A Amendment No. 1 to Form
8-K dated May 10, 1996. We also consent to the reference to us under the
heading "Experts" in the prospectus.
Price Waterhouse LLP
Philadelphia, Pennsylvania
May 29, 1996
