<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
0-16715
----------------------
COMMISSION FILE NUMBER
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
SEPTEMBER 22, 1995
----------------------
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED)
PHONETEL TECHNOLOGIES, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-1462198
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(STATE OF INCORPORATION) (I.R.S. IDENTIFICATION NO.)
1127 EUCLID AVENUE
650 STATLER OFFICE TOWER
CLEVELAND, OHIO 44115-1601
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ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES
(216) 241-2555
---------------------------
REGISTRANT'S TELEPHONE NUMBER
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Sequential Page 2 of 4 Pages
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PART I
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 22, 1995, the Registrant entered into an Agreement and Plan of
Merger (the "Agreement") with its wholly owned subsidiary, PhoneTel II Inc., a
Missouri corporation ("PhoneTel II") and World Communications, Inc., a
Missouri corporation ("WCI") wherein WCI was merged with and into PhoneTel II
(the "Merger"). Pursuant to the Merger the Shareholders of WCI received, in
the aggregate, 2,415,001 shares of Registrant's Common Stock, $.01 par value
and 530,534 shares of Registrant's 10% Non-Voting Preferred Stock in exchange
for all the outstanding WCI Common Shares. The Merger consideration was
determined as a result of arms length negotiations between unrelated parties.
The assets of WCI (the "Acquired Assets") consisted of approximately 3,200 pay
telephones installed on locations, together with enclosures, inventory of
uninstalled pay telephones, parts, vehicles, computers and contracts pursuant
to which the acquired pay telephones are installed in property owned by others.
The Registrant will continue to operate WCI's business in substantially the
same manner as it was operated by WCI.
ITEM 5. OTHER EVENTS
At a Board of Directors meeting held on September 21, 1995, the Registrant
accepted the resignations of board members Bernard Mandel, Jerry Burger and
Lonzo Coleman. The Board of Directors also accepted the resignations of Mr.
Mandel from his positions as Chief Operating Officer, President and Secretary
and Mr. Burger from his position as Chief Executive Officer of the Registrant.
The Board of Directors also nominated and approved the election of Joseph
Abrams, Stuart Hollander, Aron Katzman and Steven Richman to serve on the Board
of Directors until the next meeting of shareholders.
Messrs. Katzman and Hollander were previously officers of WCI. Messrs. Abrams
and Richman are investors of Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Registrant herein states that it is impracticable to provide at the time of
this filing all of the requisite financial information to accompany this
Current Report on Form 8-K pursuant to the Rules and Regulations of The
Securities and Exchange Act of 1934. Registrant has attached the Consolidated
Financial Statements with Supplemental Material for WCI for
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Sequential Page 3 of 4 Pages
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the years ended December 31, 1994 and 1993. Registrant has commenced the
preparation of the remainder of the requisite financial statements and pro
forma information and anticipates that this Report will be supplemented by
amendment to include said statements when prepared within the time permitted by
the aforementioned Rules and Regulations.
Exhibits
--------
(a) Financial Statements of Business Acquired:
1. World Communications, Inc.
Consolidated Financial Statements with Supplemental Material
Years Ended December 31, 1994 and 1993
2. World Communications, Inc.
Consolidated Financial Statements and Schedules
Years Ended December 31, 1993 and 1992
(b) Pro Forma Financial Information:
No pro forma financial information submitted
(c) Other Exhibits:
1. Agreement and Plan of Merger
2. Amendment to Agreement and Plan of Merger
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHONETEL TECHNOLOGIES, INC.
(Registrant)
Date: October 10, 1995 /s/ Daniel J. Moos
- ----------------------------- ----------------------------
Daniel J. Moos
Executive Vice President,
Treasurer and
Chief Financial Officer
<PAGE> 1
Exhibit (a)(1)
World Communications, Inc.
Consolidated Financial Statements
with Supplemental Material
Years Ended December 31, 1994 and 1993
22
<PAGE> 2
World Communications, Inc.
Contents
<TABLE>
<S> <C>
Independent Auditors' Report 1
Consolidated Financial Statements
Balance sheets 2
Statements of income 3
Statements of stockholders' equity 4
Statements of cash flows 5
Summary of accounting policies 6-7
Notes to consolidated financial statements 8-14
Supplemental Material
Consolidating balance sheet - 1994 15
Consolidating statement of income - 1994 16
Consolidating balance sheet - 1993 17
Consolidating statement of income - 1993 18
</TABLE>
23
<PAGE> 3
BDO Seidman
Accountants and Consultants
720 Olive Street, Suite 2300
St. Louis, Missouri 63101
Telephone:(314) 231-7575
Fax:(314) 621-6891
Independent Auditors' Report
Board of Directors
World Communications, Inc.
St. Louis, Missouri
We have audited the accompanying consolidated balance sheets of World
Communications, Inc. (the Company) as of December 31, 1994, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. The financial
statements of World Communications, Inc. as of December 31, 1993 were audited
by other auditors whose report dated April 22, 1994, expressed an unqualified
opinion on those statements.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of World
Communications, Inc. as of December 31, 1994 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information included
in the supplemental material presented for purposes of additional analysis of
the consolidated financial statements rather than to present the financial
position and results of operations of the individual companies. The
consolidating information has been subjected to the auditing procedures applied
in the audits of the consolidated financial statements and, in our opinion, is
fairly presented in all material respects in relation to the consolidated
financial statements taken as a whole.
St. Louis, Missouri
April 7, 1995 (except for Note 3
which is May 10, 1995)
24
<PAGE> 4
Consolidated Financial Statements
25
<PAGE> 5
<TABLE>
<CAPTION>
December 31 1994 1993
<S> <C> <C>
Assets
Current
Cash $ 184,112 $ 186,894
Accounts receivable, less allowance for doubtful
accounts of $46,500 and $41,000, at December 31,
1994 and 1993, respectively 486,073 361,307
Prepaid expenses 93,969 45,024
Other current assets 3,029 479
Total Current Assets 767,183 593,704
Operating Equipment (Note 5)
Telecommunication equipment 5,344,296 3,767,232
Telephone equipment held for installation 225,151 159,976
5,569,447 3,927,208
Less accumulated depreciation and amortization (2,015,225) (1,491,212)
3,554,222 2,435,996
Leasehold Improvements, Equipment, Furniture and
Fixtures (Note 5), net of accumulated depreciation and
amortization of $131,954 and $90,851 at December 31,
1994 and 1993, respectively 284,358 152,363
Intangible Assets (Note 2)
Site license contracts, net 534,375 82,333
Agreements not to compete, net 294,167 12,500
Total Intangible Assets 828,542 94,833
Other Assets 228,701 99,359
$ 5,663,006 $ 3,376,255
</TABLE>
26
<PAGE> 6
World Communications, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1994 1993
<S> <C> <C>
Liabilities and Stockholders' Equity
Current
Accounts payable $ 495,492 $ 326,398
Accrued expenses 405,305 257,292
Current maturities of deferred revenue 40,000 40,000
Current maturities of long-term debt:
Notes payable (Note 3) 551,926 98,166
Obligations under capital lease (Note 5) 477,416 285,944
Total Current Liabilities 1,970,139 1,007,800
Deferred Revenue, less current maturities 7,562 50,994
Long-term Debt, less current maturities
Notes payable (Note 3) 1,512,694 1,069,237
Obligations under capital lease (Note 5) 925,794 580,491
Subordinated convertible debentures (Note 4) 1,140,000 680,000
Total Liabilities 5,556,189 3,388,522
Commitments and Contingencies (Notes 4 and 5)
Stockholders' Equity (Note 8)
Common stock, $.01 par - shares authorized, 500,000;
issued and outstanding, 269,938 in 1994 and 1993 2,699 2,699
Additional paid-in capital 476,951 476,951
Accumulated deficit (372,833) (491,917)
Total Stockholders' Equity 106,817 (12,267)
$ 5,663,006 $ 3,376,255
<FN>
See accompanying independent auditors' report, summary of
accounting policies and notes to consolidated financial statements.
</TABLE>
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<PAGE> 7
World Communications, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years Ended December 31. 1994 1993
<S> <C> <C>
Revenue
Coin calls $2,783,519 $2,324,646
Non-coin calls 4,689,651 4,444,086
Other 61,746 86,618
7,534,916 6,855,350
Cost of Revenues
Line access charges 3,272,195 2,950,299
Commissions 869,656 791,052
Service and collection 848,980 841,094
Depreciation and amortization 570,038 567,308
5,560,869 5,149,753
Gross Profit 1,974,047 1,705,597
Selling, General and Administrative Expenses 1,583,076 1,143,574
Operating Income 390,971 562,023
Other Income (Expense)
Interest expense (380,253) (328,781)
Gain on sale of assets 67,256 154,823
Other income 41,110 19,661
Total Other Income (Expense) (271,887) (154,297)
Income before Taxes on Income 119,084 407,726
Taxes on Income (Note 6) - -
Net Income $ 119,084 $ 407,726
<FN>
See accompanying independent auditors' report, summary, of
accounting policies and notes to consolidated financial statements.
</TABLE>
3
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<PAGE> 8
World Communications, Inc.
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional Total
Common paid-in Accumulated stockholders'
stock capital deficit equity (deficit)
<S> <C> <C> <C> <C>
Balance, January 1, 1993 $2,689 $466,961 $(899,643) $(429,993)
Issuance of 1,000 shares of
$.01 par
value common stock 10 9,990 - 10,000
Net income - 407,726 407,726
Balance, December 31, 1993 2,699 476,951 (491,917) (12,267)
Net income - 119,084 119,084
Balance, December 31, 1994 $2,699 $476,951 $(372,833) $106,817
<FN>
See accompanying independent auditors' report, summary of
accounting policies and notes to consolidated financial statements.
</TABLE>
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<PAGE> 9
World Communications, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31, 1994 1993
<S> <C> <C>
Operating Activities
Net income $ 119,084 $ 407,726
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 653,695 625,511
Gain on sale of property and equipment (67,256) (154,823)
Changes in assets and liabilities:
Accounts receivable (124,766) 25,743
Prepaid, other current assets and other assets (192,490) (47,421)
Accounts payable 169,094 (137,566)
Accrued expenses 78,013 (22,697)
Deferred revenue (43,432) 79,513
Cash Provided by Operating Activities 591,942 775,986
Investing Activities
Acquisitions of telecommunication equipment,
site licenses and agreements not to compete
Purchases of telecommunication equipment, leasehold (1,126,618) (271,800)
improvements and office furniture and equipment (616,039) (492,372)
Proceeds from sale of equipment 164,352 249,200
Cash Used in Investing Activities (1,578,305) (514,972)
Financing Activities
Net borrowings (payments) under line of credit agreements 140,805 (100,000)
Principal payments on notes payable to bank (151,958) (297,515)
Principal payments on notes payable to stockholders (259,000) (450,594)
Principal payments on capital lease obligations (325,636) (337,860)
Proceeds from issuance of notes payable to bank 954,370 -
Proceeds from issuance of notes payable to stockholders 250,000 622,685
Proceeds from issuance of subordinated convertible debentures 375,000 269,000
ProCeeds from sale of common stock - 10,000
Cash Provided by (Used in) Financing Activities 983,581 (284,284)
Decrease in Cash (2,782) (23,270)
Cash, beginning of year 186,894 210,164
Cash, end of year $ 184,112 $ 186,894
<FN>
See accompanying independent auditors' report, summary of
accounting policies and notes to consolidated financial statements.
</TABLE>
5
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<PAGE> 10
World Communications, Inc.
Summary of Accounting Policies
Principles of The consolidated financial statements include the
Consolidation accounts of World Communications, Inc. and its
wholly-owned subsidiaries, Northern Florida Telephone
Corporation (North Florida) and West Texas
Communications, Inc. (West Texas) (collectively, the
Company) through the date of its disposition, June 1,
1993. West Texas was incorporated in June 1988, and
North Florida was acquired in April 1990. All
significant intercompany balances and transactions
have been eliminated in consolidation.
Revenue Recognition The Company's principal sources of revenue are monies
received from long distance operator services,
commissions, phone vending (coin calls), and
dial-around revenue. Long distance operator services
revenue is reported at the gross amount with expenses
reflected in cost of revenue. Commissions, which
represent similar earnIngs, are recorded at their net
amount received as gross revenue and expense details
are not provided to the Company. Dial-around revenue
is included in commissions and consists of payments of
$6 to $9 per phone per month received from long-
distance carriers as payment for connection and call
transfer services.
Operating Telephone equipment held for installation is carried
Equipment at lower of cost or market and consists principally of
telephones and related parts and supplies. Once
installed, the equipment is recorded in property and
equipment and depreciated.
Telecommunication equipment is stated at cost. The
Company capitalizes, as part of the cost of the
telecommunication equipment, the cost of initial
installation. Equipment held under capital leases is
initially recorded at the lower of fair market value
of the equipment or the present value of minimum lease
payments at the inception of the lease. Repairs and
maintenance are expensed as incurred.
Depreciation of operating equipment is computed using
the straight- line method over the estimated useful
life of the asset. Equipment held under capital leases
is amortized using the straight-line method over the
estimated useful life of the respective asset as the
leases contain bargain purchase options. The estimated
useful lives range from four to ten years.
6
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<PAGE> 11
World Communications, Inc.
Summary of Accounting Policies
Intangible Assets Intangible assets consist of costs allocated to site
license contracts and covenants not to compete. Site
license contracts represent the value assigned to
purchased contracts as a result of acquired equipment.
These contracts are valued at the lower of cost or
approximate gross profit remaining on the contracts at
the acquisition date.
Amortization for site license contracts is computed
using the straight-line method over the estimated life
of the contracts, estimated to be four years. The
covenants not to compete are being amortized over the
life of the respective agreements.
Income Taxes Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (FAS 109). Under the
asset and liability method FAS 109, deferred tax
assets and liabilities are recognized for the future
tax consequences attributable to the difference
between financial statement carrying amounts of
existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary
differences are expected to be recovered or settled.
Under FAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The cumulative effect of a change in method of
accounting for income taxes as of January 1, 1993 was
not material to the overall presentation of the
Company's consolidated financial statements.
Cash and Cash For purposes of the statements of cash flows, the
Equivalents Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to
be cash equivalents.
Reclassifications Certain changes in the presentation of the accounts of
the December 31, 1993 financial statements have been
made to conform to the December 31, 1994 presentation.
These changes have had no effect on net income for the
periods presented.
7
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<PAGE> 12
World Communications, Inc.
Notes to Consolidated Financial Statements
1. Business The principal business activity of the Company is the
installation and service of pay telephones. The
Company began operations in March 1988. At December
31, 1994, the Company had approximately 2,600
telephones operating in eight states.
2. Acquisitions and Acquisitions
Dispositions
During the years ended December 31, 1994 and 1993, the
Company acquired certain assets of various independent
payphone operators including the following:
<TABLE>
<CAPTION>
Amount
allocated to
Purchase intangibles
Acquisition date Selling company price acquired
<S> <C> <C> <C>
Year ended December 31,
1994:
October 1994 Advanced Projects, Inc. $464,000 $257,600
November 1994 Florida Telephone $640,000 $422,700
Year ended December 31,
1993:
February 1993 Phone Masters, Inc. $272,000 $106,500
</TABLE>
The purchase method of accounting was used to record
each of the above acquisitions. Accordingly, the
purchase price was allocated to the assets acquired
based on the estimated fair values at the purchase
dates. Operating results for the respective companies
have been included in the Company's results of
operations from the respective purchase dates.
Dispositions
On June 1, 1993, the Company completed the sale of
substantially all of the assets of West Texas to an
unrelated entity. The Company received approximately
$249,000 in cash and recorded a gain on the sale of
approximately $144,000. The funds were utilized to
reduce certain outstanding bank debt.
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<PAGE> 13
World Communications, Inc.
Notes to Consolidated Financial Statements
3. Notes Payable At December 31, 1994 and 1993, notes payable consist
of the following:
<TABLE>
<CAPTION>
December 31, 1994 1993
<S> <C> <C>
$500,000 line of credit, principal due
September 1995, interest payable monthly
at the bank's prime lending rate (8.5% at
December 31, 1994) plus 1% $ 315,805 $ -
$200,000 line of credit, principal due April
1995, interest payable monthly at the bank's
prime lending rate plus 1.75% - 100,000
$75,000 line of credit, principal due April
1995, interest payable monthly at the bank's
prime lending rate plus 1 % - 75,000
Promissory notes payable to bank, interest
rate at bank's prime lending rate plus 1%,
principal and interest payable in monthly
installments ranging from $999 to $5,971,
with payment of the remaining principal
balance at maturity in August 1995 749,807 848,403
Promissory notes payable to bank, interest
rate at bank's prime lending rate plus 1 %,
principal and interest payable in monthly
installments ranging from $5,362 to $5,971,
with payment of the remaining principal
balance at maturity in November 2001 949,008 -
Note payable to various stockholders with no
specified principal payment terms, interest
payable monthly at prime plus 3% (Note 7) 50,000 144,000
2,064,620 1,167,403
Less current maturities 551,926 98,166
$1,512,694 $1,069,237
</TABLE>
The Company's debt is secured by substantially all of
the assets of the Company, the related telephone site
license contracts and personal guarantees of officers
and stockholders of the Company.
Subsequent to year end, the Company renewed the
promissory notes payable to bank maturing in August
1995. Terms under the new agreements require monthly
principal payments of $8,877 plus interest at the
bank's prime lending rate plus 1 % with payment of the
remaining principal balance at maturity in May 1998.
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<PAGE> 14
World Communications, Inc.
Notes to Consolidated Financial Statements
<TABLE>
The aggregate maturities of long-term debt are as follows:
<CAPTION>
Year Ending December 31,
<S> <C>
1995 $ 551,926
1996 287,612
1997 237,612
1998 575,774
1999 134,328
Thereafter 277,368
$2,064,620
</TABLE>
4. Subordinated The Company has issued two separate series of
Convertible subordinated convertible debentures (the debentures)
Debentures during 1994 and 1993 to various stockholders bearing
interest at .10% payable twice annually. The
debentures issued in 1994 mature in five years and
are callable by the Company at any time following the
date of issuance. The holders may convert these
debentures into common stock at a conversion rate of
$10 per share at any time prior to the redemption of
these debentures.
The debentures issued in 1993 also mature in five
years and are callable by the Company at any time
following the date of issuance. The holders may
convert these debentures into common stock at a
conversion rate of $6 per share at any time prior to
the redemption of these debentures.
For both the 1994 and 1993 debentures, if called
within three years of issuance, the debentures shall
be redeemed at 102% of face value.
At December 31, 1994 and 1993, the outstanding balance
of the debentures were $1,140,000 and $680,000,
respectively.
10
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<PAGE> 15
World Communications, Inc.
Notes to Consolidated Financial Statements
5. Leases Capital Leases
The Company leases telephone equipment and telephone
equipment held for installation from third parties
under capital lease agreements. Terms of the leases
include monthly payments ranging from approximately
$26 to $4,300 with final installments payable through
April 1998. The gross amount of telephone equipment,
related costs, related accumulated amortization and
telephone equipment held for installation recorded
under the capital leases is as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Telecommunication equipment $1,789,432 $ 1,832,996
Other equipment 192,239 67,208
1,981,671 1,900,204
Less accumulated amortization (315,836) (683,683)
$1,665,835 $1,216,521
</TABLE>
<TABLE>
Future minimum lease payments under capital lease
agreements at December 31, 1994 are as follows:
<CAPTION>
Year Ending December 31.
<S> <C>
1995 $ 634,188
1996 570,609
1997 458,036
1998 40,033
Total minimum lease payments 1,702,866
Less amounts representing interest (299,656)
Present value of future minimum lease payments 1,403,210
Less current maturities 477,416
$ 925,794
</TABLE>
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<PAGE> 16
World Communications, Inc.
Notes to Consolidated Financial Statements
Amortization of assets held under capital leases is
included within depreciation and amortization expense.
Operating Leases
At December 31, 1994, the Company was committed to an
operating lease of its St. Louis Office through June
30, 1999 and of its Florida office through March 31,
1997.
Total rent expense under all operating leases was
$76,766 and $38,721 for the years ended December 31,
1994 and 1993, respectively.
Future minimum lease payments under an operating lease
agreement at December 311994 are as follows:
<TABLE>
<S> <C>
1995 $ 61,489
1996 68,831
1997 69,719
1998 72,561
1999 36,917
Total $309,517
</TABLE>
6. Taxes on The Company adopted FAS 109 as of January 1, 1993.
Income There was no effect on pretax income from applying FAS
109 for the year ended December 31, 1993.
Income tax expense (benefit) differed from the amounts
computed by applying the blended U.S. Federal and
state income tax rate of 36% to income before
provision for income taxes as a result of the
following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Computed "expected" tax expense $ 42,870 $ 146,781
Increase in income tax expense (benefit)
resulting from:
Other - 8,442
Utilization of net operating loss and
contribution carryforward (42,870) (155,223)
$ - $ -
</TABLE>
12
37
<PAGE> 17
World Communications, Inc.
Notes to Consolidated Financial Statements
<TABLE>
The tax effects of temporary differences that give
rise to significant portions of the deferred tax
assets are presented below:
<CAPTION>
1994 1993
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $83,000 $131,000
Less valuation allowance 83,000 131,000
Net Deferred Tax Assets $ - $ -
</TABLE>
At December 31, 1994, the Company has net operating
loss carry forwards for Federal income tax purposes
of approximately $245,000, which are available to
offset future Federal taxable amounts. Net operating
loss carryforwards begin to expire in 2005.
7. Related Party A law firm in which certain partners are stockholders
Transactions of the Company provided legal services amounting of
approximately $47,000 and $45,000 for the years ended
December 31, 1994 and 1993, respectively.
See Notes 3 and 4 relating to notes payable and
subordinated debt with stockholders. It is the
stockholders intent not to request repayment of the
notes payable in 1995.
8. Subsequent On January 16, 1995, the Company's Board of Directors
Events authorized an increase in the authorized shares of
common stock from 500,000 to 1,000,000.
In February of 1995, the Company acquired
substantially all the assets of Acuquik Pay Phones,
Inc. for a purchase price of $275,000. Approximately
$132,000 was allocated to intangibles acquired. In
conjunction with this acquisition, the Company issued
a promissory note payable to a financial institution
in the amount of $245,000. Terms of this agreement
require monthly principal payments of $2,920 plus
interest at the bank's prime lending rate plus 1% with
payment of the remaining principal balance at maturity
in February 1998.
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<PAGE> 18
World Communications, Inc.
Notes to Consolidated Financial Statements
9. Supplemental The Company paid $373,866 and $345,565 for interest in
Cash Flow the years ended December 31, 1994 and 1993,
Information respectively.
Non-cash Transactions
For the years ended December 31, 1994 and 1993,
capital lease obligations of $910,411 and $398,677,
respectively, were incurred when the Company entered
into leases for telephone equipment, related costs and
vehicles. Accordingly, capital expenditures exclude
assets recorded under the capital lease obligations.
In 1994 and 1993, approximately $85,000 and $411,000,
in stockholder and related party debt was converted
into subordinated convertible debentures,
respectively. The effects of this transaction have
been excluded from the statement of cash flows.
14
39
<PAGE> 19
Supplemental Material
40
<PAGE> 20
<TABLE>
<CAPTION>
Northern
World Florida
Communications, Telephone
December 31, 1994 Inc. Corporation Combined Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Assets
Current
Cash $ 120,166 $ 63,946 $ 184,112 $ - $ 184,112
Accounts receivable, net 430,106 55,967 486,073 - 486,073
Intercompany receivables 1,156,588 - 1,156,588 (1,156,588)
Prepaid expenses 84,042 9,927 93,969 - 93,969
Other current assets 2,850 179 3,029 - 3,029
Total Current Assets 1,793,752 130,019 1,923,771 (1,156,588) 767,183
Operating Equipment
Telecommunication equipment 4,062,613 1,281,683 5,344,296 - 5,344,296
Telephone equipment held for installation 165,336 59,815 225,151 - 225,151
4,227,949 1,341,498 5,569,447 - 5,569,447
Less accumulated depreciation and amortization (1,578,038) (437,187) (2,015,225) - (2,015,225)
2,649,911 904,311 3,554,222 - 3,554,222
Leasehold Improvements, Equipment, Furniture
and Fixtures, net of accumulated depreciation
and amortization 257,736 26,622 284,358 - 284,358
Investment in Subsidiary (486,769) (486,769) 486,769
Intangible Assets
Site license contracts, net 56,329 478,046 534,375 - 534,375
Agreements not to compete, net 2,500 291,667 294,167 - 294,167
58,829 769,713 828,542 - 828,542
Other Assets 218,149 10,552 228,701 - 228,701
$ 4,491,608 $1,841,217 $ 6,332,825 $ (669,819) $ 5,663,006
</TABLE>
41
<PAGE> 21
World Communications, Inc.
Supplemental Consolidating Balance Sheet
<TABLE>
<CAPTION>
Northern
World Florida
Communications, Telephone
December 31, 1994 Inc. Corporation Combined Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Liabilities and Stockholders' Equity
Current
Accounts payable $ 413,264 $ 82,228 $ 495,492 $ - $ 495,492
Intercompany payables 618,149 538,439 1,156,588 1,156,588
Accrued expenses 250,283 155,022 405,305 - 405,305
Current maturities of deferred revenue 40,000 - 40,000 - 40,000
Current maturities of long-term debt:
Notes payable 343,634 208,292 551,926 - 551,926
Obligations under capital lease 434,897 42,519 477,416 - 477,416
Total Current Liabilities 2,100,227 1,026,500 3,126,727 1,156,588 1,970,139
Deferred Revenue, less current maturities 7,562 - 7,562 7,562
Long-term Debt, less current maturities
Notes payable 228,257 1,284,437 1,512,694 - 1,512,694
Obligations under capital lease 908,747 17,047 925,794 - 925,794
Subordinated convertible debentures 1,140,000 1,140,000 - 1,140,000
Total Liabilities 4,384,793 2,327,984 6,712,777 1,156,588 5,556,189
Stockholders' Equity
Common stock 2,699 1,000 3,699 1,000 2,699
Additional paid-in capital 476,951 - 476,951 - 476,951
Accumulated deficit 372,833 (487,768) (860,601) (487,768) (372,833)
Total Stockholders' Equity 106,817 (486,768) (379,951) (486,768) 106,817
$ 4,491,610 $1,841,216 $ 6,332,826 $ 669,820 $ 5,663,006
</TABLE>
42
<PAGE> 22
World Communications, Inc.
Supplemental Consolidating Statement of Income
<TABLE>
<CAPTION>
Northern
World Florida
Communications, Telephone
Year Ended December 31, 1994 Inc. Corporation Combined Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenue
Coin calls $2,112,629 $ 670,890 $2,783,519 $ - $2,783,519
Non-coin calls 4,243,795 445,856 4,689,651 - 4,689,651
Other 61,683 63 61,746 - 61,746
6,418,107 1,116,809 7,534,916 - 7,534,916
Cost of Revenues
Line access charges 2,736,266 535,929 3.272,195 - 3,272,195
Commissions 748,663 120,993 869,656 - 869,656
Service and collection
Depreciation and amortization 678,350 170,630 848,980 848,980
437,416 132,622 570,038 - 570,038
4,600,695 960,174 5,560,869 - 5,560,869
Gross Profit 1,817,412 156,635 1,974,047 - 1,974,047
Selling, General and Administrative Expenses 1,392,886 190,190 1,583,076 - 1,583,076
Operating Income (Loss) 424,526 (33,555) 390,971 - 390,971
Other Income (Expense)
Interest expense (296,753) (83,500) (380,253) - (380,253)
Gain on sale of assets 65,632 1,624 67,256 - 67,256
Equity in subsidiary (223,731) - (223,731) (223,731) -
Other income 149,410 108,300 41,110 41,110
Net Income (Loss) $ 119,084 $ (223,731) $ (104,647) $(223,731) $ 119,084
</TABLE>
16
43
<PAGE> 23
<TABLE>
<CAPTION>
Northern
World Florida
Communications, Telephone
December 31, 1993 Inc. Corporation Combined Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Assets
Current
Cash $ 133,080 $ 53,814 $ 186,894 $ - $ 186,894
Accounts receivable, net 297,147 64,160 361,307 - 361,307
Intercompany receivables 151,079 - 151,079 (151,079)
Prepaid expenses 41,928 3,096 45,024 - 45,024
Other current assets 300 179 479 - 479
Total Current Assets 623,534 121,249 744,783 (151,079) 593,704
Operating Equipment
Telecommunication equipment 2,944,307 822,925 3,767,232 - 3,767,232
Telephone equipment held for installation 120,264 39,712 159,976 - 159,976
3,064,571 862,637 3,927,208 - 3,927,208
Less accumulated depreciation and amortization (1,171,501) (319,711) (1,491,212) - (1,491,212)
1,893,070 542,926 2,435,996 - 2,435,996
Leasehold Improvements, Equipment, Furniture
and Fixtures, net of accumulated depreciation
and amortization 139,477 12,886 152,363 - 152,363
Investment in Subsidiary (263,037) - (263,037) 263,037
Intangible Assets
Site license contracts, net 82,333 - 82,333 - 82,333
Agreements not to compete, net 12,500 - 12,500 - 12,500
94,833 - 94,833 - 94,833
Other Assets 89,944 9,414 99,358 - 99,358
$ 2,577,821 $ 686,475 $ 3,264,296 $ 111,958 $ 3,376,254
</TABLE>
44
<PAGE> 24
World Communications, Inc.
Supplemental Consolidating Balance Sheet
<TABLE>
<CAPTION>
Northern
World Florida
Communications, Telephone
December 31, 1993 Inc. Corporation Combined Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Liabilities and Stockholders' Equity
Current
Accounts payable $ 262,560 $ 63,838 $ 326,398 $ - $ 326,398
Intercompany payables - 151,079 151,079 151,079
Accrued expenses 205,233 52,059 257,292 - 257,292
Current maturities of deferred revenue 40,000 - 40,000 - 40,000
Current maturities of long-term debt:
Notes payable 27,160 71,006 98,166 - 98,166
Obligations under capital lease 237,460 48,484 285,944 - 285,944
Total Current Liabilities 772,413 386,466 1,158,879 151,079 1,007,800
Deferred Revenue, less current maturities 50,994 - 50,994 - 50,994
Long-term Debt, less current maturities
Notes payable 525,085 544,152 1,069,237 - 1,069,237
Obligations under capital lease 561,596 18,895 580,491 - 580,491
Subordinated convertible debentures 680,000 - 680,000 - 680,000
Total Liabilities 2,590,088 949,513 3,539,601 151,079 3,388,522
Stockholders' Equity
Common stock 2,699 1,000 3,699 1,000 2,699
Additional paid-in capital 476,951 - 476,951 - 476,951
Accumulated deficit (491,917) (264,037) (755,954) (264,037) (491,917)
Total Stockholders' Equity (12,267) (263,037) (275,304) (263,037) (12,267)
$ 2,577,821 $ 686,476 $ 3,264,297 $(111,958) $ 3,376,255
</TABLE>
17
45
<PAGE> 25
World Communications, Inc.
Supplemental Consolidating Statement of Income
<TABLE>
<CAPTION>
Northern
World Florida West Texas
Communications, Telephone Communications,
Year Ended December 31, 1994 Inc. Corporation Inc. Combined Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C>
Revenue
Coin calls $1,537,755 $ 719,030 $ 67,861 $2,324,646 $ - $2,324,646
Non-coin calls 3,840,875 579,382 23,829 4,444,086 - 4,444,086
Other 83,050 2,284 1,284 86,618 - 86,618
5,461,680 1,300,696 92,974 6,855,350 - 6,855,350
Cost of Revenues
Line access charges 2,457,240 462,560 30,499 2,950,299 - 2,950,299
Commissions 589,569 183,157 18,326 791,052 - 791,052
Service and collection 642,802 179,940 18,352 841,094 - 841,094
Depreciation and amortization 360,609 188,699 18,000 567,308 - 567,308
4,050,220 1,014,356 85,177 5,149,753 - 5,149,753
Gross Profit 1,411,460 286,340 7,797 1,705,597 - 1,705,597
Selling, General and Administrative
Expenses 996,427 137,895 9,252 1,143,574 - 1,143,574
Operating Income (Loss) 415,033 148,445 (1,455) 562,023 - 562,023
Other Income (Expense)
Interest expense (264,532) (64,249) - (328,781) - (328,781)
Gain on sale of equipment 10,791 - 144,032 154,823 - 154,823
Equity in subsidiary 109,265 - - 109,265 (109,265) -
Other income 137,169 (107,508) (10,000) 19,661 - 19,661
Net Income (Loss) $ 407,726 $ (23,312) $132,577 $ 516,991 $(109,265) $ 407,726
</TABLE>
18
46
<PAGE> 1
Exhibit (a)(2)
KPMG Peat Marwick
Certified Public Accountants
WORLD COMMUNICATIONS,
INC. AND SUBSIDIARIES
Consolidated Financial Statements and Schedules
December 31, 1993 and 1992
(With Independent Auditors' Report Thereon)
6
<PAGE> 2
KPMG Peat Marwick
Certified Public Accountants
1010 Market Street
St. Louis, MO 63101-2085
Independent Auditors' Report
The Board of Directors
World Communications, Inc.:
We have audited the accompanying consolidated balance sheets of World
Communications, Inc. and subsidiaries (the Company) as of December 31, 1993 and
1992, and the related consolidated statements of operations, stockholders'
deficit, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of World
Communications, Inc. and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The consolidating information included
in Schedules 1 through 4 is presented for purposes of additional analysis of
the consolidated financial statements rather than to present the financial
position and results of operations of the individual companies. The
consolidating information has been subjected to the auditing procedures applied
in the audits of the consolidated financial statements and, in our opinion, is
fairly presented in all material respects in relation to the consolidated
financial statements taken as a whole.
As discussed in note 1 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" in
1993.
April 22, 1994 KPMG Peat Marwick
7
7
<PAGE> 3
<TABLE>
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1993 and 1992
<CAPTION>
Assets 1993 1992
<S> <C> <C>
Current assets:
Cash $ 186,894 210,164
Accounts receivable, net 361,307 387,050
Prepaid and other current assets 45,503 60,176
Total current assets 593,704 657,390
Property and equipment:
Telephone equipment 3,765,811 3,015,970
Other equipment, furniture and fixtures 244,638 164,151
4,010,449 3,180,121
Less accumulated depreciation and amortization 1,582,065 1,261,251
Net property and equipment 2,428,384 1,918,870
Telephone equipment held for installation 159,976 173,597
Contracts in place, net of accumulated amortization 82,333 109,565
Other assets 111,858 75,464
$ 3,376,255 2,934,886
Liabilities and Stockholders' Deficit
Current liabilities:
Current maturities of long-term debt and obligations
under capital leases:
Banks 98,166 114,827
Stockholders and related party - 14,072
Obligations under capital leases 285,944 297,304
Total current maturities of long-term
debt and obligations under capital
leases 384,110 426,203
Accounts payable 250,200 387,766
Accrued expenses 333,490 356,187
Total current liabilities 967,800 1,170,156
Long-term debt and obligations under capital leases,
less current maturities:
Banks 925,237 1,306,091
Stockholders and related party 824,000 368,837
Obligations under capital leases 580,491 508,314
Total long-term debt and obligations
under capital leases 2,329,728 2,183,242
Deferred revenue 90,994 11,481
Total liabilities 3,388,522 3,364,879
Stockholders' deficit:
Common stock, $.01 par value. Authorized 500,000
shares: issued and outstanding 269,938 and 268,938
shares in 1993 and 1992, respectively 2,699 2,689
Additional paid-in capital 476,951 466,961
Accumulated deficit (491,917) (899,643)
Total stockholders' deficit (12,267) (429,993)
$ 3,376,255 2,934,886
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
8
<PAGE> 4
<TABLE>
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1993 and 1992
<CAPTION>
1993 1992
<S> <C> <C>
Revenues:
Long distance operator services $ 3,425,928 2,526,977
Commissions 1,051,934 922,435
Phone vending service 2,324,646 2,002,999
Other 86,618 51,941
6,889,126 5,504,352
Less allowance for uncollected charges 33,776 305,167
Net revenues 6,855,350 5,199,185
Cost of revenues:
Location commissions 791,052 986,535
License, processing and validation fees 1,083 390,863
Telephone line charges 2,949,216 1,608,554
Depreciation and amortization - telephone equipment
and contracts 567,308 565,309
Finder commissions 114,242 95,647
Repairs and maintenance - telephone equipment 135,397 96,718
Salaries and wages - vending and repair 387,476 307,902
Automobile expense 103,366 80,875
Other 100,613 43,770
5,149,753 4,176,173
Gross profit 1,705,597 1,023,012
Selling, general and administrative expenses:
Salaries and wages 385,955 287,807
Insurance 136,899 117,449
Professional associations 67,767 59,996
Professional fees 100,238 27,677
Outside services 140 2,984
Rent expense 60,004 46,605
Repairs and maintenance 880 3,512
Telephone 77,107 62,469
Utilities 9,085 5,451
General office 98,366 48,926
Travel and entertainment 31,418 18,061
Other taxes 28,994 56,729
Depreciation and amortization - other 58,203 45,731
Other 88,518 49,913
1,143,574 833,310
Income from operations 562,023 189,702
Other income (expense):
Interest expense (328,781) (258,095)
Gain on disposition of subsidiary 144,032 -
Gain on sale of property and equipment 10,791 13,393
Other, net 19,661 2,581
(154,297) (242,121)
Net income (loss) 407,726 (52,419)
Accumulated deficit at beginning of year (899,643) (847,224)
Accumulated deficit at end of year $ (491,917) (899,643)
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
9
<PAGE> 5
<TABLE>
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Deficit
Years ended December 31, 1993 and 1992
<CAPTION>
Addi- Total
tional Accumu- stock-
Common paid-in lated holders'
stock capital deficit deficit
<S> <C> <C> <C> <C>
Balance at December 31, 1991 $ 2,689 466,961 (847,224) (377,574)
Net loss - - (52,419) (52,419)
Balance at December 31, 1992 2,689 466,961 (899,643) (429,993)
Issuance of 1,000 shares of $.01 par
value common stock 10 9,990 - 10,000
Net income - - 407,726 407,726
Balance at December 31, 1993 $ 2,699 476,951 (491,917) (12,267)
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
10
<PAGE> 6
<TABLE>
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1993 and 1992
<CAPTION>
1993 1992
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 407,726 (52,419)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 625,511 611,040
Gain on disposition of subsidiary (144,032) -
Gain on sale of property and equipment (10,791) (13,393)
Increase (decrease) in cash from changes in assets
and liabilities, net of assets acquired under
asset purchase agreement:
Accounts receivable 25,743 (104,338)
Prepaid and other current assets 14,673 16,207
Accounts payable (137,566) 135,508
Accrued expenses (22,697) 186,448
Deferred revenue 79,513 (9,448)
Other assets (62,094) (26,603)
Net cash provided by operating
activities 775,986 743,002
Cash flows from investing activities:
Assets acquired under asset purchase agreement (271,800) -
Capital expenditures, net of telephone equipment
purchased under capital lease obligations and
acquired under asset purchase agreement (492,372) (336,450)
Proceeds from the sale of subsidiary and other
telephones and related equipment 249,200 63,379
Net cash used in investing activities (514,972) (273,071)
Cash flows from financing activities:
Proceeds from sale of common stock 10,000 -
Proceeds from additional bank borrowings 590,000 1,557,864
Proceeds from additional stockholders and related
party borrowings 891,685 140,000
Principal payments on bank debt (987,515) (1,415,580)
Principal payments on stockholders and related party debt (450,594) (249,753)
Principal payments on capital lease obligations (337,860) (292,998)
Net cash used in financing activities (284,284) (260,467)
Net increase (decrease) in cash (23,270) 209,464
Cash, beginning of year 210,164 700
Cash, end of year $ 186,894 210,164
Supplemental disclosures of cash flow information -
cash paid during the year for interest $ 345,565 258,095
<FN>
Supplemental disclosures of noncash investing and financing activities:
Capital lease obligations of $398,677 and $506,216 were incurred when the
Company entered into leases for telephone equipment, related costs, and
vehicles in 1993 and 1992, respectively. Accordingly, capital
expenditures exclude assets recorded under the capital lease
obligations.
In 1993, approximately $411,000 in stockholder and related party debt was
converted into subordinated convertible debentures. The effects of this
transaction have been excluded from the above schedule.
See accompanying notes to consolidated financial statements.
</TABLE>
11
<PAGE> 7
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1993 and 1992
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation and Nature of Business
The consolidated financial statements include the accounts of World
Communications, Inc. and its wholly owned subsidiaries, Northern
Florida Telephone Corporation (North Florida), Phone Masters, Inc.
(Phone Masters), and West Texas Communications, Inc. (West
Texas) (collectively, the Company) through the date of its
disposition June 1, 1993. West Texas was incorporated in June 1988,
and North Florida and Phone Masters were acquired in April 1990 and
February 1993, respectively. All significant intercompany balances
and transactions have been eliminated in consolidation.
The principal business activity of the Company is the installation and
service of pay telephones. The Company began operations in March
1987. At December 31, 1993, the Company had approximately 1,764
telephones operating in 9 states.
(b) Revenue recognition
The Company's principal sources of revenue are monies received from
long distance operator services, commissions, phone vending (coin
calls), and dial-around revenue. Long distance operator services
revenue is reported at the gross amount with expenses reflected in
cost of revenue, while commissions which represent similar earnings
are recorded at their net amount received as gross revenue and
expense details are not provided to the Company. Dial-around
revenue is included in commissions and consists of payments of $6.00
per phone per month received from long-distance carriers as payment
for connection and call transfer services.
(c) Property and Equipment
Property and equipment are carried at cost. Equipment held under
capital leases is initially recorded at the lower of fair market
value of the equipment or the present value of minimum lease
payments at the inception of the lease.
Depreciation of property and equipment is provided using the
straight-line method over their estimated useful lives. Equipment
held under capital leases is amortized using the straight-line
method over the estimated useful life of the respective asset as the
leases contain bargain purchase options. The estimated useful lives
range from four to ten years.
(d) Telephone Equipment held for Installation
Telephone equipment held for installation is carried at lower of cost or
market and consists principally of telephones and related parts and
supplies. Once installed, the equipment is recorded in property and
equipment and depreciated.
(e) Contracts in Place
Contracts in place represent the value assigned to purchased customer
contracts. Contracts are valued at the lower of cost or approximate
gross profit remaining on the contract at the acquisition date.
(Continued)
12
<PAGE> 8
2
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Contracts in place are being amortized over the respective remaining
contract lives.
(f) Other Assets
Other assets consist of deposits, covenants not-to-compete, and
contract costs. The covenants not-to-compete are being amortized
over the life of the respective agreements.
(g) Income Taxes
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109). Under the asset and liability method of FAS 109, deferred tax
assets and liabilities are recognized for the future tax
consequences attributable to the difference between financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. Under FAS 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
The cumulative effect of the change in method of accounting for income
taxes as of January 1, 1993 was not material to the overall
presentation of the Company's consolidated financial statements.
(h) Reclassifications
Certain 1992 balances have been reclassified to conform to the 1993
presentation.
(2) Acquisitions and Dispositions
On February 16, 1993, the Company completed an asset purchase of certain
phones, contracts in place, and related equipment from an unrelated
entity for approximately $272,000 in cash. This purchase was funded by
additional stockholder loans. The acquisition was accounted for as a
purchase. Results of operations of the acquired company are included in
the statement of operations from the date of acquisition.
On June 1, 1993, the Company completed the sale of substantially all of the
assets of West Texas to an unrelated entity. The Company received
approximately $249,000 in cash and recorded a gain on the sale of
approximately $144,000. The funds were utilized to reduce certain
outstanding bank debt.
(3) Other Assets
<TABLE>
Other assets consist of the following:
<CAPTION>
1993 1993
<S> <C> <C>
Deposits $ 44,662 21,337
Covenant not-to-compete, net 12,500 5,325
Other 54,696 48,802
$ 111,858 75,464
</TABLE>
(Continued)
13
<PAGE> 9
3
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4) Long-Term Debt
<TABLE>
At December 31, 1993 and 1992, long-term debt consists of the following:
<CAPTION>
Banks 1993 1992
<S> <C> <C>
$200,000 line of Credit, principal due April
1995, interest payable monthly at prime
(6% at December 31, 1993) plus 1.75% $ 100,000 200,000
$75,000 line of credit, principal due April
1995, interest payable monthly at prime
plus 1% 75,000 75,000
Promissory demand notes payable in monthly
installments ranging from approximately
$240 to $1,296, including interest
ranging from prime plus 1% to 12.5%,
with final installments payable through
August 1995 848,403 959,288
$225,000 line of credit converted to a promis-
sory note August 1991 - 186,630
1,023,403 1,420,918
Less current maturities 98,166 114,827
$ 925,237 1,306,091
Stockholders and Related Party
Notes payable to various stockholders with no
specified principal payment terms, interest
payable monthly at prime plus 2% to 14% 144,000 360,837
Subordinated convertible debentures to various
stockholders, interest at 10% payable twice
annually with principal to be repaid in 1998 680,000 -
Notes payable to various stockholders, payable
in monthly installments including interest
ranging from prime plus 2% to 14%, with final
installments payable through March 1993 - 14,072
Note payable to related party with no specified
principal payment terms, interest payable
quarterly at prime plus 1% - 8,000
824,000 382,909
Less current maturities - 14,072
$ 824,000 368,837
<FN>
The subordinated convertible debentures mature over a five-year period, but
are callable by the Company at anytime following the date of issuance.
If called within three years of issuance, the subordinated convertible
debentures shall be redeemed at 102% of face value.
The Company' s long-term debt is secured by substantially all of the assets
of the Company, the related telephone site contracts, and personal
guarantees of officers and stockholders of the Company.
</TABLE>
(Continued)
14
<PAGE> 10
4
WORLD COMMUNICATIONS, INC, AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
The aggregate maturities of long-term debt payable to banks and stockholders
and related party are as follows:
<CAPTION>
Stock-
holders and
related
Banks party
<S> <C> <C>
Year ending December 31:
1994 $ 98,166 -
1995 925,237 -
1996 - -
1997 - -
1998 - 680,000
Thereafter - 144,000
$ 1,023,403 824,000
</TABLE>
(5) Leases
Capital Leases
The Company leases telephone equipment and telephone equipment held for
installation from third parties under capital lease agreements. Terms
of the leases include monthly payments ranging from approximately $26 to
$4,300 with final installments payable through April 1998, The gross
amount of telephone equipment, related costs, related accumulated
amortization, and telephone equipment held for installation recorded
under the capital leases is as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Telephone equipment and related costs $ 1,900,204 1,526,645
Less accumulated amortization 683,683 503,070
$ 1,216,521 1,023,575
</TABLE>
<TABLE>
Future minimum lease payments under capital lease agreements at December 31,
1993 are as follows:
<CAPTION>
Year ending December 31:
<S> <C>
1994 $ 381,793
1995 265,036
1996 237,910
1997 172,922
1998 7,373
Total minimum lease payments 1,065,034
Less amounts representing interest 198,599
Present value of future
minimum lease payments 866,435
Less current maturities of obligations
under capital lease 285,944
$ 580,491
<FN>
Amortization of assets held under capital leases is included in depreciation
and amortization expense - telephone equipment.
</TABLE>
(Continued)
15
<PAGE> 11
5
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During 1989, the Company sold 106 telephones to a third party at a gain of
approximately $44,000 and leased back the asset under a capital lease
agreement with a term of five years. The lease agreement contains an
option to purchase the equipment at the end of the lease for $1. The
gain was deferred and is being amortized as a reduction of depreciation
and amortization expense - telephone equipment on a straight-line basis
over the lease term. Depreciation and amortization expense - telephone
equipment was reduced by approximately $8,721 of amortized revenue in
1993 and 1992.
Operating Leases
At December 31, 1993, the Company was committed to an operating lease of its
St. Louis office through June 30, 1994 and of its Chicago office through
February 28, 1995. The Company has negotiated a lease for an alternate
location for its St. Louis office.
Rent expense under the current St. Louis and Chicago office operating leases
totaled $38,721 and $27,780 in 1993 and 1992, respectively.
(6) Income Taxes
The Company adopted FAS 109 as of January 1, 1993. There was no effect on
pretax income from applying FAS 109 for the year ended December 31, 1993.
Prior years' consolidated financial statements have not been restated to
apply the provisions of FAS 109.
Income tax expense (benefit) for the year ended December 31, 1993 differed
from the amounts computed by applying the blended U.S. Federal and state
income tax rate of 36% to income before provision for income taxes as a
result of the following:
<TABLE>
<S> <C>
Computed "expected" tax expense $ 146,781
Increase in income tax expense (benefit)
resulting from:
Other 8,442
Utilization of net operating loss and
contribution carryforward (155,223)
$ -
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at December 31, 1993 are presented
below:
<S> <C>
Deferred tax assets:
Net operating loss carryforwards $ 131,000
Less valuation allowance 131,000
Net deferred tax assets $ -
</TABLE>
At December 31, 1993, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $364,000, which are
available to offset future Federal taxable amounts. Net operating loss
carryforwards begin to expire in 2005.
(Continued)
16
<PAGE> 12
6
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Related Party Transaction
A law firm in which certain partners are stockholders of the Company
provided legal services amounting to approximately $45,500 and $33,500
for the years ended December 31, 1993 and 1992, respectively.
(8) Subsequent Event
Subsequent to year-end, the Company sold 66 phones in Colorado for $113,400
in cash and recorded a gain on the sale of approximately $15,000.
In January 1994, the Company issued an additional $40,000 of subordinated
convertible debentures to current stockholders.
17
<PAGE> 13
<TABLE>
Schedule 1
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidating Balance Sheet
December 31, 1993
<CAPTION>
World Northern
Communi- Florida Phone
cations, Telephone Masters, Elimina- Consoli-
Assets Inc. Corporation Inc. tions dated
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 130,346 53,814 2,734 - 186,894
Accounts receivable, net 276,011 64,160 21,136 - 261,307
Intercompany receivables 426,548 - - (426,548) -
Prepaid and other current assets 39,623 3,275 2,605 - 45,503
Total current assets 872,528 121,249 26,475 (426,548) 593,704
Property and equipment:
Telephone equipment 2,784,255 821,504 160,052 3,765,811
Other equipment, furniture and
fixtures 197,412 19,132 28,094 - 244,638
2,981,667 840,636 188,146 - 4,010,449
Less accumulated depreciation and
amortization 1,236,540 324,535 20,990 - 1,582,065
Net property and equipment 1,745,127 516,101 167,156 - 2,428,384
Telephone equipment held for installation 116,950 39,712 3,314 - 159,976
Investment in subsidiaries (293,609) - - 293,609 -
Contracts in place, net of accumulated
amortization - - 82,333 - 82,333
Other assets 87,503 9,414 14,941 - 111,858
$ 2,528,499 686,476 294,219 (132,939) 3,376,255
Liabilities and Stockholders' Deficit
Current liabilities:
Current maturities of long-term debt and
obligations under capital leases:
Banks 27,160 71,006 - - 98,166
Stockholders and related party - - - - -
Obligations under capital leases 237,460 48,484 - - 285,944
Total current maturities of long-
term debt and obligations
under capital leases 264,620 119,490 - - 384,110
Accounts payable 179,733 49,417 21,050 - 250,200
Intercompany payable - 151,079 275,469 (426,548) -
Accrued expenses 238,738 66,480 28,272 - 333,490
Total current liabilities 683,091 386,466 324,791 (426,548) 967,800
Long-term debt and obligations under capital
leases, less current maturities:
Banks 381,085 544,152 - - 925,237
Stockholders and related party 824,000 - - - 824,000
Obligations under capital leases 561,596 18,895 - - 580,491
Total long-term debt and obligations
under capital leases 1,766,681 563,047 - - 2,329,728
Deferred revenue 90,994 - - - 90,994
Total liabilities 2,540,766 949,513 324,791 (426,548) 3,388,522
Stockholders' deficit:
Common stock 2,699 1,000 - (1,000) 2,699
Additional paid-in capital 476,951 - - - 476,951
Accumulated deficit (491,917) (264,037) (30,572) 294,609 (491,917)
Total stockholders' deficit (12,267) (263,037) (30,572) 293,609 (12,267)
$2,528,499 686,476 294,219 (132,939) 33,376,255
<FN>
See accompanying independent auditors' report.
</TABLE>
18
<PAGE> 14
<TABLE>
Schedule 2
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Year ended December 31, 1993
<CAPTION>
World West Texas Northern
Communi- Communi- Florida Phone
cations, cations, Telephone Masters, Elimina- Consoli-
Inc. Inc. Corporation Inc. tions dated
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Long-distance operator services $3,185,412 - 229,121 11,395 - 3,425,928
Commissions 587,898 25,800 361,512 76,724 - 1,051,934
Phone vending service 1,445,208 67,861 719,030 92,547 - 2,324,646
Intercompany management fees 139,000 (10,000) (108,000) (21,000) - -
Other 82,956 1,284 2,284 94 - 86,618
5,440,474 84,945 1,203,947 159,760 - 6,889,126
Loss allowance for uncollected
charges 17,895 1,971 11,251 2,659 - 33,776
Net revenues 5,422,579 82,974 1,192,696 157,101 - 6,855,350
Cst of revenues:
Location commissions 565,366 18,326 183,157 24,203 - 791,052
License, processing and validation
fees 539 - 544 - - 1,083
Telephone line charges 2,414,552 30,499 462,016 42,149 - 2,949,216
Depreciation and amortization -
telephone equipment and contracts 329,215 18,000 188,699 31,394 - 567,308
Finder commissions 92,014 - 22,228 - 114,242
Repairs and maintenance - telephone
equipment 100,653 3,433 29,041 2,270 - 135,397
Salaries and wages - vending and repair 256,000 12,804 99,456 19,216 - 387,476
Automobile expense 76,935 1,231 21,744 3,456 - 103,366
Other 88,077 884 7,471 4,181 - 100,613
3,923,351 85,177 1,014,356 126,869 - 5,149,753
Gross profit 1,444,228 (2,203) 178,340 30,232 - 1,705,597
Selling, general and administrative
expenses:
Salaries and wages 342,066 - 34,463 9,426 - 385,955
Insurance 114,320 2,261 13,980 6,338 - 136,899
Professional associations 58,184 133 7,860 1,590 - 67,767
Professional fees 94,290 - 829 5,119 - 100,238
Outside services 100 - 40 - - 140
Rent expense 36,493 2,872 8,196 12,443 - 60,004
Repairs and maintenance 336 - 262 282 - 880
Telephone 53,458 1,063 18,533 4,053 - 77,107
Utilities 5,270 - 1,695 2,120 - 9,085
General office 85,443 542 7,616 4,765 - 98,366
Travel and entertainment 30,759 - 8 651 - 31,418
Other taxes 13,599 898 14,030 467 - 28,994
Depreciation and amortization -
other 37,134 150 8,451 12,468 - 58,203
Other 62,571 1,333 21,932 2,682 - 88,518
934,023 9,252 137,895 62,404 - 1,143,574
Income (loss) from
operations 565,205 (11,455) 40,445 (32,172) - 562,023
Other income (expense):
Interest expense (264,532) - (64,249) - - (328,781)
Gain on disposition of subsidiary - 144,032 - - - 144,032
Gain on sale of property and equipment 10,791 - - - - 10,791
Equity in subsidiaries 78,693 - - - (78,693) -
Other, net 17,569 - 492 1,600 - 19,661
(157,479) 144,032 (63,757) 1,600 - (154,297)
Net income (loss) $ 407,726 132,577 (23,312) (30,572) (78,693) 407,726
<FN>
See accompanying independent auditors' report.
</TABLE>
19
<PAGE> 15
<TABLE>
Schedule 3
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidating Balance Sheet
December 31, 1992
<CAPTION>
World West Texas Northern
Communi- Communi- Florida
cations, cations, Telephone Elimina- Consoli-
Assets Inc. Inc. Corporation tions dated
<S> <C> <C> <C> <C> <C>
Current assets:
Cash $ 177,394 1,638 31,132 - 210,164
Accounts receivable, net 286,898 3,578 96,574 - 387,050
Intercompany receivables 262,141 - - (262,141) -
Prepaids and other current assets 43,341 5,429 11,406 - 60,176
Total current assets 769,774 10,645 139,112 (262,141) 657,390
Property and equipment:
Telephone equipment 2,006,314 238,632 771,024 - 3,015,970
Other equipment, furniture, and
fixtures 145,080 2,066 17,005 - 164,151
2,151,394 240,698 788,029 - 3,180,121
Less accumulated depreciation and
amortization 881,844 135,946 243,461 - 1,261,251
Net property and equipment 1,269,550 104,752 544,568 - 1,918,870
Telephone equipment held for installation 116,762 17,123 39,712 - 173,597
Investment in subsidiaries (254,304) - - 254,304 -
Contracts in place, net of accumulated
amortization - - 109,565 - 109,565
Other assets 58,011 5,212 12,241 - 75,464
$ 1,959,793 137,732 845,198 (7,837) 2,934,886
Liabilities and Stockholders' Deficit
Current liabilities:
Current maturities of long-term debt
and obligations under capital leases:
Banks 43,173 - 71,654 - 114,827
Stockholders and related party 14,072 - - - 14,072
Obligations under capital leases 253,009 - 44,295 - 297,304
Total current maturities
of long-term debt and
obligations under
capital leases 310,254 - 115,949 - 426,203
Accounts payable 293,036 8,723 86,007 - 387,766
Intercompany payables (5,690) 132,695 135,136 (262,141) -
Accrued expenses 287,808 10,893 57,486 - 356,187
Total current liabilities 885,408 152,311 394,578 (262,141) 1,170,156
long-term debt and obligations under
capital leases, less current
maturities:
Banks 685,664 - 620,427 - 1,306,091
Stockholders and related party 368,837 - - - 368,837
Obligations under capital leases 438,396 - 69,918 - 508,314
Total long-term debt and
obligations under
capital leases 1,492,897 - 690,345 - 2,183,242
Deferred revenue 11,481 - - - 11,481
Total liabilities 2,389,786 152,311 1,084,923 (262,141) 3,364,879
Stockholders' deficit:
Common stock 2,689 1,000 1,000 (2,000) 2,689
Additional paid-in capital 466,961 - - - 466,961
Accumulated deficit (899,643) (15,579) (240,725) 256,304 (899,643)
Total stockholders' deficit (429,993) (14,579) (239,725) 254,304 (429,993)
$ 1,959,793 137,732 845,198 (7,837) 2,934,886
<FN>
See accompanying independent auditors' report.
</TABLE>
20
<PAGE> 16
<TABLE>
Schedule 4
WORLD COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidating Statement of Operations
Year ended December 31, 1992
<CAPTION>
World West Texas Northern
Communi- Communi- Florida
cations, cations, Telephone Elimina- Consoli-
Inc. Inc. Corporation tions dated
<S> <C> <C> <C> <C> <C>
Revenues:
Long-distance operator service $ 2,074,776 1,323 450,878 - 2,526,977
Commissions 558,390 53,119 310,926 - 922,435
Phone vending service 1,177,950 142,342 682,707 - 2,002,999
Intercompany management fees 127,285 (24,000) (103,285) -
Other 52,178 - (237) - 51,941
3,990,579 172,784 1,340,989 - 5,504,352
Less allowance for uncollected
charges 230,932 3,365 70,870 - 305,167
Net revenues 3,759,647 169,419 1,270,119 - 5,199,185
Cost of revenues:
Location commissions 703,871 32,872 249,792 - 986,535
License, processing and validation
fees 319,443 519 70,901 - 390,863
Telephone line charges 1,086,530 67,135 454,889 - 1,608,554
Depreciation and amortization -
telephone equipment and contracts 293,368 37,996 233,945 - 565,309
Finder commissions 80,502 2,030 13,115 - 95,647
Repairs and maintenance - telephone
equipment 67,669 8,673 20,376 - 96,718
Salaries and wages - vending and repair 222,712 23,177 62,013 - 307,902
Automobile expenses 53,528 2,023 25,324 - 80,875
Other 33,592 1,453 8,725 - 43,770
2,861,215 175,878 1,139,080 - 4,176,173
Gross profit 898,432 (6,459) 131,039 - 1,023,012
Selling, general and administrative
expenses:
Salaries and wages 268,064 - 19,743 - 287,807
Insurance 95,485 3,136 18,828 - 117,449
Professional associations 45,643 118 14,235 - 59,996
Professional fees 26,878 127 672 - 27,677
Outside services 2,280 - 704 - 2,984
Rent expense 37,407 5,100 4,098 - 46,605
Repairs and maintenance 3,512 - - - 3,512
Telephone 49,646 977 11,846 - 62,469
Utilities 4,710 - 741 - 5,451
General office 40,036 1,500 7,390 - 48,926
Travel and entertainment 15,226 640 2,195 - 18,061
Other taxes 16,154 328 40,247 - 56,729
Depreciation and amortization -
other 27,365 295 18,071 - 45,731
Other 33,946 1,537 14,430 - 49,913
666,352 13,758 153,200 - 833,310
Income (loss) from
operations 232,080 (20,217) (22,161) - 189,702
Other income (expense):
Interest expense (192,020) (4) (66,071) - (258,095)
Gain on sale of property and equipment 13,393 - - - 13,393
Equity in subsidiaries (107,371) - - 107,371 -
Other, net 1,499 1,082 - - 2,581
(284,499) 1,078 (66,071) 107,371 (242,121)
Net income (loss) $ (52,419) (19,139) (88,232) 107,371 (52,419)
<FN>
See accompanying independent auditors' report.
</TABLE>
21
<PAGE> 1
Exhibit (c)(1)
TABLE OF CONTENTS
-----------------
AGREEMENT AND PLAN OF MERGER
-----------------------------
ARTICLE I - DEFINITIONS ........................................ 1
1.1 DEFINITIONS .......................................... 1
ARTICLE II - TERMS OF MERGER; THE CLOSING ....................... 5
2.1 MERGER................................................ 5
2.2 EXCHANGE OF CONSIDERATION............................. 6
2.3 CLOSING............................................... 6
2.4 DELIVERIES BY WCI..................................... 7
2.5 DELIVERIES BY BUYER AND PHONETEL...................... 7
2.6 RELATED MATTERS....................................... 8
(a) EMPLOYMENT AGREEMENTS............................ 8
(b) SECURITY AGREEMENT............................... 8
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF WCI.............. 8
3.1 ORGANIZATION AND STANDING; SUBSIDIARIES............... 8
3.2 ORGANIZATIONAL DOCUMENTS AND CORPORATE RECORDS....... 10
3.3 AUTHORIZATION........................................ 11
3.4 WCI CAPITALIZATION................................... 11
3.5 CONSENTS AND APPROVALS; NO VIOLATION................. 12
3.6 ABSENCE OF UNDISCLOSED LIABILITIES................... 13
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS................. 13
3.8 COMPLIANCE WITH LAWS AND PERMITS..................... 14
3.9 LITIGATION AND ARBITRATION........................... 15
3.10 BROKERS............................................. 16
3.11 WCI PHONES.......................................... 16
3.12 TELCO CHARGES AND LOCATION COMMISSION............... 16
3.13 DISCLOSURE.......................................... 16
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF BUYER AND PHONETEL........................................... 17
4.1 ORGANIZATION AND STANDING; SUBSIDIARIES.............. 17
4.2 AUTHORIZATION........................................ 18
4.3 CAPITALIZATION....................................... 18
4.4 CONSENTS AND APPROVALS; NO VIOLATION................. 20
4.5 ABSENCE OF UNDISCLOSED LIABILITIES................... 21
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS................. 21
4.7 COMPLIANCE WITH LAWS AND PERMITS..................... 22
4.8 LITIGATION AND ARBITRATION........................... 23
4.9 BROKERS.............................................. 24
4.10 PHONETEL PHONES..................................... 24
4.11 TELCO CHARGES AND LOCATION COMMISSIONS.............. 24
4.12 DISCLOSURE.......................................... 24
<PAGE> 2
ARTICLE V - FURTHER ASSURANCES; COOPERATION..................... 25
5.1 FURTHER ASSURANCES; COOPERATION...................... 25
5.2 EXPENSES............................................. 25
5.3 REPAYMENT OF LOANS TO SHAREHOLDERS OF WCI............ 26
5.4 REGISTRATION RIGHTS AGREEMENT........................ 26
ARTICLE VI - SURVIVAL OF REPRESENTATIONS AND WARRANTIES......... 26
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES........... 26
6.2 INDEMNIFICATION OF PHONETEL AND BUYER................ 27
6.3 INDEMNIFICATION OF WCI SHAREHOLDERS.................. 27
6.4 ASSERTION OF CLAIMS.................................. 27
ARTICLE VII - MISCELLANEOUS..................................... 28
7.1 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES.... 28
7.2 EXHIBITS AND DISCLOSURE SCHEDULE..................... 29
7.3 ENTIRE AGREEMENT..................................... 29
7.4 WAIVER OF COMPLIANCE................................. 29
7.5 ENFORCEABILITY....................................... 30
7.6 COUNTERPARTS......................................... 30
7.7 HEADINGS............................................. 30
7.8 GOVERNING LAW........................................ 30
7.9 NOTICES.............................................. 31
II
<PAGE> 3
AGREEMENT AND PLAN OF MERGER
----------------------------
This Agreement and Plan of Merger (the "Agreement") dated
September 22, 1995, by and among PhoneTel Technologies, Inc.
("PhoneTel"), an Ohio corporation, PhoneTel, II, Inc. ("Buyer"), a
Missouri corporation, and World Communications, Inc. (together with
all subsidiaries thereof "WCI"), a Missouri corporation.
WHEREAS, the parties hereto desire that WCI be merged into and
with Buyer in accordance with the terms and conditions herein
contained; and
WHEREAS, for purposes of Federal income taxation, it is
intended that the Merger shall qualify as a reorganization under
Section 368(a) of the Code (as defined herein), and this Agreement
is intended to be and is adopted as a plan of reorganization within
the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings set forth below (such
meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Brenner" shall mean Brenner Securities, Inc.
"Buyer" shall mean PhoneTel II, Inc.
<PAGE> 4
"Closing" shall have the meaning set forth in Section 2.3
hereof.
"Closing Date" shall have the meaning set forth in Section 2.3
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Disclosure Schedule" shall mean the disclosure schedule
delivered in connection herewith.
"Employment Agreements" shall have the meaning set forth in
Section 2.6(b) hereof.
"Encumbrance" shall mean any lien, encumbrance, proxy, voting
trust arrangement, pledge, security interest, collateral security
agreement, financing statement (and similar notices) filed with any
Governmental Authority, claim (including any claim as defined in
the Code), charge, equities, mortgage, pledge, objection, title
defect, option, restrictive covenant or restriction on transfer of
any nature whatsoever, and the interest of the lessor in any
property subject to a capital lease.
"GAAP" shall mean generally accepted accounting principles as
in effect on the date hereof.
"Governmental Authority" shall mean any government or political
subdivision thereof, whether federal, state, local or foreign, or
body, administrative or regulatory authority or instrumentality of
any such government or political subdivision.
2
<PAGE> 5
"Income Taxes" shall mean all Taxes based upon or measured by
income.
"Indemnitor" shall have the meaning set forth in Section 6.4
hereof.
"Joint Ventures" shall mean all of such party's rights and
interests in any joint ventures or other projects.
"Law" shall mean any law (including common law), rule,
regulation, restriction (including zoning), code, statute,
ordinance, order, writ, injunction, judgment, decree or other
requirement of a Governmental Authority.
"Losses" shall mean and include all demands, claims, actions,
causes of action, assessments, damages, losses, liabilities,
judgments, settlements, fines, penalties, sanctions, costs and
expenses (including, without limitation, interest, penalties,
reasonable attorneys' fees and expenses as incurred, and all other
reasonable costs of investigating and defending third party claims
as incurred).
"Merger" shall have the meaning set forth in Section 2.1
hereof.
"Order" shall mean any order, judgment, injunction, award,
decree, writ, rule or similar action of any Governmental Authority.
"Other Documents" shall have the meaning set forth in Section
2.3 hereof.
"Permits" shall mean any franchise, license, certificate,
approval, identification number, registration, permit,
3
<PAGE> 6
authorization, order or approval of, and any required registration
with, any Governmental Authority.
"Person" shall mean any individual, partnership, firm, trust,
association, corporation, joint venture, joint stock company,
unincorporated organization, Governmental Authority or other
entity.
"PhoneTel Financial Statements" shall have the meaning set
forth in Section 4.5 hereof.
"PhoneTel Phones" shall mean the microprocessor-based pay
telephones owned and operated by PhoneTel which are active and
generating income.
"PhoneTel Common Shares" shall mean the shares of PhoneTel
common stock $.01 par value.
"PhoneTel Preferred Shares" shall mean shares of the 10% Non-
voting Preferred Stock, without par value, $100 stated value, of
PhoneTel, substantially in the form attached as Annex A hereto.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Security Agreement" shall have the meaning set forth in
Section 2.6(c).
"Taxes" shall mean all taxes, charges, fees, duties, levies,
penalties or other assessments imposed by any federal, state, local
or foreign Governmental Authority, including, but not limited to,
income, gross receipts, excise, property, sales, gain, use,
license, capital stock, transfer, franchise, payroll, withholding,
4
<PAGE> 7
social security or other taxes, including any interest, penalties
or additions attributable thereto.
"WCI" shall mean World Communications, Inc., a Missouri
corporation, and all of its subsidiaries.
"WCI Common Shares" shall mean the common shares, $.01 par
value, of WCI issued and outstanding as of the Closing.
"WCI Phones" shall mean the microprocessor-based pay telephones
owned and operated by WCI which are active and generating income.
"WCI Shareholders" shall have the meaning set forth in Section
2.2.
"WCI Subsidiaries" shall have the meaning set forth in Section
3.1 hereof (each, a "WCI Subsidiary").
ARTICLE II
TERMS OF MERGER; THE CLOSING
2.1 MERGER. On the date hereof, WCI shall be merged into and
with Buyer (the "Merger"). Buyer shall be the surviving corporation
of the merger and shall continue to exist and to be governed by the
laws of the State of Missouri. The Merger shall be consummated
pursuant to the terms of this Agreement and the Certificate of
Merger (substantially in the form attached hereto as Exhibit A)
all of which shall have been approved and adopted by the Board of
Directors and shareholders of WCI, and the Board of Directors of
PhoneTel and Buyer. The Merger shall be effective upon filing the
Certificate of Merger with the Secretary of State of the State of
Missouri ("Secretary of State") in accordance with the General
Corporation Law of Missouri. The separate corporate existence of
5
<PAGE> 8
WCI shall terminate upon the filing of the Certificate of Merger
with the Secretary of State and, as of that date, all the assets of
WCI shall vest in Buyer and all the liabilities of WCI shall be the
liabilities of Buyer as the surviving corporation of the merger.
At any time from and after the Closing, the last acting officers of
WCI shall in the name of WCI execute and deliver all assignments
and other instruments and take such further action as Buyer deems
necessary in order to carry out the intent and purpose of this
Agreement.
2.2 EXCHANGE OF CONSIDERATION. Shareholders of WCI (the "WCI
Shareholders") listed on Exhibit B attached hereto, shall be
entitled to receive, in the aggregate, 2,415,001, shares of
PhoneTel Common Shares and 530,534 shares of PhoneTel Preferred
Shares in exchange for all the assets of WCI and the WCI Common
Shares pursuant to the Merger.
Certificates representing the PhoneTel Preferred Shares and
the PhoneTel Common Shares shall be delivered to WCI to be
delivered to the WCI Shareholders as soon as practicable after
Closing in accordance with the number of shares set forth opposite
each WCI shareholder's name on Exhibit B.
2.3 CLOSING. The closing of the transactions contemplated
hereby is taking place at the offices of Blumenfeld, Kaplan &
Sandweiss, P.C., 168 North Meramec, St. Louis, Missouri 63105 on
September 22, 1995 (the "Closing" or the "Closing Date"),
simultaneously with the execution of this Agreement, the
Certificate of Merger and other agreements, documents, instruments
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<PAGE> 9
and writings executed and delivered pursuant hereto or in
connection herewith (collectively the "Other Documents").
2.4 DELIVERIES BY WCI. WCI and the WCI Shareholders are
delivering or will deliver the following to Buyer and PhoneTel:
(a) Stock certificates representing all of the WCI
Common Shares, accompanied by stock powers duly endorsed in blank
or accompanied by duly executed instruments of transfer;
(b) A certificate from each WCI shareholder in
substantially the form attached hereto as Exhibit C;
(c) A "Stockholder Representations and Warranties" letter
from each WCI shareholder in substantially the form attached hereto
as Exhibit D;
(d) A certificate, duly executed by an officer of WCI,
representing to Buyer and PhoneTel that Exhibit B is an accurate
and complete list of all WCI Shareholders and that there are no
other WCI Common Shares issued and outstanding; and
(e) Certified resolutions of the Board of Directors and
Shareholders of WCI approving this Agreement, the Other Documents
and the transactions contemplated hereby and thereby.
2.5 DELIVERIES BY BUYER AND PHONETEL. Buyer and PhoneTel are
delivering or will deliver the following to WCI:
(a) 2,415,001 PhoneTel Common Shares and 530,534
PhoneTel Preferred Shares, for distribution to WCI Shareholders;
(b) Certified resolutions of the Board of Directors and
Shareholders of Buyer, approving this Agreement and the Other
Documents and transactions contemplated hereby and thereby; and
7
<PAGE> 10
(c) Certified resolutions of the Board of Directors of
PhoneTel approving this Agreement, the Other Documents, the
transactions contemplated hereby and thereby; and
(d) A certificate, to be filed with Secretary of State
of Missouri pursuant to Section 351.458 RSMo., substantially in the
form attached as Exhibit E; and
(e) Opinion of Hahn, Loeser & Parks substantially in the
form attached as Exhibit F.
2.6 RELATED MATTERS.
(a) EMPLOYMENT AGREEMENTS. At the Closing, Stuart
Hollander, Gary Pace and Linda Harvey are entering into the
Employment Agreements with PhoneTel which are attached hereto as
Exhibits G, H and I.
(b) SECURITY AGREEMENT. At the Closing, WCI II, Inc. (a
corporation to be formed prior to the Closing), PhoneTel and Buyer
shall enter into a Security Agreement, substantially in the form
attached as Exhibit J (the "Security Agreement").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WCI
WCI represents and warrants to Buyer and PhoneTel as follows:
3.1 ORGANIZATION AND STANDING; SUBSIDIARIES.
(a) WCI is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Missouri. Each of its subsidiaries (as defined in subsection (b)
hereof) is a corporation duly organized, validly existing and in
good standing under the laws of the state in which such subsidiary
8
<PAGE> 11
is incorporated. WCI has all requisite corporate power and
authority to own, lease and operate the properties and assets it
now owns, operates and leases and to carry on its business and
operations as currently and heretofore conducted. Except as
otherwise stated therein, Schedule 3.1(a) is a complete listing of
all jurisdictions in which WCI is duly qualified or licensed to do
business and is in good standing or in which WCI is presently doing
business.
(b) As used in this Agreement, a subsidiary of an entity
shall mean (i) any corporation for which such entity (or any
subsidiary of such entity) is entitled to elect a majority of the
directors, by virtue of its ownership of more than 50% of the
outstanding securities having ordinary voting power, or otherwise,
or (ii) any partnership, joint venture or other entity which such
entity (or any subsidiary of such entity) controls, by virtue of
its ownership of more than 50% of the equity, or otherwise. All
subsidiaries of WCI (the "WCI Subsidiaries") and their respective
states of incorporation are set forth on Schedule 3.1(b) hereto.
No WCI Subsidiary is incorporated or conducts business in Texas
except that WCI had a subsidiary, West Texas Communications, Inc.
("WTC"), which operated in Texas until it was administratively
dissolved. Documentation, including a Certificate of Dissolution,
relating to WTC is disclosed in Schedule 3.1(b) of the Disclosure
Schedule. All of the outstanding shares of capital stock of each
WCI Subsidiary are validly issued, fully paid, nonassessable and
the outstanding shares of capital stock and partnership or other
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<PAGE> 12
ownership interests in each WCI Subsidiary are owned free and clear
of any Encumbrances. WCI owns directly or indirectly all of the
issued and outstanding shares of the capital stock and partnership
or other ownership interest in each of its Subsidiaries. There are
no subscriptions, options, warrants, rights, calls, contracts,
voting trusts, proxies or other commitments, understandings,
restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights affecting any shares of
capital stock or partnership or other ownership interest in any WCI
Subsidiary, including any right of conversion or exchange under any
outstanding security instrument or agreement.
(c) WCI has used its best efforts to enable Buyer to
assume, without any adverse effect, WCI's interests in the Joint
Ventures set forth on Schedule 3.1(c) of the Disclosure Schedule.
3.2 ORGANIZATIONAL DOCUMENTS AND CORPORATE RECORDS.
(a) WCI has heretofore delivered to Buyer complete and
correct copies, with all amendments thereto, of the Certificate of
Incorporation, Articles of Incorporation and Bylaws of WCI, as
currently in effect, copies of which are attached hereto as
Exhibits K, L and M respectively. The minute books of WCI have
been made available to Buyer for its inspection and, except as set
forth on Schedule 3.2 of the Disclosure Schedule, such minute books
contain complete and correct records of all meetings, and consents
in lieu of a meeting, of WCI's Board of Directors (and any
committees thereof) and its shareholders since WCI's incorporation,
and accurately reflect all transactions referred to therein. The
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<PAGE> 13
stock books and ledgers of WCI have been made available to Buyer
fob its inspection, and such books and ledgers are complete and
correct in all material respects.
(b) WCI has made available to Buyer all accounting,
corporate and financial books and records (the "Accounting Books
and Records") which relate to the business of WCI.
3.3 AUTHORIZATION. WCI has the requisite corporate power and
authority to execute, deliver and perform its obligations under
this Agreement and the Other Documents and to consummate the
transactions contemplated hereby and thereby. All corporate
proceedings on the part of WCI which are necessary to execute,
deliver and perform this Agreement and the Other Documents and to
consummate the transactions contemplated hereby and thereby have
been duly authorized and taken. Upon execution, this Agreement and
the Other Documents will constitute valid and binding obligations
of WCI and shall be enforceable against WCI in accordance with
their terms.
3.4 WCI CAPITALIZATION. As of the date hereof, the
authorized capital stock of WCI consists of 500,000 Common Shares,
$.01 par value, 432,178 of which are issued and outstanding and
owned by the WCI Shareholders ("WCI Common Shares"). WCI has no
other class of capital stock authorized or outstanding. None of
WCI's shares of capital stock have been reserved for any purpose.
All of WCI Common Shares are duly authorized, validly issued, fully
paid and nonassessable and were not issued in violation of any
preemptive rights. Except as set forth on Schedule 3.4 of the
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<PAGE> 14
Disclosure Schedule, there are no (i) options, warrants, calls,
commitments, or rights of any character to purchase or otherwise
acquire from WCI shares of capital stock of any class, (ii)
outstanding securities of WCI that are convertible into or
exchangeable or exercisable for shares of any class of capital
stock of WCI, (iii) options, warrants or other rights to purchase
from WCI any such convertible or exchangeable securities, or (iv)
contracts, commitments, agreements, understandings or arrangements
of any kind relating to the issuance of any capital stock of WCI,
any options, warrants or rights, pursuant to which, in any of the
foregoing cases, WCI is or would be subject or bound.
3.5 CONSENTS AND APPROVALS; NO VIOLATION. Except as set
forth on Schedule 3.5 of the Disclosure Schedule, neither the
execution and delivery of this Agreement and the Other Documents,
nor the consummation of the transactions contemplated hereby or
thereby, nor compliance with any of the provisions hereof, will (a)
conflict with any provision of the Articles of Incorporation or
Bylaws (or other similar organizational documents) of WCI, (b)
require any consent, waiver, approval, authorization or Permit of,
or filing with or notification to, or any other action by, any
Governmental Authority by WCI, (c) violate any Law of Governmental
Authority applicable to WCI, or by which any of WCI's business,
properties or assets may be bound or affected or (d) violate,
breach, or conflict with, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration of any obligation to pay
12
<PAGE> 15
or result in the imposition of any Encumbrance upon any of the
property) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, Encumbrance, contract, Permit,
Order or other instrument or obligation to which WCI is a party or
by which any of WCI's business, properties or assets may be bound
or affected.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Except as set forth on Schedule 3.6(a) of the
Disclosure Schedule, WCI had no liabilities arising from or
relating to its business and operations of any nature (whether
absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due) and any and all
liabilities or obligations incurred since June 30, 1995, were
incurred in the ordinary course of business and consistent with
past practice.
(b) Schedule 3.6(b) of the Disclosure Schedule sets
forth a true, complete and accurate list of all liabilities of WCI
at the Closing.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on Schedule 3.7 of the Disclosure Schedule, since June 30,
1995:
(i) WCI has operated its business in the
ordinary course consistent with past practice;
(ii) there has not been any material adverse
change in the business, results of operations,
assets, liabilities, financial condition or (except
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<PAGE> 16
for matters which apply to United States businesses
generally) any material adverse change in the
prospects of WCI; and
(iii) WCI has not incurred any material
damage, destruction or loss (whether or not covered
by insurance) to its owned or leased property or
assets.
3.8 COMPLIANCE WITH LAWS AND PERMITS.
(a) Except as set forth on Schedule 3.8(a) of the
Disclosure Schedule, the business and operation of WCI have been
conducted and are now being conducted in all material respects in
compliance with all Laws and Orders of all Governmental Authorities
having jurisdiction over WCI and all Permits relating to any of its
properties or applicable to its business.
(b) Except as and to the extent set forth on Schedule
3.8(b) of the Disclosure Schedule, WCI possesses all Permits
necessary to own and operate its property and assets and to conduct
its business as it is currently conducted. Such Permits are valid,
subsisting in full force and effect, and WCI has fulfilled its
material obligations under each of the Permits, and no event has
occurred or condition or state of facts exists which constitutes
or, after notice or lapse of time or both, would constitute a
default or violation under any of the Permits or would permit
revocation or termination of any of the Permits. No proceeding
which might involve the revocation or termination of any such
Permits is pending or, to the knowledge of WCI, threatened.
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<PAGE> 17
(c) Except as and to the extent set forth on Schedule
3.8(c) of the Disclosure Schedule, WCI has made all filings and
received all approvals in connection with the Permits which are
necessary for Buyer to own and operate the property and assets of
WCI and to conduct WCI's business as it is currently and has
heretofore been conducted.
3.9 LITIGATION AND ARBITRATION
(a) No claim, action, cause of action, suit, proceeding,
inquiry, investigation or Order is pending or to the best of WCI's
knowledge threatened, against WCI or affecting its business,
operations, or assets, except as set forth on Schedule 3.9 of the
Disclosure Schedule. Except as set forth on Schedule 3.9 of the
Disclosure Schedule, there are no legal, administrative,
arbitration or other claims, actions, causes of action, suits,
proceedings, inquiries, investigations or Orders involving any
Governmental Authority, arbitration or mediation panel which are
pending, or to the best of WCI's knowledge, threatened, against WCI
or affecting its business, operations or assets. No Order of any
Governmental Authority, arbitrator or mediator is outstanding
against WCI, its business, operations or assets. WCI has no
knowledge of any fact or circumstance which would reasonably be
expected to result in any other claim action, cause of action,
suit, proceeding, inquiry, investigation or Order, against WCI or
affect its business, operations or assets.
(b) To the best of WCI's knowledge, no claim, action,
suit, proceeding, inquiry or investigation has been instituted
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<PAGE> 18
which threatens to restrain or prohibit or to otherwise challenge
the legality or validity of the transactions contemplated by this
Agreement or the Other Documents.
3.10 BROKERS. WCI entered into an agreement with M&M
Financial, Inc., a copy of which is attached hereto as Exhibit N,
in connection with the sale of WCI. WCI has no other obligation to
pay any brokers, finders, investment bankers, financial advisors or
similar fee in connection with this Agreement or the Other
Documents, or the transactions contemplated hereby or thereby, by
reason of any action taken by or on behalf of WCI.
3.11 WCI PHONES. There were 3,237 WCI Phones in operation as
of the close of business on June 30, 1995.
3.12 TELCO CHARGES AND LOCATION COMMISSION. WCI has paid all
telephone line charges to the local exchange companies and
commissions to site location owners which are due and payable as of
the Closing, except as set forth on Schedule 3.12 of the Disclosure
Schedule, or if not so paid, such unpaid charges and commissions
are immaterial and not likely to have a material adverse effect
upon the operation of the business of WCI.
3.13 DISCLOSURE. WCI has not failed to disclose to PhoneTel
or Buyer any facts material to WCI's business, results of
operations, assets, liabilities, and financial condition. No
representation or warranty by WCI in this Agreement and no
statement by WCI in any of the Other Documents (including the
Disclosure Schedule) or previously disclosed to PhoneTel or Buyer,
contains any untrue statement of a material fact or omits to state
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any material fact necessary, in order to make the statements made
herein or therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND PHONETEL
PhoneTel and Buyer represent and warrant to WCI as follows:
4.1 ORGANIZATION AND STANDING; SUBSIDIARIES.
(a) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Missouri. Buyer has no subsidiaries. Buyer has all requisite
corporate power and authority to own, lease and operate the
properties and assets it now owns, operates and leases and to carry
on its business and operations as currently and heretofore
conducted. Except as otherwise stated therein, Schedule 4.1(a) is
a complete listing of all jurisdictions in which Buyer is duly
qualified or licensed to do business and is in good standing or in
which Buyer is presently doing business.
(b) PhoneTel is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio.
Each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the state in which
such subsidiary is incorporated. PhoneTel has all requisite
corporate power and authority to own, lease and operate the
properties and assets it now owns, operates and leases and to carry
on its business and operations as currently and heretofore
conducted. Except as otherwise stated therein, Schedule 4.1(b) is
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<PAGE> 20
a complete listing of all jurisdictions in which PhoneTel is duly
qualified or licensed to do business and is in good standing or in
which PhoneTel is presently doing business.
4.2 AUTHORIZATION. Buyer and PhoneTel have the requisite
corporate power and authority to execute, deliver and perform their
obligations under this Agreement and the Other Documents and to
consummate the transactions contemplated hereby and thereby. All
corporate proceedings on the part of PhoneTel and Buyer which are
necessary to execute, deliver and perform this Agreement and the
Other Documents and to consummate the transactions contemplated
hereby and thereby have been duly authorized and taken. Upon
execution, this Agreement and the Other Documents will constitute
valid and binding obligations of PhoneTel and Buyer and shall be
enforceable against PhoneTel and Buyer in accordance with their
terms.
4.3 CAPITALIZATION.
(a) As of the date hereof, the authorized capital stock
of PhoneTel consists of: (i) 22,500,000 common shares ("PhoneTel
Common Shares"), $.01 par value, 12,075,404 of which are issued and
outstanding, and (ii) 2,500,000 shares of Preferred Stock, $.01 par
value, of which (A) 2,125 shares have been designated Preferred
Stock, $100 par value, of which no shares are outstanding; (B)
6,500 shares have been designated Convertible Preferred Stock,
without par value, $100 stated value, cumulative and redeemable, of
which no shares are outstanding; (C) 3,880 shares have been
designated Preferred Stock, without par value, $1,000 stated value,
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<PAGE> 21
cumulative and redeemable, of which 1,496 shares are outstanding;
(D) 16,000 shares have been designated 8% Preferred Stock, without
par value, $100 stated value, cumulative and redeemable, of which
12,200 shares are outstanding; (E) 2,500 shares have been
designated 7% Convertible Preferred Stock, without par value, $100
stated value, cumulative and redeemable, all of which shares are
outstanding; (F) 550,000 shares have been designated as PhoneTel
Preferred Shares (as defined herein), none of which is outstanding
prior to Closing; and (G) 1,918,995 shares are not yet designated
nor issued. PhoneTel has no other class of capital stock
authorized or issued and outstanding. All of the PhoneTel shares
of capital stock issued are duly authorized and validly issued,
fully paid, nonassessable and not issued in violation of any
preemptive rights.
(b) Except as set forth in Schedule 4.3(b), there are no
(i) options, warrants, calls, commitments or right of any character
to purchase or otherwise acquire from PhoneTel shares of capital
stock of any class, (ii) outstanding securities of PhoneTel that
are convertible into or exchangeable or exercisable for shares of
any class of stock of PhoneTel, (iii) options, warrants or other
rights to purchase from PhoneTel any such convertible or
exchangeable securities, or (iv) contracts, commitments,
agreements, understandings or arrangements of any kind relating to
the issuance of any capital stock of PhoneTel, any options,
warrants or rights, pursuant to which, in any of the foregoing
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cases, PhoneTel is or would be subject or bound; no other shares of
PhoneTel's capital stock have been reserved for any purpose.
(c) The authorized capital stock of Buyer consists of
30,000 shares, $0.01 par value, of which 1,000 shares are issued
and outstanding.
4.4 CONSENTS AND APPROVALS; NO VIOLATION. Except as set
forth on Schedule 4.4 of the Disclosure Schedule, neither the
execution and delivery of this Agreement and the Other Documents,
nor the consummation of the transactions contemplated hereby or
thereby, nor compliance with any of the provisions hereof, will
conflict with any provision of the Articles of Incorporation or
Bylaws (or other similar organizational documents) of Buyer or
PhoneTel, (b) require any consent, waiver, approval, authorization
or Permit of, or filing with or notification to, or any other
action by, any Governmental Authority by Buyer or PhoneTel, (c)
violate any Law of Governmental Authority applicable to Buyer or
PhoneTel, or by which any of Buyer's or PhoneTel's business,
properties or assets may be bound or affected or (d) violate,
breach, or conflict with, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration of any obligation to pay
or result in the imposition of any Encumbrance upon any of the
property) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, Encumbrance, contract, Permit,
Order or other instrument or obligation to which Buyer or PhoneTel
20
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is a party or by which any of the business, properties or assets of
Buyer or PhoneTel may be bound or affected.
4.5 ABSENCE OF UNDISCLOSED LIABILITIES.
(a) Except as set forth on Schedule 4.5(a) of the
Disclosure Schedule, (i) PhoneTel had no liabilities arising from
or relating to its business and operations of any nature (whether
absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due) which were not
reflected in the financial statements (the "PhoneTel Financial
Statements") from Form 10QSB for the quarter ended June 30, 1995,
a copy of which are attached hereto as Exhibit O, and (ii) any
liability or obligation incurred since June 30, 1995, was incurred
in the ordinary course of its business and consistent with past
practice.
(b) Schedule 4.5(b) of the Disclosure Schedule sets
forth a true, complete and accurate list of all liabilities or
obligations of PhoneTel at the Closing.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set
forth on Schedule 4.6 of the Disclosure Schedule, since June 30,
1995:
(i) PhoneTel has operated its business in the
ordinary course consistent with past practice;
(ii) there has not been any material adverse
change in the business, results of operations,
assets, liabilities, financial condition or (except
for matters which apply to United States businesses
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generally) any material adverse change in the
prospects of PhoneTel; and
(iii) PhoneTel has not incurred any material
damage, destruction or loss (whether or not covered
by insurance) to its owned or leased property or
assets.
4.7 COMPLIANCE WITH LAWS AND PERMITS.
(a) Except as set forth on Schedule 4.7(a) of the
Disclosure Schedule, the business and operation of PhoneTel have
been conducted and are now being conducted in all material respects
in compliance with all Laws and Orders of all Governmental
Authorities having jurisdiction over PhoneTel and all Permits
relating to any of its properties or applicable to its business.
(b) Except as and to the extent set forth on Schedule
4.7(b) of the Disclosure Schedule, PhoneTel possesses all Permits
necessary to own and operate its property and assets and to conduct
its business as it is currently conducted. Such Permits are valid,
subsisting in full force and effect, and PhoneTel has fulfilled its
material obligations under each of the Permits, and no event has
occurred or condition or state of facts exists which constitutes
or, after notice or lapse of time or both, would constitute a
default or violation under any of the Permits or would permit
revocation or termination of any of the Permits. No proceeding
which might involve the revocation or termination of any such
Permits is pending or, to the knowledge of PhoneTel, threatened.
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(c) Except as and to the extent set forth on Schedule
4.7(c) of the Disclosure Schedule, PhoneTel has made all filings
and received all approvals in connection with the Permits which are
necessary for PhoneTel to own and operate the property and assets
of PhoneTel and to conduct PhoneTel's business as it is currently
and has heretofore been conducted.
4.8 LITIGATION AND ARBITRATION
(a) No claim, action, cause of action, suit, proceeding,
inquiry, investigation or Order is pending or to the best of
PhoneTel's knowledge threatened, against PhoneTel or affecting its
business, operations, or assets, except as set forth on Schedule
4.8 of the Disclosure Schedule. Except as set forth on Schedule
4.8 of the Disclosure Schedule, there are no legal, administrative,
arbitration or other claims, actions, causes of action, suits,
proceedings, inquiries, investigations or Orders involving any
Governmental Authority, arbitration or mediation panel which are
pending, or to the best of PhoneTel's knowledge, threatened,
against PhoneTel or affecting its business, operations or assets.
No Order of any Governmental Authority, arbitrator or mediator is
outstanding against PhoneTel, its business, operations or assets.
PhoneTel has no knowledge of any fact or circumstance which could
reasonably be expected to result in any other claim action, cause
of action, suit, proceeding, inquiry, investigation or Order,
against PhoneTel or affect its business, operations or assets.
(b) To the best of PhoneTel's knowledge, no claim,
action, suit, proceeding, inquiry or investigation has been
23
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instituted which threatens to restrain or prohibit or to otherwise
challenge the legality or validity of the transactions contemplate
by this Agreement or the Other Documents.
4.9 BROKERS. PhoneTel entered into an agreement with Brenner
Securities, a copy of which is attached hereto as Exhibit P.
PhoneTel has no other obligation to pay any brokers, finders,
investment bankers, financial advisors or similar fee in connection
with this Agreement or the Other Documents, or the transactions
contemplated hereby or thereby, by reason of any action taken by or
on behalf of Buyer or PhoneTel, other than the issuance of warrants
in connection therewith.
4.10 PHONETEL PHONES. There were 5,400 PhoneTel Phones in
operation as of the close of business on June 30, 1995.
4.11 TELCO CHARGES AND LOCATION COMMISSIONS. PhoneTel has
paid all telephone line charges to the local exchange companies and
commissions to site location owners which are due and payable as of
the Closing, except as set forth on Schedule 4.11 of the Disclosure
Schedule, or if not so paid, such unpaid charges and commissions
are immaterial and not likely to have a material adverse effect
upon the operations of the business of PhoneTel.
4.12 DISCLOSURE. Neither PhoneTel nor Buyer has failed to
disclose to WCI any facts material to PhoneTel's business, results
of operations, assets, liabilities, and financial condition. No
representation or warranty by PhoneTel and Buyer in this Agreement
and no statement by PhoneTel and Buyer in any of the Other
Documents (including the Disclosure Schedule), contains any untrue
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statement of a material fact or omits to state any material fact
necessary, in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not
misleading.
ARTICLE V
FURTHER ASSURANCES; COOPERATION
5.1 FURTHER ASSURANCES; COOPERATION.
(a) The parties shall from time to time after the
Closing, upon the request of any other party and without further
consideration, execute, acknowledge and deliver in proper form any
further instruments or documents, and take such further actions as
such other party may reasonably require, to carry out effectively
the intent of this Agreement and the Other Documents.
5.2 EXPENSES. Any expenses incurred by the parties in
connection with or execution of this Agreement and the Other
Documents and the consummation of the transactions contemplated
hereby and thereby, including expenses of accountants, counsel,
brokers, finders, financial advisors, and other representatives
which were not paid prior to or at the Closing, shall be paid by
the surviving corporation of the merger; provided, however, the
surviving corporation shall not be liable for expenses incurred
(whether prior or subsequent to, or simultaneous with, the
execution of this Agreement) in connection with any services
provided to or any fees paid by any WCI shareholder, director,
officer or employee, which relate to such individual person's needs
or concerns.
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5.3 REPAYMENT OF LOANS TO SHAREHOLDERS OF WCI. The parties
agree that any loans made to WCI by its Shareholders as listed on
Schedule 5.3 (the "Shareholder Loans"), which, at the time of
Closing, were in the amount of Six Hundred Twenty-five Thousand
Dollars ($625,000.00), will be repaid to said Shareholders from
first funds available from any financing obtained for PhoneTel by
Brenner or any other investment banking firm or any other sale of
securities by PhoneTel pursuant to a registration statement, which
exceeds an aggregated amount of Ten Million Dollars
($10,000,000.00). In any event, Buyer or PhoneTel shall repay the
Shareholder Loans within one (1) year from the date hereof.
5.4 REGISTRATION RIGHTS AGREEMENT. The parties shall execute
a Registration Rights Agreement substantially in the form attached
hereto as Exhibit Q.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of WCI, PhoneTel and Buyer contained
herein or made pursuant hereto shall survive the Closing and any
investigation at any time made by or on behalf of any party hereto
until the earlier of (i) thirty (30) days after 1995 audited
financial statements of PhoneTel and Buyer are received by the
Board of Directors of PhoneTel, (ii) the date on which any
secondary offering for the shares of stock of PhoneTel occurs or
(iii) upon the effective registration pursuant to the Securities
Act of PhoneTel Common Shares received by shareholders of WCI.
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Notwithstanding the foregoing, if a claim with respect to a breach
of a representation and warranty is made within the applicable
period in accordance with the provisions hereinafter set forth,
such claim and any related claim may continue to be asserted after
such period.
6.2 INDEMNIFICATION OF PHONETEL AND BUYER. WCI's
shareholders agree to indemnify PhoneTel and Buyer from any loss
incurred by reason of any breach of the representations in Section
3.6. Any loss described above which was required to be paid in
cash shall give rise to a Claim as defined in Section 6.5 below;
provided, however, that a party shall have a Claim only for the
value of the loss or losses which, in the aggregate, exceed Two
Hundred Fifty Thousand Dollars ($250,000.00).
6.3 INDEMNIFICATION OF WCI SHAREHOLDERS. PhoneTel and Buyer
agree to indemnify WCI's shareholders from any loss incurred by
reason of any breach of the representations in Section 4.5(a). Any
loss described above which was required to be paid in cash shall
give rise to a Claim as defined in Section 6.5 below; provided,
however, that a party shall have a Claim only for the value of the
loss or losses which, in the aggregate, exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).
6.4 ASSERTION OF CLAIMS. If a party claims ("Claiming Party")
that it is entitled to indemnification under this Article, notice
of such claim (the "Claim") shall be given to the party from whom
the Claiming Party seeks indemnification (the "Indemnitor"). The
parties shall negotiate in good faith to determine the validity and
27
<PAGE> 30
the value of the Claim. If the parties cannot reach an agreement
as to the value of the Claim, then the Claim shall be submitted to
the largest (based upon United States revenues) United States firm
of certified public accountants (the "Accounting Firm") with offices
in St. Louis, Missouri and Cleveland, Ohio willing to accept such
engagement that is not nor has been employed by WCI or PhoneTel;
provided, however, that either PhoneTel or WCI may disqualify one
firm without cause. The Accounting Firm shall review this
Agreement, such Other Documents or information which it believes is
relevant to its determination, and the Claim. Based upon its
review, the Accounting Firm shall determine the value of the Claim.
The decision of the Accounting Firm shall be final and binding upon
the parties.
ARTICLE VII
MISCELLANEOUS
7.1 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their
respective successors and permitted assigns. This Agreement and
the rights and obligations of WCI, PhoneTel and Buyer hereunder may
not be assigned by any of the parties hereto without the prior
written consent of the other parties, except that the Buyer may
assign its rights and obligations hereunder to PhoneTel, provided,
however, that the Buyer shall remain liable for all of its
obligations.
28
<PAGE> 31
(b) This Agreement is not intended, nor shall it be
construed, to confer any rights or remedies under or by reason of
this Agreement upon any Person except the parties hereto, the
shareholders of WCI and their heirs, successors and permitted
assigns.
7.2 EXHIBITS AND DISCLOSURE SCHEDULE. All Exhibits attached
hereto and the Disclosure Schedule referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth
in full herein.
7.3 ENTIRE AGREEMENT. This Agreement and the Other
Documents, including all Exhibits, documents, schedules,
certificates and instruments referred to herein or therein, embody
the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement. This
Agreement supersedes all prior agreements, arrangements and
understandings of the parties with respect to such transaction.
7.4 WAIVER OF COMPLIANCE. No amendment, modification,
alteration, supplement or waiver of compliance with any obligation,
covenant, agreement, provision or condition hereof or consent
pursuant to this Agreement shall be effective unless evidenced by
an instrument in writing executed by all of the parties or, in the
case of a waiver, the party against whom enforcement of any waiver,
is sought. Any waiver or failure to insist upon strict compliance
with such obligations, covenant, agreement, provision or condition
shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
29
<PAGE> 32
7.5 ENFORCEABILITY. If any term, provision, covenant or
restriction of this Agreement or the application thereof to any
person or circumstance should be held by an administrative agency
or court of competent jurisdiction to be invalid, void, or
unenforceable, then the remainder of this Agreement and the
application of such term, provision, covenant, or restriction to
other persons or circumstances shall not be affected thereby, but
rather shall be enforced to the greatest extent permitted by law.
Further, it is the intent of the parties that if any term,
provision, covenant, or restriction of the Agreement should be held
to be invalid, void, or unenforceable as applied to any person or
circumstance, then such term, provision, covenant, or restriction
shall be modified to the minimum extent necessary in order to
render the same enforceable, consistent with the expressed
objectives of the parties hereto for entering into this Agreement.
7.6 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same
instrument.
7.7 HEADINGS. The table of contents, article and section
headings contained in this Agreement are for convenience only and
shall not control or affect in any way the meaning or
interpretation of the provisions of this Agreement.
7.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of Missouri
30
<PAGE> 33
without giving effect to the conflicts of law principles of such
jurisdiction.
7.9 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given (i) at the time of delivery if
personally delivered or telecopied (with confirmation of receipt),
(ii) the next day, if delivered by nationally-recognized overnight
express service, or (iii) in five (5) days, if sent by registered
or certified mail (postage prepaid, return receipt requested) to
the parties at the following addresses:
(a) If to Buyer or PhoneTel to:
PhoneTel Technologies, Inc.
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone Number: (216) 241-2555
Facsimile Number: (216) 241-2574
Attn: Daniel Moos
with copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telephone Number: (212) 735-3000
Facsimile Number: (212) 735-2000
Attn: N. J. Terris, Esq.
(b) If to WCI:
World Communications, Inc.
11656 Lilburn Park Road
St. Louis, MO 63146
Telephone Number: (314) 993-0755
Facsimile Number: (314) 993-6245
Attn: Stuart Hollander
31
<PAGE> 34
with copy to:
Blumenfeld, Kaplan & Sandweiss, P.C.
168 North Meramec, Suite 400
St. Louis, Missouri 63105
Telephone Number: (314) 863-0800
Facsimile Number: (314) 863-9388
Attn: Mark Z. Schraier, Esq.
or to such other address as the person to whom notice is to be
given may have previously furnished to the other in writing in the
manner set forth above, provided that notice of a change of address
shall be deemed given only upon receipt.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, on the day and year first above written.
WCI:
WORLD COMMUNICATIONS, INC.
By:/s/ Stuart Hollander
Stuart Hollander, Chairman
PhoneTel:
PHONETEL TECHNOLOGIES, INC.
By:/s/ P. Graf
Name:
Title: Chairman
BUYER:
PHONETEL II, INC.
By:/s/
Name:/s/
Title: President
32
<PAGE> 35
INDEX OF EXHIBITS TO
AGREEMENT AND PLAN OF MERGER
A - Certificate of Merger
B - WCI Shareholders
C - Certificate of Ownership
D - Stockholder Representations and Warranties
E - Intentionally Omitted
F - Intentionally Omitted
G - Employment Agreement - Stuart Hollander
H - Employment Agreement - Gary Pace
I - Employment Agreement - Linda Harvey
J - Security Agreement
K - WCI Certificate of Incorporation
L - WCI Articles of Incorporation
M - WCI Bylaws
N - M & M Financial, Inc. Agreement
O - PhoneTel Financial Statements - 10Q
P - Brenner Securities Fee Letter
Q - Registration Agreement
<PAGE> 36
EXHIBIT A
State of Missouri . . . . Office of Secretary of State
ROY D. BLUNT, Secretary of State
SEAL
CORPORATION DIVISION
Articles of Merger
(To be submitted in duplicate by an attorney.)
HONORABLE ROY D. BLUNT
SECRETARY OF STATE
STATE OF MISSOURI
P.O. BOX 778
JEFFERSON CITY, MO 66102
Pursuant to the provisions of The General and Business Corporation Law
of Missouri, the undersigned Corporations certify the following:
(1) That World Communications, Inc. of Missouri
------------------------------------------- -----------------------
(Name of corporation) (Parent state)
(2) That PhonTel, II, Inc. of Missouri
------------------------------------------- -----------------------
(Name of corporation) (Parent state)
(3) That of
------------------------------------------- -----------------------
are hereby merged and that the above named PhoneTel, II, Inc.
--------------------------------
(Name of corporation)
is the surviving corporation.
(4) That the Board of Directors of World Communications, Inc.
--------------------------------------------
(Name of corporation)
met on August 29, 1995 and by resolution adopted by a majority vote
------------------------
of the members of such board approved the Plan of Merger set forth in these
articles.
(5) That the Board of Directors of PhoneTel, II, Inc.
--------------------------------------------
(Name of corporation)
met on and by resolution adopted by a majority vote of
-------------- ------
the members of such board approved the Plan of merger set forth in these
articles.
(6) That the Board of Directors of
--------------------------------------------
(Name of corporation)
met on August 29, 1995 and by resolution adopted by a majority vote
------------------------
of the members of such board approved the Plan of Merger set forth in these
articles.
(7) The Plan of Merger thereafter was submitted to a vote at the special
meeting of the shareholders of World Communications, Inc. held on
----------------------------------
August 31, 1995 at 4:00 p.m. and at such meeting there were
253,684 shares entitled to vote and 253,684 voted in favor
------------- ----------------
and -0- voted against said plan.
---------
(8) The Plan of Merger thereafter was submitted to avote at the special meeting
of the shareholders of PhoneTel, II Inc. held on September 21, 1995
--------------------- ----------------------
at 3:00 p.m. and at such meeting there were 1,000 shares entitled
------------- -----------
to vote and 1,000 voted in favor and -- voted against said plan.
--------- --------
(9) The Plan of Merger thereafter was submitted to a vote at the special
meeting of the shareholders of
--------------------------------------------
held on at and at such meeting were
------------------- -------------------
shares entitled to vote and voted in favor and voted
-------- ---------- -------
against said plan.
D. PLAN OF MERGER
1. PhonTel, II, Inc. of Missouri
------------------------------- ---------------------
is the survivor.
2. All of the property, rights, privileges, leases and patents of the
World Communications, Inc. Corporation and
---------------------------------- -----------------------
are to be transferred to and become the property of PhoneTel, II., Inc.
-----------------------
the survivor. The officers and board of directors of the abovbe named
corporqation are authorized to execute all deeds assignments and
documents of every nature which may be needed to effectuate a full and
complete transfer of ownership.
<PAGE> 37
EXHIBIT A
State of Missouri . . . . Office of Secretary of State
ROY D. BLUNT, Secretary of State
SEAL
CORPORATION DIVISION
Articles of Merger
(To be submitted in duplicate by an attorney.)
HONORABLE ROY D. BLUNT
SECRETARY OF STATE
STATE OF MISSOURI
P.O. BOX 778
JEFFERSON CITY, MO 66102
Pursuant to the provisions of The General and Business Corporation Law
of Missouri, the undersigned Corporations certify the following:
(1) That World Communications, Inc. of Missouri
------------------------------------------- -----------------------
(Name of corporation) (Parent state)
(2) That PhonTel, II, Inc. of Missouri
------------------------------------------- -----------------------
(Name of corporation) (Parent state)
(3) That of
------------------------------------------- -----------------------
(Name of corporation) (Parent state)
are hereby merged and that the above named PhoneTel, II, Inc.
--------------------------------
(Name of corporation)
is the surviving corporation.
(4) That the Board of Directors of World Communications, Inc.
--------------------------------------------
(Name of corporation)
met on August 29, 1995 and by resolution adopted by a majority vote
------------------------
of the members of such board approved the Plan of Merger set forth in these
articles.
(5) That the Board of Directors of PhoneTel, II, Inc.
--------------------------------------------
(Name of corporation)
met on and by resolution adopted by a majority vote of
--------------
the members of such board approved the Plan of Merger set forth in these
articles.
(6) That the Board of Directors of
--------------------------------------------
(Name of corporation)
met on and by resolution adopted by a majority vote
------------------------
of the members of such board approved the Plan of Merger set forth in these
articles.
(7) The Plan of Merger thereafter was submitted to a vote at the special
meeting of the shareholders of World Communications, Inc. held on
----------------------------------
August 31, 1995 at 4:00 p.m. and at such meeting there were
253,684 shares entitled to vote and 253,684 voted in favor
------------- ----------------
and -0- voted against said plan.
---------
(8) The Plan of Merger thereafter was submitted to avote at the special meeting
of the shareholders of PhoneTel, II Inc. held on September 21, 1995
--------------------- ----------------------
at 3:00 p.m. and at such meeting there were 1,000 shares entitled
------------- -----------
to vote and 1,000 voted in favor and -- voted against said plan.
--------- --------
(9) The Plan of Merger thereafter was submitted to a vote at the special
meeting of the shareholders of
--------------------------------------------
held on at and at such meeting were
------------------- -------------------
shares entitled to vote and voted in favor and voted
-------- ---------- -------
against said plan.
D. PLAN OF MERGER
1. PhonTel, II, Inc. of Missouri
------------------------------- ---------------------
is the survivor.
2. All of the property, rights, privileges, leases and patents of the
World Communications, Inc. Corporation and
---------------------------------- -----------------------
are to be transferred to and become the property of PhoneTel, II., Inc.
-----------------------
the survivor. The officers and board of directors of the above named
corporation are authorized to execute all deeds assignments and
documents of every nature which may be needed to effectuate a full and
complete transfer of ownership.
<PAGE> 38
3. The officers and board of directors of PhoneTel, II, Inc.
-------------------------------------
shall continue in office until their successors are duly elected and
qualified under the provisions of the by-laws of the surviving corporation.
4. The outstanding shares of World Communications, Inc. ("WCI")
--------------------------------------------------
shall be exchanged for shares of PhoneTel Technologies, Inc. ("PhoneTel")
-------------------------------------------
on the following basis:
For each share of common stock of WCI held by a shareholder of WCI,
such shareholder shall receive approximately 5.5 shares of PhoneTel common
stock and * shares of PhoneTel preferred stock.
*1.2
5. The outstanding shares of
--------------------------------------------------
shall be exchanged for shares of
-------------------------------------------
on the following basis:
6. The articles of incorporation of the survivor are amended as follows:
After the merger, PhoneTel, II, Inc. shall change its name to World
Communications, Inc.
WITNESS WHEREOF, these Articles of Merger have been executed in duplicate by
the aforementioned corporations as to day and year hereafter acknowledged.
CORPORATE SEAL World Communications, Inc.
---------------------------------------
(Name of Corporation)
By Gary Lain
------------------------------------
Its President or Vice-President
ATTEST:
Linda M. Harvey
- ----------------------------------------
Its Secretary or Assistant Secretary
CORPORATE SEAL PhoneTel, II, Inc.
---------------------------------------
(Name of Corporation)
By Dan N. Mann
------------------------------------
Its President or Vice-President
ATTEST:
Larson X. Trenton
- ----------------------------------------
Its Secretary or Assistant Secretary
CORPORATE SEAL
---------------------------------------
(Name of Corporation)
By
------------------------------------
Its President or Vice-President
ATTEST:
- ----------------------------------------
Its Secretary or Assistant Secretary
<PAGE> 39
State of: Missouri
------------------------ \
County of: St. Louis | ss
----------------------- /
I, /s/ Rita T. Moore , a Notary Public,
-----------------------------------------------
do hereby certify that on the 21st day of September, 1995,
--------------- --------------------------
personally appeared before me Gary Pace
-----------------------------------------------
who being by me first duly sworn, declared that he is the President
-------------------
of World Communications, Inc.
-------------------------------------------------------------------------
that he signed the foregoing document as President of the corporation, and that
---------
the statements therein contained are true.
------------------------------
[Notarial Seal]| RITA I. MOORE | /s/ Rita T. Moore
| NOTARY PUBLIC NOTARY SEAL | ----------------------
| STATE OF MISSOURI | Notary Public
| ST. LOUIS COUNTY |
|MY COMMISSION EXPIRES 3/25/96| My commission expires ___________
-------------------------------
State of: Missouri
------------------------ \
County of: St. Louis | ss
----------------------- /
I, /s/ Rita T. Moore , a Notary Public,
-----------------------------------------------
do hereby certify that on the 21st day of September, 1995,
--------------- --------------------------
personally appeared before me Daniel Moos
-----------------------------------------------
who being by me first duly sworn, declared that he is the President
-------------------
of PhoneTel, II, Inc.
-------------------------------------------------------------------------
that he signed the foregoing document as President of the corporation, and the
---------
the statements therein contained are true.
------------------------------
[Notarial Seal]| RITA I. MOORE | /s/ Rita T. Moore
| NOTARY PUBLIC NOTARY SEAL | ----------------------
| STATE OF MISSOURI | Notary Public
| ST. LOUIS COUNTY |
|MY COMMISSION EXPIRES 3/25/96| My commission expires ___________
-------------------------------
State of:
------------------------ \
County of: | ss
----------------------- /
I, , a Notary Public,
-----------------------------------------------
do hereby certify that on the day of 19
--------------- ------------------, ------,
personally appeared before me
-----------------------------------------------
who being by me first duly sworn, declared that he is the
-------------------
- ----------------------------------------------------------------------------
that he signed the foregoing document as of the corporation, and the
---------
the statements therein contained are true.
--------------------------------------
Notary Public
My commission expires ________________
<PAGE> 40
EXHIBIT B
EXHIBIT B
<TABLE>
<CAPTION>
Shares after
Name Address Conversion
- ---- ------- ------------
<S> <C> <C>
Arnstein, Fred #1 Prado 4,333
St. Louis, Missouri 63124
Axelbaum, Jerold 7921 Stanford 3,659
St. Louis, MO 63130
Blumenfeld, John A. 168 North Meramec, Ste. 400 127
St. Louis, Missouri 63105
Mark Twain Trust for the separate 8820 Ladue Road 5,000
account of John A. Blumenfeld under St. Louis, Missouri 63124
Blumenfeld, Kaplan & Sandweiss Profit
Sharing Plan Account #40218-0101-8820
Mark Twain Bank, Ladue Road,
St. Louis, MO
Blumenfeld, Andrew 6845 Frying Pan Road 600
Boulder, Colorado 80301
Blumenfeld, Emily A. 731 Westwood Drive 600
St. Louis, Missouri 63106
Blumenfeld, Jane A. 4818 North Bell 600
Chicago, Illinois 60640
Blumenfeld, James M. 24 Rynda Road 600
Maplewood, NJ 07040
Blumenfeld, John, Jr. 2243 Bent Tree Lane 600
Mendota Heights, MN 55120
French, Arleen N., Trustee of the P.O. Box 776 900
Arleen N. French Revocable Trust Key Colony Beach, FL 33051
Agreement dtd. 6/30/95
Galakatos, George or his successors 10822 Kennerly Road 1,000
Trustee under living trust of George St. Louis, MO 63128-2017
Galakatos, dated 10/25/89
Galakatos, George or his successors 10822 Kennerly Road 25,250
Trustee under living trust of George St. Louis, MO 63128-2017
Galakatos, dated 10/25/89
Gavatin, Linda 720 Fairway Circle 300
St. Louis, MO 63141
Greenberg, Lawrence H. and Sandra 149 North Central 1,600
M. Greenberg, with right of survivorship St. Louis, Missouri 63105
Harvey, Michael 25 Meadow Ridge Drive 365
St. Peters, Missouri 63376
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
Shares after
Name Address Conversion
- ---- ------- ------------
<S> <C> <C>
Harvey, Linda 25 Meadow Ridge Drive 10,000
St. Peters, Missouri 63376
Harvey, Michael S. and Linda M. 25 Meadow Ridge Drive 2,166
Harvey, Joint Tenants with rights of St. Peters, Missouri 63376
survivorship
Hoffman, Larry P.O. Box 1700 1,000
Bridgeport, CT 06604
Hoffman, Augusta P.O. Box 3580 3,474
Stamford, CT 06905
Hoffman, Burton P.O. Box 3580 1,000
Stamford, CT 06905
Hoffman, James P.O. Box 3580 3,474
Stamford, CT 06905
Hoffman, David 215 St. Paul, Suite 209 8,807
Denver, CO 80206
Hollander, Jason 32 Lake Forest 2,105
St Louis, MO 63117
Hollander, Stuart S. 32 Lake Forest 2,105
St. Louis, MO 63117
Hollander, Stuart, Trustee U/T dtd. 32 Lake Forest 54,466
03/12/91, f/b/o Stuart Hollander St. Louis, MO 63117
Hollander, Sharon, M. Trustee U/T dtd. 32 Lake Forest 50,000
03/12/91, f/b/o Sharon M. Hollander St. Louis, MO 63117
Katzman, Aron 1201 Hanley Ind. Court 34,282
St. Louis, MO 63144
Kliethermes, Roberta 10459 Toelle Lane 980
St. Louis, MO 63137
Roberta Ann Kliethermes, as custodial 10459 Toelle Lane 10
trustee for Regina Linn Kliethermes St. Louis, MO 63137
under the Missouri Transfer to Minors
Law
Roberta Ann Kliethermes, as custodial 10459 Toelle Lane 10
trustee for Kimberly Anne Kliethermes St. Louis, MO 63137
under the Missouri Transfer to Minors
Law
Kolbrener, Robert 12300 Ballas Woods Court 5,333
St. Louis, MO 63131
</TABLE>
2
<PAGE> 42
<TABLE>
<CAPTION>
Shares after
Name Address Conversion
- ---- ------- ------------
<S> <C> <C>
Kolbrener, Thomas #8 Wendover Drive 2,000
St. Louis, MO 63124
Kolbrener, Richard 11401 Conway Road 2,000
St. Louis, MO 63131
Kolbrener, Maynard, II 16 Pine Valley Drive 9,000
St. Louis, MO 63124
Marx, Richard S., Trustee f/b/o Richard 168 North Meramec, Ste. 400 3,127
S. Marx U/T 8/18/87 St. Louis, MO 63105
Marx, Richard S. Mark Twain Trust for 8820 Ladue Road 13,333
separate account of Richard S. Marx St. Louis, Missouri 63124
under Blumenfeld, Kaplan & Sandweiss
Profit Sharing Plan account #40218-
0103
McCadden, John E., Jr., Trustee f/b/o 8330 Kingsbury Place 1,935
John E. McCadden, Jr. dtd. 07/19/83 St. Louis, MO 63105
McCadden, John E., Jr., Trustee f/b/o 8330 Kingsbury Place 1,666
John E. McCadden, Jr. dtd. 07/19/83 St. Louis, MO 63105
McCadden, John E., Jr. and Patricia N. 8330 Kingsbury Place 500
McCadden, Trustees U/A dtd. 07/19/83 St. Louis, MO 63105
f/b/o John E. McCadden, Jr., Trustee
Minner, Jack 701 Market, Suite 1000 53,825
St. Louis, Missouri 63101
Mitchusson, Robert L., Trust dtd. #2 Lynnbrook Road 100
06/04/86, Robert L. Mitchusson, St. Louis, MO 63131
Trustee
Mitchusson, Margaret, Trust dtd. #2 Lynnbrook Road 650
10/11/90, Margaret M. Mitchusson, St Louis, MO 63131
Trustee
Newman, Andrew R. 6 High Acres 500
St. Louis, MO 63132
Newman, Matthew, Custodian for 6 High Acres 500
Elizabeth J. Newman St. Louis, MO 63132
Newman, Lee I. 6 High Acres 500
St. Louis, MO 63132
Newman, Matthew, M.D. 6 High Acres 5,000
St. Louis, MO 63132
Niedt, Greg S. or Moira M.B. Niedt 2327 Albion Place 4,348
with right of survivorship St. Louis, MO 63104
</TABLE>
3
<PAGE> 43
<TABLE>
<CAPTION>
Shares after
Name Address Conversion
- ---- ------- ------------
<S> <C> <C>
Pace, Gary 10050 Affton Place 48,000
St. Louis, MO 63123
Roman, Melvin F., Trustee, Melvin F. 408 Conway Meadows Drive 50
Roman Revocable Living Trust dated Chesterfield, MO 63017
12/29/78, as amended
Roman, Adele G., Trustee, Adele G. 408 Conway Meadows Drive 50
Roman Revocable Living Trust dated Chesterfield, MO 63017
12/19/78, as amended
Sale, Fred R. & Susan W. Sale, Trustee 165 North Meramec, Ste. 400 5,752
f/b/o Fred R. Sale u/t dtd. 08/03/83, EIN St. Louis, MO 63105
43-6276140
Sale, Susan W. and Fred R. Sale, 165 North Meramec, Ste. 400 5,753
Trustee u/t dtd. 08/03/83, f/b/o Susan St. Louis, MO 63105
W. Sale
Sass, Richard H. 11448 Conway Road 2,819
St. Louis, MO 63132
Schraier, Mark Z. 168 North Meramec, Ste. 400 895
St. Louis, MO 63105
Spitzer, Michael N. 26 Clay 300
Irvine, California 92720
Spitzer, Sanford, Trustee U/I/T dtd. 526 Sarah Lane, #31 33,065
06/29/88, Sanford J. Spitzer Living St. Louis, MO 63141
Trust
Spitzer, Gloria F., Trustee U/I/T dtd. 526 Sarah Lane, #31 3,474
06/29/88, Gloria F. Spitzer Living Trust St. Louis, MO 63141
Spitzer, Jeffrey A. 21 Hammond 300
Leominster, MA 01453
Spitzer-Resnick, Sheryl K. 430 Sidney 300
Madison, WI 53703
Willing, Richard M. 4 Mony Blanc Court 500
Manchester, MO 63021
Willing, Susan 4 Mony Blanc Court 500
Manchester, MO 63021
Wolff, Robert S. 225 South Meramec, Ste. 300 1,690
St. Louis, MO 63105
Yavitz, Marvyn 330 Morristown 5,000
Chesterfield, MO 63017
</TABLE>
4
<PAGE> 44
EXHIBIT C
--
[LOGO] WORLD COMMUNICATIONS, INC.
CERTIFICATE OF OWNERSHIP
------------------------
The undersigned, ___________________________; being a shareholder of
World Communication, Inc. ("WCI") does hereby certify to PhoneTel Technologies,
Inc. ("PhoneTel") and Huntington National Bank ("Escrow Agent"), with respect
to the WCI Common Shares owned by the undersigned, that:
1. the undersigned is the record and benefical owner of,
and has good and marketable title to, ________ WCI
common shares of stock (the "Shares"), free and clear
of all encumberances;
2. the Shares owned by the undersigned are not subject to
any restrictions on transferability other than those
imposed by any applicable securities laws; and
3. the undersigned is acquiring PhoneTel shares of common
stock and PhoneTel shares of preferred stock pursuant
to the merger between PhoneTel II, Inc. and WCI for
the undersigned's own account and without a view to
public distribution thereof.
IN WITNESS WHEREOF, I have executed this Certificate of Ownership this
__________ day of September, 1995.
_____________________________
<PAGE> 45
EXHIBIT D
-----
STOCKHOLDER REPRESENTATIONS AND WARRANTIES
------------------------------------------
This document is being delivered in connection with the proposed merger
(the "Merger") of World Communications, Inc. ("WCI") with and into a wholly
owned subsidiary of PhoneTel Technologies, Inc. ("PhoneTel") pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") to be entered into among
PhoneTel, PhoneTel II, Inc. and WCI. The undersigned holder of shares of WCI
Common Stock (the "Stockholder") understands that, pursuant to the Merger,
his/her shares of WCI Common Stock will be converted into shares of PhoneTel
Common Stock and Phonetel Preferred Stock (collectively, "Shares").
NAME: ____________________________________________
(Please Type or Print)
ADDRESS: ____________________________________________
SOCIAL SECURITY NUMBER: _________________________
NUMBER OF WCI SHARES HELD BY STOCKHOLDER:
_______________________
NUMBER OF WCI SHARES WHICH WOULD RESULT FROM STOCKHOLDER'S
CONVERSION INTO WCI COMMON STOCK OF ALL CONVERTIBLE
DEBENTURES OF WCI HELD BY STOCKHOLDER: _______
DATE:______________________________
<PAGE> 46
PART I: ACCREDITED INVESTORS
(Based upon the definition of "accredited investor" in
Exhibit A hereto, please check one box below.)
__ Stockholder is an "accredited investor"
Stockholder Initials: __________
(Go to PART III)
__ Stockholder is not an "accredited investor"
(Continue to PART II)
PART II: KNOWLEDGE AND EXPERIENCE
Please check one of the boxes below.
__ Stockholder has such knowledge and experience in
financial and business matters that he/she is capable
of evaluating the merits and risks of the prospective
investment in the Shares. (Go to PART II(A))
__ Stockholder has relied upon a Purchaser Representa-
tive (as defined in Exhibit B hereto) in evaluating
the merits and risks of the prospective investment
in the Shares. (Go to PART II(B))
A. KNOWLEDGEABLE INVESTORS REPRESENTATIONS AND
WARRANTIES. The Stockholder hereby represents and war-
rants that the Stockholder has such knowledge, experience
and skill in evaluating and investing in issues of both
equity and debt securities, including securities of new
and speculative companies, such that he/she is capable of
evaluating the merits and risks of an investment in the
Shares, and has such knowledge, experience and skill in
financial and business matters that he/she is capable of
evaluating the merits and risks of the prospective in-
vestment in the Shares and the suitability of the Shares
as an investment.
Stockholder Initials: __________ (Go to PART III)
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<PAGE> 47
B. Purchaser Representative
------------------------
The Stockholder hereby represents and warrants
that the Purchaser Representative upon whom Stockholder
relied when making this investment decision meets the
criteria set forth in Exhibit B hereto.
Name of Purchaser Representative: ______________________
(Please Type or Print)
Occupation _______________________
Address _______________________
_______________________
Stockholder Initials: __________
(Continue to PART III)
PART III: ADDITIONAL REPRESENTATIONS AND WARRANTIES
(a) The Stockholder is acquiring the Shares
solely for his/her own beneficial account, for investment
purposes, and not with a view to, or for resale in con-
nection with, any distribution of the Shares. The under-
signed understands that the Shares have not been regis-
tered under the Securities Act of 1933 or the securities
laws of any state by reason of specific exemptions under
the provisions thereof which depend in part upon the
investment intent of the undersigned and of the other
representations made by the Stockholder. The Stockholder
understands that PhoneTel is relying upon the representa-
tions contained herein for the purpose of determining
whether the Merger meets the requirements for such exemp-
tions.
(b) The Stockholder understands that no public
market now exists for any of the shares of PhoneTel
Preferred Stock and that PhoneTel has made no assurances
with respect to any market for the Shares.
(c) The Stockholder has had an opportunity to
ask questions, receive answers and discuss the business,
management and financial affairs of PhoneTel and the
terms and conditions of an investment in the Shares with,
and has had access to, the management of PhoneTel and the
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<PAGE> 48
Stockholder has had the opportunity to review the infor-
mation received in connection with this investment. The
Stockholder is familiar with the business and financial
condition, properties, operations and prospects of
PhoneTel and WCI and with the terms of the Merger and the
Merger Agreement.
(d) Neither PhoneTel nor any person acting on
its behalf has offered the Shares to the Stockholder by
any form of general solicitation or general advertising.
(e) (i) The Stockholder's financial situation
is such that he/she can afford to bear the economic risk
of holding the Shares for an indefinite period of time,
has adequate means for providing for his/her current
needs and personal contingencies, and can afford to
suffer the complete loss of his/her investment in the
Shares; (ii) in making his/her decision to acquire the
Shares pursuant to the Merger, the Stockholder has relied
upon independent investigations made by him/her and, to
the extent believed by the Stockholder to be appropriate,
his/her representatives, including his/her own profes-
sional, financial, tax and other advisors; and (iii) all
information which the Stockholder has provided to
PhoneTel and its representatives including, without
limitation, information concerning the Stockholder and
his/her financial position is true, complete and correct
as of the date hereof, and the Stockholder agrees to
promptly notify PhoneTel if at any time this ceases to be
the case.
PART IV: RELATIVES
__ Please check this box if any relative, spouse, or
any relative of a spouse who has the same principal
residence as the Stockholder is also a stockholder
of WCI.
If you checked the box above, please list the names of
such persons:
__________________________________ _______________________________
__________________________________ _______________________________
__________________________________ _______________________________
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<PAGE> 49
PART B: MERGER
The Stockholder hereby approves the Merger and the
Merger Agreement, in the form previously furnished to
him/her, with such changes therein as the officers of WCI
executing the Merger Agreement shall approve, provided
that no such change shall affect the number or type of
Shares to be issued in consideration for the WCI Common
Stock. The Stockholder has read, understands and, in
consideration of PhoneTel's agreement to enter into the
Merger Agreement, hereby agrees to be bound by, the
provisions of Sections 6.2 and 6.4 and the registration
rights provisions of the Merger Agreement; the Stockhold-
er further agrees to be bound by substantially identical
registration rights provisions with respect to the
Shares.
IN WITNESS WHEREOF, the Stockholder has execut-
ed this document as of the date set forth above.
-------------------------------------
Stockholder
Accepted and Agreed:
PHONETEL TECHNOLOGIES, INC.
By: ____________________
Date: 1995
<PAGE> 50
EXHIBIT A
---------
"Accredited investor" shall mean any person who
comes within any of the following categories, or who the
issuer of the securities being offered or sold reasonably
believes comes within any of the following categories, at
the time of the sale of the securities to that person:
(1) Any natural person whose individual net
worth, or joint net worth with that person's spouse, at
the time of his purchase exceeds $1,000,000;
(2) Any natural person who had an individual
income in excess of $200,000 in each of the two most
recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level
in the current year;
(3) Any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of ac-
quiring the securities offered, whose purchase is direct-
ed by a person who has such knowledge and experience in
financial and business matters that he is capable of
evaluating the merits and risks of the prospective in-
vestment; and
(4) Any entity in which all of the equity
owners are accredited investors.
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<PAGE> 51
EXHIBIT B
---------
"Purchaser Representative" shall mean any
person who satisfies all of the following conditions or
who the issuer of the securities being offered or sold
reasonably believes satisfies all of the following condi-
tions:
(1) Is not an affiliate, director, officer or
other employee of the issuer, or beneficial owner of 10
percent or more of any class of the equity securities or
10 percent or more of the equity interest in the issuer,
except where the purchaser is:
(i) A relative of the purchaser represen-
tative by blood, marriage or adoption and not more
remote than a first cousin;
(ii) A trust or estate in which the
purchaser representative and any persons related to
him as specified in paragraph (i) above or (iii)
below collectively have more than 50 percent of the
beneficial interest (excluding contingent interest)
or of which the purchaser representative serves as a
trustee, executor, or in any similar capacity; or
(iii) A corporation or other organization
of which the purchaser representative and any person
related to him as specified in paragraph (i) or (ii)
above collectively are the beneficial owners of more
than 50 percent of the equity securities (excluding
directors' qualifying shares) or equity interests;
(2) Has such knowledge and experience in
financial and business matters that he is capable of
evaluating, alone, or together with other purchaser
representatives of the purchaser, or together with the
purchaser, the merits and risks of the prospective in-
vestment;
(3) Is acknowledged by the purchaser in writ-
ing, during the course of the transaction, to be his
purchaser representative in connection with evaluating
the merits and risks of the prospective investment; and
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<PAGE> 52
(4) Discloses to the purchaser in writing a reasonable time prior to
the sale of securities to that purchaser any material relationship between
himself or his affiliates and the issuer or its affiliates that then exists,
that is mutually understood to be contemplated, or that has existed at any time
during the previous two years, and any compensation received or to be received
as a result of such relationship.
8
<PAGE> 53
EXHIBIT G
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") made and entered into this
22nd day of September, 1995 by and between PhoneTel Technologies, Inc., an Ohio
corporation (hereinafter "PhoneTel") and Stuart Hollander (hereinafter
"Hollander").
WHEREAS, PhoneTel desires to have Hollander's experience and to secure
for itself the continued services and expertise of Hollander;
NOW, THEREFORE, in consideration of the premises and agreements
hereinafter contained, the parties agree as follows:
1. EMPLOYMENT. PhoneTel agrees to employ Hollander and Hollander
hereby accepts such employment, upon the terms and conditions hereinafter set
forth. Hollander shall provide advice and counsel to the PhoneTel at such
times as mutually agreed to by PhoneTel and Hollander. Hollander shall devote
such time and effort as he deems necessary to fulfill such duties.
2. TERM OF EMPLOYMENT. The term of Hollander's employment shall
commence on the day and year first written above, and continue for twenty-four
(24) months unless terminated sooner pursuant to Paragraph 5 of this Agreement.
3. COMPENSATION.
a. BASE SALARY. During the first twelve (12) months of this
Agreement, PhoneTel shall pay Hollander an annual base salary of One Hundred
Twenty-Five Thousand Dollars ($125,000.00), less all required withholdings.
During the second twelve (12) months of this Agreement, PhoneTel shall pay
Hollander a base salary of One Hundred Thirty-Five Thousand Dollars
($135,000.00), less all required withholdings. Hollander's base salary shall
be paid in equal installments on a regular basis consistent with PhoneTel's
payroll practices and procedures for similarly compensated employees. The
first twelve (12) month period of this Agreement begins on the day and year
first above written and ends on that same date twelve (12) months later. The
second twelve (12) month period of this Agreement begins on the day following
the expiration of the first twelve (12) month period of this Agreement and ends
on that same date twelve (12) months later.
b. Fringe Benefits. PhoneTel shall provide Hollander with any
and all fringe benefits, including, but not limited to, life insurance, medical
insurance, and pension and profit sharing privileges, if any, which are
commensurate with and which PhoneTel provides to similarly situated employees.
Such benefits are to commence on the date and year first above written and
shall continue throughout the term of this Agreement unless sooner terminated
pursuant to Paragraph 5.
<PAGE> 54
c. CAR ALLOWANCE. PhoneTel shall provide Hollander with an
automobile and allowance substantially similar to officers of PhoneTel who are
similarly situated, but at a minimum shall provide Hollander with an automobile
allowance of Three Hundred Ninety Dollars ($390.00) per month during the term
of this Agreement which may be used for all expenses relating to his use of an
automobile including, but not limited to, maintenance, repairs and gasoline.
This car allowance shall be paid to Hollander each month. PhoneTel shall
provide Hollander with a gasoline credit card or cards in the name of PhoneTel
which may be used for automobile expenses.
d. BONUS. PhoneTel shall pay Hollander a guaranteed bonus of ten
percent (10%) of Hollander's base salary for each of the two (2) twelve (12)
month employment periods contemplated by this Agreement. The bonus shall be
paid to Hollander on the first day of the last month of each employment period.
Notwithstanding the foregoing, no bonus shall be due and owing if PhoneTel has
no earnings before interest, taxes, depreciation and amortization ("EBITDA").
EBITDA shall be determined in accordance with generally accepted accounting
principles. If PhoneTel's Board of Directors establishes a bonus plan of which
Hollander is an eligible participant by the date such bonus payment is due,
then Hollander shall receive a bonus only if in accordance with the terms and
conditions of such plan. The Board of Directors may, in its sole and absolute
discretion, award a bonus to Hollander even if none was due to be awarded or
increase an awarded bonus.
4. REIMBURSEMENT FOR COMPANY EXPENSES. PhoneTel shall reimburse
Hollander for any expense he reasonably incurs on behalf of PhoneTel's business
or pursuant to performance of his duties under this Agreement, including all
travel, meals and lodging. Reimbursements shall be made each month for the
prior month's expenses, provided that such expenses have been reasonably
substantiated and documented.
5. TERMINATION OF EMPLOYMENT.
a. TERMINATION WITH CAUSE. PhoneTel shall have the right to
terminate this Agreement, at any time, for cause (as defined below). In such
event, PhoneTel's only liability or obligation to Hollander under this
Agreement shall be to pay Hollander's base salary through the termination date
and to reimburse Hollander for any and all outstanding expenses he incurred
pursuant to Paragraph 4 of this Agreement on or before the termination date.
Upon such termination with cause, Hollander shall be subject to and bound by
the covenant not to compete set forth in Paragraph 6 provided PhoneTel pays
those amounts set forth in Paragraph 6(a). As used herein, the term "cause"
shall mean any violation of the covenants not to compete set forth in Paragraph
6, intoxication or drug use while performing duties on behalf of PhoneTel or
while on PhoneTel's premises, gross negligence, fraud or dishonesty affecting
PhoneTel's business or funds.
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<PAGE> 55
b. TERMINATION WITHOUT CAUSE. If PhoneTel terminates Hollander's
employment for any reason other than a reason listed in Paragraph 5(a) above,
PhoneTel shall give Hollander thirty (30) days' prior written notice and shall
provide Hollander with all compensation, as defined by Paragraph 3 hereof,
including bonus pro-rata to date of termination, during what would otherwise be
the remaining term of this Agreement, provided Hollander signs a general
release to PhoneTel waiving any claims relating to his employment. Upon such
termination without cause, Hollander shall be subject to and bound by the
covenant not to compete set forth in Paragraph 6, provided PhoneTel pays those
amounts set forth in Paragraph 6(a).
c. VOLUNTARY RESIGNATION. Hollander shall have the right to
terminate this Agreement, at any time, upon fourteen (14) calendar days' prior
written notice to PhoneTel. In such event, PhoneTel's only liability or
obligation to Hollander under the terms of this Agreement shall be to pay
Hollander his base salary through the effective date of his termination and, on
the effective date of his termination, to pay Hollander for any unused vacation
time accrued as of the effective termination date and to reimburse Hollander
for any and all outstanding expenses he accrued pursuant to Paragraph 4 of this
Agreement on or before the effective termination date. Upon such voluntary
resignation, Hollander shall be subject to and bound by the covenant not to
compete set forth in Paragraph 6, provided PhoneTel pays those amounts set
forth in Paragraph 6(a).
d. TERMINATION POWER. The Chairman of the Board of Directors of
PhoneTel shall have the power, acting alone, to terminate this Agreement,
either with or without cause subject to the terms of this Section 5.
e. REMOVAL OF PROPERTY. PhoneTel acknowledges all of the office
furniture and possessions, other than the round conference table and three (3)
drawer file cabinet, in Hollander's office in St. Louis are his own property
and that, upon termination for any reason, Hollander shall be entitled to
remove those possessions.
6. COVENANT NOT TO COMPETE. In consideration of the employment and
compensation paid by PhoneTel pursuant to this Agreement, Hollander agrees that
during the term of employment set forth herein and for a period of one (1) year
after termination of Hollander's employment with PhoneTel (the "Non-Compete
Period"), regardless of how, when and why that employment ends, Hollander shall
not directly or indirectly solicit, employ or interfere with PhoneTel's
relationship with any of its employees, customers, location lessees, or agents
and shall not engage in (as a principal, partner, shareholder, director,
officer, agent, employee, consultant or otherwise) or be financially interested
in any business which is involved in business activities which are the same as,
similar to, or in competition with business activities carried on by PhoneTel,
or being definitely planned by PhoneTel at the time of the
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<PAGE> 56
termination of Hollander's employment, within the states in which PhoneTel is
doing business at the time of Hollander's termination or at any time during the
Non-Compete Period.
a. If the Non-Compete Period shall extend beyond the two (2) year
term of employment, PhoneTel shall pay Hollander, in equal monthly
installments, an amount equal to: (i) the product of (A) the number of days by
which the Non-Compete Period extends beyond the two (2) year term of employment
multiplied by (B) the Non-Compete Compensation Base, divided by (ii) three
hundred sixty-five (365). For purposes of the foregoing, Non-Compete
Compensation Base shall be forty percent (40%) of Hollander's annualized
compensation:
(i) of the current twelve (12) month period if the
covenant not to compete becomes effective due to the
termination or resignation of Hollander; or
(ii) of the final twelve (12) month period if the covenant
not to compete becomes effective due to the natural
expiration of the term of this Agreement.
b. PhoneTel is permitted to release Hollander from the
provisions of this covenant not to compete and avoid the payment of the
amounts contemplated in this Paragraph 6, provided such release is received by
Hollander in writing upon termination or expiration of this Agreement.
7. INVESTMENT EXCEPTION. Notwithstanding anything herein to the
contrary, nothing in this Agreement is intended or shall be construed as
limiting Hollander's right as an investor to hold or to acquire the investment
securities of any business entity that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded on a
generally recognized over-the-counter market, so long as Hollander's interest
of any such business entity constitutes less than five percent (5%) of the
ownership therein; provided, that, Hollander's actions or holdings do not
violate the rules or regulations of the Securities and Exchange Act of 1933 and
the Securities and Exchange Commission.
8. RELOCATION. If PhoneTel shall relocate offices such that it no
longer maintains an office in St. Louis, Hollander shall not be required to
move and he shall be able to fulfill his duties from his home.
9. DEATH OR DISABILITY OF EMPLOYEE. Upon Hollander's death or
disability (as defined herein), all obligations of PhoneTel to make payments
under Paragraphs 3, 5 or 6 shall cease and terminate in the case of death, as
of the date of Hollander's death, and in the case of disability, on the date
Hollander is disabled in accordance with the following. Hollander shall be
deemed to be disabled if he shall, as a result of such
4
<PAGE> 57
disability, fail to perform the duties, as required hereunder for any three (3)
months during a consecutive four (4) month period.
10. AMENDMENTS. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in writing and signed by
both parties.
11. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding on PhoneTel, its successors and assigns, and any corporation
with which PhoneTel may merge or consolidate or to which PhoneTel may sell all
or substantially all of its business and assets, and shall inure to the benefit
of and be binding on Hollander, his executors, administrators, heirs and
personal and legal representatives. Since Hollander's duties and services
hereunder are special, personal and unique in nature, Hollander may not
transfer, sell or otherwise assign his obligations under this Agreement.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13. SEVERABILITY. In the event that any of the terms, conditions or
provisions of this Agreement are held to be illegal, invalid or unenforceable
by any court of competent jurisdiction, the legality, validity and
enforceability of the remaining terms, conditions or provisions shall not be
affected thereby. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in its terms as possible to be legal, valid
and enforceable.
14. REMEDIES UPON BREACH. In the event of any breach of this
Agreement by either party, the non-breaching party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to enjoin the breaching party from
violating any of the terms of this Agreement, to enforce specific performance
of any of the terms of this Agreement, and to obtain damages, or any of them,
but nothing herein contained shall be construed to prevent such remedy or
combination of remedies as the non-breaching party may elect to invoke. The
failure of the non-breaching party promptly to institute legal action upon any
breach of this Agreement shall not constitute a waiver of that or any other
breach, and shall not prevent later strict enforcement of the terms of this
Agreement.
15. CHOICE OF LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Missouri.
16. NOTICES. All notices and communications required under this
Agreement shall be in writing and shall be deemed given if delivered personally
or sent by certified mail, return receipt
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<PAGE> 58
requested, to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice which shall be deemed
effective when received):
(a) To PhoneTel:
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Attn: Mr. Peter Graf
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: N.J. Terris, Esq.
(b) To Hollander:
Mr. Stuart Hollander
32 Lake Forest
St. Louis, Missouri 63117
with a copy to:
Mark Z. Schraier
Blumenfeld, Kaplan & Sandweiss, P.C.
168 N. Meramec, Suite 400
St. Louis, Missouri 63105
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and supersedes any other prior agreement or undertaking,
written or oral, between the parties with respect to the subject matter hereof
and thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
PHONETEL HOLLANDER
By:
----------------------------- -----------------------------
Stuart Hollander
Its:
----------------------------
6
<PAGE> 59
EXHIBIT H
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") made and entered into this
22nd day of September, 1995, by and between PhoneTel Technologies, Inc., an
Ohio corporation (hereinafter "PhoneTel"), and Gary Pace (hereinafter "Pace").
WHEREAS, Pace is currently employed by World Communications, Inc., a
Missouri corporation (hereinafter "WCI"), as its President, and is a valuable
and key employee; and
WHEREAS, PhoneTel and WCI are both parties to that certain Agreement
and Plan of Merger executed of even date herewith; and
WHEREAS, PhoneTel desires to retain Pace's experience and to secure for
itself the continued services and expertise of Pace;
NOW, THEREFORE, in consideration of the premises and agreements
hereinafter contained, the parties agree as follows:
1. EMPLOYMENT. PhoneTel agrees to employ Pace as Chief Operating
Officer of the surviving entity pursuant to the Agreement and Plan of Merger,
and Pace hereby accepts such employment, upon the terms and conditions
hereinafter set forth. Pace shall perform, to the best of his abilities, the
duties customarily performed by persons in the position in which he is engaged
and such other duties as PhoneTel's Board of Directors or its delegate may
reasonably assign to Pace from time to time. Pace shall devote his full
business time and efforts to rendering such services.
2. TERM OF EMPLOYMENT. The term of Pace's employment shall commence
on the day and year first written above, and continue for twenty-four (24)
months unless terminated sooner pursuant to Paragraph 5 of this Agreement.
3. COMPENSATION.
a. BASE SALARY. During the first twelve (12) months of this
Agreement, PhoneTel shall pay Pace a base salary of One Hundred Ten Thousand
Dollars ($110,000.00), less all required withholdings. During the second
twelve (12) months of this Agreement, PhoneTel shall pay Pace a base salary of
One Hundred Twenty Thousand Dollars ($120,000.00), less all required
withholdings. Pace's annual salary shall be paid in equal installments on a
regular basis consistent with PhoneTel's payroll practices and procedures for
similarly compensated employees. If Pace is relocated pursuant to Paragraph 7
hereof, Pace's base salary shall be increased proportionately for any increase
in the cost of living of the area to which Pace is relocated over St. Louis as
determined by the current publication of Places Rated" or other nationally
recognized publication.
<PAGE> 60
The first twelve (12) month period of this Agreement begins on the day and
year first above written and ends on that same date twelve (12) months later.
The second twelve (12) month period of this Agreement begins on the day
following the expiration of the first twelve (12) month period of this
Agreement and ends on that same date twelve (12) months later.
b. FRINGE BENEFITS. PhoneTel shall provide Pace with any and all
fringe benefits, including, but not limited to, life insurance, medical
insurance, and pension and profit sharing privileges, if any, which are
commensurate with and which PhoneTel provides to similarly situated employees.
Pace shall be entitled to three (3) weeks of vacation per twelve (12) month
period of the term of this Agreement, but shall not use more than two (2) weeks
of such vacation consecutively. PhoneTel further agrees to maintain Pace's
membership with the Missouri Athletic Club, St. Louis, Missouri, at PhoneTel's
expense. During the term of his employment, PhoneTel shall provide Pace, at
PhoneTel's sole expense, a mobile telephone. Such benefits are to commence on
the date and year first above written and shall continue throughout the term of
this Agreement unless sooner terminated pursuant to Paragraph 5.
c. CAR ALLOWANCE. PhoneTel shall provide Pace with an automobile
and allowance substantially similar to officers of PhoneTel who are similarly
situated, but at a minimum shall provide Pace with an automobile allowance
equal to the amount of the lease payment associated with his present
automobile, per month during the term of this Agreement to be used for expenses
relating to his use of an automobile for business purposes, including, but not
limited to, maintenance, repairs and gasoline. This car allowance shall be paid
to Pace each month. PhoneTel shall provide Pace with a gasoline credit card or
cards in the name of PhoneTel which may be used for automobile expenses.
d. BONUS. PhoneTel shall pay Pace a guaranteed bonus of ten percent
(10%) of Pace's base salary for each of the two (2) twelve (12) month
employment periods contemplated by this Agreement. The bonus shall be paid to
Pace on the first day of the last month of each employment period.
Notwithstanding the foregoing, no bonus shall be due and owing if PhoneTel has
no earnings before interest, taxes, depreciation and amortization ("EBITDA").
EBITDA shall be determined in accordance with generally accepted accounting
principles. If PhoneTel's Board of Directors has establishes a bonus plan of
which Pace is an eligible participant by the date such bonus payment is due,
then Pace shall receive a bonus only if in accordance with the terms and
conditions of such plan. The Board of Directors may, in its sole and absolute
discretion, award a bonus to Pace even if none was due to be awarded or
increase an awarded bonus.
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<PAGE> 61
4. REIMBURSEMENT FOR COMPANY EXPENSES. PhoneTel shall reimburse Pace
for any expense he reasonably incurs on behalf of PhoneTel's business or
pursuant to performance of his duties under this Agreement, including all
travel, meals and lodging. Reimbursements shall be made each month for the
prior month's expenses, provided that such expenses have been reasonably
substantiated and documented.
5. TERMINATION OF EMPLOYMENT.
a. TERMINATION WITH CAUSE. PhoneTel shall have the right to
terminate this Agreement, at any time, for cause (as defined below). In such
event, PhoneTel's only liability or obligation to Pace under this Agreement
shall be to pay Pace's base salary through the termination date and to
reimburse Pace for any and all outstanding expenses he incurred pursuant to
Paragraph 4 of this Agreement on or before the termination date. Upon such
termination with cause, Pace shall be subject to and bound by the covenant not
to compete set forth in Paragraph 6 provided PhoneTel pays those amounts set
forth in Paragraph 6(a). As used herein, the term "cause" shall mean any
violation of the covenants not to compete set forth in Paragraph 6,
intoxication or drug use while performing duties on behalf of PhoneTel or while
on PhoneTel's premises, gross negligence, fraud or dishonesty affecting
PhoneTel's business or funds.
b. TERMINATION WITHOUT CAUSE. If PhoneTel terminates Pace's
employment for any reason other than a reason listed in Paragraph 5(a) above,
PhoneTel shall give Pace thirty (30) days' prior written notice and shall
provide Pace with all compensation, as defined by Paragraph 3 hereof, including
bonus pro-rata to date of termination, during what would otherwise be the
remaining term of this Agreement, provided Pace signs a general release to
PhoneTel waiving any claims relating to his employment. Upon such termination
without cause, Pace shall be subject to and bound by the covenant not to
compete set forth in Paragraph 6, provided PhoneTel pays those amounts set
forth in Paragraph 6(a).
c. VOLUNTARY RESIGNATION. Pace shall have the right to terminate
this Agreement, at any time, upon fourteen (14) calendar days' prior written
notice to PhoneTel. In such event, PhoneTel's only liability or obligation to
Pace under the terms of this Agreement shall be to pay Pace his base salary
through the effective date of his termination, and, on such effective date, to
pay Pace for any unused vacation time accrued as of the effective termination
date and to reimburse Pace for any and all outstanding expenses he accrued
pursuant to Paragraph 4 of this Agreement on or before the effective
termination date. Upon such voluntary resignation, Pace shall be subject to
and bound by the covenant not to compete set forth in Paragraph 6 provided
PhoneTel pays those amounts set forth in Paragraph 6(a).
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<PAGE> 62
d. TERMINATION POWER. The Chairman of the Board of Directors of
PhoneTel shall have the power, acting alone, to terminate this Agreement,
either with or without cause subject to the terms of this Section 5.
6. COVENANT NOT TO COMPETE. In consideration of the employment and
compensation paid by PhoneTel pursuant to this Agreement, Pace agrees that
during the term of employment set forth herein and for a period of one (1) year
after termination of Pace's employment with PhoneTel ("Non-Compete Period"),
regardless of how, when and why that employment ends, Pace shall not directly
or indirectly solicit, employ or interfere with PhoneTel's relationship with
any of its employees, customers, location lessees, or agents and shall not
engage in (as a principal, partner, shareholder, director, officer, agent,
employee, consultant or otherwise) or be financially interested in any business
which is involved in business activities which are the same as, similar to, or
in competition with business activities carried on by PhoneTel, or being
definitely planned by PhoneTel at the time of the termination of Pace's
employment, within the states in which PhoneTel is doing business at the time
of Pace's termination or at any time during the Non-Compete Period.
a. If the Non-Compete Period shall extend beyond the two (2)
year term of employment, PhoneTel shall pay Pace, in equal monthly
installments, an amount equal to: (i) the product of (A) the number of days by
which the Non-Compete Period extends beyond the two (2) year term of employment
multiplied by (B) the Non-Compete Compensation Base, divided by (ii) three
hundred sixty-five (365). For purposes of the foregoing, Non-Compete
Compensation Base shall be forty percent (40%) of Pace's annualized
compensation:
(i) of the current twelve (12) month period if the
covenant not to compete becomes effective due to the
termination or resignation of Pace; or
(ii) of the final twelve (12) month period if the covenant
not to compete becomes effective due to the natural
expiration of the term of this Agreement.
b. PhoneTel is permitted to release Pace from the provisions of
this covenant not to compete and avoid the payment of the amounts contemplated
in this Paragraph 6, provided such release is received by Pace in writing upon
termination or expiration of this Agreement.
7. RELOCATION. In consideration of the employment and compensation
paid by PhoneTel pursuant to this Agreement, Pace agrees that during the term
of employment, subject to the
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<PAGE> 63
conditions set forth below, unless sooner terminated pursuant to Paragraph 5,
he will relocate to any location reasonably requested by PhoneTel or its
Chairman of the Board of Directors; provided that, Pace's job duties remain
substantially similar to the job for which he initially is employed or would be
considered a promotion. A reasonably requested location is one in which
PhoneTel is then conducting business.
a. EXPENSES. In consideration of the exercise of its right to
obligate Pace to relocate in order to perform his duties for PhoneTel, PhoneTel
shall assist Pace in the following manner:
(i) PhoneTel shall pay all of Pace's expenses associated with
the moving and storage of Pace's personal property and
shall pay all of his living expenses for the period, the
shorter of: (A) six (6) months from and after the date of
his relocation, or (B) the date on which Pace closes on
the sale of his primary residence; and
(ii) PhoneTel shall pay all of the expenses and commissions
associated with the sale of Pace's primary personal
residence. If Pace is unable to sell his primary personal
residence after six (6) months from the date of notice of
relocation, then, upon the sale of his primary personal
residence, PhoneTel shall pay Pace, the difference between
the net proceeds from the subsequent sale of such
residence and the appraised fair market value (as
determined by an appraiser selected and agreed to by Pace
and PhoneTel) as of the date six (6) months after his
relocation; provided, that such payment shall not exceed
Forty Thousand Dollars ($40,000.00).
b. NOTICE. PhoneTel shall provide Pace with at least six (6)
weeks prior written notice of its exercise of its right to obligate Pace to
relocate pursuant to the terms herein. Notwithstanding the preceding, PhoneTel
may not obligate Pace to relocate within the first six (6) months of the term of
employment contemplated by this Agreement.
8. INVESTMENT EXCEPTION. Notwithstanding anything herein to the
contrary, nothing in this Agreement is intended or shall be construed as
limiting Pace's right as an investor to hold or to acquire the investment
securities of any business entity that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded on a
generally recognized over-the-counter market, so long as Pace's interest of any
such business entity constitutes less than five percent (5%)
5
<PAGE> 64
of the ownership therein; provided, that, Pace's actions or holdings do not
violate the rules or regulations of the Securities and Exchange Act of 1933 and
the Securities and Exchange Commission.
9. SENIORITY. For purposes of determining Pace's seniority for
fringe benefits (other than vacation), he shall be entitled to tack his term of
employment by WCI which commenced on February 6, 1987, and will extend through
the date the merger is consummated.
10. DEATH OR DISABILITY OF EMPLOYEE. Upon Pace's death or disability
(as defined herein), all obligations of PhoneTel to make payments under
Paragraphs 3, 5 or 6 shall cease and terminate in the case of death, as of the
date of Pace's death, and in the case of disability, on the date Pace is
disabled in accordance with the following. Pace shall be deemed to be disabled
if he shall, as a result of such disability, fail to perform the duties, as
required hereunder for any three (3) months during a consecutive four (4) month
period.
11. AMENDMENTS. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in writing and signed by
both parties.
12. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding on PhoneTel, its successors and assigns, and any corporation
with which PhoneTel may merge or consolidate or to which PhoneTel may sell all
or substantially all of its business and assets, and shall inure to the benefit
of and be binding on Pace, his executors, administrators, heirs and personal
and legal representatives. Since Pace's duties and services hereunder are
special, personal and unique in nature, Pace may not transfer, sell or
otherwise assign his obligations under this Agreement.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14. SEVERABILITY. In the event that any of the terms, conditions or
provisions of this Agreement are held to be illegal, invalid or unenforceable
by any court of competent jurisdiction, the legality, validity and
enforceability of the remaining terms, conditions or provisions shall not be
affected thereby. Furthermore, in lieu of such illegal, invalid or
unenforceable provision, there shall be added automatically as a part of this
Agreement a provision as similar in its terms as possible to be legal, valid
and enforceable.
6
<PAGE> 65
15. REMEDIES UPON BREACH. In the event of any breach of this
Agreement by either party, the non-breaching party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to enjoin the breaching party from
violating any of the terms of this Agreement, to enforce specific performance
of any of the terms of this Agreement, and to obtain damages, or any of them,
but nothing herein contained shall be construed to prevent such remedy or
combination of remedies as the non-breaching party may elect to invoke. The
failure of the non-breaching party promptly to institute legal action upon any
breach of this Agreement shall not constitute a waiver of that or any other
breach, and shall not prevent later strict enforcement of the terms of this
Agreement.
16. CHOICE OF LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Missouri.
17. NOTICES. All notices and communications required under this
Agreement shall be in writing and shall be deemed given if delivered personally
or sent by certified mail, return receipt requested, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice which shall be deemed effective when received):
(a) To PhoneTel:
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Attn: Mr. Peter Graf
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: N.J. Terris, Esq.
(b) To Pace:
Mr. Gary Pace
10050 Affton Place
St. Louis, Missouri 63123
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<PAGE> 66
with a copy to:
Mark Z. Schraier
Blumenfeld, Kaplan & Sandweiss, P.C.
168 N. Meramec, Suite 400
St. Louis, Missouri 63105
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and supersedes any other prior agreement or undertaking,
written or oral, between the parties with respect to the subject matter hereof
and thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
PHONETEL PACE
By:
--------------------------- --------------------------
Gary Pace
Its:
---------------------------
8
<PAGE> 67
EXHIBIT I
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement") made and entered into this
22nd day of September, 1995, by and between PhoneTel Technologies, Inc., an
Ohio corporation (hereinafter "PhoneTel"), and Linda Harvey (hereinafter
"Harvey").
WHEREAS, Harvey is currently employed by World Communications, Inc., a
Missouri corporation (hereinafter "WCI"), as Vice President and Secretary of
the Corporation, and is a valuable and key employee; and
WHEREAS, PhoneTel and WCI are both parties to that certain Agreement
and Plan of Merger executed of even date herewith; and
WHEREAS, PhoneTel desires to retain Harvey's experience and to secure
for itself the continued services and expertise of Harvey;
NOW, THEREFORE, in consideration of the premises and agreements
hereinafter contained, the parties agree as follows:
1. EMPLOYMENT. PhoneTel agrees to employ Harvey as Vice-President
of PhoneTel, and Harvey hereby accepts such employment, upon the terms and
conditions hereinafter set forth. Harvey shall perform, to the best of her
abilities, the duties customarily performed by persons in the position in which
she is engaged and such other duties as PhoneTel's Board of Directors or its
delegate may reasonably assign to Harvey from time to time. Harvey shall devote
her full business time and efforts to rendering such services.
2. TERM OF EMPLOYMENT. The term of Harvey's employment shall
commence on the day and year first written above, and continue for twenty-four
(24) months unless terminated sooner pursuant to Paragraph 5 of this Agreement.
3. COMPENSATION.
a. BASE SALARY. During the first twelve (12) months of this
Agreement, PhoneTel shall pay Harvey a base salary of Sixty-five Thousand
Dollars ($65,000.00), less all required withholdings. During the second twelve
(12) months of this Agreement, PhoneTel shall pay Harvey a base salary of
Seventy Thousand Dollars ($70,000.00), less all required withholdings. Harvey's
annual salary shall be paid in equal installments on a regular basis consistent
with PhoneTel's payroll practices and procedures for similarly compensated
employees. If Harvey is relocated pursuant to Paragraph 7 hereof, Harvey's
base salary shall be increased proportionately for any increase in the cost of
living of the area to which Harvey is relocated over St. Louis as determined by
the current publication of "Places Rated" or
<PAGE> 68
other nationally recognized publication. The first twelve (12) month period of
this Agreement begins on the day and year first above written and ends on that
same date twelve (12) months later. The second twelve (12) month period of
this Agreement begins on the day following the expiration of the first twelve
(12) month period of this Agreement and ends on that same date twelve (12)
months later.
b. FRINGE BENEFITS. PhoneTel shall provide Harvey with any and all
fringe benefits, including, but not limited to, life insurance, medical
insurance, and pension and profit sharing privileges, if any, which are
commensurate with and which PhoneTel provides to similarly situated employees.
Harvey shall be entitled to three (3) weeks of vacation per twelve (12) month
period of the term of this Agreement, but shall not use more than two (2) weeks
of such vacation consecutively. PhoneTel further agrees to maintain Harvey's
membership with the Missouri Athletic Club, St. Louis, Missouri, at PhoneTel's
expense. During the term of her employment, PhoneTel shall provide Harvey, at
PhoneTel's sole expense, a mobile telephone. Such benefits are to commence on
the date and year first above written and shall continue throughout the term of
this Agreement unless sooner terminated pursuant to Paragraph 5.
c. CAR ALLOWANCE. PhoneTel shall provide Harvey with an automobile
and allowance substantially similar to officers of PhoneTel who are similarly
situated, but at a minimum shall provide Harvey with an automobile allowance of
Three Hundred Ninety Dollars ($390.00) per month during the term of this
Agreement for all expenses relating to her use of an automobile, including, but
not limited to, maintenance, repairs and gasoline. This car allowance shall be
paid to Harvey each month. PhoneTel shall provide Harvey with a gasoline
credit card or cards in the name of PhoneTel which may be used for automobile
expenses.
d. BONUS. PhoneTel shall pay Harvey a guaranteed bonus of ten
percent (10%) of Harvey's base salary for each of the two (2) twelve (12) month
employment periods contemplated by this Agreement. The bonus shall be paid to
Harvey on the first day of the last month of each employment period.
Notwithstanding the foregoing, no bonus shall be due and owing if PhoneTel has
no earnings before interest, taxes, depreciation and amortization ("EBITDA").
EBITDA shall be determined in accordance with generally accepted accounting
principles. If PhoneTel's Board of Directors establishes a bonus plan of which
Harvey is an eligible participant by the date such bonus payment is due, then
Harvey shall receive a bonus only if in accordance with the terms and
conditions of such plan. The Board of Directors may, in its sole and absolute
discretion, award a bonus to Harvey even if none was due to be awarded or
increase an awarded bonus.
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4. REIMBURSEMENT FOR COMPANY EXPENSES. PhoneTel shall reimburse
Harvey for any expense she reasonably incurs on behalf of PhoneTel's business
or pursuant to performance of her duties under this Agreement, including all
meals, travel and lodging. Reimbursements shall be made each month for the
prior month's expenses, provided that such expenses have been reasonably
substantiated and documented.
5. TERMINATION OF EMPLOYMENT.
-------------------------
a. TERMINATION WITH CAUSE. PhoneTel shall have the right to
terminate this Agreement, at any time, for cause (as defined below). In such
event, PhoneTel's only liability or obligation to Harvey under this Agreement
shall be to pay Harvey's base salary through the termination date and to
reimburse Harvey for any and all outstanding expenses she incurred pursuant to
Paragraph 4 of this Agreement on or before the termination date. Upon such
termination with cause, Harvey shall be subject to and bound by the covenant
not to compete set forth in Paragraph 6 provided PhoneTel pays those amounts
set forth in Paragraph 6(a). As used herein, the term "cause" shall mean any
violation of the covenants not to compete set forth in Paragraph 6,
intoxication or drug use while performing duties on behalf of PhoneTel or while
on PhoneTel's premises, gross negligence, fraud or dishonesty affecting
PhoneTel's business or funds.
b. TERMINATION WITHOUT CAUSE. If PhoneTel terminates Harvey's
employment for any reason other than a reason listed in Paragraph 5(a) above,
PhoneTel shall give Harvey thirty (30) days prior written notice and shall
provide Harvey with all compensation, as defined by Paragraph 3 hereof,
including bonus pro-rata to date of termination, during what would otherwise be
the remaining term of this Agreement, provided Harvey signs a general release
to PhoneTel waiving any claims related to her employment. Upon such
termination without cause, Harvey shall be subject to and bound by the covenant
not to compete set forth in Paragraph 6, provided PhoneTel pays those amounts
set forth in Paragraph 6(a).
c. VOLUNTARY RESIGNATION. Harvey shall have the right to
terminate this Agreement, at any time, upon fourteen (14) calendar days' prior
written notice to PhoneTel. In such event, PhoneTel's only liability or
obligation to Harvey under the terms of this Agreement shall be to pay Harvey
her base salary through the effective date of her termination date and, on such
effective date, to pay Harvey for any unused vacation time accrued as of the
effective termination date and to reimburse Harvey for any and all outstanding
expenses she accrued pursuant to Paragraph 4 of this Agreement on or before the
effective termination date. Upon such voluntary resignation, Harvey shall be
subject to and bound by the covenant not to compete set forth
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<PAGE> 70
in Paragraph 6 provided PhoneTel pays those amounts set forth in Paragraph 6(a).
d. TERMINATION POWER. The Chairman of the Board of Directors of
PhoneTel shall have the power, acting alone, to terminate this Agreement,
either with or without cause subject to the terms of this Section 5.
6. COVENANT NOT TO COMPETE. In consideration of the employment and
compensation paid by PhoneTel pursuant to this Agreement, Harvey agrees that
during the term of employment set forth herein and for a period of one (1) year
after termination of Harvey's employment with PhoneTel (the "Non-Compete
Period"), regardless of how, when and why that employment ends, Harvey shall
not directly or indirectly solicit, employ or interfere with PhoneTel's
relationship with any of its employees, customers, location lessees, or agents
and shall not engage in (as a principal, partner, shareholder, director,
officer, agent, employee, consultant or otherwise) or be financially interested
in any business which is involved in business activities which are the same as,
similar to, or in competition with business activities carried on by PhoneTel,
or being definitely planned by PhoneTel at the time of the termination of
Harvey's employment, within the states in which PhoneTel is doing business at
the time of Harvey's termination or at any time during the Non-Compete Period.
Notwithstanding the foregoing, Harvey is expressly permitted to maintain,
operate and own Missouri Telephone and Telegraph, a Missouri corporation,
provided it owns fifty (50) phones or fewer.
a. If the Non-Compete Period shall extend beyond the two (2) year
term of employment, PhoneTel shall pay Harvey, in equal monthly installments,
an amount equal to: (i) the product of (A) the number of days by which the
Non-Compete Period extends beyond the two (2) year term of employment
multiplied by (B) the Non-Compete Compensation Base, divided by (ii) three
hundred sixty-five (365). For purposes of the foregoing, Non-Compete
Compensation Base shall be forty percent (40%) of Harvey's annualized
compensation:
(i) of the current twelve (12) month period if the covenant
not to compete becomes effective due to the termination or
resignation of Harvey; or
(ii) of the final twelve (12) month period if the covenant
not to compete becomes effective due to the natural
expiration of the term of this Agreement.
b. PhoneTel is permitted to release Harvey from the provisions of
this covenant not to compete and avoid the payment of the amounts contemplated
in this Paragraph 6, provided such
4
<PAGE> 71
release is received by Harvey in writing upon termination or expiration of this
Agreement.
7. RELOCATION. In consideration of the employment and compensation
paid by PhoneTel pursuant to this Agreement, Harvey agrees that during the term
of employment, subject to the conditions set forth below, unless sooner
terminated pursuant to Paragraph 5, Harvey will relocate to any location
reasonably requested by PhoneTel or its Chairman of the Board of Directors;
provided that, Harvey's job duties remain substantially similar to the job for
which she initially is employed or would be considered a promotion. A
reasonably requested location is one in which PhoneTel is then conducting
business.
a. EXPENSES. In consideration of the exercise of its right to
obligate Harvey to relocate in order to perform her duties for PhoneTel,
PhoneTel shall assist Harvey in the following manner:
(i) PhoneTel shall pay all of Harvey's expenses associated
with the moving and storage of Harvey's personal property
and shall pay all of her living expenses for the period,
the shorter of: (A) six (6) months from and after the date
of her relocation, or (B) the date on which Harvey closes
on the sale of her primary residence; and
(ii) PhoneTel shall pay all of the expenses and commissions
associated with the sale of Harvey's primary personal
residence. If Harvey is unable to sell her primary
personal residence after six (6) months from the date
of notice of relocation, then, upon the sale of her
personal residence, PhoneTel shall pay Harvey the
difference between the net proceeds from the subsequent
sale of such residence and the appraised fair market value
(as determined by an appraiser selected and agreed to by
Harvey and PhoneTel) as of the date six (6) months after
her relocation; provided, that such payment shall not
exceed Forty Thousand Dollars ($40,000.00).
b. NOTICE. PhoneTel shall provide Harvey with at least six (6)
weeks prior written notice of its exercise of its right to obligate Harvey to
relocate pursuant to the terms herein. Notwithstanding the preceding, PhoneTel
may not obligate Harvey to relocate within the first six (6) months of the term
of employment contemplated by this Agreement.
5
<PAGE> 72
8. INVESTMENT EXCEPTION. Notwithstanding anything herein to the
contrary, nothing in this Agreement is intended or shall be construed as
limiting Harvey's right as an investor to hold or to acquire the investment
securities of any business entity that is registered on a national securities
exchange or admitted to trading privileges thereon or actively traded on a
generally recognized over-the-counter market, so long as Harvey's interest of
any such business entity constitutes less than five percent (5%) of the
ownership therein; provided, that Harvey's actions or holdings do not violate
the rules or regulations of the Securities and Exchange Act of 1933 and the
Securities and Exchange Commission.
9. SENIORITY. For purposes of determining Harvey's seniority for
fringe benefits (other than vacation), she shall be entitled to tack her term
of employment by WCI which commenced on August 6, 1986, and will extend through
the date the merger is consummated.
10. DEATH OR DISABILITY OF EMPLOYEE. Upon Harvey's death or
disability (as defined herein), all obligations of PhoneTel to make payments
under Paragraphs 3, 5 or 6 shall cease and terminate in the case of death, as
of the date of Harvey's death, and in the case of disability, on the date
Harvey is disabled in accordance with the following. Harvey shall be deemed to
be disabled if she shall, as a result of such disability, fail to perform the
duties, as required hereunder for any three (3) months during a consecutive
four (4) month period.
11. AMENDMENTS. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in writing and signed by
both parties.
12. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding on PhoneTel, its successors and assigns, and any corporation
with which PhoneTel may merge or consolidate or to which PhoneTel may sell all
or substantially all of its business and assets, and shall inure to the benefit
of and be binding on Harvey, her executors, administrators, heirs and personal
and legal representatives. Since Harvey's duties and services hereunder are
special, personal and unique in nature, Harvey may not transfer, sell or
otherwise assign her obligations under this Agreement.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14. SEVERABILITY. In the event that any of the terms, conditions or
provisions of this Agreement are held to be illegal, invalid or unenforceable
by any court of competent
6
<PAGE> 73
jurisdiction, the legality, validity and enforceability of the remaining terms,
conditions or provisions shall not be affected thereby. Furthermore, in lieu
of such illegal, invalid or unenforceable provision, there shall be added
automatically as a part of this Agreement a provision as similar in its terms
as possible to be legal, valid and enforceable.
15. REMEDIES UPON BREACH. In the event of any breach of this
Agreement by either party, the non-breaching party shall be entitled, if it so
elects, to institute and prosecute proceedings in any court of competent
jurisdiction, either in law or in equity, to enjoin the breaching party from
violating any of the terms of this Agreement, to enforce specific performance
of any of the terms of this Agreement, and to obtain damages, or any of them,
but nothing herein contained shall be construed to prevent such remedy or
combination of remedies as the non-breaching party may elect to invoke. The
failure of the non-breaching party promptly to institute legal action upon any
breach of this Agreement shall not constitute a waiver of that or any other
breach, and shall not prevent later strict enforcement of the terms of this
Agreement.
16. CHOICE OF LAW. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Missouri.
17. NOTICES. All notices and communications required under this
Agreement shall be in writing and shall be deemed given if delivered personally
or sent by certified mail, return receipt requested, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice which shall be deemed effective when received):
(a) To PhoneTel:
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Attn: Mr. Peter Graf
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: N.J. Terris, Esq.
(b) To Harvey:
Ms. Linda Harvey
25 Meadow Ridge Drive
St. Peters, Missouri 63376
7
<PAGE> 74
With a copy to:
Mark Z. Schraier, Esq.
Blumenfeld, Kaplan & Sandweiss, P.C.
168 North Meramec Avenue, Suite 400
St. Louis, Missouri 63105
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties, and supersedes any other prior agreement or undertaking,
written or oral, between the parties with respect to the subject matter hereof
and thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
PHONETEL HARVEY
By:
--------------------------- -----------------------------
Its: Linda Harvey
---------------------------
8
<PAGE> 75
EXHIBIT J
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT is made this 22nd day of September, 1995, by
and between PHONETEL II, INC. ("Buyer"), a Missouri corporation, and WCI II,
Inc. ("WCI II"), a Missouri corporation.
WHEREAS, PhoneTel Technologies, Inc. ("PhoneTel"), Buyer and World
Communications, Inc. ("WCI") are parties to that certain Agreement and Plan of
Merger ("Merger Agreement") whereby WCI shall be merged into and with Buyer in
exchange for capital stock of PhoneTel (the "Merger"); and
WHEREAS, prior to the Merger, Buyer borrowed from The Boatmen's
National Bank of St. Louis, N.A. ("Boatmen's") Two Million Four Hundred
Thousand Dollars ($2,400,000.00) evidenced by a Term Note and Loan Agreement by
and between Buyer and Boatmen's which is secured pursuant to the terms of a
Security Agreement also by and between Buyer and Boatmen's, all of which are
dated as of September 22, 1995 (hereinafter referred to as the "Boatmen's
Indebtedness") (the Term Note, Loan Agreement and Security Agreement are
hereinafter referred to as the "Boatmen's Loan Documents"); and
WHEREAS, prior to the Merger, certain shareholders of WCI guaranteed
the Boatmen's Indebtedness which will continue after the Merger, to secure the
financial obligations of Buyer, the surviving entity; and
WHEREAS, to secure Buyer's obligation to pay the Boatmen's Indebtedness
and to induce the shareholders of WCI to approve the Merger, Buyer has agreed
to grant WCI II (a Missouri corporation formed by all of the shareholders of
WCI for purposes of entering
72
<PAGE> 76
into and enforcing rights set forth in this Security Agreement, if necessary)
a security interest in certain assets of Buyer.
NOW, THEREFORE, Buyer and WCI II agree as follows:
1. GRANT OF SECURITY INTEREST. To secure payment by Buyer of the
Boatmen's Indebtedness, Buyer grants to WCI II a security interest in and to
all of Buyer's right, title and interest in and to each of the following,
wherever located and whether now or hereafter existing or now owned or
hereafter acquired or arising (the "Collateral"):
a. 1,500 pay telephones installations listed by serial number,
location, and telephone number as set forth in Exhibit A attached hereto, and
all royalty agreements, leases, contracts or location agreements, accounts
related to such pay telephones, agreements for telephone billing and collecting
services or the provision of operator services, agreements for the provision of
local or interstate telecommunications services and facilities, and all other
contracts and agreements entered into or assigned to Borrower from time to time
related to such pay telephones; and
b. All computer hardware and software used by WCI in connection
with the operation of pay telephones and which were used by WCI in the
operation of its business immediately prior to the Merger; and
c. All cash or non-cash proceeds of the foregoing, all proceeds from
the issuance on any of the foregoing, all additions and access ions to and
replacements and substitutions of
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<PAGE> 77
any of the foregoing, everything that becomes (or is held for the purpose of
being) affixed to or installed in any of the foregoing, and all products,
income and profits of or from the foregoing.
2. BUYER'S WARRANTIES AND COVENANTS. Buyer warrants and covenants:
a. Buyer owns, or after the Merger will own, the Collateral free
of all liens, security interests and encumbrances other than a first priority
lien in favor of Boatmen's, and will defend title to the same against the
claims and demands of all persons except as expressly provided herein.
b. Buyer will insure the Collateral against such risks and in
such amounts as WCI II may designate with insurance policies acceptable to
WCI II and payable to Boatmen's, and WCI II as their interests may appear and
shall furnish WCI Il with copies of such insurance policies or with certificates
evidencing such insurance policies.
c. Buyer will preserve the Collateral and keep it in good
condition and shall allow WCI II to inspect any part or all of the Collateral.
d. Buyer shall not, except in the ordinary course of its
business, sell or dispose of the Collateral or subject it to any unpaid charge
or any subsequent interest of a third person unless WCI II gives its prior
written consent.
e. WCI II may, at its option, discharge taxes, liens, security
interests, or other encumbrances on the Collateral, and
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<PAGE> 78
may pay for the repair of any damage to the collateral, the maintenance and
preservation thereof, and for insurance thereon, and upon so doing, Buyer shall
on demand reimburse WCI II for any payment 50 made. The payments advanced
shall bear interest at twelve percent (12%) per annum from the date of payment
until reimbursement and shall be secured by this Security Agreement.
f. The Collateral covered by this Agreement is to be used by
Buyer for business purposes.
g. Buyers principal place of business is at 11656 Lilburn Park
Road, St. Louis, Missouri 63146. Buyer shall immediately notify WCI II of any
change of address of its principle place of business.
h. Buyer agrees to execute and deliver to WCI II at any time and
from time to time hereafter at the request of WCI II, all agreements,
instruments, financing statements and other documents that WCI II shall
reasonably request, in a form and substance reasonably acceptable to WCI Il, to
perfect and maintain the perfection of the security interest of WCI II in the
Collateral.
i. Buyer agrees that it shall give WCI II notice, in accordance
with paragraph 8 of this Agreement, of any notice Boatmen's gives to Buyer
pursuant to the Boatmen's Loan Documents and any notice Buyer gives Boatmen's
pursuant thereto.
3. EVENTS OF DEFAULT. Buyer further warrants and covenants that the
following shall be events of default under this Security Agreement ("Events of
Default"):
4
<PAGE> 79
a. Any event which constitutes an event of default as defined
in, and pursuant to, the Boatmen's Loan Documents.
b. Reasonable determination by WCI II that any material warranty
or representation herein made was false when made or no longer continues to be
true.
4. REMEDIES. Upon the occurrence of an Event of Default and at any
time thereafter, WCI II may exercise any and all rights and remedies provided
by the Uniform Commercial Code as well as all other rights and remedies
possessed by WCI II. Buyer shall reimburse WCI II for all expenses in
connection with the retaking, holding, preparing for sale, selling and the like
of the Collateral, including the reasonable attorneys fees and legal expenses
of WCI II. Any notification of sale or other disposition of the Collateral
required to be given by WCI II will be sufficient if given personally, or
mailed by certified mail, not less than five (5) days prior to the day on which
such sale or other disposition will be made, and such notification shall be
deemed reasonable notice. Upon the sale or disposition of the Collateral, the
proceeds from such sale or disposition shall be distributed as follows:
(a) First, there shall be paid, the reasonable expenses of
retaking, holding, preparing for sale or lease, selling or leasing and the like
and, the reasonable attorneys' fees and legal expenses incurred by WCI II;
(b) Second, there shall be paid, the Boatmen's Indebtedness;
5
<PAGE> 80
(c) Third, there shall be paid any indebtedness secured by any
subordinate security interest in the Collateral if written notification of
demand therefor is received before distribution of the proceeds is completed.
If requested by the WCI II, the holder of a subordinate security interest must
seasonably furnish reasonable proof of his interest, and unless he does so, WCI
II need not comply with his demand.
(d) Finally, if there shall remain any proceeds after
satisfaction of the above items, WCI II shall remit to Buyer any surplus, and,
unless otherwise agreed, Buyer shall be liable for any deficiency.
5. NON-WAIVER. No waiver by WCI II of any default or Event of
Default shall operate as a waiver of any other default.
6. TERMINATION. Upon payment in full of the obligation to
Boatmen's, this Security Agreement shall terminate and all rights to the
Collateral shall revert to the Buyer. Upon any such termination, WCI II will
execute and deliver to the Buyer such documents as the Buyer shall reasonably
request as evidence of termination.
7. BINDING. This Security Agreement shall be binding upon Buyer's
successors and assigns.
8. NOTICE. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given upon receipt if personally delivered, upon
confirmed transmission if via telecopier, five (5) days from date of mailing if
deposited
6
<PAGE> 81
in the United States mails, certified mail, return receipt requested, or the
next day, if via a nationally recognized delivery service for next day
delivery, addressed as follows:
To Buyer: PhoneTel II, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
ATTN: Mr. Daniel J. Moos
with a copy to: Skadden, Arps, Slate,
Meagher & Flom, P.C.
919 Third Avenue
New York, New York 10022
ATTN: N.J. Terris, Esq.
If to WCI II: WCI II
11656 Lilburn Park Road
St. Louis, Missouri 63146
ATTN: Stuart Hollander
With a copy to: Blumenfeld, Kaplan & Sandweiss, P.C.
168 N. Meramec Avenue, Suite 400
St. Louis, Missouri 63105-3763
ATTN: Mark Z. Schraier, Esq.
Any party may alter the address to which communications or copies are
to be sent by giving notice of such change of address in conformity with the
provisions of this Paragraph or the giving of notice.
9. CONTROLLING LAW. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement, shall be governed by
and construed in accordance with the laws of the State of Missouri.
7
<PAGE> 82
IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
executed through duly authorized corporate action on the day and year first
above written.
PHONETEL II, INC.
By:_____________________________
Title:__________________________
WCI II
By:______________________________
Title: __________________________
8
<PAGE> 83
EXHIBIT K
STATE OF MISSOURI
[STATE SEAL]
REBECCA MCDOWELL COOK
SECRETARY OF STATE
CORPORATION DIVISION
CERTIFICATE OF CORPORATE RECORDS
WORLD COMMUNICATIONS, INC.
I, REBECCA MCDOWELL COOK, SECRETARY OF STATE OF THE STATE OF MISSOURI AND
KEEPER OF THE GREAT SEAL THEREOF, DO HEREBY CERTIFY THAT THE ANNEXED PAGES
CONTAIN A FULL, TRUE AND COMPLETE COPY OF THE ORIGINAL DOCUMENTS ON FILE AND OF
RECORD IN THIS OFFICE.
IN TESTIMONY WHEREOF, I HAVE SET MY
HAND AND IMPRINTED THE GREAT SEAL OF [STATE SEAL]
THE STATE OF MISSOURI, ON THIS, THE
24TH DAY OF AUGUST, 1995.
Rebecca McDowell Cook
---------------------
Secreatry of State
<PAGE> 84
EXHIBIT L
ARTICLES OF INCORPORATION
OF
WORLD COMMUNICATIONS, INC.
The undersigned, being a natural person of the age of twenty-one (21)
years or more, for the purpose of forming a corporation under The General
Business and Corporation Law of Missouri, hereby adopts the following Articles
of Incorporation:
ARTICLE I
---------
The name of the corporation is:
WORLD COMMUNICATIONS, INC.
ARTICLE II
----------
The address of its initial registered office in the State of Missouri
is: 8000 Maryland Avenue, Suite 1000, St. Louis, Missouri 63105, and the name
of its initial registered agent at such address is: Stuart Hollander.
ARTICLE III
-----------
The aggregate number of shares which the corporation shall have
authority to issue shall be one hundred thousand (100,000), all of which shares
shall be common shares of the par value of One ($1.00) Dollar each, amounting
in the aggregate to One Hundred Thousand ($100,000.00) Dollars.
ARTICLE IV
----------
The name and place of residence of the incorporator is as follows:
Name Address
---- -------
John A. Blumenfeld 7762 Davis Drive
Clayton, MO 63105
ARTICLE V
---------
The number of Directors to constitute the Board of Directors shall be
three (3).
ARTICLE VI
----------
The corporation shall have perpetual existence.
ARTICLE VII
-----------
The corporation is formed for the following purposes:
<PAGE> 85
(a) To buy, sell, lease, distribute or otherwise deal in communication
and electronic devices of every type and description.
(b) To buy, acquire, produce, hold, and dispose of in any manner all
kinds of personal property, and to buy, sell, hold, own, lease, or otherwise
dispose of real property.
(c) To enter into, make, perform and carry out contracts of every kind
and description with any firm, person, partnership, corporation, or
association, and to negotiate loans whether secured by real estate or an
interest therein or not, and to engage in the buying, selling, holding, or
otherwise dealing in notes and other negotiable instruments.
(d) In general, to carry on any lawful business whatsoever which is
calculated directly or indirectly to promote the interest of the corporation
or to enhance the value of its property; and to do each and every other thing
suitable or proper for the accomplishment of any of the purposes or the
attainment of any one or more of the objectives herein-above enumerated, or
which at any time shall appear conducive to or expedient for the protection or
benefit of this corporation.
(e) To possess and enjoy all rights and powers which now, or at any
time hereafter, may be granted to or exercised by a corporation of this
character.
(f) In general, to carry on any business which is lawful and proper
for a corporation organized and existing under The General and Business
Corporation Law of Missouri.
IN WITNESS WHEREOF, these Articles of Incorporation have been signed
this 4th day of August, 1986.
John A. Blumenfeld
---------------------------
John A. Blumenfeld
-2-
<PAGE> 86
STATE OF MISSOURI )
) SS.
COUNTY OF ST. LOUIS )
Before me on the 4th day of August, 1986, personally appeared John A.
Blumenfeld, who, being by me first duly sworn, declared that he is the person
who signed the foregoing document as incorporator and that the statements
contained therein are true.
/s/ Eileen Weinstein
----------------------------
Notary Public
My term expires:
EILEEN WEINSTEIN
NOTARY PUBLIC, STATE OF MISSOURI
MY COMMISSION EXPIRES JAN. 21, 1983
ST. LOUIS COUNTY
FILED AND CERTIFICATE OF
INCORPORATION ISSUED
AUG 6 1986
/s/ Roy D. Blunt
-3-
<PAGE> 87
No. 00292002
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
Certificate of Amendment
WORLD COMMUNICATIONS, INC.
WHEREAS, -----------------------------------------------------------------
a corporation organized under The General and Business Corporation Law has
delivered to me a Certificate of Amendment of its Articles of Incorporation
and has in all respects complied with the requirements of law governing the
amendment of Articles of Incorporation under The General and Business
Corporation Law.
NOW, THEREFORE, I, ROY D. BLUNT. Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
[STATE SEAL] IN TESTIMONY WHEREOF, I hereunto set my
hand and affix the GREAT SEAL of the
State of Missouri. Done at the City of
Jefferson, this 25th day of January, 1988.
---- -------------
ROY D. BLUNT
-------------------------------
Secretary of State
Fee $20.00
<PAGE> 88
STATE OF MISSOURI Office of Secretary of State
ROY D. BLUNT. Secretary of State
Amendment of Articles of Incorporation
(To be submitted in duplicate by an attorney)
HONORABLE ROY D. BLUNT
SECRETARY OF STATE
STATE OF MISSOURI
P.O. BOX 778
JEFFERSON CITY, MO 65102
Pursuant to the provisions of The General and Business Corporation Law of
Missouri, the undersigned Corporation certifies the following:
1. The present name of the Corporation is World Communications, Inc.
------------------------------------
The name under which it was originally organized was World Communications, Inc.
-------------------------
2. An amendment to the Corporation's Articles of Incorporation was adopted by
the shareholders on November 12th, 1987.
--------------------
3. Article Number III is amended to read as follows:
-----
The aggregate number of shares which the corporation shall have authority
to issue shall be Three Hundred Thousand (300,000), all of which shares
shall be common shares of the par value 33.33-1/3 cents each, amounting in
the aggregate to $100,000.00.
<PAGE> 89
CERTIFIED COPY OF CORPORATE RESOLUTION
RESOLVED, that the following named persons be, and
they hereby are, elected to the offices set forth opposite
their respective names below, to serve until the next
annual meeting of the Board of Directors of the corporation
or until their successors are duly elected and shall
qualify:
Chairman of the Board
and Chief Executive Officer Stuart Hollander
President and Chief
Operating Officer Gary Pace
Vice President Linda Harvey
Secretary Linda Harvey
Treasurer Stuart Hollander
The undersigned, Linda Harvey, hereby certifies that she is
the Secretary of World Communications, Inc., a Missouri
corporation, and that the above is a true and correct copy of a
resolution duly adopted by the Board of Directors of said
corporation on April 22, 1987. The undersigned further
certifies that said resolution is still in full force and effect
as of the date hereof.
Executed this 14th day of December, 1987.
----
Linda Harvey
------------------------
Linda Harvey, Secretary
World Communications
FILED
STATE OF MISSOURI )
) SS. JAN 25 1988
COUNTY OF ST. LOUIS )
Roy D. Blunt
Subscribed and sworn to before me this 14th day of December, 1987.
/s/ Eileen Weinstein
---------------------------
Notary Public
My term expires:
EILEEN WEINSTEIN
NOTARY PUBLIC, STATE OF MISSOURI
MY COMMISSION EXPIRES JAN. 21, 1983
ST. LOUIS COUNTY
<PAGE> 90
4. Of the Five Hundred (500) shares outstanding, Five Hundred (500) of such
shares were entitled to vote on such amendment.
The number of outstanding shares of any class entitled to vote thereon as a
class were as follows:
<TABLE>
Class Number of Outstanding Shares
----- ----------------------------
<S> <C>
500 common 500 common
</TABLE>
5. The number of shares voted for and against the amendment was as follows:
<TABLE>
Class No. Voted For No. Voted Against
----- ------------- -----------------
<S> <C> <C>
500 common 500 0
</TABLE>
6. If the amendment changed the number or par value of authorized shares
having a par value, the amount in dollars of authorized shares having a
par value as changed is: $100,000.00 (no change in aggregate amount).
If the amendment changed the number of authorized shares without par value,
the authorized number of shares without par value as changed and the
consideration proposed to be received for such increased authorized shares
without par value as are to be presently issued are:
N/A
7. If the amendment provides for an exchange, reclassification, or
cancellation of issued shares, or a reduction of the number of authorized
shares of any class below the number of issued shares of that class, the
following is a statement of the manner in which such reduction shall be
effected:
N/A
<PAGE> 91
IN WITNESS WHEREOF, the undersigned, Stuart Hollander, Pres., Chairman of
the Board has executed this instrument and its Secretary has affixed its
corporate seal hereto and attested said seal on the 12th day of November, 1987.
PLACE
CORPORATE SEAL
HERE.
(IF NO SEAL, STATE "NONE")
WORLD COMMUNICATIONS, INC.
---------------------------------
Name of Corporation
ATTEST:
/s/ Linda Harvey By: /s/ Stuart Hollander
- --------------------------------- -----------------------------
Secretary
Linda Harvey Stuart Hollander
Chairman of the Board
State of Missouri \
|
> ss
|
County of St. Louis /
I, Eileen Weinstein, a Notary Public, do hereby certify that on this 12th
day of November, 1987, personally appeared before me Stuart Hollander who,
being by me first duly sworn, declared that he is the Chairman of the Board of
World Communications, Inc. that he signed the foregoing document as Chairman of
the Board of the corporation, and that the statements therein contained are
true.
/s/ Eileen Weinstein
NOTARIAL SEAL ---------------------------------
Notary Public
My commission expires ____________
EILEEN WEINSTEIN
NOTARY PUBLIC, STATE OF MISSOURI
MY COMMISSION EXPIRES JAN. 21, 1983
ST. LOUIS COUNTY
FILED AND CERTIFICATE
I S S U E D
JAN. 25, 1988
/s/ Roy D. Blunt
Corporation Dept. SECRETARY OF STATE
<PAGE> 92
WORLD COMMUNICATIONS, INC.
2 INNERBELT BUSINESS CENTER DRIVE
ST. LOUIS, MISSOURI 63114
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
STATEMENT OF CHANGE OF REGISTERED AGENT OR
REGISTERED OFFICE BY FOREIGN OR DOMESTIC CORPORATIONS
INSTRUCTIONS
There is a $5.00 fee for filing this statement. It must be filed in
DUPLICATE.
The statement should be sealed with the corporate seal. If it does not
have a seal, write "no seal" where the seal would otherwise appear.
The registered office may be, but need not be, the same as the place of
business of the corporation, but the registered office and the business address
of the agent must be the same. The corporation cannot act as its own registered
agent.
Any subsequent change in the registered office or agent must be
immediately reported to the Secretary of State. These forms are available upon
request from the Office of the Secretary of State.
To: SECRETARY OF STATE
P.O. Box 778
Jefferson City, Missouri 65102 Charter No. 00292002
RECEIVED
OCT. 18, 1988
ROY D. BLUNT
Corporation Dept. SECRETARY OF STATE
The undersigned corporation, organized and existing under the laws of the
State of Missouri for the purpose of changing its registered agent or its
registered office, or both, in Missouri as provided by the provisions of "The
General and Business Corporation Act of Missouri," represents that:
1. The name of the corporation is World Communications, Inc.
2. The name of its PRESENT registered agent (before change) is Stuart
Hollander.
3. The name of the new registered agent is John A. Blumenfeld.
4. The address, including street number, if any, of its PRESENT registered
office (before change) is 8000 Maryland, Suite 1000, Clayton, MO 63105.
5. Its registered office (including street number, if any change is to be
made) is hereby CHANGED TO 168 North Meramec - Suite 400, Clayton, MO 63105.
6. The address of its registered office and the address of the business office
of its registered agent, as changed will be identical.
(Over)
<PAGE> 93
Such change was authorized by resolution duly adopted by the board of
directors.
IN WITNESS WHEREOF, the undersigned corporation has caused this report to
be executed in its name by its PRESIDENT or VICE-PRESIDENT, attested by its
SECRETARY or ASSISTANT SECRETARY this 14th day of OCTOBER, 1988.
World Communications, Inc.
---------------------------------
Name of Corporation
(Corporate Seal) By /s/ Gary L. Pace
NONE ------------------------------
If no seal, state "none". President or Vice-President
Gary L. Pace
Attest:
/s/ Linda Harvey F I L E D
- -------------------------------- OCT 18, 1988
Secretary or Assistant Secretary Roy D. Blunt
Linda Harvey SECRETARY OF STATE
State of Missouri \
> ss
County of St. Louis /
I, ROBERTA ANN KLIETHERMES, a Notary Public, do hereby certify that on the
14TH day of OCTOBER, 1988, personally appeared before me GARY L. PACE who
declares he is President or Vice-President of the corporation, executing the
foregoing document, and being first duly sworn, acknowledged that he signed the
foregoing document in the capacity therein set forth and declared that the
statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year
before written.
(Notarial Seal) /s/ Roberta Ann Kliethermes
--------------------------------
Notary Public
My commission expires November 2, 1991
<PAGE> 94
No. 00292002
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
SEAL OF THE SECRETARY OF STATE
[LOGO]
MISSOURI
CERTIFICATE OF AMENDMENT
WHEREAS, WORLD COMMUNICATIONS, INC. a corporation organized under The General
and Business Corporation Law has delivered to me a Certificate of Amendment of
its Articles of Incorporation and has in all respects complied with the
requirements of law governing the amendment of Articles of Incorporation under
The General and Business Corporation Law.
NOW, THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
IN TESTIMONY WHEREOF, I hereunto set my hand and affix
[SEAL] the GREAT SEAL of the State of Missouri. Done at the
City of Jefferson, this 22nd day of February, 1990.
/s/ Roy D. Blunt
----------------------------
Secretary of State
Fee $20.00
<PAGE> 95
4. Of the 1,985 shares outstanding, 1,985 of such shares were entitled to vote
on such amendment.
The number of outstanding shares of any class entitled to vote thereon as a
class were as follows:
<TABLE>
Class Number of Outstanding Shares
----- ----------------------------
<S> <C>
Common 1,985
</TABLE>
5. The number of shares voted for and against the amendment was as follows:
<TABLE>
Class No. Voted For No. Voted Against
----- ------------- -----------------
<S> <C> <C>
Common 1,738 -0-
Holders of 247 shares of
common stock were not present
and did not vote.
</TABLE>
6. If the amendment changed the number or par value of authorized shares
having a par value, the amount in dollars of authorized shares having a par
value as changed is:
Five Thousand Dollars ($5,000.00)
If the amendment changed the number of authorized shares without par
value, the authrozed number of shares without par value as changed and the
consideration proposed to be received for such increased authorized shares
without par value as are to be presently issued are:
7. If the amendment provides for an exchange, reclassification, or
cancellation of issued shares, or a reduction of the number of authorized
shares of any class below the number of issued shares of that class, the
following is a statement of the manner in which such reduction shall be
effected:
The current outstanding shares having a par value of
33.33-1/3 cents each will be exchanged for shares with a par value of
.01 cents each.
<PAGE> 96
IN WITNESS WHEREOF, the undersigned, Vice President has executed this
instrument and its Secretary has affixed its corporate seal hereto and attested
said seal on the 12th day of February, 1990.
PLACE
CORPORATE SEAL
HERE.
(IF NO SEAL, STATE "NONE")
World Communications, Inc.
-----------------------------------
Name of Corporation
ATTEST:
/s/ Linda M. Harvey By: /s/ Linda M. Harvey
- ------------------------------ -------------------------------
Secretary Vice-President
FILED AND CERTIFICATE
State of Missouri I S S U E D
ss FEB. 23, 1990
County of St. Louis Roy D. Blunt
Corporation Dept. SECRETARY OF STATE
I, Mark Z. Schraier, a Notary Public, do hereby certify that on this 19th
day of February, 1990, personally appeared before me Linda M. Harvey who, being
by me first duly sworn, declared that she is the Vice President of World
Communications, Inc. that she signed the foregoing document as Vice President
of the corporation, and that the statements therein contained are true.
/s/ Mark Z. Schraier
------------------------------------
NOTARIAL SEAL Notary Public
My commission expires ______________
MARK Z. SCHRAIER
NOTARY PUBLIC, STATE OF MISSOURI
MY COMMISSION EXPIRES APRIL 28, 1992
ST. LOUIS COUNTY
<PAGE> 97
No. 00292002
STATE OF MISSOURI
ROY D. BLUNT, Secretary of State
CORPORATION DIVISION
SEAL OF THE SECRETARY OF STATE
[LOGO]
MISSOURI
CERTIFICATE OF AMENDMENT
WHEREAS, WORLD COMMUNICATIONS, INC. a corporation organized under The General
and Business Corporation Law has delivered to me a Certificate of Amendment of
its Articles of Incorporation and has in all respects complied with the
requirements of law governing the amendment of Articles of Incorporation under
The General and Business Corporation Law.
NOW, THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri,
do hereby certify that I have filed said Certificate of Amendment as provided
by law, and that the Articles of Incorporation of said corporation are amended
in accordance therewith.
IN TESTIMONY WHEREOF, I hereunto set my hand and affix
[SEAL] the GREAT SEAL of the State of Missouri. Done at the
City of Jefferson, this 19th day of December, 1990.
/s/ Roy D. Blunt
----------------------------
Secretary of State
Fee $20.00
<PAGE> 98
STATE OF MISSOURI . . . . . Office of Secretary of State
SEAL OF THE SECRETARY OF STATE ROY D. BLUNT, Secretary of State
[LOGO]
MISSOURI
Amendment of Articles of Incorporation
(To be submitted in duplicate)
HONORABLE ROY D. BLUNT
SECRETARY OF STATE
STATE OF MISSOURI
P.O. BOX 778
JEFFERSON CITY, MO 65102
Pursuant to the provisions of The General and Business Corporation Law
of Missouri, the undersigned Corporation certifies the following:
1. The present name of the Corporation is WORLD COMMUNICATIONS, INC.
-----------------------------------
- ------------------------------------------------------------------------------
The name under which it was originally organized was WORLD COMMUNICATIONS, INC.
---------------------------
- --------------------------------------------------------------------------------
2. An amendment to the Corporation's Articles of Incorporation was adopted by
the shareholders on September 12 , 1990
------------------------------------------------------ ----
3. Article Number V is amended to read as follows:
------------
The number of Directors shall be fixed by, or in the manner provided by
the By-Laws. Any change in the number shall be reported to the Secretary of
State within thirty (30) calendar days of such change.
(If more than one article is to be amended or more space is needed attach fly
sheet.)
<PAGE> 99
IN WITNESS WHEREOF, the undersigned, Gary L. Pace, President has
executed this instrument and Linda M. Harvey, its Secretary has affixed
its corporate seal hereto and attested said seal on the 30th day of
November, 1990.
PLACE
CORPORATE SEAL
HERE.
(IF NO SEAL, STATE "NONE")
WORLD COMMUNICATIONS, INC.
-----------------------------------
Name of Corporation
ATTEST:
/s/ Linda M. Harvey By: /s/ Gary L. Pace
- ------------------------------ -------------------------------
Secretary President
FILED AND CERTIFICATE
State of Missouri \ I S S U E D
> ss DEC. 19, 1990
County of St. Charles / Roy D. Blunt
Corporation Dept. SECRETARY OF STATE
I, Linda M. Harvey, a Notary Public, do hereby certify that on this 30th
day of November, 1990, personally appeared before me Gary L. Pace who, being
by me first duly sworn, declared that he is the President of World
Communications, Inc. that he signed the foregoing document as President
of the corporation, and that the statements therein contained are true.
/s/ Linda M. Harvey
------------------------------------
NOTARIAL SEAL Notary Public
My commission expires 2-23-93
<PAGE> 100
ARTICLE IV.
Right of Purchase
-----------------
Every shareholder, upon the sale of any new stock of this Corporation
of the same kind, class or series as that which he already holds, shall have
the right to purchase his pro rata share at the price at which it is offered to
others.
ARTICLE V.
Incorporator
------------
The name and street address of the Incorporator of this Corporation is
as follows:
Floyd R. Self
Suite 701, 215 S. Monroe Street
First Florida Bank Building
Tallahassee, Florida 32301
ARTICLE VI.
Term of Corporate Existence
---------------------------
The Corporation shall exist perpetually unless dissolved according to law.
ARTICLE VII.
Address of Registered Office and Registered Agent
-------------------------------------------------
The address of the initial registered office of the Corporation in the
State of Florida shall be Suite 701, First Florida Bank Building, 215 S. Monroe
Street, Tallahassee, Florida 32301. The name of the initial registered agent of
the Corporation at the above address shall be Floyd R. Self. The Board of
Directors may from time to time change the registered office to any other
address in the State of Florida or change the registered agent.
-2-
<PAGE> 101
ARTICLE VIII.
Number of Directors
-------------------
The business of the Corporation shall be managed by a Board of Directors
consisting of at least one person, the exact number to be determined from time
to time in accordance with the By-Laws.
ARTICLE IX.
Initial Board of Directors
--------------------------
The initial Board of Directors shall consist of seven (7) members. The
names and street addresses of the members of the initial Board of Directors of
the Corporation, who shall hold office until the first annual meeting of the
shareholders, and thereafter until their successors have been elected and
qualified are as follows:
Stuart Hollander, Director
Chairman and Treasurer
1992 Innerbelt Business Center Drive
St. Louis, Missouri 63114
Gary L. Pace, Director
President
1992 Innerbelt Business Center Drive
St. Louis, Missouri 63114
Linda M. Harvey, Director
Vice President and Secretary
1992 Innerbelt Business Center Drive
St. Louis, Missouri 63114
Sharon M. Hollander, Director
1992 Innerbelt Business Center Drive
St. Louis, Missouri 63114
Jack D. Minner, Director
1992 Innerbelt Business Center Drive
St. Louis, Missouri 63114
-3-
<PAGE> 102
David Hoffman, Director
1992 Innerbelt Business Center Drive
St. Louis, Missouri 63114
John Blumenfeld, Director
1992 Innerbelt Business Center Drive
St. Louis, Missouri 63114
ARTICLE X.
Officers
--------
The Corporation shall have a President, a Secretary and a Treasurer and
may have additional assistant officers, including, without limitation thereto,
one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers.
Any two or more officers may be held by the same person.
ARTICLE XI.
Transactions in Which Directors
-------------------------------
Or Officers Are Interested
--------------------------
(a) No contract or other transaction between the Corporation and one or
more of its Directors or officers, or between the Corporaiton and any other
corporation, firm, or entity in which one or more of the Corporation's
Directors or officers are directors or officers, or have a financial interest,
shall be void or voidable solely because of such relationship or interest, or
solely because such Director(s) or officer(s) are present at or participate in
the meeting of the Board of Directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(1) the fact of such relationship or interest is disclosed or known to
the Board of Directors or the committee which authorizes, approves or ratifies
the contract or
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<PAGE> 103
transaction by a vote or consent sufficient for the purpose, without counting
the votes or consents of such interested Director or Directors; or
(2) The fact of such relationship or interest is disclosed or known
to the shareholders entitled to vote thereon, and they authorize, approve, or
ratify such contract or transaction by vote or written consent; or
(3) The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized.
(b) Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
thereof which authorizes, approves, or ratifies such contract or transaction.
ARTICLE XII.
Indemnification of Directors and Officers
-----------------------------------------
(a) The Corporation hereby indemnifies and agrees to hold harmless from
claim, liability, loss or judgment any Director or officer made a party or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative
(other than an action, suit or proceeding by or on behalf of the Corporation to
procure a judgment in its favor), brought to impose a liability or penalty on
such person for an act alleged to have been committed by such person in his
capacity as Director, officer, employee or agent of the Corporation or any
other corporation, partnership, joint venture, trust or other enterprise in
which he served at the request of the Corporation, against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees
actually and reasonably incurred as a result of such action, suit or proceeding
or any appeal thereof, if such person acted in good faith in the
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<PAGE> 104
reasonable belief that such action was in, or not opposed to, the best
interests of the Corporation, and in criminal actions or proceedings, without
reasonable ground for belief that such action was unlawful. The termination of
any such action, suit or proceeding by judgment, order, settlement, conviction
or upon a plea of nolo contendere or its equivalent shall not create a
presumption that any such Director of officer did not act in good faith in the
reasonable belief that such action was in, or not opposed to, the best
interests of the Corporaiton. Such person shall not be entitled to
indemnification in relation to matters as to which such person has been
adjudged to have been guilty of gross negligence or willful misconduct in the
performance of his duties to the Corporation.
(b) Any indemnification under paragraph (a) shall be made by the
Corporation only as authorized in the specific case upon a determination that
amounts for which a Director or officer seeks indemnification were properly
incurred and that such Director or officer acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and that, with respect to any criminal action or proceeding, he
had no reasonable ground for belief that such action was unlawful. Such
determination shall be made either (1) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (2) by a majority vote of a quorum consisting of
shareholders who were not parties to such action, suit or proceeding.
(c) The Corporation shall be entitled to assume the defense of any person
seeking indemnification pursuant to the provisions of paragraph (a) above upon
a preliminary determination by the Board of Directors that such person has met
the applicable standards of conduct set forth in paragraph (a) above, and upon
receipt of an undertaking by such
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<PAGE> 105
person to repay all amounts expended by the Corporation in such defense, unless
it shall ultimately be determined that such person is entitled to be
indemnified by the Corporation as authorized in this article. If the Corporation
elects to assume the defense, such defense shall be conducted by counsel chosen
by it and not objected to in writing for valid reasons by such person. In the
event that the Corporation elects to assume the defense of any such person and
retains such counsel, such person shall bear the fees and expenses of any
additional counsel retained by him, unless there are conflicting interests
between or among such person and other parties represented in the same action,
suit or proceeding by the counsel retained by the Corporation, that are, for
valid reasons, objected to in writing by such person, in which case the
reasonable expenses of such additional representation shall be within the scope
of the indemnification intended if such person is ultimately determined to be
entitled thereto as authorized in this article.
(d) The foregoing rights of indemnification shall not be deemed to limit
in any way the power of the Corporation to indemnify under any applicable law.
ARTICLE XIII.
Financial Information
---------------------
The Corporation shall not be required to prepare and provide a balance
sheet or a profit and loss statement to its shareholders, nor shall the
Corporation be required to file a balance sheet or profit and loss statement in
its registered office. This provision shall be demed to have been ratified by
the shareholders each year hereafter unless a resolution to the contrary has
been adopted by the shareholders.
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<PAGE> 106
ARTICLE XIV.
Amendment
---------
These Articles of Incorporation may be amended in any manner now or
hereafter provided for by law and all rights conferred upon shareholders
hereunder are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the original subscribing
Incorporator to the foregoing Articles of Incorporation has hereunto set his
hand and seal this 30th day of April, 1990.
/s/ Floyd R. Self
-------------------------------
Floyd R. Self
-8-
<PAGE> 107
STATE OF FLORIDA
COUNTY OF LEON
I HEREBY CERTIFY that on this day personally appeared before me, the
undersigned authority, Floyd R. Self, to me well known and known to me to be
the person who executed the foregoing instrument and acknowledged before me
that he executed the same freely and voluntarily for the uses and purposes
therein set forth and expressed.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal on this
30th day of April, 1990.
/s/ Ann M. Bassett
------------------------------------
NOTARY PUBLIC
My commission expires: _____________
Notary Public, State of Florida
My Commission Expires June 24, 1991
Corporation Dept. SECRETARY OF STATE
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<PAGE> 108
CERTIFICATE DESIGNATING REGISTERED AGENT AND REGISTERED OFFICE
In compliance with Florida Statutes Section 48.091 and 607.304, the
following is submitted:
Northern Florida Telephone Corporation, desiring to organize as a
corporation under the laws of the State of Florida, has designated Suite 701,
First Florida Bank Building, 215 South Monroe Street, Tallahassee, Florida
32301, as its initial Registered Office and has named Floyd R. Self located at
said address, as its initial Registered Agent.
By: /s/ Floyd R. Self
----------------------------
Floyd R. Self
Incorporator
Having been named Registered Agent for the above stated corporation, at
the designated Registered Office, the undersigned hereby accepts said
appointment, and agrees to comply with the provisions of Florida Statutes
Section 48.091 relative to keeping the office open.
/s/ Floyd R. Self
---------------------------------
Floyd R. Self
<PAGE> 109
EXHIBIT M
BYLAWS
OF
WORLD COMMUNICATIONS, INC.
ARTICLE I
---------
Offices
-------
The principal office of the corporation shall be located in St. Louis
County, Missouri.
ARTICLE II
----------
Shareholders
------------
SECTION 2.01. PLACE OF MEETING. All meetings of the shareholders
shall be held at the office of the corporation or at such other place within or
without the State of Missouri as may be designated by the President or the
Board of Directors.
SECTION 2.02. ANNUAL MEETING. Unless otherwise designated by the
Board of Directors, the annual meeting of shareholders, commencing with the
year 1987, shall be held on the Third Tuesday in January each year if not a
legal holiday, and if a legal holiday, then the day following, at 10:00 a.m.,
for the election of Directors and for the transaction or such other business as
shall properly come before the meeting.
SECTION 2.03. SPECIAL MEETINGS. Special meetings of the shareholders
for any purpose or purposes may be called by the President or by the Board of
Directors, or by the Secretary at the request in writing by shareholders owning
at least one-fifth (1/5) in amount of the entire capital stock of the
corporation issued and outstanding.
SECTION 2.04. NOTICE OF MEETINGS. Written or printed notice of
shareholders' meetings shall be given in accordance with the laws of the State
of Missouri.
SECTION 2.05. SHAREHOLDERS ENTITLED TO VOTE. The Board of Directors
may prescribe a period not exceeding fifty (50) days prior to any meeting of
the shareholders during which no transfer of stock on the books of the
corporation may be made. The Board of Directors may fix a day not more than
fifty (50) days prior to the holding of any meeting of the shareholders as the
day as of which shareholders are entitled to notice of and to vote at such
meeting.
SECTION 2.06. QUORUM. The holders of a majority of the stock issued
and outstanding, present in person or represented
<PAGE> 110
by proxy, shall be requisite and shall constitute a quorum at all meetings of
the shareholders for the transaction of business except as otherwise provided
by law, by the Articles of incorporation or by these Bylaws.
SECTION 2.07. VOTING. At each meeting of the shareholders, every
shareholder shall be entitled to vote in person, or by proxy appointed by an
instrument in writing subscribed by such shareholder, or by his duly authorized
attorney, and he shall have one vote for each share of stock registered in his
name at the time of the closing of the transfer books for said meeting, or in
lieu of closing of the transfer books the record date for voting as fixed by
the Board of Directors.
The vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express
provision of the statutes or of the Articles of Incorporation a different vote
is required, in which case such express provision shall govern and control
the decision of such question.
SECTION 2.08. INFORMAL MEETINGS. Whenever the vote of shareholders
at a meeting thereof is required or permitted to be taken in connection with
any corporate action by any provisions of the statutes or of the Articles of
incorporation, the meeting, any notice thereof and vote of shareholders thereat
may be dispensed with if all the shareholders who would have been entitled to
vote upon the action if such meeting were held shall consent in writing to such
corporate action being taken. Such written consent shall be filed with the
minutes of shareholders meetings.
SECTION 2.09. ORGANIZATION. The President, and in his absence, the
Vice-President, and in the absence of both the President and the
Vice-President, a chairman chosen by the shareholders present, shall preside
at each meeting of shareholders and shall act as chairman thereof. The
Secretary, and in his absence the Assistant Secretary, and in the absence of
both the Secretary and the Assistant Secretary, a Secretary pro tem, chosen by
the shareholders present, shall act as Secretary of all meetings of the
shareholders.
SECTION 2.10. ADJOURNMENT. If at any meeting of the shareholders a
quorum shall fail to attend at the time and place for which the meeting was
called or if the business of such meeting shall not be completed, the
shareholders present in person or represented by proxy may, by a majority vote,
adjourn the meeting from day to day or from time to time, not exceeding ninety
(90) days from such adjournment without further notice until a quorum shall
attend or the business thereof shall be completed. At any such adjourned
meeting any business may be transacted
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<PAGE> 111
which might have been transacted at the meeting as originally called.
ARTICLE III
-----------
Directors
---------
SECTION 3.01. GENERAL POWERS. The business and affairs of the
corporation shall be managed by its Board of Directors.
SECTION 3.02. NUMBER, ELECTION AND TERM. The number of directors of
the corporation shall be three (3), who shall be elected at the annual meeting
of the shareholders for a term of one year, and who shall hold office until
their successors have been elected and have qualified.
SECTION 3.03. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw, immediately
after, and at the same place as, the annual meeting of shareholders.
SECTION 3.04. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, though less than a quorum, and
the Directors so chosen shall hold office until the next annual election and
until their successors are duly elected and shall qualify, unless sooner
displaced.
SECTION 3.05. PLACE OF MEETING. Meetings of the Board of Directors of
the corporation, both regular and special, may be held at any place either
within or without the State of Missouri, and unless otherwise designated as
herein provided, shall be held at the office of the corporation.
SECTION 3.06. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such time and place as shall from time to time be
determined by resolution of the Board.
SECTION 3.07. NOTICE OF REGULAR MEETINGS. After the time and place of
regular meetings shall have been determined, no notice of any regular meetings
need be given. Notice of any change in the date or place of holding any
regular meeting or any adjournment of a regular meeting shall be given by mail
or telegram not less than forty-eight (48) hours before such meeting to all
Directors.
SECTION 3.08. SPECIAL MEETINGS. Special meetings of the Board for
any purpose or purposes may be called by the President on two (2) days notice
to each Director either personally or by mail or by telegram. Upon like
notice, the Secretary of the corporation, upon the written request of a
majority of the Directors, shall call a special meeting of the Board. Such
request shall state the purpose or purposes of the proposed
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<PAGE> 112
meeting. The officer calling the special meeting may designate the place for
holding same.
SECTION 3.09. QUORUM. At all meetings of the Board, a majority of
the Directors shall constitute a quorum for the transaction of business and
the act of a majority of the Directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors, except where otherwise
provided by law or by these Bylaws. If a quorum shall not be present at any
meeting of the Board of Directors, the Directors present thereat may adjourn
the meeting from time to time without notice other than announcement at the
meeting until a quorum shall be present.
SECTION 3.10. INFORMAL MEETINGS. Whenever the vote of directors to
be taken in connection with any corporate action is permitted by any provisions
of the Laws of Missouri to be taken by written consent it shall be approved if
the requisite number of Directors shall consent in writing to such corporate
action being taken. Such written consent shall be filed with the minutes of
the Board.
SECTION 3.11. COMMITTEES OF DIRECTORS. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consistent of two or more of the Directors of the
corporation, which, to the extent provided in the resolution, shall have and
may exercise the powers of the Board of directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors. Each committee shall
keep regular minutes of its meetings and report the same to the Board of
Directors when required.
SECTION 3.12. ORGANIZATION. The President, and in his absence a
Vice-President, and in the absence of the president and all the
Vice-Presidents, a Chairman pro tem, chosen by the Directors present shall
preside at each meeting of the Directors and shall act as Chairman thereof.
The Secretary, and in his absence, the Assistant Secretary, and in the
absence of the Secretary and the Assistant Secretary, a Secretary pro tem,
chosen by the Directors present shall act as Secretary of all meetings of the
Directors.
SECTION 3.13. MINUTES AND STATEMENTS. The Board of Directors shall
cause to be keep a complete record of their meetings and acts, and of the
proceedings of the shareholders.
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<PAGE> 113
ARTICLE IV
----------
Officers
--------
SECTION 4.01. OFFICERS. The Officers of this corporation shall be a
President and a Secretary; the Board of Directors may also from time to time
elect one or more Vice-Presidents, one or more Assistant Secretaries, a
Treasurer, and one or more Assistant Treasurers; all of whom shall be chosen by
the Board of Directors. Any person may hold two or more offices.
SECTION 4.02. SUBORDINATE OFFICERS AND EMPLOYEES. The Board of
Directors may appoint such other officers and agents as it may deem necessary
who shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board.
SECTION 4.03. COMPENSATION. The Board of Directors may from time to
time, in its discretion, fix or alter the compensation of any officer or
agent.
SECTION 4.04. ELECTION AND TERM OF OFFICE. The officers of the
corporation shall be elected annually by the Board of Directors at the regular
annual meeting of the Board of Directors. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified or
until his death or until he shall resign or shall have been removed in the
manner hereinafter provided. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever in its
judgment the best interests of the corporation would be served thereby. A
vacancy in any office because of death, resignation, removal, disqualification
or otherwise, may be filled by the Board of Directors for the unexpired portion
of the term at any meeting of the Board.
SECTION 4.05. PRESIDENT. The President shall be the chief executive
officer of the corporation. He shall preside at all meetings of the
shareholders and Directors. He shall have general and active management of
the business of the corporation and shall see that all orders and resolutions
of the Board of directors are carried into effect, subject, however, to the
right of the Board of Directors by resolution to delegate any specific powers
(other than those which may be by statute exclusively conferred upon the
President), to any other officers, director or agent of the corporation. The
President shall, on behalf of the corporation and as authorized by the Board of
Directors, execute all deeds, notes, bonds, mortgages, contracts and other
instruments in writing, except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation. He may vote all securities which the corporation is entitled
to vote except as and to the extent such authority shall be vested
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<PAGE> 114
in a different officer or agent or the corporation by the Board of Directors.
SECTION 4.06. VICE-PRESIDENT. The Vice-Presidents, in the order
designated by the Board of Directors, shall, in the absence or disability of
the President, perform the duties and exercise the powers of the President and
shall perform such other duties and have such other powers as the Board of
Directors or the President may from time to time prescribe.
SECTION 4.07. THE SECRETARY. The Secretary shall attend all
meetings of the shareholders of the corporation and of the Board of Directors
and shall record all of the proceedings of such meetings in minute books kept
for that purpose. He is authorized to affix the corporate seal to all
instruments requiring it. He shall have charge of the corporate records,
and, except to the extent authority may be conferred upon any transfer agent or
registrar duly appointed by the Board of Directors, he shall maintain the
corporation's books, registers, stock certificate and stock transfer books and
stock ledgers, and such other books, records and papers as the Board of
directors may from time to time entrust to him. He shall give or cause to be
given proper notice of all meetings of shareholders and Directors as required
by law and the Bylaws, and shall perform such other duties as may from time to
time be prescribed by the Board of Directors or the President.
SECTION 4.08. THE ASSISTANT SECRETARY. Each Assistant Secretary
shall assist the Secretary in the performance or his duties, and may at any
time perform any of the duties of the Secretary; in case of the death,
resignation, absence or disability of the Secretary, the duties of the
Secretary shall be performed by an Assistant Secretary, and each Assistant
Secretary shall have such other powers and perform such other duties as, from
time to time, may be assigned to him by the Board of Directors.
SECTION 4.09. THE TREASURER. The Treasurer shall have the custody of
the corporate funds and securities, and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the corporation, and shall
deposit all monies and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered
by the Board, taking proper vouchers for such disbursements, and shall render
to the President and directors at the regular meetings of the Board, or
whenever they may require it, an account of all his transactions as Treasurer,
and of the financial conditions of the corporation.
SECTION 4.10. THE ASSISTANT TREASURER. Each Assistant treasurer
shall assist the Treasurer in the performance of his duties, and may at any
time perform any of the duties of the
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<PAGE> 115
Treasurer; in case of the death, resignation, absence or disability of the
Treasurer, the duties of the Treasurer shall be performed by an Assistant
Treasurer, and each Assistant Treasurer shall have such other powers and
perform such other duties as, from time to time, may be assigned to him by the
Board of Directors.
ARTICLE V
---------
Resignations
------------
Any Director or officer may resign his office at any time, such
resignation to be made in writing and to take effect from the time of its
receipt by the corporation, unless some time be fixed in the resignation, and
then from that time. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE VI
----------
Contracts and Loans
-------------------
SECTION 6.01. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
SECTION 6.02. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
ARTICLE VII
-----------
Certificates for Shares and Their Transfer
------------------------------------------
SECTION 7.01. CERTIFICATES FOR SHARES. Certificates representing
shares of the corporation shall be in such form as may be determined by the
Board of Directors. Such certificates shall be signed by the President or
Vice-President and by the Secretary or an Assistant Secretary and shall be
sealed with the seal of the corporation. All certificates for shares shall be
consecutively numbered. The name of the persons owning the shares represented
thereby with the number or shares and date of issue shall be entered on the
books of the corporation. All certificates surrendered to the corporation for
transfer snail be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancel led, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued there
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<PAGE> 116
for upon such terms and indemnity to the corporation as the Board of Directors
may prescribe.
SECTION 7.02. TRANSFERS OF SHARES. Transfers or shares or the
corporation shall be made only on the books of the corporation by the
registered holder thereof or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the corporation, and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the corporation shall be deemed the
owner thereof for all purposes as regards the corporation.
ARTICLE VIII
------------
Dealings with Companies in Which Directors May Have an Interest
---------------------------------------------------------------
Inasmuch as the Directors of this corporation are or may be men of
diversified business interests, and are likely to be connected with other
corporations with which from time to time this corporation may have business
dealings, no contract or other transaction between this corporation and any
other corporation shall be affected by the fact that Directors of this
corporation are interested in, or are directors or officers of such other
corporation.
ARTICLE IX
----------
Miscellaneous provisions
------------------------
SECTION 9.01. FISCAL YEAR. The fiscal year or the corporation shall
be determined by the Board of Directors.
SECTION 9.02. INSPECTION OF BOOKS. The directors shall determine
from time to time whether, and, if allowed, when and under what conditions and
regulations the accounts and books of the corporation (except such as may by
statute be specifically open to inspection) or any of them shall be open to
inspection of the shareholders, and shareholders' rights in this respect are
and shall be restricted and limited accordingly.
SECTION 9.03. CHECKS AND NOTES. All checks and drafts on the
corporation's bank accounts and all bills of exchange and promissory notes,
and all acceptances, obligations and other instruments for the payment of
money, shall be signed by such officer or officers or agent or agents as shall
be thereunto duly authorized from time to time by the Board of Directors;
provided, that checks drawn on the corporation's payroll, dividend and special
accounts may bear the facsimile signatures, affixed there to by a mechanical
device, of such officers or agents as the Board of Directors may authorize.
-8-
<PAGE> 117
SECTION 9.04. DIVIDENDS. The Board of Directors shall declare such
dividends as they in their discretion see fit whenever the condition of the
corporation, in their opinion, shall warrant the same. The Board may declare
dividends in cash, in property or in capital stock.
SECTION 9.05. NOTICES. Whenever, under the provisions of these
Bylaws notice is required to be given to any Director, officer or shareholder,
it shall not be construed to mean personal notice, but such notice may be
given in writing by depositing the same in the post office or letter box, in a
postpaid sealed wrapper addressed to such shareholder, officer or Director at
such address as appears on the records of the corporation, and such notice
shall be deemed to be given at the time when the same shall be thus mailed.
SECTION 9.06. SEAL. The corporation may have a seal inscribed with
the name of the corporation and its state of incorporation.
ARTICLE X
---------
Indemnification
---------------
SECTION 10.01. MANDATORY INDEMNIFICATION. The corporation shall, to
the full extent permitted by the Missouri Business Corporation Law, indemnify
any person who was or is a party or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or officer of the corporation or is or was serving at the
request of the corporation as a director or officer of any other corporation or
enterprise. Such right of indemnification shall inure to the benefit of the
heirs, executors, administrators and personal representatives of such a
person.
SECTION 10.02. PERMISSIVE SUPPLEMENTARY BENEFITS. The corporation
may, but shall not be required to, supplement the right of indemnification
under Section 10.01 by (a) the purchase of insurance on behalf of any one or
more of such persons, whether or not the corporation would be obligated to
indemnify such person under Section 10.01, (b) individual or group
indemnification agreements with any one or more of such persons and (c)
advances for related expenses of such a person.
SECTION 10.03. AMENDMENT. This Article X may be amended or repealed only
by a vote of the shareholders and not by a vote of the Board of Directors.
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<PAGE> 118
ARTICLE XI
----------
Amendments
----------
These bylaws may be altered, amended or repealed and new bylaws may be
adopted by the Board of Directors or by the Shareholders at any annual or
special meeting.
ARTICLE XII
-----------
Shareholders' Agreement
-----------------------
Notwithstanding anything contained herein to the contrary, the provisions
of these Bylaws shall be subject to the provisions of any shareholders'
agreement to which the corporation is a party, which in the case of a conflict,
shall control.
ARTICLE XIII
------------
Construction
------------
When used herein, the male gender shall include the female gender and the
plural shall include the singular as is appropriate.
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<PAGE> 119
[logo] EXHIBIT N
FINANCIAL SERVICES LTD.
May 2, 1995
Confidential
- ------------
Mr. Stuart Hollander, Chairman
World Communications, Inc.
11656 Lilburn Park Rd.
St. Louis, Missouri 63146
Dear Mr. Hollander:
Under the terms of this agreement (the "Agreement") M&M Financial Services,
Ltd. ("M&M") is hereby authorized to represent World Communications, Inc.
and its Subsidiaries ("WCI") as its financial advisor in connection with the
contemplated sale of the assets of the business to PhoneTel Technologies, Inc.
("PhoneTel").
I Performance of Services
- - -----------------------
Under this Agreement, M & M will work with WCI and use its best efforts to
provide ongoing financial advisory services. The anticipated scope of the
engagement is as follows:
A. To advise and assist WCI in screening and analyzing potential offers from
PhoneTel;
B. To discuss with WCI representatives various alternative financial
strategies which may be implemented in order to create the greatest asset
value of WCI. M & M will assist in the evaluation of these strategies and
provide advice as to the manner in which to structure and implement plans
designed to finalize the stated objective;
C. To develop judgments as to relative values and financial implications to
WCI of any proposed transaction and then in consultation with WCI and
legal, accounting, and/or tax counselors, advise WCI on appropriate
negotiating strategies.
II Representation Period
- -- ---------------------
This Agreement will become effective as of May 2, 1995 and continue for a
period of six (6) months. This Agreement shall continue indefinitely
thereafter until such time as either party terminates this appointment by
giving ten (10) days written notice of such termination to the other party.
<PAGE> 120
Mr. Stuart Hollander, Chairman
May 2, 1995
Page Two
III Compensation of Services
- --- ------------------------
A. If a sale is consummated with PhoneTel, WCI agrees to pay to M & M for its
services a sum at closing calculated on the basis of the following Lehman
formula:
5% of the first $1 million in Transaction Value, plus;
4% of the second $1 million in Transaction Value, plus;
3% of the third $1 million in Transaction Value, plus;
2% of the fourth $1 million in Transaction Value, plus;
1% of any Transaction Value paid in excess of $4 million
Transaction Value is defined as follows:
The total proceeds and other considerations received (which shall be deemed to
include amounts deferred and/or paid into escrow) by PhoneTel upon the
consummation of the Acquisition (including payments made in installments,
contingent or otherwise), inclusive of cash, securities, notes or other
property (fair market value thereof to be mutually agreed upon) plus the total
value of any liabilities assumed in an asset transaction.
B. Robert L. Mitchusson will represent M & M in meetings with PhoneTel when
specifically requested to do so by authorized representatives of WCI. The
charge for his services will be calculated on the basis of $150 per hour and
will be paid on a monthly basis by WCI upon receipt of M & M's billing.
However, the aggregate paid by WCI for this service, excluding out-of-
pocket expenses, will be applied as a credit against the success fee set
forth in (A) above, along with an additional credit of $47,530 representing
fees billed through March 31, 1995 for services rendered on other related
projects.
IV Disclosure
- -- ----------
WCI agrees to provide M & M, among other things, all reasonable information
requested or reasonably required by M & M, including but not limited to
information concerning historical and projected financial results and possible
and known litigious, environmental and other contingent liabilities. WCI will
promptly advise M & M of any material changes in its business or finances
during the term of this agreement. If M & M is requested by WCI to return WCI
prepared information at the end of the Representation Period of this Agreement,
M & M will promptly comply. The provisions of this paragraph IV shall survive
the termination and expiration of this agreement.
V Indemnification
- - ---------------
WCI agrees to indemnify M & M and its representatives against any liability,
claim and damage
<PAGE> 121
Stuart Hollander, Chairman
May 2, 1995
Page Three
(including attorneys' fees) arising out of the actions, communications,
negotiations, and performance under the terms of this agreement in connection
with PhoneTel or related third parties.
VI Public Notice
- -- -------------
WCI authorizes M & M to make public notice, at M & M's expense, of any
transaction concluded under this Agreement. Any such public notice shall be
subject to prior approval of WCI which will not be unreasonably withheld.
VII Entire Understanding
- --- --------------------
This Agreement sets forth the entire understanding of the parties relating to
the subject matter hereof and supersedes and cancels any prior communications,
understandings, and agreements between the parties. This Agreement cannot be
modified or changed, nor can any of its provisions be waived except by written
agreement signed by all parties hereto.
VIII Governing Laws and Jurisdiction
- ---- -------------------------------
This Agreement shall be governed by and construed to be in accordance with the
laws of the State of Missouri applicable to contracts made and to be performed
solely in such State by citizens thereof. Any dispute arising out of this
Agreement shall be adjudicated in the courts of the State of Missouri of
process upon them by registered or certified mail at the addresses shown in
this Agreement shall be deemed adequate and lawful. The parties hereto shall
deliver notices to each other by personal delivery or by registered mail
(return receipt requested) at the addresses set forth above.
IX Acceptance
- -- ----------
Please confirm that the foregoing is in accordance with your understanding by
signing on behalf of WCI and by returning an executed copy of this Agreement,
whereupon it shall become a binding agreement between WCI and M & M.
Very truly yours,
Robert L. Mitchusson
Robert L. Mitchusson
Chairman
Accepted and Agreed to:
by SH 5/2/95
--------------------------- ------------------------------
Stuart Hollander Date
<PAGE> 122
EXHIBIT O
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report Under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934
For the quarterly period ended June 30, 1995
---------------
Transition report under Section 13 or 15(d) of the Exchange Act
- ---
For the transition period from to
------------------- ---------------------
Commission file number 0-16715
--------------
PHONETEL TECHNOLOGIES, INC.
-------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
OHIO 34-1462198
---------------------------------- --------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1127 Euclid Avenue. 650 Statler Office Tower Cleveland, OH 44115-1601
-------------------------------------------------------------------------
(Address of Principal Executive Offices)
(216) 241-2555
-------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: as of August 5, 1995,
----------------------------
10,829,218 shares of the registrant's common stock, $.01 par value, were
- ------------------------------------------------------------------------------
outstanding.
- ------------------------------------------------------------------------------
Traditional Small Business Disclosure Format (check one):
Yes X No
----- -----
<PAGE> 123
PhoneTel Technologies, Inc.
Form 10-QSB
Quarter Ended June 30, 1995
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of June 30, 1995
and December 31, 1994 ................................ 3
Statements of Operations for the
Three Months Ended June 30,
1995 and 1994 ........................................ 4
Statements of Operations for the
Six Months Ended June 30, 1995 and 1994 .............. 5
Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1994 .............. 6
Notes to Financial Statements......................... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders .. 12
Item 6. Exhibits and Reports on Form 8-K ..................... 13
Signatures........................................... 13
2
<PAGE> 124
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHONETEL TECHNOLOGIES, INC.
BALANCE SHEETS
<CAPTION>
June 30, December 31,
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 357,657 $ 478,756
Accounts receivable, net 795,499 666,339
Inventories 516,086 363,531
Prepaid expenses 69,902 60,139
----------- -----------
Total current assets 1,739,144 1,568,765
Property and equipment, net 4,778,515 4,931,308
Intangibles 2,229,173 2,821,998
Other assets, net 960,042 835,830
----------- -----------
$ 9,706,874 $10,157,901
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 1,666,601 $ 1,814,760
Current portion of obligations under
capital leases 102,126 94,343
Accounts payable 3,089,367 2,239,745
Accrued expenses 762,945 1,089,021
----------- -----------
Total current liabilities 5,621,039 5,237,869
Long-term debt 1,849,915 2,063,896
Obligations under capital leases 205,525 208,269
Total shareholders' equity (Note 3) 2,030,395 2,647,867
----------- -----------
9,706,874 $10,157,901
=========== ===========
<FN>
NOTE: The balance sheet at December 31, 1994 has been derived from the audited
financial statements at that date, but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE> 125
<TABLE>
PHONETEL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the Three Months Ended June 30,
----------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Revenues:
Coin calls $ 2,664,224 $ 2,198,392
Operator services 1,004,207 1,274,781
Commissions 397,040 664,929
Other 39,276 10,552
------------ ------------
4,104,747 4,148,654
------------ ------------
Costs and expenses:
Line and transmission charges 1,287,084 1,182,393
Location commissions 886,665 859,627
Billing and collection 255,880 256,980
Depreciation and amortization 731,591 663,922
Other operating expenses 775,347 799,437
Selling, general and administrative 869,200 725,555
------------ ------------
4,805,767 4,487,914
------------ ------------
Loss from operations (701,020) (339,260)
Interest expense (116,939) (118,951)
Interest income 6,038 1,178
------------ ------------
Net Loss $ (811,921) $ (457,033)
============ ============
Less: Preferred stock dividend
requirement (77,417) (72,995)
------------ ------------
Net loss applicable to common
shareholders $ (889,338) $ (530,028)
============ ============
Net loss per common share $ (.09) $ (.06)
============ ============
Weighted average number of shares 9,888,345 8,886,743
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 126
<TABLE>
PHONETEL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Revenues:
Coin calls $ 4,995,329 $ 3,399,063
Operator services 2,008,055 2,670,829
Commissions 810,224 777,031
Other 64,454 47,515
------------ ------------
7,878,062 6,894,438
------------ ------------
Costs and expenses:
Line and transmission charges 2,404,149 1,893,381
Location commissions 1,516,365 1,512,980
Billing and collection 513,188 528,858
Depreciation and amortization 1,432,491 898,295
Other operating expenses 1,716,983 1,389,280
Selling, general and administrative 1,494,244 1,354,260
------------ ------------
9,077,420 7,577,054
------------ ------------
Loss from operations (1,199,358) (682,616)
Interest expense (220,230) (176,181)
Interest income 6,588 2,446
------------ ------------
Net Loss $ (1,413,000) $ (856,351)
============ ============
Less: Preferred stock dividend
requirement (154,834) (145,990)
------------ ------------
Net loss applicable to common
shareholders $ (1,567,834) $ (1,002,341)
============ ============
Net loss per common share $ (.16) $ (.12)
============ ============
Weighted average number of shares 9,516,845 8,539,032
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 127
<TABLE>
PHONETEL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the Six Months Ended June 30,
----------------------------------
1995 1994
----------- ------------
<S> <C> <C>
Cash flows provided by (used in)
operating activities:
Net loss $(1,413,000) $ (856,351)
Adjustments to reconcile net loss
to net cash flow from
operating activities:
Depreciation and amortization 1,432,491 898,295
Stock and stock awards issued 61,160 17,500
Changes in assets and liabilities:
Accounts receivable (129,160) (547,338)
Inventories (152,555) (115,698)
Prepaid expenses (9,763) 10,851
Intangibles and other assets (264,296) (267,516)
Accounts payable and accrued expenses 523,546 1,320,426
----------- -----------
48,423 460,169
----------- -----------
Cash flows provided by (used in)
investing activities:
Acquisition of Alpha Pay Phones-IV, L.P. - (2,143,119)
Purchases of property and equipment, net (68,071) (32,880)
----------- -----------
(68,071) (2,175,999)
----------- -----------
Cash flows provided by (used in)
financing activities:
Proceeds from issuance of Common Stock 690,000 1,474,999
Dividends paid (40,375) -
Debt financing costs - (70,000)
Equity financing costs (52,935) (104,689)
Proceeds from warrant and option
exercises 20,000 553,460
Proceeds from debt issuances 200,000 1,400,000
Principal payments on borrowings (918,141) (1,442,307)
----------- -----------
(101,451) 1,811,463
----------- -----------
Increase (decrease) in cash (121,099) 95,633
Cash:
At beginning of period 478,756 83,555
----------- -----------
At end of period $ 357,657 $ 179,188
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 128
PHONETEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation
==============================================================================
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly. they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. For further information, refer to the Financial Statements
and Notes thereto included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1994.
NOTE 2 - Financial Condition
==============================================================================
On March 25, 1994, the Company acquired substantially all of the assets of
Alpha Pay Phones-IV, L.P. ("Alpha"), a Delaware limited partnership. The
acquired assets included 2,155 installed telephones. This acquisition was
accounted for using the purchase method and, accordingly, the purchase price
was allocated to net assets acquired based on their estimated fair values.
The purchase price was $5,598,874, of which $2,334,216 was paid in cash. To
fund in part the cash payment with respect to the acquisition of assets, the
Company borrowed $1,400,000. The balance of the purchase price was satisfied
by the Company's assumption of obligations of Alpha to U.S. Long Distance, Inc.
("USLD") in the aggregate amount of $2,164,083 and the Company's purchase money
notes to Alpha in the amount of $1,100,620.
At June 30, 1995 the following notes, related to the acquisition of Alpha
assets, were classified as current liabilities:
USLD $ 319,405
Alpha 302,030
Third parties 124,614
----------
$ 746,049
==========
The Company had a working capital deficit of $3,881,895 at June 30,1995
compared to a working capital deficit of $3,669,104 at December 31, 1994, an
increase of $212,791.
The Company is in active negotiations to secure additional commitments for
long-term debt. These additional funds along with ongoing positive cash flows
should be sufficient to assure that the Company can meet its current
obligations and maintain modest sales growth. Management believes, but cannot
assure, it will receive commitments for additional funds.
7
<PAGE> 129
The Company's long-term viability. however, is contingent upon either
restructuring its debt, selling off assets, merger with another company or its
ability to raise additional capital. Of these options, it is the intention of
the Company to raise additional capital for restructuring the balance sheet and
allow for additional growth. Growth will add to the likelihood of the long-term
viability of the Company by properly utilizing an asset base and operator and
general administration infrastructure that is currently underutilized.
The Company has the following plans to generate these additional funds. The
Company is in active negotiations with various sources to secure financing. The
Company has received firm commitments from its major pay telephone suppliers to
finance the purchase of 2,000 pay telephones over the next eighteen months at
competitive rates. The Company continues to actively pursue private financing
of the equipment and other costs involved in pay telephone installations and
acquisitions of pay telephone routes. The Company has retained the services of
a financial advisor, Brenner Securities Corporation, that has committed to a
project of raising new capital for the Company. This capital could be a
combination of senior secured financing, mezzanine financing and/or equity.
This project is actively in progress with the expectation of having the funding
secured by autumn 1995. Management believes, but cannot assure, the capital
funding will be secured.
Management believes, but cannot assure, that cash flows from operations, the
proceeds from the financing discussed above and other financial alternatives
will allow the Company to sustain its operations and meet its obligations
through the third quarter of 1996.
NOTE 3 - Shareholders' Equity
==============================================================================
As of June 30,1995 and December 31, 1994 shareholders' equity consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ------------
<S> <C> <C>
10% Cumulative Redeemable Preferred Stock
($1,000 stated value - 3,880 shares authorized;
1,496 shares issued and outstanding at
June 30, 1995 and December 31, 1994) $ 1 $ 1
8% Cumulative Redeemable Preferred Stock
($100 stated value - 16,000 shares
authorized; 12,200 shares issued and
outstanding at June 30, 1995 and
December 31, 1994) 981,084 981,084
7% Cumulative Convertible Redeemable Preferred
Stock ($100 stated value - 2,500 shares
authorized, issued and outstanding at
June 30, 1995 and December 31, 1994) 200,000 200,000
Common Stock ($0.01 par value - 22,500,00
shares authorized; 10,391,585 and 9,132,940
shares issued and outstanding at June 30, 1995
and December 31, 1994) 103,914 91,328
Additional paid-in capital 9,502,575 8,679,258
Accumulated deficit (8,757,179) (7,303,804)
---------- -----------
$ 2,030,395 $ 2,647,867
=========== ===========
</TABLE>
8
<PAGE> 130
The following transactions occurred during the six month period ended June 30,
1995 increasing shareholders' equity.
In March 1995, options to purchase 20,000 shares of the Company's Common Stock
were exercised. Proceeds from this option exercise were used to reduce amounts
owed by the Company for equity financing costs.
In May, the Company sold 825,000 shares of unregistered Common Stock in private
sales. Proceeds from the sales were $690,000.
In other equity transactions, 30,000 shares of the Company's Common Stock were
issued as consideration for services, and 45,200 shares of Common Stock were
issued under the Executive Incentive Plan, in lieu of cash payments.
All of the stock transactions reported were made at what the Company believed
to be the fair market value on the date the contractual obligations were
entered into.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
On March 25, 1994, the Company acquired substantially all of the assets of
Alpha Pay Phones-IV, L.P. ("Alpha"), a Delaware limited partnership. The
acquired assets included 2,155 installed telephones. This acquisition was
accounted for using the purchase method and, accordingly, the purchase price
was allocated to net assets acquired based on their estimated fair values.
The purchase price was $5,598,874, of which $2,334,216 was paid in cash. To
fund in part the cash payment with respect to the acquisition of assets, the
Company borrowed $1,400,000. The balance of the purchase price was satisfied by
the Company's assumption of obligations of Alpha to U.S. Long Distance, Inc.
("USLD") in the aggregate amount of $2,164,083 and the Company's purchase money
notes to Alpha in the amount of $1,100,620.
At June 30, 1995 the following notes, related to the Acquisition of Alpha
assets, were classified as current liabilities:
USLD $ 319,405
Alpha 302,030
Third parties 124,614
----------
$ 746,049
==========
The Company had a working capital deficit of $3,881,895, at June 30,1995
compared to a working capital deficit of $3,669,104 at December 31, 1994, an
increase of $212,791.
The Company is in active negotiations to secure additional commitments for
long-term debt. These additional funds along with ongoing positive cash flows
should be sufficient to assure that the Company can meet its current
obligations and maintain modest sales growth. Management believes, but cannot
assure, it will receive commitments for additional funds.
9
<PAGE> 131
The Company's long-term viability, however, is contingent upon either
restructuring its debt, selling off assets, merging with another company or its
ability to raise additional capital. Of these options, it is the intention of
the Company to raise additional capital for restructuring the balance sheet and
allow for additional growth. Growth will add to the likelihood of the long-term
viability of the Company by properly utilizing an asset base and operator and
general administration infrastructure that is currently underutilized.
The Company has the following plans to generate these additional funds. The
Company is in active negotiations with various sources to secure financing. The
Company has received firm commitments from its major pay telephone suppliers to
finance the purchase of 2,000 pay telephones over the next eighteen months at
competitive rates. The Company continues to actively pursue private financing
of the equipment and other costs involved in pay telephone installations and
acquisitions of pay telephone routes. The Company has retained the services of
a financial advisor, Brenner Securities Corporation, that has committed to a
project of raising new capital for the Company. This capital could be a
combination of senior secured financing, mezzanine financing and/or equity.
This project is actively in progress with the expectation of having the funding
secured by autumn 1995. Management believes, but cannot assure, the capital
funding will be secured.
Management believes, but cannot assure, that cash flows from operations, the
proceeds from the financing discussed above and other financial alternatives
will allow the Company to sustain its operations and meet its obligations
through the third quarter of 1996.
Results of Operations
At June 30, 1995 the Company had approximately 5,038 Company owned pay
telephones installed and 21 phones owned by others at various locations, but
managed by the Company under its national and regional account management
programs, compared to 4,481 Company owned pay telephones and 127 managed phones
at June 30, 1994. Additionally, at June 30,1995 the Company provided long
distance operator service to approximately 4,500 pay telephones (including
Company-owned phones) and hotel and hospital room phones compared to
approximately 7,193 telephones as of June 30, 1994.
Revenue
Revenue from coin calls increased 21% for the quarter to $2,664,224 in 1995
from $2,198,392 for the same period in 1994. Revenues from coin calls increased
approximately 47% for the six months ended June 30, 1995 to $4,995,329 from
$3,399,063 in 1994. These increases are primarily attributable to an increase
in the average number of pay telephones in service to 5,001 for the three
months ended June 30, 1995 from 4,445 for the comparable period in 1994 and to
4,938 for the first half of 1995 from 3,360 for the comparable period in 1994.
Revenues per phone have also increased as a result of management's program to
isolate and redeploy low revenue and/or unprofitable phones to higher revenue
producing sites.
Operator service revenue decreased 21% for the quarter ended June 30, 1995 to
$1,004,207 from $1,274,781 in 1994, and decreased 25% for the six months ended
June 30, 1995 to $2,008,055 from $2,670,829 in 1994. These decreases were
primarily the result of a decrease in the number of phones to which the Company
provides operator services through presubscription arrangements and aggressive
dial-around advertising of AT&T, Sprint and MCI. The Company expects that the
revenues will stabilize in 1995.
10
<PAGE> 132
Commission revenue decreased to $397.040 for the quarter ended June 30, 1995
from $664.929 for the comparable period in 1994. Commission revenue increased
slightly for the six months ended June 30, 1995 to $810,224 from $777,031 for
the comparable period in 1994. The decrease in commission revenue for the
quarter is attributable to a decrease in the commissions paid by USLD. USLD
provides operator services to the telephones acquired from Alpha and pays the
Company a commission. The number of telephones for which USLD provides operator
service has decreased due to management's program of isolating low revenue
and/or unprofitable phones and redeploying them to higher revenue sites.
Operator service usage for these telephones has also decreased due to the
introduction of a Company program which charges customers $0.75 in coin for a
three minute, long distance call anywhere in the continental United States,
thus diverting operator assisted calling. Also, aggressive dial-around
advertising by AT&T, Sprint and MCI has contributed to this decrease.
Costs and Expenses
Line and transmission charges increased to 31.4% of total revenue for the
quarter and 30.5% for the six months ended June 30, 1995 compared to 28.5% and
27.5% for the comparable period in 1994 as a result, in part, from increased
coin revenue from the $0.75 per three minute long distance program as well as
increases in certain local telephone company line charges. Management expects
that the increased volume on the $0.75 per three minute long distance calls
program will cause the line and transmission charges, as a percent of revenue,
to remain steady or increase slightly in the future. However, this program
reduces billing and collection and operator service costs.
Location commissions have remained relatively constant at approximately 21% of
total revenue for the quarters ended March 31, 1995 and 1994. Location
commissions decreased to 19.3% of total revenue for the six months ended June
30,1995 as compared to 21.9% for the comparable period in 1994 as a result of
renegotiating the location agreements acquired from the Alpha acquisition.
Location commissions may increase in the future due to increased competition,
however, such costs, as a percentage of total revenues, should stabilize as the
industry matures.
Billing and collection costs have remained constant at 6.2% of total revenue
for the quarters ended March 31,1995 and 1994, while decreasing to 6.5% of
total revenue for six months ended June 30,1995 from 7.7% for the comparable
period in 1994 primarily due to the introduction of new system software and
procedures which help manage costs and control expenses. Billing and collection
costs are expected to remain constant as a percentage of total revenue or
perhaps decrease as the volume of the $0.75 per three minute long distance coin
calls increase since these do not require billing and collection.
Depreciation and amortization increased to $731,591 for the quarter ended June
30, 1995 from $663,922 in 1994, and increased to $1,432,491 for the six month
period ended June 30,1995 from $898,295 in 1994. This increase was primarily
due to the Company's acquisition of Alpha assets at the end of the first
quarter 1994 and expansion of its pay telephone base which included purchases
of additional computer equipment, service vehicles and software which were made
to accommodate the Company's growth.
Other operating expenses as a percent of total revenue have remained constant
at 19% for the quarters ended June 30, 1995 and 1994, and increased slightly to
21.8% for the six months ended June 30, 1995 from 20.2% for the comparable
period in 1994. The increase for the first half of 1995 is attributable to the
addition of the Alpha assets, new operations in Texas, the establishment of
Florida and Nevada sales offices, an increase in the Company's pay telephone
base and additional personnel to accommodate increased business. Total
operating expenses are expected to remain stable in the foreseeable future and
are expected to decrease as a percentage of total revenues.
11
<PAGE> 133
Selling, general and administrative expenses increased to 21.2% of total
revenue for the quarter ended June 30, 1995 from 17.5% for the comparable
period in 1994, and remained constant at approximately 19% for the first half
of 1995 compared to 1994. The increase for the quarter is partially due to the
payment certain of executive bonuses, and increased marketing and sales
efforts. The Company has begun a program to reduce selling, general and
administrative expenses.
Interest expense decreased to $116,939 for the quarter ended June 30, 1995 from
$118,951 for the comparable period in 1994. For the six months ended June 30,
1995, interest expense increased to $220,230 from $176,181 for the comparable
period in 1994 due to financing obtained for the Alpha acquisition.
Impact of Seasonality
The seasonality of the Company's revenues from installed pay telephones,
reselling operator assisted long distance services, and national and regional
account management parallels that of the location from which the calls are
placed. Since a large concentration of these telephones are in shopping malls,
the greatest portion of the Company's revenue is earned in the fourth quarter
due to the increased holiday traffic.
Impact of Inflation
Inflation has not had a significant impact on the Company. It is possible that
during inflationary periods, the basic line charges may increase while public
utilities commissions or the Federal Communications Commission may not allow
increases in charges to customers.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders held on June 30,1995, the shareholders of
record on May 15, 1995, approved election to the Company's Board of Directors
as follows: Jerry H. Burger (5,483,693 affirmative votes and 1,323,379 votes
against), George H. Henry (6,637,114 affirmative votes and 169,958 votes
against), Bernard Mandel (5,485,693 affirmative votes and 1,321,379 votes
against), Lonzo Coleman (6,588,612 affirmative votes and 218,460 votes against)
and Daniel J. Moos (6,637,114 affirmative votes and 169,958 votes against).
Also, approved (5,423,683 affirmative votes, 1,280,325 votes against and 99,064
votes abstaining) was an amendment to the Articles of Incorporation providing
far a reverse split of the Company's Common Stock whereby six shares shall be
changed into one share. The Board of Directors shall, at its discretion, cause
this amendment to become effective subsequent to such time as the Board of
Directors has determined that the reverse stock split would assist the Company
in increasing the marketability of its Common Stock.
12
<PAGE> 134
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PHONETEL TECHNOLOGIES, INC.
Date: August 5, 1995 /s/ Daniel J. Moos
-------------------------
Daniel J. Moos
Senior Vice President and
Chief Financial Officer
13
<PAGE> 135
EXHIBIT P
BRENNER SECURITIES
CORPORATION
Two World Trade Center, Suite 3826
New York, NY 10048
(212) 839-7300 Tel
(212) 839-7339 Fax
April 20, 1995
Mr. Daniel J. Moos
Chief Financial Officer
PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Dear Mr. Moos:
This letter confirms our understanding that PhoneTel Technologies,
Inc. (the "Company") has engaged Brenner Securities Corporation ("Brenner") to
act as its exclusive financial advisor with respect to a potential merger
with., or acquisition of (the "Transaction") World Communications, Inc. (the
"Target")
The following services will be provided by Brenner pursuant to this
engagement:
- Analysis and valuation of the terms of the. Transaction, it
being understood that Brenner will rely entirely upon
information provided by the Company and the Target and their
respective officers, directors, accountants and counsel which
Brenner deems appropriate, without any independent
investigation or verification thereof; and
- Assistance in structuring and negotiating the Transaction.
The Company will compensate Brenner for its role as financial
advisor as follows:
(a) if during the term of this Agreement or 12 months after
termination of this Agreement as discussed below, a
Transaction is consummated, the Company agrees to pay Brenner,
at the time of the closing of the Transaction (the "Closing"),
a transaction fee (the "Transaction Fee") equal to $250,000
cash and warrants (the "Warrants") to purchase a number of
shares of the surviving entity's Common Stock that equals 5%
of the number of shares outstanding on a fully diluted basis,
after giving effect to the
<PAGE> 136
Transaction and the exercise of the Warrants. The Warrants
shall be exercisable at any time during the 5 year period from
date of issuance at an exercise price equal to the fair market
value of the Company's Common Stock at the time of the
issuance. The Warrants shall contain reasonable "piggyback"
and "demand" registration rights and may be assigned in whole
or in part to the employees and affiliates of Brenner.
(b) Reimbursement periodically for all reasonable out-of-pocket
expenses incurred in connection with its role hereunder,
including, without limitation, reasonable attorneys' fees and
disbursements, and the fees and disbursements of any other
advisor retained by Brenner with the prior approval of the
Company.
No advice rendered by Brenner, whether formal or informal, may be
disclosed in whole or in part, or summarized, excerpted from or otherwise
publicly referred to, without Brenner's prior written consent In addition,
Brenner may not be otherwise publicly referred to without their prior written
consent unless such public reference is, in your opinion, legally required.
Since Brenner will be acting on behalf of the Company in connection
with its engagement hereunder, the Company has entered into a separate letter
agreement attached hereto, providing for the indemnification by the Company of
Brenner and certain related entities.
As you know, Brenner is a full service securities firms and as such
may from time to time effect transactions, for its own account or the account
of customers, and hold positions in securities or options on securities of the
Company.
As is conventional in such transactions, Brenner will be engaged by
the Company during the term hereof, and will be entitled to the Transaction Fee
referred to in paragraph (a) in the event of a Transaction even if the Company
approaches the Target during the term hereof directly or through an
intermediary other than Brenner. Brenner's engagement hereunder may be
terminated at any time with or without cause by either Brenner or the Company
upon 10 days' written notice thereof to the other party; provided, however,
that Brenner will continue to be entitled to (i) the full amount of the
Transaction Fee pursuant to the terms and conditions set forth in paragraph (a)
above in the event that at any time prior to the expiration of 12 months after
such termination, a Transaction is consummated, (ii) the fees and expenses to
the extent provided in paragraph (b) above, and (iii) indemnification of
Brenner and certain related entities with respect to actions and omissions
occurring prior to such termination as provided in the separate letter
agreement referred to above.
We are delighted to accept this engagement and look forward to
working with you on this assignment. P[ease confirm that the foregoing is in
accordance with
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<PAGE> 137
your understanding by signing and returning to us the enclosed duplicate of
this Agreement.
Very truly yours,
BRENNER SECURITIES
CORPORATION
By:
-----------------------
Name:
Title:
Accepted and Agreed to:
PHONETEL TECHNOLOGIES, INC.
By: /s/ Daniel Moos
-----------------------
Name: DANIEL MOOS
Title: SUP & CFO
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EXHIBIT Q
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") made and entered
into this 22nd day of September, 1995, by and between PhoneTel Technologies,
Inc., an Ohio corporation ("PhoneTel") and World Communications, Inc., a
Missouri corporation ("WCI").
WHEREAS, PhoneTel and WCI are parties to the Agreement and Plan of
Merger of even date herewith (the "Merger Agreement") pursuant to which WCI will
merge with and into a wholly owned subsidiary of PhoneTel (the "Merger") and the
shareholders of WCI will receive shares of PhoneTel common stock $.01 par value
("PhoneTel Common Shares") and 10% Non-Voting Preferred Stock, without par
value, $100 stated value, of PhoneTel ("PhoneTel Preferred Shares"); and
WHEREAS, the shareholders of WCI have requested that, in connection with
the Merger Agreement, PhoneTel provide a means of registering PhoneTel Common
Shares under the Securities Act of 1933, as amended (the "Securities Act"), and
PhoneTel is willing to provide such registration as provided herein;
NOW, THEREFORE, in consideration of the premises and the agreements
herein contained, the parties hereto agree as follows:
1. SHELF REGISTRATION. As promptly as practicable, PhoneTel shall file
and use all reasonable efforts to cause to be declared effective a "shelf"
registration statement (the "Shelf Registration Statement") on any appropriate
form pursuant to Rule 415 (or similar rule that may be adopted by the Securities
and Exchange Commission (the "SEC") under the Securities Act for all the
PhoneTel Common Shares (i) issued in connection with the Merger, (ii) issuable
upon conversion of the PhoneTel Preferred Shares and (iii) issued or distributed
in respect of such PhoneTel Common Shares by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization,
reorganization, merger, consolidation or otherwise (collectively such PhoneTel
Common Shares shall hereinafter be referred to as the "Registrable Securities"),
which form shall be available for the sale of the Registrable Securities in
accordance
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with the intended method or methods of distribution thereof; PROVIDED, HOWEVER,
that PhoneTel's obligations under this Section 1 shall not commence until the
later of (i) 90 days following the closing of a public primary equity offering
by PhoneTel or (ii) such later date acceptable to the managing underwriter or
underwriters, if any, of such offering. PhoneTel agrees to use its best efforts
to keep the Shelf Registration Statement continuously effective and usable for
resale of Registrable Securities, for a period of twenty-four (24) months from
the date on which the SEC declares the Shelf Registration Statement effective or
such shorter period which will terminate when all the Registrable Securities
covered by the Shelf Registration Statement cease to be Registrable Securities
(such period shall hereinafter be referred to as the "Effective Period");
PROVIDED, HOWEVER, that PhoneTel may elect that the Shelf Registration Statement
not be usable during any Blackout Period (as defined in Section 2 below).
2. BLACKOUT PERIOD. PhoneTel shall be entitled to elect that the Shelf
Registration Statement not be usable, for a reasonable period of time, but not
in excess of 90 days (a "Blackout Period"), if PhoneTel determines in good faith
that the use of the Shelf Registration Statement or related prospectus) would
interfere with any pending financing, acquisition, corporate reorganization or
any other corporate development involving PhoneTel or any of its subsidiaries or
would require premature disclosure thereof and promptly gives the holders
of Registrable Securities written notice of such determination, containing a
general statement of the reasons for such postponement or restriction on use and
an approximation of the anticipated delay; PROVIDED, HOWEVER, that the aggregate
number of days included in all Blackout Periods during any consecutive 12 months
during the Effective Period shall not exceed 180 days.
3. PIGGYBACK REGISTRATIONS.
-----------------------
(a) RIGHT TO PIGGYBACK. Whenever PhoneTel proposes to
register any of its equity securities under the Securities
Act (other than the first registration after the date hereof)
and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggy-back
Registration"), PhoneTel will give prompt
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<PAGE> 140
written notice (in any event within five business days
after its receipt of notice of any exercise of other demand
registration rights) to all holders of Registrable Securities
of its intention to effect such a registration and will,
subject to paragraphs (b), (c) and (d) below, include in
such registration all Registrable Securities with respect to
which PhoneTel has received written requests for inclusion
therein within 15 days after the receipt of PhoneTel's
notice.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on
behalf of PhoneTel (whether or not also on behalf of holders
of PhoneTel's securities), and the managing underwriters
advise PhoneTel in writing that in their opinion the number
of securities requested to be included in such registration
exceeds the number which can be sold in such offering,
PhoneTel will include in such registration (i) first, the
securities PhoneTel proposes to sell, (ii) second, the
Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable
Securities on the basis of the number of shares then owned by
such holders, and (iii) third, other securities requested to
be included in such registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a
Piggyback Registration is an underwritten secondary
registration on behalf of holders of PhoneTel's securities,
and the managing underwriters advise PhoneTel in writing
that in their opinion the number of securities requested to
be included in such registration exceeds the number which can
be sold in such offering, PhoneTel will include in such
registration (i) first, the securities requested to be
included therein by the holders demanding such registration,
(ii) second, the Registrable Securities requested to be
included in such registration, pro rata among such holders on
the basis of the number of shares then owned by each such
holder and (iii) third, ocher securities requested to be
included in such registration.
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(d) Nothing in this Section 3 will prohibit PhoneTel
from determining, at any time, not to file a registration
statement or, if filed, to withdraw such registration or
terminate the registration related thereto.
4. SELECTION OF UNDERWRITERS. If any offering pursuant to a
Registration Statement is an underwritten offering, PhoneTel will select a
managing underwriter or underwriters to administer the offering.
5. REGISTRATION EXPENSES. PhoneTel will pay all of its expenses in
connection with the registration of Registrable Securities (including
registration and filing fees, printing costs, listing fees and the fees and
expenses of its counsel), and each holder shall pay all underwriting discounts
and commissions and transfer taxes, if any, relating to the sale or disposition
of such holder's Registrable Securities pursuant to any registration statement
filed pursuant to paragraph (a) or (b) above (a "Registration Statement").
6. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY PHONETEL. PhoneTel agrees to indemnify each
holder of Registrable Securities, the underwriters thereof, their
respective officers and directors and each Person who controls any of the
foregoing (within the meaning of the Securities Act), and any agent or
investment adviser thereof against all losses, claims, damages,
liabilities and expenses (including reasonable attorneys' fees and
expenses of investigation) incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation arising out of or based
upon (i) any untrue or alleged untrue statement of material fact contained
in the Registration Statement, any prospectus or preliminary prospectus, or
any amendment or supplement to any of the foregoing or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus or a preliminary prospectus, in light of the circumstances then
existing) not misleading, except in each case insofar as the same arise out
of or are based upon, any such untrue statement or omission
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<PAGE> 142
made in reliance on and in conformity with information with respect to such
indemnified party furnished in writing to PhoneTel by such indemnified party
or its counsel expressly for use therein. Notwithstanding the foregoing
provisions of this paragraph (a), PhoneTel will not be liable to any
holder of Registrable Securities, any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such holder or underwriter (within the meaning
of the Securities Act), under the indemnity agreement in this paragraph (a)
for any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense that arises out of such holder's or other
Person's failure to send or give a copy of the final prospectus to the
Person asserting an untrue statement or alleged untrue statement or omission
or alleged omission at or prior to the written confirmation of the sale of
the Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus and PhoneTel has previously furnished
copies thereof to such holder.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with the Registrartion Statement, each holder will furnish to
PhoneTel in writing such information, including with respect to the name,
address and the amount of Registrable Securities held by such holder, as
PhoneTel reasonably requests for use in such Registration Statement or the
related prospectus and agrees to indemnify and hold harmless PhoneTel, all
other prospective holders or any underwriter, as the case may be, and any of
their respective affiliates, directors, officers and controlling Persons
(within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated in such Registration Statement or
prospectus or any amendment or supplement to either of them or necessary
to make the statements therein (in the case of a prospectus, in the light of
the circumstances then existing) not misleading, but only to the extent that
any such untrue statement or omission is made in reliance on
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<PAGE> 143
and in conformity with information with respect to such holder furnished
in writing to PhoneTel by such holder or its counsel specifically for
inclusion therein.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person
entitled to indemnification hereunder agrees to give prompt written notice
to the indemnifying party after the receipt by such indemnified party of any
written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified
party may claim indemnification or contribution pursuant to this Agreement
(provided that failure to give such notification shall not affect the
obligations of the indemnifying person pursuant to this Section 6 except to
the extent the indemnifying party shall have been actually prejudiced as a
result of such failure). In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party shall not be liable to such indemnified party under these
indemnification provisions for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation, unless in the reasonable judgment of any indemnified party a
conflict of interest is likely to exist between such indemnified party and
any other of such indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the reasonable fees
and expenses of such additional counsel or counsels. The indemnifying party
will not be subject to any liability for any settlement made without its
consent (which will not be unreasonably withheld).
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<PAGE> 144
(d) CONTRIBUTION. If the indemnification from the indemnifying party
provided for in this Section 6 is unavailable to the indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities and expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in connection
with the actions which resulted in such losses, claims, damages, liabilities
and expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) above, any legal and
other fees and expenses reasonably incurred by such indemnified party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by PRO RATA
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 6, no underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Registrable Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages which such underwriter has otherwise been required to pay by
reason of such untrue or
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<PAGE> 145
alleged untrue statement or omission or alleged omission, and no holder of
Registrable Securities shall be required to contribute any amount in excess
of the amount by which the total price at which the Registrable Securities
of such holder were offered to the public (net of all underwriting discounts
and commissions) exceeds the amount of any damages which such holder has
otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided
in Section 6(a) or (b), as the case may be, without regard to the relative
fault of said indemnifying parties or indemnified party or any other
equitable consideration provided for in this paragraph (d)
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No holder of
Registrable Securities may participate in any underwritten offering hereunder
unless such holder (i) agrees to sell such holder's securities on the basis
provided in any underwriting arrangements approved by PhoneTel in its reasonable
discretion and (ii) com pletes and executes all questionnaires, powers of attor-
ney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
8. RULE 144. For a period of three years following the date hereof
(or such shorter period as may permit the sale of Registrable Securities under
Rule 144 under the Securities Act without regard to the require ment of "current
public information") , PhoneTel covenants that it will file the reports required
to be filed by it under the Securities Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations adopted by the SEC thereunder
(or, if PhoneTel is not required to file such reports, it will, upon the
request of any holder of Registrable Securities, make publicly available other
information so long as necessary to permit sales under Rule 144 under the
Securities Act), and it will
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<PAGE> 146
take such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of any
holder of Registrable Securities, PhoneTel will deliver to such holder a written
statement as to whether it has complied with such requirements.
9. REMEDIES. Each holder of Registrable Securities in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement.
10. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES
(a) This Agreement shall be binding upon, inure to the benefit of, and
be enforceable by, the parties hereto and their respective successors and
permitted assigns. This Agreement and the rights and obligations of WCI,
PhoneTel and the shareholders of WCI hereunder may not be assigned by any of the
parties hereto without the prior written consent of the other parties.
(b) This Agreement is not intended, nor shall it be construed, to
confer any rights or remedies under or by reason of this Agreement upon any
person except the parties hereto, the shareholders of WCI and their heirs,
successors and permitted assigns.
11. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof.
This Agreement supersedes all prior agreements, arrangements and understandings
of the parties with respect to such subject matter.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
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<PAGE> 147
13. HEADINGS. The section headings contained in this Agreement are for
convenience only and shall not control or affect in any way the meaning or
interpretation of the provisions of this Agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Missouri without giving effect to
the conflicts of law principles of such jurisdiction.
15. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given at the time of delivery if personally delivered or telecopied (with
confirmation of receipt), the next day, if delivered by nationally-recognized
overnight express service, or five (5) days, if sent by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses:
(a) If to PhoneTel to:
PhoneTel Technologies, Inc.
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone Number: (216) 241-2555
Facsimile Number: (216) 241-2574
Attn: Daniel Moos
with copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telephone Number: (212) 735-3000
Facsimile Number: (212) 735-2000
Attn: N.J. Terris, Esq.
(b) If to WCI:
World Communications, Inc.
11656 Lilburn Park Road
St. Louis, MO 63146
Telephone Number: (314) 993-0755
Facsimile Number: (314) 993-6245
Attn: Stuart Hollander
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with copy to:
Blumenfeld, Kaplan & Sandweiss, P.C.
168 North Meramec, Suite 400
St. Louis, Missouri 63105
Telephone Number: (314) 863-0800
Facsimile Number: (314) 863-9388
Attn: Mark Z. Schraier, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
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<PAGE> 149
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
on the day and year first above written.
WORLD COMMUNICATIONS, INC.
By:
--------------------------------
Stuart Hollander, Chairman
PHONETEL TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
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<PAGE> 150
BYLAWS
OF
NORTHERN FLORIDA TELEPHONE CORPORATION
ARTICLE I
---------
Offices
-------
The principal office of the Corporation shall be located at 1203 S.W.
12th Street, Suite D, Ocala, Florida 32674.
ARTICLE Il
----------
Shareholders
------------
SECTION 2.01. PLACE OF MEETING. All meetings of the Shareholders shall be
held at the office of the Corporation or at such other place within or without
the State of Florida as may be designated by the President or the Board of
Directors.
SECTION 2.02. ANNUAL MEETING. Unless otherwise designated by the Board of
Directors, the annual meeting of Shareholders, commencing with the year 1995,
shall be held on the first Monday in June of each year if not a legal holiday,
and if a legal holiday, then the day following, at 10:00 a.m., for the election
of Directors and for the transaction of such other business as shall properly
come before' the meeting.
SECTION 2.03. SPECIAL MEETINGS. Special meetings of the Shareholders for
any purpose or purposes may be called by the President or by the Board of
Directors, or by the Secretary at the request in writing by Shareholders owning
at least one-fifth (1/5) in amount of the entire capital stock of the
Corporation issued and outstanding.
SECTION 2.04. NOTICE OF MEETINGS. Written or printed notice of
Shareholders' meetings shall be given in accordance with the laws of the State
of Florida.
SECTION 2.05. SHAREHOLDERS ENTITLED TO VOTE. The Board of Directors may
prescribe a period not exceeding fifty (50) days prior to any meeting of the
Shareholders during which no transfer of stock on the books of the Corporation
may be made. The Board of Directors may fix a day not more than fifty (50) days
prior to the holding of any meeting of the Shareholders as the day as of which
Shareholders are entitled to notice of and to vote at such meeting.
SECTION 2.06. QUORUM. The holders of a majority of the stock issued and
outstanding, present in person or represented by
<PAGE> 151
proxy, shall be requisite and shall constitute a quorum at all meetings of the
Shareholders for the transaction of business except as otherwise provided by
law, by the Articles of Incorporation or by these Bylaws.
SECTION 2.07. VOTING. At each meeting of the Shareholders, every
Shareholder shall be entitled to vote in person, or by proxy appointed by an
instrument in writing subscribed by such Shareholder, or by his duly authorized
attorney, and he shall have one vote for each share of stock registered in his
name at the time of the closing of the transfer books for said meeting, or in
lieu of closing of the transfer books the record date for voting as fixed by
the Board of Directors.
The vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of the statutes or of the Articles of Incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of such question. In voting for Directors of the Corporation,
cumulative voting shall not be permitted.
SECTION 2.08. INFORMAL MEETINGS. Whenever the vote of Shareholders at a
meeting thereof is required or permitted to be taken in connection with any
corporate action by any provisions of the statutes or of the Articles of
Incorporation, the meeting, any notice thereof and vote of Shareholders thereat
may be dispensed with if all the Shareholders who would have been entitled to
vote upon the action if such meeting were held shall consent in writing to such
corporate action being taken. Such written consent shall be filed with the
minutes of Shareholders' meetings.
SECTION 2.09. ORGANIZATION. The President, and in his absence, the Vice
President, and in the absence of both the President and the Vice President, a
chairman chosen by the Shareholders present, shall preside at each meeting of
Shareholders and shall act as chairman thereof. The Secretary, and in his
absence the Assistant Secretary, and in the absence of both the Secretary and
the Assistant Secretary, a Secretary pro tem, chosen by the Shareholders
present, shall act as Secretary of all meetings of the Shareholders.
SECTION 2.10. ADJOURNMENT. If at any meeting of the Shareholders a
quorum shall fail to attend at the time and place for which the meeting was
called or if the business of such meeting shall not be completed, the
Shareholders present in person or represented by proxy may, by a majority vote,
adjourn the meeting from day to day or from time to time, not exceeding ninety
(90) days from such adjournment without further notice until a quorum shall
attend or the business thereof shall be completed. At any such adjourned
meeting any business may be transacted which might have been transacted at the
meeting as originally called.
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ARTICLE III
-----------
Directors
---------
SECTION 3.01. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors.
SECTION 3.02. NUMBER, ELECTION AND TERM. The number of Directors of the
Corporation shall be seven (7) who shall be elected at the annual meeting of the
Shareholders for a term of one year, and who shall hold office until their
successors have been elected and have qualified. The number of Directors may be
increased or diminished from time to time but shall not be less than two (2).
SECTION 3.03. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw, immediately after,
and at the same place as, the annual meeting of Shareholders.
SECTION 3.04. VACANCIES. Vacancies and newly created Directorships
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then in office, though less than a quorum, and
the Directors so chosen shall hold office until the next annual election and
until their successors are duly elected and shall qualify, unless sooner
displaced.
SECTION 3.05. PLACE OF MEETING. Meetings of the Board of Directors of
the Corporation, both regular and special, may be held at any place either
within or without the State of Florida, and unless otherwise designated as
herein provided, shall be held at the office of the Corporation.
SECTION 3.06. REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such time and place as shall from time to time be
determined by resolution of the Board.
SECTION 3.07. NOTICE OF REGULAR MEETINGS. After the time and place of
regular meetings shall have been determined, no notice of any regular meetings
need be given. Notice of any change in the date or place of holding any regular
meeting or any adjournment of a regular meeting shall be given by mail or
facsimile not less than forty-eight (48) hours before such meeting to all
Directors.
SECTION 3.08. SPECIAL MEETINGS. Special meetings of the Board for any
purpose or purposes may be called by the President on two (2) days' notice to
each Director either personally or by mail or by telegram. Upon like notice, the
Secretary of the Corporation, upon the written request of a majority of the
Directors, shall call a special meeting of the Board. Such request shall state
the purpose or purposes of the
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<PAGE> 153
proposed meeting. The Officer calling the special meeting may designate the
place for holding same.
SECTION 3.09. QUORUM. At all meetings of the Board, a majority of the
Directors shall constitute a quorum for the transaction of business and the act
of a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except where otherwise provided by
law or by these Bylaws. If a quorum shall not be present at any meeting of the
Board of Directors, the Directors present thereat may adjourn the meeting from
time to time without notice other than announcement at the meeting until a
quorum shall be present.
SECTION 3.10. INFORMAL MEETINGS. Whenever the vote of Directors to be
taken in connection with any corporate action is permitted by any provisions of
the Laws of the State of Florida to be taken by written consent it shall be
approved if the requisite number of Directors shall consent in writing to such
corporate action being taken. Such written consent shall be filed with the
minutes of the Board.
SECTION 3.11. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees each committee to consist of two or more of the Directors of the
Corporation, which, to the extent provided in the resolution, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation and may authorize the seal of the Corporation to
be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
SECTION 3.12. ORGANIZATION. The President, and in his absence a Vice
President, and in the absence of the President and all the Vice Presidents, a
Chairman pro tem, chosen by the Directors present shall preside at each meeting
of the Directors and shall act as Chairman thereof. The Secretary, and in his
absence, the Assistant Secretary, and in the absence of the Secretary and the
Assistant Secretary, a Secretary pro tem, chosen by the Directors present shall
act as Secretary of all meetings of the Directors.
SECTION 3.13. MINUTES AND STATEMENTS. The Board of Directors shall cause
to be kept a complete record of their meetings and acts, and of the proceedings
of the Shareholders.
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ARTICLE IV
----------
Officers
--------
SECTION 4.01. OFFICERS. The Officers of this Corporation shall be a
President, a Secretary and a Treasurer; the Board of Directors may also from
time to time elect one or more Vice Presidents, one or more Assistant
Secretaries and one or more Assistant Treasurers; all of whom shall be chosen by
the Board of Directors. Any person may hold two or more offices.
SECTION 4.02. SUBORDINATE OFFICERS AND EMPLOYEES. The Board of Directors
may appoint such other Officers and agents as it may deem necessary who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board.
SECTION 4.03. COMPENSATION. The Board of Directors may from time to
time, in its discretion, fix or alter the compensation of any Officer or agent.
SECTION 4.04. ELECTION AND TERM OF OFFICE. The Officers of the
Corporation shall be elected annually by the Board of Directors at the regular
annual meeting of the Board of Directors. Each Officer shall hold office until
his successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided. Any Officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation would be served thereby. A vacancy in any
office because of death, resignation, removal, disqualification or otherwise,
may be filled by the Board of Directors for the unexpired portion of the term at
any meeting of the Board.
SECTION 4.05. PRESIDENT. The President shall be the chief executive
officer of the Corporation. He shall preside at all meetings of the Shareholders
and Directors. He shall have general and active management of the business of
the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect, subject, however, to the right of the Board
of Directors by resolution to delegate any specific powers (other than those
which may be by statute exclusively conferred upon the President), to any other
Officer, Director or agent of the Corporation. The President shall, on behalf of
the Corporation and as authorized by the Board of Directors, execute all deeds,
notes, bonds, mortgages, contracts and other instruments in writing, except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other Officer or agent of the Corporation. He may
vote all securities which the Corporation is entitled to vote except as and to
the extent such authority shall be vested in a different Officer or agent of the
Corporation by the Board of Directors.
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<PAGE> 155
SECTION 4.06. VICE PRESIDENT. The Vice Presidents, in the order
designated by the Board of Directors, shall, in the absence or disability of the
President, perform the duties and exercise the powers of the President and shall
perform such other duties and have such other powers as the Board of Directors
or the President may from time to time prescribe.
SECTION 4.07. THE SECRETARY. The Secretary shall attend all meetings of
the Shareholders of the Corporation and of the Board of Directors and shall
record all of the proceedings of such meetings in minute books kept for that
purpose. He is authorized to affix the corporate seal to all instruments
requiring it. He shall have charge of the corporate records, and, except to the
extent authority may be conferred upon any transfer agent or registrar duly
appointed by the Board of Directors, he shall maintain the Corporation's books,
registers, stock certificate and stock transfer books and stock ledgers, and
such other books, records and papers as the Board of Directors may from time to
time entrust to him. He shall give or cause to be given proper notice of all
meetings of Shareholders and Directors as required by law and the Bylaws, and
shall perform such other duties as may from time to time be prescribed by the
Board of Directors or the President.
SECTION 4.08. THE ASSISTANT SECRETARY. Each Assistant Secretary shall
assist the Secretary in the performance of his duties, and may at any time
perform any of the duties of the Secretary; in case of the death, resignation,
absence or disability of the Secretary, the duties of the Secretary shall be
performed by an Assistant Secretary, and each Assistant Secretary shall have
such other powers and perform such other duties as, from time to time, may be
assigned to him by the Board of Directors.
SECTION 4.09. THE TREASURER. The Treasurer shall have the custody of the
corporate funds and securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the President and Directors at the regular meetings of the Board, or whenever
they may require it, an account of all his transactions as Treasurer, and of the
financial conditions of the Corporation.
SECTION 4.10. THE ASSISTANT TREASURER. Each Assistant Treasurer shall
assist the Treasurer in the performance of his duties, and may at any time
perform any of the duties of the Treasurer; in case of the death, resignation,
absence or disability of the Treasurer, the duties of the Treasurer shall be
performed by an Assistant Treasurer, and each Assistant Treasurer shall have
such other powers and perform such other duties as, from time to time, may be
assigned to him by the Board of Directors.
6
<PAGE> 156
ARTICLE V
---------
Resignations
------------
Any Director or Officer may resign his office at any time, such
resignation to be made in writing and to take effect from the time of its
receipt by the Corporation, unless some time be fixed in the resignation, and
then from that time. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE VI
----------
Contracts and Loans
-------------------
SECTION 6.01. CONTRACTS. The Board of Directors may authorize any Officer
or Officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 6.02. LOANS. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
ARTICLE VII
-----------
Certificates for Shares and Their Transfer
------------------------------------------
SECTION 7.01. CERTIFICATES FOR SHARES. Certificates representing shares
of the Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the President or Vice
President and by the Secretary or an Assistant Secretary and shall be sealed
with the seal of the Corporation. All certificates for shares shall be
consecutively numbered. The name of the persons owning the shares represented
thereby with the number of shares and date of issue shall be entered on the
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be cancel led and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed or mutilated certificate a
new one may be issued therefor upon such terms and indemnity to the Corporation
as the Board of Directors may prescribe. The Corporation shall keep at its
registered office or principal place of business a record of its Shareholders,
giving the names and addresses of all Shareholders and the number of shares
held by each.
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<PAGE> 157
SECTION 7.02. TRANSFERS OF SHARES. Transfers of shares of the Corporation
shall be made only on the books of the Corporation by the registered holder
thereof or by his attorney thereunto authorized by a power of attorney duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate for such shares. The person in whose name
shares stand on the books of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation.
ARTICLE VIII
------------
Dealings with Companies in Which
--------------------------------
Directors May Have an Interest
------------------------------
Inasmuch as the Directors of this Corporation are or may be men of
diversified business interests, and are likely to be connected with other
corporations with which from time to time this Corporation may have business
dealings, no contract or other transaction between this Corporation and any
other corporation shall be affected by the fact that Directors of this
Corporation are interested in, or are directors or officers of such other
corporation.
ARTICLE IX
----------
Miscellaneous Provisions
------------------------
SECTION 9.01. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
SECTION 9.02. INSPECTION OF BOOKS. The Directors shall determine from
time to time whether, and, if allowed, when and under what conditions and
regulations the accounts and books of the Corporation (except such as may by
statute be specifically open to inspection) or any of them shall be open to
inspection of the Shareholders, and Shareholders' rights in this respect are and
shall be restricted and limited accordingly.
SECTION 9.03. CHECKS AND NOTES. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money,
shall be signed by such Officer or Officers or agent or agents as shall be
thereunto duly authorized from time to time by the Board of Directors; provided,
that checks drawn on the Corporation's payroll, dividend and special accounts
may bear the facsimile signatures, affixed thereto by a mechanical device, of
such Officers or agents as the Board of Directors may authorize.
SECTION 9.04. DIVIDENDS. The Board of Directors shall declare such
dividends as they in their discretion see fit whenever the condition of the
Corporation, in their
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<PAGE> 158
opinion, shall warrant the same; subject to the provisions of the Florida
Statutes. The Board may declare dividends in cash, in properly or in capital
stock.
SECTION 9.05. NOTICES. Whenever, under the provisions of these Bylaws
notice is required to be given to any Director, Officer or Shareholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing by depositing the same in the post office or letter box, in a postpaid
sealed wrapper addressed to such Shareholder, Officer or Director at such
address as appears on the records of the Corporation, and such notice shall be
deemed to be given at the time when the same shall be thus mailed.
SECTION 9.06. SEAL. The Corporation may have a seal inscribed with the
name of the Corporation and its state of incorporation.
ARTICLE X
---------
Indemnification
---------------
SECTION 10.01. MANDATORY INDEMNIFICATION. The Corporation shall, to the
full extent permitted or authorized by current or future legislation, indemnify
any person who was or is a party or threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a Director or Officer of the Corporation or is or was serving at the request
of the Corporation as a director or officer of any other corporation or
enterprise. Such right of indemnification shall inure to the benefit of the
heirs, executors, administrators and personal representatives of such a person.
SECTION 10.02. PERMISSIVE SUPPLEMENTARY BENEFITS. The Corporation may,
but shall not be required to, supplement the right of indemnification under
Section 10.01 by (a) the purchase of insurance on behalf of any one or more of
such persons, whether or not the Corporation would be obligated to indemnify
such person under Section 10.01, (b) individual or group indemnification
agreements with any one or more of such persons and (c) advances for related
expenses of such a person.
SECTION 10.03. AMENDMENT. This Article X may be amended or repealed only
by a vote of the Shareholders and not by a vote of the Board of Directors.
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<PAGE> 159
ARTICLE XI
----------
Amendments
----------
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors or by the Shareholders at any annual or
special meeting.
ARTICLE XII
-----------
Construction
------------
When used herein, the male gender shall include the female gender and
the plural shall include the singular as is appropriate.
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<PAGE> 160
AMENDMENT TO AGREEMENT
AND PLAN OF MERGER
This Amendment to Agreement and Plan of Merger is entered
into as of this 22nd day of September, 1995, by and among
PHONETEL TECHNOLOGIES, INC., an Ohio corporation ("PhoneTel")
PHONETEL II, INC., a Missouri corporation ("Buyer"), WORLD
COMMUNICATIONS, INC., a Missouri corporation ("World"), and WCI
II, INC,., a Missouri corporation ("WCI").
WHEREAS, PhoneTel, Buyer and World entered into that certain
Agreement and Plan of Merger (the "Merger Agreement") of even
date herewith whereby World merged with and into Buyer (the
"Merger"); and
WHEREAS, prior to the Merger, World acquired an interest in
and to IPTA, L.L.C., an Illinois Limited Liability Company (the
"LLC") pursuant to a subscription Agreement and Operating
Agreement dated as of September 20, 1995 (collectively, the "LLC
Documents"); and
WHEREAS, World's interest in the LLC is subject to certain
restrictions on the transferability of such interest; and
WHEREAS, the Merger Agreement provides for World to transfer
all of its right, title and interest in and to the LLC to Buyer;
and
WHEREAS, PhoneTel, Buyer and World believe that it is in the
best interest of each of them that the interest in the LLC not be
transferred until such time as the members of the LLC consent to
the transfer pursuant to the terms of the LLC Documents; and
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<PAGE> 161
WHEREAS, after the closing of the Merger, WCI was formed
by all of the former shareholders of World for purpose of
retaining any asset not transferred by the Merger, including
certain contract rights pursuant to a Security Agreement executed
in connection with the Merger.
NOW, THEREFORE, the parties agree as follows:
1. Buyer and PhoneTel hereby waive any right or claim
under or pursuant to the Merger Agreement against WCI to transfer
its interest in the LLC to Buyer.
2. The interest in the LLC shall be retained by WCI, and
WCI shall take all action necessary to obtain the consent of the
members of the LLC to the transfer of the interest in the LLC to
Buyer.
3. At such time as WCI shall have obtained the consent to
the transfer if the interest in the LLC, WCI shall transfer and
assign all of its right, title and interest in and to the
interest in the LLC to Buyer.
4. If WCI shall not have obtained the consent of the
members of the LLC to the transfer of WCI's interest on or before
December 31, 1995, then at any time thereafter upon written
demand by Buyer, WCI shall transfer all of its right, title and
interest in and to the LLC to Buyer.
5. Buyer agrees to cooperate and to take all action
reasonably requested by WCI, to obtain the consent to effect
the transfer.
2
2
<PAGE> 162
6. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be
governed by and construed in accordance with the laws of the
State of Missouri.
7. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of
which shall together constitute one and the same instrument.
This Agreement shall become binding when one (1) or more
counterparts, individually or take together, shall bear the
signatures of all of the parties reflected hereon as the
signatories.
8. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed
to have been duly given (i) at the time of delivery if personally
delivered or telecopied (with confirmation of receipt), (ii) the
next day, if delivered by nationally-recognized overnight express
service, or (iii) in five (5), days from the date of mailing, if
sent by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses:
(a) If to Buyer or PhoneTel to:
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone Number: (216) 241-2555
Facsimile Number: (216) 241-2574
Attn: Daniel Moos
3
3
<PAGE> 163
(b) If to World or to WCI:
11656 Lilburn Park Road
St. Louis, MO 63146
Telephone Number: (314) 993-0755
Facsimile Number: (314) 993-6245
Attn: Stuart Hollander
with copy to:
Blumenfeld, Kaplan & Sandweiss, P.C.
168 North Meramec, Suite 400
St. Louis, Missouri 63105
Telephone Number: (314) 863-0800
Facsimile Number: (314) 863-9388
Attn: Mark Z. Schraier, Esq.
or to such other address as the person to whom notice is to be
given may have previously furnished to the other in writing in
the manner set forth above, provided that notice of a change of
address shall be deemed given only upon receipt
IN WITNESS WHEREOF, the undersigned have hereunto subscribed
their hands on the day and year first above written.
World:
WORLD COMMUNICATIONS, INC.
By:
Gary Pace, President
PhoneTel:
PHONETEL TECHNOLOGIES, INC.
By
4
4
<PAGE> 164
BUYER:
PHONETEL II, INC.
By:
WCI:
WCI II, INC.
By:
Stuart Hollander, President
5
5
<PAGE> 1
Exhibit (c)(2)
AMENDMENT TO AGREEMENT
----------------------
AND PLAN OF MERGER
------------------
This Amendment to Agreement and Plan of Merger is entered into as of
this 22nd day of September, 1995, by and among PHONETEL TECHNOLOGIES, INC., an
Ohio corporation ("PhoneTel"), PHONETEL II, INC., a Missouri corporation
("Buyer"), WORLD COMMUNICATIONS, INC., a Missouri corporation ("World"), and
WCI II, INC., a Missouri corporation ("WCI").
WHEREAS, PhoneTel, Buyer and World entered into that certain
Agreement and Plan of Merger (the "Merger Agreement") of even date herewith
whereby World merged with and into Buyer (the "Merger"); and
WHEREAS, prior to the Merger, World acquired an interest in and to
IPTA, L.L.C., an Illinois Limited Liability Company (the "LLC") pursuant to a
Subscription Agreement and Operating Agreement dated as of September 20, 1995
(collectively, the "LLC Documents"); and
WHEREAS, World's interest in the LLC is subject to certain restrictions
on the transferability of such interest; and
WHEREAS, the Merger Agreement provides for World to transfer all of its
right, title and interest in and to the LLC to Buyer; and
WHEREAS, PhoneTel, Buyer and World believe that it is in the best
interest of each of them that the interest in the LLC not be transferred until
such time as the members of the LLC consent to the transfer pursuant to the
terms of the LLC Documents; and
<PAGE>
<PAGE> 2
WHEREAS, after the closing of the Merger, WCI was formed by all of the
former shareholders of World for purposes of retaining any asset not
transferred by the Merger, including certain contract rights pursuant to a
Security Agreement executed in connection with the Merger.
NOW, THEREFORE, the parties agree as follows:
1. Buyer and PhoneTel hereby waive any right of claim under or
pursuant to the Merger Agreement against WCI to transfer its interest in the
LLC to Buyer.
2. The interest in the LLC shall be retained by WCI, and WCI shall
take all action necessary to obtain the consent of the members of the LLC to
the transfer of the interest in the LLC to Buyer.
3. At such time as WCI shall have obtained the consent to the
transfer if the interest in the LLC, WCI shall transfer and assign all of its
right, title and interest in and to the interest in the LLC to Buyer.
4. If WCI shall not have obtained the consent of the members of the
LLC to the transfer of WCI's interest on or before December 31, 1995, then at
any time thereafter upon written demand by Buyer, WCI shall transfer all of its
right, title and interest in and to the LLC to Buyer.
5. Buyer agrees to cooperate and to take all action reasonably
requested by WCI, to obtain the consent to effect the transfer.
2
<PAGE> 3
6. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the State of Missouri.
7. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original as against any party whose
signature appears thereon, and all of which shall together constitute one and
the same instrument. This Agreement shall become binding when one (1) or more
counterparts, individually or taken together, shall bear the signatures of all
of the parties reflected hereon as the signatories.
8. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
at the time of delivery if personally delivered or telecopies (with
confirmation of receipt), (ii) the next day, if delivered by
nationally-recognized overnight express service, or (iii) in five (5) days from
the date of mailing, if sent by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses:
(a) If to Buyer or PhoneTel to:
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone Number: (216) 241-2555
Facsimile Number: (216) 241-2574
Attn: Daniel Moos
3
<PAGE> 4
(b) If to World or to WCI:
11656 Lilburn Park Road
St. Louis, MO 63146
Telephone Number: (314) 993-0755
Facsimile Number: (314) 993-6245
Attn: Stuart Hollander
with copy to:
Blumenfeld, Kaplan & Sandweiss, P.C.
168 North Meramec, Suite 400
St. Louis, Missouri 63105
Telephone Number: (314) 863-0800
Facsimile Number: (314) 863-9388
Attn: Mark Z. Schraier, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
IN WITNESS WHEREOF, the undersigned have hereunto subscribed their
hands on the day and year first above written.
World:
WORLD COMMUNICATIONS, INC.
By:
---------------------------------
Gary Pace, President
PhoneTel:
PHONETEL TECHNOLOGIES, INC.
By: /s/ Daniel Moos
---------------------------------
CFO
4
<PAGE> 5
BUYER:
PHONETEL II, INC.
By: /s/ Daniel Moos
----------------------------------
President
WCI:
WCI II, INC.
By:
----------------------------------
Stuart Hollander, President
5
