UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE OF 1934 [FEE REQUIRED]
For the transition period from __________________ to ____________________
Commission file number 0-26684
GLOBAL INTELLICOM, INC.
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(Exact name of registrant as specified in its charter)
Nevada 13-3797104
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
747 Third Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)750-3772
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. Yes [_] No [_]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of March 31, 1997 was approximately $15,927,925 (based on the
average between the closing bid and asked prices of Common Stock on such date),
which value, solely for the purposes of this calculation, excludes shares held
by Registrant's officers and directors. Such exclusion should not be deemed a
determination by Registrant that all such individuals are, in fact, affiliates
of the Registrant.
As of March 31, 1997 there were outstanding 7,475,269 shares of Global
Intellicom, Inc.'s common stock, par value $.01 per share (the "Common Stock").
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PART I
Item 1. Business
General
Global Intellicom, Inc. (together with its subsidiaries, "Global" or the
"Company") develops, assembles, markets, supplies and supports complete computer
information systems, as well as computer, network and peripheral equipment and
software, to a wide range of customers, including corporate clients,
governmental entities, institutions, professional users and resellers. The
Company offers higher-end, enterprise-wide systems and components aimed
primarily at the client-server/network market, and also supplies consulting and
integration services, positioning itself as a total solution provider to its
customers. Additionally, the Company develops and markets speech recognition
technology in the form of software tools used by developers and other users of
voice-activated computer systems.
Global's business is conducted through five wholly-owned operating
subsidiaries, each of which has a distinct and complementary role.
History and Subsidiaries
Global was formed as a Nevada corporation in September, 1994. In December,
1994, it acquired Amcom Business Centers Corp. ("AMCOM"), a Pennsylavania-based
predecessor company, which acts as an aggregator and wholesale distributor of
brand name computer products. In order to avoid confusion with a similarly-named
company operating in the midwest, and to reflect an expanded business purpose,
AMCOM is changing its name to NEVCOR Technologies Group, Inc. ("NEVCOR").
Also, at the time of its acquisition of NEVCOR, the Company formed VIRCOM
Inc. ("VIRCOM"), which operates as a value-added reseller ("VAR") and integrator
of computer hardware and software and peripheral equipment for the corporate,
government, education and professional end-user.
Through National Computer Resources, Inc. ("NATCOM"), which the Company
acquired in September, 1995, Global provides high-performance, integrated
network computing systems, including hardware, software and services, for larger
customer accounts, based on equipment supplied by manufacturers such as NCR
Worldmark, Hewlett-Packard, IBM, Compaq and Sun MicroSystems.
In September, 1996, Global acquired the business of ManTech Solutions
Corporation, a producer of quality, custom-built servers and workstations, now
operated through Global's
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subsidiary, Global-InSync, Inc. ("InSync"). As a result, Global supplies
build-to-order Pentium(R)-based servers and workstations for large customers
such as the Department of Defense, Lockheed-Martin, Loral Sytems, Electronic
Data Systems, and the General Services Administration.
Most recently, in October, 1996, Global, through its subsidiary now known
as Speech Solutions, Inc. ("Speech Solutions"), acquired the assets of Pro
Notes, Inc., which had created voice recognition tools and interfaces for use
with IBM's VoiceType(TM) technology. Through Speech Solutions, Global offers
state-of-the-art voice recognition tools and interfaces for developers of speech
recognition applications based on the IBM VoiceType(TM) Dictation System.
Products
The Company offers approximately 2,200 computer information system
products and components, including its own InSync servers and workstations, as
well as proprietary software.
InSync Products and Assembly
Using its own facilities in Springfield, Virginia, the Company
assembles and supplies, under the InSync label, Pentium(R)-class
customized workstations and file servers built to individual customer
specifications. Workstations are configured on either Pentium(R) or
Pentium-Pro(R) processors, and file servers are based on both Pentium Pro
and multi-processor components. InSync product offerings include ISA, EISA
and PCI architecture, desk-top, mid-tower or full-tower cases, enhanced
IDE and SCSI hard drive platforms, CD-Rom drives, RAID array subsystems
and Energy* compliant monitors. InSync workstations and fileservers are
certified for use with Novell network software, Windows 95 and Windows NT.
Custom-built InSync products are particularly suited for situations
where standard models of name-brand equipment are either not
cost-effective, are not flexible enough to fill a particular client need,
or are not available in quantity on a stringent delivery schedule. Global
can offer its InSync products bundled with configuration, installation,
integration and maintenance services supplied by both InSync and Global's
other divisions, while nationally known manufacturers often do not supply
such "one-stop" service facilities, or are unable to change a production
line to promptly accomodate a customized product need.
InSync products are subject to stringent quality assurance
processes, including dynamic burn-in. The products can be supplied with a
significant portion of a customer's application software pre-loaded during
the product assembly process, thereby saving clients significant
installation time and improving the overall quality and consistency of a
delivered system. InSync offers a three-year product warranty, the first
year of which includes on-site service.
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Assembly facilities for InSync products consist of a 52,000 square
foot plant in Springfield, Virginia. The plant includes parts receiving
and warehousing, assembly operations, test and quality assurance
functions, and packing and shipping. InSync employs a "just-in-time"
inventory and production system, minimizing investment in component parts
and enabling it to respond quickly to special customer needs. The facility
has capacity to triple its assembly and production volume with minimal
capital investment, through the addition of personnel and work shifts.
InSync is one of only two certified build-to-order suppliers of
workstation products for the General Services Administration.
National Brand Name Products
Through NEVCOR, the Company acts as an aggregator of desktop and
notebook computer equipment, servers and peripheral products for NEC, a
major manufacturer of personal computer equipment, and as a distributor
for computer products of Sharp and InSync. (See "Marketing, Sales and
Customers" below). In addition, NEVCOR supplies UNIX-based client-server
and workstation equipment as a reseller for Sun MicroElectronics, a
leading manufacturer. NEC equipment constitutes a significant portion of
the products purchased and sold by the Company.
The Company offers, through NATCOM, the server and workstation
products of NCR Worldmark ("NCR") and a variety of related software
applications and network and integration services. NATCOM also provides
server and network products from Sun MicroSystems, IBM, Compaq, Microsoft
and Hewlett-Packard, acting as a reseller for each Company. In addition,
NATCOM supplies educational institutions with its SAMS software (Student
Administrative Management System), a proprietary scheduling, management
and administration program for elementary and middle schools.
Product Inventory and Shipment
Except for InSync products which are shipped from InSync's plant, Global's
product inventories are kept at, and all products are distributed from, a
central warehouse and distribution facility located in West Chester,
Pennsylvania. The centralized distribution facility enables the Company to track
purchase orders, control inventory requirements, and respond quickly to customer
needs for existing and new products.
Speech Solutions Software - New Products
Speech recognition technology is providing new opportunities in business
computing, in part because of the availability of cheaper computer memory and
faster computer processors
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needed for handling speech-related programs. Of the dictation-oriented speech
recognition systems now commercially available, IBM's VoiceType(TM) Dictation
System for Windows appears, to Global's management, to hold the most promise as
a large vocabulary/free dictation system. However, in order to be able to be
integrated with Windows-based application programs, the IBM system must be
interfaced with programming tools permitting the creation of custom controls and
voice commands for a user application.
Speech Solutions' Voice Tools, developed under contract with IBM, fulfills
this function. Voice Tools software is sold to developers of speech recognition
applications, either separately or bundled with the IBM VoiceType(TM) Dictation
System. Speech Solutions also markets its expertise in the speech recognition
field, acting as a consultant and custom software developer.
Supply and Integration of Complete Systems
In addition to the distribution of specific products and hardware systems,
the Company functions as a VAR. VIRCOM acts as a reseller and integrator of
computer hardware and software and other peripheral equipment for the corporate,
government, education, and professional end-user. As part of its integrated
approach, VIRCOM offers wireless and cellular services which provide data
communications to and from remote locations, as well as consulting, training and
technological services.
In its respective roles as aggregator, wholesale distributor and VAR to a
wide range of customers, the Company offers various marketing, consulting and
technical services. Such services include: needs analysis and selection of
various hardware and software options; network and system configuration and
design; custom software loading; integration of hardware and software elements;
system installation and testing; and maintenance. Such services are offered
through Global's technical and customer support staff and, where appropriate,
through outside contractors. In addition, NEVCOR, VIRCOM and NATCOM provide
various forms of product training and marketing, sales and advertising support
to their respective customers.
By furnishing such services and by using its access to a variety of
workstation and network equipment, Global can combine the elements needed to
offer a complete system or a "total solution" to meet client needs. Global's
management believes that selling complete systems rather than separate
components will generate more loyal customers and will yield higher margins.
Marketing, Sales and Customers
Global markets products and services to approximately 1,200 customers,
including corporations, government agencies, educational and other institutions,
professional users, VAR's and VAD's. Although products are marketed nationwide,
the majority of sales are to VAR's and VAD's located in the eastern half of the
United States.
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Excluding inter-company purchases, the two largest customers of Global
accounted for 18% and 14%, respectively, of the Company's total sales in 1996,
while in 1995, the two largest customers accounted for 10% and 6.8%,
respectively, of sales. No other customer in either year accounted for 10% of
sales. The Company considers its business relationship with such customers to be
good. However, a significant reduction in purchases by these customers, or a
loss of either customer account, could have a significant adverse impact on the
Company's business and financial results.
At the end of 1996, the Company had a backlog of orders, reasonably
believed to be firm, of approximately $3.4 million.
The Company's marketing and sales force consists of 43 employees who are
assigned to the respective marketing and sales efforts of Global's subsidiaries.
Marketing and sales efforts emphasize product quality and diversity, prompt
delivery, competitive pricing and a high level of product support, for which
Global's technical support staff is utilized. Training of sales personnel
includes product seminars conducted by manufacturers.
In addition to servicing and furnishing post-sale support to existing
customers, the Company's sales force solicits new business by pursuing leads
from manufacturers with whom Global has distribution relationships, by
contacting prospects identified through other industry sources, and by direct
mail campaigns, participation in trade shows, and advertising in trade
publications. As part of its marketing approach, Global offers credit terms and
floor plan financing for qualified customers. (See "Floor Plan Financing"
below.)
Vendor Relationships
Except for InSync equipment, the Company purchases products directly from
manufacturers and, in some cases, from other distributors, and its costs of
buying product are often as low as those for competitors many times its size.
Vendors benefit by gaining access, through Global, to a large base of computer
product resellers, while reducing vendors' inventory, credit, marketing and
overhead costs associated with establishing a direct relationship with
resellers.
The Company considers numerous factors in vendor selection, including
product demand, availability and performance, technical sophistication and
profit margin potential, focusing its marketing and distribution efforts on the
products of key vendors. The Company enhances its relationships with vendors by
providing customer feedback on products and by cooperating with vendors in
developing marketing programs.
The Company stocks products and accessories supplied by many vendors,
including such leading manufacturers of computer and data communications
products as IBM, Hewlett-Packard, Compaq, Sun MicroSystems, NEC, NCR, Sharp,
Toshiba, Cisco Systems, Ungermann-Bass and Racal DataCom.
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Of the Company's total product and component purchases in 1996,
approximately 37% were from NEC and 16% were from an OEM supplier.
The Company considers its relationships with its key vendors to be good,
and the loss of a direct relationship between the Company and any of its key
vendors could have a material adverse impact on the Company's business and
financial results. In addition, the loss of the ability to distribute certain
products supplied by such vendors could result in the loss of sales of other
products not directly related to those of such vendors.
The Company's vendor agreements generally grant the Company a
non-exclusive right to market and sell the vendor's products throughout the
United States, although under certain agreements, including those with NEC, the
Company may also distribute products throughout Canada. The Company believes its
agreements with vendors contain terms and conditions which are customary for the
industry, including minimum purchase requirements, allowing for termination if
such levels are not attained, and stock rotation and price protection provisions
which reduce, in part, the Company's risk of loss due to slow-moving inventory,
vendor price reductions, product updates or obsolescence. The vendor agreements
typically do not restrict the Company from selling similar products manufactured
by competitors, and allow termination by either party upon 30 to 90 days notice.
Upon termination, the Company generally is able to sell the related inventory
back to the vendor at cost.
The Company's agreement with NEC (the "NEC Agreement") is non-exclusive
and authorizes NEVCOR to act as a full product line distributor throughout the
United States and Canada for NEC hardware, software and peripheral products. The
NEC Agreement does not contain minimum purchase requirements, but, in order to
receive the vendor's maximum discount from list prices, the Company must attain
a minimum volume of purchases. NEVCOR has surpassed these volume requirements in
each year. The vendor's price lists and discount schedule are subject to change
from time-to-time at the vendor's discretion. The NEC Agreement contains price
protection provisions, allows the Company to rotate outdated or discontinued
inventory, provides for marketing development funds payable to the Company by
NEC, and provides for automatic renewal of successive one-year terms, unless
otherwise terminated by either party.
The Company's agreement with NCR (the "NCR Agreement") is non-exclusive
and authorizes NATCOM to act as a full-line reseller throughout the United
States for NCR's hardware, software and peripheral products. The NCR Agreement
does not contain minimum purchase requirements, but contemplates minimum sales
objectives, which have been surpassed in each year. The NCR Agreement provides
volume discounts from the vendor's list prices, depending on the volume of the
product purchased by the Company, but the discount schedule is subject to change
from time-to-time at the vendor's discretion. The NCR Agreement allows the
Company to rotate outdated or discontinued inventory and provides the Company
with price protection credits in the event the vendor decreases list prices or
applicable discounts. The NCR Agreement continues in effect unless terminated by
either party.
While computer information system equipment is generally available on a
continuous
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basis, the demand for certain products sold by the Company occasionally exceeds
the supply available from the applicable manufacturer. In such cases, the
manufacturer attempts to allocate the affected product equitably among its
distributors and resellers, including the Company. Global's management is aware
that the Company's ability to compete effectively has been and may be
periodically affected by such occasional product shortages, and Global
accordingly pursues a strategy of expanding the base of vendors for whom it
distributes products.
The Company receives quarterly credits on the purchase of certain vendors'
products. The amount of each vendor's credits depends upon the quantity of
products purchased or the Company's cost of products shipped. Such credits are
reflected in the Company's financial statements as a reduction of product
inventory cost when earned.
Competition
Competition in the wholesale distribution of computer systems and
equipment is intense. The Company's competitors in wholesale distribution
include national and regional distributors, aggregators and franchisers, of
whom, according to a survey conducted by Computer Resellers News, there are
approximately 200 throughout the United States. Many or most of these
competitors are privately held, and, accordingly, information on their size and
business is not readily available, although the Company believes there are a
significant number of competitors having substantially greater resources than
Global.
While there is no dominant competitor in wholesale distribution, the
Company's largest competitors appear to be Inacom Intelligent Electronics, Inc.,
Ingram Micro, Inc., Merisel, Inc., Tech Data Corporation, Gates/Arrow
Distributing, Inc., MicroAge, Inc. and a number of regional wholesale
distributors and aggregators. In some cases, the Company also competes with
manufacturers' direct sales to superstores, although many manufacturers limit
such direct sales because of the cost of dealing with a large number of
low-volume resellers.
In the server/network market addressed by NATCOM, the major competitor is
Cambridge Technology Partners.
Key competitive factors in the wholesale distribution industry include
product line selection and quality, availability, prompt delivery, pricing and
technical support. While a number of national and regional aggregators and
wholesale distributors may have substantially greater financial resources and
larger staffs than the Company, the Company views its emphasis on service and
technical support, and its offering of total systems and total solutions for
customers, as a competitive strength.
Floorplan Financing Arrangements
In addition to selling products against immediate payment, Global extends
payment terms
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to certain customers with approved credit, based upon their financial profile
and credit history, and to purchasers who have qualified for floorplan
financing.
To reduce payment risk and to facilitate sales to resellers, the Company
has floorplanning agreements with Finova Capital Corporation, IBM Credit Corp.,
Deutsche Financial Services, Nations Credit, and TransAmerica Credit. These
floorplanning agreements transfer responsibility for payment from a reseller
customer of Global to the floorplan finance company. Product is shipped by the
Company to a reseller following receipt of credit authorization for the purchase
from one of the floorplan finance companies. The finance company pays Global for
the purchase, generally within 3 to 15 days of shipment, and the reseller is
then obligated to reimburse the floorplanning company for the purchase price of
the product. The Company is typically required to pay the finance company a
range of floorplan "points" based on the invoice price of the products
purchased.
The Company finances the purchase of most of its inventory through its
floorplanning credit facility with Finova Capital Corporation. The terms offered
to the Company by its vendors generally allow the Company to maintain the
product in inventory for between 45 and 60 days without incurring finance
charges.
Financing of Accounts Receivable; Customer Credit
The Company has a factoring facility with Century Business Credit
Corporation ("Century"). Century purchases, on an uncommitted basis, receivables
from the Company. This factoring facility enhances the liquidity of the
Company's asset base and improves the Company's ability to manage its cash flow.
Purchases of receivables by Century may be made on either a recourse or
non-recourse basis. For customers who have been previously approved by Century,
such purchases will be made on a non-recourse basis, which means that the risk
of non-payment will be borne by Century. The Company retains the option of
selling certain approved receivables to Century on a partial or full recourse
basis.
On January 22, 1997, InSync entered into an agreement with Century, under
which Century agreed to factor Insync receivables on a full recourse basis and
other terms comparable to those previously afforded Global. The InSync factoring
agreement is terminable by either party upon 60 days notice.
The Company has negotiated a new factoring agreement with Century which,
in the view of Global's management, will contain terms more favorable to the
Company than those contained in the prior agreement.
Global views its relationships with both Century and Finova Capital
Corporation to be important and beneficial, and the loss of either such
relationship (which is not anticipated) could adversely affect Global's
business.
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The Company also uses a Credit Committee composed of Global officers and
employees to monitor and control its credit exposure on customer receivables.
The Credit Committee undertakes background credit checks for all proposed
customers. Assuming credit is acceptable, the Credit Committee establishes
limits on the amount of outstanding receivables which a customer can incur.
Orders in excess of this limit may only be authorized by the Credit Committee.
Customers who fail to adhere to agreed credit terms are contacted, and the
Company ordinarily discontinues shipments until acceptable credit standing is
reestablished.
Trademarks and Copyrights
The Company is in the process of applying to register various trademarks
and tradenames associated with its business. In addition, the Company holds
software copyrights and intends to acquire and register other copyrights. While
trademark and copyright registration, to the extent obtained, may prove to be a
benefit to the Company, the Company's business is not, and is not expected to
be, materially dependent on any such registration. Management believes that the
success of Global will be based more on the quality of its products and
services, and on the knowhow and skill of its marketing and technical support
efforts, than on any trademark, tradename or copyright registration.
Employees
As of December 31, 1996, the Company had 126 full-time employees,
including 43 persons employed in sales and marketing functions, 15 persons in
production and assembly, 19 persons involved in technical support roles, 13
persons involved in purchasing and warehouse functions, and 36 persons involved
in executive, administrative, and finance functions. None of Global's employees
are covered by collective bargaining agreements. Global considers its relations
with its employees to be good.
1996 Acquisitions
As previously reported, in September, 1996, InSync purchased substantially
all of the assets of Mantech Solutions Corporation ("MSOL"), which was engaged
in the business of manufacturing made-to-order computer servers and
workstations. The MSOL assets acquired include all intellectual property,
fixtures, inventory, trade accounts and accounts and notes receivable and all
other assets material to the operation of MSOL's business.
The agreed purchase price was $5,736,084, being paid to MSOL as follows:
(a) 350,000 shares of Global's Series 3 Cumulative Preferred Stock having
a liquidation preference of $10 per share and bearing a 6% cumulative dividend
payable semiannually beginning June 30, 1997. The Series 3 shares are
convertible at a value of $10 per
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share into restricted shares of Global Common Stock. The Series 3 Preferred
shares have special voting rights which, should the Company default in paying
the Series 3 dividend, entitle the Series 3 holders to elect a member of the
Company's board of directors for each second dividend payment which is missed.
(b) a promissory note from InSync to MSOL, guaranteed by Global, for
$1,486,084 (the "First Note") bearing interest at 9% per annum. Under the terms
of the First Note, interest does not accrue until March 16, 1997. Payments under
the First Note are to be made 45 days after the close of each fiscal quarter,
commencing with the quarter ended June 30, 1997, in the amount of 2% of InSync's
net sales. If, at the end of each subsequent 12-month period beginning with the
12 months ending June 30, 1998, the sum of the quarterly Note payments is less
than the interest accrued over the previous four quarters, plus 10% of the
original principal amount, an adjustment payment will be made to cover any
shortfall.
(c) a promissory note from InSync to MSOL, guaranteed by Global, for
$470,000, with substantially the same terms as the First Note, except that
payments do not commence until the earlier of December 31, 2001, or upon payment
in full of the First Note.
(d) 49,778 restricted shares of Global Common Stock.
Also as previously reported, in October, 1996, Speech Solutions entered
into an agreement by which it purchased substantially all of the assets of Pro
Notes, Inc. ("Pro Notes"), a Pennsylvania corporation engaged in the development
and marketing of speech recognition computer software, including developer's
tools and voice command and control applications. Speech Solutions did not
assume any of Pro Notes' liabilities.
The aggregate purchase price for the Pro Notes assets consisted of
$325,000, plus an earn-out amount equal to 3% of the gross sales of any Pro
Notes products sold by Speech Solutions or its affiliates to an unaffiliated
third party purchaser during the five-year period following the closing. The
earn-out amount will only be payable to the extent of Speech Solutions'
cumulative available net earnings before interest and taxes, but Pro Notes will
be entitled to receive a minimum aggregate earn-out payment equal to $195,000
for the entire five-year period. In the event that total earn-out payments are
less than $1,375,000 at the end of the five-year period, such period shall be
extended for a period not to exceed an additional five years or, until the
aggregate earn-out amount reaches $1,950,000, whichever occurs first.
Company Financing
In order to fund its working capital requirements, the Company entered
into a number of short-term loan transactions between January and August, 1996.
Two loans in the aggregate principal amount of $700,000 were arranged with
non-affiliated parties, including a $500,000 loan with interest at an annual
rate of 24%, and a
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$200,000 loan for which the Company issued warrants for the purchase of 70,000
shares of Common Stock at an exercise price of $3.00 per share in lieu of
interest. Both loans were fully repaid during the year.
The Company also entered into a number of loan arrangements with
affiliated parties in an aggregate principal amount of $290,000. Included were
(i) a $200,000 loan made by a limited partnership controlled by an outside
director, and (ii) three separate loans in the aggregate principal amount of
$90,000 from an outside director, an officer and a stockholder, at an interest
rate of 10% per annum each, of which $65,000 is due April, 1997 and $25,000 is
due in May, 1997. The $200,000 loan was repaid in full during 1996.
Between July 9 and October 4, 1996, the Company sold 140,000 shares of
Common Stock and a total of 355,825 shares of various series of Convertible
Preferred Stock to foreign investors under Regulation S, all of which
transactions were reported by the Company in its Form 10-Q filed for the quarter
ended September 30, 1996. The Company obtained net proceeds of approximately
$4,300,000, after all costs associated with the offering of such securities.
Other Transactions
In August, 1996, in connection with the sale of securities to foreign
investors pursuant to Regulation S, the Company entered into an agreement with
World Capital Funding, Inc., under which the Company paid a fee of 10% of the
gross proceeds of such sale to World Capital. In addition, the agreement called
for the issuance of 5,000 restricted shares of Common Stock for each $1,000,000
in foreign investor subscriptions received.
At the same time, the Company entered into an agreement with Corporate
Relations Group, Inc. ("CRG"), pursuant to which the Company engaged CRG to
provide advice on the raising of capital, arrange broker meetings and
presentations, and assist with investor relations, press releases, corporate
publications and other matters. The Company paid CRG fees of $617,000, and its
agreement with CRG provided for issuance of various options for the purchase of
a total of 500,000 shares of Common Stock exercisable at prices ranging from
$3.75 to $6.75 per share.
Item 2. Properties
Global's principal executive offices are located at 747 Third Avenue, New
York, New York 10017, under a lease expiring in August 2005. Global's InSync
production facility leases 52,000 square feet in Springfield, Virginia, under a
lease expiring in March, 1998. Global occupies approximately 22,000 square feet
of warehouse space as well as additional telemarketing, distribution and
administrative facilities, in West Chester, Pennsylvania, under a lease expiring
in April, 2000. Global also leases two small offices in Jamesburg, New Jersey
and Orlando, Florida, and Speech Solutions occupies office facilities in
Philadelphia.
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The Company has negotiated arrangements for the early termination of its
warehouse lease and expects to enter into a new lease for a distribution
facility in Fort Washington, Pennsylvania, on terms more advantageous than the
existing warehouse lease. Also, the Company does not expect any difficulties in
negotiating a renewal of the InSync production facility lease at prevailing
market rates.
Item 3. Legal Proceedings.
In October, 1996, Scott and Ellen Arch, the former owners NEVCOR,
commenced an action in the Delaware County Court of Common Pleas against NEVCOR
and two of the Company's directors as guarantors (the "Arch Complaint"). The
Arch Complaint stems from a dispute over the proper calculation of certain
state, local and federal income taxes incurred by the plaintiffs in 1994, which
amounts were included in the purchase price paid by Global for NEVCOR's
business. The plaintiffs allege that they are due an additional payment of
$93,449 in respect of such taxes, but NEVCOR and the Company believe that all
sums due to the plaintiffs on account of such tax obligations have been paid.
The Company intends to defend this action vigorously.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.
The Common Stock of Global is listed on the NASDAQ Small Cap Market under
the symbol GBIT. From May 16, 1996, when Global's Common Stock was first listed
on NASDAQ, to December 31, 1996, the high and low bid prices of Common Stock as
reported on NASDAQ were as follows for the calendar quarters indicated:
Bid
---
High Low
---- ---
May 16 to June 30, 1996 6 7/8 4
July 1 to September 30, 1996 6 2 3/4
October 1 to December 31, 1996 6 1 7/8
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From November 13, 1995 to May 16, 1996, Global's Common Stock was listed
on the OTC Bulletin Board under the symbol "GBIT". The high and low bid
quotations for the Common Stock from November 13 to December 31, 1995, as
reported on the OTC Bulletin Board, were $3.25 and $1.00, respectively. The high
and low bid quotations on the OTC Bulletin Board for the first quarter of 1996
were $7.375 and $3.00, respectively.
The bid quotations represent inter-dealer prices and do not include retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.
No dividends have been declared or paid with respect to the Common Stock.
As of March 18, 1997, there were approximately 3,688 record holders of the
Company's Common Stock. As of March 31, 1997 there were 7,475,269 shares of the
Company's Common Stock outstanding.
Issuance of Securities Not Registered under the Securities Act of 1933, as
Amended
The following unregistered securities were issued by the Company in 1996:
(a) In September, 1996, in connection with the Company's acquisition of
the assets of MSOL, the Company issued a total of 350,000 shares of Series 3
Cumulative Preferred Stock, convertible into Common Stock at a price of $10.00
per share, and 49,778 shares of Common Stock. The Preferred and Common shares
were issued in payment of a portion of the purchase price paid for the MSOL
assets. (See description under heading "1996 Acquisitions" in Item 1 above.)
(b) In October, 1996, the Company issued a total of 22,223 shares of
Common Stock to two employees of InSync in consideration of the termination and
waiver of certain rights under employment agreements between such employees and
InSync.
(c) In May, 1996, the Company issued an aggregate of 15,000 shares of
Common Stock to two outside directors in lieu of payment of a total of $45,000
of outside directors' fees for 1995 and 1996.
All of the foregoing securities were issued with standard restrictive
legends, and stop transfer instructions were filed with the Company's transfer
agent in connection therewith. Such issuances represented private transactions,
and no underwriter or public offering was involved. By reason of the foregoing
facts, the Company claims exemption for such issuances as private transactions
pursuant to Section 4(2) of the Securities Act of 1933, as amended.
The foregoing issuances were described in quarterly reports previously
filed by the Company, as were issuances of shares of Preferred and Common Stock
sold to foreign investors under Regulation S (see Item 1, "Company Financing").
-14-
<PAGE>
Item 6. Selected Financial Data (in thousands, except per share data).
Consolidated Statement of Operations Data:
<TABLE>
<CAPTION>
Company Predecessor Company
--------------------------------------- -------------------------
Year Year September 1, January 1, Year
Ended Ended 1994 to 1994 to Ended
December 31 December 31 December 31 December 31 December 31
1996 1995 1994(1) 1994(1) 1993
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales ...... $ 42,139,032 $30,477,467 $ 1,386,364 $22,948,519 $28,124,164
Net Income
(loss) ......... (1,085,388) 270,183 (158,184) 349,797 836,402
Net Income
(loss) per share (.33) .09 (.06) N/A N/A
Pro forma net
income (2) ..... N/A N/A N/A 210,089 502,343
Pro forma net
income per share N/A N/A N/A N/A N/A
Shares used in
computing net
income (loss)
per share ...... 3,527,053 2,927,170 2,500,000 N/A N/A
</TABLE>
Consolidated Balance Sheet Data:
<TABLE>
<CAPTION>
Company Predecessor Company
----------------------------------------------- ----------------------------
December 31 December 31 December 31 December 7 December 31
1996 1995 1994(1) 1994(1) 1993
----------- ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Working capital
(deficit) ............ $ 3,930,788 (1,106,451) 30,687 516,965 765,762
Total assets ......... 22,586,460 11,313,831 6,246,558 5,988,568 5,936,352
Due to financial
institutions ......... 1,711,429 4,994,135 3,479,188 4,546,657 4,793,856
Stockholder's equity . 9,625,172 2,329,524 1,741,816 903,199 853,402
</TABLE>
- ----------
(1) The Company was incorporated on September 1, 1994. The Company purchased
the net assets of the Predecessor Company on December 8, 1994 and
commenced operations on that date.
(2) Pro forma net income has been presented to show results of operations
assuming the Predecessor Company filed its income tax return as a C
corporation.
(3) See Notes 1 and 20 of Notes to the Consolidated Financial Statements for
an explanation of the calculation of shares used in computing net income
(loss) per share.
-15-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Background
In December, 1994, Global acquired the assets and business of its
predecessor company and also organized VIRCOM. Effective September 1, 1995,
pursuant to a registration statement filed with the Securities and Exchange
Commission, a public distribution of 850,000 shares of Global's Common Stock was
made to shareholders of another publicly held entity, as a result of which
Global became a reporting public company.
On September 28, 1995, the Company acquired NATCOM. Effective September 1,
1996, the Company purchased, through InSync, substantially all of the assets of
MSOL. On October 18, 1996, the Company purchased, through Speech Solutions, the
assets and business of Pro Notes, Inc.
The following discussion and analysis compares: (i) the operating results
of the Company for 1996 (which includes the operating results of InSync from
September 1, 1996 to December 31, 1996 and Speech Solutions from October 18,
1996 to December 31, 1996) as compared with the operating results of the Company
for 1995 and; (ii) the operating results of the Company for the year 1995 as
compared with the operating results of the Company for the period from Global's
inception on September 1, 1994 through December 31, 1994 (which period includes
the operating results of NEVCOR from December 8, 1994 to December 31, 1994)
combined with the operating results of the predecessor company for the period
January 1, 1994 through December 7, 1994 (such combined periods being referred
to as the "Combined 1994 Year").
Also included is a discussion and analysis of the Company's financial
condition and liquidity as of December 31, 1996. The following text should be
read in conjunction with the Company's Financial Statements contained in this
report.
Year Ended December 31, 1996 as Compared With Year Ended December 31, 1995
Net Sales
Net sales increased to $42,139,032 for the year ended 1996 from
$30,447,467 for the year ended 1995, a 38% increase. Net sales of InSync from
the effective date of its acquisition on September 1, 1996 to December 31, 1996
were $13,985,710. Net sales of NATCOM for the full 1996 year were $5,315,711
compared to $2,356,670 from the date of its acquisition on September 28, 1995 to
December 31, 1995. The increase in Global's aggregate net sales for 1996 due to
the InSync and NATCOM acquisitions were partially offset by a decrease in NEVCOR
and VIRCOM sales as a result of certain product unavailability.
-16-
<PAGE>
Gross Profit
The Company's gross profit for 1996 rose to $6,349,872 from $3,759,423 for
1995, with the gain of $2,590,449 representing contributions from a full year of
operations of NATCOM and four months of operations of InSync in 1996. Overall
gross profit for the two years as a percentage of net sales amounted to 15.1% in
1996 and 12.3% in 1995, although these amounts are not representative of a
comparison based on consistent full-year results because of the timing of the
NATCOM and InSync acquisitions. On a consistent basis, if the operations of
InSync and NATCOM were not included in either year, the Company's gross profit
as a percentage of sales would have been 13.6% for 1996 and 11.0% for 1995.
Operating Expenses
Operating expenses for 1996 rose substantially, to $7,310,664 from 1995's
level of $3,357,036, a 118% increase. Of the $3,953,628 increase, $2,338,916
represents incremental operating expense resulting from the inclusion of a full
year of operations of NATCOM and four months of operations of InSync in 1996,
and the remaining $1,614,712 represents additional investment in sales,
marketing and administrative personnel, along with expenditures in integrating
acquired operations.
Other Expenses
Other expenses, principally interest expense, rose to $831,135 for 1996
from $317,945 for 1995, or a $513,190 increase. The increase in 1996 interest
expense was primarily due to higher costs associated with short-term bridge
loans earlier in the year, as well as to an increase in indebtedness to the
Company's factor and financial institution because of higher operating levels.
Income (Loss) Before Provision for Income Tax Credits
For 1996, the Company generated a loss of ($1,791,927) after operating and
other expenses, compared to income before tax credits of $84,442 in 1995, as the
gains in gross profit from the full-year of operations of NATCOM and from the
four-month contribution of InSync were more than offset by the increases in such
expenses as noted above.
Provision for Income Tax Credits
The 1996 benefit for income taxes was $706,539 compared with a benefit of
$185,741 for 1995. The deferred tax benefits are based on deferred tax assets
which are considered realizable.
Net Income (Loss) Per Share
As a result of the factors discussed above, the net loss for 1996 was
($1,085,388) and net loss per share was ($.33), as compared to net income of
$270,183 and net income per share of $.09 for 1995. The per share calculation is
based on the weighted average number of shares
-17-
<PAGE>
outstanding.
Year Ended December 31, 1995 as Compared With the Combined 1994 Year
Net Sales
Net sales increased to $30,447,467 for the year ended 1995 from
$24,334,883 for the Combined 1994 Year, or a $6,112,584 increase. Net sales of
NATCOM, from the date of its acquisition on September 28, 1995 to December 31,
1995 represented $2,356,670 of the above-mentioned increase. The remaining
increase in net sales of $3,755,914 or 15.4% was due to improved sales efforts
emphasizing an increase in both volume and profitability. Increased sales to new
and existing customers included a significant increase to a Fortune 500 client.
Gross Profit
Gross profit increased to $3,759,423 for the year ended 1995 from
$1,442,841 for the Combined 1994 Year, or a $2,316,582 increase. Gross profit of
NATCOM from the date of acquisition represents $669,116 of the increase. Gross
profit excluding NATCOM as a percentage of net sales was 11.0% in 1995 as
compared to 5.9% in the Combined 1994 Year.
Operating Expenses
Operating expenses rose to $3,357,036 for the year ended 1995 from
$1,170,089 for the Combined 1994 Year, or an increase of $2,186,947. Operating
expenses of NATCOM from the date of its acquisition represented $409,021 of the
increase. The remaining $1,777,926 was due to the following items: increases in
salaries and related payroll expenses, and greater selling expenses to support
sales efforts; increased rent expense reflecting the Company's move to newer and
larger facilities consisting of a warehouse, a configuration center and
operating offices in West Chester, Pennsylvania and executive offices in New
York City; higher depreciation and amortization expense as a result of the
NEVCOR acquisition.
Other Expenses
Other expenses, principally interest expense, increased to $317,945 for
the year ended 1995, from $81,139 for the Combined 1994 Year. NATCOM, from the
date of its acquisition, represents $2,905 of this increase. The remaining
increase of $233,901 was due to costs relating to the accounts receivable credit
facilities and increased borrowings under the Company's credit facilities.
Provision for Income Tax Credit
The 1995 provision for income tax credits was $185,741 for the year ended
1995 primarily due to the recognition of a deferred tax benefit as such deferred
tax assets are
-18-
<PAGE>
considered realizable.
Net Income per Share
As a result of the above factors, net income was $270,183 and net income
per share was $0.09 for the year ended 1995. The per share calculation is based
on 2,927,170 weighted average shares of Common Stock outstanding.
Financial Condition and Liquidity
The Company's cash balance at year-end was $1,516,072 and its working
capital amounted to $3,930,788, compared to cash of $496,662 and a working
capital deficit of $1,107,000 at the end of 1995. Cash flow from operating
activities was $1,646,387 compared with $596,022 at the end of 1995.
The Company is party to a floor plan financing agreement with Finova
Capital Corp., under which it has a credit line of up to $8,000,000, used to
finance inventory purchases for NEVCOR, VIRCOM and NATCOM. The Company's
obligations under the loan agreement with Finova are personally guaranteed by
three of the Company's directors.
In addition, the Company has a factoring agreement with Century Business
Credit Corporation ("Century") under which it factors trade receivables. The
maximum aggregate amount available under the factoring facility is $9,000,000,
and approved customer receivables are handled on a non-recourse basis. The
Company's obligations under the factoring arrangement are personally guaranteed
by two of the Company's directors. The Company has negotiated a new factoring
agreement with Century which, in the view of Global's management, will contain
terms more favorable to the Company than those contained in the prior agreement.
In early 1996, the Company entered into a number of short-term loan
arrangements in order to meet the increased liquidity needs of its expanding
business operations. (See discussion under item 1, "Company Financing".) Also,
between July 9 and October 4, 1996, the Company sold 140,000 shares of Common
Stock and a total of 355,825 shares of various series of Convertible Preferred
Stock to foreign investors under Regulation S, obtaining net proceeds of
$4,294,129, after costs totaling $2,677,371.
Since inception, the Company has been actively engaged in making
acquisitions of related businesses, and expects to continue to do so in the
foreseeable future. Under existing acquisition agreements, the Company has a
variety of commitments, as described below.
In accordance with the agreements relating to the acquisition of NEVCOR,
the Company is required to pay the following amounts: a contingent payment based
upon 1/2% of net sales (as defined) which was due quarterly during 1996, and
monthly after January 1, 1997 thereafter.
-19-
<PAGE>
The acquisition of NATCOM requires the Company to make the following
future payments: $79,000 due at the end of each of the next seven quarters
following the one year anniversary of the Closing Date; and $80,000 following
the three-year anniversary, due September 28, 1998. In March 1996, the purchase
price was increased by an amendment to the acquisition agreement to include
$48,678 in lieu of amounts payable for 1995 in accordance with certain
employment and/or consulting agreements. In March 1997, the purchase price was
further increased by $359,735, of which $212,658 is payable in six monthly
installments of $35,443, commencing in July 1997, and the balance is payable
based on achieving certain performance goals. The payments may be subject to
certain adjustments for prior income taxes due by the sellers.
Future commitments for the Company's acquisition of the InSync business
include a promissory note, guaranteed by the Company, for $1,486,084, (the
"First Note") bearing interest at 9% per annum and a second promissory note,
guaranteed by the Company, for $470,000 ("the Second Note"). Under the terms of
the First Note, interest does not accrue until March 16, 1997. Payments under
the First Note are to be made 45 days after the close of each fiscal quarter,
commencing with the quarter ended June 30, 1997, in the amount of 2% of InSync's
net sales. If, at the end of each subsequent 12-month period beginning with the
12 months ending June 30, 1998, the sum of the quarterly Note payments is less
than the interest accrued over the previous four quarters, plus 10% of the
original principal amount, an adjustment payment will be made to cover any
shortfall. The Second Note contains substantially the same terms as the First
Note, except that payments do not commence until the earlier of December 31,
2001, or upon payment in full of the First Note.
The Company expects that income and cash flow anticipated from 1997
operations, together with existing financing arrangements and working capital,
will be sufficient to fund the Company's operations at existing levels. However,
if Global's operating levels and future growth exceed its financial resources,
the Company will be required to seek additional credit and financing facilities,
either through institutional financing or the issuance of debt or equity
securities in the private or public market. There is no assurance that such
credit or financing arrangements will be available on acceptable terms if
needed.
Inflation.
The impact of inflation on the Company's operations has not been
significant to date. There can be no assurance that a high rate of inflation in
the future would not have an adverse effect on the Company's operations.
-20-
<PAGE>
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted as a separate section of this
report commencing on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Pursuant to General Instruction G-3, and in response to the items
contained in this Part III, the Registrant is incorporating by reference the
information which will be included in Registrant's definitive proxy statement to
be filed within 120 days after December 31, 1996.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
1. Financial Statements
The response to this portion of Item 14 is submitted as a
separate section of this report commencing on page F-1.
2. Financial Statements Schedules
The Financial Statement Schedules are appended following the
Financial Statements.
3. Exhibits
The following is a description of exhibits required to be
filed with this report (item numbers are those assigned in the
Exhibits Table of Item 601,
-21-
<PAGE>
Regulation S-K), and the incorporation-by-reference codes
following each item are explained at the end of the listing:
(3)(i) Restated Articles of Incorporation and Certificate of
Change.(+)
(ii) Amended and Restated By-Laws.(*)
(4.1) Form of Common Stock Certificate.(*)
(4.2) Escrow Agreement, dated as of February 24, 1995, among
Communications and Entertainment Corp., Continental Stock
Transfer & Trust Company and Global Intellicom, Inc.
("Global")(*)
(4.3) Lock-Up Agreement dated May 26, 1995.(*)
(4.4) Form of Regulation S Securities Subscription Agreement,
pursuant to which the Company sold 330,000 shares of Series 1
Convertible Preferred Stock.(++)
(4.5) Form of Offshore Securities Subscription Agreement, pursuant
to which the Company sold 825 shares of Series 2 Convertible
Preferred Stock.(++)
(4.6) Form of Regulation S Securities Subscription Agreement,
pursuant to which the Company sold 25,000 shares of Series 4
Convertible Preferred Stock.(++)
(5) Form of Opinion of Goodkind Labaton Rudoff & Sucharow LLP.(**)
(10) Material Contracts
(10.1) Asset Purchase Agreement, dated as of October 28, 1994,
between Tech Acquisition Corp. and AMCom Business Centers
Corp. (*)
(10.2) Assignment and Assumption dated as of December 8, 1994
between Tech Acquisition Corp. and Global.(*)
(10.3) Global Stock Option Plan.(*)
(10.4) Additional Benefit Plan of Global.(*)
-22-
<PAGE>
(10.5) Employment Agreement, dated as of January 1, 1995, between
Global and Anthony R. Cucchi.(*)
(10.6) Loan and Security Agreement, dated December 8, 1994, among
Finova Capital Corporation ("Financial Institution") (f/k/a
Greyhound Financial Corporation) and Global's subsidiaries.(*)
(10.7) First Amendment to Loan and Security Agreement dated May 26,
1995, among the Financial Institution, Global's subsidiaries
and certain guarantors.(*)
(10.8) Floorplan Credit Line Replacement Note, dated May 26, 1995,
payable to the Financial Institution by Global's
subsidiaries.(*)
(10.9) Letter Agreement dated May 26, 1995 between VirCom, Inc.
("VIRCOM") and Century Business Credit Corporation.
("Century")(*)
(10.10) Letter Agreement, dated May 26, 1995, between AMCom Business
Centers Corp. ("AMCOM") and Century.(*)
(10.11) Corporate Guaranty Unlimited executed by Global to Century,
dated May 26, 1995, with respect to AMCOM.(*)
(10.12) Intercreditor Agreement, dated May 26, 1995, among AMCOM,
VIRCOM, the Financial Institution and Century.(*)
(10.13) Distribution Agreement, dated April 11, 1991, between
Claren, Inc. and Texas Instruments, Inc. and Assignment
Agreement from Claren, Inc. to AMCOM.(*)
(10.14) Nectech Authorized Major Reseller Agreement dated April 12,
1990.(*)
(10.15) Dealer Agreement, dated December 1995, between AT&T Global
Information Solutions (f/k/a NCR Corporation) and AMCOM.(*)
(10.16) Lease Agreement, dated March 20, 1995, between AMCOM and
Warehouse Associates for Global's West Chester, Pennsylvania
facilities.(*)
-23-
<PAGE>
(10.17) Stock Purchase Agreement dated September 28, 1995 by and
between Global and the Sellers named therein(***)
(10.18) Warrant Agreement dated March 20, 1996 by and between Global
and N. Norman Muller, Howard Maidenbaum, Anthony R. Cucchi,
Thomas W. Smith, Wayne M. Rogers and David A. Mortman (each a
Director)(++ ++)
(10.19) Letter Agreement dated as of January 1, 1995 between Global
and Perry Scheer.(++ ++)
(10.20) Letter Agreement dated January 1, 1996 between Global and
Wayne M. Rogers.(++ ++)
(10.21) Warrant Agreement dated March 5, 1996 by and between Global
and Pacific Consulting Group.(++ ++)
(10.22) Warrant Agreement dated March 20, 1996 by and between Global
and Wharton Associates.(++ ++)
(10.23) Warrant Agreement dated March 5, 1996 by and between Global
and MWW/Strategic Communications, Inc.(++ ++)
(10.24) Letter Agreement dated as March 27, 1996 by and between
Global, AMCOM and Warehouse Associates.(++ ++)
(10.25) Amendment Agreement dated as of March 28, 1996 by and
between Global and the Sellers named therein.(++ ++)
(10.26) Employment Agreement dated September 28, 1995 between
National Computer Resources, Inc. ("NATCOM"), Global as
guarantor and Frederick Smith.(++ ++)
(10.27) Employment Agreement dated September 28, 1995 between
NATCOM, Global as guarantor and Richard Dilts.(++ ++)
(10.28) Consulting Agreement dated September 28, 1995 between
NATCOM, Global as guarantor and Stephen T. Barry.(++ ++)
(10.29) Letter Agreement dated December 31, 1995 by and between
Global and Messrs. Maidenbaum and Muller.(++ ++)
(10.30) Warrant Agreement dated March 20, 1996 by and between
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<PAGE>
Global and Perry Scheer.(++ ++)
(10.31) Settlement Agreement and Mutual Release dated March 28, 1996
by and between Grove Avenue Corp. and AMCOM, VIRCOM and
Global.(++ ++)
(10.32) Assignment & Assumption Agreement dated December 8, 1994
between Tech Acquisition Corp. and AMCom Business Centers
Corp.(**)
(10.33) Employment Agreement, dated January 1, 1994 between Thomas
Vetterani and AMCom.(**)
(10.34) Stock Purchase Agreement by and between Global Intellicom,
Inc. and the Sellers named therein.(***)
(10.35) Asset Purchase Agreement dated as of September 16, 1996,
pursuant to which the Company's wholly owned subsidiary
Global-Insync, Inc. purchased substantially all of the assets
of ManTech Solutions Corporation ("MSOL"), by and between the
Company, Insync, MSOL, and MSOL's parent, ManTech
International Corporation ("ManTech").(+)
(10.36) Asset Purchase Agreement dated as of October 18, 1996 by and
between Pro Notes Acquisition Corporation and the Company on
the one hand and Pro Notes Inc. and Alan Costilo on the other,
by which the Company purchased the assets of Pro Notes,
Inc.(+++)
(10.37) Agreement dated January 22, 1997 between Global and Century
Business Credit Corporation.
(10.38) Promissory Note dated February 1, 1996 between Global as
borrower and Triangle Bridge Group, LP.
(10.39) Extension Agreement dated November 22, 1996 between Global
and Triangle Bridge Group, LP.
(10.40) Letter Agreement dated February 16, 1996 between Global and
Goodkind Labaton Rudoff & Sucharow LLP.
(10.41) Stock Purchase Agreement dated February 16, 1996 between
Goodkind Labaton Rudoff & Sucharow LLP and various Purchasers.
-25-
<PAGE>
(10.42) Letter Agreement dated August 21, 1996 between Global and
World Capital Funding, Inc.
(10.43) Lead/Corporate Relations Agreement dated August 15, 1996
between Global and Corporate Relations Group, Inc.
(11) Statement re: Computation of Per Share Earnings, attached as
Exhbit 11 to the Financial Statements.
(21) List of the Company's Subsidiaries.(*)
(27) Financial Data Schedule
(b) Reports on Form 8-K
On October 1, 1996, the Company filed a current report on Form 8-K,
describing the Company's purchase of substantially all the assets of
ManTech Solutions Corporation, followed by an amendment containing the
required financial statements.
(c) See (a)(3) above.
(d) See Schedule II included at the end of the Financial Statements.
- --------------------------------------------------------------------------------
(*) Designates document incorporated herein by reference to Global's
Registration Statement on Form S-1, File No. 33-93098.
(**) Designates document incorporated by reference to Amendment No. 1 to
Global's Registration Statement on Form S-1, File No. 33-93098.
(***) Designates document incorporated herein by reference to Global's Report on
Form 8-K dated October 12, 1995, File No. 0-26684, as amended by Amendment
No.1 to Report on Form 8-K dated December 8, 1995.
-26-
<PAGE>
(+) Designates document incorporated herein by reference to Global's
Report on Form 8-K dated September 16, 1996, File No. 0-26684.
(++) Designates document incorporated herein by reference to Global's
Report on Form 10-Q dated June 30, 1996, File No. 0-26684.
(+++) Designates document incorporated herein by reference to Global's
Report on Form 10-Q dated September 30, 1996, File No. 0-26684.
(++ ++) Designates document incorporated herein by reference to Global's
Report on Form 10-K dated March 30, 1996.
-27-
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
F-1
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
CONTENTS
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-3
CONSOLIDATED BALANCE SHEETS F-4 - F-5
CONSOLIDATED STATEMENTS OF OPERATIONS F-6
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY F-7
CONSOLIDATED STATEMENTS OF CASH FLOWS F-8 - F-9
STATEMENT OF CASH FLOWS - PREDECESSOR F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-11 - F-41
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS F-42
EXHIBIT 11 - COMPUTATION OF INCOME PER COMMON SHARE F-43
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Global Intellicom, Inc.
New York, New York
We have audited the accompanying consolidated balance sheets of Global
Intellicom, Inc. and Subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for the years ended December 31, 1996 and
1995 and for the period September 1, 1994 (inception date) to December 31, 1994.
We have also audited the statements of operations, changes in stockholders'
equity and cash flows of Amcom Business Centers Corp. (the "Predecessor") for
the period January 1, 1994 to December 7, 1994. These financial statements are
the responsibility of the Company's and Predecessor's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements of the Company referred to
above present fairly, in all material respects, the financial position as of
December 31, 1996 and 1995 and the results of their operations and their cash
flows for the periods presented in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statements of the
Predecessor present fairly, in all material respects, the results of its
operations and its cash flows for the period presented in conformity with
generally accepted accounting principles.
We have also audited Schedule II and Exhibit 11 of the Company for the years
ended December 31, 1996 and 1995 and the period September 1, 1994 (inception
edate) to December 31, 1994 and of the Predecessor for the period January 1,
1994 to December 7, 1994 included in the 1996 annual report of the Company on
Form 10-K. In our opinion, Schedule II and Exhibit 11 present fairly the
information required to be set forth therein.
MILLER, ELLIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
March 22, 1997
F-3
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
------------------------
1996 1995
----------- -----------
CURRENT ASSETS:
Cash $ 1,516,072 $ 496,622
Due from factor (Note 3) 687,139 446,424
Accounts receivable - trade, less allowance for
doubtful accounts of $168,343 and $68,265,
respectively 5,060,836 135,787
Accounts receivable - non-trade 394,951 285,933
Other receivables 250,409 92,938
Inventories (Note 4) 5,291,046 4,666,842
Notes receivable - officers and stockholders
(Note 6) 457,979 419,680
Note and loans receivable - other (Note 5) 61,788 81,315
Prepaid expenses and other current assets 182,890 322,087
Deferred income taxes (Note 15) 690,476 180,000
----------- -----------
Total current assets 14,593,586 7,127,628
----------- -----------
PROPERTY AND EQUIPMENT - net of accumulated
depreciation and amortization (Notes 7 and 10) 1,154,511 544,275
----------- -----------
INTANGIBLE ASSETS - net of accumulated
amortization (Note 8) 5,906,125 3,462,446
----------- -----------
OTHER ASSETS:
Deferred income taxes (Note 15) 493,832 --
Software development costs 220,347 --
Deferred costs 189,465 --
Other assets 28,594 54,093
Deferred offering costs -- 125,389
----------- -----------
932,238 179,482
----------- -----------
$22,586,460 $11,313,831
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements
F-4
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
CURRENT LIABILITIES:
Due to financial institutions (Note 9) $ 1,711,429 $4,994,135
Accounts payable - trade 4,518,894 1,618,091
Accounts and note payable - related party (Note 19) 81,778 445,700
Customer deposits (Note 11) 881,100 --
Notes payable - officers and stockholders (Note 14) 216,076 --
Due on acquisitions - current portion (Note 2) 847,172 422,788
Current portion of capitalized lease obligations (Note 10) 135,159 89,700
Notes payable (Note 13) 404,852 --
Income taxes payable (Note 15) 254,751 149,103
Accrued expenses and other current liabilities (Note 12) 1,611,587 514,562
----------- ----------
Total current liabilities 10,662,798 8,234,079
----------- ----------
LONG-TERM LIABILITIES:
Capitalized lease obligations - net of current portion (Note 10) 169,854 221,873
Due on acquisitions - net of current portion (Note 2) 2,109,886 447,522
Other liabilities 18,750 80,833
----------- ----------
2,298,490 750,228
----------- ----------
COMMITMENTS AND CONTINGENCIES (Note 18)
STOCKHOLDERS' EQUITY (Note 20):
Preferred stock - $.01 par value:
Authorized - 10,000,000 shares
Issued and outstanding - 378,500 shares - 1996 3,785 --
none - 1995 -- --
Common stock - $.01 par value:
Authorized - 20,000,000 shares
Issued - 6,880,830 shares - 1996 68,808 --
- 3,143,203 shares - 1995 -- 31,432
Common stock to be issued 95,873 181,753
Additional paid-in capital 10,438,979 2,013,224
Retained earnings (deficit) (973,389) 111,999
Treasury stock, at cost (8,884) (8,884)
----------- ----------
Total stockholders' equity 9,625,172 2,329,524
----------- ----------
$22,586,460 $11,313,831
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-5
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PREDECESSOR
SEPTEMBER 1, -----------
1994 JANUARY 1,
(INCEPTION 1994
YEAR ENDED YEAR ENDED DATE) TO TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 7,
1996 1995 1994 1994
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES (includes sales to related
parties of $6,411,975 in the Predecessor
period) $ 42,139,032 $ 30,447,467 $ 1,386,364 $22,948,519
COST OF GOODS SOLD (includes
purchases from related parties of
$854,702 in the Predecessor period) 35,789,160 26,688,044 1,321,475 21,570,567
------------ ------------ ----------- -----------
GROSS PROFIT 6,349,872 3,759,423 64,889 1,377,952
------------ ------------ ----------- -----------
OPERATING EXPENSES:
Selling, shipping and general and
administrative expenses (includes
related party expenses of $129,070
in the Predecessor period) 6,747,415 3,069,847 189,772 932,983
Depreciation and amortization 261,379 108,421 2,715 32,245
Amortization of intangibles 301,870 178,768 8,707 3,667
------------ ------------ ----------- -----------
7,310,664 3,357,036 201,194 968,895
------------ ------------ ----------- -----------
OPERATING INCOME (LOSS) (960,792) 402,387 (136,305) 409,057
OTHER EXPENSES (includes interest
expense to related parties of $34,391
in 1996) (Note 17) 831,135 317,945 21,879 59,260
------------ ------------ ----------- -----------
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAX CREDITS (1,791,927) 84,442 (158,184) 349,797
PROVISION FOR INCOME TAX
CREDITS (Note 15) (706,539) (185,741) -- --
------------ ------------ ----------- -----------
NET INCOME (LOSS) $ (1,085,388) $ 270,183 $ (158,184) $ 349,797
============ ============ =========== ===========
INCOME (LOSS) PER
COMMON SHARE (Note 20) $ (.33) $ .09 $ (.06) N/A
============ ============ ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
(Note 20) 3,527,053 2,927,170 2,500,000 N/A
============ ============ ===========
PRO FORMA INFORMATION (Note 25):
Net income as presented N/A N/A N/A $ 349,797
Provision for income taxes reflecting
C corporation status N/A N/A N/A 139,708
-----------
Pro forma net income N/A N/A N/A $ 210,089
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-6
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SEPTEMBER 1, 1994 (INCEPTION DATE) TO DECEMBER 31, 1996
AND JANUARY 1, 1994 TO DECEMBER 7, 1994 (PREDECESSOR)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 1, 1994
(INCEPTION DATE) -- $ -- -- $ --
Capital contributions -- -- 5,000,000 50,000
Net loss for the period September 1, 1994
to December 31, 1994 -- -- -- --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1994 -- -- 5,000,000 50,000
Reverse stock split (Note 20) -- -- (2,500,000) (25,000)
Capital contributions -- -- 643,203 6,432
Deferred offering costs in connection
with registration of common stock -- -- -- --
Common stock to be issued for services
rendered or to be rendered (Note 20) -- -- -- --
Repurchase of fractional shares -- -- -- --
Net income for the year ended December 31, 1995 -- -- -- --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1995 -- -- 3,143,203 31,432
Sale of securities under Regulation S (Note 20) 355,825 3,558 140,000 1,400
Offering costs in connection with sale of securities (Note 20) -- -- -- --
Preferred and common stock issued in connection with
acquisition of net assets of ManTech Solutions Corp. (Note 2) 350,000 3,500 72,001 720
Common stock issued for services rendered (Note 20) -- -- 69,504 695
Common stock to be issued for services rendered (Note 20) -- -- -- --
Reversal of shares authorized in 1995
for services rendered (Note 20) -- -- -- --
Conversion of preferred stock into common stock (Note 20) (327,325) (3,273) 3,456,122 34,561
Net loss for the year ended December 31, 1996 -- -- -- --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1996 378,500 $ 3,785 6,880,830 $ 68,808
============ ============ ============ ============
PREDECESSOR
BALANCE AT JANUARY 1, 1994 -- $ -- 100 $ 1,000
Net income for the period January 1, 1994 to December 7, 1994 -- -- -- --
Dividends -- -- -- --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 7, 1994 -- $ -- 100 $ 1,000
============ ============ ============ ============
<CAPTION>
COMMON
STOCK ADDITIONAL RETAINED
TO BE PAID-IN EARNINGS TREASURY
ISSUED CAPITAL (DEFICIT) STOCK
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 1, 1994
(INCEPTION DATE) $ -- $ -- $ -- $ --
Capital contributions -- 1,850,000 -- --
Net loss for the period September 1, 1994
to December 31, 1994 -- -- (158,184) --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1994 -- 1,850,000 (158,184) --
Reverse stock split (Note 20) -- 25,000 -- --
Capital contributions -- 337,068 -- --
Deferred offering costs in connection
with registration of common stock -- (198,844) -- --
Common stock to be issued for services
rendered or to be rendered (Note 20) 181,753 -- -- --
Repurchase of fractional shares -- -- -- (8,884)
Net income for the year ended December 31, 1995 -- -- 270,183 --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1995 181,753 2,013,224 111,999 (8,884)
Sale of securities under Regulation S (Note 20) -- 6,966,542 -- --
Offering costs in connection with sale of securities (Note 20) -- (2,677,371) -- --
Preferred and common stock issued in connection with
acquisition of net assets of ManTech Solutions Corp. (Note 2) -- 3,900,780 -- --
Common stock issued for services rendered (Note 20) (45,000) 267,092 -- --
Common stock to be issued for services rendered (Note 20) 95,873 -- -- --
Reversal of shares authorized in 1995
for services rendered (Note 20) (136,753) -- -- --
Conversion of preferred stock into common stock (Note 20) -- (31,288) -- --
Net loss for the year ended December 31, 1996 -- -- (1,085,388) --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1996 $ 95,873 $ 10,438,979 $ (973,389) $ (8,884)
============ ============ ============ ============
PREDECESSOR
BALANCE AT JANUARY 1, 1994 $ -- $ -- $ 852,402 $ --
Net income for the period January 1, 1994 to December 7, 1994 -- -- 349,797 --
Dividends -- -- (300,000) --
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 7, 1994 $ -- $ -- $ 902,199 $ --
============ ============ ============ ============
</TABLE>
TOTAL
STOCKHOLDERS'
EQUITY
------------
BALANCE AT SEPTEMBER 1, 1994
(INCEPTION DATE) $ --
Capital contributions 1,900,000
Net loss for the period September 1, 1994
to December 31, 1994 (158,184)
------------
BALANCE AT DECEMBER 31, 1994 1,741,816
Reverse stock split (Note 20) --
Capital contributions 343,500
Deferred offering costs in connection
with registration of common stock (198,844)
Common stock to be issued for services
rendered or to be rendered (Note 20) 181,753
Repurchase of fractional shares (8,884)
Net income for the year ended December 31, 1995 270,183
------------
BALANCE AT DECEMBER 31, 1995 2,329,524
Sale of securities under Regulation S (Note 20) 6,971,500
Offering costs in connection with sale of securities
(Note 20) (2,677,371)
Preferred and common stock issued in connection with
acquisition of net assets of ManTech Solutions Corp.
(Note 2) 3,905,000
Common stock issued for services rendered (Note 20) 222,787
Common stock to be issued for services rendered (Note 20) 95,873
Reversal of shares authorized in 1995
for services rendered (Note 20) (136,753)
Conversion of preferred stock into common stock (Note 20) --
Net loss for the year ended December 31, 1996 (1,085,388)
------------
BALANCE AT DECEMBER 31, 1996 $ 9,625,172
============
PREDECESSOR
BALANCE AT JANUARY 1, 1994 $ 853,402
Net income for the period January 1, 1994 to
December 7, 1994 349,797
Dividends (300,000)
------------
BALANCE AT DECEMBER 7, 1994 $ 903,199
============
The accompanying notes are an integral part of the consolidated financial
statements
F-7
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SEPTEMBER 1,
1994 (INCEPTION
YEARS ENDED DATE) TO
DECEMBER 31, DECEMBER 31,
------------------------- -----------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,085,388) $ 270,183 $ (158,184)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 261,379 108,421 2,715
Amortization of intangibles 301,870 178,768 8,707
Deferred income taxes (735,331) (180,000) --
Imputed interest on ManTech acquisition 58,683 -- --
Reversal of shares authorized (136,753) -- --
Other amortization -- 30,586 --
Loss on disposition of property and equipment -- 5,983 --
Changes in assets and liabilities:
Due from factor (240,715) (446,424) --
Accounts receivable - trade (1,692,909) 1,769,556 (181,975)
Accounts receivable - non-trade (109,018) (260,050) 492,974
Inventories 2,369,607 (1,846,314) (69,344)
Other receivables (157,471) (92,938) --
Notes and loan receivable - other 19,527 (658) (417)
Prepaid expenses and other 156,144 (155,491) 23,936
Other assets 45,260 220 --
Accounts payable - trade 1,533,390 402,578 215,778
Accounts and note payable - related party (363,922) 229,308 216,392
Customer deposits 797,303 -- --
Income taxes payable 105,648 149,103 --
Accrued expenses and other 581,166 433,191 41,173
Other liabilities (62,083) -- --
----------- ----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,646,387 596,022 591,755
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of assets pursuant to agreement (240,000) (100,000) (2,445,665)
Loans to stockholders (215,900) (419,680) --
Repayments of loans to stockholders 177,601 -- --
Other intangibles (586,889) (1,203,333) (10,601)
Purchases of property and equipment (383,848) (237,114) --
Software development costs (220,347) -- --
Other deferred costs (189,465) -- --
Receipt of cash from asset purchase -- 482,012 891,363
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,658,848) (1,478,115) (1,564,903)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions 6,971,500 368,500 1,900,000
Deferred offering costs (2,281,195) (324,233) --
Proceeds from notes payable 700,000 -- --
Payments of notes payable (961,098) -- --
Due to financial institutions - net (3,282,706) 1,514,947 (1,069,607)
Proceeds from notes payable - officers and stockholders 216,076 -- --
Payments on capitalized lease obligations (25,879) (28,860) --
Payments on due on acquisitions (304,787) -- --
Purchases of treasury stock -- (8,884) --
Advances on line of credit - net -- (179,022) 179,022
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,031,911 1,342,448 1,009,415
----------- ----------- -----------
NET CHANGE IN CASH 1,019,450 460,355 36,267
CASH - beginning 496,622 36,267 --
----------- ----------- -----------
CASH - ending $ 1,516,072 $ 496,622 $ 36,267
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-8
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 1,
YEARS ENDED 1994 (INCEPTION
DECEMBER 31, DATE) TO
---------------------------- DECEMBER 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
SCHEDULE OF NON-CASH ACTIVITIES:
Acquisition of Pro Notes, Inc. (Note 2) $ 125,000 $ -- $ --
============ ============ ============
Acquisition of ManTech Solutions Corp. (Note 2) $ 5,736,084 $ -- $ --
============ ============ ============
Deferred offering costs $ 125,389 $ -- $ --
============ ============ ============
Issuance of note to vendor (Note 13) $ 665,950 $ -- $ --
============ ============ ============
Increase in Natcom purchase price (Note 2) $ 359,435 $ -- $ --
============ ============ ============
Common stock to be issued for services
rendered (Note 20) $ 47,873 $ -- $ --
============ ============ ============
Purchase of property and equipment by
capital leases $ 19,319 $ 338,033 $ --
============ ============ ============
Offset of note receivable from purchase
of business (Note 5) $ -- $ 36,748 $ --
============ ============ ============
Common stock to be issued for services to be
rendered (Note 20) $ -- $ 156,753 $ --
============ ============ ============
Payments due on purchase of business (Note 2) $ -- $ 850,310 $ --
============ ============ ============
Issuance of note to related party as part of
settlement of accounts payable (Note 19) $ -- $ 295,700 $ --
============ ============ ============
Reverse stock split (Note 20) $ -- $ 25,000 $ --
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 640,082 $ 334,327 $ 1,660
Cash paid for income taxes 5,259 6,540 --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-9
<PAGE>
AMCOM BUSINESS CENTERS CORP.
(PREDECESSOR)
STATEMENT OF CASH FLOWS
JANUARY 1, 1994 TO DECEMBER 7, 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 349,797
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 32,245
Amortization of intangibles 3,667
Changes in assets and liabilities:
Accounts receivable - trade 606,256
Accounts receivable - affiliate (74,668)
Accounts receivable - non-trade (5,836)
Inventories 286,438
Loans receivable - other (25,167)
Prepaid expenses and other 15,899
Due from related party 152,400
Accounts payable - trade 140,790
Accounts payable - affiliate (130,551)
Accrued expenses and other (60,621)
-----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,290,649
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposit received on asset sale agreement 300,000
Purchases of property and equipment (32,004)
Loans to stockholders and others (302,502)
-----------
NET CASH USED IN INVESTING ACTIVITIES (34,506)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Due to financial institutions - net (247,199)
Dividends paid (300,000)
-----------
NET CASH USED IN FINANCING ACTIVITIES (547,199)
-----------
NET CHANGE IN CASH 708,944
CASH - beginning 182,418
-----------
CASH - ending $ 891,362
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 70,471
Cash paid for income taxes --
The accompanying notes are an integral part of the consolidated financial
statements
F-10
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Global Intellicom, Inc. (the "Company") was incorporated in the state of
Nevada on September 1, 1994.
Amcom Business Centers Corp. ("AMCOM" or "Predecessor") was incorporated in
the state of Pennsylvania on December 18, 1991 and commenced operations on
January 1, 1992.
Basis of Presentation
The consolidated balance sheets include the accounts of the Company as at
December 31, 1996 and 1995. The consolidated statements of operations, cash
flows and stockholders' equity include the accounts of the Company for the
years ended December 31, 1996 ("1996") and 1995 ("1995") and the period
September 1, 1994 (Inception Date) to December 31, 1994 ("Fiscal 1994") as
well as the accounts of the Predecessor for the period January 1, 1994 to
December 7, 1994 ("1994").
Business
The Company, through its wholly-owned subsidiaries listed below, conducts
the following business:
1. NEVCOR TECHNOLOGIES GROUP, INC. ("NEVCOR") (formerly known as AMCOM) -
aggregator/distributor of computers, wireless communications products,
peripherals and software, and sells to customers throughout the United
States.
2. VIRCOM, INC. ("VIRCOM") - reseller of microcomputers, peripherals,
software and wireless communication products, and sells to corporate
and other professional end-users throughout the United States.
3. NATIONAL COMPUTER RESOURCES, INC. ("NATCOM") - Value-added reseller of
computer systems consisting primarily of high-end servers and
distributes to corporations, school districts and state governmental
agencies throughout the United States.
4. GLOBAL-INSYNC, INC. ("INSYNC") - Manufacturer of made-to-order
computer servers and workstations and serves customers in the United
States.
5. SPEECH SOLUTIONS, INC. ("SPEECH SOLUTIONS") - Provider of voice
recognition tools and interfaces for speech-activated computer
programs and sells to customers in the United States .
See Note 2.
F-11
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from these
estimates.
Revenue Recognition
Revenue is recognized upon the shipment of products or performance of
services.
Service revenue is recognized only when all significant obligations have
been performed.
Sales Returns and Warranties
The Company does not provide an accrual for sales returns on damaged
merchandise as such costs are borne by the Company's vendors. The Company
provides for an amount it estimates will be needed to cover future warranty
obligations.
Sales Incentive Program
Sales incentive program rebates are amounts received from vendors for
promotional programs, price protection programs and cooperative advertising
programs, and are recognized as income in the period earned. Amounts
receivable from vendors under such programs are classified either as
accounts receivable - non-trade or have been offset against amounts due to
financial institutions.
F-12
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations of Credit Risk
Accounts Receivable - Trade
Accounts receivable consist of open trade accounts with various
companies. The Company performs ongoing credit evaluations of its
customers and believes that adequate allowances for any uncollectible
receivables are maintained.
In 1995, NEVCOR, VIRCOM and NATCOM entered into factoring agreements
with Century Business Credit Corp. ("Century"). INSYNC entered into a
factoring agreement with Century in January 1997 (see Note 3).
One customer accounted for 42% of accounts receivable at December 31,
1996. At December 31, 1995, there were no major accounts receivable.
The Company's major customers are as follows:
1. 1996 - Two customers accounted for 32% of net sales.
2. 1995 - One customer accounted for 11% of net sales.
3. Fiscal 1994 - There were no major customers.
4. 1994 - One customer of the Predecessor (a related party - see
Note 19) accounted for 22% of net sales.
Cash
The Company maintains cash balances in its banks which at times may
exceed the limits of the Federal Deposit Insurance Corp.
Inventories
INSYNC values its inventory on an identified cost basis at the lower of
cost or market. The other subsidiaries value their inventory at the lower
of cost (first-in, first-out) or market.
F-13
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets as
follows:
Machinery and equipment - 2 - 5 years
Furniture and fixtures - 2 - 7 years
Vehicles - 2 years
Leasehold improvements - Life of lease
Expenditures for repairs and maintenance are charged to expense as
incurred.
Intangible Assets
The excess of the purchase cost over the fair value of net assets acquired
in the acquisitions (see Notes 2 and 8) is included in intangible assets
and is being amortized over fifteen years on a straight-line basis in
accordance with Statement of Financial Accounting Standards No. 121 (SFAS
No. 121), "Accounting for the Impairment of Long-lived Assets and For
Long-lived Assets to Be Disposed Of." The Company periodically reviews
goodwill to assess recoverability based upon undiscounted expected future
cash flows for each subsidiary. Testing for such recoverability in each
reporting period may not be cost effective or even possible and in such
cases, the Company will test assets for impairment if a triggering event
occurs (events or changes in circumstances such that the carrying amount of
the assets may not be recoverable). Impairments would be recognized if a
permanent diminution in value were to occur.
Computer Software
The costs incurred for the development of computer software that will be
sold, leased or otherwise marketed are capitalized when technological
feasibility has been established. These capitalized costs are subject to an
ongoing assessment of recoverability based upon anticipated future revenues
and changes in hardware and software technologies. Costs that are
capitalized include labor and related overhead.
Amortization of capitalized software development costs begins when the
product is available for general release (March 1997). Amortization is
provided on a product-by-product basis using the straight-line method over
three years. Unamortized capitalized software development costs determined
to be in excess of net realizable value of the product will be expensed
immediately.
At December 31, 1996 and 1995, unamortized capitalized software development
costs were $220,347 and $-0-, respectively.
F-14
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company adopted SFAS No. 109, "Accounting for Income Taxes," which
requires the use of the liability method of accounting for income taxes.
The liability method measures deferred income taxes by applying enacted
statutory rates in effect at the balance sheet date to the differences
between the tax bases of assets and liabilities and their reported amounts
in the financial statements. The resulting deferred tax assets or
liabilities are adjusted to reflect changes in tax laws as they occur.
The Predecessor (AMCOM) elected to be taxed as an S corporation for federal
and state tax purposes, with all income and tax credits passing directly to
the stockholders. As such, no provision had been made for income taxes.
Income (Loss) Per Common Share
Income (loss) per common share is based on the weighted average number of
common shares outstanding during the period. The weighted average number of
shares outstanding has been adjusted to reflect the reverse stock split in
July 1995 (see Note 20) as if it had occurred as of the beginning of the
period for which income (loss) per share is presented. In 1996, net loss
was adjusted to reflect the cumulative undeclared dividend on Series 3
Convertible Preferred Stock (see Note 20).
Reclassifications
Certain 1995 amounts were reclassified to conform to the 1996 presentation.
NOTE 2 - ACQUISITIONS
AMCOM Business Centers Corp.
On October 28, 1994, the Company purchased certain net assets of AMCOM
subject to certain liabilities and obligations. This transaction was
accounted for as a purchase. On December 8, 1994, AMCOM began operations as
a wholly-owned subsidiary of the Company. In March 1997, AMCOM changed its
name to NEVCOR.
The total purchase price of the net assets originally consisted of the
following:
1. $300,000 upon execution of the agreement.
2. $1,924,000 at closing.
3. A contingent payment of $3,056,000 based upon the following:
a. 1% of gross sales (as defined below) of AMCOM from January 1,
1994 to December 7, 1994.
b. During the next twelve months, 1% of NEVCOR's gross sales, if
achieved, payable quarterly.
c. Thereafter, until fully paid, 1% of NEVCOR's gross sales, if
achieved, payable monthly.
F-15
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - ACQUISITIONS (CONTINUED)
In March 1996, a Settlement Agreement and Mutual Release ("Agreement") was
signed amending the amount and payment terms of the contingent payment as
follows:
1. The balance of the contingent payment was deemed to be $2,549,877 at
March 31, 1996.
2. The balance owed on the note issued by the Sellers in conjunction with
the asset purchase ($36,748) was deemed to be repaid and intangible
assets adjusted accordingly.
3. The contingent payment would be paid as follows:
a. No payments due from January 1, 1995 through March 31, 1996.
b. From April 1, 1996 through December 31, 1996, 1/2% of NEVCOR's
gross sales (as defined below), if achieved, payable quarterly.
c. Thereafter, until fully paid, 1/2% of NEVCOR's gross sales, if
achieved, payable monthly.
In addition, the Agreement called for the following to be performed on or
before April 19, 1996:
1. The Company paid to a corporation related to the prior AMCOM
stockholders ("Sellers") rent owed in the amount of $21,512.
2. The Company paid to the Sellers $120,000 representing the estimated
income tax reimbursement per the asset purchase agreement (see below).
3. The Sellers forgave $65,168, representing amounts owed by the Company.
Gross sales, as defined in the asset purchase agreement, is total revenue
from sales after deductions for trade discounts and allowances,
uncollectible accounts, sales taxes, duties, shipping and insurance and
sales returns.
The asset purchase agreement required the Company to reimburse the Sellers
for all income taxes incurred by them with respect to their distributive
share of AMCOM's taxable income for the period January 1, 1994 through the
closing date. Management estimated that the aggregate amount of this
obligation was $120,000 at December 8, 1994. This amount was reflected in
goodwill. A non-competition agreement for a period of three years ending
December 8, 1997 was entered into between the Sellers and the Company, and
$10,000 of the purchase price was allocated to the covenant.
The Company is a defendant in an action brought by the Sellers seeking an
additional $93,500 of income taxes incurred by them with respect to their
distributive share of AMCOM's taxable income for the period January 1, 1994
through the closing date. The Sellers are also seeking interest and costs.
The Company has indicated that the tax obligation to the Sellers has been
paid in full. This matter is in the discovery stage and the Company intends
to vigorously defend this matter.
F-16
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - ACQUISITIONS (CONTINUED)
National Computer Resources, Inc.
On September 28, 1995, the Company purchased all of the issued and
outstanding stock of NATCOM. The transaction was pursuant to a stock
purchase agreement between the Company and the individual stockholders of
NATCOM and was accounted for as a purchase.
The total purchase price of $933,000 consists of:
1. $100,000 in cash upon execution of the agreement (closing date).
2. Installment payments of $833,000 payable as follows:
a. $50,000 due six months after the closing date.
b. $150,000 due one year after the closing date.
c. $79,000 due at end of each of the next seven quarters
following the one year anniversary of the closing date.
d. $80,000 due following the three year anniversary of the
closing date.
In March 1996 and March 1997, the purchase price was amended as follows:
1. $933,000 as described above.
2. An increase to the purchase price of $48,678 payable for 1995 to
three prior NATCOM stockholders (see Note 18).
3. An increase to the purchase price of $359,435 payable as follows:
$212,658 payable in six equal monthly installments of $35,443
commencing in July 1997 and $146,777 payable subject to available
actual cumulative income before taxes (see Note 18).
The payments may be subject to certain adjustments for prior income taxes
due by the Sellers.
The following condensed balance sheet reflects the purchase of the stock of
NATCOM on September 28, 1995:
Current assets $ 861,850
Property and equipment 10,848
Intangible assets, including excess
cost of acquisition over net
tangible assets acquired 847,966
Other assets 220
Liabilities assumed (869,974)
Common stock (600)
---------
$ 850,310
=========
F-17
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - ACQUISITIONS (CONTINUED)
ManTech Solutions Corp.
On September 16, 1996, INSYNC entered into a contract with ManTech
Solutions Corp. ("MSOL"), a wholly-owned subsidiary of ManTech
International Corp. (ManTech) to purchase substantially all of its assets,
subject to certain liabilities. The acquisition was effective on September
1, 1996 and was accounted for as a purchase.
The purchase price was $5,736,084 and was paid as follows:
1. The issuance of 350,000 shares of Series 3 Cumulative Preferred Stock,
with a 6% annual dividend, convertible at a value of $10 per share to
restricted shares of common stock. Such preferred stock was valued at
$3,500,000.
2. The issuance of a 9% promissory note for $1,486,084.
3. The issuance of a 9% promissory note for $470,000.
4. The issuance of 49,778 restricted shares of common stock, valued at
$280,000.
The following condensed balance sheet reflects the purchase of the net
assets of MSOL on September 16, 1996:
Current assets $ 6,242,898
Property and equipment 468,448
Excess cost of acquisition over
net tangible assets acquired 1,637,996
Other assets 19,761
Liabilities assumed (2,633,019)
-----------
$ 5,736,084
===========
Pro Notes, Inc.
On October 18, 1996, SPEECH SOLUTIONS entered into a contract with Pro
Notes, Inc. to purchase certain of its assets. This transaction was
accounted for as a purchase.
The purchase price consists of the following:
1. $200,000 paid at closing.
2. Four quarterly payments of $31,250 on January 15, 1997, April 15,
1997, July 15, 1997 and October 15, 1997.
F-18
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - ACQUISITIONS (CONTINUED)
Pro Notes, Inc. (Continued)
In addition, for the five years ended September 30, 2001, SPEECH SOLUTIONS
is to make quarterly contingent payments equal to 3% of its gross sales.
Such payments will be limited to aggregate cumulative income before
interest and income taxes ("ACIBIT"). As such, if the making of a payment
reduces ACIBIT to zero or below, the payment will be limited only to that
portion which would bring ACIBIT to zero and the balance would be deferred
until the date of the next payment. At December 31, 1996, the contingent
payment owed to SPEECH SOLUTIONS was deemed to be immaterial and is not
reflected in the financial statements.
Pro Notes is entitled to receive minimum payments totalling $195,000 by the
end of the fifth year. In the event that the aggregate amount of payments
is less than $195,000, such deficiency must be paid. In addition, if the
sum of $525,000 plus the above stated contingent payments is less than
$1,950,000, SPEECH SOLUTIONS shall continue to make contingent payments for
an additional period, not to exceed five years, until such time as the sum
reaches $1,950,000. Such contingent payments are limited to ACIBIT as
described above.
The following condensed balance sheet reflects the purchase of the certain
assets of Pro Notes, Inc. on October 18, 1996:
Intangible assets, including excess
cost of acquisition over net tangible
assets acquired $365,000
========
F-19
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - ACQUISITIONS (CONTINUED)
Due on Acquisitions
Due on acquisitions at December 31, consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
9% promissory note for $1,486,084 payable to MSOL
("First Note"). Interest begins accruing on March 16, 1997.
Interest was imputed at 9% for the period September 16, 1996
(date of issuance) to March 15, 1997. Payments are to be
made forty-five days after each fiscal quarter, commencing
with the quarter ended June 30, 1997. The payments are
calculated as follows:
1. 2% of net sales (gross sales less sales discounts,
returns and allowances) of INSYNC
2. If at the end of four quarters ended June 30th
(commencing in 1998), the sum of the quarterly payments is less
than the interest accrued over the previous four quarters plus ten
percent (10%) of the original principal of the note ($148,608), an
adjustment payment will be made to cover such shortfall
The note is guaranteed by the Company. $1,463,794 $ --
9% promissory note for $470,000 payable to MSOL with substantially the
same terms as the First Note, except that payments do not commence
until the earlier of December 31, 2001 or upon the payment of the First
Note. Interest begins accruing on March 16, 1997. Interest was imputed
at 9% for the period September 16, 1996 (date of issuance) to March 15,
1997.
The note is guaranteed by the Company. 462,950 --
AMCOM contingent payments 28,230 --
Installment payments due to prior NATCOM
stockholders with interest imputed at 10% 877,084 750,310
Installment note payable to Pro Notes, Inc. 125,000 --
Estimated income tax reimbursement due to prior
AMCOM stockholders -- 120,000
---------- ----------
2,957,058 870,310
Less: Current portion 847,172 422,788
---------- ----------
$2,109,886 $ 447,522
========== ==========
</TABLE>
F-20
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 2 - ACQUISITIONS (CONTINUED)
Future minimum maturities of notes payable - acquisition are as follows:
1997 $ 847,172
1998 331,750
1999 148,608
2000 148,608
2001 1,017,969
Thereafter 462,951
----------
$2,957,058
==========
Imputed interest on the MSOL notes and NATCOM installment payments amounted
to $143,168 and $-0- for 1996 and 1995, respectively.
NOTE 3 - DUE FROM FACTOR
On May 26, 1995, NEVCOR and VIRCOM and on October 30, 1995, NATCOM
collectively entered into factoring agreements with Century Business Credit
Corporation ("Century") whereby the companies sell their trade receivables
without recourse if a customer's credit is approved. Certain dollar
limitations may be established for a customer. Receivables sold without
credit approval or in excess of a specified credit limit are subject to
recourse in the event of non-payment by the customer.
Other terms of these agreements include the following:
1. Factoring commissions are six tenths of one percent (.6%) of sales
(minimum of $4.50 per sales invoice) based upon maximum selling terms
of sixty days. The commission shall increase by 1/4% for each
additional thirty days or portion thereof of extended selling terms or
additional dating. Interest on advances will be charged at 1-1/2%
above prime.
2. The minimum aggregate annual commissions payable under the agreement
shall be $200,000.
3. Century has been granted a first priority security interest in, a
general lien on and/or a right of set-off of trade receivables and
general intangibles of NEVCOR, VIRCOM and NATCOM. In addition, Century
has received a security interest in inventory and tangible assets of
the Company's subsidiaries. Such additional security interest will be
subordinate to the one granted to the financial institution with which
the Company's subsidiaries have loan and security agreements (see Note
9).
F-21
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 3 - DUE FROM FACTOR (CONTINUED)
4. Century has received the personal guarantees of two directors of the
Company. In addition, Century has received cross-corporate guarantees
of the Company and NEVCOR, VIRCOM and NATCOM.
5. The agreement expires in May 1997 and is automatically renewed from
year to year unless terminated by either party at least sixty days
prior to the scheduled expiration date.
In 1996 and 1995, the Company factored $29,770,349 and $18,840,108 of its
sales, respectively. At December 31, 1996 and 1995, outstanding receivables
amounted to $3,940,056 and $2,171,988, respectively.
On January 22, 1997, INSYNC entered into a factoring agreement with
Century. Factoring commissions will be equal to six tenths of one percent
of sales (.6%) and interest on advances will be charged at 1-1/2% above
prime.
The Companies have a tri-party agreement with Century and a financial
institution (see Note 9) wherein Century, on behalf of the Companies, wires
funds to the financial institution for payment of vendors' invoices
relating to floorplanned inventory.
NOTE 4 - INVENTORIES
Inventories at December 31, consist of the following:
Finished goods $3,304,193
Work-in-progress 500,858
Raw materials 1,485,995
----------
$5,291,046
==========
See Note 9.
NOTE 5 - NOTE AND LOANS RECEIVABLE - OTHER
This amount included a $50,000 demand note from the Company's vice-chairman
bearing interest at 10% per annum. In 1996, it was determined that the note
should not have been included in the assets purchased from AMCOM, and as
such, was charged to goodwill.
F-22
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 6 - NOTES RECEIVABLE - OFFICERS AND STOCKHOLDERS
Notes receivable - stockholders at December 31, consists of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Note receivable from an officer/stockholder bearing interest at 1% over
prime, principal and accrued interest to be paid on
December 31, 1997. $457,979 $ --
7% note receivable from an officer/stockholder to be paid as follows:
the note was to be reduced by 25% of net profits for each quarter in
fiscal 1996 in which the Company reported a profit on its Form 10-Q,
and any outstanding principal and accrued interest no later than
December 31, 1996. No quarterly profits were reported during 1996. The
balance owed on the note at December 31, 1996 and any additional funds
advanced net of repayments made in 1996 were rolled over into a new
note (see above) -- 242,079
7% note receivable from an officer/stockholder paid in full in 1996 -- 177,601
-------- --------
$457,979 $419,680
======== ========
</TABLE>
Interest income amounted to $43,492 and $12,217 for 1996 and 1995,
respectively.
NOTE 7 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, consists of the following:
1996 1995
---------- ----------
Machinery and equipment $ 753,243 $ 128,247
Furniture and fixtures 402,446 121,914
Vehicles 11,774 11,774
Leasehold improvements 124,146 50,073
Property and equipment under capital
lease (Note 10) 231,081 345,103
---------- ----------
1,522,690 657,111
Less: Accumulated depreciation and
amortization 368,179 112,836
---------- ----------
$1,154,511 $ 544,275
========== ==========
Depreciation and amortization amounted to $261,379, $108,421, $2,715 and
$32,245 for 1996, 1995, Fiscal 1994 and 1994, respectively.
F-23
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 8 - INTANGIBLE ASSETS
Intangible assets at December 31, consist of the following:
1996 1995
---------- ----------
Goodwill $6,384,713 $3,639,163
Non-compete agreement 10,000 10,000
---------- ----------
6,394,713 3,649,163
Less: Accumulated amortization 488,588 186,717
---------- ----------
$5,906,125 $3,462,446
========== ==========
Amortization amounted to $301,870, $178,040, $8,707 and $-0- for 1996,
1995, Fiscal 1994 and 1994, respectively.
NOTE 9 - DUE TO FINANCIAL INSTITUTIONS
The Company has a loan and security agreement with a financial institution
providing for an inventory floorplanning credit line of $8,000,000. The
line is collateralized by the assets of NEVCOR, VIRCOM and NATCOM. The
agreement expires on December 8, 1997 and is automatically renewed from
year to year unless terminated by either party.
At December 31, the line of credit included the following:
1996 1995
---------- ----------
Due to financial institution $3,061,728 $5,965,125
Less: Claims receivable from
vendors for credits due 1,350,299 970,990
---------- ----------
$1,711,429 $4,994,135
========== ==========
Outstanding purchase
commitments (see Note 18) $2,510,000 $4,420,000
========== ==========
The Predecessor had an agreement with a different financial institution to
provide financing for inventory purchased from vendors. The agreement
provided for purchases up to $6,000,000.
The weighted average interest rate was 4.7%, 2.1%, 6.4% and 1.1% for 1996,
1995, Fiscal 1994 and 1994, respectively.
F-24
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 10 - OBLIGATIONS UNDER CAPITALIZED LEASES
Minimum future lease payments under capitalized leases at December 31, 1996
are as follows:
Year Ending December 31:
------------------------
1997 $169,431
1998 151,260
1999 29,257
2000 12,506
2001 1,283
--------
Total minimum lease payments 363,737
Less: Interest 58,724
--------
Present value of net minimum
lease payments $305,013
========
The capitalized leases have effective interest rates of 9.2% to 15.3%.
Interest expense amounted to $39,626, $4,008, $-0- and $-0- for 1996, 1995,
Fiscal 1994 and 1994, respectively.
NOTE 11 - CUSTOMER DEPOSITS
Customer deposits include amounts received for merchandise shipped and
invoiced in January 1997.
NOTE 12 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at December 31, consist of:
1996 1995
---------- ----------
Sales taxes payable (A) $ 415,531 $ 26,242
Warranty reserve 100,000 --
Accrued payroll 135,666 49,532
Accrued commissions 104,886 79,841
Accrued professional fees 132,388 23,609
Accrued offering costs 159,724 37,524
Other accrued expenses 106,195 102,055
Deferred rent 147,670 85,189
Accrued interest 84,201 --
Deferred revenue 11,718 18,444
Other 213,608 14,669
Acquisition fees payable -- 55,833
Accrued property and equipment -- 21,624
---------- ----------
$1,611,587 $ 514,562
========== ==========
(A) The Company's VIRCOM subsidiary did not file its Pennsylvania sales
tax returns. Sales tax payable includes a balance of $314,027 owed for
the period January 1, 1996 through December 31, 1996.
F-25
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 13 - NOTES PAYABLE
Notes payable consist of two promissory notes payable to a vendor bearing
interest at 18% per annum, payable in monthly installments including
interest of $61,055 through July 1997 and $2,625 through September 1997. At
December 31, 1996, the balance due on the notes amounted to $404,852.
In addition, in June 1996, the Company borrowed $500,000 through the
issuance of a convertible subordinated promissory note bearing interest at
24% per annum. The note was repaid in September 1996.
Interest on the above notes totalled $71,218 in 1996.
NOTE 14 - NOTES PAYABLE - OFFICERS AND STOCKHOLDERS
Notes payable - officers and stockholders at December 31, consists of the
following:
1996 1995
-------- ------
Note payable to an officer/stockholder bearing
interest at 1% over prime, principal and accrued
interest to be paid on December 31, 1997 $126,076 $ --
10% promissory notes payable to two directors
and one stockholder to be paid as follows: $65,000
in April 1997 and $25,000 in May 1997 90,000 --
6% promissory note in the amount of $200,000
payable to a limited partnership controlled by a
director, issued in January 1996 and paid in
November and December 1996 -- --
-------- ------
$216,076 $ --
======== ======
Interest amounted to $16,139 in 1996. At December 31, 1996, the Company
owed $6,218 in interest on the three one-year notes.
F-26
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 15 - INCOME TAXES
All company operations are located in the United States. As such, income
(loss) before provision for income tax credits and the provision for income
taxes (tax credits) are generated from domestic sources.
<TABLE>
<CAPTION>
Fiscal
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Income (loss) before provision
for income tax credits $(1,791,927) $ 84,442 $ (158,184)
=========== =========== ===========
The components of the provision for
income tax credits by taxing
jurisdiction are as follows:
Federal:
Current $ -- $ -- $ --
Deferred (573,558) (180,000) --
----------- ----------- -----------
(573,558) (180,000) --
----------- ----------- -----------
States:
Current 28,792 (5,741) --
Deferred (161,773) -- --
----------- ----------- -----------
(132,981) (5,741) --
----------- ----------- -----------
$ (706,539) $ (185,741) $ --
=========== =========== ===========
</TABLE>
The major components of deferred tax assets at December 31, are as follows:
1996 1995
---------- ----------
Net operating loss carryforwards $ 988,641 $ 176,500
Allowance for doubtful accounts 61,637 23,200
Inventory reserve 91,030 --
Warranty reserve 43,000 --
Financial/tax adjustments - NATCOM - cash basis -- (19,700)
---------- ----------
$1,184,308 $ 180,000
========== ==========
At December 31, 1996 and 1995, no valuation allowance was provided as the
deferred tax assets were considered realizable considering current sales
trends and estimates of future income.
F-27
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 15 - INCOME TAXES (CONTINUED)
A reconciliation of the Company's income tax expense computed at the U.S.
federal statutory tax rate of 35% and the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
Fiscal
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Income tax expense at statutory rate $(609,255) $ 29,555 $ --
Net operating loss carryforwards 609,255 -- --
State income taxes (tax credits) 28,792 (5,741) --
Deferred income tax credits (735,331) (180,000) --
Financial/tax adjustments - NATCOM - cash basis -- (29,555) --
--------- --------- ---------
Provision for income tax credits $(706,539) $(185,741) $ --
========= ========= =========
</TABLE>
A reconciliation for 1994 was not prepared as the Predecessor was an S
corporation.
At December 31, 1996, for income tax purposes, the Company has unused net
operating loss carryforwards of approximately $2,361,459 expiring in 2009
and 2010.
Income taxes payable include NATCOM's 1995 federal and New Jersey
liabilities, including penalties and interest, are as follows:
Federal $ 201,953
New Jersey 38,948
----------
$ 240,901
==========
NOTE 16 - ECONOMIC DEPENDENCE
In 1996 and 1995, the Company purchased 53% and 84% of its inventory from
two vendors, and 81% and 68% of its inventory from one vendor in Fiscal
1994 and 1994, respectively. Management believes that, if necessary, other
suppliers could provide similar products on comparable terms. However, a
change in suppliers could delay the shipment of product, resulting in a
loss of sales which may affect operating results.
F-28
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 17 - OTHER EXPENSES
Other expenses consist of the following:
Fiscal
1996 1995 1994 1994
--------- --------- -------- --------
Interest expense $ 782,966 $ 312,353 $ 22,296 $ 65,137
Interest income (67,144) (24,994) (417) (5,877)
Deferred financing costs 115,313 30,586 -- --
--------- --------- -------- --------
$ 831,135 $ 317,945 $ 21,879 $ 59,260
========= ========= ======== ========
NOTE 18 - COMMITMENTS
Leases
The Company rents real property under leases expiring through August 2005.
Certain of the leases stipulate payments of operating expenses.
Future minimum rental payments required are as follows:
Year Ending December 31,
------------------------
1997 $ 788,895
1998 459,819
1999 401,515
2000 243,881
2001 170,181
Thereafter 680,724
------------
$ 2,745,015
============
Rent expense amounted to $544,920, $229,479, $8,326 and $129,070 for 1996,
1995, Fiscal 1994 and 1994, respectively.
Purchase Commitments
The Company had outstanding purchase commitments to its major vendors which
were guaranteed under its floorplanning credit line by one of the financing
companies. Such commitments represent approved orders for the purchase of
inventory and were not in excess of normal business requirements. Such
commitments amounted to approximately $2,510,000 and $4,428,000 at December
31, 1996 and 1995, respectively.
F-29
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 18 - COMMITMENTS (CONTINUED)
Employment Agreements
In January 1994, the Company entered into an employment contract with one
of its officers for the period January 1, 1995 through December 31, 1997.
Compensation under the agreement is as follows:
1995 $ 175,000
1996 190,000
1997 210,000
In addition, the agreement provides for perquisites including various
insurance coverages, an automobile, expense reimbursements, etc.
In May 1995, the Company entered into an employment agreement with another
of its officers for calendar year 1995 at a salary of $137,000. The
agreement was not renewed in 1996.
Compensation under these agreements amounted to $190,000 and $307,641 for
1996 and 1995, respectively.
In conjunction with the purchase of the stock of NATCOM (see Note 2), the
Company entered into employment agreements with two of NATCOM's key
employees and a consulting agreement with a former key employee of NATCOM.
The agreements expire in September 2001 but can be extended to September
2005 at the option of the employees if certain conditions are met.
Compensation under the three agreements is as follows:
1. Total base compensation of $325,000 per year.
2. A fixed percentage payment ("FPP") based on revenue (as defined).
Payments relating to 1995 and 1996 are considered to be part of the
purchase price of NATCOM's stock (see Note 2).
3. Bonus Payments as follows:
Year
----
1 $ -
2 450,000
3 450,000
4 450,000
5 900,000
6 1,215,000
------------
$ 3,465,000
============
F-30
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 18 - COMMITMENTS (CONTINUED)
The FPP's and bonus payments are limited to actual cumulative income before
taxes ("ACIBT") (except in Year 1, in which the FPP's are not limited to
ACIBT). As such, if the making of an FPP and/or a bonus payment reduces
ACIBT to zero or below, the FPP will be limited only to that portion which
would bring ACIBT to zero and the balance would be deferred until the date
of the next FPP. Bonus payments in excess of ACIBT are not deferred.
Compensation amounted to $329,166 and $81,250 for 1996 and 1995,
respectively.
In conjunction with the purchase of certain assets of Pro Notes, Inc. the
Company entered into an employment agreement with a key employee of SPEECH
SOLUTIONS for the period October 18, 1996 to October 17, 2001. Compensation
under the agreement is as follows:
Year
----
1 $ 100,000
2 110,000
3 120,000
4 130,000
5 140,000
In addition, for the five years ended December 31, 2001, SPEECH SOLUTIONS
is to make quarterly contingent payments equal to 2% of its gross sales.
Such payments will be limited to ACIBIT as well as by the contingent
payments to Pro Notes, Inc.
The individual is entitled to receive minimum payments totalling $130,000
by the end of the fifth year. In the event that the aggregate amount of
payments is less than $130,000, such deficiency must be paid. In addition,
if the total amount of the contingent payments is less than $950,000,
SPEECH SOLUTIONS shall continue to make contingent payments for an
additional period, not to exceed five years, until such time as the
payments total $950,000. Such contingent payments are subject to the same
limitations as described above.
Compensation amounted to $20,128 for 1996.
Finders Fees
In connection with the acquisition of Pro Notes, Inc., the Company assumed
finders fees payable to two individuals totalling $160,000. The amount is
payable in twelve equal quarterly installments of $13,333 commencing in
January 1997. The payments are limited to ACIBIT as well as by the
contingent payments to Pro Notes, Inc. (see Note 2) and to an officer of
SPEECH SOLUTIONS (see above). Amounts due in excess of the above
calculation would be deferred until the date of the next payment but no
payments are required for amounts owing after October 15, 2006.
F-31
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 18 - COMMITMENTS (CONTINUED)
Consulting Agreement
In January 1996, the Company entered into a letter agreement with one of
its board members whereby such board member would provide consulting
services to the Company for the period January 1, 1996 through December 31,
1999. Consulting fees under the agreement are $60,000 per year. Such fee
was waived by the board member in 1996.
Additional Benefit Plan
In 1995, the Company entered into an Additional Benefit Plan (the "Plan")
providing cash and stock benefits for certain key employees
("Participants"). Such benefits are based solely on the consolidated
financial performance of NEVCOR and VIRCOM during the period from
January 1, 1995 to December 31, 1997.
The Plan provides at the conclusion of each of the 1995, 1996 and 1997
calendar years, that if the income before taxes of NEVCOR and VIRCOM
determined on a consolidated basis equals or exceeds $699,000, $3,626,000,
and $6,762,000, respectively, the Company will award a cash bonus of
$100,000 for 1996, $250,000 for 1997 and $500,000 for 1998 to be
distributed among the Participants for the relevant year in such
proportions as described in the Plan.
The Plan also provides for the following:
1. If income before taxes in any year exceeds the applicable target for
such year, the Company shall award one hundred percent (100%) of the
applicable bonus, plus an additional cash award in an amount equal to
(i) a fraction, expressed as a percentage, where the numerator is the
dollar amount by which income before taxes in the applicable year
exceeded the applicable target for such year, and the denominator is
the applicable target for such year, multiplied by (ii) the applicable
bonus for such year.
2. In any year in which seventy-five percent (75%) or more of the
applicable target is achieved, the Company shall award one hundred
percent (100%) of the applicable bonus.
3. In any year in which at least fifty percent (50%) but less than
seventy-five percent (75%) of the applicable target is achieved, the
Company shall award fifty percent (50%) of the applicable bonus.
F-32
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 18 - COMMITMENTS (CONTINUED)
Additional Benefit Plan (Continued)
4. In any plan year in which less than fifty percent (50%) of the
applicable target is achieved, the applicable bonus shall not be
awarded.
In addition to the award of cash bonus compensation, the Plan provides that
the Participants shall collectively be entitled to earn an award of 500,000
shares of the Company's common stock, if income before taxes on a
cumulative basis for the 1995, 1996 and 1997 calendar years equals or
exceeds $8,315,250. The stock award, if earned, will be divided for
issuance among the Participants, in such proportions as described in the
Plan.
The Plan also provides that in the event that one of the following events
occurs prior to December 31, 1997, the Company's Vice-Chairman shall be
entitled to receive a stock award of up to 300,000 shares of the Company's
common stock:
1. Merger, consolidation, reorganization or share exchange with or into
any other corporate entity.
2. Sale or transfer of all or substantially all of the assets of its
operating subsidiaries.
3. The Company and/or its stockholders enter into an agreement for the
sale of fifty percent (50%) or more of the Company's outstanding
common stock where the net proceeds of such a sale are not less than
$10,000,000.
4. The Company undertakes a registered public offering of its common
stock (other than the registration of common stock distributed to the
stockholders of a corporate stockholder) pursuant to which the Company
receives net proceeds of not less than $10,000,000.
Such shares will be valued based upon the market price of the Company's
traded securities and such amount will be charged against operations in the
period in which the common stock was issued.
The Plan also provides for the forfeiture of cash or common stock awards,
and the termination of all other rights, if the Participant's employment
with the Company or its subsidiaries is terminated for any reason other
than death or disability, or if the Participant breaches or threatens to
breach any of the non-competition, non-solicitation or non-disclosure
covenants contained in his respective employment agreement.
F-33
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 18 - COMMITMENTS (CONTINUED)
Additional Benefit Plan (Continued)
If a Participant's employment is terminated as a result of death or
disability, then the Participant, or the Participant's estate or personal
representative, as the case may be, shall continue to participate in bonus
compensation and common stock awards through the end of the calendar year
during which the Participant's employment terminated.
No shares have been issued under the Plan in 1996, 1995 and Fiscal 1994.
NOTE 19 - RELATED PARTY TRANSACTIONS
Company
The Company's outside corporate counsel was a stockholder of the Company.
For 1995 and Fiscal 1994, the Company incurred legal fees of approximately
$804,000 and $247,000, respectively. At December 31, 1995 and 1994, the
Company owed $696,085 and $216,392, respectively.
On February 16, 1996, the Company signed a letter agreement agreeing to pay
$464,000 in full satisfaction of outstanding legal fees, unbilled time
charges and disbursements as follows:
1. $150,000 upon the signing of the agreement.
2. A $314,000 promissory note payable in four installments as follows:
$75,000 on May 25, 1996, August 25, 1996 and November 25, 1996 and
$89,000 on December 31, 1996. As the promissory note did not bear
interest, an interest rate of 10% was imputed. In addition, if an Event
of Default occurs, the Company would be required to repay $232,085 on
December 31, 1996. Such amount represents the fees forgiven in the
settlement. At December 31, 1996 and 1995, the Company owed $81,778 and
$445,700, respectively.
One of the Company's former attorneys who later became an officer provided
outside legal services in 1996. Fees incurred totalled $179,844.
In 1995, the Company purchased property and equipment based upon an
independent appraisal in the amount of $73,850 from the Chairman of the
Board.
F-34
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 19 - RELATED PARTY TRANSACTIONS (CONTINUED)
Predecessor
The Predecessor purchased inventory from and sold inventory to two
corporations wholly-owned by the related party of the Predecessor. In
addition, the Predecessor charged one of the corporations for its share of
operating expenses including salaries, rent, utilities, etc. Transactions
between the Predecessor and its affiliates in 1994 are summarized below:
Arch Associates, Inc.:
Accounts receivable $ 23,430
Due to affiliate (13,955)
Sales to affiliate 1,276,761
Purchases from affiliate 806,043
DPSI, Inc.:
Accounts receivable $ 397,832
Sales to affiliate 5,135,214
Purchases from affiliate 48,659
NOTE 20 - STOCKHOLDERS' EQUITY
Preferred Stock
On May 30, 1995, the Company authorized the issuance of 10,000,000 shares
of preferred stock, $.01 par value. Preferred stock consists of the
following:
Series 1 Convertible Preferred Stock (Series 1 Preferred)
Series 1 Preferred stockholders have a liquidation preference of $10
per share. Series 1 Preferred is convertible into common stock at the
election of the stockholder at a per share conversion rate equal to the
lower of seventy percent (70%) of the market price of common stock on
the day of conversion or $3.50. Series 1 Preferred has no voting
rights.
Pursuant to a subscription agreement in July 1996, 330,000 Series 1
Preferred shares were issued in connection with the sale of securities
under an exemption pursuant to Regulation S promulgated under the
Securities Act of 1933. In 1996, 307,500 shares of Series 1 Preferred
were converted into 1,836,777 shares of common stock. The balance of
the Series 1 Preferred shares were converted in 1997 into 163,580
shares of common stock.
F-35
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 20 - STOCKHOLDERS' EQUITY (CONTINUED)
Preferred Stock (Continued)
Series 2 Convertible Preferred Stock (Series 2 Preferred)
Series 2 Preferred stockholders have a liquidation preference of $1,000
per share. Series 2 Preferred is convertible into common stock at the
election of the stockholder at a per share conversion rate equal to the
lower of sixty-five percent (65%) of the market price on the day of
conversion or $4.03125. Series 2 Preferred has no voting rights.
In August 1996, 825 Series 2 Preferred shares were issued in connection
with the sale of securities under an exemption pursuant to Regulation
S. In 1996, all of the shares of Series 2 Preferred were converted into
382,743 shares of common stock.
Series 3 Convertible Preferred Stock (Series 3 Preferred)
The Series 3 Preferred stockholders have a liquidation preference of
$10 per share and are entitled to receive, when declared by the board
of directors, cumulative dividends at an annual rate of 6% of the
liquidation preference ($.60 per share). Such dividends shall be
payable on a semi-annual basis commencing on June 30, 1997 and shall
have preference to dividends on any other class of common or preferred
stock. Series 3 Preferred has no voting rights except as described
below:
1. On each second Dividend Payment Date that quarterly dividends on
Series 3 Preferred Stock shall not have been paid in full as
required herein (a "Dividend Default"), then and in each such
event, the holder of shares of Series 3 Preferred shall be
entitled to elect such number of directors ("Special Directors")
as set forth below, hereof, at the next annual meeting of
stockholders of the Company. The holders of all shares otherwise
entitled to vote for directors, voting separately as a class,
shall be entitled to elect the remaining members of the Board of
Directors. Such special voting right of the holders of shares of
Series 3 Preferred may be exercised until all dividends in
default on the Series 3 Preferred shall have been paid in full or
declared and funds sufficient therefor set aside, and when so
paid or provided for together with one additional Dividend
Payment Date shall have passed without a Dividend Default, such
special voting right of the holders of shares of Series 3
Preferred shall cease and any Special Directors appointed or
elected shall resign, but subject always to the same provisions
for the vesting of such special voting rights in the event of any
such future Dividend Default.
F-36
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 20 - STOCKHOLDERS' EQUITY (CONTINUED)
Preferred Stock (Continued)
Series 3 Convertible Preferred Stock (Series 3 Preferred) (Continued)
2. On September 30, 1997, in the event that by such date there has
been a Dividend Default relating to the dividend due on June 30,
1997, the holders of Series 3 Preferred shall be entitled to
elect a number of directors sufficient to constitute 15% of the
total number of directors of the Company. On the second
subsequent Dividend Payment Date on which there has been a
Dividend Default, the holders of the Series 3 Preferred Stock
shall be entitled to elect a number of directors sufficient to
constitute an additional 15% of the total number of directors of
the Company, and, thereafter, after each second subsequent
Dividend Payment Date on which there has been a Dividend Default,
the holders of the Series 3 Preferred Stock shall be entitled to
elect a number of directors constituting an additional 15% of the
Board of Directors. In the event that the size of the Board of
Directors is increased at any time during which any Special
Director is serving thereon, such vacancies shall be filled first
by Special Directors elected by the holders of the Series 3
Preferred Stock until the appropriate number of Special Directors
shall have been so elected.
Series 3 Preferred is convertible at the election of the stockholder at
a conversion rate equal to $10 plus all accrued but unpaid dividends
divided by the conversion price ($10).
The Company has the option to call all or part of the Series 3
Preferred at an exercise price equal to the liquidation preference ($10
per share). The Company is required to provide notice of not less than
five trading days (as defined) and such exercise will be payable within
three business days after the expiration of the five trading day call
period.
In September 1996, 350,000 Series 3 Preferred shares were issued to
ManTech in connection with the acquisition of MSOL (see Note 2). For
the period September 16, 1996 to December 31, 1996, cumulative
undeclared dividends amounted to $61,250.
F-37
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 20 - STOCKHOLDERS' EQUITY (CONTINUED)
Preferred Stock (Continued)
Series 4 Convertible Preferred Stock (Series 4 Preferred)
Series 4 Preferred stockholders have a liquidation preference of $100
per share. Series 4 Preferred is convertible into common stock at the
election of the stockholder at a per share conversion rate equal to the
lower of seventy percent (70%) of the market price on the day of
conversion or $3.50. Series 4 Preferred has no voting rights.
In September 1996, 25,000 Series 4 Preferred shares were issued in
connection with the sale of securities under an exemption pursuant to
Regulation S. In 1996, 19,000 shares of Series 4 Preferred were
converted into 1,236,602 shares of common stock. In 1997, the balance
of the Series 4 Preferred shares were converted into 425,859 shares of
common stock.
Common Stock
On May 26, 1995, the Company filed Restated Articles of Incorporation with
the Nevada Secretary of State pursuant to which the Company increased its
authorized common stock from 20,000,000 pre-split shares, par value $.01
per share to 40,000,000 shares, par value $.01 per share. In addition, in
July 1995, the board of directors declared a one-for-two reverse split of
its common stock. All share data and per share amounts have been adjusted
to reflect the reverse stock split on a retroactive basis.
In 1996, the Company authorized the issuance of 39,000 shares of common
stock as follows:
1. 24,000 shares at a price of $2.00 per share to a corporation in
connection with the sale of securities. Such amount has been offset
against additional paid-in capital in the consolidated statements of
stockholders' equity.
2. 15,000 shares at a price of $3.19 per share to three prior NATCOM
stockholders relating to the payment of a portion of the purchase
price per the stock purchase agreement (see Notes 2 and 18).
F-38
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 20 - STOCKHOLDERS' EQUITY (CONTINUED)
Common Stock (Continued)
In December 1995, the Company authorized the issuance of 37,792 shares of
common stock as follows:
1. 22,792 shares at a price of $6.00 per share totalling $136,753 to the
lessor of the Company's Pennsylvania warehouse facility to prepay the
rent for the period February 1996 through October 1996. Such amount
has been included as prepaid expenses and other current assets in the
consolidated balance sheets. At December 31, 1995, such shares had not
been issued and the transaction was reversed in 1996.
2. 8,333 shares at a price of $3.00 per share totalling $25,000 to two
board members in payment of director fees. Such amount was included in
operating expenses in the consolidated statements of operations. Such
shares were issued in 1996.
3. 6,667 shares at a price of $3.00 per share totalling $20,000 to two
board members to prepay 1996 director fees. Such amount was included
as prepaid expenses and other current assets in the consolidated
balance sheets at December 31, 1995. The shares were issued in 1996
and the amount is included in operating expenses in the consolidated
statement of operations in 1996.
Sale of Securities
In 1996, the Company sold shares of preferred and common stock under an
exemption pursuant to Regulation S. The Company raised a total of
$4,294,129, which was net of offering costs totalling $2,677,371.
NOTE 21 - STOCK OPTION PLAN
The Company adopted the 1995 Stock Option Plan which provides, among other
things, for the Company's board of directors to grant options to officers
and other key employees of the Company and its subsidiaries for the
purchase of up to 250,000 shares of the Company's common stock at prices,
and over exercise periods, to be determined by the board of directors at
the time the options are granted.
In January 1996, the Company granted seven-year options to various officers
and employees to purchase 107,900 shares of common stock at $3.25 per
share. The options vest 25% per year on each of the first four
anniversaries of the date thereof. If the optionee ceases to be an
employee, the option shall terminate immediately if such cessation is for
cause or without consent, one year following such cessation if such
cessation is due to the optionee's death or disability, and three months
following such cessation in all other cases, but not after the date the
option would otherwise expire.
No options were exercised in 1996.
F-39
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 22 - WARRANTS
In 1996, the Company authorized the issuance of warrants with terms of one
to five years to various corporations in connection with the sale of
securities under Regulation S as well as per the terms of various
consulting and loan agreements.
At December 31, 1996, the Company had 933,333 warrants outstanding with
exercise prices ranging from $3.00 to $6.75 per warrant. The warrants
expire at various times from August 15, 1997 through August 15, 2001.
No warrants were exercised during 1996.
NOTE 23 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The amounts at which cash, due from factor, accounts receivable, accounts
payable, due to financial institution, notes payable and accrued expenses
and other current liabilities are presented in the balance sheets
approximate their fair value due to their short maturities. The following
table presents the carrying amount and fair value at December 31, 1996 for
due on acquisitions.
Carrying Fair
Amount Value
------------ ------------
Due on acquisitions $ 2,957,058 $ 2,223,747
============ ============
The fair value of due on acquisitions has been determined based on
discounted cash flow using a market rate of interest at the balance sheet
date as applicable to comparable debt.
F-40
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 24 - ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting
for the stock options and warrants granted. No expense was recognized in
1996. If the Company had elected to recognize expense in 1996 for the stock
options and warrants granted based on the fair value at the date of grant
consistent with the method prescribed by SFAS No. 123, net loss and loss
per share would have been changed to the pro forma amounts indicated below:
As Reported Pro Forma
----------- ---------
Net loss $ (1,085,388) $ (1,127,178)
Loss per share (.33) (.34)
In addition, the Company authorized the issuance of warrants related to the
sale of securities under Regulation S. The fair value of those warrants
totalled $870,375 and would have been offset against additional paid-in
capital.
The fair value of the stock options and warrants used to compute pro forma
net loss and loss per share disclosures is the estimated present value at
grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions: expected volatility of 47%; various risk free
interest rates of 5.8% to 6.3%; and expected holding periods of one to four
years.
NOTE 25 - PRO FORMA INFORMATION
Pro forma net income has been presented to show results of operations
assuming the Predecessor filed its income tax returns as a C corporation.
F-41
<PAGE>
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------- ------------------ ------------------ ----------------- ------------
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO END OF
OF YEAR OPERATIONS DEDUCTIONS YEAR
------------------ ------------------ ----------------- ------------
Description
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
September 1, 1994 (inception date)
to December 31, 1994 $ - $ 25,000* $ - $ 25,000
Year ended December 31, 1995 25,000 60,000 16,735 68,265
Year ended December 31, 1996 68,265 100,078 - 168,343
Allowance for doubtful accounts
(Predecessor)
January 1, 1994 to
December 7, 1994 $ - $ 25,000 $ - $ 25,000
</TABLE>
* "Assumed" as part of asset purchase of AMCOM
F-42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GLOBAL INTELLICOM, INC.
Dated: March 31, 1997
By: /s/ N. Norman Muller
-------------------------------
N. Norman Muller
(Chief Executive Officer)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Howard Maidenbaum and David Mortman his
true and lawful attorney-in-fact, 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 and all amendments to this report, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact or their substitutes, each acting
alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ N. Norman Muller Chairman of the Board of March 31, 1997
- -------------------- Directors (Class III Director)
N. Norman Muller and Chief Executive Officer
/s/ Anthony R. Cucchi Vice Chairman of the Board of March 31, 1997
- --------------------- Directors and Class II Director
Anthony R. Cucchi
/s/ David A. Mortman President and Chief Operating March 31, 1997
- -------------------- Officer and Class I Director
David A. Mortman
/s/ Howard Maidenbaum Executive Vice President and March 31, 1997
- --------------------- Class III Director
Howard Maidenbaum
<PAGE>
/s/ Thomas W. Smith Class I Director March 31, 1997
- -------------------
Thomas W. Smith
/s/ Wayne M. Rogers Class II Director March 31, 1997
- -------------------
Wayne M. Rogers
/s/ William C. Kaltnechker Vice-President and Controller March 31, 1997
- --------------------------
William C. Kaltnecker
CENTURY BUSINESS CREDIT CORPORATION
119 WEST 40TH STREET
NEW YORK, NEW YORK 10018
RE: GLOBAL-INSYNC, INC.
8000 CORPORATE COURT DRIVE
SPRINGFIELD, VA 22153
Gentlemen:
We hereby request you to act as our sole Factor upon the following terms
and conditions, namely:
1. We hereby agree to assign and sell, and do hereby assign and sell, to
you, and you hereby agree to purchase from us all Receivables acceptable to you
whether now existing or hereafter arising. For all purposes hereof, the term
"Receivables" shall mean and include all accounts, contract rights, general
intangibles, chattel papers, instruments, documents and all forms of obligations
owing to us arising from or out of the sale of merchandise and/or the rendition
of services, all proceeds thereof, all of our rights to merchandise represented
thereby, all of our rights under insurance policies covering merchandise or
services, all of our rights against carriers of said merchandise, and all of our
right, title, security interests and guarantees with respect to each Receivable,
including all rights of replevin and reclamation and stoppage in transit and all
other rights of an unpaid seller of merchandise or services.
2. We shall submit to you the principal terms of each of our customers'
orders for your written credit approval. You may, in your discretion, approve in
writing all or a portion of our customers' orders either by establishing a
credit line limited to a specific amount for a specific customer, or by
approving all or a portion of a proposed purchase order submitted by us. No
credit approval shall be effective unless in writing and unless the goods are
shipped or the services rendered within the time specified in our written credit
approval or within 30 days after the approval s given, if no time is specified.
We shall have no obligation to obtain any further approval from you between the
date of your written approval and the date of shipment of goods unless the goods
are not shipped within the time specified in the approval or the terms of sale
have changed. No written credit approval or terms of sale shall be changed
without your written approval. You shall have the right to withdraw your credit
approval or withdraw or adjust a credit line at any time before delivery of
merchandise or rendition of services. You shall not be liable to any person or
in any manner for refusing to approve the credit for any customer. We shall
execute and deliver to you written schedules of all Receivables sold or assigned
to you hereunder in form satisfactory to you, together with copies of customer's
invoices or the equivalent and upon your request conclusive evidence of delivery
for all goods sold and all other information or documents you may require. All
customers' invoices shall be marked payable to you in a manner satisfactory to
you, and such marking of invoices as payable to you, regardless of by whom done,
and/or the delivery thereof to you shall constitute an assignment thereof to you
<PAGE>
whether or not we execute any specific instrument of assignment. All
remittances, checks, bills and accounts receivable and proceeds of sales shall
be your property and we agree to confirm your title thereto by the execution
from time to time of whatever evidence of title you may deem desirable, and we
further authorize you to endorse our name on any and all checks or other forms
of remittances received in payment of Receivables whenever you deem such
endorsement to be necessary to effect collection thereof. If any remittances are
made directly to us, we shall hold the same in trust for your benefit and your
property and will immediately deliver to you the identical checks, documents,
instruments or moneys received in the same form as received by us. We have been
advised that you may employ and we consent to your use of a lockbox account for
the deposit of remittances received in payment of Receivables.
3. We represent and warrant that each and every Receivable now or
hereafter assigned to you will cover a bona fide sale and delivery of
merchandise usually dealt in by us or the rendition by us of services to
customers in the ordinary course of our business; covers merchandise or services
which have been received and accepted by our customers without dispute or claim
of any kind or nature; will be for an amount certain payable in United States
funds in accordance with the terms of our invoice covering said sale, which
shall not be changed without your written approval; except for your security
interest therein, there are no security interest, liens or encumbrances thereon
and it will at all times be kept free and clear of same except in your favor; we
have good title thereto and the legal rights to sell, assign, transfer and set
over the same to you; all documents to be delivered to you in connection
therewith will be genuine and be enforceable against our customers free and
clear of any offset, deduction, counterclaim, lien, encumbrance or any other
claim or dispute, including, without limitation, claims or disputes as to price,
terms, delivery, quantity or quality and claims of release from liability or
because of any act of God, or a public enemy, or war, or because of the
requirements of law or of rules, orders or regulations having the force of law.
We agree to indemnify you against any liability, loss or expense caused by or
arising out of the rejection of merchandise or services or claims or deductions
of every kind and nature by our customers, other than those resulting from
financial inability of our customer, whose credit standing you have approved, to
make payment. In the event of our breach of any of the foregoing representations
and/or warranties, you shall have, in addition to all your other rights under
this Agreement, the right to chargeback to us immediately the full amount of the
Receivables affected thereby together with interest, but such chargeback shall
not be deemed a reassignment thereof, and you shall retain a security interest
in such Receivable and in the merchandise represented thereby until such
Receivable is fully paid, settled or discharged or all our Obligations (as
hereinafter defined) to you are fully satisfied. You shall not, however, have
the right to chargeback to us any Receivable approved by you which is unpaid
solely because of such customer's financial inability to pay. We agree that you
may limit your purchase of Receivables arising from our sales to any one
customer, and in such event, and in any instance in which you do not approve the
credit standing of our customer or the terms of sale, you nevertheless agree to
purchase such Receivables from us and we shall sell and assign the same to you
hereunder, but with full recourse to us in the event of nonpayment thereof for
any reason whatsoever. As to Receivables purchased by you with recourse to us,
you shall have the right to charge the same back to us at any time, together
with interest, if any. Advances by you on account of any Receivable purchased by
you with recourse to us prior to collection
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<PAGE>
thereof shall be entirely in your discretion in each and every instance. Upon
the occurrence of any breach of any representation or warranty or any chargeback
by you, we shall promptly pay you the full amount of the Receivable affected
thereby.
4. We shall immediately notify you in each instance of the return,
rejection, loss of or damage to merchandise represented by any Receivable, of
any request for extension of time to pay or request for credit or adjustment, or
of any merchandise dispute or other dispute or claim relating to any Receivable
or to the merchandise or services covered thereby or tending in any way to
diminish the sum certain payable thereon. If any such dispute, controversy or
claim is not promptly settled by us, you may, if you so elect, settle,
compromise, adjust or otherwise enforce or dispose of by litigation or
otherwise, any such dispute, controversy or claim, at our expense, and upon such
terms and conditions as you in your sole discretion shall deem proper, but you
shall have no obligation to do so. We agree than, after assignment of
Receivables to you, we shall not grant any allowances, credits or adjustments to
customers, nor accept any return of merchandise, without your prior written
consent in each instance. All credit memoranda to be issued to any customer
shall be furnished by us only to you for transmission by you to our customer who
shall solely be entitled to the benefit thereof. You may charge our account with
you $4.50 on each invoice in respect of any credit memoranda or change of terms.
If any merchandise from the sale of which any Receivable arises shall be
returned by or recovered from our customer or held subject to bill and hold
invoices, we shall forthwith pay you the full amount of such Receivable, either
in cash or by the assignment of new Receivables hereunder, and until such
payment or assignment, such merchandise shall be held by us in trust for your
benefit, shall be segregated and identified by us as property held in trust for
your benefit, and upon your request we shall, at our expense, deliver the same
to you or for your account or upon your order to such place or places as you may
designate. You may sell or cause the sale of any such merchandise, at such
prices and upon such terms as you may deem proper, and in the event of any
public sale thereof, you may be the purchaser. The proceeds of any such sale or
sales shall first be charged with the costs and expenses of any incident to such
sale, and the balance, if any, shall be credited to our account.
5. (a) You will send us a monthly account current as of the end of each
month. Unless you receive our written objection to any account current rendered
by you within thirty (30) days after the mailing of such account current, it
shall be deemed accepted by us and shall become conclusive and binding upon us.
All debit balances shall be payable to you on demand and shall bear interest at
the rate of interest then in effect as hereinafter provided (herein called the
"Contract Rate"); such interest is payable to you daily but shall be charged to
our account monthly as a cash advance made by you to us. The Contract Rate of
interest hereunder shall be equal to the Prime Rate (as hereinafter defined)
plus 1-1/2% per annum. Such Contract Rate is based upon the highest announced
prime, base or reference rate charged by New York City money center banks to
substantial and responsible corporate commercial borrowers ("Prime Rate"), which
is now 9% per annum, and is neither tied to any external rate of interest or
index, nor does it necessarily reflect the lowest rate of interest actually
charged to any particular class or category of customers by such banks. Such
Contract Rate shall be increased or decreased as the case may be, as such Prime
Rate is increased or decreased and to the extent thereof; each
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<PAGE>
such change to be effective as at the first of the month after the related
change in such Prime Rate; but in no event shall the Contract Rate of interest
hereunder be in excess of the maximum rate you are permitted to charge by law.
(b) On the last day of each month, you shall credit our account with
interest on the average daily balance of matured funds and cash collateral in
our account at the Prime Rate minus 2% per annum.
6. The purchase price of Receivables sold and assigned to you shall be the
net amount thereof, as herein defined, less the amount of your commission on the
purchase of such Receivables as provided in Paragraph 7 hereof. Such purchase
price, less any reserves which you may have established as herein provided and
less any sums advanced, remitted or otherwise paid to us or for our account or
debited to our account hereunder shall be payable by you to us three (3)
business days after collection of the Receivables purchased. However, if any
Receivable as to which you have approved the credit standing of the customer
shall not be paid by reason of the customer's bankruptcy or insolvency, you will
pay us the purchase price thereof on the first business day of the month
following such customer's bankruptcy or insolvency. You may, at our request but
in your discretion, make advance payments to us on the purchase price of
Receivables prior to the aforesaid time or times of your obligation to make
payment thereof in an amount 70% of the net amount thereof. Such advance
payments, which shall be debited by you to our account with you, shall bear
interest at the Contract Rate referred to in Paragraph 5 hereof from the date of
advance to three (3) business days after the date of actual collection, or where
applicable, to the first business day following the month of the customer's
bankruptcy or insolvency. You may reserve out of the purchase price of all
Receivables sold and assigned to you an amount which, in your judgment, is
sufficient to protect you against possible returns, claims, allowances, expenses
and recourse to us on Receivables sold and assigned to you and against other
contingencies for which we may be chargeable hereunder. As used herein, the term
"net amount" of Receivables shall mean the gross amount of Receivables less
returns, allowances and discounts to customers upon shortest or longest selling
terms, as you may elect.
(b) From time to time we may request advances from you in excess of
the advance formula set forth in paragraph 6(a) hereof, or as from time to time
adjusted by you. You may in your sole discretion agree to make such advances
(hereinafter called "Overadvances"). It is understood by us that for purposes of
calculating an Overadvance, you may consider the face amount of any outstanding
acceptances guaranteed by you as an advance which has been debited to our
account with you. Interest on Overadvances shall be at a rate of 1% per annum in
excess of the Contract Rate of interest as calculated pursuant to the provisions
of Paragraph 5 hereof. All Overadvances are discretionary by you, may be
terminated at any time, and are payable on demand. Nothing herein shall limit or
restrict your right to adjust advance formulas upward or downward based upon
your lending criteria which is established in your sole discretion and on your
own collateral evaluations.
7. (a) For your services hereunder, (i) you shall receive a commission
equal to six tenths of one (.60%) percent; and (ii) in the case of any
Receivables from a customer who
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<PAGE>
is a debtor-in-possession, you shall receive an additional commission equal to
no less than one (1%) percent for 30 day selling terms, of the gross invoice
amount of each Receivable, which commission shall be due and payable by us as of
the date a Receivable arises, and shall then be chargeable to our account with
you.
(b) The minimum factoring commission on each invoice in respect of
any Receivable shall be $4.50.
(c) Your charge specified in Paragraph 7(a) hereof, is based upon
maximum selling terms of 60 days, and no more extended terms or additional
dating shall be granted by us to any customer without your prior written
approval. When such approval is given by you, your charge with respect to the
Receivables covered thereby shall be increased by an additional twenty-five
(25%) percent for each additional thirty (30) days or portion thereof of
extended terms or additional dating.
8. Amounts owing to you in respect of our purchases form other persons,
firms or corporations factored by you or your parent, subsidiary or affiliate
are to be considered as advances against our account with you and may be charged
by you to our account with you at any time whether before or after the maturity
of such amounts. If any tax by any governmental authority (other than for your
income and franchise taxes) is or may be imposed on or as a result of any
transaction between us, or in respect to sales or the merchandise affected by
such sales, which you are or may be required to withhold or pay, we agree to
indemnify and hold you harmless in respect of such taxes, and we will repay you
the amount of any such taxes, which shall be charged to our account, and until
we shall furnish you with indemnity therefor (or supply you with evidence
satisfactory to you that due provision for the payment thereof has been made),
you may hold without interest any balance standing to our credit and you shall
retain your security interest in any and all collateral held by you.
9. As security for all "Obligations" (as herein defined), we hereby grant
to you a security interest in, a general lien upon and/or a right of setoff of,
all Receivables, General Intangibles (as such term is defined in the Uniform
Commercial Code), all our credit balances with you and all our claims against
you (whether now or hereafter existing and whether arising under this Agreement
or otherwise), and all our property of every kind and description, tangible or
intangible, at any time in your possession or subject to your control, whether
now or hereafter existing or now owned or hereafter acquired and wherever
located including, without limitation, any claims for tax refunds from any
governmental authority due or to become due to the undersigned which claims are
hereby assigned to you. As used herein, the term "Obligations" means and
includes all loans, advances, indebtedness, liabilities, obligations, debit
balances, covenants and duties owing by us or any of our subsidiaries or
affiliates to you or your parent, subsidiary or affiliate of every kind and
description (whether now or hereafter existing and whether arising under this
Agreement or otherwise, including in connection with responding to our requests
for an furnishing us with information hereunder), direct or indirect, absolute
or contingent, due or to become due, including, without limitation, any
indebtedness, liabilities or obligations owing by us to others which you have
acquired by assignment, participation or
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<PAGE>
otherwise, and further including, without limitation, all interest, fees,
charges, expenses and attorneys' fees for which we are obligated hereunder. We
agree to execute such further instruments and financing statements as may be
required by any law in connection with the transactions contemplated hereby and
to cooperate with you in the filing or recording and renewal thereof, and we
hereby further authorize you (and appoint any person whom you designate as our
attorney with power) to sign our name on any such instrument and on financing
statements under the Uniform Commercial Code. Recourse to security shall not be
required and we shall at all times remain liable for the repayment on demand of
all Obligations.
10. The undersigned will pay you on demand all costs and expenses,
liabilities and judgments incurred, including a reasonable allowance for
attorneys' fees, in connection with the execution and delivery of this Agreement
and the agreement between you, AmCom, Vircom and National Computer Resources,
Inc., any amendment, supplement or modification thereof or the filing or
perfecting any security interest in the Receivables or any other collateral
granted by us or by any of our affiliates, shareholders or guarantors or to
obtain or enforce payment of any Obligation of the undersigned to you, or in the
prosecution or defense of any action or proceeding concerning any matter growing
out of or connected with this Agreement and/or the Receivables assigned and/or
any Obligations of the undersigned to you, or any collateral therefor,
including, without limitation, effecting collection of Receivables whether by
adjustments, litigation or otherwise, and realization upon recovered or returned
merchandise and defending successfully in whole or in part any and all actions
or proceedings brought by the undersigned. Upon your performance of any
collateral monitoring-namely any field examination, collateral analysis or other
business analysis, the need for which is to be determined by you and which
monitoring is undertaken by you or for your benefit, an amount equal to $550 per
day, per person, for each person employed to perform such monitoring together
with all costs, disbursements and expenses incurred by you and the person
performing such collateral monitoring shall be charged to our account.
11. We shall not be entitled to pledge your credit for any purpose
whatsoever.
12. We waive presentment and protest of any instruments and all notices
thereof, notices to which we might otherwise be entitled. We shall maintain, at
our expense, proper books of account. You shall have the right to inspect and
make extracts from such books and all of our files, records and correspondence
at all reasonable times. All sales of Receivables to you by us shall be deemed
to include all of our right, title and interest to all of our books, records and
files and all other data and documents relating to each Receivable. During the
term of this Agreement we shall not sell or assign, negotiate, pledge or grant
any security interest in any Receivables, Accounts, General Intangibles,
Contract Rights or Goods (as said terms are defined in Article 9 of the Uniform
Commercial Code) to any one other than you. We shall furnish you with as many
duplicate customers' invoices as you may from time to time require. We certify
to you that our address as set forth in this Agreement is our mailing address,
our chief place of business, and the office at which our records relating to
Receivables are kept. We shall not effect any change in our mailing address, or
in our chief place of business, or in the office in which our records relating
to Receivables are kept, without first giving you written notice thereof.
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<PAGE>
13. The term of this Agreement shall begin as of the effective date hereof
and continue until either of us are given at least sixty (60) days prior written
notice by the other, by registered or certified mail, return receipt requested.
Notwithstanding the foregoing, you may terminate this Agreement without notice
and all Obligations shall, unless and to the extent that you otherwise elect,
become immediately due and payable without notice or demand in the event that:
we fail to pay any Obligation when due or commit any breach of or default in the
performance of any of representations, warranties or covenants whether contained
herein or in any instrument or document delivered pursuant hereto or in any
other agreement, instrument, or document under which we are obligated to you; or
we or any guarantor, surety or other party liable upon any Obligation make(s)
any false or untrue representation to you in connection with this Agreement or
any transaction relating thereto, become(s) unable to pay our or its debts as
they mature, make(s) a general assignment for the benefit of creditors,
suspend(s) the transaction of our or its usual business, convene(s) or cause(s)
to be convened a meeting of our or its creditors or principal creditors or
take(s) advantage of the insolvency laws of any State, or a case is commenced or
a petition in bankruptcy or for an arrangement or reorganization under the
Federal Bankruptcy Code is filed by or against us or any such other party or a
custodian or receiver (or other court designee performing the functions of a
receiver) is appointed for or takes possession of our or any such other party's
assets or affairs or an order for relief in a case commenced under the Federal
Bankruptcy Code is entered; or any of our partners (if we are a partnership), or
any of our members or managers (if we are a limited liability company) or any
guarantor, surety or other party liable upon any Obligations shall die; or we
(if a corporation or a limited liability company) shall be dissolved or be a
party to any merger or consolidation without your written consent; or if there
shall be issued or filed against us, any guarantor, surety or other party liable
upon any Obligation any tax lien, or there shall be issued or filed against us
any attachment, injunction, execution, or judgment for an aggregate amount in
excess of $100,000 which is not removed within thirty (30) days after same was
issued or filed. Notwithstanding any termination of this Agreement we shall
continue to assign Receivables to you and turn over all collections to you as
herein provided until all Obligations shall have been fully paid and satisfied,
and until then this Agreement shall remain in full force and effect as to an be
binding upon us, and you shall be entitled to retain your security interest in
all existing and future Receivables and other security.
14. Upon the occurrence of any of the events of default specified in
Paragraph 13 hereof, you shall have all the rights and remedies of a secured
party under the Uniform Commercial Code and other applicable laws with respect
to all collateral in which you have a security interest, such rights and
remedies being in addition to all of your other rights and remedies provided for
herein. You may sell or cause to be sold any or all of such collateral, in one
or more sales or parcels, at such prices and upon such terms as you may deem
best, and for cash or on credit or for future delivery, without your assumption
of any credit risk, and at a public or private sale as you may deem appropriate.
Unless the collateral is perishable or threatens to decline speedily in value or
is of a type customarily sold on a recognized market, you will give us
reasonable notice at the time and place of any public sale thereof or of the
time after which any private sale or any other intended disposition thereof is
to be made. The requirements of reasonable notice shall be met if any such
notice is mailed, postage prepaid, to our address
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<PAGE>
shown herein, at least five (5) days before the time of the sale or disposition
thereof. You may invoice any such sale in you name or in our name, as you may
elect, as the seller, and in such latter event such invoice shall be marked
payable to you as provided in Paragraph 2 hereof. You may be the purchaser at
any such public sale and thereafter hold the property so sold at public sale,
absolutely, free from any claim or right of any kind, including any equity of
redemption. The proceeds of sale shall be applied first to all costs and
expenses of and incident to such sale, including attorneys' fees, and then to
the payment (in such order as you may elect) of all Obligations. You will return
any excess to us and we shall remain liable for any deficiency.
15. We shall furnish to you, and we shall cause all, corporate guarantors
of the Obligations, if any, to furnish (a) within 60 days after the end of each
fiscal quarter, to the extent prepared to comply with the requirements of the
Securities and Exchange Commission ("SEC"), a copy of the SEC Form 10-Q filed or
any corporate guarantor for each fiscal quarter and if no such form is so filed,
internally prepared financial statements for each fiscal quarter and (b) within
90 days after the end of each fiscal year to the extent prepared to comply with
SEC requirements, a copy of the SEC Form 10-K's filed by us or any corporate
guarantor for such fiscal year or if no such Form 10-K was filed audited annual
financial statements prepared by an independent certified public accountant
acceptable to you, all in form and substance acceptable to you. We shall cause
all individual guarantors of the Obligations, if any, to furnish to you his/her
personal financial statement in form and substance acceptable to you within 30
days after each anniversary of the date on which he/she furnishes to you the
first such statement. We shall provide to you, upon request, a Certificate of
Good Standing from the Secretary of State of the state of incorporation of the
undersigned and from every state where the undersigned is qualified to do
business.
16. We warrant that we are solvent, know of no present or pending
situation which could render us insolvent, and we will remain solvent during the
term of the Agreement. This Agreement is made and is to be performed under the
law of the State of New York and shall be governed by and construed in
accordance with said law. Each of the parties to this Agreement expressly
submits and consents to the jurisdiction of the Supreme Court of the State of
New York in the County of New York, with respect to any controversy arising out
of or relating to this Agreement or any amendment or supplement thereto or to
any transactions in connection therewith and each of the parties to this
Agreement hereby waives personal service of any summons or complaint or other
process or papers to be issued in any action or proceeding involving any such
controversy and hereby agrees that service of such summons or complaint or
process may be made by registered or certified mail to the other party at the
address appearing herein; failure on the part of either party to appear or
answer within thirty (30) days after such mailing of such summons, complaint or
process shall constitute a default entitling the other party to enter a judgment
or order as demanded or prayed for therein to the extent that said Court or duly
authorized Officer thereof may authorize or permit. You and we do hereby waive
any and all right to a trial by jury in any such action or proceeding. In the
event you commence any action or proceeding against us, we will not assert any
offset or counterclaim, of whatever nature or description, in any such action or
proceeding. No failure or delay by you in exercising any of you powers or rights
hereunder shall operate as a waiver thereof; nor shall any single or partial
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<PAGE>
exercise of any such power or right preclude other or further exercise thereof
or the exercise of any other right or power. Your rights, remedies and benefits
hereunder are comulative and not exclusive of any other rights, remedies or
benefits which you may have. This Agreement may only be modified in writing and
no waiver by you will be effective unless in writing and then only to the extent
specifically stated. All notices and other communications by either party hereto
shall be in writing and shall be sent to the other party at the address
specified herein. You shall have the right to assign this Agreement and all of
your rights hereunder shall inure to the benefit of your successors and assigns;
and this Agreement shall inure to the benefit of and shall bind our respective
successors and assigns.
Very truly yours,
GLOBAL-INSYNC, INC.
David A. Mortman
President
Accepted at New York, New York
On January 22, 1997
- ------------------------------
CENTURY BUSINESS CREDIT
CORPORATION
Thomas V. Pizzo
Executive Vice President
- 9 -
PROMISSORY NOTE
February 1, 1996
New York, New York $200,000
FOR VALUE RECEIVED, the undersigned, GLOBAL INTELLICOM, a Nevada
corporation ("Borrower"), does hereby promise to pay to the order of TRIANGLE
BRIDGE GROUP, LP, a California limited partnership ("Lender"), at such place as
the Holder shall from time to time designate in writing, in lawful money of the
United States, the principal amount of two hundred thousand dollars ($200,000),
together with interest thereon from this date until paid at the rate of 6
percent (6%) per annum.
Interest accrued shall be payable monthly, on the first (1st) day of each
calendar month beginning March 1, 1996 and continuing thereafter until August 1,
1996, when the entire balance of principal and unpaid interest shall be due and
payable.
In the event of the sale or transfer or change in control of more than
fifty percent (50%) of the outstanding stock of Borrower, or the acquisition,
merger, consolidation or other reorganization of Borrower, or the sale of assets
of Borrower outside the ordinary course of business, then, at the option of the
Holder hereof, this note shall be immediately due and payable.
Upon the occurrence of an Event of Default, as described herein, at the
option of the Holder hereof, this Note shall become immediately due and payable
in full and shall bear interest (whether or not the Holder elects that all
amounts hereunder shall be immediately due and payable) at a default rate equal
to the highest rate legally permissible. Such interest shall begin accruing on
the date of the Event of Default and shall be paid on the first day of each
month thereafter. Borrower waives notice, presentment or demand for payment,
protest or notice of non-payment or dishonor or other notices or demands of any
kind or character.
Borrower consents to any extension or delay in the time of payment or
enforcement of this Note, or to the renewal of this Note, all without affecting
the liability of Borrower. Any delay on the part of the Holder in exercising any
rights shall not operate as a waiver.
The occurrence of any of the following events shall constitute an "Event
of Default".
1. Default in the payment when due of any installment of principal or
interest under this Note or any other agreement contained herein, the Commitment
Agreement executed by Borrower dated January 29, 1996, or in the Pledge
Agreement executed concurrently herewith;
2. Borrower or any guarantor is the subject of an order for relief by the
Bankruptcy Court or makes an assignment for the benefit of creditors; or applies
for or consents to the
<PAGE>
appointment of any receiver, trustee, conservator, custodian, liquidator,
rehabilitator or similar officer for it or for all or any part of its property;
or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or
similar officer is appointed without the application or consent of Borrower or
any guarantor, as the case may be, and the appointment continues undischarged or
unstayed for sixty (60) calendar days; or Borrower or any guarantor institutes
or consents to any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, custodianship, conservatorship, liquidation,
rehabilitation or similar proceedings related to it or any part of its property
under the laws of any jurisdiction; or any similar proceedings are instituted
without the consent of Borrower or any guarantor, as the case may be, and
continues undismissed or unstayed for sixty (60) calendar days.
If the fulfillment of any provision hereof, at the time performance shall
be due, shall involve transcending the limit of validity prescribed by law, then
the obligation to be fulfilled shall be reduced to the limit of such validity.
If any payment is received by the Holder hereof which would otherwise be deemed
a payment of interest in excess of the maximum allowed by law, then that portion
of such payment amounting to any such excess shall be deemed to have been paid
on account of principal at the time of receipt and any excess principal paid
shall be promptly returned to Borrower. If any tribunal or court of appropriate
jurisdiction deems any provision hereof unreasonable or unenforceable, said
tribunal or court may declare a reasonable modification of such unreasonable or
unenforceable provision, and this Note shall be valid and enforceable, and the
parties hereto agree to be bound by such provision, as thus modified.
If there shall occur any Event of Default, which Event shall remain
uncured for ten (10) days, Lender, at its sole option, may elect to receive
unregistered common stock of Borrower as repayment of all or any portion of this
Note at a purchase price of three dollars and fifty cents ($3.50) per share of
unregistered common stock of Borrower. Lender shall notify Borrower in writing
by certified or registered mail of its election to receive unregistered common
stock of Borrower as repayment of all or any portion of this Note. The closing
and the issuance to Lender of the unregistered common stock of Borrower shall be
held within thirty (30) days of Lender's notification.
In the event Lender converts this Note into the common stock of Borrower,
then and in that event, in the event of Borrower shall at any time after the
date of such conversion seek to further register or qualify any of its capital
stock or the securities holdings of any of its controlling shareholders, on each
such occasion it shall furnish Lender with at least thirty (30) days prior
written notice thereof and Lender shall have the option, without cost or expense
to Lender, to include its Borrower's stock, or any portion thereof, in such
registration or qualification with the consent of the underwriter, who may also
require appropriate and reasonable limitations on the sale of such stock after
their registration. Lender shall exercise its "piggy-back rights" of
registration by giving written notice to Borrower and the underwriter within
twenty (20) days of receipt of written notice from Borrower. All expenses in
connection with preparing and filing the registration statement (and any
registration or qualification under the securities or "Blue Sky" laws of the
state in which the offering will be made under such
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<PAGE>
registration statement) shall be borne in full by Borrower (including up to
maximum of five (5) states in which Borrower would not otherwise sell shares
registered under such registration statement in which the shares are also
registered). This piggy-back right of registration may be assigned and
transferred by Lender to any third parties who may receive the Borrower's stock
issued to Lender pursuant to this Agreement.
Borrower agrees to indemnify and hold harmless Lender and each person, if
any, who is a representative of Lender, and each person to whom Lender assigns
Borrower's common stock, from and against any losses, claims, damages,
liabilities (which shall include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees), to which Lender,
such representative or assignee, may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or an alleged
untrue statement of any material fact contained in (a) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment thereof
or supplement thereto, (b) any blue sky application or other document executed
by Borrower specifically for that purpose or based upon written information
furnished by Borrower filed in any state or other jurisdiction in order to
qualify any or all of the shares under the securities laws thereof (any such
application, document being hereinafter called a "Blue Sky Application"), or
arise out of or are based upon the omission or alleged omission to state in the
Registration Statement, any supplement thereto, or in any Blue Sky Application,
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that Borrower will not be
liable in any such case to the extent, but only to the extent, that any such
loss, claim, damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to Borrower
through Lender or on behalf of Lender or Lender's assigns specifically for use
in the preparation of the Registration Statement or any such amendment of
supplement thereof or any such Blue Sky Application or any such Preliminary
Prospectus or the Prospectus or any such amendment or supplement thereto. This
indemnity will be in addition to any liability which Lender or any of Lender's
representatives or assigns may otherwise have.
Each payment under this Note shall first be applied to interest due and
then to principal.
In the Event of Default, Borrower agrees to pay all costs of collection
incurred by the Holder hereof, whether or not suit is filed including, without
limitation, the Holder's actual attorney's fees.
GLOBAL INTELLICOM, a Nevada
corporation
By: ____________________________
Howard Maidenbaum
Executive Vice President
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EXTENSION AGREEMENT
-------------------
THIS EXTENSION AGREEMENT dated November 22, 1996 between Global
Intellicom, Inc., a Nevada corporation with offices at 747 Third Avenue, 17th
Floor, New York, New York 10017 (hereinafter referred to as "Global"); and
Triangle Bridge Group, LP, a California limited partnership with offices at
11828 LaGrange Avenue, Los Angeles, California 90025 (hereinafter referred to as
"Triangle")
W I T N E S S E T H:
--------------------
WHEREAS, Triangle advanced the sum of Two Hundred Thousand ($200,000)
Dollars as a loan to Global on February 1, 1996, pursuant to the terms and
conditions of a Commitment Agreement dated January 29, 1996, a Pledge Agreement
dated February 1, 1996, and a Promissory Note dated February 1, 1996
(hereinafter together referred to as the "Loan"); and
WHEREAS, the Loan required interest at the rate of six (6%) percent per
annum on the sum of Two Hundred Thousand ($200,000) Dollars be paid monthly
commencing March 1, 1996 and continuing thereafter until August 1, 1996 when the
principal and unpaid interest was due and payable; and
WHEREAS, interest on the Loan has not been paid since the Loan's
inception; and
<PAGE>
WHEREAS, Global granted Triangle a first secured interest in all the
shares of capital stock of National Computer Resources, Inc. as security for
payment of the Loan; and
WHEREAS, Triangle is willing to extend the due date of the Promissory Note
to and including December 15, 1996 on terms and conditions as hereinafter set
forth at which time the principal balance of the Promissory Note in the sum of
One Hundred and Seventy Five Thousand ($175,000) Dollars together with unpaid
interest thereon shall be due and payable.
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties agree as follows:
FIRST: EXTENSION OF DUE DATE OF LOAN
The due date when the Promissory Note and Loan shall be paid by Global to
Triangle shall be extended from August 1, 1996 to and including December 15,
1996 at which time the principal balance of the Promissory Note in the sum of
One Hundred Seventy Five Thousand ($175,000) Dollars together with all unpaid
interest thereon shall be due and payable to Triangle pursuant to the terms and
conditions of the Loan.
SECOND: PAYMENT OF UNPAID ACCRUED INTEREST
Global shall simultaneously with the execution of this Agreement pay
Triangle all unpaid, accrued interest to date in the sum of Nine Thousand ($9,
000) Dollars which shall represent payment of interest at the rate of six (6%)
percent per annum on the principal balance of the Loan for the period February
1, 1996 through November 1, 1996.
THIRD: PAYMENT IN REDUCTION OF THE
PRINCIPAL BALANCE OF THE LOAN
Global shall simultaneously with the execution of this Extension Agreement
pay Triangle
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<PAGE>
the sum of Twenty-Five Thousand ($25,000) Dollars representing partial payment
of principal to Triangle in reducing the principal balance of the Loan from Two
Hundred Thousand ($200,000) Dollars to One Hundred Seventy Five Thousand
($175,000).
FOURTH: LOAN AGREEMENTS TO REMAIN IN FULL
FORCE AND EFFECT
Except as otherwise amended by extending the due date of the Loan from
August 1 to December 15, 1996, all other terms and conditions of the Commitment
Agreement dated January 29, 1996, the Pledge Agreement dated February 1, 1996,
the Promissory Note dated February 1, 1996, the Investment Letter dated January
31, 1996 between Global and Triangle shall remain in full force and effect.
FIFTH: AUTHORIZATION
Global represents to Triangle that Global is authorized to enter into this
Extension Agreement pursuant to resolutions fully adopted by the Board of
Directors of Global, and that upon execution of this Extension Agreement by N.
Norman Muller, N. Norman Muller represents to Triangle that he has the power and
authority to executive and deliver this Extension Agreement on behalf of and in
relation to Global as it relates to the terms and conditions of this Extension
Agreement.
SIXTH: SEVERABILITY
If any of the provisions of this Extension Agreement are held to be void
or unenforceable under applicable law, all of the other provisions of this
Extension Agreement shall nevertheless continue in full force and effect.
SEVENTH: AGREEMENT CONDITIONAL
This Extension Agreement is conditioned upon the payment to Triangle of
the monies
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<PAGE>
require to be paid to it by Global as set forth in paragraphs SECOND and THIRD
of this Extension Agreement.
EIGHTH: APPLICABLE LAW
This Extension Agreement shall be deemed to be contract made under the
laws of the State of New York and for all purposes shall be construed in
accordance with the laws of the State of New York.
NINTH: COUNTERPARTS
This Extension Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original and
all such counterparts shall together constitute but one and the same instrument.
Execution by facsimile transfer shall be considered original execution.
IN WITNESS WHEREOF, the parties have hereto set their hands and seals the
date and year first above written.
GLOBAL INTELLICOM, INC., a Nevada
Corporation
By: ________________________________
N. NORMAN MULLER
CHIEF EXECUTIVE OFFICER
TRIANGLE BRIDGE GROUP, LP, a
California Corporation, its General
Partner
By: ________________________________
WAYNE M. ROGERS
PRESIDENT
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GOODKIND LABATON RUDOFF & SUCHAROW LLP
A REGISTERED LIMITED LIABILITY PARTNERSHIP
100 PARK AVENUE
NEW YORK, NEW YORK 10017-5563
TELEPHONE (212) 907-0700
FAX (212) 818-0477
WRITER'S DIRECT DIAL NUMBER
(212) 907-0700
February 16, 1996
Global Intellicom, Inc.
747 Third Avenue
New York, New York 10017
Gentlemen:
Global Intellicom, Inc. ("Global") acknowledges that it is liable to
Goodkind Labaton Rudoff & Sucharow LLP ("GLR&S") in the amount of $696,085,
representing outstanding legal fees, unbilled time charges and disbursements
booked through January 17, 1996 (the "Claim"). Subject to the terms and
conditions set forth in this letter, Global agrees to pay, and GLR&S agrees to
accept, $464,000 in full satisfaction of the Claim.
This letter sets forth our agreement with respect to the Claim and the
other matters specified below.
1. The obligations of GLR&S under this letter shall be subject to the
satisfaction of the following conditions upon execution of this letter by
Global:
(a) Global shall pay GLR&S the sum of $150,000, by delivery of a
certified check payable to the order of GLR&S;
(b) Global shall execute and deliver to GLR&S a promissory note in
the form attached to this letter in the principal amount of $314,000 (the "A
Note");
(c) Global shall execute and deliver to GLR&S a promissory note in
the form attached to this letter in the principal amount of $232,085 (the "B
Note"), representing the balance of the Claim;
(d) Global shall execute and deliver to GLR&S a release in the form
attached to this letter;
<PAGE>
(e) Global shall deliver to GLR&S a certificate of its Secretary
dated as of the date of this letter certifying the resolutions adopted by
Global's Board of Directors authorizing the execution, delivery and performance
by Global of this letter agreement and the instruments attached hereto to which
it is a party (collectively, the "Global Documents"); and
(f) the representations of Global hereunder shall be correct in all
respects.
2. The obligations of Global under this letter shall be subject to the
satisfaction of the following conditions upon execution of this letter by GLR&S:
(a) GLR&S shall execute and deliver to Global a release in the form
attached to this letter; and
(b) the representations of GLR&S hereunder shall be correct in all
respects.
3. (a) If the A Note is paid in full in accordance with its terms and no
Event of Default shall have occurred under the A Note or the B Note prior to
such payment, the total Claim shall be deemed to be discharged and satisfied,
and GLR&S shall thereupon deliver the B Note to Global for cancellation. GLR&S
shall not negotiate or transfer the B Note or any interest therein to a third
party and shall hold the B Note solely for the purposes described in this
paragraph 3.
(b) If an Event of Default shall occur under the A Note or the B
Note prior to payment in full of the A Note in accordance with its terms, the
entire unpaid principal amounts of the A Note and the B Note, together with all
accrued interest and all other sums then due and payable thereunder, shall
accelerate and become immediately due and payable as provided therein, and GLR&S
may exercise all rights and remedies available to it under applicable law in
addition to, and not in lieu of, any rights and remedies expressly granted under
the A Note or B Note, provided that the total monetary recovery shall not exceed
the sum of (i) the total amount of the Claim, (ii) interest accrued under the A
Note and B Note, and (iii) other amounts expressly payable pursuant to the A
Note and B Note.
4. Global represents to and agrees with GLR&S that:
(a) Global is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has the corporate power
to own its properties and carry on its business as currently conducted. Global
is duly qualified as a foreign corporation to do business and is in good
standing in the State of New York.
(b) Global has full right, power and authority to execute, deliver
and perform the Global Documents, each of which has been duly authorized by all
requisite corporate action. The execution, delivery and performance of the
Global Documents by Global does not and, with notice, lapse of time or both,
will not conflict with, or result in the breach of, (i) its certificate of
incorporation or by-laws, (ii) any provision of an agreement or instrument to
which it is a party or by which it is bound or (iii) any provision of any law,
regulation or order, injunction or decree of any court or governmental
authority. No consent or approval of any person not already
<PAGE>
validly obtained is or will be required in connection with the execution,
delivery and performance of the Global Documents.
(c) Each of the Global Documents constitutes the valid and legally
binding obligation of Global, enforceable in accordance with its terms.
(d) Global has not relied upon Goodkind Labaton Rudoff & Sucharow
LLP or David Mortman, Esq. in connection with the execution and delivery of the
Global Documents, and has obtained the advice of other independent counsel
satisfactory to it in connection with such matters.
5. GLR&S represents to and agrees with Global that:
(a) GLR&S is a limited liability partnership duly organized and
validly existing under the laws of the State of New York and has the power to
own its properties and engage in the practice of law.
(b) GLR&S has full right, power and authority to execute, deliver
and perform this letter and the release attached hereto to which it is a party
(collectively, the "GLR&S Documents"), each of which has been duly authorized by
all requisite action. No consent or approval of any person not already validly
obtained is or will be required in connection with the execution, delivery and
performance of the GLR&S Documents.
(c) Each of the GLR&S Documents constitutes the valid and legally
binding obligation of GLR&S, enforceable in accordance with its items.
(d) GLR&S has not relied upon David Mortman, Esq. in connection with
the execution and delivery of the GLR&S Documents.
6. With respect to matters undertaken by GLR&S on Global's behalf prior to
January 17, 1996, GLR&S shall, at Global's written request, continue to provide
services to the extent necessary to facilitate the assignment of such matters to
another law firm for on-going representation; provided that Global shall pay for
all services rendered by GLR&S (at 80% of its internally established hourly
rates) and all disbursements incurred by it with Global's written authorization
after January 17, 1996 within 30 days after Global's receipt of an invoice
therefor and, provided further, that GLR&S can at any time decline to provide
services if, in good faith, it determines that it is appropriate to do so.
Within 30 days after Global's receipt of an invoice therefor, Global shall pay
GLR&S all disbursements incurred by it on or before January 17, 1996 but
recorded in its books thereafter.
7. This letter (a) constitutes the entire agreement and supersedes all
other prior and contemporaneous agreements and understandings, both written and
oral, between the parties with regard to the subject matter hereof, (b) is not
intended to confer upon any person not a party any rights or remedies hereunder
or with respect to the subject matter hereof, (c) has been made and is intended
to be performed in the State of New York and shall be governed by, and construed
and enforced in accordance with, the internal laws of that State, excluding
rules applicable to
<PAGE>
conflicts of law, (d) may be amended only by a document signed by the party to
be charged therewith and (e) may be waived with respect to any provision only by
a document signed by the party entitled to the benefit of such provision.
Very truly yours,
GOODKIND LABATON RUDOFF &
SUCHAROW LLP
By: ____________________________________
RICHARD P. ACKERMAN, PARTNER
AGREED:
GLOBAL INTELLICOM, INC.
By: ______________________________
Howard Maidenbaum, Executive
Vice President and Treasurer
<PAGE>
PROMISSORY NOTE
$314,000 February _, 1996
FOR VALUE RECEIVED, GLOBAL INTELLICOM, INC., a Nevada corporation (the
"Payor"), having an office and address for notice purposes at 747 Third Avenue,
New York, New York 10017, hereby unconditionally promises to pay to the order of
Goodkind Labaton Rudoff & Sucharow LLP at its offices at 100 Park Avenue, New
York, New York 10017, or at such other place or to such other payee as the
holder of this Note may from time to time designate in writing to the Payor, the
principal amount of THREE HUNDRED FOURTEEN THOUSAND DOLLARS ($314,000) in four
(4) payments as follows: $75,000 on each of May, August and November 25, 1996
and $89,000 on December 31, 1996. Notwithstanding anything contained and in this
Note to the contrary, from and after the occurrence of an Event of Default (as
defined in paragraph 3(a) hereof) the unpaid principal amount of this Note shall
bear interest in a rate per annum equal to 3% above the publicly announced prime
interest rate per annum of Citibank, N.A. on the date on which such Event of
Default occurs, but in no event in excess of the maximum interest rate permitted
by applicable law. This Note may be prepaid, in whole or in part, at any time
prior to the occurrence of an Event of Default without premium or penalty, and
any partial prepayment shall be applied to the unpaid principal amount of this
Note in the inverse order of the maturities of installments thereof hereunder.
All payments pursuant to this Note shall be made in the lawful currency of the
United States of America.
1. Pavor's Representations. Payor represents to and agrees with each
holder of this Note that:
(a) The Payor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and has the corporate
power to own its properties and carry on its business as currently conducted.
The Payor is duly qualified as a foreign corporation to do business and is in
good standing in the State of New York.
(b) The Payor has full right, power and authority to execute,
deliver and perform this Note, each of which has been duly authorized by all
requisite corporate action. The execution, delivery and performance of this Note
by the Payor does not and, with notice, lapse of time or both, will not conflict
with, or result in the breach of, (i) its certificate of incorporation or
by-laws, (ii) any provision of any agreement or instrument to which it is a
party or by which it is bound or (iii) any provision of any law, regulation or
order, injunction or decree of any court or governmental authority. No consent
or approval of any person not already validly obtained is or will be required in
connection with the execution, delivery or performance of this Note.
(c) This Note constitutes the valid and legally binding obligation
of the Payor, enforceable in accordance with its terms.
(d) The Payor has not relied upon Goodkind Labaton Rudoff & Sucharow
LLP or David Mortman, Esq. in connection with the execution and delivery of this
Note or the documents incident hereto, and has obtained the advice of other
independent counsel satisfactory
<PAGE>
to it in connection with such matters.
2. Payor's Covenants. Payor covenants and agrees with each holder of this
Note that, as long as any amount remains payable hereunder:
(a) Payor shall give notice to the holder of this Note as promptly
as practicable, but in any event within 48 hours, after the occurrence of any
event which constitutes or, with notice to the Payor, or lapse of time or both,
would constitute an Event of Default or a material adverse change in the
financial condition or operations of the Payor.
(b) The holder of this Note, and its representatives, shall have the
right to discuss the finances of the Payor as it relates to Payor's ability to
repay this Note, and to be advised as to the same by, the Payor's chief
financial officer or other officer or employee having knowledge of the facts at
such reasonable times and intervals as the holder may designate, but not so as
to interfere unreasonably with the Payor's operations.
3. Events of Default.
(a) The occurrence of any one or more of the following events or
conditions (each, an "Event of Default") shall constitute a default hereunder:
(i) nonpayment within 20 days of the date when due of any
payment of principal under this Note;
(ii) any representation of the Payor hereunder or under the
letter agreement of even date between Goodkind Labaton, etc. and the Payor which
provide for the making of this Note shall be materially false when made;
(iii) (A) a breach by the Payor of paragraph 2(a) or (B) a
breach by the Payor of any other provision of this Note (except as described in
(i) and (ii) above which breach is not remedied within 5 days after the giving
of written notice (or 8 days thereafter if notice is given only by certified
mail) from the holder of this Note;
(iv) the Payor shall (A) admit in writing its inability to pay
its debts as they become due; (B) file a petition in bankruptcy or for
reorganization or for the adoption of an arrangement under the Bankruptcy Code
or an answer or other pleading admitting or failing to deny the material
allegations of such a petition or seeking, consenting to or acquiescing in the
relief therein provided; (C) make an assignment for the benefit of its
creditors; (D) consent to the appointment of a receiver or trustee for all or a
substantial part of its property or to the filing of a petition against it under
the Bankruptcy Code; (E) be adjudicated a bankrupt; (F) have entered against it
a court order appointing a receiver or trustee for all or a substantial part of
its property or approving a filing in good faith or a petition filed against it
under the Bankruptcy Code (in either case without its consent); (G) allow the
assumption of custody or sequestration by a court of competent jurisdiction of
all or a substantial part of its property or (H) permit an attachment to be made
on any substantial part of its property or assets;
<PAGE>
(v) an event or condition shall occur which results in the
acceleration of the maturity of any indebtedness or liability of the Payor for
borrowed money in excess of a total of $50,000; or
(vi) the Payor dissolves, liquidates or sells or otherwise
transfers all or a substantial part of its property.
(b) If an Event of Default shall occur, the entire unpaid principal
amount of this Note, together with all accrued interest and all other sums then
due and payable hereunder, shall accelerate and become immediately due and
payable without presentment, demand, protest or notice of any kind whatsoever,
including, but not limited to, notice of dishonor, nonpayment and maturity, all
of which are hereby expressly waived.
4. Payor's Waivers and Consents.
(a) The Payor hereby assents to any indulgence, any extension of the
time for payment or any modification of the terms of payment of any part or the
whole of the indebtedness evidenced hereby and to any substitution, exchange or
release of collateral, if any, granted or permitted by the holder of this Note.
(b) The Payor hereby waives presentment, demand, protest and, except
as expressly set forth in paragraph 3(a)(iii), notice of any kind whatsoever in
connection with the delivery, acceptance, performance and enforcement of this
Note.
(c) THE OBLIGATIONS OF THE PAYOR TO PAY PRINCIPAL, INTEREST AND
OTHER SUMS AS PROVIDED IN THIS NOTE ARE ABSOLUTE AND UNCONDITIONAL, AND ARE (A)
NOT SUBJECT TO ANY DEFENSE OR ANY RIGHT OF SET-OFF, RECOUPMENT, COUNTERCLAIM OR
DEDUCTION OF ANY KIND WHICH MAY OTHERWISE BE AVAILABLE TO THE PAYOR AND (B)
WITHOUT ANY RIGHT OF SUSPENSION, DEFERMENT OR REDUCTION THE PAYOR MIGHT
OTHERWISE HAVE AT LAW OR IN EQUITY AGAINST GOODKIND LABATON RUDOFF AND SUCHAROW
LLP OR ANY OTHER PAYEE OR HOLDER OF THIS NOTE. THE PAYOR HEREBY WAIVES THE RIGHT
TO ASSERT ANY SUCH DEFENSE (OTHER THAN ACTUAL PAYMENT OF THIS NOTE OR THE
FAILURE TO GIVE ANY NOTICE EXPRESSLY REQUIRED BY SECTION 3 HEREOF) OR OTHER
RIGHT IN ANY ACTION OR PROCEEDING TO ENFORCE THIS NOTE.
5. Miscellaneous.
(a) Any notice required or desired to be given hereunder shall be
sufficiently given if in writing and if (i) delivered personally, (ii) mailed by
certified mail, return receipt requested, postage prepaid, (iii) sent by
Recognized overnight courier, charges prepaid, or (iv) sent by facsimile
transmission (if to Payor, (212) 750-2320, or if to Goodkind Labaton Rudoff &
Sucharow LLP, (212) 818-0477) and a transmission confirmation is received by the
sender; or to such other payee, holder, address or facsimile number as shall be
specified by the appropriate party or by any other payee or holder of this Note
by like notice. Service of process
<PAGE>
may be made by certified mail, return receipt requested, postage prepaid.
(b) The Payor shall pay the holder of this Note, on demand, all
costs and expenses in connection with the modification, amendment and
enforcement of this Note, whether through legal proceedings, negotiations or
otherwise (such costs and expenses shall include, without limitation, the
reasonable hourly charges and disbursements of the holder or other legal
counsel). The Payor shall, and does hereby, indemnify each holder of this Note
and hold it harmless from and against any and all claims, damages and
liabilities in connection with or arising out of any investigation, proceeding
or litigation relating to or arising out of this Note or any transaction
incident hereto. This paragraph 5(b) shall survive payment in full of this Note.
(c) No course of dealing between the Payor and the holder of this
Note or any delay on the part of the holder hereof in exercising any right
hereunder shall operate as a waiver of any right of the holder hereof, except to
the extent expressly waived in writing by the holder hereof. No delay or
omission by the holder of this Note to exercise and right hereunder shall impair
any such right or operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or future exercise thereof, or the exercise
of any other right. The remedies provided herein are cumulative and are not
exclusive of any remedy provided by law or in equity.
(d) Upon receipt by the Payor of evidence reasonably satisfactory to
the Payor of the loss, theft, destruction or mutilation of this Note and of an
indemnity agreement reasonably satisfactory to the Payor and upon surrender and
cancellation of this Note, if mutilated, the Payor shall make and deliver a new
promissory note of like tenor, in lieu of this Note. Any promissory note made
and delivered in accordance with the provisions of this paragraph shall be dated
as of the date from which unpaid principal and interest has then accrued on the
note so lost, stolen, destroyed or mutilated.
(e) The provisions of this Note shall be binding upon the Payor, its
legal representatives (including trustees in bankruptcy), successors and
assigns, and all endorsers and other persons liable under this Note.
(f) The validity, construction and enforcement of this Note shall be
governed by the internal laws of the State of New York, excluding rules
applicable to conflicts of law. This Note has been made, and is intended to be
performed, in the State of New York. Any action or proceeding concerning this
Note shall be brought in a state or federal court located in the State and
County of New York and in no other forum, and the parties hereby submit to the
exclusive jurisdiction of such courts. The provisions of this Note are
severable, and the invalidity or unenforceability of any provision shall not
alter or impair the remaining provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the Payor has duly executed and delivered this Note as
of the date first above written
Attest: GLOBAL INTELLICOM, INC.
________________________________ _______________________________
Elaine Ranieri, Assistant Howard Maidenbaum, Executive
Secretary Vice President and Treasurer
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
On the _____________________ day of February, in the year one thousand
nine hundred and ninety-six, before me personally came Howard Maidenbaum, to me
known, who being by me duly sworn, did depose and say that he resides at
________________ New York; that he is Executive Vice President and Treasurer of
Global Intellicom, Inc., the Company described in and which executed the above
instrument; and that he signed his name thereto by like authority.
________________________________
Notary Public
<PAGE>
NON-NEGOTIABLE PROMISSORY NOTE
$232,085 February ______, 1996
FOR VALUE RECEIVED, GLOBAL INTELLICOM, INC., a Nevada corporation (the
"Payor"), having an office and address for notice purposes at 747 Third Avenue,
New York, Nev York 10017, hereby unconditionally promises to pay to the order of
Goodkind Labaton Rudoff & Sucharow LLP, its successors and assigns at its
offices at 100 Park Avenue, New York, New York 10017, or at such other place as
the holder of this Note may from time to time designate in writing to the Payor,
the principal amount of TWO HUNDRED THIRTY-TWO THOUSAND EIGHTY-FIVE DOLLARS
($232,085) on December 31, 1996. Notwithstanding anything contained in this Note
to the contrary, from and after the occurrence of an Event of Default (as
defined in paragraph 3(a) hereof) the unpaid principal amount of this Note shall
bear interest at a rate per annum equal to 3% above the publicly announced prime
interest rate per annum of Citibank, N.A. on the date on which such Event of
Default occurs, but in no event in excess of the maximum interest rate permitted
by applicable law. This Note may be prepaid, in whole or in part, at any time
prior to the occurrence of an Event of Default without premium or penalty. All
payments pursuant to this Note shall be made in the lawful currency of the
United States of America.
If the promissory note of even date made by the Payor to the order of
Goodkind Labaton Rudoff & Sucharow LLP in the principal amount of $314,000 (the
"A Note") is paid in full in accordance with its terms and no Event of Default
shall have occurred under the A Note or this Note prior to such payment, then
this Note shall thereupon be deemed to be cancelled and of no further force or
effect.
1. Payor's Representations. Payor represents to and agrees with each
holder of this Note that:
(a) The Payor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada and has the corporate
power to own its Properties and carry on its business as currently conducted.
The Payor is duly qualified as a foreign corporation to do business and is in
good standing in the State of New York.
(b) The Payor has full right, power and authority to execute,
deliver and perform this Note, each of which has been duly authorized by all
requisite corporate action. The execution, delivery and performance of this Note
by the Payor does not and, with notice, lapse of time or both, will not conflict
with, or result in the breach of, (i) its certificate of incorporation or
by-laws, (ii) any provision of any agreement or instrument to which it is a
party or by which it is bound or (iii) any provision of any law, regulation or
order, injunction or decree of any court or governmental authority. No consent
or approval of any person not already validly obtained is or will be required in
connection with the execution, deliver or performance of this Note.
(c) This Note constitutes the valid and legally binding obligation
of the Payor,
<PAGE>
enforceable in accordance with its terms.
(d) The Payor has not relied upon Goodkind Labaton Rudoff & Sucharow
LLP or David Mortman, Esq. in connection with the execution and delivery of this
Note or the documents incident hereto, and has obtained the advice of other
independent counsel satisfactory to it in connection with such matters.
2. Payor's Covenants. Payor covenants and agrees with each holder of this
Note that, as long as any amount remains payable hereunder:
(a) Payor shall give notice to the holder of this Note as promptly
as practicable, but in any event within 48 hours, after the occurrence of any
event which Constitutes or, with notice to the Payor, or lapse of time or both,
would constitute an Event of Default or a material adverse change in the
financial condition or operations of the Payor.
(b) The holder of this Note, and its representatives, shall have the
right to discuss the finances of the Payor as it relates to Payor's ability to
repay this Note, and to be advised as to the same by, the Payor's chief
financial officer or other officer or employee having knowledge of the facts at
such reasonable times and intervals as the holder may designate, but not so as
to interfere unreasonably with the Payor's operations.
3. Events of Default.
(a) The occurrence of any one or more of the following events or
conditions (each, an "Event of Default") shall constitute a default hereunder:
(i) nonpayment within 20 days of the date when due of any
payment of principal under this Note;
(ii) any representation of the Payor hereunder shall be
materially false when made;
(iii) (A) a breach by the Payor of paragraph 2(a) or (B) a
breach by the Payor of any other provision of this Note (except as described in
(i) and (ii) above) which breach is not remedied within 5 days after the giving
of written notice (or 8 days thereafter if notice is given only by certified
mail) from the holder of this Note; and
(iv) the occurrence of any "Event of Default" under, and as
defined in, the A Note.
(b) If an Event of Default shall occur, the entire unpaid principal
amount of this Note, together with all accrued interest and all other sums then
due and payable hereunder, shall accelerate and become immediately due and
payable without presentment, demand, protest or notice of any kind whatsoever,
including, but not limited to, notice of dishonor, nonpayment and maturity, all
of which are hereby expressly waived.
<PAGE>
4. Pavor's Waivers and Consents.
(a) The Payor hereby assents to any indulgence, any extension of the
time for payment or any modification of the terms of payment of any part or the
whole of the indebtedness evidenced hereby and to any substitution, exchange or
release of collateral, if any, granted or permitted by the holder of this Note.
(b) The Payor hereby waives presentment, demand, protest and, except
as expressly set forth in paragraph 3(a)(iii), notice of any kind whatsoever in
connection with the delivery, acceptance, performance and enforcement of this
Note.
(c) THE OBLIGATIONS OF THE PAYOR TO PAY PRINCIPAL, INTEREST AND
OTHER SUMS AS PROVIDED IN THIS NOTE ARE ABSOLUTE AND UNCONDITIONAL, AND ARE (A)
NOT SUBJECT TO ANY DEFENSE OR ANY RIGHT OF SET-OFF, RECOUPMENT, COUNTERCLAIM OR
DEDUCTION OF ANY KIND WHICH MAY OTHERWISE BE AVAILABLE TO THE PAYOR AND (B)
WITHOUT ANY RIGHT OF SUSPENSION, DEFERMENT OR REDUCTION THE PAYOR MIGHT
OTHERWISE HAVE AT LAW OR IN EQUITY AGAINST GOODKIND LABATON RUDOFF AND SUCHAROW
LLP OR ANY OTHER PAYEE OR HOLDER OF THIS NOTE. THE PAYOR HEREBY WAIVES THE RIGHT
TO ASSERT ANY SUCH DEFENSE (OTHER THAN ACTUAL PAYMENT OF THIS NOTE OR THE A NOTE
AS PROVIDED IN THE SECOND PARAGRAPH OF THIS NOTE OR THE FAILURE TO GIVE ANY
NOTICE EXPRESSLY REQUIRED BY SECTION 3 HEREOF) OR OTHER RIGHT IN ANY ACTION OR
PROCEEDING TO ENFORCE THIS NOTE.
5. Miscellaneous.
(a) Any notice required or desired to be given hereunder shall be
sufficiently given if in writing and if (i) delivered personally, (ii) mailed by
certified mail, return receipt requested, postage prepaid, (iii) sent by
recognized overnight courier, charges prepaid, or (iv) sent by facsimile
transmission (if to Payor, (212) 750-2320, or if to Goodkind Labaton Rudoff &
Sucharow LLP, (212) 818-0477) and a transmission confirmation is received by the
sender; or to such other payee, holder, address or facsimile number as shall be
specified by the appropriate party or by any other payee or holder of this Note
by like notice. Service of process may be made by Certified mail, return receipt
requested, postage prepaid.
(b) The Payor shall pay the holder of this Note, on demand, all
costs and expenses in connection with the modification, amendment and
enforcement of this Note, whether through legal proceedings, negotiations or
otherwise (such costs and expenses shall include, without limitation, the
reasonable hourly charges and disbursements of the holder or other legal
counsel). The Payor shall, and does hereby, indemnify each holder of this Note
and hold it harmless from and against any and all claims, damages and
liabilities in connection with or arising out of any investigation, proceeding
or litigation relating to or arising out of this Note or any transaction
incident hereto. This paragraph 5(b) shall survive payment in full of this Note.
(c) No course of dealing between the Payor and the holder of this
Note or any
<PAGE>
delay on the part of the holder hereof in exercising any right hereunder shall
operate as a waiver of any right of the holder hereof, except to the extent
expressly waived in writing by the holder hereof. No delay or omission by the
holder of this Note to exercise any right hereunder shall impair any such right
or operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or future exercise thereof, or the exercise of any other
right. The remedies provided herein are cumulative and are not exclusive of any
remedy provided by law or in equity.
(d) Upon receipt by the Payor of evidence reasonably satisfactory to
the Payor of the loss, theft, destruction or mutilation of this Note and of an
indemnity agreement reasonably satisfactory to the Payor and upon surrender and
cancellation of this Note, if mutilated, the Payor shall make and deliver a new
promissory note of like tenor, in lieu of this Note. Any promissory note made
and delivered in accordance with the provisions of this paragraph shall be dated
as of the date from which unpaid principal and interest has then accrued on the
note so lost, stolen, destroyed or mutilated.
(e) The provisions of this Note stall be binding upon the Payor, its
legal representatives (including trustees in bankruptcy), successors and
assigns, and all endorsers and other persons liable under this Note.
(f) The validity, construction and enforcement of this Note shall be
governed by the internal laws of the State of New York, excluding rules
applicable to conflicts of law. This note has been made, and is intended to be
performed, in the State of New York. Any action or proceeding concerning this
Note shall be brought in a state or federal court located in the State and
County of New York and in no other forum, and the parties hereby submit to the
exclusive jurisdiction of such courts. The provisions of this Note are
severable, and the invalidity or unenforceability of any provision shall not
alter or impair the remaining provisions hereof.
IN WITNESS WHEREOF, the Payor has duly executed and delivered this Note as
of the date first above written
Attest: GLOBAL INTELLICOM, INC.
By: ___________________________ ____________________________
Elaine Ranieri, Assistant Howard Maidenbaum, Executive
Secretary Vice President and Treasurer
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
On the _____day of February, in the year one thousand nine hundred and
ninety-six, before me personally came Howard Maidenbaum, to me known, who being
by me duly sworn, did depose and say that he resides at ___________________ New
York; that he is the Executive Vice President and Treasurer of Global
Intellicom, Inc., the Company described in and which executed the above
instrument; and that he signed is name thereto by like authority.
____________________________
Notary Public
<PAGE>
To all to whom these Presents shall come or may Concern,
Know That GLOBAL INTELLICOM, INC.
A corporation organized under the laws of the State of
Nevada, as RELEASOR, in consideration of the sum of One
Dollar and other good and valuable consideration ($_____________)
received from GOODKIND LABATON & SUCHAROW LLP, a New
York limited liability partnership.
receipt whereof is hereby acknowledged, releases and discharges
as RELEASEE,
predecessor partnership and their partners, the RELEASEE, RELEASEE'S, partners,
employees, heirs, executors, administrators, successors/and assigns from all
actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgements, extents,
executions, claims, and demands whatsoever, in law, admiralty or equity, which
against the RELEASE, the RELEASOR, RELEASOR'S successors and assigns ever had,
now have or hereafter can, shall or may have, for, upon, or be reason of any
matter, cause or thing whatsoever from the beginning of the world to the day of
the date of this RELEASE; provided, however, that this Release does not apply
to, and does not affect the obligations of the RELEASEE under, the letter
agreement of even date between the RELEASEE and the RELEASOR pertaining, among
other things, to a claim by the RELEASEE against the RELEASOR in the amount of
$696,085.
The words "RELEASOR" and "RELEASEE" include all releasors and all releasees
under this RELEASE.
This RELEASE may not be changed orally.
In Witness Whereof, the RELEASOR has caused this RELEASE to be executed by its
duly authorized officers and its corporate seal to be hereunto affixed on
_________________, 1996.
In presence of: GLOBAL INTELLICOM, INC.
By: _________________________________
Howard Maidenbaum, Executive
Vice President and Treasurer
STATE OF NEW YORK, COUNTY OF NEW YORK ss.:
On February, 1996 before me personally came Howard Maidenbaum to me known,
who, by me duly sworn, did depose and say that deponent resides at
____________________________, that deponent is the Executive Vice
President/Treasurer of Global Intellicom, Inc. the corporation described in, and
which executed the foregoing RELEASE, that deponent knows the seal of the
corporation,
that the seal affixed to the RELEASE is the corporate seal, that it was affixed
by order of the board of of the corporation; and that deponent signed deponent's
name by like order.
_______________________________
<PAGE>
To all to whom these Presents shall come or may Concern,
Know That GOODKIND LABATON RUDOFF & SUCHAROW LLP
A limited liability partnership organized under the
laws of the State of New York, as RELEASOR, in
consideration of the sum of One Dollar and other good ($_____________)
and valuable consideration received from GLOBAL
INTELLICOM, INC., a Nevada corporation
receipt whereof is hereby acknowledged, releases and discharges
as RELEASEE,
,the RELEASEE, RELEASEE'S, officers,
directors and employer, heirs, executors, administrators, successors/and assigns
from all actions, causes of action, suits, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgements, extents,
executions, claims, and demands whatsoever, in law, admiralty or equity, which
against the RELEASE, the RELEASOR, RELEASOR'S successors and assigns ever had,
now have or hereafter can, shall or may have, for, upon, or be reason of any
matter, cause or thing whatsoever from the beginning of the world to the day of
the date of this RELEASE; provided, however, that this Release does not apply
to, and does not affect the obligations of the RELEASEE under, (1) the letter
agreement of even date between the RELEASEE and the RELEASOR pertaining, among
other things, to a claim by the RELEASOR against the RELEASEE in the amount of
$6,96,085, or (2) the A Note or the B Note (as defined in said letter
agreement), or (3) the letter of even date from RELEASEE to the RELEASOR
pertaining, among other things, to RELEASEE's filings with the Securities and
Exchange Commission and the absence of material changes since the dates of such
filings.
The words "RELEASOR" and "RELEASEE" include all releasors and all releasees
under this RELEASE.
This RELEASE may not be changed orally.
In Witness Whereof, the RELEASOR has caused this RELEASE to be executed by its
duly authorized officers and its corporate seal to be hereunto affixed on
, 1996.
In presence of: GOODKIND LABATON RUDOFF & SUCHAROW LLP
By: _______________________________________
,Partner
STATE OF NEW YORK, COUNTY OF NEW YORK ss.:
On February, 1996 before me personally came to me known, who, by me duly
sworn, did depose and say that deponent resides at ____________________________,
that deponent is the a Partner of Goodkind Labaton Rudoff & Sucharow LLP the
corporation described in, and which executed the foregoing RELEASE, that
deponent knows the seal of the corporation, that the seal affixed to the RELEASE
is the corporate seal, that it was affixed by order of the board of , of the
corporation; and that deponent signed deponent's name by like order of its
executive committee.
* limited liability partnership ___________________________________
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated February 16, 1996, among Goodkind Labaton
Rudoff & Suchorow LLP, a New York limited liability partnership, having a
principal place of business at 100 Park Avenue, New York, New York 10019
("Seller"); and those individuals and entities that have executed this Agreement
as of the date hereof and are named in Schedule A hereto as Purchasers (each, a
"Purchaser" and, collectively, "Purchasers") or as Beneficial Owners (each, a
"Beneficial Owner" and, collectively "Beneficial Owners"), having, in the case
of individuals, residences and, in the case of other entities, principal places
of business at the respective addresses set forth in Schedule A.
W I T N E S S E T H
WHEREAS, Seller presently owns 177,559 shares (the "Shares") of the common
stock of Global Intellicom, Inc. ("Global"), a Nevada corporation (the
"Shares");
WHEREAS, Seller, on the one hand, and Purchasers and Beneficial Owners, on
the other hand, desire to enter into this Agreement pursuant to which Seller
will sell, convey, and transfer to Purchasers and Purchasers will purchase and
acquire from Seller the Shares, which constitute all shares of Global owned by
Seller.
NOW, THEREFORE, in consideration of the premises and in reliance upon the
representations, warranties, and covenants hereinafter set forth, the parties
agree as follows:
1. The Sale and Purchase of Shares.
(a) Subject to the terms and conditions hereof, Seller hereby sells
to each Purchaser, and each Purchaser hereby purchases from Seller the number of
Shares set forth opposite such Purchaser's name in Schedule A.
<PAGE>
(b) Each Purchaser shall pay to Seller as the purchase price for the
Shares set forth opposite such Purchaser's name in Schedule A a sum equal to the
product of $1.40 multiplied by the number of such Shares, aggregating
$248,582.60 (the "Purchase Price"), payable by delivery of a certified check, or
by wire transfer to the following account:
Citibank, N.A.
ABA No. 021 0000 89
Acct. No. 3755 6977
Re: Goodkind Labaton Rudoff & Sucharow LLP
(c) Upon the due execution and delivery of this Agreement and the
payment of the Purchase Price, Seller shall deliver to Solomon & Moskowitz,
P.C., as agent for the Purchasers, (i) one or more certificates evidencing the
Shares, (ii) appropriate stock powers executed in blank with respect thereto,
and (iii) a letter of instruction to the transfer agent in the form of Exhibit A
hereto.
(d) Notwithstanding any provision of this Agreement to the contrary,
Seller shall not be required to sell any of the Shares pursuant to this
Agreement unless all of the Shares are purchased by the Purchasers in accordance
with the terms hereof. This Section 1(d) may be waived, in whole or in part, by
Seller in writing.
(e) It shall be a condition to the obligations of Seller and
Purchasers hereunder that, upon execution and delivery of this Agreement,
Solomon & Moskowitz, P.C., special counsel to Global, shall furnish Seller with
a photocopy of the signed, written opinion dated as of the date hereof that such
firm shall deliver to Global's transfer agent (which opinion shall be in form
and substance satisfactory to Seller) that Seller may sell the Shares to
Purchasers pursuant to this Agreement without registration of the Shares under
the Securities Act of 1933, as amended, pursuant to the exemption afforded by
Section 4(1) of said Act.
- 2 -
<PAGE>
2. Representations and Warranties of Seller.
Seller represents and warrants to Purchasers as follows:
(a) Seller is a duly constituted limited liability partnership under
New York law and it has full power and authority to execute, deliver, and
perform this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by it and is valid and
binding upon it in accordance with its terms.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not, and with notice
or the lapse of time, or both, would not, (i) result in the breach of any of the
terms or conditions of, or constitute a default under Seller's Partnership
Agreement or any mortgage, bond, indenture, agreement, license, lease, or other
instrument or obligation to which it is a party or by which it is bound, or (ii)
in reliance upon, and subject to, (A) the representations, warranties and
agreements of Purchasers and Beneficial Owners, (B) the accuracy of the matters
referred to in Section 3(b)(ii)(D), violate any law, regulation, judgment,
award, order, writ, injunction, or decree of any court, administrative agency,
or governmental body, provided, however, that Seller does not represent or
warrant that the sale of Shares pursuant to this Agreement will be in compliance
with the registration provisions of the Securities Act of 1933, as amended.
(c) No consent, approval, or authorization of, or declaration of
filing with, any Federal, state, or local governmental or regulatory authority
is required in connection with the valid execution and delivery of this
Agreement by it or the performance by it of the transactions contemplated
hereby, provided, however, that Seller does not represent or warrant that the
sale of Shares pursuant to this Agreement will be in compliance with the
registration provisions of
- 3 -
<PAGE>
the Securities Act of 1933, as amended.
(d) It is the beneficial and record owner of the Shares and,
assuming the conditions to the representation set forth in (A) and (B) of
Section 2(b)(ii) are satisfied, and subject to the proviso set forth in that
Section, Purchasers, upon payment for the Shares in accordance with the terms
hereof, will obtain all right, title, and interest in and to the Shares, free
and clear of all claims, encumbrances, defenses, liens, and setoffs.
(e) Seller is not aware of any material information regarding Global
other than (A) information regarding Global filed with the Securities and
Exchange Commission, and (B) public announcements of Global.
3. Representations, Warranties, and Covenants.
(a) Each Purchaser hereby represents and warrants to Seller with
respect to such Purchaser and each Beneficial Owner hereby represents and
warrants to Seller with respect to such Beneficial Owner and Dasler Corp.:
(i) With respect to Dasler Corp., (A) such Purchaser is a
corporation duly organized, validly existing, and in good standing under the
laws of its state of incorporation, (B) such Purchaser has full corporate power
and authority to execute, deliver, and perform this Agreement and to consummate
the transactions contemplated hereby, which have been duly authorized by all
requisite corporate action, and (C) all outstanding shares of common stock of
such Purchaser are owned, directly and indirectly, beneficially and of record,
by the persons who are identified in Schedule A as the Beneficial Owners.
(ii) With respect to each Purchaser other than Dasler Corp.,
such
- 4 -
<PAGE>
Purchaser has full right, power and capacity to execute, deliver and perform
this Agreement and to consummate the transactions contemplated hereby.
(iii) This Agreement has been duly executed and delivered by
each Purchaser and Beneficial Owner and is valid and binding upon such Purchaser
or Beneficial Owner in accordance with its terms.
(iv) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not, and with notice
or the lapse of time, or both, would not, (A) with respect to Dasler Corp.,
result in the breach of any of the terms or conditions of, or constitute a
default under, such Purchaser's Certificate of Incorporation or By-Laws, or (B)
result in the breach of any of the terms or conditions of, or constitute a
default under, any mortgage, bond, indenture, agreement, lease, or other
instrument or obligation to which any Purchaser or Beneficial Owner is a party
or by which it is bound, or (C) in reliance upon, and subject to, the
representations, warranties and agreements of Seller hereunder, violate any law,
regulation, judgment, award, order, writ, injunction, or decree of any court,
administrative agency, or governmental or regulatory body.
(v) No consent, approval, or authorization of, or declaration
or filing with, any Federal, state, or local governmental or regulatory
authority is required in connection with the valid execution and delivery of
this Agreement or the performance by any Purchaser or Beneficial Owner of the
transactions contemplated hereby.
(b) (i) Each Purchaser and Beneficial Owner understands that the
Shares are being offered and sold without registration under the Securities Act
of 1933, as amended (the "Securities Act"), in reliance upon an exemption
therefrom based upon Purchaser's representations
- 5 -
<PAGE>
and warranties.
(ii) Each Purchaser and Beneficial Owner represents and
warrants to, and agrees with, Seller that:
(A) Such Purchaser is purchasing the Shares for
investment purposes and with no intention of distributing or reselling any
Shares or any interest therein. Each Purchaser and each Beneficial Owner has the
requisite knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of the purchase of the Shares and
acknowledges that in purchasing the Shares such Purchaser or Beneficial Owner is
able to bear, and is prepared to continue to bear, the economic risk of the
ownership oft he Shares for an indefinite period of time, because none of the
Shares have been registered under the Securities Act and cannot be sold unless
they are registered under the Securities Act and applicable state laws, or
unless exemptions from such registration are available to Purchaser. In
addition, each Purchaser and each Beneficial Owner acknowledges and agrees that
a stop transfer order will be maintained by Global's transfer agent against the
Certificates representing the Shares to be transferred to each Purchaser and
that such Certificates shall bear a restrictive legend in customary form for
securities not registered under the Securities Act.
(B) Schedule A correctly sets forth (Y) the tax
identification number of each Purchaser and the name, and residence address of
each Purchaser other than Dasler Corp. and the principal place of business of
Dasler Corp., and (Z) the name, residence address and tax identification number
of each Beneficial Owner, being, collectively, all of the direct and indirect
beneficial and record owners of all outstanding shares of common stock of Dasler
Corp.
- 6 -
<PAGE>
(C) Each Purchaser and each Beneficial Owner is not
aware of any material information regarding Global other than (Y) information
regarding Global filed with the Securities and Exchange Commission, and (Z)
public announcements of Global and their knowledge of Global and its business
and affairs.
(D) Global has on this date represented and warranted to
the Purchasers and Beneficial Owners that (X) Global is not aware of any fact,
circumstance, development, contingency, business or financial condition of it or
of its affiliates, which would make the filings rendered to date with the
Securities and Exchange Commission under the Securities and Exchange Act of
1934, as amended, materially misleading, and that such filings do not omit to
state any materially misleading, and that such filings do not omit to state any
material fact required to be made in order to make the statements made in such
filings not misleading, (Y) Global has made all filings required under the terms
of the Securities and Exchange Act of 1934, as amended, and the rules
thereunder; and (Z) there has been no material change in the assets, business or
prospects of Global since the respective dates of such filings.
(c) Except as provided in this Agreement, neither Seller nor
any of its agents, employees, members, representatives, or attorneys has made
nay statement or representation to any other party regarding any fact or
circumstance relied upon in entering into this Agreement, and neither any
Purchaser nor any person, legal or natural, affiliated with, controlled by,
controlling, or under common control with Purchaser, including, but not limited
to, any Beneficial Owner of Purchaser, has relied upon any statement,
representation or promise of Seller (or of any officer, agent, employee,
representative or attorney for any other party) in executing this Agreement or
in purchasing the Shares.
- 7 -
<PAGE>
4. Indemnification.
(a) Each Purchaser, and each Beneficial Owner (each, an "Indemnitor"
and, collectively, the "Indemnitors") shall indemnify, defend, and hold Seller
harmless from and against all demands, claims, actions, or causes of action,
assessments, losses, damages, deficiencies, liabilities, costs and expenses
(including interest, penalties, and reasonable attorneys' fees and
disbursements) (hereinafter collectively called "Claims") arising out of or in
connection with any breach of any representation, warranty, or covenant, of such
Indemnitor contained in this Agreement or any instrument delivered hereunder.
Upon the assertion of any Claim that may give rise to a liability of an
Indemnitor hereunder, Seller shall notify the Indemnitor of the existence of
such Claim and shall give the Indemnitor reasonable opportunity to defend or
settle such Claim at the Indemnitor's own expense and with counsel of
Indemnitor's own selection. If the Indemnitor shall, within a reasonable time
after such notice, fail to defend, Seller shall have the right to undertake the
defense, compromise, or settlement of such Claim on behalf of, for the account
of, and at the risk of the Indemnitor.
(b) All of the representations, warranties, covenants and agreements
of Seller, each Purchaser and each Beneficial Owner contained herein shall
survive the consummation of the transactions contemplated hereby.
5. Further Matters Related to the Transaction.
(a) Each Purchaser and Seller shall bear his or its expenses
incurred in connection with the negotiation and preparation of this Agreement
and the consummation of the transactions contemplated hereby, including, without
limitation, all fees and expenses of agents, representatives, counsel, and
accountants.
- 8 -
<PAGE>
(b) If at any time, further documentation, assignments, transfers,
or assurances in law are necessary or reasonably desirable to carry out the
provisions hereof, Purchasers or Seller, as the case may be, shall execute and
deliver any and all tax forms, elections, assignments, transfers, other
documents, powers of attorney, and assurances in law and do all things
reasonably necessary or proper to such end, and otherwise to carry out the
provisions hereof.
(c) Any notice or other communication required or which may be given
hereunder shall be in writing and either delivered personally to the addressee
or mailed, certified or registered mail, postage prepaid, sent by recognized
overnight courier, charges prepaid, or telegraphed, telexed, faxed, or
telecopied and shall be deemed given when received by Seller at the address set
forth above or by a Purchaser or Beneficial Owner at the address set forth for
such Purchaser or Beneficial Owner in Schedule A. Any party may change the
addresses to which notices or other communications are to be sent to it or him
by giving written notice of any such change in the manner provided herein for
giving notice.
6. General.
(a) The Section headings contained in this Agreement are inserted
for convenience of reference only and shall not affect the meaning or
interpretation of this Agreement. Any reference to the masculine gender shall
also be deemed to refer to the feminine or neuter genders.
(b) This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof.
(c) This Agreement shall be governed by, construed under, and
enforced in accordance with, the laws of the State of New York applicable to
agreement made and to be
- 9 -
<PAGE>
wholly performed therein. This Agreement has been negotiated, executed and is
being performed in the State of New York. Any litigation based hereon, or
arising out of, under or in connection with this Agreement, or actions of any of
the parties hereto may be brought and maintained exclusively in the courts of
the State of New York or in the United States District Court for the Southern
District of New York. Each Purchaser each Beneficial Owner and Seller hereby
expressly and irrevocably submit to the jurisdiction of the courts of the State
of New York and of the United States District Court for the Southern District of
New York, as set forth above, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with such litigation, and further irrevocably
consents to the service of process by registered mail, postage prepaid, or by
personal service within or without the State of New York.
(d) This Agreement shall inure to the benefit of, and be binding
upon, the respective heirs, executors, administrators, successors, and assigns
of the parties hereto. Nothing in this Agreement, express or implied, is
intended to confer upon any third party, not a party hereto, any rights or
remedies under or by reason of this Agreement.
(e) This Agreement may be amended, modified, superseded, or
cancelled, and any of the terms, covenants, representations, warranties, or
conditions hereof may be waived, only by an instrument executed by the party to
be charged. The failure of any party at any time or times to require performance
of any provision hereof shall in no manner affect the right of such party at a
later time to enforce the same. No waiver of any nature, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition of any breach or a waiver of
any other condition or of any breach of any other term, covenant,
representation, or warranty of this Agreement.
- 10 -
<PAGE>
(f) This Agreement may be executed in any number of counterparts,
each of which when executed and delivered by all the parties shall be deemed to
be an original, but which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
Purchasers: Seller:
________________________ GOODKIND LABATON RUDOFF
WAYNE ROGERS & SUCHAROW LLP
________________________ By: _____________________________
AMY ROGERS Richard P. Ackerman, Partner
________________________
SUSAN BENDER Purchasers:
________________________ _________________________________
STANLEY TANNENBAUM ANTHONY CUCCHI, SR.
Beneficial Owners: DASLER CORP.
By: ______________________________
____________________________ ______________, President
AMANDA _______________
____________________________ __________________________________
MARTI MULLER HOWARD MAIDENBAUM
__________________________________
DAVID MORTMAN
- 11 -
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
RESIDENCES OR PRINCIPAL NAMES, RESIDENCES AND TAX NUMBER OF
PLACES OF BUSINESS AND TAX ID NUMBERES OF SHARES
NAME OF PURCHASER ID NUMBERS OF PURCHASER BENEFICIAL OWNERS PURCHASED PURCHASE PRICE
- ----------------- -------------------------- ------------------------- --------- --------------
<S> <C> <C> <C> <C>
ANTHONY CUCCI 27,593 $38,630.20
DASLER CORP. 27,593 $38,630.20
HOWARD MAIDENBAUM 27,594 $38,631.60
DAVID MORTMAN 27,593 $38,630.20
WAYNE AND AMY ROGERS 27,593 $38,630.20
SUSAN BENDER 27.593 $38.630.20
STANLEY TANNENBAUM 12,000 $16,800.00
</TABLE>
WORLD CAPITAL FUNDING, INC.
INVESTMENT BANKING
1750 30TH STREET, SUITE 1176
BOULDER, COLORADO 80301
303/443-9170 o FACSIMILE 303/443-3589
August 21, 1996 CONFIDENTIAL
Global Intellicom, Inc.
via fax: (212) 317-9476
Attention: David Mortman, Chairman
Dear Mr. Mortman:
This letter confirms that Global Intellicom, Inc. ("the Company") has
retained World Capital Funding, Inc. (WCF) on the terms and conditions set forth
herein, as the Company's exclusive agents to arrange financing (the "Financing")
as is defined in paragraph 1 for the Company. It is contemplated that the
Financing will consist of the sale of up to 500,000 shares of the Company's
Convertible Preferred Stock, $10 stated value, (such Preferred Stock being
hereinafter referred to as the "Securities) for a realized value of
$5,000,000.00 US Dollars. The securities offered in the first traunch (200,000)
shall be known as the Company's Series A Convertible Preferred stock. The
securities offered in the second traunch (300,000) shall be known as the
Company's Series B Convertible Preferred stock.
The shares shall be convertible to common stock at the option of the
holder, after 41 days at a price equivalent to a twenty-five percent discount
form the average high closing bid price for five days prior to the conversion or
a thirty-five percent discount from the closing price on the day of the closing
of this transaction, whichever is less.
1. Services to be Rendered.
(a) The Company hereby retains WCF and authorizes WCF to act as its
exclusive agent in connection with the placement of the Securities pursuant to
the exemption from registration under the Securities Act of 1933, as amended
(the "Act"), provided by Regulation S promulgated under the Act ("Regulation S")
and subject to the terms of this Agreement. In addition, WCF retains right of
first refusal on any Regulation D financings for a period of ten (10) business
days. If WCF elects to proceed with the Reg D funding, it shall commence funding
within 7 business days of the 10 day first right of refusal period. Such
appointment shall be effective (only if signed subscription agreements have been
received for the Series A Convertible Preferred stock on or before August 30,
1996, and signed subscription agreements have been received for the Series B
Convertible Preferred stock within 45 days of the closing of escrow for the
Series A Convertible Preferred stock) for a period of 1 year from the date of
delivery to WCF by the Company of the Offering Materials (as defined in
Paragraph 4(a) hereof (the "Offering Period"). WCF shall be deemed to have
satisfied all applicable time limit requirements by delivering signed
subscription agreements by the deadline provided it has delivered the funds to
the escrow agent 7 business days thereafter. WCF shall not be deemed as agent of
the Company
<PAGE>
for any other purpose. The Company agrees that until the termination of this
engagement letter it will not, directly or indirectly, seek to arrange or place
any equity, debt or convertible security financing, without the express written
consent of WCF. The proceeds shall be deposited with an escrow agent in a
special account (the "Escrow Account") pursuant to an escrow agreement to be
entered into between WCF, the Company and an escrow agent acceptable to WCF and
the Company, and shall be paid, less WCF's Placement Fee and Expense Allowance
(each as defined in Paragraph 2 below), to the Company at a closing or closings
held with respect to the sale of the Securities (each a "Closing") against
delivery of the appropriate amount of Securities sold.
(b) It is contemplated that WCF, on the terms and conditions set forth
herein, and subject to performance by the Company of all its obligations
hereunder, the completeness and accuracy of the Company's representations and
warranties set forth herein, and satisfactory completion of WCF's due diligence
review, will use it's reasonable best efforts to place the Securities during the
Offering Period (defined in Paragraph 1(a) above). WCF shall cause each person
who seeks to purchase Securities to complete a subscription agreement containing
customary representations, warranties and other information. The Company shall
have the right to review each such subscription agreement prior to its agreement
to sell Securities to such person; provided, however, that the Company shall
accept the subscriptions from each subscriber who executes a subscription
agreement indicating that it is a foreign "non-United States" person who
compiles with the requirements for purchase under Regulation S. This engagement
letter does not constitute an understanding or a commitment, express or implied,
by WCF to provide the Financing from its own account.
2. Fees and Expenses.
(a) As compensation for placing the Securities, the Company shall pay WCF
a placement fee equal to 10% (the "Placement Fee") of the gross proceeds from
the sale of the Securities placed by WCF. The Placement Fee with respect to each
sale of Securities shall be payable in cash from the escrow account concurrently
with each Closing. In addition, the Company shall issue to WCF 5,000 restricted
shares of its common stock for every $1,000,0000 in fully paid subscriptions.
(b) In addition to any other fees payable to WCF hereunder, if at any time
commencing with the date hereof and ending 18 months after termination of this
letter or the Closing (whichever is later) a party introduced to and
acknowledged by the Company by WCF shall purchase or commit to purchase
securities of the Company (which commitment the Company shall have accepted or
shall subsequently accept), WCF shall receive as compensation the Placement Fee
that would have been payable and issuable had such purchases occurred in
connection with the Financing, regardless of the type of securities so purchased
or the form of payment therefor.
(c) It shall be the Company's obligation to bear all of its expenses in
connection with the proposed Financing, including, but not limited to the
following: printing and duplication costs, postage and mailing expenses with
respect to the transmission of Offering Materials
- 2 -
<PAGE>
(defined in Paragraph 4 below), registrar and transfer agent fees, counsel, and
accounting fees and issue and transfer taxes, any travel and hotel expenses, if
any. The Company will be obligated to reimburse WCF for any such expenses
incurred by it with respect to the Financing in an amount up to Thirty Thousand
Dollars ($30,000), payable upon closing and presentation of an appropriate
accounting, only if WCF has complied with the time limits set forth in paragraph
1(a).
3. Obligations Limited. WCF shall be under no obligation to make an independent
investigation or inquiry as to any information regarding the Company or any
representations of the Company and shall have no liability in regard thereto.
4. Offering Materials.
(a) The Company agrees with WCF that the Company will as promptly as
practicable deliver offering materials which shall include all filings made with
the Securities and Exchange Commission since the beginning of the Company's last
completed fiscal year and all other information with respect to the business and
properties of the Company and any recent developments. Such offering material
(the "Offering Material") shall comply with all applicable securities laws. The
Company will be solely responsible for the contents of the Offering Material and
any other written information provided to any offeree with the prior approval of
the Company, and the Company represents that the Offering Materials will not, as
of the date of the offer or sale of any Securities, contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made, in light of the circumstances under which they were made,
not misleading. The Company agrees to advise WCF promptly of the occurrence of
any event or any other change, which results in the Offering Materials
containing any untrue statement of a material fact or omitting to state any
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. The
Company authorizes WCF to provide the Offering Materials in the form provided by
the Company to prospective purchasers of Securities.
(b) The Company and WCF shall have the right to approve the Offering
Materials and any other written communications form the Company or any person
acting on its behalf, which could be deemed to constitute offering materials in
connection with the offer and sale of the Securities.
(c) The Company's financial and operational history, its capitalization,
its present condition, financial and otherwise, assets and prospects, shall be
as represented to WCF in the written material delivered to WCF by the Company.
The Company shall supply WCF with such financial statements, contracts and other
corporate records and documents as WCF shall deem necessary and it shall supply
WCF counsel with all financial statements, contracts, documents and other
corporate papers as may be reasonably requested. In addition, WCF shall be
promptly and fully informed by the Company of any events which might have a
material effect on the financial condition, results of operations, assets or
prospects of the Company.
- 3 -
<PAGE>
5. Representations, Warranties and Covenants.
(a) The Company represents and warrants that this letter has been duly
authorized, executed and delivered by the Company and constitutes a valid and
binding agreement of the Company's enforceable against the Company in accordance
with its terms except that enforcement may be limited for bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or affecting
the enforcement of creditors' rights generally and by general equity principles.
The Company further represents and warrants that consummation of the
transactions contemplated herein will not conflict with or result in a breach of
any of the terms, provisions or conditions of any written agreement to which it
is a party.
(b) The Company has not offered the Securities in the United States and no
directed selling efforts have been made in the United States which could
reasonably be expected to result in general preconditioning of the United States
market for the Securities. Subject to the requirements of law, the Company shall
not make any public announcement of the Financing without the prior written
consent of WCF and in any event, shall make no such disclosure which could be
deemed to cause the exemption from registration provided by Regulation S to
become inapplicable.
6. Termination Payments. Except as to the nonrefundable payment made pursuant to
Paragraph 2(b) hereof, neither WCF nor the Company shall be responsible for any
expense of the other for any charges or claims related to the proposed Financing
or otherwise if the sale of Securities contemplated by this letter is not
consummated, except that if after the date of this letter but prior to the
delivery of the Offering Materials the Company determines not to proceed with
the offering contemplated by this letter, the Company shall promptly pay to WCF
an amount equal to $10,000, and if after the delivery of the final Offering
Materials the Company determines not to proceed with the offering contemplated
by this letter, the Company shall promptly pay to WCF an amount equal to
$25,000. Such amounts shall be in addition to any other fees and expense
obligations then due or which may subsequently become due to WCF hereunder.
7. Indemnity; Contribution.
(a) The Company agrees to indemnify and hold harmless WCF, and each
person, if any, who controls WCF and their respective employees, officers and
directors, their affiliates any controlling person of any of them (each an
"indemnified party") from and against all claims, damages, losses, liabilities,
costs and expenses (collectively, for purposes of this subparagraph (a),
"liabilities" as the same are incurred (including, without limitation, any
actual, legal or other expenses reasonably incurred in connection with
investigating, preparing to defend or defending against any action, claim, suit
or proceeding (including an investigation) commenced or threatened, or in
appearing or preparing for pretrial proceeding such as a deposition)) which
arises out of or in connection with this engagement letter, the performance of
any services pursuant to this engagement letter or the Financing contemplated
hereby (except in any event liabilities arising form acts or representations of
WCF which have not been authorized by the Company or to the extent they arise
out of or in conjunction with the use of information included in the
- 4 -
<PAGE>
Offering Materials which concerns WCF or the plan of distribution of the
Securities and which was provided in writing to the Company by WCF for inclusion
therein.)
(b) The party seeking indemnification shall promptly notify the Company by
letter or telecopy or telegram, confirmed by letter, of any claim, suit, action
or proceeding commenced or threatened to be commenced against such indemnified
party promptly after such indemnified party shall have received actual notice
thereof; provided, however that the failure by any indemnified party to give
such notice shall not relieve any indemnifying party of its obligations
hereunder except to the extent of actual prejudice directly resulting from such
failure. The Company shall not be required to make reimbursement or payment of
any settlement effected without its prior written consent, which consent shall
not be unreasonably withheld.
(c) In the event of the assertion against any indemnified party of any
such claim or the commencement of any such suit, action or proceeding, the
Company shall be entitled to participate in such suit, action or proceeding, and
in the investigation of such claim, and, after written notice from the Company
to the indemnified party, to assume the investigation or defense of such claim,
suit, action or proceeding with counsel of its choice at its expense; provided,
however, that such counsel shall be reasonably satisfactory to the indemnified
party. Notwithstanding, the election of the Company to assume the defense or
investigation of such claim, suit, action or proceeding, the indemnified party
shall have the right to employ separate counsel and to participate in the
defense or investigation of such claim, suit, action or proceeding, and the
Company shall bear the expense of one such separate counsel, if (i) counsel to
the indemnified party in good faith advises the indemnified party that use of
counsel chosen by the Company could give rise to a conflict of interest and both
are parties to the suit, (ii) the Company shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of any such
litigation or proceeding, or (iii) the Company shall authorize the indemnified
party to employ separate counsel at the expense of the Company.
(d) If for any reason the foregoing indemnification is unavailable to the
indemnified party or insufficient to hold the indemnified party harmless, the
Company shall contribute to the amount paid or payable by the indemnified party
as a result of such claim, suit, action, proceeding, damage, loss, liability,
cost or expense for which indemnification is contemplated by paragraphs (a) and
(b) above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the other party or parties
on the other hand in connection with the matters covered by this engagement
letter, or (ii) if the allocation provided by clause (iii) is not permitted by
applicable law, in such proportion as is appropriate to select not only the
relative benefits received by the parties from the placement of the Securities,
but also the relative fault of the parties in connection with the statements or
omissions which resulted in such claims, suits, actions, proceedings, damages,
losses, liabilities, costs and expenses, as well as any relevant equitable
consideration. The relative benefits received by the Company on the one hand and
WCF on the other shall be deemed to be in the same proportion as the total
proceeds from the placement of the Securities (net of the fees and expenses paid
to WCF pursuant to Paragraph 2) received by the Company bears to the fees
received by WCF pursuant to Paragraph 2. Relative fault of the Company, on the
one hand, and of WCF, on the other, shall
- 5 -
<PAGE>
be determined by reference to, among other things, the parties' relative intent,
knowledge and opportunity to correct or prevent such statement or omissions.
8. Notices. Any notice or other communication to be given to the Company
hereunder may be given by delivering the same in writing to the address set
forth above, and any notice or other communication to be given to WCF may be
given by delivering the same to World Capital Funding, Incorporated, 1750 30th
Street, Suite 1176, Boulder, Colorado 80301, Attention: Keith A. Mazer,
President, or in each case, such other address of which a party shall have
received notice. Any notice or other communication hereunder shall be deemed
given three days after deposit in the mail if mailed by certified mail, return
receipt requested, or on the day after deposit with an overnight courier service
for next day delivery, or on the date personally delivered.
9. Miscellaneous. This letter sets forth the entire understanding of WCF and the
Company concerning the subject matter hereof and supersedes and prior
communications, understandings and agreements between the parties. This letter
cannot be changed, nor can any of it's provisions be waived, except by a writing
signed by WCF and the Company. This letter shall be governed by the laws of the
State of Colorado without regard to its conflict of laws provisions. The
headings contained in this letter are for reference purposes only and shall not
affect in any way the meaning or interpretation of the provisions hereof. This
letter may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
Please executed a copy of this letter to confirm your agreement in
connection with the proposed offering referred to herein. This letter
constitutes a letter of intent only and except for Paragraphs 2, 6 and 7 hereof
no provision of this letter shall be binding on any party unless the financing
is consummated. You acknowledge and agree that there shall be no binding
commitment upon either WCF or the Company to proceed with the Financing.
Very truly yours,
WORLD CAPITAL FUNDING, INCORPORATED
By: ______________________________________
Keith A. Mazer, President
The terms set forth in the foregoing letter are agreed to and accepted by us:
Global Intellicom, Inc.
By: ___________________________________
N. Norman Muller, Chairman
- 6 -
LEAD GENERATION / CORPORATE RELATIONS AGREEMENT
THIS AGREEMENT is made this 15th day of August, 1996, between CORPORATE
RELATIONS GROUP, INC., a Florida corporation (hereinafter "CRG"), and GLOBAL
INTELLICOM INC., (hereinafter the "Client").
RECITALS
1. The Client wishes to retain CRG to provide corporate relations services to
the Client.
2. CRG is willing to provide such corporate relations services as are more
fully described herein.
NOW THEREFORE, in consideration of the mutual promises contained herein, it is
agreed as follows:
1. Furnishing of Information by Client. The Client shall furnish to CRG
information about the Client such as copies of disclosure and filing
materials, financial statements, business plans, promotional information
and background of the Client's officers and directors ("Information
Package"). The Client shall update the Information Package on a continuous
basis. The Client understands that the sole purpose for providing CRG with
the Information Package is for utilization in a Lead Generation /
Corporate Relations program. CRG is not obligated to assess the financial
viability of the Client. CRG may rely on, and assume the accuracy of the
Information Package.
2. Representations and Warranties of Client. The Client represents that all
information included in the Information Package furnished to CRG shall
disclose all material facts and shall not omit any facts necessary to make
statements made on behalf of the Client not misleading.
3. Covenants of the Client. The Client covenants and warrants that any
information submitted for dissemination will be truthful, accurate, in
compliance with all copyright and all other applicable laws and
regulations and will not be submitted in connection with any improper or
illegal act or deed.
4. Based on the Information Package, CRG will perform the services more fully
described in Exhibit "A" for a period of twelve (12) months pursuant to
the terms hereof, which services shall specifically include CRG making
oral representations on behalf of the Client pursuant to the following
procedures:
(a) Preparation of Proofs. CRG shall prepare proofs and or tapes of the
agreed upon materials and information, as set for disseminations,
for the Client's review and
<PAGE>
approval;
(b) Correction and Changes of Proofs and or Tapes. CRG shall make all
corrections and changes that the Client may request;
(c) Sign Offs. All approvals, corrections and change of proofs by the
Client shall be signed by a duly authorized representative of the
Client. The Client hereby designates the individual(s) listed in
Exhibit "C" hereof as authorized representatives for purposes of
this paragraph 4(a), (b) and (c); and CRG may rely upon this
designation.
5. Compensation. Refer to Exhibit "B".
6. It is understood and agreed by the Parties that the above compensation in
U.S. currency, or free trading shares of the Company, should be paid
timely upon execution of this Agreement. CRG will retain the option, but
is not compelled to begin it's performance under this Agreement prior to
the payment of such compensation in U.S. currency or free trading shares.
7. Assumption of Liability and Indemnification. The Client assumes and claims
all responsibility and liability for the content of all information
disseminated on behalf of the Client which have been approved by Client.
The Client shall indemnify and hold CRG, its subsidiaries and parent
company harmless from and against all demands, claims, or liability
arising for any reason due to the context of information disseminated on
behalf of the Client. This indemnity shall include any costs incurred by
CRG including, but not limited to, legal fees and expenses incurred both
in administrative proceedings, at trial and appellate levels, in
settlement of claims and payment of any judgment against CRG.
8. Assignment and Delegation. Neither party may assign any rights or delegate
any duties hereunder without the other party's express prior written
consent.
-2-
<PAGE>
9. Entire Agreement. This writing contains the entire agreement of the
parties. No representations were made or relied upon by either party,
other than those expressly set forth. Furthermore, the Client understands
that CRG makes no guarantees, assurances or representations in regard to
the results of its corporate relations program. No agent, employee or
other representative of either party is empowered to alter any of the
above terms, unless done in writing and signed by an executive officer of
the respective parties.
10. Controlling Law and Venue. This Agreement's validity, interpretation and
performance shall be controlled by and construed under the laws of the
State of Florida. The proper venue and jurisdiction shall be the Circuit
Court in Orange County, Florida.
11. Prevailing Party. In the event of the institution of any legal proceedings
or litigation, at the trial level or appellate level, with regard to this
Agreement, the prevailing party shall be entitled to receive from the
non-prevailing party all costs, reasonable attorney's fees and expenses.
12. Failure to Object not a Waiver. The failure of either party to this
Agreement to object to, or to take affirmative action with respect to any
conduct of the other which is in violation of the terms of this Agreement
shall not be construed as a waiver of the violation or breach, or of any
future violation, breach or wrongful conduct.
13. Notices. All notices or other documents under Agreement shall be in
writing and delivered personally or mailed by certified mail, postage
prepaid, addressed to the representative or Company as follows:
COMPANY: CORPORATE RELATIONS GROUP, INC.
1801 Lee Road, Suite 301
Winter Park, FL 32789
Attention: Roberto E. Veitia, President
CLIENT: GLOBAL INTELLICOM INC.
747 Third Avenue
New York, New York 10017
Attention: N. Norman Muller, Chairman of the Board
-3-
<PAGE>
14. Headings. Headings in this Agreement are for convenience only and shall
not be used to interpret or construe its provisions.
15. Time. For all intents and purposes, time is of the essence with this
Agreement.
16. Agreement Not To Hire. The Client understands and appreciates that CRG has
invested a tremendous amount of time, energy and expertise in the training
of its employees to be able to provide the service that Client desires.
Client further understands that should an employee be enticed to leave,
then CRG will be damaged in an amount the parties are incapable of
calculating at this time. Therefore, the Client agrees not to offer
employment to any employee or subcontractor of CRG, nor to allow any
officer or director of Client to offer such employment with Client or any
other company with whom officers and directors of Client are employed or
hold a financial stake for a period of three (3) years.
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
CORPORATE RELATIONS GROUP, INC.
BY: /s/ Roberto E. Veitia BY: /s/ James W. Spratt, III
------------------------- ----------------------------
Roberto E. Veitia James W. Spratt, III
President VP - Venuture Capital
GLOBAL INTELLICOM INC.
BY: /s/ Anthony R. Cucchi
-------------------------
Anthony R. Cucchi
President
-4-
<PAGE>
EXHIBIT "A"
The Corporate Relations Services to be provided by CRG for a twelve (12) month
period are as follows:
I. ADVERTISING and PRINTING SERVICES
A. MoneyWorld Magazine - Lead Generation mailing (150,000 print run
total for the twelve month period)
o Eighteen page, four color magazine will be created of which
four page advertorial will be dedicated to the Client.
o Creative concept, color separations, copy work and printing
o 150,000 to be mailed
B. Growth Industry Report - Four page, four color follow-up mail piece
designated for additional information purposes that is mailed to
respondents. A total of 7,500 will be printed.
C. The Core Broker Program - CRG will produce a core of 8-10 retail
brokers, market makes and/or money managers who will take positions
in the stock of "GLOBAL INTELLICOM INC.". This process will begin
immediately upon CRG receiving the payment as stipulated in Exhibit
"B" and will be completed no later than a month before mailing
occurs. Upon completion, selection and approval of the Core Broker
Group, CRG will arrange a Core Broker meeting. This will last for
two days, which will include: a show and tell from the top
management of "GLOBAL INTELLICOM, INC." in intence training of these
core brokers.
D. Public relations exposure to newsletter writers, trade publications
and financial gurus. At CRG's discretion, it will pay for any
special reports that may be required. The Client shall be totally
responsible for all travel expenses for the purpose of due diligence
of the company by financial newsletter writers and/or brokers. The
Client will have total pre-approval rights on these trips.
E. Inclusion as a featured "Lead Generator of the Month" in
Confidential Fax Alert, a newsletter transmitted by fax to over
3,000 Brokers.
F. Preparation of a Broker Bullet Sheet to be sent to every broker who
shows interest in working the leads and the stock. (As soon as
possible).
G. Lead Tracking Summary maintained for all response leads generated
and provided.
H. Follow-up with shareholders, brokers, funds and institutions.
-1-
<PAGE>
I. Investor Relations - Press relese placements in market publications.
The Client shall pay the actual cost incurred for these wire
services.
J. Two Location Road Shows - Locations to be determined. Client will
cover all expenses of Road Shows. Client will have prior approval
over those expenses.
K. Junior Page Advertising in four (4) separate issues of MoneyWorld
Magazine.
L. Advertising Insert in Market Express mailed to 25,000 active
subscribers.
M. CRG will distribute at its cost the due diligence packages to all
inquiring brokers. The Client shall supply the necessary materials
for this package.
N. CRG guarantees a minimum of 3% return of qualified investor leads
specifically generated for the Company.
O. Advice on Fund Raising.
1. If travel is required, the Client will pay transportation and
hotel expenses.
P. Assistance in review of documentation to be sent to brokers.
1. If travel is required, the Client will pay transportation and
hotel expenses.
Q. Assistance in public relations with investment newsletter writers
and financial institutions.
1. If travel is required, the Client will pay transportation and
hotel expenses.
R. Advice on mergers and acquisitions.
1. If travel is required, the Client will pay transportation and
hotel expenses.
-2-
<PAGE>
EXHIBIT "B"
PAYMENT AGREEMENT
made by and between
GLOBAL INTELLICOM, INC.
and
CORPORATE RELATIONS GROUP, INC.
THIS AGREEMENT is made this 15th day of August, 1996, and will serve as
confirmation of payment terms for services to be provided GLOBAL INTELLICOM INC.
("CLIENT") whereby CORPORATE RELATIONS GROUP, INC. ("CRG") has agreed to perform
said services as defined in the "Lead Generation / Corporate Relations
Agreement."
TERMS
A. CLIENT will pay to CRG, FIVE HUNDRED FIFTY THOUSAND DOLLARS ($550,000 U.S.
cy).
B. This Agreement is subject to compliance with the rules of the Exchange and
Securities Commission on which Client is listed and registered.
C. It is understood and agreed by the Parties that the above compensation in
U.S. currency, or free trading shares of the Company, should be paid
timely upon execution of this Agreement. CRG will retain the option, but
is not compelled to begin it's performance under this Agreement prior to
the payment of such compensation in U.S. currency or free trading shares.
D. In the event of termination of the Agreement by Client, CRG shall be fully
released and forever discharged by Client from any further obligations or
liabilities with respect to the "Lead Generation / Corporate Relations
Agreement" and any results therefrom, save and except liabilities arising
from CRG's own negligence during the term of this Agreement. Concurrently,
Client shall be fully released and forever discharged by CRG from any and
all obligations of further payments or liabilities with respect to the
"Lead Generation / Corporate Relations Agreement." This release in no way
affects Point # 7, Page 2 of the "Lead Generation / Corporate Relations
Agreement."
-1-
<PAGE>
EXHIBIT "B"
continued
E. Shares shall be made free trading through the registration that is
mutually agreed upon by the Company's attorney and CRG's attorney.
F. Company shall issue options to CRG as outlined below.
Amount Price Duration
------ ----- --------
100,000 shares at $3.375 One (1) year from the date of this Agreement
100,000 shares at $4.05 Two (2) years from the date of this Agreement
100,000 shares at $4.70 Three (3) years from the date of this Agreement
100,000 shares at $5.40 Five (5) years from the date of this Agreement
100,000 shares at $6.75 Five (5) years from the date of this Agreement
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
CORPORATE RELATIONS GROUP, INC.
BY: /s/ Roberto E. Veitia BY: /s/ James W. Spratt, III
------------------------- ----------------------------
Roberto E. Veitia James W. Spratt, III
President VP - Venuture Capital
GLOBAL INTELLICOM INC.
BY: /s/ Anthony R. Cucchi
-------------------------
Anthony R. Cucchi
President
-2-
<PAGE>
EXHIBIT "C"
GLOBAL INTELLICOM INC. hereby designates the following person or persons to act
on its behalf for purposes of signing off on all copies pursuant to Paragraph 4
of this Corporation Relations Agreement. CRG may rely upon the signature of any
of the following:
/s/ DAVID A. MORTMAN DAVID A. MORTMAN
- --------------------------------- ---------------------------------
DIRECTOR (PLEASE SIGN) DIRECTOR (PLEASE PRINT)
/s/ A. R. CUCCHI A. R. CUCCHI
- --------------------------------- ---------------------------------
PRESIDENT (PLEASE SIGN) PRESIDENT (PLEASE PRINT)
THOMAS D. VETTERANI THOMAS D. VETTERANI
- --------------------------------- ---------------------------------
VICE PRESIDENT (PLEASE SIGN) VICE PRESIDENT, (PLEASE PRINT)
-1-
<PAGE>
EXHIBIT "C"
GLOBAL INTELLICOM INC. hereby designates the following person or persons to act
on its behalf for purposes of signing off on all copies pursuant to Paragraph 4
of this Corporation Relations Agreement. CRG may rely upon the signature of any
of the following:
/s/ N. NORMAN MULLER N. NORMAN MULLER
- --------------------------------- ---------------------------------
DIRECTOR (PLEASE SIGN) DIRECTOR (PLEASE PRINT)
_________________________________ _________________________________
PRESIDENT (PLEASE SIGN) PRESIDENT (PLEASE PRINT)
_________________________________ _________________________________
VICE PRESIDENT (PLEASE SIGN) VICE PRESIDENT, (PLEASE PRINT)
-2-
GLOBAL INTELLICOM, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
SEPTEMBER 1,
1994
(INCEPTION
YEAR ENDED YEAR ENDED DATE) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
---------------------- --------------------- -------------
<S> <C> <C> <C>
INCOME PER COMMON SHARE
INCOME:
Net income (loss) $ (1,085,388) $ 270,183 $ (158,184)
Less: Cumulative undeclared dividend
on Series 3 Convertible Preferred Stock 61,250 - -
------------- ---------- -----------
Adjusted net loss $ (1,146,638) $ 270,183 $ (158,184)
============= ========== ===========
SHARES:
Weighted average number of common
shares outstanding 3,527,053 2,927,170 2,500,000
============= ========== ===========
INCOME (LOSS) PER COMMON SHARE $ (.33) $ .09 $ (.06)
============= ========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S BALANCE SHEET AS OF DECEMBER 31, 1996 AND STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> $1,516,072
<SECURITIES> 0
<RECEIVABLES> 5,229,179
<ALLOWANCES> 168,343
<INVENTORY> 5,291,046
<CURRENT-ASSETS> 14,593,586
<PP&E> 1,522,690
<DEPRECIATION> 368,179
<TOTAL-ASSETS> 22,586,460
<CURRENT-LIABILITIES> 10,662,798
<BONDS> 0
0
3,785
<COMMON> 68,808
<OTHER-SE> 9,552,579
<TOTAL-LIABILITY-AND-EQUITY> 22,586,460
<SALES> 42,139,032
<TOTAL-REVENUES> 42,139,032
<CGS> 35,789,160
<TOTAL-COSTS> 35,789,160
<OTHER-EXPENSES> 7,310,664
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 782,966
<INCOME-PRETAX> (1,791,927)
<INCOME-TAX> (706,539)
<INCOME-CONTINUING> (1,085,388)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,085,388)
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
