CONSENT AND AMENDMENT
This Consent and Amendment, dated as of December 2, 1996, between
Tel-Save, Inc., a Pennsylvania corporation ("TS"), and Group Long Distance,
Inc., a Florida corporation (the "Company").
WHEREAS, TS and the Company entered into that certain Agreement, dated
as of July 11, 1996 (the "Advance Agreement"), providing for certain advances
by TS to the Company and amending the terms of the GLD Partition Agreements
(herein, together with other capitalized terms used herein without other
definition, as defined in the Advance Agreement); and
WHEREAS, in connection with the Company's proposed underwritten public
offering (the "Public Offering") of shares of its common stock, the Company has
requested, and TS is prepared to agree to, certain amendments to, and waive
compliance with certain provisions of, the Advance Agreement and the GLD
Partition Agreements on the terms and conditions herein set forth;
NOW THEREFORE, in consideration of the premises and mutual
agreements, provisions and covenants herein contained and other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
A. The Advance Agreement and Stockholders Agreement
Subject to the conditions set forth in Section E, below, and the
other terms and conditions hereof:
1. The Advance Agreement is amended as follows, such amendments to be,
for all purposes, effective as of July 11, l996:
(a) The following definitions are added to Section 1 thereof, in
alphabetical order:
"Early Payment Date" shall mean January 31, 1997.
"New Date" shall mean the earlier of (i) the Public Offering Date and
(ii) the Early Payment Date.
"Public Offering" shall mean the registered public offering of
securities by the Company after the date hereof.
"Public Offering Date" shall mean the date of the consummation by the
Company of the sale in the Public Offering.
(b) Section 2(d)(i) thereof is amended to add at the end thereof
in lieu of the period the following:
"; provided, however, that, on each Prepayment Date on or before
the New Date, the principal amount of the Advance that shall be
paid from the amount of the Monthly Payment since the next
preceding Prepayment Date shall equal the amount remaining, if
any, after the payments to TS referenced in clauses "first" and
"second" of Section 2(e) hereof."
(c) Section 2(d)(ii) thereof is amended to add at the end thereof
in lieu of the period the following:
"; provided, that, the provisions of this clause (ii) shall not
apply until the New Date."
(d) Section 2(d)(iii) thereof is amended to substitute for the
phrase "the ninetieth (90th) day after the date of this Agreement" the
phrase "December 31, 1996".
(e) Section 2(d)(iv) thereof is amended to add at the end thereof
in lieu of the period the following:
"; provided, further, however, that if the Public Offering Date
shall occur on or before the Early Payment Date, the principal
amount of the Advance that shall be due and payable on such
Public Offering Date by reason of the Public Offering shall be
$3,500,000 and the unpaid balance of the principal amount of
the Advance shall thereafter be due and payable over the
six-month period after the Public Offering Date, commencing on
the Prepayment Date next following the Public Offering Date, in
six equal monthly amounts on each Prepayment Date to and
including the sixth Prepayment Date after the Public Offering
Date."
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(f) Clause (v) of Section 2(d) thereof is amended to delete such
clause and substitute therefor in its entirety the following:
"(v) On the Early Payment Date, if it shall occur before the
Public Offering Date, such principal amount of the Advance,
together with interest accrued thereon to the date of payment, as
would have been payable on or before such Early Payment Date but
for the provisions of the proviso at the end of Section 2(d)(i)
shall be due and payable."
(g) Section 3(b) thereof is amended to substitute for the phrase
"within ninety (90) days after the date hereof" the phrase "by
December 31, 1996" and to add, after the phrase "as additions and
supplements to the GLD Partition Agreements", the following: ",
except that the provision corresponding to that set forth in Section
3(a)(iii)(D)(2) hereof shall provide that the requirement that the
Company shall maintain at least $3,000,000 in "Monthly Revenues" shall
commence on November 1, 1997, whether or not TS shall have
reprovisioned any traffic under such GLD Partition Agreements,".
(h) The reference in Section 4(a)(xii) to "Matrix" is deleted.
(i) The second sentence of Section 4(c) thereof is deleted in its
entirety.
2. The Stockholders Agreement is amended as follows, such amendments
to be, for all purposes, effective as of July 11, 1996:
(a) Section 1(a) thereof is amended by
(i) deleting the words "on Schedule II, so long as the
Purchaser (or an affiliate of the Purchaser) shall hold the
Warrant or any shares of Common Stock issued pursuant thereto,"
and substituting therefor the following: "in the column
captioned 'Number of Common Shares (Unrestricted)' on Schedule I,
which have been sold as of December 2, 1996, and so long as the
Purchaser (or an affiliate of the Purchaser) shall hold the
Warrant or any other warrant issued by the
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Company to the Purchaser (or an affiliate of the Purchaser) or
any shares of Common Stock issued pursuant thereto,"; and
(ii) deleting the reference to "Section 5" and substituting
therefor "Section 1 (b)".
(b) Section 1(b) thereof is amended by adding the phrase "Except
in connection with a sale or transfer of shares of Common Stock
pursuant to Section 1(a) (other than a sale or transfer pursuant to
clause (w), (x) or (y) thereof)" at the beginning of such Section.
(c) A new Section 1(c) is hereby added to read as follows:
"(c) The provisions of this Section 1 shall not apply during any
period when all of the following shall apply: (a) all amounts due
and owing to TS under the Financing Agreement have been
satisfied, (b) the Company has filed a registration statement
with the Securities and Exchange Commission registering the
resale by the Purchaser of all of its shares of Common Stock of
the Company issued to the Purchaser (or an affiliate of the
Purchaser) by the Company pursuant to the Warrant or any other
warrant issued by the Company to the Purchaser (or an affiliate
of the Purchaser), (c) such registration statement has become and
continues to be effective and (d) such registration statement
currently covers resale of such shares by the Purchaser and the
Purchaser is not prevented from such resale by any action by or
on behalf of the Company."
(d) Schedule I to the Stockholders Agreement is hereby
substituted with Schedule I attached hereto.
3. The references in each of the Advance Agreement and the Basic
Documents (collectively, the "Basic Agreements") to any other Basic Document
shall be amended, for all purposes, effective as of July 11, 1996, to refer to
such other Basic Agreements as amended in this Section A.
B. New Warrant; Registration Rights
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1. In consideration of the TS agreements herein and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged by the Company, the Company shall issue to Tel-Save Holdings, Inc.
("Holdings") or a designated affiliate of Holdings an additional Common Stock
Purchase Warrant (the "New Warrant") to purchase 50,000 shares of the Common
Stock of the Company on the same terms and conditions as the Warrant dated July
11, 1996 to an affiliate of Holdings (the "Old Warrant"), except that the New
Warrant shall be dated the date hereof and the "Exercise Price" (otherwise
defined as in the Old Warrant) shall be $5.00.
2. From and after the date hereof, all references in the Advance
Agreement and the Basic Documents (collectively, the "Basic Agreements"),
including, without limitation, the Registration Rights Agreement, to "the
Warrant" shall mean and include the Old Warrant and the New Warrant and each of
such Basic Agreements is hereby so amended.
3. The reference in Section 3(a)(ii) of the Registration Rights
Agreement to "the first underwritten public offering after the date hereof" is
hereby amended to add at the end thereof, after the word "hereof", the phrase
"in which Holder has elected to, and does, participate".
C. Company Representations and Warranties
The Company hereby represents and warrants that:
1. This Consent and Amendment has been duly authorized, executed and
delivered by and on behalf of the Company and constitutes, and each of the
Basic Agreements constituted at the date of its execution, and, as it may be
amended hereby, constitutes, its legal, valid and binding agreement,
enforceable in accordance with its terms.
2. Assuming the amendments and waivers herein expressly contained were
effective as of July 11, 1996, no default or event of default (as such terms
may be defined in the various Basic Agreements) has occurred and is continuing
under any of the Basic Agreements.
D. TS Waivers
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1. Subject to the conditions set forth in Section E, below, and the
other terms and conditions hereof, TS hereby waives any defaults or events of
default prior to the date hereof under the Basic Agreements to the extent that
such would not have been such defaults or events of default thereunder had the
amendments set forth in Section A hereof been in effect from and as of the
original date of the Advance Agreement.
2. Subject to the conditions set forth in Section E, below, and the
other terms and conditions hereof, TS hereby waives any defaults or events of
default prior to the date hereof under the GLD Partition Agreements to the
extent that they might have occurred by reason of the actions or facts and
circumstances specifically set forth in Schedule A attached hereto.
3. Subject to the conditions set forth in Section E, below, and the
other terms and conditions hereof, TS hereby waives compliance with the
confidentiality provisions of the GLD Partition Agreements to the extent
disclosure is required to be made to the underwriters and their advisers in
connection with the Public Offering and to the extent required by law in
connection with such Public Offering, provided that the Company shall use its
reasonable best efforts to limit the extent of the disclosure of the pricing
terms of such GLD Partition Agreements.
4. Subject to the conditions set forth in Section E, below, and the
other terms and conditions hereof, TS agrees that if it is requested by the
underwriters for the Public Offering to agree not to sell its shares of Common
Stock received upon exercise of the Warrant or any other warrant issued to it
by the Company for a period of time after the Public Offering without such
underwriters' consent, it will so agree with such underwriters provided that
(a) the Company and all of the directors and officers of the Company and the
Stockholders (as defined in the Stockholders Agreement) shall have similarly
agreed not to sell any shares of Common Stock for a period of time after the
Public Offering, (b) the period of time shall be no more than the lesser of (i)
six (6) months after the Public Offering Date and (ii) the shortest period that
the Company or any such director, officer or Stockholder of the Company has
agreed with such underwriters not to sell or dispose of its shares of Common
Stock, and (c) the underwriters shall agree that they will not waive the
limitation, or shorten the period thereof, for any
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other party so agreeing unless they shall also have waived the limitation or
equally shortened the period as respects TS.
E. Amendments Effectiveness and Waiver Conditions
The amendments set forth in Section A hereof and the waivers by TS set
forth in Section D hereof shall be effective on and subject to the Company's
execution and delivery hereof and the following:
1. The satisfaction of any conditions to the Advance set forth in
Sections 4(a) and 4(b) of the Advance Agreement (as amended hereof) not
heretofore satisfied.
2. The execution and delivery by the Company to Holdings or a
designated affiliate of Holdings of the New Warrant.
3. Each of the Company's representations and warranties herein shall
be complete and correct and the President of the Company shall deliver to TS a
certificate to such effect.
4. Each of the parties to the Stockholders Agreement other than the
Company and TS shall have acknowledged and agreed in writing to the amendments
in Section A.2 and waivers herein.
F. Miscellaneous
1. Except as expressly set forth herein, this Amendment and Consent
shall not by implication or otherwise limit, impair, constitute a waiver of, or
otherwise affect the rights and remedies of any party under any of the Basic
Agreements, or alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Basic
Agreements, all of which are ratified and affirmed in all respects and shall
continue in full force and effect, as modified hereby.
2. This Consent and Amendment shall be governed by the laws of the
Commonwealth of Pennsylvania applicable to business arrangements entered into
and performed entirely within the Commonwealth of Pennsylvania.
3. This Consent and Amendment may be executed in any number of
counterparts, all of which taken together
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shall constitute one and the same instrument and any of the parties hereto may
execute this Consent and Amendment by signing any such counterpart.
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IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Amendment to be duly executed and delivered as of the date first above written.
GROUP LONG DISTANCE, INC.
By: /s/ Xxxxxx X. Xxxxx
------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
TEL-SAVE, INC.
By: /s/ Xxxx XxXxxxx
------------------------------
Name: Xxxx XxXxxxx
Title: President
The undersigned acknowledge and
agree to the amendments and other
provisions of Section A.2 as of
the date first written above.
XXXXXX X. XXXXX, XX.
/s/ XXXXXX X. XXXXX, XX.
---------------------------------
C. XXXXXXX XXXXX
/s/ XXXXXX XXXXXXX
---------------------------------
XXXXXX XXXXXXX
/s/ Xxxxx Xxxxx
---------------------------------
XXXXX XXXXX
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XXXX XXXXXXXXX
/s/ XXXX XXXXXXXXX
---------------------------------
XXXXXX XXXXX
/s/ XXXXXX XXXXX
---------------------------------
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Schedule A
1. Sections 2(b)(v), 11(d), 13(a)(ii) and 13(a)(iv):
The Company entered into two loan agreements, one for $25,000 and one
for $50,000 and one line of credit agreement for $50,000, all with Gateway
American Bank of Florida ("Gateway"). The Company granted security
interests to Gateway in all of its equipment, machinery, furniture and
general intangibles to secure the repayment of each of those loans and the
line of credit.
In June 1996, the Company converted certain accounts payable to
WorldCom, Inc. ("WorldCom") under a services agreement with WorldCom to a
promissory note in the principal amount of $566,917. As security for the
repayment of that note, the Company granted WorldCom a security interest
in certain assets of the Company, including accounts receivable, customer
lists, contractual rights and records relating to the services agreement.
In May 1996, in connection with the Company's purchase of Gulf
Communications Services, Inc., the Company assumed and agreed to be bound
by the terms of a Secured Promissory Note in favor of Gulf Components,
Inc. That note is secured by substantially all of the assets of Gulf
Communications Services, Inc.
In March 1993, a Uniform Commercial Code financing statement was filed
with the Florida Secretary of State in favor of AT&T, Inc. ("AT&T"),
covering all of the Company's accounts, accounts receivable, contract
rights, general intangibles, notes, drafts and other forms of obligations
and receivables in connection with the Company's customers' usage of
AT&T's network under a previous services agreement between the Company and
AT&T.
The Company granted a security interest in 100,000 shares of the
Company's Common Stock in favor of Xx. Xxxxxx Xxxxxx to secure the
repayment of debt owed by the Company to Xx. Xxxxxx.
2. Sections 7(b), 11(b), 13(a)(ii) and 13(a)(iv):
The Company has executed services agreements with other carriers,
including WorldCom, Intermedia Communications, Inc. and UUNET
Technologies, Inc.
3. Sections 9(b) and 13(a) (ii):
In a registration statement on Form SB-2 filed in December 1995, and
three amendments thereto filed in January 1996, February 1996 and March
1996, the Company disclosed the existence and certain terms of the
Company's Partition Agreement with TS.
4. Sections 11(e) and 13(a)(iv):
In November 1995, the predecessor to the Company (the entity which
executed the Partition Agreement with TS) merged into the Company.
5. Sections 7(d) and 13(a)(ii):
The Company may not have executed employment and/or contractual
agreements with its directors, principals, shareholders, agents and
employees setting forth the non-compete provisions of section 7, the
nature of relationship provisions of section 8 , and the confidentiality
provisions of section 9.
6. Section 13(a)(v):
In June 1993, the Company executed a Release and Settlement Agreement
with AT&T resolving a dispute regarding amounts owed by the Company to
AT&T under a previous services agreement. The Release and Settlement
Agreement provided for the payment of $1,200,000 by the Company to AT&T;
the Company may have defaulted on that agreement and several amendments
thereto.
In July 1996, the Company executed the Advance Agreement with TS. The
Company may not have paid all amounts due on each Prepayment Date as
specified by the terms of the Advance Agreement.
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SCHEDULE 1
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Number of Number of Percentage of
Name & Address of Common Shares Common Shares Common Stock
Stockholder Position Held (Restricted) (Unrestricted) Outstanding
-------------------------------------------------------------------------------------------
Xxxxx, Xx. Xxxxxx M Jr. President 211,754 23,528 10.59%
0000 X.X. 000xx Xxx.
Xxxxx Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------
Xxxxx, Xx. X. Xxxxxxx Director 94,316 10,480 4.72%
0000 X. Xxxxx Xxxx.
Xxx 000X
Xxxx Xxxxx, XX 00000
-------------------------------------------------------------------------------------------
Xxxxxxx, Mr. Xxxxxx Director 69,451 7,717 3.47%
0000 Xxxx Xxxxx Xxxxx
Xxx 000
Xx. Xxxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------
Koach, Xx. Xxxxx Director 35,584 4,287 1.93%
0000 X.X. 0xx Xxxxxx
Xxxxx 000
Xx. Xxxxxxxxxx, XX 00000
-------------------------------------------------------------------------------------------
Xxxxx, Ms. Xxxxxx Vice President 26,148 2,906 1.31%
00000 Xxxxxxxxxx Xxxxxx Xxxxxxxxx &
Xxxxx, XX 00000 Chief
Administrator
Officer
-------------------------------------------------------------------------------------------
Xxxxxxxxx, Mr. John Director 5,145 571 0.26%
000 Xxxx Xxxxxxx Xxxxx
Xxxx, Xxxxx 000
Xx. Xxxxxxxxxx, XX 00000
===========================================================================================
