<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
----------------------
SCHEDULE 13D
------------
Under the Securities Exchange Act of 1934
-----------------------------------------
(Amendment No. )*
-----------------
PHONETEL TECHNOLOGIES, INC.
---------------------------
(Name of Issuer)
Common Stock, Par Value $0.01 Per Share
---------------------------------------
(Title of Class of Securities)
71921H406
---------
(CUSIP Number)
Mr. William Austin
212-446-1930
Internationale Nederlanden (U.S.) Capital Corporation
135 East 57th Street
New York, New York 10022
------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copy to:
Hector E. Llorens, Jr.
King & Spalding
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
March 15, 1996
--------------
(Date of Event Which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: / /
1
<PAGE> 2
Check the following box if a fee is being paid with the Statement. / X / (A
fee is not required only if the reporting person (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosure provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 (the "Act") or otherwise subject to the liabilities of that section
of the Act but shall be subject to all other provisions of the Act (however,
see the Notes).
(Continued on following pages)
Page 2 of 222 Pages
Exhibit Index on Page 14
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CUSIP NO. 71921H406
1. NAME OF REPORTING PERSON
S.S. OR IRS IDENTIFICATION NO. OF ABOVE PERSON
Internationale Nederlanden (U.S.) Capital Corporation
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / X /
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7. SOLE VOTING POWER 4,464,907
SHARES
BENEFICIALLY 8. SHARED VOTING POWER -0-
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER 4,464,907
REPORTING
PERSON
WITH 10. SHARED DISPOSITIVE POWER -0-
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11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,464,907
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
56.7%
Page 3 of 222 Pages
Exhibit Index on Page 14
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14. TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
Page 4 of 222 Pages
Exhibit Index on Page 14
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STATEMENT PURSUANT TO RULE 13d-1
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OF 1934
Item 1. Security and Issuer
The class of equity securities to which this Statement on Schedule 13D
relates is the common stock, par value $0.01 per share (the"Common Stock"), of
PhoneTel Technologies, Inc. (the "Issuer"), an Ohio corporation, with its
principal executive offices located at 650 Statler Office Tower, 1127 Euclid
Avenue, Cleveland, Ohio 44115. Internationale Nederlanden (U.S.) Capital
Corporation ("Holder"), a Delaware corporation, has entered into a Credit
Agreement with the Issuer, described in Item 6. $14,500,000 of the principal
amount of the loan made by the Holder pursuant to the Credit Agreement plus
accrued interest on such portion of the loan is convertible in whole or in part
into Series B Special Convertible Preferred Stock, par value $0.20 per share
("Series B Preferred Stock") of the Issuer, at Holder's option at any time, at
a rate of 833.3333 shares of Series B Preferred Stock for each $100,000 of
principal of and interest on such portion of the loan. Each share of Series B
Preferred Stock is convertible into 20 shares of Common Stock of the Issuer.
Simultaneously with entering into the Credit Agreement with the Issuer, the
Holder purchased warrants ("Warrants") exercisable for 102,412 shares of Series
A Special Convertible Preferred Stock, par value $0.20 per share ("Series A
Preferred Stock") which shares of Series A Preferred Stock are convertible into
2,048,224.5 shares of Common Stock of the Issuer, as described in Item 6.
Item 2. Identity and Background
This statement is being filed on behalf of Internationale Nederlanden
(U.S.) Capital Corporation, a Delaware corporation. Holder is engaged
principally in the lending and financial services business. The principal
place of business and principal office of Holder is located at 135 East 57th
Street, New York, New York 10022.
Holder is a wholly owned subsidiary of Internationale Nederlanden (U.S.)
Capital Holdings Corporation ("U.S. Holdings"), a holding company with
subsidiaries engaged principally in the financial services business. U.S.
Holdings is organized under the laws of the State of Delaware and its principal
executive office is located at 135 East 57th Street, New York, New York 10022.
U.S. Holdings is a wholly owned subsidiary of ING Bank N.V. ("INB"). INB
is organized under the laws of The Netherlands and has its principal executive
offices at De Amesterdamse Poort,
Page 5 of 222 Pages
Exhibit Index on Page 14
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1102 MG, Amsterdam Zuid - Oost, Postbus 1800, 1000 AV, Amsterdam, The
Netherlands. INB is engaged principally in the financial services business.
INB is a wholly owned subsidiary of ING Groep N.V. ("ING"), a holding
company organized under the laws of The Netherlands with subsidiaries engaged
principally in the financial services business. ING's principal executive
office is located at Strawinskylaan 2631, Postbus 810, 1000 AV Amsterdam, The
Netherlands.
Schedule 1 attached hereto and incorporated herein by reference sets forth
certain additional information with respect to each executive officer and
director of (i) Holder, (ii) U.S. Holdings, (iii) INB and (iv) ING.
During the last five years, none of (i) Holder, (ii) U.S. Holdings, (iii)
INB, (iv) ING and, (v) to the best knowledge of Holder, the persons identified
in Schedule 1, has been (a) convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (b) a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violations with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The funds required for the loan to the Issuer pursuant to the Credit
Agreement and for the purchase of the Warrants of the Issuer have been provided
from the working capital of the Holder. It is anticipated that the exercise
price of the Warrants will be paid from the working capital of the Holder.
Item 4. Purpose of Transaction.
The purpose of the transaction, described in Item 6, was to provide an
inducement to Holder for entering into the Credit Agreement and providing
certain loans to Issuer, as well as for general investment purposes. Except as
set forth above and in Item 6 and the exhibits hereto, Holder has no plans or
proposals relating to any matters specified in paragraphs (a) through (j) of
Item 4 of Schedule 13D. However, Holder reserves the right to adopt such plans
or proposals in the future, subject to applicable regulatory requirements, if
any.
Item 5. Interest in Securities of the Issuer.
(a) Holder may be deemed to own beneficially (as that term is defined in
Rule 13d-3 ("Rule 13d-3") under the Act) the shares of Common Stock of the
Issuer which it has a right to acquire pursuant to (i) conversion of a portion
of the loan made pursuant to the Credit Agreement into Series B Preferred Stock
and conversion of the Series B Preferred Stock into Common Stock
Page 6 of 222 Pages
Exhibit Index on Page 14
<PAGE> 7
and (ii) the exercise of the Warrants for Series A Preferred Stock, and
conversion of the Series A Preferred Stock into Common Stock. According to the
Issuer there were 3,427,838 shares of Common Stock outstanding as of March 15,
1996. Based on such number and assuming conversion in full of the portion of
the loan made pursuant to the Credit Agreement that is convertiable by Holder
and the exercise by Holder of the Warrants in full, the Common Stock that
Holder may be deemed to own beneficially (as the term is defined in Rule 13d-3)
represents approximately 56.7% of the outstanding Common Stock. Except as
described herein, none of (i) Holder, (ii) U.S. Holdings, (iii) INB, (iv) ING
and (v) to the best knowledge of Holder, the persons identified in Schedule 1
hereto, presently beneficially own any Common Stock.
(b) Upon conversion of the loan and exercise of the Warrants and
subsequent conversion of Series A Preferred Stock and Series B Preferred Stock,
Holder will have sole power to vote or to direct the vote of, and to dispose or
to direct the disposition of, the Common Stock which Holder may be deemed to
own beneficially (as the term is defined in Rule 13d-3).
(c) Except as indicated herein, no transactions in the shares of Common
Stock have been effected by (i) Holder, (ii) U.S. Holdings, (iii) INB, (iv) ING
or, (v) to the best knowledge of Holder, by any of the persons listed on
Schedule 1 hereto, during the past 60 days.
(d) No other person is known to have the right to receive or the power to
direct the receipt of dividends from, or the proceeds from the sale of, the
securities described above.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
On March 15, 1996, Holder, as agent for various lenders, entered into a
credit agreement ("Credit Agreement") with the Issuer, as the borrower,
providing for (i) a revolving loan commitment in an aggregate amount of up to
six million dollars ($6,000,000), (ii) a revolving loan commitment of up to two
million two hundred fifty thousand dollars ($2,250,000), and (iii) a term loan
of up to twenty nine million dollars ($29,000,000) ("Term Loan"). The Term
Loan and accrued interest thereon is convertible in whole or in part at any
time into Series B Preferred Stock at the option of the lender at any time and
the Series B Preferred Stock is convertible at the option of the holder into
Common Stock of the Issuer. Holder owns $14,500,000 principal amount of the
Term Loan.
Simultaneously with entering into the Credit Agreement, Holder purchased
Warrants exercisable, at an exercise price of $.20 per Warrant Share, for
102,412 shares of Series A Preferred Stock which Series A Preferred Stock is
convertible in whole or in part at any time into Common Stock of the Issuer at
the option of the Holder. A letter agreement was entered into between PhoneTel
Technologies, Inc. and Internationale Nederlanden (U.S.) Capital Corporation
and Cerberus Partners, L.P. dated March 15, 1996 providing for an adjustment
in the number of Warrants
Page 7 of 222 Pages
Exhibit Index on Page 14
<PAGE> 8
under certain circumstances if the actual number of warrants held by other
persons to acquire shares of Common Stock differs from the parties'
understanding as of March 15, 1996. In certain circumstances the Holder has a
right to require the Issuer to repurchase the Warrant Securities (as defined in
the Warrant Purchase Agreement). These circumstances include a repurchase of
the entire amount of the Warrant Securities upon an Event of Default (as
defined in the Credit Agreement) and a portion of the Warrant Securities (the
portion determined in accordance with Section 19 of the Warrant Purchase
Agreement) in the event (i) any representation or warranty of the Issuer under
any of the documents relating to the Credit Agreement is incorrect when made in
any material respect; (ii) the Issuer defaults in performance and observance of
its obligations under the Warrant Documents; (iii) of a merger or consolidation
of the Issuer with or into any other person, except certain permitted mergers;
(iv) of a Change of Control (as defined in the Warrant Purchase Agreement); or,
(v) of a refinancing under certain circumstances.
On March 15, 1996, Holder, Cerberus Partners, L.P. and the Issuer also
entered into a registration rights agreement ("Registration Rights Agreement")
providing for the registration, under certain circumstances, of Holder's Common
Stock issuable upon conversion of Series A Preferred Stock or Series B
Preferred Stock.
The description of the transactions contained herein is qualified in its
entirety by reference to the Credit Agreement, the Warrant Purchase Agreement,
the Registration Rights Agreement, and the letter agreement between PhoneTel
Technologies, Inc. and Internationale Nederlanden (U.S.) Capital Corporation
and Cerberus Partners, L.P. dated March 15, 1996, which are attached as
Exhibits to this statement on Schedule 13D.
Item 7. Material to be filed as Exhibits.
1 Credit Agreement dated as of March 15, 1996, among PhoneTel Technologies,
Inc., as the Borrower, Various Lenders and Internationale Nederlanden
(U.S.) Capital Corporation, as the Agent for the Lenders.
2 Warrant Purchase Agreement between PhoneTel Technologies, Inc. and
Internationale Nederlanden (U.S.) Capital Corporation and Cerberus
Partners, L.P. dated as of March 15, 1996.
3 Registration Rights Agreement between PhoneTel Technologies, Inc. and
Internationale Nederlanden (U.S.) Capital Corporation and Cerberus
Partners, L.P. dated as of March 15, 1996.
4 Letter Agreement between PhoneTel Technologies, Inc. and Internationale
Nederlanden (U.S.) Capital Corporation and Cerberus Partners, L.P. dated
March 15, 1996.
Page 8 of 222 Pages
Exhibit Index on Page 14
<PAGE> 9
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 22, 1996
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/ James W. Latimer
----------------------------------------
Name: James W. Latimer
Title: Managing Director
Page 9 of 222 Pages
Exhibit Index on Page 14
<PAGE> 10
SCHEDULE 1
Set forth below is the name and position of each of the executive officers
and directors of (i) Holder, (ii) U.S. Holdings, (iii) INB and (iv) ING.
Except as otherwise indicated, the principal occupation of each person
listed below is as a Senior Officer of Holder, U.S. Holdings, INB and/or ING,
as the case may be. Unless otherwise indicated, each person listed below is a
citizen of The Netherlands.
The business address of each person at Holder and U.S. Holdings is 135
East 57th Street, New York, New York 10022. The business address of each
person at INB is De Amsterdamse Poort, 1102 MG, Amsterdam Zuid - Oost, Postbus
1800, 1000 AV, Amsterdam, The Netherlands. The business address of each person
at ING is Strawinskylaan 2631, Postbus 810, 1000 AV Amsterdam, The Netherlands.
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION
Executive Officers
- ------------------
Name Position
- ---- --------
L.C. Grijns Chairman
H.D. Bartges President
(U.S.)
Directors
- ---------
Principal Occupation
Name (if other than as indicated above)
- ---- ----------------------------------
L.C. Grijns Chairman
H.D. Bartges President
(U.S.)
J.C. Gray Treasurer Senior Managing Director of Holder
(U.S.)
Albert J. Staal
Page 10 of 222 Pages
Exhibit Index on Page 14
<PAGE> 11
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL HOLDINGS CORPORATION
Executive Officers
- ------------------
Name Position
- ---- --------
L.C. Grijns Chairman
H.D. Bartges President
(U.S.)
Directors
- ---------
Principal Occupation
Name (if other than as indicated above)
- ---- ----------------------------------
L.C. Grijns,
Chairman
J.C. Gray
(U.S.)
H.D. Bartges
(U.S.)
H.H. Idzerda
C. Maas
D. Arends
ING BANK N.V.
Executive Officers
- ------------------
Name Position
- ---- --------
G.J.A. van der Lugt Chairman
J.H.M. Lindenbergh Member
C. Maas Member
M. Minderhoud Member
Page 11 of 222 Pages
Exhibit Index on Page 14
<PAGE> 12
Directors
- ---------
Principal Occupation
Name (if other than as indicated above)
- --------- ----------------------------------
J. W. Berghuis Vice Chairman, Executive Board, Koninklijke
Pakhoed N.V.
J. Kamminga Chairman of the Board, MKB Nederland; director of
Makelaarskantoor J. Kamminga & Zonen B.V.
O.H.S. van Royen Retired
G. Verhagen Retired
P.F. van der Heijden
ING GROUP N.V.
Executive Officers
- ------------------
Name Position
- ---- -------------
A.G. Jacobs Chairman
G.J.A. van der Lugt Vice Chairman
J.H. Holsboer Member
H. Huizinga Member
E. Kist Member
J.H.M. Lindenbergh Member
C. Maas Member
M. Minderhoud Member
Directors
- ---------
Principal Occupation
Name (if other than as indicated above)
- ---- ---------------------------------------------
J.H. Chonfoer, Retired
Chairman
T.C. Braakman, Retired
Vice Chairman
J.B. Erbe, Retired
Vice Chairman
L.A.A. van den Berghe Professor at Erasmus University of Rotterdam,
(Belgium) The Netherlands (Economics and management of
insurance companies)
Page 12 of 222 Pages
Exhibit Index on Page 14
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J.W. Berghuis Vice Chairman, Executive Board, Koninklijke
Pakhoed N.V.
V. Halberstadt Professor at Leyden University, The Netherlands
(Faculty of Law, Public Finance)
J. Kamminga Chairman of the Board, MKB Nederland; director
of Makelaarskantoor J. Kamminga & Zonen B.V.
O.H.A. van Royen Retired
J.J. van Rijn Retired
G. Verhagen Retired
P.F. van der Heijden
M. Ververs Chairman of Executive Board, Wolters Kluwer N.V.
Page 13 of 222 Pages
Exhibit Index on Page 14
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EXHIBIT INDEX
Exhibit Description
- ------- -----------
1 Credit Agreement dated March 15, 1996, among PhoneTel
Technologies, Inc., as the Borrower, Various Lenders and
Internationale Nederlanden (U.S.) Capital Corporation, as
the Agent for the Lenders.
2 Warrant Purchase Agreement between PhoneTel Technologies,
Inc. and Internationale Nederlanden (U.S.) Capital
Corporation and Cerberus Partners, L.P. dated March 15,
1996.
3 Registration Rights Agreement between PhoneTel Technologies,
Inc. and Internationale Nederlanden (U.S.) Capital
Corporation and Cerberus Partners, L.P. dated March 15,
1996.
4 Letter Agreement between PhoneTel Technologies, Inc. and
Internationale Nederlanden (U.S.) Capital Corporation
and Cerberus Partners, L.P. dated March 15, 1996.
Page 14 of 222 Pages
Exhibit Index on Page 14
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- --------------------------------------------------------------------------------
U.S. $37,250,000
CREDIT AGREEMENT
DATED AS OF MARCH 15, 1996
AMONG
PHONETEL TECHNOLOGIES, INC.
AS THE BORROWER,
VARIOUS LENDERS
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION,
AS THE AGENT FOR THE LENDERS
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Use of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
1.3. Cross-References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.4. Accounting and Financial Determinations . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 2. COMMITMENTS
2.1. Loan Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.1.1. Revolving A Loan Commitment . . . . . . . . . . . . . . . . . . . . . 27
2.1.2. Revolving B Loan Commitment . . . . . . . . . . . . . . . . . . . . . 27
2.1.3. Term Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.1.4. Agent and Lenders Not Required to Extend
Credit under Revolving Loan Commitment . . . . . . . . . . . . . . . . . . . . . . . . 28
2.2. Changes in Advance Formula; Establishment
of Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.2.1. Advance Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.2.2. Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.3. Commitment and Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.4. Increased Costs; Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.5. Investment Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 3. LOANS AND NOTES
3.1. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.2. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.3. Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3.3.1. Repayments and Prepayments . . . . . . . . . . . . . . . . . . . . . . 33
3.3.2. Prepayment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.3.3. Revolving Loans on Borrower's Behalf . . . . . . . . . . . . . . . . . 36
3.3.4 Reduction of Revolving Loan Commitment . . . . . . . . . . . . . . . . 36
3.4. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.1. Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.2. Post-Default Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.4.3. Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.4.4. Rate Determinations . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.5. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.6. Payments, Interest Rate Computations, Other
Computations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.7. Proration of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.8. Setoff... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.9. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 4. CONDITIONS TO LOANS
4.1. Initial Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.1.1. Resolutions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.1.2. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.1.3. Borrowing Base Certificate . . . . . . . . . . . . . . . . . . . . . . 43
4.1.4. Additional Equity, etc. . . . . . . . . . . . . . . . . . . . . . . . 43
4.1.5. Release of Liens on Assets . . . . . . . . . . . . . . . . . . . . . . 43
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4.1.6. No Contest, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.1.7. Certificate as to Completed Conditions,
Warranties, No Default, etc. . . . . . . . . . . . . . . . . . . . . . 43
4.1.8. Documents Relating to Equity Investments . . . . . . . . . . . . . . . 44
4.1.9. Compliance with Requirements of Law . . . . . . . . . . . . . . . . . 44
4.1.10. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.1.11. Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . 44
4.1.12. Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.1.13. Security Documents and Perfection . . . . . . . . . . . . . . . . . . 45
4.1.14. Employment Agreements; Compensation . . . . . . . . . . . . . . . . . 45
4.1.15. Pension and Welfare Liabilities . . . . . . . . . . . . . . . . . . . 46
4.1.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.1.17. Financial Information, etc. . . . . . . . . . . . . . . . . . . . . . 46
4.1.18. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
4.1.19. Review of Borrower's Operations . . . . . . . . . . . . . . . . . . . 47
4.1.20. Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4.1.21. Other Documents, Certificates, etc. . . . . . . . . . . . . . . . . . 47
4.1.22. Letter to Accountants . . . . . . . . . . . . . . . . . . . . . . . . 47
4.2. All Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.2.1. Compliance with Warranties,
No Default, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
4.2.2. Borrowing Request, etc. . . . . . . . . . . . . . . . . . . . . . . . 48
4.2.3. Satisfactory Legal Form . . . . . . . . . . . . . . . . . . . . . . . 49
4.2.4. Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.2.5. Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
4.2.6. Change in Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 5. WARRANTIES, ETC.
5.1. Organization, Power, Authority, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.2. Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
5.3. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.4. Financial Information; Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.5. Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.6. Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.7. Litigation, Legislation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.8. Regulations G, T, U and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.9. Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.10. Taxes..... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.12. Labor Controversies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.13. Ownership of Properties; Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.14. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.15. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.16. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.17. Certain Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.18. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.19. No Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.20. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.21. Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.22. Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.23. Condition of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.24. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
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5.25 Acquisition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
5.26. Trade Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.27. Absence of Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.28. Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
5.29. Capitalization and Ownership of the Borrower . . . . . . . . . . . . . . . . . . . . . 59
5.30. Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.31. No Integration of Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
5.32. No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 6. COVENANTS
6.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.1.1. Financial Information, etc. . . . . . . . . . . . . . . . . . . . . . 61
6.1.2. Maintenance of Corporate Existence, etc. . . . . . . . . . . . . . . . 63
6.1.3. Foreign Qualification . . . . . . . . . . . . . . . . . . . . . . . . 63
6.1.4. Payment of Taxes, etc. . . . . . . . . . . . . . . . . . . . . . . . . 64
6.1.5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.1.6. Notice of Default, Litigation, etc. . . . . . . . . . . . . . . . . . 65
6.1.7. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 66
6.1.8. Maintenance of Properties, etc. . . . . . . . . . . . . . . . . . . . 67
6.1.9. Maintenance of Licenses and Permits . . . . . . . . . . . . . . . . . 67
6.1.10. Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.1.11. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 67
6.1.12. Interest Rate Protection . . . . . . . . . . . . . . . . . . . . . . . 67
6.1.13. Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.1.14. Government Approvals . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.1.15. Antitakeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . 68
6.1.16. Telephone Placement Agreements . . . . . . . . . . . . . . . . . . . . 68
6.1.17. Cash Management System . . . . . . . . . . . . . . . . . . . . . . . . 68
6.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
6.2.1. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.2.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
6.2.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.2.4. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . 71
6.2.5. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.2.6. Lease Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 75
6.2.7. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
6.2.8. Restricted Payments, etc. . . . . . . . . . . . . . . . . . . . . . . 76
6.2.9. Take or Pay Contracts; Sale/Leasebacks . . . . . . . . . . . . . . . . 77
6.2.10. Consolidation, Merger, Subsidiaries, etc. . . . . . . . . . . . . . . 77
6.2.11. Asset Dispositions, etc. . . . . . . . . . . . . . . . . . . . . . . . 78
6.2.12. Modification of Organic Documents, etc. . . . . . . . . . . . . . . . 78
6.2.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . 78
6.2.14. Inconsistent Agreements . . . . . . . . . . . . . . . . . . . . . . . 79
6.2.15. Change in Accounting Method . . . . . . . . . . . . . . . . . . . . . 79
6.2.16. Change in Fiscal Year End . . . . . . . . . . . . . . . . . . . . . . 79
6.2.17. Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . 79
6.2.18. Limitation on Restrictions on Subsidiary Dividends . . . . . . . . . . 79
6.2.19. Communications Laws . . . . . . . . . . . . . . . . . . . . . . . . . 79
6.2.20. Issuance of Series B Special Preferred . . . . . . . . . . . . . . . .
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
</TABLE>
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ARTICLE 7. EVENTS OF DEFAULT
7.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
7.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . 80
7.1.2. Non-Performance of Certain Covenants . . . . . . . . . . . . . . . . . 80
7.1.3. Defaults Under Other Loan Documents
Non-Performance of Other Obligations . . . . . . . . . . . . . . . . . 80
7.1.4. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . . . . . 80
7.1.5. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.1.6. Default on Other Indebtedness, etc. . . . . . . . . . . . . . . . . . 81
7.1.7. Failure of Valid, Perfected
Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7.1.8. Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.1.9. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
7.1.10. Loss of Permits, etc. . . . . . . . . . . . . . . . . . . . . . . . . 82
7.1.11. Material Adverse Change. . . . . . . . . . . . . . . . . . . . . . . . 83
7.1.12. 10% Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
7.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
ARTICLE 8. CONVERSION
8.1. Conversion Privilege . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.2. Conversion Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
8.3. Effect on Reclassification, Consolidation,
Merger or Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.4. Taxes on Shares Issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.5. Reservation of Shares; Shares to be Fully Paid;
Compliance with Government Requirements;
Listing of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
8.6. Notice to Lenders Prior to Certain Actions . . . . . . . . . . . . . . . . . . . . . . 86
ARTICLE 9. THE AGENT
9.1. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
9.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
9.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
9.4. Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.5. Loans by the Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
9.7. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
ARTICLE 10. MISCELLANEOUS
10.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
10.2. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
10.3. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
10.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
10.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
10.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.7. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.8. Counterparts, Effectiveness, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
10.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
10.11. Sale and Transfers, Participations, etc. . . . . . . . . . . . . . . . . . . . . . . . 96
10.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
10.13. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
</TABLE>
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10.14. Change in Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
10.15. Waiver of Jury Trial, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
10.16. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
10.17. Usury Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
10.18. Conflict in Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
</TABLE>
SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Schedule 1 - Disclosure Schedule
Schedule 2 - Form of Telephone Placement Agreement
Schedule 3 - Cash Management System
Schedule 4 - Ineligible Telephones
Exhibit A-1 - Revolving A Note
Exhibit A-2 - Revolving B Note
Exhibit A-3 - Term Note
Exhibit B - Borrowing Base Certificate
Exhibit C - Borrowing Request
Exhibit D - Compliance Certificate
Exhibit E - Transfer Supplement
Exhibit F - Joinder for Interest Rate Contract Counterparty
Exhibit G - Notice of Conversion
</TABLE>
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 15, 1996, among PHONETEL
TECHNOLOGIES, INC., an Ohio corporation (the "Borrower"), various lenders as
are, or may become, parties hereto (individually a "Lender" and, collectively,
the "Lenders"), and INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation, as Agent for the Lenders.
W I T N E S S E T H:
RECITALS.
A. The Borrower desires to obtain from the Lenders (i) a
Revolving A Loan Commitment in an aggregate amount of up to Six Million Dollars
($6,000,000), (ii) a Revolving B Loan Commitment in an aggregate amount of up
to Two Million Two Hundred Fifty Thousand Dollars ($2,250,000), and (iii) a
Term Loan of up to Twenty-Nine Million Dollars ($29,000,000) in the aggregate;
and
B. The Lenders are willing, on the terms and conditions
hereinafter set forth (including, without limitation, Articles 2 and 4), to
extend such credit facilities; and
C. The Loans will be used in the manner described in Section 3.9
below;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Account" means any "account" (as such term is defined in
Section 9-106 of the UCC) of the Borrower or any of its Subsidiaries arising
from the sale or lease of goods or providing of services.
"Account Debtor" means any Person who is or may become
obligated to the Borrower or any of its Subsidiaries under, with respect to, or
on account of, an Account.
<PAGE> 8
"Acquisition Agreements" means, collectively, (a) the
IPP-South Carolina Acquisition Agreement, (b) the IPP-Tennessee Acquisition
Agreement and (c) the PCS Acquisition Agreement.
"Acquisitions" means, collectively, (a) the IPP-South Carolina
Acquisition, (b) the IPP-Tennessee Acquisition and (c) the PCS Acquisition.
"Affected Lender" has the meaning set forth in clause (f) of
Section 2.4.
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or under common control
with such Person (excluding any trustee under, or any committee with
responsibility for administering, any Plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power:
(a) to vote 5% or more of the securities having ordinary
voting power for the election of directors of such Person; or
(b) to direct or cause the direction of the management or
policies of such Person whether by contract or otherwise;
provided, however, that for purposes of this Agreement no Lender (solely
because of its status as a Lender under this Agreement or by virtue of holding
any warrants or non-voting Stock) shall be deemed to be an Affiliate of the
Borrower.
"Agent" means ING as agent for the Lenders pursuant hereto, or
such other Person as shall have subsequently been appointed as the successor
agent pursuant to Section 9.4.
"Agreement" means, on any date, this Credit Agreement as
originally in effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, or otherwise modified and in
effect.
"Approval" means each and every approval, consent, filing and
registration by or with any federal, state or other regulatory authority
(domestic or foreign) necessary to authorize or permit the execution, delivery
or performance of this Agreement, the Notes or any other Loan Document, for the
granting of any security contemplated hereby or thereby, for the validity or
enforceability hereof or thereof, or for the consummation of the transactions
contemplated by the Loan Documents, including, without limitation, the
Acquisitions.
"Authorized Officer" means, relative to any Loan Party, those
officers of such Loan Party whose signatures, incumbency and authority shall
have been certified to the Agent and the Lenders pursuant to Section 4.1.1 or
which may be certified after the
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<PAGE> 9
Closing Date in a certificate conforming to the requirements of Section
4.1.1(a).
"Average Number of Telephones" means, with respect to all
Telephones during any period, (a) the sum of the number of days each of such
Telephones is operational during such period divided by (b) the number of days
in such period.
"Blocked Accounts" is defined in Schedule 3.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower Pledge Agreement" means the Stock and Notes Pledge
Agreement, dated as of the date hereof, pursuant to which the Borrower will
pledge to the Agent, for itself and the ratable benefit of the Lenders, all of
the issued and outstanding stock of its Subsidiaries and all Subsidiary Notes
issued to it by its Subsidiaries, as security for the Obligations, as such
agreement may be amended, supplemented or otherwise modified from time to time.
"Borrowing" means the Loans or portions thereof made by the
Lenders on the same Business Day pursuant to the same Borrowing Request in
accordance with Section 3.1.
"Borrowing Base" means, as of any date, (a) with respect to
Revolving A Loans and the Term Loan, (i) the number of Eligible Telephones at
such date multiplied by the lesser of (x) $2,000 or (y) the Eligible Telephone
Average Present Value as of such date, minus (ii) reserves established from
time to time pursuant to Section 2.2.2 hereof, and (b) with respect to
Revolving B Loans, the number of Eligible Telephones at such date multiplied by
$125. Notwithstanding the previous sentence, the Borrowing Base with respect
to Revolving A Loans and the Term Loan for the period beginning on the Closing
Date and ending on the first date after April 30, 1996 on which the Borrower is
required to deliver a Borrowing Base Certificate pursuant to Section 6.1(g)
shall be the number of Eligible Telephones multiplied by $2,000.
"Borrowing Base Certificate" means a certificate of the chief
executive, accounting or financial Authorized Officer of the Borrower in the
form of Exhibit B attached hereto.
"Borrowing Request" means a loan request and certificate duly
executed by an Authorized Officer of the Borrower in the form of Exhibit C
attached hereto.
"Business Day" means any day which is neither a Saturday or
Sunday nor a legal holiday on which banks are authorized or required to be
closed in New York, New York.
"Capitalized Lease Liabilities" means all monetary obligations
of the Borrower and its Subsidiaries under any leasing
- 3 -
<PAGE> 10
or similar arrangement which, in accordance with GAAP, are or would be
classified as capitalized leases.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation issued or guaranteed by the
United States of America or any agency or instrumentality thereof and backed by
the full faith and credit of the United States of America, or issued by any
state or political subdivision or public instrumentality thereof, (i) which
has a remaining maturity at the time of purchase of not more than one year or
(ii) which is subject to a repurchase agreement with any Lender or any Eligible
Lending Institution exercisable within six months from the time of purchase so
long as such direct obligation remains in the possession of the Borrower or in
the possession of any Lender and (iii) which, in the case of obligations of any
state or political subdivision or public instrumentality thereof, is rated AA
or better by Moody's Investors Service, Inc.;
(b) certificates of deposit, time deposits, demand
deposits and bankers' acceptances, having a remaining maturity at the time of
purchase of not more than one year, issued by any Lender or by any Eligible
Lending Institution;
(c) corporate obligations rated Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation, having a
remaining maturity at the time of purchase of not more than one year; and
(d) shares of funds registered under the Investment
Company Act of 1940, as amended, having assets of at least $100,000,000 which
invest only in obligations described above and which shares are rated by
Moody's Investors Service, Inc. or Standard & Poor's Corporation in one of the
two highest rating categories assigned by such agencies for obligations of such
nature.
"Cash Flow" means, for any period, an amount equal to (without
duplication) the consolidated Net Income of the Borrower and its Subsidiaries,
plus depreciation, amortization and other non-cash charges (including, without
limitation, provision for Taxes) of the Borrower and its Subsidiaries, minus
non-cash credits and revenues of the Borrower and its Subsidiaries, plus
decreases in the Borrower's and its Subsidiaries' working capital (excluding
changes in cash, Cash Equivalent Investments and current maturities of
Indebtedness), minus increases in the Borrower's and its Subsidiaries' working
capital (excluding changes in cash, Cash Equivalent Investments and current
maturities of Indebtedness).
"Certificate of Amendment" means the Certificate of Amendment
to the Articles of Incorporation of the Borrower filed with the Secretary of
State of Ohio on March 13, 1996 relating to the Series B Special Preferred
Stock.
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<PAGE> 11
"Change in Control" means the occurrence of any of the
following: (a) any Person or group of Persons shall have acquired beneficial
ownership of more than 25% of the outstanding Stock of the Borrower (within the
meaning of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934,
as amended, and the applicable rules and regulations thereunder) other than as
a result of (i) the conversion of Term Notes into Stock of the Borrower or (ii)
any other acquisition of Stock of the Borrower by any Lender; (b) during any
period of 12 consecutive months (whether commencing before or after the Closing
Date), individuals who on the first day of such period were directors of the
Borrower (together with any replacement or additional directors who were
nominated or elected by a majority of directors then in office) cease to
constitute a majority of the Board of Directors of the Borrower; (c) the
failure of Peter G. Graf to be the Chairman of the Board of Directors of the
Borrower and to be actively involved in the management of the Borrower; or (d)
the failure of Peter G. Graf to own at least 70% of the Stock of the Borrower
which he owns on the Closing Date.
"Charges" means all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) (a)
taxes at the time due and payable and (b) levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations, (iii) the Borrower's and its Subsidiaries' employees, payroll,
income or gross receipts, (iv) the Borrower's and its Subsidiaries' ownership
or use of their assets, or (v) any other aspect of the Borrower's and its
Subsidiaries' business.
"Closing Date" means the date of the initial Borrowing
hereunder.
"Collateral" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by the Borrower or any
Subsidiary in and upon which a Lien is granted to the Agent, for its benefit
and the ratable benefit of the Lenders, under any of the Loan Documents.
"Collection Account" shall mean an account of the Agent
specified from time to time to the Borrower into which amounts on deposit in
the Borrower's Concentration Accounts shall be swept on a daily basis in
accordance with the terms of the cash management system required to be
maintained by the Borrower under Section 6.1.17.
"Commitment" means, collectively, the Lenders' Revolving Loan
Commitments as the same may be reduced from time to time pursuant to the terms
of this Agreement.
"Common Stock" means shares now or hereafter authorized of any
class of common stock of the Borrower and any other capital stock of the
Borrower, however designated, that has the right (subject to any prior rights
of any other class or series of stock
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<PAGE> 12
of the Borrower) to participate in any distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding up of the Borrower and in the
earnings of the Borrower without limit as to per share amount, and shall
include, without limitation, the presently authorized 22,250,000 shares of
Common Stock, $0.01 par value per share, of the Borrower.
"Commonly Controlled Entity" means an entity or trade or
business, whether or not incorporated, which is from time to time a member of a
controlled group or a group under common control with the Borrower within the
meaning of Sections 414(b), 414(c), 414(m) or 414(o) of the IRC or Section
4001(a)(14) of ERISA.
"Compliance Certificate" means a certificate duly executed by
the chief executive, accounting or financial Authorized Officer of the Borrower
in the form of Exhibit D attached hereto, together with such changes as the
Required Lenders may from time to time reasonably request through the Agent for
purposes of monitoring the Borrower's compliance herewith.
"Concentration Account" is defined in Schedule 3.
"Confidential Information" has the meaning set forth in
Section 10.13 of this Agreement.
"Consolidated Capital Expenditures" means, for any period,
without duplication, the sum of:
(a) the gross dollar amount of additions and capital
repairs during such period to property, plant, equipment and other fixed assets
of the Borrower and its Subsidiaries, including those additions and capital
repairs made in the ordinary course of business,
plus
(b) the aggregate amount of Capitalized Lease Liabilities
incurred during such period by the Borrower and its Subsidiaries.
"Contractual Obligation" means, relative to any Person, any
provision of any security issued by such Person or of any Instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound, excluding, in the case of the Borrower and any of its
Subsidiaries, the Loan Documents.
"Conversion Rate" is defined in Section 8.1.
"Cost Savings Factor" means, on any date of calculation, a
number added to Telephone Average EBITDA for the purpose of calculating
Eligible Telephone Average Present Value. The Cost Savings Factor on any date
of calculation shall be equal to the
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<PAGE> 13
amount set forth below opposite the period below during which such date of
calculation occurs:
<TABLE>
<CAPTION>
Cost Savings
Period Factor
------ ------------
<S> <C>
Closing Date through June 30, 1996 $300
July 1, 1996 through September 30, 1996 290
October 1, 1996 through December 31, 1996 260
January 1, 1997 through March 31, 1997 200
April 1, 1997 through June 30, 1997 125
July 1, 1997 through September 30, 1997 60
October 1, 1997 through December 31, 1997 20
January 1, 1998 through Stated Maturity Date 0
</TABLE>
"Current Ratio" means, at any date, the ratio at such date of
(A) current assets at such date, to (B) current liabilities at such date,
determined on a consolidated basis for the Borrower and its Subsidiaries in
accordance with GAAP.
"Default" means any Event of Default or any condition or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"Designated Remaining Years" means, with respect to any
Telephone Placement Agreement at any date, a number equal to the lesser of (a)
10 years or (b) the sum of (i) the number of years (rounded to the nearest
whole year) from such date until the date of expiration for such Telephone
Placement Agreement plus (ii) 5 years.
"Disclosure Schedule" means the Disclosure Schedule attached
hereto as Schedule 1, as it may be amended, supplemented or otherwise modified
from time to time by the Borrower with the consent of the Required Lenders as
provided in Section 4.2.2.
"Dollar" and the sign "$" mean lawful money of the United
States.
"EBITDA" means, for any period, an amount equal to Net Income
plus (to the extent deducted in determining Net Income) interest expense,
provisions for income taxes, depreciation, amortization of intangible assets
and other non-cash charges, minus (to the extent included in determining Net
Income) non-cash credits and revenues, in each case for the Borrower and its
Subsidiaries on a consolidated basis.
"Eligible Lending Institution" means a financial institution
having a branch or office in the United States and having capital and surplus
and undivided profits aggregating at least $100,000,000 and rated Prime-1 or
better by Moody's Investors Service, Inc. or A-1 or better by Standard & Poor's
Corporation.
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<PAGE> 14
"Eligible Telephone Average Present Value" means, as of any
date, the quotient of (i) the aggregate of the amounts calculated with respect
to each Eligible Telephone equal to the product of (x) Periodic Telephone which
Income multiplied by (y) the Designated Remaining Years for the Telephonefirst
Placement Agreement relating to such Eligible Telephone (such Periodicnited
Telephone Income and Designated Remaining Years determined as of the last day
of the calendar month most recently ended for which financial statements arere
required to have been delivered pursuant to Section 6.1.1(b)), discounted at
the rate of 20% per annum (with reference to the number of years constitutingh
such Designated Remaining Years), divided by (ii) the number of Eligibleeement,
Telephones on such date.
Telephone shall not be deemed to be an Eligible Telephone if the Required
Lenders, in their reasonable judgment, determine that such Telephone should not
be included in such definition regardless of whether such Telephone meets the
requirements of clauses (a) through (f). Notwithstanding the foregoing, for
purposes of calculating the Borrowing Base, Eligible Telephones shall be deemed
to include the 518 Telephones owned by the Borrower or one of its Subsidiaries
as of the Closing Date which do not meet one or more of the requirements of
eligibility set forth above as more particularly described Schedule 4, provided
that each such Telephone shall either (i) meet each of the requirements of
eligibility set forth above or (ii) be replaced by a new Eligible Telephone
installed by the Borrower or one of its Subsidiaries after the Closing Date,
before any new Eligible Telephones shall increase the number of Eligible
Telephones used to calculate the Borrowing Base.
"Environment" means soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
"Environmental Laws" means all federal, state, local and
foreign laws or regulations, codes, common law, consent agreements, orders,
decrees, judgments or injunctions issued, promulgated, approved or entered
thereunder relating to pollution or protection of the Environment, natural
resource or occupational health and safety.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, remedial actions,
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<PAGE> 15
losses, damages, punitive damages, consequential damages, treble damages, costs
and expenses (including all reasonable fees, disbursements and expenses of
counsel, expert and consulting fees and costs of investigation and feasibility
studies), fines, penalties, settlement costs, sanctions and interest incurred
as a result of any claim or demand, by any Person, whether based in contract,
tort, implied or express warranty, strict liability, criminal or civil statute,
any Environmental Law, permit, order, variance or agreement with a Governmental
Authority or other Person, arising from or related to the administration of any
Environmental Law or arising from environmental, health or safety conditions or
a release or threatened release resulting from the past, present or future
operations of the Borrower or its Subsidiaries or affecting any of their
properties, or any release or threatened release for which the Borrower or any
of its Subsidiaries is otherwise responsible under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together with
the regulation thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"Event of Default" means any of the events set forth in
Section 7.1.
"Excess Cash Flow" means, for any period, the sum of (A) Cash
Flow for such period, plus (B) the amount of principal repayments received by
the Borrower or any of its Subsidiaries during such period in respect of notes
receivable held by the Borrower or any of its Subsidiaries, minus (C) the sum
of (x) repayments of the Loans pursuant to Section 3.3.1(i) and scheduled
repayments of other Indebtedness (including Capitalized Lease Obligations)
during such period and (y) actual payments of Taxes during such period, minus
(D) the lesser of (x) the amount of Consolidated Capital Expenditures made by
the Borrower and its Subsidiaries during such period and (y) the amount of
Consolidated Capital Expenditures permitted to be made by the Borrower and its
Subsidiaries during such period under Section 6.2.5.
"Facility Fee Letter" means that certain letter agreement
dated as of the date hereof between the Lenders party to this Agreement on the
Closing Date and the Borrower.
"Fair Saleable Value Balance Sheets" means a hypothetical
consolidated balance sheet of the Borrower and its Subsidiaries and a
hypothetical balance sheet of each Subsidiary of the Borrower, in each case,
prepared by the Borrower or its Subsidiaries based on the respective Pro Forma
Balance Sheets and setting forth (a) in the case of the Borrower, (i) the
consolidated assets of the Borrower and its Subsidiaries (restated at the fair
saleable value thereof), (ii) the consolidated liabilities of the Borrower and
its Subsidiaries (including all liabilities and obligations of the Borrower and
its Subsidiaries,
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<PAGE> 16
fixed or contingent, direct or indirect, disputed or undisputed, and whether or
not required to be reflected on a balance sheet prepared in accordance with
GAAP), and (iii) the excess of such assets over such liabilities and (b) in the
case of each Subsidiary of the Borrower, (i) the assets of such Subsidiary
(restated at the fair saleable value thereof), (ii) the liabilities of such
Subsidiary (including all liabilities and obligations of such Subsidiary, fixed
or contingent, direct or indirect, disputed or undisputed, and whether or not
required to be reflected on a balance sheet prepared in accordance with GAAP),
and (iii) the excess of such assets over such liabilities.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York; or
(b) if such rate is not so published for any day which is
a Business Day, the arithmetic average of the quotations for such transactions
received by the Agent, in its sole discretion, either from (i) three federal
funds brokers of recognized standing selected by the Agent in its sole
discretion or (ii) the Reference Lenders.
"Financing Statements" means the financing statements under
the Uniform Commercial Codes of the applicable jurisdictions, filed with
respect to the Security Documents pursuant to clause (e) of Section 4.1.13.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means, subject to Sections 6.2.16 and 10.14,
each twelve month accounting period of the Borrower ending on December 31st
thereafter; references to a Fiscal Year with a number corresponding to any
calendar year (e.g., the "1996 Fiscal Year") refer to the Fiscal Year ending on
December 31st in such calendar year.
"Fixed Charge Coverage Ratio" means, for any period, the ratio
of (a) an amount equal to EBITDA to (b) Borrower's Fixed Charges during such
period.
"Fixed Charges" means, for any period, the sum of (a) Interest
Expense during such period, plus (b) scheduled principal repayments of
Indebtedness (including, without limitation, scheduled payments of principal in
respect of Capitalized Lease Liabilities but excluding scheduled repayments of
the Obligations) during such period, plus (c) Consolidated Capital Expenditures
by the Borrower and its Subsidiaries during such period, plus (d)
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<PAGE> 17
provisions for taxes for such period, minus (e) decreases in the Borrower's and
its Subsidiaries' working capital (excluding changes in cash, Cash Equivalent
Investments and current maturities of Indebtedness) during such period, and
plus (f) increases in Borrower's and its Subsidiaries' working capital
(excluding changes in cash, Cash Equivalent Investments and current maturities
of Indebtedness) during such period.
"Foreign Lender" means any Lender organized under the laws of
a jurisdiction outside the United States.
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System (or any successor).
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"herein", "hereof", "hereto", "hereunder" and similar terms
contained in this Agreement or any other Loan Document refer to this Agreement
or such other Loan Document, as the case may be, as a whole and not to any
particular Section, clause or provision of this Agreement or such other Loan
Document.
"HSR Act" has the meaning set forth in Section 6.1.14.
"including" means including without limiting the generality of
any description preceding such term.
"Indebtedness" of any Person means, without duplication,
(a) all obligations of such Person for borrowed money
(including all notes payable and drafts accepted representing extensions of
credit) and all obligations evidenced by bonds, debentures, notes or other
similar instruments on which interest charges are customarily paid;
(b) all obligations, contingent or otherwise, relative to
the face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person (to
the extent required by GAAP to be included on the balance sheet of such
Person);
(d) whether or not so included as liabilities in
accordance with GAAP:
(i) all obligations of such Person to pay the deferred
purchase price of property or services (excluding trade
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<PAGE> 18
accounts payable for other than borrowed money arising in the ordinary
course of business) and indebtedness secured by a Lien on property
owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements),
whether or not such indebtedness shall have been assumed by such
Person or is limited in recourse; and
(ii) all obligations of such Person in respect of, and
obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise assure a creditor against loss in respect of,
Indebtedness of another Person of the type described in clause (a),
(b), (c) or (d)(i), above, or clause (e) below;
(e) net obligations under Interest Rate Contracts; and
(f) all obligations of such Person to redeem, purchase or
otherwise retire or extinguish any of its Stock at a fixed or determinable date
(whether by operation of a sinking fund or otherwise), at another's option or
upon the occurrence of a condition not solely with the control of such Person
(e.g., redemption from future earnings).
"Indemnified Liabilities" means any and all actions, causes of
action, suits, losses, costs, liabilities, damages and expenses incurred by or
asserted or awarded against any Lender Party and against which the Borrower has
indemnified the Lender Parties as provided in Section 10.4.
"ING" means Internationale Nederlanden (U.S.) Capital
Corporation.
"ING Alternate Base Rate" means a fluctuating rate of interest
per annum equal to the higher of:
(a) the arithmetic average of rates of interest announced
by each of the Reference Lenders from time to time at such Reference Lender's
principal New York City office as its prime (or base) rate for U.S. domestic
commercial loans; and
(b) the Federal Funds Rate from time to time in effect
plus 1/2 of 1% (0.50%).
Changes in the rate of interest on Loans shall take effect on the date of each
change in the ING Alternate Base Rate. The Agent shall give notice promptly to
the Borrower and the Lenders of changes in the ING Alternate Base Rate.
"Insolvency" or "Insolvent" means, at any particular time, a
Multiemployer Pension Plan is insolvent within the meaning of Section 4245 of
ERISA.
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<PAGE> 19
"Instrument" means any contract, agreement, letter of credit,
indenture, mortgage, warrant, deed, certificate of title, document or writing
(whether by formal agreement, letter or otherwise) under which any obligation
is evidenced, assumed or undertaken, any Lien (or right or interest therein) is
granted or perfected, or any property (or right or interest therein) is
conveyed.
"Intellectual Property" means, collectively, (a) patents,
patent rights and patent applications, copyrights and copyright applications,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, applications for registration of trademarks, trade names
and service marks, fictitious names registrations and trademark, trade name and
service mark registrations, including, without limitation, the name "PhoneTel
Technologies", and all derivations thereof, and (b) patent licenses, trademark
licenses, copyright licenses and other licenses to use any of the items
described in clause (a), and any other items necessary to conduct or operate
the business of the Borrower and its Subsidiaries.
"Interest Expense" means, for any period, the Borrower's
consolidated interest expense accrued during such period in respect of all
Indebtedness of the Borrower and its Subsidiaries provided, however, the effect
of the accretion, if any, of the right to put any warrants for Stock and the
effect of original issue discount, if any, which is attributable to
Indebtedness as a result of the issuance of warrants in connection therewith
shall not be taken into account when calculating Interest Expense.
"Interest Rate Contract" means any interest rate cap
agreement, interest rate collar agreement, interest rate swap agreement or
other agreement or arrangement designed to protect against fluctuations in
interest rates.
"Interest Rate Contract Counterparty" means any counterparty
to an Interest Rate Contract which the Borrower is required to enter into
pursuant to Section 6.1.12.
"Internal Revenue Service" means the Internal Revenue Service
of the United States of America.
"Investment" means, relative to any Person:
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business);
(b) any ownership or similar interest held by such Person
in any other Person; and
(c) the purchase of any debt or equity securities or
instruments issued by any other Person (including, without limitation, Stock,
notes, debentures, drafts and acceptances,
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<PAGE> 20
trust certificates, partnership interests or units or membership interests in
limited liability companies).
The amount of any Investment of the nature referred to in clause (a) or (b)
shall be the original principal or capital amount thereof less all returns of
principal or equity thereon (and without adjustment by reason of the financial
condition of such other Person) and shall, if made by the transfer or exchange
of property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such property.
"IPP-South Carolina" means International Pay Phones, Inc., a
South Carolina Corporation.
"IPP-South Carolina Acquisition" means the acquisition by the
Borrower of IPP-South Carolina pursuant to a merger of IPP-South Carolina into
the Borrower in exchange for the "Consideration" (as such term is defined in
the IPP-South Carolina Acquisition Agreement) pursuant to the terms and
conditions of the IPP-South Carolina Acquisition Agreement.
"IPP-South Carolina Acquisition Agreement" means that certain
Agreement and Plan of Merger, dated November 22, 1995, among Borrower,
IPP-South Carolina and the "Sellers" identified therein and any amendments or
other modifications related to the foregoing.
"IPP-Tennessee" means International Pay Phones, Inc., a
Tennessee Corporation.
"IPP-Tennessee Acquisition" means the acquisition by the
Borrower of IPP-Tennessee pursuant to a merger of IPP-Tennessee into the
Borrower in exchange for the "Consideration" (as such term is defined in the
IPP-Tennessee Acquisition Agreement) pursuant to the terms and conditions of
the IPP-Tennessee Acquisition Agreement.
"IPP-Tennessee Acquisition Agreement" means that certain
Agreement and Plan of Merger, dated November 22, 1995, among Borrower,
IPP-Tennessee and the "Sellers" identified therein and any amendments or other
modifications related to the foregoing.
"IRC" means the Internal Revenue Code of 1986, as amended, and
any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to
sections of the IRC also refer to any successor sections.
"Lender" means (a) any of the various lenders as are, or may
become, parties hereto, and (b) each Interest Rate Contract Counterparty that
is a Lender pursuant to clause (a) of this definition and has executed and
delivered a joinder agreement in
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<PAGE> 21
the form of Exhibit F attached hereto, duly executed by such Interest Rate
Contract Counterparty and delivered to the Agent.
"Lender Parties" means, collectively, the Agent and each
Lender, and each of their respective successors and assigns, and each of the
respective officers, directors, employees, attorneys and agents of the Agent
and each Lender and of each of their respective successors and assigns,
indemnified by the Borrower as provided in Section 10.4.
"Lien" means any mortgage, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, lien (statutory or other), adverse
claim or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease involving substantially
the same economic effect as any of the foregoing and the filing of any
financing statement under the UCC or comparable law of any jurisdiction).
"Loan" means, as the context may require, any Revolving Loan
or all or any portion of the Term Loan.
"Loans" means the Revolving Loans and the Term Loan.
"Loan Documents" means, collectively, this Agreement, the
Notes, each Security Document, the Facility Fee Letter, the Subsidiary
Guaranty, each Borrowing Request, any Interest Rate Contract entered into by
the Borrower with a Lender, and each other Instrument executed and delivered by
the Borrower or any of its Subsidiaries, as of the date hereof or at any time
thereafter, in connection with the transactions contemplated by this Agreement,
in each case, as amended, modified or supplemented from time to time.
"Loan Party" means any of the Borrower, the Borrower's
Subsidiaries and any Affiliate of any of them which is a party to any of the
Loan Documents.
"Loss" means any loss, damage, destruction, theft, or seizure
of, or any other casualty with respect to, or any condemnation of, any property
or asset of any Person in an amount in excess of $50,000 individually or
$100,000 in the aggregate for any Fiscal Year; and the "amount" of any Loss
means (i) if such asset or property is repaired or replaced, the greater of (A)
the cost to repair or replace the property or asset that was the subject of
such Loss and (B) the amount of insurance proceeds or condemnation awards
payable as a result of such Loss, and (ii) if such asset or property is not
repaired or replaced, the amount of insurance proceeds or condemnation awards
payable as a result of such loss.
"Material Adverse Change" means a material adverse change in
(a) the condition (financial or otherwise), operations,
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<PAGE> 22
performance, business, properties or prospects of the Borrower and its
Subsidiaries taken as a whole; or (b) the rights and remedies of the Lenders or
the Agent under the Loan Documents; or (c) the ability of the Borrower to repay
the Obligations or of the Borrower or any Subsidiary to perform their
respective obligations under the Loan Documents; or (d) the legality, validity
or enforceability of any Loan Document; or (e) the Liens granted the Agent for
the benefit of the Lenders pursuant to the Security Documents.
"Maturity" means relative to any Loan or portion thereof, the
earlier of such Loan's Stated Maturity Date or such other date when such Loan
or portion thereof shall be or become due and payable in accordance with the
terms of this Agreement, whether by required repayment, prepayment,
declaration, acceleration or otherwise.
"Maximum Overhead Expense" means, for any period, all expenses
of the Borrower and its Subsidiaries for such period classified as "Other
Operating Expenses" and "Sales, General and Administrative Expense", determined
on a consolidated basis in accordance with GAAP and as reported by the Borrower
for such period on a basis consistent with the financial statements referenced
in clauses (i) and (ii) in Section 5.4(a).
"Minimum Gross Margin Percentage - Non-Coin Calls" means, for
any period, a number (expressed as a percentage) equal to (a) "Non-Coin
Revenue" plus commissions minus "O/S Processing Expense" as reported by the
Borrower for such period on a basis consistent with the financial statements
referenced in clauses (i) and (ii) of Section 5.4(a) divided by (b) "Non-Coin
Revenue" (to the extent included in clause (a)).
"Monthly Payment Date" means the last day of each calendar
month or, if such day is not a Business Day, the immediately preceding Business
Day.
"Multiemployer Pension Plan" means a Multiemployer Plan which
is subject to Subtitle E of Title IV of ERISA.
"Multiemployer Plan" means a Plan which is a "multiemployer
plan" within the meaning of Section 3(37) of ERISA.
"Net Balance" is defined in Schedule 3.
"Net Cash Proceeds" means, with respect to any sale or
disposition of assets, (A) the gross cash proceeds received from such sale or
disposition minus (B) the sum of (x) all reasonable out-of-pocket fees and
expenses incurred in connection with such sale or disposition plus (y) all
taxes incurred in connection with such sale or disposition plus (z) the
outstanding principal amount of Indebtedness (other than the Loan) required to
be repaid under the terms thereof as a result of such sale or disposition,
provided, however, that nothing contained in this definition shall
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<PAGE> 23
be deemed to be a consent to any sale or disposition that is not otherwise
permitted by the Loan Documents.
"Net Income" means, as to any Person, for any period, the net
income (or loss) of such Person for such period, determined in accordance with
GAAP, but excluding extraordinary gains or losses for such period.
"Net Worth" means, at any time, the total shareholder's equity
of the Borrower and its Subsidiaries as determined on a consolidated basis in
accordance with GAAP, provided, however, the effect of the accretion, if any,
of the right to put any warrants for Stock and the effect of original issue
discount, if any, which is attributable to Indebtedness as a result of the
issuance of warrants in connection therewith shall not be taken into account
when calculating Net Worth.
"Note" means, as the context may require, any Term Note or
any Revolving Note.
"Notes" means, collectively, all of the Term Notes and all of
the Revolving Notes.
"Obligations" means all obligations of the Borrower with
respect to the repayment or performance of any obligations (monetary or
otherwise) of the Borrower arising under or in connection with this Agreement,
the Notes and the other Loan Documents.
"Organic Document" means, relative to any Person, its articles
or certificate of incorporation or certificate of limited partnership or
organization, its bylaws, partnership or operating agreement or other
organizational documents, and all stockholders agreements, voting trusts and
similar arrangements applicable to any of its Stock or partnership interests or
other ownership interests.
"OSP Agreement" means any agreement with an operator service
provider pursuant to which commissions, fees or surcharges are to be paid to
the Borrower or one of its Subsidiaries on all or a portion of the long
distance traffic relating to any pay telephones owned or leased by or to the
Borrower or one of its Subsidiaries.
"Participant" means the banks or other entities that purchase
participating interests in any Loan, Note, Revolving Loan Commitment or other
interest hereunder, as provided in clause (a) of Section 10.11.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
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<PAGE> 24
"PCS" means Paramount Communications Systems, Inc., a Florida
corporation.
"PCS Acquisition" means the acquisition by the Borrower from
all of the shareholders of PCS of 100% of the issued and outstanding Stock of
PCS in exchange for the "Consideration" (as such term is defined in the PCS
Acquisition Agreement) pursuant to the terms and conditions of the PCS
Acquisition Agreement.
"PCS Acquisition Agreement" means that certain Share Purchase
Agreement, dated November 16, 1995, among the Borrower, PCS and the "Sellers"
identified therein and any amendments or other modifications related to the
foregoing.
"Pension Plan" means any Plan which is subject to the
provisions of Title IV of ERISA, or to the provisions of Section 302 of ERISA
or Section 412 of the IRC.
"Periodic Telephone Income" means, as of any date, the sum of
(i) Telephone Average EBITDA for the most recent three-month period ending on
or prior to such date multiplied by four (4), plus (ii) the Cost Savings Factor
as of such date, provided, however, that notwithstanding anything contained in
this definition to the contrary, as of any date prior to June 30, 1996 the
Telephone Average EBITDA shall be equal to (a) the Telephone Average EBITDA
from April 1, 1996 until the last day of the calendar month ending on or prior
to such date and (b) such Telephone Average EBITDA for such period shall not be
multiplied by four (4) but shall be multiplied by (i) twelve (12) if such date
is prior to May 30, 1996, and (ii) six (6) if such date is after May 30, 1996
prior to June 30, 1996.
"Person" means any natural person, corporation, partnership,
limited liability company, firm, association, government, governmental agency
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" shall mean, at a particular time, any employee benefit
plan (within the meaning of Section 3(3) of ERISA), which is covered by ERISA
and in respect of which the Borrower, a Subsidiary or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Post-Default Rate" means (a) in the case of each Loan, the
sum of the rate per annum otherwise applicable to such Loan from time to time
plus two percent (2%) per annum and (b) in the case of all other Obligations,
the ING Alternate Base Rate plus seven percent (7%) per annum; provided,
however, that in all cases where the Post- Default Rate is being applied as a
result of an Event of Default under Section 7.1.1 then in such cases the
Post-Default Rate shall mean a rate of interest equal to twenty-one percent
(21%) per annum.
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<PAGE> 25
"Preferred Stock" means shares now or hereafter authorized of
any class of capital stock of the Borrower other than Common Stock, and shall
include, without limitation, the presently authorized 2,500,000 shares of
Preferred Stock, $.01 par value, of which (i) 2,125 shares have been designated
Preferred Stock, $100 par value, of which no shares are outstanding, (ii) 6,500
shares have been designated Convertible Preferred Stock, without par value,
$100 stated value, cumulative and redeemable, of which no shares are
outstanding, (iii) 3,880 shares have been designated Preferred Stock, without
par value, $1,000 stated value, cumulative and redeemable, of which no shares
are outstanding, (iv) 16,000 shares have been designated 8% Preferred Stock,
without par value, $100 stated value, cumulative and redeemable, of which no
shares are outstanding, (v) 2,500 shares have been designated 7% Convertible
Preferred Stock, without par value, $100 stated value, cumulative and
redeemable, of which no shares are outstanding, (vi) 550,000 shares have been
designated 10% Preferred Stock, without par value, $10 stated value,
cumulative, of which 530,534 shares are outstanding, (vii) 250,000 shares have
been designated Series A Special Convertible Preferred Stock, $.20 par value,
of which no shares are outstanding, (viii) 250,000 shares have been designated
Series B Special Convertible Preferred Stock, $.20 par value, of which no
shares are outstanding, (ix) 200,000 shares have been designated 14%
Convertible Preferred Stock, without par value, $60 stated value, of which
107,918 shares are outstanding and (x) 1,218,995 shares are undesignated and
unissued.
"Prepayment Fee" means the fee payable by the Borrower to the
Lenders prior to or concurrently with any prepayment as required under Section
3.3.2.
"Pro Forma Balance Sheets" means, collectively, (a) the
consolidated pro forma balance sheet of the Borrower and its Subsidiaries as of
the Closing Date, prepared by the Borrower based on the financial statements
described in clauses (i) and (ii) of Section 5.4 and after giving effect to the
consummation of the transactions contemplated by the Acquisition Agreements and
the consummation of the transactions contemplated hereby, including the making
of the initial Loans on the Closing Date and (b) the pro forma balance sheet of
each of the Borrower's Subsidiaries as of the Closing Date, prepared by such
Subsidiaries based on the financial statements described in clause (ii) of
Section 5.4 and after giving effect to the consummation of the transactions
contemplated by the Acquisition Agreements and the consummation of the
transactions contemplated hereby, including the making of the initial Loans on
the Closing Date.
"Projections" means, collectively, (a) the statements of
operations of the Borrower for the Fiscal Years 1996-2000 inclusive, dated
March 14, 1996, prepared by the Borrower on a monthly basis for the 1996 Fiscal
Year and on a quarterly basis for all Fiscal Years thereafter, together with
supporting details and a statement of underlying assumptions, and (b) the
projected
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<PAGE> 26
balance sheets, statements of operations and changes in cash flows of the
Borrower for the Fiscal Years 1996-2000 inclusive, dated March 12, 1996,
prepared by Brenner Securities Corporation on an annual basis, together with
supporting details and a statement of underlying assumptions, all of which have
been delivered to the Lenders prior to the Closing Date.
"Purchase Money Indebtedness" means Indebtedness incurred to
finance part or all of (but not more than) the purchase price of equipment in
which neither the Borrower nor any of its Subsidiaries had at any time prior to
such purchase an interest.
"Purchasing Lender" means any Person purchasing all or any
part of the rights and obligations under this Agreement and the Notes of any
Lender pursuant to a Transfer Supplement in accordance with Section 10.11.
"Quarterly Payment Date" means the last day of each March,
June, September and December, or, if such day is not a Business Day, the
immediately preceding Business Day.
"Quoted Price" of Common Stock for each day means the last
reported sales price of Common Stock on such day as reported by NASDAQ or, if
Common Stock is listed on a national security exchange, the last reported sales
price of Common Stock on such exchange (which shall be for consolidated trading
if applicable to such exchange) on such day, or if not so reported or listed,
the average of the last reported bid and ask prices of Common Stock on such
day, in each case as appropriately adjusted for any stock splits or reverse
stock splits occurring after the Closing Date.
"Reference Lenders" means, collectively, The Chase Manhattan
Bank, N.A. (or any successor thereto), Citibank, N.A. and Morgan Guaranty Trust
Company of New York.
"Register" means the register for the recordation of the names
and addresses of the Lenders and the Revolving Loan Commitment of, and the
principal amounts of the Loans owing to, each Lender from time to time, as
provided in clause (c) of Section 10.11.
"Registrations Rights Agreement" means the Registration Rights
Agreement, dated of even date herewith, between the Borrower and the Lenders,
as in effect on the date hereof and as hereafter amended, supplemented,
restated or otherwise modified.
"Regulatory Change" means, as to any or all of the Lenders or
the Agent, any change (including, without limitation, any change in the
interpretation) occurring after the Closing Date in any (or the adoption after
such date of any new):
(a) United States federal or state law or foreign law
applicable to the Agent or such Lender; or
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<PAGE> 27
(b) regulation, interpretation, directive, guideline or
request (whether or not having the force of law) applicable to the Agent or
such Lender of any court or Governmental Authority charged with the
interpretation or administration of any law referred to in clause (a) or of any
central bank or fiscal, monetary or other authority having jurisdiction over
the Agent or such Lender.
"Reorganization" means with respect to any Multiemployer
Pension Plan, the condition that such plan is in reorganization within the
meaning of such term as used in Section 4241 of ERISA.
"Replacement Lender" has the meaning set forth in clause (f)
of Section 2.4 of this Agreement.
"Reportable Event" means (i) a reportable event described in
Section 4043 of ERISA and regulations thereunder (other than any Reportable
Event described in Section 4043(b)(2) or (7)), (ii) a withdrawal by a
"substantial employer" (within the meaning of Section 4001(a)(2) of ERISA) from
a Single Employer Plan to which more than one employer contributes, as referred
to in Section 4063(b) of ERISA, or (iii) a cessation of operations at a
facility causing more than twenty percent (20%) of participants under a Single
Employer Plan to be separated from employment, as referred to in Section
4062(e) of ERISA.
"Required Lenders" means, (a) Lenders having, in the
aggregate, 66-2/3% or more of the aggregate of the Revolving Loan Commitment
plus the outstanding principal amount of the Term Loan or (b) if the Revolving
Loan Commitments shall have been terminated, whether pursuant to this Agreement
or otherwise, Lenders having, in the aggregate, 66-2/3% of the aggregate of the
outstanding principal amount of the Loans.
"Requirements of Law" means, as to any Person, the Organic
Documents of such Person, and all federal, state and local laws, rules,
regulations, orders, decrees or other determinations of an arbitrator, court or
other Governmental Authority, including, without limitation, all disclosure and
other requirements of ERISA, the requirements of Environmental Laws and
Environmental Permits, the requirements of OSHA, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"Responsible Officer" means the Chief Executive Officer, the
President, the Chief Financial Officer, the Treasurer or the Director of
Accounting of the Borrower.
"Revolving A Loan" means relative to any Lender, any loan made
by such Lender to the Borrower pursuant to Section 2.1.1.
"Revolving A Loan Availability" means, on any date, the excess
of (a) the lesser of (i) the Revolving A Loan Commitment
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<PAGE> 28
Amount or (ii) the excess of (x) the Borrowing Base for Revolving A Loans and
Term Loan minus (y) the outstanding principal balance of the Term Loan, minus
(b) the then aggregate principal amount of all outstanding Revolving A Loans.
"Revolving A Loan Commitment" means the collective commitments
of the Lenders to make Revolving A Loans pursuant to Section 2.1.1.
"Revolving A Loan Commitment Amount" means $6,000,000 as such
amount may be reduced from time to time pursuant to Section 3.3.4.
"Revolving A Loan Commitment Termination Date" means the
earliest of:
(a) the applicable Stated Maturity Date;
(b) immediately and without further action upon the
occurrence of any Event of Default described in Section 7.1.4;
(c) immediately when any other Event of Default shall
have occurred and be continuing and either:
(i) any Loans shall be declared to be due and
payable pursuant to Section 7.3; or
(ii) in the absence of such declaration, the
Agent, acting at the direction of the Required Lenders, shall give
notice to the Borrower that the Revolving A Loan Commitment has been
terminated; and
(d) immediately upon the occurrence of a Change in
Control.
"Revolving A Note" means a promissory note of the Borrower
dated the date hereof and substantially in the form of Exhibit A-1 attached
hereto, and shall also refer to all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"Revolving B Loan" means relative to any Lender, any Loan made
by such Lender to the Borrower pursuant to Section 2.1.2.
"Revolving B Loan Availability" means, on any date, the excess
of (a) the lesser of (i) the Revolving B Loan Commitment Amount or (ii) the
Borrowing Base for Revolving B Loans minus (b) the then aggregate principal
amount of all outstanding Revolving B Loans.
"Revolving B Loan Commitment" means the collective commitments
of the Lenders to make Revolving B Loans pursuant to Section 2.1.2.
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<PAGE> 29
"Revolving B Loan Commitment Amount" means $2,250,000 as such
amount may be reduced from time to time pursuant to Section 3.3.4.
"Revolving B Loan Commitment Termination Date" means the
earliest of:
(a) the applicable Stated Maturity Date;
(b) immediately and without further action upon the
occurrence of any Event of Default described in Section 7.1.4;
(c) immediately when any other Event of Default shall
have occurred and be continuing and either:
(i) any Loans shall be declared to be due and
payable pursuant to Section 7.3; or
(ii) in the absence of such declaration, the
Agent, acting at the direction of the Required Lenders, shall give
notice to the Borrower that the Revolving B Loan Commitment has been
terminated; and
(d) immediately upon the occurrence of a Change in
Control.
"Revolving B Note" means a promissory note of the Borrower
dated the date hereof and substantially in the form of Exhibit A-2 attached
hereto, and shall also refer to all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"Revolving Loan Commitment Amount" means, collectively, the
Revolving A Loan Commitment Amount and the Revolving B Loan Commitment Amount.
"Revolving Loan Commitment" means, collectively, the Revolving
A Loan Commitment and the Revolving B Loan Commitment.
"Revolving Loans" means relative to any Lender, any Loans made
by such Lender to the Borrower pursuant to Section 2.1.1 or Section 2.1.2.
"Revolving Notes" means, collectively, all of the Revolving A
Notes and all of the Revolving B Notes.
"Revolving Percentage" of any Lender means, at any time, in
respect of the Revolving Loan Commitment and the Revolving Loans, the
percentage set forth opposite such Lender's signature hereto under the caption
"Percentage", as the same may be adjusted pursuant to Section 10.11.
"Securities Legend" is defined in clause (j) of Section 10.11.
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<PAGE> 30
"Security Agreement" means the Security Agreement, dated as of
the date hereof, made by the Borrower and each of its Subsidiaries in favor of
the Agent, for its benefit and the benefit of the Lenders, as such agreement
may be amended, supplemented or otherwise modified from time to time.
"Security Documents" means, collectively, the Security
Agreement, the Trademark Assignments, the assignment of "key-man" life
insurance described in Section 6.1.5 and of the Interest Rate Contracts
described in Section 6.1.12 to the extent that the Interest Rate Contract
Counterparty is a Lender, the Borrower Pledge Agreement, the Subsidiary Pledge
Agreement, the Assignment of Rights under Acquisition Agreements described in
clause (b) of Section 4.1.13, and each other Instrument at any time delivered
in connection with this Agreement to secure the Obligations.
"Senior Interest Coverage Ratio" means, for any period, the
ratio of (a) EBITDA for such period to (b) Interest Expense for such period.
"Series B Special Preferred Stock" means the 250,000 shares of
Series B Special Convertible Preferred Stock of the Borrower, $0.20 par value
per share, authorized pursuant to the Certificate of Amendment, of which no
shares are outstanding as of the Closing Date.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, other than a Multiemployer Plan.
"Solvent" means, with respect to any Person on a particular
date, that on such date (i) the fair value of the assets of such Person (both
at fair valuation and at present fair saleable value) is, on the date of
determination, greater than the total amount of liabilities, including, without
limitation, contingent and unliquidated liabilities, of such Person, (ii) such
Person is able to pay all liabilities of such Person as they mature, and (iii)
such Person does not have unreasonably small capital with which to carry on its
business. In computing the amount of contingent or unliquidated liabilities at
any time, such liabilities will be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.
"Stated Maturity Date" means:
(a) with respect to the Revolving A Loans, June 30, 1999;
(b) with respect to the Revolving B Loans, March 31,
1997; and
(c) with respect to the Term Loan, June 30, 1999.
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<PAGE> 31
"Stock" means all shares of capital stock of or in a
corporation, whether voting or non-voting, and including, without limitation,
common stock and preferred stock.
"Subsidiary" of any corporation means any other corporation,
partnership or limited liability company greater than 50% of the outstanding
shares of Stock or other ownership interests having ordinary voting power for
the election of directors (or others serving equivalent functions) is owned
directly or indirectly by such corporation, and, except as otherwise indicated
herein, references to Subsidiaries shall refer to Subsidiaries of the Borrower.
"Subsidiary Guaranty" means the Guaranty of all the
Obligations, dated as of the date hereof, made by the Borrower's Subsidiaries,
jointly and severally, in favor of the Agent and the Lenders.
"Subsidiary Note" means each promissory note executed by a
Subsidiary of the Borrower payable to the order of the Borrower, each in the
amount of Twenty Million Dollars ($20,000,000), as amended, supplemented,
restated or otherwise modified from time to time.
"Subsidiary Pledge Agreement" means the Stock and Notes Pledge
Agreement, dated as of the date hereof, pursuant to which World Communications,
Inc., a Missouri corporation and a wholly owned Subsidiary of the Borrower,
will pledge to the Agent, for its benefit and the ratable benefit of the
Lenders, all of the issued and outstanding stock of its Subsidiaries, as such
agreement may be amended, supplemented or otherwise modified from time to time.
"Tangible Net Worth" means, at any time, Net Worth less all
intangible assets, as determined for the Borrower and its Subsidiaries on a
consolidated basis in accordance with GAAP, with such intangible assets to
include, in any event, goodwill.
"Taxes" means all taxes, levies, imposts, deductions, charges
or withholdings, and all liabilities with respect thereto, excluding, in the
case of each Lender and the Agent, taxes imposed on its net income and
franchise taxes imposed on it.
"Telephone" shall mean a microprocessor-based non-cellular
telephone through which a user may initiate a call payable only by coins or by
credit card, collect or third number billing procedures and which has been
installed for operation.
"Telephone Average EBITDA" means, with respect to any period,
the quotient of (a) the aggregate EBITDA during such period divided by (b) the
Average Number of Telephones during such period.
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<PAGE> 32
"Telephone Placement Agreement" shall mean any agreement
between the Borrower or one of its Subsidiaries and another Person pursuant to
which the Borrower or such Subsidiary installs one or more Telephones on
property or properties owned, leased or operated by such Person and pays to
such Person a fee or percentage of revenues earned from such Telephone(s), and
such other compensation as may be provided pursuant thereto, in return for such
installation right.
"Term Loan" means, collectively, the loans, in an aggregate
principal amount of $29,000,000, made by the Lenders on the Closing Date to the
Borrower pursuant to Section 2.1.3.
"Term Note" means a promissory note of the Borrower dated the
date hereof and substantially in the form of Exhibit A-3 attached hereto, and
shall refer to all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"Term Percentage" of any Lender means, at any time, in respect
of the Term Loan, the percentage set forth opposite such Lender's signature
hereto under the caption "Percentage", as the same may be adjusted pursuant to
Section 10.11.
"Term Note Shares" is defined in clause (j) of Section 10.11.
"Trademark Assignments" means the Collateral Assignment and
Security Agreements (Trademarks), each dated as of the date hereof, made by the
Borrower and certain of its Subsidiaries in favor of the Agent, for its benefit
and the ratable benefit of the Lenders.
"Transfer Supplement" means a Transfer Supplement,
substantially in the form of Exhibit E, executed pursuant to Section 10.11.
"UCC" means the Uniform Commercial Code of the State of New
York, as in effect from time to time.
"United States" or "U.S." means the United States of America,
its 50 States and the District of Columbia.
"written" or "in writing" means any form of written
communication or a communication by means of telex, telecopier device,
telegraph or cable.
SECTION 1.2. Use of Defined Terms. Unless otherwise
defined or the context otherwise requires, terms for which meanings are
provided in this Agreement shall have such meanings when used in the Disclosure
Schedule and each Note, Borrowing Base Certificate, Borrowing Request,
Compliance Certificate, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.
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<PAGE> 33
SECTION 1.3. Cross-References. Unless otherwise
specified, references in this Agreement and in each other Loan Document to any
Article or Section are references to such Article or Section of this Agreement
or such other Loan Document, as the case may be, and unless otherwise
specified, references in any Article, Section, or definition to any clause are
references to such clause of such Section, Article or definition.
SECTION 1.4. Accounting and Financial Determinations.
Unless otherwise specified, all accounting terms used herein or in any other
Loan Document shall be interpreted, all accounting determinations and
computations hereunder or thereunder shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared
in accordance with GAAP.
ARTICLE 2.
COMMITMENTS
SECTION 2.1. Loan Commitments. Subject to the terms and
conditions of this Agreement (including Article 4), each Lender severally and
for itself alone agrees to provide: (a) its Revolving Percentage of the
Revolving A Loan Commitment; (b) its Revolving Percentage of the Revolving B
Loan Commitment; and (c) its Term Percentage of the Term Loan, each as more
fully described in this Section 2.1.
SECTION 2.1.1. Revolving A Loan Commitment. Subject to the
limitations set forth in Section 2.1.4, each Lender will from time to time on
any Business Day occurring during the period commencing on the Closing Date and
continuing to (but not including) the Revolving A Loan Commitment Termination
Date, make Revolving A Loans, in amounts not to exceed when aggregated with all
such Lender's Revolving A Loans such Lender's Revolving Percentage of the
Revolving A Loan Commitment Amount, to the Borrower equal to its Revolving
Percentage of the aggregate amount of any Borrowing of Revolving A Loans
requested by the Borrower to be made on such Business Day in accordance with
Section 3.1.
SECTION 2.1.2. Revolving B Loan Commitment. Subject to the
limitations set forth in Section 2.1.4, each Lender will from time to time on
any Business Day occurring during the period commencing on the Closing Date and
continuing to (but not including) the Revolving B Loan Commitment Termination
Date, make Revolving B Loans, in amounts not to exceed when aggregated with all
such Lender's Revolving B Loans such Lender's Revolving Percentage of the
Revolving B Loan Commitment Amount, to the Borrower equal to its Revolving
Percentage of the aggregate amount of any Borrowing of Revolving B Loans
requested by the Borrower to be made on such Business Day in accordance with
Section 3.1.
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<PAGE> 34
SECTION 2.1.3. Term Loan Commitment. On the Closing Date,
each Lender will make a single Term Loan to the Borrower equal to such Lender's
respective Term Percentage of $29,000,000.
SECTION 2.1.4. Agent and Lenders Not Required to Extend
Credit under Revolving Loan Commitment. No Lender shall be required to make
any Revolving Loan, if after giving effect thereto:
(a) the then aggregate outstanding principal amount of
all Revolving A Loans and the then aggregate outstanding principal amount of
the Term Loan would exceed the Borrowing Base for Revolving A Loans and Term
Loan; or
(b) the then aggregate outstanding principal amount of
all Revolving B Loans would exceed the Borrowing Base for Revolving B Loans; or
(c) the then aggregate outstanding principal amount of
all Revolving A Loans or all Revolving B Loans would exceed the Revolving A
Loan Commitment Amount or the Revolving B Loan Commitment Amount, respectively;
or
(d) the then aggregate outstanding principal amount of
such Lender's Revolving Loans would exceed its Revolving Percentage of the
Revolving Loan Commitment Amount; or
(e) the then aggregate outstanding principal amount of
such Lender's Revolving A Loans or Revolving B Loans would exceed its Revolving
Percentage of the Revolving A Loan Commitment Amount or the Revolving B Loan
Commitment Amount, respectively.
Subject to the terms hereof, the Borrower may from time to time borrow, repay
and reborrow Revolving A Loans and Revolving B Loans, in all cases pursuant to
the Revolving A Loan Commitment or the Revolving B Loan Commitment,
respectively. The Term Loan or any portion thereof once repaid may not be
reborrowed.
SECTION 2.2. Changes in Advance Formula; Establishment of
Reserves.
SECTION 2.2.1. Advance Ratios. The Borrower acknowledges
that the advance formula provided for in the definition of "Borrowing Base" in
Section 1.1 has been established based upon the Required Lenders' determination
of the loan value of the Eligible Telephones as of the date of this Agreement.
Upon the occurrence and during the continuance of an Event of Default, based on
the Required Lenders' customary credit considerations, the Required Lenders, in
their sole discretion, may decrease the advance ratios against Eligible
Telephones, and any such decrease shall become effective immediately upon the
Agent's giving notice thereof to the Borrower, and shall remain in effect for
so long as such Event of Default continues.
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<PAGE> 35
SECTION 2.2.2. Reserves. The Agent shall have the right to
establish, in such amounts, and with respect to such matters, as the Agent,
based on the Agent's customary credit considerations, shall deem necessary or
appropriate, reserves with respect to (i) Charges and Liens; (ii) Environmental
Liabilities and Costs; and (iii) sums as to which the Agent and the Lenders are
permitted to make Revolving Loans on the Borrower's behalf under Section 3.3.3
of this Agreement.
SECTION 2.3. Commitment and Agent's Fee.
(a) (i) The Borrower agrees to pay to the Agent for the
account of each Lender, a nonrefundable fee for the period from the Closing
Date to and including the Revolving A Loan Commitment Termination Date equal to
such Lender's Revolving Percentage of 1/2 of 1% (0.50%) per annum on the
difference between (A) the Revolving A Loan Commitment Amount and (B) the
average daily aggregate outstanding principal amount of all Revolving A Loans.
The commitment fee described in this subclause (i) shall be calculated on a
daily basis and shall be payable by the Borrower in arrears on each Monthly
Payment Date and on the Revolving A Loan Commitment Termination Date.
(ii) The Borrower agrees to pay to the Agent for the
account of each Lender, a nonrefundable fee for the period from the Closing
Date to and including the Revolving B Loan Commitment Termination Date equal to
such Lender's Revolving Percentage of 1/2 of 1% (0.50%) per annum on the
difference between (A) the Revolving B Loan Commitment Amount and (B) the
average daily aggregate outstanding principal amount of all Revolving B Loans.
The commitment fee described in this subclause (ii) shall be calculated on a
daily basis and shall be payable by the Borrower in arrears on each Monthly
Payment Date and on the Revolving B Loan Commitment Termination Date.
(b) The Borrower agrees to pay to the Agent, for its
account, an agent's fee of $35,000 per Fiscal Year. The agent's fee described
in this clause (b) shall be payable in advance on the Closing Date and on the
first day of each Fiscal Year thereafter prior to the Stated Maturity Date.
One-quarter (25%) of the agent's fee described in this clause (b) in respect of
each Fiscal Year shall be fully earned and nonrefundable on the first day of
each Fiscal Quarter of such Fiscal Year (except in the case of the 1996 Fiscal
Year where such percentage shall be fully earned and nonrefundable on the
Closing Date) such that the entire agent's fee in respect of any Fiscal Year
shall be fully earned and nonrefundable on the first day of the last Fiscal
Quarter of such Fiscal Year. Subject to Section 3.8, upon repayment in full of
all the Loans and termination of the Commitment, any portion of the agent's fee
which is then unearned shall be promptly refunded to the Borrower.
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SECTION 2.4. Increased Costs; Capital Adequacy.
(a) The Borrower shall pay to each Lender from time to time
on demand such amounts as such Lender may determine to be reasonably necessary
to compensate it or its holding company for any costs which such Lender
determines are attributable to its making or maintaining Loans, or maintaining
Commitments hereunder or its obligation to make any such Loans hereunder, or
any reduction in any amount receivable by such Lender hereunder in respect of
any such Loans, Commitments or obligation, resulting from any Regulatory Change
which: (i) changes the basis of taxation of any amounts payable to such Lender
under this Agreement in respect of any of such Loans or Commitments (other than
taxes imposed on the overall net income of such Lender); or (ii) imposes or
modifies any reserve, special deposit, deposit insurance or assessment, minimum
capital, capital ratio or similar requirements relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of, such
Lender or any holding company of such bank (including, without limitation, a
request or requirement which affects the manner in which any Lender or the
holding company of any thereof allocates capital resources to commitments,
including the Commitments and obligations of such Lender hereunder). Each
Lender will notify the Borrower of any event occurring after the date of this
Agreement which will entitle such Lender to compensation pursuant to this
clause (a) as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation.
(b) Without limiting the effect of the foregoing
provisions of this Section 2.4 (but without duplication), the Borrower shall
pay to each Lender from time to time upon demand by such Lender such amounts as
the Lender may determine to be reasonably necessary to compensate such Lender
for any costs which it determines are attributable to the maintenance by it or
its holding company, pursuant to any law or regulation of any jurisdiction or
any interpretation, directive or request (whether or not having the force of
law) of any court or governmental or monetary authority, whether in effect on
the date of this Agreement or thereafter, of capital in respect of its Loans or
its obligation to make the Loans hereunder (such compensation to include,
without limitation, an amount equal to any reduction in return on assets or
equity of such Lender or its holding company to a level below that which it
could have achieved but for such law, regulation, interpretation, directive or
request). The Lender will notify the Borrower with a copy to the Agent) if it
is entitled to compensation pursuant to this clause (b) as promptly as
practicable after it determines to request such compensation.
(c) Each notice delivered by any Lender pursuant to this
Section 2.4 shall contain a statement of such Lender as to any such additional
amount or amounts (including calculations thereof in reasonable detail) which
shall, in the absence of manifest error, be conclusive of the matters stated
therein and be binding upon the Borrower. In determining such amount, any
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<PAGE> 37
Lender may use any method of averaging and attribution that it in good
faith shall deem applicable.
(d) Without prejudice to the survival of any other
agreement of the Borrower hereunder or under any other Loan Document, the
agreements and obligations of the Borrower contained in this Section 2.4 shall
survive the payment in full of principal, interest and other amounts payable
hereunder and under the Notes and the other Loan Documents.
(e) Notwithstanding anything in this Section 2.4 to the
contrary, to the extent that notice is given by any Lender to the Borrower of
any additional amount owing to such Lender under this Section 2.4 more than 360
days after the occurrence of the event giving rise to such obligation, such
Lender shall not be entitled to compensation under this Section 2.4 for any
amounts incurred or accruing 360 days prior to the giving of such notice to
Borrower.
(f) Upon the receipt by the Borrower from any Lender (an
"Affected Lender") of a claim for compensation pursuant to this Section 2.4 or
Section 3.5, the Borrower may (i) request one or more of the Lenders to acquire
all or part of such Affected Lender's Loans and Revolving Loan Commitment
(provided that no such other Lender shall have any obligation to so acquire or
assume all or any part of such Affected Lender's Loans and Revolving Loan
Commitment), or (ii) designate a Replacement Lender reasonably satisfactory to
the Agent. Any such designation of a Replacement Lender under clause (ii)
shall be subject to the prior written consent of the Agent, which consent shall
not be unreasonably withheld.
SECTION 2.5. Investment Representations. Each Lender
represents and warrants that it is holding its Notes for its own account, for
investment purposes and not with a view to distribution thereof; provided,
however, that the foregoing representation shall not be construed as imposing
any limitation on such Lender's right to transfer or sell any Loans or Notes
that is not otherwise expressly set forth in this Agreement or required under
applicable law. Each Lender agrees that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge; hypothecate or otherwise dispose of any
of the Notes, any shares of Series B Preferred Stock or any Common Stock (or
solicit any offers to buy, purchase or otherwise acquire or take a pledge of
Notes, Series B Preferred Stock or Common Stock), except in compliance with the
Securities Act of 1933, as amended or otherwise modified from time to time.
Each Lender agrees that it will not transfer, sell, assign, pledge, hypothecate
or otherwise dispose of any Notes, Series B Preferred Stock or Common Stock if
any such disposition would cause the Borrower to be required to register any of
the foregoing pursuant to Section 12(g) of the Securities Exchange Act of 1934,
as amended or otherwise modified from time to time.
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<PAGE> 38
ARTICLE 3.
LOANS AND NOTES
SECTION 3.1. Borrowing Procedure. By delivering a
Borrowing Request to the Agent at the Agent's Atlanta Office on or before 11:00
a.m., New York City time, on a Business Day, the Borrower may from time to
time request, (i) in the case of Revolving A Loans, on not less than two (2)
Business Days' nor more than three (3) Business Days' notice and (ii) in the
case of Revolving B Loans, on not less than one (1) Business Day notice, that a
Borrowing of Revolving Loans be made on the Business Day specified in such
Borrowing Request. The Borrowing Request shall specify whether such Borrowing
is to be made as Revolving A Loans or Revolving B Loans. Borrowings of
Revolving A Loans shall be in a minimum aggregate amount equal to $250,000 and
in integral multiples of $50,000 or, if less, the amount of the Revolving A
Loan Availability immediately prior to such Borrowing. Borrowings of Revolving
B Loans shall be in a minimum aggregate amount equal to $50,000 and in integral
multiples of $50,000 or, if less, the amount of the Revolving B Loan
Availability immediately prior to such Borrowing. Each Revolving Loan shall be
made on the Business Day specified in the Borrowing Request therefor (including
the initial Revolving Loans to be made on the Closing Date). On the day prior
to such Business Day specified by the Borrower, each Lender shall, on or before
2:00 p.m., New York City time, deposit same day funds with the Agent in an
amount equal to such Lender's Revolving Percentage of the requested Borrowing,
such deposit to be made to such account as the Agent shall specify from time to
time by notice to the Lenders. On the Business Day specified by the Borrower
in the Borrowing Request, the proceeds of all Borrowings shall be made
available to the Borrower by wire transfer of such proceeds to such
transferees, or to such accounts of the Borrower, as the Borrower shall have
specified in the Borrowing Request therefor; provided, however, that in each
case the Agent shall be required to make available to the Borrower the proceeds
of any Borrowing only to the extent received by it in same day funds from the
Lenders. No Lender's obligation to make any Loan shall be affected by any
other Lender's failure to make any Loan.
SECTION 3.2. Notes. All Loans made by each Lender shall
be evidenced:
(a) in the case of such Lender's portion of the Term
Loan, by a Term Note payable to the order of such Lender in a principal amount
equal to such Lender's Term Percentage of the Term Loan;
(b) in the case of such Lender's Revolving A Loans, by a
Revolving A Note payable to the order of such Lender in a principal amount
equal to such Lender's Revolving Percentage of the Revolving A Loan Commitment
Amount; and
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<PAGE> 39
(c) in the case of such Lender's Revolving B Loans, by a
Revolving B Note payable to the order of such Lender in a principal amount
equal to such Lender's Revolving Percentage of the Revolving B Loan Commitment
Amount.
The Borrower hereby irrevocably authorizes each Lender to make (or cause to be
made) appropriate notations on a grid schedule attached to such Lender's Notes
(or on a continuation of any such grid attached to any Note and made a part
thereof), which notations shall evidence, inter alia, the date and outstanding
principal amount of the Loans evidenced thereby. The notations on any such
grid (and on any such continuation) indicating the outstanding principal amount
of such Lender's Loans shall be presumptive evidence of the principal amount
thereof owing and unpaid, but the failure to record any such amount on any such
grid (or on any such continuation) shall not limit or otherwise affect the
obligations of the Borrower hereunder or under such Note to make payments of
principal of or interest on such Loans when due.
SECTION 3.3. Principal Payments. Repayments and
prepayments of principal of the Loans shall be made in accordance with this
Section 3.3.
SECTION 3.3.1. Repayments and Prepayments. The Borrower
will make payment in full of all unpaid principal of each Loan at its Stated
Maturity Date (or such earlier date as such Loan may become or be declared due
and payable pursuant to Article 7). Prior thereto, the Borrower:
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal amount
of any Loans; provided, however, that (i) all such voluntary prepayments shall
be in a minimum amount of $50,000 (subject to the Borrower's right to prepay in
full the entire unpaid principal amount of the Loans), (ii) such prepayment
shall require (x) in the case of Revolving Loans, at least five (5) Business
Days prior written notice to the Agent or (y) in the case of the Term Loan, at
least thirty (30) days prior written notice to the Agent, (iii) the Borrower
pays to the Lenders any Prepayment Fee required to be paid pursuant to Section
3.3.2, (iv) the Borrower may only prepay the Term Loan if the Revolving Loan
Commitment has been irrevocably terminated and there are no Revolving Loans
outstanding (unless all outstanding Revolving Loans are fully repaid and the
Revolving Loan Commitment is irrevocably terminated simultaneously with a
prepayment on the Term Loan), and (v) the Borrower may not prepay the Revolving
A Loans if there are any Revolving B Loans outstanding (unless all outstanding
Revolving B Loans are fully repaid simultaneously with a prepayment of the
Revolving A Loans);
(b) (i) shall, on any Business Day on which the sum
of (A) the aggregate outstanding principal amount of all Revolving A Loans and
(B) the aggregate outstanding principal amount of the Term Loan exceeds the
Borrowing Base for Revolving A Loans and
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<PAGE> 40
Term Loan, make a mandatory prepayment of the outstanding principal amount of
Revolving A Loans and the Term Loan in an amount equal to such excess amount
(such prepayment to be applied first to all of the Revolving A Loans until paid
in full and then to the Term Loan);
(ii) shall, on any Business Day on which the
aggregate outstanding principal amount of all Revolving B Loans exceeds the
Borrowing Base for Revolving B Loans, make a mandatory prepayment of the
outstanding principal amount of the Revolving B Loans in an amount equal to
such excess amount;
(iii) shall, on any Business Day on which the aggregate
outstanding principal amount of all Revolving A Loans exceeds the Revolving A
Loan Commitment Amount, make a mandatory prepayment of the outstanding
principal amount of the Revolving A Loans in an amount equal to such excess
amount; and
(iv) shall, on any Business Day on which the aggregate
outstanding principal amount of all Revolving B Loans exceeds the Revolving B
Loan Commitment Amount, make a mandatory prepayment of the outstanding
principal amount of the Revolving B Loans in an amount equal to such excess
amount;
(c) shall, concurrently with receipt by the Borrower or
any Subsidiary or the Agent of any condemnation awards with respect to any
Loss, make a mandatory prepayment of the Loans in an amount equal to such
condemnation awards;
(d) shall, within 180 days after receipt by the Borrower
or any Subsidiary or the Agent of any insurance proceeds with respect to any
Loss resulting from a casualty, make a mandatory prepayment of the Loans in an
amount by which such insurance proceeds exceed the actual cost incurred by the
Borrower or such Subsidiary to repair or replace the property or asset which
was the subject of the Loss or deemed Loss giving rise to such insurance
proceeds;
(e) shall, within 180 days after receipt by the Borrower
or any Subsidiary or the Agent of any insurance proceeds with respect to any
Loss resulting from a liability, make a mandatory prepayment of the Loans in an
amount by which such insurance proceeds exceed the amount of the liability to
be satisfied with such proceeds (to the extent such liability is so satisfied);
(f) shall, unless the Required Lenders shall have
otherwise agreed, concurrently with the receipt by the Borrower of any proceeds
of the life insurance policies described in clause (c) of Section 6.1.5, make a
mandatory prepayment of the Loans in an amount equal to the amount of such
insurance proceeds;
(g) shall prepay the entire outstanding principal amount
of the Loans together with accrued and unpaid interest and
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<PAGE> 41
all of the outstanding Obligations hereunder upon the occurrence of a Change in
Control;
(h) shall, concurrently with the delivery of the
financial statements required to be delivered under Section 6.1.1(a),
commencing with the financial statements required to be delivered in respect of
the earliest of (x) the Fiscal Year ending December 31, 1997 or (y) the first
Fiscal Year during which an Event of Default shall have occurred, and
continuing thereafter with the delivery of such financial statements in respect
of each successive Fiscal Year (but in no event later than the date on which
such financial statements are required to be delivered pursuant to Section
6.1.1(a)), make a mandatory prepayment of the outstanding principal amount of
the Loans in an amount equal to the Excess Cash Flow with respect to such
Fiscal Year; and
(i) shall, beginning on September 30, 1997 and for each
Quarterly Payment Date thereafter, make a mandatory prepayment of the Revolving
A Loans and the Term Loan in an amount equal to that percentage set forth
opposite such Quarterly Payment Date below multiplied by the sum of (x) the
aggregate outstanding principal amount of the Revolving A Loans as of September
15, 1996, plus (y) the aggregate outstanding principal amount of the Term Loan
as of September 15, 1996, plus (z) the Revolving A Loan Availability (if any):
<TABLE>
<CAPTION>
Quarterly Payment Date In: Percentage
------------------------- ----------
<S> <C>
September, 1997 1.75%
December, 1997 1.75%
March, 1998 3.00%
June, 1998 3.00%
September, 1998 3.00%
December, 1998 3.00%
March, 1999 3.50%.
</TABLE>
(j) shall, in accordance with the terms of the cash
management system required to be maintained by the Borrower under Section
6.1.17, make mandatory prepayments of the Revolving A Loans and the Revolving B
Loans in such amounts and at such times as are required pursuant to such cash
management system, whether by virtue of cash sweeps from Blocked Accounts and
Concentration Accounts into the Collection Account or as a result of Net
Balances of the Borrower and its Subsidiaries exceeding $150,000 on any
Business Day or otherwise (such mandatory prepayments to be applied first to
the payment in full of all outstanding Revolving B Loans, and thereafter to the
payment in full of all outstanding Revolving A Loans).
Unless expressly set forth to the contrary in this Section 3.3.1 or elsewhere
in the Agreement, any payments required to be made by the Borrower pursuant to
this Section 3.3.1 shall be applied to principal in the following order:
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<PAGE> 42
(i) first, to the payment in full of all outstanding
Revolving A Loans,
(ii) second, to the payment in full of all outstanding
Revolving B Loans, and
(iii) finally, to the payment in full of the outstanding
balance of the Term Loan.
SECTION 3.3.2. Prepayment Fee. Upon any prepayment of any
Loans on or prior to the later of (x) the date on which the Shelf Registration
Statement (as such term is defined in the Registration Rights Agreement) is
declared effective by the Securities and Exchange Commission or (y) the first
anniversary of Closing Date, whether in full or in part, in each case utilizing
the proceeds of borrowed funds or the issuance of debt securities, the Borrower
shall be required to pay to the Lenders prior to or concurrently with such
prepayment a Prepayment Fee in an amount equal to one percent (1%) of the
amount of the Loans as of the date of the prepayment. Any Prepayment Fee shall
be paid by the Borrower to the Lenders as liquidated damages for the loss of
the bargain and shall not constitute a penalty.
SECTION 3.3.3. Revolving Loans on Borrower's Behalf. The
Lenders are authorized to, and at their option may, make Revolving Loans on
behalf of the Borrower for payment of all fees, expenses, charges, costs,
principal and interest owed by the Borrower to the Lenders or the Agent under
this Agreement and the other Loan Documents. Such Revolving Loans shall be
made when and as the Borrower fails promptly to pay same, and all such
Revolving Loans shall constitute Revolving Loans made to the Borrower and
shall be secured by all of the Collateral. Following the making of any
Revolving Loans pursuant to this Section 3.3.3, such Lender shall promptly
notify the Borrower of the making of such Revolving Loans on the Borrower's
behalf and the aggregate principal amount of such Loans; provided that the
failure by any Lender to give such notice shall not affect the Borrower's
obligations under this Agreement or with respect to such Revolving Loans.
SECTION 3.3.4. Reduction of Revolving Loan Commitment.
(a) The Borrower shall have the right, upon at least
thirty (30) days notice to the Agent, to reduce in whole or in part (ratably as
to all Lenders) the Revolving A Loan Commitment Amount and the Revolving B Loan
Commitment Amount, provided, however, that the Revolving A Loan Commitment
Amount and the Revolving B Loan Commitment Amount of the Lenders shall not be
reduced to an amount which is less than the aggregate amount of the Revolving A
Loans and Revolving B Loans, respectively, then outstanding after giving effect
to any prepayments made in connection with such reduction, provided, further,
however, that each partial reduction of the Revolving A Loan Commitment Amount
or the Revolving B Loan Commitment Amount shall be in an aggregate amount of
$1,000,000 or an integral multiple of $500,000 in excess
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<PAGE> 43
thereof (or, if less, the entire amount thereof), and the Borrower shall pay
any Prepayment Fee required under Section 3.3.2. Any notice given pursuant to
this clause (a) of Section 3.3.4 shall be irrevocable, and once the Revolving A
Loan Commitment Amount or the Revolving B Loan Commitment Amount, as the case
may be, is reduced pursuant to this clause (a) of Section 3.3.4, such amount
thereafter may not be reinstated or increased. The Borrower shall not be
permitted to reduce the Revolving B Loan Commitment Amount unless the Revolving
A Loan Commitment Amount has been reduced to zero in accordance with the terms
hereof.
(b) The Revolving A Loan Commitment (and the Revolving A
Loan Commitment Amount) and the Revolving B Loan Commitment (and the Revolving
B Loan Commitment Amount) shall be permanently reduced by the amount of Net
Cash Proceeds received by the Borrower or any of its Subsidiaries in connection
with any sale or disposition of assets to the extent the net book value of the
asset(s) sold or disposed together with the net book value of all other assets
sold or disposed during the term of this Agreement exceeds $250,000. Any
reduction pursuant to this clause (b) shall be applied first to the Revolving A
Loan Commitment Amount and then to the Revolving B Loan Commitment Amount.
(c) On September 15, 1996, the Revolving A Loan
Commitment (and the Revolving A Loan Commitment Amount) shall be permanently
reduced (ratably as to all Lenders) by an amount equal to the difference
between the Revolving A Loan Commitment Amount and the amount of Revolving A
Loans outstanding on such date.
(d) The Revolving A Loan Commitment (and the Revolving A
Loan Commitment Amount) and the Revolving B Loan Commitment (and Revolving B
Loan Commitment Amount) shall be permanently reduced by the amount of any
prepayments required under clauses (c), (d), (e), (f), (g), (h) or (i) of
Section 3.3.1. Any reduction pursuant to this clause (d) shall be applied
first to the Revolving A Loan Commitment Amount and then to the Revolving B
Loan Commitment Amount.
SECTION 3.4. Interest. Interest on the outstanding
principal amount of the Loans and other outstanding Obligations shall accrue
and be payable in accordance with this Section 3.4.
SECTION 3.4.1. Rates. Subject to Section 3.4.3, Borrowings
shall accrue interest at the ING Alternate Base Rate as in effect from time to
time plus 5.00%.
SECTION 3.4.2. Post-Default Rates. From and after the
occurrence of an Event of Default and during the continuance thereof, the
Borrower shall pay interest (after as well as before judgment) on the
outstanding principal amount of all Loans and other Obligations at a rate per
annum equal to the Post-Default Rate applicable to such Loans and Obligations.
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SECTION 3.4.3. Payment Dates. Accrued interest on the Loans
shall be payable, without duplication:
(a) on Maturity;
(b) with respect to any portion of any Loan prepaid or
repaid pursuant to Section 3.3.1, on the date of such prepayment or repayment
is due as provided in Section 3.3.1 and, in the case of a voluntary prepayment,
on the date set forth in any notice required for such prepayment; and
(c) on each Monthly Payment Date, commencing with the
first such day following the Closing Date.
Interest accruing at any Post-Default Rate and, to the extent permitted by
applicable law, interest on overdue amounts (including overdue interest), shall
be payable upon demand.
SECTION 3.4.4. Rate Determinations. All determinations by
the Agent of the rate of interest applicable to any Loan shall be conclusive in
the absence of manifest error.
SECTION 3.5. Taxes. (a) Any and all payments by the
Borrower hereunder or under the Notes or any other Loan Document shall be made,
in accordance with this Section 3.5, free and clear of and without deduction
for any and all present or future Taxes. If the Borrower shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder or
under any Note to any Lender or the Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
3.5), such Lender or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law;
(b) In addition, the Borrower agrees to pay any present
or future stamp or documentary taxes or intangibles taxes or any other excise
or property taxes, transfer taxes, charges or similar levies which arise from
any payment made hereunder or under the Notes or from the execution, delivery
or registration of, or otherwise with respect to this Agreement, the Notes, or
any other Loan Document;
(c) The Borrower will indemnify each Lender and the Agent
for the full amount of the taxes, charges and levies described in clauses (a)
and (b) of this Section 3.5 (including, without limitation, any such taxes,
charges and levies imposed by any jurisdiction on amounts payable under this
Section 3.5) paid by such Lender or the Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such taxes, charges and
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<PAGE> 45
levies were correctly or legally asserted. Payment under this clause (c) shall
be made within 10 days from the date such Lender or the Agent (as the case may
be) makes written demand therefor;
(d) Within 10 days after the date of any payment of
Taxes, the Borrower will furnish to the Agent, at its address referred to in
Section 10.2, the original or a certified copy of any receipt received by the
Borrower evidencing payment thereof;
(e) On or prior to the Closing Date and on or prior to
the first Business Day of each calendar year thereafter, each Foreign Lender
shall provide the Agent and the Borrower with two properly executed original
Forms 4224 and 1001 (or any successor form) prescribed by the Internal Revenue
Service or other documents satisfactory to the Borrower and the Agent, and
properly executed Internal Revenue Service Forms W-8 or W-9, as the case may
be, certifying (i) as to such Foreign Lenders's status for purposes of
determining exemption from United States withholding taxes with respect to all
payments to be made to such Foreign Lender hereunder and under the Notes or
(ii) that all payments to be made to such Foreign Lender hereunder and under
the Notes are subject to such taxes at a rate reduced to zero by an applicable
tax treaty. Each Foreign Lender agrees to provide the Agent and the Borrower
with new forms prescribed by the Internal Revenue Service upon the expiration
or obsolescence of any previously delivered form, or after the occurrence of
any event requiring a change in the most recent forms delivered by it to the
Agent and the Borrower;
(f) In the event that the Agent or any Lender receives a
refund of any taxes paid on its behalf by the Borrower in accordance with this
Section 3.5, the Agent or such Lenders, as the case may be, shall pay such
refund to the Borrower; and
(g) Without prejudice to the survival of any other
agreement hereunder, the agreements and obligations contained in this Section
3.5 shall survive the payment in full of principal and interest hereunder and
under the Notes.
SECTION 3.6. Payments, Interest Rate Computations, Other
Computations, etc. All payments by the Borrower pursuant to this Agreement,
the Notes or any other Loan Document, in respect of principal or interest on
the Notes shall be made by the Borrower to the Agent for the account of the
Lenders, pro rata according to their respective unpaid principal amounts of the
Notes. The payment of the commitment fee referred to in Section 2.3 shall be
made by the Borrower to the Agent for the account of the Lenders pro rata
according to their respective Revolving Percentages. All other amounts payable
to the Agent or any Lender under this Agreement or any other Loan Document
(except under Section 2.4) shall be paid to the Agent for the account of the
Person entitled thereto. All such payments required to be made to the Agent
shall be made, without setoff, deduction or counterclaim, not later than 2:00
p.m., New York City time, on the
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<PAGE> 46
date due, in immediately available funds, to the Collection Account. Funds
received after that time shall be deemed to have been received by the Agent on
the next following Business Day. The Agent shall promptly remit in the type of
funds received to each Lender notified to the Agent its share, if any, of such
payments received by the Agent for the account of such Lender or holder. All
interest and fees shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the
period for which such interest or fee is payable over a year comprised of 360
days. Whenever any payment to be made shall otherwise be due on a day which is
not a Business Day, such payment shall be made on the immediately preceding
Business Day. For purposes of determining the Revolving A Loan Availability
and the Revolving B Loan Availability (a) all payments (including cash sweeps)
consisting of cash, wire, or electronic transfers in immediately available
funds shall be deemed received by the Agent on the day of deposit in the
Collection Account and notice to the Agent of such deposit, and (b) all
payments consisting of checks, drafts, or similar noncash items shall be deemed
received on the day of receipt of good funds following deposit in the
Collection Account (together with notice to the Agent of such deposit). For
the purposes of computing interest and fees hereunder, all payments received in
the form of cash sweeps from the Concentration Accounts will be credited on the
Business Day following the day on which such payments are deemed received for
purposes of the preceding sentence.
SECTION 3.7. Proration of Payments. If any Lender shall
obtain any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of principal of or interest on
any Loan or other Obligations in excess of such Lender's or holder's pro rata
share of payments then or therewith obtained thereon by all Lenders, such
Lender which has received in excess of its pro rata share shall purchase from
the other Lenders such participations in such Notes or other Obligations held
by them as shall be necessary to cause such purchaser to share the excess
payment or other recovery ratably with each of them; provided, however, that if
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing holder, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery, but without interest.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 3.7 may, to the fullest extent permitted by
law, exercise all its rights of payment (including pursuant to Section 3.8)
with respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a setoff to which this Section 3.7 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.7 to share in the benefits of any recovery on such secured claim.
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SECTION 3.8. Setoff. In addition to and not in limitation
of any rights of any Lender under applicable law, each Lender shall, upon the
occurrence and during the continuance of any Event of Default, have the right
to appropriate and apply to the payment of the Obligations owing to it (whether
or not then due), and (as security for such Obligations) the Borrower hereby
grants to each Lender, a continuing security interest in, any and all balances,
credits, deposits, accounts or moneys of the Borrower then or thereafter
maintained with such Lender; provided, however, that any such appropriation and
application shall be subject to the provisions of Section 3.7. Following any
such appropriation and application pursuant to this Section 3.8, such Lender
shall promptly provide the Borrower with notice of such appropriation and
application and the amount applied, provided, that the failure by any Lender to
give any such notice shall not affect the obligations of the Borrower or impair
any right of any Lender under this Agreement or subject any Lender to any
liability.
SECTION 3.9. Use of Proceeds.
(a) The Borrower shall use the proceeds of the Term Loan
and the Revolving A Loans and Revolving B Loans made on the Closing Date (i) to
pay a portion of the "Consideration" (as such term is defined in each of the
Acquisition Agreements), (ii) to pay costs and expenses arising in connection
with the transactions contemplated hereby which are set forth in Item 1
("Transaction Costs") of the Disclosure Schedule (subject to the Required
Lenders' approval of such costs and expenses), (iii) to refinance certain
existing Indebtedness as listed on Item 3 ("Indebtedness to be Refinanced") of
the Disclosure Schedule, all as more specifically described in Item 2 ("Sources
and Uses") of the Disclosure Schedule, and (iv) to finance its general working
capital needs.
(b) The Borrower shall use the proceeds of (i) the
Revolving A Loans made after the Closing Date to finance acquisitions
(provided, however, that this clause (i) shall not be construed to permit any
acquisitions which are otherwise prohibited by the terms of this Agreement or
the other Loan Documents), and (ii) the Revolving B Loans made after the
Closing Date to finance its continuing working capital needs; provided,
however, that the Revolving B Loans shall not be used to repay any other
outstanding Loan.
(c) No part of the proceeds of any Loans shall be used
for any purpose which violates Regulations G, T, U or X of the F.R.S. Board.
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ARTICLE 4.
CONDITIONS TO LOANS
SECTION 4.1. Initial Loans. The obligations of the
Lenders to fund the initial Borrowings of Loans on the Closing Date, shall be
subject to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 4.1, except as the Required Lenders shall
otherwise consent.
SECTION 4.1.1. Resolutions, etc. The Agent shall have
received:
(a) a certificate, dated the date hereof, with
counterparts for each Lender, of the Secretary or an assistant secretary of
each Loan Party as to:
(i) resolutions of its Board of Directors, then in full
force and effect authorizing the execution, delivery and performance
of the Loan Documents to which such Loan Party is a party and the
related transactions contemplated thereby, and
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to the Loan Documents to which
it is party, upon which certificate each Lender may conclusively rely
until it shall have received further certificates of the Secretary or
an assistant secretary of such Loan Party cancelling or amending such
prior certificates;
(b) copies of the Organic Documents of each Loan Party
certified by, in the case of the charters, the appropriate Governmental
Authority of the State of such Loan Party's incorporation and, in the case of
its other Organic Documents, such Loan Party's Secretary or assistant
secretary, which documents shall be satisfactory to the Agent;
(c) a so-called "good standing" certificate with respect
to each Loan Party from the appropriate Governmental Authority of the State of
its incorporation;
(d) evidence of qualification of each Loan Party to do
business in each other jurisdiction in which such Loan Party is required to
qualify; and
(e) such other documents (certified if requested) as any
Lender may reasonably request, with respect to this Agreement, the Notes, any
other Loan Document, the transactions contemplated hereby and thereby, or any
Organic Document, Contractual Obligation of the Borrower or any of its
Subsidiaries, or Approval.
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SECTION 4.1.2. Notes. The Agent shall have received for the
account of each Lender, such Lender's Notes, in each case duly executed and
delivered pursuant to clauses (a), (b) and (c) of Section 3.2.
SECTION 4.1.3. Borrowing Base Certificate. The Agent shall
have received a Borrowing Base Certificate dated as of the Closing Date from
the chief financial Authorized Officer of the Borrower.
SECTION 4.1.4. Additional Equity, etc. The Borrower shall
have issued shares of 14% PIK Preferred Stock for an aggregate issue price, net
of commissions, of not less than $3,795,000, and, after giving effect to such
issuance, as of the Closing Date, the Borrower's Net Worth shall be not less
than $17,796,000.
SECTION 4.1.5. Release of Liens on Assets. All Indebtedness
of the Borrower and any other Loan Party described in Item 3 ("Indebtedness to
be Refinanced") of the Disclosure Schedule shall have been repaid in full and
all holders of such Indebtedness shall have acknowledged such repayment,
released Borrower and its Subsidiaries from any liability in respect of such
Indebtedness, and released all Liens on the assets securing such Indebtedness
pursuant to UCC-3 termination statements and other Instruments as shall be
suitable or appropriate in connection therewith.
SECTION 4.1.6. No Contest, etc. On the Closing Date, no
litigation, arbitration, governmental investigation, injunction, proceeding or
inquiry shall be pending or, to the knowledge of the Borrower, threatened
which:
(a) seeks to enjoin or otherwise prevent the consummation
of, or to recover any damages or obtain relief as a result of, the transactions
contemplated by or in connection with the Acquisition Agreements, this
Agreement or any Loan Document; or
(b) would, in the reasonable opinion of the Required
Lenders, be materially adverse to any of the parties hereto with respect to the
transactions contemplated hereby;
No litigation set forth in Item 4 ("Litigation") of the Disclosure Schedule in
the reasonable opinion of the Agent, could reasonably result in a Material
Adverse Change or give rise to any liability on the part of the Agent or any
Lender in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby.
SECTION 4.1.7. Certificate as to Completed Conditions,
Warranties, No Default, etc. The Agent shall have received a certificate,
dated the Closing Date, with counterparts for each
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Lender, of the chief financial Authorized Officer of the Borrower, to the
effect that:
(a) all conditions precedent set forth in this Section
4.1 have been satisfied;
(b) all representations and warranties set forth in
Article 5 are true and correct in all material respects;
(c) all representations and warranties set forth in the
Loan Documents are true and correct in all material respects; and
(d) no Default or Event of Default has occurred and is
continuing.
SECTION 4.1.8. Documents Relating to Equity Investments.
The terms and conditions of each of the stock subscription agreements pursuant
to which the 14% PIK Preferred Stock of the Borrower was issued shall in each
case be satisfactory in all respects to the Agent, and the Agent shall have
received copies of each of the foregoing documents certified as true and
correct by an Authorized Officer of the Borrower.
SECTION 4.1.9. Compliance with Requirements of Law. The
Agent shall have received evidence satisfactory to it that the Borrower is in
compliance in all material respects with all other Requirements of Law and has
obtained and maintains in full force and effect (a) all licenses, permits and
approvals issued by Governmental Authorities necessary to carry on its business
(except where the failure to have any such license, permit or approval could
not result in a Material Adverse Change), and (b) all Approvals.
SECTION 4.1.10. Opinions of Counsel. The Agent shall have
received opinion letters, dated the Closing Date and addressed to the Agent and
all Lenders, from Skadden, Arps, Slate, Meagher & Flom, counsel to the Borrower
and its Subsidiaries, in form and substance satisfactory to the Agent, and (b)
such other local counsel as requested by the Agent and covering such matters as
the Agent may reasonably request, including, without limitation, the
Acquisitions and the issuance of the additional equity required under Section
4.1.4; and
SECTION 4.1.11. Closing Fees, Expenses, etc. The Agent shall
have received, for its own account, the facility fee payable pursuant to the
Facility Fee Letter and all costs and expenses which have been invoiced and are
payable upon the initial Borrowing pursuant to Section 10.3.
SECTION 4.1.12. Subsidiary Guaranty. The Agent shall have
received the Subsidiary Guaranty, duly executed by Authorized Officers of the
Loan Parties that are a party thereto.
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SECTION 4.1.13. Security Documents and Perfection. The Agent
shall have received:
(a) The Security Agreement, duly executed by an
Authorized Officer of the Borrower and each of its Subsidiaries (including,
without limitation, those Persons that shall become Subsidiaries of the
Borrower on the Closing Date);
(b) A satisfactory collateral assignment to the Agent,
for its benefit and the ratable benefit of the Lenders, of the Borrower's
rights under the Acquisition Agreements and all other documents executed or
delivered pursuant to the Acquisition Agreements, duly consented to by the
"Sellers" under each of such Acquisition Agreements;
(c) The Borrower Pledge Agreement, duly executed by the
chief executive Authorized Officer of the Borrower;
(d) The Subsidiary Pledge Agreement, duly executed by the
chief executive Authorized Officer of World Communications, Inc.;
(e) Evidence of all filings of the Financing Statements
with respect to the Security Agreement and other Security Documents; searches
or other evidence as to the absence of any Liens (except those previously
disclosed to and consented to by the Lenders and those to be released in
accordance with Section 4.1.5); and evidence that all other actions (including
all actions necessary such that the Trademark Assignment is acceptable for
filing in the United States Patent and Trademark Office and the payment of all
documentary, intangibles, filing and recording taxes and fees) with respect to
the Liens created by the Security Documents have been taken as are necessary or
appropriate to perfect such Liens;
(f) All (i) stock certificates and undated stock powers
duly executed in blank relating thereto with respect to the pledged securities
under the Borrower Pledge Agreement, which pledged securities shall constitute
all outstanding Stock of the Borrower's Subsidiaries; (ii) Subsidiary Notes
pledged under the Borrower Pledge Agreement duly endorsed in blank; and (iii)
stock certificates and undated stock powers duly executed in blank relating
thereto with respect to the pledged securities under the Subsidiary Pledge
Agreement.
SECTION 4.1.14. Employment Agreements; Compensation. The
Agent shall have received copies of all employment agreements to which the
Borrower is a party, and the Agent shall be reasonably satisfied in all
respects with the levels of compensation (including, without limitation, fees,
wages, salaries, deferred payment arrangements, stock options, incentive plans
and pension or employee benefit contributions) paid to key members of
management.
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SECTION 4.1.15. Pension and Welfare Liabilities. The Agent
shall have received, with counterparts for each of the Lenders (i) the most
recent actuarial valuation report, if any, for each Single Employer Plan, if
any, and a copy of Schedule B to the Annual Report on Form 5500 of the Internal
Revenue Service, if any, for each Single Employer Plan, if any, most recently
filed with the Internal Revenue Service, and (ii) a report prepared by the
Borrower in form and substance satisfactory to the Agent and each Lender
detailing any liabilities of the Borrower and each Subsidiary and Commonly
Controlled Entity for post-retirement benefits under Plans which are welfare
benefit plans.
SECTION 4.1.16. Insurance. The Agent shall have received
evidence satisfactory to it that the insurance maintained by the Borrower and
its Subsidiaries is issued by an insurance company with a Best's rating of "A"
or better and a financial size category of not less than XII, is in amounts
reasonably satisfactory to the Agent, under policies naming the Agent, for its
benefit and the ratable benefit of the Lenders, as loss payee (in the case of
casualty insurance policies) and as additional insured (in the case of
liability policies), and otherwise complies with the requirements of this
Agreement and the Security Documents.
SECTION 4.1.17. Financial Information, etc. The Agent shall
have received for each Lender, the historical financial statements referred to
in Section 5.4, the Pro Forma Balance Sheets, the Fair Saleable Value Balance
Sheets and the Projections, and the Agent shall be satisfied in all respects
with such materials. Additionally, the Agent shall be satisfied in all
respects with materials contained on the Disclosure Schedule, including,
without limitation, the information contained on Item 1 ("Transaction Costs")
and Item 2 ("Sources and Uses").
SECTION 4.1.18. Acquisitions. The Acquisition Agreements
shall be in full force and effect and shall not have been amended, modified or
supplemented without the Required Lenders' prior written consent; all
conditions precedent to the consummation by the Borrower of the transactions
contemplated by the Acquisition Agreements shall have been fully satisfied or,
with the prior written consent of the Required Lenders, waived; the Borrower
shall have delivered to the Agent evidence satisfactory to the Agent that the
Acquisitions shall be consummated simultaneously with the initial Borrowings in
accordance with the terms of the Acquisition Agreements; and the Borrower shall
have delivered to the Agent each of the following:
(a) resolutions of the boards of directors and, to the
extent required, the stockholders of the Borrower, certified by the Secretary
or an assistant secretary of the Borrower, to be duly adopted and in full force
and effect on the Closing Date, authorizing the execution, delivery and
performance by the Borrower of the Acquisition Agreements;
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(b) resolutions of the boards of directors and, to the
extent required, the stockholders of IPP- South Carolina, IPP-Tennessee and
PCS, certified by the Secretary or an assistant secretary of the such Persons,
to be duly adopted and in full force and effect on the Closing Date,
authorizing the execution, delivery and performance by the such Persons of the
Acquisition Agreements;
(c) certified copies of all documents evidencing any
other necessary corporate action, consents and governmental approvals with
respect to the consummation of the transactions contemplated by the Acquisition
Agreements;
(d) copies of all legal opinions delivered in connection
with each of the Acquisitions, if any, along with reliance letters in favor of
the Agent and the Lenders; and
(e) a certificate from the Chief Executive Officer of the
Borrower to the effect that attached thereto are true and correct copies of the
Acquisition Agreements and each of the material documents, instruments and
agreements executed and delivered pursuant to the Acquisition Agreements and
making such statements of fact concerning the Acquisitions and the other
transactions consummated pursuant to such agreements as the Agent shall
request.
SECTION 4.1.19. Review of Borrower's Operations. The Agent
or its representatives shall have completed their review of the Borrower's
management information systems, accounting, financial reporting and cash
management systems as well as the legal structure of each Loan Party and the
nature of each Loan Party's asset composition and contingent liabilities, and
the Agent shall be satisfied in all respects with the results of such review.
SECTION 4.1.20. Material Contracts. The Agent shall have
received a certificate from an Authorized Officer of the Borrower to the effect
that attached thereto are true and correct copies of each of the items listed
on Item 14 ("Contracts") of the Disclosure Schedule, and the Agent shall be
satisfied in all respects with terms of such items.
SECTION 4.1.21. Other Documents, Certificates, Etc. The
Agent shall have received such other documents, certificates, opinions of
counsel or other materials as it reasonably requests from any Loan Party.
SECTION 4.1.22. Letter to Accountants. The Agent shall have
received satisfactory evidence that the Borrower has delivered a letter to its
independent public accountants authorizing such public accountants to discuss
the Borrower's financial matters with the Agent and each Lender or any of their
respective representatives whether or not a representative of the Borrower is
present.
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SECTION 4.2. All Loans. Without duplication of any
conditions precedent required to be satisfied pursuant to Section 4.1, the
obligations of the Lenders to make any Loans, shall be subject to the
satisfaction of each of the additional conditions precedent set forth in this
Section 4.2.
SECTION 4.2.1. Compliance with Warranties, No Default, etc.
The representations and warranties set forth in Article 5 shall have been true
and correct in all material respects as of the date initially made, and both
before and after giving effect to the making of any such Loan (except to the
extent expressly stated to be as of an earlier date),
(a) such representations and warranties shall be true and
correct in all material respects with the same effect as if then made (except
to the extent expressly stated to be as of an earlier date);
(b) all representations and warranties set forth in the
Security Documents shall be true and correct in all material respects with the
same effect as if then made (except to the extent expressly stated to be as of
an earlier date);
(c) no material adverse development shall have occurred
in any such litigation, arbitration or governmental investigation or proceeding
so disclosed pursuant to Section 5.7 which renders such litigation, arbitration
or governmental investigation or proceeding likely to succeed in the reasonable
opinion of the Required Lenders and, if successful, could result in a Material
Adverse Change; and
(d) no Default or Event of Default shall have occurred
and be continuing.
SECTION 4.2.2. Borrowing Request, etc. The Agent shall have
received a duly completed Borrowing Request. The delivery of any such
Borrowing Request, and the acceptance by the Borrower of the proceeds of the
Loan requested thereby, shall constitute a representation and warranty by the
Borrower that on the date of such request, and before and after giving effect
to the making of such Loans and the application of any proceeds of such Loans,
all statements set forth in Section 4.2.1 are true and correct. In the event
that, in connection with the delivery of any such Borrowing Request the
Borrower is required to amend any Item of the Disclosure Schedule in order that
the statement set forth in clause (a) or (b) of Section 4.2.1 shall be true and
correct, the Borrower shall deliver to the Agent at least five (5) Business
Days prior to the date of the Borrowing requested or to be requested, a request
that such Item of the Disclosure Schedule be amended, and the Agent shall
promptly forward such request to the Lenders. To the extent that the Required
Lenders agree to such requested amendment or otherwise agree to make any Loans
after receipt of such request, the representations and warranties
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proposed to be amended by such requested amendment to the Disclosure Schedule
will be deemed amended for purposes of this Agreement.
SECTION 4.2.3. Satisfactory Legal Form. All documents
executed or submitted by or on behalf of the Borrower or any other Loan Party
shall be satisfactory in form and substance to the Agent and its counsel; the
Required Lenders shall have received all information, and such counterpart
originals or such certified or other copies of such Instruments, as the
Required Lenders may reasonably request; and all legal matters incident to the
transactions contemplated by this Agreement shall be satisfactory to the
Required Lenders.
SECTION 4.2.4. Margin Regulations. The making of such Loan
and the use of the proceeds thereof shall not violate Regulations G, T, U and X
of the F.R.S. Board.
SECTION 4.2.5. Adverse Change. In the reasonable judgment
of the Required Lenders, no Material Adverse Change shall have occurred since
the Closing Date.
SECTION 4.2.6. Change in Law. On the date of such
Borrowing, no change shall have occurred in applicable law, or in applicable
regulations thereunder or in interpretations thereof by any court or
Governmental Authority which, in the opinion of any Lender, would make it
illegal for such Lender to make the Loan required to be made on such date.
ARTICLE 5.
WARRANTIES, ETC.
In order to induce the Lenders and the Agent to enter into
this Agreement, to engage in the transactions contemplated herein and in the
other Loan Documents and to make the Loans, the Borrower represents and
warrants to the Agent and each Lender as set forth in this Article 5. Each and
all of the representations and warranties set forth in this Article 5 shall be
true and correct, assuming and after giving effect to the consummation of the
Acquisitions and the consummation of the other transactions contemplated by
this Agreement and the other Loan Documents.
SECTION 5.1. Organization, Power, Authority, etc. Each of
the Borrower and its Subsidiaries (i) is a corporation validly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction where the failure to so qualify
could result in a Material Adverse Change, and (iii) has full power and
authority, and, except as set forth in Item 5 ("Governmental Licenses") of the
Disclosure Schedule, holds all governmental licenses, permits, registrations
and other approvals required under all Requirements
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of Law, to own and hold under lease its property and to conduct its business as
conducted prior to the Closing Date and as contemplated to be conducted
subsequent to the consummation of the Acquisitions, including, without
limitation, all Approvals. The Borrower has full power and authority to enter
into and perform its Obligations under this Agreement, the Notes and each other
Loan Document executed or to be executed by it and to obtain Loans hereunder.
SECTION 5.2. Due Authorization.
(a) The execution and delivery by the Borrower of this
Agreement, the Notes and each other Loan Document executed or to be executed by
it, and the incurrence and performance by the Borrower of the Obligations have
been duly authorized by all necessary corporate action, do not require any
Approval (except those Approvals already obtained), do not and will not
conflict with, result in any violation of, or constitute any default under, any
provision of any Organic Document or Contractual Obligation of any Loan Party
or any law or governmental regulation or court decree or order, and will not
result in or require the creation or imposition of any Lien on any Loan Party's
properties pursuant to the provisions of any Contractual Obligation of any Loan
Party other than the Loan Documents.
(b) The Certificate of Amendment has been duly adopted
pursuant to applicable law, has been duly filed with the Ohio Secretary of
State and is in full force and effect.
(c) No vote (including any vote under the rules of any
securities exchange or trading system or market on which any of the Borrower's
securities are listed or traded) on the part of the stockholders of the
Borrower is required to approve or authorize the Certificate of Amendment, any
of the transactions contemplated by this Agreement or any of the other Loan
Documents or the authorization or the issuance of the Series B Special
Preferred Stock pursuant to Article 8 or of Common Stock issuable upon
conversion of the Series B Special Preferred Stock.
(d) The issuance of the shares of Series B Special
Preferred Stock has been duly authorized and, when issued upon exercise of any
Lender's conversion rights under Article 8, such shares will have been validly
issued and will be fully paid and nonassessable and the issuance thereof will
not give rise to any preemptive rights. The issuance of the shares of Common
Stock issuable upon conversion of the Series B Special Preferred Stock has been
duly authorized and, when issued upon conversion of the Series B Special
Preferred Stock, such shares will have been validly issued and will be fully
paid and nonassessable and the issuance thereof will not give rise to any
preemptive rights. 250,000 shares of Series B Special Preferred Stock have
been duly reserved for issuance upon conversion of Term Notes pursuant to
Article 8 and 5,000,000 shares of Common Stock have been duly reserved for
issuance upon conversion of the Series B Special
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Preferred Stock. Except as set forth in the Registration Rights Agreement and
as set forth in Item 26 ("Registration Rights") of the Disclosure Schedule, no
Person has the right to demand or any other right to cause the Borrower to file
any registration statement under the Securities Act relating to any securities
of the Borrower or any right to participate in the any such registration.
SECTION 5.3. Validity, etc. This Agreement is, and the
Notes and each other Loan Document executed by the Borrower will upon the due
execution and delivery thereof constitute, the legal, valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms subject to the effect of any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally, and the
effect of general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
SECTION 5.4. Financial Information; Solvency.
(a) Except as disclosed in Item 6 ("Exceptions to GAAP")
of the Disclosure Schedule, all balance sheets, all statements of operations,
stockholders' equity and cash flows, and all other financial information of the
Borrower which have been or shall hereafter be furnished by or on behalf of the
Borrower to each Lender and the Agent for the purposes of or in connection with
this Agreement or any transaction contemplated hereby, including:
(i)(A) the consolidated audited balance sheets of the
Borrower as of December 31, 1992, December 31, 1993 and December 31,
1994, and the related consolidated statements of income and cash flows
for each of the three (3) fiscal years of the Borrower ending December
31, 1992, December 31, 1993 and December 31, 1994, together with the
opinion thereon of Price Waterhouse LLP and unaudited statements of
income and cash flow of the Borrower for the nine-month period ending
September 30, 1995;
(B) the unaudited consolidated balance sheets of the
Borrower as of December 31, 1995 and the related consolidated
statements of income and cash flows for the Fiscal Year ending
December 31, 1995;
(ii) the Form 8-K of the Borrower as filed with the
Securities and Exchange Commission for the period ending June 30,
1995;
(iii)(A) the audited balance sheet of IPP-South
Carolina as of December 31, 1994 and the related statements of income
and cash flows for the fiscal year of IPP-South Carolina then ended;
together with the unaudited statements of income and cash flow of
IPP-South Carolina for the nine-month period ending September 30,
1995;
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(B) the audited balance sheet of IPP-Tennessee as of
December 31, 1994 and the related statements of income and cash flows
for the fiscal year of IPP-Tennessee then ended; together with the
audited statements of income and cash flow of IPP-Tennessee for the
nine-month period ending September 30, 1995;
(C) the audited balance sheets of PCS as of December 31,
1992, December 31, 1993 and December 31, 1994, and the related
consolidated statements of income and cash flows for each of the three
(3) fiscal years of PCS ending December 31, 1992, December 31, 1993,
and December 31, 1994; together with the unaudited statements of
income and cash flow of PCS for the nine-month period ending September
30, 1995;
(iv) the Pro Forma Balance Sheets; and
(v) the Projections;
have been prepared in accordance with GAAP consistently applied (except to the
extent items in the Projections are based upon estimates) throughout the
periods involved and present fairly in all material respects the matters
reflected therein subject, in the case of unaudited statements, to changes
resulting from normal year-end audit adjustments and except as to the absence
of footnotes. As of the date hereof, neither the Borrower nor any of its
Subsidiaries has material contingent liabilities or material liabilities for
taxes, long-term leases or unusual forward or long-term commitments which are
not reflected in the financial statements described in clauses (i), (ii) and
(iii).
(b) Giving effect to the consummation of the transactions
contemplated by the Acquisition Agreements, the consummation of the
transactions contemplated by this Agreement and the other Loan Documents
(including the making of Loans), the Borrower and each of its Subsidiaries is
Solvent.
SECTION 5.5. Material Adverse Change. Since December 31,
1994, there has been no Material Adverse Change and there has been no Material
Adverse Change in any industry in which the Borrower or any of its Subsidiaries
is engaged.
SECTION 5.6. Absence of Default. Neither the Borrower nor
any Subsidiary is in default in the payment of (or in the performance of any
obligation applicable to) any Indebtedness, or is in material default under any
regulation of any Governmental Agency or court decree or order, or is in
default under any Requirements of Law which default could result in a Material
Adverse Change.
SECTION 5.7. Litigation, Legislation, etc. Except as
disclosed in Item 4 ("Litigation") of the Disclosure Schedule, there is no
pending or, to the knowledge of the Borrower,
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threatened litigation, arbitration or governmental investigation, proceeding or
inquiry which, if adversely determined, could result in a Material Adverse
Change; and none of the proceedings set forth in such Item 4 seeks to amend,
modify or enjoin the transactions contemplated hereby or, if adversely
determined, could result in a Material Adverse Change. There is no
legislation, governmental regulation or judicial decision that could result in
a Material Adverse Change.
SECTION 5.8. Regulations G, T, U and X. Neither the
Borrower nor any Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying Margin Stock (as defined in F.R.S. Board Regulation G or U), and no
assets of the Borrower or any Subsidiary consist of Margin Stock. The Loans
hereunder will not be used for a purpose which violates, or would be
inconsistent with, F.R.S. Board Regulation G, T, U or X.
SECTION 5.9. Government Regulation. Neither the Borrower
nor any Subsidiary is an "investment company" within the meaning of the
Investment Holding Company Act of 1940, as amended, or a "holding company," or
a "subsidiary company" of a "holding company," or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended, or
subject to regulation under the Federal Power Act, the Interstate Commerce Act
or any other federal or state law limiting its ability to incur Indebtedness or
to execute, deliver or perform the Loan Documents to which it is party.
SECTION 5.10. Taxes. Each of the Borrower and its present
or past Subsidiaries has filed all tax returns and reports required by law to
have been filed by it and has paid all taxes and Charges thereby shown to be
owing, except any such taxes or Charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.
SECTION 5.11. Pension and Welfare Plans. Except as
disclosed in Item 7 ("Benefit Plans") of the Disclosure Schedule,
(a) neither the Borrower nor any Subsidiary or Commonly
Controlled Entity has assumed any liability under (i) any employee benefit
plan, fund, program, arrangement, agreement or commitment disclosed in Schedule
5.17(a) of the Acquisition Agreements, or (ii) any other employee benefit plan,
fund, program, arrangement, agreement or commitment maintained by or on behalf
of or contributed to by or on behalf of any entity or trade or business which,
together with any of such corporations, is treated as a single employer under
Sections 414(b), (c), (m) or (o) of the IRC. Neither the Borrower nor any
Subsidiary or Commonly Controlled Entity shall be subject (directly or
indirectly) to any liability, tax or penalty whatsoever to any person
whomsoever with respect to any employee benefit plan, fund, program,
arrangement, agreement
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or commitment described in clause (i) or (ii) of the immediately preceding
sentence.
(b) No Reportable Event which could result in a Material
Adverse Change has occurred during the six-year period prior to the date on
which this representation is made or deemed made with respect to any Single
Employer Plan. The Borrower, each Commonly Controlled Entity, each Subsidiary,
each Plan, and each trust maintained pursuant to any such Plan have complied in
all material respects with the applicable provisions of ERISA, the IRC, and any
other applicable laws. Except as disclosed in Item 7 ("Benefit Plans") of the
Disclosure Schedule, the present value of all "benefit liabilities" (within the
meaning of Section 4001(a)(16) of ERISA) under each Single Employer Plan
maintained by the Borrower, any Subsidiary or any Commonly Controlled Entity
(based on those assumptions that would be used in a termination of each such
Plan) did not, as of the last annual valuation date for which an actuarial
valuation report has been done, exceed the value of the assets of such Plan as
of such date. Except as disclosed in such Item 7, neither the Borrower nor any
Commonly Controlled Entity or Subsidiary has incurred any liability to the PBGC
or to any other Person under Section 4062, 4063 or Section 4064 of ERISA on
account of the termination of, or its withdrawal from, a Single Employer Plan,
and no Lien has been imposed on the assets of the Borrower or any Commonly
Controlled Entity or Subsidiary under Section 4068 of ERISA. To the knowledge
of the Borrower and any Commonly Controlled Entities and Subsidiaries, there
does not exist any event or condition which would permit the institution of
proceedings to terminate any Single Employer Plan pursuant to Section 4042 of
ERISA. Except as disclosed in Item 7 of the Disclosure Schedule, no
"accumulated funding deficiency" (as defined in Section 302 of ERISA or Section
412 of IRC), whether or not waived, exists with respect to any Pension Plan.
The Borrower and each Commonly Controlled Entity and Subsidiary have timely
made in full each quarterly installment payment to any Pension Plan required
under Section 302(e) of ERISA or Section 412(m) of the IRC and have also made
full and timely payment of any other costs or expenses related to such a Plan.
The Borrower and all Commonly Controlled Entities and Subsidiaries have made
full and timely payment of all contributions to Multiemployer Plans required
under ERISA, the IRC or applicable collective bargaining agreements. Neither
the Borrower nor any Commonly Controlled Entity or Subsidiary has had a
complete or partial withdrawal from any Multiemployer Pension Plan and the
liability to which the Borrower or any Commonly Controlled Entity or Subsidiary
would become subject under ERISA if the Borrower or any such Commonly
Controlled Entity or Subsidiary were to withdraw completely from all
Multiemployer Pension Plans as of the valuation date most closely preceding the
date hereof is not in excess of $100,000. No such Multiemployer Pension Plan
has been terminated or is in Reorganization or Insolvent, nor, to the knowledge
of the Borrower and any Commonly Controlled Entities and Subsidiaries, is any
such Multiemployer Pension Plan likely to be terminated or to become in
Reorganization or Insolvent. To the
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knowledge of the Borrower and any Commonly Controlled Entities and
Subsidiaries, no "accumulated funding deficiency" (as defined in Section 302 of
ERISA or Section 412 of the IRC), whether or not waived, exists with respect to
any Multiemployer Plan. The present value (determined using assumptions which
are reasonable in respect of the benefits provided and the employees
participating) of the aggregate liability of the Borrower and each Subsidiary
and Commonly Controlled Entity for post-retirement benefits to be provided to
their current and former employees under Plans which are welfare benefit plans
(as defined in Section 3(1) of ERISA) is not in excess of $100,000. No written
notice of liability has been received with respect to the Borrower, any of its
Subsidiaries, or any Plan for any "prohibited transaction" (within the meaning
of Section 4975 of the IRC or Section 406 of ERISA), nor has any such
prohibited transaction resulting in material liability to the Borrower, any of
its Subsidiaries occurred. Neither the Borrower nor any Subsidiary or Commonly
Controlled Entity will, as a result of consummating the transactions
contemplated by this Agreement (pursuant to the provisions of the Agreement, by
operation of law or otherwise) (i) have incurred or become liable for any tax
assessed by the Internal Revenue Service for any alleged violations of Section
4975 of the IRC or any civil penalty imposed by the Department of Labor for any
alleged violations of Section 406 of ERISA, (ii) have caused or permitted to
occur any "prohibited transaction" within the meaning of such Section 4975 of
the IRC or Section 406 of ERISA with respect to any Plan for which no exemption
is available or (iii) have incurred any liability to the PBGC (other than
ordinary and usual PBGC premium liability) or any liability for complete or
partial withdrawal to any Multiemployer Plan. Neither the Borrower nor any
Subsidiary is subject (directly or indirectly) to, and no facts exist which
could subject the Borrower or any Subsidiary (directly or indirectly) to, any
other liability, penalty, tax or lien whatsoever, which could result in a
Material Adverse Change and which is directly or indirectly related to any
Plan, including, but not limited to, liability for any damages or penalties
arising under Title I or Title IV of ERISA, liability for any tax or penalty
resulting from a loss of deduction under Section 404 or 419 of the IRC, any tax
or penalty under chapter 43 of the IRC, or any taxes or penalties under any
other applicable law, but excluding any liability to make contributions or pay
premiums to or under an ongoing Plan before the last due date on which such
contributions or premiums could be paid or made without penalty or to pay
benefits when due in accordance with Plan terms.
SECTION 5.12. Labor Controversies. Except as disclosed in
Item 8 ("Labor Controversies") of the Disclosure Schedule, there are no labor
controversies pending or, to the best knowledge of the Borrower, threatened,
relating to the Borrower or any Subsidiary. There is (i) no unfair labor
practice complaint pending against the Borrower, or any of its Subsidiaries or,
to the best knowledge of the Borrower, threatened against any of them, before
the National Labor Relations Board, and no grievance
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or arbitration proceeding arising out of or under any collective bargaining
agreement is so pending against the Borrower or any of its Subsidiaries or, to
the best knowledge of the Borrower, threatened against any of them, (ii) no
strike, labor dispute, slowdown or stoppage is pending against the Borrower or
any of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against the Borrower or any of its Subsidiaries and (iii) no union
representation question existing with respect to the employees of the Borrower
or any of its Subsidiaries. Each of the Borrower and its Subsidiaries is in
compliance in all material respects with all collective bargaining agreements
to which it is subject.
SECTION 5.13. Ownership of Properties; Collateral.
(a) Each of the Borrower and its Subsidiaries shall own good
title to all of its material personal properties and assets of any nature
whatsoever, free and clear of all Liens except as permitted pursuant to Section
6.2.3.
(b) Except to the extent otherwise consented to in
writing by the Required Lenders, the provisions of the Security Agreement are
effective to create in favor of the Agent for the benefit of the Agent and the
Lenders, a legal, valid and enforceable security interest in all right, title
and interest of the Loan Parties in the Collateral described therein, and, upon
the filing of the Financing Statements and any required filing in the United
States Patent and Trademark Office pursuant to Section 4.1.13, the Security
Documents will create a fully perfected first priority security interest in all
right, title and interest of the Loan Parties in all of the Collateral
described therein, to the extent that a security interest therein can be
perfected by such a filing, subject to no other Liens other than Liens
permitted by Section 6.2.3.
SECTION 5.14. Intellectual Property. Each of the Borrower
and its Subsidiaries owns or licenses all such Intellectual Property, and has
obtained assignments of all licenses and other rights, as the Borrower
considers necessary for or as are otherwise material to the conduct of the
business of the Borrower and its Subsidiaries as now conducted without,
individually or in the aggregate, any infringement upon rights of other Persons
which could result in a Material Adverse Change. All Intellectual Property
owned or licensed from third Persons described in this Section 5.14 is set
forth in Item 9 ("Intellectual Property") of the Disclosure Schedule.
SECTION 5.15. Accuracy of Information. All factual
information heretofore or contemporaneously furnished by or on behalf of the
Borrower in writing to the Agent or any Lender for purposes of or in connection
with this Agreement or any transaction contemplated hereby is true and accurate
in every material respect on the date as of which such information is dated or
certified and as of the date of execution and delivery of this Agreement by the
Agent or such Lender and such information is not
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incomplete by omitting to state any material fact necessary to make such
information not misleading. Neither this Agreement nor any document or
statement furnished to the Agent or any of the Lenders by or on behalf of the
Borrower contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements contained herein or
therein not materially misleading.
SECTION 5.16. Insurance. All policies of insurance in
effect of any kind or nature owned by or issued to the Borrower and its
Subsidiaries, including policies of life, fire, theft, product liability,
public liability, property damage, other casualty, employee fidelity, workers'
compensation, property and liability insurance, (a) as of the Closing Date are
listed in Item 10 ("Insurance") of the Disclosure Schedule, (b) are, together
with all policies of employee health and welfare and title insurance, in full
force and effect, (c) comply in all respects with the applicable requirements
set forth herein and in the Security Documents and (d) are of a nature and
provide such coverage as is customarily carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower and its Subsidiaries operate. Neither the Borrower nor any of its
Subsidiaries provides any of its insurance through self-insurance except as
disclosed in Item 10 of the Disclosure Schedule.
SECTION 5.17. Certain Indebtedness. Item 11
("Indebt-edness") of the Disclosure Schedule specifies all Indebtedness of the
Borrower and its Subsidiaries as of the Closing Date which (a) is for borrowed
money, or (b) is not incurred in the ordinary course of the business of the
Borrower or any Subsidiary in a manner and to the extent consistent with past
practice, or (c) is material to the financial condition, operations,
businesses, properties or prospects of the Borrower or any Subsidiary.
SECTION 5.18. Environmental Matters. Except as disclosed
in Item 12 ("Environmental Matters") of the Disclosure Schedule to the best of
the Borrower's knowledge, the Borrower and each of its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws, and
there are no conditions or circumstances associated with the currently or
previously owned, operated, used or leased properties or current or past
operations of the Borrower or any Subsidiary which may give rise to
Environmental Liabilities and Costs which could result in a Material Adverse
Change or which may give rise to any Environmental Lien.
SECTION 5.19. No Burdensome Agreements. Neither the
Borrower nor any Subsidiary is a party to or has assumed any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject to
any charter or other corporate restriction that could result in a Material
Adverse Change.
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SECTION 5.20. Consents. Except as disclosed in Item 13
("Consents") of the Disclosure Schedule the Borrower and its Subsidiaries have
all material permits and governmental consents and approvals necessary under
Requirements of Law or, in the reasonable business judgment of the Borrower,
deemed advisable under Requirements of Law, in connection with the transactions
contemplated hereby and the ongoing business and operations of the Borrower and
its Subsidiaries.
SECTION 5.21. Contracts. Set forth in Item 14
("Contracts") of the Disclosure Schedule is an accurate and complete list of
all material Contractual Obligations of the Borrower and its Subsidiaries.
Each such material Contractual Obligation is in full force and effect in
accordance with the terms thereof. There are no material defaults by the
Borrower or any Subsidiary or, to the Borrower's knowledge after due inquiry,
any other default in existence under any such material Contractual Obligations,
in each case that could result in a Material Adverse Change.
SECTION 5.22. Employment Agreements. Set forth in Item 15
("Employment Contracts") of the Disclosure Schedule is a complete and accurate
list of each employment agreement to which the Borrower or any Subsidiary is a
party, or by which it is bound.
SECTION 5.23. Condition of Property. All of the assets and
properties owned by, leased to or used by the Borrower and its Subsidiaries
material to the conduct of their business are in adequate operating condition
and repair, ordinary wear and tear excepted, and are free and clear of known
defects except for defects which do not substantially interfere with the use
thereof in the conduct of normal operations.
SECTION 5.24. Subsidiaries. Item 16 ("Subsidiaries") of
the Disclosure Schedule sets forth all Subsidiaries of the Borrower as of the
Closing Date.
SECTION 5.25. Acquisition Agreements. The closing of the
transactions contemplated by the Acquisition Agreements shall occur on the
Closing Date simultaneously with the making of the initial Borrowings, and
Borrower has not waived or in any way amended, without the prior written
consent of the Required Lenders, any condition to the obligations to consummate
the Acquisitions. A true and complete copy of the Acquisition Agreements
(including all exhibits, schedules and amendments thereto) has been delivered
to the Agent. Borrower is not in default under the Acquisition Agreements or
under any instrument or document to be delivered in connection therewith. The
representations and warranties made in the Acquisition Agreements by Borrower
and the other Persons which are parties thereto are true and correct in all
material respects on and as of the Closing Date as though made on and as of
such date.
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SECTION 5.26. Trade Relations. Except as disclosed in Item
17 ("Termination of Material Contracts") of the Disclosure Schedule, as of the
Closing Date, there exists no actual or, to the best of Borrower's knowledge,
threatened termination, cancellation or limitation of, or any modification or
change in, the business relationship of the Borrower with any customer or group
of customers of the Borrower.
SECTION 5.27. Absence of Takeover Statutes. The Board of
Directors of the Borrower has approved for purposes of Chapter 1704 of the Ohio
Revised Code (Transactions Involving Interested Shareholders) the transactions
contemplated by this Agreement and the other Loan Documents and the issuance of
the Series B Special Preferred Stock upon conversion of the Term Notes pursuant
to Article 8 or the issuance of any shares of Common Stock upon conversion of
any Series B Special Preferred Stock. The provisions of Ohio Revised Code
Section 1707.041 with respect to "control bids" as defined in Ohio Revised Code
Section 1707.01(V)(1) do not apply to transactions contemplated by the Loan
Documents or the issuance of any shares of Series B Special Preferred Stock to
be issued pursuant to this Agreement or upon conversion of such shares. No
other "fair price," "moratorium," "control share acquisition," "business
combination," "shareholder protection," or similar antitakeover statute will
apply to the Agent or any Lender as a result of this Agreement or any of the
other Loan Documents or the authorization or issuance of Series B Special
Preferred Stock upon conversion of Notes pursuant to Article 8 or any shares of
Common Stock to be issued upon conversion of shares of Series B Special
Preferred Stock.
SECTION 5.28. Communications Act. None of the Borrower and
its Subsidiaries holds any licenses or conducts any business which would result
in the application of Section 310 of the Communications Act of 1934 as a result
of this Agreement or any of the other Loan Documents or the authorization or
issuance of any shares of capital stock to be issued upon conversion of Term
Notes pursuant to Article 8 of this Agreement or the authorization of Common
Stock upon conversion of the Series B Preferred Stock.
SECTION 5.29. Capitalization and Ownership of the Borrower.
On the Closing Date, the authorized capital stock of the Borrower consists of
22,500,000 shares of Common Stock, par value $0.01 per share, 3,410,939 of
which will be outstanding; 2,500,000 shares of Preferred Stock, $0.01 par
value, of which (i) 2,125 shares have been designated Preferred Stock, $100 par
value, of which no shares will be outstanding, (ii) 6,500 shares have been
designated Convertible Preferred Stock, without par value, $100 stated value,
cumulative and redeemable, of which no shares will be outstanding, (iii) 3,880
shares have been designated Preferred Stock, without par value, $1,000 stated
value, cumulative and redeemable, of which no shares will be outstanding, (iv)
16,000 shares have been designated 8% Preferred Stock, without par value, $100
stated value, cumulative and redeemable, of which no shares will be
outstanding, (v) 2,500
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shares have been designated 7% Convertible Preferred Stock, without par value,
$100 stated value, cumulative and redeemable, of which no shares will be
outstanding, (vi) 550,000 shares have been designated 10% Preferred Stock,
without par value, $10 stated value, cumulative, of which 530,534 shares will
be outstanding, (vii) 250,000 shares have been designated Series A Special
Convertible Stock, $.20 par value, of which no shares will be outstanding, and
(viii) 250,000 shares have been designated Series B Special Convertible
Preferred Stock, $.20 par value, of which no shares will be outstanding, (ix)
200,000 shares have been designated 14% Convertible Preferred Stock, without
par value, $60 stated value, of which 107,918 shares will be outstanding, and
(x) 1,218,995 shares are undesignated and unissued. All outstanding shares of
capital stock of the Borrower are duly authorized, validly issued, fully paid
and nonassessable, and are not, and will not have been, issued in violation of
any preemptive rights. Except as set forth in Item 24 (Preemptive Rights,
Options, Warrants) of the Disclosure Schedule, no issued, no authorized but
unissued and no treasury shares of capital stock of the Borrower are subject to
any preemptive right, option, warrant, right of conversion or purchase or any
similar right issued or granted by the Borrower or, to the knowledge of the
Borrower, by any of its shareholders. Except as set forth in the Organic
Documents of the Borrower, or in Item 25 (Voting and Transfer Agreements) of
the Disclosure Schedule, there are no agreements or understandings with respect
to the voting, sale or transfer of any shares of stock of the Borrower to which
the Borrower or any of its Subsidiaries is a party.
SECTION 5.30. Securities Laws. In reliance on the
investment representations contained in Section 2.5, the issuance and delivery
of Series B Special Preferred Stock upon the conversion of the Notes by the
Lenders and the issuance and delivery of Common Stock to the Lenders upon the
conversion of the Series B Special Preferred Stock, are and will be exempt from
the registration requirements of the Securities Act and all applicable state
securities laws, as such laws are currently in effect.
SECTION 5.31. No Integration of Issue. Neither the
Borrower nor any Person authorized or employed by the Borrower as agent, broker
or otherwise in connection with the offering of the Notes has offered the Notes
for sale to, or solicited any offers to buy the Notes from, or otherwise
approached or negotiated or communicated in respect thereof with, anyone other
than Lenders. Neither the Borrower nor any Person acting on behalf of the
Borrower will sell or offer any class of securities to, or solicit any offers
to buy any class of securities from, or otherwise approach, negotiate or
communicate in respect thereof with, any Person so as to require the
registration of the Notes under the Securities Act or any applicable state
securities laws.
SECTION 5.32. No Conflict. None of the transactions
contemplated by this Agreement or any of the other Loan Documents (including
the issuance of shares of Series B Special Preferred
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Stock upon conversion of Notes or shares of Common Stock upon conversion of the
Series B Special Preferred Stock) will give rise to any payment or the
acceleration of any obligation (whether with or without the passage of time or
upon the occurrence of any event) to any director, officer or employee of the
Borrower or any Subsidiary.
ARTICLE 6.
COVENANTS
SECTION 6.1. Affirmative Covenants. The Borrower agrees
with each Lender that until the Revolving Loan Commitment has terminated and
all Loans and Obligations (other than Obligations that expressly survive the
termination of this Agreement pursuant to Section 10.5) have been paid and
performed in full, the Borrower will perform the Obligations set forth in this
Section 6.1.
SECTION 6.1.1. Financial Information, etc. The Borrower
will furnish, or will cause to be furnished, to each Lender and to the Agent
copies of its financial statements, reports and information:
(a) (i) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a consolidated
and consolidating balance sheet at the close of such Fiscal Year, and
related consolidated and consolidating statements of operations,
retained earnings, and cash flows for such Fiscal Year, of Borrower
and its Subsidiaries (with comparable information at the close of and
for the prior Fiscal Year), certified (in the case of consolidated
statements) without qualification by Price Waterhouse LLP or other
independent public accountants reasonably satisfactory to the Agent,
together with a report containing a description of projected business
prospects (including capital expenditures) and management's discussion
and analysis of financial condition and results of operation of
Borrower and its Subsidiaries;
(ii) promptly when available and in any event within ninety
(90) days after the close of each Fiscal Year, a letter report of such
independent public accountants at the close of such Fiscal Year to
the effect that they have reviewed the provisions of this Agreement
and the most recent Compliance Certificate being furnished pursuant to
clause (a)(iii) and are not aware of any miscalculation in such
Compliance Certificate relating to the financial tests set forth in
Section 6.2.4 or of any default in the performance by the Borrower or
any of its Subsidiaries to be performed by such Loan Parties hereunder
or under any other
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Loan Document, except such miscalculation or default, if any, as
may be disclosed in such statement; and
(iii) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a Compliance
Certificate calculated as of the computation date at the close of such
Fiscal Year; and
(b) promptly when available and in any event within (x)
forty-five (45) days after the close of each calendar month of the 1996 Fiscal
Year, or (y) thirty (30) days after the close of each calendar month of each
Fiscal Year other than the 1996 Fiscal Year:
(i) consolidated and consolidating balance sheets at the
close of such month, and consolidated and consolidating statements of
operations, retained earnings, and cash flows for such month and for
the period commencing at the close of the previous Fiscal Year and
ending with the close of such month, of Borrower and Subsidiaries
(with comparable information at the close of and for the corresponding
month of the prior Fiscal Year and for the corresponding portion of
such prior Fiscal Year and with comparable information set forth in
the Projections for the relevant period, provided, however, that the
Borrower shall not be required to deliver comparisons to the prior
Fiscal Year for all financial statements relating to a calendar month
ending on or prior to December 31, 1996), certified by the principal
accounting or chief financial Authorized Officer of the Borrower,
together with a description of projected business prospects (including
Consolidated Capital Expenditures) and a brief report containing
management's discussion and analysis of the financial condition and
results of operations of the Borrower and its Subsidiaries (including
a discussion and analysis of any changes compared to prior results and
the Projections);
(ii) updates to the business plan described in clause (e)
hereof for the remaining term of Borrower's then current Fiscal Year;
and
(c) within thirty (30) days after the close of each
Fiscal Quarter, a Compliance Certificate calculated as of the computation date
at the close of such month;
(d) promptly upon receipt thereof, copies of all detailed
financial and management reports submitted to Borrower by its independent
public accountants in connection with each annual or interim audit made by such
independent public accountants of the books of Borrower or any Subsidiary;
(e) within ten (10) days prior to the end of each Fiscal
Year of the Borrower, a business plan of the Borrower and its Subsidiaries, in
form, scope and detail reasonably satisfactory to the Required Lenders, for the
twelve (12) months
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following the end of such Fiscal Year, including consolidated and consolidating
operating budgets prepared on a monthly basis for such Fiscal Year, which
budgets shall include estimated Consolidated Capital Expenditures and other
costs to be incurred by the Borrower and its Subsidiaries, on a consolidated
and consolidating basis, during the applicable Fiscal Year, in each case, with
accompanying detail, together with a report containing management's discussion
and analysis of the projected financial condition and results of operations of
the Borrower and its Subsidiaries;
(f) promptly after approved by the Borrower's Board of
Directors, any updates or revisions to any business plan described in the
preceding clause (e), in addition to those described in clause (b)(ii) above;
(g) (i) not later than Friday of each calendar week, a
Borrowing Base Certificate as of the last day of the preceding calendar week
and (ii) following a request by the Agent, within one (1) Business Day, a
Borrowing Base Certificate as of the day of such request;
(h) promptly upon the sending or filing thereof, copies
of all reports that the Borrower or any of its Subsidiaries sends to its
security holders generally, and copies of all reports and registration
statements that the Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange;
(i) within sixty (60) days after the Closing Date, the
audited balance sheets of IPP-South Carolina, IPP-Tennessee and PSC as at the
Closing Date, certified without qualification by independent public accountants
acceptable to the Required Lenders, and in form and scope reasonably
satisfactory to the Required Lenders;
(j) no later than Thursday of each calendar week, a
detailed aged schedule, in a form satisfactory to the Required Lenders, of all
accounts payable of the Borrower and its Subsidiaries as of the last Business
Day of the prior week; and
(k) such other information with respect to the financial
condition, business, property, assets, revenues and operations of the Borrower
and any Subsidiary as any Lender may (through the Agent) from time to time
reasonably request.
SECTION 6.1.2. Maintenance of Corporate Existence, etc.
Except as permitted by Section 6.2.10, the Borrower will cause to be done at
all times all things necessary to maintain and preserve the corporate
existences of the Borrower and each Subsidiary.
SECTION 6.1.3. Foreign Qualification. The Borrower will,
and will cause each Subsidiary to, cause to be done at all times all things
necessary to be duly qualified to do business and
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be in good standing as a foreign corporation in each jurisdiction where the
failure to so qualify could result in a Material Adverse Change. The Borrower
will cause each of its agents, if any, to be duly qualified to do business in,
and at all times comply with all applicable Requirements of Law of each
jurisdiction where the failure to so qualify or comply could result in a
Material Adverse Change.
SECTION 6.1.4. Payment of Taxes, etc. The Borrower will,
and will cause each Subsidiary to, pay and discharge, as the same become due
and payable, (a) all Charges against it or on any of its property, as well as
claims of any kind which, if unpaid, might become a Lien upon any one of its
properties, and (b) all lawful claims for labor, materials, supplies, services
or otherwise before any thereof become a default; provided, however, that the
foregoing shall not require the Borrower or any Subsidiary to pay or discharge
any such Charge or claim so long as it shall be diligently contesting the
validity thereof in good faith by appropriate proceedings and shall have set
aside on its books adequate reserves in accordance with GAAP with respect
thereto.
SECTION 6.1.5. Insurance. In addition to any insurance
required to be maintained pursuant to any other Loan Document, the Borrower
will, and (with respect to the insurance described in clauses (a) and (b)
below) will cause each Subsidiary to, maintain or cause to be maintained with
insurance companies with a Best's rating of "A" or better:
(a) insurance with respect to its properties and business
against such casualties, contingencies and liabilities (including, without
limitation, business interruption insurance) and of such types and in such
amounts as is acceptable to the Agent and the Lenders and will furnish to the
Agent, annually at the policy renewal date, a certificate of an Authorized
Officer setting forth the nature and extent of all insurance maintained by the
Borrower and its Subsidiaries in accordance with this Section;
(b) within 60 days after the Closing Date and at all
times thereafter, a "key-man" life insurance policy from a reputable insurance
provider acceptable to the Required Lenders on the life of the Person that
serves as Chief Operating Officer, President or similar position within the
Borrower's organizational structure, which policy shall (i), at all times after
the date of its issuance, have a minimum face value of not less than $3,000,000
in the aggregate and (ii) be assigned to the Agent, for its benefit and the
ratable benefit of the Lenders. Further, the Borrower shall deliver to the
Agent such assignments, acknowledgments or other instruments as the Required
Lenders shall reasonably request in order to perfect the Agent's interest in
such policy.
Each such policy shall be issued by an insurance company with a Best's rating
of "A" or better and a financial size category of
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<PAGE> 71
not less than XII, shall be in effect on the Closing Date and the premiums for
each such policy shall be paid as such premiums shall come due. All policies
of casualty insurance shall contain an endorsement, in the form submitted to
the Borrower by the Agent, showing loss payable to the Agent, for its benefit
and the ratable benefit of the Lenders, as their interests may appear. All
policies of liability insurance, including, without limitation, all primary and
umbrella liability policies, shall name the Agent, for its benefit and the
ratable benefit of the Lenders, as additional insureds. The Borrower shall
retain all the incidents of ownership of the insurance maintained pursuant to
this Section 6.1.5, but shall not borrow upon or otherwise impair its right to
receive the proceeds of such insurance, other than customary financing of
annual premiums. Subject to clauses (d) and (e) of Section 3.3.1, so long as
no Event of Default has occurred and is continuing, the Borrower and its
Subsidiaries shall have the right to use the proceeds of casualty insurance to
repair or replace damaged or destroyed property and shall have the right to use
the proceeds of business interruption insurance for its ongoing business needs.
SECTION 6.1.6. Notice of Default, Litigation, etc. Upon a
Responsible Officer learning thereof, the Borrower will give prompt written
notice (with a description in reasonable detail) to the Agent of:
(a) the occurrence of any Default;
(b) the occurrence of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed in writing by
the Borrower to the Lenders which has been instituted or, to the knowledge of
the Borrower, is threatened against, the Borrower or any Subsidiary or to which
any of its properties, assets or revenues is subject which, if adversely
determined, could result in a Material Adverse Change;
(c) any material development which shall occur in any
litigation, arbitration or governmental investigation or proceeding previously
disclosed by the Borrower to the Lenders pursuant to Section 5.7 which could
result in a Material Adverse Change;
(d) the occurrence of any other circumstance which could
result in a Material Adverse Change;
(e) the occurrence of any Loss; and
(f) (i) the occurrence or expected occurrence of any
Reportable Event with respect to any Single Employer Plan, or any withdrawal
from, or the termination, Reorganization or Insolvency of any Multiemployer
Pension Plan, (ii) the institution of proceedings or the taking of any other
action by the PBGC or the Borrower or any Commonly Controlled Entity or
Subsidiary or any Multiemployer Pension Plan with respect to the withdrawal
from, or
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<PAGE> 72
the termination, Reorganization or Insolvency of, any Single Employer Plan or
Multiemployer Pension Plan, or the receipt of notice by the Borrower or any
Commonly Controlled Entity or Subsidiary that the institution of any such
proceedings or the taking of any such action is under consideration or
anticipated, (iii) the institution of any proceedings or other action by the
Internal Revenue Service or the Department of Labor with respect to the minimum
funding requirements of any Pension Plan, or the receipt of notice by the
Borrower or any Commonly Controlled Entity or Subsidiary that the institution
of any such proceedings or the taking of any such action is under consideration
or anticipated, (iv) the occurrence or expected occurrence of any event which
could result in the incurrence of unpredictable contingent event benefits under
Section 302 of ERISA or Section 412 of the IRC with respect to any Pension
Plan, (v) any event or condition which could increase the liability of the
Borrower or any Commonly Controlled Entity or Subsidiary with respect to
post-retirement welfare benefits under any Plan, or (vi) the occurrence of any
other event or condition with respect to any Plan which could subject the
Borrower or any Subsidiary (directly or indirectly) to any tax, penalty or
liability under Title I or Title IV of ERISA, Section 404 or 419 and Chapter 43
of the IRC, or any other applicable laws, and in each case in clauses (i)
through (vi) above, such event or condition, together with all other events or
conditions, if any, could subject the Borrower or any Subsidiary (directly or
indirectly) to any tax, fine, penalty, or other liabilities in amounts which in
the aggregate could result in a Material Adverse Change. The Borrower will
deliver to each of the Lenders a true and complete copy of each annual report
(Form 5500) of each Plan (other than a Multi-Employer Plan) required to be
filed with the Internal Revenue Service, promptly after the filing thereof; and
(g) the condemnation or threat of condemnation with
respect to any property used or necessary in the conduct of the businesses of
the Borrower or any of its Subsidiaries.
SECTION 6.1.7. Books and Records. The Borrower will, and
will cause each Subsidiary to, keep books and records reflecting all of its
business affairs and transactions in accordance with GAAP and permit the Agent
and each Lender or any of their respective representatives, at reasonable times
and reasonable intervals upon one Business Day's notice, to visit all of its
offices, to discuss its financial matters with its officers and independent
public accountants and to examine (and, at the expense of the Borrower,
photocopy extracts from) any of its books or other corporate records. The
Borrower shall pay any fees and expenses, including, without limitation, any
fees of its independent public accountants incurred in connection with the
Agent's or any Lender's exercise of its rights pursuant to this Section 6.1.7,
provided, however, that unless an Event of Default has occurred and is
continuing the Borrower shall be required to pay such fees for not more than
two visits and examinations in each Fiscal Year.
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<PAGE> 73
SECTION 6.1.8. Maintenance of Properties, Etc. The Borrower
will: (a) maintain and preserve, and cause each of its Subsidiaries to maintain
and preserve, all of its properties (real and personal and including all
intangible assets), except obsolete properties, which are used or necessary in
the conduct of its business in good working order and condition, ordinary wear
and tear excepted, except that this clause (a) shall not apply to any
circumstance where noncompliance, together with all other noncompliances, could
not reasonably result in a Material Adverse Change; and (b) to the extent
Borrower deems advisable in its reasonable business judgment, forthwith repair
or replace, at its own expense, any such property or asset that suffers a Loss.
SECTION 6.1.9. Maintenance of Licenses and Permits. The
Borrower will maintain and preserve, and will cause each of its Subsidiaries to
maintain and preserve, all Intellectual Property, rights, permits, licenses,
approvals and privileges issued under or arising under any Requirements of Law,
except that this Section 6.1.9 shall not apply to any circumstance where
noncompliance, together with all other noncompliances, could not result in a
Material Adverse Change.
SECTION 6.1.10. Employee Plans. The Borrower will at all
times comply in all material respects with the provisions of ERISA and the IRC
which are applicable to any of the Plans, and cause each of its Subsidiaries so
to do.
SECTION 6.1.11. Compliance with Laws. The Borrower will, and
will cause each Subsidiary to, comply with all applicable Requirements of Law;
provided, however, that this Section 6.1.11 shall not apply to any circumstance
of noncompliance that together with all other noncompliances could not result
in a Material Adverse Change.
SECTION 6.1.12. Interest Rate Protection. Within 180 days
after the Closing Date, the Borrower shall obtain and thereafter maintain in
full force and effect, from ING, or from an Eligible Lending Institution, one
or more Interest Rate Contracts, protecting the Borrower against increases in
the ING Alternate Base Rate in excess of 100 basis points above the ING
Alternate Base Rate on the Closing Date for an aggregate notional amount equal
to at least $20,000,000, for a term of at least three (3) years. ING shall
make available to the Borrower various proposals for Interest Rate Contracts.
Should the Borrower obtain any proposal for Interest Rate Contracts from a
source other than ING, the Borrower agrees that ING shall have a right to
provide such Interest Rate Contracts on the same terms as those set forth in
such proposal. The Borrower will collaterally assign such Interest Rate
Contracts to the Agent, for its benefit and the ratable benefit of the Lenders,
pursuant to documentation acceptable to the Agent, and the Borrower may secure
any net obligations of the Borrower under any such Interest Rate Contracts on a
pari passu basis with the Obligations.
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<PAGE> 74
SECTION 6.1.13. Real Estate. If the Borrower or any of its
Subsidiaries shall acquire a fee or leasehold interest (other than office
leases) in real estate which the Required Lenders determine to be material to
the Borrower or such Subsidiary, the Borrower or such Subsidiary, as the case
may be, will execute a first priority mortgage, deed of trust or deed to secure
debt or leasehold mortgage, leasehold deed of trust or leasehold deed to secure
debt, as appropriate, in form and substance reasonably satisfactory to the
Required Lenders, in favor of the Agent, for its benefit and the ratable
benefit of the Lenders, and shall use its best efforts to deliver to the Agent
such title insurance policies, surveys and landlords' estoppel agreements with
respect thereto as the Required Lenders shall request.
SECTION 6.1.14. Governmental Approvals. The Borrower will
secure, and will cooperate with the Lenders in any case to secure, all
necessary consents, approvals, authorizations and exemptions from all
governmental authorities, (including the making of all filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act")) in connection with any conversion of Term Notes pursuant to Article 8
and the issuance of shares of Series B Special Preferred Stock in connection
therewith, and the issuance of shares of Common Stock upon the conversion of
such shares of Series B Special Preferred Stock. The Borrower shall be
responsible for the payment of all expenses with respect to all filings under
the HSR Act in connection with the foregoing, including but not limited to the
filing fees and the fees and expenses of counsel to each Lender in connection
therewith.
SECTION 6.1.15. Antitakeover Statutes. The Borrower shall
take all action necessary to avoid the application of any "fair price,"
"moratorium," "control share acquisition," "business combination," "shareholder
protection" or similar antitakeover statute to the transactions contemplated by
this Agreement or any of the other Loan Documents.
SECTION 6.1.16. Telephone Placement Agreements. With respect
to Telephone Placement Agreements entered into or renewed or extended after the
Closing Date, the Borrower shall only utilize and execute Instruments which are
in the form of Schedule 2 attached hereto.
SECTION 6.1.17. Cash Management System. On or prior to April
15, 1996, the Borrower will establish and thereafter maintain at all times the
cash management system described in Schedule 3.
SECTION 6.2. Negative Covenants. The Borrower agrees with
each Lender that until all Commitments have terminated and all Obligations
(other than Obligations that expressly survive the termination of this
Agreement pursuant to Section 10.5) have been
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<PAGE> 75
paid and performed in full, the Borrower will perform the Obligations set forth
in this Section 6.2.
SECTION 6.2.1. Business Activities. The Borrower will not,
and will not permit any Subsidiary to, engage in any business activity, except
those in which the Borrower is engaged on the Closing Date and such activities
as may be incidental or related thereto.
SECTION 6.2.2. Indebtedness. The Borrower will not, and
will not permit any Subsidiary to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness other than:
(a) Indebtedness in respect of the Loans and other
Obligations;
(b) Indebtedness in respect of the Interest Rate
Contracts required pursuant to Section 6.1.12 to the extent such do not
constitute Obligations;
(c) obligations that constitute Indebtedness solely by
virtue of being secured by Liens permitted under Section 6.2.3;
(d) Indebtedness in respect of liabilities resulting from
(i) endorsements of negotiable instruments in the ordinary course of business;
and (ii) surety bonds issued for the account of the Borrower or any of its
Subsidiaries in the ordinary course of business;
(e) Indebtedness existing on the Closing Date and set
forth in Item 18 ("Existing Indebtedness") of the Disclosure Schedule;
(f) Indebtedness of any Subsidiary owing to the Borrower,
provided that such Indebtedness is evidenced by a demand promissory note that
is pledged to the Agent, for its benefit and the benefit of the Lenders, as
security for the Obligations pursuant to the Borrower Pledge Agreement;
(g) Capitalized Lease Liabilities provided that (i) the
aggregate amount thereof which in accordance with GAAP is attributable to
principal, together with the aggregate outstanding principal amount of all
Purchase Money Indebtedness of the Borrower and its Subsidiaries, does not
exceed $100,000 at any one time outstanding, (ii) payments under each
capitalized lease giving rise to such Capitalized Lease Liabilities shall be
made in equal periodic installments, (iii) such Capitalized Lease Liabilities
are not incurred to finance the purchase of Telephones and related equipment,
and (iv) the Consolidated Capital Expenditures financed by such Capitalized
Lease Liabilities are permitted under Section 6.2.5;
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<PAGE> 76
(h) Purchase Money Indebtedness provided that (i) the
amount of such Indebtedness, together with the amount of any outstanding
Capitalized Lease Liabilities of the Borrower and its Subsidiaries that in
accordance with GAAP are attributable to principal, does not exceed $100,000 at
any one time outstanding, (ii) such Indebtedness provides for the payment of
principal in equal periodic installments, (iii) such Purchase Money
Indebtedness is not incurred to finance the purchase of Telephones and related
equipment, and (iv) the Consolidated Capital Expenditures financed by such
Purchase Money Indebtedness are permitted under Section 6.2.5;
(i) extensions, refinancings, replacements and renewals
of any of the foregoing items described in clauses (a) through (h) above,
provided that the principal amount thereof is not increased or the terms
thereof are not modified to impose more burdensome covenants, rates of
interest, repayment terms or events of default upon the Borrower or its
Subsidiaries, as the case may be; and
(j) other Indebtedness not otherwise covered by clauses
(a) through (i) above not to exceed $100,000 in aggregate amount outstanding at
any time during the term of this Agreement.
SECTION 6.2.3. Liens. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist any Lien
upon any of its property, revenues or assets, whether now owned or hereafter
acquired, except:
(a) Liens in favor of the Agent or the Lenders granted
pursuant to any Loan Document;
(b) Liens identified in Item 19 ("Permitted Liens") of
the Disclosure Schedule evidencing rights of lessors in leased equipment and/or
purchase money liens on specific items of equipment;
(c) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable with penalty
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books;
(d) Liens of carriers, warehousemen, mechanics, and
materialmen incurred in the ordinary course of business for sums not overdue or
being contested in good faith by appropriate proceedings (which proceedings
have the effect of preventing the forfeiture or sale of the asset subject to
such Lien) and for which adequate reserves in accordance with GAAP shall have
been set aside on its books;
(e) Liens (other than Liens arising under ERISA or
Section 412(n) of the Code) incurred in the ordinary course of business in
respect of deposits made in connection with workmen's compensation,
unemployment insurance or other forms of
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<PAGE> 77
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds;
(f) judgment Liens with respect to judgments to the
extent such judgments do not constitute an Event of Default described in
Section 7.1.9;
(g) Liens which arise by operation of law under Article 2
of the UCC in favor of unpaid sellers of goods, or liens in items or any
accompanying documents or proceeds of either arising by operation of law under
Article 4 of the UCC in favor of a collecting bank;
(h) easements (including, without limitation, reciprocal
easement agreements and utility agreements), rights-of-way, covenants,
consents, reservations, encroachments, variations and other restrictions,
charges or encumbrances (whether or not recorded) affecting the use of
property, which do not materially detract from the value of such property or
impair the use thereof;
(i) Liens securing Indebtedness permitted under clauses
(g) or (h) of Section 6.2.2;
(j) Leases and subleases granted to others in the
ordinary course of business not interfering in any material respect with any
business of the Borrower or any of its Subsidiaries;
(k) Liens which constitute rights of set-off of a
customary nature or bankers' liens with respect to amounts on deposit, whether
arising by operation of law or by contract, in connection with deposit accounts
established with banks in the ordinary course of business; and
(l) extensions, renewals or replacements of any Lien
referred to in paragraphs (a) through (k) above, provided that the principal
amount of the obligation secured thereby is not increased and that any such
extension, renewal or replacement is limited to the property originally
encumbered thereby.
SECTION 6.2.4. Financial Condition. The Borrower hereby
covenants and agrees as set forth below:
(a) Fixed Charge Coverage Ratio. The Borrower will not
permit its Fixed Charge Coverage Ratio for the twelve-month period ending on
the last day of any Fiscal Quarter to be less than the ratio set forth opposite
such Fiscal Quarter (for each Fiscal
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<PAGE> 78
Quarter ending prior to March 31, 1997, such ratio to be calculated as provided
in clause (h) of this Section 6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Ratio
--------------------- --------
<S> <C>
June 30, 1996 0.4
September 30, 1996 0.8
December 31, 1996 1.0
March 31, 1997 1.1
June 30, 1997 1.5
September 30, 1997 1.8
December 31, 1997 2.3
March 31, 1998 2.5
June 30, 1998 2.7
September 30, 1998 3.0
December 31, 1998 3.3
March 31, 1999 3.3
June 30, 1999 2.9
</TABLE>
(b) EBITDA. The Borrower will not permit EBITDA of the
Borrower and its Subsidiaries for the twelve-month period ending on the last
day of any Fiscal Quarter to be less than the amount set forth opposite such
Fiscal Quarter (for each Fiscal Quarter ending prior to March 31, 1997, such
amount to be calculated as provided in clause (h) of this Section 6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Amount
--------------------- ---------
<S> <C>
June 30, 1996 $ 875,000
September 30, 1996 3,028,000
December 31, 1996 5,589,000
March 31, 1997 8,036,000
June 30, 1997 11,170,000
September 30, 1997 13,317,000
December 31, 1997 16,521,000
March 31, 1998 16,914,000
June 30, 1998 17,458,000
September 30, 1998 18,017,000
December 31, 1998 18,704,000
March 31, 1999 19,130,000
June 30, 1999 19,739,000
</TABLE>
(c) Current Ratio. The Borrower will not permit the
Current Ratio of the Borrower and its Subsidiaries on the last day of any
Fiscal Quarter to be less than 0.6.
(d) Tangible Net Worth. The Borrower will not permit its
Tangible Net Worth on the last day of any Fiscal Quarter to be
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<PAGE> 79
less than the amount set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Amount
--------------------- ---------
<S> <C>
June 30, 1996 ($9,775,000)
September 30, 1996 (9,170,000)
December 31, 1996 (8,149,000)
March 31, 1997 (7,455,000)
June 30, 1997 (5,157,000)
September 30, 1997 (2,535,000)
December 31, 1997 1,616,000
March 31, 1998 3,051,000
June 30, 1998 6,211,000
September 30, 1998 9,655,000
December 31, 1998 14,640,000
March 31, 1999 16,188,000
June 30, 1999 18,890,000
</TABLE>
(e) Senior Interest Coverage Ratio. The Borrower will
not permit the Senior Interest Coverage Ratio of the Borrower and its
Subsidiaries for the twelve-month period ending on the last day of any Fiscal
Quarter to be less than the ratio set forth opposite such Fiscal Quarter (for
each Fiscal Quarter ending prior to March 31, 1997, such ratio to be calculated
as provided in clause (h) of this Section 6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Ratio
--------------------- --------
<S> <C>
June 30, 1996 0.9
September 30, 1996 1.6
December 31, 1996 2.0
March 31, 1997 2.3
June 30, 1997 3.4
September 30, 1997 4.4
December 31, 1997 5.8
March 31, 1998 6.9
June 30, 1998 8.4
September 30, 1998 10.6
December 31, 1998 14.3
March 31, 1999 18.2
June 30, 1999 24.8
</TABLE>
(f) Minimum Gross Margin Percentage - Non-Coin Calls.
The Borrower will not permit the Minimum Gross Margin Percentage - Non-Coin
Calls for the twelve-month period ending on the last day of any Fiscal Quarter
to be less than the percentage set forth opposite such Fiscal Quarter (for each
Fiscal Quarter ending prior
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<PAGE> 80
to March 31, 1997, such percentage to be calculated as provided in clause (h)
of this Section 6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Percentage
--------------------- ----------
<S> <C>
June 30, 1996 55.2%
September 30, 1996 55.2
December 31, 1996 55.2
March 31, 1997 54.2
June 30, 1997 54.4
September 30, 1997 54.7
December 31, 1997 56.0
March 31, 1998 56.2
June 30, 1998 56.4
September 30, 1998 56.6
December 31, 1998 56.8
March 31, 1999 56.7
June 30, 1999 56.7
</TABLE>
(g) Maximum Overhead Expense. The Borrower will not
permit Maximum Overhead Expense of the Borrower and its Subsidiaries for the
twelve-month period ending on the last day of any Fiscal Quarter to be more
than the amount set forth opposite such Fiscal Quarter (for each Fiscal Quarter
ending prior to March 31, 1997, such amount to be calculated as provided in
clause (h) of this Section 6.2.4):
<TABLE>
<CAPTION>
Fiscal Quarter Ending: Amount
--------------------- ---------
<S> <C>
June 30, 1996 $ 3,989,000
September 30, 1996 6,862,000
December 31, 1996 9,717,000
March 31, 1997 12,885,000
June 30, 1997 12,119,000
September 30, 1997 12,524,000
December 31, 1997 13,002,000
March 31, 1998 13,279,000
June 30, 1998 13,554,000
September 30, 1998 13,830,000
December 31, 1998 14,104,000
March 31, 1999 14,392,000
June 30, 1999 14,679,000
</TABLE>
(h) Calculations for Stub Periods. Notwithstanding any
thing contained herein to the contrary, for any period ending prior to March
31, 1997, calculation of all items relating to income or expense (including,
without limitation, EBITDA) and increases or decreases in working capital)
shall be made for the period commencing on the Closing Date and ending on the
date of determination.
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<PAGE> 81
SECTION 6.2.5. Capital Expenditures. The Borrower will not,
and will not permit any Subsidiary to, make or commit to make Consolidated
Capital Expenditures, except that the Borrower and its Subsidiaries may make
Consolidated Capital Expenditures during any Fiscal Year provided (x) no
Default or Event of Default has occurred and is continuing and (y) the
aggregate amount of Consolidated Capital Expenditures made during such Fiscal
Year does not exceed the amount set forth below opposite such Fiscal Year (in
the case of the 1996 Fiscal Year, for the period commencing on the Closing Date
to the end of such Fiscal Year):
<TABLE>
<CAPTION>
Fiscal Year: Amount
----------- --------
<S> <C>
1996 $ 3,300,000
1997 4,000,000
1998 4,250,000
1999 4,325,000
</TABLE>
provided, however, that the Borrower and its Subsidiaries shall not make or
incur Consolidated Capital Expenditures prior to May 1, 1996 in excess of
$350,000 in the aggregate; provided, further however, that the Borrower and its
Subsidiaries may not make or incur Consolidated Capital Expenditures in the
calendar month immediately following any calendar month where the Borrower and
its Subsidiaries experience negative cash flow on a consolidated basis (i.e.,
cash expenditures exceed cash revenues during such calendar month); provided,
further however, that expenditures from insurance proceeds received upon the
occurrence of a Loss which are made to replace or repair damaged or destroyed
assets will not be included in the foregoing calculation for the Fiscal Year
such replacement or repair was made.
SECTION 6.2.6. Lease Obligations. The Borrower will not,
and will not permit any Subsidiary to, create or suffer to exist any obligation
for the payment of rent for any property under any operating lease or agreement
to lease having a term of one year or more, except for (a) leases in existence
on the Closing Date and described in Item 20 ("Leases") of the Disclosure
Schedule, and (b) any lease of real property entered into by the Borrower or
any Subsidiary after the Closing Date in the ordinary course of business;
provided, however, that no such lease shall, to the best of the Borrower's
knowledge, subject the Borrower or any Subsidiary to Environmental Liabilities
and Costs and that the aggregate amount of payments due from the Borrower and
its Subsidiaries for all leases referred to in this Section 6.2.6, during each
Fiscal Year set forth below, is less than the amount set forth below opposite
such Fiscal Year (in the case of the 1996
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<PAGE> 82
Fiscal Year, for the period commencing on the Closing Date to the end of such
Fiscal Year):
<TABLE>
<CAPTION>
Fiscal Year: Amount
----------- --------
<S> <C>
1996 $ 100,000
1997 100,000
1998 100,000
1999 100,000
</TABLE>
SECTION 6.2.7. Investments. The Borrower will not, and will
not permit any Subsidiary to, make, incur, assume or suffer to exist any
Investment in any other Person except:
(a) Cash Equivalent Investments;
(b) deposits for utilities, security deposits under
leases and similar prepaid expenses;
(c) Accounts arising in the ordinary course of business;
(d) Investments existing on the Closing Date and
disclosed in Item 21 ("Existing Investments") of the Disclosure Schedule;
(e) Investments by the Borrower in its Subsidiaries to
the extent such Investments are evidenced by demand promissory notes in
principal amounts equal to the amount of such Investments, payable to the
Borrower and pledged by the Borrower in favor of the Agent pursuant to the
Borrower Pledge Agreement;
(f) Investments arising under Interest Rate Contracts;
and
(g) Investments consisting of deposit accounts of the
Borrower and its Subsidiaries maintained with banks in the ordinary course of
business.
SECTION 6.2.8. Restricted Payments, etc. The Borrower will
not declare, pay or make any dividend or distribution (in cash, property or
obligations) on any shares of any class of Stock (now or hereafter outstanding)
of the Borrower or on any warrants, options or other rights in respect of any
class of Stock (now or hereafter outstanding) of the Borrower or apply, or
permit any Subsidiary to apply, any of its funds, property or assets to the
purchase, redemption, sinking fund or other retirement of any shares of any
class of Stock (now or hereafter outstanding) of the Borrower or any rights,
options or warrants to subscribe for or purchase any shares of any class of
Stock of the Borrower, or make any deposit for any of the foregoing.
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<PAGE> 83
SECTION 6.2.9. Take or Pay Contracts; Sale/Leasebacks.
(a) Except as set forth on Item 23 ("Take or Pay
Contracts") of the Disclosure Schedule, the Borrower will not, and will not
permit any Subsidiary to, enter into or be a party to any arrangement for the
purchase of materials, supplies, other property or services if such arrangement
by its express terms requires that payment be made by the Borrower or such
Subsidiary regardless of whether or not such materials, supplies, other
properties or services are delivered or furnished to it; and
(b) The Borrower will not enter into, or permit any
Subsidiary to enter into, any arrangement with any Person providing for the
leasing by the Borrower or one or more Subsidiaries of any property or assets,
which property or assets has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person.
SECTION 6.2.10. Consolidation, Merger, Subsidiaries, etc.
(a) The Borrower will not, and will not permit any
Subsidiary to, liquidate or dissolve, consolidate with, or merge into or with,
any other corporation, or purchase or otherwise acquire all or substantially
all of the assets of any Person (or of any division or business unit thereof),
except that any such Subsidiary may liquidate or dissolve voluntarily into, and
may merge with and into, the Borrower or any other wholly-owned Subsidiary (so
long as the Borrower or such wholly-owned Subsidiary is the surviving
corporation), provided, however, that the Borrower shall be permitted to merge
with and into a Delaware corporation for the sole purpose of changing its state
of incorporation to the State of Delaware provided that (i) the shareholders of
the surviving corporation immediately after such merger are the shareholders of
the Borrower immediately prior to such merger, (ii) the number of authorized
and issued and authorized and unissued shares, and the respective classes and
series, of capital stock of the surviving corporation shall be the same as the
number of authorized and issued and authorized and unissued shares, and the
respective classes and series of capital stock of the Borrower immediately
prior to such merger, (iii) the voting powers, designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations and restrictions of all classes and series of capital stock of the
surviving corporation shall be identical to the voting powers, designations,
preferences (including, without limitation, stated values and liquidation
preferences) and relative, participating, optional or other special rights, and
qualifications, limitations and restrictions of the respective classes and
series of the capital stock of the Borrower as in effect immediately prior to
such merger, (iv) the Lenders shall have received (A) an assumption agreement
in form and substance satisfactory to the Required Lenders, duly executed by
the surviving corporation and pursuant to which the surviving
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corporation shall expressly assume all of the obligations of the Borrower under
this Agreement and the other Loan Documents, and (B) such acknowledgments,
certificates, instruments and legal opinions relating to such merger and
assumption agreement as the Required Lenders shall reasonably request, and (v)
the provisions of Section 203 of the Delaware General Corporation Law would not
apply to the Borrower, the Agent or any Lender, this Agreement, any of the
other Loan Documents or the authorization or the issuance of the shares of
capital stock to be issued pursuant to the Loan Documents or upon conversion of
such shares; and
(b) The Borrower will not, and will not permit any
Subsidiary to, create any Subsidiary or transfer any assets to any Subsidiary.
SECTION 6.2.11. Asset Dispositions, etc. The Borrower will
not, and will not permit any Subsidiary to, sell, transfer, lease or otherwise
dispose of, or grant options, warrants or other rights with respect to, any of
its assets (including Accounts and Stock of Subsidiaries) to any Person,
unless:
(a) such disposition constitutes a disposition of
obsolete or retired assets not used in the business of the Borrower and its
Subsidiaries; or
(b) the disposition is in the ordinary course of business
and the net book value of the asset to be disposed of does not exceed $100,000,
and together with the net book value of all other assets disposed of by the
Borrower or any Subsidiary pursuant to this clause (b) during the term of this
Agreement does not exceed $250,000, and solely cash is received therefor.
SECTION 6.2.12. Modification of Organic Documents, etc. The
Borrower will not consent to any amendment, supplement or other modification of
any of the terms or provisions contained in, or applicable to, the Certificate
of Incorporation or the By-Laws of the Borrower, except for any amendment,
supplement or other modification which does not adversely affect the Borrower's
ability to pay or perform the Obligations.
SECTION 6.2.13. Transactions with Affiliates. Except as set
forth on Item 22 ("Transaction with Affiliates") of the Disclosure Schedule,
the Borrower will not, and will not permit any Subsidiary to, enter into, or
cause, suffer or permit to exist:
(a) any management contract or arrangement, consulting
agreement or arrangement, contract or arrangement relating to the allocation of
revenues, expenses or similar contract or arrangement requiring any payments to
be made by the Borrower or any Subsidiaries to any Affiliate; and
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(b) any other transaction, arrangement or contract with
any of its other Affiliates which is on terms which are less favorable than are
obtainable from any Person which is not one of its Affiliates.
SECTION 6.2.14. Inconsistent Agreements. The Borrower will
not, and will not permit any Subsidiary to, enter into any material agreement
containing any provision which would be violated or breached in any material
respect by any Loan or by the performance by the Borrower or any Subsidiary of
its obligations hereunder or under any Loan Document.
SECTION 6.2.15. Change in Accounting Method. The Borrower
will not, and will not permit any Subsidiary to, make any change in accounting
treatment and reporting practices except as required by GAAP.
SECTION 6.2.16. Change in Fiscal Year End. The Borrower will
not change its Fiscal Year end without the Required Lenders' prior written
consent, which consent will not be unreasonably withheld but will not be given
with respect to more than one such change during the term of this Agreement.
SECTION 6.2.17. Compliance with ERISA. The Borrower shall
not, and shall not permit any Subsidiary to take, or fail to take, any action
with respect to a Plan, including, but not limited to, establishing, amending,
or terminating or withdrawing from any Plan, without first obtaining the
Required Lenders' written approval, where such action or failure to act could
result in any liabilities under the IRC, ERISA, or any other applicable law
which individually or in the aggregate could reasonably result in a Material
Adverse Change.
SECTION 6.2.18. Limitation on Restrictions on Subsidiary
Dividends. The Borrower will not, and will not permit any of its Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any such
Subsidiary to (a) pay dividends or make other distributions on its Stock or
other interests or participations in profits owned by Borrower or any
Subsidiary of Borrower or pay any Indebtedness owed to Borrower or any
Subsidiary of Borrower, (b) make loans or advances to Borrower or any
Subsidiary of Borrower or (c) transfer any of its property or assets to
Borrower or any Subsidiary of Borrower, except for such encumbrances and
restrictions existing under or by reason of this Agreement and the other Loan
Documents.
SECTION 6.2.19. Communications Laws. Neither the Borrower nor
any of its Subsidiaries will acquire any licenses or conduct any business which
would result in the application of Section 310 of the Communications Act of
1934 as a result of this Agreement or any of the other Loan Documents or the
authorization or issuance of the Notes or any shares of capital stock to be
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issued pursuant to the Loan Documents, or upon conversion of the Series B
Special Preferred Stock.
SECTION 6.2.20. Issuance of Series B Special Preferred Stock.
The Borrower shall not issue any shares of Series B Special Preferred Stock
other than pursuant to the conversion of Term Notes in accordance with Article
8.
ARTICLE 7.
EVENTS OF DEFAULT
SECTION 7.1. Events of Default. The term "Event of
Default" shall mean any of the events set forth in this Section 7.1.
SECTION 7.1.1. Non-Payment of Obligations. The Borrower
shall default:
(a) in the payment or prepayment when due of any
principal of any Loan; or
(b) in the payment when due of the interest payable in
respect of any Loan, the fees provided for in Section 2.3 hereof or any other
Obligations and such default shall continue unremedied for a period of five
days.
SECTION 7.1.2. Non-Performance of Certain Covenants. The
Borrower shall default in the due performance and observance of any of its
obligations under Section 6.1 and such default shall continue unremedied for a
period of 10 Business Days after notice thereof shall have been given to the
Borrower by the Agent, or shall default in the due performance or observation
of any of its obligations under Section 6.2.
SECTION 7.1.3. Defaults Under Other Loan Documents;
Non-Performance of Other Obligations. Any "Event of Default" shall occur under
the other Loan Documents; or the Borrower or any Subsidiary shall default in
the due performance and observance of any other obligation, covenant or
agreement contained herein or in any other Loan Document and such default shall
continue unremedied for a period of ten (10) Business Days after notice thereof
shall have been given to the Borrower by the Agent.
SECTION 7.1.4. Bankruptcy, Insolvency, etc. The Borrower or
any Subsidiary shall:
(a) become insolvent or generally fail to pay, or admit
in writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian for the
Borrower or any Subsidiary or any property of
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any thereof, or make a general assignment for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any Subsidiary or for a
substantial part of the property of any thereof, and such trustee, receiver,
sequestrator or other custodian shall not be discharged within sixty (60) days;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower or any Subsidiary, and, if such case or
proceeding is not commenced by the Borrower or such Subsidiary, such case or
proceeding shall be consented to or acquiesced in by the Borrower or such
Subsidiary or shall result in the entry of an order for relief or shall remain
for sixty (60) days undismissed; or
(e) take any corporate action authorizing, or in
furtherance of, any of the foregoing.
SECTION 7.1.5. Breach of Warranty. Any representation or
warranty of the Borrower or any Subsidiary hereunder or in any other Loan
Document or in any other writing furnished by or on behalf of the Borrower or
such Subsidiary to the Agent or any Lender for the purposes of or in connection
with this Agreement or any such Loan Document is or shall be incorrect when
made in any material respect.
SECTION 7.1.6. Default on Other Indebtedness, etc. (a) Any
Indebtedness of the Borrower or any Subsidiary in an aggregate principal amount
exceeding $100,000 (i) shall be duly declared to be or shall become due and
payable prior to the stated maturity thereof, or (ii) shall not be paid as and
when the same becomes due and payable including any applicable grace period; or
(b) there shall occur and be continuing any event which constitutes an event of
default under any Instrument relating to any Indebtedness of the Borrower or
any Subsidiary in an aggregate principal amount exceeding $100,000, the effect
of which is to permit the holder or holders of such Indebtedness, or a trustee,
agent or other representative on behalf of such holder or holders, to cause
such Indebtedness to become due prior to its stated maturity.
SECTION 7.1.7. Failure of Valid, Perfected Security
Interest. The security interest or Lien in the Collateral and all proceeds
thereof, securing the Obligations shall cease to be valid or perfected at any
time after the Closing Date provided, however, that the failure of the Agent or
any Lender to file any necessary UCC continuation statements shall not be
deemed to constitute an Event of Default under this Section 7.1.7.
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SECTION 7.1.8. Employee Plans. Any of the following events
shall occur with respect to any Plan: (i) any Person shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan and such "prohibited transaction" could result in
a Material Adverse Change, (ii) any "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA) not disclosed in
Item 7 ("Benefit Plans") of the Disclosure Schedule, whether or not waived,
shall exist with respect to any Single Employer Plan, (iii) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Required Lenders,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA, (iv) a notice of intent to terminate any Single Employer Plan for
purposes of Title IV of ERISA is issued by the plan administrator thereof
without the prior written consent of the Required Lenders, or the PBGC shall
commence proceedings to terminate any Single Employer Plan, (v) the Borrower or
any Commonly Controlled Entity or Subsidiary shall, or in the reasonable
opinion of the Required Lenders is likely to, incur any liability in connection
with a withdrawal from, or the Insolvency, Reorganization or termination of, a
Multiemployer Plan, (vi) the Borrower or any Commonly Controlled Entity or
Subsidiary shall fail to make any quarterly installment payment to a Pension
Plan required under Section 302(e) of ERISA or Section 412(m) of the Code,
(vii) the Borrower or any Commonly Controlled Entity or Subsidiary shall fail
to make any contribution to a Multiemployer Plan which is required under ERISA,
the Code or applicable collective bargaining agreements, or (viii) any other
event or condition shall occur or exist with respect to a Plan; and in each
case in clauses (i) through (viii) above, such event or condition, together
with all other such events or conditions, if any, could subject the Borrower or
any Subsidiary (directly or indirectly) to any tax, penalty or other
liabilities under Title I or Title IV of ERISA, Section 404 or 419 and Chapter
43 of the IRC or any other applicable law which in the aggregate could result
in a Material Adverse Change.
SECTION 7.1.9. Judgments. A final judgment which, with
other such outstanding final judgments against the Borrower and its
Subsidiaries (in each case to the extent not covered by insurance), exceeds an
aggregate of $250,000, shall be entered against the Borrower or any of its
Subsidiaries and, within 30 days after entry thereof, such judgment shall not
have been discharged or execution thereof stayed pending appeal, or, within 30
days after the expiration of any such stay, such judgment shall not have been
discharged.
SECTION 7.1.10. Loss of Permits, Etc. The expiration, loss,
termination, cancellation, revocation, forfeiture, suspension, diminution,
impairment of or failure to
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renew any Intellectual Property, right, permit, license or approval which could
result in a Material Adverse Change; or the entry of any order of a court
enjoining, restraining or otherwise preventing the Borrower or any Subsidiary
from conducting all or any material part of its business affairs; or the
cessation of business or dissolution of the Borrower.
SECTION 7.1.11. Material Adverse Change. A Material Adverse
Changes occurs with respect to the Borrower or any of its Subsidiaries.
SECTION 7.1.12. 10% Preferred Stock. The Borrower's 10%
Preferred Stock, without par value, $10 stated value, shall not be convertible
into Common Stock at any time after September 30, 1996 or such Preferred Stock
otherwise shall be subject to redemption by the Borrower at the option of the
holders thereof at any time after such date.
SECTION 7.2. Action if Bankruptcy. If any Event of
Default described in Section 7.1.4 shall occur, the outstanding principal
amount of all outstanding Loans and all other Obligations shall automatically
be and become immediately due and payable, without notice or demand, and the
Agent, upon the direction of the Required Lenders, shall exercise any and all
rights and remedies available under this Agreement or any other Loan Document,
or available at law or in equity, at any time, in any order and in any
combination.
SECTION 7.3. Action if Other Event of Default. If any
Event of Default (other than any Event of Default described in Section 7.1.4)
shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Agent may, and upon the direction of the Required Lenders,
shall upon notice or demand, (a) declare all or any portion of the outstanding
principal amount of the Loans to be due and payable and any or all other
Obligations to be due and payable, whereupon the full unpaid amount of such
Loans and any and all other Obligations which shall be so declared due and
payable shall be and become immediately due and payable, without further
notice, demand, or presentment, and to the extent paid by the Borrower shall
constitute a prepayment under this Agreement and (b) exercise any and all
rights and remedies available under this Agreement or any other Loan Document,
or available at law or in equity, at any time, in any order and in any
combination. Notwithstanding anything to the contrary set forth in this
Section 7.3, the Agent is permitted to act without the consent of the Required
Lenders pursuant to this Section 7.3, only if (a) the Agent reasonably believes
it should exercise the rights afforded to it under this Section 7.3 to protect
the interests of the Lenders, (b) the Agent shall have made due inquiry of each
Lender (i) having more than 33-1/3% of the aggregate of the Revolving Loan
Commitments plus the outstanding principal amount of the Term Loan or (ii) if
the Revolving Loan Commitments shall have been terminated, having more than
33-1/3% of the aggregate of the outstanding principal amount
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of the Loans as to whether the Agent should act under this Section 7.3,
and (c) such Lender(s) fail(s) to respond to the Agent's inquiry within a
reasonable period of time.
ARTICLE 8.
CONVERSION
SECTION 8.1. Conversion Privilege. Each Lender may, at
such Lender's option, any time prior to the satisfaction in full of all of the
outstanding principal under and accrued interest on such Lender's Term Note or
Term Notes, convert its Term Note or Term Notes, in whole or in part (in
amounts of $100,000 or integral multiples thereof), at 100% of the amount so
converted, into fully paid and non-assessable shares of Series B Special
Preferred Stock at a rate (the "Conversion Rate") of 833.3333 shares of Series
B Special Preferred Stock for each $100,000 of outstanding principal and
accrued interest so converted. All outstanding principal under and accrued
interest on the Term Notes may be converted as provided herein.
SECTION 8.2. Conversion Procedure.
(a) To convert a Term Note or portion thereof, a Lender
must (i) complete and sign the notice set forth as Exhibit G hereto, (ii)
surrender such Term Note to the Borrower and (iii) furnish appropriate
endorsements and transfer documents if reasonably required by the Borrower.
(b) As promptly as practicable after the surrender of a
Term Note in compliance with this Section 8.2, the Borrower shall issue and
deliver to the Lender so surrendering such Term Note, or on such Lender's
written order, a certificate of certificates for the number of whole and
fractional shares of Series B Special Preferred Stock issuable upon the
conversion of such Term Note or portion thereof in accordance with the
provisions of this Article 8. If a Term Note shall be surrendered for partial
conversion, the Borrower shall execute and deliver to the Lender so
surrendering such Term Note without charge to such Lender, a new Term Note in
an aggregate principal amount equal to the unconverted portion of the
surrendered Term Note with no other changes in or to the terms thereof.
(c) Each conversion shall be deemed to have been effected
on the date on which the Term Note shall have been surrendered in compliance
with this Section 8.2, and the Person in whose name any certificate or
certificates issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; provided,
however, that any such surrender on any date when the stock transfer books of
the Borrower shall be closed shall constitute the Person in whose name the
certificates are to be issued as the record holder
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thereof for all purposes on the next succeeding day on which such stock
transfer books are open, but such conversion shall be at the Conversion Price
in effect on the date upon which the Term Note shall have been surrendered.
The Borrower shall deliver certificates for shares of Series B Special
Preferred Stock reflecting such conversion as directed by the converting Lender
not later than 48 hours after the surrender of the Term Note in accordance
herewith.
SECTION 8.3. Effect on Reclassification, Consolidation,
Merger or Sale. In the event of (i) any reclassification or change of
outstanding shares of Borrower Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of subdivision or combination), (ii) any consolidation, merger or
combination of the Borrower with another corporation or entity as a result of
which holders of shares of Borrower Common Stock shall be entitled to receive
securities or other property (including cash) with respect to or in exchange
for such shares or (iii) any sale or conveyance of the property of the Borrower
as, or substantially as, an entirety to any other corporation or entity as a
result of which holders of shares of Common Stock shall be entitled to receive
securities or other property (including cash) with respect to or in exchange
for such shares, then the Borrower or the successor or purchasing corporation
or entity, as the case may be, shall enter into a supplemental agreement
providing that the Term Notes shall be convertible into the kind and amount of
securities or other property (including cash) receivable upon such
reclassification, exchange, consolidation, merger, combination, sale or
conveyance by a holder of a number of shares issuable upon conversion of the
Term Notes immediately prior to such reclassification, exchange, consolidation,
merger, combination, sale or conveyance. Such supplemental agreement shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 8. The above
provision of this Section 8.3 shall similarly apply to successive
reclassifications, exchanges, consolidations, mergers, combinations, sales or
conveyances.
SECTION 8.4. Taxes on Shares Issued. The issuance of
stock certificates on conversions of the Term Notes shall be made without
charge to the converting Lender for any tax in respect of the issuance thereof.
The Borrower shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of a
stock certificate in any name other than that of the converting Lender.
SECTION 8.5. Reservation of Shares; Shares to be Fully
Paid; Compliance with Government Requirements; Listing of Shares.
(a) The Borrower shall reserve, out of its authorized but
unissued shares or its shares held in treasury, sufficient shares of Series B
Special Preferred Stock to provide for the
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conversion in full of all Term Notes that may be outstanding under this
Agreement.
(b) The Borrower covenants that all shares of Series B
Special Preferred Stock which may be issued upon conversion of Term Notes will
upon issuance be fully paid and nonassessable by the Borrower and free from all
taxes, liens and charges with respect to the issue thereof.
(c) The Borrower covenants that if any shares to be
provided for the purpose of conversion of Term Notes require registration with
or approval of any governmental authority under any applicable federal or state
law (excluding federal or state securities laws) before such shares may be
validly issued upon conversion, the Borrower will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be.
(d) The Borrower covenants that if at any time shares of
Common Stock shall be listed on the New York Stock Exchange or any other
national securities exchange or on the Nasdaq Stock Market, the Borrower will,
if permitted by the rules of such exchange or market list and keep listed so
long as the shares shall be so listed on such exchange or market, all shares of
Common Stock into which Series B Special Preferred Stock may be converted.
SECTION 8.6. Notice to Lenders Prior to Certain Actions.
In the event:
(a) the Borrower shall declare a dividend (or any other
distribution) on its shares (other than in cash out of retained earnings); or
(b) the Borrower shall authorize the granting to the
holders of its shares generally of rights or warrants to subscribe for or
purchase any shares of any class of its Stock or any other rights or warrants;
or
(c) of any reclassification of shares of the Borrower
(other than a subdivision or combination of its outstanding shares, or a change
in par value, or from par value to no par value, or from par value to par
value), or of any consolidation or merger to which the Borrower is a party and
for which approval of any shareholders of the Borrower is required, or of the
sale or transfer of all or substantially all of the assets of the Borrower; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Borrower;
then in each such case, the Borrower shall cause to be mailed to each Lender,
as promptly as possible but in any event at least fifteen (15) days prior to
the applicable date hereinafter
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specified, a notice prepared by the Borrower stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants, or if a record is not to be taken, the date as of which the holders
of shares of record to be entitled to such dividend, distribution, rights or
warrants are to be determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occurring and the date as of which it is
expected that holders of shares of record shall be entitled to exchange their
shares for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
ARTICLE 9.
THE AGENT
SECTION 9.1. Actions. Each Lender and the holder of each
Note authorize the Agent to act on behalf of such Lender or holder under this
Agreement and any other Loan Document and, in the absence of other written
instructions from the Required Lenders received from time to time by the Agent
(with respect to which the Agent agrees that it will, subject to the last two
sentences of this Section 9.1, comply, except as otherwise reasonably advised
by counsel), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto.
Each Lender (including, without limitation, ING in its capacity as a Lender)
agrees (which agreement shall survive any termination of this Agreement) to
indemnify the Agent, severally but not jointly pro rata according to such
Lender's aggregate percentage of the Revolving Loan Commitments and the
principal amount of outstanding Term Loans, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may at any time be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising out of this Agreement, the Notes, or any other
Loan Document, including the reimbursement of the Agent for all out-of-pocket
expenses (including attorneys' fees) incurred by the Agent hereunder or in
connection herewith or in enforcing the Obligations of the Borrower under this
Agreement or any other Loan Document, in all cases as to which the Agent is not
reimbursed by the Borrower; provided that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
determined by a court of competent jurisdiction in a final proceeding to have
resulted primarily from the Agent's gross negligence or wilful misconduct.
Notwithstanding any other provision of this Agreement to the contrary, the
Agent shall not be required to take any action hereunder or under any other
Loan Document, or to prosecute or
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defend any suit in respect of this Agreement or any other Loan Document, unless
it is indemnified to its reasonable satisfaction by the Lenders against loss,
costs, liability and expense. If any indemnity in favor of the Agent shall
become impaired, it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given.
SECTION 9.2. Funding Reliance, etc. Unless the Agent
shall have been notified by telephone, confirmed in writing, by any Lender by
5:00 p.m., New York City time, on the day prior to a Borrowing that such Lender
will not make available the amount which would constitute its Revolving
Percentage of such Borrowing on the date specified therefor, the Agent may
assume that such Lender has made such amount available to the Agent and, in
reliance upon such assumption, make available to the Borrower a corresponding
amount; provided, however, that the Agent shall have no obligation to do so.
If such amount is made available by such Lender to the Agent on a date after
the date of such Borrowing, such Lender shall pay to the Agent on demand
interest on such amount at the Federal Funds Rate for the number of days from
and including the date of such Borrowing to the date on which such amount
becomes immediately available to the Agent, together with such other
compensatory amounts as may be required to be paid by such Lender to the Agent
pursuant to the Rules for Interbank Compensation of the Council on
International Banking or the Clearinghouse Compensation Committee, as the case
may be, as in effect from time to time. A statement of the Agent submitted to
any Lender with respect to any amounts owing under this Section 9.2 shall be
conclusive, in the absence of manifest error. If such amount is not in fact
made available to the Agent by such Lender within three Business Days after the
date of such Borrowing, the Agent shall be entitled to recover such amount,
with interest thereon at the rate per annum then applicable to the Loans
comprising such Borrowing, within five Business Days after demand, from the
Borrower.
SECTION 9.3. Exculpation. Neither the Agent nor any of
its directors, officers, employees or agents shall be liable to any Lender for
any action taken or omitted to be taken by it under this Agreement, the Notes,
or any Loan Document, or in connection herewith or therewith, except for its
own wilful misconduct or gross negligence. The Agent shall not be responsible
to any Lender for any recitals, statements, representations or warranties
herein or in any certificate or other document delivered in connection herewith
or for the authorization, execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, or sufficiency of any of the Loan
Documents, the financial condition of the Borrower or any Subsidiary or the
condition or value of any of the Collateral, or be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of any of the Loan Documents, the financial condition of the
Borrower or any Subsidiary or the existence or possible existence of any
Default. The Agent shall be entitled to rely upon advice of counsel
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concerning legal matters and upon any notice, consent, certificate, statement
or writing which it believes to be genuine and to have been presented by a
proper Person.
SECTION 9.4. Successor. The Agent may resign as such at
any time upon at least thirty (30) days' prior notice to the Borrower and all
Lenders, such resignation not to be effective until a successor Agent is in
place. The Agent shall be required to resign, upon the written request of the
Required Lenders, if it holds less than $10,000,000 of the Loans and
Commitments outstanding; provided, however, that the Agent shall not be
required to resign pursuant to the terms of this sentence if the Agent's
Revolving Percentage plus its Term Percentage is equal to or greater than that
of each other Lender. If the Agent at any time resigns, the Required Lenders
may appoint another Lender as a successor Agent which shall thereupon become
the Agent hereunder. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Agent's giving notice of resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be
one of the Lenders or a financial institution reasonably acceptable to the
Borrower organized under the laws of the United States and having a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
be entitled to receive from the retiring Agent such documents of transfer and
assignment as such successor Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations under this Agreement and the other Loan Documents.
SECTION 9.5. Loans by the Agent. The Agent shall have the
same rights and powers with respect to (a) the Loans made by it or any of its
Affiliates and (b) the Notes held by it or any of its Affiliates, as any Lender
and may exercise the same as if it were not the Agent.
SECTION 9.6. Credit Decisions. Each Lender acknowledges
that it has, independently of the Agent and each other Lender, and based on
such financial information and such other documents, information and
investigations as it has deemed appropriate, made its own credit decision to
extend its Commitments, and to make the Loans. Each Lender also acknowledges
that it will, independently of the Agent and each other Lender, and based on
such other documents, information and investigations as it shall deem
appropriate at any time, continue to make its own credit decisions as to
exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 9.7. Copies, etc. The Agent shall give prompt
notice to each Lender of each notice or request required or
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permitted to be given to the Agent by the Borrower pursuant to the terms of
this Agreement. The Agent will distribute to each Lender each Instrument
received for its account and copies of all other communications received by the
Agent from the Borrower for distribution to the Lenders by the Agent in
accordance with the terms of this Agreement. Notwithstanding anything herein
contained to the contrary, all notices to and communications with the Borrower
under this Agreement and the other Loan Documents shall be effected by the
Lenders through the Agent.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.1. Waivers, Amendments, etc.
(a) The provisions of this Agreement and of each Loan
Document may from time to time be amended, modified or waived, if such
amendment, modification or waiver is in writing and, (x) in the case of an
amendment or modification, is consented to by the Borrower and the Required
Lenders or (y) in the case of a waiver of any obligation of the Borrower or
compliance with any prohibition contained in this Agreement, is consented to by
the Required Lenders; provided, however, that no such amendment, modification
or waiver:
(i) which would modify any requirement hereunder that any
particular action be taken by all the Lenders or by the Required
Lenders shall be effective unless consented to by each Lender;
(ii) which would modify this Section 10.1, change the
definition of "Required Lenders," increase the Revolving Loan
Commitment Amount or change any Revolving Percentage or Term
Percentage for any Lender, reduce any fees payable to the Lenders
described in Article 2 and Article 3, extend the Revolving Loan
Commitment Termination Date or subject any Lender to any additional
obligations shall be made without the consent of each Lender;
(iii) which would extend the due date for, or reduce the
amount of, any payment or prepayment of principal of or interest on
any Loan (or reduce the principal amount of or rate of interest on any
Loan) shall be made without the consent of the holder of the Note
evidencing such Loan; or
(iv) which would affect adversely the interests, rights,
compensation or obligations of the Agent qua the Agent shall be made
without consent of the Agent.
(b) No failure or delay on the part of the Agent, any
Lender or the holder of any Note in exercising any power or right under this
Agreement or any other Loan Document shall operate as a
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waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on the Borrower in any case shall
entitle it to any notice or demand in similar or other circumstances. No
waiver or approval by the Agent, any Lender, or the holder of any Note under
this Agreement or any other Loan Document shall, except as may be otherwise
stated in such waiver or approval, be applicable to subsequent transactions.
No waiver or approval hereunder shall require any similar or dissimilar waiver
or approval thereafter to be granted hereunder.
(c) Neither any Lender nor the Agent shall be under any
obligation to marshal any assets in favor of the Borrower or any other party or
against or in payment of any or all of the Obligations. Recourse for security
shall not be required at any time. To the extent that the Borrower makes a
payment or payments to the Agent or the Lenders, or the Agent or the Lenders
enforce their security interests or exercise their rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently for any reason invalidated, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
SECTION 10.2. Notices. All notices hereunder shall be in
writing or by telecopy and shall be sufficiently given to the Agent, the
Lenders or the Borrower if addressed or delivered to them at the following
addresses:
If to the Agent: ING
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: ING
Atlanta Office
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Telecopier No.: (770) 951-1005
and a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr. Esq.
Telecopier No.: (404) 572-5100
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If to any other Lender: At its address set forth beneath its name on
the signature pages hereof
If to the Borrower: PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chief Executive Officer,
Chief Financial Officer and
General Counsel
Telecopier No.: (216) 241-2574
with a copy to: Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Stephen M. Banker, Esq.
Telecopier No.: (212) 735-2000
or at such other address as any party may designate to any other party by
written notice. All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; when
received, if deposited in the mail, postage prepaid; when transmission is
verified, if telecopied; and on the next Business Day, if timely delivered to
an air courier guaranteeing overnight delivery.
SECTION 10.3. Costs and Expenses. The Borrower agrees to
pay all reasonable out-of-pocket expenses of the Agent and the Lenders party to
this Agreement on the Closing Date for the negotiation, preparation, execution,
and delivery of this Agreement and each other Loan Document, including
schedules and exhibits, and any amendments, waivers, consents, supplements,
terminations, releases or other modifications to this Agreement or any other
Loan Document as may from time to time hereafter be required (including the
reasonable fees and expenses of counsel for the Agent and the Lenders party to
this Agreement on the Closing Date, or of any consultants or other experts
retained by the Agent and the Lenders party to this Agreement on the Closing
Date from time to time in connection therewith) whether or not the transactions
contemplated hereby are consummated, and to pay all reasonable expenses of the
Agent and the Lenders party to this Agreement on the Closing Date (including
reasonable fees and expenses of counsel to the Agent and the Lenders party to
this Agreement on the Closing Date, or of any consultants or other experts
retained by the Agent and the Lenders party to this Agreement on the Closing
Date) incurred in connection with the preparation and review of the form of any
Instrument relevant to this Agreement, the Notes or any other Loan Document.
The Borrower also agrees to pay and hold the Agent and the Lenders harmless
from any stamp, documentary, intangibles, transfer or similar taxes or charges,
and all recording or filing fees with respect to the Loan Documents or any
payments to be made thereunder and all title insurance premiums, surveyors
costs and valuation fees, and to reimburse the Agent and each Lender upon
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demand for all reasonable out-of-pocket expenses (including reasonable
attorneys' fees and expenses) incurred by the Agent or such Lender in enforcing
the Obligations of the Borrower or any Subsidiary under this Agreement or any
other Loan Document or related Document or in connection with any restructuring
or "work-out" of any Obligations.
SECTION 10.4. Indemnification. In consideration of the
execution and delivery of this Agreement by the Agent and each Lender, the
making of the Term Loan and the extension of the Revolving Loan Commitment, the
Borrower hereby indemnifies, exonerates and holds the Agent and each Lender,
each of their respective successors and assigns, each of the respective
officers, directors, employees, partners, attorneys and agents of the Agent and
each Lender and each of their respective successors and assigns (collectively,
the "Lender Parties") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities (including, but not limited
to, Environmental Liabilities and Costs), damages and expenses (irrespective of
whether such Lender Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by the Lender Parties or any of them
or asserted or awarded against the Lender Parties or any of them as a result
of, or arising out of, or relating to:
(a) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of any Loan, including,
without limitation, the Acquisitions;
(b) the use of any of the proceeds of the Loans by the
Borrower for any other purpose;
(c) any information furnished by the Borrower in
connection with the syndication of this Agreement;
(d) the making of any claim by any investment banking
firm, broker or third party in each case claiming through the Borrower or any
of its Subsidiaries or as a result of their relationship to such parties that
it is entitled to compensation from the Agent or any Lender in connection with
this Agreement;
(e) the entering into and performance of this Agreement
and any other Loan Document by any of the Lender Parties (other than the breach
by such Lender Party of this Agreement);
(f) the existence of any contaminant, in, under, on or
otherwise affecting any property owned, used, operated, or leased by Borrower
or any Subsidiary in the past, present, or future or any surrounding areas
affected by such property, regardless of whether the existence of the
contaminant is related to the past, present, or future operations of the
Borrower and its Subsidiaries, or their predecessors in interest or any other
Person; any Environmental Liabilities and Costs related to any property owned,
used, operated, or leased by Borrower or any Subsidiary in the past, present,
or future; any Environmental Liabilities and Costs related to the past,
present, or future operations of the Borrower or any Subsidiaries; any alleged
violations of any Environmental Law related to any
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property owned, used, operated, or leased by Borrower or any Subsidiary in the
past, present, or future; any alleged violations of any Environmental Law
related to the past, present, or future operations of the Borrower or any
Subsidiaries; the performance of any remedial action that is related to any
property owned, used, operated, or leased by Borrower or any Subsidiaries in
the past, present, or future; the performance of any remedial action that is
related to the past, present, or future operations of the Borrower or any
Subsidiaries; and the imposition of any Lien on any property affected by this
Agreement or any of the other Loan Documents arising from any Environmental
Liabilities or Costs;
(g) the breach in any material respect by Borrower of any
representation or warranty set forth in this Agreement or any Loan Document;
(h) the failure of Borrower to comply in any material
respect with any term, condition, or covenant set forth in this Agreement or
any Loan Document; or
(i) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not the Agent or any Lender (or
any of their respective officers, directors, partners, employees or agents) is
a party thereto;
except for any such Indemnified Liabilities arising for the account of a
particular Lender Party by reason of the relevant Lender Party's bad faith,
gross negligence or wilful misconduct as determined by a final and
nonappealable decision of a court of competent jurisdiction. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. The foregoing indemnity shall become effective immediately
upon the execution and delivery hereof and shall remain operative and in full
force and effect notwithstanding the consummation of the transactions
contemplated hereunder, the repayment of any of the Loans made hereunder, the
invalidity or unenforceability of any term or provision of this Agreement or
any other Loan Document, or any investigation made by or on behalf of any
Lender or the Agent.
SECTION 10.5. Survival. The obligations of the Borrower
under Sections 2.4, 3.5, 10.3 and 10.4, and the obligations of the Lenders
under Section 9.1, shall in each case survive any termination of this
Agreement. The representations and warranties made by the Borrower in this
Agreement, the Notes and in each other Loan Document shall survive the
execution and
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deliver of this Agreement, the Notes and each such other Loan Document.
SECTION 10.6. Severability. Any provision of this
Agreement, the Notes or any other Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, the Notes or such
other Loan Document or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 10.7. Headings. The various headings of this
Agreement, the Notes and of each other Loan Document are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement, the Notes or such other Loan Document or any provisions hereof or
thereof.
SECTION 10.8. Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each
of which shall be executed by the Borrower and the Agent and be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Borrower and each Lender.
SECTION 10.9. Governing Law; Entire Agreement. (a) THIS
AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the
Notes and the other Loan Documents constitute the entire understanding among
the parties hereto with respect to the subject matter hereof and supersede any
prior agreements, written or oral, with respect thereto.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR RELATED DOCUMENT, AND EACH HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE BORROWER
AGREES THAT SUCH JURISDICTION SHALL BE EXCLUSIVE WITH RESPECT TO ANY SUCH
ACTION OR PROCEEDING BROUGHT BY IT AGAINST THE AGENT OR ANY LENDER. EACH PARTY
TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO, THE DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING.
(c) The Borrower hereby irrevocably designates, appoints
and empowers CT Corporation System, whose present address is 1633 Broadway, New
York, New York 10019, as its authorized
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agent to receive, for and on its behalf and its property, service of process
in the State of New York when and as such legal actions or proceedings may be
brought in the courts of the State of New York or of the United States of
America sitting in New York, and such service of process shall be deemed
complete upon the date of delivery thereof to such agent whether or not such
agent gives notice thereof to the Borrower, or upon the earliest of any other
date permitted by applicable law. The Borrower shall furnish the consent of CT
Corporation System so to act to the Agent on or prior to the Closing Date. It
is understood that a copy of said process served on such agent will as soon as
practicable be forwarded to the Borrower, at its address set forth below, but
its failure to receive such copy shall not affect in any way the service of
said process on said agent as the agent of the Borrower. The Borrower
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of the copies thereof by
certified mail, return receipt requested, postage prepaid, to it at its address
set forth herein, such service to become effective upon the earlier of (i) the
date 10 calendar days after such mailing or (ii) any earlier date permitted by
applicable law. The Borrower agrees that it will at all times continuously
maintain an agent to receive service of process in the State of New York on
behalf of itself and its properties and in the event that, for any reason, the
agent named above or its successor shall no longer serve as its agent to
receive service of process in the State of New York on its behalf, it shall
promptly appoint a successor so to serve and shall advise the Agent and the
Lenders thereof (and shall furnish to the Agent the consent of any successor
agent so to act). Nothing in this Section 10.9 shall affect the right of the
Agent or any Lender to bring proceedings against the Borrower in the courts of
any other jurisdiction or to serve process in any other manner permitted by
applicable law.
SECTION 10.10. Successors and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that the Borrower may not
assign or transfer its rights or obligations hereunder without the prior
written consent of all Lenders; and the rights of sale, assignment and transfer
of the Lenders are subject to Section 10.11.
SECTION 10.11. Sale and Transfers, Participations, etc.
(a) Any Lender may at any time sell to one or more
Participants participating interests in any Loan owing to such Lender, any Note
held by such Lender, the Revolving Loan Commitment of such Lender, or any other
interest of such Lender hereunder. In the event of any such sale by a Lender
of participating interests to a Participant, such Lender's obligations under
this Agreement shall remain unchanged and such Lender shall remain solely
responsible for the performance thereof, such Lender shall remain the holder of
any such Note for all purposes under this Agreement and the other Loan
Documents,
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and the Borrower and the Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. The Borrower agrees that if amounts
outstanding under this Agreement and the Notes are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall be deemed to have the right of setoff
in respect of its participating interest in amounts owing under this Agreement
and any Note to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement or any Note,
provided that such right of setoff shall be subject to the approval of the
Required Lenders and to the obligations of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as provided in
Section 3.7 as if the Participant were a Lender hereunder. The Borrower also
agrees that each Participant shall be entitled to the benefits of (i) Section
10.4 and (ii) Sections 2.4 and 3.6, with respect to its participation in the
Commitments and the Loans outstanding from time to time; provided, that no
Participant shall be entitled to receive any greater amount pursuant to the
Sections referred to in clause (ii) than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such Participant had no such transfer occurred.
No Lender shall grant any participation under which the Participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Loan Document except to the extent such amendment or waiver would (i) extend
the due date for, or reduce the amount of, any payment or prepayment of
principal of or interest on the Loan or reduce the principal amount of or rate
of interest on the Loan (except in connection with a waiver of interest at the
Post-Default Rate) (it being understood that a waiver of any Default or Event
of Default shall not constitute a change in the terms of such participation,
and that an increase in the Loan shall be permitted without consent of any
Participant if the Participant's participation is not increased as a result
thereof), (ii) release a substantial part of the Collateral, or (iii) consent
to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement.
(b) Subject to the provisions of clause (g) of this
Section 10.11, with the consent of the Required Lenders and the consent of the
Borrower (which consent, in all instances, shall not be unreasonably withheld
or delayed), any Lender may at any time sell to any Purchasing Lender all or
any part in a minimum amount of $1,000,000, of its rights and obligations under
this Agreement and the Notes pursuant to a Transfer Supplement, executed by
such Purchasing Lender, such transferor Lender, the Agent and the Borrower.
Upon (i) such execution of such Transfer Supplement, and (ii) delivery of a
fully executed copy thereof to the Borrower, such Purchasing Lender shall for
all purpose be a Lender party to this Agreement and shall have all the rights
and obligations of a Lender under this Agreement, to the same extent as if it
were an original party hereto with a Revolving Percentage
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and Term Percentage as set forth in such Transfer Supplement, and no further
consent or action by the Borrower, the Lenders or the Agent shall be required.
Such Transfer Supplement shall be deemed to amend this Agreement to the extent,
and only to the extent, necessary to reflect the addition of such Purchasing
Lender and the resulting adjustment of Revolving Percentages and Term
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Notes. Upon the consummation of any transfer to a Purchasing
Lender pursuant to this paragraph (b), the transferor Lender, the Agent and the
Borrower shall make appropriate arrangements so that, if required, replacement
Notes are issued to such transferor Lender and new Notes to the Purchasing
Lender in the amount equal to their respective Revolving Loan Commitments and
outstanding Loans, as appropriately adjusted pursuant to such Transfer
Supplement.
(c) The Agent shall maintain at its address referred to
herein a copy of each Transfer Supplement delivered to it and the Register for
the recordation of the names and addresses of the Lenders and the Revolving
Loan Commitment of, and principal amount of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Loans recorded therein for all purposes of this Agreement. The Register shall
be available for inspection by the Borrower or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a Transfer Supplement executed by
a transferor Lender, the Agent and a Purchasing Lender together with payment by
such Purchasing Lender to the Agent, for the account of the Agent and not for
the account of the Lenders, of a registration and processing fee of $2,500, and
the Notes subject to such Transfer Supplement, the Agent shall (i) accept such
Transfer Supplement, (ii) record the information therein in the Register and
(iii) give prompt notice of such acceptance and recordation to the Lenders and
the Borrower.
(e) If, pursuant to this Section 10.11, any interest in
this Agreement or any Note is transferred to any Participant or Purchasing
Lender which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Participant or Purchasing Lender, concurrently with the effectiveness of such
transfer, (i) to represent to the transferor Lender (for the benefit of the
transferor Lender, the Agent and the Borrower) that under applicable law and
treaties no taxes will be required to be withheld by the Agent, the Borrower or
the transferor Lender with respect to any payments to be made to such
Participant or Purchasing Lender in respect of the Loans or Commitments, (ii)
to furnish to the transferor Lender, the Agent and the Borrower two properly
executed original Internal Revenue Service Forms 4224 or
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1001 (or any successor forms) and properly executed Internal Revenue Service
Forms W-8 and W-9, as the case may be, (wherein such Participant or Purchasing
Lender claims entitlement to complete exemption from the United States federal
withholding tax on all interest payments hereunder and all fees payable under
Section 2.3) and (iii) to agree (for the benefit of the transferor Lender, the
Agent and the Borrower) to provide the transferor Lender, the Agent and the
Borrower new Internal Revenue Service Forms 4224 or 1001 upon the expiration or
obsolescence of any previously delivered form or after the occurrence of any
event requiring a change in the most recent forms delivered by it to the
Transferor Lender, the Agent and the Borrower, and comparable statements in
accordance with applicable United States laws and regulations and amendments
duly executed and completed by such Participant or Purchasing Lender, and to
comply from time to time with all applicable United States laws and regulations
with regard to such withholding tax exemption.
(f) Notwithstanding anything to the contrary set forth in
this Section 10.11, but subject to the provisions of clause (g) of this Section
10.11, (i) any Lender may sell to any of its Affiliates all or any part of its
rights and obligations under this Agreement and the Notes, (ii) any Lender may
create a security interest in all or any portion of its rights under this
Agreement (including, without limitation, the Loans owing to it and the Notes
held by it) in favor of the Federal Reserve Bank in accordance with Regulation
A of the F.R.S. Board, and (iii) upon the occurrence and during the continuance
of an Event of Default, any Lender may sell to any Purchasing Lender all or any
part of its rights and obligations under this Agreement and the Notes, in the
case of clause (i) or (iii) above, notwithstanding that the Borrower does not
consent to such sale, provided such Lender has obtained the consent of the
Agent (which consent shall not be unreasonably withheld or delayed) and
otherwise meets the requirements of this Section 10.11. The Agent agrees to
waive the registration and processing fee set forth in clause (d) of this
Section 10.11 in connection with the exercise by any Lender of its rights under
clause (i) of the preceding sentence prior to April 15, 1996.
(g) If any transfer of a Term Note is not made pursuant
to an effective registration statement under the Securities Act, the Lender
desiring to transfer such Term Note will, if reasonably requested by the
Borrower, deliver to the Borrower an opinion of counsel, which may be counsel
to such Lender but which counsel must be reasonably satisfactory to the
Borrower (provided that King & Spalding and Lowenstein, Sandler, Kohl, Fisher &
Boylan shall be deemed reasonably satisfactory), reasonably satisfactory in
form, scope and substance to the Borrower, that such Term Note may be sold
without registration under the Securities Act, and the Purchasing Lender shall
upon purchase of such Term Note or portion thereof be deemed to have affirmed
and agreed to the investment representation set forth in Section 2.5. Each
Lender agrees that its Term Note will bear the following legend:
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<PAGE> 106
"THIS TERM NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION,
OR AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO
THE HOLDER) AS TO AN EXEMPTION, FROM THE
REGISTRATION PROVISIONS OF SAID ACT OR LAWS."
Each Lender further agrees that its Term Note will bear the following legend:
"THIS TERM NOTE IS SUBJECT TO THE TERMS OF A CREDIT
AGREEMENT, DATED AS OF MARCH 15, 1996, BETWEEN
PHONETEL TECHNOLOGIES, INC. (THE "BORROWER"), THE
LENDERS NAMED THEREIN, AND INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, AS AGENT FOR THE LENDERS,
COPIES OF EACH OF WHICH ARE ON FILE AT THE MAIN
OFFICE OF THE BORROWER. ANY SALE OR TRANSFER OF THE
SECURITIES EVIDENCED BY THIS TERM NOTE IS SUBJECT TO
THE TERMS OF SAID CREDIT AGREEMENT AND ANY SALE OR
TRANSFER OF SUCH SECURITIES IN VIOLATION OF SAID
CREDIT AGREEMENT SHALL BE INVALID."
(h) If any transfer of any shares of Series B Special
Preferred Stock or Common Stock issued upon conversion of Series B Special
Preferred Stock (any such shares, "Term Note Shares") is not made pursuant to
an effective registration statement under the Securities Act, the holder
desiring to transfer such Term Note Shares will, if reasonably requested by the
Borrower, deliver to the Borrower an opinion of counsel, which may be counsel
to such holder but which counsel must be reasonably satisfactory to the
Borrower (provided that King & Spalding and Lowenstein, Sandler, Kohl, Fisher &
Boylan shall be deemed reasonably satisfactory), reasonably satisfactory in
form, scope and substance to the Borrower, that such Term Note Shares may be
sold without registration under the Securities Act, as well as (i) an
investment covenant reasonably satisfactory to the Borrower signed by the
proposed transferee (except that no such covenant will be required in
connection with a transfer effected in accordance with Rule 144A under the
Securities Act), and (ii) an agreement by such transferee to the impression of
the restrictive legends set forth below on the Term Note Shares.
All Term Note Shares will bear the following legend (the "Securities Legend"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS
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<PAGE> 107
AMENDED, OR ANY STATE SECURITIES LAWS, SAID
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION, OR AN
OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE
HOLDER) AS TO AN EXEMPTION, FROM THE REGISTRATION
PROVISIONS OF SAID ACT OR LAWS."
Notwithstanding the foregoing provisions of this clause (h) of Section 10.11,
the restrictions upon the transferability of Term Note Shares and the
Securities Legend requirements set forth in this clause (h) of this Section
10.11 shall terminate as to any such Term Note Shares (i) when and so long as
such Term Note Shares shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when the Borrower shall
have received an opinion of counsel reasonably satisfactory to it that such
Securities Legend is not required in order to ensure compliance with the
Securities Act. Whenever the restrictions imposed by this clause (h) of
Section 10.11 shall terminate as to any Term Note Shares as hereinabove
provided, the holder thereof shall be entitled to receive from the Borrower, at
the expense of the Borrower, a new certificate or certificates for such Term
Note Shares bearing the following legend in place of the Securities Legend set
forth above:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE TERMINATED
ON ______________, 19__, AND ARE OF NO FURTHER FORCE
AND EFFECT."
In addition, each certificate representing Term Note Shares will bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO THE TERMS OF CLAUSE (H) OF SECTION 10.11
OF A CREDIT AGREEMENT, DATED AS OF MARCH 15, 1996,
BETWEEN PHONETEL TECHNOLOGIES, INC. (THE "COMPANY"),
THE LENDERS NAMED THEREIN, AND INTERNATIONALE
NEDERLANDEN (U.S.) CAPITAL CORPORATION ("ING") AS
AGENT FOR THE LENDERS, COPIES OF EACH OF WHICH ARE ON
FILE AT THE MAIN OFFICE OF THE COMPANY. ANY SALE OR
TRANSFER OF THE SECURITIES EVIDENCED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS OF SAID AGREEMENT
AND ANY SALE OR TRANSFER OF SUCH SECURITIES IN
VIOLATION OF SAID AGREEMENT SHALL BE INVALID."
- 101 -
<PAGE> 108
SECTION 10.12. Other Transactions. Nothing contained herein
shall preclude the Agent or any other Lender from engaging in any transaction,
in addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
SECTION 10.13. Confidentiality. (a) The Lenders and the
Agent shall treat any information concerning the Borrower (whether prepared by
the Borrower, its advisors or otherwise) which has been or will be furnished by
or on behalf of the Borrower or any Subsidiary thereof (herein collectively
referred to as the "Confidential Information") in accordance with the customary
procedures for handling confidential information of this nature and will not
willfully disclose any Confidential Information to any other party, except as
otherwise provided herein. The Confidential Information will be used solely in
connection with the transactions contemplated by the Loan Documents or as
otherwise authorized by the Borrower. The term "Confidential Information" does
not include information which (i) is or becomes generally available to the
public other than as a result of a disclosure by the Agent, the Lenders or
their respective affiliates, directors, officers or employees, or (ii) becomes
available on a nonconfidential basis from a source other than the Borrower, any
of its Subsidiaries, or their advisors, provided that such source is not known
by the Agent or the Lenders to be bound by a confidentiality agreement with or
other obligation of secrecy to the Borrower or any of its Subsidiaries.
(b) Notwithstanding the foregoing, (i) Confidential
Information may be disclosed to the Agent's and Lenders' affiliates, directors,
partners, officers, employees and advisors who are in a confidential
relationship with such Person or who are informed of the confidential nature of
such information, (ii) Confidential Information may be disclosed as reasonably
required by any proposed syndicate member or any proposed transferee or
participant in connection with the contemplated transfer of any Note or
participation therein or of any Loan Document or related document, provided
that any such proposed syndicate member or proposed transferee or participant
shall have agreed in writing for the Borrower's benefit to be bound by the
terms of this Section 10.13, and shall agree to return any Confidential
Information, and will not retain any copies, extracts or other reproductions in
whole or in part of such Confidential Information, if it does not become a
syndicate member, transferee or participant, (iii) Confidential Information may
be disclosed to the extent requested or required by bank regulators or auditors
or any administrative body or commission to whose jurisdiction the Agent or a
Lender may be subject, (iv) Confidential Information may be disclosed to the
extent required by law, regulation, subpoena, judicial order or legal process,
provided that notice of such requirement or order shall be promptly furnished
to the Borrower unless such notice is legally prohibited, (v) Confidential
Information may be disclosed to the extent
- 102 -
<PAGE> 109
required by the rules of any securities exchange on which securities of the
Agent or any Lender are listed and traded, (vi) Confidential Information may be
disclosed in connection with the enforcement by the Agent or any Lender of its
rights under the Loan Documents or in connection with any litigation between
any Loan Party and the Agent or any Lender with respect to the Loan or any Loan
Document, and (vii) Confidential Information may be disclosed to the extent the
Borrower consents to such disclosure.
SECTION 10.14. Change in Accounting Principles. If
(a) any changes in accounting principles from those used
in the preparation of the financial statements referred to in clause (a)(i) of
Section 5.4 hereafter occur as a result of the promulgation of rules,
regulations, pronouncements or opinions by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) result in a change in the method of
calculation of financial covenants, standards or terms found in this Agreement;
or
(b) there is any change in the Borrower's Fiscal Year
with the Required Lenders' prior written consent pursuant to Section 6.2.16
hereof;
the parties hereto agree to enter into negotiations in order to amend such
financial covenants, standards or terms so as to equitably reflect such changes
with the desired result that the evaluations of the Borrower's financial
condition shall be the same after such changes as if such changes had not been
made; provided, however, that, until the parties hereto have reached a
definitive agreement on such amendments the Borrower shall not change its
Fiscal Year and the Borrower's financial condition and operations shall
continue to be evaluated on the same principles as those used in the
preparation of the financial statements referred to in clause (a)(i) of Section
5.4.
SECTION 10.15. Waiver of Jury Trial, Etc. THE AGENT, THE
LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE
NOTES OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, SUCH LENDERS,
OR THE BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND
SUCH LENDERS ENTERING INTO THIS AGREEMENT.
SECTION 10.16. Limitation of Liability. Neither the Agent,
the Lenders nor any Affiliate thereof shall have any liability with respect to,
and THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON, ANY CLAIM
FOR ANY SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES
SUFFERED BY THE BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY
RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS, THE TRANSACTIONS
- 103 -
<PAGE> 110
CONTEMPLATED HEREIN, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH.
SECTION 10.17. Usury Savings Clause. Notwithstanding
anything to the contrary in this Agreement or any other Loan Document, if at
any time any rate of interest accruing on any Obligation, when aggregated with
all amounts payable by the Borrower or any other Loan Party under any of the
Loan Documents that are deemed or construed to be interest accrued or accruing
on such Obligation under applicable law, exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable to such Lender with respect to such
Obligation (each a "Maximum Lawful Rate"), then in such event and so long as
the Maximum Lawful Rate would be so exceeded, such rate of interest shall be
reduced to the Maximum Lawful Rate; provided that if at any time thereafter
such rate of interest accruing on Obligations held by such Lender is less than
the Maximum Lawful Rate, the Borrower shall continue to pay interest to such
Lender at the Maximum Lawful Rate until such time as the total interest
received by such Lender in respect of the Obligations held by it is equal to
the total interest which such Lender would have received had interest on all
Obligations held by such Lender (but for the operation of this Section 10.17)
accrued at the rate otherwise applicable under this Agreement and the other
Loan Documents. Thereafter, interest payable to such Lender in respect of the
Obligations held by it shall accrue at the applicable rate set forth in this
Agreement or other Loan Documents unless and until such rate again exceeds the
Maximum Lawful Rate, in which event this Section 10.17 shall again apply. In
no event, shall the total interest received by any Lender pursuant to the terms
hereof exceed the amount which such Lender could lawfully have received had
interest been calculated for the full term of this Agreement at the Maximum
Lawful Rate. In the event that the Maximum Lawful Rate is calculated pursuant
to this Section 10.17, (a) if required by applicable law, such interest shall
be calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made, and (b) if
permitted by applicable law, the Borrower and such Lender shall (i)
characterize any non-principal payment as an expense, fee or premium rather
than as interest, (ii) exclude voluntary prepayments and the effect thereof,
and (iii) amortize, prorate, allocate and spread in equal or unequal parts the
total amount of interest throughout the entire contemplated term of the Loans
so that interest for the entire term of the Loans shall not exceed the Maximum
Lawful Rate. In the event that a court of competent jurisdiction,
notwithstanding the provisions of this Section 10.17 shall make a final
determination that any Lender has received interest in excess of the Maximum
Lawful Rate, such Lender shall, to the extent permitted by applicable law,
promptly apply such excess, first to any interest due and outstanding under
this Agreement and the other Loan Documents, second to any principal due and
payable under this Agreement and the Notes, third to the remaining principal
amount of the Notes and fourth to other unpaid
- 104 -
<PAGE> 111
Obligations held by such Lender, and thereafter shall refund any excess to the
Borrower or as a court of competent jurisdiction may otherwise order.
SECTION 10.18. Conflict in Loan Documents. To the extent
there is any actual irreconcilable conflict between the provisions of this
Agreement and any other Loan Document, the provisions of this Agreement shall
prevail.
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<PAGE> 112
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter G. Graf
--------------------------------
Peter G. Graf
Chairman and
Chief Executive Officer
Attest: /s/ T. L. Martin
----------------------------
Name: T. L. Martin
Title: Secretary
[CORPORATE SEAL]
- 106 -
<PAGE> 113
Percentage
50% - Revolving INTERNATIONALE NEDERLANDEN (U.S.)
Percentage CAPITAL CORPORATION, AS AGENT AND AS
LENDER
50% - Term Percentage
By: /s/ James W. Latimer
-------------------------------
James W. Latimer
Managing Director
- 107 -
<PAGE> 114
Percentage
50% - Revolving CERBERUS PARTNERS, L.P., AS LENDER
Percentage
50% - Term Percentage By: Cerberus Associates, L.P.,
Its General Partner
By: /s/ Stephen Feinberg
--------------------------
Name: Stephen Feinberg
Title: General Partner
Address for Notices:
950 Third Avenue
20th Floor
New York, New York 10022
Attention: Mr. Seth P. Plattus
Telecopier No: (212) 421-2847
with a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068-1791
Attention: Robert G. Minion, Esq.
Telecopier No: (201) 992-5820
- 108 -
<PAGE> 1
- --------------------------------------------------------------------------------
WARRANT PURCHASE AGREEMENT
BETWEEN
PHONETEL TECHNOLOGIES, INC.
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
AND
CERBERUS PARTNERS, L.P.
Dated as of March 15, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Purchase and Sale of Warrants; Closing . . . . . . . . . . . . . . . 12
Section 3. Investment Representations . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5. Warranties, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7. Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 8. Execution of Warrant Certificates . . . . . . . . . . . . . . . . . . 23
Section 9. Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 10. Registration of Transfers and Exchanges . . . . . . . . . . . . . . . 23
Section 11. Warrants; Exercise of Warrants . . . . . . . . . . . . . . . . . . . 25
Section 12. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 13. Mutilated or Missing Warrant
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 14. Reservation of Warrant Shares . . . . . . . . . . . . . . . . . . . . 27
Section 15. Adjustment of Exercise Price and Number
of Warrant Shares Issuable . . . . . . . . . . . . . . . . . . . . . 28
(a) Reorganization of the Company . . . . . . . . . . . . . . . . . . 28
(b) When Issuance or Payment May be
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 16. Fractional Interests . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 17. Notice to Warrant Holders . . . . . . . . . . . . . . . . . . . . . . 30
Section 18. Cash Distributions and Dividends . . . . . . . . . . . . . . . . . . 31
Section 19. Put Rights; Tag-Along Rights and
Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . 32
(a) Put by Holders . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) Restrictions on Purchase . . . . . . . . . . . . . . . . . . . . 34
(d) Tag-Along Rights . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
(e) Limitation on Put Rights of Others . . . . . . . . . . . . . . . 36
(f) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(g) Registration Rights . . . . . . . . . . . . . . . . . . . . . . . 37
Section 20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 21. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 22. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 23. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 24. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 25. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 26. Benefits of this Agreement . . . . . . . . . . . . . . . . . . . . . 40
Section 27. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 28. Amendments; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 29. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 30. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 31. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 32. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 33. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Exhibit A Form of Warrant Certificate
Exhibit B Preemptive Rights, Options, Warrants, Rights of
Conversion and Purchase, etc.
Exhibit C Agreements Regarding Voting, Sale or Transfer
Exhibit D Registration Rights
Exhibit E Transactions with Affiliates
</TABLE>
-ii-
<PAGE> 4
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of March 15, 1996 by and between PHONETEL TECHNOLOGIES, INC.,
an Ohio corporation (the "Company"), INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION, a Delaware corporation ("ING") and CERBERUS PARTNERS, L.P., a
Delaware limited partnership ("Cerberus") (ING and Cerberus, each the
"Purchaser", and collectively, the "Purchasers").
W I T N E S S E T H:
RECITALS:
A. Simultaneously herewith, the Purchasers are entering
into a Credit Agreement, dated of even date herewith, among the Company, the
Purchasers and various other lenders that may become parties thereto (the
"Lenders") and ING in its capacity as Agent for the Lenders;
B. It is a condition precedent to the initial extensions
of credit by the Purchasers to the Company contemplated by the Credit Agreement
that the Company agree to issue to the Purchasers Warrants initially
exercisable for 204,824 shares of Series A Special Convertible Preferred Stock,
par value $.20 per share, of the Company; and
C. The Purchasers and the Company desire to set forth in
this Agreement the terms and provisions of the Warrants and the conditions to
the issuance and sale thereof to the Purchasers;
NOW, THEREFORE, in consideration of the premises and the
agreements herein set forth and to induce the Purchasers to proceed with the
transactions contemplated by the Credit Agreement, the parties hereto,
intending to be legally bound, hereby agree as follows:
SECTION 1. Definitions.
(a) Defined Terms. Capitalized terms appearing herein
and not otherwise defined herein shall have the meanings ascribed thereto in
the Credit Agreement (irrespective of whether the Credit Agreement is in effect
or has been terminated). The following terms (whether or not underscored) when
used in this Agreement, including its preamble and recitals, shall, except
where the context otherwise requires, have the following meanings:
"Acquisition" means the acquisition by the Company or any of
its Subsidiaries of Telephones or rights to manage or service Telephones,
whether by acquisition of an operating
<PAGE> 5
division or business unit or assets of another Person, by acquisition of shares
in another Person, by merger or consolidation with another Person, by
acquisition from a vendor or otherwise.
"Additional Put Event" means any of the following: (a) any
representation or warranty of the Company under this Agreement or any other
Warrant Document or under the Credit Document or any other Loan Document is or
shall be incorrect when made in any material respect; (b) the Company shall
default in the due performance and observance of any of its obligations under
any Warrant Document; (c) an Event of Default shall have occurred due to a
default by the Company in the payment of any amount or other obligation due
under the Loan Documents or any other material Event of Default shall have
occurred under the Loan Documents; (d) a merger or consolidation of the Company
with or into any other Person (other than (i) a Permitted Merger, and (ii) a
merger with or into a corporation unaffiliated with the Company if 80% of the
assets of such corporation are directly related to the operation of Telephones
and 80% of the revenues of such corporation are derived directly from the
operation of Telephones) or any acquisition of the Company by means of a share
exchange; and (e) a Change of Control.
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or under common control
with such Person (excluding any trustee under, or any committee with
responsibility for administering, any Plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power
(a) to vote 5% or more of the securities having ordinary
voting power for the election of directors of such Person; or
(b) to direct or cause the direction of the management or
policies of such Person whether by contract or otherwise;
provided that ING and Cerberus shall not be deemed to be an Affiliate of the
Company hereunder.
"Agent" is defined in Recital A.
"Agreement" means this Warrant Purchase Agreement as in effect
on the date hereof and as hereafter amended, supplemented, restated or
otherwise modified.
"Approval" means each and every approval, consent, filing and
registration by or with any federal, state or other regulatory authority
(domestic or foreign) necessary to authorize or permit the execution, delivery
or performance of this Agreement or any other Warrant Document, or for the
validity or enforceability thereof.
-2-
<PAGE> 6
"Authorized Officer" means, relative to the Company, those of
the Company's officers whose signatures and incumbency shall have been
certified to the Agent and the Lenders pursuant to Section 4.1.(a)(ii) of the
Credit Agreement.
"Below Market Dilution Shares" shall mean, in connection with
the issuance of any shares of Common Stock pursuant to an acquisition at a
price below the Fair Market Value per Share, the product of (i) the quotient of
(A) the Fair Market Value per Share on the date of issuance minus the price per
share of Common Stock issued in connection with such acquisition, divided by
(B) such Fair Market Value per Share, times (ii) the number of shares of Common
Stock so issued.
"Business Day" means any day which is neither a Saturday or
Sunday nor a legal holiday on which banks are authorized or required to be
closed in New York, New York.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation issued or guaranteed by the
United States of America or any agency or instrumentality thereof and backed by
the full faith and credit of the United States of America, or issued by any
state or political subdivision or public instrumentality thereof, (i) which
has a remaining maturity at the time of purchase of not more than six months or
(ii) which is subject to a repurchase agreement with any Lender or any Eligible
Lending Institution exercisable within six months from the time of purchase so
long as such direct obligation remains in the possession of the Company or in
the possession of any Lender and (iii) which, in the case of obligations of any
state or political subdivision or public instrumentality thereof, is rated A or
better by Moody's Investors Service, Inc.;
(b) certificates of deposit, time deposits, demand
deposits and bankers' acceptances, having a remaining maturity at the time of
purchase of not more than six months, issued by any Lender or by any Eligible
Lending Institution;
(c) corporate obligations rated Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation, having a
remaining maturity at the time of purchase of not more than one (1) year; and
(d) shares of funds registered under the Investment
Company Act of 1940, as amended, having assets of at least $100,000,000 which
invest only in obligations described above and which shares are rated by
Moody's Investors Service, Inc. or Standard & Poor's Corporation in one of the
two highest rating categories assigned by such agencies for obligations of such
nature.
"Certificate of Amendment" means the Certificate of Amendment
to the Articles of Incorporation of the Company filed
-3-
<PAGE> 7
with the Secretary of State of Ohio on March 13, 1996 relating to the Series A
Special Preferred Stock.
"Change of Control" means the occurrence of any of the
foregoing: (a) any Person or group of Persons shall have acquired beneficial
ownership of more than 25% of the outstanding Stock of the Company (within the
meaning of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934,
as amended, and the applicable rules and regulations thereunder) other than as
a result of the issuance by the Company of Notes pursuant to the Credit
Agreement or the conversion thereof or of the exercise of the Warrants; (b)
during any period of 12 consecutive months (whether commencing before or after
the Closing Date), individuals who on the first day of such period were
directors of the Company (together with any replacement or additional directors
who are nominated or elected by a majority of directors then in office) cease
to constitute a majority of the Board of Directors of the Company; (c) the
failure of Graf to be the Chairman of the Board of Directors of the Company and
to be actively involved in the management of the Company; or (d) the failure of
Graf to own, beneficially and of record, 70% of the shares of Stock owned by
Graf on the Closing Date.
"Closing" means the closing of the sale and purchase of the
Warrants as contemplated hereby.
"Closing Date" means the date of the Closing.
"Common Stock" means shares now or hereafter authorized of any
class of common stock of the Company and any other capital stock of the
Company, however designated, that has the right (subject to any prior rights of
any other class or series of Stock) to participate in any distribution of the
assets upon voluntary or involuntary liquidation, dissolution or winding up of
the Company and in the earnings of the Company without limit as to per share
amount, and shall include, without limitation, the presently authorized
22,250,000 shares of Common Stock, $0.01 par value per share of the Company.
"Common Stock" shall not include preferred or special stock.
"Company" is defined in the preamble to this Agreement.
"Confidential Information" is defined in Section 32.
"Contract Value per Share" means the value determined in
accordance with paragraphs (i), (ii) and (iii) below and shall equal the
highest number yielded by such determination:
(i) The Contract Value per Share determined pursuant to
this paragraph (i) shall be an amount equal to the average of the Quoted Prices
for Common Stock for the thirty (30) consecutive trading days commencing
forty-five (45) trading days before the date of determination.
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<PAGE> 8
(ii) The Contract Value per Share determined pursuant to
this paragraph (ii) shall equal the quotient of (A) five (5.0) times EBITDA,
minus (1) the outstanding principal amount of Funded Indebtedness as of the
last day of the fiscal month ending immediately prior to the date of
determination, plus (2) cash and Cash Equivalent Investments on the balance
sheet of the Company and its Subsidiaries as of the last day of the fiscal
month ending immediately prior to the date of determination, all determined in
accordance with GAAP, divided by (B) the sum of (1) the number of shares of
Common Stock outstanding on the date of determination, plus (2) the number of
Warrant Shares purchasable and receivable upon exercise of the rights
represented by the Warrant Certificates as of the date of determination.
(iii) If (but only if) the Company is not a Public Company,
the Contract Value per Share determined pursuant to this paragraph (iii) shall
be the quotient of (A) the fair market value of the Company and its
Subsidiaries taken as a whole on the date of determination, taking into account
all the factors relevant thereto, including, without limitation, the price that
could be obtained from an arms'-length sale without time constraints of (1) all
or substantially all of the assets of the Company and the Subsidiaries subject
to or after satisfaction of all liabilities of the Company and the
Subsidiaries, excluding any tax or other liabilities incurred in connection
with such sale or (2) all of the Stock of the Company, whether by stock sale,
merger, consolidation or otherwise, divided by (B) the sum (1) the number of
fully vested shares of Stock on the date of determination, plus (2) the number
of Warrant Shares purchasable and receivable upon exercise of the rights
represented by the Warrant Certificates as of the date of determination. In no
event shall the Contract Value per Share determined pursuant to this paragraph
(iii) be reduced or discounted on the basis that any securities to be valued on
the basis of such Contract Value per Share may represent the right to acquire a
minority interest in the Company or may not be freely transferable under
federal or state securities laws, or for any other reason. In any
circumstances in which the Contract Value per Share is to be determined
pursuant to this paragraph (iii), the Company shall give to the Holder (or, if
such determination affects less than all of the Holders, to the Holders so
affected) written notice of the proposed Contract Value per Share, as
determined in good faith by the Board of Directors of the Company. If, within
thirty (30) days after the date such notice is given, the Company and the
Required Holders agree upon the Contract Value per Share then the Contract
Value per Share for purposes of this paragraph (iii) shall be as so agreed. If
the Required Holders and the Company do not agree upon such Contract Value per
Share within such 30-day period, then the Required Holders and the Company
shall appoint a recognized investment banking firm of national reputation,
reasonably acceptable to the Required Holders and the Company. If the Company
and the Required Holders cannot agree on the appointment of a mutually
acceptable investment banking firm, or if the firm so appointed declines or
fails to serve, then the Required Holders and the Company shall
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<PAGE> 9
each choose one such investment banking firm and the respective firms so chosen
shall appoint another recognized investment banking firm of national
reputation. The investment banking firm so selected shall appraise the value
of the Company for the purposes of this paragraph (iii), and such investment
banking firm shall make such appraisal (which shall be in the form of a written
report signed by such investment banking firm), and, for the purposes of
determining the Contract Value per Share pursuant to this paragraph (iii), such
appraised value of the Company determined as herein provided shall be final and
conclusive and binding on the Company and the Holders. All costs of appraisals
shall be borne by the Company.
"Conversion Rate" is defined in subparagraph (1)(iv) of the
Certificate of Amendment.
"Convertible Securities" is defined in subparagraph
(l)(vii)(C) of the Certificate of Amendment.
"Credit Agreement" means the Credit Agreement, dated of even
date herewith, among the Company, the Purchasers and various other Lenders that
may become parties thereto and ING as Agent for the Lenders, as in effect on
the date hereof and as hereafter amended, supplemented, restated or otherwise
modified.
"EBITDA" means the net income of the Company and its
Subsidiaries, reported on a consolidated basis for the twelve-month period
immediately preceding the month of the date of determination, adjusted by
adding thereto the amount of all interest expense, depreciation, amortization
of intangible assets and other non-cash charges (to the extent deducted in
computing net income for such period) and taxes incurred, if any, that were
deducted in computing net income for such period, all determined in accordance
with GAAP as in effect on the Closing Date, but excluding the effect of the
accretion of the right to put Warrant Securities pursuant to this Agreement and
any original issue discount on the issuance of the Warrants; provided, however
that if the Company or any of its Subsidiaries has effected an Acquisition
during such twelve-month period, EBITDA shall be calculated giving pro forma
effect to such Acquisition as if such Acquisition was consummated (and any
Funded Indebtedness incurred in connection therewith was incurred) on the first
day of such period. In giving pro forma effect to any Acquisition, EBITDA with
respect to Telephones acquired pursuant to such Acquisition shall be based upon
the Company's projected EBITDA with respect to such Telephones for the 12-month
period commencing with the month immediately following such Acquisition as
determined in good faith by the Board of Directors of the Company, but in any
event EBITDA shall be deemed to be not less than $600 per Telephone acquired
pursuant to such Acquisition. In giving pro forma effect to any Funded
Indebtedness incurred in connection with an Acquisition, interest attributable
to Funded Indebtedness bearing a floating rate of interest shall be computed as
if the rate in effect on the
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<PAGE> 10
date of determination had been the applicable rate for the entire period.
"Eligible Lending Institution" means a financial institution
having a branch or office in the United States and having capital and surplus
and undivided profits aggregating at least $100,000,000 and whose long-term
debt securities are rated Prime-1 or better by Moody's Investor Service, Inc.
or A-1 or better by Standard & Poor's Corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended or otherwise modified from time to time.
"Exercise Price" means $0.20 per Warrant Share, as adjusted as
herein provided.
"Fair Market Value per Share" means the fair market value of
a share of Common Stock as determined in accordance with subparagraph
(l)(vii)(H) of the Certificate of Amendment.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means each twelve month accounting period of the
Company which ends on December 31; references to a Fiscal Year with a number
corresponding to any calendar year (e.g., the "1996 Fiscal Year") refer to the
Fiscal Year in which the majority of days in such Fiscal Year occur.
"Funded Indebtedness" means (i) the indebtedness under the
Credit Agreement, and (ii) all other indebtedness of the Company and its
Subsidiaries which matures more than one year from the date of its creation or
matures within one year from such date but is renewable or extendable, at the
option of the Company or any of its Subsidiaries, to a date more than one year
from such date or arises under an agreement which obligates the lender or
lenders to extend credit during a period of more than one year from such date.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Graf" means Peter G. Graf.
"Holders" means, collectively, the Purchasers and any
subsequent registered holders, from time to time, of Warrant Securities.
"Indemnified Liabilities" is defined in Section 22.
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"Indemnified Parties" is defined in Section 22.
"Legally Available Funds" means, with respect to any purchase
of Warrant Securities pursuant to Section 19(a), the amount of funds of the
Company legally available therefor under the corporate laws under which the
Company is organized and existing.
"Lender" is defined in Recital A.
"Lien" means any mortgage, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, lien (statutory or other), adverse
claim (i.e., a claim that a transfer was or would be wrongful or that a
particular adverse person is the owner or has an interest in property),
security agreement or other arrangement of any kind or nature whatsoever that
entitles any creditor or obligee to be satisfied from any or all of the assets
of a debtor or obligor prior to the satisfaction of any claims of any other
creditor or obligee (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Loan" means, collectively, the Revolving Loans and the Term
Loan made by the Lenders to the Company pursuant to Section 2.1 of the Credit
Agreement.
"Obligations" means all obligations of the Company with
respect to the repayment or performance of any obligations (monetary or
otherwise) of the Company arising under or in connection with the Credit
Agreement, the "Notes" or the other "Loan Documents" (as such terms are defined
in the Credit Agreement) and the Warrant Documents.
"Organic Document" means, relative to any Person, its articles
or certificate of incorporation or certificate of limited partnership, its
by-laws, partnership agreement or other organizational documents, and all
stockholders agreements, voting trusts and similar arrangements applicable to
any of its stock or partnership interests, in each case, as amended.
"Permitted Merger" means the merger of the Company with and
into a Delaware corporation for the sole purpose of changing the Company's
state of incorporation to the State of Delaware, provided that (i) the
shareholders of the surviving corporation immediately after such merger are the
shareholders of the Company immediately prior to such merger, (ii) the number
of authorized and issued and authorized and unissued shares, and the respective
classes and series, of capital stock of the surviving corporation shall be the
same as the number of authorized and issued and authorized and unissued shares,
and the respective classes and series, of capital stock of the Company
immediately prior to such merger, (iii) the voting powers, designations,
preferences and
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<PAGE> 12
relative, participating, optional or other special rights, and qualifications,
limitations and restrictions of all classes and series of capital stock of the
surviving corporation shall be identical to the voting powers, designations,
preferences (including, without limitation, stated values and liquidation
preferences) and relative, participating, optional or other special rights, and
qualifications, limitations and restrictions of the respective classes and
series of the capital stock of the Company as in effect immediately prior to
such merger, (iv) the Holders shall have received (A) an assumption agreement
in form and substance satisfactory to the Required Holders, duly executed by
the surviving corporation and pursuant to which the surviving corporation shall
expressly assume all of the obligations of the Company under this Agreement and
the other Warrant Documents, and (B) such acknowledgments, certificates,
instruments and legal opinions relating to such merger and assumption agreement
as the Required Holders shall reasonably request, and (v) the provisions of
Section 203 of the Delaware General Corporation Law would not apply to the
Company or any Holder, this Agreement, any of the other Warrant Documents or
any of the Loan Documents or the authorization or the issuance of the Warrant
Securities or any shares of capital stock to be issued pursuant to the Loan
Documents.
"Person" means any natural person, corporation, partnership,
limited liability company, firm, association, government, governmental agency
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Preferred Stock" means shares now or hereafter authorized of
any class of capital stock of the Company other than Common Stock, and shall
include, without limitation, the presently authorized 2,500,000 shares of
Preferred Stock, $.01 par value, of which (i) 2,125 shares have been designated
Preferred Stock, $100 par value, of which no shares are outstanding, (ii) 6,500
shares have been designated Convertible Preferred Stock, without par value,
$100 stated value, cumulative and redeemable, of which no shares are
outstanding, (iii) 3,880 shares have been designated Preferred Stock, without
par value, $1,000 stated value, cumulative and redeemable, of which no shares
are outstanding, (iv) 16,000 shares have been designated 8% Preferred Stock,
without par value, $100 stated value, cumulative and redeemable, of which no
shares are outstanding, (v) 2,500 shares have been designated 7% Convertible
Preferred Stock, without par value, $100 stated value, cumulative and
redeemable, of which no shares are outstanding, (vi) 550,000 shares have been
designated 10% Preferred Stock, without par value, $10 stated value,
cumulative, of which 530,534 shares are outstanding, (vii) 250,000 shares have
been designated Series A Special Convertible Preferred Stock, $.20 par value,
of which no shares are outstanding, (viii) 250,000 shares have been designated
Series B Special Convertible Preferred Stock, $.20 par value, of which no
shares are outstanding, (ix) 200,000 shares have been designated 14%
Convertible Preferred Stock, without par value, $60 stated value, of which
107,918
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<PAGE> 13
shares are outstanding and (x) 1,218,995 shares are undesignated and unissued.
"Prospective Purchaser" shall have the meaning set forth in
Section 19(d).
"Public Company" means a company (i) which is subject to the
reporting requirements of Section 15(d) of the Exchange Act, or (ii) any of
whose securities are registered pursuant to Section 12(b) or 12(g) of the
Exchange Act.
"Purchase Price" is the amount payable to each Holder for such
Holder's Warrant Securities, as calculated in accordance with Section 19(a).
"Put Closing Date" is defined in Section 19(b).
"Put Notice" is the written notice to the Company specifying
the number and type of Warrant Securities with respect to which the Put Right
is being exercised.
"Put Right" is the right of each Holder to require that the
Company purchase all or any portion of the Warrant Securities then owned by
such Holder.
"Quoted Price" of Common Stock for each day means the last
reported sales price of Common Stock on such day as reported by NASDAQ or, if
Common Stock is listed on a national securities exchange, the last reported
sales price of Common Stock on such exchange (which shall be for consolidated
trading if applicable to such exchange) on such day, or if not so reported or
listed, the average of the last reported bid and asked prices of Common Stock
on such day, in each case as appropriately adjusted for any stock splits or
reverse stock splits occurring after the Closing Date.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated of even date herewith, between the Company and the Purchasers,
as in effect on the date hereof and as hereafter amended, supplemented,
restated or otherwise modified.
"Required Holders" means Holders holding at least 66-2/3% of
the Warrant Securities outstanding (treating all Warrants as fully exercised
for the Warrant Shares to which Holders would be entitled upon exercise of such
Warrants) or, if any matter affects the interest of less than all of the
Holders, then Holders holding at least 66-2/3% of the Warrant Securities so
affected, as the context may require.
"Required Lenders" is defined in the Credit Agreement.
"Restriction on Purchase" exists if, at the time of a Closing,
(i) the purchase of such Warrant Securities would result in a default under or
a breach of any Restrictive Provision (assuming that the covenants applicable
to the Company at the end
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<PAGE> 14
of the Fiscal Quarter in which such purchase is to occur were applicable on the
date of such purchase), or (ii) the Company would not have sufficient Legally
Available Funds to pay the Purchase Price for the Warrant Securities.
"Restrictive Provision" means any of the financial covenants
contained in Section 6.2.4 or the negative covenants contained in Section 6.2.8
of the Credit Agreement, in each case as the same may be amended from time to
time; provided, however, that to the extent noncompliance with any such
covenant as a result of the purchase by the Company of Warrant Securities is
waived in accordance with Section 9.1 of the Credit Agreement such covenant
shall not constitute a Restrictive Provision.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Securities Legend" is defined in Section 10.
"Selling Holder" is defined in Section 19(c).
"Selling Holder Notice" is defined in Section 19(d).
"Selling Holder Offer" is defined in Section 19(d).
"Series A Special Preferred Stock" means the 250,000 shares of
Series A Special Convertible Preferred Stock of the Company, $.20 par value per
share, authorized pursuant to the Certificate of Amendment, of which no shares
are outstanding as of the Closing Date.
"Series B Special Preferred Stock" means the 250,000 shares of
Series B Special Convertible Preferred Stock of the Company, $.20 par value per
share, authorized pursuant to the Certificate of Amendment, of which no shares
are outstanding as of the Closing Date.
"Stock" means any capital stock of the Company.
"Subsidiary" of any corporation means any other corporation
greater than 50% of the outstanding shares of capital stock of which having
ordinary voting power for the election of directors is owned directly or
indirectly by such corporation, and, except as otherwise indicated herein,
references to Subsidiaries shall refer to Subsidiaries of the Company.
"Substitute Securities" is defined in Section 15(a).
"Telephone" is defined in the Credit Agreement.
"Transfer Agent" is defined in Section 14.
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"Warrant Certificates" means the certificates evidencing the
Warrants in the form of Exhibit A.
"Warrant Documents" means, collectively, this Agreement, the
Warrants, the Registration Rights Agreement and any other document, instrument
or agreement executed or delivered in connection with any of the foregoing to
which the Company is a party, but excluding the Credit Agreement and the other
Loan Documents (as defined in the Credit Agreement).
"Warrant Securities" means, collectively, the Warrants and
Warrant Shares.
"Warrant Shares" means the securities which a Holder may
acquire upon exercise of a Warrant, together with any other securities which
such Holder may acquire on account of any such securities, including, without
limitation, as the result of the Series A Special Preferred Stock being
converted into shares of Common Stock and/or any dividend or other distribution
on Common Stock, any split-up of such Common Stock, or in accordance with a
recapitalization, merger, consolidation, share exchange, reorganization or
other transaction or series of related transactions in which shares of Common
Stock are changed into or exchanged for securities of another corporation, or
the exercise of any preemptive right (or the exercise or conversion of any
security which such Holder may acquire in connection with the exercise of any
preemptive right) with respect to any such Common Stock.
"Warrants" means the warrants referred to in Recital B
evidenced by the Warrant Certificates, together with any warrants issued in
substitution or replacement therefor.
(b) Cross-References. Unless otherwise specified,
references in this Agreement to any Article or Section are references to such
Article or Section of this Agreement, and unless otherwise specified,
references in any Article, Section, or definition to any clause are references
to such clause of such Section, Article or definition.
(c) Gender; Usage. Whenever used herein the singular
number shall include the plural, the plural shall include the singular, and the
use of any gender shall include all genders. The words "hereof," "herein" and
"hereunder," and words of similar import, when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
SECTION 2. Purchase and Sale of Warrants; Closing.
(a) Subject to the initial funding of the Loan, the Company
hereby agrees to sell to each Purchaser and, subject to the provisions of
Section 4, each Purchaser hereby agrees to purchase from the Company, Warrants
to purchase 102,412 shares of Series A Special Preferred Stock, for an
aggregate purchase
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<PAGE> 16
price of $1.00 and other good and valuable consideration, all of which shall be
deemed to have been received by the Company upon the initial funding of the
Loan under the Credit Agreement.
(b) The sale and purchase of the Warrants shall take
place at the Closing at the offices of Skadden, Arps, Slate, Meagher & Flom,
919 Third Avenue, New York, New York 10022 at 10:00 a.m. on March 15, 1996 or
such other place and time as may be agreed upon by the Purchasers and the
Company. At the Closing, the Company will deliver to each Purchaser Warrant
Certificates in the form of Exhibit A attached hereto evidencing the Warrants
to be purchased by such Purchaser (in such denomination or denominations as
such Purchaser may request and registered in its name or the name of its
nominee), dated the Closing Date.
SECTION 3. Investment Representations. Each Purchaser
represents and warrants that it is purchasing the Warrants for its own account,
for investment purposes and not with a view to the distribution thereof;
provided, however, that the foregoing representation shall not be construed as
imposing any limitation on such Purchaser's right to transfer any of the
Warrants that is not otherwise expressly set forth in the Warrant Documents or
required under applicable law. Each Holder agrees that it will not, directly
or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any of the Warrant Securities (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of the Warrant Securities),
except in compliance with the Securities Act. Each Holder agrees that it will
not transfer, sell, assign, pledge, hypothecate or otherwise dispose of any of
the Warrant Securities if any such disposition would cause the Company to be
required to register any Warrant Securities pursuant to Section 12(g) of the
Exchange Act.
SECTION 4. Conditions Precedent. The obligation of
Purchasers to purchase the Warrants on the Closing Date pursuant to Section 2
hereof shall be subject to the prior or concurrent satisfaction of each of the
conditions precedent set forth in this Section 4, except as the Purchasers
shall otherwise consent:
(a) the accuracy of the representations set forth in this
Agreement and in the other Warrant Documents in all material respects;
(b) the compliance by the Company in all material
respects with all covenants and agreements required to be performed by it on or
prior to the Closing;
(c) the satisfaction of all of the conditions precedent
set forth in Article 4 of the Credit Agreement;
(d) the initial funding of the Loan under the Credit
Agreement;
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<PAGE> 17
(e) each Purchaser's receipt of Warrant Certificates
registered in such Purchaser's name (or in the name of a nominee of such
Purchaser) evidencing the Warrants;
(f) the Purchasers' receipt of the Registration Rights
Agreement with respect to the Warrants, in form and substance satisfactory to
Purchasers, duly executed and delivered by the Company and dated the Closing
Date;
(g) the Purchasers' receipt of a copy of the Company's
certificate of incorporation, certified by the Secretary of State of Ohio as of
a recent date;
(h) the Purchasers' receipt of a certificate of the
secretary or an assistant secretary of the Company, together with true and
correct copies of the resolutions of the Board of Directors authorizing or
ratifying the execution, delivery and performance of this Agreement and the
other Warrant Documents, and authorizing the creation and issuance of the
Warrants and the Warrant Shares; and setting forth the names of the Authorized
Officers of the Company executing this Agreement and the other Warrant
Documents, together with a sample of the true signature of each such Authorized
Officer;
(i) the Purchasers' receipt of certified copies of all
documents evidencing any other necessary corporate action, consents and
governmental approvals or filings (if any) with respect to this Agreement and
the other Warrant Documents;
(j) the Purchasers' receipt of an opinion, dated the
Closing Date, from Messrs. Skadden, Arps, Slate, Meagher & Flom, counsel to the
Company, in form and substance satisfactory to each Purchaser and its counsel,
and covering such matters as each Purchaser may reasonably request; and
(k) all proceedings taken in connection with the
transactions contemplated by this Agreement and the other Warrant Documents
shall be satisfactory in form and substance to each Purchaser and its counsel,
and each Purchaser and its counsel shall have received copies (executed or
certified as may be appropriate) of all documents, instruments and agreements
which such Purchaser or its counsel may request in connection with the
consummation of such transactions.
SECTION 5. Warranties, etc. In order to induce the
Purchasers to enter into this Agreement, to engage in the transactions
contemplated herein and in the other Warrant Documents and to purchase the
Warrants hereunder, the Company represents and warrants unto each Purchaser as
set forth in this Section 5, each and all of which representations and
warranties shall survive the execution and delivery of this Agreement and the
Closing hereunder:
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<PAGE> 18
(a) Credit Agreement Warranties. Each of the
representations and warranties of the Company set forth in the Credit Agreement
is true and correct as of the date of this Agreement and will be true and
correct as of the Closing Date.
(b) Power, Authority, etc. The Company has full power
and authority to enter into and perform its obligations under this Agreement
and each of the other Warrant Documents.
(c) Due Authorization. The Certificate of Amendment has
been duly adopted pursuant to applicable law, has been duly filed with the Ohio
Secretary of State and is in full force and effect. The execution and delivery
by the Company of this Agreement and each of the other Warrant Documents, the
performance by the Company of its obligations hereunder and thereunder and the
issuance of the Warrant Securities by the Company have been duly authorized by
all necessary corporate action, do not require any Approval (except those
Approvals already obtained), do not and will not conflict with, result in any
violation of, or constitute any default under, any provision of any Organic
Document of the Company or any Subsidiary, any agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which it or any of its
property is bound, or any law or governmental regulation or court decree or
order and will not result in or require the creation or imposition of any Lien
on any of the Company's or any Subsidiary's properties pursuant to the
provisions of any such agreement or instrument. No vote (including any vote
under the rules of any securities exchange or trading system or market on which
any of the Company's securities are listed or traded) on the part of the
stockholders of the Company is required to approve or authorize the Certificate
of Amendment, any of the transactions contemplated by this Agreement, any of
the other Warrant Documents or any of the Loan Documents or the authorization
or the issuance of the Warrant Securities or any shares of capital stock to be
issued pursuant to the Loan Documents. None of the transactions contemplated
by this Agreement, any of the other Warrant Documents or any of the Loan
Documents (including the issuance of the Warrant Securities or any shares of
capital stock to be issued pursuant to the Loan Documents) will give rise to
any payment or the acceleration of any obligation (whether with or without the
passage of time or upon the occurrence of any event) to any director, officer
or employee of the Company or any Subsidiary.
(d) Absence of Takeover Statutes. The Board of Directors
of the Company has approved for purposes of Chapter 1704 of the Ohio Revised
Code (Transactions Involving Interested Shareholders) the transactions
contemplated by this Agreement, the other Warrant Documents and the Loan
Documents and the issuance of the Warrant Securities and any shares of capital
stock to be issued pursuant to the Loan Documents and upon conversion of any
such shares. The provisions of Ohio Revised Code Section 1707.041 with respect
to "control bids" as defined in Ohio Revised Code Section 1707.01(V)(1) do not
apply to the transactions
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<PAGE> 19
contemplated by the Warrant Agreement, the other Warrant Documents and the Loan
Documents or the issuance of the Warrant Securities and any shares of Stock to
be issued pursuant to the Loan Documents or upon conversion of such shares. No
other "fair price," "moratorium," "control share acquisition," "business
combination," "shareholder protection," or similar antitakeover statute will
apply to any Holder as a result of this Agreement, any of the other Warrant
Documents or any of the Loan Documents or the authorization or issuance of the
Warrant Securities or any shares of capital stock to be issued pursuant to the
Loan Documents. The Company is not a party to, and is not subject to, any
rights plan, rights agreement or similar agreement, arrangement or
understanding.
(e) Communications Act. None of the Company and its
Subsidiaries holds any licenses or conducts any business which would result in
the application of Section 310 of the Communications Act of 1934 as a result of
this Agreement, any of the other Warrant Documents, or any of the Loan
Documents or the authorization or issuance of the Warrant Securities or any
shares of capital stock to be issued pursuant to the Loan Documents.
(f) Validity, etc. This Agreement constitutes, and each
of the other Warrant Documents will upon the execution and delivery thereof
constitute, the legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms, in each case subject to (i) the
effect of any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally, and (ii) the effect of general
principles of equity (regardless of whether considered in a proceeding in
equity or at law).
(g) Capitalization and Ownership of the Company. The
authorized capital stock of the Company consist of 22,500,000 shares of Common
Stock, par value $0.01 per share, 3,410,939 of which will be outstanding on the
Closing Date; 2,500,000 shares of Preferred Stock, $.01 par value, of which (i)
2,125 shares have been designated Preferred Stock, $100 par value, of which no
shares will be outstanding on the Closing Date, (ii) 6,500 shares have been
designated Convertible Preferred Stock, without par value, $100 stated value,
cumulative and redeemable, of which no shares will be outstanding on the
Closing Date, (iii) 3,880 shares have been designated Preferred Stock, without
par value, $1,000 stated value, cumulative and redeemable, of which no shares
will be outstanding on the Closing Date, (iv) 16,000 shares have been
designated 8% Preferred Stock, without par value, $100 stated value, cumulative
and redeemable, of which no shares will be outstanding on the Closing Date, (v)
2,500 shares have been designated 7% Convertible Preferred Stock, without par
value, $100 stated value, cumulative and redeemable, of which no shares will
be outstanding on the Closing Date, (vi) 550,000 shares have been designated
10% Preferred Stock, without par value, $10 stated value, cumulative, of which
530,534 shares will be outstanding on the Closing Date, (vii) 250,000 shares
have been designated Series
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<PAGE> 20
A Special Convertible Preferred Stock, $.20 par value, no shares of which will
be outstanding on the Closing Date, (viii) 250,000 shares have been designated
Series B Special Convertible Preferred Stock, $.20 par value, no shares of
which will be outstanding on the Closing Date, (ix) 200,000 shares have been
designated 14% Convertible Preferred Stock, without par value, $60 stated
value, of which 107,918 shares will be outstanding on the Closing Date and (x)
1,218,995 shares are undesignated and unissued on the Closing Date. All
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable, and are not, and will not have been,
issued in violation of any preemptive rights. Except as set forth in Exhibit B
attached hereto, no issued, no authorized but unissued and no treasury shares
of capital stock of the Company are subject to any preemptive right, option,
warrant, right of conversion or purchase or any similar right issued or granted
by the Company or, to the knowledge of the Company, by any of its shareholders.
Except as set forth in the Organic Documents of the Company, in Section 19 of
this Agreement, or on Exhibit C attached hereto, there are no agreements or
understandings with respect to the voting, sale or transfer of any shares of
stock of the Company to which the Company or any of its Subsidiaries is a
party.
(h) Authorization and Issuance of Warrants. The issuance
of the Warrants has been duly authorized and, upon delivery to the Purchasers
of the Warrant Certificates therefor in accordance with the terms hereof, the
Warrants will have been validly issued and fully paid and nonassessable, free
and clear of all Liens and the issuance thereof will not give rise to any
preemptive rights. The issuance of the shares of Series A Special Preferred
Stock subject to the Warrants has been duly authorized and, when issued upon
exercise of the Warrants, such shares will have been validly issued and will be
fully paid and nonassessable and the issuance thereof will not give rise to any
preemptive rights. The issuance of the shares of Common Stock issuable upon
conversion of the Series A Special Preferred Stock has been duly authorized
and, when issued upon conversion of the Series A Special Preferred Stock, such
shares will have been validly issued and will be fully paid and nonassessable
and the issuance thereof will not give rise to any preemptive rights. 250,000
shares of Series A Special Preferred Stock have been duly reserved for issuance
upon the exercise of the Warrants and 5,000,000 shares of Common Stock have
been duly reserved for issuance upon the conversion of the Series A Special
Preferred Stock. Except as set forth in the Registration Rights Agreement and
as set forth on Exhibit D attached hereto, no Person has the right to demand or
any other right to cause the Company to file any registration statement under
the Securities Act relating to any securities of the Company or any right to
participate in the any such registration.
(i) Securities Laws. In reliance on the investment
representations contained in Section 3, the offer, issuance, sale and delivery
of the Warrants to the Purchasers, as provided in
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<PAGE> 21
this Agreement, and the issuance and delivery of Series A Special Preferred
Stock upon the exercise of the Warrants by the Purchasers and the issuance and
delivery of Common Stock to the Purchasers upon the conversion of the Series A
Special Preferred Stock, are and will be exempt from the registration
requirements of the Securities Act and all applicable state securities laws, as
such laws are currently in effect.
(j) No Integration of Issue. Neither the Company nor any
Person authorized or employed by the Company as agent, broker or otherwise in
connection with the offering of the Warrants has offered the Warrants for sale
to, or solicited any offers to buy the Warrants from, or otherwise approached
or negotiated or communicated in respect thereof with, anyone other than
Purchasers. Neither the Company nor any Person acting on behalf of the Company
will sell or offer any class of securities to, or solicit any offers to buy any
class of securities from, or otherwise approach, negotiate or communicate in
respect thereof with, any Person so as to require the registration of the
Warrants under the Securities Act or any applicable state securities laws.
SECTION 6. Covenants. The Company agrees with each Holder
that, until the termination of this Agreement pursuant to Section 24 hereof,
the Company will perform the obligations set forth in this Section 6:
(a) Financial and Business Information. At any time
during which the Company is not a Public Company, the Company will furnish, or
will cause to be furnished, to each Holder copies of the following financial
statements, reports and information:
(i) promptly when available and in any event
within ninety (90) days after the close of each Fiscal Year, a
consolidated and consolidating balance sheet at the close of
such Fiscal Year, and related consolidated and consolidating
statements of operations, retained earnings, and cash flows
for such Fiscal Year, of the Company and its Subsidiaries
(with comparable information at the close of and for the prior
Fiscal Year), certified (in the case of consolidated
statements) without qualification by Price Waterhouse LLP or
other independent public accountants reasonably satisfactory
to the Required Holders, together with a report containing a
description of projected business prospects (including capital
expenditures) and management's discussion and analysis of
financial condition and results of operation of the Company
and its Subsidiaries;
(ii) at any time during which any indebtedness
shall be outstanding under the Credit Agreement, promptly when
available but in any event within thirty (30) days after the
close of each calendar month of each Fiscal Year, consolidated
and consolidating balance
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<PAGE> 22
sheets at the close of such month, and consolidated and
consolidating statements of operations, retained earnings, and
cash flows for such month and for the period commencing at the
close of the previous Fiscal Year and ending with the close of
such month, of the Company and its Subsidiaries (with
comparable information at the close of and for the
corresponding month of the prior Fiscal Year and for the
corresponding portion of such prior Fiscal Year), certified by
the Chief Financial Officer of the Company, together with a
description of projected business prospects (including capital
expenditures) and a brief report containing management's
discussion and analysis of the financial condition and results
of operations of the Company and its Subsidiaries (including a
discussion and analysis of any changes compared to prior
results);
(iii) at any time during which all outstanding
indebtedness under the Credit Agreement shall have been
repaid in full, promptly when available and in any event
within forty-five (45) days after the close of each Fiscal
Quarter of each Fiscal Year, consolidated and consolidating
balance sheets at the close of such quarter, and consolidated
and consolidating statements of operations, retained
earnings, and cash flows for such quarter and for the period
commencing at the close of the previous Fiscal Year and
ending with the close of such Fiscal Quarter, of the Company
and its Subsidiaries (with comparable information at the
close of and for the corresponding Fiscal Quarter of the
prior Fiscal Year and for the corresponding portion of such
prior Fiscal Year), certified by the Chief Financial Officer
of the Company, together with a description of projected
business prospects (including capital expenditures) and a
report containing management's discussion and analysis of the
financial condition and results of operations of the Company
and its Subsidiaries (including a discussion and analysis of
any changes compared to prior results); and
(iv) promptly upon the sending or filing thereof,
copies of all reports that the Company sends to its security
holders generally.
(b) Issuance of Additional Warrants. Within 10 days
following the first date on which the aggregate principal amount of the
Revolving B Loans exceeds $1,500,000, the Company shall issue to the Lenders,
ratably in accordance with such Lenders' Revolving Percentages on such date,
additional Warrants to purchase shares of Series A Special Preferred Stock
which are convertible into 0.31% of the outstanding common stock of the Company
on a fully-diluted basis as of the Closing Date (but without taking into
account the Term Notes or other the Series B Special Preferred Stock), for an
aggregate purchase price of $1.00
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<PAGE> 23
and other good and valuable consideration, and the Company shall deliver to
each Lender Warrant Certificates in the form of Exhibit A attached hereto
evidencing the Warrants to be issued to such Lenders (in such denomination or
denominations as such Lenders may request and registered in its name or the
name of its nominee), dated the date of such issuance.
(c) Maintenance of Corporate Existences, etc. The
Company will cause to be done at all times all things necessary to maintain and
preserve the corporate existences of the Company and its Subsidiaries.
(d) Maintenance of Books and Records. The Company will,
and will cause each Subsidiary to, keep books and records reflecting all of its
business affairs and transactions in accordance with GAAP.
(e) Inconsistent Agreements. The Company will not, and
will not permit any Subsidiary to, enter into any agreement containing any
provision which would be violated or breached by the issuance of the Warrants
or the Warrant Shares or by the performance by the Company or any Subsidiary of
its obligations under this Agreement or under any other Warrant Documents.
(f) Organic Documents. So long as any Warrant Securities
are outstanding, the Company's certificate of incorporation shall contain the
provisions regarding the Series A Special Preferred Stock set forth in its
Organic Documents as constituted on the date hereof. The Company shall not
permit to occur any amendment, alteration or modification to its Organic
Documents, as constituted on the date hereof, the effect of which, in the
Purchasers' or the Required Holders' reasonable judgment, would be to impair or
adversely affect either the rights and benefits of Purchasers or the Holders or
the duties and obligations of the Company under this Agreement and the other
Warrant Documents. The Company shall not adopt or enter into any rights plan,
rights agreement, or similar arrangement or understanding.
(g) Transactions with Affiliates. Except as set forth on
Exhibit E, the Company will not, and will not permit any Subsidiary to, enter
into, or cause, suffer or permit to exist:
(i) any management contract or agreement, consulting
agreement or arrangement, contract or arrangement relating to the
allocation of revenues or expenses or similar contract or arrangement
requiring any payments to be made by the Company or any of its
Subsidiaries to any Affiliate, other than any arrangement solely among
the Company and its wholly-owned Subsidiaries; and
(ii) any other transaction, arrangement or contract with
any of its Affiliates which is on terms which are less
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<PAGE> 24
favorable than are obtainable in a transaction from any Person which is
not one of its Affiliates.
(h) Issuance of Additional Rights, Options and Warrants.
The Company will not issue any rights, options or warrants to subscribe for or
purchase or otherwise acquire Common Stock or Convertible Securities, whether or
not the right to exercise such rights, options or warrants or to convert or
exchange such Convertible Securities is immediately exercisable or is
conditioned upon the passage of time, an occurrence or non-occurrence of some
other event, or both; provided, however, that:
(i) the Company may issue any such rights, options or
warrants to members of management of the Company (other than Graf)
pursuant to a management incentive plan approved by the Company's
Board of Directors provided (x) any such rights, options or warrants
granted pursuant to any such plan are granted in respect of any fiscal
year only upon meeting the Projections (as defined in the Loan
Documents) for such fiscal year and (y) the aggregate amount of Common
Stock for which any such rights, options or warrants may be exercised,
when taken together with the aggregate amount of any Below Market
Dilution Shares, shall not exceed 10% of the outstanding Common Stock
of the Company as of the Closing Date, and (z) such rights, options or
warrants granted in respect of any single fiscal year shall not
represent more than 50% of the maximum number of rights, options or
warrants that may be granted pursuant to such plan; and
(ii) subject to the Company's obligations under subparagraph
(l)(vii) of the Certificate of Amendment, the Company may issue
rights, options or warrants to purchase Common Stock to Graf.
(i) Preferred Stock. The Company will not declare, pay
or make any dividend or distribution, in cash, property or obligations, on any
shares of Preferred Stock issued and outstanding as of the Closing Date
(including, without limitation, dividends or distributions by issuance of
shares of Stock or by accretion to the liquidation preference or stated value
of such Preferred Stock), except such dividends and distributions as accrue and
cumulate in accordance with the terms of such Preferred Stock as in effect on
the Closing Date. The Company will not apply, or permit any Subsidiary to
apply, any of its funds, properties or assets to the purchase, redemption,
sinking fund or other retirement of any shares of Preferred Stock issued and
outstanding as of the Closing Date, or make any deposit for any of the
foregoing, except that the Company may purchase or redeem such Preferred Stock
at such times as are required in accordance with the terms of such Preferred
Stock as in effect on the Closing Date and at a purchase or redemption price
not to exceed the stated value of such Preferred Stock plus accrued and unpaid
dividends (to the extent not added to the stated value thereof). The Company
will not issue any Preferred Stock having a stated value
-21-
<PAGE> 25
or liquidation preference in excess of the issue price therefor. The Company
will not effect a conversion or exchange of any shares of Preferred Stock
issued and outstanding as of the Closing Date for other securities of the
Company except that the Company may convert such Preferred Stock into Common
Stock in accordance with the terms of such Preferred Stock as in effect on the
Closing Date.
(j) Antitakeover Statutes. The Company shall take all
action necessary to avoid the application of any "fair price," "moratorium,"
"control share acquisition," "business combination," "shareholder protection"
or similar antitakeover statute to the transactions contemplated by this
Agreement, any of the other Warrant Documents or any of the Loan Documents
(including the issuance of the Warrant Securities or any shares of capital
stock to be issued pursuant to the Loan Documents).
(k) Redemptions; Extraordinary Dividends. The Company (i)
shall not redeem, purchase or otherwise retire any Stock or any rights, options
or warrants to subscribe for or purchase any Stock, and (ii) shall not declare
or pay any extraordinary dividend or distribution on any shares of Stock.
(l) FCC Licenses. Neither the Company nor any of its
Subsidiaries will acquire any licenses or conduct any business which would
result in the application of Section 310 of the Communications Act of 1934 (or
any similar provision) as a result of this Agreement, any of the other Warrant
Documents, or any of the Loan Documents or the authorization or issuance of the
Warrant Securities or any shares of capital stock to be issued pursuant to the
Loan Documents.
(m) Governmental Approvals. The Company will, and will
cooperate with the Holders to, secure all necessary consents, approvals,
authorizations and exemptions from all governmental authorities (including the
making of all filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act")) in connection with the exercise of the
Warrants, the issuance of shares of Series A Special Preferred Stock upon
exercise of the Warrants and the issuance of shares of Common Stock upon the
conversion of such shares of Series A Special Preferred Stock. The Company
shall be responsible for all filing fees and other expenses with respect to all
filings under the HSR Act in connection with the foregoing.
(n) Issuances of Shares. The Company will not issue any
shares of Series A Special Preferred Stock other than pursuant to the exercise
of the Warrants or Series B Special Preferred Stock other than pursuant to the
conversion of the Term Notes.
SECTION 7. Warrant Certificates. The Warrant Certificates to
be delivered pursuant to this Agreement shall be in registered form only and
shall be in the form set forth as Exhibit A attached hereto.
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<PAGE> 26
SECTION 8. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by its Chairman of the
Board or its President or a Vice President and by its Secretary or an Assistant
Secretary under its corporate seal. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of the Chairman of the
Board, President, Vice President, Secretary or Assistant Secretary and may be
printed or otherwise reproduced on the Warrant Certificates and for that
purpose the Company may adopt and use the facsimile signature of any person who
shall have been Chairman of the Board, President, Vice President, Secretary or
Assistant Secretary, notwithstanding the fact that at the time the Warrant
Certificates shall be delivered or disposed of such person shall have ceased to
hold such office. The seal of the Company may be in the form of a facsimile
thereof and may be impressed, affixed, imprinted or otherwise reproduced on the
Warrant Certificates.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as though such person
had not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date of
the execution of such Warrant Certificate, shall be a proper officer of the
Company to sign such Warrant Certificate although at the date of the execution
of this Agreement such person was not such an officer.
SECTION 9. Registration. The Company shall number and
register the Warrant Certificates in a register as they are issued. The
Company may deem and treat the registered holder(s) of the Warrant Certificates
as the absolute owner(s) thereof (notwithstanding any notation of ownership or
other writing thereon made by anyone) for all purposes and shall not be
affected by any notice to the contrary.
SECTION 10. Registration of Transfers and Exchanges. The
Company shall from time to time register the transfer of any outstanding
Warrant Certificates in a Warrant register to be maintained by the Company upon
surrender of such Warrant Certificates accompanied by a written instrument or
instruments of transfer in form reasonably satisfactory to the Company, duly
executed by the registered Holder or Holders thereof or by the duly appointed
legal representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be cancelled and
disposed of by the Company. The Company agrees that it will make the Warrant
register available for inspection by the Holders during normal business hours
at its office and that the Holders may rely on the Warrant register for
purposes of complying with the preceding sentence.
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<PAGE> 27
The Warrants shall be transferable in whole or in part and, in
the event that a Warrant Certificate is transferred in respect of fewer than
all the Warrants evidenced by the Warrant Certificate, a new Warrant
Certificate evidencing the remaining Warrant or Warrants will be issued and
delivered pursuant to the provisions of this Section 10 and of Section 8.
If such transfer of Warrants is not made pursuant to an
effective registration statement under the Securities Act, the Holder will, if
reasonably requested by the Company, deliver to the Company an opinion of
counsel, which may be counsel to the Holder but which counsel must be
reasonably satisfactory to the Company (provided that King & Spalding and
Lowenstein, Sandler, Kohl, Fisher & Boylan shall be deemed reasonably
satisfactory), reasonably satisfactory in form, scope and substance to the
Company, that the Warrants may be sold without registration under the
Securities Act, as well as:
(1) an investment covenant reasonably
satisfactory to the Company signed by the proposed transferee (except that no
such covenant will be required in connection with a transfer effected in
accordance with Rule 144A under the Securities Act); and
(2) an agreement by such transferee to the
impression of the restrictive legends set forth below on the Warrant
Certificate.
The Holders agree that each Warrant Certificate and each
certificate representing Warrant Shares will bear the following legend (the
"Securities Legend"):
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS.
SAID SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION, OR AN
OPINION OF COUNSEL (WHICH MAY BE COUNSEL
TO THE HOLDER) AS TO AN EXEMPTION, FROM
THE REGISTRATION PROVISIONS OF SAID ACT
OR LAWS."
Notwithstanding the foregoing provisions of this Section 10, the restrictions
upon the transferability of the Warrant Certificates and the Securities Legend
requirement set forth above in this Section 10 shall terminate as to any of the
Warrant Securities (i) when and so long as such Warrant Security shall have
been effectively registered under the Securities Act and disposed of pursuant
thereto or (ii) when the Company shall have received an opinion of counsel
reasonably satisfactory to it that such Securities Legend is not required in
order to ensure compliance with the Securities Act. Whenever the restrictions
imposed by
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<PAGE> 28
this Section 10 shall terminate as to any Warrant Security, as hereinabove
provided, the Holder thereof shall be entitled to receive from the Company, at
the expense of the Company, a new Warrant Certificate or certificate for
Warrant Shares bearing the following legend in place of the Securities Legend
set forth above:
"THE RESTRICTIONS ON TRANSFERABILITY OF
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE TERMINATED ON ______________,
19__, AND ARE OF NO FURTHER FORCE AND
EFFECT."
The Holders further agree that each Warrant Certificate and
each certificate representing Warrant Shares will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS OF A
WARRANT PURCHASE AGREEMENT, DATED AS OF
MARCH 15, 1996, BETWEEN PHONETEL
TECHNOLOGIES, INC. (THE "COMPANY") AND
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL
CORPORATION ("ING") AND CERBERUS
PARTNERS, L.P. ("CERBERUS"), AND A
REGISTRATION RIGHTS AGREEMENT, DATED AS
OF MARCH 15, 1996, AMONG THE COMPANY, ING
AND CERBERUS, COPIES OF EACH OF WHICH ARE
ON FILE AT THE MAIN OFFICE OF THE
COMPANY. ANY SALE OR TRANSFER OF THE
SECURITIES EVIDENCED BY THIS CERTIFICATE
IS SUBJECT TO THE TERMS OF THOSE
AGREEMENTS AND ANY SALE OR TRANSFER OF
SUCH SECURITIES IN VIOLATION OF SAID
AGREEMENTS SHALL BE INVALID."
Warrant Certificates may be exchanged at the option of the
Holder(s) thereof when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrants, including, without
limitation, upon an adjustment in the Exercise Price or in the number of
Warrant Shares purchasable upon exercise of the Warrants. Warrant Certificates
surrendered for exchange shall be cancelled and disposed of by the Company.
SECTION 11. Warrants; Exercise of Warrants. Subject to the
terms of this Agreement, each Holder shall have the right, which may be
exercised at any time or from time to time prior to April 1, 2006, to receive
from the Company the number of fully paid and nonassessable Warrant Shares
which such Holder may at the time be entitled to receive on exercise of all or
any part of the Warrants and payment of the Exercise Price then in effect for
such Warrant Shares.
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<PAGE> 29
A Warrant may be exercised upon surrender to the Company at
its office designated for such purpose (the address of which is set forth in
Section 20) of the certificate or certificates evidencing the Warrants to be
exercised with the form of election to purchase attached thereto properly
completed and signed, upon payment to the Company of the Exercise Price for the
number of Warrant Shares in respect of which such Warrants are then exercised.
Payment of the aggregate Exercise Price shall be made in cash or by check
payable to the order of the Company.
Upon such surrender of Warrant Certificates and payment of the
Exercise Price, the Company shall issue and cause to be delivered with all
reasonable dispatch (and in any event within five (5) Business Days of such
surrender and payment) to or, subject to the provisions of Section 10, upon the
written order of the Holder, and in the name of the Holder or the Holder's
nominee, a certificate or certificates for the number of full Warrant Shares
issuable upon the exercise of such Warrants together with such other property
(including cash) and securities as may then be deliverable upon such exercise,
including cash for fractional Warrant Shares as provided in Section 16. Such
certificate or certificates shall be deemed to have been issued and the Person
so named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date of the surrender of such Warrant Certificates and
payment of the Exercise Price.
The Warrants shall be exercisable, at the election of the
Holders thereof, either in full or from time to time in part, and, in the event
that a Warrant Certificate is exercised in respect of fewer than all of the
Warrant Shares issuable pursuant to such Warrant Certificate at any time prior
to the date of expiration of the Warrants, a new Warrant Certificate evidencing
the remaining Warrant or Warrants will be issued and delivered pursuant to the
provisions of this Section 11 and of Section 8.
All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled and disposed of by the Company. The Company shall keep
copies of this Agreement and any notices received hereunder available for
inspection during normal business hours at its office. The Company will
furnish, at its expense, copies of this Agreement and all such notices, upon
request, to any Holder of any Warrant Certificates.
SECTION 12. Payment of Taxes. The Company will pay all stamp
and transfer taxes in connection with the issuance, sale and delivery of the
Warrants hereunder, as well as all such taxes attributable to the initial
issuance of Warrant Shares upon the exercise of Warrants and payment of the
Exercise Price and upon the issuance of shares of Common Stock upon the
conversion of shares of Series A Special Preferred Stock. The Company will
not, however, be required to pay any tax or other similar charges imposed in
connection with any transfer of any Warrant Securities. Nothing herein shall
be construed as requiring the Company to pay any taxes imposed in respect of
income realized by any Holder upon
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<PAGE> 30
the purchase, transfer or exercise of Warrants or upon conversion of shares of
Series A Special Preferred Stock.
SECTION 13. Mutilated or Missing Warrant Certificates. In
case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed, upon receipt of an affidavit and reasonable indemnity from the
holder thereof stating that such Warrant Certificate has been mutilated, lost,
stolen or destroyed the Company shall issue, in exchange and substitution for
and upon cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants.
SECTION 14. Reservation of Warrant Shares. The Company will
at all times reserve and keep available, free from preemptive or similar
rights, out of the aggregate of its authorized but unissued capital stock or
its authorized and issued capital stock held in its treasury, for the purpose
of enabling it to satisfy any obligation to issue Warrant Shares upon exercise
of Warrants, (i) the maximum number of shares of each class of capital stock
constituting a part of the Warrant Shares which may then be deliverable upon
the exercise of all outstanding Warrants and (ii) the maximum number of shares
of each class of Stock of the Company which may then be delivered upon the
conversion into Common Stock of all issued Warrant Shares. The Company shall
cause all shares of Common Stock into which Warrant Shares are convertible to
be (x) listed (or to be listed subject to notice of issuance) on each
securities exchange on which shares of Common Stock are listed, or (y) admitted
for trading in any inter-dealer quotation system on which shares of Common
Stock are traded.
The Company or, if appointed, the transfer agent for shares of
each class of capital stock of the Company (the "Transfer Agent") and every
subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent and with every subsequent transfer agent for any
shares of the Company's capital stock issuable upon the exercise of the rights
of purchase represented by the Warrants or of the rights of conversion of the
Warrant Shares. The Company will furnish such Transfer Agent a copy of all
notices of adjustments, and certificates related thereto, transmitted to each
Holder pursuant to Section 17.
Before taking any action which would cause an adjustment
pursuant to Section 15 to reduce the Exercise Price below the then par value
(if any) of the Warrant Shares, the Company will take any corporate action
which may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid
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<PAGE> 31
and nonassessable Warrant Shares at the Exercise Price as so adjusted.
SECTION 15. Adjustment of Exercise Price and Number of
Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares
issuable upon the exercise of each Warrant are subject to adjustment from time
to time upon the occurrence of any of the events enumerated in this Section 15.
(a) Reorganization of the Company
In the event of any capital reorganization, recapitalization
or reclassification of the capital stock of the Company, or consolidation,
merger or amalgamation of the Company with another entity, any acquisition of
capital stock of the Company by means of a share exchange, or the sale, lease,
transfer, conveyance or other disposition of all or substantially all of its
assets to another entity, then, as a condition of such reorganization,
recapitalization, reclassification, consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other disposition, lawful and
adequate provision shall be made whereby the Holders of the Warrant
Certificates shall thereafter have the right to purchase and receive, on the
basis and upon the terms and conditions specified in this Agreement and in lieu
of the Warrant Shares immediately theretofore purchasable and receivable upon
the exercise of the rights represented by the Warrants, (i) such shares of
stock, securities, cash or property as may be issued or payable with respect to
or in exchange for a number of outstanding Warrant Shares equal to the number
of Warrant Shares immediately theretofore purchasable and receivable upon the
exercise of the rights represented by the Warrant Certificates had such
reorganization, recapitalization, reclassification, consolidation, merger,
amalgamation, share exchange or sale, lease, transfer, conveyance or other
disposition not taken place, and (ii) if such consolidation, merger,
amalgamation, share exchange, sale, lease, transfer, conveyance or other
disposition is with any Person (or any Affiliate of such Person) who shall have
made a purchase, tender or exchange offer which was accepted by the holders of
not less than twenty percent (20%) of the outstanding shares of Common Stock,
the Holders of the Warrants shall have been given a reasonable opportunity
(and, in no event, less than 30 days) to elect to receive, either (x) the
stock, securities, cash or property it would have received pursuant to clause
(i) immediately preceding or (y) the stock, securities, cash or property issued
to previous holders of the Common Stock in accordance with such offer, or the
equivalent thereof. In any such case appropriate provision shall be made with
respect to the rights and interests of the Holders of the Warrants to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Exercise Price and of the number and type of securities
purchasable upon the exercise of the Warrants) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities, cash or
property thereafter deliverable upon
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the exercise of the Warrants. The Company shall not effect any such
consolidation, merger, amalgamation, share exchange or sale, lease, transfer,
conveyance or other disposition unless prior to or simultaneously with the
consummation thereof the successor entity (if other than the Company) resulting
from such consolidation, merger or amalgamation, share exchange or the entity
purchasing or otherwise acquiring such assets or shares (i) shall assume by a
supplemental Warrant Agreement, satisfactory in form, scope and substance to
the Holders (which shall be mailed or delivered to the Holders of the Warrants
at the last address of such Holders appearing on the books of the Company) the
obligation to deliver to such Holders such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions, such Holders may be
entitled to purchase (the "Substitute Securities") and (ii) shall assume all of
the other obligations of the Company set forth in this Agreement and the
Registration Rights Agreement. Following such assumption such obligations
shall apply to the Substitute Securities rather than to the Warrants and the
Warrant Shares. The foregoing provisions of this paragraph shall similarly
apply to successive reorganizations, recapitalizations, reclassifications,
consolidations, mergers, amalgamations, share exchanges, sales, leases,
transfers, conveyances or other dispositions.
If the issuer of securities deliverable upon exercise of
Warrants under the supplemental Warrant Agreement is an Affiliate of the
formed, surviving, transferee or lessee entity, such issuer shall join the
supplemental Warrant Agreement.
(b) When Issuance or Payment May Be Deferred
In any case in which this Section 15 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event (i) issuing to the Holder of any Warrant exercised after such record date
the Warrant Shares issuable upon such exercise over and above the Warrant
Shares issuable upon such exercise on the basis of the Exercise Price prior to
such adjustment and (ii) paying to such Holder any amount in cash in lieu of a
fractional share pursuant to Section 16; provided, however, that the Company
shall deliver to such Holder a bill or other appropriate instrument evidencing
such Holder's right to receive such additional Warrant Shares and cash upon the
occurrence of the event requiring such adjustment.
SECTION 16. Fractional Interests. The Company shall not
be required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same time
by the same Holder, the number of full Warrant Shares which shall be issuable
upon exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of the Warrant Shares would, except for the provisions of this Section
16, be issuable on the exercise of
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any Warrants (or specified portion thereof), the Company shall pay an amount in
cash equal to the product of (x) the Fair Market Value per Share on the day
immediately preceding the date the Warrant is presented for exercise,
multiplied by (y) the Conversion Rate, multiplied by (z) such fraction.
SECTION 17. Notice to Warrant Holders. Upon any
adjustment of the Exercise Price or number of Warrant Shares purchasable upon
exercise of the Warrants pursuant to Section 15 or subparagraph (l)(vii) of the
Certificate of Amendment and as otherwise required by Section 15 or
subparagraph (l)(vii) of the Certificate of Amendment, the Company shall
promptly thereafter (i) upon the reasonable request of the Required Holders,
cause to be filed with the Company a certificate of the independent certified
public accountants for the Company setting forth the Exercise Price and the
number and type of securities or other property constituting Warrant Shares
after such adjustment and setting forth in reasonable detail the method of
calculation and the facts upon which such calculations are based and, in the
case of an adjustment pursuant to Section 15(a) or subparagraph (l)(vii) of the
Certificate of Amendment, setting forth the number and type of securities or
other property constituting Warrant Shares (or portion thereof) issuable, after
such adjustment in the Exercise Price and number of Warrant Shares purchasable
upon exercise of the Warrants, upon exercise of a Warrant and payment of the
adjusted Exercise Price, and (ii) cause to be given to each of the Holders of
the Warrant Certificates written notice of such adjustments, together with a
copy of such certificate. Where appropriate, such notice may be given in
advance and included as a part of the notice required to be given under the
other provisions of this Section 17.
In the event:
(a) the Company shall authorize the issuance to holders
(although not necessarily to all such holders) of shares of Common Stock or
rights, options or warrants to subscribe for or purchase or otherwise acquire
shares of Common Stock or of any other securities or property (including
securities of any other issuer) or of any other subscription rights, options or
warrants; or
(b) the Company shall authorize the payment of any
dividend or distribution to holders of shares of Common Stock of cash, capital
stock or other securities or property (including securities of any other
issuer) of the Company; or
(c) of any capital reorganization, reclassification or
recapitalization of the capital stock of the Company, or any amalgamation,
consolidation or merger to which the Company is a party, or any acquisition of
capital stock of the Company through a share exchange, or of the sale, lease,
conveyance, transfer or other disposition of the properties and assets of the
Company substantially as an entirety, or a purchase, tender or exchange offer
for shares of Common Stock or other securities constituting
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part of the Warrant Shares (whether by the Company or some other party); or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company proposes to take any action which would
require an adjustment of the Exercise Price or number of Warrant Shares
purchasable upon exercise of the Warrants pursuant to Section 15 or
subparagraph (l)(vii) of the Certificate of Amendment;
then the Company shall cause to be given to each of the Holders, at least 20
days prior to the applicable record date hereinafter specified (or promptly in
the case of events for which there is no record date), a written notice stating
(as applicable) (i) the date as of which the holders of record of shares of
Common Stock entitled to receive any such rights, options, warrants or
dividends or distribution are to be determined, (ii) the date on which any such
reclassification, recapitalization or reorganization, consolidation, merger,
amalgamation, share exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up is expected to become effective or be
consummated, or (iii) the initial expiration date set forth in any purchase,
tender or exchange offer for shares of Common Stock, and the date as of which
it is expected that holders of record of shares of Common Stock or other
securities constituting a part of the Warrant Shares (or securities into which
the Warrant Shares may be converted) shall be entitled to exchange such shares
or securities for securities or other property, if any, deliverable upon such
reclassification, recapitalization, reorganization, consolidation, merger,
amalgamation, share exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up.
Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the
right to vote or to consent as stockholders in respect of the meetings of
stockholders or the election of members of the Board of Directors of the
Company or any other matter, or any rights whatsoever as stockholders of the
Company.
SECTION 18. Cash Distributions and Dividends. If the
Company pays a dividend or makes a distribution to the holders of its Common
Stock of any securities (other than capital stock for which an adjustment in
the Conversion Rate is made pursuant to subparagraph (l)(vii) of the
Certificate of Amendment) or property (including cash and securities of other
companies) of the Company, or any rights, options or warrants to subscribe for
or purchase securities (other than Common Stock) or property (including
securities of other companies) of the Company, then, simultaneously with the
payment of such dividend or the making of such distribution, and as a condition
precedent to its right to do so, it will pay or distribute to the Holders of
Warrant
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<PAGE> 35
Certificates an amount of property (including, without limitation, cash) and/or
securities (including, without limitation, securities of other companies) of
the Company as would have been received by such Holders had they exercised all
of the Warrants represented by the Warrant Certificates and the Warrant Shares
issued upon such exercise had been converted into Common Stock, in each case
immediately prior to the record date (or other applicable date) used for
determining stockholders of the Company entitled to receive such dividend or
distribution. No adjustment to the Exercise Price shall be made for the
distribution of Convertible Securities or rights, options or warrants to
purchase Convertible Securities of the Company to the Holders pursuant to the
provisions of this Section 18.
SECTION 19. Put Rights; Tag-Along Rights and Registration
Rights.
(a) Put by Holders.
Unless the Required Holders have otherwise agreed in writing,
at any time and from time to time on or after (i) the repayment in full or in
part of the Loan in each case utilizing the proceeds of borrowed funds or the
issuance of debt securities or (ii) the occurrence of an Additional Put Event,
the Put Right shall be exercisable by each of the Holders, provided, however,
that ING agrees not to exercise its Put Right upon the occurrence of an event
specified in clause (i) until an event in clause (ii) occurs if the event in
clause (i) involves the use of proceeds of borrowed funds provided through a
credit facility for which ING serves as the administrative agent or the
issuance of debt securities pursuant to a private placement or public offering
for which ING or one of its Affiliates serves as a co-placement agent or
co-lead underwriter, and provided, further, with respect to each event
specified in clauses (i) and (ii) (other than an Additional Put Event within
the meaning of clause (c) of such definition in which case the put may be
exercised with respect to all Warrant Securities), the total number of Warrant
Securities that the Holders shall be entitled to put pursuant to this Section
19 shall not represent more than the greater of (x) 6% of the shares of Common
Stock outstanding on a fully diluted basis on the date hereof, and (y) 20% of
the Warrant Securities held by such Holders (it being understood that each
Holder shall be entitled to put such Warrant Securities pro rata based upon the
number of Warrant Securities held by it). The Put Right shall be exercised by
the delivery of a Put Notice
After receipt of a Put Notice from any Holder, the Company
will promptly (and in any event within ten (10) days) give written notice (the
"Exercise Notice") to each of the other Holders of Warrant Securities that a
Put Right has been exercised. Each Holder will have the right to participate
in the Put Right and require the Company to repurchase all or any portion of
such Holder's Warrant Securities by delivering written notice to the Company
within ten (10) days following receipt of the Exercise
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<PAGE> 36
Notice. All such notices delivered by such other Holders will be deemed to
have been delivered as of the date of the initial Put Notice and taken together
will be deemed to be one exercise of the Put Right.
Upon the exercise by a Holder of the Put Right, the Purchase
Price payable to such Holder by the Company for such Holder's Warrant
Securities shall be as follows:
(i) in the case of Warrants, an amount determined by
subtracting (A) the aggregate Exercise Price for such Warrants then in effect
under the Warrant Agreement from (B) the product of (1) the Contract Value per
Share, multiplied by (2) the number of shares of Common Stock that may be
acquired upon the conversion by such Holder of the shares of Series A Special
Preferred Stock that would be received upon exercise of such Holder's Warrants
with respect to which the Put Right is being exercised;
(ii) in the case of Series A Special Preferred Stock, an
amount equal to the product of (A) the Contract Value per Share, multiplied by
(B) the number of shares of Common Stock that may be acquired upon the
conversion by such Holder of the shares of Series A Special Preferred Stock
with respect to which the Put Right is being exercised; and
(iii) in the case of Common Stock, an amount equal to the
product of (A) the Contract Value per Share, multiplied by (B) the number of
shares of Common Stock with respect to which the Put Right is being exercised.
Promptly upon the receipt of a Put Notice pursuant to Section
19(a) the Company shall cause the Contract Value per Share to be determined,
and shall give written notice of the determination thereof to each Holder,
promptly upon the determination thereof and in any event within thirty (30)
days following the Company's receipt of the Put Notice.
The provisions of this Section 19(a) shall apply until the
termination of this Agreement pursuant to Section 24 to any Person who acquires
in any manner any Warrant Securities from any Holder.
(b) Closing.
Each closing of the purchase and sale of any Warrant
Securities pursuant to Section 19(a) shall take place on a date (a "Put Closing
Date") which is thirty (30) days after the giving of the Put Notice, provided
that if such day is not a Business Day such closing shall be on the next
succeeding Business Day. Payment of the Purchase Price shall be due and
payable in full on the Put Closing Date. The closing of such purchase and sale
of Warrant Securities shall take place at 10:00 a.m. on the Put Closing Date at
such location in Atlanta, Georgia, or New York, New York, as the Required
Holders may reasonably determine and
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notify the Company or at such other location as may be agreed to by the Company
and the Required Holders.
The Purchase Price shall be paid in full at each such closing,
by wire transfer of immediately available federal funds, and the Warrant
Securities to be repurchased at such closing shall be duly endorsed for
transfer. Such Warrant Securities shall be free and clear of all liens and
encumbrances of any kind, nature and description, other than applicable
restrictions under federal and state securities laws, and each Holder shall
represent and warrant to the Company to such effect with respect to such
Holder's Warrant Securities. The Company will pay all stamp and transfer taxes
in connection with the repurchase of the Warrant Securities hereunder.
(c) Restrictions on Purchase.
The Company covenants and agrees that, other than the
Restrictive Provisions, it shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the Required Holders,
enter into or agree to become subject to any term, condition, provision or
agreement that would conflict with or restrict in any way the performance of
the Company's obligations under this Agreement or that would by its terms
restrict the availability of Legally Available Funds with which to perform such
obligations.
Anything in this Agreement to the contrary notwithstanding,
the Company shall not be required to purchase Warrant Securities under Section
19(a) if at the time of closing of the purchase and sale of any Warrant
Securities pursuant to Section 19(a) there exists any Restrictions on Purchase.
Upon receipt of a Put Notice, if the Company's obligations
under Section 19(a) at the time of performance would be subject to Restrictions
on Purchase, then the Company (i) shall promptly use all reasonable efforts
(excluding the payment of waiver, consent or similar transactional fees, but
including reasonable documentation costs and other similar expenses) to cause
the Required Lenders to waive compliance with any such Restrictive Provisions
and/or to amend the Restrictive Provisions so as to permit the purchase of the
Warrant Securities pursuant to this Agreement, (ii) shall not repay, redeem,
purchase or otherwise retire any indebtedness for borrowed money of, or any
debt securities issued by, the Company in an amount or for a price or other
consideration in excess of the principal amount thereof, and (iii) shall not
declare or pay any dividend or distribution on any shares of Stock (other than
dividends that accrue and cumulate on Preferred Stock in accordance with the
terms of such Preferred Stock as is in effect on the date such Put Notice is
received by the Company).
If, notwithstanding the Company's reasonable efforts required
under this Section 19(c), the Company is unable to
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<PAGE> 38
fulfill its obligations under Section 19(a) because of the existence of one or
more Restrictions on Purchase, the Company shall give prompt written notice
thereof to each Holder exercising Put Rights, specifying in reasonable detail
the nature thereof and the extent, if any, to which the Company would be able
to fulfill its obligation to pay the Purchase Price within the Restrictions on
Purchase.
If any Restrictions on Purchase exist on the proposed Put
Closing Date, then at the sole and independent election of each such Holder,
and pursuant to written notice given by any such Holder to the Company: (i)
such Holder's Put Right shall remain exercised and the closing of the purchase
and sale of Warrant Securities pursuant to such Holder's Put Right shall be
deferred until not more than five Business Days after all such Restrictions on
Purchase cease to exist; provided, however, that, as and to the extent that
such Restrictions on Purchase cease to exist, the Company shall promptly make
partial payments of the Purchase Price to such Holder, in which case there
shall be a series of such closings, each of which shall take place not more
than five Business Days after such Restrictions on Purchase have ceased to
exist to an extent that would permit such partial payments of the Purchase
Price in increments of not less than $100,000 ("Partially Available Funds"); or
(ii) the exercise of such Holder's Put Right shall be rescinded and such Holder
shall reserve its right to exercise the Put Right at any subsequent time. In
the event that any Holders make the election provided in clause (i) of the
immediately preceding sentence, the Company shall purchase from such selling
Holders that number of Warrant Securities as may be purchased at the Purchase
Price using that portion of Partially Available Funds for such purchase as
equals the product of (a) all Partially Available Funds, and (b) the ratio of
(i) the Warrant Securities originally proposed to be sold by such Holders
electing to sell and not electing to rescind pursuant to clause (ii) of the
immediately preceding sentence, to (ii) the Warrant Securities originally
proposed to be sold by all Holders (treating all Warrants as fully exercised
for the Warrant Shares to which the Holders would be entitled upon exercise of
such Warrants). Such purchase shall be made from each selling Holder pro rata
based on the ratio of (i) the number of Warrant Securities originally proposed
to be sold by such Holder to (ii) the Warrant Securities originally proposed to
be sold by all Holders.
None of the provisions of this Section 19(c) shall be
construed to limit any other right or remedy under applicable law which any
Holder may have as a result of the failure by the Company to purchase Warrant
Securities as herein provided.
(d) Tag-Along Rights.
Without limitation to the right of any Holder to exercise its
Put Right pursuant to Section 19(a), if at any time the Company or Graf shall
determine to enter into any transaction or series of transactions that would
result in a Change of Control
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<PAGE> 39
(a "Change of Control Transaction") (any third party proposing to enter into
such transaction or transactions with the Company or Graf being hereinafter
referred to in this Section 19(d) as a "Prospective Purchaser"), either the
Company or Graf, as the case may be, and in either case any Prospective
Purchaser, shall first give written notice (the "Offer Notice") to all of the
Holders, specifying the name and address of the Prospective Purchaser and the
number of shares, if any, of Stock proposed to be issued, sold, transferred or
otherwise disposed of by the Company or Graf, as applicable, and setting forth
in reasonable detail the price, structure and other terms and conditions of the
Change of Control Transaction, as applicable. The Offer Notice shall represent
the offer (the "Offer") from the Prospective Purchaser to each of the Holders
of the right to sell to the Prospective Purchaser as a condition to the
consummation of the proposed transaction described in the Offer Notice, all the
Warrant Securities then owned by each Holder to the Prospective Purchaser and,
at the option of the Holders, on the same terms and conditions (including price
and form of consideration) as are being offered by the Prospective Purchaser to
the Company or Graf, as the case may be, or at the Fair Market Value per Share,
determined as of the date of the Offer Notice. Each Holder shall have thirty
(30) days from the date of receipt of the Offer Notice to give written notice
of its intention to accept or reject the Offer. Failure to respond within such
thirty-day period shall be deemed notice of rejection. In the event that any
Holder gives written notice to the Company or Graf, as the case may be, and the
Prospective Purchaser of its intention to accept such Offer, then such written
notice, taken in conjunction with the Offer Notice, shall constitute a valid
and legally binding agreement, and each of the Holders so giving such written
notice shall be entitled to sell to the Prospective Purchaser,
contemporaneously with the consummation of the Change of Control Transaction,
all of the Warrant Securities at the price specified therefor by such Holder in
accordance with this Section 19(d). In the event that all of the Holders
reject or are deemed to have rejected the offer represented by the Offer
Notice, the Company or Graf, as applicable, shall be free to proceed to
consummate such Change of Control Transaction on the terms and conditions set
forth in the Offer Notice, provided that such sale is not otherwise prohibited
by any agreement between the Company and the Purchaser. In the event the
Company or Graf, as applicable, fails to complete the proposed sale, transfer
or other disposition within ninety (90) days after the Holder or Holders
rejected or were deemed to have rejected the Offer, such shares of Stock shall
again be subject to the provisions of this Section 19(d).
The provisions of this Section 19(d) shall apply until the
termination of this Agreement pursuant to Section 24 to any Person who acquires
in any manner any Warrant Securities from any Holder.
(e) Limitation on Put Rights of Others. The Company
covenants and agrees that, neither the Company nor any of its
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Subsidiaries shall, directly or indirectly, grant to any Person or agree to or
otherwise become obligated in respect of any rights to require the Company or
any of its Subsidiaries to purchase securities of the Company upon the demand
of any Person. The Company represents and warrants that neither it nor any of
its Subsidiaries has previously entered into any agreement granting any such
rights to any Person.
(f) Severability. If any provision of this Agreement
shall be held or deemed to be, or shall in fact be, invalid, inoperative or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the conflict
of any provision with any constitution, statute, rule or public policy, or for
any other reason, such circumstances shall not have the effect of rendering the
provision or provisions in question, invalid, inoperative or unenforceable in
any other jurisdiction or in any other case or circumstance or of rendering any
other provision or provisions herein contained invalid, inoperative or
unenforceable to the extent that such other provisions are not themselves
actually in conflict with such constitution, statute, rule or public policy,
but this Agreement shall be reformed and construed in any such jurisdiction or
case as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
(g) Registration Rights. The Warrant Securities are
subject to and entitled to the benefit of certain registration rights, as more
fully set forth in the Registration Rights Agreement, which is incorporated
herein by reference.
SECTION 20. Notices. All notices, consents, approvals,
agreements and other communications provided hereunder shall be in writing or
by telex or telecopy and shall be sufficiently given to the Purchasers, the
Holders and the Company if addressed or delivered to them at the following
addresses:
If to ING: Internationale Nederlanden
(U.S.) Capital Corporation
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: Internationale Nederlanden
(U.S.) Capital Corporation
Atlanta Office
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Telecopier No.: (770) 951-1005
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<PAGE> 41
and a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr., Esq.
Telecopier No.: (404) 572-5100
If to Cerberus: Cerberus Partners, L.P.
950 Third Avenue
20th Floor
New York, New York 10022
Attention: Mr. Seth P. Plattus
Telecopier No.: (212) 421-2847
with a copy to: Lowenstein, Sandler, Kohl,
Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068-1791
Attention: Robert G. Minion, Esq.
Telecopier No.: (201) 992-5820
If to any other Holder: At its last known address appearing on the
books of the Company maintained for such
purpose
If to the Company: PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chief Executive Officer
Telecopier No.: (216) 241-2574
with a copy to: Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022-3897
Attention: Stephen M. Banker, Esq.
Telecopier No.: (212) 735-2000
or at such other address as any party may designate to any other party by
written notice.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when
received if deposited in the mail, postage prepaid, if mailed; when answered
back, if telexed; when transmission is verified, if telecopied; and on the next
Business Day, if timely delivered to an air courier guaranteeing overnight
delivery.
SECTION 21. Costs and Expenses. The Company agrees to
pay all expenses of the Purchasers for the negotiation, preparation, execution,
and delivery of this Agreement and each other Warrant Document, and any
amendments, waivers, consents,
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supplements, or other modifications to this Agreement or any other Warrant
Document as may from time to time hereafter be required (including the
reasonable fees and expenses of counsel retained by the Purchasers from time to
time in connection therewith), whether or not the transactions contemplated
hereby are consummated, and to pay all reasonable expenses of the Purchasers
(including reasonable fees and expenses of counsel to the Purchasers) incurred
in connection with the consideration of legal questions relevant hereto and
thereto. Except as otherwise provided herein, the Company also agrees to
reimburse the Purchasers and each Holder upon demand for all reasonable
expenses (including attorneys' fees and expenses) incurred by the Purchasers or
such Holder in enforcing the obligations of the Company under this Agreement or
any other Warrant Document or in connection with any amendment, waiver,
consent, supplement or other modification to this Agreement or any Warrant
Document. Except in connection with the exercise by any Purchaser of any of
its rights under Section 19 or under the Registration Rights Agreement, and
except as otherwise expressly provided herein and in the other Warrant
Documents, the Company shall have no obligation to reimburse the Purchasers for
any expenses incurred by the Purchasers in connection with any subsequent
transfer of the Warrants.
SECTION 22. Indemnification. In consideration of the
transactions contemplated by this Agreement and the other Warrant Documents,
the Company hereby agrees to indemnify, exonerate and hold the Purchasers and
each Holder, each of their respective successors and assigns, each of the
respective officers, directors, employees, attorneys and agents of the
Purchasers and each Holder and each of their respective successors and assigns
(collectively, the "Indemnified Parties") free and harmless from and against
any and all actions, causes of action, suits, losses, costs, liabilities,
damages and expenses (irrespective of whether such Indemnified Party is a party
to the action for which indemnification hereunder is sought), including
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred by
the Indemnified Parties or any of them or asserted or awarded against the
Indemnified Parties or any of them as a result of, or arising out of, or
relating to:
(a) the making of any claim by any investment banking
firm, broker or third party, claiming through the Company or as a result of the
relationship of such investment banking firm, broker or third party with the
Company, that it is entitled to compensation from any Indemnified Party in
connection with this Agreement or the transactions contemplated hereby;
(b) any claim, investigation, litigation, or proceeding
made or commenced by a third party related to this Agreement or any other
Warrant Documents, whether or not the Indemnified Party or any other
Indemnified Party is party thereto;
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<PAGE> 43
(c) the breach by the Company of any representation or
warranty set forth in this Agreement or in any other Warrant Document; or
(d) the failure of the Company to comply with all terms,
conditions, and covenants set forth in this Agreement or in any other Warrant
Document;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or wilful misconduct as determined by a final and
nonappealable decision of a court of competent jurisdiction.
If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The foregoing indemnity
shall become effective immediately upon the execution and delivery hereof and
shall remain operative and in full force and effect notwithstanding the
consummation of the transactions contemplated hereunder, the issuance or
exercise of the Warrants hereunder, the termination of this Agreement pursuant
to Section 24, the invalidity or unenforceability of any term or provision of
this Agreement or any other Warrant Document, or any investigation made by or
on behalf of any Holder or any Purchaser.
SECTION 23. Successors. All the covenants and provisions
of this Agreement by or for the benefit of the Company or the Holders shall
bind and inure to the benefit of their respective successors and assigns,
including those by operation of law, merger, consolidation or as otherwise
provided in Section 15(a).
SECTION 24. Termination. Except as otherwise provided
herein, this Agreement shall terminate when all Warrants have expired
unexercised in accordance with their terms and no Warrant Securities are
outstanding.
SECTION 25. Governing Law. THIS AGREEMENT AND THE
WARRANTS SHALL BE GOVERNED BY THOSE PROVISIONS OF THE CORPORATE CODE OF THE
JURISDICTION IN WHICH THE COMPANY IS INCORPORATED AND ARTICLE 8 OF THE UNIFORM
COMMERCIAL CODE OF THE JURISDICTION IN WHICH THE COMPANY IS INCORPORATED WHICH
ARE NECESSARILY APPLICABLE TO SECURITIES ISSUED BY A CORPORATION INCORPORATED
IN SUCH JURISDICTION AND OTHERWISE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
SECTION 26. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company and
the Holders any legal or equitable right, remedy or
-40-
<PAGE> 44
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company and the Holders.
SECTION 27. Counterparts. This Agreement may be executed
in any number of counterparts and each such counterpart shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute one and the same instrument.
SECTION 28. Amendments; Waiver. No provision of this
Agreement may be amended or waived except by an instrument in writing signed by
the party sought to be bound; provided, however, that any amendment requested
or waiver sought from the Holders of any provision of this Agreement which
affects Holders generally may be given by the Required Holders and any waiver
so given shall be binding on all Holders; provided further, that the provisions
of Section 11 with respect to the type of securities for which the Warrants are
exercisable may not be changed without the consent of each Holder affected
thereby. No failure or delay by any party in exercising any right or remedy
hereunder shall operate as a waiver thereof, nor shall a waiver of a particular
right or remedy on one occasion be deemed a waiver of any other right or remedy
or a waiver of the same right or remedy on any subsequent occasion.
SECTION 29. Waiver of Jury Trial. EACH PURCHASER, EACH
HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE
ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, ON THE WARRANTS OR ON ANY OF THE OTHER WARRANT DOCUMENTS, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, THE WARRANTS OR ANY OF THE
OTHER WARRANT DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE PURCHASERS, ANY HOLDER
OR THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PURCHASERS'
ENTERING INTO THIS AGREEMENT.
SECTION 30. Jurisdiction. The Company hereby agrees that
any legal action or proceeding against it with respect to this Agreement, the
Warrants or any of the other Warrant Documents may be brought in the courts of
the State of New York or of the United States of America sitting in New York as
any Holder may elect, and, by execution and delivery hereof, for itself and in
respect of its property it accepts and consents to, generally and
unconditionally, the jurisdiction of the aforesaid courts and agrees that such
jurisdiction shall be exclusive, unless waived by the Required Holders in
writing, with respect to any action or proceeding brought by it against such
Holders. The Company hereby irrevocably designates, appoints and empowers CT
Corporation System whose present address is 1633 Broadway, New York, New York
10019, as its authorized agent to receive, for and on its behalf and its
property, service of process in the State of New York when and as legal actions
or proceedings may be brought in the courts of the State of New York or of the
United States of America sitting in New York, and such service of process shall
be deemed complete upon the date of delivery thereof to such agent, or upon
-41-
<PAGE> 45
the earliest of any other date permitted by applicable law. It is understood
that a copy of said process served on such agent will be forwarded to the
Company as soon as practicable, at its address set forth herein, but its
failure to receive such copy shall not affect in any way the service of said
process on said agent as the agent of the Company. The Company irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of the copies thereof by certified
mail, return receipt requested, postage prepaid, to it at its address set forth
herein, such service to become effective upon the earlier of (i) the date 10
calendar days after such mailing and (ii) any earlier date permitted by
applicable law. The Company agrees that it will at all times continuously
maintain an agent to receive service of process in the State of New York on
behalf of itself and its properties and in the event that, for any reason, the
agent named above or its successor shall no longer serve as its agent to
receive service of process in the State of New York on its behalf, it shall
promptly appoint a successor so to serve and shall advise the Holders thereof.
The Company agrees that Sections 5-1401 and 5-1402 of the General Obligations
Law of the State of New York shall apply to this Agreement and each of the
other Warrant Documents and waives any right to stay or to dismiss any action
or proceeding brought before said courts on the basis of forum non conveniens.
Nothing herein shall affect the right of any Holder to bring proceedings
against the Company in the courts of any other jurisdiction or to serve process
in any other manner permitted by applicable law.
SECTION 31. Specific Performance. The Company recognizes
that the rights of the Holders under this Agreement and the other Warrant
Documents are unique and, accordingly, the Holders shall, in addition to such
other remedies as may be available to any of them at law or in equity, have the
right to enforce their rights hereunder and thereunder by actions for
injunctive relief and specific performance to the extent permitted by law. The
Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Agreement
or any of the other Warrant Documents and hereby agrees to waive in any action
for specific performance the defense that a remedy at law would be adequate.
This Agreement is not intended to limit or abridge any rights of the Holders
which may exist apart from this Agreement.
SECTION 32. Confidentiality.
(a) Each Holder shall treat any information concerning
the Company (whether prepared by the Company, its advisors or otherwise) which
has been or will be furnished by or on behalf of the Company or any Subsidiary
thereof (herein collectively referred to as the "Confidential Information") in
accordance with such Holder's customary procedures for handling confidential
information of this nature and will not wilfully disclose any Confidential
Information to any other party, except as otherwise provided herein. The
Confidential Information will be used solely
-42-
<PAGE> 46
in connection with the transactions contemplated by the Warrant Documents or as
otherwise authorized by the Company. The term "Confidential Information" shall
not include, with respect to any Holder, information which (i) is or becomes
generally available to the public other than as a result of a disclosure by
such Holder, or its affiliates, partners, directors, officers or employees, or
(ii) becomes available on a non-confidential basis from a source other than the
Company, any of its Subsidiaries, or their respective affiliates, partners,
directors, officers, employees or advisors, provided that such source is not
known by such Holder to be bound by a confidentiality agreement with or other
obligation of secrecy to the Company or any of its Subsidiaries.
(b) Notwithstanding the foregoing, (i) Confidential
Information may be disclosed to the Holders' affiliates, partners, directors,
officers, employees and advisors who are in a confidential relationship with
such Person or who are informed of the confidential nature of such information,
(ii) Confidential Information may be disclosed as reasonably required by any
proposed transferee of Warrant Securities, provided that such proposed
transferee shall have agreed in writing for the Company's benefit to be bound
by the terms of this Section 32 and shall agree to return any Confidential
Information, and will not retain any copies, extracts or other reproductions in
whole or in part of such Confidential Information, if it does not become a
transferee of Warrant Securities, (iii) Confidential Information may be
disclosed to the extent requested or required by bank regulators or auditors or
any administrative body or commission to whose jurisdiction a Holder may be
subject, (iv) Confidential Information may be disclosed to the extent required
by law, regulation, subpoena, judicial order or legal process, provided that
notice of such requirement or order shall be promptly furnished to the Company
unless such notice is legally prohibited, (v) Confidential Information may be
disclosed to the extent required by the rules of any securities exchange on
which securities of any Holder are listed and traded, (vi) Confidential
Information may be disclosed in connection with the enforcement by any Holder
of its rights under the Warrant Documents or in connection with any litigation
between the Company and any Holder with resect to such Holder's Warrant
Securities or any Warrant Document, and (vii) Confidential Information may be
disclosed to the extent the Company consents to such disclosure.
SECTION 33. Entire Agreement. The parties hereto agree
that this Agreement, the Registration Rights Agreement, and the Loan Documents
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements and understandings between
them as to such subject matter; and there are no restrictions, agreements,
arrangements, oral or written, between any or all of the parties relating to
the subject matter hereof which are not fully expressed or referred to herein
or therein.
-43-
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:/s/ Peter G. Graf
-----------------------------
Peter G. Graf
Chairman and
Chief Executive Officer
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By:/s/ James W. Latimer
-----------------------------
James W. Latimer
Managing Director
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, L.P.,
its general partner
By:/s/ Stephen Feinberg
------------------------
Stephen Feinberg
General Partner
STEPHEN FEINBERG
General Partner Cerberus Associates, L.P.
General Partner Cerberus Partners
Solely for purposes of
Section 19(d):
/s/ Peter G. Graf
----------------------------
Peter G. Graf
-44-
<PAGE> 48
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SAID
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION, OR AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE HOLDER)
AS TO AN EXEMPTION, FROM THE REGISTRATION PROVISIONS OF SAID ACT OR LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A
WARRANT PURCHASE AGREEMENT, DATED AS OF MARCH 15, 1996, BETWEEN PHONETEL
TECHNOLOGIES, INC. (THE "COMPANY") AND INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION ("ING") AND CERBERUS PARTNERS, L.P. ("CERBERUS") AND A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF MARCH 15, 1996, AMONG THE COMPANY,
ING AND CERBERUS, COPIES OF EACH OF WHICH ARE ON FILE AT THE MAIN OFFICE OF THE
COMPANY. ANY SALE OR TRANSFER OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE
IS SUBJECT TO THE TERMS OF THOSE AGREEMENTS AND ANY SALE OR TRANSFER OF SUCH
SECURITIES IN VIOLATION OF SAID AGREEMENTS SHALL BE INVALID.
No. 1 102,412 Warrants
Warrant Certificate
PHONETEL TECHNOLOGIES, INC.
This Warrant Certificate certifies that INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, or registered assigns, is the registered holder of
the number of Warrants (the "Warrants") set forth above to purchase shares of
Series A Special Convertible Preferred Stock, par value $.20 per share (the
"Series A Special Preferred Stock"), of PHONETEL TECHNOLOGIES, INC., an Ohio
corporation (the "Company"). Each Warrant entitles the holder upon exercise to
receive from the Company one fully paid and nonassessable share of Series A
Special Preferred Stock (a "Warrant Share") at the initial exercise price (the
"Exercise Price") of $0.20, payable in lawful money of the United States of
America, upon surrender of this Warrant Certificate and payment of the Exercise
Price, if applicable, at the office of the Company designated for such purpose,
subject to the conditions set forth herein and in the Warrant Agreement
referenced below. The Exercise Price and number and type of Warrant Shares
issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events, as set forth in the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to
a Warrant Purchase Agreement dated as of March 15, 1996 (the "Warrant
Agreement"), duly executed and delivered by the Company, ING and Cerberus,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
obligations and duties hereunder of the Company and the holders of the Warrants
(the words "holders" or "holder"
<PAGE> 49
meaning the registered holders or registered holder). A copy of the Warrant
Agreement may be obtained by the holder hereof upon written request to the
Company.
The holder of Warrants evidenced by this Warrant Certificate may exercise such
Warrants under and pursuant to the terms and conditions of the Warrant
Agreement by surrendering this Warrant Certificate, with the form of election
to purchase attached hereto (and by this reference made a part hereof) properly
completed and executed, together with payment of the Exercise Price in cash at
the office of the Company designated for such purpose. In the event that any
exercise of Warrants evidenced hereby shall be for less than the total number
of Warrants evidenced hereby, there shall be issued by the Company to the
holder hereof or his or its registered assignee a new Warrant Certificate
evidencing the number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of certain events the
Exercise Price set forth on the face hereof may, subject to certain conditions,
be adjusted. If the Exercise Price is adjusted, the Warrant Agreement
provides that the number of shares of Warrant Shares issuable upon the exercise
of each Warrant shall be adjusted. No fractional shares of Warrant Shares will
be issued upon the exercise of any Warrant, but the Company will pay the cash
value thereof determined as provided in the Warrant Agreement.
The holder hereof possesses certain rights to require the Company to purchase
the Warrants (the "Put Rights"), and the holder hereof has been granted
certain rights to participate in a sale of the Common Stock of the Company by
certain shareholders of the Company (and certain of their successors and
assigns) all at the times specified in, and pursuant to the terms and
conditions set forth in, the Warrant Agreement.
The Holders of the Warrants are entitled to certain registration rights as set
forth in a Registration Rights Agreement dated as of March 15, 1996, among
the Company, ING and Cerberus (the "Registration Rights Agreement"). By
acceptance of this Warrant Certificate, the Holder hereof agrees that upon
exercise of any or all of the Warrants evidenced hereby, such Holder will be
bound by the Registration Rights Agreement. A copy of the Registration Rights
Agreement may be obtained by the holder hereof upon written request to the
Company.
Warrant Certificates, when surrendered at the office of the Company by the
registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, for another Warrant Certificate
or Warrant Certificates of like tenor evidencing in the aggregate a like number
of Warrants.
2
<PAGE> 50
The Company may deem and treat the registered holder(s) thereof as the absolute
owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing made hereon) for the purpose of any exercise hereof,
of any distribu tion to the holder(s) hereof and for all other purposes, and
the Company shall not be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company (other than the right to receive dividends and
distributions as set forth in Section 18 of the Warrant Agreement).
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its duly authorized officer and has caused its corporate seal to
be affixed hereunto or imprinted hereon.
Dated: March 15, 1996
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter Graf
----------------------------------
Name: Peter Graf
Title: Chairman of the Board
[CORPORATE SEAL]
<PAGE> 51
FORM OF ELECTION TO PURCHASE
[To Be Executed Upon Exercise of Warrant]
The undersigned holder hereby represents that he or it is the registered holder
of this Warrant Certificate, and hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive ____________ shares
of Series A Special Convertible Preferred Stock, par value $.20 per share (the
"Series A Special Preferred Stock"), of PHONETEL TECHNOLOGIES, INC. (the
"Company") and herewith tenders payment for such shares to the order of the
Company in the amount of $___________ in accordance with the terms hereof. The
undersigned requests that a certificate for such shares be registered in the
name of the undersigned or his/its nominee hereinafter set forth, and further
that such certificate be delivered to the undersigned at the address
hereinafter set forth or to such other person or entity as is hereinafter set
forth. If said number of shares is less than all of the shares of Series A
Special Preferred Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares be
registered in the name of the undersigned or his/its nominee hereinafter set
forth, and further that such Warrant Certificate be delivered to the
undersigned at the address hereinafter set forth or to such other person or
entity as is hereinafter set forth.
Certificate to be registered as follows:
---------------------------------------
Name:
Address:
Certificate to be delivered as follows:
--------------------------------------
Name:
Address:
Date:
-------------------- -------------------------------
(Signature must conform in all
respects to the name of the
holder as specified on the fact
of the Warrant Certificate,
unless Form of Assignment has
been executed)
4
<PAGE> 52
FORM OF ASSIGNMENT
[To be executed upon Transfer of Warrant]
FOR VALUE RECEIVED, the undersigned registered holder of the
enclosed Warrant Certificate hereby sells, assigns and transfers unto
________________________________________ the right represented by such Warrant
Certificate to purchase _____________ shares of Series A Special Convertible
Preferred Stock, par value $.20 per share, of PHONETEL TECHNOLOGIES, INC. to
which such Warrant Certificate relates, and appoints __________________
_______________________________ Attorney to make such transfer on the books of
PHONETEL TECHNOLOGIES, INC. maintained for such purpose, with full power of
substitution in the premises.
Date:
------------------- ---------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
<PAGE> 53
THIS TERM NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION, OR AN OPINION OF COUNSEL
(WHICH MAY BE COUNSEL TO THE HOLDER) AS TO AN EXEMPTION, FROM THE REGISTRATION
PROVISIONS OF SAID ACT OR LAWS.
THIS TERM NOTE IS SUBJECT TO THE TERMS OF A CREDIT AGREEMENT, DATED AS OF MARCH
15, 1996, BETWEEN PHONETEL TECHNOLOGIES, INC. (THE "BORROWER"), THE LENDERS
NAMED THEREIN, AND INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, AS
AGENT FOR THE LENDERS, A COPY OF WHICH IS ON FILE AT THE MAIN OFFICE OF THE
BORROWER. ANY SALE OR TRANSFER OF THE SECURITIES EVIDENCED BY THIS TERM NOTE
IS SUBJECT TO THE TERMS OF SAID CREDIT AGREEMENT AND ANY SALE OR TRANSFER OF
SUCH SECURITIES IN VIOLATION OF SAID CREDIT AGREEMENT SHALL BE INVALID.
TERM NOTE
$ 14,500,000 March 15, 1996
FOR VALUE RECEIVED, the undersigned, PHONETEL TECHNOLOGIES, INC., an Ohio
corporation (the "Borrower"), promises to pay to the order of INTERNATIONALE
NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware corporation, (the "Lender"),
at the times provided in the Credit Agreement referenced hereinafter, the
principal sum of FOURTEEN MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($14,500,000.00) or, if less, the outstanding principal amount of the Term Loan
made by the Lender pursuant to that certain Credit Agreement, dated as of March
15, 1996 (together with all amendments and other modifications, if any, from
time to time hereafter made thereto, the "Credit Agreement"; capitalized terms
used herein and not defined herein shall have the meaning ascribed to them in
the Credit Agreement), among the Borrower, Internationale Nederlanden (U.S.)
Capital Corporation, as Agent, and the various lenders (including the Lender)
as are, or may from time to time become, parties thereto. Notations indicating
the Term Loan made by the Lender pursuant to the Credit Agreement and all
payments on account of the principal thereof may be endorsed by the holder
hereof on the grid schedule attached to this Note, as provided in the Credit
Agreement.
The unpaid principal amount of this Note from time to time shall bear
interest as provided in Section 3.4 of the Credit Agreement. All payments of
principal of and interest on this Note shall be payable in lawful currency of
the United States of America to the account designated by the Agent (and as to
which the Agent has notified the Borrower) in immediately available funds.
<PAGE> 54
This Note is a Term Note referenced in, and evidences Indebtedness
incurred under, the Credit Agreement, to which reference is made for a
description of the security for this Note and for a statement of the terms and
conditions on which the Borrower is permitted and required to make prepayments
and repayments of principal of the Indebtedness evidenced by this Note and on
which such Indebtedness may be declared to be or may automatically become
immediately due and payable.
THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and notice of any kind with respect to
this Note. All amounts owing hereunder are payable by the Borrower without
relief from any valuation or appraisal laws.
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter G. Graf
------------------------------
Peter G. Graf
Chairman and
Chief Executive Officer
-2-
<PAGE> 55
Schedule to Term Note
Schedule of Term Loan and Repayments
<TABLE>
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</TABLE>
<PAGE> 1
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
BETWEEN
PHONETEL TECHNOLOGIES, INC.
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
AND
CERBERUS PARTNERS, L.P.
Dated as of March 15, 1996
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2. Registration of Securities by the Company . . . . . . . . . . . . . 4
Section 3. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5. Conditions to Registration . . . . . . . . . . . . . . . . . . . . . 22
Section 6. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7. Exchange Act Registration;
Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8. Limitation on Registration Rights of
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9. Mergers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 10. Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 11. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12. Waivers and Further Agreements . . . . . . . . . . . . . . . . . . . 31
Section 13. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 14. Assignment; Successors and Assigns . . . . . . . . . . . . . . . . . 32
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 16. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 17. Section Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 18. Gender; Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 19. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 20. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 21. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 22. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . 34
Schedule I Agreements Containing Registration Rights
in Favor of Other Shareholders
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of March 15, 1996, by and between PHONETEL TECHNOLOGIES, INC.,
an Ohio corporation (the "Company"), and INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION, a Delaware corporation ("ING") and CERBERUS PARTNERS,
L.P., a Delaware limited partnership ("Cerberus") (ING and Cerberus, each the
"Purchaser," and collectively, the "Purchasers").
W I T N E S S E T H:
RECITALS.
A. Simultaneously herewith, the Purchasers are entering into a
Credit Agreement (as defined in Section 1), by and among the Company, the
Purchasers and various other lenders that may become parties thereto (the
"Lenders") and ING in its capacity as Agent for the Lenders; and
B. It is a condition precedent to the initial extensions of
credit by the Purchasers to the Company contemplated by the Credit Agreement
that the Company agree to issue to the Purchasers Warrants initially
exercisable for _______ shares of Series A Special Convertible Preferred Stock,
par value $.20 per share, of the Company (the "Series A Special Preferred
Stock"); and
C. Each Lender is entitled at such Lender's option, subject to
the terms and conditions of the Credit Agreement, to convert Term Notes (as
defined in the Credit Agreement) into shares of Series B Special Convertible
Preferred Stock, par value $.20 per share, of the Company (the "Series B
Special Preferred Stock"); and
D. Shares of Series A Special Preferred Stock and Series B
Special Preferred Stock are convertible, at the option of each of the holders
thereof, into shares of Common Stock, par value $.01 per share, of the Company;
and
E. The Purchasers are unwilling to extend credit to the Company
pursuant to the Credit Agreement or to purchase the Warrants pursuant to the
Warrant Agreement (as defined in Section 1) unless they receive the assurances
set forth in this Agreement;
<PAGE> 4
NOW, THEREFORE, in consideration of the recitals, of the Purchasers'
proceeding with the consummation of the transactions contemplated by the
Warrant Agreement and the Credit Agreement, and the mutual covenants
hereinafter set forth, the parties, intending to be legally bound, hereby
agree as follows:
SECTION 1. Definitions.
(a) Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Agreement" means this Registration Rights Agreement as in effect on
the date hereof and as hereafter amended, supplemented, restated or otherwise
modified.
"Available Securities" is defined in Section 2.
"Business Day" is defined in the Warrant Agreement.
"Certificate of Amendment" is the certificate of amendment to the
Company's Articles of Incorporation relating to the Series A Special Preferred
Stock and the Series B Special Preferred Stock.
"Common Stock" is defined in the Warrant Agreement.
"Company" is defined in the Preamble.
"Credit Agreement" means the Credit Agreement, dated of even date
herewith, by and among the Purchasers, various Lenders signatory thereto, and
the Company, as in effect on the date hereof and as hereafter amended,
supplemented, restated or otherwise modified.
"Exchange Act" is defined in the Warrant Agreement.
"Holders" shall mean, collectively, the Purchasers and any subsequent
registered holders, from time to time, of the Term Notes, the Series B Special
Preferred Stock, Common Stock issuable upon conversion of the Series B Special
Preferred Stock, or the Warrant Securities. Whenever the phrase "Holder of any
Registrable Securities" or any similar phrase is used herein, it shall also
include any holders of Warrants, Term Notes, Series A Special Preferred Stock,
Common Stock issuable upon conversion of the Series B Special Preferred Stock,
or Series B Special Preferred Stock.
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<PAGE> 5
"Indemnified Person" is defined in Section 6(a).
"Indemnifying Person" is defined in Section 6(c).
"NASD" means the National Association of Securities Dealers, Inc.
"Person" is defined in the Warrant Agreement.
"Prospectus" means each prospectus included as part of any
Registration Statement, as amended or supplemented, including each preliminary
prospectus and all material incorporated by reference in such prospectus.
"Purchaser" is defined in the Preamble.
"Quoted Price" is defined in the Warrant Agreement.
"Registrable Securities" shall mean the shares of Common Stock issued
or issuable upon the conversion of shares of Series A Special Preferred Stock
or Series B Special Preferred Stock (including any conversion in accordance
with subparagraph (l)(vii) or subparagraph (m)(vii) of the Certificate of
Amendment), but excluding (i) shares that have been disposed of under a
Registration Statement, the Shelf Registration Statement or any other effective
registration statement, and (ii) shares distributed to the public pursuant to
Rule 144 under the Securities Act.
"Registration Expenses" is defined in Section 4(c).
"Registration Statement" means any registration statement of the
Company which covers Registrable Securities pursuant to Section 2 of this
Agreement, including the Prospectus, amendments, including post-effective
amendments, and supplements to such registration statement and Prospectus and
all exhibits and all material incorporated by reference in such registration
statement.
"Required Holders" shall mean the holders of Term Notes, shares of
Series B Special Preferred Stock and/or Warrant Securities which when fully
converted would represent at least two-thirds of the voting power of such
securities held by all of the Holders.
"Securities Act" is defined in the Warrant Agreement.
"SEC" is defined in the Warrant Agreement.
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<PAGE> 6
"Shelf Prospectus" shall mean the prospectus included in the Shelf
Registration Statement, including any preliminary prospectus, and any amendment
or supplement thereto, including any supplement relating to the terms of the
offering of any portion of the Registrable Securities covered by the Shelf
Registration Statement, and in each case including all material incorporated by
reference therein.
"Shelf Registration" shall mean a registration required to be effected
pursuant to Section 3 hereof.
"Shelf Registration Statement" shall mean a registration statement of
the Company (and any other entity required to be a registrant with respect to
such registration statement pursuant to the requirements of the Securities Act)
that covers all of the Registrable Securities to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, or any similar
rule that may be adopted by the SEC, and all amendments (including post-
effective amendments) to such registration statement, and all exhibits thereto
and materials incorporated by reference therein.
"Specified Registrable Securities" is defined in Section 2(a).
"Stock" is defined in the Warrant Agreement.
"Warrant Agreement" means the Warrant Purchase Agreement, dated of
even date herewith, by and between the Purchasers and the Company, as in effect
on the date hereof and as hereafter amended, supplemented, restated or
otherwise modified.
"Warrant Securities" is defined in the Warrant Agreement.
"Warrants" is defined in the Warrant Agreement.
(b) Cross-References. Unless otherwise specified,
references in this Agreement to any Article or Section are references to such
Article or Section of this Agreement, and unless otherwise specified,
references in any Article, Section, or definition to any clause are references
to such clause of such Section, Article or definition.
SECTION 2. Registration of Securities by the Company.
(a) Piggyback Registration. If at any time or from time to
time the Company shall propose to file on its behalf or on behalf of any of its
security holders a registration statement under the Securities Act on Form S-1,
S-2 or S-3 (or on any other form for the general registration of securities)
with respect to
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<PAGE> 7
any class of securities (other than a Shelf Registration Statement filed
pursuant to Section 3), the Company shall in each case:
(i) promptly give written notice to each Holder
at least thirty (30) days before the anticipated filing date,
indicating the proposed offering price and describing the plan
of distribution;
(ii) include in such registration (and any related
qualification under blue sky or other state securities laws or
other compliance) and, at the request of any Holder, in any
underwriting involved therein, all the Registrable Securities
specified by any Holder or Holders of Registrable Securities
(the "Specified Registrable Securities") in a written request
(the "Registration Request") made within twenty (20) days
after receipt of such written notice from the Company; and
(iii) use its best efforts to cause the
managing underwriter(s) of such proposed underwritten offering
to permit the Specified Registrable Securities to be included
in the Registration Statement for such offering on the same
terms and conditions as any similar securities of the Company
included therein.
Notwithstanding the foregoing, if the managing underwriter(s) of such offering
advise(s) the Holders of Specified Registrable Securities in writing that
marketing considerations require a limitation on the securities, other than the
securities the Company intends to sell, to be included in any Registration
Statement filed under this Section 2 to a certain number of shares (the
"Available Securities"), then the Company shall in such case be obligated to
such Holders only with respect to such number of Available Securities. Subject
to the registration rights of the holder of the Warrant to Purchase Common
Stock of the Company dated September 12, 1995 between PhoneTel and Gabriel
Capital, L.P., the holder of the Warrant to Purchase Common Stock of the
Company dated September 12, 1995 between PhoneTel and Ariel Fund, Ltd., the
former stockholders of World Communications, Inc. as beneficiaries of the
Registration Rights Agreement, dated September 22, 1995 (the "World
Registration Rights Agreement"), and the former stockholders of Public
Telephone Corporation as beneficiaries of the Registration Rights Agreement
dated October 16, 1995 in each case as in effect on the date hereof, the
limitation on the number of Specified Registrable Securities will be imposed
pro rata (based upon the ratio of the number of shares of Specified Registrable
Securities which the managing underwriter(s) propose to include at the
anticipated initial public offering price to the number of Specified
Registrable
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<PAGE> 8
Securities owned by each Holder) among all Holders of Specified Registrable
Securities.
Each Registration Request shall set forth the number or amount of
Specified Registrable Securities. Notwithstanding any other provision of this
Agreement to the contrary, neither the delivery of the notice by the Company
nor of the Registration Request by any Holder shall in any way obligate the
Company to file a Registration Statement and, notwithstanding such filing, the
Company may, at any time prior to the effective date thereof, in its sole
discretion, determine not to offer the securities to which the Registration
Statement relates without liability to any of the Holders. No registration of
Registrable Securities effected under this Section 2 shall relieve the Company
of its obligation to effect the registration of Registrable Securities pursuant
to Section 3.
(b) Piggyback Registration Procedures. If and when the
Company shall be required by the provisions of this Section 2 to effect the
registration of Registrable Securities under the Securities Act, the Company
will use its best efforts to effect such registration to permit the sale of
such Registrable Securities in accordance with the intended method or methods
of disposition thereof, and pursuant thereto it will, as expeditiously as
possible:
(i) before filing a Registration Statement or Prospectus
or any amendments or supplements thereto, furnish to the Holders of
the Registrable Securities covered by such Registration Statement and
the underwriter(s), if any, copies of all such documents proposed to
be filed, which documents will be made available, on a timely basis,
for review by such Holders and underwriters;
(ii) prepare and file with the SEC such amendments and
post-effective amendments to any Registration Statement, and such
supplements to the Prospectus, as may be reasonably requested by any
Holder of Registrable Securities or the managing underwriter(s), if
any, or as may be required by the Securities Act, the Exchange Act or
by the rules, regulations or instructions applicable to the
registration form utilized by the Company or as may otherwise be
necessary to keep such Registration Statement effective until the
earlier of such time as all of the Registrable Securities covered by
such Registration Statement have been disposed of in accordance with
the intended method of disposition set forth in such Registration
Statement or Prospectus; and cause the Prospectus as so supplemented
to be filed pursuant to Rule 424 (or any successor rule) under the
Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
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<PAGE> 9
Registration Statement during the applicable period in accordance with
the intended methods of disposition by the sellers thereof set forth
in such Registration Statement or Prospectus;
(iii) promptly notify the selling Holders of Registrable
Securities and the managing underwriter(s), if any, and if requested
by any such Person, confirm such advice in writing:
(a) of the filing of the Prospectus or any
supplement to the Prospectus and of the effectiveness of the
Registration Statement and/or any post-effective amendment,
(b) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectus or
for additional information,
(c) of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose,
(d) of the Company's becoming aware at any time
that the representations and warranties of the Company
contemplated by paragraph (xiv)(a) below have ceased to be
true and correct,
(e) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threat of any proceeding for
such purpose, and
(f) of the existence of any fact which, to the
knowledge of the Company, results in the Registration
Statement, the Prospectus or any document incorporated therein
by reference containing an untrue statement of material fact
or omitting to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading;
(iv) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration
Statement or any qualification referred to in paragraph (iii)(e) at
the earliest possible moment;
(v) if reasonably requested by the managing
underwriter(s) or the Required Holders of Registrable Securities being
sold in connection with an underwritten
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<PAGE> 10
offering, immediately incorporate in a supplement to the Prospectus or
post-effective amendment to the Registration Statement such
information as the managing underwriter(s) or the Required Holders of
the Registrable Securities being sold reasonably request to have
included therein relating to the plan of distribution with respect to
such Registrable Securities, including, without limitation,
information with respect to the amount of Registrable Securities being
sold to such underwriters, the purchase price being paid therefor by
such underwriters and any other terms of the underwritten (or
best-efforts underwritten) offering of the Registrable Securities to
be sold in such offering; and make all required filings of such
supplement to the Prospectus or post-effective amendment to the
Registration Statement as soon as notified of the matters to be
incorporated in such supplement to the Prospectus or post-effective
amendment to the Registration Statement;
(vi) at the request of any selling Holder of Registrable
Securities, furnish to such selling Holder of Registrable Securities
and each managing underwriter, if any, without charge, at least one
signed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(vii) deliver to each selling Holder of Registrable Securities
and the managing underwriter(s), if any, without charge, as many
copies of the Registration Statement, each Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto (in
each case including all exhibits), as such Persons may reasonably
request, together with all documents incorporated by reference in such
Registration Statement or Prospectus, and such other documents as such
selling Holder may reasonably request in order to facilitate the
disposition of its Registrable Securities covered by such Registration
Statement; the Company consents to the use of each Prospectus and any
supplement thereto by each of the selling Holders of Registrable
Securities and the managing underwriter(s), if any, in connection with
the offering and sale of the Registrable Securities covered by each
Prospectus or any supplement thereto;
(viii) prior to any public offering of Registrable
Securities, register or qualify or reasonably cooperate with the
selling Holders of Registrable Securities, the managing
underwriter(s), if any, and their respective counsel in connection
with the registration or qualification of such Registrable Securities
for offer and sale under the
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<PAGE> 11
securities or blue sky laws of such jurisdictions as any selling
Holder or managing underwriter(s) reasonably request(s) and do any and
all other acts or things necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the
Registration Statement;
(ix) cooperate with the selling Holders of Registrable
Securities and the managing underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any legends
restricting the transfer thereof; and enable such Registrable
Securities to be in such denominations and registered in such names as
the managing underwriters may request at least two Business Days prior
to any sale of Registrable Securities to the underwriters;
(x) use its best efforts to cause the Registrable
Securities covered by the applicable Registration Statement to be
registered with or approved by such United States, state and local
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate
the disposition of such Registrable Securities;
(xi) if any fact contemplated by paragraph (iii)(b) or
(iii)(f) above shall exist, promptly notify each Holder on whose
behalf Registrable Securities have been registered and promptly
prepare and furnish to such Holders a supplement or post-effective
amendment to the Registration Statement or the related Prospectus or
any document incorporated therein by reference and promptly file any
other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, neither the Registration
Statement nor the Prospectus will contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(xii) if requested by the Required Holders of the
Registrable Securities or by the managing underwriter(s), if any,
cause all Registrable Securities covered by the Registration Statement
to be (A) listed on each securities exchange on which securities of
the same class are then listed or (B) admitted for trading in any
inter-dealer quotation system on which securities of the same class
are then traded;
(xiii) not later than the effective date of the applicable
Registration Statement, provide a CUSIP number for all Registrable
Securities covered by the Registration Statement and provide the
applicable transfer agent with
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<PAGE> 12
printed certificates for such Registrable Securities which are in a
form eligible for deposit with Depository Trust Company;
(xiv) enter into agreements (including underwriting
agreements) and take all other reasonable actions in order to expedite
or facilitate the disposition of such Registrable Securities and in
such connection, except as otherwise provided, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(a) make such representations and warranties to
the Holders selling such Registrable Securities and, in
connection with any underwritten offering, to the
underwriters, in form, substance and scope as are customarily
made by issuers to underwriters in similar underwritten
offerings;
(b) obtain opinions of counsel to the Company and
updates thereof addressed to each selling Holder and the
underwriters, if any, covering the matters customarily covered
in opinions requested in similar underwritten offerings and
such other matters as may be reasonably requested by such
Holders and underwriters, which counsel and opinions shall be
reasonably satisfactory (in form, scope and substance) to the
managing underwriters, if any, and the Required Holders of
such Registrable Securities;
(c) in connection with any underwritten offering,
obtain so-called "cold comfort" letters and updates thereof
from the Company's independent certified public accountants
addressed to the selling Holders of Registrable Securities and
the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold
comfort" letters to underwriters in connection with similar
underwritten offerings;
(d) if an underwriting agreement is entered into,
cause the same to set forth in full the indemnification and
contribution provisions and procedures of Section 6 (or such
other substantially similar provisions and procedures as the
underwriters shall reasonably request) with respect to all
parties to be indemnified pursuant to said Section 6; and
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<PAGE> 13
(e) deliver such documents and certificates as
may reasonably be requested by the Required Holders of the
Registrable Securities being sold, or the managing
underwriter(s), if any, to evidence compliance with this
paragraph (xiv) and with any customary conditions contained in
the underwriting agreement or other agreement entered into by
the Company;
the foregoing to be done upon each closing under any underwriting or
similar agreement as and to the extent required thereunder and from
time to time as may reasonably be requested by any selling Holder of
Registrable Securities in connection with the disposition of
Registrable Securities pursuant to such Registration Statement, all in
a manner consistent with customary industry practice;
(xv) upon execution and delivery of such confidentiality
agreements as the Company may reasonably request, make available to
the Holders of the Registrable Securities being sold, any underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney or accountant retained by such Holders or
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with the registration, at such time or times as the Person
requesting such information shall reasonably determine;
(xvi) otherwise use its best efforts to comply with the
Securities Act, the Exchange Act, all applicable rules and regulations
of the SEC and all applicable state blue sky and other securities
laws, rules and regulations, and make generally available to its
security holders an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act, as soon as practicable, but in no
event later than thirty (30) days after the end of the 12 calendar
month period commencing after the effective date of the Registration
Statement;
(xvii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter" that is required to be retained in accordance with the
rules and regulations of the NASD); and
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<PAGE> 14
(xviii) prior to the filing of any document which is being
prepared for incorporation by reference into the Registration
Statement or the Prospectus, upon receipt of such confidentiality
agreements as the Company may reasonably request, provide copies of
such document to counsel to the selling Holders of Registrable
Securities, and to the managing underwriter(s), if any, and make the
Company's representatives available for discussion of such document.
If requested in writing by the Company or the lead underwriter, if any, of any
public offering effected pursuant to this Section 2, the Company and each
Holder owning Registrable Securities exercisable for or evidencing at least 1%
of outstanding Common Stock will execute and deliver an agreement undertaking
not to effect any public sale or distribution, including any sale pursuant to
Rule 144 under the Securities Act, of any shares of Common Stock (other than as
part of such underwritten public offering) within 7 days before or 120 days
after the effective date of a registration statement filed pursuant to this
Section 2.
SECTION 3. Shelf Registration.
(a) Filing of Shelf Registration Statement. Promptly
after the date hereof and in any event on or before June 1, 1996, the Company
shall cause to be filed the Shelf Registration Statement providing for the sale
by the Holders of all of the Registrable Securities in accordance with the
terms hereof, and the Company will use its best efforts to cause such Shelf
Registration Statement to be declared effective by the SEC on or before June
30, 1996. The Company agrees to use its best efforts to keep the Shelf
Registration Statement with respect to the Registrable Securities continuously
effective so long as any Holder holds Registrable Securities until such time as
each Holder has received an opinion of counsel to the Company (which opinion
and counsel shall be reasonably satisfactory to the Holder) to the effect that
each such Holder is permitted under Rule 144 to dispose of all of its
Registrable Securities within three months without such registration. The
Company further agrees to amend the Shelf Registration Statement if and as
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or any rules and regulations thereunder; provided,
however, that the Company shall not be deemed to have used its best efforts to
keep the Shelf Registration Statement effective during the applicable period if
it voluntarily takes any action that would result in selling Holders not being
able to sell Registrable Securities covered thereby during that period, unless
such action is permitted by this Agreement or required under applicable law or
the Company has filed a post-effective amendment to the Shelf Registration
Statement and the SEC has not declared
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<PAGE> 15
it effective. The Company may cause to be included in the Shelf Registration
Statement any securities of the Company held by persons with registration
rights under the agreements listed on Schedule I to the extent provided by such
agreements and to permit such persons to exercise any existing registration
rights contained in the agreements listed on Schedule I.
(b) Shelf Registration Procedures. In connection with
the obligations of the Company with respect to the Shelf Registration Statement
contemplated by this Section 3, the Company shall use its best efforts to
effect such registration to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto it will, as expeditiously as possible:
(i) before filing a Shelf Registration Statement or Shelf
Prospectus or any amendments or supplements thereto, furnish to the
Holders of the Registrable Securities covered by such Shelf
Registration Statement and the underwriter(s), if any, copies of all
such documents proposed to be filed, which documents will be made
available, on a timely basis, for review by such Holders and
underwriters; and the Company will not file any Shelf Registration
Statement or amendment thereto or any Shelf Prospectus or any
supplement thereto to which the Required Holders of the Registrable
Securities covered by such Shelf Registration Statement or the
managing underwriter(s), if any, shall reasonably object;
(ii) prepare and file with the SEC, within the time period
set forth in Section 3(a) hereof, the Shelf Registration Statement,
which Shelf Registration Statement (a) shall be available for the sale
of the Registrable Securities in accordance with the intended method
or methods of distribution by the selling Holders thereof and (b)
shall comply as to form in all material respects with the requirements
of the applicable form and include all financial statements required
by the SEC to be filed therewith;
(iii) (a) prepare and file with the SEC such amendments to
such Shelf Registration Statement as may be reasonably requested by
any Holder of Registrable Securities or the managing underwriter(s),
if any, or as may be required by the Securities Act, the Exchange Act
or by the rules, regulations or instructions applicable to the
registration form utilized by the Company or as may otherwise be
necessary to keep such Shelf Registration Statement effective for the
applicable period; (b) cause the Shelf Prospectus to be amended or
supplemented as may be reasonably requested by any Holder of
Registrable Securities or the managing underwriter(s), if any, or as
may be required by the Securities Act, the
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<PAGE> 16
Exchange Act or by the rules, regulations or instructions applicable
to the registration form utilized by the Company or as may otherwise
be necessary to keep such Shelf Registration Statement effective for
the applicable period; (c) cause the Shelf Prospectus as so amended or
supplemented to be filed pursuant to Rule 424 (or any successor rule)
under the Securities Act; (d) respond as promptly as practicable to
any comments received from the SEC with respect to the Shelf
Registration Statement or any amendment thereto; and (e) comply with
the provisions of the Securities Act with respect to the disposition
of all securities covered by such Shelf Registration Statement during
the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof;
(iv) promptly notify the selling Holders of Registrable
Securities and the managing underwriter(s), if any, and if requested
by any such Person, confirm such advice in writing:
(a) of the filing of the Shelf Prospectus or any
supplement to the Shelf Prospectus and of the effectiveness of
the Shelf Registration Statement and/or any post-effective
amendment,
(b) of any request by the SEC for amendments or
supplements to the Shelf Registration Statement or the Shelf
Prospectus or for additional information,
(c) of the issuance by the SEC of any stop order
suspending the effectiveness of the Shelf Registration
Statement or the initiation of any proceedings for that
purpose,
(d) of the Company's becoming aware at any time
that the representations and warranties of the Company
contemplated by paragraph (xv)(a) below have ceased to be true
and correct,
(e) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threat of any proceeding for
such purpose, and
(f) of the existence of any fact which, to the
knowledge of the Company, results in the Shelf Registration
Statement, the Shelf Prospectus or any document incorporated
therein by reference containing an untrue statement of
material fact or omitting to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading;
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<PAGE> 17
(v) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Shelf Registration
Statement or any qualification referred to in paragraph (iii)(e) at
the earliest possible moment;
(vi) if reasonably requested by the managing
underwriter(s) or the Required Holders of Registrable Securities being
sold in connection with an underwritten offering, immediately
incorporate in a supplement to the Shelf Prospectus or post-effective
amendment to the Shelf Registration Statement such information as the
managing underwriter(s) or the Required Holders of the Registrable
Securities being sold reasonably request to have included therein
relating to the plan of distribution with respect to such Registrable
Securities, including, without limitation, information with respect to
the amount of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and any
other terms of the underwritten (or best-efforts underwritten)
offering of the Registrable Securities to be sold in such offering;
and make all required filings of such supplement to the Shelf
Prospectus or post-effective amendment to the Shelf Registration
Statement as soon as notified of the matters to be incorporated in
such supplement to the Shelf Prospectus or post-effective amendment to
the Shelf Registration Statement;
(vii) at the request of any selling Holder of Registrable
Securities, furnish to such selling Holder of Registrable Securities
and each managing underwriter, if any, without charge, at least one
signed copy of the Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(viii) deliver to each Holder of Registrable Securities and
the managing underwriter(s), if any, without charge, as many copies of
the Shelf Registration Statement, each Shelf Prospectus and any
amendment or supplement thereto (in each case including all exhibits),
as such Persons may reasonably request, together with all documents
incorporated by reference in such Shelf Registration Statement or
Shelf Prospectus, and such other documents as such selling Holder may
reasonably request in order to facilitate the disposition of its
Registrable Securities; the Company consents to the use of the Shelf
Prospectus and any amendment or supplement thereto by each such Holder
of Registrable Securities and the underwriter(s), if any, in
connection with the offering and sale of the Registrable Securities
covered by the Shelf Prospectus or amendment or supplement thereto;
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<PAGE> 18
(ix) prior to the time the Shelf Registration Statement is
declared effective by the SEC, register or qualify the Registrable
Securities or reasonably cooperate with the selling Holders, the
underwriter(s), if any, and their respective counsel in connection
with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such
jurisdictions as any selling Holder or managing underwriter(s), if
any, reasonably request(s), keep each such registration or
qualification effective during the period such Shelf Registration
Statement is required to be kept effective, and do any and all other
acts or things necessary to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Shelf
Registration Statement;
(x) cooperate with the selling Holders of Registrable
Securities and the managing underwriter(s), if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any legends
restricting the transfer thereof; and enable such Registrable
Securities to be in such denominations and registered in such names as
the selling Holders or the managing underwriters, if any, may request
at least two Business Days prior to any sale of Registrable
Securities;
(xi) use its best efforts to cause the Registrable Securities
covered by the Shelf Registration Statement to be registered with or
approved by such United States, state and local governmental agencies
or authorities as may be necessary to enable the seller or sellers
thereof or the underwriters, if any, to consummate the disposition of
such Registrable Securities;
(xii) if any fact contemplated by paragraph (iv)(b) or (iv)(f)
above shall exist, promptly notify each Holder on whose behalf
Registrable Securities have been registered and promptly prepare and
furnish to such Holders a supplement or post-effective amendment to
the Shelf Registration Statement or the related Shelf Prospectus or
any document incorporated therein by reference and promptly file any
other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, neither the Shelf
Registration Statement nor the Shelf Prospectus will contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading;
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(xiii) if requested by the Required Holders of the Registrable
Securities or by the managing underwriter(s), if any, cause all
Registrable Securities covered by the Shelf Registration Statement to
be (a) listed on each securities exchange on which securities of the
same class are then listed or (b) admitted for trading in any
inter-dealer quotation system on which securities of the same class
are then traded;
(xiv) not later than the effective date of the Shelf
Registration Statement, provide a CUSIP number for all Registrable
Securities covered by the Shelf Registration Statement and provide the
applicable transfer agent with printed certificates for such
Registrable Securities which are in a form eligible for deposit with
Depository Trust Company;
(xv) enter into agreements (including underwriting
agreements) and take all other reasonable actions in order to expedite
or facilitate the disposition of such Registrable Securities and in
such connection, except as otherwise provided, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration:
(a) make such representations and warranties to
the Holders selling such Registrable Securities and, in
connection with any underwritten offering, to the
underwriters, in form, substance and scope as are customarily
made by issuers to underwriters in similar underwritten
offerings;
(b) obtain opinions of counsel to the Company and
updates thereof addressed to each selling Holder and the
underwriters, if any, covering the matters customarily covered
in opinions requested in similar underwritten offerings and
such other matters as may be reasonably requested by such
Holders and underwriters, which counsel and opinions shall be
reasonably satisfactory (in form, scope and substance) to the
managing underwriters, if any, and the Required Holders of
such Registrable Securities;
(c) in connection with any underwritten offering,
to obtain so-called "cold comfort" letters and updates thereof
from the Company's independent certified public accountants
addressed to the selling Holders of Registrable Securities and
the underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in "cold
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<PAGE> 20
comfort" letters to underwriters in connection with similar
underwritten offerings;
(d) if an underwriting agreement is entered into,
cause the same to set forth in full the indemnification and
contribution provisions and procedures of Section 6 (or such
other substantially similar provisions and procedures as the
underwriters shall reasonably request) with respect to all
parties to be indemnified pursuant to said Section 6; and
(e) deliver such documents and certificates as
may reasonably be requested by the Required Holders of the
Registrable Securities being sold, or the managing
underwriter(s), if any, to evidence compliance with this
paragraph (xiv) and with any customary conditions contained in
the underwriting agreement or other agreement entered into by
the Company;
the foregoing to be done upon each closing under any underwriting or
similar agreement as and to the extent required thereunder and from
time to time as may reasonably be requested by any selling Holder of
Registrable Securities in connection with the disposition of
Registrable Securities pursuant to such Shelf Registration Statement,
all in a manner consistent with customary industry practice;
(xvi) upon execution and delivery of such confidentiality
agreements as the Company may reasonably request, make available to
the Holders of the Registrable Securities being sold, any underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney or accountant retained by such Holders or
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such Holder, underwriter, attorney or accountant in
connection with the registration, at such time or times as the Person
requesting such information shall reasonably determine;
(xvii) otherwise use its best efforts to comply with the
Securities Act, the Exchange Act, all applicable rules and regulations
of the SEC and all applicable state blue sky and other securities
laws, rules and regulations, and make generally available to its
security holders, as soon as practicable, an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act;
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<PAGE> 21
(xviii) cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter" that is required to be retained in accordance with the
rules and regulations of the NASD); and
(xix) prior to the filing of any document which is being
prepared for incorporation by reference into the Registration
Statement or the Prospectus, upon receipt of such confidentiality
agreements as the Company may reasonably request, provide copies of
such document to counsel to the selling Holders of Registrable
Securities, and to the managing underwriter(s), if any, and make the
Company's representatives available for discussion of such document.
(c) Covenants of Holders. In connection with and as a
condition to the Company's obligations with respect to the Shelf Registration
Statement pursuant to this Section 3, each Holder covenants and agrees that (i)
upon receipt of any notice from the Company contemplated by Section 3(b)(iv)
(in respect of the occurrence of an event contemplated by clause (f) of Section
3(b)(iv)), such Holder shall not offer or sell any Registrable Securities
pursuant to the Shelf Registration Statement until such Holder receives copies
of the supplemented or amended Shelf Prospectus contemplated by Section
3(b)(xii) hereof and receives notice that any post-effective amendment has
become effective, and, if so directed by the Company, such Holder will deliver
to the Company (at the expense of the Company) all copies in its possession,
other than permanent file copies then in such Holder's possession, of the Shelf
Prospectus as amended or supplemented at the time of receipt of such notice;
(ii) such Holder and any of its officers, directors or affiliates, if any, will
comply with the provisions of Rule 10b-6 and 10b-7 under the Exchange Act as
applicable to them in connection with sales of Registrable Securities pursuant
to the Shelf Registration Statement; and (iii) such Holder and any of its
officers, directors or affiliates, if any, will comply with the prospectus
delivery requirements of the Securities Act as applicable to them in connection
with sales of Registrable Securities pursuant to the Shelf Registration
Statement.
(d) Mechanics of Shelf Registration. Each registration
effected pursuant to this Section 3 shall be effected by the filing of a Shelf
Registration Statement on Form S-1 or Form S-3 (provided that if Form S-3 is
used the Shelf Prospectus shall contain the information that would have been
required to be included therein had Form S-1 been used), unless the use of a
different form has been agreed upon in writing by the Required Holders;
provided, however, that if the intended method of disposition by the requesting
Holders is to be an underwritten
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<PAGE> 22
offering, the Company shall use such form of Registration Statement as is
acceptable to the underwriter(s). Whenever a registration requested by one or
more Holders pursuant to this Section 3 is for an underwritten offering, only
Registrable Securities which are to be distributed by the underwriters may be
included in such registration, without the written consent of the Required
Holders.
(e) Blackout Period. The Company shall be entitled to (i)
postpone for not more than 45 days the filing of the Shelf Registration
Statement otherwise required to be prepared and filed by the Company pursuant
to Section 3, or (ii) elect that the Shelf Registration Statement not be
usable, for a reasonable period of time, but not in excess of 45 days (a
"Blackout Period"), if the Company determines in good faith that the
registration and distribution of Registrable Securities (or the use of the
Shelf Registration Statement or related Shelf Prospectus) would interfere with
any pending material financing, acquisition or corporate reorganization or
similar transaction involving the Company or any of its subsidiaries because it
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 shall not exceed 90 days.
(f) Holdback Agreement. Subject to the provisions of
this sentence becoming effective in accordance with the immediately following
sentence, if (i) the Company shall file a registration statement (other than in
connection with the registration of securities issuable pursuant to an employee
stock option, stock purchase or similar plan or pursuant to a merger, exchange
offer or a transaction of the type specified in Rule 145(a) under the
Securities Act) with respect to its Common Stock and (ii) with reasonable prior
notice, the managing underwriter or underwriters advises the Company in writing
(in which case the Company shall notify the Holders) that a public sale or
distribution of Registrable Securities would adversely impact such offering,
then each Holder of Registrable Securities shall, to the extent not
inconsistent with applicable law, refrain from effecting any public sale or
distribution of Registrable Securities during the 10-day period prior to, and
during the 90-day period beginning on, the effective date of such registration
statement. The provisions set forth in the preceding sentence shall not become
effective until the Company shall have entered into agreements with the holders
of at least two-thirds of the shares entitled to registration rights pursuant
to the World Registration Rights Agreement providing that (i) such holders
agree to waive any priority to which they are entitled over the
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<PAGE> 23
Holders in connection with the exercise of incidental or piggyback registration
rights and instead agree that in connection with any reductions in the shares
entitled to participate in an underwritten offering such holders under the
World Registration Rights Agreement, the Holders and any other holders entitled
to an equal priority with the Holders will bear such reductions on a pro rata
basis based on the number of shares held by each such Person, and (ii) such
holders agree to a holdback agreement on terms no less favorable to the Company
than set forth in the preceding sentence.
SECTION 4. Registration Expenses.
(a) All expenses incident to the Company's performance of
or compliance with its obligations under this Agreement (excluding underwriting
discounts, selling commissions and brokerage fees, which will be paid by the
selling Holders) will be paid by the Company, regardless of whether Registrable
Securities are sold pursuant to any Registration Statement or Shelf
Registration Statement, including, without limitation:
(i) all registration, filing and listing fees;
(ii) fees and expenses of compliance with securities or
blue sky laws (including, without limitation, the fees and
disbursements of counsel for the underwriters, if any, or selling
Holders in connection with blue sky and state securities
qualifications of Registrable Securities and determination of their
eligibility for investment under the laws of such jurisdictions as the
managing underwriter(s), if any, or the Required Holders of the
Registrable Securities covered by such Registration Statement or Shelf
Registration Statement may reasonably designate);
(iii) printing (including, without limitation, expenses
of printing or engraving certificates for the Registrable Securities
in a form eligible for deposit with Depository Trust Company and of
printing prospectuses), messenger, telephone and delivery expenses;
(iv) fees and disbursements of counsel for the Company
and, subject to Section 4(b), counsel for the selling Holders of the
Registrable Securities;
(v) fees and disbursements of all independent
certified public accountants of the Company (including, without
limitation, the expenses of any special audit and, in connection with
any underwritten offering, "cold
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<PAGE> 24
comfort" letters required by or incident to such performance);
(vi) Securities Act liability insurance if the Company
so desires or if the managing underwriters, if any, so require(s);
(vii) fees and expenses of other Persons (including
special experts) retained by the Company; and
(viii) fees and expenses associated with any NASD filing
required to be made in connection with any Registration Statement or
Shelf Registration Statement, including, if applicable, the fees and
expenses of any "qualified independent underwriter" (and its counsel)
that is required to be retained in accordance with the rules and
regulations of the NASD.
The Company will, in any event, pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the securities to
be registered on each securities exchange on which securities of the same class
are then listed or the qualification for trading of the securities to be
registered in each inter-dealer quotation system in which securities of the
same class are then traded, and rating agency fees.
(b) In connection with each Registration Statement or
Shelf Registration Statement required hereunder, the Company will reimburse the
Holders of Registrable Securities being registered pursuant to such
Registration Statement or Shelf Registration Statement for the reasonable fees
and disbursements of not more than one counsel chosen by the Required Holders
of the Registrable Securities being sold; the expense of any additional counsel
for the Holders shall be paid by the Holders.
(c) The term "Registration Expenses" shall mean the
expenses payable by the Company pursuant to the provisions of this Section 4.
SECTION 5. Conditions to Registration.
Each Holder's right to have Registrable Securities included in any
Registration Statement or Shelf Registration Statement filed by the Company in
accordance with the provisions of Section 2 or Section 3 shall be subject to
the following conditions:
(a) The Holders on whose behalf such Registrable
Securities are to be included shall be required to furnish the
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<PAGE> 25
Company in a timely manner with all information required by the applicable
rules and regulations of the SEC concerning the proposed method of sale or
other disposition of such securities, the identity of and compensation to be
paid to any proposed underwriters to be employed in connection therewith, and
such other information as may be reasonably required by the Company properly to
prepare and file such Registration Statement or Shelf Registration Statement in
accordance with applicable provisions of the Securities Act;
(b) If any such Holder desires to sell and distribute
Registrable Securities over a period of time, or from time to time, at then
prevailing market prices, then any such Holder shall execute and deliver to the
Company such written undertakings as the Company and its counsel may reasonably
require in order to assure full compliance with relevant provisions of the
Securities Act and the Exchange Act;
(c) In the case of any registration requested pursuant to
the provisions of Section 2, the offering price for any Registrable Securities
to be so registered shall be no less than for any securities of the same class
then to be registered for sale for the account of the Company or other security
holders, unless such Registrable Securities are to be offered from time to time
based on the prevailing market price;
(d) Upon receipt of any notice from the Company of the
happening of any event of the kind described in paragraph (xi) of Section 2(b)
or paragraph (xii) of Section 3(b), such Holder will forthwith discontinue
disposition of Registrable Securities until such Holder's receipt of the copies
of the supplemented Prospectus contemplated by such paragraph, or until it is
advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings
which are incorporated by reference in the Prospectus, and, if so directed by
the Company, such Holder will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice; and
(e) In the case of any underwritten offering on behalf of
the Holders of Registrable Securities, such Holders will enter into such
agreements (including underwriting agreements and lock-up agreements) as the
managing underwriters shall reasonably request and as are customary in similar
circumstances.
SECTION 6. Indemnification.
(a) Indemnification by the Company. In the event of the
registration of any Registrable Securities under the
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Securities Act pursuant to the provisions hereof, the Company will indemnify
and hold harmless the seller of such Registrable Securities, its partners,
directors, officers, employees and agents, each underwriter, broker and dealer,
if any, who participates in the offering or sale of such securities, and each
other Person, if any, who controls such seller or any such underwriter, broker
or dealer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each such Person being hereinafter sometimes
referred to as an "Indemnified Person", provided that for purposes of clauses
(b), (c) and (d) of this Section 6 "Indemnified Person" shall include the
Company, its partners, directors, officers, employees and agents, and each
other Person, if any who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act) from and
against any losses, claims, damages, liabilities or expenses, joint or several,
to which such indemnified Person may become subject under the Securities Act,
the Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained or incorporated by reference in any Registration Statement,
Shelf Registration Statement, Prospectus or Shelf Prospectus or any amendment
or supplement thereto, or any document incorporated by reference therein, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such Indemnified
Person for any legal or other expenses reasonably incurred by such Indemnified
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability (i) arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made or incorporated by
reference in the Registration Statement, Shelf Registration Statement,
Prospectus or Shelf Prospectus or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by such Indemnified Person for use in preparation thereof or (ii)
arises out of the use of any Prospectus or Shelf Prospectus by an Indemnified
Party after the Company has provided such Indemnified Party with the notice and
supplement referred to in Section 2(b)(xi) or Section 3(b)(xii) if such
Prospectus or Shelf Prospectus is the subject of such notice. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of such Indemnified Person and shall survive the transfer of such
Registrable Securities by such seller.
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(b) Indemnification by Holders of Registrable Securities.
In the event of the registration of any Registrable Securities under the
Securities Act pursuant to the provisions hereof, each Holder on whose behalf
such Registrable Securities shall have been registered will indemnify and hold
harmless each and every Indemnified Person against any losses, claims, damages
or liabilities, joint or several, to which such Indemnified Person may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained or incorporated by reference in any
Registration Statement, Shelf Registration Statement, Prospectus or Shelf
Prospectus or any amendment or supplement thereto or any document incorporated
by reference therein, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue statement
or alleged untrue statement or omission or alleged omission has been made or
incorporated therein in reliance upon and in conformity with written
information furnished to the Company by such Holder specifically stating that
it is for use in preparation thereof, and will reimburse each such Indemnified
Person for any legal and other expenses reasonably incurred by such Indemnified
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the liability of each
Holder hereunder shall be limited to the proceeds received by such Holder from
the sale of Registrable Securities covered by such Registration Statement or
Shelf Registration Statement.
(c) Procedure. Promptly after receipt by an Indemnified
Person of notice of the commencement of any action (including any governmental
investigation or inquiry), such Indemnified Person will, if such Indemnified
Person intends to make a claim in respect thereof against the party agreeing to
indemnify such Indemnified Person pursuant to paragraphs (a) or (b) hereof
(each such Person being hereinafter referred to as an "Indemnifying Person"),
give written notice to such Indemnifying Person of the commencement thereof,
but the omission so to notify the Indemnifying Person shall not relieve the
Indemnifying Person from any of its obligations pursuant to the provisions of
this Section 6 except to the extent that the Indemnifying Person is actually
prejudiced by such failure to give notice. In case any such action is brought
against any Indemnified Person and it notifies an Indemnifying Person of the
commencement thereof, the Indemnifying Person shall be entitled to participate
in, and to the extent that it may wish, jointly with any other Indemnifying
Person similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Person, and after notice from the
Indemnifying Person to such Indemnified Person, the Indemnifying Person shall
not, except as hereinafter
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provided, be responsible for any legal or other expenses subsequently incurred
by such Indemnified Person in connection with the defense thereof. No
Indemnifying Person will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Person of a release from all
liability in respect of such claim or litigation.
Such Indemnified Person shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall be the expense of such Indemnified
Person unless (a) the Indemnifying Person has agreed to pay such fees and
expenses or (b) the Indemnifying Person shall have failed to assume the defense
of such action or proceeding or has failed to employ counsel reasonably
satisfactory to such Indemnified Person in any such action or proceeding or (c)
the named parties to any such action or proceeding (including any impleaded
parties) include both such Indemnified Person and the Indemnifying Person and
such Indemnified Person shall have been advised by counsel that representation
of both parties by the same counsel would be inappropriate due to actual or
potential material differing interests between them (in which case, if such
Indemnified Person notifies the Indemnifying Person in writing that it elects
to employ separate counsel at the expense of the Indemnifying Person, the
Indemnifying Person shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Person). The Indemnifying
Person shall not be liable for any settlement of any such action or proceeding
effected without its written consent, which consent shall not unreasonably be
withheld, delayed or conditioned, but if settled with its written consent, or
if there is a final judgment for the plaintiff in any such action or
proceeding, the Company agrees to indemnify and hold harmless such Indemnified
Persons from and against any loss or liability by reason of such settlement or
judgment.
(d) Contribution. If the indemnification provided for in
this Section 6 is unavailable to a party that would have been an Indemnified
Person under this Section 6 in respect of any losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to herein,
then each party that would have been an Indemnifying Person thereunder shall,
in lieu of indemnifying such Indemnified Person, contribute to the amount paid
or payable by such Indemnified Person as a result of such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Person on the one hand and the Indemnified Person on the other in connection
with the statement or omission which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. The
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relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission of a material fact relates to information supplied by the
Indemnifying Person or the Indemnified Person and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. 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 Section 6(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with the investigation or defense of any action or claim. The Company and each
Holder of Registrable Securities agrees 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 this Section 6. Notwithstanding
the provisions of this Section 6(d), 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 sold by it exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged 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.
Indemnification or, if appropriate, contribution, similar to that
specified in the preceding provisions of this Section 6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
such securities under any federal or state law or regulation or governmental
authority other than the Securities Act.
In the event of any underwritten offering of Registrable Securities
under the Securities Act pursuant to the provisions of Section 2 or Section 3,
the Company and each Holder on whose behalf such Registrable Securities shall
have been registered agree to enter into an underwriting agreement, in standard
form, with the underwriters, which underwriting agreement may contain
additional provisions with respect to indemnification and contribution in lieu
thereof.
SECTION 7. Exchange Act Registration; Rule 144 Reporting.
The Company covenants and agrees that until such time as the Holders
no longer hold any Registrable Securities it will:
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(a) if required by law, maintain an effective
registration statement (containing such information and documents as the SEC
shall specify) with respect to the Common Stock of the Company under Section
12(g) of the Exchange Act;
(b) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the
reporting requirements of the Securities Act or the Exchange Act (even if the
Company subsequently ceases to be subject to such reporting requirements);
(c) file with the SEC in a timely manner all reports and
documents required of the Company under the Securities Act and the Exchange
Act;
(d) furnish to any Holder promptly upon request (i) a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (and any similar or successor rules) and of the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company (beginning after the Company becomes subject to
such reporting requirements), and (iii) such other reports and documents of the
Company and other information in the possession of or reasonably attainable by
the Company as such Holder may reasonably request in availing itself of any
rule or regulation of the SEC allowing such Holder to sell any such securities
without registration; and
(e) take such further action as any Holder of Registrable
Securities may from time to time reasonably request 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.
The Company represents and warrants that such registration statement
or any information, document or report filed with the SEC in connection
therewith or any information so made public shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements contained therein
not misleading. The Company agrees to indemnify and hold harmless (or to the
extent the same is not enforceable, make contribution to) the Holders, their
partners, officers, directors, employees and agents, each broker, dealer or
underwriter (within the meaning of the Securities Act) acting for any Holder in
connection with any offering or sale by such Holder of Registrable Securities
or any Person controlling (within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act) such Holder and any such
broker, dealer or underwriter from and against any and
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all losses, claims, damages, liabilities or expenses (or actions in respect
thereof) arising out of or resulting from any breach of the foregoing
representation or warranty, all on terms and conditions comparable to those set
forth in Section 6.
SECTION 8. Limitation on Registration Rights of Others.
The Company represents and warrants that, except as set forth on
Schedule I to this Agreement, it has not granted to any Person the right to
request or require the Company to register any securities issued by the
Company. The Company covenants and agrees that after the date hereof, so long
as any Holder holds any Warrant Securities, Term Notes, Series B Special
Preferred Stock or Common Stock issuable upon conversion of Series B Special
Preferred Stock, the Company will not, directly or indirectly, grant to any
Person (except as provided in Section 3(a) hereof) or agree to or otherwise
become obligated in respect of (a) any registration rights of securities of the
Company upon the demand of any Person (including any shelf registration)
without the prior written consent of the Required Holders; or (b) rights of
registration in the nature or substantially in the nature of those set forth in
Section 2 unless such rights are expressly subject and subordinated to the
rights of registration of the Holders pursuant to Section 2 hereof on terms
reasonably satisfactory to the Required Holders.
SECTION 9. Mergers, etc.
In addition to any other restrictions on mergers, consolidations and
reorganizations contained in the Credit Agreement, the Warrant Agreement or in
the certificate of incorporation, by-laws or agreements of the Company, the
Company covenants and agrees that it shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation and in which the Holders shall not have had the
right to receive cash for all their Registrable Securities, unless the
surviving corporation shall, prior to such merger, consolidation or
reorganization, agree in a writing satisfactory in form, scope and substance to
the Required Holders to assume the obligations of the Company under this
Agreement, and for such purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which such Holders would
be entitled to receive in exchange for Registrable Securities pursuant to any
such merger, consolidation or reorganization.
If, and as often as, there are any changes in the Registrable
Securities by way of stock split, stock dividend, combination or
classification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustments shall be made
in the provisions hereof as may be
29
<PAGE> 32
required, so that the rights and privileges granted hereby shall continue with
respect to the Registrable Securities as so changed.
SECTION 10. Notices, etc.
All notices, consents, approvals, agreements and other communications
provided hereunder shall be in writing or by telex or telecopy and shall be
sufficiently given to the Purchasers, the Holders and the Company if addressed
or delivered to them at the following addresses:
If to ING: Internationale Nederlanden
(U.S.) Capital Corporation
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: Internationale Nederlanden
(U.S.) Capital Corporation
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Attention: James W. Latimer
Telecopier No.: (770) 951-1005
and to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr., Esq.
Telecopier No.: (404) 572-5100
If to Cerberus: Cerberus Partners, L.P.
950 Third Avenue
20th Floor
New York, New York 10022
Attention: Mr. Seth P. Plattus
Telecopier No.: (212) 421-2847
with a copy to: Lowenstein, Sandler, Kohl,
Fisher & Boylan
65 Livingston Avenue
Roseland, New Jersey 07068-1791
Attention: Robert G. Minion, Esq.
Telecopier No.: (201) 992-5820
If to any other Holder: At its last known address appearing on the
books of the Company maintained for such
purpose
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If to the Company: PhoneTel Technologies, Inc.
450 Statler Office Tower
41127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chief Executive Officer
Telecopier No.: (216) 241-2574
with a copy to: Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022-3897
Attention: Stephen M. Banker, Esq.
Telecopier No.: (212) 735-2000
or at any such other address as any party may designate to any other party by
written notice.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when received
if deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when transmission is verified, if telecopied; and on the next business
day, if timely delivered to an air courier guaranteeing overnight delivery.
SECTION 11. Entire Agreement.
The parties hereto agree that this Agreement and the agreements
specifically referred to in Section 33 of the Warrant Agreement constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings between them as to such
subject matter; and there are no restrictions, agreements, arrangements, oral
or written, between any or all of the parties relating to the subject matter
hereof which are not fully expressed or referred to herein or therein.
SECTION 12. Waivers and Further Agreements.
Any waiver of any terms or conditions of this Agreement shall not
operate as a waiver of any other breach of such terms or conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof;
provided, however, that no such written waiver unless it by its own terms
explicitly provides to the contrary, shall be construed to effect a continuing
waiver of the provision being waived and no such waiver in any instance shall
constitute a waiver in any other instance or for any other purpose or impair
the right of the party against whom such waiver is claimed in all other
instances or for all other purposes to require full compliance with such
provision. Each of the parties hereto agrees to execute all such further
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<PAGE> 34
instruments and documents and to take all such further action as the other
parties may reasonably require in order to effectuate the terms and purposes of
this Agreement.
SECTION 13. Amendments.
This Agreement may not be amended nor shall any waiver, change,
modification, consent or discharge be effected except by an instrument in
writing executed by or on behalf of the party or parties against whom
enforcement of any amendment, waiver, change, modification, consent or
discharge is sought; provided, however, that any waiver sought from the Holders
of any provision of this Agreement which affects the Holders generally, and any
action required to be taken by the Holders as a group pursuant to this
Agreement, shall be given or taken by the Required Holders, and any such waiver
or action so given or taken shall be binding on all Holders. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or a waiver of the
same right or remedy on any subsequent occasion.
SECTION 14. Assignment; Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, legal
representatives, successors and permitted assigns, including, without
limitation, any Holders, from time to time of the Registrable Securities.
Anything in this Agreement to the contrary notwithstanding, the term "Holders"
as used in this Agreement shall be deemed to include the registered Holders
from time to time of the Warrant Securities, the Term Notes, the Series B
Special Preferred Stock and Common Stock issuable upon conversion of the Series
B Special Preferred Stock.
SECTION 15. Severability.
If any provision of this Agreement shall be held or deemed to be, or
shall in fact be, invalid, inoperative or unenforceable as applied to any
particular case in any jurisdiction or jurisdictions, or in all jurisdictions
or in all cases, because any provision conflicts with any constitution,
statute, rule or public policy, or for any other reason, such circumstance
shall not have the effect of rendering the provision or provisions in question,
invalid, inoperative or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to the extent that such other
provisions are not themselves actually in conflict with such constitution,
statute, rule or public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case
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<PAGE> 35
as if such invalid, inoperative or unenforceable provision had never been
contained herein and such provision reformed so that it would be valid,
operative and enforceable to the maximum extent permitted in such jurisdiction
or in such case.
SECTION 16. Counterparts.
This Agreement may be executed in two or more counterparts (each of
which need not be executed by each of the parties), each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument, and in pleading or proving any provision of this Agreement, it
shall not be necessary to produce more than one such counterpart.
SECTION 17. Section Headings.
The headings contained in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
SECTION 18. Gender; Usage.
Whenever used herein the singular number shall include the plural, the
plural shall include the singular, and the use of any gender shall include all
genders. The words "hereof," "herein" and "hereunder," and words of similar
import, when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement.
SECTION 19. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK OTHER THAN THE CONFLICTS OF
LAWS PRINCIPLES THEREOF.
SECTION 20. Termination.
The rights of any Holder under Sections 2 and 3 of this Agreement
shall terminate as to any Registrable Securities when such Registrable
Securities have been effectively registered under the Securities Act and sold
pursuant to a Registration Statement or Shelf Registration Statement covering
such Registrable Securities. The indemnification and contribution provisions
of Sections 6 and 7 shall survive any termination of this Agreement.
SECTION 21. Expenses.
The Company shall be obligated to pay to the Holders, on demand, all
costs and expenses (including, without limitation, court costs and attorneys'
fees and expenses and interest to the extent permitted by applicable law on
overdue amounts) paid or
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<PAGE> 36
incurred in collecting any sums due from, or enforcing any other obligations
of, the Company.
SECTION 22. Specific Performance.
The Company recognizes that the rights of the Holders under this
Agreement are unique and, accordingly, the Holders shall, in addition to such
other remedies as may be available to any of them at law or in equity, have the
right to enforce their rights hereunder by actions for injunctive relief and
specific performance to the extent permitted by law. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at
law would be adequate. This Agreement is not intended to limit or abridge any
rights of the Holders which may exist apart from this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter G. Graf
--------------------------------
Peter G. Graf
Chairman and
Chief Executive Officer
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By: /s/ James W. Latimer
--------------------------------
James W. Latimer
Managing Director
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<PAGE> 37
CERBERUS PARTNERS, L.P.
By: Cerberus Associates, L.P.,
its general partner
By: /s/ Stephen Feinberg
---------------------------
Stephen Feinberg
General Partner
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<PAGE> 1
Internationale Nederlanden (U.S.) Cerberus Partners, L.P.
Capital Corporation 950 Third Avenue
200 Galleria Parkway, N.W. 20th Floor
Suite #950 New York, New York 10022
Atlanta, Georgia 30339
Ladies and Gentlemen:
Reference is hereby made to the Warrant Purchase Agreement (the
"Warrant Agreement") entered into as of March 15, 1996 by and between PhoneTel
Technologies, Inc., an Ohio corporation, (the "Company"), Internationale
Nederlanden (U.S.) Capital Corporation, a Delaware corporation ("ING"), and
Cerberus Partners, L.P., a Delaware limited partnership ("Cerberus", and
together with ING, the "Purchasers"), whereby in connection with the
Purchasers' initial extensions of credit to the Company under the Term Loan,
the Revolving A Loan Commitment and the Revolving B Loan Commitment as set
forth in the Credit Agreement, the Company has agreed to sell to each of ING
and Cerberus, and ING and Cerberus have each agreed to purchase from the
Company, warrants to purchase 204,824 shares of Series A Special Preferred
Stock (the "Warrants"), which is intended by the parties hereto to represent
the right of each of ING and Cerberus, upon exercise of the Warrants, to
acquire 15.12% of the outstanding shares of common stock of the Company on a
fully-diluted basis as of the Closing Date (but without taking into account the
Term Notes and the Series B Preferred Stock). Furthermore, in the event the
Company shall borrow in excess of One Million Five Hundred Thousand Dollars
($1,500,000) under the Revolving B Loan Commitment, the Company shall issue
Warrants to each of ING and Cerberus each of ING and Cerberus in an amount
equal to the amount necessary to result in each of ING and Cerberus having the
right to acquire an additional 0.31% of the outstanding shares of common stock
of the Company on a fully-diluted basis as of the Closing Date (but without
taking into account the Term Notes and the Series B Preferred Stock).
The Company hereby represents that it has used its best efforts to
determine that the number of Warrants issued or to be issued to each of ING and
Cereberus in the instances described above shall represent the percentage of
the outstanding shares of common stock of the Company, the Purchasers are
entitled to receive as described above. In the event that it is determined
after the Closing that the number of Warrants issued to the Purchasers shall
not represent the percentage of the outstanding
<PAGE> 2
Internationale Nederlanden (U.S.)
Capital Corporation
Cerberus Partners, L.P.
March , 1996
Page 2
shares of common stock of the Company that the parties intend that the
Purchasers are entitled to receive as set forth above, then the parties hereby
agree that (i) if the number of Warrants issued to the Purchasers was
insufficient to satisfy the intended percentage interests described above, the
Company shall issue an additional number of Warrants to make the number of
Warrants received by the Purchasers equal to the intended percentages or (ii)
if the number of Warrants issued to the Purchasers shall exceed the percentage
interest described above, the Purchasers shall surrender to the Company the
number of excess Warrants that the Purchasers received.
Capitalized terms used herein shall have their respective meanings
ascribed to them in the Warrant Agreement unless otherwise defined herein.
Very truly yours,
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter Graf
------------------------
Name: Peter Graf
Title: Chairman
Agreed and Accepted:
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/
----------------------------
Name:
Title:
CERBERUS PARTNERS, L.P.
By: CERBERUS ASSOCIATES, L.P., Its General Partner
By: /s/ Stephen Feinberg
-----------------------
Name: Stephen Feinberg
Title: General Partner
