As filed with the Securities and Exchange Commission on December 30, 1996.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3698386
- ------------------------- ----------------------------------
(State of Incorporation) (I.R.S. Employer Identification
Number)
5697 Rising Sun Avenue
Philadelphia, PA 19120
(215) 342-7700
(Address and telephone number of principal executive offices)
Shelly Finkel
Chairman of the Board
Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, PA 19120
(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 the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Maximum Aggregate
Title of Each Class of Amount to be Offering Price Offering Amount Of
Securities to be Registered Registered Per Unit(1) Price(2) Registration Fee
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 18,868 $3.0625 $57,783.25 $19.93
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value, 3,000,000(4) $9,187,500.00 $3,168.10
underlying Warrants(3) 150,000(5) $3.0625 $459,375.00 $158.41
50,000(6) $153,125.00 $52.80
TOTAL FEE................................................................................................$3,399.24
===========================================================================================================================
<FN>
(1) Based upon the market price of the Common Stock, as reported by The Nasdaq
Stock Market, on December 27, 1996, in accordance with Rule 457(c)
promulgated under the Securities Act of 1933, as amended ("Securities
Act").
(2) The proposed maximum aggregate offering price, based upon the market price
of the Common Stock, as reported by The Nasdaq Stock Market, on December
27, 1996, in accordance with Rules 457(c) under the Securities Act.
(3) Pursuant to Rule 416, there are also being registered additional shares of
Common Stock as may become issuable pursuant to the antidilution provisions
in the instruments governing the Warrants pursuant to which the shares of
Common Stock registered hereon are issuable.
(4) Represents the resale of shares of Common Stock underlying the Warrants by
the holders of such warrants ("Warrant Holders") who purchased the
securities in a private placement of these and certain other securities
consummated in December 1996 ("December 1996 Private Placement").
(5) Represents the resale of shares of Common Stock underlying the Warrants
acquired by Whale Securities Co., L.P. as a finder's fee in connection with
the December 1996 Private Placement.
(6) Represents the resale of shares of Common Stock underlying the Warrants
acquired by Graubard Mollen & Miller in payment of certain legal fees and
expenses.
</FN>
</TABLE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
PRELIMINARY PROSPECTUS DATED DECEMBER 30, 1996
SUBJECT TO COMPLETION
PROSPECTUS
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
3,218,868 Shares of Common Stock
This Prospectus relates to up to 3,218,868 shares ("Shares") of Common
Stock, par value $.01 per share, of Global Telecommunication Solutions, Inc.
("Company" or "GTS") that may be offered for resale for the account of certain
securities holders ("Selling Securityholders") of the Company as set forth
herein under the heading "Selling Securityholders."
Of the 3,218,868 shares being offered for resale by the Selling
Securityholders, (i) 18,868 shares are currently outstanding, (ii) 3,000,000
shares are issuable upon exercise of the Common Stock Purchase Warrants
("Warrants") issued in connection with a private placement consummated by the
Company in December 1996 ("December 1996 Private Placement"), (iii) 150,000
shares are issuable upon exercise of Warrants issued to Whale Securities Co.,
L.P. ("Whale") as a finder's fee in connection with the December 1996 Private
Placement and (iv) 50,000 shares are issuable upon exercise of Warrants issued
to Graubard Mollen & Miller in payment of certain legal fees and expenses.
All of the Shares are being offered hereby for the respective accounts
of the Selling Securityholders. No period of time has been fixed within which
the securities covered by this Prospectus may be offered or sold. The Company
will not receive any of the proceeds from the sale of the Shares by the Selling
Securityholders. Of the 3,218,868 shares offered hereby, 3,200,000 shares are
issuable upon exercise of the Warrants. If such securities are fully exercised,
the Company will receive up to an aggregate of $8,000,000 in gross proceeds. All
proceeds received by the Company, if any, will be used for working capital and
general corporate purposes. See "Use of Proceeds" and "Selling Securityholders."
All costs, expenses and fees in connection with the registration of the
Shares offered by this Prospectus will be borne by the Company. Such expenses
are estimated to be $30,000. Brokerage commissions and discounts, if any,
attributable to the sale of the Shares for the account of Selling
Securityholders will be borne by them.
The principal market for trading of the Common Stock and the Company's
publicly-traded warrants ("Public Warrants") is the Nasdaq SmallCap Market under
the symbols GTST and GTSTW, respectively. On December 27, 1996, the last sale
price for the Common Stock was $3-1/16 and for the Public Warrants was $3/4 as
reported by the Nasdaq SmallCap Market. The Common Stock and the Public Warrants
also are listed on the Boston Stock Exchange under the symbols GTL and GTLW,
respectively.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.
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 __________________
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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 OF CONTENTS
Page
TABLE OF CONTENTS............................................................2
AVAILABLE INFORMATION........................................................2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................3
PROSPECTUS SUMMARY...........................................................4
RISK FACTORS.................................................................9
USE OF PROCEEDS.............................................................16
SELLING SECURITYHOLDERS.....................................................17
PLAN OF DISTRIBUTION........................................................19
LEGAL MATTERS...............................................................19
EXPERTS ...................................................................19
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form S-3 ("Registration Statement")
under the Securities Act of 1933, as amended ("Securities Act") with respect to
the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and exhibits thereto. For
further information with respect to the Company and the Shares, reference is
hereby made to the Registration Statement and exhibits. The statements contained
in this Prospectus as to the contents of any contract or other document filed as
an exhibit are not complete and the description of such contract or document is
qualified in its entirety by reference to such contract or document. The
Registration Statement, together with the exhibits, may be inspected at the
Commission's principal office in Washington, D.C. and copies may be obtained
upon payment of the fees prescribed by the Commission.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Copies of such information, reports, proxy statements and other
information filed by the Company under the Exchange Act may be examined without
charge at the public reference facilities of the Commission, Judiciary Plaza,
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the
following Regional Offices: 7 World Trade Center, Suite 1300, New York, New York
10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611. Copies can also be obtained at prescribed rates from
the Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, all reports filed by the Company via
the Commission's Electronic Data Gathering and Retrieval System (EDGAR) can be
obtained from the Commission's Internet Web Site located at http:\\www.sec.gov.
The Common Stock and Public Warrants are traded on the Nasdaq SmallCap Market
(Symbols: GTST and GTSTW), and such reports, proxy statements and other
information concerning the Company also can be inspected at the offices of the
Nasdaq SmallCap Market, 1735 K Street, N.W., Washington, D.C. 20006. The Common
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Stock and Public Warrants also are listed on the Boston Stock Exchange (Symbols:
GTL and GTLW) and information concerning the Company can be inspected and copied
at the Boston Stock Exchange, Inc., One Boston Place, Boston, Massachusetts
02108.
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 and amendment thereto on Form 10-KSB/A,
filed with the Commission on September 6, 1996;
(b) Current Report of the Company on Form 8-K, dated March 1,
1996, filed with the Commission on March 15, 1996, and
amendments thereto on Form 8-K/A, filed with the Commission on
May 10, 1996 and September 6, 1996, respectively;
(c) Quarterly Report on Form 10-QSB of the Company for the quarter
ended March 31, 1996 and amendment thereto on Form 10-QSB/A,
filed with the Commission on September 6, 1996;
(d) Quarterly Report on Form 10-QSB of the Company for the quarter
ended June 30, 1996 and amendment thereto on Form 10-QSB/A,
filed with the Commission on September 27, 1996;
(e) Proxy Statement dated July 11, 1996; and
(f) Quarterly Report on Form 10-QSB of the Company for the quarter
ended September 30, 1996 and amendment thereto on Form
10-QSB/A, filed with the Commission on November 20, 1996;
(g) Current Report of the Company on Form 8-K, dated December 20,
1996, filed with the Commission on December 26, 1996.
The Company's Registration Statement on Form 8-A (which contains
descriptions of the Company's Common Stock and Public Warrants), which was
declared effective by the 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 5697 Rising Sun Avenue, Philadelphia,
Pennsylvania 19120, Attention: Investor Relations (telephone number: (215)
342-7700).
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<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.
Certain of the information contained in this summary and elsewhere in this
Prospectus are forward-looking statements. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the Company notes that a
variety of factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations expressed
in the Company's forward-looking statements. For a discussion of important
factors that could cause actual results to differ materially from the
forward-looking statements, see "Risk Factors."
The Company
General
The Company and its subsidiaries design, develop and market 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.
The purchase price paid for Global Link was approximately $11,500,000. 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.
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<PAGE>
May 1996 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 ("Units"), each consisting of 20,000 shares of
Common Stock and 40,000 Redeemable Common Stock Purchase Warrants ("May 1996
Warrants"). The May 1996 Warrants are identical to the Public 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 Company has agreed, however,
that, notwithstanding the terms of its Public Warrants, each of the May 1996
Warrants is not redeemable by the Company until it is (i) registered for public
sale under the Securities Act and (ii) transferred by the original purchasers
thereof. The per Unit offering price was $100,000, which price was determined by
arms' length negotiations between the Company and Whale based on an assessment
of the prospects for the industry in which the Company competes, the Company's
management and capital structure, and the prevailing market prices of the Common
Stock and Public Warrants, with a discount taken due to the private nature of
the transaction. The securities underlying the Units sold in the May 1996
Private Placement were registered for public resale by the holders thereof under
the Securities Act pursuant to a registration statement declared effective on
September 30, 1996.
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 27 1/2 of the 30 Units sold (no commission was paid with
respect to 2 1/2 Units sold to certain purchasers introduced to the Company by
entities other than Whale) and a $15,000 nonaccountable expense allowance. Whale
also received an option ("UPO") to purchase three Units, which Units are
identical to the Units sold in the May 1996 Private Placement, at an exercise
price of $100,000 per Unit, exercisable until May 10, 2001.
December 1996 Private Placement
In December 1996, the Company consummated the December 1996 Private
Placement from which the Company derived gross proceeds of $3,000,000 through
the sale of an aggregate of $3,000,000 of promissory notes ("Notes") and
3,000,000 Warrants. Each Warrant is exercisable at any time during the period
commencing March 1, 1997 and ending on November 27, 2001, at an initial exercise
price equal to $2.50 per share. The Notes are payable on the earlier of (i)
November 27, 1998 and (ii) the date on which the Company undergoes a "change in
control" in which any person other than an officer, director or 5% stockholder
acquires securities of the Company having 50% or more of the total voting power
of all of the Company's securities then outstanding ("Maturity Date"). No
interest will accrue on the Notes unless the Notes are not paid on or prior to
the Maturity Date, at which time the outstanding principal will immediately
begin to accrue interest at the rate of 12% per annum and the principal amount
outstanding and interest accrued thereon will become convertible, at the option
of the holders, into that number of shares of Common Stock equal to the
principal amount and interest being converted divided by the lesser of (i) $2.00
and (ii) 80% of the average of the closing bid prices of the Common Stock on the
five trading days ending on the date immediately following the date a holder
elects to convert. The Notes are not convertible unless the Notes are not paid
in full on the Maturity Date.
Whale was paid a finder's fee in connection with the December 1996 Private
Placement equal to 5% of the gross proceeds received by the Company ($150,000)
and 150,000 Warrants. Additionally, Graubard Mollen & Miller received $50,000 of
Notes and 50,000 Warrants in payment of certain legal fees and expenses.
Shelly Finkel, Chairman of the Board of Directors of the Company,
participated in the December 1996 Private Placement. See "Selling
Securityholders."
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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.
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. In 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 by companies such as NYNEX Corporation
("NYNEX"), a leading regional telephone company. In order for smart card
technology to become a viable option for a calling card company in any
particular area, all or substantially all of the public pay telephones in that
area must have the technology to accept and read the smart cards. Accordingly,
NYNEX might be able to utilize smart card technology as a viable economic
alternative to remote memory technology in areas, such as New York City, in
which NYNEX owns and operates a significant number of its own public pay
telephones (and thus, controls the technology), but currently the Company could
not. However, smart card technology may be a viable alternative in a "closed"
environment in which the Company would have access to each of the consumers
which would utilize the public telephone system in such environment and in which
there was only one public pay telephone provider. Examples of closed
environments include colleges, universities and entertainment facilities.
Notwithstanding the foregoing, the Company may choose not to implement smart
card technology at all if the Company determines that its prepaid calling cards
are not being primarily utilized from public pay telephones. Moreover, in the
event the Company chooses to implement smart card technology, it may not replace
its remote memory technology entirely because many of the Company's customers
utilize its prepaid phone cards from telephones other than public pay
telephones. Unlike smart cards, the Company's prepaid phone cards may be
utilized from any touch-tone telephone.
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 (although, as of the date of this Prospectus,
the Company has no agreements, understandings or commitments with respect
thereto); and (vi) maintaining the Company's retail phone
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<PAGE>
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 5697 Rising Sun Avenue, Philadelphia,
Pennsylvania 19120 and its telephone number is (215) 342-7700.
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities offered by Selling
Securityholders................................... 3,218,868 shares of Common Stock
Risk Factors........................................ The securities offered hereby are speculative and
involve a high degree of risk including, among others,
the Company's limited operating history and revenues;
significant and continuing losses; accumulated and
working capital deficits; the recent acquisition of Global
Link; significant outstanding indebtedness and security
interests; the relative infancy of the prepaid calling card
industry and the uncertainty of market acceptance of
phone cards; and the risks associated with marketing
strategy and rapid expansion. See "Risk Factors."
Nasdaq SmallCap Market Symbols...................... Common Stock: GTST
Warrants: GTSTW
Boston Stock Exchange Symbols....................... Common Stock: GTL
Warrants: GTLW
Use of Proceeds..................................... The Company will not receive any of the proceeds from
the sale of the Shares by the Selling Securityholders.
Of the 3,218,868 shares offered hereby, 3,200,000
shares are issuable upon exercise of the Warrants. If
such securities are fully exercised, the Company will
receive up to an aggregate of $8,000,000 in gross
proceeds. All proceeds received by the Company, if
any, will be used for working capital and general
corporate purposes. See "Use of Proceeds" and
"Selling Securityholders."
</TABLE>
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<PAGE>
Outstanding Securities
Common Stock. As of December 27, 1996, there were 5,531,669 shares of
Common Stock outstanding.
Public Warrants. As of December 27, 1996, there were outstanding 4,141,678
Public 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 270,000 Public Warrants upon exercise of the UPO and an option
issued to Whale in connection with the Company's initial public offering ("IPO")
consummated on December 14, 1994. The Public Warrants may be redeemed by the
Company, with the consent of Whale, upon notice of not less than 30 days, at a
price of $.10 per Public Warrant, provided that 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 Public Warrants (currently $7.50, subject to adjustment).
Warrants. As of December 27, 1996, there were outstanding 3,200,000
Warrants, each of which entitles the holder thereof to purchase one share of
Common Stock for $2.50 at any time during the period commencing March 1, 1997
and ending on November 27, 2001. The Company has agreed to register the shares
underlying the Warrants for resale under the registration statement of which
this Prospectus forms a part. Once such registration statement is effective, the
Company has agreed to maintain the effectiveness of the registration statement
until all such shares are sold or until all such shares may be sold by the
holders thereof under Rule 144 of the Securities Act without volume limitations.
The Company shall bear all fees and expenses incurred in the preparation and
filing of the registration statement.
8
<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, which are described
further below. 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
occurred 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 nine
months ended September 30, 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 $5,243,038. 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 September 30, 1996, the Company had an accumulated deficit of
$9,910,074 and a working capital deficit of $6,510,540.
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 approximately
$10,719,000 of indebtedness of Global Link, including $2,800,000 aggregate
principal amount of convertible debentures ("Convertible Debentures") of Global
Link, 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
approximately $3,916,000 and Global Link's deferred revenue of approximately
$1,998,000. At September 30, 1996, total indebtedness of the Company and Global
Link aggregated approximately $15,992,000, of which $5,926,000 represented
deferred revenue. Events of default under the Company's Convertible Debentures
include, among others, failure to pay certain other indebtedness of the Company
or Global Link in an aggregate principal amount of $250,000 or more and failure
by the Company or Global Link to observe or perform any covenant under the
agreements relating to the Convertible Debentures. The Convertible 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 Convertible Debentures or the securities purchase agreement relating to such
Convertible Debentures,
9
<PAGE>
the holders of the Convertible Debentures could declare the Convertible
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 Convertible 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 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, the May 1996 Private Placement and the
December 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
December 1996 Private Placement, together with projected cash flow from
operations, should be sufficient to satisfy its anticipated cash requirements
during 1997. However, there can be no assurance that this will be the case. 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 1997 (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
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<PAGE>
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 securityholders. 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
securityholders 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.
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, 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
11
<PAGE>
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 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 has installed telephone equipment in New York
City employing "smart" card technology. Unlike the Company, NYNEX is able to
utilize smart card technology in areas, such as New York City, in which NYNEX
owns and operates a significant number of its own public pay telephones (and
thus, controls the 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.
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<PAGE>
Regulatory Factors. Long distance telecommunications services are
subject to regulation by the Federal Communications Commission ("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 Telecommunications Act of 1996
("Telecommunications Act"), 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 Federal
Trade Commission regulation and other federal and state laws relating to the
promotion, advertising, labeling and packaging of its products.
On June 6, 1996, the FCC issued a Notice of Proposed Rulemaking
("NPRM"), pursuant to which it proposed to adopt new rules governing the pay
telephone industry, as directed by the Telecommunications Act. This proposed
rulemaking requires the FCC to establish a means by which all pay telephone
service providers are to be compensated for interstate and intrastate calls
originated from their pay telephones, including calls which utilize "800" toll
free access. If adopted, such rules may require phone card companies utilizing
800 toll free telephone numbers to access their networks to pay a "set use fee"
for each call originating from a pay telephone. The Company's prepaid phone
cards utilize an 800 number to access the Company's switched network. The
promulgation of the rules proposed by the NPRM has not been effectuated and such
proposal has been, and is expected to continue to be, the subject of numerous
comments by members of the telecommunications industry and others. Consequently,
there can be no assurance that the NPRM will result in the adoption of rules
consistent with the form initially proposed in the NPRM, or that such rules will
be adopted at all. Until such rules are actually adopted, the rules currently in
existence remain in effect, which rules do not require the Company to pay set
use fees. If new rules are adopted which require the Company to pay such fees,
it could have a material adverse effect on the Company.
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 ten
retail phone centers located in the New York City metropolitan area and in South
Miami Beach, Florida. The Company has
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<PAGE>
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 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. The task force has not yet taken a formal
position on the application of the Telecommunications Excise Tax. The IRS'
policy, once established, if different than the Company's policy (which is to
accrue for the anticipated 3% tax), could materially affect the Company's
operations. Additionally, the Company believes that the sale of long distance
services through prepaid phone cards is subject to state sales and use taxes.
However, most state taxing authorities have also not established formal policies
on the application of the sales and use taxes to the provision of long distance
services through prepaid phone cards. While the Company has not filed any
federal or state tax returns to report the Telecommunications Excise Tax or
state sales and use taxes, it believes it is accurately accruing for these
expenses on its financial statements (see Note 9 to the financial statements
incorporated by reference herein). However, there can be no assurance that the
IRS or a state taxing authority will concur with the Company's method of
determining the applicable 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. Both Messrs. Finkel and Wasserson's employment agreements contain a
provision prohibiting them from competing with the Company during the term of
employment and for a period of two years thereafter. 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 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 securityholders of the
Company have entered into a voting agreement pursuant to which each group has
agreed to vote for the other group's designees as directors of the Company. Such
securityholders, 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
securityholders, 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. The
Company intends to retain future earnings, if any, to finance the development
and expansion of its business. Certain covenants contained in documents relating
to Global Link's indebtedness currently prohibit the Company from declaring or
paying cash dividends.
Tax Loss Carryforwards. At December 31, 1995, the Company and Global Link
had net operating loss carryforwards ("NOLs") aggregating approximately
$5,167,000 and $4,985,000, respectively,
14
<PAGE>
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, the Company and Global Link are subject to limitations on the use of
their 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 will 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 Public Warrants are
currently listed on The Nasdaq SmallCap Market ("Nasdaq"). On November 6, 1996,
the Board of Directors of The Nasdaq Stock Market, Inc. approved changes to the
maintenance requirements that companies listed on Nasdaq (such as the Company)
must meet in order to have their securities listed on Nasdaq. The failure to
meet such new requirements may result in the delisting of the Company's
securities from Nasdaq and trading, if any, in the Company's 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 additional
burdens imposed upon broker-dealers by such requirements may discourage them
from effecting transactions in the Common Stock, which could severely limit the
liquidity of the Common Stock and the ability of purchasers in this offering to
sell the Common Stock in the secondary market.
Shares Eligible for Future Sale. Substantially all of the Company's
outstanding shares of Common Stock have been or will be registered for sale
under the Securities Act or are eligible for sale under an exemption therefrom.
The possibility that substantial amounts of Common Stock may be sold in the
public market may adversely affect prevailing market prices for the Common Stock
and could impair the Company's ability to raise capital through the sale of its
equity securities.
Outstanding Warrants, Options and Convertible Debentures; Potential
Adverse Effect on Market Price of Common Stock and Warrants. The Company has
4,141,678 Public Warrants outstanding, exercisable at a price of $4.00 per
share. Additionally, as of the date of this Prospectus, the Company has reserved
an aggregate of 5,932,863 shares of Common Stock for issuance upon exercise of
the Warrants, other outstanding warrants and options and the conversion of the
Convertible Debentures. To the extent that the Warrants and other outstanding
options and warrants are exercised or Convertible
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<PAGE>
Debentures are converted, dilution of the percentage ownership of the Company's
securityholders will occur, and any sales in the public market of the Common
Stock underlying the Warrants, other options and warrants and Convertible
Debentures may adversely affect prevailing market prices for the Common Stock
and the Public Warrants. Moreover, the terms upon which the Company will be able
to obtain additional equity capital may be adversely affected since the holders
of the Warrants and other 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 Warrants and other outstanding options and warrants.
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
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 not receive any of the proceeds from the sale of the
Shares by the Selling Securityholders. Of the 3,218,868 shares offered hereby,
3,200,000 shares are issuable upon exercise of the Warrants. If such securities
are fully exercised, the Company will receive up to an aggregate of $8,000,000
in gross proceeds. However, there can be no assurance as to when and if the
Warrants will be exercised, and accordingly, there can be no assurance that the
Company will receive any proceeds from the exercise of the Warrants. All
proceeds received by the Company, if any, will be used for working capital and
general corporate purposes. Pending application of the proceeds, the Company
intends to place the funds in interest-bearing investments such as bank
accounts, certificates of deposit and United States government obligations.
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SELLING SECURITYHOLDERS
Of the 3,218,868 shares being offered for resale by the Selling
Securityholders, (i) 18,868 shares are currently outstanding, (ii) 3,000,000
shares are issuable upon exercise of the Warrants issued in connection with the
December 1996 Private Placement, (iii) 150,000 shares are issuable upon exercise
of Warrants issued to Whale as a finder's fee in connection with the December
1996 Private Placement and (iv) 50,000 shares are issuable upon exercise of
Warrants issued to Graubard Mollen & Miller in consideration for rendering legal
services to the Company in connection with the December 1996 Private Placement.
Unless otherwise indicated in the footnotes hereto or otherwise in this
Prospectus, none of the Selling Securityholders has had a material relationship
with the Company within the past three years.
<TABLE>
<CAPTION>
Percentage
Beneficial Beneficial
Common Ownership of Ownership of
Beneficial Ownership Stock Being Common Common
of Common Stock Registered Stock Stock
Name(1) Prior to Sale(2) for Sale After Sale After Sale
<S> <C> <C> <C> <C>
Wheatley Partners, L.P. 1,880,000 1,880,000 -- *
Wheatley Foreign Partners, L.P. 120,000 120,000 -- *
Woodland Partners(3) 305,000 200,000 105,000 1.9
Barry Fingerhut(4) 200,000 200,000 -- *
Irwin Lieber(4) 200,000 200,000 -- *
Woodland Venture Fund 109,000 100,000 9,000 *
Seneca Ventures 100,000 100,000 -- *
DISS Partners 100,000 100,000 -- *
Shelly Finkel(5) 937,736 50,000 887,736 15.6
David Nussbaum 25,000 25,000 -- *
Roger Gladstone 25,000 25,000 -- *
Graubard Mollen & Miller(6) 50,000 50,000 -- *
Whale Securities Co., L.P.(7) 730,000 150,000 580,000 9.6
Laurence Sragow(8) 33,868 18,868 15,000 *
<FN>
* Less than 1%.
(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) Includes the shares of Common Stock issuable upon exercise of the Warrants.
(3) Includes 105,000 shares of Common Stock beneficially owned by Woodland
Partners, a New York general partnership of which Barry Rubenstein is a
partner. 94,500 of such shares represent Mr. Rubenstein's equity interest
in such partnership. Barry Rubenstein is also a general partner of Seneca
Ventures and Woodland Venture Fund and is an officer and member of Wheatley
Partners, LLC, which is the general partner of Wheatley Partners, L.P. and
Wheatley Foreign Partners, L.P. Excludes shares beneficially owned by Mr.
Rubenstein as a result of his equity interests in such partnerships or
otherwise, including 100,000 shares issuable upon exercise of currently
exercisable options granted to Mr. Rubenstein in connection with performing
certain consulting services for the Company.
(4) Does not include an aggregate of 2,000,000 shares of Common Stock
underlying Warrants that were purchased in the December 1996 Private
Placement by Wheatley Partners, L.P. (1,880,000 shares) and
17
<PAGE>
Wheatley Foreign Partners, L.P. (120,000 shares), Delaware limited
partnerships of which Wheatley Partners, LLC is the general partner.
Messrs. Fingerhut and Lieber are officers and members of Wheatley Partners,
LLC.
(5) Includes 50,000 shares of Common Stock issuable upon exercise of currently
exercisable options and an aggregate of 92,618 shares of Common Stock
issuable upon exercise of Public Warrants. Shelly Finkel is Chairman of the
Board of Directors of the Company.
(6) Graubard Mollen & Miller received 50,000 Warrants in payment of certain
legal fees and expenses.
(7) Does not include shares held in Whale's trading account. Includes shares
underlying 100,000 warrants issued to Whale in consideration of certain
investment banking services rendered to the Company. Also includes 60,000
shares of Common Stock and 120,000 shares of Common Stock underlying the
May 1996 Warrants issuable to Whale upon exercise of the UPO. Also includes
150,000 shares of Common Stock and 150,000 shares underlying Public
Warrants issuable to Whale pursuant to the warrant issued to Whale in
connection with the Company's IPO ("Underwriter's Warrant"). All of the
shares underlying the UPO and the Underwriter's Warrants 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.
(8) Includes 18,868 shares issued by the Company to Mr. Sragow in connection
with a termination agreement, dated December 20, 1996, entered into between
the Company and Mr. Sragow. Also includes 15,000 shares issuable upon
exercise of currently exercisable options.
</FN>
</TABLE>
18
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered by the Selling Securityholders 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 Shares 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.
LEGAL MATTERS
The legality of the securities being offered hereby has been passed
upon by Graubard Mollen & Miller, New York, New York. Graubard Mollen & Miller
received $50,000 of Notes and 50,000 Warrants in payment of certain legal fees
and expenses.
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 such 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 Form 8-K, filed March 15,
1996, and as thereafter amended on May 10, 1996 and September 6, 1996, in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, included therein and upon authority of such 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 Form 8-K, filed March 15, 1996, and as thereafter amended on May 10,
1996 and September 6, 1996, in reliance upon the report of Price Waterhouse LLP,
independent certified public accountants, included therein and upon authority of
such firm as experts in accounting and auditing.
19
<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:
SEC filing fee....................................................... $3,399.24
Legal fees and expenses.............................................. 20,000.00
Accounting fees and expenses......................................... 2,000.00
Miscellaneous........................................................ 4,600.76
Total......................................................$ 30,000.00
===========
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
II-1
<PAGE>
to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only 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
II-2
<PAGE>
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 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
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------------ --------------
<S> <C> <C>
3.1 A Certificate of Incorporation
3.2 A Amendment to Certificate of Incorporation
3.3 A By-Laws
3.4 C Certificate of Merger of Merger Sub into Global Link
4.1 A Form of Common Stock Certificate
4.2 A Form of Redeemable Warrant Certificate
4.3 A Warrant Agreement
4.4 A Underwriter's Warrant
4.5 A Stock Option Agreement between the Company and Shelly Finkel
4.6 A Stock Option Agreement between the Company and Paul Silverstein
4.7 A Stock Option Agreement between the Company and James Koplik (Originally Exhibit
4.10 to the Company's Registration Statement on Form SB-2 (No. 33-85998))
4.8 B Stock Option Agreement between the Company and John McCabe
4.9 D Placement Agent Warrant dated May 10, 1996 issued to Whale Securities Co., L.P.
("Whale")
4.10 * Warrant Agreement dated April 15, 1995 between the Company and Craig
Shapiro
4.11 * Warrant Agreement dated October 26, 1995 between the Company and
Frog Hollow Partners
4.12 * Warrant Agreement dated January 22, 1996 between Company and Whale
II-3
<PAGE>
Exhibit
Number Description
- ----------- -------------
4.13 E Form of Subscription Agreement for December 1996 Private Placement
4.14 E Form of Warrant issued in the December 1996 Private Placement
4.15 E Form of Promissory Note issued in the December 1996 Private Placement
5.1 * Opinion of Graubard Mollen & Miller (including consent)
10.1 A Sublease for 342 Madison Avenue, New York, New York
10.2 A Sublease for additional space at 342 Madison Avenue, New York, New York
10.3 A Employment Agreement between the Company and Shelly Finkel
10.4 A Employment Agreement between the Company and Paul Silverstein
10.5 A Employment Agreement between the Company and Maria Bruzzese
10.6 A 1994 Performance Equity Plan
10.7 A Service Agreement between the Company and MCI Telecommunications Corporation
(Originally Exhibit 10.17 to the Company's Registration Statement on Form SB-2 (No.
33-85998))
10.8 A Service Agreement between the Company and Sprint Corporation (Originally Exhibit
10.18 to the Company's Registration Statement on Form SB-2 (No. 33-85998))
10.9 A Service Agreement between Independent Properties Sales Corporation ("IPSC") and
Metromedia Communications Corporation ("Metromedia," which was later acquired
by WorldCom) (Originally Exhibit 10.19 to the Company's Registration Statement on
Form SB-2 (No. 33-85998))
10.10 A Consent between IPSC and Metromedia allowing the assignment to the Company of
IPSC's right to receive services from Metromedia.
10.11 B Employment Agreement between the Company and John McCabe
10.12 B Consulting Agreement between the Company and Barry Rubenstein
10.13 B Consulting Agreement between the Company and Eli Oxenhorn
10.14 C Merger Agreement by and among the Company, Merger Sub and Global Link
10.15 C Directors Voting Agreement
10.16 C Peoples Agreement, together with the Company's Guaranty of Peoples Second
Payment
10.17 C Ancillary Agreement between Global Link and Peoples regarding payment of the
Peoples Accounts Receivable, together with Holding Corp's Guaranty of such
payment
10.18 C Amended and Restated Securities Purchase Agreement
10.19 C The Company's Guaranty of Debentures
10.20 C Employment Agreement between the Company and Gary Wasserson
10.21 C Employment Agreement between the Company and David Tobin
II-4
<PAGE>
Exhibit
Number Description
- ------------ -------------
10.22 C Stock Option Agreement between the Company and Gary Wasserson
10.23 C Stock Option Agreement between the Company and David Tobin
10.24 A Sublease for space at 40 Elmont Road, Elmont, New York (Originally Exhibit 10.14
to Post-Effective Amendment No. 1 to the Company's Registration Statement on
Form SB-2 (No. 33-85998))
10.25 D Form of Registration Rights Agreement for May 1996 Private Placement
10.26 D Agency Agreement between the Company and Whale for May 1996 Private
Placement
10.27 D Placement Agent Warrant Agreement for May 1996 Private Placement
10.28 * Consulting Agreement dated January 22, 1996 between the Company and Whale
10.29 * First Amendment to Peoples Agreement, dated August 14, 1996
10.30 * Second Amendment to Peoples Agreement, dated November 27, 1996
10.31 E Finder's fee agreement between the Company and Whale Securities Co., L.P. relating
to the December 1996 Private Placement
23.1 * Consent KPMG Peat Marwick LLP
23.2 * Consent of Price Waterhouse LLP
23.3 * Consent of Graubard Mollen & Miller (filed as part of Exhibit 5.1)
- ------------
<FN>
* Filed herewith.
A Incorporated by reference to the Company's Registration Statement on Form SB-2 (No. 33-85998).
B Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1994.
C Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on March 15, 1996.
D Incorporated by reference to Post-Effective Amendment No. 2 to the Company's Registration
Statement on Form SB-2 on Form S-3 (No. 33-85998).
E Incorporated by reference to the Company's Current Report on Form 8-K,
filed with the Commission on December 26, 1996.
</FN>
</TABLE>
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 to this registration statement:
II-5
<PAGE>
(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.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or 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, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission 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.
(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 December 27,
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 Gary Wasserson 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>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Shelly Finkel Chairman of the Board December 27, 1996
- --------------------------------
Shelly Finkel
/s/ Gary Wasserson Chief Executive Officer December 27, 1996
- -------------------------------- and Director
Gary Wasserson
/s/ Alan Kaufman Director December 27, 1996
- --------------------------------
Alan Kaufman
/s/ Jack Tobin Director December 27, 1996
- --------------------------------
Jack Tobin
/s/ John McCabe President and Director December 27, 1996
- --------------------------------
John McCabe
/s/ Donald Ptalis Director December 27, 1996
- --------------------------------
Donald Ptalis
/s/ Maria Bruzzese Chief Financial Officer December 27, 1996
- -------------------------------- (and principal accounting
Maria Bruzzese officer)
</TABLE>
II-7
<PAGE>
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT
WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT EXCEPT AS HEREIN PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, APRIL 15, 2000.
WARRANT
For the Purchase of
50,000 Shares of Common Stock
of
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
1. Warrant.
THIS CERTIFIES THAT, in consideration of $10.00 and other good
and valuable consideration, duly paid by or on behalf of Craig Shapiro
("Holder"), as registered owner of this Warrant, to Global Telecommunication
Solutions, Inc. ("Company"), Holder is entitled, at any time or from time to
time at or after April 15, 1995 ("Commencement Date"), and at or before 5:00
p.m., Eastern Time, April 15, 2000 ("Expiration Date"), but not thereafter, to
subscribe for, purchase and receive, in whole or in part, up to Fifty Thousand
(50,000) shares of Common Stock of the Company, $.01 par value ("Common Stock").
If the Expiration Date is a day on which banking institutions are authorized by
law to close, then this Warrant may be exercised on the next succeeding day
which is not such a day in accordance with the terms herein. During the period
ending on the Expiration Date, the Company agrees not to take any action that
would terminate the Warrant. This Warrant is initially exercisable at $5.00 per
share of Common Stock purchased; provided, however, that upon the occurrence of
any of the events specified in Section 6 hereof, the rights granted by this
Warrant, including the exercise price and the number of shares of Common Stock
to be received upon such exercise, shall be adjusted as therein specified. The
term "Exercise Price" shall mean the initial exercise price or the adjusted
exercise price, depending on the context, of a share of Common Stock. The term
"Securities" shall mean the shares of Common Stock issuable upon exercise of
this Warrant.
2. Exercise.
2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price for the
Securities being purchased. If the subscription rights represented hereby shall
not be exercised at or before 5:00 p.m., Eastern
<PAGE>
time, on the Expiration Date, this Warrant shall become and be void without
further force or effect, and all rights represented hereby shall cease and
expire.
2.2 Legend. Each certificate for Securities purchased under this
Warrant shall bear a legend as follows, unless such Securities have been
registered under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act") or applicable state law. The securities may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act,
or pursuant to an exemption from registration under the Act
and applicable state law."
3. Transfer.
3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
shares of Common Stock purchasable hereunder or such portion of such number as
shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the Company has received the opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
4. New Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Warrant for cancellation, together with the duly executed exercise or
assignment form and funds (or conversion equivalent) sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered to
the Holder without charge a new Warrant of like tenor to this Warrant in the
name of the Holder evidencing the right of the Holder to purchase the aggregate
number of shares of Common Stock and Warrants purchasable hereunder as to which
this Warrant has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant and of
reasonably satisfactory indemnification,
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the Company shall execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual obligation
on the part of the Company.
5. Registration Rights.
5.1 "Piggy-Back" Registration.
5.1.1 Grant of Right. The Holders of this Warrant shall have
the right for a period of seven years from the Commencement Date to include all
or any part of this Warrant and the shares of Common Stock underlying this
Warrant (collectively, the "Registrable Securities") as part of any registration
of securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8 or
any equivalent form); provided, however, that if, in the written opinion of the
Company's managing underwriter or underwriters, if any, for such offering (the
"Underwriter"), the inclusion of the Registrable Securities, when added to the
securities being registered by the Company or the selling stockholder(s), will
exceed the maximum amount of the Company's securities which can be marketed (i)
at a price reasonably related to their then current market value, or (ii)
without materially and adversely affecting the entire offering, the Company
shall nevertheless register all or any portion of the Registrable Securities
required to be so registered but such Registrable Securities shall not be sold
by the Holders until 90 days after the registration statement for such offering
has become effective; and provided further that, if any securities are
registered for sale on behalf of other stockholders in such offering and such
stockholders have not agreed to defer such sale until the expiration of such 90
day period, the number of securities to be sold by all stockholders in such
public offering during such 90 day period shall be apportioned pro rata among
all such selling stockholders, including all holders of the Registrable
Securities, according to the total amount of securities of the Company proposed
to be sold by said selling stockholders, including all holders of the
Registrable Securities.
5.1.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. In the event of such a proposed registration, the
Company shall furnish the then Holders of outstanding Registrable Securities
with not less than thirty days written notice prior to the proposed date of
filing of such registration statement. Such notice to the Holders shall continue
to be given for each registration statement filed by the Company until such time
as all of the Registrable Securities have been sold by the Holder. The holders
of the Registrable Securities shall exercise the "piggy-back" rights provided
for herein by giving written notice, within twenty days of the receipt of the
Company's notice of its intention to file a registration statement. The Company
shall cause any registration statement filed pursuant to the above "piggyback"
rights to remain effective for at least nine months from the date that the
Holders of the Registrable Securities are first given the opportunity to sell
all of such securities. Nothing contained in this Warrant shall be construed as
requiring any Holder to exercise this Warrant or any part thereof prior to the
initial filing of any registration statement or the effectiveness thereof.
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5.2 General Terms.
5.2.1 Indemnification.
(a) The Company shall indemnify the Holder(s) of the Registrable Securities
to be sold pursuant to any registration statement hereunder and any underwriter
or person deemed to be an underwriter under the Act and each person, if any, who
controls such Holders or underwriter or persons deemed to be underwriters within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage,
expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement. The
Holder(s) of the Registrable Securities to be sold pursuant to such registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, against all loss, claim, damage, expense or liability
(including all reasonable attorneys' fees and other expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, in writing, for
specific inclusion in such registration statement.
(b) If any action is brought against a party hereto, ("Indemnified Party")
in respect of which indemnity may be sought against the other party
("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and Indemnifying
Party shall assume the defense of such action, including the employment and fees
of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified
Party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the employment of such counsel shall have been
authorized in writing by Indemnifying Party in connection with the defense of
such action, or (ii) Indemnifying Party shall not have employed counsel to
defend such action, or (iii) such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which may
result in a conflict between the Indemnified Party and Indemnifying Party (in
which case Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of attorneys
designated in writing by the Indemnified Party shall be borne by Indemnifying
Party. Notwithstanding anything to the contrary contained herein, if Indemnified
Party shall assume the defense of such action as provided above, Indemnifying
Party shall not be liable for any settlement of any such action effected without
its written consent.
(c) If the indemnification or reimbursement provided for hereunder is
finally judicially determined by a court of competent jurisdiction to be
unavailable to an Indemnified Party (other than as a consequence of a final
judicial determination of willful misconduct, bad faith or gross negligence of
such Indemnified Party), then Indemnifying Party agrees, in lieu of indemnifying
such Indemnified Party, to contribute to the amount paid or payable by such
Indemnified Party (i) in such proportion as is appropriate to reflect the
relative benefits received, or sought to be received, by Indemnifying Party on
the one hand and by such Indemnified Party on the other or (ii) if (but only if)
the allocation provided in clause (i) of this
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sentence is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in such clause
(i) but also the relative fault of Indemnifying Party and of such Indemnified
Party; provided, however, that in no event shall the aggregate amount
contributed by a Holder exceed the profit, if any, earned by such Holder as a
result of the exercise by him of the Warrants and the sale by him of the
underlying shares of Common Stock.
(d) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
5.2.2 Exercise of Warrants. Nothing contained in this Warrant
shall be construed as requiring the Holder(s) to exercise their Warrants prior
to or after the initial filing of any registration statement or the
effectiveness thereof.
5.2.3 Documents Delivered to Holders. The Company shall
furnish to each Holder participating in any of the foregoing offerings and to
each Underwriter of any such offering, if any, a signed counterpart, addressed
to such Holder or Underwriter, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under any underwriting agreement related thereto), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities. The Company shall also deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such Holder shall reasonably request.
6. Adjustments.
6.1 Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of shares of Common Stock underlying this Warrant
shall be subject to adjustment from time to time as hereinafter set forth:
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<PAGE>
6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
6.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Warrant shall be decreased in proportion to such decrease in outstanding shares.
6.1.3 Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Warrant is
adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted
(to the nearest cent) by multiplying such Exercise Price immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
6.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expiration of the right of exercise of this Warrant) to receive upon the
exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Warrant immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by Sections 6.1.1 or 6.1.2, then such adjustment shall be
made pursuant to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
6.1.5 Changes in Form of Warrant. This form of Warrant need
not be changed because of any change pursuant to this Section, and Warrants
issued after such change may state the same Exercise Price and the same number
of shares of Common Stock and Warrants
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<PAGE>
as are stated in the Warrants initially issued pursuant to this Agreement. The
acceptance by any Holder of the issuance of new Warrants reflecting a required
or permissive change shall not be deemed to waive any rights to a prior
adjustment or the computation thereof.
6.2 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any 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 of Common Stock or other securities,
properties or rights.
7. Reservation and Listing. 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 exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights 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 of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon exercise of the
Warrants to be listed (subject to official notice of issuance) on all securities
exchanges (or, if applicable on Nasdaq) on which the Common Stock is then listed
and/or quoted.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if 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 retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) 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 (iii) a merger or reorganization in which the Company is not the
surviving party, or (iv) a dissolution, liquidation or winding up
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<PAGE>
of the Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business shall be
proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
9. Miscellaneous.
9.1 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 Warrant.
9.2 Entire Agreement. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
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.
9.3 Binding Effect. This Warrant shall inure solely to the benefit of
and shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
9.4 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflict of laws. The Company and the
Holder hereby agree that any action, proceeding or claim arising out of, or
relating in any way to this Warrant shall be brought and enforced in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company and the Holder hereby waive any
objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum. Any process or summons to be served upon the Company may be
served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 8 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the
8
<PAGE>
Company in any action, proceeding or claim. Each of the Company and the Holder
agrees that the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable attorneys' fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
9.5 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Warrant or any provision hereof or the right of the Company or
any Holder to thereafter enforce each and every provision of this Warrant. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Warrant shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer as of the 15th day of April, 1995.
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
------------------------------------------
Name: Shelly Finkel
Title: Chairman of the Board
REGISTERED HOLDER INFORMATION:
CRAIG SHAPIRO 1617 South Beverly Boulevard #201 Los Angeles, CA 90024 ID
####-##-####
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Form to be used to exercise Warrant:
==================================
- ----------------------------------
Date:_________________, 19__
The undersigned hereby elects irrevocably to exercise the
within Warrant and to purchase ____ shares of Common Stock of
_____________________________ and hereby makes payment of $____________ (at the
rate of $_________ per share of Common Stock) in payment of the Exercise Price
pursuant thereto. Please issue the Common Stock as to which this Warrant is
exercised in accordance with the instructions given below.
------------------------------
Signature
- ------------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
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<PAGE>
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Warrant):
FOR VALUE RECEIVED,____________________________________ does
hereby sell, assign and transfer unto_______________________ the right to
purchase _______________________ shares of Common Stock of
_______________________________ ("Company") evidenced by the within Warrant and
does hereby authorize the Company to transfer such right on the books of the
Company.
Dated:___________________, 199_
------------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
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<PAGE>
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF, AGREES
THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT EXCEPT AS HEREIN
PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, OCTOBER 26, 2000.
WARRANT
For the Purchase of
50,000 Shares of Common Stock
of
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
1. Warrant.
THIS CERTIFIES THAT, in consideration of $10.00 and other good
and valuable consideration, duly paid by or on behalf of Frog Hollow Partners
("Holder"), as registered owner of this Warrant, to Global Telecommunication
Solutions, Inc. ("Company"), Holder is entitled, at any time or from time to
time at or after October 26, 1995 ("Commencement Date"), and at or before 5:00
p.m., Eastern Time, October 26, 2000 ("Expiration Date"), but not thereafter, to
subscribe for, purchase and receive, in whole or in part, up to Fifty Thousand
(50,000) shares of Common Stock of the Company, $.01 par value ("Common Stock").
If the Expiration Date is a day on which banking institutions are authorized by
law to close, then this Warrant may be exercised on the next succeeding day
which is not such a day in accordance with the terms herein. During the period
ending on the Expiration Date, the Company agrees not to take any action that
would terminate the Warrant. This Warrant is initially exercisable at $5.00 per
share of Common Stock purchased; provided, however, that upon the occurrence of
any of the events specified in Section 6 hereof, the rights granted by this
Warrant, including the exercise price and the number of shares of Common Stock
to be received upon such exercise, shall be adjusted as therein specified. The
term "Exercise Price" shall mean the initial exercise price or the adjusted
exercise price, depending on the context, of a share of Common Stock. The term
"Securities" shall mean the shares of Common Stock issuable upon exercise of
this Warrant.
2. Exercise.
2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price for the
Securities being purchased. If the subscription rights represented hereby shall
not be exercised at or before 5:00 p.m., Eastern
<PAGE>
time, on the Expiration Date, this Warrant shall become and be void without
further force or effect, and all rights represented hereby shall cease and
expire.
2.2 Legend. Each certificate for Securities purchased under this
Warrant shall bear a legend as follows, unless such Securities have been
registered under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act") or applicable state law. The securities may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act,
or pursuant to an exemption from registration under the Act
and applicable state law."
3. Transfer.
3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
shares of Common Stock purchasable hereunder or such portion of such number as
shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the Company has received the opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
4. New Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Warrant for cancellation, together with the duly executed exercise or
assignment form and funds (or conversion equivalent) sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered to
the Holder without charge a new Warrant of like tenor to this Warrant in the
name of the Holder evidencing the right of the Holder to purchase the aggregate
number of shares of Common Stock and Warrants purchasable hereunder as to which
this Warrant has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant and of
reasonably satisfactory indemnification,
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<PAGE>
the Company shall execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual obligation
on the part of the Company.
5. Registration Rights.
5.1 "Piggy-Back" Registration.
5.1.1 Grant of Right. The Holders of this Warrant shall have
the right for a period of seven years from the Commencement Date to include all
or any part of this Warrant and the shares of Common Stock underlying this
Warrant (collectively, the "Registrable Securities") as part of any registration
of securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8 or
any equivalent form); provided, however, that if, in the written opinion of the
Company's managing underwriter or underwriters, if any, for such offering (the
"Underwriter"), the inclusion of the Registrable Securities, when added to the
securities being registered by the Company or the selling stockholder(s), will
exceed the maximum amount of the Company's securities which can be marketed (i)
at a price reasonably related to their then current market value, or (ii)
without materially and adversely affecting the entire offering, the Company
shall nevertheless register all or any portion of the Registrable Securities
required to be so registered but such Registrable Securities shall not be sold
by the Holders until 90 days after the registration statement for such offering
has become effective; and provided further that, if any securities are
registered for sale on behalf of other stockholders in such offering and such
stockholders have not agreed to defer such sale until the expiration of such 90
day period, the number of securities to be sold by all stockholders in such
public offering during such 90 day period shall be apportioned pro rata among
all such selling stockholders, including all holders of the Registrable
Securities, according to the total amount of securities of the Company proposed
to be sold by said selling stockholders, including all holders of the
Registrable Securities.
5.1.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. In the event of such a proposed registration, the
Company shall furnish the then Holders of outstanding Registrable Securities
with not less than thirty days written notice prior to the proposed date of
filing of such registration statement. Such notice to the Holders shall continue
to be given for each registration statement filed by the Company until such time
as all of the Registrable Securities have been sold by the Holder. The holders
of the Registrable Securities shall exercise the "piggy-back" rights provided
for herein by giving written notice, within twenty days of the receipt of the
Company's notice of its intention to file a registration statement. The Company
shall cause any registration statement filed pursuant to the above "piggyback"
rights to remain effective for at least nine months from the date that the
Holders of the Registrable Securities are first given the opportunity to sell
all of such securities. Nothing contained in this Warrant shall be construed as
requiring any Holder to exercise this Warrant or any part thereof prior to the
initial filing of any registration statement or the effectiveness thereof.
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5.2 General Terms.
5.2.1 Indemnification.
(a) The Company shall indemnify the Holder(s) of the Registrable Securities
to be sold pursuant to any registration statement hereunder and any underwriter
or person deemed to be an underwriter under the Act and each person, if any, who
controls such Holders or underwriter or persons deemed to be underwriters within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage,
expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement. The
Holder(s) of the Registrable Securities to be sold pursuant to such registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, against all loss, claim, damage, expense or liability
(including all reasonable attorneys' fees and other expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, in writing, for
specific inclusion in such registration statement.
(b) If any action is brought against a party hereto, ("Indemnified Party")
in respect of which indemnity may be sought against the other party
("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and Indemnifying
Party shall assume the defense of such action, including the employment and fees
of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified
Party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the employment of such counsel shall have been
authorized in writing by Indemnifying Party in connection with the defense of
such action, or (ii) Indemnifying Party shall not have employed counsel to
defend such action, or (iii) such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which may
result in a conflict between the Indemnified Party and Indemnifying Party (in
which case Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of attorneys
designated in writing by the Indemnified Party shall be borne by Indemnifying
Party. Notwithstanding anything to the contrary contained herein, if Indemnified
Party shall assume the defense of such action as provided above, Indemnifying
Party shall not be liable for any settlement of any such action effected without
its written consent.
(c) If the indemnification or reimbursement provided for hereunder is
finally judicially determined by a court of competent jurisdiction to be
unavailable to an Indemnified Party (other than as a consequence of a final
judicial determination of willful misconduct, bad faith or gross negligence of
such Indemnified Party), then Indemnifying Party agrees, in lieu of indemnifying
such Indemnified Party, to contribute to the amount paid or payable by such
Indemnified Party (i) in such proportion as is appropriate to reflect the
relative benefits received, or sought to be received, by Indemnifying Party on
the one hand and by such Indemnified Party on the other or (ii) if (but only if)
the allocation provided in clause (i) of this
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sentence is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in such clause
(i) but also the relative fault of Indemnifying Party and of such Indemnified
Party; provided, however, that in no event shall the aggregate amount
contributed by a Holder exceed the profit, if any, earned by such Holder as a
result of the exercise by him of the Warrants and the sale by him of the
underlying shares of Common Stock.
(d) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
5.2.2 Exercise of Warrants. Nothing contained in this Warrant
shall be construed as requiring the Holder(s) to exercise their Warrants prior
to or after the initial filing of any registration statement or the
effectiveness thereof.
5.2.3 Documents Delivered to Holders. The Company shall
furnish to each Holder participating in any of the foregoing offerings and to
each Underwriter of any such offering, if any, a signed counterpart, addressed
to such Holder or Underwriter, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under any underwriting agreement related thereto), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities. The Company shall also deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and
independent auditors, all to such reasonable extent and at such reasonable times
and as often as any such Holder shall reasonably request.
6. Adjustments.
6.1 Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of shares of Common Stock underlying this Warrant
shall be subject to adjustment from time to time as hereinafter set forth:
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6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
6.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Warrant shall be decreased in proportion to such decrease in outstanding shares.
6.1.3 Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Warrant is
adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted
(to the nearest cent) by multiplying such Exercise Price immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
6.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expiration of the right of exercise of this Warrant) to receive upon the
exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Warrant immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by Sections 6.1.1 or 6.1.2, then such adjustment shall be
made pursuant to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
6.1.5 Changes in Form of Warrant. This form of Warrant need
not be changed because of any change pursuant to this Section, and Warrants
issued after such change may state the same Exercise Price and the same number
of shares of Common Stock and Warrants
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as are stated in the Warrants initially issued pursuant to this Agreement. The
acceptance by any Holder of the issuance of new Warrants reflecting a required
or permissive change shall not be deemed to waive any rights to a prior
adjustment or the computation thereof.
6.2 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any 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 of Common Stock or other securities,
properties or rights.
7. Reservation and Listing. 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 exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights 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 of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon exercise of the
Warrants to be listed (subject to official notice of issuance) on all securities
exchanges (or, if applicable on Nasdaq) on which the Common Stock is then listed
and/or quoted.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if 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 retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) 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 (iii) a merger or reorganization in which the Company is not the
surviving party, or (iv) a dissolution, liquidation or winding up
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of the Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business shall be
proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
9. Miscellaneous.
9.1 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 Warrant.
9.2 Entire Agreement. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
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.
9.3 Binding Effect. This Warrant shall inure solely to the benefit of
and shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
9.4 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflict of laws. The Company and the
Holder hereby agree that any action, proceeding or claim arising out of, or
relating in any way to this Warrant shall be brought and enforced in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company and the Holder hereby waive any
objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum. Any process or summons to be served upon the Company may be
served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 8 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the
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Company in any action, proceeding or claim. Each of the Company and the Holder
agrees that the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable attorneys' fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
9.5 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Warrant or any provision hereof or the right of the Company or
any Holder to thereafter enforce each and every provision of this Warrant. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Warrant shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer as of the 26th day of October, 1995.
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
--------------------------------
Name: Shelly Finkel
Title: Chairman of the Board
REGISTERED HOLDER INFORMATION:
FROG HOLLOW PARTNERS
Attn: James D. Whitten, General Partner
2801 Ocean Drive
Vero Beach, FL 32963
ID # ###-##-####
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Form to be used to exercise Warrant:
==================================
- ----------------------------------
Date:_________________, 19__
The undersigned hereby elects irrevocably to exercise the
within Warrant and to purchase ____ shares of Common Stock of
_____________________________ and hereby makes payment of $____________ (at the
rate of $_________ per share of Common Stock) in payment of the Exercise Price
pursuant thereto. Please issue the Common Stock as to which this Warrant is
exercised in accordance with the instructions given below.
------------------------------
Signature
- ------------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
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Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Warrant):
FOR VALUE RECEIVED,____________________________________ does
hereby sell, assign and transfer unto_______________________ the right to
purchase _______________________ shares of Common Stock of
_______________________________ ("Company") evidenced by the within Warrant and
does hereby authorize the Company to transfer such right on the books of the
Company.
Dated:___________________, 199_
------------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
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THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF,
AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT EXCEPT
AS HEREIN PROVIDED.
VOID AFTER 5:00 P.M. EASTERN TIME, JANUARY 22, 2001.
WARRANT
For the Purchase of
200,000 Shares of Common Stock
of
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
1. Warrant.
THIS CERTIFIES THAT, in consideration of $10.00 and other good
and valuable consideration, duly paid by or on behalf of Whale Securities Co.,
L.P. ("Holder"), as registered owner of this Warrant, to Global
Telecommunication Solutions, Inc. ("Company"), Holder is entitled, at any time
or from time to time at or after January 22, 1996 ("Commencement Date"), and at
or before 5:00 p.m., Eastern Time, January 22, 2001 ("Expiration Date"), but not
thereafter, to subscribe for, purchase and receive, in whole or in part, up to
Two Hundred Thousand (200,000) shares of Common Stock of the Company, $.01 par
value ("Common Stock"). If the Expiration Date is a day on which banking
institutions are authorized by law to close, then this Warrant may be exercised
on the next succeeding day which is not such a day in accordance with the terms
herein. During the period ending on the Expiration Date, the Company agrees not
to take any action that would terminate the Warrant. This Warrant is initially
exercisable at $5.125 per share of Common Stock purchased; provided, however,
that upon the occurrence of any of the events specified in Section 6 hereof, the
rights granted by this Warrant, including the exercise price and the number of
shares of Common Stock to be received upon such exercise, shall be adjusted as
therein specified. The term "Exercise Price" shall mean the initial exercise
price or the adjusted exercise price, depending on the context, of a share of
Common Stock. The term "Securities" shall mean the shares of Common Stock
issuable upon exercise of this Warrant.
2. Exercise.
2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivered to the
Company, together with this Warrant and payment of the Exercise Price for the
Securities being purchased. If the subscription rights represented hereby shall
not be exercised at or before 5:00 p.m., Eastern
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time, on the Expiration Date, this Warrant shall become and be void without
further force or effect, and all rights represented hereby shall cease and
expire.
2.2 Legend. Each certificate for Securities purchased under this
Warrant shall bear a legend as follows, unless such Securities have been
registered under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended
("Act") or applicable state law. The securities may not be
offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act,
or pursuant to an exemption from registration under the Act
and applicable state law."
3. Transfer.
3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The Company shall
immediately transfer this Warrant on the books of the Company and shall execute
and deliver a new Warrant or Warrants of like tenor to the appropriate
assignee(s) expressly evidencing the right to purchase the aggregate number of
shares of Common Stock purchasable hereunder or such portion of such number as
shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (i)
the Company has received the opinion of counsel for the Holder that such
securities may be sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
4. New Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Warrant may be exercised or assigned in whole or in part.
In the event of the exercise or assignment hereof in part only, upon surrender
of this Warrant for cancellation, together with the duly executed exercise or
assignment form and funds (or conversion equivalent) sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered to
the Holder without charge a new Warrant of like tenor to this Warrant in the
name of the Holder evidencing the right of the Holder to purchase the aggregate
number of shares of Common Stock and Warrants purchasable hereunder as to which
this Warrant has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant and of
reasonably satisfactory indemnification,
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the Company shall execute and deliver a new Warrant of like tenor and date. Any
such new Warrant executed and delivered as a result of such loss, theft,
mutilation or destruction shall constitute a substitute contractual obligation
on the part of the Company.
5. Registration Rights.
5.1 "Piggy-Back" Registration.
5.1.1 Grant of Right. The Holders of this Warrant shall have
the right for a period of seven years from the Commencement Date to include all
or any part of this Warrant and the shares of Common Stock underlying this
Warrant (collectively, the "Registrable Securities") as part of any registration
of securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8 or
any equivalent form); provided, however, that if, in the written opinion of the
Company's managing underwriter or underwriters, if any, for such offering (the
"Underwriter"), the inclusion of the Registrable Securities, when added to the
securities being registered by the Company or the selling stockholder(s), will
exceed the maximum amount of the Company's securities which can be marketed (i)
at a price reasonably related to their then current market value, or (ii)
without materially and adversely affecting the entire offering, the Company
shall nevertheless register all or any portion of the Registrable Securities
required to be so registered but such Registrable Securities shall not be sold
by the Holders until 90 days after the registration statement for such offering
has become effective; and provided further that, if any securities are
registered for sale on behalf of other stockholders in such offering and such
stockholders have not agreed to defer such sale until the expiration of such 90
day period, the number of securities to be sold by all stockholders in such
public offering during such 90 day period shall be apportioned pro rata among
all such selling stockholders, including all holders of the Registrable
Securities, according to the total amount of securities of the Company proposed
to be sold by said selling stockholders, including all holders of the
Registrable Securities.
5.1.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, but the Holders shall pay
any and all underwriting commissions and the expenses of any legal counsel
selected by the Holders to represent them in connection with the sale of the
Registrable Securities. In the event of such a proposed regis tration, the
Company shall furnish the then Holders of outstanding Registrable Securities
with not less than thirty days written notice prior to the proposed date of
filing of such registration statement. Such notice to the Holders shall continue
to be given for each registration statement filed by the Company until such time
as all of the Registrable Securities have been sold by the Holder. The holders
of the Registrable Securities shall exercise the "piggy-back" rights provided
for herein by giving written notice, within twenty days of the receipt of the
Company's notice of its intention to file a registration statement. The Company
shall cause any registration statement filed pursuant to the above "piggyback"
rights to remain effective for at least nine months from the date that the
Holders of the Registrable Securities are first given the opportunity to sell
all of such securities. Nothing contained in this Warrant shall be construed as
requiring any Holder to exercise this Warrant or any part thereof prior to the
initial filing of any registration statement or the effectiveness thereof.
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<PAGE>
5.2 General Terms.
5.2.1 Indemnification.
(a) The Company shall indemnify the Holder(s) of the Registrable Securities
to be sold pursuant to any registration statement hereunder and any underwriter
or person deemed to be an underwriter under the Act and each person, if any, who
controls such Holders or underwriter or persons deemed to be underwriters within
the meaning of Section 15 of the Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), against all loss, claim, damage,
expense or liability (including all reasonable attorneys' fees and other
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement. The
Holder(s) of the Registrable Securities to be sold pursuant to such registration
statement, and their successors and assigns, shall severally, and not jointly,
indemnify the Company, against all loss, claim, damage, expense or liability
(including all reasonable attorneys' fees and other expenses reasonably incurred
in investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, in writing, for
specific inclusion in such registration statement.
(b) If any action is brought against a party hereto, ("Indemnified Party")
in respect of which indemnity may be sought against the other party
("Indemnifying Party"), such Indemnified Party shall promptly notify
Indemnifying Party in writing of the institution of such action and Indemnifying
Party shall assume the defense of such action, including the employment and fees
of counsel reasonably satisfactory to the Indemnified Party. Such Indemnified
Party shall have the right to employ its or their own counsel in any such case,
but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the employment of such counsel shall have been
authorized in writing by Indemnifying Party in connection with the defense of
such action, or (ii) Indemnifying Party shall not have employed counsel to
defend such action, or (iii) such Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which may
result in a conflict between the Indemnified Party and Indemnifying Party (in
which case Indemnifying Party shall not have the right to direct the defense of
such action on behalf of the Indemnified Party), in any of which events, the
reasonable fees and expenses of not more than one additional firm of attorneys
designated in writing by the Indemnified Party shall be borne by Indemnifying
Party. Notwithstanding anything to the contrary contained herein, if Indemnified
Party shall assume the defense of such action as provided above, Indemnifying
Party shall not be liable for any settlement of any such action effected without
its written consent.
(c) If the indemnification or reimbursement provided for hereunder is
finally judicially determined by a court of competent jurisdiction to be
unavailable to an Indemnified Party (other than as a consequence of a final
judicial determination of willful misconduct, bad faith or gross negligence of
such Indemnified Party), then Indemnifying Party agrees, in lieu of indemnifying
such Indemnified Party, to contribute to the amount paid or payable by such
Indemnified Party (i) in such proportion as is appropriate to reflect the
relative benefits received, or sought to be received, by Indemnifying Party on
the one hand and by such Indemnified Party on the other or (ii) if (but only if)
the allocation provided in clause (i) of this
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<PAGE>
sentence is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in such clause
(i) but also the relative fault of Indemnifying Party and of such Indemnified
Party; provided, however, that in no event shall the aggregate amount
contributed by a Holder exceed the profit, if any, earned by such Holder as a
result of the exercise by him of the Warrants and the sale by him of the
underlying shares of Common Stock.
(d) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
5.2.2 Exercise of Warrants. Nothing contained in this Warrant
shall be construed as requiring the Holder(s) to exercise their Warrants prior
to or after the initial filing of any registration statement or the
effectiveness thereof.
5.2.3 Documents Delivered to Holders. The Company shall
furnish to each Holder participating in any of the foregoing offerings and to
each Underwriter of any such offering, if any, a signed counterpart, addressed
to such Holder or Underwriter, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, an opinion dated the date
of the closing under any underwriting agreement related thereto), and (ii) a
"cold comfort" letter dated the effective date of such registration statement
(and, if such registration includes an underwritten public offering, a letter
dated the date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities. The Company shall also deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and permit each Holder and underwriter to do such
investigation, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary to comply with applicable securities laws or rules of the NASD. Such
investigation shall include access to books, records and properties and
opportunities to discuss the business of the Company with its officers and inde
pendent auditors, all to such reasonable extent and at such reasonable times and
as often as any such Holder shall reasonably request.
6. Adjustments.
6.1 Adjustments to Exercise Price and Number of Securities . The
Exercise Price and the number of shares of Common Stock underlying this Warrant
shall be subject to adjustment from time to time as hereinafter set forth:
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<PAGE>
6.1.1 Stock Dividends - Recapitalization, Reclassification,
Split-Ups. If, after the date hereof, and subject to the provisions of Section
6.2 below, the number of outstanding shares of Common Stock is increased by a
stock dividend on the Common Stock payable in shares of Common Stock or by a
split-up, recapitalization or reclassification of shares of Common Stock or
other similar event, then, on the effective date thereof, the number of shares
of Common Stock issuable on exercise of this Warrant shall be increased in
proportion to such increase in outstanding shares.
6.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.3, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification of
shares of Common Stock or other similar event, then, upon the effective date
thereof, the number of shares of Common Stock issuable on exercise of this
Warrant shall be decreased in proportion to such decrease in outstanding shares.
6.1.3 Adjustments in Exercise Price. Whenever the number of
shares of Common Stock purchasable upon the exercise of this Warrant is
adjusted, as provided in this Section 6.1, the Exercise Price shall be adjusted
(to the nearest cent) by multiplying such Exercise Price immediately prior to
such adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
6.1.4 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 hereof or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification or reorganization
of the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation or entity of the property of the Company as an
entirety or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expiration of the right of exercise of this Warrant) to receive upon the
exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Warrant immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by Sections 6.1.1 or 6.1.2, then such adjustment shall be
made pursuant to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
6.1.5 Changes in Form of Warrant. This form of Warrant need
not be changed because of any change pursuant to this Section, and Warrants
issued after such change may state the same Exercise Price and the same number
of shares of Common Stock and Warrants
6
<PAGE>
as are stated in the Warrants initially issued pursuant to this Agreement. The
acceptance by any Holder of the issuance of new Warrants reflecting a required
or permissive change shall not be deemed to waive any rights to a prior
adjustment or the computation thereof.
6.2 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of this Warrant, nor shall it be required to issue scrip or
pay cash in lieu of any 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 of Common Stock or other securities,
properties or rights.
7. Reservation and Listing. 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 exercise of this Warrant, such number of shares of Common Stock
or other securities, properties or rights 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 of Common Stock and other
securities issuable upon such exercise shall be duly and validly issued, fully
paid and non-assessable and not subject to preemptive rights of any stockholder.
As long as the Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon exercise of the
Warrants to be listed (subject to official notice of issuance) on all securities
exchanges (or, if applicable on Nasdaq) on which the Common Stock is then listed
and/or quoted.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed
as conferring upon the Holders the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if 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 retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company, or (ii) 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 (iii) a merger or reorganization in which the Company is not the
surviving party, or (iv) a dissolution, liquidation or winding up
7
<PAGE>
of the Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business shall be
proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price Notice").
The Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's President and Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt by the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
9. Miscellaneous.
9.1 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 Warrant.
9.2 Entire Agreement. This Warrant (together with the other agreements
and documents being delivered pursuant to or in connection with this Warrant)
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.
9.3 Binding Effect. This Warrant shall inure solely to the benefit of
and shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
9.4 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accor dance with the law of the State
of New York, without giving effect to conflict of laws. The Company and the
Holder hereby agree that any action, proceeding or claim arising out of, or
relating in any way to this Warrant shall be brought and enforced in the courts
of the State of New York or of the United States of America for the Southern
District of New York, and irrevocably submits to such jurisdiction, which
jurisdiction shall be exclusive. The Company and the Holder hereby waive any
objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum. Any process or summons to be served upon the Company may be
served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 8 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the
8
<PAGE>
Company in any action, proceeding or claim. Each of the Company and the Holder
agrees that the prevailing party(ies) in any such action shall be entitled to
recover from the other party(ies) all of its reasonable attorneys' fees and
expenses relating to such action or proceeding and/or incurred in connection
with the preparation therefor.
9.5 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Warrant shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Warrant or any provision hereof or the right of the Company or
any Holder to thereafter enforce each and every provision of this Warrant. No
waiver of any breach, non-compliance or non-fulfillment of any of the provisions
of this Warrant shall be effective unless set forth in a written instrument
executed by the party or parties against whom or which enforcement of such
waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer as of the 22nd day of January, 1996.
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
-----------------------------------
Name: Shelly Finkel
Title: Chairman of the Board
REGISTERED HOLDER INFORMATION:
WHALE SECURITIES CO., L.P.
650 Fifth Avenue
New York, New York 10019
ID # ___________________
9
<PAGE>
Form to be used to exercise Warrant:
==================================
- ----------------------------------
Date:_________________, 19__
The undersigned hereby elects irrevocably to exercise the
within Warrant and to purchase ____ shares of Common Stock of
_____________________________ and hereby makes payment of $____________ (at the
rate of $_________ per share of Common Stock) in payment of the Exercise Price
pursuant thereto. Please issue the Common Stock as to which this Warrant is
exercised in accordance with the instructions given below.
------------------------------
Signature
- ------------------------------
Signature Guaranteed
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ________________________________________________________
(Print in Block Letters)
Address ________________________________________________________
10
<PAGE>
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer
of the within Warrant):
FOR VALUE RECEIVED,____________________________________ does
hereby sell, assign and transfer unto_______________________ the right to
purchase _______________________ shares of Common Stock of
_______________________________ ("Company") evidenced by the within Warrant and
does hereby authorize the Company to transfer such right on the books of the
Company.
Dated:___________________, 199_
------------------------------
Signature
NOTICE: The signature to this form must correspond with the
name as written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever.
11
<PAGE>
EXHIBIT 5.1
December 30, 1996
Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, PA 19120
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-3
("Registration Statement") filed by Global Telecommunication Solutions, Inc.
("Company") under the Securities Act of 1933, as amended ("Act"), with respect
to an aggregate of 3,218,868 shares of common stock, par value $.01 per share
("Common Stock"), including (i) 18,868 shares of Common Stock currently issued
and outstanding and owned by certain persons listed in the Registration
Statement as Selling Securityholders ("Selling Securityholders") and (ii)
3,200,000 shares of Common Stock to be issued by the Company to certain of the
Selling Securityholders upon exercise of the Common Stock Purchase Warrants
("Warrants") issued in the private placement consummated by the Company in
December 1996 ("Private Placement").
We have examined such documents and considered such legal
matters as we have deemed necessary and relevant as the basis for the opinion
set forth below. With respect to such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as reproduced or certified copies, and the authenticity of the originals of
those latter documents. As to questions of fact material to this opinion, we
have, to the extent deemed appropriate, relied upon certain representations of
certain officers and employees of the Company.
Based upon the foregoing, it is our opinion that (i) the
shares of Common Stock currently outstanding and owned by certain of the Selling
Securityholders and being registered on the Registration Statement have been
duly authorized and legally issued, and are fully paid and non-assessable and
(ii) the shares of Common Stock being registered on the Registration Statement
to be issued by the Company to certain of the Selling Securityholders upon
exercise of the Warrants have been duly authorized and, when sold to the Selling
Securityholders and paid for in the manner provided in the Registration
Statement and the various agreements and instruments governing the Warrants of
the Selling Securityholders and the Company, will be legally issued, fully paid
and non-assessable.
In giving this opinion, we have assumed that all certificates
for the Company's shares of Common Stock have been or, prior to their issuance,
will be duly executed on behalf of the Company by the Company's transfer agent
and registered by the Company's registrar, if necessary, and will conform,
except as to denominations, to specimens which we have examined.
We hereby consent to the use of this opinion as an exhibit to
the Registration Statement, to the use of our name as your counsel, and to all
references made to us in the Registration Statement and in the Prospectus
forming a part thereof. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Act, or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ Graubard Mollen & Miller
GRAUBARD MOLLEN & MILLER
<PAGE>
CONSULTING AGREEMENT
January 22, 1996
Global Telecommunication Solutions, Inc.
342 Madison Avenue
New York, New York 10173
Attention: Mr. Shelly Finkel, President
Dear Mr. Finkel:
This will confirm the arrangements, terms and conditions
pursuant to which Whale Securities Co., L.P. (the "Consultant"), has been
retained to serve as a financial consultant and advisor to Global
Telecommunication Solutions, Inc., a Delaware corporation (the "Company"), on a
non-exclusive basis for a period of one (1) year commencing on January 22, 1996.
The undersigned hereby agrees to the following terms and conditions:
1. Duties of Consultant.
(a) Advice Concerning Financing and Merger
and Acquisition Proposals. Consultant shall, at the request of the Company, upon
reasonable notice, assist the Company in developing, studying and evaluating
financing and merger and acquisition proposals based upon documentary
information provided to the Consultant by the Company.
(b) Wall Street Liaison. Consultant shall,
when appropriate, arrange meetings between representatives of the Company and
individuals and financial institutions in the investment community, such as
security analysts, portfolio managers and market makers.
The services described in this Section 1 shall be rendered by
Consultant without any direct supervision by the Company and at such time and
place and in such manner (whether by conference, telephone, letter or otherwise)
as Consultant may determine.
2. Compensation. As compensation for Consultant's services hereunder, the
Company shall issue to Consultant and/or its designees a warrant (the "Warrant")
to purchase 200,000 shares of Common Stock of the Company at an exercise price
of $5.125 per share, subject to the same
<PAGE>
anti-dilution provisions as are contained in the Company's public warrants. The
Warrant shall expire on January 22, 2001. The Warrant and the shares issuable
upon the exercise thereof will contain piggyback registration rights and
otherwise be in form reasonably satisfactory to Whale, the Company and their
respective counsel.
3. Additional Compensation for Certain Transactions. The
Company acknowledges that Consultant has rendered services to the Company in
connection with the Company's evaluation of Global Link Telco Corporation
("Global Link") and Sitel Corp. ("Sitel") as suitable candidates for an
acquisition. If, at any time, the Company acquires, by merger or otherwise, all
or substantially all of the assets or capital stock of Global Link (the "Global
Link Transaction"), the Company will pay to Consultant additional compensation
of $100,000 with respect to such Global Link Transaction, which will be paid, by
certified check, upon the closing of the Global Link Transaction. If, at any
time, the Company acquires, by merger or otherwise, all or substantially all of
the assets or capital stock of Sitel (the "Sitel Transaction"), the Company will
pay to Consultant additional compensation of $150,000 with respect to such Sitel
Transaction which will be paid, by certified check, (i) 50% upon the closing of
the Sitel Transaction and (ii) 50% on the first anniversary of the closing of
the Sitel Transaction.
4. Available Time. Consultant shall make available such time as it, in its
discretion, shall deem appropriate for the performance of its obligations under
this agreement.
5. Relationship. Nothing herein shall constitute Consultant as an employee
or agent of the Company, except to such extent as might hereafter be agreed upon
for a particular purpose. Except as might hereafter be expressly agreed,
Consultant shall not have the authority to obligate or commit the Company in any
manner whatsoever.
6. Indemnity. The Company agrees to indemnify and hold
Consultant and each of its partners, employees and agents and each of the
officers, directors, shareholders, employees and agents of Consultant's general
partner harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses, including, without limitation, reasonable
attorney's fees and disbursements, to which Consultant or any such parties may
become subject, arising in any manner out of or in connection with Consultant's
rendering of services under this Agreement, except for any losses, claims,
damages, liabilities, costs
2
<PAGE>
or expenses resulting from any act of Consultant involving its gross
negligence or intentional misconduct.
7. Assignment and Termination. This Agreement shall not be assignable by
any party; provided that the Consultant may transfer or assign the Warrants as
specified therein.
8. Governing Law. This Agreement 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.
If the foregoing reflects your understanding, please execute
the enclosed copy of this letter and return it to Consultant, whereupon this
letter shall become a binding agreement between the Company and Consultant.
Very truly yours,
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By: /s/ William G. Walters
---------------------------
Name: William G. Walters
Title: Chairman
AGREED AND ACCEPTED:
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.
By: /s/ Shelly Finkel
----------------------------
Name: Shelly Finkel
Title: Chairman of the Board
3
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 1
As of August 14, 1996
Global Link Teleco Corporation
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Attention: David S. Tobin
General Counsel
Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Attention: David S. Tobin
General Counsel
Re: Agreement, dated January 18, 1996 (the "Agreement"), by and between Peoples
Telephone Company, Inc., a New York corporation ("Peoples"), and Global
Link Teleco Corporation, a Delaware corporation ("Global Link")
Ladies and Gentlemen:
Reference is made to the captioned Agreement pursuant to which
Peoples and Global Link agreed to settle certain obligations and indebtedness
between them. In accordance with the provisions of the Agreement, a "Second Cash
Payment" in the amount of $500,000, together with interest thereon at the rate
of eight percent (8%) per annum, was due and payable by Global Link to Peoples
on June 28, 1996. The obligations and indebtedness of Global Link to make timely
payment of the Second Cash Payment pursuant to the provisions of the Agreement
have been absolutely and unconditionally guaranteed by Global Telecommunication
Solutions, Inc. ("GTS"), pursuant to the provisions of that certain Guaranty
Agreement, dated as of January 19, 1996 (the "Guaranty"), from GTS in favor of
Peoples. As of the date hereof, Global Link continues in default of the payment
of the Second Cash Payment, together with interest as aforesaid, all of which
was due and payable on June 28, 1996. Global Link and GTS have requested that
Peoples agree to waive such default and restructure the payment of the Second
Cash Payment, together with interest thereon as aforesaid, on the terms more
particularly set forth herein. Capitalized terms used herein and not defined
herein shall have the meanings given them in the Agreement.
Subject to the acceptance by Global Link and GTS of each of the
terms and conditions hereinafter set forth, Peoples hereby agrees to waive
Global Link's default in the payment of the Second Cash Payment on and as of
June 28, 1996, together with interest thereon.
The foregoing waiver is expressly limited to the matters stated
herein and shall not be deemed to constitute a waiver of or consent to the
non-compliance by Global Link or GTS with any other term or provision of the
Agreement or the Guaranty, nor shall it be deemed, except as expressly set forth
herein, to extend to or affect compliance by Global Link or GTS with any other
term or provision of the Agreement or the Guaranty.
By your acceptance of the terms of this letter by signing this
letter in the spaces provided therefor below, each of Global Link and GTS hereby
agree with Peoples as follows:
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 2
1 Global Link and GTS hereby covenant and agree that the Second Cash Payment,
together with accrued and unpaid interest thereon, shall be evidenced by
and shall be due and payable in accordance with the terms of a Promissory
Note, duly executed and completed by Global Link, substantially in the form
of Exhibit A attached hereto and made a part hereof (the "Second Cash
Payment Note"). An immediate payment of principal in the amount of $100,000
on the Second Cash Payment Note shall be a condition precedent to the
effectiveness of this waiver letter.
2. The Guaranty Agreement is hereby amended to guarantee, in addition to all
obligations presently guaranteed thereby, the full and timely performance
by Global Link of all of the obligations and indebtedness of Global Link
under the Second Cash Payment Note, all of which obligations shall be
equally guaranteed by the Guaranty Agreement with the same priority as the
obligations originally guaranteed thereby, provided that nothing herein
shall be deemed or construed to mean that the Guaranty Agreement by its own
terms does not presently guarantee such obligations and indebtedness.
3. As June 30, 1996, Global Link's receivable balance on the books of Peoples
(exclusive of the Trade Receivables hereinafter described) (the "Book
Receivables") equaled $97,742.01, plus certain uninvoiced charges for June
1996 as hereinafter provided (the parties agree that the Bell South - Local
Calling charges, LDDS Customer Service 800 number charges, the MCl 800
number charges for T-1 and the MCI T-1 outbound (customer service) charges
for June 1996 have not been received by Peoples or invoiced to Global Link,
but will be paid to Peoples by Global Link within thirty (30) days of
invoicing). Additional Book Receivables have arisen since June 30, 1996
through the date of this waiver letter, but have not yet been invoiced (all
such Book Receivables, together with the Book Receivables owing and unpaid
as of June 30, 1996 are collectively referred to herein as the "Present
Book Receivables"). An immediate payment in reduction of the Present Book
Receivables in the amount of $45,000 shall be a condition precedent to the
effectiveness of this waiver letter. The remaining unpaid balance of the
Present Book Receivables shall, unless sooner payable in accordance with
the provisions of this letter agreement, be due and payable in full on the
date which is three (3) months following the date of this letter agreement.
All Book Receivables arising subsequent to June 30, 1996 shall be paid
monthly on a current basis.
4. As of the date hereof, the full amount of Trade Receivables (as defined in
that certain Letter Agreement, dated as of January 18, 1996, between
Peoples and Global Link (the "Trade Receivable Letter")) remains
outstanding. Notwithstanding any provision of the Trade Receivable Letter
to the contrary, the entire unpaid balance of the Trade Receivables shall
be due and payable in the event, of the occurrence of a "Change of Control"
or an "Event of Default" (as such terms are hereinafter described);
provided that, absent the occurrence of a Change of Control or Event of
Default, the Trade Receivables shall otherwise be payable as set forth in
the Trade Receivable Letter.
5. That certain Guaranty Agreement, dated January 18, 1996 (the "Trade
Receivables Guaranty"), from GTS in favor of Peoples, is hereby amended to
guarantee, in addition to all obligations presently guaranteed thereby, the
full and timely performance by Global Link of the Trade Receivables and all
of the obligations and indebtedness of Global Link under the Trade
Receivables Letter, as amended hereby, all of which obligations shall be
equally guaranteed by the Trade Receivables Guaranty with the same priority
as the obligations originally guaranteed thereby, provided that nothing
herein shall be deemed or construed to mean that the Trade Receivables
Guaranty by its own terms does not presently guarantee such obligations and
indebtedness.
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 3
6. In addition to the scheduled payments set forth in the Second Cash Payment
Note and the foregoing scheduled payments of the Present Book Receivables
and the Trade Receivables, and notwithstanding the provisions of any other
document or agreement to the contrary (including, without limitation, the
Trade Receivables Letter), Global Link shall be required to prepay the
outstanding principal balance of the Second Cash Payment Note, together
with accrued and unpaid interest on the principal amount prepaid to the
date of prepayment, and the outstanding balance of the Present Book
Receivables and the Trade Receivables (the aggregate outstanding principal
balance of the Second Cash Payment Note and the outstanding balance of the
Present Book Receivables and the Trade Receivables, as of the date of any
determination thereof, is referred to herein as the "Aggregate Outstanding
Balance"), as follows:
(a) Global Link shall be required to make a prepayment of
the Aggregate Outstanding Balance (other than in respect
of the Trade Receivables) in an amount equal to thirty
percent (30%) of the Aggregate Outstanding Balance
(excluding the Trade Receivables), together with accrued
and unpaid interest on the principal portion of the
Second Cash Payment Note prepaid to the date of
prepayment, at such time as any Financing is completed
from and after the date of this Note for an amount less
than $1,000,000.00;
(b) Global Link shall be required to make a prepayment of
the Aggregate Outstanding Balance (other than in respect
of the Trade Receivables) in an amount equal to
forty-five percent (45%) of the Aggregate Outstanding
Balance (excluding the Trade Receivables), together with
accrued and unpaid interest on the principal portion of
the Second Cash Payment Note prepaid to the date of
prepayment, at such time as any Financing is completed
from and after the date of this Note for an amount equal
or greater than $1,000,000.00 but less than
$1,500,000.00;
(c) Global Link shall be required to make a prepayment of
the Aggregate Outstanding Balance (other than in respect
of the Trade Receivables) in an amount equal to sixty
percent (60%) of the Aggregate Outstanding Balance
(excluding the Trade Receivables), together with accrued
and unpaid interest on the principal portion of the
Second Cash Payment Note prepaid to the date of
prepayment, at such time as any Financing is completed
from and after the date of this Note for an amount equal
or greater than $1,500,000.00 but less than
$2,000,000.00;
(d) Global Link shall be required to prepay one hundred
percent (100%) of the Aggregate Outstanding Balance
(excluding the Trade Receivables), together with accrued
and unpaid interest on the principal portion of the
Second Cash Payment Note prepaid to the date of
prepayment, at such time as any Financing is completed
from and after the date of this Note for an amount equal
to or greater than $2,000,000.00;
(e) Immediately upon the receipt of $5,000,000.00 or more by
GTS subsequent to the completion of Global Link's merger
transaction with GTS from a Financing, Global Link shall
be required to prepay one hundred percent (100%) of the
Trade Receivables;
(f) Global Link shall be required to prepay one hundred
percent (100%) of the Aggregate Outstanding Balance,
together with accrued and unpaid interest on the
principal portion of the Second Cash Payment Note
prepaid to the date of prepayment, in the event of the
occurrence of any Change of Control; and
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 4
(g) Global Link shall be required to prepay one hundred
percent (100%) of the Aggregate Outstanding Balance,
together with accrued and unpaid interest on the
principal portion of the Second Cash Payment Note
prepaid to the date of prepayment, upon the occurrence
of an "Event of Default" (as such term is defined in the
Second Cash Payment Note).
Any prepayment of the Aggregate Outstanding Balance required
pursuant to the foregoing provision shall be made by Global Link
(w) within two (2) business days following the closing of any
Financing, or portion thereof, (x) in the case of the prepayment
of the Trade Receivables, immediately upon the occurrence of the
event described in clause (e) above, (y) within thirty (30) days
following the occurrence of any Change of Control, and (z)
immediately upon the occurrence of an "Event of Default" (as
defined in the Second Cash Payment Note), as the case may be.
Each such prepayment of the Aggregate Outstanding Balance shall
be applied proportionately to the outstanding principal balance
of the Second Cash Payment Note and the outstanding balance of
the Book Receivables and the Trade Receivables. All prepayments
of the Second Cash Payment Note shall be applied first to the
payment of all accrued and unpaid interest then due and owing
thereunder and thereafter to the payment of the installments of
principal thereunder in the inverse order of maturity.
For the purposes hereof, the following terms shall have
the following meanings:
"Affiliate" shall mean any person or entity who or which
controls, is controlled by, or is under common control with,
Global Link and GTS, or either of them.
"Change of Control" shall mean, in respect of either of
Global Link or GTS, the acquisition of beneficial ownership,
direct or indirect, of equity securities of Global Link or GTS by
any "person" (as that term is defined in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) which, when combined with all other securities of Global
Link or GTS, as the case may be, beneficially owned, directly or
indirectly by that person, equals or exceeds 50% of (i) either
the then outstanding shares of common stock of Global Link or
GTS, as the case may be (the "Outstanding Company Common Stock")
or (ii) the combined voting power of the then outstanding voting:
securities of Global Link or GTS, as the case may be, entitled to
vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition by GTS, any of its subsidiaries or any
"person" (as defined in Sections 13(d) and 14(d) of the Exchange
Act) or "group" (as defined in Section 13(d) of the Exchange Act)
which, as of the date of this waiver letter, owns five percent
(5%) or more of the outstanding common stock of GTS, (ii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by GTS or any of its subsidiaries or
(iii) any acquisition by any corporation with respect to which,
following such acquisition, more than 75% of, respectively, the
then outstanding shares of common stock of such corporation and
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the
election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such acquisition in substantially
the same proportions as their ownership, immediately prior to
such acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
"Financing" shall mean any third party financing,
whether debt or lease financing or equity offering (but excluding
any operating or capital leases of equipment incurred in the
ordinary course of business and lines of credit to finance the
working capital requirements of Global Link, GTS and their
Affiliates, incurred
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 5
in the ordinary course of business), made to or for the benefit
of Global Link, GTS and their Affiliates, or any one or more of
them.
7. Notwithstanding the provisions of Section 8.4 of the Agreement or that
certain Lock-Up Agreement, dated as of January 18, 1996 (the "Lock-Up
Agreement"), between Peoples and GTS, to the contrary, Peoples shall be
permitted to sell, transfer or otherwise dispose of up to 25% of the shares
of GTS Common Stock during each of the three-month periods beginning on the
six-, nine-, twelve- and fifteen-month anniversaries of the Closing Date
(as defined in the Agreement); provided that if at any time during the
fifteen-month period following the Closing, Peoples wishes to sell,
transfer or otherwise dispose of any of the GTS Common Stock (such shares
being referred to herein as the "Offered Shares"), prior to selling,
transferring or otherwise disposing of any of the Offered Shares to any
party other than GTS, any of its Affiliates or any other person or entity
which GTS introduces to Peoples within such 10-day period for the purpose
of purchasing the Offered Shares, Peoples shall provide written or
telephonic (promptly confirmed in writing) notice thereof to GTS, following
which GTS, such Affiliate of GTS or such other person or entity which GTS
introduces to Peoples within such 10-day period for the purpose of
purchasing the Offered Shares, shall have ten (10) days in which to
purchase the Offered Shares for a purchase price, payable prior to the
close of business on the tenth (10th) day following the giving of such
notice in United States Dollars in immediately available funds, equal to
the average market closing price for the consecutive five-day period ending
on the date Peoples provides such notice with respect to the Offered Shares
multiplied by the number of Offered Shares.
The effectiveness of this waiver letter is expressly conditioned
upon the acceptance by Global Link and GTS of the terms and conditions of this
waiver letter and satisfaction of each of the following conditions, each of
which shall have been met or performed by Global Link and GTS to the
satisfaction of Peoples and Peoples' counsel in their sole and absolute
discretion:
A. Peoples shall have received this letter agreement, duly accepted and
agreed to by each of Global Link and GTS as evidenced by their
execution of this letter agreement in the spaces provided therefor
below.
B. Peoples shall have received the Second Cash Payment Note, duly
executed and completed by Global Link, substantially in the form of
Exhibit A attached hereto and made a part hereof; for the purposes
hereof, delivery of the Second Cash Payment Note shall be made to
VVilliam Rubin, Esquire, Peoples' agent for acceptance of delivery of
the Second Cash Payment Note outside of the State of Florida, at the
following address:
William Rubin, Esquire
Whitman Breed Abbott & Morgan
200 Park Avenue
New York, New York 10166
C. Peoples shall have received a payment in the amount of $100,000.00 in
respect of the Second Cash Payment Note and a payment in the amount of
$45,000.00 in respect of the Present Book Receivables, in each case in
United States Dollars in immediately available funds.
Each notice or other communication hereunder (other than telephonic
notices permitted pursuant to Section 7 above, provided that such telephonic
notices shall be promptly confirmed in writing) shall be in writing, shall be
sent by messenger, telecopy or by reputable overnight courier, and shall be
deemed to have been given or made the first business
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 6
day after the deposit thereof with a reputable overnight courier, delivery fees
prepaid, when telecopied with confirmation of delivery or when received if
delivered by hand, addressed to the appropriate party as follows:
If to Global Link or GTS: Global Link Teleco Corporation
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Attention: David S. Tobin
General Counsel
Telephone: (215) 342-7700
Telecopy: (215) 745-9108
Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Attention: David S. Tobin
General Counsel
Telephone: (215) 342-7700
Telecopy: (215) 745-9108
If to Peoples: Peoples Telephone Company, Inc,
2300 Northwest 89th Place
Miami, Florida 33126
Attention: Francis J. Harkins, Jr.
Assistant General Counsel
Telephone: (305)593-9667
Extension 149
Telecopy: (305) 477-9890
or to such other address as any such party may designate to the others, by
written notice to the other as herein provided.
By your acceptance of the terms hereof, each of Global Link and GTS
hereby represent and warrant that, after giving effect to the provisions of this
waiver letter, each of the representations and warranties of each of them set
forth in the Agreement, the Guaranty, the Trade Receivables Letter, the Trade
Receivables Guaranty and the Lock-Up Letter is true and correct as of the date
hereof and no default or event of default, has occurred and is continuing under
the Agreement. By your acceptance of the terms hereof, Global Link and GTS
hereby further ratify and confirm each of Global Link's and GTS's respective
obligations and indebtedness in respect of the Book Receivables and the Trade
Receivables and under the Second Cash Payment Note, the Agreement, the Guaranty,
the Trade Receivables Letter, the Trade Receivables Guaranty and the Lock-Up
Letter, each as amended by this letter agreement, and represent and warrant to
Peoples that neither of Global Link nor GTS has or claims any defenses, offsets
or counterclaims to any of their respective obligations or indebtedness in
respect of the Book Receivables or the Trade Receivables or under the Second
Cash Payment Note, the Agreement, the Guaranty, the Trade Receivables Letter,
the Trade Receivables Guaranty or the LockUp Letter, each as amended by this
letter agreement.
BY YOUR ACCEPTANCE OF THE TERMS HEREOF, GLOBAL LINK AND GTS HEREBY, AND
PEOPLES HEREBY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS WAIVER LETTER OR ANY AGREEMENT
EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, THE BOOK
RECEIVABLES, THE TRADE RECEIVABLES, THE SECOND
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 7
CASH PAYMENT NOTE OR IN CONJUNCTION WITH THE AGREEMENT, THE GUARANTY, THE TRADE
RECEIVABLES LETTER, THE TRADE RECEIVABLES GUARANTY OR THE LOCK-UP LETTER, EACH
AS AMENDED BY THIS LETTER AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO PEOPLES ENTERING INTO THIS WAIVER LETTER
AND MAKING THE ACCOMMODATIONS PROVIDED FOR HEREIN.
Except as expressly provided herein, all terms and conditions contained
in the Agreement, the Guaranty, the Trade Receivables Agreement, the Trade
Receivables Guaranty and the Lock-Up Letter shall remain unchanged and in full
force and effect in accordance with their respective terms.
If the foregoing terms and conditions are acceptable to you, please
indicate your acceptance and agreement by signing this letter in the space
provided therefor below and returning the same to Francis J. Harkins, Jr.,
Esquire, Peoples Telephone Company, Inc., 2300 NW 89th Place, Miami, Florida
33126 on or before the close of business on August 22, 1996. The foregoing
agreement shall not be effective until your accepted copy of this letter shall
be returned as aforesaid and each of the other conditions precedent to the
effectiveness of this waiver letter shall have been met or performed in
accordance with the provisions hereof. In the event that we shall have not
received this waiver letter, accepted by you as aforesaid, and each of the other
conditions precedent to the effectiveness of this waiver letter shall not have
been met or performed in accordance with the provisions hereof, on or before the
close of business on August 22, 1996, this waiver letter shall be void and of no
force or effect.
Very truly yours,
PEOPLES TELEPHONE COMPANY, INC.
Accepted and Agreed to this
____ day of August, 1996
GLOBAL LINK TELECO CORPORATION,
a Delaware corporation
By:______________________________
Its:
Accepted and Agreed to this
_____ day of August, 1996
GLOBAL TELECOMMUNICATION SOLUTIONS, INC.,
a Delaware corporation
By:_______________________________________
Its:
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 8
EXHIBIT A
SECOND CASH PAYMENT NOTE
$500,000 Dated as of January 18, 1996
For value received, GLOBAL LINK TELECO CORPORATION, a Delaware
corporation ("Global Link"), promises to pay to the order of PEOPLES TELEPHONE
COMPANY, INC., a New York corporation, its successors and assigns (together with
its successors and assigns, "Peoples"), at the office of Peoples at 2300 NW.
89th Place, Miami, Florida 33172, the principal sum of FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($500,000,00), in installments as hereinafter provided, in lawful
money of the United States of America, and to pay interest on the unpaid
principal balance hereof in like money at such office from the date hereof until
the principal hereof shall have been paid in full, and at maturity (whether by
acceleration or otherwise), at a fixed rate per annum equal to eight percent
(8%) per annum.
Interest calculated as aforesaid shall be payable in arrears,
commencing on September 1, 1996, and continuing monthly on the first day of each
month thereafter, with all accrued and unpaid interest payable at maturity;
provided that all accrued and unpaid interest owing in respect of the principal
balance evidenced by this Note which accrued from and after January 18, 1996 to
the date of execution of this Note shall be due and payable in full on the final
maturity date hereof. Interest on this Note shall be computed on the actual
number of days elapsed over a 360-day year; i.e., 1/360th of a full year's
interest shall accrue for each day any portion of the loan evidenced by this
Note is outstanding.
Principal on this Note shall be due and payable in thirteen (13)
installments as follows: in one (1) installment of principal in the amount of
$100,000.00, due and payable on and as of the date of execution of this Note,
together with eleven (11) equal consecutive monthly installments of $33,333.33
each, commencing on November 1, 1996, and continuing monthly on the first day of
each month thereafter, together with a final installment of principal equal to
the entire unpaid principal balance hereof, due and payable on October 1, 1997.
The unpaid balance of this Note may be prepaid at any time and from
time to time without premium or penalty. All prepayments of this Note shall be
applied first to the payment of all accrued and unpaid interest then due and
owing hereunder and thereafter to the payment of the installments of principal
hereunder in the inverse order of maturity.
If the principal of this Note or any portion hereof and, to the extent
permitted by law, interest hereon shall not be paid when due, whether by
acceleration or otherwise, the same shall, or in the event of the occurrence of
an Event of Default (as hereinafter defined), the outstanding principal balance
of this Note shall, at the option of Peoples, thereafter bear interest for any
period during which the same shall be overdue, or during the pendency of any
such Event of Default, at a rate per annum equal to the maximum rate permitted
by applicable law, or, where no maximum rate is prescribed by law, at the rate
of eighteen percent (18%) per annum, and payable on demand.
Upon the happening of any of the following events, each of which shall
constitute a default hereunder (herein referred to as an "Event of Default"),
all liabilities of Global Link to Peoples, whether or not evidenced by this
Note, shall thereupon or thereafter, at the option of Peoples, without notice or
demand, become due and payable:
(a) failure of Global Link or Global Telecommunication
Solutions, Inc. ("GTS") to perform any agreement (other than to pay
money) hereunder or under any other instrument or agreement evidencing,
securing and/or guaranteeing the obligations and indebtedness of Global
Link to Peoples evidenced by this Note, which failure continues for a
period of five (5) days following written notice thereof from Peoples
to Global Link or GTS, as the case may be, or the failure to pay in
full, when due and payable, any liability whatsoever or any principal
installment of this Note or interest installment hereon, if such
failure shall continue for a period of one (1) day following written
notice thereof from Peoples to Global Link;
(b) failure of Global Link or GTS to perform any agreement
(other than to pay money) under that certain Letter Agreement, dated as
of August 14, 1996 (the "Letter Agreement"), which failure continues
for a period of five (5) days following written notice thereof from
Peoples to Global Link or GTS, as the case may be, or the failure to
pay in full, when due and payable, any obligation or indebtedness of
Global Link and/or GTS now or hereafter owed to Peoples, including,
without limitation, the Book Receivables and/or the Trade Receivables,
if such failure shall continue for a period of one (1) day following
written notice thereof from Peoples to Global Link;
(c) Global Link or GTS shall:
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 9
(i) make an assignment for the benefit of creditors,
petition or apply to any court or other tribunal for the appointment of
a custodian, receiver or any trustee or shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction
whether now or hereafter in effect; or if there shall have been filed
any such petition or application, or any such proceeding shall have
been commenced against Global Link or GTS in which an order for relief
is entered or which remains undismissed for a period of thirty (30)
days or more; Global Link or GTS, by any act or omission shall indicate
consent to, approval of or fail to timely object to any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or any trustee or shall suffer any such
custodianship, receivership or trusteeship to continue undischarged for
a period of thirty (30) days or more;
(ii) admit in writing its inability to pay its debts generally as they
mature; or
(iii) have concealed, removed or permitted to be
concealed or removed any part of its properties or assets, with intent
to hinder, delay or defraud its creditors or any of them, or made or
suffered a transfer of any of its property which may be fraudulent
under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have not
been paid; or
(iv) be "insolvent", as such term is defined in the federal bankruptcy
code;
(d) the issuing of any attachment or garnishment against any
property of Global Link or GTS pledged to secure the obligations of
Global Link and/or GTS to Peoples evidenced by this Note or otherwise,
or the filing of any lien against any property of Global Link or GTS
pledged to secure the obligations of Global Link and/or GTS to Peoples
evidenced by this Note or otherwise, in either of which case is not
cured, bonded or released within ten (10) days following notice thereof
from Peoples to Global Link or GTS or is not previously approved in
writing by Peoples;
(e) the taking of possession of any substantial part of the property
of Global Link or GTS at the instance of any governmental authority;
and
(f) the dissolution, merger, consolidation or reorganization
of Global Link or GTS (other than the merger or consolidation of Global
Link with or into GTS and other than the merger or consolidation of
subsidiaries of Global Link with or into Global Link where Global Link
is the surviving entity); and
(g) any warranty, representation, certificate or statement of
Global Link or GTS (whether contained in the Letter Agreement, this
Note or otherwise) made to Peoples is not true.
Global Link agrees to pay all reasonable costs incurred by any holder
hereof, including reasonable attorneys' fees (including those for appellate
proceedings), incurred in connection with any Event of Default, or in connection
with the collection or attempted collection or enforcement hereof, or in
connection with the protection of any collateral given as security for the
payment hereof, whether or not legal proceedings may have been instituted.
All parties to this Note, including Global Link and any sureties,
endorsers or guarantors, hereby waive presentment for payment, demand, protest,
notice of dishonor, notice of acceleration of maturity, and all defenses on the
ground of extension of time for payment hereof, and agree to continue and remain
bound for the payment of principal, interest and all other sums payable
hereunder, notwithstanding any change or changes by way of release, surrender,
exchange or substitution of any security for this Note or by way of any
extension or extensions of time for payment of principal or interest; and all
such parties waive all and every kind of notice of such change or changes and
agree that the same may be made without notice to or consent of any of them. The
rights and remedies of the holder as provided herein shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the holder, and may be exercised as often as occasion therefor
shall occur, and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release of the same.
Anything herein to the contrary notwithstanding, the obligations of
Global Link under this Note shall be subject to the limitation that payments of
interest to Peoples shall not be required to the extent that receipt of any such
payment by Peoples would be contrary to provisions of law applicable to Peoples
(if any) which limit the maximum rate of interest which may be charged or
collected by Peoples; provided, however, that nothing herein shall be construed
to limit Peoples to presently existing maximum rates of interest, if an
increased interest rate is hereafter permitted by reason of applicable federal
or state legislation. In the event that Global Link makes any payment of
interest, fees or other charges, however denominated, pursuant to this Note,
which payment results in the interest paid to Peoples to exceed the maximum rate
<PAGE>
Global Link Teleco Corporation
Global Telecommunication Solutions, Inc.
As of August 14, 1996
Page 10
of interest permitted by applicable law, any excess over such maximum shall be
applied in reduction of the principal balance owed to Peoples as of the date of
such payment, or if such excess exceeds the amount of principal owed to Peoples
as of the date of such payment, the difference shall be paid by Peoples to
Global Link.
No delay or omission on the part of Peoples in exercising any right
hereunder shall operate as a waiver of such right or of any right under this
Note. No waiver shall be binding upon Peoples, unless in a writing signed by an
authorized officer of Peoples. The rights and remedies of Peoples under this
Note are cumulative and in addition to any other rights Peoples may have at law,
in equity or otherwise.
GLOBAL LINK HEREBY, AND PEOPLES BY ITS ACCEPTANCE OF THIS NOTE,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS NOTE OR ANY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR, PEOPLES MAKING THE LOAN EVIDENCED BY
THIS NOTE.
The parties hereto hereby irrevocably submit in any suit, action or
proceeding arising out of or relating to this Note or any transactions
contemplated hereby to the exclusive jurisdiction of the United States District
Court for the Southern District of Florida or if jurisdiction is not available
therein the jurisdiction of any state court in Dade County, State of Florida,
and waive any and all objections to such jurisdiction or venue that they may
have under the laws of any state or country, including, without limitation, any
argument that jurisdiction, situs and/or venue are inconvenient or otherwise
improper. Each party further agrees that process may be served upon such party
in any manner authorized under the laws of the United States or Florida, and
waives any objections that such party may otherwise have to such process.
This Note shall be governed by and construed in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of laws thereunder.
IN WITNESS WHEREOF, Global Link has caused this Note to be effective as
of the date first above written, but has in fact caused this Note to be duly
executed and delivered as of this ___ day of August, 1996.
GLOBAL LINK TELECO CORPORATION, a
Delaware corporation
By:
Its:
STATE OF )
) SS:
COUNTY OF )
I HEREBY CERTIFY that on this day of August, 1996, before me, an officer duly
authorized in the State and in the County aforesaid to take acknowledgments,
personally appeared to me known to be the person who executed the attached
promissory note, dated as of January 18, 1996, in the maximum principal amount
of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00), on behalf of GLOBAL
LINK TELECO, INC., a Delaware corporation and acknowledged before me that he
executed the same.
----------------------------------------
Notary Public
Printed name:_____________________________
Commission #:______________________________
Expiration:________________________________
[SEAL]
<PAGE>
Global Link Teleco Corporation
Global Telecommunications Solutions, Inc.
As of November 27, 1996
Page 1
As of November 27, 1996
Global Link Teleco Corporation
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Attention: David S. Tobin
General Counsel
Global Telecommunication Solutions, Inc.
5697 Rising Sun Avenue
Philadelphia, Pennsylvania 19120
Attention: David S. Tobin
General Counsel
Re: Agreement, dated January 18, 1996 (the "Agreement"), by and between Peoples
Telephone Company, Inc., a New York corporation ("Peoples"), and Global
Link Teleco Corporation, a Delaware corporation ("Global Link")
Ladies and Gentlemen:
Reference is made to the captioned Agreement pursuant to which Peoples
and Global Link agreed to settle certain obligations and indebtedness between
them and to that certain Letter Agreement, dated as of August 14, 1996 (the
"First Waiver Letter"), among Peoples, Global Link and Global Telecommunication
Services, Inc. ("GTS"). Capitalized terms used herein and not defined herein
shall have the meanings given them in the Agreement and in the First Waiver
Letter, as the case may be.
As of November 25, 1996, (a) the outstanding principal balance of the
Second Cash Payment Note equaled $366,666.67 and accrued and unpaid interest
thereon equaled $32,340.74, and (b) the aggregate amount of Book Receivables
currently received by Peoples and billed to Global Link due and owing equaled
$79,927.92 (certain invoices through September, 1996 may not yet have been
invoiced to Global Link by Peoples). Global Link and GTS have advised Peoples
that GTS anticipates that it will close one or more Financings prior to December
9, 1996 aggregating $3,000,000.00 in principal amount, which, pursuant to the
terms of the First Waiver Letter would require the prepayment in full of the
Aggregate Outstanding Balance (including the Trade Receivables). Notwithstanding
such requirement, Global Link and GTS have requested that Peoples waive the
right to accelerate payment of the Aggregate Outstanding Balance (including the
Trade Receivables) as set forth in the First Waiver Letter due to the Financing
described above and to accept a reduced prepayment of the Aggregate Outstanding
Balance in the amount of $300,000.00.
Subject to the acceptance by Global Link and GTS of each of the terms
and conditions hereinafter set forth and the satisfaction of each of the
conditions precedent to the effectiveness of this Agreement, Peoples agrees to
waive the right to accelerate payment of the Aggregate Outstanding Balance
(including the Trade Receivables) as set forth in the First Waiver Letter due to
the Financing described above and to accept such reduced prepayment subject to
the following terms and conditions:
1. On or before the close of business on November 29, 1996,
Peoples shall have received from Global Link and/or GTS at
least $300,000.00 in immediately available funds, which shall
be applied first to the payment of all outstanding Book
Receivables, then to accrued and unpaid interest due and owing
under the Second Cash Payment Note and thereafter to the
outstanding principal balance of the Second Cash Payment Note.
2. Notwithstanding the provisions of the Second Cash Payment
Note to the contrary,
<PAGE>
Global Link Teleco Corporation
Global Telecommunications Solutions, Inc.
As of November 27, 1996
Page 2
the remaining outstanding principal balance thereof (after
giving effect to the prepayment described in item 1 above)
shall be repaid in three (3) equal installments of principal,
each equal to one-third (1/3) of the remaining outstanding
principal balance of the Second Cash Payment Note, together
with accrued and unpaid interest thereon at the rate set forth
in the Second Cash Payment Note, on December 27, 1996, January
27, 1997 and February 27, 1997. The entire outstanding
principal balance of the Second Cash Payment Note, together
with accrued and unpaid interest thereon, shall be due and
payable in full on February 27, 1997. Upon payment in
accordance with the provisions of this agreement of the full
amount of the outstanding principal balance of the Second Cash
Payment Note, together with all accrued and unpaid interest
thereon, Peoples agrees to cancel and return the original
Second Cash Payment Note to Global Link.
3. In addition to the payments of the Second Cash Payment Note
described in item 2 above and the scheduled payments of the
Trade Receivables set forth in the Trade Receivable Letter and
the First Waiver Letter, and notwithstanding the provisions of
any other document or agreement to the contrary (including,
without limitation, the Trade Receivable Letter), Global Link
shall be required to prepay the Aggregate Outstanding Balance,
as follows:
(a) Global Link shall be required to make a prepayment of the Aggregate
Outstanding Balance (including the Trade Receivables) in an amount equal to
thirty percent (30%) of the Aggregate Outstanding Balance (including the
Trade Receivables), together with accrued and unpaid interest on the
principal portion of the Second Cash Payment Note prepaid to the date of
prepayment, at such time as any Financing is completed after December 9,
1996 for an amount less than $2,000,000.00;
(b) Global Link shall be required to make a prepayment of the Aggregate
Outstanding Balance (including the Trade Receivables) in an amount equal to
forty-five percent (45%) of the Aggregate Outstanding Balance (including
the Trade Receivables), together with accrued and unpaid interest on the
principal portion of the Second Cash Payment Note prepaid to the date of
prepayment, at such time as any Financing is completed after December 9,
1996 for an amount equal or greater than $2,000,000.00 but less than
$3,000,000.00;
(c) Global Link shall be required to make a prepayment of the Aggregate
Outstanding Balance (including the Trade Receivables) in an amount equal to
sixty percent (60%) of the Aggregate Outstanding Balance (including the
Trade Receivables), together with accrued and unpaid interest on the
principal portion of the Second Cash Payment Note prepaid to the date of
prepayment, at such time as any Financing is completed after December 9,
1996 for an amount equal or greater than $3,000,000.00 but less
<PAGE>
Global Link Teleco Corporation
Global Telecommunications Solutions, Inc.
As of November 27, 1996
Page 3
than $4,000,000.00;
(d) Global Link shall be required to prepay one hundred percent (100%) of the
Aggregate Outstanding Balance (including the Trade Receivables), together
with accrued and unpaid interest on the principal portion of the Second
Cash Payment Note prepaid to the date of prepayment, at such time as any
Financing is completed after December 9, 1996 for an amount equal to or
greater than $4,000,000.00;
(e) Global Link shall be required to prepay one hundred percent (100%) of the
Aggregate Outstanding Balance (including the Trade Receivables), together
with accrued and unpaid interest on the principal portion of the Second
Cash Payment Note prepaid to the date of prepayment, in the event of the
occurrence of any Change of Control; and
(f) Global Link shall be required to prepay one hundred percent (100%) of the
Aggregate Outstanding Balance (including the Trade Receivables), together
with accrued and unpaid interest on the principal portion of the Second
Cash Payment Note prepaid to the date of prepayment, upon the occurrence of
an "Event of Default" (as such term is defined in the Second Cash Payment
Note) or any failure of Global Link or GTS to timely pay or perform any
obligation or indebtedness under this agreement.
Any such prepayment of the Aggregate Outstanding Balance shall
be made at such times and applied in such manner as set forth
in Section 6 of the First Waiver Letter.
4. For the purposes of this agreement, "Book Receivables" shall
mean Global Link's present unpaid receivable balance on the
books of Peoples (exclusive of the Trade Receivables),
together with all other billed and unbilled receivable
balances of Global Link on the books of Peoples, whether
presently existing or from time to time hereafter created,
incurred or arising. Except as set forth in item 1 above, all
Book Receivables shall be paid monthly on a current basis.
The foregoing agreement is expressly limited to the matters stated
herein and shall not be deemed to constitute a waiver of or consent to the
non-compliance by Global Link or GTS with any other term or provision of the
Agreement, the Guaranty, the Trade Receivable Letter, the Trade Receivable
Guaranty, the Lock-Up Letter, the Second Cash Payment Note or the First Waiver
Letter, nor shall it be deemed, except as expressly set forth herein, to extend
to or affect compliance by Global Link or GTS with any other term or provision
of the Agreement, the Guaranty, the Trade Receivable Letter, the Trade
Receivable Guaranty, the Lock-Up Letter, the Second Cash Payment Note or the
First Waiver Letter.
The effectiveness of this agreement is expressly conditioned upon the
acceptance by Global Link and GTS of the terms and conditions of this agreement
and satisfaction of each of the following conditions, each of which shall have
been met or performed by Global Link and GTS to the satisfaction of Peoples in
its sole
<PAGE>
Global Link Teleco Corporation
Global Telecommunications Solutions, Inc.
As of November 27, 1996
Page 4
and absolute discretion:
A. Peoples shall have received this letter agreement, duly accepted and
agreed to by each of Global Link and GTS as evidenced by their
execution of this letter agreement in the spaces provided therefor
below.
B. On or before the close of business on November 29, 1996, Peoples shall
have received a prepayment of the Aggregate Outstanding Balance in the
amount of $300,000.00, in United States Dollars in immediately
available funds.
By your acceptance of the terms hereof, each of Global Link and GTS
hereby represent and warrant that, after giving effect to the provisions of this
agreement, each of the representations and warranties of each of them set forth
in the Agreement, the Guaranty, the Trade Receivables Letter, the Trade
Receivables Guaranty, the Lock-Up Letter, the First Waiver Letter and the Second
Cash Payment Note is true and correct as of the date hereof and no default or
event of default has occurred and is continuing under the Agreement. By your
acceptance of the terms hereof, Global Link and GTS hereby further represent and
warrant to Peoples that neither Global Link nor GTS has or claims any defenses,
offsets or counterclaims to any of their respective obligations or indebtedness
in respect of the Trade Receivables or under the Second Cash Payment Note, the
Agreement, the First Waiver Letter (as modified hereby), the Guaranty, the Trade
Receivables Letter, the Trade Receivables Guaranty or the Lock-Up Letter.
BY YOUR ACCEPTANCE OF THE TERMS HEREOF, GLOBAL LINK AND GTS HEREBY, AND
PEOPLES HEREBY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT
EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, THE TRADE
RECEIVABLES, THE SECOND CASH PAYMENT NOTE, THE FIRST WAIVER LETTER OR IN
CONJUNCTION WITH THE AGREEMENT, THE GUARANTY, THE TRADE RECEIVABLES LETTER, THE
TRADE RECEIVABLES GUARANTY OR THE LOCK-UP LETTER, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT TO PEOPLES ENTERING INTO THIS
AGREEMENT AND MAKING THE ACCOMMODATIONS PROVIDED FOR HEREIN.
Except as expressly provided herein, all terms and conditions contained
in the Agreement, the Guaranty, the Trade Receivables Agreement, the Trade
Receivables Guaranty, the Lock-Up Letter, the First Waiver Letter and the Second
Cash Payment Note shall remain unchanged and in full force and effect in
accordance with their respective terms.
If the foregoing terms and conditions are acceptable to you, please
indicate your acceptance and agreement by signing this letter in the space
provided therefor below and returning the same to Francis J. Harkins, Jr.,
Esquire, Peoples Telephone Company, Inc., 2300 NW 89th Place, Miami, Florida
33126 on or before the close of business on November 27, 1996. The foregoing
agreement shall not be effective until your accepted copy of this letter shall
be returned as aforesaid and each of the other conditions precedent to the
effectiveness of this waiver letter shall have been met or performed in
accordance with the provisions hereof. In the event that we shall have not
received this agreement, accepted by you as aforesaid, on or before the close of
business on November 27, 1996, and each of the other conditions precedent to the
effectiveness of this waiver letter shall not have been met or performed in
accordance with the provisions hereof, this agreement shall be void and of no
force or effect.
Very truly yours,
PEOPLES TELEPHONE COMPANY, INC.
By:
Its:
Accepted and Agreed to this
day of November, 1996
GLOBAL LINK TELECO CORPORATION, a
Delaware corporation
By:
Its:
Accepted and Agreed to this
day of November, 1996
GLOBAL TELECOMMUNICATION SOLUTIONS,
INC., a Delaware corporation
By:
Its:
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Global Telecommunication Solutions, Inc. and subsidiaries
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.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
December 26, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form 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. 2 to Form
8-K filed September 6, 1996. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Philadelphia, PA
December 26, 1996
<PAGE>
