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, 1998 .
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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 .
- ------------------------- -------------------
(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: (973) 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
--- ---
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 $40.25 closing price) of the voting
stock held by nonaffiliates of the Registrant as of May 12, 1998:
$100,481,509.
Number of shares of Common Stock outstanding on May 12, 1998:
3,441,447.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART 1
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Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K are
"forward-looking statements" intended to qualify for the safe harbors
from liability established by the Private Securities Litigation Reform
Act of 1995. These forward-looking statements can generally be
identified as such because the context of the statement will include
words such as the Company "believes", "anticipates", "expects", or words
of similar import. Similarly, statements that describe the Company's
future plans, objectives or goals are also forward-looking statements.
Such forward-looking statements are subject to certain risks and
uncertainties which are described in close proximity to such statements
and which could cause actual results to differ materially from those
anticipated as of the date of this report. Shareholders, potential
investors and other readers are urged to consider these factors in
evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements. The forward-
looking statements included herein are only made as of the date of this
report and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or
circumstances.
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, 1991. The Registrant's principal executive
office is located at 150 Clove Road, Little Falls, New Jersey, 07424 and
its telephone number is (973) 812-1100. The Registrant operates as a
full service inter-exchange carrier as more fully described herein.
PRINCIPAL PRODUCTS AND SERVICES
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Telecommunications Services
- ---------------------------
In September, 1982, Registrant formed Total-Tel, 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. Total-Tel
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 digital computerized
switches in Newark, New Jersey, New York, New York and Miami, Florida,
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 New York City through Total-Tel USA,
Incorporated, a wholly owned subsidiary. On August 1, 1992, TotalTel
extended its telecommunications services to commercial customers in the
Southeastern United States through Total-Tel Southeast, Inc., a wholly
owned subsidiary. 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 $57,981,349 and $31,429,277 for the fiscal
years ended January 31, 1998 and 1997, 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, and other Regional Bell
Operating Companies, (RBOC'S).
During the Fiscal year ended January 31, 1998, and in Fiscal 1997,
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 16,000 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.
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" ), U. S. Sprint, WorldCom, 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.
The Telecommunications Act of 1996 ("The Act") allows local
exchange carriers (LECs), under certain circumstances, 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 anticipates
entering this market during the latter half of Fiscal 1999.
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.
Year 2000 Matters
- -----------------
As is the case with most other companies using computers in their
operations, the Company is in the process of addressing the Year 2000
problem. This matter will be addressed concurrently with another
project to enhance the companies billing system. While the primary focus
of the project is to install a state of the art billing system, it will
also include a solution to the Year 2000 problem, As such, no
additional cost for the Year 2000 problem over and above the normal cost
of the new billing system is anticipated. The switching and accounting
programs have been audited and found to be Year 2000 compliant.
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
- ----------------------
On August 1, 1982, 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 switch-based 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 RBOCS and other 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 the 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. TotalTel'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 expenditure.
Personnel
- ---------
Registrant and its subsidiaries currently employ 231 full-time
employees in its long distance telecommunication service, of the full
time employees 48 are engaged in sales activities, 11 in customer
support, 25 in customer service, 33 in technical and field services, 16
in data processing, and 98 in general and administrative activities.
The Company also employs approximately 15 part time employees and
utilizes the services of approximately 260 independent sales agents. The
Registrant considers its relations with its employees to be excellent.
ITEM 2. PROPERTIES
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On November 15, 1993, and December 28, 1993, Total-Tel 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, 1994 through
December 31, 1998 at an annual rental of $51,480 and also require the
tenant to pay a proportionate share of any increase in the "Consumer
Price Index", U. S. City Average, over the base year.
On December 1, 1993, Total-Tel 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, 1994, Total-Tel Inc. entered into a lease,
subsequently modified on April 15, 1994, for approximately 17,700 square
feet of space at 150 Clove Road, Little Falls, New Jersey to be used as
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, 1995 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 taxes
increased over the base year.
On January 30, 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 at 150 Clove Road, Little Falls, New
Jersey. 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 addition, the Company
is liable for its proportionate share of increases in real estate taxes
and operating expenses over the base year.
On November 1, 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 was 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 five years and
ten months. The lease requires the payment of the tenant's proportional
share of increased operating expenses and real estate taxes over the
base year.
On November 8, 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
commenced February 1, 1997 and is for sixty three months. The lease
requires the payment of the tenant's proportionate share of increased
operating expenses and real estate taxes over the base year.
On February 6, 1998, the Company entered into a lease for
approximately 5,000 square feet of space at 28 W. Flagler Street, Miami,
Florida. The term of the lease is 15 years, commencing February 1,
1998. The annual rental fee is $106,618, with an annual adjustment
based on the Revised Urban Wage Earners and Clerical Workers Index,
capped at a maximum of 3% increase over the prior years rental payment.
In addition, the Company is liable for its proportionate share of
increases in real estate taxes and operating expenses over the base
year.
Certain of the 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 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.
On March 31, 1998 the Board of Directors of the Registrant adopted
a Shareholders Rights Plan. Subsequently Gold and Appel Transfer, SA
commenced a proceeding, in the Chancery Court, Bergen County, State of
New Jersey, to enjoin the adoption of the Plan as well as certain by-law
amendments adopted by the Board. The proceeding is currently pending.
Registrant believes that the adoption of the Plan and by-law amendments
will be sustained by the court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
(THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
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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, 1996 have been
adjusted to reflect the stock split, discussed in (d) below.
FISCAL 1998 HIGH LOW
----------- ---- ---
February 1 thru April 30 18 1/4 11
May 1 thru July 31 25 1/2 13 5/8
August 1 thru October 31 30 1/4 18
November 1 thru January 31,1998 33 25 1/4
FISCAL 1997
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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
(b) As of April 20, 1998, the approximate number of
recordholders of Registrant's Common Stock was 752, 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, 1996, 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, .
-----------------------------------------------------------------------------
RESULTS OF OPERATIONS: 1998 1997 1996 1995 1994 .
----------- ----------- ----------- ----------- -----------
RESTATED
<S> <C> <C> <C> <C> <C>
Net sales $ 123,286 $ 89,326 $ 49,873 $ 29,817 $ 18,999
Earnings from
continuing operations $ 1,094 $ 492 $ 1,555 $ 1,100 1,052
Net earnings $ 1,094 $ 492 $ 1,555 $ 1,100 $ 1,156
Earnings Per Common and Common Equivalent Shares (b):
Basic:
Continuing Operations
Before Cumulative Effect
Of Accounting Change $ 0.35 $ 0.17 $ 0.53 $ 0.34 $ 0.34
Accounting Change $ -- $ -- $ -- $ -- $ 0.03
Net earnings per share $ 0.35 $ 0.17 $ 0.53 $ 0.34 $ 0.37
Diluted:
Continuing Operations
Before Cumulative Effect
Of Accounting Change $ 0.32 $ 0.15 $ 0.48 $ 0.34 $ 0.32
Accounting Change $ -- $ -- $ -- $ -- $ 0.03
Net earnings per share $ 0.32 $ 0.15 $ 0.48 $ 0.34 $ 0.35
Average common shares
outstanding (a)
Basic 3,107 2,941 2,909 3,258 3,158
Diluted 3,421 3,369 3,263 3,258 3,268
Cash dividends per
common share NONE NONE NONE NONE NONE
Additions to property
& equipment $ 3,268 $ 6,397 $ 3,028 $ 2,268 $ 1,375
Depreciation and
amortization $ 2,028 $ 1,382 $ 1,026 $ 663 $ 492
FINANCIAL POSITION:
Working Capital $ 7,936 $ 5,419 $ 4,799 $ 5,031 $ 4,683
Property and equipment - net $ 12,406 $ 11,066 $ 6,011 $ 3,924 $ 2,236
Total assets $ 40,245 $ 31,029 $ 20,520 $ 15,110 $ 11,071
Long-term debt $ 2,092 $ 2,940 $ -- $ -- $ --
Shareholders' Equity $ 18,598 $ 14,772 $ 10,700 $ 9,093 $ 7,917
Common shares
outstanding (a) 3,329 2,945 2,927 2,900 2,876
</TABLE>
(a) All per share amounts have been restated to reflect the 2 for 1
stock split distributed July 1, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Results of Operations
- ---------------------
Fiscal 1998 as Compared to Fiscal 1997
--------------------------------------
The following discussion of the results of operations relates to
the continuing operations of the Registrant.
Net sales of telecommunications services and systems in Fiscal 1998
were $123,286,028 as compared to $89,325,921 in fiscal 1997,
representing approximately a $33,960,000 increase, or 38%.
The continued growth in revenues in Fiscal 1998 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
Fiscal 1995, which increased transmission capabilities significantly and
was designated to allow for substantial future expansion.
The Registrant also completed installation of a DEX 600E MEGAHUB
switch at its new facility in New York City which should double the
Registrant's current revenue capacity. This facility became operational
in July, 1997.
The Registrant is currently in the process of bringing on line a
DEX 600E MEGAHUB switch at its facility in Miami, Florida. This site
will increase revenue capacity for the Eastern Seaboard as well as serve
as an international gateway to South America. This site should be
operational in the second quarter of Fiscal 1999.
TotalTel had operating income of $1,547,574 in Fiscal 1998 and
operating income, as restated, of $653,241 in Fiscal 1997. The
operating income represents the income before interest income, interest
expense, other income, other expense and provision for income taxes.
For Fiscal 1998, the Registrant billed approximately 862,479,000
minutes of calls as compared to approximately 616,990,000 minutes of
calls for the prior fiscal year, an increase of approximately
245,489,000 minutes or 39.8%.
Cost of sales includes line costs, operations costs and purchase of
phone systems for resale. Cost of sales for Fiscal 1998 increased
approximately $32,257,000 or 48.3% as compared to the prior fiscal year.
This increase was unfavorable in relation to the 38.0% increase in sales
volume for the period and is attributable to having a higher mix of
lower margin wholesale sales and competitive pricing pressure in the
industry. Line costs for Fiscal 1998 were $94,492,000, an increase of
$30,657,000 or 48.0% over the prior year. The increase in line cost,
was attributable primarily to the substantially increased sales volume
of the Company. The balance of cost of sales was for phone system
sales. The operating expense components are switch and field
technician salaries, utilities, rent and depreciation which totaled
$4,142,000 for Fiscal 1998, an increase of $1,148,000 or 38.3%. This
increase was primarily due to the additions of the New York switch and a
new Network Operations Center.
Selling, general and administrative expenses increased
approximately $3,779,000 or 20.6% for Fiscal 1998 as compared to the
prior fiscal year. The increase was primarily due to increased salaries
of $3,282,626 or 49.9%, increased commissions of $839,000 or 18.4%.
The increase in salaries results from the buildup of infrastructure in
Product Development, MIS, Customer Service, and Sales. The buildup is
to serve the anticipated growth. The substantial increase in
commission, is directly attributable to the sales volume growth.
Stock compensation expense decreased approximately $2,970,000. In
Fiscal 1997, options to purchase 218,000 shares of common stock had
their expiration dates extended to January 17, 2002. This caused a non-
cash charge of approximately $3,482,000. In 1998, stock
options to purchase only 16,500 stock options were remeasured giving
rise to a $433,000 expense item.
Other income of $359,000 consists of insurance proceeds upon the
death of a former officer and director of the Company.
Interest income for Fiscal 1998 decreased approximately $39,000 as
compared to Fiscal 1997 primarily due to a reduction in the funds
available for investment.
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 $5,662,000 or 44.8% 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.
Stock compensation expense of $3,539,653 arose from the remeasuring
of certain stock options granted to executives of the Registrant. As
required by Financial Accounting Standards Board opinion number 123,
when the expiration date of stock options is extended, the compensation
expense related to those options is remeasured at the Fair Market Value
on the date of the extension.
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.
Liquidity and Capital Resources
-------------------------------
At January 31, 1998, the Registrant had working capital of
approximately $7,936,000 as compared to $5,419,000 at January 31, 1997,
an increase of $2,517,000. This increase in working capital at January
31, 1998 was attributable primarily to an increase in accounts
receivable of $6,413,000 (net of allowance for doubtful accounts), an
increase in cash and cash equivalents of $828,000, an increase in
prepaid and other current assets of $1,914,000, and a decrease in other
current and accrued liabilities of $465,000, partially offset by a
decrease in investments available for sale of $432,000, a decrease in
deferred tax assets of $46,000, an increase in accounts payable of
$6,134,000, and an increase in the current portion of long term debt of
$487,000.
The current ratio of 1.4 to 1, remained constant between fiscal
1997 and 1998. The Registrant continues to maintain a strong liquid
position with cash and cash equivalents and investments available for
sale of $4,000,000 representing 21.8% of current liabilities.
The cash flow statement of the Registrant for Fiscal 1998 indicated
an increase in cash of $828,000. Net earnings of $1,094,001 and non
cash adjustments of $4,427,000 reduced by net changes in assets and
liabilities of $3,046,000 provided cash from operations of $2,475,000.
Cash used in investing activities totaled $2,705,000. The major
components were purchases of property and equipment of $3,268,000 and
additions to line installation costs of $123,000, partially offset by
the proceeds from the sale of securities for $443,000, and collection of
notes due from employees of $233,000. Cash provided by financing
activities totaled $1,057,000 and was the result of the exercise of
stock options, partially offset by the scheduled paydown of long term
debt.
Capital Expenditures
--------------------
Capital expenditures during Fiscal 1998 totaled approximately
$3,268,000 and were financed from funds provided from Registrant's
working capital, cash derived from operations, and bank borrowings.
Of the $3,268,000, $1,074,000 was used for additional enhancements to
the New York city switch, $504,000 was for switch enhancements in
Newark, $759,000 was spent on leasehold improvements and furniture and
fixtures in the additional space leased at the Company's principal
office in New Jersey, $310,000 was spent on the new NOC, $424,000 was
spent on improvements to the LAN networks and MIS software and hardware
upgrades, $40,000 for trucks for service and $100,000 initial
expenditures on the Miami switch.
Capital expenditures for Fiscal 1999 are estimated at approximately
$15,000,000 and are expected to be financed from funds provided from the
registrants bank line of credit, existing working capital, and cash
derived from operations.
The capital expenditures are expected to be used for the installation
of a switch in Miami, $1,139,000, installation of a switch in London
(4th quarter), $3,000,000, new EDS billing system, $3,000,000, LAN/WAN
software and hardware upgrades, $1,100,000, installation of switch
equipment to enter the local market, $2,255,000, various improvements to
current switch operations, $1,100,000 and the purchase of an IRU to London,
$3,000,000.
As of January 31, 1998, the Registrant had a bank line of credit of
$6,000,000. In March of 1998 the Company entered into a modification of
the agreement which increased the line of credit to $8,000,000 and
$5,000,000 for the purchase of machinery and equipment. During Fiscal
1998 Registrant had bank borrowings of $2,579,201. For further detail
see Note 10 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 are 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.
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
- ---- --- --------
Solomon Feldman 77 Director
Warren H. Feldman 42 Chairman, Chief Executive Officer
and Director
Leon Genet 66 Director
Thomas P. Gunning 60 Vice President, Treasurer
and Secretary
Jay J. Miller 65 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.
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, 1987 and President of Total-Tel USA Division on October 27,
1988. 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
Edison Control Corporation, a manufacturer of pipe, fittings and
accessories for concrete pumping equipment. He is also Chairman of the
Board of AmTrust Pacific, LTD., a New Zealand real estate company.
OTHER SIGNIFICANT EMPLOYEES
Ben Goldberg joined TotalTel, Inc., the principal 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, 1994, Mr. Goldberg was promoted to Senior Vice President of
TotalTel , Inc.
David Hess, President and Chief Operating Officer of TotalTel,
Inc., 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. On September 27, 1997 , Mr. Hess was promoted to President of
Total Tel, Inc.. 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 provides consulting services to
various telecommunications companies including the Registrant. In 1990,
Mr. Slater served as Corporate Director of Product 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. Mr. Slater resigned his position effective
December 31, 1997. Effective January 1, 1998, Mr. Slater ceased to be
an employee, and currently serves as a consultant to the Company.
<TABLE>
<CAPTION>
ITEM 11. EXECUTIVE COMPENSATION
----------------------
a) The following table sets forth the compensation which the Registrant paid during the fiscal years ended January 31, l998,
1997, 1996 to the Chief Executive, each Executive Officer of the Registrant whose aggregate remuneration exceeded $100,000.
Summary Compensation Table
--------------------------
<S> <C> <C> <C> <C> <C> <C>
Name and Fiscal Year Annual Compensation Other Compensation
Principal Ended Annual Awards All Other
Position January 31 Salary ($) Bonus(s) Compensation($) Options (#) Compensations(s)
- -------- ------------ ---------- -------- --------------- ----------- ---------------
Warren H. 1998 $287,115 (1) $350,000 $ 15,325 (4)
Feldman 1997 $315,000 (1) $295,000 $ 7,025 (5)
Chairman and 1996 $195,000 (1) $274,241 $ 4,667 (6)
Chief Executive
Officer
Kevin Alward 1998 (2)(3) $268,817 $270,499 $ 12,877 (7)
President and 1997 $315,000 $280.000 $ 9,769 (8)
Chief Operating 1996 $195,000 $274.241 $ 6,010 (9)
Officer
Thomas P. 1998 $116,000 $ 4,000 $ 8,265 (10)
Gunning 1997 $ 95,231 $ 6,000 $ 6,560 (11)
Vice President,
Treasurer and
Secretary
David Hess 1998 $264,615 $176,773 $115,008 (12) $ 8,655 (13)
President &
Chief Operating
Officer of
Total Tel, Inc.
Jeff Slater 1998 $235,846 $235,433 $ 3,461 (14)
Senior Vice
President of
Total Tel, Inc.
(1) Does not include an annual Director's fee of $15,000.
(2) Resigned as an officer of the Company on January 23, 1998
(3) Does not include director's fees of $2,500.
(4) The amounts shown represent the Registrant's contribution under its 401 (K) Deferred Compensation and Retirement
Savings Plan of $4,688 and $2,357 for the use of a company vehicle for non-business purposes and $8,280 term life
insurance premiums.
(5) The amount shown represents 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.
(6) The amounts 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.
(7) The amounts shown represent the Registrant's contribution under its 401 (K) Deferred Compensation and Retirement
Savings Plan of $5,931 and $4,041 for the use of a company vehicle for non-business purposes and $2,905 term life
insurance premiums.
(8) 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.
(9) The amount shown represents 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.
(10) The amount shown represent the Registrant's contribution under its 401 (K) Deferred compensation and Retirement
Savings Plan of $3,468 and $1,393 for the use of a company vehicle for non-business purposes and $3,404 term life
insurance premiums.
(11) The amount 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.
(12) The amount shown represent commissions paid to Mr. Hess in his capacity as Vice President of Total-Tel Carrier
Services, Inc.
(13) The amount shown represents the Registrant's contribution under its 401 (K) Deferred compensation and Retirement
Savings Plan of $5,795, and $2,860 term life insurance premiums.
(14) The amount shown represents the Registrants contribution under its 401K Deferred compensation and Retirement
Savings Plan of $3,461.
</TABLE>
(b) Compensation Pursuant to Plans
------------------------------
1987 Stock Option Plan
----------------------
In October 1987, the Registrant adopted its 1987 Stock Option Plan
and in October 1996, 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 664,900 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, 1994 have been adjusted for the 10% stock dividend. The shares for
options granted prior to July 1, 1996 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.
<TABLE>
<CAPTION>
OPTIONS GRANTS IN LAST FISCAL YEAR
----------------------------------
Options /SAR Grants in last Fiscal Year Potential realizable Value
at Assumed Annual rates
Individual Grants of stock Appreciation for
- ------------------------------------------------------------------------------------------ Option term
Number of
Securities % of Total
Underlying Options/SARs
options / Granted to
SARs Employees in Exercise or Base Expiration
Name Granted (#)(1) Fiscal Year Price Date 5% ($) 10% ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warren Feldman 40,000 17.24% $ 14.50 January 15, 2001 $124,994 $269,178
Kevin Alward (2) 40,000 17.24% $ 14.50 January 15, 2001 $124,994 $269,178
David Hess 20,000 8.62% $ 14.50 January 15, 2001 $ 62,497 $134,589
David Hess 50,000 21.55% $ 20.00 September 29, 2001 $215,506 $464,100
Jeffrey Slater 20,000 8.62% $ 14.50 January 15, 2001 $ 62,497 $134,589
Jeffrey Slater 40,000 17.24% $ 20.00 January 2, 2001 $172,405 $371,280
(1) Stock option granted under the 1996 Plan. One fifth of the new options are exercisable on each of the first, second,
third, fourth and fifth anniversary dates of the original grant.
(2) Kevin Alward exercised 10,000 shares on January 16, 1998. The balance of his shares were canceled.
<CAPTION>
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End (#)
Shares Acquired
Name on Exercise(#) Value Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warren Feldman 69,200 $ 155,892 139,000 30,000 $3,465,125 $442,500
Kevin Alward 260,000 $988,263 -- -- -- --
David Hess -- -- 12,500 82,500 $224,063 $1,114,063
Jeffrey Slater 4,772 11,543 35,900 59,000 $776,695 $676,290
Thomas Gunning -- .-- 21,500 1,000 $572,513 $20,500
(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.
</TABLE>
<TABLE>
<CAPTION>
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 known by Registrant to own beneficially more than
5% of any class of the Registrant's voting shares on May 12, 1998.
<S> <C> <C> <C>
Name and Amount and
Title Address of Nature of Percentage
of Beneficial Beneficial of
Class Owner Ownership (1) Class
- ----- ---------- ------------- -----
Common Warren H. Feldman 587,262 (2) 16.4%
Stock $.05 150 Clove Road shares
par value Little Falls, NJ 07424
Common Heartland Advisors, Inc. 200,200 5.6%
Stock $.05 790 North Milwaukee St. shares
par value Milwaukee, WI 53202
Common Solomon Feldman 443,190 12.4%
Stock $.05 1890 South Ocean Drive shares
par value Hallandale, FL 33009
Common Gold & Appel, SA 928,817 25.9%
Stock $.05 Morris F.DeFeo,Jr shares
par value Swidler & Berlin, Chartered
3000 K St., NW, Suite 300
Washington, DC 20007
Common Michael A. Karp 219,340 6.1%
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 139,000 shares of the Registrant's Common Stock which are currently exercisable or
within 60 days hereof.
<CAPTION>
(b) Security Ownership of Management
--------------------------------
The following table sets forth as of May 12, 1998, 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:
<S> <C> <C> <C>
Name and Amount and
Title Address of Nature of Percentage
of Beneficial Beneficial of
Class Owner Ownership (1) Class
- ----- ---------- ------------- -----
Common Solomon H. Feldman 443,190 12.3%
Stock $.05 1890 South Ocean Drive shares
par value Hallandale, FL 33009
Common Warren H. Feldman 587,262 (2) 16.3%
Stock $.05 150 Clove Road shares
par value Little Falls, NJ 07424
Common Leon Genet 45,560 1.3%
Stock $.05 30 Farmstead Road
value Short Hills, NJ 07078
Common Jay J. Miller 200
Stock $.05 430 E 57th St.,Suite 5D
value New York, NY 10022
Common All directors 1,131,612(3) 31.4%
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 139,000 shares of the Registrant's Common Stock which are currently exercisable
or within 60 days hereof.
(3) Includes options to purchase 158,500 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.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
On December 1, 1993, 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 major
shareholder is also a partner. During the fiscal year ended January 31,
1998, the Company paid rent of $60,450 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 set forth in Note 9 to the Financial Statements, the Registrant
from time to time has made loans to a former executive employee and
shareholder of the Registrant.
(THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK)
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC.
----------------------------------
AND SUBSIDIARIES
----------------
I
TEM 14. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULE
------------------------------------------
YEARS ENDED JANUARY 31, 1998, 1997, AND 1996
--------------------------------------------
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:
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS: PAGE
- --------------------------------- ----
Independent auditors' report F-1
Consolidated balance sheets - January 31, 1998
and 1997 F-2
Consolidated statements of earnings - years
ended January 31, 1998, 1997 and 1996 F-3
Consolidated statements of shareholder's equity -
years ended January 31, 1998, 1997, 1996 F-4
Consolidated statements of cash flow - years
ended January 31, 1998, 1997, 1996 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, 1998, 1997
and 1996.
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)
</TABLE>
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 13th day of May, 1998
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 1934,
this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/S/ Solomon Feldman Director May 13, l998
Solomon Feldman
/S/ Warren H. Feldman Chairman of the Board, May 13, l998
Warren H. Feldman Chief Executive Officer
and Director
/S/ Leon Genet Director May 13, l998
Leon Genet
/S/ Thomas P. Gunning Vice President, Treasurer, May 13, l998
Thomas P. Gunning Secretary and Principal
Accounting Officer
/S/ Jay J. Miller Director May 13, l998
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.
(3)(d) By-Law Amendments incorporated by reference to Form 8K
filed on April 7, 1998.
(3)(e) Shareholder Rights plan filed by reference to Form 8K, on
April 12, 1998.
(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 Birnfeld 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,
1983 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, 1983.
(10)(e) (ii) Installment Note and Equipment Loan and Security Agreement
of Mansol Ceramics Company and Guaranty of Registrant,
dated August 1, 1988, 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, 1983. Incorporated by reference to
Exhibit 10 (f) to Registrant's Annual Report on Form 10-K
for the year ended January 31, 1984.
(10)(g) Lease Modification Agreement re: Lease of Premises at 471
Cortland Street dated July 24, 1985. Incorporated by
reference to Exhibit 10 (g) to Registrant's Annual Report
on Form 10-K for the year ended January 31, l986.
Exhibit No. Description of Document
- ---------- -----------------------
(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.
Exhibit No. Description of Document
- ---------- -----------------------
(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, 1994
(10)(t) Lease of premises at 471 Cortland Street, Belleville, New
Jersey, between Total-Tel USA Inc. and Birnfeld Associates -
Belleville dated December 1, 1993. 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, 1994.
Incorporated by reference to Exhibit 10 (u) to the
Registrant's Annual Report on Form 10-K for the
year ended January 31, 1994.
(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, 1994. 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, 1995. Incorporated by reference to
Exhibit 10 (w) to the Registrant's Annual Report on Form
10-K for the year ended January 31, 1995.
(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. Incorporated by reference to exhibit (10)(x) to the
registrants Annual Report on Form 10-K for the
year ended January 31, l997.
(10)(y) Equipment Facility and Revolving Credit Agreement dated
August 23, 1996 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. Incorporated by referral to Exhibit
(10)(y) to the Registrants Annual Report on Form 10K for
the year ended January 3, 1997.
(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 10K
for the year ended January 31, 1997.
(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, 1996.
Incorporated by reference to Form 10K for the year ended
January 31, 1997.
(10)(AB) 1996 Stock Option Plan, Incorporated by reference to
Registrant's Proxy Statement relating to its 1996 Annual
Stockholder Meeting.
(10)(AC) Lease of premises of 28 West Flagler Street, Miami,
Florida between TotalTel, Inc. and Mosta Corporation, Inc.
dated February 6, 1998.
(10)(AD) Amended Equipment Facility and Revolving Credit Agreement
dated August 23, 1996 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 13,000,000.
(22) 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 Schedules.
Total-Tel USA Communications, Inc.
and Subsidiaries
Consolidated Financial Statements for the
Years Ended January 31, 1998, 1997 (Restated) and 1996, 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, 1998 and 1997, and the related consolidated statements of
earnings, shareholders' equity, and cash flows for each of the three
years in the period ended January 31, 1998. 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, 1998
and 1997, and the results of their operations and their cash flows
for each of the three years in the period ended January 31, 1998 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.
As discussed in Note 14, the accompanying 1997 financial statements
have been restated.
DELOITTE & TOUCHE LLP
New York, New York
May 8, 1998
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1998 AND 1997 (RESTATED)
- -----------------------------------------------------------------------------------------------------
ASSETS 1998 1997
(As Restated,
See Note 14)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $3,416,904 $2,589,187
Investments available for sale 578,293 1,010,594
Trade accounts receivable (net of allowance for doubtful accounts
of $866,421 and $1,053,670 in 1998 and 1997, respectively) 20,346,988 13,933,652
Notes receivable - employees 117,590 163,706
Deferred income taxes 151,256 196,800
Prepaid expenses and other current assets 2,497,707 583,223
------------ ------------
Total current assets 27,108,738 18,477,162
------------ ------------
PROPERTY AND EQUIPMENT - Net 12,405,924 11,065,689
------------ ------------
OTHER ASSETS:
Notes receivable - employees -- 86,383
Deferred line installation costs (net of accumulated amortization
of $389,827 and $283,801 in 1998 and 1997, respectively) 298,304 281,392
Deferred income taxes -- 602,159
Other assets 432,275 516,635
------------ ------------
Total other assets 730,579 1,486,569
------------ ------------
$40,245,241 $31,029,420
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $16,356,427 $10,222,260
Other current and accrued liabilities 1,757,375 2,222,141
Salaries and wages payable 572,112 613,477
Current portion of long-term debt 487,000 --
------------ ------------
Total current liabilities 19,172,914 13,057,878
------------ ------------
OTHER LONG-TERM LIABILITIES 331,754 259,220
------------ ------------
LONG-TERM DEBT 2,092,201 2,940,000
------------ ------------
DEFERRED INCOME TAXES 50,491 --
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 11)
SHAREHOLDERS' EQUITY:
Common stock, par value $.05 per share; authorized
20,000,000 shares in 1998 and 1997, issued
4,141,187 and 3,755,840 shares in 1998 and 1997, respectively 207,059 187,792
Additional paid-in capital 9,656,488 7,054,370
Retained earnings 10,175,784 9,081,783
------------ ------------
20,039,331 16,323,945
Treasury stock - at cost - 812,110 shares in 1998 and 810,510
shares in 1997 (1,547,331) (1,547,251)
Receivable from shareholder -- (100,000)
Unrealized gain on available for sale securities 105,881 95,628
------------ ------------
Total shareholders' equity 18,597,881 14,772,322
------------ ------------
$40,245,241 $31,029,420
============ ============
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JANUARY 31, 1998, 1997 (RESTATED) AND 1996
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996
(As Restated,
See Note 14)
<S> <C> <C> <C>
NET SALES $123,286,028 $ 89,325,921 $ 49,873,477
------------ ------------- --------------
COSTS AND EXPENSES:
Cost of sales 99,086,234 66,829,283 34,854,000
Selling, general and administrative 22,082,829 18,303,834 12,641,680
Stock compensation 569,391 3,539,563 68,815
------------ ------------- --------------
Total costs and expenses 121,738,454 88,672,680 47,564,495
------------ ------------- --------------
OPERATING INCOME 1,547,574 653,241 2,308,982
------------ ------------- --------------
OTHER INCOME (EXPENSE):
Interest income 101,865 141,181 166,170
Other income 358,729 50,920 36,091
Interest expense (183,623) (68,348) (3,854)
------------ ------------- --------------
Total other income 276,971 123,753 198,407
------------ ------------- --------------
EARNINGS BEFORE INCOME TAXES 1,824,545 776,994 2,507,389
INCOME TAX PROVISION 730,544 285,540 952,800
------------ ------------- --------------
NET EARNINGS $ 1,094,001 $ 491,454 $ 1,554,589
============ ============= ==============
BASIC EARNINGS PER COMMON SHARE $0.35 $0.17 $0.53
===== ===== =====
DILUTED EARNINGS PER COMMON SHARE $0.32 $0.15 $0.48
===== ===== =====
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Unrealized
Gain (Loss) on
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, 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
Remeasurement of employee stock
options (see Note 14) -- 3,482,344 -- -- -- -- 3,482,344
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 (RESTATED) -- -- 491,454 -- -- -- 491,454
---------- ------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT JANUARY 31, 1997
(RESTATED) 187,792 7,054,370 9,081,783 (1,547,251) (100,000) 95,628 14,772,322
Unrealized gain on available for
sale securities -- -- -- -- -- 10,253 10,253
Exercise of employee stock options 19,267 1,399,004 -- (80) -- -- 1,418,191
Remeasurement of employee stock
options -- 433,126 -- -- -- -- 433,126
Tax benefit due to exercise of
nonqualified options -- 769,988 -- -- -- -- 769,988
Repayment of shareholder receivable -- -- -- -- 100,000 -- 100,000
Net earnings -- -- 1,094,001 -- -- -- 1,094,001
---------- ------------ ------------ ------------ ------------ ------------ ------------
BALANCE AT JANUARY 31, 1998 $ 207,059 $ 9,656,488 $ 10,175,784 $ (1,547,331) $ -- $ 105,881 $18,597,881
========== ============ ============ ============ ============ ============ ============
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, 1998, 1997 (RESTATED) AND 1996
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996
(As Restated,
See Note 14)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,094,001 $ 491,454 $ 1,554,589
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 2,027,557 1,381,931 1,026,102
Provision for doubtful accounts 416,713 950,495 820,131
Tax benefit of options exercised 769,988 -- --
Noncash compensation expense 569,391 3,539,563 68,815
Deferred income taxes 648,544 (1,070,460) 139,800
Gain on disposal of property and
equipment (4,852) -- --
Change in assets and liabilities:
(Increase) decrease in assets:
Trade accounts receivable (6,830,049) (6,142,229) (3,622,415)
Prepaid expenses and other current
assets (1,914,484) (190,249) 27,335
Other assets 84,360 (90,471) (53,499)
Increase (decrease) in liabilities:
Accounts payable 6,134,167 3,617,801 2,483,618
Other current and accrued
liabilities and salaries and wages
payable (592,746) 587,247 738,956
Other long-term liabilities 72,534 (54,522) 202,928
-------------- -------------- --------------
Net cash provided by operating
activities 2,475,124 3,020,560 3,386,360
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Collections on notes receivable -- -- 628,792
Proceeds from sales and maturities of
short-term investments available for sale 442,554 973,141 1,600,963
Purchase of investments available for sale -- (984,129) (581,517)
Purchases of property and equipment (3,267,833) (6,397,259) (3,027,719)
Proceeds from sale of fixed assets 10,920 53,759 --
Payments for deferred line installation
costs (122,939) (127,488) (111,283)
Issuance of notes to employees -- (136,706) (115,000)
Collection on notes receivable from
employees 232,499 3,898 32,500
-------------- -------------- --------------
Net cash used in investing
activities (2,704,799) (6,614,784) (1,573,264)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised 1,418,191 66,273 15,927
Bank borrowings -- 2,000,000 --
Additional borrowings 770,000 940,000 490
Repayment on bank borrowings (1,130,799) -- --
-------------- -------------- --------------
Net cash provided by financing
activities 1,057,392 3,006,273 16,417
-------------- -------------- --------------
<CAPTION>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1998, 1997 (RESTATED) AND 1996
- ------------------------------------------------------------------------------------------------------------
1998 1997 1996
(As Restated,
See Note 14)
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 827,717 $ (587,951) $ 1,829,513
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 2,589,187 3,177,138 1,347,625
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,416,904 $ 2,589,187 $ 3,177,138
============== ============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 187,211 $ 64,761 $ 3,854
Income taxes $ 752,761 $ 1,511,149 $ 560,000
See notes to consolidated financial statements.
</TABLE>
TOTAL-TEL USA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. 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 other common carriers.
2. 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
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 northeastern 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, 1998, 1997 and 1996 are as follows:
1998 1997 1996
Retail $ 65,304,679 $ 57,896,644 $ 46,289,295
Wholesale 57,981,349 31,429,277 3,584,182
-------------- -------------- --------------
$ 123,286,028 $ 89,325,921 $ 49,873,477
============== ============== ==============
Earnings per Share - The Company adopted SFAS No. 128 "Earnings per
Share," in the fourth quarter of Fiscal 1998. The Statement
establishes standards for computing basic earnings per share, which
is represented by net earnings available to common shareholders
divided by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or stock options
were exercised or converted into common stock during the period, if
dilutive (see Note 12). Earnings per share amounts for prior years
have been restated to reflect this revised standard.
Stock Split - On July 1, 1996, the Company 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. 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.
Fair Value of Financial Instruments - The estimated fair value of
publicly traded financial instruments is determined by the Company
using quoted market prices, dealer quotes and prices obtained from
independent third parties. For financial instruments not publicly
traded, fair values are estimated based on values obtained from
independent third parties or quoted market prices of comparable
instruments. However, judgment is required to interpret market data
to develop the estimates of fair value. Accordingly, the estimates
are not necessarily indicative of the amounts that could be realized
in a current market exchange.
<TABLE>
<CAPTION>
The carrying values and fair values of financial instruments are as follows:
1998 1997
- -----------------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments Available For Sale $ 578,293 $ 578,293 $ 1,010,594 $ 1,010,594
Liabilities:
Debt 2,579,201 2,579,201 2,940,000 2,940,000
Reclassifications - Certain reclassifications have been made to prior year financial statements to conform to
classifications used in the current year.
New Accounting Pronouncements - The Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information," in 1997. These statements may impact the
disclosures made in future financial statements of the Company.
</TABLE>
<TABLE>
<CAPTION>
3. INVESTMENT SECURITIES
Investments available for sale consist of:
1998 1997
----------------------------------------------- -----------------------------------------------
Gross Unrealized Gross Unrealized
------------------------ Market ------------------------ Market
Cost Gain Loss Value Cost Gain Loss Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal
bonds and notes $ 50,000 $ 8 $ -- $ 50,008 $ 477,227 $ 1,887 $ -- $ 479,114
Mutual funds 281,991 1,104 -- 283,095 277,299 10,260 -- 287,559
Common stock 70,700 174,490 -- 245,190 70,700 173,221 -- 243,921
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 402,691 $ 175,602 $ -- $ 578,293 $ 825,226 $ 185,368 $ -- $1,010,594
========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
Maturity dates of municipal bonds and notes as of January 31, 1998 are as follows:
Maturing Within Cost Market Value
<S> <C> <C>
1 year $ 25,000 $ 25,008
After 1 year through 5 years 25,000 25,000
----------- -----------
$ 50,000 $ 50,008
=========== ===========
4. PROPERTY AND EQUIPMENT
Property and equipment consists of:
1998 1997
Machinery and equipment $12,027,693 $ 7,243,651
Office furniture, fixtures and equipment 1,703,657 1,257,440
Leasehold improvements 914,205 305,812
Vehicles 192,954 152,583
Computer equipment and software 3,220,808 2,420,830
Leasehold improvements in progress 205,644 260,578
Machinery and equipment in progress 100,000 3,585,205
----------- -----------
18,364,961 15,226,099
Less accumulated depreciation and amortization 5,959,037 4,160,410
----------- -----------
$12,405,924 $11,065,689
=========== ===========
Depreciation and amortization expense related to property and equipment for the years ended January 31, 1998, 1997 and
1996 was $1,921,530, $1,288,816 and $940,853, respectively.
</TABLE>
5. INCOME TAXES
The provision for income taxes includes the following:
1998 1997 1996
(RESTATED)
Federal:
Current $ 60,000 $ 1,078,000 $ 663,000
Deferred 517,544 (824,160) 95,400
State income taxes:
Current 22,000 278,000 150,000
Deferred 131,000 (246,300) 44,400
--------- ----------- ---------
$ 730,544 $ 285,540 $ 952,800
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:
<TABLE>
<CAPTION>
1998 1997
(RESTATED)
Current Long-term Current Long-term
<S> <C> <C> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 151,256 $ -- $ 196,800 $ --
Accrued compensation expense -- 1,275,096 -- 1,452,460
Unamortized lease incentive -- 132,701 -- 103,500
--------- ----------- --------- ----------
Total deferred tax assets 151,256 1,407,797 196,800 1,555,960
--------- ----------- --------- ----------
Deferred tax liabilities:
Difference between book and tax basis
of property and equipment -- (1,388,568) -- (890,181)
Unrealized gains on securities
available for sale -- (69,720) -- (63,620)
--------- ----------- --------- ----------
Total deferred tax liabilities -- (1,458,288) -- (953,801)
--------- ----------- --------- ----------
Net deferred tax asset (liability) $ 151,256 $ (50,491) $ 196,800 $9,602,159
--------- ----------- --------- ----------
</TABLE>
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:
<TABLE>
<CAPTION>
1998 1997 1996
(RESTATED)
<S> <C> <C> <C>
Computed expense at statutory rates $ 620,345 $ 264,178 $ 852,500
(Reductions) increase in taxes resulting from:
Tax-exempt interest income (14,300) (16,000) (23,200)
State taxes, net of federal income tax benefit 118,000 28,300 128,300
Insurance proceeds on officer's death (114,400) - -
Other 120,899 9,062 (4,800)
--------- --------- ---------
Actual expense $ 730,544 $ 285,540 $ 952,800
========= ========= =========
</TABLE>
6. 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 of the Company. During the fiscal years ended
January 31, 1998, 1997 and 1996, the Company paid rent of $60,450,
$59,760 and $59,670, 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
future minimum rentals shown below.
Future minimum annual rentals on these leases as of January 31,
1998 are as follows:
Year Ending
January 31,
1999 $ 1,286,101
2000 1,195,018
2001 1,219,107
2002 1,219,107
2003 756,986
2004 and thereafter 2,590,786
-----------
$ 8,267,105
===========
Rental expense for the years ended January 31, 1998, 1997 and 1996
was approximately $1,047,000, $626,600 and $517,600, respectively.
7. 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. Effective
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 $165,000, $111,000 and $41,000 for the years ended
January 31, 1998, 1997 and 1996, respectively.
8. 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 issuance of an aggregate of
664,900 shares of the Company's Common Stock for options granted
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 issuance of an aggregate of 300,000 shares of the
Company's Common Stock for options granted under the Plan.
Incentive Stock Options granted 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 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 Plan were granted prior to September 1, 1997. All options
available to be granted under the 1996 Plan, totaling 104,125 at
January 31, 1998, must be granted by October 10, 2006. The options
currently outstanding have terms that expire between five to ten
years from the date of grant and vest over a period of three to four
years from the date of grant.
Information regarding options under the 1987 Plan is as follows:
<TABLE>
<CAPTION>
Weighted
Option Average
Price Exercise
Per Share Outstanding Exercisable Price
<S> <C> <C> <C> <C>
January 31, 1995 balance $ 1.03 - 9.63 634,900 378,718 $ 3.57
Granted $ 7.99 - 8.63 33,000 -- $ 8.32
Became Exercisable $ 1.03 - 9.63 -- 269,582 --
Exercised $ 1.99 (8,000) (8,000) $ 1.99
Cancelled $ 8.75 (17,000) (17,000) $ 8.75
----------------- ----------------- ----------------- -----------------
January 31, 1996 balance $ 1.03 - 9.63 642,900 623,300 $ 3.70
----------------- ----------------- ----------------- -----------------
Granted $ 9.50 22,000 -- $ 9.50
Became Exercisable -- -- 18,100 --
Exercised $ 1.99 - 6.57 (18,228) (18,228) $ 3.27
----------------- ----------------- ----------------- -----------------
January 31, 1997 $ 1.03 - 9.63 646,672 623,172 $ 3.91
----------------- ----------------- ----------------- -----------------
Became Exercisable -- -- 23,500 --
Exercised $ 1.03 - 9.50 (361,272) (361,272) $ 3.22
Cancelled $ 5.63 - 9.50 (6,000) (6,000) $ 7.70
----------------- ----------------- ----------------- -----------------
January 31, 1998 balance $ 1.03 - 9.63 279,400 279,400 $ 4.72
================= ================= ================= =================
Information regarding options under the 1996 plan is as follows:
Weighted
Option Average
Price Exercise
Per Share Outstanding Exercisable Price
January 31, 1997 balance -- -- -- --
Granted $ 14.50 - 20.00 232,000 $ 16.81
Became Exercisable $ 14.50 - 20.00 -- 33,625 --
Exercised $ 14.50 (10,875) (10,875) $ 14.50
Cancelled $ 14.50 (36,125) (875) $ 14.50
----------------- ----------------- ----------------- -----------------
January 31, 1998 balance $ 14.50-20.00 185,000 21,875 $ 17.40
================= ================= ================= =================
</TABLE>
<TABLE>
<CAPTION>
The following table summarizes information about options outstanding under the 1987 and 1996 plans:
Options Outstanding Options Exercisable
------------------------------------ ------------------------------------
Weighted-
Average Weighted- Weighted-
Range of Number of Remaining Average Number of Average
Exercise Shares Contractual Exercise Shares Exercise
Prices Outstanding Life Price Outstanding Price
<S> <C> <C> <C> <C> <C> <C>
$1.03 - 9.63 279,400 2.77 years $ 4.72 279,400 $ 4.72
$14.50 -20.00 185,000 3.17 years $ 17.40 21,875 $ 14.50
------------- ------------- ------------- ------------- ------------- -------------
$1.03 - 20.00 464,400 2.93 years $ 9.77 301,275 $ 5.43
------------- ------------- ------------- ------------- ------------- -------------
Compensation expense related to the nonqualified stock options was $136,265, $57,219 and $68,815 for the years ended
January 31, 1998, 1997 and 1996, respectively.
Compensation expense related to the remeasurement of nonqualified and incentive stock options was $433,126,
$3,482,344 and $0 for the years ended January 31, 1998, 1997 and 1996, 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 plans been determined based on the
fair value at the grant date for awards in the fiscal years ended January 31, 1998, 1997 and 1996, consistent with the
provisions of SFAS No. 123, the Company's net earnings and basic and diluted earnings per share would have been
reduced to the pro forma amounts indicated below:
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
(As Restated,
See Note 14)
<S> <C> <C> <C>
Net earnings - as reported $ 1,094,001 $ 491,454 $ 1,554,589
Net earnings (loss) - pro forma 931,066 (52,536) 1,544,510
Basic earnings per share - as reported 0.35 0.17 0.53
Basic earnings (loss) per share - pro forma 0.30 (0.02) 0.53
Diluted earnings per share - as reported 0.32 0.15 0.48
Diluted earnings (loss) per share - pro forma 0.27 (0.02) 0.47
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 1998, 1997 and 1996: dividend yield
of 0.00% for the three years; expected volatility of 67.82%, 33.00% and 33.00%, respectively; risk-free interest rate
of 6.53%, 6.72% and 6.72%, respectively; and expected lives of 5 years for each of the three years.
</TABLE>
9. 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
employees in the amounts of $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. These three notes were repaid with interest in
January, 1998.
In 1993, the Company made a separate $100,000 unsecured loan to the
above mentioned employee for the purchase of the Company's common
stock. This note is shown as a reduction in shareholder's equity as
of January 31, 1997. This note was repaid in full as of January 31,
1998.
10. LONG-TERM DEBT
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 a $6,000,000 facility for the
purchase of machinery and equipment, primarily switching equipment,
and is secured by the Company's machinery and equipment.
The Company had drawn down $2,000,000 of the $6,000,000 Facility in
the prior year. In the current year, the Company converted the balance
to a term loan payable in monthly installments of $55,923 including
principal and interest payable over a term of 60 months. The
remaining balance on this note as of January 31, 1998 was $2,579,201,
of which $487,000 was classified as current.
The Company has utilized $100,000 of the unsecured line of credit
for the issuance of a letter of credit.
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 7.71% on the balance.
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, 1998 and 1997, the Company was in compliance with all
covenants of the facility.
On March 16, 1998, the Company entered into an Amended and Restated
Equipment Facility and Revolving Credit Agreement (the "Amended
Facility") with the same bank. This Amended Facility increases the
unsecured line of credit to $8,000,000 and the Facility for the
purchase of machinery and equipment to $5,000,000.
Scheduled maturities of notes payable during the next five years and
thereafter are as follows:
Years Ending
January 31,
1999 $ 487,000
2000 526,361
2001 568,653
2002 615,113
2003 382,074
2004 and thereafter --
------------
$ 2,579,201
============
11. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in a law suit, filed by one of its
customers for alleged breach of contract, seeks compensatory and
punitive damages of $1,300,000. The Company believes that the suit
is completely without merit and intends to vigorously defend it.
However the outcome cannot be determined at this time.
12. EARNINGS PER SHARE
Basic earnings per share was computed by dividing net earnings by
the weighted average number of shares of common stock outstanding
during each year. Diluted earnings per share was computed on the
assumption that all stock options converted or exercised during each
year or outstanding at the end of each year were converted at the
beginning of each year or at the date of issuance or grant, if
dilutive.
<TABLE>
<CAPTION>
The reconciliation of the earnings and common shares included in the computation of basic earnings per common share and
diluted earnings per common share for the years ended January 31, 1998, 1997 and 1996 is as follows:
1998 1997 1996
Earnings Shares Per-Share Earnings Shares Per-Share Earnings Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Earnings $ 1,094,001 $ 491,454 $ 1,554,589
----------- ----------- -----------
Basic Earnings
Per Share: 1,094,001 3,106,702 $ 0.35 491,454 2,941,330 $ 0.17 1,554,589 2,908,702 $ 0.53
Effect of Dilutive
Securities:
Stock Options 314,473 427,931 354,187
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Diluted Earnings
Per Share $ 1,094,001 3,421,175 $ 0.32 $ 491,454 3,369,261 $ 0.15 $ 1,554,589 3,262,889 $ 0.48
=========== =========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Amounts in thousands except per share data.
April 30, July 31, October 31, January 31,
1995 1995 1995 1996
<S> <C> <C> <C> <C>
Revenues $ 10,516 $ 11,620 $ 13,454 $ 14,283
Operating income 569 410 948 382
Net earnings 366 246 594 349
Basic earnings per common share 0.13 0.08 0.20 0.12
Diluted earnings per common share 0.11 0.08 0.18 0.11
April 30, July 31, October 31, January 31,
1996 1996 1996 1997
(restated)
Revenues $ 17,370 $ 23,118 $ 23,948 $ 24,890
Operating income (loss) 807 1,251 1,311 (2,716)
Net earnings (loss) 503 781 810 (1,602)
Basic earnings (loss) per common share 0.17 0.27 0.28 (0.55)
Diluted earnings (loss) per common share 0.15 0.23 0.24 (0.55)
April 30, July 31, October 31, January 31,
1997 1997 1997 1998
Revenues $ 26,333 $ 36,152 $ 29,919 $ 30,882
Operating income (loss) 1,048 480 577 (557)
Net earnings (loss) 623 258 316 (103)
Basic earnings (loss) per common share 0.20 0.08 0.10 (0.03)
Diluted earnings (loss) per common share 0.18 0.08 0.09 (0.03)
</TABLE>
<TABLE>
<CAPTION>
14. RESTATEMENT
Subsequent to the issuance of the January 31, 1997 financial statements,
the Company's management determined that an additional $3,482,344 in
compensation expense should have been recorded in connection with the an
extension of the exercise period of certain stock options that were granted
to certain employees in 1992. These options were due to expire in 1997 and
were extended, in January of 1997, for an additional five year period. As a
result, the financial statements were restated from amounts previously
reported to recognize the additional compensation expense and its effect
on the income tax provision and deferred taxes.
The effect of the restatement is as follows:
As
For the year ended Previously
January 31, 1997 Reported As restated
<S> <C> <C>
Consolidated Balance Sheet:
Current Deferred income tax asset $ 263,600 $ 196,800
Long term deferred income tax asset -- 602,159
Long term deferred income tax liability 850,301 --
Additional paid in capital 3,572,026 7,054,370
Retained earnings 11,178,467 9,081,783
Consolidated Statement of Earnings:
Stock compensation expense 57,219 3,539,563
Net earnings 2,588,138 491,454
Income tax provision 1,671,200 285,540
Basic earnings per common share $ 0.88 $ 0.17
Diluted earnings per common share $ 0.75 $ 0.15
</TABLE>
15. SUBSEQUENT EVENTS
On March 31, 1998, the Board of Directors of the Company (the
"Board") adopted a Shareholder Rights Plan and declared a dividend
of one common share purchase right ("Right") for each share of
common stock of the Company outstanding on April 13, 1998. Until it
is announced that a person or group has acquired 20% or more of the
outstanding common stock of the Company ("Acquiring Person") or has
commenced a tender offer that could result in such person or group
owning 10% or more of such common stock, the Rights will initially
be redeemeable for $0.01 each, will be evidenced solely by the
Company's stock certificates, will automatically trade with the
Company's common stock and will not be exercisable. Following any
such announcement, separate Rights certificates would be
distributed, with each Right entitling its holder to purchase common
stock of the Company for an exercise price of $125, subject to
adjustment, as more fully described below.
Upon announcement that any person or group has become an Acquiring
Person and unless the Board acts to redeem the Rights, then ten
business days after such announcement (the "Flip-in Date"), each
Right (other than Rights beneficially owned by an Acquiring Person
or transferee thereof, which Rights become void) will entitle the
holder to purchase, for the $125 exercise price, a number of shares
of the Company's common stock having an aggregate market value of
$250. In addition, if, after the Acquiring Person gains control of
the Board, the Company is involved in a merger with any person or
sells more than 50% of its assets or earning power to any person (or
has entered into an agreement to do either of the foregoing), and,
in the case of a merger, an Acquiring Person would receive different
treatment than other stockholders, each Right would entitle its
holder to purchase, for the $125 exercise price, a number of shares
of common stock of such other person having an aggregate market
value of $250. If any person or group acquires between 10% and 50%
of the Company's common stock, the Board may, at its option, require
the Rights to be exchanged for common stock of the Company. The
Rights generally may be redeemed by the Board for $0.01 per Right
prior to the Flip-in Date.
******
<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 Charge Offs Period
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 31,
1998:
Reserves and allowances
deducted from asset accounts:
Allowance for uncollectible
accounts $ 1,053,670 $416,713 $ -- $603,962 $866,421
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
</TABLE>
Total-Tel 10K.edg Page 52 To Total-Tel
AMENDED AND RESTATED 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 ________, 1997, 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 New
Jersey corporation ("Total-Tel Comm"), TOTAL-TEL, INC., a New Jersey
corporation and wholly owned subsidiary of Total-Tel Comm ("Total-
Tel"), TOTAL-TEL USA, INC., a New Jersey corporation and wholly owned
subsidiary of Total-Tel Comm ("Total-Tel USA"), TOTAL-TEL CARRIER
SERVICES, INC., a New Jersey corporation and wholly owned subsidiary
of Total-Tel Comm ("Total-Tel Carrier"), and TOTAL-TEL INTERNATIONAL,
INC., a ________________ corporation and wholly owned subsidiary of
Total-Tel Comm ("Total-Tel International"), TOTAL-TEL SOUTHEAST, INC.,
a Georgia corporation and wholly owned subsidiary of Total-Tel Comm
("Total-Tel Southeast"), TOTAL-TEL SERVICES, INC., a New Jersey
corporation and wholly owned subsidiary of Total-Tel Comm ("Total-Tel
Services"), TOTAL-TEL FLORIDA, INC., a New Jersey corporation and
wholly owned subsidiary of Total-Tel Comm ("Total-Tel Florida"), and
TOTAL-TEL U.K., LTD., a corporation organized under the laws of the
United Kingdom and a wholly owned subsidiary of Total-Tel Comm
("Total-Tel U.K."), Total-Tel Comm, Total-Tel, Total-Tel USA, Total-
Tel Carrier Total-Tel International, Total-Tel Southeast, Total-Tel
Services, Total-Tel Florida and Total-Tel U.K. are hereafter each
referred to as a "Borrower" and collectively referred to as the
"Borrowers").
BACKGROUND
WHEREAS, pursuant to that certain Equipment Facility and
Revolving Credit Agreement dated August 23, 1996 (the "1996
Agreement"), the Bank made available to Total-Tel Comm, Total-Tel,
Total-Tel USA and Total-Tel Carrier an equipment purchase facility in
the principal amount of up to $6,000,000 (the "1996 Equipment
Facility") for the purpose of financing the acquisition from time to
time of certain digital switching equipment and related computer
equipment to be used in the operation of such Borrowers' long distance
telephone service business ("Financed Equipment"); and
WHEREAS, pursuant to the 1996 Agreement, the Bank further made
available to Total-Tel Comm, Total-Tel, Total-Tel USA and Total-Tel
Carrier a committed revolving credit facility, pursuant to which such
Borrowers were able to request advances from time to time in a
principal amount of up to $4,000,000 outstanding at any time (the
"1996 Revolving Credit Facility"); and
WHEREAS, Total-Tel Comm, Total-Tel, Total-Tel USA and Total-Tel
Carrier have requested that the Bank amend the 1996 Agreement to make
available to the Borrowers, in addition to the amounts outstanding
pursuant to the 1996 Equipment Facility which, as of the date hereof
totals $___________, an equipment purchase facility in a maximum
principal amount of up to $5,000,000 for the purpose of financing the
acquisition of Financed Equipment; and
WHEREAS, Total-Tel Comm, Total-Tel, Total-Tel USA and Total-Tel
Carrier have further requested that the Bank amend the 1996 Agreement
to include Total-Tel International, Total-Tel Souteast, Total-Tel
Services, Total-Tel Florida and Total-Tel U.K. as Borrowers under both
the Equipment Facility and the Revolving Credit Facility, and to
increase the maximum principal amount of the 1996 Revolving Credit
Facility to $8,000,000 outstanding at any time; and
WHEREAS, the Bank is willing to amend and restate the 1996
Agreement in order 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 Borrowers 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 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 may be made as Prime Rate Loans or LIBOR Loans, as
requested by the relevant Borrower pursuant to the notice of borrowing
delivered with respect thereto pursuant to Section 1.03 hereof. Upon
the conversion of the Equipment Loans into a single term loan pursuant
to Section 1.04 hereof, such Loan shall be a Fixed Rate Loan.
1.02 Equipment Facility Maximum Principal Amount. The
maximum aggregate principal amount of Equipment Loans outstanding at
any time, not including the amounts outstanding pursuant to the 1996
Equipment Facility, which as of the date hereof totals $_________,
shall not exceed FIVE MILLION 00/100 DOLLARS ($5,000,000.00), 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 desires 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 3 Business Days 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) a 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 $50,000.00.
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 3 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 is less than $2,000,000.00. The notice delivered
pursuant to the foregoing sentence shall state the effective date of
such conversion, which in no event shall be beyond the Equipment
Facility Expiration Date (the "Conversion Date"). If conversion is
permitted hereunder, then (i) the Term Loan shall mature and be due
and payable on the fifth (5th) anniversary of the Conversion Date (the
"Term Loan Maturity Date"), and (ii) effective as of the Conversion
Date, all Equipment Loans then outstanding shall be deemed
consolidated into a single Term Loan and all such Loans as so
consolidated shall be deemed refinanced as of the Conversion Date at
the interest rate basis (plus any applicable margin as set forth in
Section 1.05 hereof) selected by the Borrowers in the notice of
conversion delivered pursuant to this Section 1.04. If the Borrowers
select a Conversion Date which shall cause any then outstanding
Equipment Loan that is a LIBOR Loan to be deemed consolidated into the
Term Loan on any date other than the last day of the then expiring
Interest Period applicable thereto, then the Borrowers shall indemnify
the Bank for any loss or expense described in Section 4.05 hereof that
is incidental to such consolidation.
1.05 Interest on Equipment Loans/Term Loan. Prior to the
Conversion Date (if any), (i) interest on the Equipment Loan that is a
Prime Rate Loan shall accrue at a per annum rate equal to the Prime
Rate as in effect from time to time and be payable monthly, in
arrears, on each Payment Date during which such Loan is outstanding,
and upon payment in full of the aggregate outstanding balance thereof
and (ii) interest on each Equipment Loan that is a LIBOR Loan shall
accrue at a per annum rate equal to LIBOR plus 200 basis points (2.0%)
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. Upon conversion of the Equipment Loans to a
Term Loan, interest shall accrue thereon from the Conversion Date at a
per annum rate equal to the Fixed Rate plus 150 basis points (1.50%)
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 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 3 Business Days prior to the
Conversion Date. Upon such election, the Bank shall promptly (but in
no event later than 2 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 accrued and unpaid interest
thereon.
1.07 Conversion of 1996 Equipment Facility. Pursuant to the
terms and conditions of the 1996 Agreement, on ________ ___, 19__, the
entire aggregate outstanding principal balance of the advances made
under the 1996 Equipment Facility (the "1996 Equipment Loans") was
converted to a single term loan (the "1996 Term Loan"), which is
evidenced by a term note in the form of "Equipment Facility/Term Note"
attached hereto as Exhibit C (the "1996 Term Note").
1.08 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 EIGHT MILLION 00/100 DOLLARS ($8,000,000.00) (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 D hereto (together with any
attachments thereto and/or amendments or modifications thereof in
effect from time to time, the "Revolving Credit Note").
1.09 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
Outstanding at such time shall not exceed EIGHT MILLION 00/100 DOLLARS
($8,000,000.00), 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 Outstanding at any time exceed the Maximum Revolving
Credit Principal Amount, the Borrowers shall immediately repay to the
Bank the amount of such excess.
1.10 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
Outstanding at such time, would exceed $1,000,000.00 or (y) when added
to the sum of the aggregate outstanding principal amount of the
Revolving Credit Loans plus the Letter of Credit Outstanding, 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 one year from the date of
issuance and in any event no later than (i) 6 months, in the case of
commercial letters of credit, and (ii) 1 year, in the case of
irrevocable automatically renewable letters of credit, after the
Revolving Credit Expiration Date. Each Letter of Credit 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 3
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 letter
of credit fees and other expenses that are customarily charged by the
Bank in connection therewith.
1.11 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 200 basis points (2.0%) 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.
1.12 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 Credit Expiration Date.
1.13 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 E. Each borrowing under the Revolving Credit Facility shall
be in an amount equal to $50,000.00 or any whole multiple thereof.
1.14 Revolving Credit Interest Conversion and Continuance
Options.
(a) Subject to the limitation of the last sentence of
Section 1.13 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 1.14, then any such Loan shall automatically convert
to a Prime Rate Loan on the last day of the then expiring applicable
Interest Period.
1.15 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.
1.16 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:
Amended and Restated Security Agreement. The term "Amended and
Restated Security Agreement" means that certain Amended and Restated
Security Agreement of the Borrowers in favor of the Bank of even date
herewith.
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 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 Amended and Restated 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) February 28, 1999, 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 (rounded up to the next highest 1/8 of 1%) 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 3 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 of 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 times 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 Carrier, Total-Tel
International, Total-Tel Southeast, Total-Tel Services, Total-Tel
Florida and Total-Tel U.K.
Guaranties. The term "Guaranties" means collectively the
Guaranty and Suretyship Agreement 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. S101), 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 (or the Borrowers) in the relevant notice with
respect thereto given pursuant to Section 1.03, 1.04, 1.12 or 1.14
hereof, as the case may be; 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
1.14(b)(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 (a) with respect to a Revolving Credit Loan, would extend such
Interest Period beyond the Revolving Credit Expiration Date, (and)
with respect to an Equipment Loan, would extend such Interest Period
beyond the Equipment Facility 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 1.10 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 1.10 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, Term Loan or the 1996 Term Loan, as the context shall
require, and the term "Loans" means, collectively, the Revolving
Credit Loans, Equipment Loans, Term Loan and the 1996 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 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 1.09 hereof.
Note. The term "Note" means the Equipment Facility Note,
the Revolving Credit Note or the 1996 Term Note, as the context shall
require, and the term "Notes" means, collectively, the Equipment
Facility Note, the Revolving Credit Note and the 1996 Term 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, ,
1998 and the same day of each month occurring thereafter; provided,
however, on or about the Conversion Date, the Bank may adjust the
Payment Dates with respect to interest payable on the Term Loan to
cause such dates to coincide with the dates otherwise set for payment
of installment of principal pursuant to Section 1.06 hereof.
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, 1998.
Revolving Credit Facility. The term "Revolving Credit
Facility" shall have the meaning assigned to such term in Section 1.08
hereof.
Revolving Credit Loan and Revolving Credit Loans. The terms
"Revolving Credit Loan" and "Revolving Credit Loans" shall have the
meanings assigned to such terms in Section 1.08 hereof.
Revolving Credit Note. The term "Revolving Credit Note"
shall have the meaning assigned to such term in Section 1.08 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.
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.
1996 Agreement. The term "1996 Agreement" shall have the meaning
assigned to such term in the first recital clause of this Agreement
1996 Equipment Facility. The term "1996 Equipment Facility"
shall have the meaning assigned to such term in the first recital
clause of this Agreement.
1996 Equipment Loan and 1996 Equipment Loans. The terms "1996
Equipment Loan" and "1996 Equipment Loans" shall have the meanings
assigned to such terms in Section 1.07 hereof.
1996 Revolving Credit Facility. The term "1996 Revolving Credit
Facility" shall have the meaning assigned to such term in the second
recital clause of this Agreement.
1996 Term Note. The term "1996 Term Note" shall have the
meaning assigned to such term in Section 1.07 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
$50,000.00, or any multiple 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 $50,000.00, 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 and the 1996 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) 2%
of the amount of the prepayment if the prepayment occurs during the
first or second year of the term of the Term Loan or the 1996 Term
Loan, as the case may be, or (ii) 1% of the amount of the prepayment
if the prepayment occurs during the third or fourth year of the term
of the Term Loan or the 1996 Term Loan, as the case may be. There
shall be no prepayment fee payable pursuant to this Section 3.02 if
the prepayment occurs during the fifth year of the term of the Term
Loan or the 1996 Term Loan, as the case may be. All partial
prepayments of principal balance of the Term Loan or the 1996 Term
Loan shall be applied to the such Loan in inverse order of maturity.
All prepayments of the Term Loan or the 1996 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 1.14 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 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 1.14 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 Borrowers 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, jointly and severally, 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, (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, (iii) default by any Borrower in making any
borrowing of a LIBOR Loan under the Equipment Facility or Revolving
Credit Facility, as the case may be, after such Borrower has given
notice thereof in accordance with Section 1.03 or 1.12 hereof, (iv)
default by any Borrower in making any prepayment after such Borrower
has given a notice thereof, or (v) the consolidation of any LIBOR Loan
into the Term Loan pursuant to Section 1.04 hereof on any date other
than the last day of the Interest Period applicable thereto. 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 F, 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) permit the conversion of any Revolving Credit
Loan to a LIBOR Loan pursuant to Section 1.14 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 or jurisdiction 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 its assets is 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
the only Subsidiaries of Total-Tel Comm and each such Subsidiary is a
corporation, duly organized, validly 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. The audited consolidated
financial statements contained in the Form 10-K of Total-Tel Comm
filed with the SEC for the fiscal year ended January 31, 1997 and the
consolidated financial statements contained in the Form 10-Q of Total-
Tel Comm for the fiscal quarter ended October 31, 1997 were prepared
in accordance with GAAP, consistently applied, are true and correct in
all material respects, present fairly the financial condition of the
Borrowers, and, taken together, 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, to
the best of each Borrower's knowledge there are no actions, suits,
proceedings, or claims pending or threatened against the Borrowers, or
any of their respective properties which, if adversely determined
against any Borrower, would have a Material Adverse Effect.
6.06 Defaults. None of the Borrowers is 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. _ 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. Each Borrower has 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. To the best of each
Borrower's knowledge, ach 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 is 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 and shall 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 Business Integration. The business operations of
Borrowers 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, 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 in
all material respects by 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, income and cash flows,
a reconciliation of net worth, and supporting schedules (prepared in
accordance with GAAP consistently applied, and certified as true,
correct and complete in all material respects by Total-Tel Comm's
chief financial officer); (iii) promptly upon filing the same with the
SEC, copies of any filings and registrations with, and reports to, the
SEC by Total-Tel Comm, including, but not limited to, any reports on
Form 8-K (or successor form 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 G hereto, signed by Total-Tel
Comm's chief financial officer, certifying that: (i) all
representations 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 has 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 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 Borrower'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 1996 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, in an amount sufficient to
discharge the clam out of which the lien arises, one of the following:
(x) a bond satisfactory to the Governmental Authority, (y) a cash
deposit, or (z) other security reasonably satisfactory to such
Governmental Authority.
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 Financed 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 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 currently 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 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.
8.05 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 $500,000; provided, however, that in no event shall
there be outstanding under such loans an amount in excess of $250,000
on an unsecured basis and for terms longer than 1 year.
8.06 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.
8.07 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.
8.08 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.
8.09 Tangible Net Worth. Total-Tel Comm shall not permit its
Tangible Net Worth at any time to be less than $12,500,000, 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 as shown 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.
8.10 Debt to Equity Ratio. Total-Tel Comm shall not permit
the ratio of its Total Liabilities to Tangible Capital Funds 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 as shown 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 8.10 hereof plus (ii) the principal amount of any
then outstanding Approved Subordinated Debt.
8.11 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.
8.12 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.
8.13 Change Fiscal Year. Total-Tel Comm shall not change its
fiscal year to end on any date other than January 31, or permit the
fiscal year end of any of its Subsidiaries to end on any day other
than January 31.
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, within ten (10) days after the due date, of any principal of,
or interest on, the Loans or (ii) default in the payment, within ten
(10) days after the due date, of 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 30 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 $600,000.00 (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 $100,000.00 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 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 and not
stayed or discharged within 30 days of the commencement thereof;
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 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, other than the merger of any
Borrower (other than Total-Tel Comm) into another Borrower;
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 which, in the aggregate,
involve liabilities in excess of the sum of $100,000.00 (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.
10.03 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 Superseding Effect. 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 Borrower 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, jointly and severally, agree 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, jointly and severally, 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: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL CARRIER SERVICES, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL INTERNATIONAL, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL SOUTHEAST, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL SERVICES, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL FLORIDA, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL U.K., LTD.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
SUMMIT BANK
By:_____________________________
Name:
Title:
Address:________________________
________________________
Telecopier:_____________________
EXHIBIT A
EQUIPMENT FACILITY/TERM NOTE
$5,000,000.00 _____________ __, 1997
, 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 February 28, 1999 (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 Amended and Restated
Equipment Facility and Revolving Credit Agreement, dated as of
__________ , 1998, 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 its
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. In the event that any payment hereunder
shall not be received by the Bank within ten (10) days of the due date
thereof, the undersigned shall, to the extent permitted by law, pay
the Bank a late charge of five percent (5%) of the overdue payment
(but in no event to be less than $25.00 nor more than $2,500.00). Any
such late charge assessed is immediately due and payable.
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, which shall not be
unreasonably withheld, 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.
6. 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: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL, INC.
By:__________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:__________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL CARRIER SERVICES, INC.
By:__________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL INTERNATIONAL, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL SOUTHEAST, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL SERVICES, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL FLORIDA, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL U.K., LTD.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
EXHIBIT B
Notice of Borrowing Under
Equipment Facility
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 requests a borrowing
("Borrowing") in the form of an Equipment Loan under the Amended and
Restated Equipment Facility and Revolving Credit Agreement dated as of
________ __, 1998 (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 D
AMENDED AND RESTATED REVOLVING CREDIT NOTE
$8,000,000.00 __________ ___, 1997
, 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
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, 1998.
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 Amended and Restated Equipment
Facility and Revolving Credit Agreement, dated as of _______ , 1998,
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. In the event that any payment hereunder
shall not be received by the Bank within ten (10) days of the due date
thereof, the undersigned shall, to the extent permitted by law, pay
the Bank a late charge of five percent (5%) of the overdue payment
(but in no event to be less that $25.00 nor more than $2,500.00). Any
such late charge assessed is immediately due and payable.
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. Superseding Effect. This Restated Revolving Credit
Note supersedes the note issued under the 1996 Revolving Credit
Facility in the original principal amount of $4,000,000.00. This
Restated Revolving Credit Note is issued in substitution and
replacement of such 1996 note and not in payment thereof, any and all
amounts due pursuant to such 1996 note including, without limitation,
all accrued and unpaid interest, shall be evidenced hereby and paid in
accordance with the terms hereof.
4. 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, which shall not be unreasonably
withheld, and any such assignment or attempted assignment by any of
the undersigned shall be void and of no effect with respect to the
Bank.
5. 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.
6. 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: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL CARRIER SERVICES, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL INTERNATIONAL, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL SOUTHEAST, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL SERVICES, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL FLORIDA, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL U.K., LTD.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
EXHIBIT E
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 F
CLOSING CHECKLIST
SUMMIT BANK ( the "Bank")
AMENDED AND RESTATED EQUIPMENT FACILITY
AND REVOLVING CREDIT AGREEMENT
with
TOTAL-TEL USA COMMUNICATIONS, INC.
TOTAL-TEL, INC.,
TOTAL-TEL USA, INC.
TOTAL-TEL CARRIER SERVICES, INC.
TOTAL-TEL INTERNATIONAL, INC.
TOTAL-TEL SOUTHEAST, INC.
TOTAL-TEL SERVICES, INC.
TOTAL-TEL FLORIDA, INC.
and
TOTAL TEL U.K., LTD.
as "Borrowers"
__________ __, 1998
1. Amended and Restated Equipment Facility and Revolving Credit
Agreement
2. Equipment Facility/Term Note
3. Amended and Restated Revolving Credit Note
4. 1996 Term Note
5. Guaranty and Suretyship Agreement of Borrowers
6. Amended and Restated Security Agreement
7. Certificate of Authority and Incumbency from Secretary of each
Borrower, which shall have attached as and exhibit an Authorizing
Resolution of the Board of Directors
8. Certificates of Good Standing for each Borrower in New Jersey
9. Certificates of Qualification to do business as a foreign
corporation in New York and Florida, as appropriate
10. UCC, Tax Lien and Judgment Searches against each Borrower in
all appropriate jurisdictions
11. Opinion of Counsel to Borrowers
12. Evidence of Requisite Insurance
13. Current financial statements [if any]
14. Reliance letter from Borrowers' certified public accountant
regarding audited annual statements
EXHIBIT G
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 Amended and Restated
Equipment Facility and Revolving Credit Agreement (the "Credit
Agreement") dated as of ___________ , 1998.
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 that to the best of his/her knowledge:
(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 8.10, 8.11, 8.12 and 8.13 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.
Total-Tel Sarasota, Inc.
Total-Tel International, Inc.
Total-Tel Florida, Inc.
Total-Tel U.K., Ltd.
ANNEX I (cont.)
PENDING LITIGATION
ANNEX I (cont.)
EXISTING INDEBTEDNESS
- -NONE-
ANNEX I (cont.)
PERMITTED EXISTING LIENS
- -NONE-
$13,000,000.00
AMENDED AND RESTATED EQUIPMENT FACILITY
AND REVOLVING CREDIT AGREEMENT
By and Between
SUMMIT BANK,
as Bank
and
TOTAL-TEL USA COMMUNICATIONS, INC.,
TOTAL-TEL, INC.,
TOTAL-TEL USA, INC.,
TOTAL-TEL CARRIER SERVICES, INC.,
and
TOTAL-TEL INTERNATIONAL, LTD.
as Borrowers
Dated as of ___________ ___, 1997
BORROWER GUARANTY AND SURETYSHIP AGREEMENT
This BORROWER AND SURETYSHIP AGREEMENT, dated as of __________
___, 1998 (together with all modifications and amendments hereto in
effect from time to time, this Guaranty) is made by TOTAL-TEL USA
COMMUNICATIONS, INC., a New Jersey corporation (Total-Tel Comm),
TOTAL-TEL, INC., a New Jersey corporation, TOTAL-TEL USA, INC., a New
Jersey corporation, TOTAL-TEL CARRIER SERVICES, INC., a New Jersey
corporation, TOTAL-TEL INTERNATIONAL, INC., a __________ corporation,
TOTAL-TEL SOUTHEAST, INC., a Georgia corporation (Total-Tel
Southeast), TOTAL-TEL SERVICES, INC., a New Jersey corporation
(Total-Tel Services), TOTAL-TEL FLORIDA, INC., a New Jersey
corporation (Total-Tel Florida), and TOTAL-TEL U.K., LTD., a
corporation organized under the laws of the United Kingdom (Total-Tel
U.K.) (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 Amended and Restated 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 by 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 Amended and
Restated Security Agreement of the Guarantors in favor of the Bank,
dated as of even date herewith (hereinafter, the Security Agreement)
and any other property of any 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
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 and each
and every maker, endorser, guarantor, and surety 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 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. Total-Tel, Inc. Total-Tel USA, Inc.,
Total-Tel Carrier Services, Inc., Total-Tel International, Inc.,
Total-Tel Southeast, Total-Tel Services, Total-Tel Florida and Total-
Tel U.K. 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 a 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:
TOTAL-TEL CARRIER SERVICES, INC.
WITNESS OR ATTEST:
By:___________________________ By:______________________________
Name: Name:
Title: Title:
TOTAL-TEL INTERNATIONAL, INC.
WITNESS OR ATTEST:
By:___________________________ By:______________________________
Name: Name:
Title: Title:
TOTAL-TEL SOUTHEAST, INC.
WITNESS OR ATTEST:
By:___________________________ By:______________________________
Name: Name:
Title: Title:
TOTAL-TEL SERVICES, INC.
WITNESS OR ATTEST:
By:___________________________ By:______________________________
Name: Name:
Title: Title:
TOTAL-TEL FLORIDA, INC.
WITNESS OR ATTEST:
By:___________________________ By:______________________________
Name: Name:
Title: Title:
TOTAL-TEL U.K., LTD.
WITNESS OR ATTEST:
By:___________________________ By:______________________________
Name: Name:
Title: Title:
ACKNOWLEDGED AND ACCEPTED BY:
SUMMIT BANK
By:________________________
Name:
Title:
AMENDED AND RESTATED SECURITY AGREEMENT
This SECURITY AGREEMENT, is dated as of this ________ day of
________, 1998 (this Agreement), made by TOTAL-TEL USA
COMMUNICATIONS, INC., a New Jersey corporation (Total-Tel Comm),
TOTAL-TEL, INC., a New Jersey corporation (Total-Tel), TOTAL-TEL USA,
INC., a New Jersey corporation (Total-Tel USA), TOTAL-TEL CARRIER
SERVICES, INC., a New Jersey corporation, TOTAL-TEL INTERNATIONAL,
INC., a _____________ corporation, TOTAL-TEL SOUTHEAST, INC., a
Georgia corporation (Total-Tel Southeast), TOTAL-TEL SERVICES, INC.,
a New Jersey corporation (Total-Tel Services), TOTAL-TEL FLORIDA,
INC., a New Jersey corporation (Total-Tel Florida), and TOTAL-TEL
U.K., LTD., a corporation organized under the laws of the United
Kingdom (Total-Tel U.K.), 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, Total-Tel USA, Total-Tel Carrier,
Total-Tel International, Total-Tel Southeast, Total-Tel Services,
Total-Tel Florida and Total-Tel U.K. are herein referred to as the
Borrowers, and each of the Borrowers are herein referred to
individually as a Grantor and collectively as the Grantors.
PRELIMINARY STATEMENT
A. The Bank has entered into that Amended and Restated
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, in addition to the amounts outstanding
pursuant to the 1996 Equipment Facility which, as of the date hereof
totals $_____________, an equipment finance facility in the principal
amount of up to $5,000,000 and a revolving credit facility which,
when added to the Letter of Credit Outstanding, shall not exceed a
principal amount of $8,000,000. The obligations of the Borrowers
thereunder is evidenced by the Equipment Facility Note and the
Amended and Restated Revolving Credit Note referred to therein.
B. To support said obligations of the Borrowers under the
Credit Agreement, 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.
D. All capitalized terms used herein and not defined herein
shall have the meanings set forth in the Credit 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, including without limitation,
digital switching equipment and computer equipment and software that
is used or useful in such Grantor's long distance telephone service
business located at the Grantors' facilities at 744 Broad Street in
Newark, New Jersey, at ______________, New York, and at
_____________, Florida, (ii) such other equipment of the type
described in clause (i) above, wherever located, if the acquisition
of such equipment was or will be financed by the use of proceeds of
Equipment Loans or Revolving Credit Loans made under the Credit
Agreement, or the 1996 Equipment Loan referenced in the Credit
Agreement, and (iii) all tools, tooling, molds, templates, drawings,
schematics and other design descriptions of, and manufacturer's
manuals pertaining to, the foregoing; together with all parts and
replacements thereof, accessions and additions thereto and
substitutions and exchanges therefor (any and all such equipment,
parts, accessions, additions, substitutions and replacements being
the Equipment); and
(b) all of such Grantor's books and records indicating,
summarizing, evidencing or relating to the Equipment or the
Obligations; 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 that are used or useful in the
operation of the Equipment; 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; but specifically excluding any accounts receivable or
notes receivable of such Grantor generated by the use of the
Collateral in the ordinary course of such Grantor's business;
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 all obligations and indebtedness of Grantor or any
other Obligor, owed to the Bank arising under or in connection with
the indebtedness evidenced by the Equipment Facility Note, the
Revolving Credit Note and the 1996 Term Note, whether such
indebtedness is incurred under such Note, the Credit Agreement, the
Borrower Guaranty, or any amendments, modifications, extensions,
supplements or renewals of any of the foregoing, whether such
obligations are primary or secondary, direct or indirect, absolute or
contingent, sole, joint or several, contractual or tortious, due or
to become due, arising by operation of law or otherwise, and 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 a 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. Grantors Remain 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 (other than
those liens held by the Bank), 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 $100,000.00 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 evidenced by or arising under the Equipment Facility
Note as contemplated in Section 2 hereof 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: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-8509
WITNESS/ATTEST: TOTAL-TEL, INC.
By:___________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-8509
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:___________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-8509
WITNESS OR ATTEST: TOTAL-TEL CARRIER SERVICES, INC.
By:___________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-8509
WITNESS OR ATTEST: TOTAL-TEL INERNATIONAL, INC.
By:___________________________ By:_____________________________
Name: Name:
Title: Title:
Address:_____________________
_____________________
Telecopier:__________________
WITNESS OR ATTEST: TOTAL-TEL SOUTHEAST, INC.
By:___________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-8509
WITNESS OR ATTEST: TOTAL-TEL SERVICES, INC.
By:___________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-8509
WITNESS OR ATTEST: TOTAL-TEL FLORIDA, INC.
By:___________________________ By:_____________________________
Name: Name:
Title: Title:
Address:
Telecopier:
WITNESS OR ATTEST: TOTAL-TEL U.K., LTD.
By:___________________________ By:_____________________________
Name: Name:
Title: Title:
Address:
Telecopier:
ACCEPTED AND AGREED TO BY:
SUMMIT BANK
By:_____________________________
Name:
Title:
Address:_____________________
_____________________
Telecopier:__________________
470035v2
SCHEDULE I
TO
SECURITY AGREEMENT
Location of Chief Executive Office:
Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Locations of Equipment
744 Broad Street
Newark, New Jersey 07102
Lot ___, Block ___
________________________
________________________
England ____________
Record Owners of Equipment Location:
744 Broad Street Associates, L.L.C.
744 Broad Street
Newark, New Jersey 07102
Filing Offices
* Secretary of State of New Jersey
* Office of the Register of Essex County
CREDIT MODIFICATION AGREEMENT
This CREDIT MODIFICATION AGREEMENT (this "Agreement") is made
and entered into as of this ___ day of March, 1998 by and between
SUMMIT BANK (The "Bank"), a banking corporation organized under the
laws of the State of New Jersey, TOTAL-TEL USA COMMUNICATIONS, a New
Jersey corporation ("Total-Tel Comm"), TOTAL-TEL, INC., a New Jersey
corporation and wholly owned subsidiary of Total-Tel Comm ("Total-
Tel"), TOTAL-TEL USA, INC., a New Jersey corporation and wholly owned
subsidiary of Total-Tel Comm ("Total-Tel USA"), TOTAL-TEL CARRIER
SERVICES, INC., a New Jersey corporation and wholly owned subsidiary
of Total-Tel Comm ("Total-Tel Carrier"), TOTAL-TEL INTERNATIONAL,
INC., a New Jersey corporation and wholly owned subsidiary of Total-
Tel Comm ("Total-Tel International"), TOTAL-TEL SOUTHEAST, INC., a
Georgia corporation and wholly owned subsidiary of Total-Tel Comm
("Total-Tel Southeast"), TOTAL-TEL SERVICES, INC., a New Jersey
corporation and wholly owned subsidiary of Total-Tel Comm ("Total-Tel
Services"), TOTAL-TEL FLORIDA, INC., a New Jersey corporation and
wholly owned subsidiary of Total-Tel Comm ("Total-Tel Florida"), and
TOTAL-TEL U.K., LTD., a corporation organized under the laws of the
United Kingdom and a wholly owned subsidiary of Total-Tel Comm
("Total-Tel U.K."; Total-Tel Comm, Total-Tel, Total-Tel USA, Total-
Tel Carrier, Total-Tel International, Total-Tel Southeast, Total-Tel
Services, Total-Tel Florida and Total-Tel U.K. are hereafter each
referred to as a "Borrower" and collectively referred to as the
"Borrowers").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Equipment Facility and
Revolving Credit Agreement dated August 23, 1996 (the "1996
Agreement"), the Bank made available to Total-Tel Comm, Total-Tel,
Total-Tel USA and Total-Tel Carrier an equipment purchase facility in
the principal amount of up to $6,000,000 (the "1996 Equipment
Facility") for the purpose of financing the acquisition from time to
time of certain digital switching equipment and related computer
equipment to be used in the operation of such Borrowers' long
distance telephone service business ("Financed Equipment"); and
WHEREAS, pursuant to the 1996 Agreement, the Bank further made
available to Total-Tel Comm, Total-Tel, Total-Tel USA and Total-Tel
Carrier a committed revolving credit facility, pursuant to which such
borrowers were able to request advances from time to time in a
principal amount of up to $4,000,000 outstanding at any time (the
"1996 Revolving Credit Facility"); and
WHEREAS, pursuant to that certain Amended and Restated Equipment
Facility and Revolving Credit Agreement dated March ___, 1998 (the
"Amended Agreement"), the Bank amended the 1996 Agreement to make
available to the Borrowers, in addition to the amounts outstanding
pursuant to the 1996 Equipment Facility, an equipment purchase
facility in a maximum principal amount of up to $5,000,000 for the
purpose of financing the acquisition of Financed Equipment; and
WHEREAS, pursuant to the Amended Agreement, the Bank further
amended the 1996 Agreement to include Total-Tel International, Total-
Tel Southeast, Total-Tel Services, Total-Tel Florida and Total-Tel
U.K. as Borrowers under both the Equipment Facility and the Revolving
Credit Facility, and to increase the maximum principal amount of the
1996 Revolving Credit Facility to $8,000,000 outstanding at any time;
and
WHEREAS, Summit Bank, as holder of the Loan Documents, wishes to
further modify certain terms and conditions thereof, as hereinafter
set forth; and
WHEREAS, all capitalized terms used herein but not otherwise
defined herein shall have the meanings given to them in the Amended
Agreement.
NOW THEREFORE, in consideration of One Dollar ($1.00) together
with such other valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. Negative Covenants.
The parties hereby agree that Article VIII of the Amended
Agreement is hereby modified to add the following:
8.14 Mergers or Acquisitions. Each Borrower agrees that it
shall not permit another Person to acquire all or substantially all
of the capital stock or property of it or any of its Subsidiaries.
2. Counterparts
This Agreement may be executed in one or more counterparts,
each of which shall constitute an original and all of which when
taken together shall constitute one and the same instrument.
3. No Further Amendments
Except as modified herein, all of the terms and provisions
of the Amended Agreement and the other Loan Documents shall remain
unmodified and continue in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
WITNESS/ATTEST: TOTAL-TEL USA COMMUNICATIONS, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL USA, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL CARRIER SERVICES, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address: Overlook at Great Notch
150 Clove Road
Little Falls, NJ 07424
Telecopier: 201-812-7509
WITNESS/ATTEST: TOTAL-TEL INTERNATIONAL, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL SOUTHEAST, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL SERVICES, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL FLORIDA, INC.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
WITNESS/ATTEST: TOTAL-TEL U.K., LTD.
By:_____________________________ By:_____________________________
Name: Name:
Title: Title:
Address:________________________
________________________
Telecopier:_____________________
SUMMIT BANK
By:_____________________________
Name:
Title:
Address:________________________
________________________
Telecopier:_____________________
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL SERVICES, INC., a New
Jersey corporation (the "Company"), in connection with the
transactions contemplated in that certain Amended and Restated
Equipment Facility and Revolving Credit Agreement (the "Agreement"),
dated the date hereof, made by and among the Company, the other
borrowers named therein and SUMMIT BANK, DOES HEREBY CERTIFY THAT:
(a) There has been no change to the [Certificate/Articles]
of Incorporation of the Company since August 23, 1996.
(b) There has been no change to the By-Laws of the Company
since August 23, 1996, and the By-Laws are in full force and effect
as of the date hereof.
(c) Attached hereto as Exhibit A is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of the "Credit Documents" (as such term is
defined in the Agreement) to which the Company is a party, and such
resolution is in full force and effect as of the date hereof.
(d) The following are the duly elected, qualified and
acting officers of the Company who are authorized to act on behalf
of the Company in accordance with the transactions contemplated
under the Agreement and in accordance with the terms of the
Resolution, and that the signatures set forth opposite their
respective names below are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
____________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL FLORIDA, INC., a New
Jersey corporation (the "Company"), in connection with the
transactions contemplated in that certain Amended and Restated
Equipment Facility and Revolving Credit Agreement (the "Agreement"),
dated the date hereof, made by and among the Company, the other
borrowers named therein and SUMMIT BANK, DOES HEREBY CERTIFY THAT:
(a) There has been no change to the [Certificate/Articles]
of Incorporation of the Company since August 23, 1996.
(b) There has been no change to the By-Laws of the Company
since August 23, 1996, and the By-Laws are in full force and effect
as of the date hereof.
(c) Attached hereto as Exhibit A is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of the "Credit Documents" (as such term is
defined in the Agreement) to which the Company is a party, and such
resolution is in full force and effect as of the date hereof.
(d) The following are the duly elected, qualified and
acting officers of the Company who are authorized to act on behalf
of the Company in accordance with the transactions contemplated
under the Agreement and in accordance with the terms of the
Resolution, and that the signatures set forth opposite their
respective names below are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
____________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL U.K., LTD., a
corporation organized under the laws of the United Kingdom (the
"Company"), in connection with the transactions contemplated in that
certain Amended and Restated Equipment Facility and Revolving Credit
Agreement (the "Agreement"), dated the date hereof, made by and
among the Company, the other borrowers named therein and SUMMIT
BANK, DOES HEREBY CERTIFY THAT:
(a) There has been no change to the [Certificate/Articles]
of Incorporation of the Company since August 23, 1996.
(b) There has been no change to the By-Laws of the Company
since August 23, 1996, and the By-Laws are in full force and effect
as of the date hereof.
(c) Attached hereto as Exhibit A is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of the "Credit Documents" (as such term is
defined in the Agreement) to which the Company is a party, and such
resolution is in full force and effect as of the date hereof.
(d) The following are the duly elected, qualified and
acting officers of the Company who are authorized to act on behalf
of the Company in accordance with the transactions contemplated
under the Agreement and in accordance with the terms of the
Resolution, and that the signatures set forth opposite their
respective names below are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
____________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL SOUTHEAST, INC., a
Georgia corporation (the "Company"), in connection with the
transactions contemplated in that certain Amended and Restated
Equipment Facility and Revolving Credit Agreement (the "Agreement"),
dated the date hereof, made by and among the Company, the other
borrowers named therein and SUMMIT BANK, DOES HEREBY CERTIFY THAT:
(a) There has been no change to the [Certificate/Articles]
of Incorporation of the Company since August 23, 1996.
(b) There has been no change to the By-Laws of the Company
since August 23, 1996, and the By-Laws are in full force and effect
as of the date hereof.
(c) Attached hereto as Exhibit A is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of the "Credit Documents" (as such term is
defined in the Agreement) to which the Company is a party, and such
resolution is in full force and effect as of the date hereof.
(d) The following are the duly elected, qualified and
acting officers of the Company who are authorized to act on behalf
of the Company in accordance with the transactions contemplated
under the Agreement and in accordance with the terms of the
Resolution, and that the signatures set forth opposite their
respective names below are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
____________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL USA COMMUNICATIONS,
INC., a New Jersey corporation (the "Company"), in connection with
the transactions contemplated in that certain Amended and Restated
Equipment Facility and Revolving Credit Agreement (the "Agreement"),
dated the date hereof, made by and among the Company, the other
borrowers named therein, and SUMMIT BANK, DOES HEREBY CERTIFY THAT:
(a) There has been no change to the [Certificate/Articles]
of Incorporation of the Company since August 23, 1996.
(b) There has been no change to the By-Laws of the Company
since August 23, 1996, and the By-Laws are in full force and effect
as of the date hereof.
(c) Attached hereto as Exhibit A is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of each of the "Credit Documents" (as such
term is defined in the Agreement) to which the Company is a party,
and such resolution is in full force and effect as of the date
hereof.
(d) The following are the duly elected, qualified and acting
officers of the Company who are authorized to act on behalf of the
Company in accordance with the transactions contemplated under the
Agreement and in accordance with the terms of the Resolution, and
that the signatures set forth opposite their respective names below
are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
_________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL, INC., a New Jersey
corporation (the "Company"), in connection with the transactions
contemplated in that certain Amended and Restated Equipment Facility
and Revolving Credit Agreement (the "Agreement"), dated the date
hereof, made by and among the Company, the other borrowers named
therein, and SUMMIT BANK, DOES HEREBY CERTIFY THAT:
(a) There has been no change to the [Certificate/Articles]
of Incorporation of the Company since August 23, 1996.
(b) There has been no change to the By-Laws of the Company
since August 23, 1996, and the By-Laws are in full force and effect
as of the date hereof.
(c) Attached hereto as Exhibit A is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of each of the "Credit Documents" (as such
term is defined in the Agreement) to which the Company is a party,
and such resolution is in full force and effect as of the date
hereof.
(d) The following are the duly elected, qualified and
acting officers of the Company who are authorized to act on behalf
of the Company in accordance with the transactions contemplated
under the Agreement and in accordance with the terms of the
Resolution, and that the signatures set forth opposite their
respective names below are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
_____________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL USA, INC., a New Jersey
corporation (the "Company"), in connection with the transactions
contemplated in that certain Amended and Restated Equipment Facility
and Revolving Credit Agreement (the "Agreement"), dated the date
hereof, made by and among the Company, the other borrowers named
therein, and SUMMIT BANK, DOES HEREBY CERTIFY THAT:
(a) There has been no change to the [Certificate/Articles]
of Incorporation of the Company since August 23, 1996.
(b) There has been no change to the By-Laws of the Company
since August 23, 1996, and the By-Laws are in full force and effect
as of the date hereof.
(c) Attached hereto as Exhibit A is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of each of the "Credit Documents" (as such
term is defined in the Agreement) to which the Company is a party,
and such resolution is in full force and effect as of the date
hereof.
(d) The following are the duly elected, qualified and
acting officers of the Company who are authorized to act on behalf
of the Company in accordance with the transactions contemplated
under the Agreement and in accordance with the terms of the
Resolution, and that the signatures set forth opposite their
respective names below are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
_____________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL CARRIER SERVICES, INC.,
a New Jersey corporation (the "Company"), in connection with the
transactions contemplated in that certain Amended and Restated
Equipment Facility and Revolving Credit Agreement (the "Agreement"),
dated the date hereof, made by and among the Company, the other
borrowers named therein, and SUMMIT BANK, DOES HEREBY CERTIFY THAT:
(a) There has been no change to the [Certificate/Articles]
of Incorporation of the Company since August 23, 1996.
(b) There has been no change to the By-Laws of the Company
since August 23, 1996, and the By-Laws are in full force and effect
as of the date hereof.
(c) Attached hereto as Exhibit A is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of each of the "Credit Documents" (as such
term is defined in the Agreement) to which the Company is a party,
and such resolution is in full force and effect as of the date
hereof.
(d) The following are the duly elected, qualified and acting
officers of the Company who are authorized to act on behalf of the
Company in accordance with the transactions contemplated under the
Agreement and in accordance with the terms of the Resolution, and
that the signatures set forth opposite their respective names below
are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
____________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
SECRETARY'S CERTIFICATE
The undersigned, Secretary of TOTAL-TEL INTERNATIONAL, INC., a
______________ corporation (the "Company"), in connection with the
transactions contemplated in that certain Amended and Restated
Equipment Facility and Revolving Credit Agreement (the "Agreement"),
dated the date hereof, made by and among the Company, the other
borrowers named therein, and SUMMIT BANK, DOES HEREBY CERTIFY THAT:
(a) Attached hereto as Exhibit A is a true and correct copy
of the [Certificate/Articles] of Incorporation of the Company, as
amended to date.
(b) Attached hereto as Exhibit B is a true and correct copy
of the By-Laws of the Company, as in full force and effect as of the
date hereof.
(c) Attached hereto as Exhibit C is a true and correct copy
of a resolution (the "Resolution") duly adopted by the Board of
Directors of the Company approving and authorizing the execution,
delivery and performance of each of the "Credit Documents" (as such
term is defined in the Agreement) to which the Company is a party,
and such resolution is in full force and effect as of the date
hereof.
(d) The following are the duly elected, qualified and
acting officers of the Company who are authorized to act on behalf
of the Company in accordance with the transactions contemplated
under the Agreement and in accordance with the terms of the
Resolution, and that the signatures set forth opposite their
respective names below are the true signatures of said officers.
Name Office Signature
___________________ _________________ ____________________
___________________ _________________ ____________________
___________________ _________________ ____________________
IN WITNESS WHEREOF, the undersigned has executed this
Certificate and affixed the corporate seal hereto this _____ day of
_____________, 1998.
_______________________________ Name:
Title: Secretary
(SEAL)
I, __________________, __________________________ of the
Company, hereby certify that appearing above is the true and correct
signature of __________________________, Secretary of the Company.
_______________________________
Name:
Title:
Dated:
LEASE AGREEMENT
THIS AGREEMENT, entered into this 6th day of February, 1998,
by and between MOSTA CORPORATION, INC., a Florida Corporation,
hereinafter referred to as "LANDLORD", whose business address is 28
West Flagler Street, Suite 303, Miami, Florida 33130, and TOTALTEL
FLORIDA, INC., a New Jersey Corporation, hereinafter referred to as
"TENANT", whose business address is 150 Clove Road, Little Falls
New Jersey 07424.
WITNESSETH, that the LANDLORD does hereby devise and lease
unto said TENANT, and TENANT does hereby hire and take as tenant
under and from said LANDLORD, the following described space and
premises, hereinafter referred to as the leased premises, to-wit:
Space designated as the Penthouse Floor, comprising
approximately 4,959 square feet, more or less, being on
the Penthouse Floor, in the Courthouse Plaza, located at
28 W. Flagler Street, City of Miami, State of Florida,
hereinafter referred to as the "Building", subject to and
conditioned upon all of the term, provisions and
conditions of this lease.
1. TERM: TENANT to have and to hold the above described
premises subject to the provisions and conditions of the Lease, for
the term of fifteen (15) years, commencing on the 1st day of
February, 1998 and terminating on the 1st day of January, 2013.
2. RENT: TENANT hereby covenants and agrees to pay, without
deduction, diminution or set-off, together with any and all sales
and use taxes levied upon the use and occupancy of the leased
premises, during the term hereof, to the LANDLORD, in advance and
beginning on the commencement date of this Lease and on the first
day of each and every month thereafter, for the annual rent of ONE
HUNDRED SIX THOUSAND SIX HUNDRED EIGHTEEN AND 50/100 ($106,618.50)
DOLLARS, lawful money of the United States, hereinafter sometimes
referred to as "Base Rent" or "Base Rental", in equal monthly
installments of EIGHT THOUSAND EIGHT HUNDRED EIGHTY FOUR AND 88/100
($8,884.88) DOLLARS, plus applicable taxes, in advance, to LANDLORD
at its principal office or that of its agent (or at any other place
designated in writing by LANDLORD). Monthly base rent will be
adjusted annually in the manner set forth in Paragraph Three. If
TENANT'S possession commences on other than the first day of the
month, TENANT shall occupy the leased premises under the terms,
conditions, and provisions of this Lease, and the prorata portion
of the monthly rent for said month shall be paid and the term of
this Lease shall commence on the first day of the month following
that in which possession is given. A service charge of three
percent (3%) of the delinquent rent or a minimum charge of Twenty
Five ($25.00) Dollars, whichever shall be the greater, may be
assessed on the payment of rent received after the due date
thereof. A service charge of Twenty Five ($25.00) will be assessed
or handling of any returned check.
TENANT shall not be required to make any rental payment for
the month of February, 1998. TENANT'S initial rental payment shall
be applied to the monthly rental payment due on March 1, 1998.
TENANT shall have five (5) day grace period in which to make
the monthly rental payments due under this Lease.
LANDLORD agrees to give a rent credit to TENANT, in the total
amount of SEVENTY FIVE THOUSAND ($75,000.00) DOLLARS, which rent
credit shall be given to TENANT based upon the following schedule:
(a) TENANT shall not be required to pay the monthly rental
payment to LANDLORD, in the monthly amount of EIGHT THOUSAND EIGHT
HUNDRED EIGHTY FOUR and 88/100 ($8,884.88) DOLLARS. which is due on
March 1, 1998, April 1, 1998, and May 1, 1998.
(b) TENANT shall not be required to pay the monthly rental
payment to LANDLORD, which is due on February 1, 1999, March 1,
1999, and April 1, 1999.
(c) TENANT shall not be required to pay the monthly rental
payment to LANDLORD, which is due on February 1, 2000, and March 1,
2000.
(d) After deducting amount of the monthly rental payment
credits set forth in paragraphs (a), (b) and (c) hereinabove from
the SEVENTY FIVE THOUSAND ($75,000.00) DOLLAR rental credit due
TENANT, any remaining rental credit due TENANT shall be deducted
from the rental payment due LANDLORD on April 1, 2000. The balance
of the April 1, 2000 rental payment due LANDLORD shall be due and
payable to LANDLORD.
3. ANNUAL RENT ADJUSTMENT: The monthly base rent for each
twelve month period subsequent to the first complete twelve month
period occurring during the term of this Lease or any renewal
thereof shall be computed by multiplying the base rent, as set
forth in Paragraph Two, by a fraction whose numerator shall be the
number reported by the U.S. Department of Labor, Bureau of Labor
Statistics as the Revised Urban Wage Earners and Clerical Workers
Index for the third month prior to the respective anniversary date
and whose denominator shall be the number supplied for the third
month prior to the commencement date of the Lease, provided that in
no event shall such rent be less than the rent paid by TENANT for
each twelve (12) month period of this Lease immediately prior to
each anniversary date of this Lease.
The LANDLORD shall notify the lessee of the adjusted monthly
base rent, in writing, if such adjustment occurs. The TENANT
agrees to pay the adjusted monthly base rent, together with any
applicable taxes, on the first day of each and every month for the
following twelve (12) month period.
In the event the Bureau of Labor Statistics changes the form
or the basis of calculating the Index, the parties agree that the
burden shall be upon the LANDLORD to select the new Index to be
used. The new Index selected by LANDLORD shall be an index
comparable to the Index set forth hereinabove.
TENANT'S annual rental payment due LANDLORD for each
subsequent year that this lease shall be in effect shall be capped
at a maximum of a three (3%) percent increase annually based upon
the amount of the prior year's rental payment.
4. PRO RATA SHARE OF INCREASE IN OPERATING COSTS: (a) In
addition to the "Base Rental" described above, each calendar year
the TENANT is required to pay his pro rata share of any increase in
the direct operating costs of the Building. The TENANT'S pro rata
share of any increase in direct operating costs is known herein as
"additional rent". (b) The amount of increase in direct operating
costs for each calendar year (January 1 to December 31) shall be
computed by comparing the cost during that year with the costs
incurred during the "Base Year". The Base Year shall be 1998.
TENANT'S prorata share of any increase is hereby fixed at 7.96%
percent.
4.1. PRO RATA SHARE: The pro rata share of the increase in
direct operating costs to be charged to TENANT shall be pro rated
based upon the number of square feet leased by the TENANT as it
related to the whole leasable square footage of the Building. In
the event part of the Building is unoccupied during the Base Year
or any subsequent calendar year, the direct operating costs shall
be adjusted so as to reflect operating costs of the Building as
though fully occupied and the computation of increase shall be
based upon such adjusted costs.
4.2. DIRECT OPERATING COSTS: Direct operating costs shall
include taxes and assessments, janitorial, guard and maintenance
services, labor, reasonable managerial expenses, insurance, air
conditioning, heating, electricity, water, sewage, payroll
expenses, materials and supplies, services, charges and all other
direct operating costs of operating and maintaining the Building.
Direct operating costs shall not include expenditures for capital
improvements, interest expenses or depreciation, nor additional
charges imposed under Paragraphs six (6) and seven (7) hereof.
Such additional charges shall be computed separately for each
TENANT. All expenditures scheduled less often than annually shall
be pro rated over the period to which such expenditures are
applicable.
4.3. TAXES: Taxes for the Base Year shall be computed for this
purpose by multiplying the general real estate rate by the assessed
value of the land and the completed building for the Base Year.
Taxes for subsequent Base Years shall be deemed to be the taxes
payable in the respective calendar year even though the levy or
assessment thereof may be for a different year. Said taxes shall
include general real estate taxes, special assessments, and any
other taxes that may be imposed partially or entirely in lieu of
general real estate taxes. Changes in taxes may be due to changes
in the tax rates and/or changes in the assessment of the land
and/or Building.
4.4. CALCULATING ADDITIONAL RENT: For each calendar year after
the Base Year the direct operating costs for the Building during
that calendar year shall be determined. This determination shall
be made as soon as appropriate accounting information for the
calendar year is available. This amount shall then be compared to
the direct operating costs of the Building during the TENANT'S Base
year. The "additional rent" payable by the TENANT shall be his pro
rata share (See Schedule 4.1) of the increase in direct operating
costs when said costs are compared to the direct costs of the Base
Year.
4.5. STATEMENTS: A statement, in reasonable detail, containing
the above described calculations of "additional rent" shall be
rendered to the TENANT for each calendar year after the Base Year.
The statement will be issued subsequent to the termination of the
calendar year and as soon as practicable after appropriate
accounting information for the calendar year is available as set
forth in Paragraph 4.6. The TENANT shall have thirty (30) days
from the receipt of said statement to make any "additional rent"
payments due and owing thereunder.
4.6. METHOD OF ACCOUNTING - BASE YEAR OPERATING COSTS:
LANDLORD agrees to keep books and records reflecting direct
operating costs of the Building in accordance with the standard
method of accounting consistently applied. Within thirty (30) days
after receipt of this statement the TENANT shall have the right
upon reasonable notice and at such reasonable business hours to
inspect and review the books and records of the LANDLORD that
verify such statement. This statement shall be conclusive between
all parties as to the operating costs of the Building for each
calendar year. Once the operating costs for the Base Year have
been determined, the parties hereto agree to acknowledge the same
in writing.
4.7. FINAL CALENDAR YEAR OF LEASE: "Additional Rent" for the
final months of this Lease is due and payable even though it may
not be calculated until subsequent to the termination date of the
Lease. In calculating "additional rent" for the final months of
the Lease, the direct operating costs for the calendar year during
which the Lease terminated shall be pro rated according to that
portion of said calendar year that this Lease was actually in
effect.
5. SERVICES TO BE FURNISHED: LANDLORD will furnish the
following services to TENANT: (1) twenty four (24) hour elevator
service; (2) electric current for normal and customary usage as is
provided to the existing tenant; water in such amounts as in
LANDLORD'S reasonable judgment is necessary for lavatory and like
purposes; heat and/or air conditioning service to the demised
premises from 8:30 A.M. until 5:00 P.M., Monday through Friday, at
such temperatures and in such amounts as are reasonably considered
by LANDLORD to be standard, but LANDLORD shall not be required to
furnish heat and/or air conditioning on Saturdays, Sundays and
legal holidays; provided, however, upon the timely request by
TENANT, LANDLORD shall furnished heat and/or air conditioning
service to the demised premises during hours other than the
foregoing at an hourly rate to be negotiated in advance, and such
rate for additional service shall be billed to TENANT monthly; and
(5) cleaning and janitorial service to the demised premises for all
public and special service areas, except on Saturdays, Sundays, and
legal holidays, in the manner and to the extent reasonably deemed
by LANDLORD to be standard.
6. INCREASE IN SERVICE: If TENANT shall require electrical
current or shall install electrical equipment, including but not
limited to electrical heating, refrigeration equipment, electronic
data processing machines, computers, punch card machines, or
machines or equipment using current in excess of 110 volts, or
which will in any way increase the amount of electricity and/or
water usually furnished for general or normal use of the demised
premises, then TENANT shall obtain prior written approval from the
LANDLORD, who may condition such consent upon the payment by the
TENANT of additional rent as compensation for excess consumption of
water and/or electricity occasioned by the operation of said
equipment or machinery, including any installation costs thereof.
LANDLORD shall not be liable for any delay or failure to supply
such services due to unusual conditions beyond its control, and
LANDLORD shall not be liable for damages nor shall TENANT ever be
entitled to any abatement of rent for failure to supply the same.
LANDLORD hereby acknowledges that the current tenant's present use
of the demised premises does not increase the amount of electricity
and/or water furnished for general or normal office use of the
demised premises. TENANT shall be solely responsible for payment
of the cost of electricity used to operate TENANT'S equipment.
7. INCREASE IN INSURANCE: TENANT shall not do or permit
anything to be done upon or bring or keep or permit anything to be
brought or kept into or on the premises which shall increase the
rate of insurance on the Building of which the premises form a part
or on the property located therein. If by reason of the failure of
TENANT to comply with the terms of this Lease, or by reason of
TENANT'S occupancy (even though permitted or contemplated by this
Lease), the insurance rate shall at any time be higher than it
would otherwise be, TENANT shall reimburse LANDLORD for that part
of all insurance premiums charged because of such violation or
occupancy by TENANT. LANDLORD hereby acknowledges that the current
tenant's present use of the demised premises does not cause an
increase the rate of insurance on the Building of which the
premises form a part or on the property located therein.
8. NO LIABILITY: It is covenanted and agreed by and between
the parties hereto that the LANDLORD shall not in any event,
whether caused by LANDLORD's negligence or otherwise, except for
LANDLORD'S gross negligence or intentional conduct, be liable for
any failure of water supply, electric current, heating or air
conditioning, elevator service, or any other service, nor be
liable for any loss, damage or injury to the TENANT. TENANT'S
agents, servants, employees or visitors, or the TENANT'S property,
for any damage or injury caused by or from the bursting or leaking
of boilers of water, sewer, steam or gas pipes or gas pipes or from
electricity, water, rain or dampness, which may leak or flow from
any part of the Building, or by fire or theft or by other tenants
or persons in the Building, or resulting from the operation of
elevators, heating or air conditioning or light apparatus, or from
falling plaster or tiles, or from electric wires equipment or
fixtures, or from gas odors or plumbing fixtures, or from the
elements, or from any cause whatsoever, except in the case of the
willful neglect of the LANDLORD. All goods and property or
personal effects stored or placed by the TENANT in or about the
Building shall be at the sole risk of the TENANT.
9. LIENS: The TENANT herein shall not have any authority to
create any liens for labor or material on the LANDLORD'S interest
in the above described property, and all persons contracting with
the TENANT for the destruction or removal of any building or for
the erection, installation, alteration, or repair of any building
or other improvements on the above described premises, and all
materialmen, contractors, mechanics, and laborers, are hereby
charged with notice that they must look to the TENANT and to the
TENANT'S interests only in the above described property to secure
the payment of any bill for work done or material furnished during
the rental period created by this Lease. LANDLORD shall not be
liable nor shall the leased premises be subject to any mechanics,
materialmen or other type liens and TENANT shall keep the premises
and property in which the leased premises are situated free from
any such liens and shall indemnify LANDLORD against and satisfy any
such liens which may be obtained because of acts of TENANT
notwithstanding the foregoing provision. TENANT further agrees
that TENANT will pay all liens of contractors, mechanics, laborers,
materialmen, and other items of like character, and will indemnify
LANDLORD against all legal costs and charges, bond premium for
release of liens and including counsel fees reasonably incurred in
and about the defense of any suit in discharging the said premises
or any part thereof from any liens, judgments, or encumbrance
caused or suffered by TENANT. It is understood and agreed between
the parties hereto that the cost and charges above referred to
shall be considered as rent due and shall be included in any lien
for rent.
10. ALTERATIONS AND IMPROVEMENTS, ETC.: TENANT shall not make
any alterations, additions, or improvements to the premises without
the prior written consent from the LANDLORD which consent shall not
be unreasonably withheld. In making any alterations, decorations,
additions, installments, or improvements to or in the premises,
TENANT shall employ only such labor as will not cause strikes or
labor trouble with other employees in the Building employed by
LANDLORD or LANDLORD'S contractors; and all such work done by
TENANT shall be performed and installed in such a manner that the
same shall comply with all provisions of law, ordinances, and all
rules and regulations of any and all agencies and authorities
having jurisdiction over the premises, and at such time and in such
manner as not to interfere with the progress of any work being
performed by or on account of LANDLORD. Notwithstanding the
foregoing, it is understood that all alterations, additions,
improvements, decorations or installations, including, but not
limited to, all presently existing or hereinafter installed
telephone communications equipment, generators and fuel tanks,
partitions, railings, air conditioning ducts or equipment, movable
equipment, furniture and fixtures contained within the demised
premises shall be removed by TENANT at the termination of the term
of this Lease.
11. INSPECTION, EXAMINATION AND ENTRY: LANDLORD and
LANDLORD'S agents shall have the right to enter the premises at all
reasonable hours to examine the same, and workmen may enter at any
reasonable time when authorized by LANDLORD and LANDLORD'S agents
to make such repairs, alterations or improvements in the Building
as LANDLORD may deem necessary or desirable. If during the last
month of the term, TENANT shall have removed all or substantially
all of TENANT'S property, LANDLORD may immediately enter the
premises and prepare them for any future TENANT. Furthermore the
LANDLORD may allow such future TENANT to occupy the premises.
These acts shall have no effect upon TENANT'S obligation under this
Lease and TENANT shall be entitled to no abatement or diminution of
rent as a result thereof, except that in the event such future
TENANT makes any payment for the period up until the expiration of
this Lease, TENANT shall be entitled to a credit to the extent of
such payment. If TENANT shall not be personally present to open
and permit entry into the premises, when entry thereinto shall be
permissible or necessary hereunder, LANDLORD may enter same at all
reasonable times. LANDLORD shall have the right, after reasonable
prior notice to TENANT, to enter the leased premises at all
reasonable hours for the purpose of displaying said premises to
prospective tenants within ninety (90) days prior to the
termination of this Lease. LANDLORD shall give TENANT reasonable
prior notice of LANDLORD'S intention to enter the leased premises
except in the case of an emergency.
12. INDEMNIFICATION: The LANDLORD shall not be liable for
any damage or injury to any person or property whether it be the
person or property of the TENANT, the TENANT'S employees, agents,
guests, invitees or otherwise by reason of TENANT'S occupancy and
use of the leased premises or because of fire, flood, windstorm,
Acts of God, or for any other reason. TENANT shall indemnify and
save LANDLORD harmless, and does agree to indemnify and save
LANDLORD harmless, of and from all fines, claims, demands and
causes of action of every nature whatsoever arising or growing out
of or in any manner connected with the occupation or use of the
premises and Building, and every part thereof, by TENANT and the
employees, agents, servants, guests and invitees of TENANT
including without limiting the generality of the foregoing, any
claims, demands and causes of action for personal injury and/or
property damage, and said indemnification shall extend to any
fines, claims, demands and causes of action of every nature
whatsoever which may be made upon, sustained or incurred by
LANDLORD by reason of any breach, violation or non-performance of
any term, covenant or condition hereof on the part of TENANT, or by
reason of any act or omission on the part of TENANT and the
employees, agents, servants, guests, and invitees of TENANT. TENANT
agrees that this indemnification shall further extend to all costs
incurred by LANDLORD including reasonable attorney's fees.
13. ASSIGNMENT AND SUBLEASE: The TENANT covenants and agrees
not to encumber or assign this Lease or to sublet all or any part
of the leased premises without the prior written consent of the
LANDLORD. The LANDLORD covenants and agrees that consent shall not
be unreasonably withheld, provided that:
A) The LANDLORD shall have the option to refuse to consent to
any sublease or assignment by canceling this Lease and mutually
releasing the TENANT from this Lease.
B) At the option of the LANDLORD there shall be deposited with
LANDLORD such additional sums as LANDLORD deems reasonably
necessary to secure the faithful performance of the terms and
conditions of this Lease.
C) The LANDLORD may, at LANDLORD'S option, require that any
sublease or assignment include therein such terms, conditions or
covenants as LANDLORD deems reasonably necessary to safeguard
LANDLORD'S interests.
D) In no event shall TENANT be entitled to sublease the leased
premises for a rental amount which exceeds the amount of rental
which the TENANT is obligated to pay to LANDLORD at the time the
sublease is proposed.
TENANT agrees to give notice to LANDLORD, within ten (10)
days, of the transfer by TENANT of any controlling stock or
interest in its business; LANDLORD shall have the option to deem
any such transfer to be an assignment by TENANT of this Lease, and
subject to LANDLORD'S written consent and all other rights retained
by LANDLORD in respect of an assignment of the leased premises.
LANDLORD acknowledges that TENANT may permit the use of
TENANT'S equipment and improvements by other telephone service
providers and that such use shall not constitute an assignment or
sublease of the demised premises by TENANT.
14. DEFAULT: In the event TENANT shall default in the
payment of rent or any other sums payable by TENANT herein and such
default shall continue for a period of three (3) days, or if the
TENANT shall abandon the premises and remove or attempt to remove
therefrom the major portion of its furniture or fixtures, or if the
TENANT shall default in the performance of any other covenants or
agreements of this Lease and such default shall continue for thirty
(30) days or for fifteen (15) days after written notice thereof, or
if TENANT should become bankrupt or insolvent or any debtor
proceedings be taken by or against the TENANT, then and in addition
to any and all other legal remedies and rights, the LANDLORD may
declare the entire balance of the rent for the remainder of the
term to be due and payable and may collect the same by distress or
otherwise and LANDLORD shall have a lien on the personal property
of the TENANT which is located in the leased premises and in order
to protect its security interest in the said property LANDLORD may,
without first obtaining a distress warrant, lock up the leased
premises in order to protect said interest in the secured property,
or the LANDLORD may terminate this Lease and retake possession of
the leased premises, or enter the leased premises and relet the
same without termination, in which latter event the TENANT
covenants and agrees to pay any deficiency after TENANT is credited
with the rent thereby obtained less all repairs and expenses
(including the expenses of obtaining possession), or the LANDLORD
may resort to any two or more of such remedies or rights, and
adoption of one or more such remedies or rights shall not
necessarily prevent the enforcement of others concurrently or
thereafter. Any monies received from the TENANT at any point
during the period of the Lease will be applied at LANDLORD'S
discretion towards TENANT'S earliest obligation.
TENANT also covenants and agrees to pay reasonable attorney's
fees and costs and expenses of the LANDLORD, including court costs,
if the LANDLORD employs an attorney to collect rent or enforce
other rights of the LANDLORD herein in event of any breach as
aforesaid and the same shall be payable regardless of whether
collection or enforcement is effected by suit or otherwise.
15. DAMAGE BY FIRE OR OTHER CASUALTY: If, through no fault
or negligence of TENANT, its visitors, agents, or servants, the
premises shall be partially damaged by fire or other casualty, the
damage shall be repaired by LANDLORD, and the rent until such
repairs are made, shall be apportioned according to the portion of
the premises which are still usable. If the damage shall be so
extensive as to render the premises wholly untenantable, the rent
shall cease until such time as the premises shall become
tenantable. However, if the damage is so extensive that the
premises cannot be made tenantable within three (3) months from the
date rehabilitation is started, either party shall have the right
to terminate this Lease upon ten (10) days written notice to the
other. In case the Building generally throughout (though the
demised premises may not be affected) is so injured or destroyed by
fire or other casualty that LANDLORD shall decide no to re-build or
reconstruct the Building, the term of this Lease shall cease upon
ten (10) days' written notice sent by LANDLORD and the rent shall
be paid up to the time of such destruction and the Lease shall
thereafter be o no further effect. In the event that any question
shall arise between LANDLORD and TENANT as to whether or not
repairs shall have been made with reasonable dispatch, due
allowance shall be made for any delays which may arise in
connection with the adjustment of the fire insurance loss and for
any delays arising out of what are commonly known as "labor
troubles" or "material troubles" or from any other cause beyond
LANDLORD'S control. In any event LANDLORD shall not be liable to
TENANT by reason of fire or other damage to the Building or the
demised premises. LANDLORD shall not be liable to carry fire,
casualty or extended damage insurance on the person or property of
the TENANT or any person or property which may now or hereinafter
be place in the leased premises.
16. CONDEMNATION: If during the term of this Lease, the
whole of the leased premises or Building, or such portion(s)
thereof as will render the leased premises unusable for the purpose
leased, be condemned or otherwise leased or taken under the right
of eminent domain by any competent authority for public or quasi-
public use or purpose or is taken by private purchase in lieu of
condemnation, then in such event, this Lease shall, at the option
of the LANDLORD, cease and come to an end as of the date of the
vesting of title in such public authority or by private purchase,
or when possession is given to such public authority, whichever
event last occurs. Upon such occurrence the rent shall be
proportioned as of such date and any prepaid rent shall be returned
to the TENANT. The LANDLORD shall be entitled to the entire award
or purchase price for the building and improvements owned by
LANDLORD and the TENANT shall have no right or claim, to any part
thereof. TENANT shall be entitled to claim an award for the value
of TENANT'S property located upon the demised premises. LANDLORD
shall have no interest in those sums specifically awarded to TENANT
for TENANT'S interest in the leased premises which may be
recoverable by TENANT in the condemnation proceeding. The interest
of LANDLORD and TENANT shall be dealt with separately and according
to law and TENANT shall be a party in any condemnation proceeding
and/or action at law in connection with or relating to any
condemnation proceeding; the foregoing being for the purpose of
establishing TENANT'S interest and compensation therefor in the
event that condemnation does occur.
17. SUBORDINATION: This lease shall be subject to and
subordinate at all time to any mortgage or ground or underlying
lease now or hereafter placed upon or affecting the land or
Building or demised premises. To that effect TENANT agrees to
execute any and all instruments necessary to effect said
subordination. The liability of the LANDLORD or his assigns under
this Lease shall exist only so long as such person is the owner of
the subject real estate, and such liability shall not continue or
survive after transfer of ownership. LANDLORD shall assist TENANT,
and use its best efforts, in obtaining Non-Disturbance Agreements
from the existing first and second mortgagees but, in no event
shall the failure of TENANT to obtain such Non-Disturbance
Agreements affect the validity of this Lease.
A) TENANT agrees, in the event of any act or omission by
LANDLORD which would give TENANT the right to terminate this Lease
or to claim a partial or total eviction, not to exercise any such
right (i) until he has notified in writing the holder of any
mortgage which at the time shall be a lien on the demised premises
or the underlying LANDLORD, if any, of such act or omission, (ii)
until a reasonable period, not exceeding thirty (30) days, shall
have elapsed following the giving of such notice, and (iii) unless
such holder or underlying LANDLORD with reasonable diligence, shall
not have so commenced and continued to remedy such act or omission
or to cause the same to be remedied. During the period between the
giving of such notice and the remedying of such act or omission,
the rental herein recited shall be abated and apportioned to the
extent that any part of the demised premises shall be untenable.
B) If such mortgage be foreclosed or such underlying Lease be
terminated, then, upon request of the mortgagee or underlying
LANDLORD, TENANT will attorn to the purchaser at any foreclosure
sale thereunder or the underlying LANDLORD and will execute such
instruments as may be necessary or appropriate to evidence such
attornment.
18. EXAMINATION OF PREMISES AND NO ORAL REPRESENTATIONS: At
the time of taking possession of the premises the TENANT shall be
afforded the opportunity to examine said premises and submit to the
LANDLORD a written list of any discrepancies it may know. If said
list is not provided to the LANDLORD within twenty-four (24) hours
of taking possession of the premises, said premises shall be deemed
to be in good condition at the time of said examination. No
representations, except those contained herein, have been made on
the part of LANDLORD with respect to the order, repair or condition
of the premises or the Building. TENANT will make no claim on
account of any representations whatsoever, whether made by any
renting agent, broker, officer or other representative of LANDLORD
or which may be contained in any circular, prospectus or
advertisement with respect to the order, repair or condition of the
premises or the Building unless the same is specifically set forth
in this Lease.
19. SECURITY: TENANT has deposited with LANDLORD the sum of
EIGHT THOUSAND EIGHT HUNDRED EIGHTY FOUR AND 88/100 ($8,884.88)
DOLLARS, as security for the faithful performance and observance by
TENANT of the terms, provisions and conditions of this Lease; it is
agreed that, in the event TENANT defaults in respect to any of the
terms, provisions, and conditions of this Lease, including, but not
limited to the payment of rent and additional rent, LANDLORD may
use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and
additional rent or any other sum as to which TENANT is in default
or for any sum which LANDLORD may expend or may be required to
expend by reason of TENANT'S default in respect to any of the
terms, covenants and conditions of this Lease, including, but not
limited to any damages or deficiency in the re-letting of the
premises, whether such damage or deficiency accrued before or after
summary proceedings or other re-entry by LANDLORD. In the event
that TENANT shall fully and faithfully comply with all of the
terms, provisions, covenants and conditions of this Lease the
security shall be returned to TENANT after the date fixed as the
end of the Lease and after delivery of entire possession of the
premises to LANDLORD. In the event of a sale of the land and
Building, of which the premises form a part, LANDLORD shall have
the right to transfer the security to the vendee, and LANDLORD
shall thereupon be released by TENANT from all liability for the
return of such security and TENANT agrees to look to the new
LANDLORD solely for the return of said security. It is agreed that
the provisions hereof shall apply to every transfer or assignment
made of the security to a new LANDLORD. TENANT further covenants
that it will not assign or encumber the monies deposited herein as
security and that neither LANDLORD nor its assigns shall be bound
by any such assignment or encumbrance. LANDLORD shall not be
required to keep the security in a segregated account and the
security may be commingled with other funds of LANDLORD, and in no
event shall TENANT be entitled to any interest on the security.
20. NOTICE: In every instance where it shall be necessary or
desirable for the LANDLORD to serve any notice or demand upon the
TENANT, it shall be sufficient (a) to deliver or cause to be
delivered to the TENANT, during regular business hours, at the
demised premises a written or printed copy thereof, in which event
the notice or demand shall be deemed to have been served at the
time the copy is so delivered, or (b) to send a written or printed
copy thereof by United States registered or certified mail, return
receipt requested, addressed to the TENANT at the demised premises,
in which event the notice or demand shall be deemed to have been
served three (3) business days from the date of deposit in the
United States mails, postage prepaid, or (c) to leave a written or
printed copy thereof, in or upon the demised premises or to affix
the same upon any door leading into the demised premises, in which
event the notice or demand shall be deemed to have been served at
the time the copy is so left or affixed. All notices or demands
shall be signed by or on behalf of the LANDLORD.
Any notice by TENANT to LANDLORD shall be deemed duly given is
sent by United States registered or certified mail, return receipt
requested, postage prepaid, to LANDLORD at 28 West Flagler Street,
Suite 301, Miami, Florida 33130 or at such address as may hereafter
be designated by LANDLORD, and also to the agent of LANDLORD
charged with the renting and management of the Building.
21. USE OF PREMISES: TENANT shall use and occupy the
premises only for operation of telephone communication services or
other lawful general office purposes and for no other purpose. In
the event the TENANT uses premises for purposes not expressly
permitted herein, the LANDLORD may terminate the Lease or, without
notice to TENANT, restrain said improper use by injunction.
22. CERTIFICATE BY TENANT: TENANT shall deliver to LANDLORD
or to its mortgagee, auditors, or prospective purchaser, or the
owner of the fee, when requested by LANDLORD, a certificate to the
effect that this Lease is in full force and effect and that
LANDLORD is not in default therein, or stating specifically any
exceptions thereto. Failure to give such a certificate within two
(2) weeks after written request shall be conclusive evidence that
the TENANT is in full force and effect and LANDLORD is not in
default and TENANT shall be estopped from asserting any defaults
known to him at that time.
23. POSSESSION: If, for any reason, LANDLORD is unable to
give possession of the demised premises on the date of the
commencement of this Lease, this Lease shall not be affected
thereby nor shall TENANT have any claim against LANDLORD by reason
thereof. All claims for damages arising out of such delay other
than a proportionate abatement of rent are waived and released by
TENANT. Nothing herein contained shall operate to extend the term
of the Lease beyond the agreed expiration date and TENANT'S only
remedy and LANDLORD'S only liability shall be the abatement of rent
herein referred to. If LANDLORD is unable to give possession of
the demised premises to TENANT within ninety (90) days next after
the commencement of the term of this lease, then TENANT shall have
the right to cancel this Lease upon written notice thereof
delivered to LANDLORD within ten (10) days after the lapse of said
ninety (90) day period, and upon such cancellation, LANDLORD and
TENANT shall each be released and discharged from all liability in
connection with this Lease. This lease is contingent upon the
existing tenant vacating the subject property and surrendering
possession of the demised premises to LANDLORD at which time the
LANDLORD shall immediately tender possession and occupancy of the
demised premises to TENANT.
24. HOLDING OVER: In the event the TENANT shall withhold
from the LANDLORD the possession of the premises demised herein
after the termination of this Lease and the term hereby demised,
whether by expiration of said term or by the election or act of
either party hereto, the damages for which the TENANT shall be
liable to the LANDLORD for such detention shall be and hereby are
liquidated at a sum equal to double the amount of rent stipulated
herein for a period equal to the period of such detention. In the
event the TENANT shall remain in possession of said premises after
the expiration and termination of this Lease for any cause
whatsoever, the TENANT shall then be considered a tenant at will
and by sufferance, and no such holding over or retention of
possession or occupancy shall operate as an extension or renewal of
this Lease in any manner whatsoever.
25. TENANT TO TAKE GOOD CARE OF PREMISES: TENANT shall keep
the premises in a clean, safe and sanitary condition and shall
permit no waste or injury to occur to the premises and fixtures
therein, or to any additions, alterations, and improvements
thereto. All damage caused by TENANT'S negligence, or that of its
agents, servants, employees or visitors, shall be repaired promptly
by TENANT at his sole cost and expense. In the event that the
TENANT fails to comply with the foregoing provisions the LANDLORD
shall have the option to enter the premises and make all necessary
repairs at TENANT'S cost and expense, the same to be added to and
be payable with the next monthly installment of rent.
26. COMPLIANCE WITH ORDINANCES AND DIRECTIVES OF AUTHORITIES:
TENANT shall at its own cost and expense comply with all present or
future rules, regulations, directives, laws, ordinances and orders
of all public authorities, and Fire Underwriters, which are or may
become applicable to TENANT'S leased premises, which are required
as a result of TENANT'S use of the leased premises, except as said
rules pertain to any structural work or outside repairs or common
areas. TENANT waives any claim against LANDLORD for any expenses
or damages resulting from compliance with any of the said rules,
regulations, directives, laws, ordinances or orders which are or
may become applicable to the leased premises and space, except as
said rules pertain to any structural work or outside repairs.
27. NO ABATEMENT: No diminution or abatement of rent, or
other compensation, shall be allowed for inconvenience or injury
arising from the making of repairs, alterations, or improvements to
the Building nor for any space taken to comply with any law,
ordinance, or order of governmental authority, nor for the
LANDLORD'S failure, delay, or interruption in supplying any
service, or in performing any obligation on LANDLORD'S part to be
performed if the same be occasioned or caused, in whole or in part,
by accident, alterations, or repairs, desirable or necessary to be
made, or by LANDLORD'S inability or difficulty in obtaining labor,
material or supplies or by reason of any cause beyond LANDLORD'S
control. No such interruption, curtailment or change of any such
"service" shall be deemed a constructive or actual eviction.
LANDLORD shall not be required to furnish any of such "services"
during any period wherein TENANT shall be in default in the
payment of rent or additional rent. LANDLORD shall be required to
make reasonable efforts, when undertaking such repairs, so as to
permit TENANT'S continuous use and occupancy of the demised
premises.
28. NO WAIVER OF PERFORMANCE: No waiver by LANDLORD of any
provision hereof shall be deemed to have been made unless such
waiver be in writing signed by LANDLORD. The failure of LANDLORD
to insist upon the strict performance of any of the covenants or
conditions of this Lease, or to exercise any option herein
conferred, shall not be construed as waiving or relinquishing for
the future any such covenants, conditions or option but the same
shall continue and remain in full force and effect. No act of
LANDLORD or its agent during the term hereof shall be deemed an
acceptance of a surrender of the said premises unless made in
writing and personally subscribed by LANDLORD, neither shall the
delivery of the keys to the premises by TENANT to LANDLORD or its
agent be deemed a surrender and acceptance thereof. No payment by
TENANT of a lesser amount than the monthly rent herein stipulated
shall be deemed to be other than on account of the stipulated rent.
29. TIME OF THE ESSENCE: Every term of this agreement shall
be deemed and construed to be of the essence thereof, and any
breach shall be deemed and construed to be of the very substance of
this agreement, and the lessee hereby consents to the issuance of
an injunction by any court of competent jurisdiction restraining
any threatened breach or any continuing breach of any covenants
imposed upon the TENANT herein and hereby. Said right of
injunction shall be cumulative to the other remedies mentioned
herein.
30. SURRENDER AT EXPIRATION OF TERM: TENANT agrees at the
expiration of the term to quit and surrender the premises hereby
demised and everything belonging to or connected therewith in as
good a state and condition as reasonable wear and use thereof will
permit, and to remove all signs, advertisements and rubbish from
the said premises; and TENANT hereby expressly authorizes LANDLORD,
as the agent of TENANT, to remove such rubbish and make repairs as
may be necessary to restore the premises to such condition at the
expense of TENANT. TENANT shall, upon the expiration or
termination of this Lease, reasonably restore the leased premises
to the condition as exists as of the date of execution of this
lease by LANDLORD and TENANT.
31. ADDITIONAL RENT: If LANDLORD shall make any expenditure,
for which TENANT is liable under this Lease, or if TENANT shall
fail to make any payment due from him under this Lease, the amount
thereof shall at LANDLORD'S option be deemed "additional rent" and
shall be due with the next succeeding installment of rent. For the
non payment of any "additional rent" LANDLORD shall have the same
remedies and rights and LANDLORD has for the nonpayment of the base
rent.
32. QUIET POSSESSION AND OTHER COVENANTS: LANDLORD covenants
that if and so long as TENANT pay the rent and additional rent
reserved by this Lease and performs and observes all of the
covenants, conditions, and rules and regulations hereof. TENANT
shall quietly enjoy the demised premises subject, however, to all
of the terms of this Lease. TENANT expressly agrees for itself,
and its successors and assigns that the covenant of quiet enjoyment
(express or implied) and all other covenants in this Lease on the
part of the LANDLORD to be performed shall be binding upon LANDLORD
only so long as LANDLORD remains the owner of the Building of which
the demised premises form a part.
33. RULES AND REGULATIONS: TENANT agrees to observe and
comply with and TENANT agrees that its agents and all persons
visiting in the demised premises will observe and comply with the
reasonable rules and regulations as LANDLORD may from time to time
deem needful and prescribe for the reputation, safety, care and
cleanliness of the Building and the preservation of good order
therein and the comfort, quiet and convenience of other occupants
of the Building which reasonable rules and regulations shall be
deemed terms and conditions of this Lease. LANDLORD shall not be
liable to TENANT for the violation of any said rules and
regulations by any other TENANT or person. LANDLORD shall not
enact any rules or regulations which shall limit TENANT'S ability
to use, occupy and conduct business within the demised premises.
34. EMERGENCY GENERATOR: TENANT specifically assumes
liability for the maintenance of generator and tank located upon
the terrace of the Penthouse Floor and agrees to indemnify and hold
LANDLORD harmless form any damage to or incurred by any person as
a result of the operation of the generator and tank.
35. PARKING: There is no parking provided under this Lease.
36. LANDLORD'S WORK: LANDLORD shall paint the demised
premises using two (2) coats of building standard satin finish
paint. LANDLORD shall also re-carpet all areas of the demised
premises where carpeting presently exists, using building standard
carpeting, and shall make ordinary repairs. TENANT shall choose
the color of the paint and carpeting. LANDLORD shall also "power
clean" the floors located in the switch room and all floor tile
located within the demised premises.
37. "AS IS" CONDITION: The subject property is being leased
by TENANT in its existing "as is" condition.
38. ENVIRONMENTAL REQUIREMENTS: TENANT shall, if at any time
TENANT or LANDLORD believes or has any suspicion that there are
materials or wastes located on or under the property which, under
any Environmental Requirement require special handling in
collection, storage treatment, or disposal, take or cause to be
taken within thirty (30) days after written notice thereof, at its
sole expense, such investigations or tests or otherwise, and if
they exist, then to comply with all Environmental Requirements. If
TENANT fails to take such actions, LANDLORD may make advances or
payments towards performance or satisfaction of the same, but shall
be under no obligation so do to; and all sums so advanced or paid,
including all sums advanced or paid in connection with any judicial
or administrative investigation or proceeding relating thereto,
including, without limitation, reasonable attorneys' fees,
including paralegal assistants, fines or other penalty payments,
and any losses, claims, expenses, damages and liabilities suffered
or incurred by LANDLORD, directly or indirectly, because of
TENANT'S failure to take such actions (including but not limited to
tests, inspections, clean-up or removal, etc.), shall be at once
repayable to LANDLORD.
Failure of TENANT to comply with this Section and all
Environmental Requirements shall constitute and be a default under
these Lease Agreement and LANDLORD shall be entitled to all
remedies hereunder arising out of TENANT'S breach of this Lease
Agreement.
TENANT shall give LANDLORD prompt notice of any notice it
receives concerning Waste or material problem(s) under any
Environmental Requirement, or of any administrative review, claim,
demand, action or suit, threatened or instituted against LANDLORD
or TENANT or anyone having any relationship to the property, by
reason of or in connection with any Waste or material problem under
any Environmental Requirements.
TENANT shall remain totally liable for all damages and losses
to LANDLORD under this Section as to any and all hazardous and/or
toxic waste materials, products and violations caused by or in
behalf of TENANT, TENANT'S agents, guests, invitees and employees
and TENANT shall be responsible for all costs and expenses to
correct any environmental violations or remove any hazardous waste
or hazardous materials. TENANT shall not be liable for any costs
and expenses to correct any environmental violations or remove any
hazardous waste or hazardous materials which are in existence prior
to TENANT'S occupancy of the demised premises.
LANDLORD, to the best of LANDLORD'S knowledge, is not aware of
any environmental violations, hazardous waste, hazardous materials
or radon gas affecting the real property and/or improvements
containing the demised premises.
39. RADON GAS NOTIFICATION: Radon is a naturally occurring
radioactive gas that, when it has accumulated in a building in
sufficient quantities, may present health risks to persons who are
exposed to it over time. Levels of radon that exceed federal and
state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be
obtained from you county public health unit.
40. MISCELLANEOUS:
(a) It is understood that any dimensions or sizes on
either working or renting plans are merely approximations and
whether such plans are attached or are made part of this Lease or
not, LANDLORD shall not be liable, because exigencies arising
during construction, alteration or preparation for TENANT'S
occupancy result in changes not indicated on such plans.
(b) Whenever the word "its" is used it shall refer
likewise to "his", or "her" or "their", whenever the word "his" is
used it shall refer likewise "her", "its" or "their", and whenever
the word "Landlord" or "Tenant" is used it shall refer likewise to
"LANDLORD" and "TENANT", respectively. The plural shall be
substituted for the singular number in any place or places herein
where the context may require such substitution or substitutions.
(c) If any term or provision of this Lease or the
application thereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Lease or
the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable shall not be affected thereby and such term and
provision of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
(d) This Lease shall not be altered, changed, or amended,
except by an instrument in writing signed by both parties hereto.
LANDLORD may at any time change the name or number of the
Building, remodel or alter the same, or the location of any
entrance thereto, or any other portion thereof not occupied by
TENANT, and the same shall not constitute a constructive or actual,
total or partial eviction.
(e) In the event this Lease or any instrument referring to
this Lease is recorded without the consent of lessor, then LANDLORD
shall have the right to void this Lease or bring an action to
expunge this Lease from the Public Records and shall be entitled to
damages, costs and attorney's fees.
(f) LANDLORD shall not be held responsible for acts of God
or anything else beyond its control and in no event shall LANDLORD
be liable to TENANT for a sum greater than the balance of the
unpaid rent.
41. DIRECTORY LISTING: LANDLORD shall provide TENANT with
five (5) listings in the directory located in the building lobby.
42. COMPENSATION OF BROKER: LANDLORD and TENANT acknowledge
that TENANT shall be solely responsible for payment of any and all
compensation to HARPER-LAWRENCE INC., hereinafter referred to as
"BROKER", whose business address is 600 Madison Avenue, New York,
New York 10022, for BROKER'S services rendered in behalf of TENANT.
LANDLORD shall have no obligation or responsibility for payment of
BROKER'S services rendered referable to the lease of the demised
premises between LANDLORD and TENANT.
IN WITNESS WHEREOF, the parties hereto have set their hands
and seals on the dates as are set forth hereinbelow.
Executed by TENANT this day of February, 1998.
Signed, Sealed and Delivered TENANT:
in the Presence of: TOTALTEL FLORIDA, INC.,
a New Jersey Corporation
By:
Authorized Agent
Executed by LANDLORD this day of February, 1998.
Signed, Sealed and Delivered LANDLORD:
in the Presence of: MOSTA CORPORATION, a Florida
Corporation
By:
Authorized Agent
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0 0 0
<COMMON> 93,671 93,671 93,671
<OTHER-SE> 11,149,173 11,936,498 12,765,404
<TOTAL-LIABILITY-AND-EQUITY> 22,368,378 26,933,393 30,589,407
<SALES> 17,370,047 40,487,602 64,435,474
<TOTAL-REVENUES> 17,409,409 40,586,029 64,563,527
<CGS> 12,588,507 29,677,300 47,812,689
<TOTAL-COSTS> 12,588,507 29,677,300 47,812,689
<OTHER-EXPENSES> 3,763,097 8,276,703 13,786,869
<LOSS-PROVISION> 211,723 475,749 532,748
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 846,082 2,156,277 3,496,717
<INCOME-TAX> 342,700 871,400 1,402,200
<INCOME-CONTINUING> 503,382 1,284,877 2,094,517
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 503,382 1,284,877 2,094,517
<EPS-PRIMARY> 0.07 0.44 0.72
<EPS-DILUTED> 0.15 0.38 0.62
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> JAN-31-1998 JAN-31-1998 JAN-31-1998
<PERIOD-END> APR-30-1997 JUL-31-1997 OCT-31-1997
<CASH> 3,553,998 2,183,923 2,131,512
<SECURITIES> 1,006,121 922,494 849,460
<RECEIVABLES> 17,907,273 22,389,446 20,486,532
<ALLOWANCES> 1,641,461 1,283,714 1,278,335
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 21,918,790 25,320,699 23,246,704
<PP&E> 16,078,532 16,614,565 17,663,013
<DEPRECIATION> 4,528,376 5,050,117 5,563,852
<TOTAL-ASSETS> 34,464,204 38,076,289 36,526,984
<CURRENT-LIABILITIES> 16,063,092 19,382,011 18,233,832
<BONDS> 2,940,000 2,940,000 2,217,088
0 0 0
0 0 0
<COMMON> 196,075 196,875 196,900
<OTHER-SE> 14,158,941 14,426,224 14,707,348
<TOTAL-LIABILITY-AND-EQUITY> 34,464,204 38,076,289 36,526,984
<SALES> 26,332,527 62,484,109 92,403,054
<TOTAL-REVENUES> 26,363,560 62,534,982 92,483,959
<CGS> 20,267,332 50,713,044 74,191,131
<TOTAL-COSTS> 20,267,332 50,713,044 74,191,131
<OTHER-EXPENSES> 4,777,938 10,168,176 15,857,866
<LOSS-PROVISION> 238,949 74,504 249,097
<INTEREST-EXPENSE> 35,052 76,271 130,622
<INCOME-PRETAX> 1,044,176 1,502,987 2,055,243
<INCOME-TAX> 421,400 621,800 858,200
<INCOME-CONTINUING> 622,776 881,187 1,197,043
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 622,776 881,187 1,197,043
<EPS-PRIMARY> 0.20 0.28 0.38
<EPS-DILUTED> 0.18 0.26 0.35
</TABLE>
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in Registration Statement
No. 33-64611 of Total-Tel USA Communications, Inc. on Form S-8 of our
report dated May 8, 1998, (which expresses an unqualified opinion and
includes an explanatory paragraph relating to the restatement of the
1997 financial statements) appearing in this Annual Report on Form 10-K
of Total-Tel USA Communications, Inc. for the year ended January 31,
1998, and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
May 15, 1998
