UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 January 31, l997 .
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
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Commission File Number 0-2180
TOTAL-TEL USA COMMUNICATIONS, INC. .
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(Exact name of registrant as specified in its charter)
New Jersey . 22-1656895 .
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Clove Road, Little Falls, NJ 07424
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (201) 812-1100
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.05 par value per share
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
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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 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. [ ]
Aggregate market value (based upon a $14.625 closing price) of the
voting stock held by nonaffiliates of the Registrant as of May 6, l997:
$29,431,204.
Number of shares of Common Stock outstanding on May 6, 1997: 3,109,602.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART 1
ITEM 1. BUSINESS
Total-Tel USA Communications, Inc. ( "TotalTel", the "Registrant" or the
"Company" ), a New Jersey corporation, was organized on June 8, 1959,
under the name of Faradyne Electronics Corp. and adopted its present
name on November 4, l991. The Registrant's principal executive office is
located at 150 Clove Road, Little Falls, New Jersey 07424 and its
telephone number is (201) 812-1100. The Registrant operates as a full
service inter exchange carrier as more fully described herein.
PRINCIPAL PRODUCTS AND SERVICES
Telecommunications Services
In September, l982, Registrant formed Total-Tel USA ( "TotalTel" ), as a
division of its principal operating subsidiary, commenced offering
interstate telephone communication services in January, 1983 and
provided the foundation for what is now the Registrant's primary
business. TotalTel operates as a full service interexchange carrier
providing 24 hour, 7 day a week, telephone communication services to
customers nationwide. The Registrant's principal market is Northern New
Jersey and the New York Metropolitan area for direct transmission within
the contiguous United States, and to over 150 countries around the
world. The intercity circuits TotalTel utilizes to transmit its
customers' telephone calls include, among other facilities, private
lines leased from AT&T, World Com, Inc., Qwest and other usage sensitive
services leased from other competing carriers. TotalTel offers its
services primarily through its network consisting of a digital
computerized switch in Newark, New Jersey and intercity circuits which
provide access and identification, call routing, transmission and
billing records. Subscribers are billed based on the distance and
duration of each call completed.
In July, 1987, TotalTel began offering its telecommunication services to
commercial customers in Manhattan through Total-Tel USA, Incorporated, a
wholly owned subsidiary of the Registrant. In August, l992, TotalTel
extended its telecommunications services to commercial customers in the
Southeastern United States through Total-Tel Southeast, Inc., a wholly
owned subsidiary of the Registrant. TotalTel began offering its
dedicated services and related high usage T1.544 services in late 1985.
These services were designed to attract larger, more sophisticated
business customers to the Registrant. In April 1995, the Registrant
formed TotalTel Carrier Services, Inc. for the purpose of providing long
distance service to other common carriers in the telecommunications
industry, on a wholesale basis. Wholesale sales were $31,429,277 and
$3,584,182 for the years ended January 31, 1997 and 1996, respectively.
TotalTel employs SS7 digital technology and Sonet Ring technology in its
network. Digital facilities utilize more sophisticated engineering to
yield enhanced voice quality as opposed to older analog technology. The
capital expenditure necessary to increase transmission capability
through digital technology is less than the comparable cost to expand on
an analog basis. Additionally, most of TotalTel's calling volume is
carried over fiber optic facilities leased from other carriers as
described above and from Bell Atlantic, NYNEX, other Regional Bell
Operating Companies.
During the year ended January 31, 1997, as in the Fiscal 1996, a
majority of the traffic was carried through various equal access
services, also known as switched access, and are priced and offered
based on the calling volume of the particular customer. The retail
marketing focus is on customizing services for business customers in the
niche market now served by Registrant.
TotalTel currently has approximately 18,000 active accounts of which
approximately 95% are commercial and the balance are residential
subscribers. Sales are made primarily through advertising, direct
telephone solicitation, field sales contacts, agent sales and referrals
from present customers.
In February, 1993, the Registrant, through its wholly owned subsidiary,
TotalTel Services, Inc., commenced the sale and installation of
Panasonic telephone systems primarily in the Northern New Jersey and New
York Metropolitan area. Sales during Fiscal 1997 were not significant.
Net sales of telecommunications services and systems in Fiscal 1997 were
$89,325,921 as compared to $49,873,477 in fiscal year 1996. TotalTel had
operating income of $4,135,585 in Fiscal 1997 and operating income of
$2,308,982 in Fiscal 1996. The operating income represents the income
before interest income, interest expense, other income, other expense
and provision for income taxes. For further details, see MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
elsewhere in this Report.
The continued growth in revenues in Fiscal 1997 is largely attributable
to the rapid expansion of the Registrant's sales to other carriers along
with aggressive internal sales and marketing efforts. The Registrant
completed the installation of its upgraded DEX 600 switch at its new
facility in Newark, New Jersey in the second quarter of the Fiscal 1995,
which increased transmission capabilities significantly and was
designated to allow for substantial future expansion.
The Registrant is currently in the process of installing a DEX 600E
MEGAHUB switch at its new facility in New York City which will double
the Registrant's current revenue capacity. It is expected that this
facility should be operational in the second quarter of the Registrant's
current fiscal year.
Due to TotalTel's strategic geographic location in the New York
Metropolitan Area, the Company continues to foresee benefits from the
availability of a large number of suppliers of transmission facilities
located in New York which should provide potential for improved
operating efficiency.
Competition
The most significant competitor in the telecommunications industry,
AT&T, has indicated that it intends to compete vigorously with other
common carriers (other independent telephone companies). In the past
several years, AT&T has implemented several significant rate reductions
for its long distance message services. These reductions have required
other carriers, including TotalTel, to lower their rates in order to
remain competitive.
In addition, TotalTel competes with carriers such as MCI Communications
Corporation ( "MCI" ), Sprint, World Com, Inc., Frontier and other large
companies engaged in providing services in competition with those
services offered by TotalTel. TotalTel also directly competes with local
and regional companies which resell services, a number of which are
substantially larger than TotalTel.
More recently, the Telecom Act of 1996 ("The Act") allows local exchange
carriers (LECSs) to compete in the long distance telecommunications
market which should substantially increase competition in the future.
The Act also allows long distance carriers to provide local service and
the Registrant intends to enter this market during the current fiscal
year.
In the opinion of Registrant's management, TotalTel's principal methods
of competition with AT&T and others have been and are expected to
continue to be pricing, customized service, quality and the development
of special billing and other niche services. TotalTel's long distance
capability and its customer services should continue to make it
competitive for most business users of AT&T, MCI and US Sprint services.
Seasonal Nature of Business
Registrant's business is not seasonal.
Patents, Trademarks, Licenses, etc.
Registrant does not hold any material patents, franchises or
concessions.
Government Regulations
In August, l982, the Federal Communications Commission ( "FCC" )
substantially deregulated resale common carriers, such as the
Registrant. The FCC does not require certification of such carriers to
initiate business activities nor does it exercise its authority to
regulate their rates and services, although it has the power to do so in
the future, The FCC may act upon complaints against the Registrant or
any other common carrier for failure to comply with its statutory
obligations as a common carrier. Registrant is duly tariffed with the
FCC as a switched bases interexchange carrier.
In 1995, the FCC discontinued regulating the rates and services of AT&T,
determining that AT&T is a non dominant carrier. This determination may
affect the Registrant because it competes with AT&T, utilizes AT&T lines
to transmit some of its long distance traffic and leases local access
transmission facilities from local telephone companies which are FCC
regulated. The FCC currently prohibits carriers such as AT&T from
refusing to permit resale of their services.
Services in New York City are regulated by the New York State Public
Service Commission, which requires the filing of a tariff, among other
requirements. TotalTel has received approval of its tariff and continues
to maintain its tariff in full force and effect. TotalTel Southeast,
Inc. is regulated by Georgia Public Service Commission which requires
the filing of a tariff. TotalTel Southeast, Inc. has received approval
of its tariff and continues to maintain its tariff in full force and
effect.
Since Fiscal 1996, the Registrant is registered in 49 states, in respect
to service within those states, and is thus subject to the regulatory
requirements of the various Public Service Commissions or similar
agencies of these states.
Beginning in April, 1988, TotalTel provided its domestic customers
international phone service to numerous foreign countries. International
services are regulated by the FCC which requires a license and the
filing of a tariff. Total-Tel's license has been granted and its tariff
has been approved.
Compliance with Environmental Provisions
Registrant believes that it complies in all material respects with
current pertinent Federal, state, and local provisions relating to the
protection of the environment and does not believe that continued
compliance should require any material capital expenditures.
Personnel
Registrant and its subsidiaries currently employ 183 full-time and 23
part-time employees in its long distance telecommunication service, of
whom 45 are engaged in sales activities, 7 in customer support, 19 in
customer service, 28 in technical and field services, 16 in data
processing, and 91 in general and administrative activities. The
Registrant considers its relations with its employees to be excellent.
Foreign Operations and Export Sales
While the Registrant currently has no significant foreign operations or
export sales, it is conducting a feasability study of the European
telecommunications market to determine the viability of entering this
market. The requirements, including costs and personell needs have not
yet been determined. Depending on the capital requirements, the
Registrant may need additional capital funds, the source and cost of
which are not currently known.
ITEM 2. PROPERTIES
On November 15, l993 and December 28, l993 Total-Tel USA, Inc., a
subsidiary of the Registrant, entered into leases to rent an aggregate
of approximately 3,500 square feet of space at 744 Broad Street, Newark,
New Jersey for its upgraded switching equipment. The leases run from
January 1, l994 through December 31, 1998 at an annual rental of $51,480
and also require the tenant to pay a proportionate share of any
increases in the "Consumer Price Index", U. S. City Average, over the
base year.
On December 1, l993, Total-Tel USA, Inc. a subsidiary of the Registrant,
entered into a five year lease to rent approximately 20,000 square feet
of space from a partnership in which two of the partners are directors
and major shareholders of the Company. The lease provides for annual
rentals of $58,560 for the first three years and $63,885 for years four
and five. This space is used for warehousing and office space for the
technical support employees. The lease requires the payment of any
increase in operating expenses and real estate taxes over the base year.
On February 22, l994, Total-Tel USA Inc., a subsidiary of the
Registrant, entered into a lease, subsequently modified on April 15,
l994, for approximately 17,700 square feet of space at 150 Clove Road,
Little Falls, New Jersey to be used as its sales, executive and
administrative offices. The lease provided for a rent holiday until
July, 1995 after which the annual rental would be approximately
$360,000. The lease is for five years and ten months and has been
amended by a second lease modification agreement dated February 9, l995
whereby the Registrant leased approximately 6,700 additional square feet
of space at the same location at an additional annual rental of $121,707
for the first four years and $138,154 for the next year and two months.
The modified agreement also extended the term of the existing lease for
an additional two years to August 14, 2002 at a then annual rental of
$563,063. The lease requires the payment of the tenant's proportionate
share of operating expenses and real estate tax increases over the base
year.
On November 1, l996, the Company entered into a lease for approximately
8,300 square feet of space at 40 Rector Street, New York City, New York
to be used for a second switching facility. The term of the lease is for
fifteen years and ten months from the date of commencement which is
estimated to be February 1, l998. Rental payments are $133,184 per annum
for the first five years after commencement, $166,480 per annum for the
next five years and $183,128 per annum for five years and ten months.
The lease requires the payment of the tenant's proportional share of
operating expenses and real estate tax increase over the base year.
On November 8, l996, a subsidiary of the Company entered into a lease
for approximately 2,300 square feet of office space in New York City,
New York at an annual rental of approximately $75,900. The lease
commenced February 1, l997 and is for sixty three months. The lease
requires the payment of the tenant's proportionate share of operating
expenses and real estate tax increases over the base year.
On January 30, l997, the Company entered into a third modification of
its lease for approximately 16,640 square feet of additional office
space at its existing facility at 150 Clove Road, Little Falls, New
Jersey. The commencement date of the modification is expected to be July
1, l997. The annual rental on the additional space will be $357,760 per
annum from July 1, l997 through February 14, l998, $366,800 per annum
from February 15, l998 through August 14, 2000 and $382,720 per annum
from August 15, 2000 through August 14, 2002. In addition, the Company
is liable for its proportionate share of increases in real estate taxes
and operating expenses over the base year.
All leases contain options to renew for various periods at rentals to be
determined by the then prevailing fair market rental rates for similar
real estate in the area.
ITEM 3. PENDING LEGAL PROCEEDINGS
The Registrant brought suit in Civil Court of the City of New York,
County of New York against a customer, Community Network Services, Inc.
d/b/a Telecommunity, for the recovery of an account receivable of
$37,917 plus interest, attorneys fees and damages. Defendant has
asserted a counter claim against the Registrant in the Supreme Court of
the State of New York, County of New York alleging breach of contract
and seeks compensatory and punitive damages of $1,300,000. The
Registrant believes the counter suit is without merit and is vigorously
defending this action.
The Registrant is a defendant in an action filed in State Court in New
Jersey by a former employee which, among other claims, alleged breach of
contract and seeks compensatory and punitive damages of $1,900,000. The
Registrant believes that the suit is without merit and intends to
vigorously defend this action.
In another action, previously reported, Telecommunications Specialists,
Inc., a former customer of the Registrant, brought suit in the United
States District Court for the District of Minnesota alleging breach of
contract which sought compensatory and punitive damages. The suit was
settled without material liability to the Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
(a) Registrant's Common Stock is traded in the over-the-counter market
on the NASDAQ National Market System. The following table sets forth,
for the quarterly fiscal periods indicated, the high and low closing
sales prices for Registrant's Common Stock in such market, as reported
by the National Association of Securities Dealers, Inc. Closing sale
prices prior to July 1, l996 have been adjusted to reflect the stock
split, discussed in (d) below.
FISCAL 1997 HIGH LOW
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February 1 thru April 30 12 1/4 8 3/4
May 1 thru July 31 18 1/8 9 1/4
August 1 thru October 31 25 7/8 16 1/2
November 1 thru January 31,1997 23 15 1/4
FISCAL 1996
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February 1 thru April 30 9 3/8 7 5/8
May 1 thru July 31 10 8 1/2
August 1 thru October 31 11 1/2 8 1/4
November 1 thru January 31, l996 12 1/4 8 1/2
(b) As of May 6, l997, the approximate number of recordholders of
Registrant's Common Stock was 349, as reported by Registrant's transfer
agent.
(c) Registrant has not paid or declared any cash dividends during the
past two fiscal years and does not anticipate paying any in the
foreseeable future.
(d) On July 1, l996 the Registrant distributed 1,873,420 shares of
Common Stock in connection with a 2 for 1 stock split of all outstanding
shares as of June 15, 1996.
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
(In thousands except per share amounts)
Year ended January 31, .
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RESULTS OF OPERATIONS: 1997 1996 1995 1994 1993 .
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<S> <C> <C> <C> <C> <C>
Net sales $89,326 $49,873 $29,817 $18,999 $11,736
Earnings from
continuing operations $ 2,588 $ 1,555 $ 1,100 $ 1,052 9
Net earnings $ 2,588 $ 1,555 $ 1,100 $ 1,156 $ 9
Earnings Per Common and Common Equivalent Shares (b):
Primary:
Continuing Operations
Before Cumulative Effect
Of Accounting Change $ 0.75 $ 0.47 $ 0.34 $ 0.34 $ 0.01
Accounting Change $ -- $ -- $ -- $ 0.03 $ --
Net earnings per share $ 0.75 $ 0.47 $ 0.34 $ 0.37 $ 0.01
Fully Diluted:
Continuing Operations
Before Cumulative Effect
Of Accounting Change $ 0.75 $ 0.47 $ 0.34 $ 0.32 $ 0.01
Accounting Change $ -- $ -- $ -- $ 0.03 $ --
Net earnings per share $ 0.75 $ 0.47 $ 0.34 $ 0.35 $ 0.01
Average common shares
outstanding (a) (b)
Primary 3,430 3,284 3,258 3,158 2,998
Fully Diluted 3,430 3,284 3,258 3,268 2,998
Cash dividends per
common share NONE NONE NONE NONE NONE
Additions to property
& equipment $ 6,397 $ 3,028 $ 2,268 $ 1,375 $ 721
Depreciation and
amortization $ 1,382 $ 1,026 $ 663 $ 492 $ 458
FINANCIAL POSITION:
Working Capital $ 5,486 $ 4,799 $ 5,031 $ 4,683 $ 4,717
Property and equipment - net $11,066 $ 6,011 $ 3,924 $ 2,236 $ 1,272
Total assets $30,494 $20,520 $15,110 $11,071 $ 9,044
Long-term debt $ 2,940 $ -- $ -- $ -- $ --
Shareholders' Equity $13,387 $10,700 $ 9,093 $ 7,917 $ 6,860
Common shares
outstanding (a) (b) 2,945 2,927 2,900 2,876 2,876
</TABLE>
(a) All per share amounts have been restated to reflect the 2 for 1
stock split distributed July 1, l996.
ITEM 7. ANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Fiscal 1997 as Compared to Fiscal 1996
The following discussion of the results of operations relates to the
continuing operations of the Registrant.
Net sales for Fiscal 1997 increased approximately $39,453,000 as
compared to Fiscal 1996. The increase in telephone sales volume of
approximately 79.1% was primarily due to intensive sales and marketing
by the Registrant, both internally, through expanded agency sales
partially offset by lower prices and the substantial increase in sales
to other carriers on a wholesale basis.
For Fiscal 1997, the Registrant billed approximately 616,990,000 minutes
of calls as compared to approximately 365,878,000 minutes of calls for
the prior fiscal year, an increase of approximately 251,112,000 minutes
or 68.6%.
Cost of sales for Fiscal 1997 increased approximately $31,975,000 or
91.7% as compared to the prior fiscal year. This increase was
unfavorable in relation to the 79.1% increase in sales volume for the
period and is attributable to the lower gross profit in wholesale sales
to other carriers and competitive pricing pressures in the industry.
Line costs for Fiscal 1997 were $63,835,000, an increase of $31,393,000
or 96.8% over the prior year. The other components are switch and field
technician salaries, utilities, rent and depreciation which totaled
$2,994,000 for Fiscal 1997, an increase of $580,000 or 24.1%. The
increase in cost of sales was attributable primarily to the
substantially increased sales of the Company. Gross profit decreased in
Fiscal 1997 to 25.2% from 30.1% in Fiscal 1996. The decrease in gross
profit was due to carrier sales having a substantial lower gross margin.
Selling, general and administrative expenses increased approximately
$5,651,000 or 44.5% for Fiscal 1997 as compared to the prior fiscal
year. The increase was primarily due to increased salaries of $2,113,000
or 47.3%, increased commissions of $1,228,000 or 36.8%, increased
provision for bad debts of $130,000 or 15.9% and an increase in legal
and professional of $445,000 or 38.7%. The continued substantial
increase in commission is attributable to the aggressive pursuit of new
business in a highly competitive market. The substantial increase in
legal and professional is attributable to the defense of a lawsuits as
disclosed in the Registrant's Financial Statements, which was settled
during the year.
Interest income for Fiscal 1997 decreased approximately $25,000 as
compared to Fiscal 1996 primarily due to a reductions in the funds
available for investment.
Fiscal 1996 as Compared to Fiscal 1995
The following discussion of the results of operations relates to the
continuing operations of the Registrant, which is comprised of the long
distance telephone service business.
Net sales for Fiscal 1996 increased approximately $20,056,000 as
compared to Fiscal 1995. The increase in telephone sales volume of
approximately 67.3% was primarily due to intensive sales and marketing
by the Registrant.
For Fiscal 1996, the Registrant billed approximately 365,878,000 minutes
of calls as compared to approximately 204,631,000 minutes of calls in
the prior fiscal year, resulting in an increase of approximately
161,247,000 minutes or 78.8% as compared to the prior fiscal year. This
increase was unfavorable in relation to the 67.3% increase in sales
volume for the period and was indicative of the lower cost per minute
billed due to substantial competitive pressure.
The major component of cost of sales is leased facilities or line costs
which is the purchased transmission capacity over which the Registrant
routes its long distance traffic. Line costs for Fiscal 1996 were
$32,442,000 an increase of $13,335,000 or 69.9% which was slightly
unfavorable as compared to the increase in sales of approximately 67.3%.
The other components are switch and technician salaries, utilities, rent
and depreciation which totaled $2,413,000 for Fiscal year 1996 an
increase of $666,000 or 38.1%. The increase in cost of sales was
attributable to the increased sales of the Registrant.
Selling, general and administrative expenses increased approximately
$5,299,000 or 71.5% for fiscal year 1996 as compared to the prior fiscal
year. The increase was primarily due to increased salaries expense of
$1,774,000 or 58.4%, increased commissions of $1,432,000 or 75.1% and
increased provision for bad debts of $428,000 or 109.2%. The substantial
increase in commissions and provision for bad debts is a reflection of
the aggressive pursuit of new business in a highly competitive market.
The increase in interest income for the Fiscal 1996 was primarily due to
increased interest rates.
Liquidity and Capital Resources
At January 31, l997, the Registrant had working capital of $5,486,000 as
compared to $4,799,000 at January 31, l996, an increase of $687,000. The
ratio of current assets to current liabilities at January 31, 1997 was
1.4:1 and at January 31, 1996 was 1.5:1. This increase in working
capital at January 31, l997 was attributable primarily to an increase in
accounts receivable of $5,192,000 (net of doubtful accounts), an
increase in the current portiion of notes receivable of $137,000, an
increase in prepaid and other current assets of $190,000, partially
offset by a decrease in cash and cash equivalents of $588,000, an
increase in accounts payable of $3,618,000 and an increase in other
current and accrued liabilities and salaries and wages payable of
$619,000.
The decrease in the current ratio from 1.5:1 to 1.4:1 is primarily due
to the purchase of property and equipment during Fiscal Year 1997 in the
amount of $6,397,000. The Registrant continues to maintain a strong
liquid position with cash and cash equivalents and investments available
for sale of $3,600,000 representing 27.6% of current liabilities. The
Registrant believes that its current cash position, projected operating
revenue and bank line availability should be sufficient to meet its
foreseeable operating needs and planned capital expenditures.
The cash flow statement of the Registrant for Fiscal 1997 indicated a
decrease in cash of $588,000. Net earnings of $2,588,000 and non cash
adjustments of $2,730,000 reduced by net changes in assets and
liabilities of $2,298,000 provided cash from operations of $3,020,000.
Cash used in investing activities totaled $6,615,000. The major
components were purchases of property and equipment of $6,397,000 and
additions to line installation cost of $127,000, net maturities of
available for sale securities of $973,000, and issuance of notes to
employees net of repayment of $133,000. Cash provided by financing
activities totaled $3,006,000 and was the result of bank borrowings and
the exercise of stock options.
Capital Expenditures
Capital expenditures during Fiscal 1997 totaled approximately $6,397,000
and were financed from funds provided from Registrant's working capital,
cash derived from operations, and bank borrowings. The capital
expenditures were used to purchase the following equipment and leasehold
improvements:
$1,389,000 - to upgrade and provide further enhancement of the
signaling and switching system, to enhance the
interconnection to the Bell Companies and other long
distance carriers and to increase switching capacity to
allow for future growth.
$ 755,000 - primarily data processing equipment and data processing
software to be used in the headquarters' local area
network and enhancement of the Registrant's billing and
information systems.
$ 245,000 - furniture and fixtures for the general offices located in
Little Falls, New Jersey, the switch facility in Newark,
New Jersey, and the new switch facility in New York City.
$ 291,000 - for leasehold improvements primarily for the switch in
New York City.
$3,585,000 - to construct a new switch in New York City.
$ 24,000 - trucks for service.
$ 108,000 - equipment for leasing.
Capital expenditures for Fiscal 1998 are estimated at approximately
$5,000,000 and are expected to be used for the following:
To provide a network operations center at Little Falls, New Jersey; for
office improvements, furniture and equipment in connection with the
expansion of the main office and sales office operation; for new data
processing equipment to complement and expand the present system of the
Registrant; improvement to the new facility located in New York City;
continued development of the local area network for the sales and
administrative offices in Little Falls, New Jersey.
The Registrant anticipates that capital expenditures for Fiscal 1998
will be funded from operations and current working capital and,
additional long term borrowings.
As of January 31, l997, the Registrant had a bank line of credit of
$10,000,000. During Fiscal 1997 Registrant had bank borrowings of
$2,940,000. For further detail see Note M to the Consolidated Financial
Statements.
Inflation
Since inflation has slowed in recent years, the Registrant does not
believe that its business has been materially affected by the relatively
modest rate of price increases in the economy. The Registrant continues
to seek improvements in operations and efficiency through capital
expenditures. Expenditures to improve the signaling system, information
systems and the local area network is expected to result in operating
costs savings which could partially offset any cost increases which may
occur in the future.
Environmental Matters
The Registrant is not a party to any legal proceedings or the subject of
any claim regarding environmental matters generally incidental to its
business. In the opinion of Management, compliance with the present
environmental protection laws should not have a material adverse effect
on the financial condition of the Registrant.
Accounting for the Impairment of Long - Lived Assets and For Long -
Lived Assets to Be Disposed of
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long - Lived Assets and For
Long - Lived Assets to Be Disposed of." Based on the provisions of the
statement, the Company determined that no provision for impairment of
the carrying cost of its machinery and equipment, or other long - lived
assets, was necessary.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share, which is
effective for financial statements ending after December 15, 1997. This
statement supersedes Accounting Principle Board Option No. 15 and
replaces the presentation of primary EPS with a presentation of basic
EPS. It also requires dual presentation of basic and diluted EPS on the
face of the income statement for all entities with complex capital
structures, and provides guidance on other computational changes. Had
the provisions of the statement been effective for the current year, the
following pro forma EPS amounts would have been disclosed.
Basic EPS: $ .88
Diluted EPS: $ .75
Accounting for Stock Based Compensation
The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for
the stock option plans. Had compensation cost for the Company's two
stock option plans been determined based on the fair value at the grant
date for awards in the fiscal years ended January 31, l997 and 1996,
consistent with the provisions of SFAS No. 123, the Company's net
earnings and earnings per share would have been reduced to the pro forma
amounts indicated below
1997 1996
---- ----
Net earnings - as reported $ 2,588,138 $ 1,554,589
----------- -----------
Net earnings - pro forma $ 2,536,789 $ 1,481,221
----------- -----------
Earnings per share - as reported $ .75 $ .47
----------- -----------
Earnings per share - pro forma $ .74 $ .45
----------- -----------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Supplementary Data are included under Item
14 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and officers of the Registrant are as follows:
Name Age Position
Kevin Alward 30 President, Chief Operating
Officer and Director
Solomon Feldman 76 Director
Warren H. Feldman 41 Chairman, Chief Executive
Officer and Director
Leon Genet 65 Director
Thomas P. Gunning 59 Vice President, Treasurer
and Secretary
Jay J. Miller 64 Director
The Registrant's directors all serve for one year terms or until their
successors are elected and qualify. Officers serve at the pleasure of
the Board of Directors.
Kevin A. Alward, President and Chief Operating Officer of the
Registrant, joined Registrant in October, 1988, as a sales account
executive. Mr. Alward became Manager of Sales in November, l990 and Vice
President of Marketing in 1991. In February, 1992, Mr. Alward was
promoted to Senior Vice President and assumed the additional
responsibilities of Chief Operating Officer in April, l993. In 1994, Mr.
Alward was promoted to President of TotalTel, Inc., the principal
operating subsidiary of the Registrant. In October 1996, Mr. Alward was
elected a Director, President and Chief Operating Officer of the
Registrant.
Mr. Solomon Feldman has served as a Director of the Registrant
continuously since its inception in 1959, and as Treasurer from
inception to May 2, 1997. Mr. Feldman is currently a private investor
and devotes approximately 25% of his time to the business of the
Company.
Warren H. Feldman, Esq. was elected President and Chief Executive
Officer of the Registrant in September, 1992 and was elected Chairman of
the Board in September, 1994. Prior to such time, he served as Vice
President - Regulatory Affairs of the Registrant since January, 1986,
and had been the General Manager of Total-Tel USA Division and in-house
General Counsel of Registrant since 1984. He was elected a Director on
April 1, l987 and President of Total-Tel USA Division on October 27,
l988. Warren H. Feldman is the son of Solomon Feldman.
Leon Genet is a partner in Genet Realty, a commercial and industrial
real estate brokerage firm. Following graduation from Syracuse
University, he was an officer in the United States Air Force. Mr. Genet
continues his significant involvement with Syracuse University as a
benefactor and as a charter member of the Board of the College for Human
Development, home of the highly popular Genet lecture series, which
brings CEO's of leading worldwide corporations to the Syracuse campus.
He serves as a member of the National Commerce and Industry Board for
the State of Israel Bonds Organization and is a shareholder, director
and officer of LPJ Communications, Inc. which has earned commissions
from TotalTel USA Communications, Inc. on the same basis as other
independent representatives.
Thomas P. Gunning was appointed Chief Financial Officer in September,
1994 and Secretary of the Registrant in January, 1995. He has served as
Controller of the Registrant since September 1992. He is a Certified
Public Accountant licensed by the States of New York and New Jersey.
From 1989 until joining the Registrant, Mr. Gunning was the Senior Audit
Manager at Rosenberg Selsman & Company a certified public accounting
firm. From 1976 to 1989, he was Chief Financial Officer of Flyfaire,
Incorporated a travel wholesale operator. Prior to such time, Mr.
Gunning held various positions in both public and private accounting.
Jay J. Miller, Esq. has been a practicing attorney for more than thirty
years in the State of New York. Mr. Miller is a Director of Vestro
Natural Foods, Inc., a specialty food firm, and Edison Control
Corporation, a manufacturer of pipe, fittings and accessories for
concrete pumping equipment. He is also Chairman of the Board of AmTrust,
a New Zealand real estate company.
OTHER SIGNIFICANT EMPLOYEES
Ben Goldberg joined TotalTel, Inc., the major operating subsidiary of
the Registrant, in February, 1983 as an account executive. In January
1992 Mr. Goldberg was promoted to Vice President of Sales. In June of
1994 Mr. Goldberg was promoted to Senior Vice President.
David Hess joined TotalTel Carrier Services, Inc., an operating
subsidiary of the Registrant, in May 1995 as Vice President. Mr. Hess
was appointed Senior Vice President of TotelTel Carrier Services, Inc.
in October 1996. Prior to joining the Registrant Mr. Hess served as
Director of Eastern Regional Carrier Sales for West Coast
Telecommunication, Inc. from 1993 to 1995. From 1991 to 1993 Mr. Hess
was National Account Manager for Sprint Carrier Services. From 1989 to
1993 Mr. Hess was Strategic Account Manager for United Telephone
Systems. From 1986 to 1989 Mr. Hess was employed by M C I in various
sales management positions.
Jeff Slater joined TotalTel, Inc., as Senior Vice President in September
1996. From 1991 to 1996 Mr. Slater was founder and President of JTEK
Systems, Ltd., a firm which provided consulting services to various
telecommunications companies including the Registrant. In 1990 Mr.
Slater served as Corporate Director of Products Development for LCI
Communications, Inc. From 1987 to 1990 Mr. Slater served as Executive
Vice President of Operations of Charter Network Company which was
acquired by LCI Communications, Inc. in 1990. Prior to such time Mr.
Slater held various executive positions with Companies in the
telecommunications industry.
ITEM 11. EXECUTIVE COMPENSATION
a) The following table sets forth the compensation which the Registrant
paid during the fiscal years ended January 31, l997, 1996, 1995 to the
Chief Executive, each Executive Officer of the Registrant whose
aggregate remuneration exceeded $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
----------------------------
Name and Fiscal Year Annual Compensation Other Compensation
Principal Ended Annual Awards All Other
Position January 31 Salary ($) Bonus(s) Compensation($) Options (#) Compensations(s)
- -------- ----------- --------- -------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Warren H. 1997 $315,000 (1) $295,000 $7,025 (4)
Feldman 1996 $195,000 (1) $274,241 $4,667 (5)
Chairman and 1995 $195,103 (1) $ 74,153 15,000 (3) $4,583 (6)
Chief Executive
Officer
Kevin Alward 1997 $315,000 (2) $280,000 $9,769 (9)
President and 1996 $195,000 $274,241 $6,010 (10)
Chief Operating 1995 $195,000 $ 63,700 31,500 (7)(8) $5,256 (11)
Officer
Thomas P. 1997 $ 95,231 $ 6,000 $6,560 (12)
Gunning
Vice President,
Treasurer and
Secretary
</TABLE>
(1) Does not include an annual Director's fee of $15,000.
(2) Does not include director's fees of $2,500.
(3) Represents incentive options to purchase 30,000 shares of Common
Stock exercisable at a price of $9.625 per share (110% of the market
price at the date of issue), adjusted for the 2 for 1 stock split issued
July 1, l996. These options vest over a period of forty-eight (48)
months, with 25% of each option exercisable at the 12th, 24th, 36th, and
48th month of its term, subject to earlier vesting in certain
circumstances as provided in the option agreement.
(4) The amounts shown represent the Registrant's contribution under its
401 (K) Deferred Compensation and Retirement Savings Plan of $4,668 and
$2,357 for the use of a company vehicle for non business purposes.
(5) The amount shown represents the Registrant's contribution under its
401 (K) Deferred Compensation and Retirement Savings Plan of $2,310 and
$2,357 for the use of a company vehicle for non business purposes.
(6) The amounts shown represents the Registrant's contribution under its
401 (K) Deferred Compensation and Retirement Savings Plan of $2,226 and
$2,357 for the use of a company vehicle for non business purposes.
(7) Represents incentive options to purchase 33,000 shares of Common
Stock exercisable at a price of $7.28 per share, adjusted for the 10%
stock dividend issued in July 1994 and the 2 for 1 stock split issued at
July 1, l996. These options vest over a period of thirty-six (36) months
with 25% of each option exercisable at the 8th, 12th, 24th, and 36th
month of its term, subject to earlier vesting in certain circumstances
as provided in the option agreement.
(8) Represents incentive options to purchase 30,000 shares of Common
Stock exercisable at a price of $8.75 per share, adjusted for the 2 to 1
stock split issued July 1, l996. These options vest over a period of
forty-eight (48) months with 25% of each option exercisable at the 12th,
24th, 36th, and 48th month of its term, subject to earlier vesting in
certain circumstances as provided in the option agreement.
(9) The amounts shown represent the Registrant's contribution under its
401 (K) Deferred Compensation and Retirement Savings Plan of $5,620 and
$3,071 for the use of a company vehicle for non business purposes and
$1,078 term life insurance premiums.
(10) The amounts shown represent the Registrant's contribution under its
401 (K) Deferred Compensation and Retirement Savings Plan of $2,310 and
$2,643 for the use of a company vehicle for non business purposes and
$1,057 term life insurance premiums.
(11) The amount shown represents the Registrant's contribution under its
401 (K) Deferred Compensation and Retirement Savings Plan of $1,556 and
$2,643 for the use of a company vehicle for non business purposes and
$1,057 term life insurance premiums.
(12) The amounts shown represent the Registrant's contribution under its
401-K Deferred compensation and Retirement Savings Plan of $3,110 and
$1,179 for the use of a company vehicle for non business purposes and
$2,271 term life insurance premiums.
(b) Compensation Pursuant to Plans
1987 Stock Option Plan
In October, 1987, the Registrant adopted its 1987 Stock Option Plan and
in October, l996, adopted its 1996 Stock Option Plan (the "Plans"). The
Plans provide that certain options granted thereunder are intended to
qualify as "incentive stock options" within the meaning of Section 422A
of the United States Internal Revenue Code of 1954, as amended (the "
Code " ), while non-qualified options may also be granted under the
Plans. Incentive stock options may be granted only to employees of the
Registrant, while non-qualified options may be granted to non-executive
directors, consultants and others as well as to employees.
The Plans are administered by a Committee of the Registrant's Board of
Directors. The Registrant has reserved 664,500 shares of Common Stock
under the 1987 Plan and 300,000 shares of Common Stock under the 1996
Plan for issuance to employees, officers, directors and consultants of
the Company. The shares for options granted prior to July 15, l994 have
been adjusted for the 10% stock dividend. The shares for options granted
prior to July 1, l996 have been adjusted to reflect the 2 for 1 stock
split.
No option may be transferred by an optionee other than by will or the
laws of descent and distribution, and during the lifetime of an
optionee, an option may be exercised only by him. In the event of
termination of employment other than by death or disability, the
optionee will have one month (subject to extension not to exceed an
additional two months) after such termination during which he may
exercise his option. Upon termination of employment of an optionee by
reason of death or permanent total disability, his option remains
exercisable for one year thereafter to the extent it was exercisable on
the date of such termination. No similar limitation applies to non-
qualified options.
Options under the Plans must be granted within ten years from the
effective date of the Plans. Incentive stock options granted under the
Plans cannot be exercised later than ten years from the date of grant.
Options granted under the Plans will permit payment of the exercise
price in cash or by delivery to the Registrant of shares of Common Stock
already owned by the optionee having a fair market value equal to the
exercise price of the options being exercised, or by a combination of
such methods of payment. Therefore, an optionee may be able to tender
shares of Common Stock to purchase additional shares of Common Stock and
may theoretically exercise all of his stock options with no additional
investment other than his original shares.
Any options that expire unexercised or that terminate upon an employee's
ceasing to be employed by the Registrant become available once again for
issuance under the Plans.
OPTIONS GRANTS IN LAST FISCAL YEAR
NONE
(c) Other Compensation
None.
(d) Compensation of Directors
Each director of the Registrant receives $15,000 per year for services
in such capacity.
(e) Termination of Employment and Change of Control Arrangements
None.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Set forth below is certain information concerning persons who are know
by Registrant to own beneficially more than 5% of any class of the
Registrant's voting shares on May 7, 1997.
Name and Amount and
Title Address of Nature of Percentage
of Beneficial Beneficial of
Class Owner . Ownership (1) Class .
Common Warren H. Feldman 577,262 (2) 16.9%
Stock $.05 150 Clove Road shares
par value Little Falls, NJ 07424
Common Heartland Advisors, Inc. 578,700 16.9%
Stock $.05 790 North Milwaukee St. shares
par value Milwaukee, WI 53202
Common Solomon Feldman 476,190 13.9%
Stock $.05 1890 South Ocean Drive shares
par value Hallandale, FL 33009
Common Kevin Alward 281,950 (3) 8.2%
Stock $.05 182 Powell Road shares
par value Allendale, NJ 07401
Common Michael A. Karp 219,340 6.4%
Stock $.05 3416 Sansom Street shares
par value Philadelphia, PA 19104
(1) All shares are beneficially owned and sole investment and voting
power is held by the persons named to the best of the Registrant's
knowledge.
(2) Includes options to purchase 129,000 shares of the Registrant's
Common Stock which are currently exercisable or within 60 days hereof.
(3) Includes options to purchase 181,000 shares of the Registrant's
Common Stock which are currently exercisable or within 60 days hereof.
(b) Security Ownership of Management
The following table sets forth as of May 6, 1997 information concerning
the beneficial ownership of each class of equity securities by each
director of the Registrant and all directors and officers of the
Registrant as a group:
Name and Amount and
Title Address of Nature of Percentage
of Beneficial Beneficial of
Class Owner . Ownership (1) Class .
Common Kevin Alward 281,950 (3) 8.2%
Stock $.05 182 Powell Road
value Allendale, NJ 07401
Common Solomon Feldman 476,190 13.8%
Stock $.05 1890 South Ocean Drive shares
par value Hallandale, FL 33009
Common Warren H. Feldman 577,262 (2) 16.8%
Stock $.05 150 Clove Road shares
par value Little Falls, NJ 07424
Common Leon Genet 49,310 1.4%
Stock $.05 30 Farmstead Road
par value Short Hills, NJ 07078
Common Jay J. Miller --- ---
Stock $.05 430 E 57th St.,Suite 5D
value New York, NY 10022
Common All directors 1,407,212 (2)(3) 40.9%
Stock $.05 and officers as a shares
par value group (6 in number)
(1) All shares are beneficially owned and sole investment and voting
power is held by the persons named.
(2) Includes options to purchase 129,000 shares of the Registrant's
Common Stock which are currently exercisable or within 60 days hereof.
(3) Includes options to purchase 181,000 shares of the Registrant's
Common Stock which are currently excercisable or within 60 days hereof.
c) Changes in Control
The Registrant knows of no contractual arrangement which may, at a
subsequent date, result in a change in control of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 1, l993, the Company leased warehouse space in Belleville,
New Jersey from a partnership in which two directors and major
shareholders are partners and a former director and a major shareholder
is also a partner. During the fiscal year ended January 31, l997, the
Company paid rent of $59,760 to the partnership. The annual rent for
this premise is $58,560 for the first three years and $63,885 for years
four and five. Registrant believes such premises are leased on terms not
less favorable to Registrant than in an arm's length transaction.
As explained more fully in Note K to the Financial Statements the
Registrant has from time to time made loans to an executive employee and
shareholder of the Registrant.
(THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)
TOTAL-TEL USA COMMUNICATIONS, INC.
AND SUBSIDIARIES
ITEM 14. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULE
YEARS ENDED JANUARY 31, 1997, 1996, AND 1995
INDEX
(a) (1) FINANCIAL STATEMENTS: The following consolidated financial
statements of Total-Tel USA Communications, Inc. and subsidiaries are
included at the end of this Report:
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
Independent auditors' report F-1
Consolidated balance sheets - January 31, l997
and 1996 F-2
Consolidated statements of earnings - years
ended January 31, 1997, 1996 and 1995 F-3
Consolidated statements of shareholder's equity -
years ended January 31, 1997, 1996, 1995 F-4
Consolidated statements of cash flow - years
ended January 31, l997, 1996, 1995 F-5
Notes to consolidated financial statements F-7
(a) (2) SUPPLEMENTARY DATA FURNISHED PURSUANT
TO THE REQUIREMENTS OF FORM 10-K:
Schedule - years ended January 31, l997, l996
and 1995.
II Valuation and Qualifying Accounts (Consolidated) F-16
***************
Schedules other than those listed above are omitted because they are not
required, not applicable or the information has been otherwise supplied.
(THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)
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, on
the 7th day of May, 1997.
TOTAL-TEL USA COMMUNICATIONS, INC.
(Registrant)
By: /S/ WARREN H. FELDMAN
Warren H. Feldman
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of l934,
this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/S/ KEVIN ALWARD President, Chief Operating May 7, l997
Kevin Alward Officer and Director
/S/ SOLOMON FELDMAN Director May 7, l997
Solomon Feldman
/S/ WARREN H. FELDMAN Chairman of the Board, May 7, l997
Warren H. Feldman Chief Executive Officer
and Director
/S/ LEON GENET Director May 7, l997
Leon Genet
/S/ THOMAS P. GUNNING Vice President, Treasurer, May 7, l997
Thomas P. Gunning Secretary and Principal
Accounting Officer
/S/ JAY J. MILLER Director May 7, l997
Jay J. Miller
Exhibit No. Description of Document
(3)(a) Certificate of Incorporation, as amended. Incorporated by
reference to Exhibits 2-A, 2-B, 2-C and 2-D to Registration
Statement No. 2-15546 and Registrant's proxy statement
relating to its 1987 Annual Stockholder's Meeting.
(3)(b) By-Laws of Registrant. Incorporated by reference to Exhibit
A to Registrant's Annual Report on Form 10-K for the year
ended January 31, 1972.
(3)(c) Amended Certificate of Incorporation to change the name of
the Corporation from Faradyne Electronics Corp. to Total-Tel
USA Communications, Inc., dated November 4, l991.
Incorporated by reference to Exhibit 3 (c) to Registrant's
Annual Report on Form 10-K for the year ended January 31,
l992.
(10)(a) Lease of premises at 140 Little Street, Belleville, New
Jersey, between Mansol Realty Company and Mansol Ceramics
Company, dated March 30, 1960. Incorporated by reference to
Exhibit 13 (e) to Registration Statement No. 2-17546.
(10)(a) (1) Assignment of lease from Mansol Realty Company to Mansol
Realty Associates. Incorporated by reference to Exhibit 10
(a) (1) to Registrant's Annual Report on Form 10-K for the
year ended January 31, l982.
(10)(b) Extension Agreement re: Lease of premises at 140 Little
Street dated October 31, l974. Incorporated by reference to
Exhibit 10 (b) to Registrant's Annual Report on Form 10-K
for the year ended January 31, l981.
(10)(c) Lease of premises at 471 Cortland Street, Belleville, New
Jersey, between Birnfield Associates and Mansol Ceramics
Company, dated October 31, 1974. Incorporated by reference
to Exhibit 10 (c) to Registrant's Annual Report on Form 10-K
for the year ended January 31, 1981.
(10)(d) Lease Modification Agreement re: Lease of premises at 471
Cortland Street dated July 24, 1980. Incorporated by
reference to Exhibit 10 (d) to Registrant's Annual Report on
Form 10-K for the year ended January 31, 1981.
(10)(e) (i) Term Loan Agreement and Term Note both dated April 22, l983
between Mansol Ceramics Company and United Jersey Bank in
the principal amount of $1,192,320. Incorporated by
reference to Exhibit 10 (e) to Registrants Annual Report on
Form 10-K for the year ended January 31, l983.
(10)(e)(ii) Installment Note and Equipment Loan and Security Agreement
of Mansol Ceramics Company and Guaranty of Registrant, dated
August 1, l988, in connection with extension of the maturity
date of the loan referenced to in Exhibit 10 (e) (i).
(10)(f) Lease of premises at 17-25 Academy Street, Newark, New
Jersey between Mansol Ceramics Company and Rachlin & Co.,
dated April 29, l983. Incorporated by reference to Exhibit
10 (f) to Registrant's Annual Report on Form 10-K for the
year ended January 31, l984.
(10)(g) Lease Modification Agreement re: Lease of Premises at 471
Cortland Street dated July 24, l985. Incorporated by
reference to Exhibit 10 (g) to Registrant's Annual Report on
Form 10-K for the year ended January 31, l986.
(10)(h) Master Lease Agreement between Mansol Ceramics Company and
Fidelcor Services, Inc. dated December 30, l985.
Incorporated by reference to Exhibit 10 (h) to Registrant's
Annual Report on Form 10-K for the year ended January 31,
l986.
(10)(i) Deed, Mortgage and Mortgage Note between William and Fred
Schneper as Grantees and Borrowers and Mansol Ceramics
Company as Grantor and Lender, dated July 26, l985 re:
property located in Hanover Township, New Jersey.
Incorporated by reference 10 (i) to Registrant's Annual
Report on Form 10-K for the year ended January 31, l986.
(10)(j) Lease of premises at 140 Little Street, Belleville, New
Jersey, between Mansol Realty Association and Mansol
Ceramics Company, dated July 31, 1986. Incorporated by
reference to Exhibit 10 (j) to Registrant's Annual Report on
Form 10-K for the year ended January 31, l987.
(10)(k) 1987 Stock Option Plan. Incorporated by reference to
Registrant's proxy statement relating to its 1987 Annual
Stockholders' Meeting.
(10)(k)(1) Amendment to the 1987 Stock Option Plan. Incorporated by
reference to Registrant's Form S-8 dated November 13, l995.
(10)(l) Renewal of Lease and Extension to additional space at 17-25
Academy Street, Newark, New Jersey (a/k/a 1212 Raymond
Boulevard, Newark, New Jersey) between Mansol Ceramics
Company and Rachlin & Co. Incorporated by reference to
Exhibit 10 (l) to Registrant's Annual Report on Form 10-K
for the year ended January 31, l988. (See also Exhibit 10
(f)).
(10)(m) Agreement, dated June 13, 1989, between Mansol Ceramics
Company and Bar-lo Carbon Products, Inc. providing for the
sale of Ceramics' Carbon fixtures division. Incorporated by
reference to Exhibit 10 (m) to Registrant's Annual Report on
Form 10-k for the year ended January 31, 1990.
(10)(n) Modification of Note and Mortgage from William Schneper,
Fred Schneper and Leon Schneper (Mortgagor) to Mansol
Ceramics Company (Mortgagee) dated August 1, l990, extending
the term of the Note and Mortgage and modifying the interest
provision.
(10)(o) Asset Purchase Agreement between Registrant, Mansol Ceramics
Company and Mansol Industries Inc. dated May 22, l990,
including Subordinated Term Promissory Note and Security
Agreement, covering sale of assets and business of
Manufacturing Division of Mansol Ceramics Company.
Incorporated by reference to Exhibits 1, 2 and 3 to
Registrant's Current Report on Form 8-K dated May 22, l990.
(10)(p) Modification of Loan between Mansol Industries, Inc.
(borrower) and Mansol Ceramics Company (Lender) dated
January 31, 1992, allowing for the deferral of the principal
for twelve months through and including the period ending
June 22, l992 in consideration for personal guarantees from
Borrower. Incorporated by reference to Exhibit 10 (p) to
Registrant's Annual Report on Form 10-K for the year ended
January 31, 1992.
(10)(q) Lease of premises at 470 Colfax Avenue, Clifton, New Jersey,
between Total-Tel USA Communications, Inc. and Broadway
Financial Investment Services, Inc. dated March 25, 1991.
Incorporated by reference to Exhibit 10 (q) to Registrant's
Annual Report on Form 10-K for the year ended January 31,
l992.
(10)(r) Lease of premises at 744 Broad Street, Newark, New Jersey
between Total-Tel USA Inc. and Investment Property Services,
Inc. dated November 15, 1993. Incorporated by reference to
Exhibit 10 (r) to the Registrant's Annual Report on Form 10-
K for the year ended January 31, 1994.
(10)(s) Lease of premises at 744 Broad Street, Newark, New Jersey
between Total-Tel USA, Inc. and Investment Property
Services, Inc. dated December 28, 1993. Incorporated by
reference to Exhibit 10 (s) to the Registrant's Annual
Report on Form 10-K for the year ended January 31, l994.
(10)(t) Lease of premises at 471 Cortland Street, Belleville, New
Jersey, between Total-Tel USA Inc. and Birnfield Associates
- Belleville dated December 1, l993. Incorporated by
reference to Exhibit 10 (t) to the Registrant's Annual
Report on Form 10-K for the year ended January 31, 1994.
(10)(u) Lease of premises at 150 Clove Road, Little Falls, New
Jersey, between Total-Tel USA Inc. and the Prudential
Insurance Company of America dated February 22, l994.
Incorporated by reference to Exhibit 10 (u) to the
Registrant's Annual Report on Form 10-K for the year ended
January 31, l994.
(10)(v) Lease modification to the lease of the premises at 150 Clove
Road, Little Falls, New Jersey between TotalTel, Inc. and
The Prudential Company of America dated May 18, l994.
Incorporated by reference to Exhibit 10 (v) to the
Registrant's Annual Report on Form 10-K for the year ended
January 31, l995.
(10)(w) Second lease modification to the lease of the premises at
150 Clove Road, Little Falls, New Jersey between TotalTel,
Inc. and Theta Holding Company, L. P., successor to the
Prudential Insurance Company of America dated February 9,
l995. Incorporated by reference to Exhibit 10 (w) to the
Registrant's Annual Report on Form 10-K for the year ended
January 31, l995.
(10)(x) Third lease modification to the lease of the premises at 150
Clove Road, Little Falls, New Jersey between TotalTel, Inc.
and Theta Holding Company, L. P., successor to the
Prudential Insurance Company of America dated January 31,
1997.
(10)(y) Equipment Facility and Revolving Credit Agreement dated
August 23, l996 between Total-Tel USA Communications, Inc.,
TotalTel, Inc., Total-Tel USA, Inc., and Total-Tel Carrier
Services, Inc. and the Summit Bank in the amount of
$10,000,000.
(10)(z) Lease of premises at 500 fifth Avenue, New York City, New
York between TotalTel, Inc. and 1472 Broadway, Inc. dated
November 8, 1996. Incorporated by reference to Form SE for
the year ended January 31, l997.
(10)(AA) Lease of premises at 40 Rector Street, New York City, New
York between Total-Tel USA Communications, Inc. and 40
Rector Street Company dated November 1, l996.
Incorporated by reference to Form SE for the year ended
January 31, l997.
(10)(AB) 1996 Stock Option Plan, Incorporated by reference to
Registrant's Proxy Statement relating to its 1996 Annual
Stockholder Meeting.
(21) Subsidiaries of Registrant. Incorporated by reference to
Exhibit 22 to Registrant's Annual Report on Form 10-K for
the year ended January 31, 1996.
(27) Financial Data Schedule.
THIRD MODIFICATION OF LEASE
THIS THIRD MODIFICATION OF LEASE, sometimes hereinafter "this Lease"
dated this --th day of January, 1997, by and between THETA HOLDING
COMPANY, L.P., having an office at 150 Clove Road, Little Falls, New
Jersey, (hereinafter referred to as "Landlord"); and TOTAL-TEL USA,
INC., a corporation of the State of New Jersey, having an office at 150
Clove Road, Little Falls, New Jersey (hereinafter referred to as
"Tenant").
WHEREAS, Landlord is the owner of a building commonly known as Overlook
at Great Notch (hereinafter referred to as the "Building"), located at
150 Clove Road, Little Falls, County of Passaic, State of New Jersey,
which land is also improved with landscaping, parking facilities and
other improvements, all of which, together with the Building and
underlying land, shall be known as and referred to collectively herein
as the "Project"; and
WHEREAS, Landlord has leased to Tenant 15,011 rentable square feet on
the Eighth Floor, by lease dated February 22, 1994, 2,673 rentable
square feet on the Eighth Floor by Spreader and Modification of Lease
dated May 18, 1994 and 6,658 rentable square feet on the Eighth Floor by
Second Modification of Lease dated February 9, 1995 (together referred
to as the "Original Premises"), and which aforementioned Lease and
modifications are hereinafter collectively referred to as "the Lease",
and
WHEREAS, Landlord and Tenant wish to spread said lease over an
additional 16,640 rentable square footage on the Second Floor of the
Building, making a total of 40,982 rentable square feet on both the
Second and Eighth Floors, and to modify certain other provisions of the
Lease in connection with the taking of said additional 16,640 rentable
square feet.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, and other good and valuable consideration, the
receipt of which is hereby acknowledged, Landlord and Tenant hereby
agree to amend and modify said Lease as follows:
1.(A) Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord approximately 16,640 rentable square feet on the Second Floor,
hereinafter referred to as "Additional Space", as shown on Exhibit "A",
making a total of approximately 40,982 rentable square feet,
constituting a portion of the Second Floor and the entire Eighth Floor
and hereinafter in total sometimes referred to as the "Enlarged
Premises".
(B) As referenced in the Second Modification of Lease, in order to
properly reflect the loss factor of the Building, from and after August
15, 2000, the Premises shall be increased by the addition thereto of 139
square feet of space, it being understood that no actual physical area
shall be added to the Premises. From and after said date, the Enlarged
Premises for all purposes of this Lease shall be calculated as 41,121
rentable square feet.
2.(A) The commencement date for the Additional Space shall be the date
of substantial completion of Landlord's Work to be completed by Landlord
for the Additional Space, which is estimated to be June 1, 1997,
hereinafter referred to as the "Additional Space Date". However, the
Additional Space Date shall not be postponed beyond July 1, 1997,
regardless of whether the Additional Space is ready for Tenant's
occupancy, if (i) the delay in the availability of the Additional Space
for possession shall be due to special work, changes, alterations or
additions required or made by the Tenant, (ii) the delay was caused in
whole or in part by the delay of the Tenant in submitting any plans
and/or specifications, supplying information, approving plans,
specifications or estimates, or giving authorizations; or (iii) the
delay was otherwise caused wholly or substantially by delay and/or
default on the part of the Tenant. If the Additional Space Date occurs
on any other day other than the first day of the calendar month, the
basic annual rental will be pro-rated on a daily basis (i.e., annual
rental [divided] 365 days). As of the Additional Space Date, the
Additional Space shall be deemed to be a part of the premises demised
under the Lease. The Additional Space shall expire co-terminously with
Tenant's Original Premises on August 14, 2002.
(B) The construction of the tenant improvements in the Additional Space
shall be completed by Landlord at Landlord's cost and expense in
conformance with specifications attached hereto as Exhibit B. Tenant
understands and agrees that any changes or deviations to the attached
plans and specifications requested by Tenant, shall be completed at
Tenant's sole cost and expense, which payments shall be made in full
prior to the Additional Space Date.
3.(A) Effective as of the Additional Space Date, Tenant shall pay, in
addition to the Basic Rent for the Original Premises, Basic Rent for
the Additional Space equal to $21.50 per rentable square foot through
February 14, 1998, $22.00 per rentable square foot from February 15,
1998 through August 14, 2000 and $23.00 per rentable square foot
from August 15, 2000 through August 14, 2002 as follows:
Date Monthly Rent Annual Rent Rent Per Sq.Ft.
==== ============ =========== ===============
through 2/14/98 $29,813.33 $357,760.00 $21.50
2/15/98 - 8/14/00 $30,506.67 $366,080.00 $22.00
8/15/00 - 8/14/02 $31,893.33 $382,720.00 $23.00
(B) There is presently an electric meter in operation for the
calculation of Tenant's electric usage in the Original Premises.
Likewise, the Additional Space shall also have a separate meter
installed by Landlord for the purpose of determining Tenant's actual
electric use.
4.(A) From and after the Additional Space Date, the "Percentage Share"
provided for in Basic Lease Provision 3 of said Lease shall be 4.0% for
the Additional Space only.
(B) The Base Year for Project Operating Expenses and Project Property
Taxes for the Additional Space shall be 1997. The Base Year for the
Original Premises shall remain unchanged.
5.From and after the Additional Space Date, the "Security Deposit"
provided for in Basic Lease Provision 10 of said lease shall be
increased by $89,440.00 to $215,714.12, which increase shall be paid by
Tenant in full prior to the Additional Space Date. For the convenience
of Tenant, the increase in security deposit may be paid by Tenant in the
form of a revolving letter of credit, which shall be in force for the
duration of Tenant's Lease. Landlord shall have the power to draw
against the letter for any amount that may be due as a result of
Tenant's default under any of the terms of this Lease. In the event of a
sale or leasing of the Building, Landlord shall have the right to
transfer the letter of credit to the grantee or lessee. It is agreed
that the provisions hereof shall apply to every such transfer or
assignment made of the letter of credit.
6.From and after the Additional Space Date, the number of unreserved
parking spaces provided for in Basic Lease Provision 11 of said lease
shall be increased to 135 total spaces, of which fourteen (14) shall be
reserved spaces.
7.Tenant represents and warrants that it has not directly or indirectly
dealt with any real estate broker other than Harper Lawrence, Inc. 600
Madison Avenue, New York, New York 10022, in connection with this
transaction. Landlord will pay Harper Lawrence, Inc. Tenant agrees to
indemnify, defend and hold Landlord harmless from and against any and
all liabilities, claims, suits, demands, judgements, costs, interest and
expenses (including, but not limited to, reasonable counsel fees
incurred in the defense of any action or proceeding) to which Landlord
may be subject or suffer by reason of Tenant's having had dealings with
respect to the Project or this Lease with any real estate agents or
brokers. This Article shall survive the expiration or earlier
termination of this Lease.
8.Renewal Option:The renewal option for the Additional Space shall be as
follows:
(A) Renewal Terms. Provided Tenant is not in default under this Lease,
Tenant shall have the option to renew space per the Third Modification
of the Lease for the Additional Space for two (2) Renewal Terms of five
(5) years each, commencing at the expiration of the initial Lease term,
or the First Renewal Term, as the case may be, upon the same terms and
conditions as in this Lease, except as hereinafter set forth.
(B) Notice to Landlord. The right of Tenant to renew and extend this
Third Modification of Lease is expressly conditioned upon Tenant's
delivering to Landlord, in writing, by certified mail, return receipt
requested, not later than nine (9) months prior to the expiration of the
initial Lease term or the First Renewal Term, as the case may be (such
time period being hereby made of the essence), a notice of exercise of
the Renewal Term.
(C) Basic Rent.
(i) The Basic Rent for the Renewal Term shall be the greater of Fair
Rental Value (as hereinafter defined) of the Additional Space or $23.00
per square foot times the rentable square feet in the Additional Space
which Fair Rental Value shall be determined not later than nine (9)
months prior to the commencement of the Renewal Term.
(D) Fair Rental Value. Fair Rental Value shall mean the fair rental
value for similar space in a comparable Project in the Northern New
Jersey area. In the event that, based upon the application of the above
criteria, there is an increase in the Fair Rental Value and thus an
increase in the Basic Rent hereunder for any renewal period over the
Basic Rent paid in the next preceding term of Lease or prior renewal
period, then, in that event, there shall be an adjustment of the Base
Year for Project Property Tax and Project Operating Expense which shall
thereafter be the calendar year next preceding the initial year of the
applicable Renewal Period.
(E) Appraisal.Landlord shall notify Tenant of the Fair Rental Value as
established by Landlord. Should Tenant dispute Landlord's determination,
then Tenant shall be free, at Tenant's sole cost and expense, to employ
the services of an appraiser familiar with office buildings comparable
to the Project located within the Northern New Jersey area, which
appraiser shall be an MAI and who shall render an opinion as to the Fair
Rental Value of the Additional Space. If Landlord and Tenant's appraiser
cannot agree on the Fair Rental Value, and in the event Landlord and
Tenant cannot agree on an independent appraiser who shall be acceptable
to them both, either party may request the American Arbitration
Association in Passaic County, New Jersey, to appoint an independent
appraiser who shall be an MAI and who shall be familiar with projects in
the area of the Project. The average of the Fair Rental Value in the
opinion of the two appraisers and Landlord shall be the Fair Rental
Value. If Fair Rental Value is less than the applicable square foot rent
in Section (C) above and Tenant is unwilling to pay said Basic Rent,
Tenant shall have the right to rescind the exercise of its Renewal Term
by notice given no later than six (6) months prior to the expiration of
the then current term. Failure to give a rescission notice within said
period shall constitute an acceptance of the Basic Rental established
above. In any event, Landlord and Tenant shall share equally the cost of
the independent appraiser.
9. Tenant acknowledges that the Building design specifications provide
for a maximum of one occupant per each 200 square feet.
10. As of the Additional Space Date, Paragraph 44 of the lease shall be
expanded to include the following provision:
Paragraph 44: Tenant's Right of First Offer. Upon condition that Tenant
is not in default in the payment of any Rent or other charge payable by
Tenant under this Lease and not in default in the performance of any
covenant or obligation to be performed by Tenant under this Lease,
Landlord agrees that Landlord will not enter into a lease of contiguous
second (2nd) floor space in the Building during the initial term of this
Lease with any new tenant unless Landlord shall first notify the Tenant
in writing of the availability of said space and afford Tenant the
opportunity to lease said space as hereinafter set forth. Landlord
agrees that Tenant shall thereupon have the one-time right to lease the
space indicated in the notice delivered from Landlord to Tenant at a
base rent per square foot to be determined by the greater of Fair Rental
Value (as defined in Article 8) or the base rent being paid by Tenant
pursuant to this Lease at the time of the election of this right to
lease such additional space. Said right must be exercised by Tenant
within fifteen (15) calendar days after Tenant's receipt of written
notice of said offer by Tenant's giving written notice to Landlord of
the exercise of said right. If Tenant shall fail to exercise its right
hereunder in the manner set forth herein and Landlord shall thereafter
lease the space to any tenant, then Tenant shall execute in recordable
form a release of its right of first offer herein granted as to that
space. This right of first offer (i) is not assignable and shall be
deemed personal to Total-Tel USA, Inc.; (ii) will not apply to any space
to be leased by Landlord to a tenant therein leasing other space in the
Building; and (iii) is subject to any prior rights which have been
granted to other tenants in the building.
11. Signage. If the Landlord intends to enter into an arrangement to
lease building exterior signage rights to (i) an outside entity which
does not lease or occupy space in the building or (ii) an entity leasing
other space in the Building equal to, or smaller in size than the
Enlarged Premises of the Tenant, then the Landlord shall first contact
Tenant and under the same terms and conditions and Tenant shall have the
first right to exercise the same signage arrangements for consideration
equal to that which would have been paid by an outside entity or entity
leasing space in the Building. If the offered signage rights are to be
incorporated into the entity's lease for space within the Building, then
the consideration for the signage rights will be calculated as the
excess of rental to be paid during the term of the lease over Fair
Rental Value. If Tenant chooses not to pursue the signage availability
at that time, then Landlord shall be free to lease signage rights to the
other entity without any future obligation to Tenant. This right shall
be personal to Tenant, shall not be assignable or transferrable and is
subject to any prior rights which have been granted to other tenants in
the building.
12. Tenant hereby renews its obligations to Landlord for the full,
prompt and timely payment of all Basic Annual Rent, Additional Rent and
all other sums of money required to be paid by Tenant during the term of
said Lease, as herein modified, and for the full, prompt and timely
performance, compliance and observance of all terms contained in the
Lease, as herein modified. Landlord acknowledges that all the benefits
and conditions applicable to the Original Premises under said lease,
hereby apply to the Additional Space pursuant hereto originally as if
same were part of the Lease.
13. The provisions hereto shall inure to the benefit of and be binding
upon the respective successors and assigns of each of the parties
hereto.
14. Except as herein modified and to the extent as herein modified the
provisions of said lease shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have caused these presents to be
signed by their respective duly authorized officer, the day and year
first above written.
LANDLORD:
ATTEST: THETA HOLDING COMPANY, L.P. by
M & E Packaging Corp, its General Partner
By:-----------------------------------------
Alfred S. Teo, President
TENANT:
ATTEST: TOTAL-TEL USA, INC.
/S/ Warren H. Feldman, President
By:-----------------------------------------
Warren H. Feldman, President
EXHIBIT A
MAIN TOWER
Second Floor
[GRAPHIC OMITTED]
EXHIBIT "B"
LANDLORD'S WORK
Tenant shall submit a complete set of Tenant approved working plans and
specifications, sealed by the Landlord's licensed New Jersey architect,
for the permanent leasehold improvements in the Additional Space. These
working plans and specifications may include upgrades to Project
Standards as outlined below, but must at minimum meet Project Standards
and all State and Local codes and requirements. All plans shall be
subject to Landlord's review and approval, which shall not be
unreasonably withheld or delayed. Landlord agrees that it will obtain
all permits and inspections required for occupancy, excluding any
special permits or approvals related to Tenant's equipment or business
operations, and perform the construction work in accordance with the
Tenant and Landlord approved plans prior to the Additional Space Date
(collectively referred to as "Landlord's Work"). The cost of Landlord's
Work, including the cost of working plans and specifications and filing
fees, shall not be subject to Landlord's customary supervisory and
overhead fee and shall be paid by the Landlord up to $366,080 ($22.00
per rentable square feet). If the cost of Landlord's Work exceeds
$366,080, then Tenant shall reimburse Landlord for the excess within 10
days of receiving a statement from Landlord. Landlord will perform all
work in a good and workmanlike condition.
As soon as practical, Landlord shall provide Tenant with a written
breakdown of the estimated cost of Landlord's Work for final approval.
Tenant may review the estimate and make revisions to the working plans
and specifications within seven (7) business days. Such revised working
plans and specifications shall be subject to the same terms and
approvals as above.
PROJECT STANDARDS
Partitions
Between the Premises and corridor(s) and/or between the Premises and
adjacent space, 5/8" fire code gypsum board, taped and spackled, on each
side of 3-5/8" metal studs, 16" on center. Demising partitions to have
3-1/2" (full thick) sound deadening insulation installed within from
floor to underside of floor above.
In the Premises, 5/8" gypsum board on each side of 3-5/8" metal stud,
24" on center, taped and spackled, 9' high.
Partitions terminating in the Project exterior wall shall meet either a
mullion or a column without interfering with access to the peripheral
enclosure.
Doors and Bucks
All bucks to be 16 gauge hollow metal, KD, with 2" trim.
Doors within Tenant space to be 3'0" x 6'8" x 1-3/4" solid core wood,
stain grade.
Tenant's main entrance to be double 3'0" x full height 1/2" tempered
glass doors with continuous brass top and bottom rails, polished brass
pulls, flush top and bottom pivots. Herculite or equal.
Secondary egress doors, if required, on public corridors to be full
height oak veneer, with surface mounted closer, and 2 pair ball bearing
hinges.
Glazing
Glazing in interior windows and doors shall be as required by Local,
State and Federal regulations.
Rough and Finished Hardware
All interior doors to receive Schlage or equal "D" series passage
hardware sets with lever handles, brushed chrome finish.
All secondary egress doors to receive Schlage or equal "D" series
locksets with lever handles and closer. Locksets to be keyed to
building master.
All interior wood doors to receive 1-1/2" pr. standard hinges, Stanley
FB series or equal.
All doors to be located, oriented and equipped with hardware in
accordance with local codes.
Acoustical Ceilings
Lay-in acoustic tile ceilings shall be 24" x 48" "Second Look" tile,
Armstrong #2767 or equal in 15/16" standard grid (USG Corp.), white
finish.
Flooring
Standard carpeting shall be installed, direct glue down, Queen (or
equal) "Commitment" 26 oz. nylon loop or Queen (or equal) "Baytowne" 30
oz. nylon cut pile.
Base to be 4" vinyl, cove/straight at all carpeted areas, coved at all
V.C.T. areas.
V.C.T. to be Armstrong (or equal) in all non-carpet areas.
All carpet or V.C.T. tiles will be selected from Landlord's samples,
which will include a representative range of commercially available
products.
Painting
Interior wall surfaces of gypsum board shall receive one (1) prime coat
and two (2) finish coats of flat alkyd paint, colors to be selected by
Tenant from Benjamin Moore standard colors.
Metal doors, door bucks and other metal surfaces not having baked enamel
finish shall receive two (2) coats of enamel paint over one (1) coat of
primer, colors to be selected by Tenant from Benjamin Moore standard
colors.
All stain grade doors to receive one (1) coat of stain, two (2) coats of
satin finish, color to be selected by Tenant from Minwax standard colors
Millwork
All coat closets shall be furnished with vinyl coated wire wardrobe
shelving units, continuous for length of closet, as manufactured by
Closetmaid or equal.
All storage closets shall be furnished with five (5) adjustable melamine
shelves on metal standards with clips.
Tenant Signage
All public corridor tenant signage shall conform to the following
specification: Pin mounted, stainless steel or Polished Aluminum (first
floor shall be brass), minimum 14 gauge, mirror finish, 3/8" deep,
individual letters not to exceed 4" in height, logo not to exceed 10" in
height. Overall identification not to exceed 40" in width x 15" in
height and not to be higher than 80" or lower than 65" from corridor
floor. Signage not to end closer than two inches from any corner or
door jam. No signage shall be placed directly on doors or windows.
HVAC Specifications
The HVAC system shall be a Carrier variable air volume system using 2' x
2' lay-in style diffusers. The electric "VAV" boxes will contain all
necessary controls including wall mounted thermostat.
The "VAV" boxes are connected to supply duct systems which are supplied
with conditioned air from a dual controlled chilled water system, with
cooling coils, chillers, filters, mixing dampers and relief dampers,
cooling towers and pumps.
All Demising Partitions shall have the appropriate size Fire Dampers
installed.
All heating will be provided from existing perimeter electric baseboard
radiation.
The control system for the heating will be by means of an electronic
"SCR" controller and solar compensation system.
The system will be under time clock control to operate during Business
Hours on Business Days (as those terms are defined in the Lease).
Zoning on tenant areas will be based on 600 to 1,200 square feet per
zone, depending upon usage and orientation.
Lighting load on HVAC system will be based on 2.5 to 3 watts per square
foot.
Watts per square foot of lighting load and miscellaneous equipment load
combined shall not exceed 6 watts per square foot as per original base
building design.
Base Building Standards being 1.0 CFM per square foot of building supply
air.
Base building design for outside air supply is at 7.5 CFM per person.
Upon project completion, HVAC system shall be balanced as required to
adjust air volumes in accordance with new areas. A certified balancing
report must be submitted and building engineer approved.
If Tenant's equipment (i.e., computers, etc.) requires air-conditioning
above and beyond Project standard as outlined, said additional air-
conditioning (including cost of operation as stipulated in the Lease)
shall be paid for by Tenant as an extra cost. Any special exhaust
requirements will also be an extra cost to be paid by Tenant.
Electrical Specifications
Lighting
Office areas - provide one 2'0" x 4'0" three-tube recessed parabolic
fluorescent fixture with return air troffer for each 100 square feet.
Fixtures to be as manufactured by Lithonia, catalog number 2PM3GC33218LS
277 1/3 GEB with T8-32W 41K lamps or approved equal, as selected by
Landlord.
One (1) duplex receptacle will be provided for each 100 square feet of
useable area and to meet all applicable codes. Duplex receptacles shall
be wired on 20A circuits, maximum 6 per circuit.
Exit and emergency lighting to be provided as per codes and wired to
base building 24-hour emergency circuit.
One light switch will be provided in each office. General area switches
shall be single pole or three-way based on 30 fixtures per circuit.
The average electric load of the Premises shall not exceed six (6) watts
per square foot for lighting and power.
Sprinkler
Coverage shall be estimated at 1 head per 100 sq. ft. or as per code,
whichever is greater.
Heads shall be semi-recessed, polished chrome finish, Viking or equal.
All heads shall be located in tile centers.
Telephone Service
All telephone/data wiring and equipment shall be at the expense of
Tenant and be arranged for by Tenant with Bell Atlantic or other
qualified installer. Landlord will coordinate work with other trades as
required.
(Original Document Name = 1157)
SECURITY AGREEMENT
This SECURITY AGREEMENT, is dated as of this ----- day of August, 1996
(this Agreement), made by TOTAL-TEL USA COMMUNICATIONS, INC., a --------
- - corporation (Total-Tel Comm), TOTAL-TEL, INC., a --------------
corporation (Total-Tel), TOTAL-TEL USA, INC., a -------------
corporation (Total-Tel USA), TOTAL-TEL SOUTHEAST, INC., a --------------
corporation (Total-Tel Southeast), TOTAL-TEL CARRIER SERVICES, INC., a -
- ------------- corporation (Total-Tel Carrier) and TOTAL-TEL SERVICES,
INC., a ------------- corporation (Total-Tel Services), in favor of
SUMMIT BANK, a banking corporation organized under the laws of the State
of New Jersey (the Bank). Total-Tel Comm, Total-Tel and Total-Tel USA
are herein referred to as the Borrowers, Total-Tel Southeast, Total-Tel
Carrier and Total-Tel Services are herein referred to as the Subsidiary
Guarantors and each of the Borrowers and each of the Subsidiary
Guarantors are herein referred to individually as a Grantor and
collectively as the Grantors.
PRELIMINARY STATEMENT
A. The Bank has entered into that Equipment Facility and Revolving
Credit Agreement of even date herewith (said Credit Agreement, as it may
be hereafter amended or otherwise modified from time to time, being the
Credit Agreement; capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the
Credit Agreement) with the Borrowers pursuant to which the Bank agreed
to make available to the Borrowers an equipment finance facility in the
principal amount of up to $6,000,000 and a revolving credit facility in
the principal amount of up to $4,000,000. The obligations of the
Borrowers thereunder as evidenced by the Notes referred to therein.
B. To support the obligations of the Borrowers under the Credit
Agreement, the Subsidiary Guarantors have executed and delivered to the
Bank that certain Subsidiary Guaranty and Suretyship Agreement of even
date herewith in favor of the Bank (the Subsidiary Guaranty). To further
support said obligations of the Borrowers, the Borrowers have executed
and delivered to the Bank that certain Borrower Guaranty and Suretyship
Agreement of even date herewith in favor of the Bank (the Borrower
Guaranty).
C. It is a condition to the availability of the credit facilities under
the Credit Agreement that the Grantors shall have granted to the Bank
the security interests contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and in order to induce the Bank to make the credit
facilities under the Credit Agreement available to the Borrowers, the
Grantors hereby agree as follows:
SECTION 1. Grant of Security. Each Grantor hereby grants and assigns to
the Bank a security interest in all of such Grantor's right, title and
interest in and to the following assets (collectively, the Collateral):
(a) any and all equipment and machinery, in all forms, (including, but
not limited to, (i) all digital switching equipment and computer
equipment and software that is used or useful in such Grantor's long
distance telephone service business, (ii) all sales, distribution, data
processing and office equipment, furniture, and furnishings, and (iii)
all tools, tooling, molds, templates, drawings, schematics and other
design descriptions of the foregoing and manufacturer's manuals to the
foregoing, and (iv) all shelving, warehouse racks, forklifts, conveyors
and other fixtures), together with all parts and replacements thereof
accessions and additions thereto and substitutions and exchanges
therefor (any and all such equipment, machinery, fixtures, parts,
accessions, additions, substitutions and replacements being the
Equipment); and
(b) all of such Grantor's books and records, including, but not limited
to, records indicating, summarizing, or evidencing, the Collateral, the
Obligations, or such Grantor's property, business operations, or
financial condition; computer runs, invoices, tapes, processing
software, processing contracts (such as contracts for computer time and
services) and any computer prepared information, tapes, or data of every
kind and description, whether in the possession of such Grantor or in
the possession of third parties; and
(c) any and all "Proceeds" of the foregoing (as such term is defined in
the Uniform Commercial Code in effect from time to time in the State of
New Jersey (hereinafter, the UCC)), whether cash or non-cash, together
with any insurance indemnity, warranty or guaranty payable to such
Grantor from time to time with respect to any of the Collateral, any and
all payments (in any form whatsoever) made or due and payable to such
Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or part of the
Collateral by any governmental body, authority, bureau or agency or any
other Person (whether or not acting under color of governmental
authority), and any and all other amounts from time to time paid or
payable under or in connection with any of the foregoing Collateral; and
(d) all property (together with the proceeds thereof) in which such
Grantor at any time has any rights and which at any time has been
delivered, transferred, pledged, mortgaged or assigned to, or deposited
in or credited to an account with, the Bank or any third part(y)(ies)
acting on its behalf at any time in the possession or under the control
of the Bank, or any third part(y)(ies) acting in its behalf, whether
expressly as collateral or for safekeeping or for any other or different
purposes, including, but not limited to, any property which may be in
transit by mail or carrier for any purpose, or covered or affected by
any documents in the possession of the Bank, or in the possession of any
such third part(y)(ies), and all property in which such Grantor at any
time has rights and in which at any time a security interest has been
transferred to the Bank;
in each case, whether now owned or hereafter acquired by such Grantor
and howsoever its interest therein may arise or appear (whether by
ownership, security interest, claim or otherwise).
SECTION 2. Security for Obligations. The Collateral secures the payment
of any and all obligations and indebtedness of every kind and
description of any Grantor or any other Obligor, now or hereafter
existing, owed to the Bank (including, but not limited to, all such
obligations and indebtedness arising under (i) this Agreement, the
Credit Agreement, the Notes, the Letters of Credit, the Subsidiary
Guaranty, the Borrower Guaranty, (ii) any of the other Credit Documents
executed in connection therewith, and (iii) any amendments,
modifications, extensions, supplements or renewals of any of the
foregoing), whether primary or secondary, direct or indirect, absolute
or contingent, sole, joint or several, contractual or tortious, due or
to become due, secured or unsecured, arising by operation of law or
otherwise, whether incurred by a Grantor or any other Obligor as
principal, surety, endorser, guarantor, accommodation party, or
otherwise, including, but not limited to, all late fees, collections
fees and expenses, and attorneys' fees and costs and/or allocated fees
and costs of the Bank's in-house counsel, in each case incurred in
connection therewith (all such obligations and indebtedness of any
Grantor and/or any other Obligor described in this Section 2 being
collectively hereinafter referred to as the Obligations).
SECTION 3. Delivery with Respect to Certain Collateral. If a Grantor
shall receive, by virtue of its being or having been an owner of any
Collateral, any (i) certificate, promissory note or other instrument or
(ii) option or right, whether as an addition to, or in substitution or
exchange for, any Collateral, or otherwise, such Grantor shall receive
such items in trust for the benefit of the Bank, shall segregate them
from such Grantor's other assets and shall, to the extent evidenced by a
writing, deliver said writing forthwith to the Bank in the exact form
received, with any necessary assignments, endorsements or consents to
the transfer of said interests to the Bank, to be held by the Bank as
Collateral and as further security for the Obligations.
SECTION 4. As to Equipment. (a) No Grantor will do anything to impair
the rights of the Bank in the Equipment. Each Grantor shall keep the
Equipment in which it is granting a security interest thereunder at the
places specified in Section 8(c) or, upon 30 days' prior written notice
to the Bank, at such other places in jurisdictions where all action
required by Section 9 shall have been taken with respect to such
Equipment.
(b) The Bank shall have the right to adjust any material claim under
insurance on the Equipment. Subject to Section 10(c) hereof, the Bank
may apply any proceeds of insurance received by it toward the payment of
any of the Obligations, whether or not the same shall then be due.
(c) Each Grantor shall retain all liability and responsibility in
connection with the Equipment in which it is granting or security
interest hereunder; and its liability under the Credit Documents shall
in no way be affected or diminished by reason of the fact that any such
Equipment may be lost, destroyed, stolen, damaged or for any reason
whatsoever be unavailable to it.
(d) Upon the request of the Bank, each Grantor to which such request has
been made will, at its own expense, shall, execute, endorse,
acknowledge, file and/or deliver to the Bank from time to time such
lists, descriptions and designations of its Equipment, warehouse
receipts, bills of lading, documents of title, vouchers, such invoices,
schedules, confirmations, assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates,
reports and other assurances or instruments and take such further steps
relating to such Equipment and other property or rights covered by the
security interest hereby granted, which the Bank deems reasonably
appropriate or advisable to perfect, preserve or protect its security
interest therein. The Bank may at any time notify any bailee of any
Equipment of its security interests therein.
(e) Each Grantor shall cause the Equipment in which it is granting a
security interest hereunder to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and in accordance with any manufacturer's manual, and shall
forthwith, or in the case of any loss or damage to any of such Equipment
as promptly as practicable after the occurrence thereof, make or cause
to be made all repairs, replacements and other improvements in
connection therewith which are necessary or desirable to such end. Each
relevant Grantor shall promptly furnish to the Bank a statement
respecting any loss or damage to any of such Equipment.
(f) Each Grantor shall pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon
payer, and all claims (including claims for labor, materials and
supplies) against, the Equipment in which it is granting a security
interest hereunder, except to the extent contested in good faith by
appropriate proceedings and for which adequate reserves have been
maintained.
(g) No Grantor shall permit any of the Equipment in which it is granting
a security interest hereunder to become fixtures to real estate or
accessions to other personal property unless the Bank has a first
priority security interest in such real estate or personal property.
SECTION 5. Filing and Recording Costs. The Grantors shall pay the filing
and recording costs of any documents or instruments necessary to
perfect, extend, modify, or terminate the security interests created
hereunder, as demanded by the Bank.
SECTION 6. Default. The Grantors shall be in default hereunder if there
occurs an Event of Default under any of the Credit Documents. In the
event of any such default, the Bank shall have all of the rights and
remedies set forth in the Credit Agreement, the other Credit Documents,
hereunder and as available at law or equity.
SECTION 7. Borrower Remains Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set
forth therein to perform all of its duties and obligations thereunder to
the same extent as if this Agreement had not been executed, (b) the
exercise by the Bank of any of the rights hereunder shall not release
any Grantor from any of its duties or obligations under the contracts
and agreements included in the Collateral, and (c) the Bank shall not
have any obligation or liability under the contracts and agreements
included in the Collateral by reason of this Agreement, nor shall the
Bank be obligated to perform any of the obligations or duties of the
relevant Grantor thereunder or to take any action to collect or enforce
any claim for payment assigned hereunder.
SECTION 8. Representations and Warranties. Each Grantor represents and
warrants that:
(a) such Grantor has exclusive possession and control of the Equipment
in which it is granting a security interest hereunder;
(b) such Grantor owns the Collateral in which it is granting a security
interest hereunder free and clear of any lien, security interest, charge
or encumbrance;
(c) set forth on Schedule I is: (i) the address of the chief executive
office (as such term is used in the UCC) of such Grantor; (ii) all
locations where the Equipment in which it is granting a security
interest hereunder is kept, used or maintained; and (iii) the record
owners of all such locations;
(d) all necessary consents required to permit the security interest,
encumbrance and assignments granted herein have been obtained;
(e) to the extent that ownership or possession of any of the Equipment
is evidenced by a certificate of title or similar instrument, such
certificates and instruments have been delivered to the Bank with all
necessary or advisable endorsements; and
(f) upon the proper and timely filing of UCC financing statements in the
filing offices set forth on Schedule I, the Bank will have a duly
perfected, legal, valid and enforceable first priority security interest
in and to the Collateral against all third parties, and all action
required to fully perfect the Bank's security interest in and to the
Collateral will have been taken and completed.
SECTION 9. Further Assurances. (a) Each Grantor agrees that from time to
time, at the expense of such Grantor, it will promptly execute and
deliver all further instruments and documents, and take all further
action, that may be necessary or that the Bank may reasonably request,
in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Bank to exercise and
enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, each
Grantor will execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices as may be
necessary and as the Bank may reasonably request, in order to perfect
and preserve the security interests granted or purported to be granted
hereby.
(b) Each Grantor hereby irrevocably authorizes the Bank to file
financing statements (and amendments thereto and continuations thereof)
relative to all or any part of the Collateral without the signature of
such Grantor. The Bank agrees to provide the relevant Grantor with
copies of the same. A photocopy or other reproduction of this Agreement
or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law. The
Bank shall have no obligation to file any such financing statements.
(c) The Grantors will furnish to the Bank, from time to time, statements
and schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral as the Bank may in its
sole discretion reasonably request, all in reasonable detail.
SECTION 10. Covenants as to the Collateral Generally. Each Grantor
shall:
(a) at its own cost and expense, consistent with current practices of
such Grantor, keep and maintain satisfactory and complete records with
respect to its Equipment and make available to the Bank such books and
records at any and all reasonable times upon reasonable demand by the
Bank;
(b) at its own cost and expense, defend the Bank's right, title and
security interest in and to the Collateral against the claims of any
person or entity;
(c) at its own cost and expense, maintain insurance with respect to the
Collateral in such amounts, against such risks, in such form and with
such insurers, as shall be satisfactory to the Bank from time to time.
Each policy for liability insurance shall provide for all losses to be
paid on behalf of the Bank and the relevant Grantor as their respective
interests may appear and each policy for property damage insurance shall
provide for all losses to be paid directly to the Bank. Notwithstanding
anything to contrary set forth herein, with respect to any loss of
Collateral in an amount less than or equal to $---------- in the
aggregate and provided there is then no continuing Event of Default, the
Bank shall permit the application of any insurance proceeds to the
restoration, replacement or repair of the affected Collateral, and the
relevant Grantor shall be obligated to so replace or repair the same.
Each such policy shall in addition (i) name the Bank as loss payee and
additional insured thereunder as its interests may appear, (ii) contain
the agreement by the insurer that any loss thereunder shall be payable
to the Bank notwithstanding any action, inaction or breach of
representation or warranty by the relevant Grantor, (iii) provide that
there shall be no recourse against the Bank for payment of premiums or
other amounts with respect thereto, and (iv) provide that at least 30
days' prior written notice of cancellation or of lapse shall be given to
the Bank by the insurer. The relevant Grantor shall, if so requested by
the Bank, deliver to the Bank original or duplicate policies of such
insurance and, as often as the Bank may reasonably request a report of a
reputable insurance broker with respect to such insurance. Further, the
relevant Grantor shall, at the request of the Bank, duly execute and
deliver such insurance policies to comply with the requirements of this
Section 10;
(d) not create or suffer to exist any Lien, security interest or other
charge or encumbrance upon or with respect to any Collateral;
(e) not take or fail to take any action which should reasonably be taken
in order that the value or enforceability of any Collateral not be
impaired;
(f) not move the Equipment in which such Grantor has granted a security
interest hereunder, cause such Equipment to be annexed or permanently
affixed to any real property; or otherwise take any actions as to the
Collateral which will, under applicable law, cause the security
interests of the Bank therein to become unperfected or cause the
priority of such security interests to be adversely affected in any
manner; and
(g) not sell, assign, lease, or otherwise dispose (whether voluntary or
involuntarily) of any of the Collateral, or relinquish exclusive
possession or control of any Equipment in which such Grantor has granted
a security interest hereunder.
SECTION 11. Bank Appointed Attorney-in-Fact. The Bank is hereby
irrevocably appointed the attorney-in-fact for each Grantor, with full
authority in the place and stead of and in the name of such Grantor, the
Bank or otherwise, to take any action and to execute any instrument
which the Bank may deem necessary or advisable to accomplish the
purposes of this Agreement, including:
(a) to file any claims or take any action or institute any proceedings
which the Bank may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of the Bank with
respect to any of the Collateral;
(b) to execute on behalf of any Grantor any and all documents,
including, without limitation, the Agreements, as may be necessary for
the collection of any Collateral or to establish the Accounts; and
(c) to execute financing statements on behalf of any Grantor.
The power of attorney granted hereby shall be a present grant of an
irrevocable power of attorney, coupled with an interest; provided,
however, the Bank agrees not to exercise the same (other than in Section
11(c), above, which right the Bank may exercise at any time) until the
occurrence of an Event of Default. The foregoing grant of power of
attorney shall not in any manner create, or be deemed to create, any
fiduciary relationship or other relationship of trust between the Bank
and any Grantor, it being understood and agreed that the relationship of
the Bank and each Grantor is that of creditor and debtor.
SECTION 12. Bank May Perform. Except as otherwise provided herein, if
any Grantor fails to perform any agreement contained herein, the Bank
may itself perform, or cause performance of, such agreement, and the
reasonable expenses of the Bank incurred in connection therewith shall
be payable by the Grantors under Section 15(b) hereof.
SECTION 13. The Bank's Duties. The powers conferred on the Bank
hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession, and the accounting for
moneys actually received by, it the Bank shall have no duty as to any
Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral.
SECTION 14. Remedies. If any Event of Default under the Credit Agreement
or any other Credit Document shall have occurred and be continuing:
(a) The Bank may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available
under law to it, all the rights and remedies of a secured party under
the UCC (whether or not the UCC applies to the affected Collateral), and
also may (i) require any relevant Grantor to, and each such Grantor
hereby agrees that it will at its expense and upon the request of the
Bank forthwith, assemble all or part of the Collateral as directed by
the Bank and make it available to the Bank at a place to be designated
by the Bank which is reasonably convenient to both parties, and (ii)
with such telephone or other notice, if any, as is required by law and
practicable under the circumstances or as specified below, sell the
Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Bank's offices or elsewhere, for cash, on
credit or for future delivery, and at such price or prices and upon such
other terms as are commercially reasonable. Each Grantor agrees that, to
the extent notice of sale shall be required by law, at least 10 days'
written notice to any relevant Grantor of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. The Bank shall not be obligated to
make any sale of Collateral, regardless of notice of sale having been
given. The Bank may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(b) All cash proceeds received by the Bank in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Bank, be held by the Bank as
collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Bank pursuant to Section 15
hereof) by the Bank against, all or any part of the Obligations in such
order as the Bank shall elect. Any surplus of such cash proceeds held by
the Bank and remaining after payment in full of all the Obligations
shall be paid over to the relevant Grantor or to whomsoever may be
lawfully entitled to receive such surplus.
SECTION 15. Indemnity and Expenses. -)(a) Each Grantor agrees to
indemnify the Bank from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement or the
Collateral (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting from the
Bank's gross negligence or willful misconduct. The provisions of this
Section 15(a) shall survive the termination of this Agreement.
(b) Each Grantor will upon demand pay to the Bank the amount of any and
all reasonable expenses, including the reasonable fees and disbursements
of its counsel and of any experts and agents, which the Bank may incur
in connection with (i) the preparation of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Bank hereunder, or
(iv) the failure by a Grantor to perform or observe any of the
provisions hereof.
SECTION 16. Amendments; Etc. -)No amendment or waiver of any provision
of this Agreement nor consent to any departure by a Grantor therefrom
shall in any event be effective unless the same shall be in writing and
signed by the Bank and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which
given.
SECTION 17. Addresses for Notices. -)All notices and other
communications provided for hereunder shall be in writing and mailed by
registered or certified mail, return receipt requested, to the address
specified in the Credit Agreement for the Bank and each Grantor or to
such other address as shall be designated by any party in a written
notice to the other parties complying as to delivery with the terms of
the Credit Agreement. All such notices and communications shall be
deemed delivered when delivered in accordance with the terms of the
Credit Agreement.
SECTION 18. Continuing Security Interest; Transfer of Notes. This
Agreement shall create a continuing security interest in the Collateral
and shall (i) remain in full force and effect until payment in full of
the Obligations, (ii) be binding upon each Grantor, its successors and
assigns and (iii) inure to the benefit of the Bank and its successors
and assigns. Without limiting the generality of the foregoing clause
(iii), subject to the restrictions on transfer of the Credit Agreement,
the Bank may assign or otherwise transfer its interest in the Notes to
any other Person and such other Person shall thereupon become vested
with all the benefits in respect thereof granted to the Bank herein and
otherwise. Upon the indefeasible and final payment in full of the
Obligations, the security interest granted hereby shall terminate and
all rights to the Collateral shall revert to the relevant Grantor. Upon
any such termination, the Bank shall (at the Grantors' sole cost and
expense) execute and deliver to the relevant Grantor such documents as
such Grantor shall reasonably request to evidence such termination.
SECTION 19. Security Interest Absolute. The obligations of each Grantor
under this Agreement are independent of the Obligations under any of the
other Credit Documents, and a separate action or actions may be brought
and prosecuted against each Grantor to enforce this Agreement,
irrespective of whether any action is brought against any other Obligor
or whether any Grantor or any other Obligor is joined in any such action
or actions. All rights of the Bank hereunder, and all Obligations of
each Grantor hereunder, shall be absolute and unconditional,
irrespective of:
(a) any lack of validity or enforceability of any Credit Document or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, or any release of all or any of the Obligations or any
other amendment or waiver of or any consent to any departure from any
Credit Document, including, without limitation, any increase in the
Obligations resulting from the extension of additional credit to any
Grantor, or otherwise;
(c) any taking, exchange, subordination, substitution, release or non-
perfection of any collateral, or any taking, release or amendment or
waiver of or consent to departure from any guaranty, for all or any of
the Obligations;
(d) any manner of application of Collateral, or proceeds thereof, to all
or any of the Obligations, or any manner of sale or other disposition of
any Collateral for all or any of the Obligations or any other assets of
any Grantor;
(e) any change, restructuring or termination of the corporate structure
or existence of any Grantor, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any Grantor or its
assets or any resulting release or discharge of any Obligation of any
other Obligor under any Credit Document; or
(f) any other circumstance (including, but not limited to, any statute
of limitations) that might otherwise constitute a defense available to,
or a discharge of, the Obligations of any other Obligor.
Without limiting the generality of the foregoing, each Grantor hereby
consents to, and hereby agrees, that the rights of the Bank hereunder,
and the liability of each Grantor hereunder, shall not be affected by
any and all releases for any purpose of any Collateral from the liens
and security interests created by any other security agreement securing
the Obligations. This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the Bank upon
the insolvency, bankruptcy, reorganization or similar proceeding of any
Grantor or otherwise, all as though such payment had not been made.
SECTION 20. Governing Law; Terms. -)This Agreement shall be governed by
and construed in accordance with the laws of the State of New Jersey
without regard to conflict of laws principles. Unless otherwise defined
herein or in the Credit Agreement, terms used in Article 9 of the UCC
are used herein as therein defined.
IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly
executed and delivered by its duly authorized officer as of the date
first above written.
WITNESS/ATTEST: TOTAL-TEL USA COMMUNICATIONS, INC.
By:--------------------------- By:-----------------------------
Name: Name:
Title: Title:
Address:---------------------
---------------------
Telecopier:------------------
WITNESS/ATTEST: TOTAL-TEL, INC.
By:--------------------------- By:-----------------------------
Name: Name:
Title: Title:
Address:---------------------
---------------------
Telecopier:------------------
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:--------------------------- By:-----------------------------
Name: Name:
Title: Title:
Address:---------------------
---------------------
Telecopier:------------------
WITNESS OR ATTEST: TOTAL-TEL SOUTHEAST, INC.
By:--------------------------- By:-----------------------------
Name: Name:
Title: Title:
Address:---------------------
---------------------
Telecopier:------------------
WITNESS OR ATTEST: TOTAL-TEL CARRIER SERVICES, INC.
By:--------------------------- By:-----------------------------
Name: Name:
Title: Title:
Address:---------------------
---------------------
Telecopier:------------------
WITNESS OR ATTEST: TOTAL-TEL SERVICES, INC.
By:--------------------------- By:-----------------------------
Name: Name:
Title: Title:
Address:---------------------
---------------------
Telecopier:------------------
ACCEPTED AND AGREED TO BY:
SUMMIT BANK
By:-----------------------------
Name:
Title:
Address:---------------------
---------------------
Telecopier:------------------
SCHEDULE I
TO
SECURITY AGREEMENT
Location of Chief Executive Office:
Total-Tel USA Communications, Inc.:
Total-Tel, Inc.:
Total-Tel USA, Inc.:
Total-Tel Southeast, Inc.:
Total-Tel Carrier Services, Inc.:
Total-Tel Services, Inc.:
Locations of Equipment
Total-Tel USA Communications, Inc.:
Total-Tel, Inc.:
Total-Tel USA, Inc.:
Total-Tel Southeast, Inc.:
Total-Tel Carrier Services, Inc.:
Total-Tel Services, Inc.:
Record Owners of Equipment Location:
Total-Tel USA Communications, Inc.:
Total-Tel, Inc.:
Total-Tel USA, Inc.:
Total-Tel Southeast, Inc.:
Total-Tel Carrier Services, Inc.:
Total-Tel Services, Inc.:
Filing Offices
(Original Document Name = 0301271.01)
EQUIPMENT FACILITY AND REVOLVING CREDIT AGREEMENT
This EQUIPMENT FACILITY AND REVOLVING CREDIT AGREEMENT (together with
all exhibits hereto and any amendments and modifications hereto in
effect from time to time, this "Agreement") is made as of this ----- day
of August, 1996, by and between SUMMIT BANK (the "Bank") a banking
corporation organized under the laws of the State of New Jersey, TOTAL-
TEL USA COMMUNICATIONS, INC., a -------- corporation ("Total-Tel Comm"),
TOTAL-TEL, INC., a -------- corporation and wholly owned subsidiary of
Total-Tel Comm ("Total-Tel"), and TOTAL-TEL USA, INC., a ----------
corporation and wholly owned subsidiary of Total-Tel Comm ("Total-Tel
USA", Total-Tel Comm, Total-Tel and Total-Tel USA each are hereafter
referred to as a "Borrower" and collectively referred to as the
"Borrowers"). All other capitalized terms used herein shall have the
meanings assigned to such terms in Article II hereof.
BACKGROUND
WHEREAS, the Borrowers have requested that the Bank make available an
equipment purchase facility in the principal amount of up to $6,000,000
for the purpose of financing the acquisition from time to time of
certain specific digital switching equipment and related computer
equipment to be used in the operation of the Borrowers' long distance
telephone service business (the "Financed Equipment"); and
WHEREAS, the Borrowers have further requested that the Bank make
available a committed revolving credit facility, pursuant to which the
Borrowers may request advances from time to time in the principal amount
of up to $4,000,000 outstanding at any time.
WHEREAS, the Bank is willing to make available to the Borrowers such
equipment purchase facility and committed revolving credit facility upon
the terms and conditions herein stated;
AGREEMENT
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, the Bank and the Borrower agree as follows:
I. THE CREDIT ACCOMMODATIONS
1.01 Equipment Facility. Subject to the terms and conditions herein set
forth, during the Equipment Facility Commitment Period, the Bank agrees
to make available to the Borrowers, on a joint and several basis, an
equipment finance facility (the "Equipment Facility"), under which the
Bank shall make advances (each an "Equipment Loan" and collectively the
"Equipment Loans") to the Borrowers from time to time to finance the
acquisition of the Financed Equipment. Amounts borrowed under the
Equipment Facility and repaid may not be reborrowed. The amounts
outstanding under the Equipment Facility shall be evidenced by a single
promissory note, substantially in the form of Exhibit A hereto (together
with any attachments thereto and amendments or modifications thereof in
effect from time to time, the "Equipment Facility Note"). During the
Equipment Facility Commitment Period, the Equipment Loans shall be Prime
Rate Loans. Upon the conversion of the Equipment Loans into a single
term loan pursuant to Section 1.04 hereof, such Loan shall be either a
Prime Rate Loan or a Fixed Rate Loan, as selected by the Borrowers in
connection with said conversion.
1.02 Equipment Facility Maximum Principal Amount. The maximum aggregate
principal amount of Equipment Loans outstanding at any time shall not
exceed SIX MILLION 00/100 DOLLARS ($6,000,000.00), such amount being
hereinafter referred to as the "Maximum Equipment Facility Principal
Amount". If the aggregate principal amount of Equipment Loans
outstanding at any time under the Equipment Facility exceeds the Maximum
Equipment Facility Principal Amount, then the Borrowers shall
immediately repay to the Bank the amount of such excess.
1.03 Borrowing Procedures Under Equipment Facility. If a Borrower desire
to borrow under the Equipment Facility, the relevant Borrower shall give
the Bank an irrevocable notice of the amount and date of such borrowing
by no later than ---- Business Day[s] prior to the proposed borrowing.
Such notice shall be in the form of the "Notice of Borrowing Under
Equipment Facility" attached hereto as Exhibit B and shall be
accompanied by (i) true and complete description of the Financed
Equipment and the location (or proposed location) of such equipment and
(ii) a true and correct copy of the vendor's invoice or bill of sale, as
the case may be, rendered in connection with the purchase of such
equipment. Upon receipt of any such notice, the Bank may, in its sole
discretion, request any documents or instruments (including, without
limitation, additional financing statements and/or certificate or
documents of title) that are necessary or advisable in order to assure
the Bank's first priority security interest in the relevant Financed
Equipment and in connection with such request, the Bank may refuse or
postpone the funding of the relevant Equipment Loan until such time as
the relevant Borrower has complied therewith. The Borrowers shall pay to
the Bank on demand the costs to be incurred in connection with the
filing or recordation of any such document or instrument so requested.
The principal amount of any Equipment Loan requested hereunder shall not
exceed eighty percent (80%) of the purchase price of the relevant
Financed Equipment as stated on the invoice or bill of sale accompanying
the relevant notice of borrowing, but in no event shall any Equipment
Loan be in a principal amount of less than $-------------.
1.04 Conversion of Equipment Loan to a Term Loan. Subject to the terms
and conditions hereof (including, without limitation, the conditions set
forth in Section 6.02 hereof), by irrevocable written notice given to
the Bank by the Borrowers no later than ------ Business Days prior to
the proposed Conversion Date, the Borrowers may convert the entire (and
not less than the entire) aggregate outstanding principal balance of the
Equipment Loans to a single term loan (such Loans, as so converted, the
"Term Loan"); provided, however, that in no event shall the Borrowers be
permitted to so convert the Equipment Loans if at the time of such
conversion the aggregate principal balance thereof if less than
$3,000,000.00. The notice delivered pursuant to the foregoing sentence
shall state (i) the effective date of such conversion, which in no event
shall be beyonmd the Equipment Facility Expiration Date (the "Conversion
Date") and (ii) whether the Term Loan shall be a Prime Rate Loan or
Fixed Rate Loan. If conversion is permitted hereunder, then the Term
Loan shall (i) remain a Prime Rate Loan or a Fixed Rate Loan, as
selected by the Borrowers for the full term thereof and (ii) mature and
be due and payable on the 5th anniversary of the Conversion Date (the
"Term Loan Maturity Date").
1.05 Interest on Equipment Loans/Term Loan. Prior to the Conversion Date
(if any), interest on the Equipment Loans shall accrue interest at the
Prime Rate (with no margin) and be payable monthly, in arrears, on each
Payment Date during which such Loans are outstanding, and upon payment
in full of the aggregate outstanding balance thereof. If the Equipment
Loans are converted to a Term Loan pursuant to Section 1.04 hereof and
the Term Loan is then a Prime Rate Loan, then interest on such Loan
shall continue to accrue at the Prime Rate (with no margin) and be
payable monthly, in arrears, on each Payment Date during which such Loan
is outstanding and upon payment in full of the outstanding balance
thereof. If, however, the Term Loan is then a Fixed Rate Loan, interest
shall accrue thereof at a per annum rate equal to the Fixed Rate plus
200 basis points (2.00%) and shall be payable in arrears on the dates on
which principal shall be payable thereon pursuant to Section 1.06
hereof, and upon payment in full of the principal balance thereof.
1.06 Equipment Loans/Term Loan Principal Payment Terms. If the Equipment
Loans are not converted to a Term Loan pursuant to Section 1.04 hereof,
the aggregate outstanding balance thereof, together with any accrued and
unpaid interest thereon, shall be due and payable on the Equipment
Facility Expiration Date. If the Equipment Loans are converted to a Term
Loan pursuant to Section 1.04 hereof, then the outstanding principal
balance thereof shall be payable in consecutive monthly installments
equal to .0166% of the aggregate principal balance outstanding as of the
Conversion Date on each Payment Date. If, however, the Term Loan is then
a Fixed Rate Loan then in lieu of the foregoing amortization the
Borrowers may elect to repay the principal balance of the Term Loan
pursuant to a level principal and interest amortization schedule that
would fully amortize the Term Loan over a 5 year term. The Borrowers may
elect the foregoing level amortization option by giving irrevocable
written notice thereof to the Bank at least ---- Business Days prior to
the Conversion Date. Upon such election, the Bank shall promptly (but in
no event later than Business Days) prior to the Conversion Date) deliver
to the Borrowers an amortization schedule of payments and payment dates
reflecting such level principal and interest amortization and, absent
manifest error in the determination thereof, principal and interest on
the Term Loan shall be payable in accordance therewith. In any event,
the final installment of principal on the Term Loan shall be due and
payable on the Term Loan Maturity Date and shall be in an amount equal
to the then remaining unpaid principal balance thereof, together with
any income and unpaid interest thereon.
1.07 The Revolving Credit Facility. Subject to the terms and conditions
hereof, the Bank agrees to make available to the Borrowers, on a joint
and several basis, a revolving credit facility (the "Revolving Credit
Facility") under which the Bank shall make advances to the Borrowers
from time to time during the Revolving Credit Commitment Period in an
aggregate principal amount outstanding at any one time of up to FOUR
MILLION 00/100 DOLLARS ($4,000,000.00) (each a "Revolving Credit Loan"
and collectively the "Revolving Credit Loans"). During the Revolving
Credit Commitment Period, the Borrowers may borrow, repay and reborrow
as provided herein. Revolving Credit Loans may be made as Prime Rate
Loans or LIBOR Loans, as requested by the relevant Borrower pursuant to
Section 1.12 hereof. The Revolving Credit Loans shall be evidenced by a
single promissory note, substantially in the form of Exhibit C hereto
(together with any attachments thereto and/or amendments or
modifications thereof in effect from time to time, the "Revolving Credit
Note").
1.08 Revolving Credit Facility Maximum Principal Amount. The maximum
aggregate principal amount of the Revolving Credit Loans outstanding at
any time, when added to the Letter of Credit Outstandings at such time
shall not exceed FOUR MILLION 00/100 DOLLARS ($4,000,000.00) such amount
being hereinafter referred to as the "Maximum Revolving Credit Principal
Amount". If the aggregate outstanding principal amount of the Revolving
Credit Loans plus the Letters of Credit Outstandings at any time exceed
the Maximum Revolving Credit Principal Amount, the Borrowers shall
immediately repay to the Bank the amount of such excess.
1.09 Letter of Credit Sub-Facility. Within the limitations of the
Revolving Credit Facility herein set forth, the Borrowers may from time
to time request that the Bank issue irrevocable standby or commercial
letters of credit for the account of the relevant Borrower and in
support of any obligation deemed acceptable by the Bank in its sole
discretion (any such letter of credit so issued, a "Letter of Credit"
and collectively the "Letters of Credit"). Notwithstanding the foregoing
(i) no Letter of Credit shall be issued by the Bank in a Stated Amount
which (x) when added to the Letters of Credit Outstandings at such time,
would exceed $600,000.00 or (y) when added to the sum of the aggregate
outstanding principal amount of the Revolving Credit Loans plus the
Letter of Credit Outstandings, at such time, would exceed the Maximum
Revolving Credit Principal Amount. Each Letter of Credit issued in
accordance herewith shall have an expiration date occurring no later
than ------- from the date of issuance and in any event no later than
the Business Day next preceding then the Revolving Credit Expiration
Date and shall be denominated in U.S. dollars. When a Borrower desires
that a Letter of Credit be issued for its account, it shall give the
Bank at least ------- Business Days' written notice (or such lesser
number of days as may be agreed to by the Bank). Each such request shall
be accompanied by a completed and executed "Letter of Credit
Application/Agreement" (or an amendment to any then effective
application) in the form furnished by the Bank to the Borrowers from
time to time. The terms of each such application/agreement are
incorporated herein to the extent not consistent herewith. In connection
with the issuance of any Letters of Credit in accordance herewith, the
Borrowers shall pay all letters of credit fees and other expenses that
are customarily charged by the Bank in connection therewith.
1.10 Interest on Revolving Credit Loans. Interest on each Revolving
Credit Loan that is a Prime Rate Loan shall accrue at the Prime Rate
(with no margin) and shall be payable monthly, in arrears, on each
Payment Date during which such Loan is outstanding, and upon payment in
full of the outstanding balance of such Loan. Interest on each Revolving
Credit Loan that is a LIBOR Loan shall accrue at LIBOR plus 225 basis
points (2.25%) and shall be payable, in arrears, on each Payment Date
during which such Loan is outstanding, and upon payment in full of the
outstanding balance of such Loan.
1.11 Revolving Credit Principal Payment Terms. The aggregate outstanding
principal balance of the Revolving Credit Loans, together with all
accrued and unpaid interest thereon, shall be due and payable on the
Revolving Expiration Date.
1.12 Borrowing Procedures Under the Revolving Credit Facility. If a
Borrower desires to borrow under the Revolving Credit Facility, such
Borrower shall give the Bank irrevocable written notice of the amount
and date of such borrowing no later than 1 Business Day prior to the
date of such proposed borrowing in the case of Prime Rate Loans and 3
Business Days prior to the date of such proposed borrowing in the case
of LIBOR Loans. Such notice shall be in the form of a "Notice of
Borrowing Under Revolving Credit" attached hereto as Exhibit D. Each
borrowing under the Revolving Credit Facility shall be in an amount
equal to $------ or any whole multiple thereof. No Borrower shall be
permitted to request a Revolving Credit Loan in the form of a LIBOR
Loan, if the making of such Loan would cause the aggregate number of
LIBOR Loans outstanding under the Revolving Credit Facility for all
Borrowers to exceed ---------- at such time.
1.13 Revolving Credit Interest Conversion and Continuance Options.
(a) Subject to the limitation of the last sentence of Section 1.12
hereof, during the Revolving Credit Commitment Period, the Borrowers may
elect to convert any Revolving Credit Loan to a Loan maintained at the
other rate of interest available for Revolving Credit Loans hereunder by
giving the Bank irrevocable notice (which may be telephone notice
promptly confirmed in writing) of such election at least 3 Business Days
prior to the conversion to a LIBOR Loan and at least 1 Business Day
prior to the conversion to a Prime Rate Loan. Said notice shall specify,
in the case of a conversion to a LIBOR Loan, the desired Interest Period
with respect thereto, which shall be either 1, 2 or 3 months in duration
as selected by the relevant Borrower. Conversions of LIBOR Loans to
Prime Rate Loans shall be made only on the last day of the Interest
Period applicable thereto. Conversions of Prime Rate Loans to LIBOR
Loans shall only be made on a Business Day.
(b) During the Revolving Credit Commitment Period, the Borrowers may
elect to continue any Revolving Credit Loan that is a LIBOR Loan as such
upon the expiration of the then current Interest Period with respect
thereto by giving the Bank an irrevocable notice (which may be telephone
notice promptly confirmed in writing) of such election at least 3
Business Days prior to the expiration of the then current Interest
Period with respect thereto. Such notice shall also specify the desired
Interest Period for the Loan so continued, which may be 1, 2 or 3 months
in duration as selected by the relevant Borrower.
(c) If the Borrowers fail to notify the Bank of the conversion or
continuance of any LIBOR Loan within the time specified in this Section
1.13, then any such Loan shall automatically convert to a Prime Rate
Loan on the last day of the then expiring applicable Interest Period.
1.14 Computation. Interest and any fees or compensation based upon a per
annum rate shall be calculated on the basis of a 360 day year for the
actual number of days elapsed.
1.15 Payments Generally. All payments made hereunder shall be paid in
accordance with the payment terms set forth in the Notes.
II. DEFINITIONS.
2.01 Defined Terms. The following terms used throughout this Agreement
shall have the meanings assigned below:
Approved Subordinated Indebtedness. The term "Approved Subordinated
Indebtedness" means any Indebtedness of a Borrower that (i) is
subordinated to the Obligations on terms and conditions approved in
writing by the Bank and (ii) does not constitute Guaranteed Indebtedness
of such Borrower or any Borrower or Guarantor, or any Subsidiary or
affiliate thereof.
Business Day. The term "Business Day" means any day other than a
Saturday, Sunday, or a day on which commercial banks are authorized or
obligated by law or executive order to be closed in the State of New
Jersey.
Capitalized Lease. The term "Capitalized Lease" means any lease with
respect to which the obligation to pay rent or other amounts constitutes
Capitalized Lease Obligations.
Capitalized Lease Obligations. The term "Capitalized Lease Obligations"
means obligations to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal
property which obligations are required to be classified and accounted
for as capital leases on a balance sheet in accordance with GAAP.
Closing Date. The term "Closing Date" means the date on which the
conditions set forth in Section 5.01 hereof have been fulfilled to the
satisfaction of the Bank.
Conversion Date. The term "Conversion Date" shall have the meaning
assigned to such term in Section 1.04 hereof.
Credit Documents. The term "Credit Documents" means this Agreement, the
Notes, the Security Agreement, the Guaranties, any Letters of Credits
and any letter of credit agreement/application executed in connection
with the issuance thereof, each of the other documents, referenced in
the Closing Checklist attached hereto as Exhibit F, each of the "Credit
Documents" referenced therein, and all other all credit accommodations,
notes, loan agreements, guaranties, security agreements, mortgages,
instruments, pledge agreements, assignments, acceptance agreements,
commitments, facilities, letters of credit, reimbursement agreements and
any other agreements and documents, between any Borrower and the Bank,
in each case now or hereafter existing, creating, evidencing,
guarantying, securing or relating to any or all of the Obligations,
together with in each case all amendments, modifications, renewals, or
extensions thereof.
Environmental Laws. The term "Environmental Laws" means all applicable
laws, regulations and other requirements of Governmental Authorities
relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into
ambient air, surface water, ground weather, or land, or otherwise
relating to the disposal, transport, or handling of pollutants,
contaminants, or hazardous or toxic material or wastes.
Equipment Facility. The term "Equipment Facility" shall have the meaning
assigned to such term in Section 1.01 hereof.
Equipment Facility Commitment Period. The term "Equipment Facility
Commitment Period" means the period commencing on the Closing Date and
ending on the Equipment Facility Expiration Date.
Equipment Facility Expiration Date. The term "Equipment Facility
Expiration Date" means the date that is the earlier to occur of (i) the
first anniversary of the Closing Date or (ii) the Conversion Date.
Equipment Facility Note. The term "Equipment Facility Note" shall have
the meaning assigned to such term in Section 1.01 hereof.
Equipment Loan and Equipment Loans. The terms "Equipment Loan" and
"Equipment Loans" shall have the meanings assigned to such terms in
Section 1.01 hereof.
Event of Default. The term "Event of Default" shall have the meaning
assigned to such term in Article IX hereof.
Financed Equipment. The term "Financed Equipment" shall have the meaning
assigned to such term in the first recital clause of this Agreement.
Fixed Rate. The term "Fixed Rate" means the highest asked yield for
"Govt. Bonds & Notes", as set forth in the column designated "Treasury
Bonds, Notes & Bills" in The Wall Street Journal most recently published
as of the date that is ----- Business Days prior to the Conversion Date,
having a maturity date that falls in the same month as the Term Loan
Maturity Date, provided that if no such yield is published for the
relevant month, yields for the published month next succeeding and the
published month next preceding such month shall be used to determine the
Fixed Rate by interpolating such yields on a straight-line basis. If The
Wall Street Journal at the time determination of the Fixed Rate is no
longer publishing the yields described above, then the Bank shall
determine such yield based on any other nationally recognized source for
such published yields as it may select in its reasonable discretion.
Fixed Rate Loan. The term "Fixed Rate Loan" means the Term Loan at all
time during which such Loan bears interest based upon the Fixed Rate.
GAAP. The term "GAAP" means generally accepted accounting principles in
effect from time to time in the United States.
Governmental Authority. The term "Governmental Authority" means any
nation or government, any state or other political subdivision thereof
and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
Guaranteed Indebtedness. The term "Guaranteed Indebtedness" means, as to
any Person, all Indebtedness of the type referred to in clauses (i)
through (ix) of the definition of Indebtedness in this Agreement
guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person, or in effect
guaranteed directly or indirectly by such Person through an agreement
(i) to pay or purchase such Indebtedness or to advance or supply funds
for the payment or purchase of such Indebtedness, (ii) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Indebtedness or to assure the holder of such
Indebtedness against loss, (iii) to supply funds to or in any other
manner invest in the debtor (including any agreement to pay for property
or services irrespective of whether or not such property is received or
such services are rendered), or (iv) otherwise to assure a creditor
against loss.
Guarantors. The term "Guarantors" means collectively Total-Tel Comm,
Total-Tel, Total-Tel USA, Total-Tel Southeast, Inc., a -------------
corporation, Total-Tel Carrier Services, Inc., a --------------
corporation, and Total-Tel Services, Inc., a corporation.
Guaranties. The term "Guaranties" means collectively Guaranty and
Suretyship Agreements executed by the Guarantors in favor of the Bank on
even date herewith.
Indebtedness. The term "Indebtedness" means, as to any Person (i) all
indebtedness of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes, or other similar
instruments, (iii) all obligations of such Person to pay the deferred
purchase price of property or services, (iv) all indebtedness created or
arising under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though the rights
and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (v)
all Capitalized Lease Obligations of such Person, (vi) all obligations,
contingent or otherwise, of such Person under acceptances, letters of
credit or similar facilities, (vii) all obligations of such Person to
purchase, redeem, retire, defease or otherwise acquire for value any
capital stock of such person or any warrants, rights or options to
acquire such capital stock, valued, in the case of redeemable preferred
stock, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (viii) all obligations of
such Person in respect of interest rate swap agreements (as defined in
11 U.S.C. [SECTION START] 101), currency swap agreements and other
similar agreements designed to hedge against fluctuations in interest
rates or foreign exchange rates, (ix) all obligations of production
payments from property operated by or on behalf of such Person and
other similar arrangements with respect to natural resources, (x)
all Guaranteed Indebtedness of such Person, and (xi) all Indebtedness
of the type referred to in clauses (i) through (x) above secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contracts rights) owned
by such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness.
Interest Period. The term "Interest Period" means, with respect to any
LIBOR loan:
(a) initially, the period commencing on, as the case may be, the date of
borrowing or conversion with respect to such LIBOR Loan and ending 1, 2
or 3 months thereafter as selected by the relevant Borrower in its
notice of borrowing as provided in Section 1.12 hereof or its notice of
conversion as provided in Section 1.13(a) hereof; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending 1, 2
or 3 months thereafter as selected by the relevant Borrower in its
notice of continuance as provided in Section 1.13(b) hereof;
provided that the foregoing provisions relating to Interest Periods are
subject to the following:
(I) if any Interest Period pertaining to a LIBOR Loan would otherwise
end on a day which is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day unless the result of such
extension would be to carry such Interest Period into another calendar
month in which even such Interest Period shall end on the immediately
preceding Business Day;
(ii) any Interest Period pertaining to a LIBOR Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar month;
and
(iii) no Borrower shall select any Interest Period that would extend
such Interest Period beyond the Revolving Credit Expiration Date.
Letter of Credit and Letters of Credit. The terms "Letter of Credit" and
"Letters of Credit" shall have the meanings assigned to such terms in
Section 1.09 hereof.
Letter of Credit Outstanding. The term "Letter of Credit Outstanding"
means, at any time, the sum of, without duplication (i) the aggregate
Stated Amount of all outstanding Letters of Credit; (ii) the aggregate
amount of all unreimbursed drawing thereunder; and (iii) the Stated
Amount of all Letters of Credit requested in accordance with Section
1.09 hereof but not yet issued.
LIBOR. The term "LIBOR" means, with respect to each day during each
Interest Period, the rate (rounded to the next higher 1/100 of 1%) for
U.S. dollar deposits with a maturity equal to the relevant Interest
Period in the London interbank market as determined by the Bank from a
recognized source for quotations of the London interbank offered rate,
on the second London business day before the relevant Interest Period
begins, adjusted for reserves by dividing that rate by 1.00 minus the
LIBOR Reserve.
LIBOR Loan. The term "LIBOR Loan" means any Revolving Credit Loan at all
times during which such Loan bears interest based upon LIBOR.
LIBOR Reserve. The term "LIBOR Reserve" means the maximum percentage
reserve requirement (rounded to the next higher 1/100 of 1% and
expressed as a decimal) in effect for any day during the relevant
Interest Period under the Federal Reserve Board's Regulation D for
Eurocurrency liabilities as defined therein.
Lien. The term "Lien" means any mortgage, pledge, security interest,
encumbrance, lien or other form of charge or preferential arrangement of
any kind (including, without limitation, any agreement to give any of
the foregoing, any conditional sale or other title retention or any
lease in the nature thereof).
Loan. The term "Loan" means a Revolving Credit Loan, Equipment Loan or
the Term Loan, as the context shall require, and the term "Loans" means,
collectively, the Revolving Credit Loans, Equipment Loans and the Term
Loan.
Material Adverse Effect. The term "Material Adverse Effect" means a
material adverse effect on (a) the business, operations, property,
condition (financial or otherwise) of the Total-Tel Comm and its
Subsidiaries taken as a whole, (b) the ability of any Borrower to
perform their respective obligations under this Agreement, the Notes or
any of the other Credit Documents, or (c) the validity or enforceability
of this Agreement, the Notes or any of the other Credit Documents, or
the rights or remedies of the Bank hereunder or thereunder.
Maximum Equipment Facility Principal Amount. The term "Maximum Equipment
Facility Principal Amount", shall have the meaning assigned to such term
in Section 1.02 hereof.
Maximum Revolving Credit Principal Amount. The term "Maximum Revolving
Credit Principal Amount" shall have the meaning assigned to such term in
Section 1.08 hereof.
Note. The term "Note" means the Equipment Facility Note or the Revolving
Credit Note, as the context shall require, and the term "Notes" means,
collectively, the Equipment Facility Note and the Revolving Credit Note.
Obligations. The term "Obligations" means any and all obligations and
indebtedness of every kind and description of the Borrowers owing to the
Bank or to any Affiliate, whether under the Credit Documents or other
loan documents or agreements, and whether such debts or obligations are
primary or secondary, direct or indirect, absolute or contingent, sole,
joint or several, secured or unsecured, due or to become due,
contractual or tortious, arising by operation of law or otherwise, or
now or hereafter existing, including, without limitation, principal
interest, fees, late fees, expenses, attorneys' fees and costs and/or
allocated fees and costs of Bank's in-house legal counsel, that have
been or may hereafter be contracted or incurred.
Payment Date. The term "Payment Date" means (i) in the case of a LIBOR
Loan, the last day of each Interest Period applicable thereto and (ii)
in the case of a Prime Rate Loan, ----------------- ----, 1996 and the
same day of each month occurring thereafter.
Permitted Investments. The term "Permitted Investments" means (i)
readily marketable direct obligations of the Government of the United
States of America or any agency or instrumentality thereof or any full
faith and credit obligations of the United States Government or
obligations guaranteed by the United States Government and its agencies,
(ii) any investment grade debt or equity securities issued by any other
Person, (iii) certificates of deposit of any United States commercial
bank, (iv) any investment arranged by the Bank, or an affiliate of the
Bank, on behalf of a Borrower pursuant to cash management services
provided to a Borrower by the Bank or such affiliate, (v) instruments
held for collection in the ordinary course of business, and (vi) any
equity or debt securities or other form of debt instrument obtained in
settlement of debts previously contracted.
Permitted Liens. The term "Permitted Liens" means those Liens permitted
to exist pursuant to Section 8.02 hereof.
Person. The term "Person" means any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or
any government or political subdivision or any agency, department or
instrumentality thereof.
Prime Rate. The term "Prime Rate" means the per annum rate of interest
established by the Bank as its reference rate in making loans, and does
not reflect the rate of interest charged to any particular borrower or
class of borrowers. The Borrowers acknowledge that the Prime Rate is not
tied to any external rate of interest and that the rate of interest
charged hereunder shall change automatically and immediately as of the
date of any change in the Prime Rate, without notice to the Borrowers.
Prime Rate Loan. The term "Prime Rate Loan" means any Loan at all times
during which such loan bears interest based upon the Prime Rate.
Revolving Credit Commitment Period. The term "Revolving Credit
Commitment Period" mean the period commencing on the Closing Date and
ending on the Revolving Credit Expiration Date.
Revolving Credit Expiration Date. The term "Revolving Credit Expiration
Date" means May 31, 1997.
Revolving Credit Facility. The term "Revolving Credit Facility" shall
have the meaning assigned to such term in Section 1.07 hereof.
Revolving Credit Loan and Revolving Credit Loans. The terms "Revolving
Credit Loan" and "Revolving Credit Loans" shall have the meanings
assigned to such term in Section 1.07 hereof.
Revolving Credit Note. The term "Revolving Credit Note" shall have the
meanings assigned to such term in Section 1.07 hereof.
SEC. The term "SEC" shall mean the Securities and Exchange Commission or
any Governmental Authority which may succeed to the authority thereof or
be substituted therefor.
Security Agreement. The term "Security Agreement" means that certain
Security Agreement of the Borrowers and the other Guarantors in favor of
the Bank of even date herewith.
Stated Amount. The term "Stated Amount" means with respect to any Letter
of Credit, the maximum amount available to be drawn thereunder,
determined without regard to whether any conditions to drawing could
then be met.
Subsidiary. The term "Subsidiary" means, as to any Person, any
corporation or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board
of directors or other persons performing similar functions are at the
time directly or indirectly owned or controlled by such Person, one or
more of the other Subsidiaries of such Person or any combination
thereof.
Term Loan. The term "Term Loan" shall have the meaning assigned to such
term in Section 1.04 hereof.
Term Loan Maturity Date. The term "Term Loan Maturity Date" shall have
the meaning assigned to such term in Section 1.04 hereof.
2.02 Principles of Construction.
(a) References. All references to articles, sections, schedules and
exhibits are to articles, sections, schedules and exhibits in or to this
Agreement unless otherwise specified. The words "hereof", "herein", and
"hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(b) Accounting Terms. All accounting terms not specifically defined
herein or in any exhibit hereto shall be construed in accordance with
GAAP in conformity with those principles used in the preparation of the
financial statements referred to in Section 6.04 hereof.
III. PREPAYMENT.
3.01 Prepayment of Revolving Credit Loans. The Revolving Credit Loans
may be prepaid, in whole or in part, at any time, provided that any
prepayment in respect of a LIBOR Loan shall be made only on the last day
of the Interest Period applicable thereto, and provided, further, that
any partial prepayments of the Revolving Credit Loans shall be in a
principal amount of not less than $--------------, or multiples thereof.
All prepayments shall include accrued and unpaid interest to the date of
prepayment on the principal amount prepaid. All partial prepayments
received pursuant to this Section 3.01 shall be applied to the
Obligations that are in respect of the Revolving Credit Loans in the
manner determined by the Bank in its reasonable discretion.
3.02 Prepayments of Equipment Loans and Term Loan. At any time prior to
the Conversion Date, the Equipment Loans may be prepaid, in whole or in
part at any time, without premium or penalty; provided, that any partial
prepayment of the Equipment Loans shall be in a principal amount of not
less than $------------, or any multiple thereof. All prepayments of the
Equipment Loans shall include accrued and unpaid interest to the date of
prepayment on the principal amount prepaid. The Term Loan may be
prepaid, in whole or in part, at any time, provided, that any prepayment
(whether in whole or in part and whether made voluntarily or because of
acceleration) shall also be accompanied by an amount equal to (i) 3% of
the amount of the prepayment if the prepayment occurs during the first
or second year of the term of the Term Loan, (ii) 2% of the amount of
the prepayment if the prepayment occurs during the third or fourth year
of the term of the Term Loan, and (iii) 1% of the amount of the
prepayment if the prepayment occurs during the fifth year of the term of
the Term Loan. All partial prepayments of principal balance of the Term
Loan shall be applied to the Term Loan in inverse order of maturity. All
prepayments of the Term Loan shall also include accrued and unpaid
interest to the date of prepayment on the principal amount prepaid.
IV. YIELD MAINTENANCE PROVISIONS.
4.01 Inability to Determine Rate. If with respect to any Interest
Period, the Bank determines that extraordinary and unforeseen
circumstances beyond the control of the Bank exists with respect to the
relevant market which make it impracticable to ascertain the interest
rate applicable for such Interest Period, the Bank shall promptly notify
the Borrowers of such determination. Upon such determination, no
additional LIBOR Loans shall be permitted under the Revolving Credit
Facility and no conversion to, or continuances of, LIBOR Loans shall be
permitted pursuant to Section 1.13 hereof until the notice of such
determination has been withdrawn. If such notice has not been withdrawn
by the last day of the then current Interest Period applicable to any
then outstanding LIBOR Loans, the Borrowers must elect on the last day
of such Interest Period to either convert such LIBOR Loan to a Prime
Rate Loan or prepay the outstanding principal balance thereof and
accrued interest thereon in full.
4.02 Illegality. Notwithstanding any other provisions herein, if any
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for the
Bank to make or maintain the any of the Loans as LIBOR Loans as
contemplated by this Agreement, (i) the Bank's commitment hereunder to
make LIBOR Loans under the Revolving Credit Facility or to permit
conversions to, or continuances of, LIBOR Loans pursuant to Section 1.13
hereof shall forthwith be suspended until the circumstances surrounding
such unlawfulness shall no longer exit and (ii) any of the then
outstanding LIBOR Loans shall be converted to a Prime Rate Loan on the
last day of the Interest Period applicable thereto or within such
earlier period as may be required by law.
4.03 Requirement of Law. In the event that any law, regulation, treaty
or directive or any change therein or in the interpretation or
application thereof or compliance by the Bank with any request or
directive (whether or not having the force of law) from any central bank
or other governmental authority, agency or instrumentality:
(a) does or shall subject the Bank to any tax of any kind whatsoever
with respect to this Agreement, the Notes or any loan made hereunder, or
change the basis of taxation of payments to the Bank of principal,
commitment fee, interest or any other amount payable hereunder (except
for changes in the rate of any tax presently imposed on the Bank);
(b) does or shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
or deposits or other liabilities in or for the account of, advances or
loans by, or other credit extended by, or any other acquisition of funds
by, any office of the Bank which are not otherwise included in the
determination of LIBOR hereunder; or
(c) does or shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the
Bank of making, renewing or maintaining advances or extensions of credit
to the Borrowers or to reduce any amount receivable from the Borrowers
hereunder then, in any such case, the Borrowers shall promptly pay to
the Bank, upon its demand, any additional amounts necessary to
compensate the Bank for such additional cost or reduced amount
receivable which the Bank deems to be material as determined by the Bank
with respect to this Agreement, the Notes or the Loans made hereunder.
If the Bank becomes entitled to claim any additional amounts pursuant to
this Section 4.03, it shall promptly notify the Borrowers of the event
by reason of which it has become so entitled. A certificate setting
forth calculations as to any additional amounts payable pursuant to the
foregoing sentence submitted by the Bank to the Borrowers shall be
conclusive in the absence of manifest error.
4.04 Capital Adequacy. If after the date hereof, the Bank shall have
determined that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or
directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on the Bank's
capital as a consequence of its obligations hereunder to a level below
that which the Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect
to capital adequacy) by an amount deemed by the Bank to be material,
then from time to time, within 30 days after demand by the Bank, the
Borrowers shall pay to the Bank such additional amount or amounts as
will compensate the Bank for such reduction. The Bank will promptly
notify the Borrower of any event of which it has knowledge, occurring
after the date hereof, which will entitle the Bank to compensation
pursuant to this Section 4.04, and such notification of the amount due
pursuant to this Section 4.04 shall be conclusive absent manifest error.
Notwithstanding anything to the contrary set forth above, the Bank shall
have no right to seek additional compensation pursuant to this Section
4.04 until after the Bank shall have allocated, and sought compensation
for, such increased costs fairly and equitably among all of its
customers of the same general class as the Borrowers that are generally
affected by the above set forth circumstances.
4.05 Indemnity. The Borrowers agree to indemnify the Bank and to hold
the Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of (i) default by any Borrower in payment of the
principal of or interest on the any LIBOR Loan, including, but not
limited to, any such loss or reasonable expense arising from additional
interest or fees payable by the Bank to lenders of funds obtained by it
in order to maintain the any Loan as a LIBOR Loan, (ii) any prepayment
of any LIBOR Loan received (from any source) on any date other than the
last day of the Interest Period applicable thereto, including, but not
limited to, any such loss or expense in connection with the employing of
deposits as a consequence thereof, (iii) default by any Borrower in
making any borrowing of a LIBOR Loan under the Revolving Credit Facility
after such Borrower has given notice thereof in accordance with Section
1.12 hereof, of a LIBOR Loan or (iv) default by any Borrower in making
any prepayment after such Borrower has given a notice thereof. This
covenant shall survive termination of this Agreement and payment of the
Notes.
4.06 Match Funding. The amount payable or indemnifiable under Sections
4.03, 4.04 and 4.05 hereof shall be determined, in the Bank's sole
discretion, based upon the assumption that the Bank funded 100% of any
affected LIBOR Loan in the applicable London interbank market.
V. CONDITIONS.
5.01 Requirements for Initial Funding. The obligation of the Bank to
make the initial advance of any Loan available hereunder is subject to
the Bank's receipt of each of the documents listed on the Closing
Checklist attached hereto as Exhibit E, and such other documents as the
Bank may reasonably request, each, as appropriate, duly executed and
delivered by the parties thereto and in form and substance satisfactory
to the Bank.
5.02 Requirements for Any Advance or Conversion. The obligation of the
Bank to (i) make any advance under the Revolving Credit Facility or the
Equipment Facility, or (ii) permit the conversion of the Equipment Loans
to the Term Loan pursuant to Section 1.04 hereof or (iii) to permit the
conversion of any Revolving Credit Loan to a LIBOR Loan pursuant to
Section 1.13 hereof, is subject to and conditioned upon the following:
(a) the representations and warranties contained in Article VI hereof
are correct on and as of the date of each such advance, conversion or
continuation;
(b) no Event of Default, and no event which, with the giving of notice,
or the passage of time, or both, would become an Event of Default, has
occurred and is continuing;
(c) there has been no material adverse change in the Borrowers'
condition, financial or otherwise, since the date of this Agreement; and
(d) all of the Credit Documents remain in full force and effect.
VI. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants that:
6.01 Organization; Authority. Each Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of its organization, is duly qualified as a foreign corporation
and is in good standing under the laws of each jurisdiction in which it
is required to be qualified because of the business it conducts or the
property it owns, and (b) has the necessary power and authority to enter
into and perform its obligations under the Credit Documents and all
other documents required by the Bank in connection therewith. The
execution and performance of the Credit Documents have been duly
authorized by all necessary proceedings on the part of each Borrower,
and, upon their execution and delivery, they will be valid, binding, and
enforceable in accordance with their terms. The execution and
performance of the Credit Documents by each Borrower will not violate
any orders, laws or regulations applicable to it, any of its
organizational documents, or any instruments, indentures or agreements
(including any provisions pertaining to subordinated debt) to which any
Borrower is a party or by which any Borrower or any of their respective
are bound, except to the extent that any such violation would not have a
Material Adverse Effect. All consents, approvals, licenses, franchises,
trademarks and other general intangibles that are necessary or
appropriate in connection with this Agreement, the other Credit
Documents or the operation of the business of each Borrower have been
obtained and are in full force and effect, except to the extent that any
such failure to so obtain and maintain such general intangibles would
not have a Material Adverse Effect.
6.02 Subsidiaries. The corporations listed on Annex I are all the only
Subsidiaries of Total-Tel Comm and each such Subsidiary is a
corporation, duly organized, valid existing and in good standing, under
the law of the jurisdiction of its organization, is duly qualified as a
foreign corporation and is in good standing under the law of each
jurisdiction in which it is required to be qualified because of the
business it conducts or the property it owns and have all necessary
power and authority to own its property and conduct its business, as
contemplated to be conducted. All consents, approvals, licenses,
franchises, trademarks and other general intangibles that are necessary
or appropriate in connection with the operation of the business of each
Subsidiary, as contemplated to be operated, have been obtained and are
in full force and effect, except to the extent that any such failure to
so obtain and maintain such general intangibles would not have a
Material Adverse Effect. Each such Subsidiary is a wholly owned
Subsidiary of Total-Tel Comm and no other Person has any direct or
indirect interest in such Subsidiary, other than such interests which
may exist as a result of any stock ownership interest of any Person in
Total-Tel Comm.
6.03 Use of Proceeds; Margin Regulation. The proceeds of the Equipment
Loans shall be used exclusively to finance the acquisition of Financed
Equipment. The proceeds of borrowings under the Revolving Credit
Facility shall be used by the Borrowers for working capital and other
general corporate purposes. The Borrowers are not engaged in the
business of extending credit for the purpose of buying or carrying
"margin stock" (within the meaning of Regulation U issued by the Board
of Governors of the Federal Reserve System). Neither the making of any
Loan nor use of the proceeds thereof will violate or be inconsistent
with the provisions of Regulation G, T, U or X of the Board of Governors
of the Federal Reserve System.
6.04 Financial Statements. [Specify Financial Statements relied upon by
Bank] were prepared in accordance with GAAP, consistently applied, are
true and correct, and disclose all presently outstanding indebtedness or
obligations of the Borrowers, including contingent obligations,
obligations under leases of property from others, and all liens and
encumbrances, including tax liens, against its properties and assets;
and there have been no adverse changes in the Borrowers' financial
condition or business since the date of such statements.
6.05 Suits. Other than as disclosed on Annex I hereof, there are no
actions, suits, proceedings, or claims pending or threatened against the
Borrowers, any other Guarantor, or any of their respective properties.
6.06 Defaults. None of the Borrowers are in default under any agreement
to which it is a party or by which it is or any of its properties are
bound, or under any indenture or instrument evidencing any its
indebtedness and neither the execution of nor performance by any
Borrower under the Credit Documents will create a default or any lien or
encumbrance under any such agreement, indenture or instrument other than
a lien or encumbrance in favor of the Bank, except, in each case, to the
extent that the occurrence of any such defaults or the existence of any
such liens would not have a Material Adverse Effect.
6.07 ERISA. No employee benefit plan established or maintained by the
Borrower which is subject to the Employee Retirement Income Security
Act, 29 U.S.C. [SECTION START] 1001 et seq. ("ERISA") has an accumulated
funding deficiency (as such term is defined in ERISA). No material
liability to the Pension Benefit Guaranty Corporation (or any successor
thereto under ERISA) has been incurred by the Borrowers with respect
to any such plan and no Reportable Event under ERISA has occurred.
The Borrowers have no actual or anticipated liability under Section
4971 of the Internal Revenue Code ("Code") (relating to tax on failure
to meet the minimum funding standard of Section 412 of the Code) with
respect to any employee benefit plan to which any of them contributes
but which is not maintained or established by any of them.
6.08 Tax Returns and Taxes. The Borrowers have filed all federal, state
and local tax returns required to be filed and has paid all taxes,
assessments and governmental charges and levies thereon, including
interest and penalties, except where the same are being contested in
good faith by appropriate proceedings and for which adequate reserves
have been set aside, and no liens for taxes have been filed and no
claims are being assessed by a Governmental Authority with respect to
any taxes or the charges, accruals and reserves on the books of the
Borrowers with respect thereto.
6.09 Compliance with Statutes, etc. Each Borrower is in compliance with
all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, any Government Authority, in respect of the
conduct of its business and the ownership of its property (including,
without limitation, any applicable Environmental Laws), except such
instances of noncompliances as would not have a Material Adverse Effect.
6.10 Not an Investment Company. None of the Borrowers are an "investment
company" or a company "controlled" by an "investment company", within
the meaning of the Investment Company Act of 1940, as amended.
6.11 Intellectual Property, etc. The Borrowers have obtained all
material patents, trademarks, servicemarks, trade names, copyrights,
technology, processes, licenses and other rights (Intellectual
Property), free from any burdensome restrictions, that are necessary for
the operation of their respective businesses as presently conducted and
as proposed to be conducted. No claim has been asserted or threatened
questioning the use of such Intellectual Property, nor does any Borrower
know of any valid basis for any such claim.
6.12 Assets and Properties. Each Borrower has good and marketable title
to all of its assets and properties (tangible and intangible) and all
such assets and properties are free and clear of all Liens (except
Permitted Liens). Substantially all of the assets and properties owned
by, leased to or used by each Borrower are in adequate operating
condition and repair, ordinary wear and tear excepted, are free and
clear of known defects except such defects as do not substantially
increase with the continued use thereof in the conduct of normal
operation, and such assets are able to serve the function for which they
are currently being used, except in each case, where the failure of such
asset or property to meet such requirements would not have a Material
Adverse Effect.
6.13 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by the Borrowers to the
Bank for the purposes of or in connection with this Agreement or any
transactions contemplated herein is, and all other such factual
information (taken as a whole) hereafter furnished by or on behalf of
the Borrowers in writing to the Bank will be, true and accurate in all
material respects on the date as of which such information is dated or
certified and does not omit to state any fact necessary to make such
information (taken as a whole) not misleading at such time in light of
the circumstances under which such information was provided.
6.14 Solvency. Each Borrower is solvent, is able to pay its debts as
they become due and has capital sufficient to carry on its business and
all businesses in which it is about to engage, and now owns property
having a value both at fair valuation and at present fair salable value
greater than the amount required to satisfy the joint and several
Obligations it has incurred hereunder and under the other Credit
Documents. No Borrower will be rendered insolvent by the transactions
contemplated hereunder or under any other Credit Document. The business
operations of Borrowers and the other Guarantors are related and have a
common business purpose. To permit the uninterrupted and continuous
operations of their common economic enterprise, such corporations now
require and will from time to time hereafter require funds for general
business purposes. Accordingly, the proceeds of Loans made hereunder
will directly or indirectly benefit each Borrower and each other
Guarantor, regardless of which corporation actually or directly receives
part or all of the proceeds of such Loans.
VII. AFFIRMATIVE COVENANTS.
Total-Tel Comm and (as the context so requires) each of the other
Borrowers covenant and agree that so long as there are any outstanding
Obligations hereunder or otherwise or the Bank shall have any
commitments hereunder:
7.01 Financial Statements. Total-Tel Comm shall furnish to the Bank the
following financial information: (i) as soon as available but in any
event within 90 days after the close of each fiscal year of Total-Tel
Comm, to the extent prepared to comply with SEC requirements, a copy of
the SEC Form 10-K (or successor form promulgated by the SEC) filed by
Total-Tel Comm with the SEC for such fiscal year, or, if no such form
was so filed for such fiscal year, consolidated audited year-end
financial statements for Total-Tel Comm, including, but not limited to,
statements of financial condition, income and cash flows, a
reconciliation of net worth, notes and other supporting schedules to
such financial statements and any other information that may assist the
Bank in assessing the Borrowers' financial condition (prepared in
accordance with GAAP consistently applied, and accompanied by an
opinion, satisfactory in form and substance to the Bank, by an
independent certified public accountant acceptable to the Bank, and
certified as true, correct and complete by the Total-Tel Comm's chief
financial officer); (ii) as soon as available but in any event within 45
days after each interim fiscal quarter, to the extent prepared to comply
with SEC requirements, a copy of the SEC Form 10-Q (or successor form
promulgated by the SEC) filed by Total-Tel Comm with the SEC for such
fiscal quarter; or, if no such form was so filed for such fiscal
quarter, unaudited management prepared consolidated financial statements
for Total-Tel Comm for such quarter, including, but not limited to,
statements of financial condition, incoming cash flows, a reconciliation
of net worth, and supporting schedules (prepared in accordance with GAAP
consistently applied, and certified as true, correct and complete by
Total-Tel Comm's chief financial officer); (iii) promptly upon filing
the same with the SEC, copies of any filings and registrations with, any
and reports to, the SEC by Total-Tel Comm, including, but not limited
to, any reports on Form 8-K (or successor term promulgated by the SEC),
or any proxy or registration statement or any other form of public
disclosure prescribed by the SEC; and (iv) such other information
respecting the operations, financial or otherwise, of the Borrowers as
the Bank may from time to time reasonably request.
7.02 Compliance Certificate. Total-Tel Comm shall furnish to the Bank,
together with each set of financial statements described in clauses (i)
and (ii) of Section 7.01 hereof, a compliance certificate, substantially
in the form of Exhibit F hereto, signed by Total-Tel Comm's chief
financial officer, certifying that: (i) all representa-tions and
warranties set forth in this Agreement and in the other Credit Documents
are true and correct as of the date thereof; (ii) none of the covenants
in this Agreement or in the other Credit Document have been breached;
and (iii) no event has occurred which, alone, or with the giving of
notice or the passage of time, or both, would constitute an Event of
Default under this Agreement or the other Credit Documents.
7.03 Notice of Certain Events. The Borrowers shall promptly give written
notice to the Bank of: (i) the details of any Reportable Events (as
defined in ERISA) which have occurred, (ii) the occurrence of any event
which alone or with notice, the passage of time, or both, would
constitute an Event of Default, and (iii) the commencement of any
proceeding or litigation which, if adversely determined, would have a
Material Adverse Effect.
7.04 Preservation of Property; Insurance. Each Borrower shall keep and
maintain, and require each of the other Guarantors to keep and maintain,
all of its and their properties and assets in good order and repair;
maintain extended coverage, general liability, hazard, business
interruption, property and other insurance in amounts deemed
satisfactory to the Bank and as is customary for businesses similar to
such corporation's business and deliver to the Bank certificates of all
such insurance in effect; and cause all such policies covering business
interruption to contain loss payee endorsements in favor of the Bank and
to be subject to cancellation or reduction in coverage only upon 30 days
prior written notice thereof to the Bank at its address set forth in
this Agreement. The foregoing insurance requirements are in addition to
any insurance requirements set forth in the Security Agreement.
7.05 Taxes. Each Borrower shall pay and discharge, and require each of
the other Guarantors to pay and discharge, when due, all taxes,
assessments or other governmental charges imposed on them or any of
their respective properties, unless the same are currently being
contested in good faith by appropriate proceedings and adequate reserves
are maintained therefor.
7.06 Conduct of Business and Maintenance of Existence. Each Borrower
shall continue to engage in business of the same general type as now
conducted, and preserve, renew and keep in full force and effect its
corporate existence and rights, privileges and franchises necessary or
desirable in the normal conduct of business and which are material to
each Borrower and each of the other Guarantors.
7.07 Operation of Business and Properties. Each Borrower shall operate
its business and properties, and cause those of the other Guarantors to
be operated, in compliance with all applicable orders, rules,
regulations and other requirements of any Governmental Authority
applicable thereto, and duly file or cause to be filed such reports
and/or information returns as may be required or appropriate under
applicable orders, rules, regulations or other requirements of any
Governmental Authority, including, without limitation, any Environmental
Laws, except to the extent that such non-compliance would not have a
Material Adverse Effect.
7.08 Access to Properties, Books and Records. Each Borrower shall permit
the Bank's representatives and/or agents full and complete access to any
or all of the Borrower's properties and financial records, to make
extracts from and/or audit such records and to examine and discuss their
properties, business, finances and affairs with the Borrowers' officers
and outside accountants, provided that such access need only be provided
by the Borrowers during normal business hours and on not less than 72
hours' prior notice the Borrowers shall keep adequate records and books
of account reflecting all their respective financial transactions.
7.09 Environmental Liens. In the event that there shall be filed a lien
against any property of any Borrower by any Governmental Authority
arising from an act or omission of a Borrower, resulting in the
discharge of hazardous substances or wastes into the atmosphere or
waters or onto lands, then the affected Borrower shall, within 60 days
from the date that such Borrower is given notice that the lien has been
placed against such property or within such shorter period of time in
the event that such Governmental Authority has commenced steps to cause
such property to be sold pursuant to the lien, either (i) pay the claim
and remove the lien from the applicable property or (ii) furnish to such
Governmental Authority with one of the following: (x) a bond
satisfactory to Governmental Authority in the amount of the claim out of
which the lien arises, (y) a cash deposit in the amount of the claim out
of which the lien arises, or (z) other security reasonably satisfactory
to such Governmental Authority in an amount sufficient to discharge the
claim out of which the lien arises.
7.10 Removal of Hazardous Substances. Should a Borrower cause or permit
any act or omission resulting in the discharge of hazardous substances
or wastes into the atmosphere or waters, or onto the lands in violation
of any applicable Environmental Law, such Borrower shall promptly clean
up same in accordance with all applicable Environmental Laws.
7.11 Further Assurances. Each Borrower shall do, execute, acknowledge
and deliver or cause to be done, executed, acknowledged and delivered,
all such further instruments, acts, deeds, and assurances as may be
reasonably requested by the Bank for the purpose of carrying out the
provisions and intent of the Credit Documents.
VIII. NEGATIVE COVENANTS.
So long as any Obligations are outstanding, without the prior written
consent of the Bank (which consent shall not be unreasonably withheld):
8.01 Incur Indebtedness. No Borrower shall incur, create, assume, or
permit to exist any Indebtedness at any time, except:
(a) Indebtedness of the Borrowers owing to the Bank under this Agreement
and the Notes;
(b) other Indebtedness of a Borrower owing to the Bank;
(c) Indebtedness existing on the date hereof that is described on Annex
I hereof.
(d) Approved Subordinated Indebtedness;
(e) Indebtedness in respect of normal trade debt arising in the ordinary
course of business which does not materially exceed the levels of such
debt historically incurred by a Borrower;
(f) Indebtedness secured by Liens permitted to exist pursuant to Section
8.02(f); or
(g) Indebtedness that constitutes Guaranteed Indebtedness of a Borrower
that has been incurred by such Borrower solely by virtue of such
Borrower's endorsement of checks or drafts negotiated in the ordinary
course of the business.
8.02 Negative Pledge. No Borrower shall create, permit to exist, or
suffer the creation of, any Lien, on any of its properties or assets
(real or personal, tangible or intangible), except:
(a) Liens in favor of the Bank;
(b) Liens existing on the date hereof that are listed on Annex I hereto;
(c) Liens for taxes, assessments or governmental charges or levies to
the extent not required to be paid by Section 7.05 hereof;
(d) Liens imposed by law, such as materialmen's, mechanics', carrier's,
workmen's, and repairmen's Liens and other similar Liens arising in the
ordinary course of business securing obligations which are not overdue
for a period of more than 30 days;
(e) pledges or deposits to secure obligations under workmen's
compensation laws or similar legislation or to secure public or
statutory obligations of a Borrower;
(f) Liens for finance leases of equipment leased by a Borrower which do
not constitute Capitalized Leases, or purchase money Liens upon or in
property acquired or held by a Borrower in the ordinary course of
business to secure the purchase price of such property or to secure
Indebtedness incurred solely for the purpose of financing the
acquisition of any such property to be subject to such Liens, or Liens
existing on any such property at the time of the leasing, acquisition,
or extensions, renewals or replacements of any of the foregoing for the
same or a lesser amount, provided that no such Lien shall extend to or
cover any property (including, but not limited to the Financial
Equipment) other than the property being leased or acquired and no such
extension, renewal or replacement shall extend to or cover any property
not theretofore subject to the Lien being extended, renewed or replaced,
and provided, further, that (i) the aggregate principal amount of the
Indebtedness at any one time outstanding secured by Liens permitted
pursuant to this clause (f) shall not exceed $ at any one time
outstanding and (ii) any such Indebtedness shall not otherwise be
prohibited by the terms of this Agreement; or
(g) the replacement, extension or renewal of any Lien permitted by
clauses (a) through (f) above upon or in the same property theretofore
subject thereto or the replacement, extension or renewal (without
increase of principal amount) of the Indebtedness secured thereby.
8.03 Sale of Assets; Liquidation; Merger; Acquisitions. No Borrower
shall (i) convey, lease, sell, transfer or assign any assets or
properties presently owned or hereafter acquired by it, except
dispositions of inventory in the ordinary course of business for value
received and such other dispositions of assets and properties that are
not material to the business or operations of such Borrower, if such
asset or property is replaced with reasonable promptness or is otherwise
obsolete, (ii) liquidate or discontinue its normal operations with
intent to liquidate; (iii) enter into any merger or consolidation; (iv)
acquire all or substantially all of the assets, stock or other equity
interests of any other Person; or (v) take any action, or enter into any
agreements, to effect any of the foregoing.
8.04 Lease Obligations. No Borrower shall incur, create, or assume any
commitment to make any Lease Payments if the amount payable thereunder
in any one fiscal year would exceed $----------- in the aggregate as to
Total-Tel Comm and its Subsidiaries. As used herein, "Lease Payments"
means any direct or indirect payments, whether as rent or otherwise,
including fees or services or finance charges, under any lease, rental
or other agreement for the use of property of any Person other than a
Borrower, whether or not such agreement contains an option to purchase
such property.
8.05 Sale-Leaseback Transactions. No Borrower shall enter into any sale-
leaseback transaction or any transaction howsoever termed which would
have the same or substantially the same result or effect as a sale-
leaseback.
8.06 Prepayment of Other Indebtedness. No Borrower shall prepay any
amounts on any outstanding Indebtedness not required to be prepaid by
the express terms thereof, except to the Bank, or cause or permit the
acceleration of any amounts on any outstanding Indebtedness now existing
or hereafter arising.
8.07 Investments. No Borrower shall purchase or make any investment in
the stock, securities or evidences of indebtedness of, or make capital
contributions or loans or advances to, or other forms of investments in,
any Person, except Permitted Investments. Notwithstanding the foregoing,
the Borrowers shall be permitted to make loans to its employees for
corporate purposes; provided that the aggregate principal amount of such
loans outstanding at any one time shall not exceed $ .
8.08 Create Subsidiaries. No Borrower shall create, permit to exist, or
invest or otherwise participate in any Subsidiaries (other than the
Subsidiaries listed on Annex 1 hereto) or any partnership, joint venture
or other material enterprise; provided that the foregoing shall not
apply to any new Subsidiaries that executes and delivers in favor of the
Bank a guaranty and security agreement (as well as resolutions
authorizing the same) substantially the same as the guaranty and
security agreement executed and delivered by the Guarantors in
connection with the transactions herein contemplated.
8.09 Hazardous Substances. No Borrower shall cause or permit to exist a
discharge of hazardous substances or wastes into the atmosphere or
waters or onto lands unless such discharge is pursuant to and in
compliance with the conditions of a permit issued by the appropriate
Governmental Authorities or otherwise in compliance with applicable
Environmental Law.
8.10 Current Ratio. Total-Tel Comm shall not permit the ratio of its
Current Assets to its Current Liabilities at any time to be less than
1.00:1.00, measured on a consolidated basis no less frequently than
quarterly. As used herein, "Current Assets" and "Current Liabilities"
means all assets and liabilities which, in accordance with GAAP
consistently applied, should be classified as current assets and current
liabilities, respectively.
8.11 Tangible Net Worth. Total-Tel Comm shall not permit its Tangible
Net Worth at any time to be less than $10,000,000, measured on a
consolidated basis no less frequently than quarterly. As used herein,
"Tangible Net Worth" means, at any date (i) the total assets of Total-
Tel Comm which would be shown as assets on a consolidated balance sheet
of Total-Tel Comm prepared in accordance with GAAP less (ii) the total
liabilities of Total-Tel Comm which would be shown as liabilities on a
consolidated balance sheet of Total-Tel Comm prepared in accordance with
GAAP, after subtracting therefrom the aggregate amount of any
capitalized research and development costs, capitalized interest, debt
discount and expense, goodwill, patents, trademarks, copyrights,
franchises, licenses, amounts owing from officers, directors,
shareholders, principals, partners or affiliates of any Borrower or
Guarantor and any investments in any entities owned or controlled by any
of the foregoing, and such other assets as are properly classified as
"intangible assets", in each case determined in accordance with GAAP
consistently applied.
8.12 Debt to Equity Ratio. Total-Tel Comm shall not permit the ratio of
its Total Liabilities to Tangible Capital Fund at any time to exceed
2.00:1.00, measured on a consolidated basis no less frequently than
quarterly. As used herein, "Total Liabilities" means the total
liabilities of Total-Tel Comm which would be shown as liabilities on a
consolidated balance sheet of Total-Tel Comm prepared in accordance with
GAAP, specifically including, without limitation, Capitalized Lease
Obligations, contingency and other reserves, deferred taxes and other
deferred sums, but specifically excluding amounts in respect of any then
outstanding Approved Subordinated Debt, in each case determined in
accordance with GAAP consistently applied. As used herein, "Tangible
Capital Funds" means the sum of (i) the Tangible Net Worth of Total-Tel
Comm as determined pursuant to the definition thereof set forth in
Section 8.11 hereof plus (ii) the principal amount of any then
outstanding Approved Subordinated Debt.
8.13 Debt Service Coverage Ratio. Total-Tel Comm shall not permit the
ratio of its EBITDA to its CPLTD plus Interest Expense to be at any time
less than 1.50:1.00, measured on a consolidated basis no less frequently
than annually. As used herein, "EBITDA" means, at any time, the earnings
(excluding any extraordinary or unusual items and non-operating earnings
adjustments) before interest expense, taxes, depreciation and
amortization, determined in accordance with GAAP consistently applied,
and "CPLTD plus Interest Expense" means, at any time, current maturities
of all Indebtedness which by its terms, or by the terms of any
instrument or agreement relating thereto, matures, or which is otherwise
payable, 1 year or more after the date of creation thereof (whether such
payment is in respect of sinking fund requirements, mandatory
prepayments, or final payment upon maturity), including, without
limitation, any Capital Lease Obligations, plus all cash and non-cash
interest (including, without limitation, capitalized interest) accrued
and/or payable during the relevant fiscal period in or in connection
with any Indebtedness, in each case determined in accordance with GAAP,
consistently applied.
8.14 Use of Proceeds. No Borrower shall use the proceeds of any Loan
made hereunder for any purpose other than the purposes described in
Section 6.03 hereof.
8.15 Change Fiscal Year. Total-Tel Comm shall not change its fiscal year
to end on any date other than , or permit the fiscal year end of any of
its Subsidiaries to end on any day other than .
IX. EVENTS OF DEFAULT.
Each of the following shall constitute an event of default ("Event of
Default") hereunder:
9.01 Payment Default. Any Borrower shall (i) default in the payment when
due of any principal of, or interest on, the Loans or (ii) default in
the payment any other amounts owing hereunder, under the Notes or under
any other Credit Document;
9.02 Negative Covenant Breach. Any Borrower shall default in the due
performance or observance by it of any term, covenant or agreement
contained in Article VIII hereof;
9.03 Other Covenant Breaches. Any Borrower shall default in the due
performance or observance of any term, covenant or agreement (other than
those referred to in Sections 9.01 and 9.02) contained in this
Agreement, the Notes or any other Credit Document, and such default
shall continue unremedied for a period of at least ___ days after the
earlier to occur of (i) the date a Borrower obtains actual knowledge of
such default or (ii) the date notice of such default is given to a
Borrower by the Bank;
9.04 Default Under Agreements for Borrowed Money. (i) Any Borrower shall
default in any payment with respect to any Indebtedness in excess of $
(individually or in the aggregate as to all Borrowers) beyond the period
of grace, if any, provided in the instrument or agreement under which
such Indebtedness was created or default in the observance or
performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition
is to cause, or to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause
(determined without regard to whether any notice or lapse of time is
required), any such Indebtedness to become due prior to its stated
maturity, or (ii) any such Indebtedness shall be declared to be due and
payable, or required to be prepaid as a mandatory prepayment, prior to
the stated maturity thereof;
9.05 Default Under Other Material Contracts. Any Borrower shall default
in the due performance or observance of any material term, covenant or
agreement contained in any contract, agreement, understanding or
arrangement, beyond the period of grace, if any, provided in the
relevant contract, involving an aggregate consideration payable by or to
such Borrower of $-------------- or more in any 1 year or is otherwise
material to the business, condition, operations, performance, properties
or prospects of such Borrower;
9.06 Voluntary Bankruptcy. Any Borrower or any other Guarantor commences
any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under the United States Bankruptcy Code or under any similar
foreign, federal, state, or local statute, or any dissolution or
liquidation proceeding, or makes a general assignment for the benefit of
creditors, or takes any action for the purpose of effecting any of the
foregoing;
9.07 Involuntary Bankruptcy. Any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under the United States
Bankruptcy Code or under similar foreign, federal, state or local
statute, or any dissolution or liquidation proceeding, is involuntarily
commenced against or in respect of any Borrower or any other Guarantor;
9.08 Appointment of Receiver. The appointment, or the filing of a
petition seeking the appointment of a custodian, receiver, trustee, or
liquidator for any Borrower or any of their respective property, or the
taking of possession of any part of the property of any Borrower at the
instance of any Governmental Authority;
9.09 Insolvency. Any Borrower or any other Guarantor becomes insolvent
(however defined), is generally not paying its debts as they become due,
or has suspended transaction of its usual business;
9.10 Reorganization. The dissolution, merger, consolidation, or
reorganization of any Borrower or any other Guarantor;
9.11 Material Misstatement. Any statement, representation or warranty
made in or pursuant to this Agreement or any other Credit Document or to
induce the Bank to enter into this Agreement or to enter into the
transactions referred to in this Agreement shall prove to be untrue or
misleading in any material respect;
9.12 Material Adverse Change. The occurrence of a material adverse
change in the financial condition of any Borrower or the occurrence of
any event which, in the reasonable opinion of the Bank, materially
impairs the financial responsibility of any Borrower; or
9.13 Entry of Judgment. The entry or issuance of judgments, orders,
decrees or fines against any Borrower or any other Guarantor which, in
the aggregate, involve liabilities in excess of the sum of $----------
(the discharge of which is not the obligation of any insurance company)
and any such judgments or orders involving liabilities in excess of said
sum shall have continued unbonded or unsatisfied and without stay of
execution or agreement between the parties thereon for a period of 30
days after the entry or issuance of such judgment.
X. REMEDIES.
10.01 Acceleration of Obligations; Other Remedies. Upon and following
the occurrence of an Event of Default described in Article IX hereof
(other than the Events of Default described in Sections 9.06, 9.07, and
9.08 hereof), at the Bank's sole option, the Bank's commitment, if any,
to make any further advance or Loans hereunder shall terminate and all
Obligations shall immediately become due and payable in full, all
without protest, presentment, demand or further notice of any kind to
the Borrowers, all of which are expressly waived. Upon the occurrence of
the Event of Default described in Sections 9.06, 9.07, and 9.08 hereof,
immediately and automatically, the Bank's commitment, if any, to make
any further advances or Loans hereunder shall terminate and all
Obligations shall immediately become due and payable in full, all
without protest, presentment, demand or further notice of any kind to
the Borrowers, all of which are expressly waived. Upon and following an
Event of Default, the Bank may, at its option, exercise any and all
rights and remedies it has under this Agreement, any other Credit
Document and/or applicable law, including, without limitation, the right
to charge and collect interest on the principal portion of the
Obligations at a rate equal to the lesser of: (i) the highest rate of
interest set forth in the Credit Documents, or (ii) the highest rate of
interest allowed by law, such rate of interest to apply to the
Obligations, at the Bank's option, upon and after an Event of Default,
maturity, whether by acceleration or otherwise, and the entry of a
judgment in favor of the Bank with respect to any or all of the
Obligations. Upon and following an Event of Default, the Bank may
proceed to protect and enforce the Bank's rights under any Credit
Document and/or under applicable law by action at law, in equity or
other appropriate proceeding including, without limitation, an action
for specific performance to enforce or aid in the enforcement of any
provision contained herein or in any other Credit Document.
10.02 Right of Set-off. If any of the Obligations shall be due and
payable or any one or more Events of Default shall have occurred,
whether or not the Bank shall have made demand under any Credit Document
and regardless of the adequacy of any collateral for the Obligations or
other means of obtaining repayment of the Obligations, the Bank shall
have the right, without notice to any Borrower, and is specifically
authorized hereby to set-off against and apply to the then unpaid
balance of the Obligations any items or funds of any Borrower held by
the Bank, any and all deposits (whether general or special, time or
demand, matured or unmatured) or any other property of any Borrower,
including, without limitation, securities and/or certificates of
deposit, now or hereafter maintained by any Borrower for its or their
own account with the Bank, and any other indebtedness at any time held
or owing by the Bank to or for the credit or the account of any
Borrower, even if effecting such set-off results in a loss or reduction
of interest or the imposition of a penalty applicable to the early
withdrawal of time deposits. For such purpose, the Bank shall have, and
each Borrower hereby grants to the Bank, a lien on and security interest
in such deposits, property, funds and accounts and the proceeds thereof.
10.04 Remedies Cumulative; No Waiver or Impairment. The rights, powers
and remedies of the Bank provided in this Agreement and any of the
Credit Documents are cumulative and not exclusive of any right, power or
remedy provided by law or equity. No failure or delay on the part of the
Bank in the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise preclude any
other or further exercise thereof, or the exercise of any other right,
power or remedy. The liabilities of the Borrowers hereunder and under
the other Credit Documents shall be joint and several and the Bank may,
in its sole and absolute discretion, enforce any such liability against
any Borrower or all Borrowers without affecting or impairing the further
enforcement of the liabilities hereunder or under the other Credit
Documents against any other Borrower or all Borrowers, as the case may
be.
XI. MISCELLANEOUS.
11.01 Notices. Notices and communications under this Agreement and the
other Credit Documents shall be in writing and shall be given by either
(i) hand-delivery, (ii) certified mail (return receipt requested,
postage prepaid), (iii) reliable overnight commercial courier (charges
prepaid), or (iv) telecopy, to the addresses and telecopy numbers listed
in this Agreement. Notice given by telecopy shall be deemed to have been
given and received when sent. Notice by overnight courier shall be
deemed to have been given and received on the date scheduled for
delivery. Notice by certified mail shall be deemed to have been given
and received on the dates indicated on the receipt returned to the
sender thereof. A party may change its address and/or telecopier number
by giving written notice to the other party as specified herein. For the
avoidance of doubt, any notice required to be given by the Bank to the
Borrowers or any Borrower shall be deemed given by the Bank for all
purposes when given to Total-Tel Comm in accordance with this Section
11.01. Furthermore, with respect to any notice required to be given by
the Borrowers or any particular Borrower, the Bank may rely (and shall
be fully protected in relying) on any notice received from any
authorized officer of any Borrower which the Bank believed in good faith
to be genuine and correct and to be acting on behalf of all Borrowers.
11.02 Costs and Expenses. Whether or not the transactions contemplated
by the Credit Documents are fully consummated, the Borrowers shall
promptly pay (or reimburse, as the Bank may elect) all reasonable costs
and expenses which the Bank has incurred or may hereafter incur in
connection with the negotiation, preparation, reproduction,
interpretation, perfection, monitoring, administration and enforcement
of the Credit Documents, the collection of all amounts due under the
Credit Documents, and all amendments, modifications, consents or
waivers, if any, to the Credit Documents. Such costs and expenses shall
include, without limitation, the reasonable fees and disbursements of
counsel to the Bank (including the Bank's in-house counsel), the costs
of appraisals, costs of environmental studies, searches of public
records, costs of filing and recording documents with public offices,
internal and/or external audit and/or examination fees and costs, stamp,
excise and other taxes and costs and expenses incurred by the Bank, and
the fees of the Bank's accountants, consultants or other professionals.
The Borrowers' reimbursement obligations under this paragraph shall
survive any termination of the Credit Documents.
11.03 Payment Due on a Day Other Than a Business Day. If any payment due
or action to be taken under this Agreement or any Credit Document falls
due or is required to be taken on a day that is not a Business Day, such
payment or action shall be made or taken on the next succeeding Business
Day and such extended time shall be included in the computation of
interest.
11.04 Governing Law. This Agreement shall be construed in accordance
with and governed by the substantive laws of the State of New Jersey
without reference to conflict of laws principles.
11.05 Integration. This Agreement and the other Credit Documents
constitute the sole agreement of the parties with respect to the subject
matter hereof and thereof and supersede all oral negotiations and prior
writings with respect to the subject matter hereof and thereof.
11.06 Amendment; Waiver. No amendment of this Agreement, and no waiver
of any one or more of the provisions hereof shall be effective unless
set forth in writing and signed by the parties hereto.
11.07 Successors and Assigns. This Agreement (i) shall be binding upon
the Borrowers and the Bank and their respective successors and permitted
assigns, and (ii) shall inure to the benefit of the Borrowers and the
Bank and their respective successors and permitted assigns; provided,
however, that no Borrowers may assign its rights hereunder or any
interest herein without the prior written consent of the Bank, and any
such assignment or attempted assignment by a Borrower shall be void and
of no effect with respect to the Bank.
11.08 Sale, Assignment or Participations. The Bank may from time to time
sell or assign, in whole or in part, or grant participations in some or
all of the Credit Documents and/or the obligations evidenced thereby.
The holder of any such sale, assignment or participation, if the
applicable agreement between the Bank and such holder so provides, (i)
shall be entitled to all of the rights, obligations and benefits of the
Bank and (ii) shall be deemed to hold and may exercise the rights of
set-off or banker's lien with respect to any and all obligations of such
holder to any Borrower, in each case as fully as though such Borrower
were directly indebted to such holder. The Bank may, in its discretion,
give notice to any Borrower of such sale, assignment or participation;
however, the failure to give such notice shall not affect any of the
Bank's or such holder's rights hereunder. Each Borrower authorizes the
Bank to provide information concerning the Borrowers to any prospective
purchaser, assignee or participant. The information provided may
include, but is not limited to, amounts, terms, balances, payment
history, return item history and any financial or other information
about the Borrowers. The Borrowers agrees to indemnify, defend, release
the Bank, and hold the Bank harmless, at the Borrowers' cost and
expense, from and against any and all lawsuits, claims, actions,
proceedings, or suits against the Bank or against any Borrower and the
Bank, arising out of or relating to the Bank's reporting or disclosure
of such information, unless any such claims are the result of the Bank's
gross negligence or willful misconduct.
11.09 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of
the remaining provisions of this Agreement or any instrument or
agreement required hereunder. In lieu of any illegal or unenforceable
provision in this Agreement, there shall be added automatically as a
part of this Agreement a legal and enforceable provision as similar in
terms to such illegal or unenforceable provision as may be possible.
11.10 Consent to Jurisdiction and Service of Process. Each Borrower
irrevocably appoints each and every corporate officer of such Borrower
as their attorneys upon whom may be served, by regular or certified mail
at the address set forth in this Agreement, any notice, process or
pleading in any action or proceeding against it arising out of or in
connection with this Agreement or any of the other Credit Documents.
Each Borrower hereby consents that any action or proceeding against it
may be commenced and maintained in any court within the State of New
Jersey or in the United States District Court for the District of New
Jersey by service of process on any such officer. Each Borrower further
agrees that such courts of the State of New Jersey and the United States
District Court for the District of New Jersey shall have jurisdiction
with respect to the subject matter hereof and the person of such
Borrower and all collateral for the Obligations. Notwithstanding the
foregoing, each Borrower agrees that any action brought by such Borrower
shall be commenced and maintained only in a court in the federal
judicial district or county in which the Bank has its principal place of
business in New Jersey.
11.11 Indemnification.
(a) If, after receipt of any payment of all or any part of the
Obligations, the Bank is compelled or agrees, for settlement purposes,
to surrender such payment to any person or entity for any reason
(including, without limitation, a determination that such payment is
void or voidable as a preference or fraudulent conveyance, an
impermissible set-off, or a diversion of trust funds), then this
Agreement and the other Credit Documents shall continue in full force
and effect, and each Borrower shall be liable for, and shall indemnify,
defend and hold harmless the Bank with respect to the full amount so
surrendered.
(b) The Borrowers shall indemnify, defend and hold harmless the Bank
with respect to any and all claims, expenses, demands, losses, costs,
fines or liabilities of any kind (including, without limitation, those
involving death, personal injury or property damage and including
reasonable attorneys fees and costs) arising from or in any way related
to any hazardous materials or a dangerous environmental condition
within, on, from, related to or affecting any real property owned or
occupied by the Borrower including, without limitation, any and all
claims that may arise as a result of an intentional or unintentional act
or omission of any Borrower, any previous owner and/or operator of real
property owned or occupied by any Borrower that resulted in the
discharge of hazardous substances or wastes into the atmosphere or
waters or onto the lands.
(c) The provisions of this paragraph shall survive the termination of
this Agreement and the other Credit Documents and shall be and remain
effective notwithstanding the payment of the Obligations, the release of
any security interest, lien or encumbrance securing the Obligations or
any other action which the Bank may have taken in reliance upon its
receipt of such payment. Any action by the Bank shall be deemed to have
been conditioned upon any payment of the Obligations having become final
and irrevocable.
11.12 Inconsistencies. The Credit Documents are intended to be
consistent. However, in the event of any inconsistencies among any of
the Credit Documents, such inconsistency shall not affect the validity
or enforceability of each Credit Document. Each Borrower agrees that in
the event of any inconsistency or ambiguity in any of the Credit
Documents, the Credit Documents shall not be construed against any one
party but shall be interpreted consistent with the Bank's policies and
procedures.
11.13 Headings. The headings of articles, sections and paragraphs have
been included herein for convenience only and shall not be considered in
interpreting this Agreement.
11.14 Schedules. All Schedules, Annexes and/or an Exhibits attached
hereto are incorporated herein.
11.15 Judicial Proceeding; Waivers.
(a) EACH PARTY TO THIS AGREEMENT AGREES THAT ANY SUIT, ACTION OR
PROCEEDING, WHETHER CLAIM OR COUNTER-CLAIM, BROUGHT OR INSTITUTED BY ANY
PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY PARTY, ON OR WITH RESPECT
TO THIS AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS OR THE DEALINGS
OF THE PARTIES WITH RESPECT HERETO, OR THERETO, SHALL BE TRIED ONLY BY A
COURT AND NOT BY A JURY.
(b) EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING.
FURTHER, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER, IN
ANY SUCH SUIT, ACTION OR PROCEEDING, ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES.
(c) .EACH BORROWER ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT THE BANK WOULD
NOT EXTEND CREDIT TO ANY BORROWER IF THE WAIVERS SET FORTH IN THIS
SECTION WERE NOT A PART OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties by their duly authorized representatives
have executed this Agreement as of the day and year first above written.
WITNESS/ATTEST: TOTAL-TEL USA COMMUNICATIONS, INC.
By:------------------------ By:-----------------------------
Name: Name:
Title: Title:
Address:------------------------
------------------------
Telecopier:---------------------
WITNESS/ATTEST: TOTAL-TEL, INC.
By:------------------------ By:-----------------------------
Name: Name:
Title: Title:
Address:------------------------
------------------------
Telecopier:---------------------
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:------------------------ By:-----------------------------
Name: Name:
Title: Title:
Address:------------------------
------------------------
Telecopier:---------------------
SUMMIT BANK
By:-----------------------------
Name:
Title:
Address:------------------------
------------------------
Telecopier:---------------------
EXHIBIT A
EQUIPMENT FACILITY/TERM NOTE
$6,000,000.00 August ----, 1996
----------------, New Jersey
FOR VALUE RECEIVED, and intending to be legally bound hereby, the
undersigned, jointly, severally and unconditionally promise to pay to
the order of SUMMIT BANK (the "Bank"), the principal amount of all
Equipment Loans (as defined in the Credit Agreement referred to below)
that are now or may hereafter be made under and pursuant to the
Equipment Facility established under said Credit Agreement and that are
then outstanding, together with all accrued and unpaid interest thereon
and any unpaid costs and expenses payable thereunder and hereunder, on
August , 1997 (the "Expiration Date"), unless such obligations are
converted to a term loan obligation pursuant to said Credit Agreement,
in which case such obligations shall mature and be due and payable on
the fifth anniversary of the date of said conversion (the "Maturity
Date").
A.Terms of Note.
1. Payment of Principal. The principal balance of each Equipment Loan
evidenced by this note (together with any attachments hereto and any
amendments or modifications hereof in effect from time to time, this
"Note") due and payable in full on the Expiration Date, unless the
obligations evidenced hereby are converted to a term loan obligation
pursuant to Section 1.04 of the Credit Agreement, in which case the
principal balance hereunder shall be payable in consecutive monthly
installments in the amounts and on the dates prescribed in Section 1.06
of the Credit Agreement, with a final installment in the amount of the
remaining outstanding principal hereunder, together with any accrued and
unpaid interest thereon, due and payable on the Maturity Date.
2. Interest Payments. The undersigned agree to pay to the Bank,
interest, in arrears, on the outstanding principal balance hereunder at
the rates and on the dates set forth in the Credit Agreement, until the
entire principal balance hereunder, together with accrued and unpaid
interest thereon, is paid in full.
3. Computation of Interest. Interest hereunder shall be computed daily
on the basis of a year of 360 days for the actual number of days
elapsed. If the due date for any payment of principal is extended by
operation of law, interest shall be payable for such extended time.
4. Payment Terms. All payments made hereunder shall be made on or before
10:00 a.m. on the due date thereof, in immediately available funds and
in lawful currency of the United States of America and free and clear
of, and without deduction or withholding for, any taxes or other
payments. Payments shall be deemed made when delivered to the Bank at
its offices set forth in this Note or at such other office of the Bank
as the Bank shall notify the undersigned of in writing.
5. Incorporation by Reference. This Note is the Equipment Facility/Term
Note referred to in that certain Equipment Facility and Revolving Credit
Agreement, dated as of August -----, 1996, by and between the Bank and
the undersigned (together with any amendments and modifications thereto
in effect from time to time, the "Credit Agreement") and is subject to
the terms and conditions thereof, which terms and conditions are
incorporated herein, including, without limitation, the terms pertaining
to payment, definitions, representations, warranties, covenants, events
of default and remedies. Any capitalized term used herein without
definition shall have the meaning set forth in the Credit Agreement.
6. Bank Records of Advance. The Bank may enter in it business records
the date and the amount of each advance and payment of Equipment Loans
made pursuant to the Credit Agreement and the date and terms of the
conversion of such loans to a term loan pursuant to the Credit
Agreement. The Bank's records thereof shall, in the absence of manifest
error, be conclusively binding upon the undersigned. In the event the
Bank gives notice or renders a statement by mailing such notice or
statement to the undersigned, concerning any such advance, conversion or
payment, or the amount of principal and interest due on this Note, the
undersigned agree that, unless the Bank receives a written notification
of exceptions to such a statement within 10 calendar days after such
statement or notice is mailed, the statement or notice shall be an
account stated, correct and acceptable and binding upon the undersigned.
7. Late Charge. If any installment of principal or interest hereunder is
not paid in full when the same is due, the Bank may collect from the
undersigned a fee on such unpaid amount equal to 5 percent (5%) of such
amount; provided that no such fee shall be imposed if such payment is
received by the Bank within ----- days of the due date thereof.
8. Default Rate. At the Bank's option, interest will be assessed on any
principal which remains unpaid at the maturity of this Note, whether by
acceleration or otherwise, or upon and following an Event of Default, at
a rate which is 400 basis points (4%) higher than the rate otherwise
charged with respect thereto (the "Default Rate") provided that at no
time shall the amounts owed by the undersigned to the Bank pursuant to
any judgments entered in favor of Bank with respect to this Note, or any
other Credit Document.
B.Remedies.
1. Generally. Upon and following an Event of Default, the Bank, at its
option, may exercise any and all rights and remedies it has under this
Note, the other Credit Documents and under applicable law, including,
without limitation, the right to charge and collect interest on the
principal portion of the amounts outstanding hereunder at the Default
Rate. Upon and following an Event of Default hereunder, the Bank may
proceed to protect and enforce the Bank's rights hereunder and/or
applicable law by action at law, in equity, or other appropriate
proceeding, including, without limitation, an action for specific
performance to enforce or aid in the enforcement of any provision
contained herein or in any other Credit Document.
2. Remedies Cumulative; No Waiver. The remedies hereunder and under the
other Credit Documents are cumulative and concurrent, and are not
exclusive of any other remedies available to the Bank. No failure or
delay on the part of the Bank in the exercise of any right, power,
remedy or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power, remedy or privilege
preclude any other or further exercise thereof, or the exercise of any
other right, power, remedy or privilege.
C.Miscellaneous.
1. Governing Law. This Note shall be construed in accordance with and
governed by the substantive laws of the State of New Jersey without
reference to conflict of laws principles.
2. Amendment; Waiver. No amendment of this Note, and no waiver of any
one or more of the provisions hereof shall be effective unless set forth
in writing and signed by the Borrower and the Bank.
3. Successors and Assigns. This Note (i) shall be binding upon the
undersigned and the Bank, their respective successors and permitted
assigns, and (ii) shall inure to the benefit of the undersigned and the
Bank and, their respective successors and permitted assigns; provided,
however, that none of the undersigned may assign its rights or
obligations hereunder or any interest herein without the prior written
consent of the Bank, and any such assignment or attempted assignment by
any of the undersigned shall be void and of no effect with respect to
the Bank.
4. Severability. The illegality or unenforceability of any provision of
this Note or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Note or any instrument or agreement required
hereunder. In lieu of any illegal or unenforceable provision in this
Note, there shall be added automatically as part of this Note a legal
and enforceable provision as similar in terms to such illegal or
unenforceable provision as may be possible.
5. Judicial Proceeding; Waiver.
(a) THE UNDERSIGNED AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER
CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE BANK OR THE
UNDERSIGNED OR ANY SUCCESSOR OR ASSIGN OF THE BANK OR THE UNDERSIGNED,
ON OR WITH RESPECT TO THIS NOTE OR ANY OTHER CREDIT DOCUMENT OR THE
DEALINGS OF THE PARTIES WITH RESPECT HERETO, OR THERETO, SHALL BE TRIED
ONLY BY A COURT AND NOT BY A JURY.
(b) THE BANK AND THE UNDERSIGNED EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION OR PROCEEDING. FURTHER, THE UNDERSIGNED WAIVE ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
(c) THE UNDERSIGNED ACKNOWLEDGE AND AGREE THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT THE BANK WOULD NOT
EXTEND CREDIT TO THE UNDERSIGNED IF THE WAIVERS SET FORTH IN THIS
SECTION WERE NOT A PART OF THIS NOTE.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered to
the Bank this Note as of the day and year first above written.
WITNESS/ATTEST: TOTAL-TEL USA COMMUNICATIONS, INC.
By:-----------------------By:--------------------------
Name: Name:
Title: Title:
Address:----------------------
----------------------
Telecopier:-------------------
WITNESS/ATTEST: TOTAL-TEL, INC.
By:-----------------------By:--------------------------
Name: Name:
Title: Title:
Address:----------------------
- ----------------------
Telecopier:-------------------
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:-----------------------By:--------------------------
Name: Name:
Title: Title:
Address:----------------------
- ----------------------
Telecopier:-------------------
EXHIBIT B
Notice of Borrowing Under
Equipment Facility
Borrower: ------------------------------------
Date of Borrowing: ---------------------------
Amount Requested: $---------------------------
The Borrower hereby notifies the Bank that it requires a borrowing
("Borrowing") in the form of an Equipment Loan under the Equipment
Facility and Revolving Credit Agreement dated as of August --, 1996
(together with any amendments or modifications thereto in effect from
time to time, the "Credit Agreement") established for the Borrowers
thereunder in the amount set forth above. The Borrowing will be
deposited in the Borrower's Account No. -----------------------. In
order to induce the Bank to fund such Borrowing, the Borrower hereby
affirms the following:
1. The representations and warranties contained in the Credit Agreement
are correct on and as of the date of this Notice of Borrowing.
2. No Event of Default (as defined in the Credit Agreement), and no
event which, with the giving of notice, passage of time, or both, would
become an Event of Default, has occurred and is continuing.
3. There has been no adverse change in the condition, financial or
otherwise, of any of the Borrowers since the date of the Credit
Agreement.
4. All of the Credit Documents (as defined in the Credit Agreement)
remain in full force and effect.
5. Attached hereto is a true and correct copy of [invoice/bill of sale]
rendered by the vendor in connection with the acquisition of the
equipment to be financed with the proceeds of the Borrowing. Said
[invoice/bill of sale] accurately states the total consideration to be
paid for such equipment, which is $------------ . Also attached is a
true and complete description of said equipment and the location or
proposed location thereof.
Date: ----------------------, 19
[RELEVANT BORROWER]
By:----------------------------
Name:
Title:
EXHIBIT C
REVOLVING CREDIT NOTE
$4,000,000.00 August ----, 1996
, New Jersey
FOR VALUE RECEIVED, and intending to be legally bound hereby, the
undersigned, jointly, severally and unconditionally to pay to the order
of SUMMIT BANK (the "Bank"), the principal amount of all advances that
are now or may hereafter be made under and pursuant to the Revolving
Credit Facility established under the Credit Agreement (as defined
below) and that are then outstanding, together with accrued, unpaid
interest thereon and any unpaid costs and expenses payable hereunder, on
May 31, 1997.
A. Terms of Note.
1. Interest Payments. The principal amount of each Revolving Credit Loan
(as defined in the Credit Agreement) evidenced by this note (together
with any attachments hereto and any amendments and modifications hereto
in effect from time to time, this "Note") shall bear interest at the
rates set forth in the Credit Agreement and accrued interest shall be
due and payable by the undersigned in accordance with the provisions
thereof.
2. Computation of Interest. Interest hereunder shall be computed daily
on the basis of a year of 360 days for the actual number of days
elapsed. If the due date for any payment of principal is extended by
operation of law, interests shall be payable for such extended time.
3. Payment Terms. All payments made hereunder shall be made on or before
10:00 a.m. on the due date thereof, in immediately available funds and
in lawful currency of the United States of America and free and clear
of, and without deduction or withholding for, any taxes or other
payments. Payments shall be deemed made when delivered to the Bank at
its offices set forth in this Note or at such other office of the Bank
as the Bank shall notify the undersigned of in writing.
4. Incorporation by Reference. This Note is the Revolving Credit Note
referred to in that certain Equipment Facility and Revolving Credit
Agreement, dated as of August ----, 1996, between the Bank and the
undersigned (together with any amendments and modifications thereto in
effect from time to time, the "Credit Agreement") and is subject to the
terms and conditions thereof, which terms and conditions are
incorporated herein, including, without limitation, terms pertaining to
definitions, representations, warranties, covenants, events of default
and remedies. Any capitalized term used herein without definition shall
have the definition contained in the Credit Agreement.
5. Bank Records of Advance. The Bank may enter in its business records
the date and the amount of each advance of a Revolving Credit Loan, each
conversion from one interest rate basis to another and each payment made
pursuant to this Note and the Credit Agreement. The Bank's records of
such advance, conversion or payment shall, in the absence of manifest
error, be conclusively binding upon the undersigned. In the event the
Bank gives notice or renders a statement by mailing such notice or
statement to the undersigned, concerning any such advance, conversion or
payment, or the amount of principal and interest due on this Note, the
undersigned agree that, unless the Bank receives a written notification
of exceptions to such a statement within 10 calendar days after such
statement or notice is mailed, the statement or notice shall be an
account stated, correct and acceptable and binding upon the undersigned.
6. Late Charge. If any payment hereunder is not paid in full when the
same is due, the Bank may collect from the undersigned a fee on such
unpaid amount equal to 5 percent (5%) of such amount; provided that no
such fee shall be imposed if such payment is received by the Bank within
- --- days of the due date thereof.
7. Default Rate. At the Bank's option, interest will be assessed on any
principal which remains unpaid at the maturity of this Note, whether by
acceleration or otherwise, or upon and following any Event of Default,
at a rate which is 400 basis points (4%) higher than the rate otherwise
charged with respect thereto (the "Default Rate"), provided that at no
time shall the Default Rate exceed the highest rate of interest allowed
by law. Such Default Rate of interest shall also be charged on the
amounts owed by the undersigned to the Bank pursuant to any judgments
entered in favor of Bank in respect of this Note or any other Credit
Document.
B. Remedies.
1. Generally. Upon and following an Event of Default, the Bank, at its
option, may exercise any and all rights and remedies it has under this
Note, the other Credit Documents and under applicable law, including,
without limitation, the right to charge and collect interest on the
principal portion of the amounts outstanding hereunder at the Default
Rate. Upon and following an Event of Default, the Bank may proceed to
protect and enforce the Bank's rights under any Credit Document and/or
under applicable law by action at law, in equity, or other appropriate
proceeding, including, without limitation, an action for specific
performance to enforce or aid in the enforcement of any provision
contained herein or in any other Credit Document.
2. Remedies Cumulative; No Waiver. The remedies hereunder and under the
other Credit Documents are cumulative and concurrent, and are not
exclusive of any other remedies available to the Bank. No failure or
delay on the part of the Bank in the exercise of any right, power,
remedy or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power, remedy or privilege
preclude any other or further exercise thereof, or the exercise of any
other right, power, remedy or privilege.
C. Miscellaneous.
1. Governing Law. This Note shall be construed in accordance with and
governed by the substantive laws of the State of New Jersey without
reference to conflict of laws principles.
2. Amendment; Waiver. No amendment of this Note, and no waiver of any
one or more of the provisions hereof shall be effective unless set forth
in writing and signed by the Bank and the undersigned.
3. Successors and Assigns. This Note (i) shall be binding upon the
undersigned and the Bank, their respective successors and permitted
assigns, and (ii) shall inure to the benefit of the undersigned and the
Bank and their respective successors and permitted assigns; provided,
however, that none of the undersigned may assign its rights or
obligations hereunder or any interest herein without the prior written
consent of the Bank, and any such assignment or attempted assignment by
any of the undersigned shall be void and of no effect with respect to
the Bank.
4. Severability. The illegality or unenforceability of any provision of
this Note or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Note or any instrument or agreement required
hereunder. In lieu of any illegal or unenforceable provision in this
Note, there shall be added automatically as part of this Note a legal
and enforceable provision as similar in terms to such illegal or
unenforceable provision as may be possible.
5. Judicial Proceeding; Waivers.
(a) THE UNDERSIGNED AGREE THAT ANY SUIT, ACTION OR PROCEEDING, WHETHER
CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY THE BANK OR THE
UNDERSIGNED OR ANY SUCCESSOR OR ASSIGN OF THE BANK OR THE UNDERSIGNED,
ON OR WITH RESPECT TO THIS NOTE OR ANY OTHER CREDIT DOCUMENT OR THE
DEALINGS OF THE PARTIES WITH RESPECT HERETO, OR THERETO, SHALL BE TRIED
ONLY BY A COURT AND NOT BY A JURY.
(b) THE BANK AND THE UNDERSIGNED EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION OR PROCEEDING. FURTHER, THE UNDERSIGNED WAIVE ANY RIGHT IT MAY
HAVE TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
(c) THE UNDERSIGNED ACKNOWLEDGE AND AGREE THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS NOTE AND THAT THE BANK WOULD NOT
EXTEND CREDIT TO THE UNDERSIGNED IF THE WAIVERS SET FORTH IN THIS
SECTION WERE NOT A PART OF THIS NOTE.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered to
the Bank this Note as of the date first above written.
WITNESS/ATTEST: TOTAL-TEL USA COMMUNICATIONS, INC.
By:------------------------ By:-----------------------------
Name: Name:
Title: Title:
Address:------------------------
------------------------
Telecopier:---------------------
WITNESS/ATTEST: TOTAL-TEL, INC.
By:------------------------ By:-----------------------------
Name: Name:
Title: Title:
Address:------------------------
------------------------
Telecopier:---------------------
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:------------------------ By:-----------------------------
Name: Name:
Title: Title:
Address:------------------------
------------------------
Telecopier:---------------------
EXHIBIT D
Notice of Borrowing Under
Revolving Credit
Borrower: ------------------------------------
Date of Borrowing: ---------------------------
Amount Requested: $---------------------------
Interest Rate Basis: Prime/LIBOR
Interest Period: 1/2/3 Month[s]
The Borrower hereby notifies the Bank that it requires a borrowing
("Borrowing") in the form of a Revolving Credit Loan under the Equipment
Facility and Revolving Credit Agreement dated as of August ---, 1996
(together with any amendments or modifications thereto in effect from
time to time, the "Credit Agreement") established for the Borrowers
thereunder in the amount set forth above. The Borrowing will be
deposited in the Borrower's Account No. -----------------------. In
order to induce the Bank to fund such Borrowing, the Borrower hereby
affirms the following:
1. The representations and warranties contained in the Credit Agreement
are correct on and as of the date of this Notice of Borrowing.
2. No Event of Default (as defined in the Credit Agreement), and no
event which, with the giving of notice, passage of time, or both, would
become an Event of Default, has occurred and is continuing.
3. There has been no adverse change in the condition, financial or
otherwise, of any of the Borrowers since the date of the Credit
Agreement.
4. All of the Credit Documents (as defined in the Credit Agreement)
remain in full force and effect.
5. Use of Borrowing will be:
Date: ---------------------, 19
[RELEVANT BORROWER]
By:-------------------------
Name:
Title:
EXHIBIT E
CLOSING CHECKLIST
SUMMIT BANK ( the "Bank")
EQUIPMENT FACILITY AND REVOLVING CREDIT AGREEMENT
with
TOTAL-TEL USA COMMUNICATIONS, INC.
TOTAL-TEL, INC.,
and
TOTAL-TEL USA, INC.
as "Borrowers"
and
TOTAL-TEL SOUTHWEST, INC.
TOTAL-TEL CARRIER SERVICES, INC.
and
TOTAL-TEL SERVICES, INC.
as "Subsidiary Guarantors"
August ----, 1996
1. Equipment Facility and Revolving Credit Agreement
2. Equipment Facility/Term Note
3. Revolving Credit Note
4. Security Agreement of Borrowers and Subsidiary Guarantors
5. UCC-1 Financing Statements against Borrowers and Subsidiary
Guarantors (state and local in NJ, NY and FLA)
6. Guaranty and Suretyship Agreement of Subsidiary Guarantors
7. Guaranty and Suretyship Agreement of Borrowers
8. Certificate of Authority and Incumbency from Secretary of each
Borrower, which shall have attached as exhibits:
a) Certificate of Incorporation
b) By-laws
c) Authorizing Resolution of Board of Directors
9. Certificates of Good Standing for each Borrower in New Jersey
10. Certificates of Qualification to do business as a foreign
corporation in New York and Florida, as appropriate
11. Certificate of Authority from Secretary of each Subsidiary
Guarantor, which shall have attached as exhibits:
a) Certificate of Incorporation
b) By-laws
c) Authorizing Resolution of Board of Directors
d) Shareholders' Consent
12. Certificates of Good Standing for each Subsidiary Guarantor in New
Jersey
13. UCC, Tax Lien and Judgment Searches against each Borrower and
Subsidiary Guarantor in all appropriate jurisdictions
14. Landlord Consent and Waivers for each landlord of premises in which
equipment is located
15. Opinion of Counsel to Borrowers and Subsidiary Guarantors
16. Evidence of Requisite Insurance
17. Currently due financial statements [if any]
18. Reliance letter from Borrowers' certified public accountant
regarding audited annual statements
EXHIBIT F
COMPLIANCE CERTIFICATE OF TOTAL-TEL USA COMMUNICATIONS, INC.
FOR THE FISCAL YEAR ENDING ------------------------ 19 --- OR
FOR THE FISCAL QUARTER ENDING --------------------- 19 ---
This Compliance Certificate, signed by the chief financial officer of
TOTAL-TEL USA COMMUNICATIONS, INC. (the "Company"), is delivered to the
Bank pursuant to Section 7.02 of the Equipment Facility and Revolving
Credit Agreement (the "Credit Agreement") dated as of August ---, 1996.
The undersigned certificates that he/she is authorized to execute this
Compliance Certificate on behalf of the Company and hereby certifies on
behalf of the Company as follows:
(1) all representations and warranties set forth in the Credit Agreement
and in any other Credit Document (as defined in the Credit Agreement)
remain true and correct;
(2) none of the covenants in the Credit Agreement or in any of the other
Credit Documents has been breached;
(3) no event has occurred which, alone, or with the giving of notice or
the passage of time, or both, would constitute an Event of Default under
the Credit Agreement or under any of the other Credit Documents. No
material adverse change has occurred in the financial condition of any
of the Borrowers; and
(4) attached hereto is the computation of the financial covenants set
forth in Sections [ ---, ---, --- and ] of the Credit Agreement,
together with the calculation of each significant component necessary to
determine compliance with such covenants.
The foregoing representations concerning the Company's financial
condition are made to the Bank with the understanding that the Bank will
rely on these representations in making credit decisions with respect to
the Credit Agreement.
TOTAL-TEL USA
COMMUNICATIONS, INC.
By:---------------------------
Name:
Title:
ANNEX I
SUBSIDIARIES OF
TOTAL-TEL USA COMMUNICATIONS, INC.
Total-Tel, Inc.
Total-Tel USA, Inc.
Total-Tel Southeast, Inc.
Total-Tel Carrier Services, Inc.
Total-Tel Services, Inc.
ANNEX I (cont.)
PENDING LITIGATION
ANNEX I (cont.)
EXISTING INDEBTEDNESS
ANNEX I (cont.)
PERMITTED EXISTING LIENS
$10,000,000.00
EQUIPMENT FACILITY AND REVOLVING CREDIT AGREEMENT
By and Between
SUMMIT BANK,
as Bank
and
TOTAL-TEL USA COMMUNICATIONS, INC.,
TOTAL-TEL, INC.,
and
TOTAL-TEL USA, INC.
as Borrowers
Dated as of August -----, 1996
(Original Document Name = 1168)
BORROWER GUARANTY AND SURETYSHIP AGREEMENT
This BORROWER AND SURETYSHIP AGREEMENT, dated as of August --, 1996
(together with all modifications and amendments hereto in effect from
time to time, this Guaranty) is made by TOTAL-TEL USA COMMUNICATIONS,
INC., a -------------- corporation (Total-Tel Comm), TOTAL-TEL, INC., a
- ---------------- corporation, and TOTAL-TEL USA, INC., a ---------------
- ---- corporation (each a Guarantor and collectively the Guarantors), in
favor of SUMMIT BANK, a banking corporation organized under the laws of
the State of New Jersey (the Bank).
BACKGROUND
The Guarantors are the Borrowers, on a joint and several basis, under
and pursuant to that certain Equipment Facility and Revolving Credit
Agreement, dated even date herewith, with the Bank (such agreement,
together with any amendments, modifications, renewal or extensions
thereof, the Credit Agreement) and to induce the Bank to make the credit
accommodations available to each Guarantor thereunder and to make
additional loans, extensions of credit or other financial accommodations
to the Obligors (as defined below) now or in the future, and to further
secure the observance, payment, and performance of the Obligations (as
defined below) by each of the Guarantors and other Obligors, and with
full knowledge that the Bank would not make said loans, extensions of
credit, or financial accommodations without this Guaranty, which shall
be a contract of suretyship, each Guarantor unconditionally, and
intending to be legally bound hereby, agrees as follows:
A. Obligations Guarantied. Each Guarantor, jointly and severally,
hereby guaranties the full, prompt, and unconditional payment of the
Obligations (as defined below), when and as the same shall become due,
whether at the stated maturity date, by acceleration, or otherwise, and
the full, prompt, and unconditional performance of each and every term
and condition of every covenant and agreement to be kept and performed
by any of them and/or to any other Obligor under the Credit Agreement
and each other Credit Document (as defined below). This Guaranty is a
primary obligation of each Guarantor and shall be a continuing
inexhaustible Guaranty without limitation as to amount or duration and
may not be revoked by any Guarantor except by notice in writing by such
Guarantor to the Bank and received by the Bank at least 30 days prior to
the date set for such revocation. No such notice shall affect such
Guarantor's liability under this Guaranty for any loan, extension of
credit, or other financial accommodation made to or committed to be made
to any of them and/or to any other Obligor by the Bank occurring prior
to the effective date of the revocation, regardless of whether such loan
or extension of credit was made before or after notice of revocation.
B. Definitions. As used herein, the following terms shall have the
following meanings:
1. Collateral. The term Collateral means all of the "Collateral" as
such term is defined in that certain Security Agreement of the Guarantor
any Subsidiary Guarantor in favor of the Bank, dated as of even date
herewith (hereinafter, the Security Agreement) and any other property of
any Guarantor, any Subsidiary Guarantor and/or other Obligor, now or
hereafter in the possession of the Bank, in any capacity whatsoever
including, but not limited to, any balance or share of any deposit,
trust or agency account and all property and assets of any Guarantor,
Subsidiary Guarantor and/or other Obligor now or hereafter subject to a
security agreement, pledge, mortgage, assignment or other document or
agreement granting the Bank a security interest therein or lien or
encumbrance thereon.
2. Credit Documents. The term Credit Documents means this Guaranty, the
Credit Agreement, the Security Agreement, each "Credit Document"
referenced therein, and all other credit accommodations, notes, loan
agreements, guarantees, security agreements, mortgages, instruments,
pledge agreements, assignments, acceptance agreements, commitments,
facilities, reimbursement agreements and any other agreements, documents
and instruments, now or hereafter existing, creating, evidencing,
guarantying, securing or relating to any or all of the Obligations,
together with all amendments, modifications, renewals, or extensions
thereof.
3. Obligations. The term Obligations means any and all obligations and
indebtedness of every kind and description of any Guarantor or of any
other Obligor owed to the Bank (including, without limitation, all such
obligations and indebtedness arising under the Credit Agreement and the
other Credit Documents and any amendments, modifications, extensions,
supplements or renewals of any of the foregoing) whether primary or
secondary, direct or indirect, absolute or contingent, sole, joint or
several, secured or unsecured, due or to become due, contractual or
tortious, arising by operation of law or otherwise, or now or hereafter
existing, whether incurred by a Guarantor or any other Obligor as
principal, surety, endorser, guarantor, accommodation party or
otherwise, including, without limitation, principal, interest and fees
including, without limitation, late fees and expenses, including,
without limitation, attorneys' fees and costs and/or allocated fees and
costs of the Bank's in-house legal counsel.
4. Obligor. The term Obligor means each Guarantor, each Subsidiary
Guarantor and each and every maker, endorser, guarantor, and surety of
or for the Obligations.
5. Subsidiary Guarantors. The term Subsidiary Guarantors means,
collectively, Total-Tel Southeast, Inc., Total-Tel Carrier Services,
Inc. and Total-Tel Services, Inc., each a wholly owned subsidiary of
Total-Tel Comm.
C. Representations and Warranties; Covenants. Each Guarantor covenants,
represents and warrants as of the date hereof and at all times hereafter
until the Obligations are fully paid and performed, and any commitments
to make loans, extensions of credit, or other financial accommodations
to any Obligor have been terminated, as follows:
1. Execution of the Guaranty. This Guaranty and any other Credit
Document to which any Guarantor is a party have been duly executed and
delivered to the Bank by each Guarantor. Execution, delivery and
performance of this Guaranty and any other Credit Document to which any
Guarantor is a party will not (i) violate any of such Guarantor's
organizational documents, any provision of law, any order of any court,
agency, or instrumentality of government, or any provision of any
indenture, agreement, or other instrument to which it is a party or by
which it or any of its properties is bound; (ii) result in the creation
or imposition of any lien, charge, or encumbrance of any nature, other
than the liens created by the Credit Documents; or (iii) require any
authorization, consent, approval, license, exemption of, or filing or
registration with, any court or governmental authority.
2. Obligations of the Guarantor. This Guaranty and any other Credit
Document to which any Guarantor is a party are the legal, valid, and
binding obligations of each Guarantor, enforceable against it in
accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, or other laws or equitable
principles relating to or affecting the enforcement of creditors' rights
generally. Each Guarantor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and all
businesses in which it is about to engage, and now owns property having
a value both at fair valuation and at present fair salable value greater
than the amount required to pay its debts. No Guarantor will be
rendered insolvent by the execution and delivery of this Guaranty or any
of the other documents executed in connection with this Guaranty or by
the transactions contemplated hereunder or thereunder. Total-Tel, Inc.
Total-Tel USA, Inc. and the Subsidiary Guarantors are each the wholly
owned subsidiaries of Total-Tel Comm and the business and operations of
such corporations are related and have a common business purpose. To
permit the uninterrupted and continuous operations of such common
economic enterprise, such corporations now require and will from time to
time hereafter require funds for general business purposes.
Accordingly, the proceeds of advances under the Credit Agreement will
provide material direct and indirect benefits to each Guarantor,
regardless of which corporation receives part or all of the proceeds of
such advances.
D. No Limitation of Liability. Without incurring responsibility to any
Guarantor and without impairing or releasing the obligations of any
Guarantor to the Bank, the Bank may, at any time, and from time to time,
without the consent of, or notice to any Guarantor, upon any terms or
conditions, and in whole or in part:
1. Payment Terms. Change the manner, place, or terms of payment, and/or
change or extend the time for payment, or renew or alter, any of the
Obligations, any security therefor or any of the Credit Documents
evidencing same, and the Guaranty herein made shall apply to the
Obligations and the Credit Documents as so changed, extended, renewed,
or altered;
2. Sale of Property. Sell, exchange, release, surrender, realize upon,
or otherwise deal with in any manner and in any order, any property by
whomsoever at any time pledged, mortgaged, or in which a security
interest is given to secure, or howsoever securing, the Obligations;
3. Failure to Exercise Rights. Exercise or refrain from exercising any
rights against any Guarantor or any other Obligor or against any
Collateral for the Obligations or otherwise act or refrain from acting;
4. Settlement of Obligations. Settle or compromise any Obligations,
dispose of any Collateral therefor, with or without consideration, or
settle or compromise any liability incurred directly or indirectly in
respect thereof or hereof, and subordinate the payment of all or any
part thereof to the payment of any Obligations;
5. Application of Funds. Apply any sums by whomsoever paid or howsoever
realized to any Obligations;
6. Release of Obligations. Add, release, settle, modify, or discharge
the obligation of any Obligor or any other party who is in any way
obligated for any of the Obligations;
7. Additional Security. Accept any additional security for the
Obligations in any order deemed appropriate by the Bank; and/or
8. Any Other Action. Take any other action which might constitute or
defense available to, or a discharge of, any Obligor (including any
Guarantor), in respect of the Obligations.
The invalidity, irregularity, or unenforceability of all or any part of
the Obligations or any Credit Document or any agreement or instrument
relating thereto, or the lack of validity, enforceability, perfection,
impairment or loss of any liens or security interests granted in
connection therewith, whether caused by any action or inaction of the
Bank or otherwise, shall not affect, impair, or be a defense to any
Guarantor's obligations under this Guaranty.
E. Waiver of Subrogation. Each Guarantor irrevocably waives any present
or future right to which it is or becomes entitled to be subrogated to
the Bank's rights against any other Guarantor or Obligor or to seek
contribution, reimbursement, indemnification, payment or the like from
any other Guarantor or Obligor on account of this Guaranty or any other
Credit Document. If, notwithstanding such waiver, any funds or property
shall be paid or transferred to a Guarantor on account of such
subrogation, indemnification, or contribution at any time when all of
the Obligations have not been paid in full, such Guarantor shall hold
such funds and/or property in trust for the Bank and shall segregate
such funds and/or property from other funds of such Guarantor and shall
forthwith pay over or deliver to the Bank such funds and/or property for
application by the Bank to the Obligations, whether matured or
unmatured, in accordance with the terms of the Credit Documents.
F. Events of Default and Remedies. The occurrence of an "Event of
Default" under any Credit Document shall constitute an Event of Default
hereunder. Upon and following an Event of Default, the Bank may proceed
to protect and enforce the Bank's rights hereunder and/or under
applicable law by action at law, in equity or other appropriate
proceeding including, without limitation, an action for specific
performance to enforce or aid in the enforcement of any provision
contained herein or in any other Credit Document.
G. Continuation of Guaranty.
1. Settlements. Settlement of any claim by the Bank against any
Guarantor or other Obligor, whether in any proceeding or not, and
whether voluntary or involuntary, shall not reduce the amount due under
the terms of this Guaranty except to the extent of the amount actually
paid by a Guarantor or any other Obligor and legally retained by the
Bank in connection with the settlement.
2. Indemnification Upon Recision. If, after receipt of any payment of
all or any part of the Obligations or the obligations of any Guarantor
to the Bank, the Bank is compelled or agrees, for settlement purposes,
to surrender such payment to any person or entity for any reason
(including, without limitation, a determination that such payment is
void or voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then this Guaranty
and the other Credit Documents shall continue in full force and effect
or be reinstated, as the case may be, and the Guarantors shall be liable
for, and shall indemnify, defend and hold harmless the Bank with respect
to the full amount so surrendered. The provisions of this Section shall
survive the termination of this Guaranty and the other Credit Documents
and shall be and remain effective notwithstanding the payment of the
Obligations, the cancellation of the Guaranty or any other Credit
Document, the release of any security interest, lien or encumbrance
securing the Obligations, the cancellation of the Guaranty or any other
Credit Document or any other action which the Bank may have taken in
reliance upon its receipt of such payment. Any cancellation of the
Guaranty, release of any encumbrance, security interest or lien or other
such action shall be deemed to have been conditioned upon any payment of
the Obligations having become final and irrevocable.
H. Miscellaneous.
1. Notices. Notices and communications under this Guaranty shall be
given in the manner prescribed in the Credit Agreement.
2. Costs, Expenses and Professional Fees. Whether or not the
transactions contemplated by the Credit Documents are fully consummated,
the Guarantors shall promptly pay (or reimburse, as the Bank may elect)
all costs and expenses which the Bank has incurred or may hereafter
incur in connection with the negotiation, preparation, reproduction,
interpretation, perfection, administration and enforcement of this
Guaranty, the collection of all amounts due under this Guaranty, and all
amendments, modifications, consents or waivers, if any, to this
Guaranty. Such costs and expenses shall include, without limitation,
the fees and disbursements of counsel to the Bank (including the Bank's
in-house counsel). The Guarantors' reimbursement obligations under this
Section shall survive any termination of the Credit Documents.
3. Governing Law. This Guaranty shall be construed in accordance with
and governed by the substantive laws of the State of New Jersey without
reference to conflict of laws principles.
4. Integration, Amendment. This Guaranty and the other Credit Documents
constitute the sole agreement of the parties with respect to the subject
matter hereof and thereof and supersede all oral negotiations and prior
writings with respect to the subject matter hereof and thereof. No
amendment of this Guaranty, and no waiver of any one or more of the
provisions hereof shall be effective unless set forth in writing and
signed by each Guarantor and the Bank.
5. Successors and Assigns. This Guaranty (i) shall be binding upon each
Guarantor and the Bank and their respective successors and permitted
assigns, and (ii) shall inure to the benefit of each Guarantor and the
Bank and their respective successors and permitted assigns; provided,
however, that no Guarantor may assign its interests or obligations
hereunder without the prior written consent of the Bank, and any such
assignment or attempted assignment by a Guarantor shall be void and of
no effect with respect to the Bank.
6. Severability and Consistency. The illegality or unenforceability of
any provision of this Guaranty or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Guaranty or any
instrument or agreement required hereunder. The Credit Documents are
intended to be consistent. However, in the event of any inconsistencies
among any of the Credit Documents, such inconsistency shall not affect
the validity or enforceability of each Credit Document. The Guarantors
agree that in the event of any inconsistency or ambiguity in any of the
Credit Documents, the Credit Documents shall not be construed against
any one party but shall be interpreted consistent with the Bank's
policies and procedures.
7. Consent to Jurisdiction and Service of Process. Each Guarantor
irrevocably appoints each and every corporate officer of such Guarantor
as its attorneys upon whom may be served, by regular or certified mail
at the address set forth in this Guaranty, any notice, process or
pleading in any action or proceeding against it arising out of or in
connection with this Guaranty or any of the other Credit Documents.
Each Guarantor hereby consents that any action or proceeding against it
may be commenced and maintained in any court within the State of New
Jersey or in the United States District Court for the District of New
Jersey by service of process on any such officer. Each Guarantor
further agrees that such courts of the State of New Jersey and the
United States District Court for the District of New Jersey shall have
jurisdiction with respect to the subject matter hereof and the person of
such Guarantor and all Collateral for the Obligations. Notwithstanding
the foregoing, each Guarantor agrees that any action brought by such
Guarantor shall be commenced and maintained only in a court in the
federal judicial district or county in which the Bank has its principal
place of business in New Jersey.
8. Headings. The headings of sections and paragraphs have been included
herein for convenience only and shall not be considered in interpreting
this Guaranty.
9. Judicial Proceeding; Waivers.
a. EACH PARTY TO THIS GUARANTY AGREES THAT ANY SUIT, ACTION OR
PROCEEDING WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY ANY
PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY PARTY, ON OR WITH RESPECT
TO THIS GUARANTY OR ANY OF THE OTHER CREDIT DOCUMENTS OR THE DEALINGS OF
THE PARTIES WITH RESPECT HERETO, OR THERETO, SHALL BE TRIED ONLY BY A
COURT AND NOT BY A JURY.
b. EACH GUARANTOR AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION OR PROCEEDING. FURTHER, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
c. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS GUARANTY AND THAT THE BANK WOULD
NOT EXTEND CREDIT TO ANY GUARANTOR OR OTHER OBLIGOR IF THE WAIVERS SET
FORTH IN THIS SECTION WERE NOT A PART OF THIS GUARANTY. EACH GUARANTOR
HEREBY WAIVES PRESENTMENT, NOTICE OF DISHONOR AND PROTEST OF ALL
INSTRUMENTS INCLUDED IN OR EVIDENCING THE OBLIGATIONS OR THE COLLATERAL,
IF ANY, AND ALL OTHER NOTICES AND DEMANDS WHATSOEVER, WHETHER OR NOT
RELATING TO SUCH INSTRUMENTS.
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered
to the Bank by each Guarantor on the day and year first above written.
TOTAL-TEL USA COMMUNICATIONS, INC.
WITNESS OR ATTEST:
By:--------------------------- By:------------------------------
Name: Name:
Title: Title:
TOTAL-TEL, INC.
WITNESS OR ATTEST:
By:--------------------------- By:------------------------------
Name: Name:
Title: Title:
TOTAL-TEL USA, INC.
WITNESS OR ATTEST:
By:--------------------------- By:------------------------------
Name: Name:
Title: Title:
ACKNOWLEDGED AND ACCEPTED BY:
SUMMIT BANK
By:------------------------
Name:
Title:
(Original Document Name = 1169)
SUBSIDIARY GUARANTY AND SURETYSHIP AGREEMENT
This SUBSIDIARY GUARANTY AND SURETYSHIP AGREEMENT, dated as of August --
, 1996 (together with all modifications and amendments hereto in effect
from time to time, this Guaranty) is made by TOTAL-TEL SOUTHEAST, INC.,
a corporation, TOTAL-TEL CARRIER SERVICES, INC., a corporation and
TOTAL-TEL SERVICES, INC., a corporation (each a Guarantor and
collectively the Guarantors), in favor of SUMMIT BANK, a banking
corporation organized under the laws of the State of New Jersey (the
Bank).
BACKGROUND
To induce the Bank to make loans, extensions of credit or other
financial accommodations to TOTAL-TEL USA COMMUNICATIONS, INC. (Total-
Tel Comm), TOTAL-TEL, INC. and TOTAL-TEL USA, INC. (each a Borrower and
collectively the Borrowers), (including, without limitation, any such
credit accommodation provided pursuant to that certain Equipment
Facility and Revolving Credit Agreement, dated even date herewith, by
and among the Borrowers and the Bank, such agreement, together with any
amendments, modifications, renewal or extensions thereof, the Credit
Agreement) now or in the future, to secure the observance, payment, and
performance of the Obligations (as defined below) and with full
knowledge that the Bank would not make said loans, extensions of credit,
or financial accommodations without this Guaranty which shall be a
contract of suretyship, each Guarantor unconditionally, and intending to
be legally bound hereby, agrees as follows:
A. Obligations Guarantied. Each Guarantor, jointly and severally, hereby
guaranties the full, prompt, and unconditional payment of the
Obligations (as defined below), when and as the same shall become due,
whether at the stated maturity date, by acceleration, or otherwise, and
the full, prompt, and unconditional performance of each and every term
and condition of every covenant and agreement to be kept and performed
by any Borrower and any other Obligor under the Credit Agreement and
each other Credit Document (as defined below). This Guaranty is a
primary obligation of each Guarantor and shall be a continuing
inexhaustible Guaranty without limitation as to amount or duration and
may not be revoked by any Guarantor except by notice in writing by such
Guarantor to the Bank and received by the Bank at least 30 days prior to
the date set for such revocation. No such notice shall affect such
Guarantor's liability under this Guaranty for any loan, extension of
credit, or other financial accommodation made to or committed to be made
to any Borrower or any other Obligor by the Bank occurring prior to the
effective date of the revocation, regardless of whether such loan or
extension of credit was made before or after notice of revocation.
B. Definitions. As used herein, the following terms shall have the
following meanings:
1. Collateral. The term Collateral means all of the "Collateral" (as
such term is defined in that certain Security Agreement of the Borrowers
and Guarantors in favor of the Bank, dated as of even date herewith
hereinafter, the Security Agreement) and any other property of any
Borrower, Guarantor and/or other Obligor, now or hereafter in the
possession of the Bank, in any capacity whatsoever including, but not
limited to, any balance or share of any deposit, trust or agency account
and all property and assets of any Borrower, Guarantor and/or other
Obligor now or hereafter subject to a security agreement, pledge,
mortgage, assignment or other document or agreement granting the Bank a
security interest therein or lien or encumbrance thereon.
2. Credit Documents. The term Credit Documents means this Guaranty, the
Credit Agreement, the Security Agreement, each "Credit Document"
referenced therein, and all other credit accommodations, notes, loan
agreements, guarantees, security agreements, mortgages, instruments,
pledge agreements, assignments, acceptance agreements, commitments,
facilities, reimbursement agreements and any other agreements, documents
and instruments, now or hereafter existing, creating, evidencing,
guarantying, securing or relating to any or all of the Obligations,
together with all amendments, modifications, renewals, or extensions
thereof.
3. Obligations. The term Obligations means any and all obligations and
indebtedness of every kind and description of any Borrower or of any
other Obligor owed to the Bank (including, without limitation, all such
obligations and indebtedness arising under the Credit Agreement and the
other Credit Documents and any amendments, modifications, extensions,
supplements or renewals of any of the foregoing) whether primary or
secondary, direct or indirect, absolute or contingent, sole, joint or
several, secured or unsecured, due or to become due, contractual or
tortious, arising by operation of law or otherwise, or now or hereafter
existing, whether incurred by a Borrower or any other Obligor as
principal, surety, endorser, guarantor, accommodation party or
otherwise, including, without limitation, principal, interest and fees
including, without limitation, late fees and expenses, including,
without limitation, attorneys' fees and costs and/or allocated fees and
costs of the Bank's in-house legal counsel.
4. Obligor. The term Obligor means each Borrower and each and every
maker, endorser, guarantor, and surety, including, without limitation,
each Guarantor, of or for the Obligations.
C. Representations and Warranties; Covenants. Each Guarantor covenants,
represents and warrants as of the date hereof and at all times hereafter
until the Obligations are fully paid and performed, and any commitments
to make loans, extensions of credit, or other financial accommodations
to any Borrower have been terminated, as follows:
1. Organization, Powers, etc. Each Guarantor is duly organized, validly
existing and in good standing under the laws of the State of its
organization. Each Guarantor is authorized to do business in every
jurisdiction wherein its ownership of property or conduct of business
legally requires such authorization; has the power and authority to own
its properties and assets and to carry on its business as it is now
being conducted and as now contemplated; and has the power and authority
to execute, deliver and perform all of its obligations under this
Guaranty and any other Credit Document to which it is a party.
2. Execution of the Guaranty. This Guaranty and any other Credit
Document to which any Guarantor is a party have been duly executed and
delivered to the Bank by each Guarantor. Execution, delivery and
performance of this Guaranty and any other Credit Document to which any
Guarantor is a party will not (i) violate any of such Guarantor's
organizational documents, any provision of law, any order of any court,
agency, or instrumentality of government, or any provision of any
indenture, agreement, or other instrument to which it is a party or by
which it or any of its properties is bound; (ii) result in the creation
or imposition of any lien, charge, or encumbrance of any nature, other
than the liens created by the Credit Documents; or (iii) require any
authorization, consent, approval, license, exemption of, or filing or
registration with, any court or governmental authority.
3. Obligations of the Guarantor. This Guaranty and any other Credit
Document to which any Guarantor is a party are the legal, valid, and
binding obligations of each Guarantor, enforceable against it in
accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, or other laws or equitable
principles relating to or affecting the enforcement of creditors' rights
generally. Each Guarantor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and all
businesses in which it is about to engage, and now owns property having
a value both at fair valuation and at present fair salable value greater
than the amount required to pay its debts. No Guarantor will be rendered
insolvent by the execution and delivery of this Guaranty or any of the
other documents executed in connection with this Guaranty or by the
transactions contemplated hereunder or thereunder. Each Guarantor is the
wholly owned subsidiary of Total-Tel Comm and the business and
operations of the Guarantors and the Borrowers are related and have a
common business purpose. To permit the uninterrupted and continuous
operations of such common economic enterprise, such corporations now
require and will from time to time hereafter require funds for general
business purposes. Accordingly, the proceeds of advances under the
Credit Agreement will provide material direct and indirect benefits to
each Guarantor, regardless of which corporation receives part or all of
the proceeds of such advances.
4. Books and Records. Each Guarantor shall keep and maintain complete
and accurate books and records in accordance with generally accepted
accounting principles (GAAP) consistently applied, reflecting all of its
financial affairs. Each Guarantor shall permit representatives of the
Bank to examine and audit such Guarantor's books and records and to
inspect its facilities and properties at reasonable times and upon
reasonable notice. Each Guarantor shall promptly notify the Bank of any
Event of Default, adverse litigation and/or a material adverse change in
its financial condition.
5. Taxes and Other Charges. Each Guarantor shall prepare and timely file
all federal, state and local tax returns required to be filed by it and
shall submit to the Bank a copy of its federal tax return within fifteen
(15) day after filing same with the Internal Revenue Service.
6. Obligations under Loan Agreement. Each Guarantor represents and
warrants that it has received and has had an opportunity to review the
Credit Agreement and each of the Credit Documents executed in connection
therewith. Each Guarantor covenants and agrees that it shall perform and
observe all of the terms, covenants and agreements set forth in the
Credit Agreement on its part to be performed or observed or that the
Borrower has agreed to cause the Guarantors to perform or observe.
D. No Limitation of Liability. Without incurring responsibility to any
Guarantor and without impairing or releasing the obligations of any
Guarantor to the Bank, the Bank may, at any time, and from time to time,
without the consent of, or notice to any Guarantor, upon any terms or
conditions, and in whole or in part:
1. Payment Terms. Change the manner, place, or terms of payment, and/or
change or extend the time for payment, or renew or alter, any of the
Obligations, any security therefor or any of the Credit Documents
evidencing same, and the Guaranty herein made shall apply to the
Obligations and the Credit Documents as so changed, extended, renewed,
or altered;
2. Sale of Property. Sell, exchange, release, surrender, realize upon,
or otherwise deal with in any manner and in any order, any property by
whomsoever at any time pledged, mortgaged, or in which a security
interest is given to secure, or howsoever securing, the Obligations;
3. Failure to Exercise Rights. Exercise or refrain from exercising any
rights against any Borrower or any other Obligor (including any
Guarantor) or against any Collateral for the Obligations or otherwise
act or refrain from acting;
4. Settlement of Obligations. Settle or compromise any Obligations,
dispose of any Collateral therefor, with or without consideration, or
settle or compromise any liability incurred directly or indirectly in
respect thereof or hereof, and subordinate the payment of all or any
part thereof to the payment of any Obligations;
5. Application of Funds. Apply any sums by whomsoever paid or howsoever
realized to any Obligations;
6. Release of Obligations. Add, release, settle, modify, or discharge
the obligation of any Obligor or any other party who is in any way
obligated for any of the Obligations;
7. Additional Security. Accept any additional security for the
Obligations in any order deemed appropriate by the Bank; and/or
8. Any Other Action. Take any other action which might constitute or
defense available to, or a discharge of, any Borrower or any other
Obligor (including any Guarantor), in respect of the Obligations.
The invalidity, irregularity, or unenforceability of all or any part of
the Obligations or any Credit Document or any agreement or instrument
relating thereto, or the lack of validity, enforceability, perfection,
impairment or loss of any liens or security interests granted in
connection therewith, whether caused by any action or inaction of the
Bank or otherwise, shall not affect, impair, or be a defense to any
Guarantor's obligations under this Guaranty.
E. Waiver of Subrogation. Each Guarantor irrevocably waives any present
or future right to which it is or becomes entitled to be subrogated to
the Bank's rights against any Borrower or any other Obligor or to seek
contribution, reimbursement, indemnification, payment or the like from
any Borrower or any other Obligor on account of this Guaranty or any
other Credit Document. If, notwithstanding such waiver, any funds or
property shall be paid or transferred to a Guarantor on account of such
subrogation, indemnification, or contribution at any time when all of
the Obligations have not been paid in full, such Guarantor shall hold
such funds and/or property in trust for the Bank and shall segregate
such funds and/or property from other funds of such Guarantor and shall
forthwith pay over or deliver to the Bank such funds and/or property for
application by the Bank to the Obligations, whether matured or
unmatured, in accordance with the terms of the Credit Documents.
F. Events of Default. The occurrence of an "Event of Default" under any
Credit Document shall constitute an Event of Default hereunder.
G. Remedies.
1. Acceleration of Obligations; Default Rate; Other Remedies. Upon and
following an Event of Default (other than the commencement by any
Obligor of any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under the United States Bankruptcy Code or under any
similar foreign, federal, state, or local statute, or any dissolution or
liquidation proceeding, or the making by any Obligor of a general
assignment for the benefit of creditors, or the taking of any action for
the purpose of effecting any of the foregoing, or the involuntary
commencement against any Obligor of any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under the United States
Bankruptcy Code or under any similar foreign, federal, state or local
statute, or any dissolution or liquidation proceeding against or in
respect of any Obligor or the entry of an order for relief in any such
proceeding (herein referred to as a Bankruptcy Event)) at the Bank's
option, all Obligations shall immediately become due and payable in
full, all without protest, presentment, demand or further notice of any
kind to any Guarantor or other Obligor, all of which are expressly
waived. Upon and following a Bankruptcy Event, immediately and
automatically, all Obligations shall become due and payable in full, all
without protest, presentment, demand or further notice of any kind to
any Guarantor or any other Obligor, all of which are expressly waived.
Upon and following an Event of Default, the Bank may, at its option,
exercise any and all rights and remedies it has under this Guaranty, any
other Credit Document and/or applicable law, including, without
limitation, the right to charge and collect interest on the principal
portion of the Obligations at a rate equal to the lesser of: (i) the
highest rate of interest set forth in the Credit Documents, or (ii) the
highest rate of interest allowed by law, such rate of interest to apply
to the Obligations, at the Bank's option, after an Event of Default,
maturity, whether by acceleration or otherwise, and after the entry of a
judgment in favor of the Bank with respect to any or all of the
Obligations. Upon and following an Event of Default, the Bank may
proceed to protect and enforce the Bank's rights hereunder and/or under
applicable law by action at law, in equity or other appropriate
proceeding including, without limitation, an action for specific
performance to enforce or aid in the enforcement of any provision
contained herein or in any other Credit Document.
2. Right of Set-off. If any of the Obligations shall be due and payable
or any one or more Events of Default shall have occurred, whether or not
the Bank shall have made any demand under this Guaranty, and regardless
of the adequacy of any Collateral for the Obligations or other means of
obtaining repayment of the Obligations, the Bank shall have the right,
without notice to any Guarantor or to any other Obligor, and is
specifically authorized hereby to apply toward and set-off against and
apply to the then unpaid balance of the Obligations any items or funds
of any Guarantor held by the Bank, any and all deposits (whether general
or special, time or demand, matured or unmatured) or any other property
of any Guarantor, including, without limitation, securities and/or
certificates of deposit, now or hereafter maintained by any Guarantor
for its own account with the Bank, and any other indebtedness at any
time held or owing by the Bank to or for the credit or the account of
any Guarantor, even if effecting such set-off results in a loss or
reduction of interest or the imposition of a penalty applicable to the
early withdrawal of time deposits. For such purpose, the Bank shall
have, and each Guarantor hereby grants to the Bank, a first lien on and
security interest in such deposits, property, funds and accounts and the
proceeds thereof.
3. Remedies Cumulative; No Waiver. The rights, powers, remedies and
privileges of the Bank provided in this Guaranty and the other Credit
Documents are cumulative and not exclusive of any right, power, remedy
or privilege provided by law or equity. No failure or delay on the part
of the Bank in the exercise of any right, power, remedy or privilege
shall operate as a waiver thereof, nor shall any single or partial
exercise preclude any other or further exercise thereof, or the exercise
of any other right, power, remedy or privilege. The liabilities of the
Guarantors hereunder shall be joint and several and the Bank may, in its
sole and absolute discretion, enforce any such liability against any
Guarantor or all of the Guarantors without affecting or impairing the
enforcement of the liabilities hereunder against any other Guarantor or
all Guarantors, as the case may be.
H. Continuation of Guaranty.
1. Settlements. Settlement of any claim by the Bank against any
Borrower, whether in any proceeding or not, and whether voluntary or
involuntary, shall not reduce the amount due under the terms of this
Guaranty except to the extent of the amount actually paid by a Borrower
or any other Obligor and legally retained by the Bank in connection with
the settlement.
2. Indemnification Upon Recision. If, after receipt of any payment of
all or any part of the Obligations or the obligations of any Guarantor
to the Bank, the Bank is compelled or agrees, for settlement purposes,
to surrender such payment to any person or entity for any reason
(including, without limitation, a determination that such payment is
void or voidable as a preference or fraudulent conveyance, an
impermissible setoff, or a diversion of trust funds), then this Guaranty
and the other Credit Documents shall continue in full force and effect
or be reinstated, as the case may be, and the Guarantors shall be liable
for, and shall indemnify, defend and hold harmless the Bank with respect
to the full amount so surrendered. The provisions of this Section shall
survive the termination of this Guaranty and the other Credit Documents
and shall be and remain effective notwithstanding the payment of the
Obligations, the cancellation of the Guaranty or any other Credit
Document, the release of any security interest, lien or encumbrance
securing the Obligations, the cancellation of the Guaranty or any other
Credit Document or any other action which the Bank may have taken in
reliance upon its receipt of such payment. Any cancellation of the
Guaranty, release of any encumbrance, security interest or lien or other
such action shall be deemed to have been conditioned upon any payment of
the Obligations having become final and irrevocable.
I. Miscellaneous.
1. Notices. Notices and communications under this Guaranty shall be in
writing and shall be given by either (i) hand-delivery, (ii) first class
mail (postage prepaid), (iii) reliable overnight commercial courier
(charges prepaid), or (iv) telecopy, to the addresses and telecopy
numbers set forth in this Guaranty. Notice given by telecopy shall be
deemed to have been given and received when sent. Notice by overnight
courier shall be deemed to have been given and received on the date
scheduled for delivery. Notice by mail shall be deemed to have been
given and received 3 calendar days after the date first deposited in the
United States Mail. Notice by hand delivery shall be deemed to have been
given and received upon delivery. A party may change its address and/or
telecopier number by giving written notice to the other party as
specified herein.
2. Costs, Expenses and Professional Fees. Whether or not the
transactions contemplated by the Credit Documents are fully consummated,
the Guarantors shall promptly pay (or reimburse, as the Bank may elect)
all costs and expenses which the Bank has incurred or may hereafter
incur in connection with the negotiation, preparation, reproduction,
interpretation, perfection, administration and enforcement of this
Guaranty, the collection of all amounts due under this Guaranty, and all
amendments, modifications, consents or waivers, if any, to this
Guaranty. Such costs and expenses shall include, without limitation, the
fees and disbursements of counsel to the Bank (including the Bank's in-
house counsel). The Guarantors' reimbursement obligations under this
Section shall survive any termination of the Credit Documents.
3. Governing Law. This Guaranty shall be construed in accordance with
and governed by the substantive laws of the State of New Jersey without
reference to conflict of laws principles.
4. Integration, Amendment. This Guaranty and the other Credit Documents
constitute the sole agreement of the parties with respect to the subject
matter hereof and thereof and supersede all oral negotiations and prior
writings with respect to the subject matter hereof and thereof. No
amendment of this Guaranty, and no waiver of any one or more of the
provisions hereof shall be effective unless set forth in writing and
signed by each Guarantor and the Bank.
5. Successors and Assigns. This Guaranty (i) shall be binding upon each
Guarantor and the Bank and their respective successors and permitted
assigns, and (ii) shall inure to the benefit of each Guarantor and the
Bank and their respective successors and permitted assigns; provided,
however, that no Guarantor may assign its interests or obligations
hereunder without the prior written consent of the Bank, and any such
assignment or attempted assignment by a Guarantor shall be void and of
no effect with respect to the Bank.
6. Sale, Assignment or Participations. The Bank may from time to time
sell or assign, in whole or in part, or grant participations in some or
all of the Credit Documents and/or the obligations evidenced thereby.
The holder of any such sale, assignment or participation, if the
applicable agreement between the Bank and such holder so provides, (i)
shall be entitled to all of the rights, obligations and benefits of the
Bank and (ii) shall be deemed to hold and may exercise the rights of
set-off or banker's lien with respect to any and all obligations of such
holder against any Guarantor, in each case as fully as though each such
Guarantor were directly indebted to such holder. The Bank may, in its
sole discretion, give notice to the Guarantors of such sale, assignment
or participation; however, the failure to give such notice shall not
affect any of the Bank's or such holder's rights hereunder. Each
Guarantor authorizes the Bank to provide information concerning such
Guarantor to any prospective purchaser, assignee or participant.
7. Severability and Consistency. The illegality or unenforceability of
any provision of this Guaranty or any instrument or agreement required
hereunder shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Guaranty or any
instrument or agreement required hereunder. The Credit Documents are
intended to be consistent. However, in the event of any inconsistencies
among any of the Credit Documents, such inconsistency shall not affect
the validity or enforceability of each Credit Document. The Guarantors
agree that in the event of any inconsistency or ambiguity in any of the
Credit Documents, the Credit Documents shall not be construed against
any one party but shall be interpreted consistent with the Bank's
policies and procedures.
8. Consent to Jurisdiction and Service of Process. Each Guarantor
irrevocably appoints each and every corporate officer of such Guarantor
as its attorneys upon whom may be served, by regular or certified mail
at the address set forth in this Guaranty, any notice, process or
pleading in any action or proceeding against it arising out of or in
connection with this Guaranty or any of the other Credit Documents. Each
Guarantor hereby consents that any action or proceeding against it may
be commenced and maintained in any court within the State of New Jersey
or in the United States District Court for the District of New Jersey by
service of process on any such officer. Each Guarantor further agrees
that such courts of the State of New Jersey and the United States
District Court for the District of New Jersey shall have jurisdiction
with respect to the subject matter hereof and the person of such
Guarantor and all Collateral for the Obligations. Notwithstanding the
foregoing, each Guarantor agrees that any action brought by such
Guarantor shall be commenced and maintained only in a court in the
federal judicial district or county in which the Bank has its principal
place of business in New Jersey.
9. Headings. The headings of sections and paragraphs have been included
herein for convenience only and shall not be considered in interpreting
this Guaranty.
10. Judicial Proceeding; Waivers.
a. EACH PARTY TO THIS GUARANTY AGREES THAT ANY SUIT, ACTION OR
PROCEEDING WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY ANY
PARTY HERETO OR ANY SUCCESSOR OR ASSIGN OF ANY PARTY, ON OR WITH RESPECT
TO THIS GUARANTY OR ANY OF THE OTHER CREDIT DOCUMENTS OR THE DEALINGS OF
THE PARTIES WITH RESPECT HERETO, OR THERETO, SHALL BE TRIED ONLY BY A
COURT AND NOT BY A JURY.
b. EACH GUARANTOR AND THE BANK HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUCH SUIT,
ACTION OR PROCEEDING. FURTHER, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES.
c. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT THIS SECTION IS A
SPECIFIC AND MATERIAL ASPECT OF THIS GUARANTY AND THAT THE BANK WOULD
NOT EXTEND CREDIT TO ANY BORROWER OR OTHER OBLIGOR IF THE WAIVERS SET
FORTH IN THIS SECTION WERE NOT A PART OF THIS GUARANTY. EACH GUARANTOR
HEREBY WAIVES PRESENTMENT, NOTICE OF DISHONOR AND PROTEST OF ALL
INSTRUMENTS INCLUDED IN OR EVIDENCING THE OBLIGATIONS OR THE COLLATERAL,
IF ANY, AND ALL OTHER NOTICES AND DEMANDS WHATSOEVER, WHETHER OR NOT
RELATING TO SUCH INSTRUMENTS.
IN WITNESS WHEREOF, this Guaranty has been duly executed and delivered
to the Bank by each Guarantor on the day and year first above written.
TOTAL-TEL SOUTHEAST, INC.
WITNESS OR ATTEST:
By:--------------------------- By:------------------------------
Name: Name:
Title: Title:
Address:----------------------
----------------------
----------------------
Telecopier:-------------------
TOTAL-TEL CARRIER SERVICES, INC.
WITNESS OR ATTEST:
By:--------------------------- By:------------------------------
Name: Name:
Title: Title:
Address:----------------------
----------------------
----------------------
Telecopier:-------------------
TOTAL-TEL SERVICES, INC.
WITNESS OR ATTEST:
By:--------------------------- By:------------------------------
Name: Name:
Title: Title:
Address:----------------------
----------------------
----------------------
Telecopier:-------------------
ACKNOWLEDGED AND ACCEPTED BY:
SUMMIT BANK
By:------------------------
Name:
Title:
Address:-----------------
-----------------
-----------------
Telecopier:--------------
Total-Tel USA
Communications, Inc.
and Subsidiaries
Consolidated Financial Statements for the
Years Ended January 31, 1997, 1996 and 1995, and
Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Total-Tel USA Communications, Inc.
Little Falls, New Jersey
We have audited the accompanying consolidated balance sheets of Total-
Tel USA Communications, Inc. and subsidiaries as of January 31, 1997 and
1996, and the related consolidated statements of earnings, shareholders'
equity, and cash flows for each of the three years in the period ended
January 31, 1997. Our audits also included the financial statement
schedule listed in the index at item 14(a)(2). These financial
statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule 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 financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Total-Tel USA
Communications, Inc. and subsidiaries as of January 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the
three years in the period ended January 31, 1997 in conformity with
generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in
all material respects the information set forth therein.
Deloitte & Touche LLP
New York, NY
April 24, 1997
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1997 AND 1996
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $2,589,187 $3,177,138
Investments available for sale 1,010,594 966,935
Trade accounts receivable (net of allowance for doubtful accounts
of $1,053,670 and $831,538 in 1997 and 1996, respectively) 13,933,652 8,741,918
Notes receivable 163,706 27,000
Deferred income taxes 263,600 314,600
Prepaid expenses and other current assets 583,223 392,974
----------- -----------
Total current assets 18,543,962 13,620,565
----------- -----------
PROPERTY AND EQUIPMENT, NET 11,065,689 6,011,005
----------- -----------
OTHER ASSETS:
Notes receivable 86,383 90,281
Deferred line installation costs (net of accumulated amortization
of $283,801 and $796,170 in 1997 and 1996, respectively) 281,392 247,019
Other assets 516,635 426,164
----------- -----------
Total other assets 884,410 763,464
----------- -----------
$30,494,061 $20,395,034
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $10,222,260 $6,604,459
Other current and accrued liabilities 2,222,141 1,775,256
Salaries and wages payable 613,477 441,516
----------- -----------
Total current liabilities 13,057,878 8,821,231
----------- -----------
OTHER LONG-TERM LIABILITIES 259,220 313,742
----------- -----------
LONG-TERM DEBT 2,940,000 --
----------- -----------
DEFERRED INCOME TAXES 850,301 560,481
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note G)
SHAREHOLDERS' EQUITY:
Common stock, par value $.05 per share; authorized 20,000,000 and
5,000,000 shares in 1997 and 1996, respectively, issued
3,755,840 and 3,737,612 shares in 1997 and 1996, respectively 187,792 93,440
Additional paid-in capital 3,572,026 3,600,105
Retained earnings 11,178,467 8,590,329
----------- -----------
14,938,285 12,283,874
Treasury stock - at cost - 810,510 shares (1,547,251) (1,547,251)
Receivable from shareholder (100,000) (100,000)
Unrealized gain on available for sale securities 95,628 62,957
----------- -----------
Total shareholders' equity 13,386,662 10,699,580
----------- -----------
$30,494,061 $20,395,034
=========== ===========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JANUARY 31, 1997, 1996 and 1995
1997 1996 1995
<S> <C> <C> <C>
NET SALES $89,325,921 $49,873,477 $29,816,632
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 66,829,283 34,854,000 20,852,638
Selling, general and administrative 18,361,053 12,710,495 7,410,758
----------- ----------- -----------
Total costs and expenses 85,190,336 47,564,495 28,263,396
----------- ----------- -----------
OPERATING INCOME 4,135,585 2,308,982 1,553,236
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 141,181 166,170 146,465
Gain on sale of real estate -- -- 48,570
Other income 50,920 36,091 50,353
Interest expense (68,348) (3,854) (3,112)
----------- ----------- -----------
Total other income 123,753 198,407 242,276
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES 4,259,338 2,507,389 1,795,512
INCOME TAX PROVISION 1,671,200 952,800 695,982
----------- ----------- -----------
NET EARNINGS $2,588,138 $1,554,589 $1,099,530
=========== =========== ===========
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $0.75 $0.47 $0.34
===== ===== =====
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Unrealized
Gain (Loss)
Additional Receivable Available
Common Paid-In Retained Treasury From for Sale
Stock Capital Earnings Stock Shareholder Securities Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 31, 1994 $86,088 $1,371,632 $8,143,777 ($1,584,687) ($100,000) $ -- $7,916,810
Unrealized gain on available for sale
securities at February 1, 1995 -- -- -- -- -- 70,211 70,211
Unrealized loss on available for
sale securities -- -- -- -- -- (43,034) (43,034)
Exercise of employee stock options 562 48,715 -- -- -- -- 49,277
Common stock dividend 6,590 2,200,977 (2,207,567) -- -- -- --
Net earnings -- -- 1,099,530 -- -- -- 1,099,530
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT JANUARY 31, 1995 93,240 3,621,324 7,035,740 (1,584,687) (100,000) 27,177 9,092,794
Unrealized gain on available for
sale securities -- -- -- -- -- 35,780 35,780
Exercise of employee stock option 200 15,727 -- -- -- 15,927
Issuance of employee stock grants -- (36,946) -- 37,436 -- -- 490
Net earnings -- -- 1,554,589 -- -- -- 1,554,589
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT JANUARY 31, 1996 93,440 3,600,105 8,590,329 (1,547,251) (100,000) 62,957 10,699,580
Unrealized gain on available for
sale securities -- -- -- -- -- 32,671 32,671
Exercise of employee stock options 681 65,592 -- -- -- -- 66,273
Stock split 93,671 (93,671) -- -- -- -- --
Net earnings -- -- 2,588,138 -- -- -- 2,588,138
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE AT JANUARY 31, 1997 $187,792 $3,572,026 $11,178,467 ($1,547,251) ($100,000) $95,628 $13,386,662
=========== =========== =========== =========== =========== =========== ===========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1997, 1996 AND 1995
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $2,588,138 $1,554,589 $1,099,530
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 1,381,931 1,026,102 663,149
Provision for doubtful accounts 950,495 820,131 391,656
Noncash compensation expense 57,219 68,815 49,602
Gain on sale of real estate -- -- (48,570)
Deferred income taxes 340,820 139,800 53,000
Change in assets and liabilities:
(Increase) decrease in assets:
Trade accounts receivable (6,142,229) (3,622,415) (3,217,529)
Prepaid expenses and other current assets (190,249) 27,335 (22,296)
Other assets (90,471) (53,499) 11,416
Increase (decrease) in liabilities:
Accounts payable 3,617,801 2,483,618 1,874,974
Other current and accrued liabilities and
salaries and wages payable 561,627 738,956 659,873
Other long-term liabilities (54,522) 202,928 110,814
------------ ------------ ------------
Net cash provided by operating activities 3,020,560 3,386,360 1,625,619
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes receivable -- 628,792 125,447
Proceeds from sales and maturities of short-term
investments available for sale 973,141 1,600,963 1,705,893
Purchase of investments available for sale (984,129) (581,517) (1,147,416)
Purchases of property and equipment (6,397,259) (3,027,719) (2,268,339)
Proceeds from sale of fixed assets 53,759 -- --
Payments for deferred line installation costs (127,488) (111,283) (111,327)
Issuance of notes to employees (136,706) (115,000) (50,000)
Collection on notes receivable from employees 3,898 32,500 50,000
------------ ------------ ------------
Net cash used in investing activities (6,614,784) (1,573,264) (1,695,742)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised 66,273 15,927 49,277
Bank borrowings 2,000,000 -- --
Additional borrowings 940,000 490 --
------------ ------------ ------------
Net cash provided by financing activities 3,006,273 16,417 49,277
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (587,951) 1,829,513 (20,846)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 3,177,138 1,347,625 1,368,471
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $2,589,187 $3,177,138 $1,347,625
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $64,761 $3,854 $3,112
Income taxes $1,511,149 $560,000 $573,000
NONCASH ITEMS:
Unrealized gain on available for sale securities $32,671 $35,780 $27,177
Fair market value of stock dividend, 131,795 shares
granted at $16.75 per share $ -- $ -- $2,207,567
See notes to consolidated financial statements.
</TABLE>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF OPERATIONS
Total-Tel USA Communications, Inc. ("Total-Tel") with its wholly-owned
subsidiaries Total-Tel, Inc. Total-Tel USA, Inc., Total-Tel Southeast
Inc., Total-Tel Carrier Services, Inc., Total-Tel Sarasota, Inc., and
Total-Tel Services (collectively, the "Company") operates as a switch
based resale common carrier providing twenty-four hour, seven day a
week, domestic and international long distance telecommunications
service to customers throughout the United States. The Company's
principal customers are primarily businesses and more recently other
common carriers.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements
include the accounts of Total-Tel USA Communications, Inc. and its
subsidiaries, all of which are wholly-owned. All intercompany
transactions and balances have been eliminated in the consolidated
financial statements.
Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization is being provided by use of the straight-
line method over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the shorter of the term of the
lease or the useful lives of the asset.
The estimated useful lives of the principal classes of assets are as
follows:
Classification Years
Machinery and equipment 5 - 10
Office furniture, fixtures and equipment 7 - 10
Vehicles 3 - 5
Leasehold improvements 2 - 10
Computer equipment and software 5 - 7
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." Based on the provisions of the
statement, the Company determined that no provision for impairment of
the carrying cost of its machinery and equipment, or other long-lived
assets, was necessary.
Deferred Line Installation Costs - The Company defers charges from other
common carriers which cover the cost of installing telephone
transmission facilities (lines). Amortization of these costs is provided
using the straight-line method over the estimated life (five years) of
the lines.
Use of Estimates - The Company's financial statements include the use of
estimates and assumptions which have been developed by management based
on available facts and information. Actual results could differ from
those estimates.
Concentrations of Credit Risk - The Company sells its telecommunications
services and products to customers operating primarily in the north
eastern region of the United States. The Company performs ongoing credit
evaluations of its customers as it generally does not require
collateral. Allowances are maintained for potential credit losses and
such losses have been within management's expectations.
Sales by Category - The Company's operations are conducted within one
business segment, the providing of long distance telecommunications to
business customers (retail) and other carriers (wholesale). Sales by
category for the fiscal years ended January 31, 1997, 1996 and 1995 are
as follows:
1997 1996 1995
Retail $57,896,644 $46,289,295 $29,816,632
Wholesale 31,429,277 3,584,182 --
----------- ----------- -----------
$89,325,921 $49,873,477 $29,816,632
=========== =========== ===========
Earnings per Common and Common Equivalent Share - Earnings per share
were computed by dividing the net earnings by the weighted average
number of shares outstanding during each year. The weighted average
number of shares includes the number of outstanding common shares plus
the assumed exercise of dilutive outstanding common stock options using
the treasury stock method.
Stock Split - On July 1, 1996, the Company distributed 1,873,420 of
common stock in connection with a 2 for 1 stock split of all outstanding
shares as of June 15, 1996. All per share and number of shares data have
been restated to reflect this stock split.
Cash and Cash Equivalents - The Company considers all highly liquid
investments purchased with an original maturity of three months or less
to be cash equivalents. Cash and cash equivalents consist of cash on
hand, demand deposits and money market accounts.
Reclassifications - Certain reclassifications have been made to prior
year financial statements to conform to classifications used in the
current year.
New Accounting Pronouncements - In 1997, the Financial Accounting
Standards Board issued Statement of Financial Accountings Standards No.
128, "Earnings per Share," which is effective for financial statements
ending after December 15, 1997. This statement supersedes Accounting
Principles Board Opinion No. 15 and replaces the presentation of primary
EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all
entities with complex capital structures, and provides guidance on other
computational changes. Had the provisions of the statement been
effective for the current year, the following pro forma EPS amounts
would have been disclosed:
Basic EPS: $0.88
=====
Diluted EPS: $0.75
=====
C.INVESTMENT SECURITIES
<TABLE>
<CAPTION>
Investments available for sale consist of:
1997 1996
Gross Unrealized Market Gross Unrealized Market
Cost Gain Loss Value Cost Gain Loss Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal
bonds and
notes $477,227 $1,887 $-- $479,114 $582,063 $ -- $6,296 $575,767
Mutual
funds 277,299 10,260 -- 287,559 272,794 742 -- 273,536
Common -- -- -- -- -- -- -- --
stock 70,700 173,221 -- 243,921 7,121 10,511 -- 117,632
-------- -------- --- ---------- -------- -------- ------ --------
$825,226 $185,368 $-- $1,010,594 $861,978 $111,253 $6,296 $966,935
======== ======== === ========== ======== ======== ====== ========
</TABLE>
<TABLE>
<CAPTION>
Maturity dates of municipal bonds and notes as of January 31, 1997 are as follows:
Maturing Within Cost Market Value
<S> <C> <C>
1 year $426,793 $428,486
After 1 year through 5 years 50,434 50,628
-------- --------
$477,227 $479,114
======== ========
</TABLE>
<TABLE>
<CAPTION>
D. PROPERTY AND EQUIPMENT
Property and equipment consists of:
1997 1996
<S> <C> <C>
Machinery and equipment $7,243,651 $7,814,911
Office furniture, fixtures and equipment 1,257,440 1,070,249
Leasehold improvements 305,812 343,004
Vehicles 152,583 147,698
Computer equipment and software 2,420,830 1,704,239
Leasehold improvements in progress 260,578 --
Machinery and equipment in progress 3,585,205 --
----------- -----------
15,226,099 11,080,101
Less accumulated depreciation and amortization 4,160,410 5,069,096
----------- -----------
$11,065,689 $6,011,005
=========== ===========
Depreciation and amortization expense related to property and
equipment for the years ended January 31, 1997, 1996 and 1995 was
$1,288,816, $940,853 and $580,414, respectively.
</TABLE>
E. SALE OF REAL ESTATE HELD FOR INVESTMENT
In 1985, the Company sold approximately 13 acres of land to two
unrelated individuals for $580,000. Payment was received in cash of
$120,000 and a $460,000 first purchase money note and mortgage, which
was subsequently paid. The Company used the installment method to
report the gain on the sale, which amounted to $469,519. For the
fiscal year ended January 31, 1995, the Company recognized a gain of
$48,570.
F. INCOME TAXES
The provision for income taxes includes the following:
1997 1996 1995
Federal:
Current $1,078,000 $663,000 $518,000
Deferred 249,700 95,400 (13,000)
State income taxes:
Current 278,000 150,000 124,982
Deferred 65,500 44,400 66,000
----------- --------- ---------
$1,671,200 $952,800 $695,982
=========== ========= =========
<TABLE>
<CAPTION>
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. The income tax effects of significant items comprising the
Company's net deferred tax liability are as follows:
1997 1996
Current Long-term Current Long-term
<S> <C> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $196,800 $ $ 217,600 $ --
Accrued compensation expense 66,800 97,000 --
Unamortized lease incentive -- 103,500 -- 125,100
--------- --------- --------- ----------
Total deferred tax assets 263,600 103,500 314,600 125,100
--------- --------- --------- ----------
Deferred tax liabilities:
Difference between book and tax basis
of property and equipment -- 890,181) -- (643,581)
Unrealized gains on securities
available for sale -- (63,620) -- (42,000)
-------- --------- -------- ---------
Total deferred tax liabilities -- (953,801) -- (685,581)
-------- --------- -------- ---------
Net deferred tax asset (liability) $263,600 $(850,301) $314,600 $(560,481)
======== ========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
A reconciliation from the U.S. statutory tax rate of 34% to the effective tax rate for
income taxes on the consolidated statements of earnings is as follows:
1997 1996 1995
<S> <C> <C> <C>
Computed expense at statutory rates $1,448,000 $852,500 $610,000
(Reductions) increase in taxes resulting from:
Tax-exempt interest income (16,000) (23,200) (21,900)
State taxes, net of federal income tax benefit 227,000 128,300 126,000
Other 12,200 (4,800) (18,118)
---------- -------- --------
Actual expense $1,671,200 $952,800 $695,982
========== ======== ========
</TABLE>
G. LEASE COMMITMENTS
The Company rents various facilities under lease agreements classified
as operating leases. Several of the underlying agreements contains
certain incentives eliminating payments at the inception of the lease.
Lease incentives are amortized on a straight-line basis over the
entire lease term. Under terms of these leases, the Company is
required to pay its proportionate share of increases in real estate
taxes, operating expenses and other related costs.
In 1993, the Company leased warehouse space in Belleville, New Jersey
from a partnership in which two of the partners are directors and
major shareholders. During the fiscal years ended January 31, 1997,
1996 and 1995, the Company paid rent of $59,760, $59,670 and $49,101,
respectively to the partnership. The annual rent for this premise is
$58,560 for the first three years and $63,885 for years four and five
and is included in the table of minimum rentals shown below.
In 1995, the Company entered into a second modification of its lease
for additional office space at its existing facility in Little Falls,
New Jersey. This agreement extended the original lease to August 14,
2002. The annual rental on the additional space is $121,707 annually
for months 7-48 and $138,154 thereafter. In 1997, the Company entered
into a third modification of its lease for approximately 16,640 square
feet of additional office space at its existing facility in Little
Falls, New Jersey. The commencement date of the modification is
expected to be July 1, 1997. The annual rental on the additional space
will be $357,760 per annum from July 1, 1997 through February 14,
1998, $366,800 per annum from February 15, 1998 through August 14,
2000 and $382,720 per annum from August 15, 2000 through August 14,
2002.
In 1996, a subsidiary of the Company entered into a lease for
approximately 2,300 square feet of office space in New York City, New
York at an annual rental of approximately $75,900. The lease
commencement date is February 1, 1997 and is for sixty three months.
The lease requires the payment of the tenant's proportionate share of
operating expenses and real estate tax increases over the base year.
Also in 1996, the Company entered into a lease for approximately 8,300
square feet of space at 40 Rector Street, New York City, New York to
be used for a second switching facility. The term of the lease is for
fifteen years and ten months from the date of commencement which is
estimated to be February 1, 1998. Rental payments are $133,184 per
annum for the first five years after commencement, $166,480 per annum
for the next five years and $183,128 per annum for the next five years
and ten months. The lease requires the payment of the tenant's
proportional share of operating expenses and real estate tax increase
over the base year.
Future minimum annual rentals on these leases as of January 31, 1997
are as follows:
Year Ending
January 31,
1998 $1,011,970
1999 1,179,483
2000 1,088,400
2001 1,112,489
2002 1,112,489
2003 and thereafter 2,174,974
----------
$7,679,805
==========
Rental expense for the years ended January 31, 1997, 1996 and 1995 was
approximately $626,600, $517,600 and $310,550, respectively.
H. EMPLOYEE BENEFIT PLANS
The Company has established a savings incentive plan for substantially
all employees of the Company which is qualified under section 401(k)
of the Internal Revenue Code. The savings plan provides for
contributions to an independent trustee by both the Company and its
participating employees. Under the plan, employees may contribute up
to 15% of their pretax base pay and the Company had made matching
contributions equal to 25% of the first 6% of participant
contributions. On January 1, 1996, the Company increased its matching
contribution to 50% of the first 6% of participant contributions.
Participants vest immediately in their own contributions and over a
period of six years for the Company's contributions. Company
contributions were approximately $111,000, $41,000 and $25,000 for the
years ended January 31, 1997, 1996 and 1995, respectively.
I. STOCK OPTION PLAN
The Company has two stock option plans authorizing the granting of
either "Incentive Stock Options" or "Nonqualified Stock Options." The
1987 Stock Option Plan provides for the acquiring of an aggregate of
not more than 664,900 shares of the Company's common stock reserved
for issuance under the Plan. The 1996 Stock Option Plan, which was
approved by the shareholders and adopted by the Company on October 10,
1996, provides for the acquiring of an aggregate of not more than
300,000 shares.
Incentive Stock Options granted pursuant to the Plans must have an
exercise price equal to the fair market value of the Company's Common
Stock at the time the option is granted, except that the price shall
be at least 110 percent of the fair market value where the option is
granted to an employee who owns more than 10 percent of the combined
voting power of all classes of the Company's voting stock.
Nonqualified Stock Options granted pursuant to the Plans must have an
exercise price equal to at least 50 percent of the fair market value
of the Company's Common Stock at the time the option is granted.
Incentive Stock Options may be granted only to employees. Nonqualified
Stock Options may be granted to employees as well as directors,
independent contractors and agents, as determined by the Board of
Directors. All options available to be granted under the 1987 and 1996
Plans must be granted by September 1, 1997 and October 10, 2006,
respectively.
Outstanding options under the 1987 Plan are as follows:
Number Option
of Shares Price
Outstanding February 1, 1994 500,500 $1.03 -- 2.73
Granted 183,900 $6.00 -- 9.63
Exercised (24,750) $ 1.99
Canceled (24,750) $1.03 -- 1.99
-------
Outstanding January 31, 1995 634,900 $1.03 -- 9.63
Granted 33,000 $7.99 -- 8.63
Exercised (8,000) $ 1.99
Canceled (17,000) $ 8.75
-------
Outstanding January 31, 1996 642,900 $1.03 -- 9.63
Granted 22,000 $ 9.50
Exercised (18,228) $1.99 -- 6.57
Canceled -- --
-------
Outstanding January 31, 1997 646,672 $1.03 -- 9.63
======= -------------
Exercisable January 31, 1997 623,172 $1.03 -- 9.63
======= =============
Available for grant-- January 31, 1997 --
=======
There were no outstanding options under the 1996 Plan at January 31,
1997. Compensation expense related to the nonqualified stock options
was $57,219, $68,815 and $49,602 for the years ended January 31, 1997,
1996 and 1995, respectively.
The Company has adopted the disclosure-only provision of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Had compensation cost for the Company's two stock
option plans been determined based on the fair value at the grant date
for awards in the fiscal years ended January 31, 1997 and 1996,
consistent with the provisions of SFAS No. 123, the Company's net
earnings and earnings per share would have been reduced to the pro
forma amounts indicated below:
1997 1996
Net earnings -- as reported $2,588,138 $1,554,589
Net earnings -- pro forma 2,536,789 1,481,221
Earnings per share -- as reported 0.75 0.47
Earnings per share -- pro forma 0.74 0.45
The assumption regarding the stock options issued to executives in
fiscal 1997 was that 100% of such options vested in fiscal 1996 rather
than 1/4 as required by the Plan, since 1/4 of 1994 and 1995 would
have vested in 1996.
The fair value of each option grant is estimated based on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in fiscal 1996 and 1997:
dividend yield of 0.00%; expected volatility of 33.00%; risk-free
interest rate of 6.72%; and expected lives of 5 years.
J. NOTES RECEIVABLE
In 1990, the Company sold the net assets of its manufacturing division
for approximately $1,418,000 in cash and a promissory note of
approximately $877,000.
The promissory note was payable over a period of five years. The
unpaid principal balance and accrued interest was paid on May 8, 1995.
K. NOTES RECEIVABLE FROM SHAREHOLDER
In 1993, the Company made a $25,000 noninterest bearing, unsecured
loan to an executive employee and shareholder of the Company. In 1995,
the Company made two additional unsecured loans to the same employee,
$55,000 and $60,000, with interest at the prime rate published in the
Wall Street Journal, and 9% per annum, respectively. In 1996, the
three notes, together with unpaid interest, were combined into one
note with a principal balance of $117,281. The note bears interest at
8% per annum and is payable in semi-monthly installments for seven and
one half-years, commencing February 7, 1996. At January 31, 1997,
$3,898 of this note has been repaid.
In 1993, the Company made a separate $100,000 unsecured loan to the
above mentioned employee for the purchase of Company common stock.
This note, which is shown as a reduction in shareholder's equity,
bears interest at the prime rate published in the Wall Street Journal.
Interest payments are due monthly and the principal balance
(originally due April 1, 1995 and extended to December 31, 1996) was
extended during the current year to December 31, 1997.
L. CONTINGENCIES
The Company is a defendant in two law suits. The first suit, filed by
one of its customers for alleged breach of contract, seeks
compensatory and punitive damages of $1,300,000. The second suit,
filed by a former employee for alleged breach of contract, seeks
compensatory and punitive damages of $1,900,000. The Company believes
that the suits are completely without merit and intends to vigorously
defend them.
M. LONG-TERM DEBT
Long-term debt consists of the following at January 31, 1997:
Loan from bank $2,000,000
Purchase commitment 940,000
----------
$2,940,000
==========
On August 23, 1996, the Company entered into an Equipment Facility and
Revolving Credit Agreement (the "Facility") with a major New Jersey
bank. This Facility provides the Company with an unsecured line of
credit of $4,000,000 and $6,000,000 for the purchase of machinery and
equipment, primarily switching equipment, and is secured by the
Company's machinery and equipment.
The Company has currently drawn down $2,000,000 of the $6,000,000 and
has the ability and intent to convert this to a term loan.
The Company has utilized $100,000 of the unsecured line of credit for
the issuance of a letter of credit.
The $940,000 purchase commitment is part of the purchase of a new
switch. It is the Company's intention to pay off the commitment by
drawing down from the equipment Facility and then converting the
drawdowns to a term loan.
The interest rate for borrowings under the Facility is at the bank's
prime rate or, at the Company's option, 225 basis points above the
LIBOR rate. The Company is currently paying 7.75% on the $2,000,000
drawdown.
The facility requires the Company to meet certain covenants. Among the
covenants contained in the Facility are ratios and balances as to
minimum tangible net worth, current ratio, debt to net worth and fixed
charge coverage(all as defined). Other covenants include the level of
capital expenditures, acquisitions of capital stock, the incurrence of
new long-term indebtedness (as defined), and new liens on assets, as
well as the maintenance of certain other ratios. At January 31, 1997,
the Company was in compliance with all covenants of the facility.
N. QUARTERLY FINANCIAL INFORMATION (Unaudited)
<TABLE>
<CAPTION>
Amounts in thousands except per share data.
April 30, July 31, October 31, January 31,
1994 1994 1994 1995
<S> <C> <C> <C> <C>
Revenues $5,414 $6,741 $8,297 $ 9,365
Operating income 232 324 427 570
Net earnings 167 203 307 423
Net earnings per common share 0.05 0.06 0.10 0.13
April 30, July 31, October 31, January 31,
1995 1995 1995 1996
Revenues $10,516 $11,620 $13,454 $14,283
Operating income 569 410 948 382
Net earnings 366 246 594 349
Net earnings per common share 0.11 0.09 0.18 0.09
April 30, July 31, October 31, January 31,
1996 1996 1996 1997
Revenues $17,370 $23,118 $23,948 $24,890
Operating income 807 1,251 1,311 767
Net earnings 503 781 810 494
Net earnings per common share 0.15 0.23 0.23 0.14
******
</TABLE>
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
SCHEDULE II-- VALUATION AND QUALIFYING ACCOUNTS
(CONSOLIDATED)
- ----------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Additions
----------------------------
Charged to
Balance at Charged to Other Balance
Beginning Cost and Accounts- Deductions- at End of
Description of Period Expenses Describe Describe Period
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 31,
1997:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts $831,538 $950,495 $-- $728,363 $1,053,670
YEAR ENDED JANUARY 31,
1996:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts $492,235 $820,131 $-- $480,828 $831,538
YEAR ENDED JANUARY 31,
1995:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts $294,009 $391,656 $-- $193,430 (1)$492,235
(1) Uncollectible accounts written off, net of recoveries.
</TABLE>
TotTel10K.edg PAGE 20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
TOTAL-TEL USA COMMUNICATIONS, INC.
Exhibit 27 - FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF
JULY 31, 1997 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR SIX MONTHS ENDED JULY 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 2,589,187
<SECURITIES> 1,010,594
<RECEIVABLES> 14,987,322
<ALLOWANCES> 1,053,670
<INVENTORY> 0
<CURRENT-ASSETS> 18,543,962
<PP&E> 15,226,099
<DEPRECIATION> 4,160,410
<TOTAL-ASSETS> 30,494,061
<CURRENT-LIABILITIES> 13,057,878
<BONDS> 2,940,000
<COMMON> 187,792
0
0
<OTHER-SE> 13,198,870
<TOTAL-LIABILITY-AND-EQUITY> 30,494,061
<SALES> 89,325,921
<TOTAL-REVENUES> 89,518,022
<CGS> 66,829,283
<TOTAL-COSTS> 66,829,283
<OTHER-EXPENSES> 17,420,558
<LOSS-PROVISION> 950,495
<INTEREST-EXPENSE> 68,348
<INCOME-PRETAX> 4,135,585
<INCOME-TAX> 1,671,200
<INCOME-CONTINUING> 2,588,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,588,138
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
</TABLE>
