<PAGE> 1
UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report
0-16715
----------------------
Commission File Number
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
September 13, 1996
---------------------------------
Date of Report
(Date of Earliest Event Reported)
PHONETEL TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1462198
------------------------ ---------------------------
(State of Incorporation) (I.R.S. Identification No.)
1127 Euclid Avenue
650 Statler Office Tower
Cleveland, Ohio 44115-1601
---------------------------------------------------
Address and zip code of principal executive offices
(216) 241-2555
-----------------------------
Registrant's telephone number
page 1 of 5 pages
<PAGE> 2
PART I
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September, 13, 1996, PhoneTel Technologies., Inc. the Registrant (or
"Company") completed the acquisition of certain assets of ACI-HDT Supply
Company, Amtel Communications Services, Amtel Communications Correctional
Facilities, Amtel Communications, Inc. and Amtel Communications Payphones, Inc.
(all California corporations and Debtors-in-Possession) collectively referred
to as "Amtel" for the purchase of approximately 8,435 telephones, of which
7,335 are installed telephones, for a purchase price consisting of: (i)
$7,000,000 in cash; (ii) 2,162,163 shares of the Company's Common Stock, valued
at the average of the BID and ASK (as reported by The NASDAQ Stock Market
("NASDAQ") on September 13, 1996, less an unregistered and block discount and
for the effects of net dilution of 20% as determined by Key Trust Company of
Ohio, N.A. ("Key Trust")) $4,637,840, or $2.15 per share; and (iii)
approximately $675,122 in related acquisition expenses; and
On September 16, 1996, the Company completed the acquisition of Payphones of
America, Inc. ("POA"), pursuant to which the Company acquired approximately
3,115 installed pay telephones for a purchase price, consisting of: (i)
$500,000 in cash; (ii) 166,666 unregistered shares of the Company's Common
Stock, valued at the average of the BID and ASK (as reported by NASDAQ on
September 16, 1996, less an unregistered and block discount and for the effects
of net dilution of 30.5% as determined by Key Trust) $311,665, or $1.87 per
share; (iii) assumption of capital lease obligations of $7,750,000; (iv) notes
payable to the selling shareholders of POA, $3,634,114; (v) assumption of other
debt, $234,890; (vi) two five year non-competition and consulting agreements
with two of the selling shareholders, $307,264; and (vii) approximately
$166,748 in related acquisition expenses.
The Amtel and POA acquisitions will be recorded as purchases and the
differences between the aggregate fair values of the tangibles assets acquired
and the total purchase price, $15,865,835, will be recorded as acquired pay
telephone location contracts and will be amortized over the estimate average
remaining life of the further acquired location contracts (54 months for
Amtel's contracts and 72 months for POA's contracts).
ITEM 5. OTHER EVENTS
CHANGES IN LONG-TERM DEBT
On September 13, 1996, concurrent with the acquisitions of Amtel and POA,
Internationale Nederlanden (U.S.) Capital Corporation and Cerberus Partners,
L.P. (collectively known as "Lenders") further amended the $37,250,000 Credit
Facility the Company entered into on March 15, 1996, wherein the Lenders agreed
to increase the total amount available under the Credit Facility to
$41,000,000. On September 13, 1996, the Company borrowed an additional
$8,776,546 under the amended Credit Facility to complete the Amtel and POA
acquisitions, pay related expenses, and other obligations of the Company. There
are no additional amounts available under the Credit Facility.
page 2 of 5 pages
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired:
1. Amtel Communications, Inc. and Combined Companies
(Debtor-in-Possession)
Financial Statements for the Six Months ended
June 30, 1996 and for the Year Ended December 31, 1995
2. Amtel Communications, Inc. and Combined Companies
(Debtor-in-Possession)
Combined Statements of Revenues and Direct Operating Expenses
for the Three Months Ended December 31, 1994
3. Payphones of America, Inc. and Subsidiary
Financial Statements for the Years Ended December 31, 1995 and 1994
4. Payphones of America, Inc. and Subsidiary
Unaudited Financial Statements:
Consolidated Balance Sheet as of June 30, 1995 and 1996
Consolidated Income Statement for the Six Months Ended June 30,
1995 and 1996
Consolidated Cash Flow Statement for the Six Months Ended June
30, 1995 and 1996
(b) Pro Forma financial information:
1. Introduction to Unaudited Pro Forma Combined Condensed Financial
Information
2. Amtel Communications, Inc. and Combined Companies
(Debtor-in-Possession), Payphones of America, Inc. and Subsidiary, and
PhoneTel Technologies, Inc. - Unaudited Pro Forma Combined Condensed
Balance Sheet at June 30, 1996
3. Amtel Communications, Inc. and Combined Companies
(Debtor-in-Possession), Payphones of America, Inc. and Subsidiary,
International Pay Phones, Inc. (a Tennessee company), International
Pay Phones, Inc. (a South Carolina Company), Paramount Communications
Systems, Inc., and PhoneTel Technologies, Inc. - Unaudited Pro Forma
Combined Condensed Statement of Operations for the Six Months Ended
June 30, 1996
4. Amtel Communications, Inc. and Combined Companies
(Debtor-in-Possession), Payphones of America, Inc. and Subsidiary,
International Pay Phones, Inc. (a Tennessee company), International
Pay Phones, Inc. (a South Carolina Company), Paramount Communications
Systems, Inc., World Communications, Inc., Public Telephone
Corporation, and PhoneTel Technologies, Inc. - Unaudited Pro Forma
Combined Condensed Statement of Operations for the Year Ended
December 31, 1995
5. Amtel Communications, Inc. and Combined Companies
(Debtor-in-Possession), Payphones of America, Inc. and Subsidiary,
International Pay Phones, Inc. (a Tennessee company), International
Pay Phones, Inc. (a South Carolina Company), Paramount Communications
Systems, Inc., World Communications, Inc., Public Telephone
Corporation, and PhoneTel Technologies, Inc. - Unaudited Pro Forma
Combined Condensed Financial Information Footnotes to Financial
Information
page 3 of 5 pages
<PAGE> 4
(c) Other exhibits
1. Asset Purchase Agreement among PhoneTel Technologies, Inc., an Ohio
Corporation As Buyer and ACI-HDT Supply Company, a California
corporation, Amtel Communications Services, a California corporation,
Amtel Communications Correctional Facilities, a California
corporation, Amtel Communication, Inc., a California corporation,
Amtel Communications, Inc., a California corporation, Amtel
Communications Payphones, Inc., a California corporation, as Seller,
dated June 26, 1996, and all amendments thereto
2. Amended and Restated Share Purchase Agreement among PhoneTel III,
Inc., Payphones of America, Inc. and All of the Shareholders of
Payphones of America, Inc., dated August 1, 1996, and all amendments
thereto
3. Second Amendment to Credit Agreement dated June __, 1996, among
PhoneTel Technologies, Inc. and Internationale Nederlanden (U.S.)
Capital Corporation and Cerberus Partners, L.P.
4. Third Amendment to Credit Agreement dated August 1, 1996, among
PhoneTel Technologies, Inc. and Internationale Nederlanden (U.S.)
Capital Corporation and Cerberus Partners, L.P.
5. Fourth Amendment to Credit Agreement dated September 13, 1996, among
PhoneTel Technologies, Inc. and Internationale Nederlanden (U.S.)
Capital Corporation and Cerberus Partners, L.P.
6. Fifth Amendment to Credit Agreement dated September 13, 1996, among
PhoneTel Technologies, Inc. and Internationale Nederlanden (U.S.)
Capital Corporation and Cerberus Partners, L.P.
page 4 of 5 pages
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PhoneTel Technologies, Inc.
(Registrant)
Date: September 27, 1996 By: /s/ Peter G. Graf
------------------------------
Peter G. Graf
Chairman of the Board and
Chief Executive Officer
page 5 of 5 pages
<PAGE> 1
EXHIBIT (a) 1.
<PAGE> 2
AMTEL COMMUNICATIONS, INC.
AND COMBINED COMPANIES
(Debtor-in-Possession)
FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 and
FOR THE YEAR ENDED DECEMBER 31, 1995
<PAGE> 3
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report....................................................................................1
Financial Statements:
Combined Balance Sheets as of June 30, 1996 and
December 31, 1995........................................................................................2
Combined Statements of Operations for the six months ended
June 30, 1996 and the year ended December 31, 1995.......................................................3
Combined Statements of Changes in Stockholder's Deficit for the six months
ended June 30, 1996 and the year ended
December 31, 1995........................................................................................4
Combined Statements of Cash Flows for the six months ended
June 30, 1996 and the year ended December 31, 1995.......................................................5
Notes to Combined Financial Statements..................................................................6-11
</TABLE>
<PAGE> 4
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS OF
AMTEL COMMUNICATIONS, INC:
We have audited the accompanying combined balance sheets of Amtel
Communications, Inc., and combined Companies (Note B) as of June 30, 1996 and
December 31, 1995, and the related combined statements of operations,
stockholder's deficit, and cash flows for the periods then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amtel Communications, Inc., and
combined Companies (Note B) as of June 30, 1996 and December 31, 1995, and the
results of their operations and their cash flows for the periods then ended in
conformity with generally accepted accounting principles.
The accompanying combined financial statements have been prepared assuming that
the Company will continue as a going concern. As described in Note A, on August
3, 1995, the Company filed voluntary petitions for relief under Chapter 11 of
Title II of the United States Bankruptcy Code and was authorized to continue
managing and operating the business as a debtor in possession subject to the
control and supervision of the Bankruptcy Court. Those conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Harlan & Boettger
San Diego, California
August 23, 1996
<PAGE> 5
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMBINE COMPANIES
(DEBTOR-IN-POSSESSION)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 422,566 $ 616,974
Accounts receivable 527,883 791,238
Inventory 2,001,072 1,874,290
Other 137,553 180,280
------------ ------------
TOTAL CURRENT ASSETS 3,089,074 3,462,782
------------ ------------
FIXED ASSETS (Note C)
Property and equipment, net 462,813 1,060,119
Deferred site costs, net 9,812,154 10,359,692
------------ ------------
TOTAL FIXED ASSETS 10,274,967 11,419,811
------------ ------------
OTHER ASSETS 294,619 289,216
------------ ------------
TOTAL ASSETS $ 13,658,660 $ 15,171,809
============ ============
POST-PETITION LIABILITIES
Accounts payable - trade $ 677,425 $ 1,010,211
Accounts payable - bankruptcy 1,253,555 539,942
Accrued expenses 767,661 709,518
------------ ------------
TOTAL POST-PETITION LIABILITIES 2,698,641 2,259,671
PRE-PETITION LIABILITIES
SUBJECT TO COMPROMISE (Note D)
Accounts payable - trade 6,123,480 6,123,480
Accrued sales tax 1,615,671 1,615,671
Notes payable 7,774,805 7,774,805
Lessor liabilities 65,085,000 65,085,000
------------ ------------
TOTAL PRE-PETITION LIABILITIES 80,598,956 80,598,956
------------ ------------
STOCKHOLDER'S DEFICIT
Common stock, 1,000,000 shares
authorized, $0.01 par value, 400,000 shares
authorized, no par value, 50,000 shares issued
and outstanding 50,000 50,000
Retained deficit (69,688,937) (67,736,818)
------------ ------------
TOTAL STOCKHOLDER'S DEFICIT (69,638,937) (67,686,818)
------------ ------------
TOTAL LIABILITIES & DEFICIT $ 13,658,660 $ 15,171,809
============ ============
<FN>
See accompanying notes to the financial statements.
</TABLE>
2
<PAGE> 6
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMBINED COMPANIES
(DEBTOR-IN-POSSESSION)
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the six For the year
months ended ended
June 30, 1996 December 31,1995
------------- ----------------
<S> <C> <C>
REVENUE
Coin $ 4,696,852 $ 9,689,179
LD Commissions 1,406,593 2,848,753
Interstate 578,681 761,181
Intralata 460,601 1,849,477
Other 62,095 1,910,550
----------- ------------
TOTAL REVENUE 7,204,822 17,059,140
----------- ------------
COSTS AND EXPENSES
Line charges 2,428,704 6,862,015
Location commissions 1,639,127 3,921,741
Other operating expenses 321,947 2,651,734
Selling, general and administrative 2,231,970 15,103,091
Depreciation and amortization 777,823 1,621,029
Other - 67,356
----------- ------------
LOSS FROM OPERATIONS BEFORE OTHER
EXPENSES AND REORGANIZATION ITEMS (194,749) (13,167,826)
----------- ------------
OTHER
Interest income (1,606) -
Interest expense 6,077 7,429,502
Loss on asset disposal 453,898 429,967
Other expenses 505,113 -
----------- ------------
LOSS BEFORE REORGANIZATION ITEMS (1,158,231) (21,027,295)
REORGANIZATION ITEMS (Note E)
Professional fees 721,277 539,942
Other 68,611 -
----------- ------------
LOSS BEFORE INCOME TAXES (1,948,119) (21,567,237)
INCOME TAXES (Note F) 4,000 4,000
----------- ------------
NET LOSS $(1,952,119) $(21,571,237)
=========== ============
<FN>
See accompanying notes to the financial statements.
</TABLE>
3
<PAGE> 7
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMBINED COMPANIES
(DEBTOR-IN-POSSESSION)
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S DEFICIT
<TABLE>
<CAPTION>
Common stock Total
------------------------------------- Retained Stockholder's
Shares Amount Deficit Deficit
-------- --------- ------------ -------------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994 50,000 $ 50,000 $(46,165,581) $(46,115,581)
Net loss - - (21,571,237) (21,571,237)
------ --------- ------------ ------------
DECEMBER 31, 1995 50,000 50,000 (67,736,818) (67,686,818)
Net loss - - (1,952,119) (1,952,119)
------ --------- ------------ ------------
JUNE 30, 1996 50,000 $ 50,000 $(69,688,937) $(69,638,937)
====== ========= ============ =============
<FN>
See accompanying notes to the financial statements.
</TABLE>
4
<PAGE> 8
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMBINED COMPANIES
(DEBTOR-IN-POSSESSION)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,952,119) $ (21,571,237)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 777,823 1,621,029
Loss on disposal of property 453,898 429,966
Non-cash reorganization items 713,613 539,942
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 263,355 50,449
Inventory (126,782) (16,077)
Deposits (5,401) (140,157)
Other assets 42,726 (175,612)
Increase (decrease) in:
Accounts payable (332,786) 2,426,573
Accrued expenses 58,143 2,325,189
Notes payable - 4,556,207
------------ -------------
NET CASH USED IN OPERATING ACTIVITIES (107,530) (9,953,728)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (103,518) (64,151)
Proceeds from sale of property 147,635 -
Expenditures for deferred site costs (130,995) (2,866,920)
------------ -------------
NET CASH USED IN INVESTING ACTIVITIES (86,878) (2,931,071)
------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital lease obligations - (76,148)
Proceeds from lessor liabilities - 13,209,000
------------ -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES - 13,132,852
NET INCREASE (DECREASE) IN CASH (194,408) 248,053
CASH, BEGINNING OF PERIOD 616,974 368,921
------------ -------------
CASH, END OF PERIOD $ 422,566 $ 616,974
============ =============
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE> 9
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMPANIES
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS
A. REORGANIZATION AND LEGAL MATTERS:
Amtel Communications, Inc. and its combined companies (the "Company")
filed voluntary petitions for relief under Chapter 11 of Title II of
the United States Bankruptcy Code (the "Code") on August 3, 1995 (the
"petition date") administratively consolidated under Case No.
95-08253-A11. The Company is currently operating its business as a
debtor-in-possession under the jurisdiction of the United States
Bankruptcy Court for the Southern District of California. The
Company's liabilities as of the petition date are generally subject to
settlement in a plan of reorganization, which must be voted on by
certain of its creditors and confirmed by the Court. Until a
reorganization plan has been confirmed, the Company is prevented from
making payments on pre-petition debt unless permitted by the Code or
approved by the Court. Certain contracts existing at the petition date
have been rejected or assumed with the approval of the Court. The
Company continues to review all other unexpired pre-petition executory
contracts to determine whether they should be assumed or rejected.
Parties affected by the rejection of contracts and leases may file
claims against the Company.
The combined financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates
continuity of operations and the realization of assets and the
satisfaction of liabilities in the normal course of business. The
Chapter 11 filings, the Company's leveraged financial structure, and
recurring net losses resulting in a deficit in stockholder's equity,
raise substantial doubt about its ability to continue as a going
concern. A plan of reorganization may materially change the amounts
reported in the consolidated financial statements (which do not give
effect to adjustments to the carrying values of assets and liabilities
which may be necessary as a consequence of a plan of reorganization).
The continuation of the Company's business as a going concern is
contingent upon, among other things, the ability to (1) formulate a
plan of reorganization that will be confirmed by the Court, (2)
achieve satisfactory levels of future profitable operations, (3)
maintain adequate financing, and (4) provide sufficient cash from
operations to meet future obligations.
The Company has commenced actions against various parties relating to
the management of the Company. These actions seek to avoid or
subordinate certain obligations incurred by the Company and to recover
certain payments made by or on behalf of the Company in connection
with its operations. The Company has also filed actions against
several entities seeking avoidance and recovery of certain transfers
of interests of the Company in property alleged to be preferences
under section 547(b) of the Code. The ultimate outcome of these
actions and the potential recoveries, if any, resulting from the
resolution of these actions is unknown at this time and, accordingly,
no provision for any amounts has been recorded in these combined
financial statements.
6
<PAGE> 10
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMPANIES
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF COMBINATION
The combined financial statements include the accounts of Amtel
Communications, Inc., Amtel Communications Payphones, Inc., Amtel
Communications Services, Inc., Amtel Communications Correctional
Facilities, Inc. and ACI-HDT Supply Company. The five entities are all
owned 100% by the same individual. Collectively, the five entities will
be referred to as "the Company". Material intercompany transactions and
balances have been eliminated.
CASH
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less and money market funds to be cash equivalents.
INVENTORY
Inventory consists primarily of pay telephones, pedestals, and
enclosures to be installed in the Company's business locations.
Inventory is stated at the lower of cost or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated on the
straight-line basis over estimated useful lives of 3-5 years.
DEFERRED SITE COSTS
Deferred site costs consist of pay telephones and related components
and installation costs necessary to make the pay phone ready for
operation. Costs are being amortized on the straight-line method over
estimated useful lives of 8 years.
REVENUE RECOGNITION
Revenue is recognized when it is earned with the exception of coin
revenue, which is recognized when it is collected.
7
<PAGE> 11
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMPANIES
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES
The Company provides for federal and state income taxes currently
payable as well as for those deferred because of timing differences
between reporting income and expenses for financial statement purposes
and income and expenses for tax purposes.
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes".
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Although these estimates are based
on management's knowledge of current events and actions it may
undertake in the future, they may ultimately differ from actual
results.
C. FIXED ASSETS:
Included in fixed assets are property and equipment (furniture,
fixtures, and computers) and deferred site costs (pay phones, housing
and installation costs) both of which are carried at cost.
Property and equipment and deferred site costs are summarized as
follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Property and equipment $ 989,108 $ 1,898,564
Accumulated depreciation (526,295) (838,446)
------------ ------------
Net $ 462,813 $ 1,060,118
============ ============
Deferred site costs $ 13,284,000 $ 13,153,005
Accumulated amortization (3,471,849) (2,793,313)
------------ ------------
Net $ 9,812,151 $ 10,359,692
============ ============
</TABLE>
8
<PAGE> 12
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMPANIES
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
D. PRE-PETITION LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION
PROCEEDINGS:
Pre-petition liabilities consist of secured and unsecured debt, all of
which are subject to compromise under the proposed plan of
reorganization. Certain inventory was returned to the parties claiming
a secured interest in the asset at or around the petition filing date.
The claimed secured claims are classified as subject to compromise as
the value of the collateral is less than the corresponding obligation.
Pre-petition liabilities at June 30, 1996 and December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
---------- ------------
<S> <C> <C>
Accounts payable $ 6,123,480 $ 6,123,480
Accrued state sales tax 1,615,671 1,615,671
Secured notes payable 7,774,805 7,774,805
Lessor liabilities 65,085,000 65,085,000
----------- -----------
$80,598,956 $80,598,956
=========== ===========
</TABLE>
A plan of reorganization may materially change the amount and terms of
these pre-petition liabilities.
Lessor liability consists of funds borrowed from independent third
parties, under which the Company agreed to sell, lease-back, install
and maintain, a pay telephone for an initial investment of $3,000 -
$3,600 per pay telephone. The Company agreed to pay $51 per month per
phone, for a five year period and then return the initial investment to
the investors. Investors had the right to have their investment
returned at any time within the five year period for a nominal
surrender fee. These transactions have been accounted for as financing
transactions and payments made by the Company have been recorded as
interest expense in the statement of operations.
Payments to investors for the six months ended June 30, 1996 and the
year ended December 31, 1995 were approximately $0 and $6,762,000,
respectively.
As of the petition date, in accordance with current accounting
pronouncements, the Company discontinued accruing interest on its
pre-petition debt obligations. If such interest had continued to be
accrued, interest expense for the first six months of 1996 and the last
five months of 1995 would have been $457,628 and $379,351,
respectively. Interest expense associated with the lessor liability is
not reflected in these accruals as the obligations are not represented
by formal notes.
9
<PAGE> 13
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMPANIES
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
D. PRE-PETITION LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION
PROCEEDINGS (CONTINUED):
In conjunction with the Chapter 11 case, there are differences between
claims filed by potential creditors and amounts recorded by the
Company. These differences will be resolved by negotiated agreement
between the Company and the claimant or by the Court. Additional claims
may arise in conjunction with the termination of contractual
obligations related to executory contracts and leases. As a result,
recorded amounts may be adjusted but the Company believes that any such
adjustments will not be material.
E. REORGANIZATION ITEMS:
Reorganization items represent expenses resulting from the
reorganization and restructuring of the business. Since these expenses
do not relate to the Company's normal operations they are reported
separately on the statement of operations.
F. INCOME TAXES:
As discussed in Note B, the Company adopted SFAS 109, "Accounting for
Income Taxes". SFAS 109 requires the use of the balance sheet method of
accounting for income taxes. Under this method, a deferred tax asset or
liability represents the tax effect of temporary differences between
financial statement and tax bases of assets and liabilities and is
measured using the latest enacted tax rates.
The provision for income taxes for the six months ended June 30, 1996
and the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Current provision $ 4,000 $ 4,000
======= =======
</TABLE>
The Company realized substantial net operating losses for the six
months ended June 30, 1996 and the year ended December 31, 1995 as
well as in prior periods. Calculation of the temporary differences
between financial statement and tax bases of assets and liabilities is
complicated by the fact the Company has not filed tax returns since
1993. A valuation reserve has been established equal to the potential
tax benefit that could result from the use of the net operating losses
for these periods since there is reasonable doubt the Company can
generate income to utilize these losses.
<PAGE> 14
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMPANIES
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
G. COMMITMENTS:
The Company leases building space for its six branches, including
warehouse facilities in Seattle, Washington; Denver, Colorado;
Portland, Oregon; Hayward, California; Los Angeles, California; and
its corporate headquarters in San Diego, California. The leases have
expiration dates ranging from September, 1996 to October, 1998. The
agreements call for a cumulative annual base rent of $246,336.
Net future minimum rental payments required under this lease as of
June 30, 1996 are as follows:
<TABLE>
<CAPTION>
Years ended
June 30,
-----------
<S> <C>
1997 $ 209,461
1998 113,040
1999 33,600
2000 -
2001 -
---------
$ 356,101
=========
</TABLE>
Total rent expense charged to operations for the six months ended June
30, 1996 and the year ended December 31, 1995 was $204,227 and
$544,193, respectively.
H. PROPOSED PLAN OF REORGANIZATION:
During the six months ended June 30, 1996, the Company evaluated its
long-term market strategies with the goal of reducing expenses and
improving overall operating results. As a result, the Company entered
into an asset purchase agreement with PhoneTel Technologies, Inc. (an
Ohio Corporation) ("PhoneTel") dated June 26, 1996 wherein the Company
will sell substantially all of its pay phone operating assets for cash
and stock of PhoneTel totaling $13,000,000 ($7,000,000 cash and
$6,000,000 PhoneTel stock). In July, 1996 PhoneTel made a non
refundable deposit of $1,300,000 to open escrow for the purchase of
these assets.
11
<PAGE> 1
EXHIBIT (a) 2.
<PAGE> 2
AMTEL COMMUNICATIONS, INC.
AND COMBINED COMPANIES
(Debtor-in-Possession)
COMBINED STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994
<PAGE> 3
INDEX TO COMBINED STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report....................................................................................1
Combined Statement of Revenues and Direct Operating Expenses
for the three months ended December 31, 1994...........................................................2
Notes to Combined Statement of Revenues and Direct
Operating Expenses...................................................................................3-4
</TABLE>
<PAGE> 4
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS
OF AMTEL COMMUNICATIONS, INC:
We have audited the accompanying combined statement of revenues and direct
operating expenses of Amtel Communications, Inc., and combined Companies (Note
B) for the three months ended December 31, 1994. This combined statement of
revenues and direct operating expenses is the responsibility of the Company's
management. Our responsibility is to express an opinion on the statement of
revenues and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined statement of revenues and direct operating
expenses are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and direct operating expenses. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the combined
statement of revenues and direct operating expenses. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statement was prepared to present the revenues and direct
operating expenses for the three months ended December 31, 1994, pursuant to the
Securities and Exchange Commission's communication dated July 25, 1996 described
in Note C, and is not intended to be a complete presentation of the Company's
operations.
In our opinion, the combined statement of revenues and direct operating expenses
referred to above presents fairly, in all material respects, the revenue and
direct operating expenses of Amtel Communications, Inc., and combined Companies
(Note B) for the three months ended December 31, 1994 in conformity with
generally accepted accounting principles.
The accompanying combined statement of revenues and direct operating expenses
has been prepared assuming that the Company will continue as a going concern. As
described in Note A, on August 3, 1995, the Company filed voluntary petitions
for relief under Chapter 11 of Title II of the United States Bankruptcy Code and
was authorized to continue managing and operating the business as a debtor in
possession subject to the control and supervision of the Bankruptcy Court. Those
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The combined statement of revenues and direct operating expenses
does not include any adjustment that might result from the outcome of this
uncertainty.
/s/ Harlan & Boetgger
San Diego, California
August 23, 1996
<PAGE> 5
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMBINED COMPANIES
(DEBTOR-IN-POSSESSION)
COMBINED STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
<TABLE>
<CAPTION>
For the three
months ended
December 31, 1994
-----------------
<S> <C>
REVENUE
Coin $ 2,603,577
LD Commissions 593,370
Interstate 68,155
Intralata 593,842
Other 1,509,861
-----------
TOTAL REVENUE 5,368,805
-----------
COSTS AND EXPENSES
Line charges 1,342,855
Location commissions 890,903
Other operating expenses 1,481,073
Selling, general and administrative 4,115,854
Depreciation and amortization 480,702
-----------
LOSS FROM OPERATIONS BEFORE OTHER
INCOME AND EXPENSES (2,942,582)
-----------
OTHER
Interest income (105)
Interest expense 2,295,382
-----------
NET LOSS $(5,237,859)
===========
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE> 6
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMPANIES
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
A. REORGANIZATION AND LEGAL MATTERS:
Amtel Communications, Inc. and its combined companies (the "Company")
filed voluntary petitions for relief under Chapter 11 of Title II of
the United States Bankruptcy Code (the "Code") on August 3, 1995 (the
"petition date") administratively consolidated under Case No.
95-08253-A11. The Company is currently operating its business as a
debtor-in-possession under the jurisdiction of the United States
Bankruptcy Court for the Southern District of California. The Company's
liabilities as of the petition date are generally subject to settlement
in a plan of reorganization, which must be voted on by certain of its
creditors and confirmed by the Court. Until a reorganization plan has
been confirmed, the Company is prevented from making payments on
pre-petition debt unless permitted by the Code or approved by the
Court. Certain contracts existing at the petition date have been
rejected or assumed with the approval of the Court. The Company
continues to review all other unexpired pre-petition executory
contracts to determine whether they should be assumed or rejected.
Parties affected by the rejection of contracts and leases may file
claims against the Company.
The combined statement of revenues and direct operating expenses has
been prepared assuming the Company will continue as a going concern,
which contemplates continuity of operations and the realization of
assets and the satisfaction of liabilities in the normal course of
business. The Chapter 11 filings, the Company's leveraged financial
structure, and recurring net losses resulting in a deficit in
stockholder's equity, raise substantial doubt about its ability to
continue as a going concern. A plan of reorganization may materially
change the amounts reported in the combined statement of revenues and
direct operating expenses (which do not give effect to adjustments to
the carrying values of assets and liabilities which may be necessary as
a consequence of a plan of reorganization). The continuation of the
Company's business as a going concern is contingent upon, among other
things, the ability to (1) formulate a plan of reorganization that will
be confirmed by the Court, (2) achieve satisfactory levels of future
profitable operations, (3) maintain adequate financing, and (4) provide
sufficient cash from operations to meet future obligations.
The Company has commenced actions against various parties relating to
the management of the Company. These actions seek to avoid or
subordinate certain obligations incurred by the Company and to recover
certain payments made by or on behalf of the Company in connection with
its operations. The Company has also filed actions against several
entities seeking avoidance and recovery of certain transfers of
interests of the Company in property alleged to be preferences under
section 547(b) of the Code. The ultimate outcome of this actions and
the potential recoveries, if any, resulting from the resolution of
these actions is unknown at this time and, accordingly, no provision
for any amounts has been recorded in this combined statement of
revenues and direct operating expenses.
3
<PAGE> 7
[HB LOGO] [HARLAN & BOETTGER LETTERHEAD]
AMTEL COMMUNICATIONS, INC. AND COMPANIES
(DEBTOR-IN-POSSESSION)
NOTES TO COMBINED STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
(CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF COMBINATION
The combined statement of revenues and direct operating expenses
includes the accounts of Amtel Communications, Inc., Amtel
Communications Payphones, Inc., Amtel Communications Services, Inc.,
Amtel Communications Correctional Facilities, Inc. and ACI-HDT Supply
Company. The five entities are all owned 100% by the same individual.
Collectively, the five entities will be referred to as "the Company".
Material intercompany transactions and balances have been eliminated.
REVENUE RECOGNITION
Revenue is recognized when it is earned with the exception of coin
revenue, which is recognized when it is collected.
ESTIMATES
The preparation of a combined statement of revenues and direct
operating expenses in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the amounts reported in the combined statement of revenues and
direct operating expenses and accompanying notes. Although these
estimates are based on management's knowledge of current events and
actions it may undertake in the future, they may ultimately differ from
actual results.
C. INCOMPLETE PRESENTATION:
By letter dated July 25, 1996 to PhoneTel Technologies, Inc., the
Securities and Exchange Commission (SEC) granted a waiver of Item
310(c) of Regulation S-B which requires submission of two years of
audited statements of operations. Instead, the SEC has accepted audited
statements of operations for a twenty-one month period. This combined
statement of revenues and direct operating expenses together with the
combined statement of operations from the audited financial statements
for the six months ended June 30, 1996 and for the year ended December
31, 1995 comprise the twenty-one month period.
D. SUBSEQUENT EVENT - PROPOSED PLAN OF REORGANIZATION:
In 1996, the Company evaluated its long-term market strategies with the
goal of reducing expenses and improving overall operating results. As a
result, the Company entered into an asset purchase agreement with
PhoneTel Technologies, Inc. (an Ohio Corporation) ("PhoneTel") dated
June 26, 1996 wherein the Company will sell substantially all of its
pay phone operating assets for cash and stock of PhoneTel totaling
$13,000,000 ($7,000,000 cash and $6,000,000 PhoneTel stock). In July,
1996 PhoneTel made a non refundable deposit of $1,300,000 to open
escrow for the purchase of these assets.
4
<PAGE> 1
EXHIBIT (a) 3.
<PAGE> 2
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
PAYPHONES OF AMERICA, INC.
AND SUBSIDIARY
December 31, 1995 and 1994
<PAGE> 3
KERBER, ECK & BRAECKEL LLP
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report
----------------------------
Board of Directors
Payphones of America, Inc.
We have audited the accompanying consolidated balance sheets of
Payphones of America, Inc. (a Tennessee corporation) and subsidiary as of
December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Payphones of America, Inc. and subsidiary as of December 31, 1995 and 1994, and
the consolidated results of their operations and their consolidated cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
<PAGE> 4
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As described in
Note B, the Company has suffered recurring losses from operations and has
limited liquidity which raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note B. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Kerber, Eck & Braeckel LLP
------------------------------
Kerber, Eck & Braeckel LLP
St. Louis, Missouri
January 30, 1996 (except for Note L, as
to which the date is February 7, 1996)
<PAGE> 5
Payphones of America, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 3,852 $ 147,910
Accounts receivable 377,325 367,973
Prepaid expenses 25,754 14,315
----------- -----------
Total current assets 406,931 530,198
PROPERTY AND EQUIPMENT
Telephone equipment 3,891,230 3,831,941
Furniture and fixtures 59,497 47,396
Trucks and autos 201,555 154,956
----------- -----------
4,152,282 4,034,293
Less accumulated depreciation
and amortization 1,422,621 820,509
----------- -----------
2,729,661 3,213,784
Uninstalled pay telephone equipment 89,145 104,074
Building not used in operations, net of
accumulated depreciation of $5,375
for 1995 and $3,763 for 1994 59,125 60,738
----------- -----------
2,877,931 3,378,596
OTHER ASSETS
Site location contracts, less
accumulated amortization of $1,000,928
for 1995 and $406,776 for 1994 1,980,822 2,530,488
Excess of cost over net assets of
businesses acquired, less accumulated
amortization of $70,377 for 1995 and
$50,889 for 1994 709,125 728,613
Covenants not to compete, less accumulated
amortization of $545,417 for 1995 and
$380,417 for 1994 279,584 444,584
Other intangibles, less accumulated
amortization of $59,099 for 1995 and
$43,589 for 1994 102,558 117,767
Other 24,332 21,510
----------- -----------
3,096,421 3,842,962
----------- -----------
$ 6,381,283 $ 7,751,756
=========== ===========
<CAPTION>
LIABILITIES 1995 1994
----------- -----------
<C> <C> <C>
CURRENT LIABILITIES
Notes payable to bank $ 243,750 $ 262,750
Current maturities of long-term obligations 1,330,954 1,241,818
Accounts payable 882,723 699,385
Accrued expenses 146,063 18,656
----------- -----------
Total current liabilities 2,603,490 2,222,609
LONG-TERM OBLIGATIONS, less current
maturities 4,753,853 5,355,740
DEFERRED INCOME TAXES - 284,000
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIT)
Convertible preferred stock - authorized but
unissued, 10,000,000 shares - -
Common stock - authorized, 10,000,000 shares
without par value; issued and outstanding,
2,567,324 shares in 1995 and 1,033,990
shares in 1994 348,756 339,423
Additional contributed capital - 132,230
Accumulated deficit (1,324,816) (582,246)
----------- -----------
(976,060) (110,593)
----------- -----------
$ 6,381,283 $ 7,751,756
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Net sales
Coin calls $ 3,747,247 $ 2,153,974
Non-coin calls 4,418,667 3,692,117
Other 49,221 22,053
------------- -------------
Total net sales 8,215,135 5,868,144
Cost of sales
Telephone charges 3,599,271 2,676,604
Commissions 1,178,156 722,746
Service, maintenance and network expense 289,036 214,636
Depreciation and amortization 1,218,095 723,516
------------- -------------
6,284,558 4,337,502
------------- -------------
Gross profit 1,930,577 1,530,642
Selling, general and administrative expenses
Salaries, wages and benefits 823,430 488,913
Depreciation and amortization 200,095 198,398
Dues and subscriptions 53,905 50,960
Outside services 40,521 63,736
Phone maintenance 118,824 -
Professional services 171,303 85,920
Taxes
Personal property 75,785 4,295
Sales 63,948 37,907
Telephone 69,137 24,696
Rent 71,511 31,389
Other 223,165 120,105
------------- -------------
1,911,624 1,106,319
------------- -------------
Earnings from operations 18,953 424,323
Other income (expense)
Interest income 415 14,741
Interest expense (971,141) (600,624)
Gain (loss) on sale of assets (80,652) 98,904
Other income 12,135 9,366
------------- -------------
(1,039,243) (477,613)
------------- -------------
Loss before income taxes (1,020,290) (53,290)
Income taxes
Current (6,280) (8,856)
Deferred 284,000 (128,000)
------------- -------------
277,720 (136,856)
------------- -------------
NET LOSS $ (742,570) $ (190,146)
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 7
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Period indicated below
<TABLE>
<CAPTION>
Additional Retained
Common contributed earnings
stock capital (deficit) Total
------------ ----------- --------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1994
As originally reported $ 339,423 $ 210,219 $ (153,727) $ 395,915
Prior period adjustment - 55,192 (238,373) (183,181)
------------ ---------- -------------- ------------
As restated 339,423 265,411 (392,100) 212,734
Net loss for the year ended
December 31, 1994 - - (190,146) (190,146)
Cash dividends - (133,181) - (133,181)
------------ ---------- -------------- ------------
Balance at December 31, 1994 339,423 132,230 (582,246) (110,593)
Net loss for the year ended
December 31, 1995 - - (742,570) (742,570)
Stock warrants exercised 9,333 - - 9,333
Cash dividends - (132,230) - (132,230)
------------ ---------- -------------- ------------
Balance at December 31, 1995 $ 348,756 $ - $ (1,324,816) $ (976,060)
============ ========== ============== ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 8
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net loss $ (742,570) $ (190,146)
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization 1,418,191 921,914
(Gain) loss on sale of assets 80,652 (98,904)
Changes in assets and liabilities
(Increase) decrease in accounts receivable (9,352) 9,040
(Increase) decrease in prepaid expenses (11,439) 72
Increase in other asset (2,822) -
Increase in accounts payable 183,338 244,517
Increase in accrued expenses 127,407 18,554
Increase (decrease) in deferred income taxes (284,000) 128,000
----------- -----------
Total adjustments 1,501,975 1,223,193
----------- -----------
Net cash provided by operating activities 759,405 1,033,047
Cash flows from investing activities
Capital expenditures (203,112) (229,613)
Proceeds from sale of assets 54,297 195,714
------------ -----------
Net cash used in investing activities (148,815) (33,899)
Cash flows from financing activities
Proceeds from long-term obligations 507,239 123,355
Payments on notes payable to bank (19,000) (11,900)
Payments on long-term obligations (1,119,990) (696,191)
Stock warrants exercised 9,333 -
Dividends paid (132,230) (133,181)
----------- ----------
Net cash used in financing activities (754,648) (717,917)
----------- ----------
Net increase (decrease) in cash (144,058) 281,231
Cash (overdraft) at beginning of period 147,910 (133,321)
------------ -----------
Cash at end of period $ 3,852 $ 147,910
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 9
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. The Company
-----------
Payphones of America, Inc. operates, services and maintains a system of
approximately 2,800 pay telephones in the Southeastern and Midwestern United
States.
2. Principles of Consolidation
---------------------------
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiary. Intercompany transactions and balances
have been eliminated in consolidation.
3. Accounts Receivable
-------------------
The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts
become uncollectible, they will be charged to operations when that
determination is made.
4. Property and Equipment
----------------------
Property and equipment are recorded at cost. Depreciation and amortization
are provided for in amounts sufficient to relate the cost of depreciable
assets to operations over their estimated service lives. Leased property
under capital leases is amortized over the service lives of the assets for
those leases which substantially transfer ownership. The straight-line
method of depreciation is followed for substantially all assets for
financial reporting purposes, but accelerated methods are used for tax
purposes. Future income taxes resulting from depreciation temporary
differences have been provided for.
5. Intangible Assets
-----------------
Site location contracts are exclusive rights to operate pay telephones at
various locations acquired through business combinations and are stated at
cost. Amortization of site contract costs is recorded using the
straight-line method over five years, the expected average lives of the
contracts.
The Company has classified as goodwill the cost in excess of fair value of
the net assets of companies acquired in purchase transactions. Goodwill is
amortized on a straight-line method over 40 years. The covenants not to
compete are being amortized over their contractual lives of five years.
Other intangible assets, including license agreements and deferred financing
costs, are amortized over the life of the agreements.
<PAGE> 10
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. Recognition of Revenue
----------------------
Revenues from coin calls and non-coin calls are recognized as calls are
made. When revenue on a telephone call is recorded, an expense is also
recorded for fees associated with the call.
7. Concentrations of Credit Risk
-----------------------------
Revenues have a significant concentration of credit risk in the
telecommunications industry. In addition, a significant amount of 1995
revenues were generated by the Company's pay telephones located in the
states of Missouri (36%) and Virginia (33%). No other area has a
disproportionate credit risk.
8. Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE B - GOING CONCERN
The Company has experienced recurring losses and has accumulated losses
since inception of $1,324,816. As of December 31, 1995, the Company's
current liabilities exceed its current assets by $2,196,559. These factors
raise doubt about the Company's ability to continue as a going concern. The
Company's continued existence as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely
basis, to comply with the terms of its debt and lease obligations and to
obtain additional financing or refinancing as may be required.
Historically, the Company has generated sufficient cash flow to meet its
obligations and to pay its debt and lease obligations, and, although it
cannot be assured that the Company will be able to continue as a going
concern in view of its present financial condition, management believes that
continued strategic business acquisitions and improvements in planning and
budgeting should enable the Company to meet its obligations and sustain its
operations.
<PAGE> 11
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE C - NOTE PAYABLE TO BANK
Note payable to bank is comprised of a $245,000 revolving line of credit
agreement with Mark Twain Bank. Interest is payable monthly at 1.50% over
the bank's corporate base rate (8.50% at December 31, 1995). The line of
credit is secured by certain equipment of the Company and other accounts
receivable and matures on February 10, 1996.
NOTE D - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at December 31,:
<TABLE>
<CAPTION>
1995
---------------------------------------------
Current Long-term 1994
portion portion Total Total
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Notes payable to stockholders $ 248,333 $ 184,276 $ 432,609 $ 149,000
Note payable to Mark Twain Bank 1,594 26,988 28,582 29,683
Notes payable to Ford Motor
Credit Company 36,098 36,389 72,487 63,582
Notes payable to Ronald L. Coleman 14,069 299,868 313,937 426,517
Note payable to Pay-Tele
Communications, Inc. d/b/a
Midwest Telecom 105,454 185,273 290,727 397,818
Note payable to Communications
Finance Corporation 87,466 320,034 407,500 482,853
Note payable to R. Greg Kintz and
Paul Wm. Schindler 103,350 45,750 149,100 236,550
Capital lease obligations
Berthel, Fisher & Company
Leasing, Inc. 717,554 3,655,275 4,372,829 4,749,921
Intellicall, Inc. 17,036 - 17,036 59,466
Copying Concepts Office Systems - - - 2,168
-------------- ------------- ------------- --------------
$ 1,330,954 $ 4,753,853 $ 6,084,807 $ 6,597,558
============== ============= ============= ==============
</TABLE>
<PAGE> 12
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE D - LONG-TERM OBLIGATIONS - Continued
The notes payable to stockholders consist of eight unsecured loans maturing
at various dates through April 30, 2000. Interest is payable at the rate of
10%.
The note payable to Mark Twain Bank requires payments of $326 per month
including interest at the rate of 8.75%. The final payment of the entire
unpaid balance of principal and interest will be due October 15, 1998. This
note is secured by a deed of trust for a condominium.
The notes payable to Ford Motor Credit Company consist of ten loans secured
by automobiles and trucks maturing at various dates through April 22, 1999.
The notes require monthly payments of $4,329 including interest at rates
from 8.12% to 10.54%.
The notes payable to Ronald L. Coleman consist of two loans. The notes are
unsecured and mature in April, 2007. These notes require monthly payments
of $4,271 including interest at rates from 8% to 15%.
The note payable to Pay-Tele Communications, Inc. d/b/a Midwest Telecom is
secured by telephone equipment and site location contracts. The note
requires annual principal payments of $100,000 with interest at the rate of
10% through maturity on June 1, 1998. The note is personally guaranteed by
the stockholders of the Company.
The note payable to Communications Finance Corporation is secured by
telephone equipment and site location contracts. The note requires monthly
payments of $11,895 including interest at the rate of 15% through maturity
on September 15, 1999. The note is personally guaranteed by the
stockholders of the Company.
The note payable to R. Greg Kintz and Paul Wm. Schindler requires monthly
principal payments of $7,950 plus interest at rates from 12% to 16% through
maturity on May 1, 1997. The stockholders of the Company have personally
pledged some of their common stock to the lenders as security.
The Company conducts a portion of its business using leased pay telephone
equipment and other intangible assets. For financial and tax reporting
purposes, the present values of minimum lease payments have been
capitalized. Implicit interest rates for these leases range from 14% to
18%.
<PAGE> 13
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE D - LONG-TERM OBLIGATIONS - Continued
The leases, which are noncancelable, expire at various dates through 2001.
The following is a schedule of leased property and other assets under
capital leases included on the accompanying balance sheets:
<TABLE>
<S> <C>
Telephone equipment $ 3,871,519
Site location contracts 2,980,749
-------------
6,852,268
Less accumulated depreciation
and amortization (2,256,701)
-------------
$ 4,595,567
=============
</TABLE>
Annual maturities of all long-term obligations are as follows for years
following December 31, 1995:
<TABLE>
<S> <C>
1996 $ 1,330,954
1997 1,087,032
1998 1,024,518
1999 998,138
2000 771,115
2001 and thereafter 873,050
--------------
$ 6,084,807
==============
</TABLE>
NOTE E - INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting For Income Taxes" (SFAS).
Under the liability method specified by SFAS 109, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities as measured by the enacted
tax rates which will be in effect when these differences reverse. Deferred
tax income and expense is the result of changes in deferred tax assets and
liabilities. The principal types of differences between assets and
liabilities for financial statement and tax return purposes are accumulated
depreciation and accumulated amortization.
<PAGE> 14
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE E - INCOME TAXES - Continued
The provision for income taxes consists of the following for the year ended
December 31,:
<TABLE>
<CAPTION>
1995 1994
----------- -------------
<S> <C> <C>
Current $ (6,280) $ (8,856)
Deferred 284,000 (128,000)
----------- ------------
$ 277,720 $ (136,856)
=========== ============
</TABLE>
Deferred tax assets and liabilities are attributable to the following at
December 31,:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Deferred tax assets (liabilities)
Noncurrent
Accumulated depreciation $ (472,000) $ (365,000)
Accumulated amortization 262,000 81,000
Tax benefit of net operating loss
carryforward 460,000 -
------------- -------------
250,000 (284,000)
Less valuation allowance (250,000) -
------------- -------------
Net deferred tax asset (liability) $ - $ (284,000)
============= =============
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The net deferred assets
reflect management's estimate of the amount which will be realized from
future profitability which can be predicted with reasonable certainty.
The Company has net operating loss carryforwards for Federal income tax
purposes which are available to offset future Federal taxable income. These
carryforwards expire as follows:
<TABLE>
<S> <C>
2008 $ 9,194
2009 332,849
2010 836,510
-------------
$ 1,178,553
=============
</TABLE>
<PAGE> 15
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE F - COMMITMENTS
The Company conducts a substantial portion of its operations utilizing
leased facilities and equipment. The minimum rental commitments under
operating leases are as follows for the year ended December 31,:
<TABLE>
<S> <C>
1996 $ 95,091
1997 93,246
1998 60,550
1999 59,000
2000 64,400
2001 and thereafter 310,500
-----------
Total minimum lease payments $ 682,787
===========
</TABLE>
Rent expense for all operating leases for the years ended December 31, 1995
and 1994,was $71,512 and $31,389, respectively.
NOTE G - STOCK WARRANTS
The Company has issued various warrants which are exercisable for common
stock as follows:
<TABLE>
<CAPTION>
Warrant Number Exercise Expiration
number of shares price date
----------------------- --------------- --------------------------
<S> <C> <C> <C>
6 319,114 $ 1.00 October 24, 2004
9 250,000 $ 2.00 July 28, 2000
</TABLE>
Warrant six has been issued to the Company's vice president and warrant nine
has been issued to a lender.
NOTE H - STATEMENT OF CASH FLOWS
Cash paid for interest and income taxes was as follows during the year ended
December 31,:
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Interest $ 852,612 $ 597,956
Income taxes 6,280 16,388
</TABLE>
During 1995 and 1994, the Company entered into capital lease obligations
totalling $100,000 and $4,000,000, respectively, which represent noncash
financing activities.
<PAGE> 16
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE I - PRIOR PERIOD ADJUSTMENT
Retained earnings at December 31, 1994, were restated following completion of
the Company's first audit to reflect the correction of the following account
balances:
<TABLE>
<S> <C>
Accounts receivable $ (14,061)
Property and equipment 15,307
Other assets 20,521
Accumulated depreciation and
amortization 21,219
Accounts payable (94,965)
Income taxes payable (20,639)
Notes payable 49,112
Deferred income taxes (156,000)
Additional contributed capital (55,192)
Other (3,675)
-----------
$ 238,373
===========
</TABLE>
NOTE J - ACQUISITION
On September 23, 1994, the Company purchased certain assets of Eastern
Telecom Corporation, operators of pay telephones in the Southeastern region
of the United States. The acquisition was accounted for using the purchase
method. The purchase price of $4,000,000 was allocated as follows:
<TABLE>
<S> <C>
Fair market value of assets acquired
Inventories $ 2,000
Equipment 1,721,839
Site contracts 2,276,161
--------------
Purchase price $ 4,000,000
==============
</TABLE>
In connection with the asset purchase, the Company entered into a purchase
commitment with the seller for services of $500,000. In 1995, the commitment
decreased to approximately $192,000 based on actual revenues generated by the
assets acquired. The Company's annual obligation under this agreement is
$32,000 through 2001.
NOTE K- RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 financial statements to
conform to the 1995 presentation.
<PAGE> 17
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE L - SUBSEQUENT EVENT
On February 7, 1996, the Telecommunications Act of 1996 was signed into law.
The Act recognizes that independent public payphone providers are entitled to
fair rules to compete with the Regional Bell Operating Companies and other
local exchange companies. For instance, the Act prohibits Bell operating
companies from subsidizing payphone service directly or indirectly with
revenues generated from their exchange or access services. Bell companies
are also prohibited from discriminating in favor of their payphone services.
The legislation directs the Federal Communications Commission to develop fair
rules in implementing the payphone provision within nine months. The
potential impact of this Act on the financial position of the Company is
unknown at this time.
NOTE M - FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, trade
receivables, trade payables and debt instruments. The book values of cash
and trade payables are representative of their fair values due to the
short-term maturity of these instruments. The book value of the Company's
debt instruments is considered to approximate their fair value at December
31, 1995, based on market rates and conditions.
<PAGE> 1
Exhibit (a) 4.
Payphones of America, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Jun-95 Jun-96
<S> <C> <C>
ASSETS
Current Assets:
Cash ($169,071.69) ($170,709.08)
Accounts Receivable 339,498.44 372,557.99
Prepaid Expenses 499,311.96 39,245.11
Other Current Assets 91,139.99 40,210.91
--------- ---------
Total Current Assets 760,878.70 281,304.93
---------- ----------
Operating Equipment
Telecommunications equipment 3,848,670.36 3,924,343.66
Telephone Equipment held for installation 20,684.45 20,684.45
--------- ---------
3,869,354.81 3,945,028.11
Less accumulated depreciation and amortization (991,873.18) (1,533,605.18)
----------- -------------
Net Operating Equipment 2,877,481.63 2,411,422.93
------------ ------------
Leasehold improvements, equipment, furniture and fixtures
net of accumulated depreciation and amortization of
$118,347.19 and $180,991.76 respectively 167,422.68 30,706.63
Intangible Assets
Site contracts, net amortization 2,234,952.07 1,688,500.68
Non Compete Agreements, net amortization 362,083.35 197,083.33
---------- ----------
2,597,035.42 1,885,584.01
Other Assets 831,335.75 793,406.35
Total Assets $7,234,154.18 $5,402,424.85
============ ============
LIABILITIES
Current Liabilities
Accounts Payable $ 337,245.60 $ 84,690.23
Accrued Expenses 1,255,345.44 623,809.53
Current Maturities of long term debt and notes payable 63,003.28 50,458.91
0.00 0.00
---- ----
Total Current Liabilities 1,655,594.32 758,958.67
Deferred Revenue, less current maturities 0.00 (11,522.00)
Long-term debt, less current maturities
Notes payable and obligations under capital leases 6,141,313.57 5,380,965.03
Notes payable to stockholders 262,894.81 644,190.19
---------- ----------
Total Liabilities 8,059,802.70 6,772,591.89
------------ ------------
Stockholders Equity:
Common Stock 348,756.03 348,756.03
APIC (46,133.09) 0.00
Accumulated deficit(retained earnings) (1,128,271.46) (1,718,923.07)
Total Stockholders Equity (825,648.52) (1,370,167.04)
----------- -------------
$7,234,154.18 $5,402,424.85
============ ============
</TABLE>
<PAGE> 2
Payphones of America, Inc.
Unaudited Consolidated Income Statement
<TABLE>
<CAPTION>
Jun-95 Jun-96
<S> <C> <C>
Revenues
Coin Calls $1,649,738.77 $1,516,505.67
Non Coin Calls 1,937,053.41 1,539,280.30
Other Revenue 13,786.67 712,438.98
--------- ----------
Total Revenues 3,600,578.85 3,768,224.95
------------ ------------
Cost of Revenues
Line Access Charges 866,025.91 698,365.13
Commissions 556,942.49 436,680.69
Service & Collections 777,406.11 1,060,772.30
Depreciation & Amortization 679,329.58 698,211.55
---------- ----------
Total Cost of Revenues 2,879,704.09 2,894,029.67
------------ ------------
Gross Profit 720,874.76 874,195.28
SGA Expenses 846,050.26 883,212.48
---------- ----------
Operating Income (loss) (125,175.50) (9,017.20)
Other Income (expenses)
Interest Expense (479,226.62) (333,229.92)
Gain/Loss of Sale of Assets 6,273.67 (55,474.76)
Other Income 4,192.64 4,110.74
-------- --------
Total Other Income (expense) (468,760.31) (384,593.94)
----------- -----------
Income (loss) before taxes on Income (593,935.81) (393,611.14)
Taxes on Income 0.00 0.00
---- ----
Net Income ($ 593,935.81) ($ 393,611.14)
============= =============
</TABLE>
<PAGE> 1
EXHIBIT (b) 1.
INTRODUCTION
The following unaudited combined, condensed pro forma financial statements
adjust the historical statements of operations data for the year ended December
31, 1995 and the six months ended June 30, 1996 and adjusts the historical
balance sheet data as of June 30, 1996 to give effect to:
(1) the acquisitions completed in 1995:
(a) on September 22, 1995, the Company completed its merger with
World Communications, Inc. (a Missouri corporation) ("World") in
an transaction accounted for as a purchase wherein the Company
acquired current assets of $256,571, approximately 3,237
installed telephones, assumed approximately $6,900,000 in debt
and outstanding liabilities of World and issued 402,500
unregistered shares of the Company's Common Stock and 530,534
shares of the Company's 10% Non-Voting Redeemable Preferred
Stock, which was subsequently converted to 884,214 unregistered
shares of Common Stock on June 28, 1996;
(b) on October 16, 1995, the Completed the acquisition of Public
Telephone Corporation (an Indiana corporation) ("Public
Telephone") in an transaction accounted for as a purchase wherein
the Company acquired current assets of $54,742, approximately
1,200 installed telephones, assumed approximately $2,800,000 in
debt and outstanding liabilities of Public Telephone and issued
304,879 unregistered shares of the Company's Common Stock to the
shareholders of Public Telephone;
(2) the acquisitions completed in the first quarter of 1996:
(a) on March 15, 1996 the Company acquired all the outstanding common
stock of International Pay Phones, Inc. (a South Carolina
company) and International Pay Phones, Inc. (a Tennessee company)
(collectively "IPP"), companies affiliated through common
ownership and management. In connection with the acquisition of
IPP, the Company acquired 2,101 installed telephones for a
purchase price consisting of: (i) $3,496,487 in cash; (ii)
555,589 unregistered shares of the Company's Common Stock, par
value $.01, ("Common Stock"); (iii) 5,453.14 unregistered shares
of 14% Convertible Cumulative Redeemable Preferred Stock ("14%
Preferred"); and (iv) warrants to purchase 117,785 shares of the
Company's Common Stock at a nominal exercise price per share
("Nominal Value Warrants"). Additionally, the Company assumed
approximately $1,757,000 in liabilities, of which $1,551,796 was
repaid by the Company on March 15, 1996. The cash purchase price
included three five year non-compete agreements, with an
aggregate value of $60,000, with three of IPP's former officers;
and
(b) on March 15, 1996, the Company completed a Share Purchase
Agreement with Paramount Communications Systems, Inc. (a Florida
corporation) ("Paramount"). Under the terms of the Agreement, the
Company acquired 2,528 installed telephones for a purchase price
consisting of: (i) $9,618,553 in cash; (ii) 8,333.33 shares of
14% Preferred; and (iii) Nominal Value Warrants to purchase
179,996 shares of the Company's Common Stock. In addition, the
Company assumed outstanding liabilities of approximately
$733,000, of
1
<PAGE> 2
which $697,947 was repaid on March 15, 1996. The purchase price
included a five year consulting and non-compete agreement, valued
at $50,000, with one of Paramount's former officers.
(2) the Amtel acquisition completed on September 13, 1996 and the POA
acquisition completed on September 16, 1996; and
(3) the additional funds borrowed under the Lender's Credit Facility on
September 13 and 16, 1996, to complete the acquisition of Amtel and POA,
pay related expenses and other obligations of the Company.
The pro forma adjustments are included in the unaudited pro forma balance sheet
as if the transactions had occurred on June 30, 1996 and in the unaudited pro
forma statements of operations as if the transactions had occurred at the
beginning of each period presented. The unaudited pro forma combined condensed
financial data should be read in conjunction with the historical financial
statements and notes thereto included elsewhere in this Prospectus, and are not
necessarily indicative of the results of operations that might have occurred if
the transactions had taken place on the dates indicated or which might occur in
any future period.
2
<PAGE> 1
Exhibit (b) 2.
<PAGE> 2
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT JUNE 30, 1996
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
PhoneTel
Technologies Amtel POA Ref
---------------- --------------- ---------------- -----------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash $1,025,382 $422,566 - (1,2,3)
Accounts receivable, net 1,570,576 527,883 $372,558 (1,2)
Other current assets 302,469 137,553 39,245 (1,2)
---------------- --------------- ----------------
Total current assets 2,898,427 1,088,002 411,803
Property and equipment, net 22,995,039 12,276,039 2,482,341 (1,2)
Intangible assets, net 24,286,302 - 1,885,584 (1,2,3)
Other assets 1,863,716 294,619 793,406 (1,2)
--------------- -------------- ---------------
$52,043,484 $13,658,660 $5,573,134
================ =============== ================
Liabilities and Equity
Current liabilities:
Current portion of long-term debt:
payable to related parties $3,548,454 - - (3)
payable to others 1,502,653 - $50,459 (2)
Current portion capital leases 73,510 - - (2)
Accounts payable 2,039,122 $1,930,980 84,690 (1,2,3)
Accrued expenses 3,338,419 767,661 782,997 (1,2,3)
Pre-petition liabilities - 80,598,956 - (1)
Deferred revenues 900,000 - -
Contractual settlements and other unusual charges 480,551 - -
---------------- --------------- ----------------
Total current liabilities 11,882,709 83,297,597 918,146
Long-term debt:
payable to related parties 23,149,508 - - (3)
payable to others 287,556 - 644,190 (2)
Obligations under capital leases 202,557 - 5,380,965 (2)
14% preferred mandatorily redeemable at $6,742,960 6,404,228 - -
Other equity:
Series A preferred stock - - -
Common stock 52,482 50,000 348,756 (1,2)
Additional paid in capital 35,702,864 - - (1,2)
Accumulated deficit (25,638,420) (69,688,937) (1,718,923) (1,2)
---------------- --------------- ----------------
Total other equity 10,116,926 (69,638,937) (1,370,167)
---------------- --------------- ----------------
$52,043,484 $13,658,660 $5,573,134
================ =============== ================
The accompanying notes are an integral part of these financial statements.
</TABLE>
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT JUNE 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Pro Forma
Adjustments
for Pro Forma
Acquisitions As Adjusted
---------------- ---------------
<S> <C> <C>
Assets
Current assets:
Cash ($650,188) $797,760
Accounts receivable, net (900,441) 1,570,576
Other current assets (145,084) 334,183
---------------- ---------------
Total current assets (1,695,713) 2,702,519
Property and equipment, net (5,674,740) 32,078,679
Intangible assets, net 14,199,511 40,371,397
Other assets (2,610,831) 340,910
---------------- ---------------
$4,218,227 $75,493,505
================ ===============
Liabilities and Equity
Current liabilities:
Current portion of long-term debt:
payable to related parties $7,276,546 $10,825,000
payable to others 238,425 1,791,537
Current portion capital leases 690,200 763,710
Accounts payable (3,017,670) 1,037,122
Accrued expenses (2,744,956) 2,144,121
Pre-petition liabilities (80,598,956) -
Deferred revenues - 900,000
Contractual settlements and other unusual charges - 480,551
---------------- ---------------
Total current liabilities (78,156,411) 17,942,041
Long-term debt:
payable to related parties 1,500,000 24,649,508
payable to others 3,203,940 4,135,686
Obligations under capital leases 1,712,089 7,295,611
14% preferred mandatorily redeemable at $6,742,960 - 6,404,228
Other equity:
Series A preferred stock - -
Common stock (375,468) 75,770
Additional paid in capital 4,926,217 40,629,081
Accumulated deficit 71,407,860 (25,638,420)
---------------- ---------------
Total other equity 75,958,609 15,066,431
---------------- ---------------
$4,218,227 $75,493,505
================ ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 1
EXHIBIT (b) 3.
<PAGE> 2
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
IPP and
Paramount
PhoneTel As Adjusted
Technologies (4) Amtel POA Ref
--------------- ---------------- ---------------- --------------- -------
<S> <C> <C> <C> <C> <C>
Revenues $16,805,510 $2,488,680 $7,204,822 $3,768,225 (6)
Operating expenses:
Line and transmission charges 3,866,207 585,463 2,428,704 698,365
Location commissions 2,536,730 376,269 1,639,127 436,681
Other operating expenses 5,047,451 356,816 321,947 1,060,772 (5,6)
Depreciation and amortization 5,312,885 928,840 777,823 698,212 (5,6)
Selling, general and administrative 2,398,724 253,483 2,231,970 883,212 (5,6)
Contractual settlements and
other unusual charges 5,334,514 - - -
----------- --------- ----------- ----------
24,496,511 2,500,871 7,399,571 3,777,242
----------- --------- ----------- ----------
Loss from operations (7,691,001) (12,191) (194,749) (9,017)
Other income (expense):
Interest expense - related parties (1,816,890) - - - (7)
Interest expense - others (274,221) (30,881) (6,077) (333,230) (5,6)
Interest income 1,976 - 1,606 -
Reorganization expenses - - (789,888) - (5)
Other - (12,638) (959,011) (51,364) (5)
----------- --------- ----------- ----------
Total other income (expense) (2,089,135) (43,519) (1,753,370) (384,594)
----------- --------- ----------- ----------
Loss before income taxes
and extraordinary item (9,780,136) (55,710) (1,948,119) (393,611)
Income taxes - - 4,000 -
=========== ========= =========== ==========
Loss before extraordinary item ($9,780,136) ($55,710) ($1,952,119) ($393,611)
=========== ========= =========== ==========
Earnings per share calculation:
Preferred dividend requirement (134,741) - - -
----------- --------- ----------- ----------
Loss before extraordinary
item applicable to
common shareholders ($9,914,877) ($55,710) ($1,952,119) ($393,611)
=========== ========= =========== =========
Loss per common share before
extraordinary item (8) ($2.77)
===========
Weighted average number of shares 3,576,381 216,217 2,162,163 166,666
=========== ======== =========== =========
Pro Forma
Adjustments
for Pro Forma
Acquisitions As Adjusted
--------------- ----------------
<S> <C> <C>
Revenues ($27,625) $30,239,612
Operating expenses:
Line and transmission charges - 7,578,739
Location commissions - 4,988,807
Other operating expenses (206,786) 6,580,200
Depreciation and amortization 1,317,300 9,035,060
Selling, general and administrative (1,242,808) 4,524,581
Contractual settlements and
other unusual charges - 5,334,514
--------- ----------
(132,294) 38,041,901
--------- ----------
Loss from operations 104,669 (7,802,289)
Other income (expense):
Interest expense - related parties (581,446) (2,398,336)
Interest expense - others 51,414 (592,995)
Interest income - 3,582
Reorganization expenses 789,888 -
Other 959,011 (64,002)
--------- ----------
Total other income (expense) 1,218,867 (3,051,751)
--------- ----------
Loss before income taxes
and extraordinary item 1,323,536 (10,854,040)
Income taxes - 4,000
========== ============
Loss before extraordinary item $1,323,536 ($10,858,040)
========== ============
Earnings per share calculation:
Preferred dividend requirement - (134,741)
--------- ----------
Loss before extraordinary
item applicable to
common shareholders $1,323,536 ($10,992,781)
========== ============
Loss per common share before
extraordinary item (8) ($1.80)
============
Weighted average number of shares 6,121,427
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 1
EXHIBIT (b) 4.
<PAGE> 2
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(9)
World, Public
Telephone, IPP
PhoneTel & Paramount
Technologies As Adjusted Amtel POA
---------------- ------------------ ---------------- ---------------
<S> <C> <C> <C> <C>
Revenues $18,717,983 $18,488,923 $17,059,140 $8,215,135
Operating expenses:
Line and transmission charges 5,475,699 6,377,191 6,862,015 3,599,271
Location commissions 3,467,626 2,094,157 3,921,741 1,178,156
Other operating expenses 5,310,262 1,047,352 2,651,734 289,036
Depreciation and amortization 4,383,049 8,176,553 1,621,029 1,218,095
Selling, general and administrative 3,200,742 3,225,009 15,103,091 1,911,624
Other - - 67,356 -
Contractual settlements and
other unusual charges 2,169,503 - - -
---------- ---------- ---------- ---------
24,006,881 20,920,262 30,226,966 8,196,182
---------- ---------- ---------- ---------
Loss from operations (5,288,898) (2,431,339) (13,167,826) 18,953
Other income (expense):
Interest expense - related parties - (7,135,340) - -
Interest expense - others (836,911) (458,853) (7,429,502) (971,141)
Interest income 16,112 19,671 - 415
Reorganization expenses - - (539,942) -
Other - (405,505) (429,967) (68,517)
---------- ---------- ---------- ---------
Total other income (expense) (820,799) (7,980,027) (8,399,411) (1,039,243)
---------- ---------- ---------- ---------
Loss before income taxes
and extraordinary item (6,109,697) (10,411,366) (21,567,237) (1,020,290)
Income taxes - - 4,000 (277,720)
---------- ---------- ---------- ---------
Loss before extraordinary item ($6,109,697) ($10,411,366) ($21,571,237) ($742,570)
=========== ============ ============ =========
Earnings per share calculation:
Preferred dividend requirements (309,668) (874,101) - -
---------- ---------- ---------- ---------
Loss before extraordinary
item applicable to
common shareholders ($6,419,365) ($11,285,467) ($21,571,237) ($742,570)
=========== ============ ============ =========
Loss per common share before
extraordinary item (8) ($3.29)
===========
Weighted average number of shares 1,950,561 1,086,171 2,162,163 166,666
=========== ============ ============ =========
Pro Forma
Adjustments
for Pro Forma
Ref Acquisitions As Adjusted
-------------------------------- ----------------
<S> <C> <C> <C>
Revenues (10,11) ($2,871,447) $59,609,734
Operating expenses:
Line and transmission charges (10) (1,694,515) 20,619,661
Location commissions (10) (800,000) 9,861,680
Other operating expenses (10,11) (2,227,295) 7,071,089
Depreciation and amortization (10,11) 2,569,217 17,967,943
Selling, general and administrative (10,11) (12,305,693) 11,134,773
Other - 67,356
Contractual settlements and
other unusual charges - 2,169,503
----------- ----------
(14,458,286) 68,892,005
----------- ----------
Loss from operations 11,586,839 (9,282,271)
Other income (expense):
Interest expense - related parties (12) (1,162,892) (8,298,232)
Interest expense - others (10,11) 7,564,998 (2,131,409)
Interest income - 36,198
Reorganization expenses (10) 539,942 -
Other (10) 429,967 (474,022)
----------- ----------
Total other income (expense) 7,372,015 (10,867,465)
----------- ----------
Loss before income taxes
and extraordinary item 18,958,854 (20,149,736)
Income taxes - (273,720)
----------- ----------
Loss before extraordinary item $18,958,854 ($19,876,016)
=========== ============
Earnings per share calculation:
Preferred dividend requirements (13) 530,534 (653,235)
----------- ----------
Loss before extraordinary
item applicable to
common shareholders $19,489,388 ($20,529,251)
=========== ============
Loss per common share before
extraordinary item (8) ($3.83)
============
Weighted average number of shares 5,365,561
============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 1
EXHIBIT (b) 5.
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION
(1) PURCHASE PRICE ALLOCATION FOR ASSETS PURCHASED FROM AMTEL
<TABLE>
<CAPTION>
Debit Credit
----- ------
<S> <C> <C>
Cash $ 6,400,188
Accounts receivable, net 527,883
Other current assets 137,553
Other assets 1,517,425
Property and equipment, net 8,566,221
Intangible assets, net $ 8,525,949
Accounts payable 1,930,980
Pre-petition payables 80,598,956
Accrued expenses 370,161
Common stock 28,379
Additional paid in capital 4,616,218
Accumulated deficit 69,688,937
</TABLE>
Represents the acquisition of selected assets of Amtel for a purchase
price consisting of: (i) $7,277,622 in cash ($1,300,000 paid in June
1996); (ii) 2,162,163 unregistered shares of the Company's Common
Stock, valued at the average of the BID and ASK (as reported by NASDAQ
on September 13, 1996, less an unregistered and block discount of
20.19% as determined by Key Trust) $4,637,840, or $2.15 per share; and
(iii) acquisition expenses of approximately $397,500; and the
elimination of assets and liabilities not acquired.
(2) PURCHASE PRICE ALLOCATION FOR ASSETS PURCHASED FROM POA AND
LIABILITIES ASSUMED
<TABLE>
<CAPTION>
Debit Credit
----- ------
<S> <C> <C>
Cash $ 200,000
Accounts receivable, net 372,558
other current assets 7,531
Property and equipment, net $ 2,891,481
Intangible assets, net 5,613,562
Other assets 1,093,406
Current portion of long-term debt - others 238,425
Current portion of long-term leases 690,200
Accounts payable 84,690
Accrued expenses 610,249
Long-term debt - others 3,203,940
Obligations under capital leases 1,712,089
Common stock 347,089
Additional paid in capital 309,999
Accumulated deficit 1,718,923
</TABLE>
1
<PAGE> 2
PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(2) PURCHASE PRICE ALLOCATION FOR ASSETS PURCHASED FROM POA AND
LIABILITIES ASSUMED (CONTINUED)
Represents the acquisition of POA for a purchase price consisting of:
(i) $500,000 in cash ($300,000 paid in March 1996); (ii) 166,666
unregistered shares of Common Stock, valued at the average of the BID
and ASK (as reported by NASDAQ on September 16, 1996, less an
unregistered and block discount of 30.42% as determined by Key Trust)
$311,665, or $1.87 per share; (iii) assumption of capital lease
obligations of $7,750,000; (iv) notes payable to selling shareholders
of POA, $3,634,114; (v) assumption of other debt $234,890; (vi) two
five year non-competition and consulting agreements with two of the
selling shareholders, $307,264; and (vii) approximately $166,748 in
related acquisition expenses; and the elimination of assets and
liabilities not acquired.
(3) FINANCING TO COMPLETE THE ACQUISITION OF AMTEL AND POA AND TO PROVIDE
ADDITIONAL WORKING CAPITAL
<TABLE>
<CAPTION>
Debit Credit
----- ------
<S> <C>
Cash $ 5,950,000
Intangibles, net 60,000
Accrued expenses 1,764,546
Accounts payable 1,002,000
Current long-term debt $ 7,276,546
Long-term debt 1,500,000
</TABLE>
Represents the additional borrowings under the Credit Facility, as
amended September 13, 1996, to complete the acquisitions of POA and
Amtel, pay related acquisition expenses and to pay other obligations of
the Company.
2
<PAGE> 3
PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(4) PRO FORMA ADJUSTMENTS FOR THE ACQUISITIONS COMPLETED ON MARCH 15, 1996
The following adjustment combines the operations of IPP and Paramount
for the period from January 1, 1996 through March 14, 1996 and gives
effect to the pro forma adjustments. The pro forma adjustments
represent the estimated recurring savings resulting from the
acquisition of IPP and Paramount on March 15, 1996, and the incremental
depreciation and amortization associated with the acquired tangible and
intangible assets. The savings are primarily the result of backroom
efficiencies, including the elimination of certain offices and
executives and economies of scale in billing and other operating areas.
Property and equipment is assumed to depreciate over 60 months while
the intangible assets, consisting primarily of existing phone
contracts, is being amortized over 60 months, representing the average
remaining life of all acquired contracts.
Pro Forma Statement of Operations
for the period
January 1, 1996 through March 14, 1996
<TABLE>
<CAPTION>
Pro Forma
IPP Paramount Adjustments As Adjusted
--------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 856,459 $ 1,632,221 $ -- $ 2,488,680
Operating expenses:
Line & transmission charges 309,582 275,881 -- 585,463
Location commissions 144,412 231,857 -- 376,269
Other operating expenses 90,474 266,342 -- 356,816
Depreciation & amortization 102,013 81,918 744,909 928,840
Selling, general, & admin 296,181 196,063 (238,761) 253,483
--------- ----------- --------- -----------
942,662 1,052,061 506,148 2,500,871
--------- ----------- --------- -----------
Loss from operations (86,203) 580,160 (506,148) (12,191)
Other income (expense):
Interest expense (19,511) (11,370) -- (30,881)
Other -- (12,638) -- (12,638)
--------- ----------- --------- -----------
(19,511) (24,008) -- (43,519)
--------- ----------- --------- -----------
Loss before income taxes (105,714) 556,152 (506,148) (55,710)
Income taxes -- -- -- --
--------- ----------- --------- -----------
Net loss $(105,714) $ 556,152 $(506,148) $ (55,710)
========= =========== ========= ===========
</TABLE>
3
<PAGE> 4
PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(5) AMTEL'S COST SAVINGS FOR THE SIX MONTHS ENDED JUNE 30, 1996
Represents the estimated reduction in: (i) selling, general, and
administrative expenses of $823,408; (ii) other operating expenses of
$25,000; (iii) reorganization expenses of $789,888; (iv) interest
expense of $6,077; and (v) other expenses of $959,011 resulting from
the acquisition of certain assets of Amtel and the incremental increase
in depreciation and amortization of $555,275 associated with the
acquired tangible and intangible assets. The savings are primarily due
to the elimination of costs associated with Amtel's operations which
were not acquired, the closing of certain offices, the elimination of
redundant executives, the economies of scale in billing and other
operating areas, and the elimination of the costs associated with the
bankruptcy of Amtel. The increase in property and equipment is assumed
to depreciate over 60 months, other assets over 36 months, while the
intangible assets, consisting primarily of existing telephone location
contracts, is being amortized over 54 months, representing the average
remaining life of all acquired telephone location contracts.
(6) POA'S COST SAVINGS FOR THE SIX MONTHS ENDED JUNE 30, 1996
Represents the estimated reduction in revenues, from the acquisition of
POA, of $27,625; and the estimated cost savings consisting of: (i)
other operating expenses, $181,786; (ii) selling, general, and
administrative expenses, $419,400; (iii) interest expense of $45,337;
and the incremental depreciation and amortization of $762,025
associated with the acquired tangible and intangible assets. The
savings are primarily the result of backroom efficiencies, including
the elimination of certain offices and executives and economies of
scale in billing and other operating areas. The increase in property
and equipment is assumed to depreciate over 60 months while the
intangible assets, consisting primarily of POA's existing telephone
location contracts, is being amortized over 72 months, representing the
average remaining life of all acquired contracts.
(7) INTEREST ON THE ADDITIONAL DEBT FOR THE SIX MONTHS ENDED JUNE 30, 1996
Represents the estimated increase in interest expense of $581,446
resulting from the additional debt, under the Credit Facility, required
to complete the Amtel and POA acquisitions, pay related expenses and
other obligations, at an assumed interest rate of 13.25%.
(8) CALCULATION OF EARNINGS PER SHARE
Earnings per share excludes a loss of $2,002,386 which was realized on
redemption of the 10% Preferred, 8% Preferred, and 7% Preferred and an
extraordinary loss of $267,281 realized on the restructuring of the
Company's debt on March 15, 1996.
4
<PAGE> 5
PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(9) PRO FORMA ADJUSTMENTS FOR THE ACQUISITIONS COMPLETED IN SEPTEMBER AND
OCTOBER 1995 AND MARCH 1996
Represents the operations of IPP and Paramount for the period from
January 1, 1995 through December 31, 1995, World from January 1, 1995
through September 21, 1995, and Public Telephone from January 1, 1995
through October 16, 1995, and gives effect to the pro forma
adjustments. The pro forma adjustments represent the estimated
recurring savings resulting from the acquisitions of IPP, Paramount,
Public Telephone, and World and the incremental depreciation and
amortization associated with the acquired tangible and intangible
assets. The savings are primarily the result of backroom efficiencies,
including the elimination of certain offices and executives and
economies of scale in billing and other operating areas. Property and
equipment is assumed to depreciate over 60 months while the intangible
assets relating to IPP's and Paramount's existing phone contracts is
being amortized over 60 months (36 months for World's and Public
Telephone's acquired intangibles), representing the average remaining
life of all acquired contracts. The value of the Non-compete Agreements
is being amortized over the life of the agreements.
<TABLE>
<CAPTION>
Pro Forma Statement of Operations
for the periods prior to the dates of acquisition
Public IPP and Pro Forma Pro Forma
World Telephone Paramount Adj's As Adjusted
----------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 6,317,048 $ 1,941,190 $ 10,230,685 $ -- $ 18,488,923
Operating expenses:
Line and transmission charges 2,706,199 535,771 3,135,221 -- 6,377,191
Location commissions 852,944 196,243 1,311,970 (267,000) 2,094,157
Other operating expenses 1,026,000 112,071 709,281 (800,000) 1,047,352
Depreciation and amortization 855,059 268,262 936,307 6,116,925 8,176,553
Selling, general, and administrative 1,276,056 594,588 3,358,416 (2,004,051) 3,225,009
----------- ----------- ------------ ------------- ------------
6,716,258 1,706,935 9,451,195 3,045,874 20,920,262
----------- ----------- ------------ ------------- ------------
Loss from operations (399,210) 234,255 779,490 (3,045,874) (2,431,339)
Other income (expense):
Interest expense (590,980) (304,664) (312,458) (3,462,527) (4,571,629)
Interest expense accretion of debt -- -- -- (3,022,564) (3,022,564)
Interest income 834 3,371 15,466 -- 19,671
Other -- (321,923) (83,582) -- (405,505)
----------- ----------- ------------ ------------- ------------
(590,146) (623,216) (281,574) (6,485,091) (7,980,027)
----------- ----------- ------------ ------------- ------------
Income (loss) before taxes (989,356) (388,961) 479,916 (9,530,965) (10,411,366)
Income taxes -- -- 38,100 (38,000) --
----------- ----------- ------------ ------------- -------------
Net income (loss) $ (989,356) $ (388,961) $ 459,816 $ (9,492,865) $(10,411,366)
=========== =========== ============ ============= =============
</TABLE>
5
<PAGE> 6
PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(10) AMTEL'S COST SAVINGS FOR THE YEAR ENDED DECEMBER 31, 1995
Represents the estimated reduction in: (i) selling, general, and
administrative expenses of $11,360,614; (ii) other operating expenses
of $2,131,584; (iii) line and transmission charges of $1,694,515; (iv)
commissions expense of $800,000; (v) revenues of $2,859,394; (vi)
interest expense of $7,429,502; (vii) reorganization expense of
$539,942; (viii) other expenses of $429,967; resulting from the
acquisition of Amtel and the incremental increase in depreciation and
amortization of $1,045,167 associated with the acquired tangible and
intangibles assets. The savings are primarily due to the elimination of
employees and expenses resulting from the restructuring plan
implemented by the trustee on behalf of the bankruptcy court in the
later part of 1995, the elimination of costs associated with Amtel's
operations which were not acquired, the closing of certain offices, the
elimination of the redundant executives, the economies of scale in
billing and other operating areas, and the elimination of costs
associated with the bankruptcy of Amtel. The increase in property and
equipment is assumed to depreciate over 60 months, other assets over 36
months, while the intangible assets, consisting primarily of existing
telephone location contracts, is being amortized over 54 months,
representing the average remaining life of all acquired contracts.
(11) POA'S COST SAVINGS FOR THE YEAR ENDED DECEMBER 31, 1995
Represents the estimated reduction in revenues, resulting from the
acquisition of POA, of $12,053; and the estimated cost savings
consisting of: (i) other operating expenses, $95,711; (ii) selling,
general, and administrative expenses, $945,079; (iii) interest expense
of $135,496; and the incremental depreciation and amortization of
$1,524,050 associated with the acquired tangible and intangible assets.
The savings are primarily the result of backroom efficiencies,
including the elimination of certain offices and executives and
economies of scale in billing and other operating areas. The increase
in property and equipment is assumed to depreciate over 60 months while
the intangible assets, consisting primarily of POA's existing telephone
location contracts, is being amortized over 72 months, representing the
average remaining life of all acquired contracts.
(12) INTEREST ON THE ADDITIONAL DEBT FOR THE YEAR ENDED DECEMBER 31, 1995
Represents the incremental increase in interest expense of $1,162,892
resulting from the additional debt, under the Credit Facility, required
to complete the Amtel and POA acquisitions, pay related expenses and
other obligations, at an assumed interest rate of 13.25%.
(13) CONVERSION OF THE 10% PREFERRED
To eliminate the preferred dividend requirement of $530,534 based on
the conversion of the 10% Preferred into 884,214 shares of Common Stock
on June 28, 1996.
6
<PAGE> 1
EXHIBIT (c) 1.
<PAGE> 2
ASSET PURCHASE AGREEMENT
among
PHONETEL TECHNOLOGIES, INC.,
an Ohio Corporation
As Buyer,
and
ACI-HDT SUPPLY COMPANY, a California corporation, AMTEL
COMMUNICATIONS SERVICES, a California corporation, AMTEL
COMMUNICATIONS CORRECTIONAL FACILITIES, a California
corporation, AMTEL COMMUNICATIONS, INC., a California corporation,
AMTEL COMMUNICATIONS PAYPHONES, INC., a California
corporation,
As Seller
June 26, 1996
<PAGE> 3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
ARTICLE I
PURCHASE AND SALE; THE CLOSING......................................................................2
1.1 Purchase and Sale.................................................................2
1.1.1 Sale of Payphone Operating Assets........................................2
1.1.2 Excluded Assets..........................................................3
1.1.3 Instruments of Conveyance................................................3
1.1.4 Liabilities Assumed or Not
Assumed by Buyer ...............................................4
1.2 Consideration.....................................................................4
1.2.1 General Consideration....................................................4
1.2.2 Additional Consideration.................................................6
1.3 Calculation of Established Value..................................................7
1.4 The Closing.......................................................................8
1.5 Deliveries by Amtel...............................................................8
1.6 Deliveries by the Buyer...........................................................9
ARTICLE II
AMTEL'S REPRESENTATIONS AND WARRANTIES.....................................................9
2.1 Authorization; Binding Obligation.................................................9
2.2 Consents and Approvals...........................................................10
2.3 Brokers..........................................................................10
2.4 Average Revenue..................................................................11
2.5 Minimum Payphones................................................................11
2.6 Minimum Average of Remaining Term of Site Location
Agreements.......................................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER...............................................11
3.1 Organization and Standing........................................................11
3.2 Authorization; Binding Obligation................................................11
3.3 Brokers..........................................................................12
3.4 The Common Stock.................................................................12
ARTICLE IV
ADDITIONAL COVENANTS......................................................................12
4.1 Conduct of Business of Amtel.....................................................12
4.2 Further Assurances; Cooperation..................................................15
4.3 Confidentiality..................................................................16
4.4 Publicity........................................................................17
4.5 Expenses.........................................................................17
4.6 Forwarding of Payments Received..................................................17
4.7 Transfer and Similar Taxes; Indemnity............................................17
4.8 Delivery of Financial Statement..................................................19
4.9 Employees........................................................................19
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
4.10 Duty to Obtain Court Approval....................................................19
4.10.1 Necessity for Court Approval/
Duty to Obtain .........................................................19
4.10.2 Enabling Order Effective Date...........................................20
4.10.3 No Overbid..............................................................21
4.11 Permissible Back-Up Offers; Duty to Disclose Back-Up
Offers...........................................................................22
4.12 Audit Cooperation................................................................23
4.13 Special Provisions Regarding Common Stock........................................24
ARTICLE V
CONDITIONS TO CLOSING.....................................................................26
5.1 Conditions Precedent to Obligations of the Buyer.................................26
5.1.1 Accuracy of Representations
and Warranties .........................................................26
5.1.2 Performance of Agreements...............................................26
5.1.3 Enabling Order..........................................................26
5.1.4 Minimum Payphones.......................................................29
5.1.5 Minimum Average of Remaining Term of
Site Location Agreements................................................29
5.1.6 Injunction..............................................................29
5.2 Conditions Precedent to Obligations of Amtel.....................................29
5.2.1 Accuracy of Representations
and Warranties .........................................................30
5.2.2 Performance of Agreements...............................................30
5.2.3 Adverse Proceedings.....................................................30
5.2.4 Enabling Order..........................................................30
5.2.5 Injunction..............................................................30
ARTICLE VI
MISCELLANEOUS.............................................................................31
6.1 Parties in Interest; No Third Party Beneficiaries................................31
6.2 Exhibits.........................................................................31
6.3 Entire Agreement.................................................................31
6.4 Waiver of Compliance.............................................................32
6.5 Validity.........................................................................32
6.6 Counterparts.....................................................................32
6.7 Headings.........................................................................32
6.8 Governing Law; Jurisdiction......................................................33
6.9 Termination......................................................................33
6.9.1 Termination by Amtel....................................................33
6.9.2 Termination by Buyer....................................................34
6.9.3 By Mutual Consent.......................................................34
6.9.4 Disposition of Nonrefundable Deposit....................................34
6.10 Notices..........................................................................35
6.10.A Break-Up Fee............................................................36
6.11 Amtel............................................................................38
</TABLE>
ii
<PAGE> 5
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of June 26,
1996, among PhoneTel Technologies, Inc., an Ohio corporation (the "Buyer"), and
ACI-HDT Supply Company, a California corporation ("HDT"), Amtel Communications
Services, Inc., a California corporation ("ACS"), Amtel Communications
Correctional Facilities, Inc., a California corporation ("ACF"), Amtel
Communications, Inc., a California corporation ("ACI"), and Amtel Communications
Payphones, Inc., a California corporation ("ACP") all of which are hereinafter
collectively referred to as "Amtel" or "Seller."
FIRST: Amtel is engaged in the business of owning and operating pay
telephones and engaging in the sale, installation and maintenance of pay
telephones (the "Business");
SECOND: HDT, ACS, ACF, ACI, and ACP are all separate
Debtors-In-Possession in separate Chapter 11 reorganization proceedings now
pending before the United States Bankruptcy Court for the Southern District of
California (the "Bankruptcy Court") identified as Case Nos. 95-08253-A11 through
95-08257-B11, respectively, all of which have been administratively consolidated
under Case No. 95-08253-A11 (the "Bankruptcy Case");
THIRD: Two official committees have been appointed and are acting in
the Bankruptcy Case pursuant to the provisions of 11 U.S.C. section 1102(a).
They are known as the "Official Committee
1
<PAGE> 6
of Lessors" (hereinafter the "OCL") and the "Official Unsecured Creditors'
Committee" (hereinafter the "OUCC"); and,
FOURTH: The Buyer desires to purchase, and Amtel desires to sell, free
and clear of all liens, claims, and interests in accordance with and pursuant to
11 U.S.C. sections 363(b) and (f) and section 365(a), all of the assets,
claims, and property of every description in which Amtel holds an ownership or
other interest that are used in, or arose from Amtel's operating the Business
(the "Payphone Operating Assets"). The Payphone Operating Assets include all of
the assets and property of Amtel except the assets and property specifically
excluded by the terms of the Agreement (the "Reserved Assets"). The Buyer
desires to purchase and Amtel desires to sell the Payphone Operating Assets upon
the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements, covenants,
representations and warranties set forth herein, and intending to be legally
bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE; THE CLOSING
1.1 PURCHASE AND SALE.
1.1.1 SALE OF PAYPHONE OPERATING ASSETS. Upon the terms
and subject to the conditions hereof, at the Closing (as hereinafter defined)
Amtel will sell, assign, transfer and
2
<PAGE> 7
deliver to the Buyer, and the Buyer will accept and purchase from Amtel, free
and clear of all encumbrances, the Payphone Operating Assets, which consist of
all of the items of tangible and intangible property and property rights set
forth in "Exhibit A" attached hereto and incorporated herein by this reference.
1.1.2 EXCLUDED ASSETS. Specifically excluded from the
Payphone Operating Assets are the Reserved Assets as set forth on "Exhibit B"
attached hereto and incorporated herein by this reference.
1.1.3 INSTRUMENTS OF CONVEYANCE. To effectuate the sale,
assignment, transfer and conveyance contemplated by this Agreement, Amtel will
execute and deliver to the Buyer at the Closing all bill of sale, deeds,
documents or instruments of sale, assignment, transfer or conveyance, reasonably
necessary or appropriate to vest in Buyer good, valid and marketable title to
all of the Assets, together with a valid assignment of all of Amtel's right,
title and interest in all of the Payphone Operating Assets which are contracts,
leases or licenses, in each case free and clear of any encumbrances
(collectively, the "Bill of Sale"). Buyer and Amtel specifically agree that the
Bill of Sale shall be in substantially the form and substance set forth in
Exhibits C, attached hereto and incorporated herein by this reference.
3
<PAGE> 8
1.1.4 LIABILITIES ASSUMED OR NOT ASSUMED BY BUYER. In
connection with the purchase of Payphone Operating Assets, whether through this
Agreement, Buyer shall not be obligated, assume or in any manner be or become
responsible for any liabilities of Amtel or its affiliates except those
liabilities set forth on "Exhibit D" hereto (the "Assumed Liabilities"). Without
limiting the foregoing, Buyer shall not be liable for (a) any taxes of Amtel for
any taxable period, including, without limitation, taxes incurred pursuant to
Section 1.1502-6 of the Treasury Regulations, or similar provisions under state,
local or foreign law, (b) any debt owed by Amtel to any creditor, whether
secured or unsecured whether or not scheduled by Amtel on the schedules filed in
the Bankruptcy Court, and whether or not a proof of claim has been filed with
respect to such debt, (c) any liability of Amtel arising from violations of
state or federal securities law, (d) any amount owed by Amtel to any present or
former employee, (e) any other amount for which Amtel is or may be deemed to be
liable, other than post-Closing obligations under the Location Agreements and
every other contract, lease, license, or agreement of Amtel that constitutes a
Payphone Operating Asset; or (f) expenses of administration in the Bankruptcy
case.
1.2 CONSIDERATION
1.2.1 GENERAL CONSIDERATION. Upon the terms and subject to
the conditions hereof, in reliance upon the
4
<PAGE> 9
representations, warranties, covenants and agreements of Amtel contained herein,
the Buyer will deliver the following consideration (the "Consideration"):
(a) Cash in the amount of Seven Million Dollars ($7
million); and (b) Shares of the Buyer's Common stock having
an "Established Value," as hereinafter defined, of not less
than Six Million Dollars ($6 million) (the "Common Stock").
No fractional shares shall be delivered in satisfaction of
this obligation. Rather, Buyer shall be obligated to deliver
the least number of shares of the Common Stock necessary to
provide an Established Value of not less than Six Million
Dollars; (c) Notwithstanding any provision of this Agreement
which may be construed to the contrary, Buyer may, in its
sole and exclusive discretion, elect to deliver cash in the
amount of six million dollars ($6 million) in place of the
Common Stock if, but only if, the Established Value of the
Common Stock is less than $3.50 per share. Buyer may
exercise this option, if at all, by filing with the
Bankruptcy Court, and serving upon Amtel, the OCL and the
OUCC, a written notice of that
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election not later than the date of the Closing described in
paragraph 1.4 below.
1.2.2 ADDITIONAL CONSIDERATION. In addition to the foregoing,
Buyer shall either (a) shall at its expense cause the Common Stock to be
registered in accordance with and pursuant to the Securities Act of 1933, and
Securities and Exchange Act of 1934, as soon as practicable, but in all events
not later than March 31, 1997; or (b) a "no action" letter from the Securities
Exchange Commission reasonably satisfactory to Amtel.
1.2.3 The Consideration Described in Paragraph
1.2.1 above shall be paid and delivered to Amtel as follows:
(a) UPON EXECUTION. Upon execution of this Agreement Buyer
shall deliver to Amtel cash in the amount of one million
three hundred thousand dollars ($1,300,000) as its earnest
money deposit (the "Non-Refundable Deposit"). The Non-
Refundable Deposit shall be deposited into an
interest-bearing special client's trust account maintained
by Robbins & Keehn, APC at Union Bank (San Diego Main
Branch) for the benefit of Amtel and the Buyer from which no
withdrawals may be made unless specifically authorized by a
written instruction executed by Amtel and Buyer, or an order
issued from the Bankruptcy Court. No
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request to withdraw any portion of the NonRefundable Deposit
shall be made except as contemplated by paragraph 6.9.4 and
without providing Buyer prior written notice and opportunity
to be heard with respect to the request. Any interest that
shall accrue on the Non-refundable Deposit through the
Closing Date as defined herein shall be credited against the
cash that the Buyer is obligated to deliver to Amtel at the
Closing; provided however, that if, for any reason the
Closing actually occurs on a date later than ten (10)
business days after the entry of the Enabling Order (i.e.
the defined Closing Date), then any such interest shall not
be credited against the cash that the Buyer is obligated to
deliver to Amtel at the Closing, but shall be retained by
Amtel.
(b) AT THE CLOSING. The balance of the Consideration shall
be paid and delivered to Amtel at the Closing pursuant
to paragraph 1.4 below.
1.3 CALCULATION OF ESTABLISHED VALUE. As used herein, "Established
Value" shall be determined by calculating the arithmetic average of the closing
price for the Common Stock on the ten business days ending on the fourth
business day preceding the date of the Closing (the "Test Period"). If there is
any day
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in the Test Period on which there are no trades, the closing price for such day
shall be deemed to be the closing price for the last date preceding such day on
which trading did occur.
1.4 THE CLOSING. Upon the terms and subject to the conditions contained
in this Agreement, the Closing of the transactions contemplated hereby, and the
execution and delivery of the Bill of Sale (the "Closing") will take place at
the offices of Robbins & Keehn, A Professional Corporation, 530 "B" Street,
Suite 2400, San Diego, California on or prior to 5:00 p.m. of the tenth (10th)
business day following the entry of the "Enabling Order" as hereinafter defined
(the "Closing Date"). The Closing may be continued by the written mutual consent
of Amtel and the Buyer to any date beyond the defined Closing Date which is
mutually acceptable to them.
1.5 DELIVERIES BY AMTEL. At the Closing, Amtel shall deliver to the
Buyer (unless previously delivered) the following:
(a) a certified copy of the Enabling Order;
(b) the Bill of Sale;
(c) a written acknowledgment of receipt of the
payments provided pursuant to this Agreement;
(d) authenticated resolutions of the Board of Directors
of HDT, ACS, ACF, ACI, and ACP approving this Agreement
and the form of the Bill of Sale; and
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(e) A certificate from the general manager of Amtel
certifying that all representations and warranties con
tained in Article II are true and correct as of the
Closing Date;
1.6 DELIVERIES BY THE BUYER. At the Closing the Buyer shall
deliver (unless previously delivered) the following to Amtel:
(a) Cash in the amount of $7 million less an amount
equal to the Non-refundable deposit plus interest that
has accrued thereon as of the defined Closing Date;
(b) (1) the Common Stock; or alternatively,
(2) cash in the amount of $6 million if Buyer makes the
election permitted by paragraph 1.2.1(c).
(c) A certificate evidencing the good standing of the
Buyer under the laws of the state of Ohio; and,
(d) Certified resolutions of the Board of Directors of
the Buyer approving this Agreement and the transactions
contemplated hereby.
ARTICLE II
AMTEL'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
Amtel represents and warrants to the Buyer as follows:
2.1 AUTHORIZATION; BINDING OBLIGATION. This Agreement has been duly and
validly executed and delivered by Amtel and,
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subject only to the authorization to be provided through the Enabling Order,
constitutes a legal, valid and binding obligation of HDT, ACS, ACF, ACI, and
ACP, and each of them, enforceable against them in accordance with its terms.
Amtel has the legal capacity and all requisite power and authority to execute
and deliver this Agreement as provided herein, and to perform Amtel's
obligations hereunder which by their nature are to be performed prior to the
Closing; and, upon entry of the Enabling Order, will have the legal capacity and
all requisite power to consummate the transactions contemplated hereby at the
Closing. Such execution, delivery and consummation has been duly and validly
authorized by all necessary action on the part of Amtel and, upon entry of the
Enabling Orders, the Bankruptcy Court.
2.2 CONSENTS AND APPROVALS. Except for the need to obtain the Enabling
Order neither the execution, delivery or performance of this Agreement will
require any consent, waiver, approval, authorization or permit of any
governmental unit, subdivision, or agency, or any other person or entity.
2.3 BROKERS. Amtel neither has nor will have any obligation to pay any
broker's, finder's, investment banker's, financial advisor's or similar fee in
connection with this Agreement or the Bill of Sale, or the transactions
contemplated hereby or thereby, by reason of any action taken by or on behalf of
Amtel.
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2.4 AVERAGE REVENUE. Amtel's average Payphone revenues as reflected on
its "Operating Reports" filed in the Bankruptcy Case for the calendar months of
October 1995 through April 1996, inclusive, accurately reflect the revenues
generated by Amtel's payphone operations for that period of time.
2.5 MINIMUM PAYPHONES. The Payphone Operating Assets include not less
than 7,500 pay telephones, at least 6,000 of which are installed and operating.
2.6 MINIMUM AVERAGE OF REMAINING TERM OF SITE LOCATION AGREEMENTS. The
average length of the remaining term for each payphone on all of the Location
Agreements, included as part of the Payphone Operating Assets (see Exhibit A),
is not less than twelve (12) months.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer represents and warrants to Amtel as follows:
3.1 ORGANIZATION AND STANDING. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. The Buyer has all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business and
operations as it is now being conducted.
3.2 AUTHORIZATION; BINDING OBLIGATION. The Buyer has all requisite
corporate power and authority to execute and deliver
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this Agreement and the other documents contemplated hereby and to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby and thereby by the Buyer
have been duly and validly authorized by the Board of Directors of the Buyer.
This Agreement has been validly executed and delivered by the Buyer and,
constitute legal, valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their terms.
3.3 BROKERS. Buyer does not have or will not have any obligation to pay
any broker's, finder's, investment banker's, financial advisor's or similar fee
in connection with this Agreement or the Other Documents, or the transactions
contemplated hereby or thereby, by reason of any action taken by or on behalf of
Buyer.
3.4 THE COMMON STOCK. The Common Stock described in paragraph 1.2.1(b)
as of the Closing will be validly issued, nonassessable, voting shares of Buyers
stock.
ARTICLE IV
ADDITIONAL COVENANTS
--------------------
4.1 CONDUCT OF BUSINESS OF AMTEL. Amtel agrees that from the date of
execution of this Agreement until the Closing (unless otherwise expressly
consented to in writing by the Buyer):
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4.1.1 Amtel shall carry on the Business with reasonable
diligence and substantially in the same manner conducted from and after January
1, 1996 ("Past Practice") and shall not institute any material changes not in
the ordinary course of business or inconsistent with Past Practice, except to
the extent that business or other exigencies compel such changes in order to
preserve, maintain or enhance the value of the Payphone Operating Assets before
such consent can be attained. Without limiting the generality of the foregoing,
Amtel will not, with respect to the Business (I) change the accounting methods,
principles or practices of the Business in any material respect from Past
Practice, (ii) revalue any of the assets of the Business, (iii) sell, lease,
transfer or otherwise dispose of any assets of the Business other than in the
ordinary course of business and consistent with Past Practice, or (iv) install
any telephones which will become new Amtel Payphones without the prior written
consent of Buyer, which consent will not be unreasonably withheld.
4.1.2 Amtel shall take such action as may be reasonable,
prudent and cost justified (I) to maintain, and preserve the Business; and (ii)
to maintain all of the "Hard Assets" described in paragraph 1.0 of Exhibit A in
good operating condition.
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4.1.3 Amtel shall duly comply with (I) all laws applicable to
the Business and its operations the failure to so comply with would have a
material adverse effect on the Business and (ii) all laws compliance with which
is required for the valid consummation of the transactions contemplated by this
Agreement.
4.1.4 Amtel shall not, without Buyer's prior written
approval, enter into, adopt, amend or terminate any employee benefit plan,
increase in any manner the compensation or fringe benefits of any officer or
employee or enter into any contract, agreement, commitment or arrangement to do
any of the foregoing. Notwithstanding any provision of the foregoing which may
be construed to the contrary, this Paragraph 4.1.4 does not apply to any
provision for the payment of bonuses to key management personnel which are, or
may hereafter be provided for by any provision of a Chapter 11 plan as to which
Amtel is a plan proponent, and for which the Buyer shall have no liability.
4.1.5 Amtel shall not enter into or offer to enter into any
employment or consulting agreement with any person except to the extent
necessary to aid in its efforts to obtain Confirmation of the Plan, or prosecute
or defend any litigation in which it is a party;
4.1.6 Amtel shall not take, or agree in writing or otherwise
to take, any of the foregoing actions or any action which would make any
representation or warranty of Amtel
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contained in this Agreement untrue or incorrect as of the date when made or, as
of any future date or which could prevent the satisfaction of any condition to
Closing.
4.2 FURTHER ASSURANCES; COOPERATION.
4.2.1 Upon execution of this Agreement, and after Amtel has
received the Non-Refundable Deposit, Amtel will provide Buyer with copies of all
pleadings and papers filed in the Bankruptcy Case pertaining to this Agreement
and/or the transactions that it contemplates. The purpose of this provision is
to provide Buyer with as much advance notice of and opportunity to comment upon
such pleadings and papers as the circumstances reasonably permit. Accordingly,
and except for the pleadings and papers described in the following sentence,
Amtel shall provide Buyer with copies of all such pleadings and papers at least
48 hours before such proposed filing. The calculation of this time shall exclude
intervening weekends and holidays prior to the time of the proposed filing. With
respect to any Chapter 11 Plan, Disclosure Statement, reply papers, papers
submitted pursuant to a Court order entered 10 or fewer days prior to the
deadline set in such order, or submitted as part of any emergency application to
the Bankruptcy Court, Buyer's copy shall be provided as soon as practical, with
an advanced draft as soon as practical, and the final version shall at a minimum
be transmitted to Buyer via telecopier concurrently with the filing
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<PAGE> 20
thereof. Buyer's execution of this agreement shall be deemed to constitute a
written request for copies of Amtel's Plan(s) and related Disclosure
Statement(s) within the meaning of Rule 3017(a) of the Federal Rules of
Bankruptcy Procedure.
4.2.2 The parties shall, from time to time after the Closing,
upon the request of any other party and without further consideration, execute,
acknowledge and deliver in proper form any further instruments, and take such
further actions as such other party may reasonably require, to carry out
effectively the intent of this Agreement and the Bill of Sale.
4.3 CONFIDENTIALITY. Amtel agrees that it will not (and will cause its
officers and directors to not) at any time after the Closing, without the prior
written consent of the Buyer, disclose or use any information obtained during
the negotiation or due diligence process nor any other confidential information
(relating to either the Buyer or Amtel) otherwise obtained except (i) as may be
necessary in connection with their filing and reporting obligations under the
Bankruptcy Code (Title 11 U.S.C.), the taxing authority of any governmental
agency, subdivision or unit, or any contract which is part of the Business; and
(ii) as may be necessary in connection with Seller's Plan and Disclosure
Statement; (iii) as may be necessary in connection with seeking approval of the
enabling orders; (iv) as ordered by Bankruptcy Court; (v) as required by the
taxing
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authority of any governmental agency, subdivision or unit or any contract which
is part of the business, and (vi) to the extent same is, or reasonably may be,
required by any provision of any applicable law.
4.4 PUBLICITY. None of the parties hereto shall issue any press release
or make any public statement regarding the transactions contemplated hereby,
without the prior approval of the other parties, which approval shall not be
unreasonably withheld, except as may be required by law or as necessary to
secure financing or obtain entry of the Enabling Order.
4.5 EXPENSES. Except as otherwise specifically provided for herein,
each party hereto shall be solely responsible for all expenses incurred by it or
on its behalf in connection with the preparation and execution of this Agreement
and the Bill of Sale and the consummation of the transactions contemplated
hereby and thereby, including, without limitation, the fees and expenses of its
counsel, accountants, brokers, finders, financial advisors and other
representatives.
4.6 FORWARDING OF PAYMENTS RECEIVED. Amtel shall immediately remit to
Buyer any monies received in respect of the Business after the Closing.
4.7 TRANSFER AND SIMILAR TAXES; INDEMNITY.
4.7.1 The parties agree that all transfer, sales, use, conveyance,
documentary or other similar taxes and fees
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(including penalties, interest and additions) arising out of or related to the
sale of the Payphone Operating Assets pursuant to this Agreement shall be borne
by the Buyer pursuant to California Civil Code section 1656.1. The payment of
Sales Tax shall be in addition to and not withheld from the consideration
described in paragraph 1.2 above. Buyer shall be entitled to allocate the total
consideration paid under this Agreement for the Payphone Operating Assets, and
Seller expressly agrees to support, and refrain from taking any position
inconsistent with, any written allocation of that consideration made by Buyer.
Notwithstanding any provision of this Agreement which may be construed to the
contrary, the parties agree that Buyer shall not be required to pay all, or any
portion of, any State or Federal income tax of Amtel, whether such income
tax(es) arises (arose) from the transactions contemplated by this Agreement or
otherwise.
4.7.2 By execution of this Agreement, Buyer, for itself and
all its successors in interest, covenants and agrees to pay any and all of the
sales, use, conveyance, documentary or similar taxes described in Paragraph
4.7.1 above if, to the extent that, and when such taxes become due; and,
expressly agrees to save, defend, and hold Amtel harmless from any and all
claims arising out of or related to Buyer's actual or claimed failure to pay
such taxes when due.
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4.8 DELIVERY OF FINANCIAL STATEMENT. Amtel shall continue to prepare
balance sheets and statements of revenue and expense ("Financial Statements") as
of the end of each month, consistent with its Prior Practice, and shall deliver
such Financial State ments to Buyer within three (3) business days after they
have been prepared, reviewed by its accounting manager, and finalized, but not
later than thirty (30) days after the end of each month.
4.9 EMPLOYEES. Amtel shall permit Buyer access to all employees of
Amtel at reasonable times. Upon or after the Closing, Buyer may employ any
employee of Amtel, upon such terms as Buyer and such employee may agree. Buyer
shall have no obligation to employ any employee of Amtel, and shall have no
obligation in respect of their employment with Amtel including any obligation in
respect of the termination of such employment.
4.10 DUTY TO OBTAIN COURT APPROVAL.
4.10.1 NECESSITY FOR COURT APPROVAL/DUTY TO OBTAIN. By
execution hereof the parties acknowledge and agree that (a) the sale of the
Payphone Operating Assets as provided in this Agreement is a transaction outside
of Amtel's ordinary course of business which requires prior authorization and
approval of the Bankruptcy Court pursuant to 11 U.S.C. section 363(b) and (f);
and, (b) the assumption by Amtel and simultaneous assignment to Buyer of the
"Location Agreements" (as described in paragraph 2.0 of Exhibit A) and every
other contract, license, lease or agreement
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that constitutes a part of the Payphone Operating Assets require prior
authorization and approval of the Bankruptcy Court pursuant to 11 U.S.C. section
365(a). Amtel shall move as promptly as practicable after the execution hereof,
with due notice to all persons entitled to notice thereof, including without
limitation each person asserting an interest in any of the Payphone Operating
Assets and each party (other than Amtel) to a Location Agreement and every other
contract, lease, license, or agreement of Amtel that constitutes a Payphone
Operating Assets, for an order of the Bankruptcy Court authorizing the sale of
the Payphone Operating Assets to the Buyer and the assumption and assignment to
the Buyer of each Location Agreement and every other contract, lease, license,
or agreement of Amtel that constitutes a Payphone Operating Asset, and shall use
its best efforts to cause the entry of such order. If the Bankruptcy Court is
unwilling to enter the Enabling Order except in connection with the confirmation
of a reorganization plan for Amtel, Amtel will as soon as practicable seek the
entry of an order confirming such a plan and incorporating the provisions of
such an Enabling Order.
4.10.2 ENABLING ORDER EFFECTIVE DATE. Except for obligations
which, by their nature, will be performed prior to entry of the Enabling Order,
including, without limitation, the performance of obligations under paragraphs
4.10.3 and 6.9 of
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<PAGE> 25
this Agreement, this Agreement shall not be valid and binding upon the parties
until the entry of the Enabling Order; PROVIDED HOWEVER, that upon entry of the
"Enabling Order," the binding effect of this Agreement shall relate back to the
first date hereinabove set forth (the "Effective Date"). The Enabling Order may,
but are not required to be, part of an order confirming Amtel's Chapter 11 plan
in the Bankruptcy Case.
4.10.3 NO OVERBID. The Buyer's original offer to purchase the
Payphone Operating Assets, was made under the express condition that if
accepted, it would not be subject to any form of overbid procedure, in the
Bankruptcy Court or otherwise. Amtel accepted the Buyer's offer upon those
terms. Accordingly, by execution of this Agreement, the parties hereto
acknowledge and agree that the transactions contemplated by this Agreement shall
not be subject to any form of overbid procedure in the Bankruptcy Court or
otherwise. In the event that the Bankruptcy Court, or any other person or
entity, compels Amtel to subject the transactions contemplated by this Agreement
to any overbid procedure, then, unless the Buyer waives the provisions of this
paragraph 4.10 in writing Amtel's acceptance of the offer, shall be deemed to
have been ineffective, all of the rights of both parties under this Agreement
shall automatically terminate, and the Nonrefundable Deposit (notwithstanding
its name) shall be returned forthwith to the Buyer, together with any
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and all interest earned thereon from the date of deposit to the
date of return.
4.11 PERMISSIBLE BACK-UP OFFERS; DUTY TO DISCLOSE BACK-UP
OFFERS.
4.11.1 Notwithstanding any provision of this Agreement which
may be construed to the contrary (including, without limitation, the "no
overbid" provisions of Paragraph 4.10.3 above), Amtel shall have the right to
negotiate with interested parties to obtain "Back-Up Offers" for transactions
which may include a sale or other disposition of the Payphone Operating Assets
at any time up to the actual date of the Closing provided that Amtel has reason
to believe that the Enabling Order will not be issued, that Buyer will not have
sufficient funds to satisfy its obligations hereunder, or that Buyer will not
consummate the Closing by the Closing Date for any other reason. Seller shall
have the right to obtain any authorization or approval necessary from the
Bankruptcy Court which reasonably may be necessary to authorize Amtel to enter
into and consummate transactions which are the subject of "Back-Up Offers" prior
to the Closing; provided however, that any order of the Bankruptcy Court
authorizing or approving Amtel's acceptance or performance of any Back-Up Offers
shall, by its express terms, make the authorization and/or approval conditional
upon Buyer's failure to close the transactions contemplated by this Agreement on
or
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before the Closing Date; notwithstanding the satisfaction of the conditions set
forth in paragraph 5.1. Any such order not containing that limitation shall be
conclusively presumed to create and constitute an "overbid procedure" within the
meaning of this Agreement, and in violation of paragraph 4.10.3 above.
4.11.2 Amtel shall disclose, to the Buyer, in writing, the
identity of the prospective purchaser under any Back-Up-Offer, the nature and
extent of the assets to be purchased, the nature and extent of the consideration
to be received, and the terms upon which the consideration is to be paid or
otherwise delivered. This writing shall be issued not later than three (3)
business days following the date that the Back-Up Offer is received by Amtel's
General Manager. In the event that Amtel makes any counterproposal to any such
Back-Up Offer, or the Back-Up Offer is otherwise modified or withdrawn, then a
follow-up written notice identifying the proposed and/or modified terms of the
prospective transaction shall be given not later than three (3) business days
following the date that either the counterproposal is made by Amtel or the
modification/withdrawal is received by Amtel's General Manager.
4.12 AUDIT COOPERATION. By execution of this Agreement Amtel
expressly covenants and agrees that it will make available documents and
personnel which are subject to its control and provide such other assistance as
may be reasonably be necessary
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to cooperate with any audit conducted by any firm of certified public
accountants engaged by Buyer for the purpose of auditing all or any portion of
Amtel's financial books and records or other documents relating to the Business.
4.13 SPECIAL PROVISIONS REGARDING COMMON STOCK.
4.13.1 Amtel represents and warrants that it intends to
distribute the Common Stock acquired pursuant to this Agreement only to its
creditors, in exchange for their claims, in accordance with the terms of the
Plan and after the entry of an order of the Bankruptcy Court confirming the Plan
(the "Confirmation Order"). Such distribution will be made in reliance on 11
U.S.C. section 1145 and on the exemption set forth therein from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), and any state or local law requiring registration for offer
or sale of a security (collectively referred to ans "Blue Sky Laws"). Amtel
agrees that it will not make such distribution unless:
(a) The confirmation Order includes a finding of fact that the Buyer is
a "successor" of Amtel within the meaning of 11 U.S.C. section 1145 and
a conclusion of law that the distribution qualifies for the exemption
from registration in that section, or;
(b) The Confirmation Order includes a conclusion of law that the
distribution either (I) qualifies for an exemption
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<PAGE> 29
(other than 11 USC section 1145) from the registration requirements of
the securities Act, and any applicable Blue Sky Law, or; (ii) is being
made in compliance with the Securities Act and any applicable Blue Sky
Law.
4.13.2 Prior to the entry of a Confirmation Order that
includes the finding and/or conclusion set forth in the foregoing paragraph,
Amtel, for itself and any successor in interest, including without limitation
any trustee appointed by the Bankruptcy Court, agrees that it will not for a
period of twenty-five months following the effective date of the Plan sell,
transfer, pledge or otherwise dispose of all or any portion of the Common Stock
(other than pursuant to an effective registration statement under the Securities
Act) without first delivering to the Buyer a written opinion of counsel,
reasonably satisfactory in form and substance to the Buyer, that there is
available therefor an exemption from the registration requirements of the
Securities Act.
4.13.3 The certificate representing the Common Stock to be
delivered to Amtel at the Closing will bear a legend which shall be in substance
substantially identical to the legend set forth in Exhibit E attached hereto and
incorporated herein by this reference (the "Restrictive Legend"). After the
entry of a Confirmation Order the includes the finding and conclusion set forth
in paragraph 4.13.1 and in connection with the distribution
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of the Common Stock pursuant to the Plan, at the request of Amtel, the Buyer
will cause such certificate to be replaced with certificates of Common Stock in
appropriate denominations for distribution under the Plan, which replacement
certificates will not bear the Restrictive Legend.
ARTICLE V
CONDITIONS TO CLOSING
---------------------
5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER.The obligation of
the Buyer to consummate the transactions contemplated hereby is subject to the
satisfaction or waiver on or before the Closing of each of the following
conditions:
5.1.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Amtel contained in this Agreement, or in the
Bill of Sale shall have been true and correct in all material respects when
made, and shall be true and correct in all material respects as of the Closing
Date as though made on and as of such date.
5.1.2 PERFORMANCE OF AGREEMENTS. Amtel shall have performed
and complied with all of the covenants and agreements contained in this
Agreement to be performed or complied with by them at or before the Closing.
5.1.3 ENABLING ORDER.
(a) The Enabling Order shall have been entered,
shall be in form and substance reasonably satisfactory
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to the Buyer, and such order shall not have been reversed, modified or amended
without the Buyer's consent, and shall not be the subject of any stay. The
Buyer's execution of an "approved as to form and substance" acknowledgment on
the Enabling Order shall conclusively establish this requirement. If the Buyer
does not execute such an "approved as to form and substance" acknowledgment,
then unless the Buyer objects in writing to the form or substance of the
Enabling Order within three (3) business days after it is entered, it shall be
conclusively deemed to be satisfactory in form and substance to the Buyer.
Without limiting Buyer's approval rights, the Enabling Order shall:
(1) Authorize Amtel to sell all of
the Payphone Operating Assets to the Buyer free and clear of all liens or other
interests under 11 U.S.C. section 363(f).
(2) Include a finding of fact that
the transfer by Amtel of the Payphone Operating Assets pursuant to the Enabling
Order will transfer to Buyer good and marketable title to those assets free and
clear of all liens, claims, and interest.
(3) Authorize Amtel to assume and
assign all of the Location Agreements and every other contract, lease, license,
or agreement of Amtel that constitutes a Payphone Operating Asset under 11
U.S.C. section 365(a).
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(4) Order that by performing its
obligations under the Agreement, the Buyer will not become liable for any debt
or obligation of Amtel, including without limitation the debts and obligations
described in paragraph 1.1.4(a)-(f) above, except only post-Closing obligations
under each of the Location Agreements and every other contract, lease, license,
or agreement of Amtel that constitutes a Payphone Operating Asset.
(5) Include a finding of fact that
notice of the motion for entry of the Enabling Order was duly served on all
persons entitled thereto.
(6) Include a finding of fact that
the Buyer shall acquire the Payphone Operating Assets in "good faith" within the
meaning of 11 U.S.C. section 363(m).
(7) Include a finding of fact that
Amtel has provided "adequate assurance," within the meaning of 11 U.S.C. section
365 (f)(2)(B), of the Buyer's ability to perform the obligations of Amtel under
each Location Agreements and every other contract, lease, license, or agreement
of Amtel that constitute a Payphone Operating Asset.
(8) Direct Amtel to cure (or
provide for cure with a segregated cash fund in the maximum amount required for
such cure) all defaults under any Location Agreement and every other contract,
lease, license, or agreement of Amtel that
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constitutes a Payphone Operating Asset not later than three business days after
the Closing.
(9) Provide that Amtel and any
successor in interest to Amtel, including any trustee appointed by the
Bankruptcy Court, is and shall be bound by the restrictions on transfer of the
Common Stock set forth in paragraph 4.13.2 hereof and in the Restrictive Legend.
5.1.4 MINIMUM PAYPHONES. The Payphone Operating Assets
include not less than 7,500 pay telephones, at least 6,000 of which are
installed and operating.
5.1.5 MINIMUM AVERAGE OF REMAINING TERM OF SITE LOCATION
AGREEMENTS. The average length of the remaining term on each of the payphones on
all of the Location Agreements, included as part of the Payphone Operating
Assets (see Exhibit A), is not less than twelve (12) months.
5.1.6 INJUNCTION. There shall not have been entered an order
of a court of competent jurisdiction enjoining or prohibiting consummation of
the sale and purchase of Payphone Operating Assets contemplated by this
Agreement, other than an injunction or prohibition entered against Buyer solely
by reason of facts pertaining to Buyer (e.g. if Buyer's shareholders obtain an
injunction to block consummation of the sale).
5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF AMTEL. The
obligations of Amtel to consummate the transactions contemplated
29
<PAGE> 34
hereby are subject to the satisfaction or waiver (subject to applicable Law) on
or before the Closing of each of the following conditions:
5.2.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Buyer contained in this Agreement on or
before the Closing pursuant hereto shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects as of the Closing Date as though made on and as of such date.
5.2.2 PERFORMANCE OF AGREEMENTS. The Buyer shall have
performed and complied with all of the covenants and agree ments contained in
this Agreement to be performed or complied with by the Buyer at or before the
Closing.
5.2.3 ADVERSE PROCEEDINGS. No claim, action, suit,
investigation or governmental proceeding shall be pending, and no law of any
Governmental Authority shall be enacted, rendered or in force, which would
render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement and the Other Documents to be executed and
delivered pursuant hereto.
5.2.4 ENABLING ORDER. The Enabling Order has been entered by
the Bankruptcy Court, and no order staying the effect of the Enabling Order has
been entered.
5.2.5 INJUNCTION. There shall not have been entered an order
of a court of competent jurisdiction enjoining
30
<PAGE> 35
or prohibiting consummation of the sale and purchase of Payphone Operating
Assets contemplated by this Agreement.
ARTICLE VI
MISCELLANEOUS
-------------
6.1 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES.
6.1.1 This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns. This Agreement and the rights and obligations
of the Buyer and Amtel hereunder may not be assigned by any of the parties
hereto without the prior written consent of the other parties.
6.1.2 This Agreement is not intended, nor shall it be
construed, to confer upon any person or entity except the parties hereto and
their heirs, successors and permitted assigns any rights or remedies under or by
reason of this Agreement.
6.2 EXHIBITS. All Exhibits annexed hereto referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein.
6.3 ENTIRE AGREEMENT. This Agreement, including the Exhibits
hereto and the documents, schedules, certificates and instruments referred to
herein, embody the entire agreement and understanding of the parties hereto in
respect of the transactions contemplated by this Agreement. This Agreement
31
<PAGE> 36
supersedes all prior agreements, arrangements and understandings of the parties
with respect to such transactions.
6.4 WAIVER OF COMPLIANCE. No amendment, modification, alteration,
supplement or waiver of compliance with any obligation, covenant, agreement,
provision or condition hereof or consent pursuant to this Agreement shall be
effective unless evidenced by an instrument in writing executed by all of the
parties or in the case of a waiver, the party against whom enforcement of any
waiver, is sought. Any waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement, provision or condition shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure.
6.5 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
6.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.7 HEADINGS. The table of contents, article and section headings
contained in this Agreement are for convenience only and shall not control or
affect in any way the meaning or interpretation of the provisions of this
Agreement. By execution
32
<PAGE> 37
hereof the parties acknowledge and agree that each has participated in the
negotiation in development of terms and conditions reflected in this Agreement,
and that in so doing, neither has operated under any unfair disparity of
bargaining power with respect to the other. Accordingly, no provision of this
Agreement is to be interpreted for or against either party because that party or
his legal representative may have drafted such provisions.
6.8 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the State of California without
giving effect to the conflicts of law principles of such jurisdiction. The
United States District Court for the Southern District of California (which term
includes the United States Bankruptcy Court for the Southern District of
California) shall have the exclusive jurisdiction to resolve any and all claims
and controversy between the Buyer and Amtel arising from or related to this
Agreement.
6.9 TERMINATION.
6.9.1 TERMINATION BY AMTEL. This Agreement may be
terminated without breach by Amtel:
(a) if all of the conditions to the obligations of
Buyer set forth in paragraph 5.1 have been
satisfied or waived on or before the Closing Date,
33
<PAGE> 38
and the Closing has not been fully consummated by the
Closing Date; or, (b) if the Closing has not occurred by
December 31, 1996, and Amtel is not in default of its
obligations under this Agreement.
6.9.2 TERMINATION BY BUYER. This Agreement may be
terminated without breach by Buyer:
(a) Pursuant to the provisions of paragraph
4.10.3 above;
(b) If the Conditions to the obligations of
Amtel hereunder set forth in paragraph 5.2 above have been satisfied or waived
and the Closing has not occurred on or before the Closing Date; or,
(c) If the Closing has not occurred by December
31, 1996, and Buyer is not in default of its obligations under this Agreement.
6.9.3 BY MUTUAL CONSENT. Amtel and the Buyer
may, subject to the provisions of Rule 9019(a) of the Federal Rules of
Bankruptcy Procedure to the extent that it would be applicable, terminate this
Agreement without breach at any time by their mutual consent expressed and
memorialized in writing.
6.9.4 DISPOSITION OF NONREFUNDABLE DEPOSIT. If this
Agreement is terminated by Amtel pursuant to paragraph 6.9.1(a) above, then
Amtel shall retain the Nonrefundable Deposit
34
<PAGE> 39
and all interest earned thereon free and clear of all claims of Buyer. If this
Agreement is terminated pursuant to paragraphs 6.9.1(b) above, or by Buyer
pursuant to paragraph 4.10.3 or 6.9.2 above, or by mutual consent pursuant to
paragraph 6.9.3 above, then the Nonrefundable Deposit, together with all
interest earned thereon, shall be returned to Buyer within three (3) business
days after such termination.
6.10 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally, telecopied (with confirmation of receipt),
delivered by nationally recognized overnight express service or sent by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses:
(a) If to the Buyer to:
PhoneTel Technologies, Inc.
650 Statler Officer Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone: (216) 241-2555
Telecopy: (216) 241-2574
Attention: Chief Executive Officer
35
<PAGE> 40
Copy to:
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Stephen M. Banker, Esq.
(b) If to Amtel:
Amtel Communications, Inc.
5452 Oberlin Drive, Suite B
San Diego, California 92121
Copy to:
L. Scott Keehn
ROBBINS & KEEHN
530 "B" Street, Suite 2400
San Diego, California 92101
Jeffry A. Davis, Esq.
GRAY CARY, WARE & FREIDENRICH
401 B Street, Suite 1700
San Diego, California 92101
Gerald N. Sims, Esq.
PYLE SIMS DUNCAN & STEVENSON
401 B Street, Suite 1500
San Diego, California 92101
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
6.10.A BREAK-UP FEE. In the event that the Bankruptcy Court approves a
transaction, or confirms a plan of reorganization or liquidation, other than a
transaction or plan
36
<PAGE> 41
which PhoneTel approves, which renders Amtel unable to: (i) obtain the Enabling
Order as defined in this Agreement, or; (ii) perform its obligations under this
Agreement, then, and only then, Phonetel will be entitled to a Break-Up Fee of
$300,000.00. It is expressly understood between the parties that the obligation
to pay this Break-Up Fee does not arise if Amtel defaults its obligations under
this Agreement except as specifically set forth in this paragraph. PhoneTel
understands and acknowledges that, in the event Amtel defaults the Agreement
without obtaining approval of another transaction or Chapter 11 plan, PhoneTel
will not be entitled to the Break-Up Fee or any administrative claim related to
the Break-Up Fee. Notwithstanding the provisions of Section 6.9, the provisions
of this Section 6.10.A shall survive for six (6) months following termination of
this Agreement.
/ / / / /
/ / / / /
/ / / / /
37
<PAGE> 42
6.11 AMTEL. As used herein, the term "Amtel" means ACI-Co., ACS, ACF,
ACI, and ACP, and each of them, and also includes all of their successors in
interest, including, without limitation any Trustee appointed pursuant to any
provision of Title II of the United States Code.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, on the day and year first above written.
HDT SUPPLY COMPANY, a
California corporation,
AMTEL COMMUNICATIONS SERVICES, a
California corporation,
AMTEL COMMUNICATIONS CORRECTIONAL
FACILITIES, a California
corporation,
AMTEL COMMUNICATIONS, INC., a
California corporation,
AMTEL COMMUNICATIONS PAYPHONES,
INC., a California corporation
By: /s/ Alan Kaniss
-----------------------------------
Alan Kaniss, General Manager
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter Graf
----------------------------------
Name: Peter Graf
Title: Chairman and CEO
<PAGE> 43
EXHIBIT A
PAYPHONE OPERATING ASSETS
The "Payphone Operating Assets" consist of all of the following
categories of tangible and intangible property of Amtel:
1.0 HARD ASSETS. All of Amtel's pay telephones, pay telephone equipment and
related components, pedestals, enclosures, accessories, and other inventory,
goods, fixtures, furniture, vehicles, office equipment, trade fixtures, and/or
equipment which are not specifically identified or described as Reserved Assets
on "Exhibit B" attached hereto.
2.0 LOCATION AGREEMENTS. All of Amtel's right, title, interest, and claim
arising under the site location Agreements for the pay telephones referenced in
paragraph 1.0 above attached hereto and incorporated herein by this reference.
3.0 OTHER GENERAL INTANGIBLES. All trademarks, trade names, copyrights,
trade secrets, good will, patents, computer tapes, customer lists, documents
containing names, addresses, telephone numbers and other information regarding
Amtel's customers, subscribers, tapes, programs, print outs, disks, and other
material and documents relating to the recording or analyzing of any of the
foregoing; together with all rights title and interest to network contracts,
customer contacts for the furnishing by Amtel of Telecommunication Services, and
billing and collection contracts; and all records, documents relating to any and
all of the foregoing, including, without limitation, all records in the form of
writing, microfilm, microfiche, tape or electronic media.
4.0 CHOSES IN ACTION. All choses in action, or rights to recover money or
property from any person or entity, arising out of, or related to actual or
claimed violations of the automatic stay (11 U.S.C. Sec. 362(a)), together with
any and all causes of action or claims which could otherwise have been asserted
by Amtel based upon any breach of contract, wrongful interference with the
Business, or any other act or omission committed, or omitted (other than a
failure to pay an account receivable or money otherwise payable to Amtel), in
connection with the Business which acts were committed, or omitted at any time
prior to the Closing.
5.0 DEPOSITS. Any and all deposits of cash made by Amtel with any person or
entity, other than deposits made to landlords with respect to Amtel's
obligations under leases which are not assumed
EXHIBIT A
<PAGE> 44
by Buyer pursuant to the terms of this Agreement.
6.0 GENERAL SCOPE. Any item of property described in paragraphs 1.0 through
4.0 above include all property which was "property of the estate" for any of the
Amtel entities, at any time on or after August 3, 1995, and prior to the
Closing; AND is also "property of the estate" on and as of the Closing. As used
here in the term "property of the estate," means and refers to any item of
property which is or would have been property of the estate of any of the Amtel
entities as that term is defined and established in 11 U.S.C. section 541.
EXHIBIT A
2
<PAGE> 45
EXHIBIT B
RESERVED ASSETS
The "Reserved Assets" consist of all of the following categories
of tangible and intangible property of Amtel:
1.0 HARD ASSETS. All of the pay telephones, pay telephone equipment and
related components, pedestals, enclosures, accessories and related inventory
which is part of:
1.1 The "Elcotel Sequestered Collateral" described on "Exhibit B-1"
attached hereto;
1.2 The Protel "Surplus Inventory" described on "Exhibit B-2" attached
hereto; or,
1.3 The "Released Payphones" described in "Exhibit B-3" attached hereto
which will be returned to Texas Coin Phone, a Texas general
partnership.
2.0 LOCATION AGREEMENTS. All of Amtel's right, title, interest and claim
arising out of any of the site location agreements applicable to any of the
Released Payphones described in "Exhibit B-3" attached hereto and incorporated
herein by this reference.
3.0 OTHER GENERAL INTANGIBLES.
3.1 Any and all telephone accounts, and accounts receivable arising
from telecommunications services rendered to an end user prior to
the Closing Date (the "End User Accounts") to a regional Bell
operating company, a Bell operating company, local exchange
company, credit card company or provider of local telephone
services (each a "LEC") for billing, collection and rights in and
to any of the telephone receivables, debts, and other accounts
payable to Amtel by any LEC and all cash and noncash proceeds from
the foregoing, which first arose prior to the Effective Date of the
Agreement, and remain uncollected as of the Closing;
3.2 All of debtor's cash and cash equivalents;
3.3 All rights with respect to insurance policies owned by Amtel; and
3.4 All tax or other refund claims held by Amtel against any
governmental agency, subdivision or unit.
EXHIBIT B
<PAGE> 46
4.0 CHOSES IN ACTION. Any and all causes of action or entitlement to recover
money or property against any person or entity which may be asserted by Amtel
pursuant to any of the provisions of Chapter 5 of the United States Bankruptcy
Code ("Title 11 U.S.C."). This includes, without limitation, the adversary
proceedings now pending in the Bankruptcy Court against the following
Defendants: Scott Mitchell, an individual, dba Payphones USA, Inc. (Adv. Case
No. 95-90805); Mountain States Payphones (Adv. Case No. 95-90805).; Orange
County Wings, et al. (Adv. Case No. 95-90805); Randy Kuhlmann (Adv. Case No. 96-
90245); David Darling (Adv. Case No. 96-90275); Four-Star Cinema, Inc., a
California Corporation dba Family Four Cinemas (Adv. Case No. 96-90318); Austin
Entertainment Group, Inc., a Texas Corporation dba The Roxy (Adv. Case No.
96-90349); Pacific Bell, (Public Utilities Commission Case No. 95-08-062); AT&T
Communications, Inc., a Delaware Corporation; AT&T Corp., a New York
Corporation; AT&T Communications Interexchange Companies, an association or
business entity, form unknown (Adv. Case No. 96-90318)
5.0 DEPOSITS. All deposits given to landlords for leases which have not been
assumed by the Buyer pursuant to the terms of this Agreement.
6.0 GENERAL SCOPE. Any item of property described in paragraphs 1.0 through 4.0
above include all property which was "property of the estate" for any of the
Amtel entities, at any time on or after August 3, 1995, and prior to the
Closing; AND is also "property of the estate" on and as of the Closing. As used
here in the term "property of the estate," means and refers to any item of
property which is or would have been property of the estate of any of the Amtel
entities as that term is defined and established in 11 U.S.C. section 541.
EXHIBIT B
2
<PAGE> 47
EXHIBIT B-1
ELCOTEL SEQUESTERED COLLATERAL
The Elcotel Sequestered collateral consists of the following Elcotel
products:
A. New/used Pay Telephones 1,337
B. Booths & enclosures 619
EXHIBIT B-1
<PAGE> 48
EXHIBIT B-2
SURPLUS INVENTORY
The Surplus Inventory consists of the following Protel products:
A. New Pay Telephones 1,002
B. Used Pay Telephones 152
C. Miscellaneous Telephone Circuit Boards 10
EXHIBIT B-2
<PAGE> 49
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)261-7889 5TH STREET GROCERY Com Opt 16 Per 0.00
3013 5TH STREET Add Opt 0 Per 0.00
STAFFORD TX 77477-
(713)928-7925 6-12 DRIVE IN Com Opt 2 Per 20.00
612 MARCARIO GARCIA Add Opt 0 Per 0.00
HOUSTON TX 77011-
(713)464-9846 99 CENTS STORE Com Opt 16 Per 0.00
10120 HAMMERLY Add Opt 0 Per 0.00
HOUSTON TX 77080-
Com Opt 2 Per 25.00
Add Opt 0 Per 0.00
(713)731-0713 ALL AROUND CAR CARE Com Opt 15 Per 0.00
8601 MLK Add Opt 0 Per 0.00
HOUSTON TX 77033-
(713)575-7136 ATLAS DELI & IMPORTS Com Opt 16 Per 0.00
6692 HIGHWAY 6 SOUTH Add Opt 0 Per 0.00
HOUSTON TX 77083-
(713)669-7659 AUTO CARE Com Opt 16 Per 0.00
6703 ADLER Add Opt 0 Per 0.00
HOUSTON TX 77081-
(713)692-9639 B & J LIQUOR Com Opt 15 Per 0.00
5202 1/2 YALE Add Opt 0 Per 0.00
HOUSTON TX 77091-
(713)988-4054 B BEST CAR WASH Com Opt 2 Per 25.00
6705 ROOKIN Add Opt 0 Per 0.00
HOUSTON TX
(713)671-9926 BALI HAI FOOD Com Opt 2 Per 20.00
2305 SAKOWITZ Add Opt 0 Per 0.00
HOUSTON TX 77020-
(713)232-0958 BECERRAS GROCERY Com Opt 2 Per 20.00
500 SECOND Add Opt 0 Per 0.00
ROSENBERG TX 77471-
(713)232-0951 BEST FLEA MARKET Com Opt 16 Per 0.00
4020 AVENUE H Add Opt 0 Per 0.00
ROSENBERG TX 77471-
</TABLE>
EXHIBIT B 3
<PAGE> 50
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)524-8044 BLODGETT FISH MARKET Com Opt 15 Per 0.00
2603 BLODGETT Add Opt 0 Per 0.00
HOUSTON TX 77004-
(713)774-2083 BRAEBURN LIQUOR Com Opt 16 Per 0.00
9906 SOUTH GESSNER Add Opt 0 Per 0.00
HOUSTON TX 77071-
(713)232-0934 BRAZOS BEND SHELL Com Opt 2 Per 30.00
(713)232-0949 1010 JACKSON Add Opt 0 Per 0.00
RICHMOND TX 77469-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(713)228-2745 CAFE EVITA'S Com Opt 13 Per 0.00
1246 LORRAINE Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)954-7228 CAMERON H. BEVIS TRUST#50 Com Opt 2 Per 20.00
6234 RICHMOND Add Opt 0 Per 0.00
HOUSTON TX
(713)921-7205 CATRACHITAS LOUNGE Com Opt 15 Per 0.00
211 WAYSIDE Add Opt 0 Per 0.00
HOUSTON TX 77011-
Com Opt 13 Per 0.00
Add Opt 0 Per 0.00
(713)534-6194 CORTEZ AUTO REPAIR Com Opt 2 Per 30.00
2902 MAIN Add Opt 0 Per 0.00
DICKENSON TX 77539-
(713)941-1467 COUNTRY LIQUOR Com Opt 2 Per 20.00
11017 FUQUA Add Opt 0 Per 0.00
HOUSTON TX 77089-
(713)988-1063 COURTYARDS ON HILLCROFT Com Opt 2 Per 30.00
(713)988-1421 7303 HILLCROFT Add Opt 0 Per 0.00
HOUSTON TX 77081-
(713)869-8624 CRYSTAL DETAIL SHOP Com Opt 16 Per 0.00
7503 N. MAIN STREET Add Opt 0 Per 0.00
HOUSTON TX 77022-
</TABLE>
EXHIBIT B 3
2
<PAGE> 51
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)991-0106 CRYSTAL SPRINGS APARTMENT Com Opt 16 Per 0.00
5900 SELINSKY Add Opt 0 Per 0.00
HOUSTON TX 77048-
(713)228-2742 CULLEN & POLK TEXACO Com Opt 16 Per 0.00
4104 POLK Add Opt 0 Per 0.00
HOUSTON TX 77023-
(713)643-0695 CULLEN TIRE MART Com Opt 16 Per 0.00
6525 BELLFORT Add Opt 0 Per 0.00
HOUSTON TX 77087-
(713)643-3573 DAIRY MAID Com Opt 15 Per 0.00
7102 BELLFORT Add Opt 0 Per 0.00
HOUSTON TX 77087-
(713)587-9504 DISCOS LATINOS Com Opt 15 Per 0.00
12325 VETERANS MEMORIAL DRIVE Add Opt 0 Per 0.00
HOUSTON TX 77014-
(713)869-8192 DISCOUNT LIQUOR #5 Com Opt 2 Per 25.00
1003 1/2 ENID Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)464-9909 DOW PHARMACY Com Opt 16 Per 0.00
8800 LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)480-9924 EL DORADO MINI MART Com Opt 16 Per 0.00
375 EL DORADO Add Opt 0 Per 0.00
WEBSTER TX 77598-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(713)921-5032 EL PETATE RESTAURANT Com Opt 16 Per 0.00
7433 CANAL Add Opt 0 Per 0.00
HOUSTON TX 77011-
(713)455-0070 ELITE WASHATERIA Com Opt 2 Per 25.00
818 UVALDE Add Opt 0 Per 0.00
HOUSTON TX 77015-
Com Opt 16 Per 0.00
Add Opt 0 Per 0.00
</TABLE>
EXHIBIT B 3
3
<PAGE> 52
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)669-7662 FRUITLANDIA Com Opt 16 Per 0.00
3818 LINK VALLEY Add Opt 0 Per 0.00
HOUSTON TX 77025-
Com Opt 2 Per 20.00
Add Opt 0 Per 0.00
(713)954-9475 GOOD EATS RESTAURANT Com Opt 15 Per 0.00
11129 WESTHEIMER Add Opt 0 Per 0.00
HOUSTON TX 77042-
(713)941-8751 GUADALAJARA MEAT MARKET Com Opt 15 Per 0.00
3808 S. SHAVER Add Opt 0 Per 0.00
HOUSTON TX 77587-
(409)986-7994 GULF HOLIDAY R.V. PARK Com Opt 15 Per 0.00
8330 HIGHWAY 6 Add Opt 0 Per 0.00
HITCHCOCK TX 77563-
(713)988-2739 HARRISONS BARBER SHOP Com Opt 15 Per 0.00
1010-H BISSONET Add Opt 0 Per 0.00
HOUSTON TX 77036-
(713)869-8308 HEIGHTS TERRACE APARTMENT Com Opt 15 Per 0.00
1449 HEIGHTS Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)228-3178 HONEY COMB DRIVE IN Com Opt 2 Per 30.00
115 A PALMER Add Opt 0 Per 0.00
HOUSTON TX 77003-
(713)988-7560 HOUSTON BAPTIST UNIVERSIT Com Opt 2 Per 20.00
(713)988-5845 7502 FONDREN ROAD Add Opt 0 Per 0.00
(713)988-3078 HOUSTON TX 77074-
(713)988-4038
(713)988-7433
(713)988-2366
(713)988-7516
(713)988-4235
(713)988-3950
(713)954-9059 INDIA GROCERS Com Opt 16 Per 0.00
5604 HILLCROFT Add Opt 0 Per 0.00
HOUSTON TX 77036-
</TABLE>
<PAGE> 53
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)988-6128 INDIA GROCERS Com Opt 15 Per 0.00
9683 SOUTHWEST FREEWAY Add Opt 0 Per 0.00
HOUSTON TX
(713)464-9750 J & J TIRE SHOP Com Opt 2 Per 25.00
8117 LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)455-9782 JACK IN THE BOX Com Opt 15 Per 0.00
1395 FEDERAL ROAD Add Opt 0 Per 0.00
HOUSTON TX 77015-
(713)921-0098 JEANIE'S LIQUOR STORE Com Opt 15 Per 0.00
4801 CANAL Add Opt 0 Per 0.00
HOUSTON TX 77011-
(713)228-0817 JESSE GALINDO PHILLIPS 66 Com Opt 16 Per 0.00
2303 NORTH MAIN Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)751-0640 JORDON'S WASHATERIA Com Opt 2 Per 25.00
2722 NAPOLEAN Add Opt 0 Per 0.00
HOUSTON TX 77004-
(713)692-9669 KEE'S FULTON GROCERY Com Opt 2 Per 25.00
9812 FULTON Add Opt 0 Per 0.00
HOUSTON TX
(713)590-6778 KETTLE RESTAURANT Com Opt 6 Per 0.00
(713)590-5895 15360 KENNEDY BLVD Add Opt 0 Per 0.00
HOUSTON TX
(713)524-6773 KING COLE LIQUOR Com Opt 2 Per 20.00
(713)524-8714 1802 RICHMAND AVENUE Add Opt 0 Per 0.00
HOUSTON TX 77098-
(713)575-7170 KING SOLOMANS SVC Com Opt 16 Per 0.00
(713)575-7148 12313 BELLAIRE Add Opt 0 Per 0.00
HOUSTON TX 77072-
(713)669-7670 L & L AUTOMOTIVE Com Opt 2 Per 25.00
(713)669-7671 10722 SOUTH MAIN STREET Add Opt 0 Per 0.00
HOUSTON TX 77025-
(713)228-2735 L & L FOOD STORE Com Opt 2 Per 25.00
1423 GREGG Add Opt 0 Per 0.00
HOUSTON TX 77020-
</TABLE>
EXHIBIT B 3
5
<PAGE> 54
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)688-9754 LA AZTECA Com Opt 2 Per 25.00
7635 LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)699-2984 LA MICHOACANA Com Opt 16 Per 0.00
(713)699-2985 7502 FULTON Add Opt 0 Per 0.00
HOUSTON TX 77022-
(713)575-7191 LA MORELIANA Com Opt 16 Per 0.00
(713)575-7193 10769 BELLFORT Add Opt 0 Per 0.00
HOUSTON TX 77099-
(713)464-9755 LA RAZA LIQUOR STORE Com Opt 2 Per 25.00
1851 BINGLE Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)455-9867 LAMP LIGHT TERRACE Com Opt 15 Per 0.00
1110 KEYPORT LANE Add Opt 0 Per 0.00
HOUSTON TX 77015-
(713)855-7961 LANGHAM CREEK HI SCHOOL Com Opt 2 Per 20.00
(713)855-7962 17610 RM 529 Add Opt 0 Per 0.00
HOUSTON TX 77095-
(713)579-9962 LIQUOR MART #4 Com Opt 16 Per 0.00
964 SOUTH FRY ROAD Add Opt 0 Per 0.00
KATY TX 77450-
Com Opt 2 Per 25.00
Add Opt 0 Per 0.00
(713)643-0294 MAHERS SERVICE STATION Com Opt 2 Per 25.00
6399 LONG DRIVE Add Opt 0 Per 0.00
HOUSTON TX 77087-
(713)524-8581 MAI HAN CAFE Com Opt 15 Per 0.00
3316 MILAM Add Opt 0 Per 0.00
HOUSTON TX 77006-
(713)228-2734 MARKET STREET GROCERY Com Opt 15 Per 0.00
3808 MARKET STREET Add Opt 0 Per 0.00
HOUSTON TX 77020-
(713)228-0816 MAS DISTRIBUTORS Com Opt 16 Per 0.00
2221 FULTON Add Opt 0 Per 0.00
HOUSTON TX 77009-
</TABLE>
EXHIBIT B 3
6
<PAGE> 55
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)455-9839 MATAMOROS MEAT MARKET Com Opt 15 Per 0.00
14660 WILLISVILLE Add Opt 0 Per 0.00
HOUSTON TX 77015-
(713)688-9847 MEMORIAL MARKET Com Opt 2 Per 30.00
(713)688-9844 7925 KATY FREEWAY Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)232-0959 MR SEAFOOD MARKET Com Opt 16 Per 0.00
2309 AVENUE H Add Opt 0 Per 0.00
ROSENBERG TX 77471-
(713)590-4034 NABEL SUPERMARKET Com Opt 15 Per 0.00
4303 CHARRITON Add Opt 0 Per 0.00
HOUSTON TX 77039-
(713)691-5451 OXFORD PLACE APARTMENTS Com Opt 15 Per 0.00
(713)691-5443 605 BERRY ROAD Add Opt 0 Per 0.00
HOUSTON TX 77022-
(713)524-6860 PARK PLAZA HOSPITAL Com Opt 13 Per 0.00
(713)524-6862 1313 HERMAN DRIVE Add Opt 2 Per 15.00
(713)524-6890 HOUSTON TX 77004-
(713)524-6733
(713)524-6756
(713)524-6794
(713)524-6894
(713)524-6672
(713)524-6769
(713)524-6841
(713)524-6944
(713)524-6948
(713)524-6950
(713)524-6753
(713)524-6801
(713)524-6762
(713)869-8085 PONDEROSA APARTMENTS Com Opt 15 Per 0.00
214 W. 17TH Add Opt 0 Per 0.00
HOUSTON TX 77008-
(713)741-8075 QUICK PICK FOOD STORE Com Opt 2 Per 20.00
(713)741-8074 4438 GRIGGS Add Opt 0 Per 0.00
HOUSTON TX 77021-
</TABLE>
EXHIBIT B 3
7
<PAGE> 56
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)928-7976 QUICK STORE Com Opt 2 Per 30.00
(713)928-8192 91 SOUTH LOCKWOOD Add Opt 0 Per 0.00
HOUSTON TX 77011-
(713)587-9481 RAMADA LIMITED Com Opt 16 Per 0.00
15725 BAMMEL VILLAGE DRIVE Add Opt 0 Per 0.00
HOUSTON TX 77014-
Com Opt 16 Per 0.00
Add Opt 0 Per 0.00
(713)524-8732 SAM'S BURGER/LAN PHAM Com Opt 2 Per 25.00
4320 ALMEDA Add Opt 0 Per 0.00
HOUSTON TX 77004-
(713)434-0879 SAM'S TEXACO Com Opt 16 Per 0.00
4515 WEST FUQUA Add Opt 0 Per 0.00
HOUSTON TX 77045-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(713)731-0601 SANDY'S CAR CARE CENTER Com Opt 2 Per 25.00
11226 CULLEN Add Opt 0 Per 0.00
HOUSTON TX 77047-
(713)534-6443 SHAW GAS MART Com Opt 16 Per 0.00
(713)534-6524 2901 HIGHWAY 3 Add Opt 0 Per 0.00
DICKENSON TX 77539-
(713)991-7901 SHOP & LO Com Opt 15 Per 0.00
10855 TELEPHONE ROAD Add Opt 0 Per 0.00
HOUSTON TX 77075-
(713)434-0830 SM FOOD MART #2 Com Opt 16 Per 0.00
(713)434-0838 15216 SOUTH POST OAK Add Opt 0 Per 0.00
HOUSTON TX 77053-
(713)671-9885 SNOW FLAKE DONUT Com Opt 15 Per 0.00
5205 LOCKWOOD Add Opt 0 Per 0.00
HOUSTON TX 77026-
(713)721-3831 SOUTH MAIN GARAGE Com Opt 2 Per 20.00
14301 SOUTH MAIN Add Opt 0 Per 0.00
HOUSTON TX 77035-
</TABLE>
EXHIBIT B 3
8
<PAGE> 57
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)464-9735 SOUTHERN GROCERY Com Opt 15 Per 0.00
10070 LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
Com Opt 16 Per 0.00
Add Opt 0 Per 0.00
Com Opt 2 Per 20.00
Add Opt 0 Per 0.00
(409)740-3805 STOP AND SHOP Com Opt 15 Per 0.00
(409)740-2795 5201 BROADWAY Add Opt 0 Per 0.00
GALVESTON TX 77551-
(713)447-9010 SUPERMERCADO LA MEXICANA Com Opt 15 Per 0.00
11214 VETERANS MEMORIAL DRIVE Add Opt 0 Per 0.00
HOUSTON TX 77067-
(713)988-5256 T & K CHINESE RESTAURANT Com Opt 16 Per 0.00
9140 BELLAIRE Add Opt 0 Per 0.00
HOUSTON TX 77036-
(713)671-9850 T'S MINI MART Com Opt 2 Per 30.00
(713)671-9811 3604 OATES ROAD Add Opt 0 Per 0.00
HOUSTON TX 77013-
(713)869-8436 TAQUERIA OCOTLAN Com Opt 16 Per 0.00
2523 AIRLINE Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)643-0911 THAI XUAN VILLAGE Com Opt 15 Per 0.00
8200 BROADWAY BLVD. Add Opt 0 Per 0.00
HOUSTON TX 77061-
(713)524-2342 THE CALIFORNIAN Com Opt 15 Per 0.00
1508 CALIFORNIA Add Opt 0 Per 0.00
HOUSTON TX 77006-
(713)228-2744 THE THREE COMPADRES Com Opt 16 Per 0.00
1912 NORTH MAIN Add Opt 0 Per 0.00
HOUSTON TX
(713)475-0779 THRIFT CITY #3 Com Opt 15 Per 0.00
914 W. SOUTHMORE B Add Opt 0 Per 0.00
PASADENA TX 77502-
</TABLE>
EXHIBIT B 3
9
<PAGE> 58
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)688-9756 THU THU RESTAURANT Com Opt 2 Per 25.00
5015 A ANTOINE Add Opt 0 Per 0.00
HOUSTON TX 77092-
(713)434-8907 TOWNWOOD PHARMACY Com Opt 16 Per 0.00
4430 WEST OREM ROAD Add Opt 0 Per 0.00
HOUSTON TX 77023-
(713)671-9886 U & C FOOD STORE Com Opt 16 Per 0.00
(713)671-9887 404 FIDELITY Add Opt 0 Per 0.00
HOUSTON TX 77029-
(713)464-9851 USA LIQUORS #2 Com Opt 16 Per 0.00
10026A LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
Com Opt 16 Per 0.00
Add Opt 0 Per 0.00
(713)691-5586 VETTA'S SUPER TAMALE Com Opt 15 Per 0.00
3423 LAURA KOPPE Add Opt 0 Per 0.00
HOUSTON TX 77093-
(713)434-0841 WI BOUTIQUE Com Opt 16 Per 0.00
4437 W. FUQUE Add Opt 0 Per 0.00
HOUSTON TX 77045-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(713)589-9856 WINDCHIMES CINEMA Com Opt 2 Per 20.00
13155 WESTHEIMER ROAD Add Opt 0 Per 0.00
HOUSTON TX
(713)635-4981 WONDER SUPER MARKET Com Opt 2 Per 25.00
(713)635-5956 4902 TIDDWELL Add Opt 0 Per 0.00
HOUSTON TX 77016-
</TABLE>
EXHIBIT B 3
10
<PAGE> 59
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(214)372-8667 ANGELO'S FOOD MARKET Com Opt 6 Per 0.00
(214)372-8620 3530 SUNNYVALE Add Opt 0 Per 0.00
DALLAS TX 75216-
(817)468-8039 ARLINGTON JET CENTER, INC Com Opt 15 Per 0.00
(817)466-8040 50701 S. COLLINS Add Opt 0 Per 0.00
ARLINGTON TX 73018-
(214)641-4821 BABY MART Com Opt 15 Per 0.00
2424 SOUTH CARRIER PKWY, 111 Add Opt 0 Per 0.00
GRAND PRAIRIE TX 75051-
(214)391-9991 BARBEC'S Com Opt 6 Per 0.00
1625 S. BUCKNER Add Opt 0 Per 0.00
DALLAS TX
Com Opt 6 Per 0.00
Add Opt 0 Per 0.00
(214)426-0464 BUD'S SALADS INC. Com Opt 15 Per 0.00
2428 HARRISON Add Opt 0 Per 0.00
DALLAS TX 75815-
(214)306-9597 CENTERPOINT APTS Com Opt 6 Per 0.00
2626 FRANKFORT Add Opt 0 Per 0.00
DALLAS TX 75287-
(214)372-8654 CLASSIC CAR WASH Com Opt 2 Per 25.00
4870 SUNNYVALE Add Opt 0 Per 0.00
DALLAS TX 75216-
(214)340-4702 CLASSIC CAR WASH Com Opt 2 Per 25.00
8206 FOREST LAND Add Opt 0 Per 0.00
DALLAS TX
(214)381-8816 CLASSIC CAR WASH Com Opt 2 Per 25.00
6204 SAMUELS Add Opt 0 Per 0.00
DALLAS TX
(817)926-8962 D SUPER WASH Com Opt 4 Per 50.00
(817)926-5171 2801 HEMPHILL Add Opt 0 Per 0.00
FORT WORTH TX 76110-
</TABLE>
EXHIBIT B 3
11
<PAGE> 60
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(817)625-5231 D SUPER WASH #2 Com Opt 4 Per 50.00
3710 DECATUR STREET Add Opt 0 Per 0.00
FORT WORTH TX 76106-
(817)861-3254 DAYS INN Com Opt 2 Per 20.00
910 NORTH COLLINS Add Opt 0 Per 0.00
ARLINGTON TX 76011-
(817)595-4954 DSR AUTOMOTIVE INC. Com Opt 15 Per 0.00
(817)595-4949 7537 JACK NEWELL BLVD. N. Add Opt 0 Per 0.00
(817)595-4691 FORT WORTH TX 76118-
Com Opt 2 Per 20.00
Add Opt 0 Per 0.00
(214)841-9842 EL TAQUITO Com Opt 6 Per 0.00
5427 EAST GRANT Add Opt 0 Per 0.00
DALLAS TX
(214)864-1690 FLEMING FOOD Com Opt 2 Per 20.00
(214)864-1885 DISTRIBUTION CENTER Add Opt 0 Per 0.00
(214)864-1995 GARLAND TX 75041-
(214)278-7384
(214)864-8475
(214)301-9941 GOLDEN CHICK Com Opt 14 Per 0.00
445 W. ARAPAHO ROAD Add Opt 0 Per 0.00
RICHARDSON TX 75083-
(214)276-2481 GOOD SHEPHERD SCHOOL Com Opt 15 Per 0.00
214 SOUTH GARLAND AVENUE Add Opt 0 Per 0.00
GARLAND TX 75040-
Com Opt 6 Per 0.00
Add Opt 0 Per 0.00
(214)426-0499 HOTEL NEWLAND Com Opt 15 Per 0.00
1108 S. AKARD Add Opt 0 Per 0.00
DALLAS TX 75215-
(214)944-5549 ILLINOIS CAR WASH Com Opt 6 Per 0.00
213 W. ILLINOIS Add Opt 0 Per 0.00
DALLAS TX 75224-
</TABLE>
EXHIBIT B 3
12
<PAGE> 61
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(214)353-8575 JEFF'S GEM CAR WASH Com Opt 14 Per 0.00
3143 INWOOD Add Opt 0 Per 0.00
DALLAS TX 75235-
(214)613-7308 JET WASH DEPOT Com Opt 15 Per 0.00
2530 BIG TOWN BLVD. Add Opt 0 Per 0.00
MESQUITE TX 75150-
(214)381-8831 M & J FOODS Com Opt 6 Per 0.00
(214)381-8842 4441 LAWNVIEW Add Opt 0 Per 0.00
DALLAS TX 75227-
(214)272-8563 MEMORIAL HOSP GARLAND Com Opt 2 Per 25.00
(214)276-0584 2300 MARIE CURIE Add Opt 0 Per 0.00
(214)276-5981 GARLAND TX
(214)276-7090
(214)276-7383
(214)276-8571
(214)276-8787
(214)276-8652
Com Opt 6 Per 0.00
Add Opt 0 Per 0.00
(214)709-3112 PARK VILLAGE Com Opt 6 Per 0.00
7575 WESTMORELAND Add Opt 0 Per 0.00
DALLAS TX 75237-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(817)460-0184 PYRAMID MANAGEMENT CO Com Opt 15 Per 0.00
LAMAR EAST OFFICE TOWER Add Opt 0 Per 0.00
ARLINGTON TX 76011-
(214)840-6205 ROB REEVES SERVICE CENTER Com Opt 15 Per 0.00
2410 WEST MILLER ROAD Add Opt 0 Per 0.00
GARLAND TX 75042-
(817)649-9577 SUBWAY - ARLINGTON Com Opt 2 Per 20.00
921 SIX FLAG DRIVE Add Opt 0 Per 0.00
ARLINGTON TX
</TABLE>
EXHIBIT B 3
13
<PAGE> 62
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(214)902-7903 SUBWAY - DALLAS Com Opt 2 Per 20.00
4347 W. NW HWY, #150 Add Opt 0 Per 0.00
DALLAS TX
(817)668-5912 SUBWAY - GAINSVILLE Com Opt 2 Per 20.00
902 EAST HWY Add Opt 0 Per 0.00
GAINSVILLE, TX
(214)594-0109 SUITES INN Com Opt 2 Per 10.00
1701 W. AIRPORT BLVD. Add Opt 0 Per 0.00
IRVING TX
(214)939-1200 THE ADOLPHUS HOTEL Com Opt 13 Per 0.00
(214)939-1210 1321 COMMERCE STREET Add Opt 0 Per 0.00
(214)939-1212 DALLAS TX 75052-
(214)939-1211
(214)939-1209
(214)939-1208
(214)939-1214
(214)939-1218
(214)939-1217
(214)939-1215
(214)939-1219
(214)939-1216
(214)939-1213
(214)939-1232
(214)939-1229
(214)939-1230
(214)939-1239
(214)939-1231
(214)939-1233
(214)939-1228
(214)939-1227
(214)939-1223
(214)939-1221
(214)939-1220
(214)939-1222
(214)939-1205
(214)939-1204
(214)939-1207
(214)939-1206
(214)939-1240
(214)939-1203
(214)939-1201
(214)939-1202
(214)939-1224
(214)939-1225
(214)939-1226
</TABLE>
EXHIBIT B 3
14
<PAGE> 63
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
Payphone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(214)306-1077 TOSCANA APTS Com Opt 6 Per 0.00
17910 KELLY BLVD. Add Opt 0 Per 0.00
DALLAS TX 75287-
(214)579-9457 UNIVERSITY OF DALLAS Com Opt 1 Per 20.00
(214)579-3010 1845 EAST NORTHGATE DRIVE Add Opt 0 Per 0.00
(214)579-9960 IRVING TX 75062-4799
(214)579-9861
(214)579-4915
(214)579-9778
(214)986-7141 VETERAN'S BINGO HALL Com Opt 2 Per 20.00
3200 SHADY GROVE Add Opt 0 Per 0.00
IRVING, TX
(214)320-5514 WATERHOLE CLUB Com Opt 15 Per 0.00
(214)320-5526 3727 DILIDO #146 Add Opt 0 Per 0.00
DALLAS TX 75228-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(214)559-9176 ZUZU'S Com Opt 15 Per 0.00
3848 OAKLAWN Add Opt 0 Per 0.00
DALLAS TX 75219-
</TABLE>
EXHIBIT B 3
15
<PAGE> 64
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
10 SAN ANTONIO
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(210)520-1260 ALAMO BLIMPIE #2 Com Opt 15 Per 0.00
6766 INGRAM SQ SHOPPING CENTER Add Opt 0 Per 0.00
SAN ANTONIO TX 78238-
(210)923-8479 AMBER APARTMENTS Com Opt 15 Per 0.00
131 WEST AMBER Add Opt 0 Per 0.00
SAN ANTONIO TX 78221-
(210)734-0309 ARBY'S Com Opt 2 Per 25.00
3696 FREDERICKSBURG ROAD Add Opt 0 Per 0.00
SAN ANTONIO TX 78201-
(210)533-9384 BURKE PROPERTIES/DOLLAR Com Opt 15 Per 0.00
4014 CLARK AVENUE Add Opt 0 Per 0.00
SAN ANTONIO TX 78223-
(210)804-1317 CLOTH WORLD #62 Com Opt 15 Per 0.00
1526 AUSTIN HIGHWAY Add Opt 0 Per 0.00
SAN ANTONIO TX 78218-
(210)675-1296 CLOTH WORLD #90 Com Opt 15 Per 0.00
8125 MEADOWLEAF Add Opt 0 Per 0.00
SAN ANTONIO TX 78227-
(210)635-8831 COUNTRYSIDE ICE STATION Com Opt 15 Per 0.00
14028 HWY 181 SOUTH Add Opt 0 Per 0.00
SAN ANTONIO TX 78222-
(210)534-6431 DAIRY QUEEN Com Opt 15 Per 0.00
2282 S.E. MILITARY DRIVE Add Opt 0 Per 0.00
SAN ANTONIO TX 78223-
(210)434-1536 DUNKIN DONUTS Com Opt 15 Per 0.00
1571 BANDERA ROAD Add Opt 0 Per 0.00
SAN ANTONIO TX 78228-
(210)675-5666 DUNKIN DONUTS Com Opt 15 Per 0.00
7000 WEST MILITARY DRIVE Add Opt 0 Per 0.00
SAN ANTONIO TX 78228-
(210)308-0236 DUNKIN DONUTS Com Opt 15 Per 0.00
5129 WEST AVENUE Add Opt 0 Per 0.00
SAN ANTONIO TX 78228-
(210)773-4464 EL MERCADO Com Opt 15 Per 0.00
(210)773-4600 2323 NORTH MAIN Add Opt 0 Per 0.00
(210)773-5019 EAGLE PASS TX 78852-
</TABLE>
EXHIBIT B 3
16
<PAGE> 65
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
10 SAN ANTONIO
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(210)434-0953 HIGHWAY 90 QUIK STOP Com Opt 2 Per 27.00
(210)434-5724 1007 OLD HIGHWAY 90 WEST Add Opt 0 Per 0.00
(210)434-5745 SAN ANTONIO TX 78237-
(210)434-3360
(210)534-7615 JOSEPH'S CAR WASH Com Opt 15 Per 0.00
1248 S. ST. MARY'S Add Opt 0 Per 0.00
SAN ANTONIO TX 78210-
(210)308-0243 KENTUCKY FRIED CHICKEN Com Opt 15 Per 0.00
4310 VANCE JACKSON Add Opt 0 Per 0.00
SAN ANTONIO TX 78230-
(210)599-7745 LITTLE CEASARS #1 Com Opt 15 Per 0.00
13954 NACAGODOCHES Add Opt 0 Per 0.00
SAN ANTONIO TX 78217-
(210)666-0209 LULAC EAST PARK PLACE Com Opt 15 Per 0.00
4619 DIETRICH ROAD Add Opt 0 Per 0.00
SAN ANTONIO TX 78219-
(210)922-9094 M-CO DISCOUNT AUTO SUPPLY Com Opt 2 Per 25.00
2423 PALO ALTO Add Opt 0 Per 0.00
SAN ANTONIO TX 78211-
(210)534-3529 PATTY'S TACO HOUSE Com Opt 15 Per 0.00
2422 SOUTH HACKBERRY Add Opt 0 Per 0.00
SAN ANTONIO TX 78210-
(210)734-6523 POP IN GO VIDEO Com Opt 15 Per 0.00
3655 FREDERICKSBURG ROAD Add Opt 0 Per 0.00
SAN ANTONIO TX 78201-
(210)675-2614 POP IN GO VIDEO Com Opt 15 Per 0.00
7121 HWY 90 WEST Add Opt 0 Per 0.00
SAN ANTONIO TX 78245-
(210)509-0003 R. TREVINO CONST/CAR WASH Com Opt 15 Per 0.00
4319 CALLAGHAN Add Opt 0 Per 0.00
SAN ANTONIO TX 78228-
(210)534-7520 SANTOS MEAT MARKET Com Opt 15 Per 0.00
2820 NOGALITOS Add Opt 0 Per 0.00
SAN ANTONIO TX 78225-
</TABLE>
EXHIBIT B 3
17
<PAGE> 66
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
10 SAN ANTONIO
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(210)927-3182 SOLARIZE Com Opt 15 Per 0.00
826 S.W. MILITARY DRIVE Add Opt 0 Per 0.00
SAN ANTONIO TX 78221-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(210)436-6921 STAR IGA #27 Com Opt 15 Per 0.00
(210)436-6855 6137 GENERAL MCMULLEN Add Opt 0 Per 0.00
(210)436-6724 SAN ANTONIO TX 78220-
(210)927-6542 STAR IGA #28 Com Opt 15 Per 0.00
(210)927-6547 2651 S.W. MILITARY Add Opt 0 Per 0.00
(210)927-6524 SAN ANTONIO TX 78224-
(210)804-0469 SUPERIOR CAR WASH Com Opt 15 Per 0.00
1024 AUSTIN HIGHWAY Add Opt 0 Per 0.00
SAN ANTONIO TX 78209-
(210)927-6193 TAQUERIA GUADALAUJARA Com Opt 13 Per 0.00
7150 NEW LAREDO HIGHWAY Add Opt 0 Per 0.00
SAN ANTONIO TX 78211-
(210)733-8007 THE HAPPY HUT Com Opt 15 Per 0.00
1902 WEST AVENUE Add Opt 0 Per 0.00
SAN ANTONIO TX 78210-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(512)306-1168 ZUZU'S RESTAURANT Com Opt 15 Per 0.00
3633 BEE CAVE ROAD Add Opt 0 Per 0.00
AUSTIN TX 78746-
(210)341-9348 ZUZU'S RESTURANT Com Opt 15 Per 0.00
2267 N.W. MILITARY HWY Add Opt 0 Per 0.00
SAN ANTONIO TX 78213-
</TABLE>
EXHIBIT B 3
18
<PAGE> 67
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
8000 MEDICAL CITY
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(214)934-4961 10 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-7944 11 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-0979 12A ELEVATOR Com Opt 6 Per 0.00
(214)490-7901 HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4953 2 A BACK ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4948 2 A FATHERS WAITING Com Opt 6 Per 0.00
(214)934-4949 HUMANA HOSPITAL Add Opt 0 Per 0.00
DaLLAS TX
(214)490-7906 3AICU/CCU WAITING Com Opt 6 Per 0.00
(214)934-4940 HUMANA HOSPITAL Add Opt 0 Per 0.00
(214)934-4989 DALLAS TX
(214)934-4990
(214)490-7945 3RD FLOOR NORTH WAITING Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4955 4 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4958 5 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4944 5 NORTH WAITING Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4956 6 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
</TABLE>
EXHIBIT B 3
19
<PAGE> 68
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
8000 MEDICAL CITY
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(214)934-4957 7 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4959 8 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4960 9 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-7934 EMERGENCY ROOM Com Opt 6 Per 0.00
(214)490-7935 HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-7946 LOBBY Com Opt 6 Per 0.00
(214)934-4941 HUMANA HOSPITAL Add Opt 0 Per 0.00
(214)934-4942 DALLAS TX
(214)934-4943
</TABLE>
EXHIBIT B 3
20
<PAGE> 69
EXHIBIT C
BILL OF SALE
This Bill of Sale is given to acknowledge and memorialize that AMTEL
COMMUNICATIONS, INC., a California corporation, AMTEL COMMUNICATIONS SERVICES,
INC., a California corporation, AMTEL COMMUNICATION CORRECTIONAL FACILITIES,
INC., a California corporation, AMTEL COMMUNICATIONS PAYPHONES, INC., a
California corporation, and ACI-HDT SUPPLY COMPANY, a California corporation
(hereinafter collectively referred to as "Seller"), whose principal place of
business is 5452 Oberlin Drive, Suite B, San Diego, California 92121), does
hereby sell, assign, transfer and deliver to PHONETEL TECHNOLOGIES, INC., an
Ohio corporation, whose principal place of business is located at 650 Statler
Office Tower, 1127 Euclid Avenue, Cleveland, Ohio 44115-1601 ("Buyer"), for the
sum of $7,000,000, together with ______ shares of the Buyer's Common Stock,
plus California State Sales Tax in the amount of $___________, receipt of which
is hereby acknowledged, the following categories of tangible and intangible
property of Seller:
1.0 HARD ASSETS. All of Seller's pay telephones, pay telephone equipment and
related components, pedestals, enclosures, accessories, and other inventory,
goods, fixtures, furniture, vehicles, office equipment, trade fixtures, and/or
equipment which are not specifically identified or described as Reserved Assets
on "Exhibit 1" attached hereto.
2.0 LOCATION AGREEMENTS. All of Seller's right, title, interest, and claim
arising under the site location Agreements identified on "Exhibit 2" attached
hereto and incorporated herein by this reference.
3.0 OTHER GENERAL INTANGIBLES. All trademarks, trade names, copyrights, trade
secrets, good will, patents, computer tapes, customer lists, documents
containing names, addresses, telephone numbers and other information regarding
Seller's customers, subscribers, tapes, programs, print outs, disks, and other
material and documents relating to the recording or analyzing of any of the
foregoing; together with all rights title and interest to network contracts,
customer contracts for the furnishing by Seller of Telecommunication Services,
and billing and collection contracts; and all records, documents relating to any
and all of the foregoing, including, without limitation, all records in the form
of writing, microfilm, microfiche, tape or electronic media.
4.0 CHOSES IN ACTION. All choses in action, or rights to recover money or
property from any person or entity, arising out
EXHIBIT C
<PAGE> 70
of, or related to actual or claimed violations of the automatic stay (11 U.S.C.
sec. 362(a)), together with any and all causes of action or claims which could
otherwise have been asserted by Seller based upon any breach of contract,
wrongful interference with the Business, or any other act or omission committed,
or omitted (other than a failure to pay an account receivable or money otherwise
payable to Seller), in connection with the Business which acts were committed,
or omitted at any time prior to the date of this Bill of Sale.
5.0 DEPOSITS. Any and all deposits of cash made by Seller with any person or
entity, other than deposits made to landlords with respect to Seller's
obligations under leases which are not assumed by Buyer pursuant to the terms of
this Agreement.
The tangible and intangible property hereindescribed are sold and
transferred to Buyer on a "where-is, as-is" basis and Seller makes no
warranties whatsoever to Buyer in connection with this sale, other than the
warranty of authority set forth in the following paragraph.
Seller warrants and represents that (1) the sale memorialized by this
Bill of Sale has been authorized by that certain "[title of the Enabling Order)"
entered by the United States Bankruptcy Court for the Southern District of
California in its consolidated case number 95-08253-A11; and (2) that the
aforesaid order has not been reversed, modified, or amended without the Buyers
consent and is not the subject of any stay.
Dated:__________________ AMTEL COMMUNICATIONS, INC.
A California Corporation
By:_____________________________
Alan C. Kaniss, General Manager
EXHIBIT C
<PAGE> 71
EXHIBIT 1
TO BILL OF SALE
DATED _______, 1996
RESERVED ASSETS
The "Reserved Assets" consist of all of the following categories of
tangible and intangible property of Seller:
1.0 HARD ASSETS. All of the pay telephones, pay telephone equipment and related
components, pedestals, enclosures, accessories and related inventory which is
part of:
1.1 The "Elcotel Sequestered Collateral" described on "Exhibit 1.1"
attached hereto;
1.2 The Protel "Surplus Inventory" described on "Exhibit 1.2" attached
hereto; or,
1.3 The "Released Payphones" described in "Exhibit 1.3" attached hereto
which will be returned to Texas Coin Phone, a Texas general
partnership.
2.0 LOCATION AGREEMENTS. All of Seller's right, title, interest and claim
arising out of any of the site location agreements applicable to any of the
Released Payphones described in "Exhibit 1.3" attached hereto and incorporated
herein by this reference.
3.0 OTHER GENERAL INTANGIBLES.
3.1 Any and all telephone accounts, and accounts receivable arising from
telecommunications services rendered to an end user prior to the
Closing Date (the "End User Accounts") to a regional Bell operating
company, a Bell operating company, local exchange company, credit card
company or provider of local telephone services (each a "LEC") for
billing, collection and rights in and to any of the telephone
receivables, debts, and other accounts payable to Seller by any LEC
and all cash and noncash proceeds from the foregoing, which first
arose prior to the Effective Date of the Agreement, and remain
uncollected as of the date of this Bill of Sale;
3.2 All of Seller's cash and cash equivalents;
3.3 All rights with respect to insurance policies owned by Seller; and
3.4 All tax or other refund claims held by Seller against
EXHIBIT 1
<PAGE> 72
any governmental agency, subdivision or unit.
4.0 CHOSES IN ACTION. Any and all causes of action or entitlement to recover
money or property against any person or entity which may be asserted by Seller
pursuant to any of the provisions of Chapter 5 of the United States Bankruptcy
Code ("Title 11 U.S.C."). This includes, without limitation, the adversary
proceedings now pending in the Bankruptcy Court against the following
Defendants: Scott Mitchell, an individual, dba Payphones USA, Inc. (Adv. Case
No. 95-90805); Mountain States Payphones (Adv. Case No. 95-90805); Orange County
Wings, et al. (Adv. Case No. 95-90805); Randy Kuhlmann (Adv. Case No. 96-
90245); David Darling (Adv. Case No. 96-90275); Four-Star Cinema, Inc., a
California Corporation dba Family Four Cinemas (Adv. Case No. 96-90318); Austin
Entertainment Group, Inc., a Texas Corporation dba The Roxy (Adv. Case No.
96-90349); Pacific Bell, (Public Utilities Commission Case No. 95-08-062); AT&T
Communications, Inc., a Delaware Corporation; AT&T Corp., a New York
Corporation; AT&T Communications Interexchange Companies, an association or
business entity, form unknown (Adv. Case No. 96-90318)
5.0 DEPOSITS. All deposits given to landlords for leases which have not been
assumed by the Buyer pursuant to the terms of this Agreement.
EXHIBIT 1
<PAGE> 73
EXHIBIT D
ASSUMBD OBLIGATIONS
Obligations arising from Amtel's right, title, interest, and claim
arising under all of Amtel's pay telephone the site location Agreements other
than the site location agreements for the pay telephone identified on Exhibit
B-3 of this Agreement attached hereto and incorporated herein by this reference,
to the extent that the obligations arise or accrue on or after the Closing Date.
EXHIBIT D
<PAGE> 74
EXHIBIT E
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 opinion of counsel, reasonably satisfactory to the issuer, that such sale or
transfer is exempt from the registration provisions of said act or laws.
<PAGE> 75
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)524-8044 BLODGETT FISH MARKET Com Opt 15 Per 0.00
2603 BLODGETT Add Opt 0 Per 0.00
HOUSTON TX 77004-
(713)774-2083 BRAEBURN LIQUOR Com Opt 16 Per 0.00
9906 SOUTH GESSNER Add Opt 0 Per 0.00
HOUSTON TX 77071-
(713)232-0934 BRAZOS BEND SHELL Com Opt 2 Per 30.00
(713)232-0949 1010 JACKSON Add Opt 0 Per 0.00
RICHMOND TX 77469-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(713)228-2745 CAFE EVITA'S Com Opt 13 Per 0.00
1246 LORRAINE Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)954-7228 CAMERON H. BEVIS TRUST#50 Com Opt 2 Per 20.00
6234 RICHMOND Add Opt 0 Per 0.00
HOUSTON TX
(713)921-7205 CATRACHITAS LOUNGE Com Opt 15 Per 0.00
211 WAYSIDE Add Opt 0 Per 0.00
HOUSTON TX 77011-
Com Opt 13 Per 0.00
Add Opt 0 Per 0.00
(713)534-6194 CORTEZ AUTO REPAIR Com Opt 2 Per 30.00
2902 MAIN Add Opt 0 Per 0.00
DICKENSON TX 77539-
(713)941-1467 COUNTRY LIQUOR Com Opt 2 Per 20.00
11017 FUQUA Add Opt 0 Per 0.00
HOUSTON TX 77089-
(713)988-1063 COURTYARDS ON HILLCROFT Com Opt 2 Per 30.00
(713)988-1421 7303 HILLCROFT Add Opt 0 Per 0.00
HOUSTON TX 77081-
(713)869-8624 CRYSTAL DETAIL SHOP Com Opt 16 Per 0.00
7503 N. MAIN STREET Add Opt 0 Per 0.00
HOUSTON TX 77022-
</TABLE>
EXHIBIT B 3
2
<PAGE> 76
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)991-0106 CRYSTAL SPRINGS APARTMENT Com Opt 16 Per 0.00
5900 SELINSKY Add Opt 0 Per 0.00
HOUSTON TX 77048-
(713)228-2742 CULLEN & POLK TEXACO Com Opt 16 Per 0.00
4104 POLK Add Opt 0 Per 0.00
HOUSTON TX 77023-
(713)643-0695 CULLEN TIRE MART Com Opt 16 Per 0.00
6525 BELLFORT Add Opt 0 Per 0.00
HOUSTON TX 77087-
(713)643-3573 DAIRY MAID Com Opt 15 Per 0.00
7102 BELLFORT Add Opt 0 Per 0.00
HOUSTON TX 77087-
(713)587-9504 DISCOS LATINOS Com Opt 15 Per 0.00
12325 VETERANS MEMORIAL DRIVE Add Opt 0 Per 0.00
HOUSTON TX 77014-
(713)869-8192 DISCOUNT LIQUOR #5 Com Opt 2 Per 25.00
1003 1/2 ENID Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)464-9909 DOW PHARMACY Com Opt 16 Per 0.00
8800 LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)480-9924 EL DORADO MINI MART Com Opt 16 Per 0.00
375 EL DORADO Add Opt 0 Per 0.00
WEBSTER TX 77598-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(713)921-5032 EL PETATE RESTAURANT Com Opt 16 Per 0.00
7433 CANAL Add Opt 0 Per 0.00
HOUSTON TX 77011-
(713)455-0070 ELITE WASHATERIA Com Opt 2 Per 25.00
818 UVALDE Add Opt 0 Per 0.00
HOUSTON TX 77015-
Com Opt 16 Per 0.00
Add Opt 0 Per 0.00
</TABLE>
EXHIBIT B 3
3
<PAGE> 77
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)669-7662 FRUITLANDIA Com Opt 16 Per 0.00
3818 LINK VALLEY Add Opt 0 Per 0.00
HOUSTON TX 77025-
Com Opt 2 Per 20.00
Add Opt 0 Per 0.00
(713)954-9475 GOOD EATS RESTAURANT Com Opt 15 Per 0.00
11129 WESTHEIMER Add Opt 0 Per 0.00
HOUSTON TX 77042-
(713)941-8751 GUADALAJARA MEAT MARKET Com Opt 15 Per 0.00
3808 S. SHAVER Add Opt 0 Per 0.00
HOUSTON TX 77587-
(409)986-7994 GULF HOLIDAY R.V. PARK Com Opt 15 Per 0.00
8330 HIGHWAY 6 Add Opt 0 Per 0.00
HITCHCOCK TX 77563-
(713)988-2739 HARRISONS BARBER SHOP Com Opt 15 Per 0.00
1010-H BISSONET Add Opt 0 Per 0.00
HOUSTON TX 77036-
(713)869-8308 HEIGHTS TERRACE APARTMENT Com Opt 15 Per 0.00
1449 HEIGHTS Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)228-3178 HONEY COMB DRIVE IN Com Opt 2 Per 30.00
115 A PALMER Add Opt 0 Per 0.00
HOUSTON TX 77003-
(713)988-7560 HOUSTON BAPTIST UNIVERSITY Com Opt 2 Per 20.00
(713)988-5845 7502 FONDREN ROAD Add Opt 0 Per 0.00
(713)988-3078 HOUSTON TX 77074-
(713)988-4038
(713)988-7433
(713)988-2366
(713)988-7516
(713)988-4235
(713)988-3950
(713)954-9059 INDIA GROCERS Com Opt 16 Per 0.00
5604 HILLCROFT Add Opt 0 Per 0.00
HOUSTON TX 77036-
</TABLE>
EXHIBIT B 3
4
<PAGE> 78
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)988-6128 INDIA GROCERS Com Opt 15 Per 0.00
9683 SOUTHWEST FREEWAY Add Opt 0 Per 0.00
HOUSTON TX
(713)464-9750 J & J TIRE SHOP Com Opt 2 Per 25.00
8117 LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)455-9782 JACK IN THE BOX Com Opt 15 Per 0.00
1395 FEDERAL ROAD Add Opt 0 Per 0.00
HOUSTON TX 77015-
(713)921-0098 JEANIE'S LIQUOR STORE Com Opt 15 Per 0.00
4801 CANAL Add Opt 0 Per 0.00
HOUSTON TX 77011-
(713)228-0817 JESSE GALINDO PHILLIPS 66 Com Opt 16 Per 0.00
2303 NORTH MAIN Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)751-0640 JORDON'S WASHATERIA Com Opt 2 Per 25.00
2722 NAPOLEAN Add Opt 0 Per 0.00
HOUSTON TX 77004-
(713)692-9669 KEE'S FULTON GROCERY Com Opt 2 Per 25.00
9812 FULTON Add Opt 0 Per 0.00
HOUSTON TX
(713)590-6778 KETTLE RESTAURANT Com Opt 6 Per 0.00
(713)590-5895 15360 KENNEDY BLVD Add Opt 0 Per 0.00
HOUSTON TX
(713)524-6773 KING COLE LIQUOR Com Opt 2 Per 20.00
(713)524-8714 1802 RICHMAND AVENUE Add Opt 0 Per 0.00
HOUSTON TX 77098-
(713)575-7170 KING SOLOMANS SVC Com Opt 16 Per 0.00
(713)575-7148 12313 BELLAIRE Add Opt 0 Per 0.00
HOUSTON TX 77072-
(713)669-7670 L & L AUTOMOTIVE Com Opt 2 Per 25.00
(713)669-7671 10722 SOUTH MAIN STREET Add Opt 0 Per 0.00
HOUSTON TX 77025-
(713)228-2735 L & L FOOD STORE Com Opt 2 Per 25.00
1423 GREGG Add Opt 0 Per 0.00
HOUSTON TX 77020-
</TABLE>
EXHIBIT B 3
5
<PAGE> 79
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)688-9754 LA AZTECA Com Opt 2 Per 25.00
7635 LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)699-2984 LA MICHOACANA Com Opt 16 Per 0.00
(713)699-2985 7502 FULTON Add Opt 0 Per 0.00
HOUSTON TX 77022-
(713)575-7191 LA MORELIANA Com Opt 16 Per 0.00
(713)575-7193 10769 BELLFORT Add Opt 0 Per 0.00
HOUSTON TX 77099-
(713)464-9755 LA RAZA LIQUOR STORE Com Opt 2 Per 25.00
1851 BINGLE Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)455-9867 LAMP LIGHT TERRACE Com Opt 15 Per 0.00
1110 KEYPORT LANE Add Opt 0 Per 0.00
HOUSTON TX 77015-
(713)855-7961 LANGHAM CREEK HI SCHOOL Com Opt 2 Per 20.00
(713)855-7962 17610 RM 529 Add Opt 0 Per 0.00
HOUSTON TX 77095-
(713)579-9962 LIQUOR MART #4 Com Opt 16 Per 0.00
964 SOUTH FRY ROAD Add Opt 0 Per 0.00
KATY TX 77450-
Com Opt 2 Per 25.00
Add Opt 0 Per 0.00
(713)643-0294 MAHERS SERVICE STATION Com Opt 2 Per 25.00
6399 LONG DRIVE Add Opt 0 Per 0.00
HOUSTON TX 77087-
(713)524-8581 MAI HAN CAFE Com Opt 15 Per 0.00
3316 MILAM Add Opt 0 Per 0.00
HOUSTON TX 77006-
(713)228-2734 MARKET STREET GROCERY Com Opt 15 Per 0.00
3806 MARKET STREET Add Opt 0 Per 0.00
HOUSTON TX 77020-
(713)228-0816 MAS DISTRIBUTORS Com Opt 16 Per 0.00
2221 FULTON Add Opt 0 Per 0.00
HOUSTON TX 77009-
</TABLE>
EXHIBIT B 3
6
<PAGE> 80
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)455-9839 MATAMOROS MEAT MARKET Com Opt 15 Per 0.00
14660 WILLISVILLE Add Opt 0 Per 0.00
HOUSTON TX 77015-
(713)688-9847 MEMORIAL MARKET Com Opt 2 Per 30.00
(713)688-9844 7925 KATY FREEWAY Add Opt 0 Per 0.00
HOUSTON TX 77055-
(713)232-0959 MR SEAFOOD MARKET Com Opt 16 Per 0.00
2309 AVENUE H Add Opt 0 Per 0.00
ROSENBERG TX 77471-
(713)590-4034 NABEL SUPERMARKET Com Opt 15 Per 0.00
4303 CHARRITON Add Opt 0 Per 0.00
HOUSTON TX 77039-
(713)691-5451 OXFORD PLACE APARTMENTS Com Opt 15 Per 0.00
(713)691-5443 605 BERRY ROAD Add Opt 0 Per 0.00
HOUSTON TX 77022-
(713)524-6860 PARK PLAZA HOSPITAL Com Opt 13 Per 0.00
(713)524-6862 1313 HERMAN DRIVE Add Opt 2 Per 15.00
(713)524-6890 HOUSTON TX 77004-
(713)524-6733
(713)524-6756
(713)524-6794
(713)524-6894
(713)524-6672
(713)524-6769
(713)524-6841
(713)524-6944
(713)524-6948
(713)524-6950
(713)524-6753
(713)524-6801
(713)524-6762
(713)869-8085 PONDEROSA APARTMENTS Com Opt 15 Per 0.00
214 W. 17TH Add Opt 0 Per 0.00
HOUSTON TX 77008-
(713)741-8075 QUICK PICK FOOD STORE Com Opt 2 Per 20.00
(713)741-8074 4438 GRIGGS Add Opt 0 Per 0.00
HOUSTON TX 77021-
</TABLE>
EXHIBIT B 3
7
<PAGE> 81
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)928-7976 QUICK STORE Com Opt 2 Per 30.00
(713)928-8192 91 SOUTH LOCKWOOD Add Opt 0 Per 0.00
HOUSTON TX 77011-
(713)587-9481 RAMADA LIMITED Com Opt 16 Per 0.00
15725 BAMMEL VILLAGE DRIVE Add Opt 0 Per 0.00
HOUSTON TX 77014-
Com Opt 16 Per 0.00
Add Opt 0 Per 0.00
(713)524-8732 SAM'S BURGER/LAN PHAM Com Opt 2 Per 25.00
4320 ALMEDA Add Opt 0 Per 0.00
HOUSTON TX 77004-
(713)434-0879 SAM'S TEXACO Com Opt 16 Per 0.00
4515 WEST FUQUA Add Opt 0 Per 0.00
HOUSTON TX 77045-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(713)731-0601 SANDY'S CAR CARE CENTER Com Opt 2 Per 25.00
11226 CULLEN Add Opt 0 Per 0.00
HOUSTON TX 77047-
(713)534-6443 SHAW GAS MART Com Opt 16 Per 0.00
(713)534-6524 2901 HIGHWAY 3 Add Opt 0 Per 0.00
DICKENSON TX 77539-
(713)991-7901 SHOP & LO Com Opt 15 Per 0.00
10855 TELEPHONE ROAD Add Opt 0 Per 0.00
HOUSTON TX 77075-
(713)434-0830 SM FOOD MART #2 Com Opt 16 Per 0.00
(713)434-0838 15216 SOUTH POST OAK Add Opt 0 Per 0.00
HOUSTON TX 77053-
(713)671-9885 SNOW FLAKE DONUT Com Opt 15 Per 0.00
5205 LOCKWOOD Add Opt 0 Per 0.00
HOUSTON TX 77026-
(713)721-3831 SOUTH MAIN GARAGE Com Opt 2 Per 20.00
14301 SOUTH MAIN Add Opt 0 Per 0.00
HOUSTON TX 77035-
</TABLE>
EXHIBIT B 3
8
<PAGE> 82
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)464-9735 SOUTHERN GROCERY Com Opt 15 Per 0.00
10070 LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
Com Opt 16 Per 0.00
Add Opt 0 Per 0.00
Com Opt 2 Per 20.00
Add Opt 0 Per 0.00
(409)740-3805 STOP AND SHOP Com Opt 15 Per 0.00
(409)740-2795 5201 BROADWAY Add Opt 0 Per 0.00
GALVESTON TX 77551-
(713)447-9010 SUPERMERCADO LA MEXICANA Com Opt 15 Per 0.00
11214 VETERANS MEMORIAL DRIVE Add Opt 0 Per 0.00
HOUSTON TX 77067-
(713)988-5256 T & K CHINESE RESTAURANT Com Opt 16 Per 0.00
9140 BELLAIRE Add Opt 0 Per 0.00
HOUSTON TX 77036-
(713)671-9850 T'S MINI MART Com Opt 2 Per 30.00
(713)671-9811 3604 OATES ROAD Add Opt 0 Per 0.00
HOUSTON TX 77013-
(713)869-8436 TAQUERIA OCOTLAN Com Opt 16 Per 0.00
2523 AIRLINE Add Opt 0 Per 0.00
HOUSTON TX 77009-
(713)643-0911 THAI XUAN VILLAGE Com Opt 15 Per 0.00
8200 BROADWAY BLVD. Add Opt 0 Per 0.00
HOUSTON TX 77061-
(713)524-2342 THE CALIFORNIAN Com Opt 15 Per 0.00
1508 CALIFORNIA Add Opt 0 Per 0.00
HOUSTON TX 77006-
(713)228-2744 THE THREE COMPADRES Com Opt 16 Per 0.00
1912 NORTH MAIN Add Opt 0 Per 0.00
HOUSTON TX
(713)475-0779 THRIFT CITY #3 Com Opt 15 Per 0.00
914 W. SOUTHMORE B Add Opt 0 Per 0.00
PASADENA TX 77502-
</TABLE>
EXHIBIT B 3
<PAGE> 83
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
11 HOUSTON (TELEPROFITS)
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(713)688-9756 THU THU RESTAURANT Com Opt 2 Per 25.00
5015 A ANTOINE Add Opt 0 Per 0.00
HOUSTON TX 77092-
(713)434-8907 TOWNWOOD PHARMACY Com Opt 16 Per 0.00
4430 WEST OREM ROAD Add Opt 0 Per 0.00
HOUSTON TX 77023-
(713)671-9886 U & C FOOD STORE Com Opt 16 Per 0.00
(713)671-9887 404 FIDELITY Add Opt 0 Per 0.00
HOUSTON TX 77029-
(713)464-9851 USA LIQUORS #2 Com Opt 16 Per 0.00
10026A LONG POINT Add Opt 0 Per 0.00
HOUSTON TX 77055-
Com Opt 16 Per 0.00
Add Opt 0 Per 0.00
(713)691-5586 VETTA'S SUPER TAMALE Com Opt 15 Per 0.00
3423 LAURA KOPPE Add Opt 0 Per 0.00
HOUSTON TX 77093-
(713)434-0841 WI BOUTIQUE Com Opt 16 Per 0.00
4437 W. FUQUE Add Opt 0 Per 0.00
HOUSTON TX 77045-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(713)589-9856 WINDCHIMES CINEMA Com Opt 2 Per 20.00
13155 WESTHEIMER ROAD Add Opt 0 Per 0.00
HOUSTON TX
(713)635-4981 WONDER SUPER MARKET Com Opt 2 Per 25.00
(713)635-5956 4902 TIDDWELL Add Opt 0 Per 0.00
HOUSTON TX 77016-
</TABLE>
EXHIBIT B 3
10
<PAGE> 84
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(214)372-8667 ANGELO'S FOOD MARKET Com Opt 6 Per 0.00
(214)372-8620 3530 SUNNYVALE Add Opt 0 Per 0.00
DALLAS TX 75216-
(817)468-8039 ARLINGTON JET CENTER, INC Com Opt 15 Per 0.00
(817)468-8040 50701 S. COLLINS Add Opt 0 Per 0.00
ARLINGTON TX 73018-
(214)641-4821 BABY MART Com Opt 15 Per 0.00
2424 SOUTH CARRIER PKWY, 111 Add Opt 0 Per 0.00
GRAND PRAIRIE TX 75051-
(214)391-9991 BARBEC'S Com Opt 6 Per 0.00
1625 S. BUCKNER Add Opt 0 Per 0.00
DALLAS TX
Com Opt 6 Per 0.00
Add Opt 0 Per 0.00
(214)426-0464 BUD'S SALADS INC. Com Opt 15 Per 0.00
2428 HARRISON Add Opt 0 Per 0.00
DALLAS TX 75815-
(214)306-9597 CENTERPOINT APTS Com Opt 6 Per 0.00
2626 FRANKFORT Add Opt 0 Per 0.00
DALLAS TX 75287-
(214)372-8654 CLASSIC CAR WASH Com Opt 2 Per 25.00
4870 SUNNYVALE Add Opt 0 Per 0.00
DALLAS TX 75216-
(214)340-4702 CLASSIC CAR WASH Com Opt 2 Per 25.00
8206 FOREST LAND Add Opt 0 Per 0.00
DALLAS TX
(214)381-8816 CLASSIC CAR WASH Com Opt 2 Per 25.00
6204 SAMUELS Add Opt 0 Per 0.00
DALLAS TX
(817)926-8962 D SUPER WASH Com Opt 4 Per 50.00
(817)926-5171 2801 HEMPHILL Add Opt 0 Per 0.00
FORT WORTH TX 76110-
</TABLE>
EXHIBIT B 3
11
<PAGE> 85
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(817)625-5231 D SUPER WASH #2 Com Opt 4 Per 50.00
3710 DECATUR STREET Add Opt 0 Per 0.00
FORT WORTH TX 76106-
(817)861-3254 DAYS INN Com Opt 2 Per 20.00
910 NORTH COLLINS Add Opt 0 Per 0.00
ARLINGTON TX 76011-
(817)595-4954 DSR AUTOMOTIVE INC. Com Opt 15 Per 0.00
(817)595-4949 7537 JACK NEWELL BLVD. N. Add Opt 0 Per 0.00
(817)595-4691 FORT WORTH TX 76118-
Com Opt 2 Per 20.00
Add Opt 0 Per 0.00
(214)841-9842 EL TAQUITO Com Opt 6 Per 0.00
5427 EAST GRANT Add Opt 0 Per 0.00
DALLAS TX
(214)864-1690 FLEMING FOOD Com Opt 2 Per 20.00
(214)864-1885 DISTRIBUTION CENTER Add Opt 0 Per 0.00
(214)864-1995 GARLAND TX 75041-
(214)278-7384
(214)864-8475
(214)301-9941 GOLDEN CHICK Com Opt 14 Per 0.00
445 W. ARAPAHO ROAD Add Opt 0 Per 0.00
RICHARDSON TX 75083-
(214)276-2481 GOOD SHEPHERD SCHOOL Com Opt 15 Per 0.00
214 SOUTH GARLAND AVENUE Add Opt 0 Per 0.00
GARLAND TX 75040-
Com Opt 6 Per 0.00
Add Opt 0 Per 0.00
(214)426-0499 HOTEL NEWLAND Com Opt 15 Per 0.00
1108 S. AKARD Add Opt 0 Per 0.00
DALLAS TX 75215-
(214)944-5549 ILLINOIS CAR WASH Com Opt 6 Per 0.00
213 W. ILLINOIS Add Opt 0 Per 0.00
DALLAS TX 75224-
</TABLE>
EXHIBIT B 3
12
<PAGE> 86
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(214)353-8575 JEFF'S GEM CAR WASH Com Opt 14 Per 0.00
3143 INWOOD Add Opt 0 Per 0.00
DALLAS TX 75235-
(214)613-7308 JET WASH DEPOT Com Opt 15 Per 0.00
2530 BIG TOWN BLVD. Add Opt 0 Per 0.00
MESQUITE TX 75150-
(214)381-8831 M & J FOODS Com Opt 6 Per 0.00
(214)381-8842 4441 LAWNVIEW Add Opt 0 Per 0.00
DALLAS TX 75227-
(214)272-8563 MEMORIAL HOSP GARLAND Com Opt 2 Per 25.00
(214)276-0584 2300 MARIE CURIE Add Opt 0 Per 0.00
(214)276-5981 GARLAND TX
(214)276-7090
(214)276-7383
(214)276-8571
(214)276-8787
(214)276-8652
Com Opt 6 Per 0.00
Add Opt 0 Per 0.00
(214)709-3112 PARK VILLAGE Com Opt 6 Per 0.00
7575 WESTMORELAND Add Opt 0 Per 0.00
DALLAS TX 75237-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(817)460-0184 PYRAMID MANAGEMENT CO Com Opt 15 Per 0.00
LAMAR EAST OFFICE TOWER Add Opt 0 Per 0.00
ARLINGTON TX 76011-
(214)840-6205 ROB REEVES SERVICE CENTER Com Opt 15 Per 0.00
2410 WEST MILLER ROAD Add Opt 0 Per 0.00
GARLAND TX 75042-
(817)649-9577 SUBWAY - ARLINGTON Com Opt 2 Per 20.00
921 SIX FLAG DRIVE Add Opt 0 Per 0.00
ARLINGTON TX
</TABLE>
EXHIBIT B 3
13
<PAGE> 87
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(214)902-7903 SUBWAY - DALLAS Com Opt 2 Per 20.00
4347 W. NW HWY, #150 Add Opt 0 Per 0.00
DALLAS TX
(817)668-5912 SUBWAY - GAINSVILLE Com Opt 2 Per 20.00
902 EAST HWY Add Opt 0 Per 0.00
GAINSVILLE, TX
(214)594-0109 SUITES INN Com Opt 2 Per 10.00
1701 W. AIRPORT BLVD. Add Opt 0 Per 0.00
IRVING TX
(214)939-1200 THE ADOLPHUS HOTEL Com Opt 13 Per 0.00
(214)939-1210 1321 COMMERCE STREET Add Opt 0 Per 0.00
(214)939-1212 DALLAS TX 75052-
(214)939-1211
(214)939-1209
(214)939-1208
(214)939-1214
(214)939-1218
(214)939-1217
(214)939-1215
(214)939-1219
(214)939-1216
(214)939-1213
(214)939-1232
(214)939-1229
(214)939-1230
(214)939-1239
(214)939-1231
(214)939-1233
(214)939-1228
(214)939-1227
(214)939-1223
(214)939-1221
(214)939-1220
(214)939-1222
(214)939-1205
(214)939-1204
(214)939-1207
(214)939-1206
(214)939-1240
(214)939-1203
(214)939-1201
(214)939-1202
(214)939-1224
(214)939-1225
(214)939-1226
</TABLE>
EXHIBIT B 3
14
<PAGE> 88
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
3 DALLAS
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(214)306-1077 TOSCANA APTS Com Opt 6 Per 0.00
17910 KELLY BLVD. Add Opt 0 Per 0.00
DALLAS TX 75287-
(214)579-9457 UNIVERSITY OF DALLAS Com Opt 1 Per 20.00
(214)579-3010 1845 EAST NORTHGATE DRIVE Add Opt 0 Per 0.00
(214)579-9960 IRVING TX 75062-4799
(214)579-9861
(214)579-4915
(214)579-9778
(214)986-7141 VETERAN'S BINGO HALL Com Opt 2 Per 20.00
3200 SHADY GROVE Add Opt 0 Per 0.00
IRVING, TX
(214)320-5514 WATERHOLE CLUB Com Opt 15 Per 0.00
(214)320-5526 3727 DILIDO #146 Add Opt 0 Per 0.00
DALLAS TX 75228-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(214)559-9176 ZUZU'S Com Opt 15 Per 0.00
3848 OAKLAWN Add Opt 0 Per 0.00
DALLAS TX 75219-
</TABLE>
EXHIBIT B 3
15
<PAGE> 89
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
10 SAN ANTONIO
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(210)520-1260 ALAMO BLIMPIE #2 Com Opt 15 Per 0.00
6766 INGRAM SQ SHOPPING CENTER Add Opt 0 Per 0.00
SAN ANTONIO TX 78238-
(210)923-8479 AMBER APARTMENTS Com Opt 15 Per 0.00
131 WEST AMBER Add Opt 0 Per 0.00
SAN ANTONIO TX 78221-
(210)734-0309 ARBY'S Com Opt 2 Per 25.00
3696 FREDERICKSBURG ROAD Add Opt 0 Per 0.00
SAN ANTONIO TX 78201-
(210)533-9384 BURKE PROPERTIES/DOLLAR Com Opt 15 Per 0.00
4014 CLARK AVENUE Add Opt 0 Per 0.00
SAN ANTONIO TX 78223-
(210)804-1317 CLOTH WORLD #62 Com Opt 15 Per 0.00
1526 AUSTIN HIGHWAY Add Opt 0 Per 0.00
SAN ANTONIO TX 78218-
(210)675-1296 CLOTH WORLD #90 Com Opt 15 Per 0.00
8125 MEADOWLEAF Add Opt 0 Per 0.00
SAN ANTONIO TX 78227-
(210)635-8831 COUNTRYSIDE ICE STATION Com Opt 15 Per 0.00
14028 HWY 181 SOUTH Add Opt 0 Per 0.00
SAN ANTONIO TX 78222-
(210)534-6431 DAIRY QUEEN Com Opt 15 Per 0.00
2282 S.E. MILITARY DRIVE Add Opt 0 Per 0.00
SAN ANTONIO TX 78223-
(210)434-1536 DUNKIN DONUTS Com Opt 15 Per 0.00
1571 BANDERA ROAD Add Opt 0 Per 0.00
SAN ANTONIO TX 78228-
(210)675-5666 DUNKIN DONUTS Com Opt 15 Per 0.00
7000 WEST MILITARY DRIVE Add Opt 0 Per 0.00
SAN ANTONIO TX 78228-
(210)308-0236 DUNKIN DONUTS Com Opt 15 Per 0.00
5129 WEST AVENUE Add Opt 0 Per 0.00
SAN ANTONIO TX 78228-
(210)773-4464 EL MERCADO Com Opt 15 Per 0.00
(210)773-4600 2323 NORTH MAIN Add Opt 0 Per 0.00
(210)773-5019 EAGLE PASS TX 78852-
</TABLE>
EXHIBIT B 3
16
<PAGE> 90
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
10 SAN ANTONIO
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(210)434-0953 HIGHWAY 90 QUIK STOP Com Opt 2 Per 27.00
(210)434-5724 1007 OLD HIGHWAY 90 WEST Add Opt 0 Per 0.00
(210)434-5745 SAN ANTONIO TX 76237-
(210)434-3360
(210)534-7615 JOSEPH'S CAR WASH Com Opt 15 Per 0.00
1248 S. ST. MARY'S Add Opt 0 Per 0.00
SAN ANTONIO TX 78210-
(210)308-0243 KENTUCKY FRIED CHICKEN Com Opt 15 Per 0.00
4310 VANCE JACKSON Add Opt 0 Per 0.00
SAN ANTONIO TX 78230-
(210)599-7745 LITTLE CEASARS #1 Com Opt 15 Per 0.00
13954 NACAGODOCHES Add Opt 0 Per 0.00
SAN ANTONIO TX 78217-
(210)666-0209 LULAC EAST PARK PLACE Com Opt 15 Per 0.00
4619 DIETRICH ROAD Add Opt 0 Per 0.00
SAN ANTONIO TX 78219-
(210)922-9094 M-CO DISCOUNT AUTO SUPPLY Com Opt 2 Per 25.00
2423 PALO ALTO Add Opt 0 Per 0.00
SAN ANTONIO TX 78211-
(210)534-3529 PATTY'S TACO HOUSE Com Opt 15 Per 0.00
2422 SOUTH HACKBERRY Add Opt 0 Per 0.00
SAN ANTONIO TX 76210-
(210)734-6523 POP IN GO VIDEO Com Opt 15 Per 0.00
3655 FREDERICKSBURG ROAD Add Opt 0 Per 0.00
SAN ANTONIO TX 78201-
(210)675-2614 POP IN GO VIDEO Com Opt 15 Per 0.00
7121 HWY 90 WEST Add Opt 0 Per 0.00
SAN ANTONIO TX 78245-
(210)509-0003 R. TREVINO CONST/CAR WASH Com Opt 15 Per 0.00
4319 CALLAGHAN Add Opt 0 Per 0.00
SAN ANTONIO TX 78228-
(210)534-7520 SANTOS MEAT MARKET Com Opt 15 Per 0.00
2820 NOGALITOS Add Opt 0 Per 0.00
SAN ANTONIO TX 78225-
</TABLE>
EXHIBIT B 3
17
<PAGE> 91
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
10 SAN ANTONIO
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(210)927-3182 SOLARIZE Com Opt 15 Per 0.00
826 S.W. MILITARY DRIVE Add Opt 0 Per 0.00
SAN ANTONIO TX 78221-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(210)436-6921 STAR IGA #27 Com Opt 15 Per 0.00
(210)436-6855 6137 GENERAL MCMULLEN Add Opt 0 Per 0.00
(210)436-6724 SAN ANTONIO TX 78220
(210)927-6542 STAR IGA #28 Com Opt 15 Per 0.00
(210)927-6547 2651 S.W. MILITARY Add Opt 0 Per 0.00
(210)927-6524 SAN ANTONIO TX 78224-
(210)804-0469 SUPERIOR CAR WASH Com Opt 15 Per 0.00
1024 AUSTIN HIGHWAY Add Opt 0 Per 0.00
SAN ANTONIO TX 78209-
(210)927-6193 TAQUERIA GUADALAUJARA Com Opt 13 Per 0.00
7150 NEW LAREDO HIGHWAY Add Opt 0 Per 0.00
SAN ANTONIO TX 78211-
(210)733-8007 THE HAPPY HUT Com Opt 15 Per 0.00
1902 WEST AVENUE Add Opt 0 Per 0.00
SAN ANTONIO TX 78210-
Com Opt 15 Per 0.00
Add Opt 0 Per 0.00
(512)306-1168 ZUZU'S RESTAURANT Com Opt 15 Per 0.00
3633 BEE CAVE ROAD Add Opt 0 Per 0.00
AUSTIN TX 78746-
(210)341-9348 ZUZU'S RESTURANT Com Opt 15 Per 0.00
2267 N.W. MILITARY HWY Add Opt 0 Per 0.00
SAN ANTONIO TX 78213-
</TABLE>
EXHIBIT B 3
18
<PAGE> 92
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
8000 MEDICAL CITY
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(214)934-4961 10 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-7944 11 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-0979 12A ELEVATOR Com Opt 6 Per 0.00
(214)490-7901 HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4953 2 A BACK ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4948 2 A FATHERS WAITING Com Opt 6 Per 0.00
(214)934-4949 HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-7906 3AICU/CCU WAITING Com Opt 6 Per 0.00
(214)934-4940 HUMANA HOSPITAL Add Opt 0 Per 0.00
(214)924-4989 DALLAS TX
(214)934-4990
(214)490-7945 3RD FLOOR NORTH WAITING Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4955 4 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4958 5 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4944 5 NORTH WAITING Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4956 6 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
</TABLE>
EXHIBIT B 3
19
<PAGE> 93
Texas Coinphone
Company Owned Accounts
<TABLE>
<CAPTION>
Account Number Account Name Date: 05/02/96
8000 MEDICAL CITY
PayPhone Number(s) Location Information
<S> <C> <C> <C> <C> <C>
(214)934-4957 7 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4959 8 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)934-4960 9 A ELEVATOR Com Opt 6 Per 0.00
HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-7934 EMERGENCY ROOM Com Opt 6 Per 0.00
(214)490-7935 HUMANA HOSPITAL Add Opt 0 Per 0.00
DALLAS TX
(214)490-7946 LOBBY Com Opt 6 Per 0.00
(214)934-4941 HUMANA HOSPITAL Add Opt 0 Per 0.00
(214)934-4942 DALLAS TX
(214)934-4943
</TABLE>
EXHIBIT B 3
20
<PAGE> 94
EXHIBIT C
BILL OF SALE
This Bill of Sale is given to acknowledge and memorialize that AMTEL
COMMUNICATIONS, INC., a California corporation, AMTEL COMMUNICATIONS SERVICES,
INC., a California corporation, AMTEL COMMUNICATION CORRECTIONAL FACILITIES,
INC., a California corporation, AMTEL COMMUNICATIONS PAYPHONES, INC., a
California corporation, and ACI-HDT SUPPLY COMPANY, a California corporation
(hereinafter collectively referred to as "Seller"), whose principal place of
business is 5452 Oberlin Drive, Suite B, San Diego, California 92121), does
hereby sell, assign, transfer and deliver to PHONETEL TECHNOLOGIES, INC., an
Ohio corporation, whose principal place of business is located at 650 Statler
Office Tower, 1127 Euclid Avenue, Cleveland, Ohio 44115-1601 ("Buyer"), for the
sum of $7,000,000, together with _____ shares of the Buyer's Common Stock, plus
California State Sales Tax in the amount of $____________, receipt of which is
hereby acknowledged, the following categories of tangible and intangible
property of Seller:
1.0 HARD ASSETS. All of Seller's pay telephones, pay telephone equipment and
related components, pedestals, enclosures, accessories, and other inventory,
goods, fixtures, furniture, vehicles, office equipment, trade fixtures, and/or
equipment which are not specifically identified or described as Reserved Assets
on "Exhibit 1" attached hereto.
2.0 LOCATION AGREEMENTS. All of Seller's right, title, interest, and claim
arising under the site location Agreements identified on "Exhibit 2" attached
hereto and incorporated herein by this reference.
3.0 OTHER GENERAL INTANGIBLES. All trademarks, trade names, copyrights, trade
secrets, good will, patents, computer tapes, customer lists, documents
containing names, addresses, telephone numbers and other information regarding
Seller's customers, subscribers, tapes, programs, print outs, disks, and other
material and documents relating to the recording or analyzing of any of the
foregoing; together with all rights title and interest to network contracts,
customer contracts for the furnishing by Seller of Telecommunication Services,
and billing and collection contracts; and all records, documents relating to any
and all of the foregoing, including, without limitation, all records in the form
of writing, microfilm, microfiche, tape or electronic media.
4.0 CHOSES IN ACTION. All choses in action, or rights to recover money or
property from any person or entity, arising out
EXHIBIT C
<PAGE> 95
of, or related to actual or claimed violations of the automatic stay (11 U.S.C.
362(a)), together with any and all causes of action or claims which could
otherwise have been asserted by Seller based upon any breach of contract,
wrongful interference with the Business, or any other act or omission committed,
or omitted (other than a failure to pay an account receivable or money otherwise
payable to Seller), in connection with the Business which acts were committed,
or omitted at any time prior to the date of this Bill of Sale.
5.0 DEPOSITS. Any and all deposits of cash made by Seller with any person or
entity, other than deposits made to landlords with respect to Seller's
obligations under leases which are not assumed by Buyer pursuant to the terms of
this Agreement.
The tangible and intangible property hereindescribed are sold and
transferred to Buyer on a "where-is, as-is" basis and Seller makes no warranties
whatsoever to Buyer in connection with this sale, other than the warranty of
authority set forth in the following paragraph.
Seller warrants and represents that (1) the sale memorialized by this
Bill of Sale has been authorized by that certain "[title of the Enabling Order]"
entered by the United States Bankruptcy Court for the Southern District of
California in its consolidated case number 95-08253-All; and (2) that the
aforesaid order has not been reversed, modified, or amended without the Buyers
consent and is not the subject of any stay.
Dated:__________________ AMTEL COMMUNICATIONS, INC.
A California Corporation
By:______________________________
Alan C. Kaniss, General Manager
EXHIBIT C
<PAGE> 96
EXHIBIT 1
TO BILL OF SALE
DATED _______, 1996
RESERVED ASSETS
The "Reserved Assets" consist of all of the following categories of
tangible and intangible property of Seller:
1.0 HARD ASSETS. All of the pay telephones, pay telephone equipment and related
components, pedestals, enclosures, accessories and related inventory which is
part of:
1.1 The "Elcotel Sequestered Collateral" described on "Exhibit 1.1"
attached hereto;
1.2 The Protel "Surplus Inventory" described on "Exhibit 1.2" attached
hereto; or,
1.3 The "Released Payphones" described in "Exhibit 1.3" attached hereto
which will be returned to Texas Coin Phone, a Texas general
partnership.
2.0 LOCATION AGREEMENTS. All of Seller's right, title, interest and claim
arising out of any of the site location agreements applicable to any of the
Released Payphones described in "Exhibit 1.3" attached hereto and incorporated
herein by this reference.
3.0 OTHER GENERAL INTANGIBLES.
3.1 Any and all telephone accounts, and accounts receivable arising from
telecommunications services rendered to an end user prior to the
Closing Date (the "End User Accounts") to a regional Bell operating
company, a Bell operating company, local exchange company, credit card
company or provider of local telephone services (each a "LEC") for
billing, collection and rights in and to any of the telephone
receivables, debts, and other accounts payable to Seller by any LEC
and all cash and noncash proceeds from the foregoing, which first
arose prior to the Effective Date of the Agreement, and remain
uncollected as of the date of this Bill of Sale;
3.2 All of Seller's cash and cash equivalents;
3.3 All rights with respect to insurance policies owned by Seller; and
3.4 All tax or other refund claims held by Seller against
EXHIBIT 1
<PAGE> 97
any governmental agency, subdivision or unit.
4.0 CHOSES IN ACTION. Any and all causes of action or entitlement to recover
money or property against any person or entity which may be asserted by Seller
pursuant to any of the provisions of Chapter 5 of the United States Bankruptcy
Code ("Title 11 U.S.C."). This includes, without limitation, the adversary
proceedings now pending in the Bankruptcy Court against the following
Defendants: Scott Mitchell, an individual, dba Payphones USA, Inc. (Adv. Case
No. 95-90805); Mountain States Payphones (Adv. Case No. 95-90805); Orange County
Wings, et al. (Adv. Case No. 95-90805); Randy Kuhlmann (Adv. Case No. 96-
90245); David Darling (Adv. Case No. 96-90275); Four-Star Cinema, Inc., a
California Corporation dba Family Four Cinemas (Adv. Case No. 96-90318); Austin
Entertainment Group, Inc., a Texas Corporation dba The Roxy (Adv. Case No.
96-90349); Pacific Bell, (Public Utilities Commission Case No. 95-08-062); AT&T
Communications, Inc., a Delaware Corporation; AT&T Corp., a New York
Corporation; AT&T Communications Interexchange Companies, an association or
business entity, form unknown (Adv. Case No. 96- 90318)
5.0 DEPOSITS. All deposits given to landlords for leases which have not been
assumed by the Buyer pursuant to the terms of this Agreement.
EXHIBIT 1
<PAGE> 98
EXHIBIT D
ASSUMED OBLIGATIONS
Obligations arising from Amtel's right, title, interest, and claim
arising under all of Amtel's pay telephone the site location Agreements other
than the site location agreements for the pay telephone identified on Exhibit
B-3 of this Agreement attached hereto and incorporated herein by this reference,
to the extent that the obligations arise or accrue on or after the Closing Date.
EXHIBIT D
<PAGE> 99
EXHIBIT E
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 opinion of counsel, reasonably satisfactory to the issuer, that such sale or
transfer is exempt from the registration provisions of said act or laws.
EXHIBIT E
<PAGE> 100
AMENDMENT NO.1 TO THE
ASSET PURCHASE AGREEMENT
This AMENDMENT NO.1 (the "Amendment") to the ASSET PURCHASE AGREEMENT
dated as of June 26, 1996, among PhoneTel Technologies, Inc., an Ohio
corporation (the "Buyer"), and ACI-HDT Supply Company, a California corporation,
Amtel Communications Services, Inc., a California corporation, Amtel
Communications Correctional Facilities, Inc., a California corporation, Amtel
Communications, Inc., a California corporation, and Amtel Communications
Payphones, Inc., a California corporation, all of which are hereinafter
collectively referred to as "Amtel" or "Seller."
WHEREAS, Parent and the Company have entered into the Asset Purchase
Agreement dated as of June 26, 1996 (the "Agreement"; capitalized terms used
herein and not defmed shall have the meanings given them in the Agreement); and
WHEREAS, the Agreement contemplates that the Buyer purchase the assets
and property of Amtel except the assets and property specifically excluded by
the terms of the Agreement; and
WHEREAS, Buyer and Amtel wish to amend certain provisions of the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
AGREEMENT
Each of Buyer and Amtel agrees that the following provisions be and
hereby are amended as set forth below.
1. Section 1.2.1(a) of the Agreement is hereby amended and
restated in its entirety to read as follows:
(a) Cash in the amount of Six Million Dollars ($6 million); and
2. Section 1.2.1(b) of the Agreement is hereby amended and
restated in its entirety to read as follows:
<PAGE> 101
(a) Shares of the Buyer's Common stock having an "Established Value,"
as hereinafter defined, of not less than Seven Million Dollars
($7 million) (the "Common Stock"). No fractional shares shall be
delivered in satisfaction of this obligation. Rather, Buyer shall
be obligated to deliver the least number of shares of the Common
Stock necessary to provide an Established Value of not less than
Seven Million Dollars;
3. The first sentence of Section 1.2.1(c) of the Agreement is amended
by replacing the first sentence thereof with the following sentence:
Notwithstanding any provision of this Agreement which may be
construed to the contrary, Buyer may, in its sole and exclusive
discretion, elect to deliver cash in the amount of Seven Million
dollars ($7 million) in place of the Common Stock if, but only
if, the Established Value of the Common Stock is less than $3.50
per share.
4. Section 1.3 of the Agreement is hereby amended to add the following
sentence at the end thereof:
Notwithstanding the foregoing, in no event shall the Established
Value be greater than $6.50 per share.
5. Section 1.6(a) of the Agreement is hereby amended and restated in
its entirety to read as follows:
(a) Cash in the amount of $6 million less an amount equal to the
Non-refundable deposit plus interest that has accrued thereon as
of the defined Closing Date;
6. Section 1.6(b) of the Agreement is hereby amended and restated in
its entirety to read as follows:
(a) (1) the Common Stock; or alternatively,
(2) cash in the amount of $7 million if Buyer makes the
election permitted by paragraph 1.2.1(c).
2
<PAGE> 102
7. Except as amended hereby, the Agreement remains in full force and
effect.
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the duly authorized officers of Buyer and Amtel on the date first
above written.
ACI-HDT SUPPLY COMPANY, a
California corporation,
AMTEL COMMUNICATIONS SERVICES, INC., a
California corporation,
AMTEL COMMUNICATIONS CORRECTIONAL
FACILITIES, INC., a California corporation,
AMTEL COMMUNICATIONS, INC., a
California corporation,
AMTEL COMMUNICATIONS PAYPHONES, INC., a
California corporation
By : /s/ Alan Kaniss
------------------------------
Name: Alan Kaniss
Title: General Manager
PHONETEL TECHNOLOGIES, INC.
By : /s/ Peter Graf
------------------------------
Name: Peter Graf
Title: Chairman
3
<PAGE> 103
AMENDMENT NO. 2 TO THE
ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 2 dated as of August 26, 1996 (the "Amendment") to
the ASSET PURCHASE AGREEMENT dated as of June 26, 1996, as amended, among
PhoneTel Technologies, Inc., an Ohio corporation (the "Buyer"), and ACI-HDT
Supply Company, a California corporation, Amtel Communications Services, Inc.,
a California corporation, Amtel Communications Correctional Facilities, Inc., a
California corporation, Amtel Communications, Inc., a California corporation,
and Amtel Communications Payphones, Inc., a California corporation, all of
which are hereinafter collectively referred to as "Amtel" or "Seller."
WHEREAS, Parent and the Company have entered into the Asset Purchase
Agreement dated as of June 26, 1996, as amended (the "Agreement"; capitalized
terms used herein and not defined shall have the meanings given them in the
Agreement); and
WHEREAS, the Agreement contemplates that the Buyer purchase the assets
and property of Amtel except the assets and property specifically excluded by
the terms of the Agreement; and
WHEREAS, Buyer and Amtel wish to amend certain provisions of the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
AGREEMENT
Each of Buyer and Amtel agrees that the following provisions be and
hereby are amended as set forth below.
1. Section 1.2.1(a) of the Agreement is hereby amended and
restated in its entirety to read as follows:
(a) Cash in the amount of Seven Million Dollars ($7 million);
and
<PAGE> 104
2. Section 1.2.1(b) of the Agreement is hereby amended and restated in
its entirety to read as follows:
(a) Shares of the Buyer's Common stock having an "Established Value,"
as hereinafter defined, of not less than Six Million Dollars ($6
million) (the "Common Stock"). No fractional shares shall be
delivered in satisfaction of this obligation. Rather, Buyer shall
be obligated to deliver the least number of shares of the Common
Stock necessary to provide an Established Value of not less than
Six Million Dollars;
3. The first sentence of Section 1.2.1(c) of the Agreement is amended by
replacing the first sentence thereof with the following sentence:
Notwithstanding any provision of this Agreement which may be
construed to the contrary, Buyer may, in its sole and exclusive
discretion, elect to deliver cash in the amount of Six Million
dollars ($6 million) in place of the Common Stock if, but only
if, the Established Value of the Common Stock is less than $3.50
per share.
4. Section 1.6(a) of the Agreement is hereby amended and restated in its
entirety to read as follows:
(a) Cash in the amount of $7 million less an amount equal to the
Non-refundable deposit plus interest that has accrued thereon as
of the defined Closing Date;
5. Section 1.6(b) of the Agreement is hereby amended and restated in its
entirety to read as follows:
(a) (1) the Common Stock; or alternatively,
(2) cash in the amount of $6 million if Buyer makes the
election permitted by paragraph 1.2.1(c).
6. Except as amended hereby, the Agreement remains in full force and
effect.
2
<PAGE> 1
EXHIBIT (c)(2)
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
among
PHONETEL III, INC.,
PAYPHONES OF AMERICA, INC.
and
ALL OF THE SHAREHOLDERS
of
PAYPHONES OF AMERICA, INC.
August 1, 1996
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I - PURCHASE AND SALE OF THE SHARES;
THE CLOSING..................................................... 2
1.1 Purchase and Sale.......................................... 2
1.2 Purchase Price............................................. 2
1.3 Consideration.............................................. 4
1.4 The Closing; Closing Payment............................... 5
1.5 Consideration Adjustments.................................. 6
1.6 Deliveries by the Sellers.................................. 9
1.7 Deliveries by the Buyer.................................... 11
1.8 Escrow Agreements.......................................... 12
1.9 Payment of Liabilities..................................... 12
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF EACH
SELLER.......................................................... 13
2.1 Authorization; Binding Obligation.......................... 13
2.2 Title to the Shares........................................ 14
2.3 Consents and Approvals; No Violation....................... 14
2.4 Brokers.................................................... 15
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF POA
AND SELLERS..................................................... 16
3.1 Organization and Standing; Subsidiaries.................... 16
3.2 Organizational Documents and Corporate
Records.................................................... 17
3.3 Authorization.............................................. 18
3.4 POA Capitalization......................................... 18
3.5 Consents and Approvals; No Violation....................... 19
3.6 Financial Statements....................................... 20
3.7 Absence of Undisclosed Liabilities......................... 22
3.8 Accounts Receivable........................................ 23
3.9 Equipment.................................................. 23
3.10 Absence of Certain Changes or Events...................... 24
3.11 Properties and Assets..................................... 27
3.12 Contracts................................................. 27
3.13 Compliance with Laws and Permits.......................... 28
3.14 Litigation and Arbitration................................ 29
3.15 Employee Matters.......................................... 30
3.16 Labor Relations........................................... 31
3.17 Taxes..................................................... 31
3.18 Intellectual Property..................................... 33
3.19 Environmental Matters..................................... 34
3.20 Insurance................................................. 34
i
<PAGE> 3
3.21 Customers and Suppliers................................... 35
3.22 Warranties; Returns and Cancellations..................... 36
3.23 Affiliate Transactions.................................... 37
3.24 Brokers................................................... 37
3.25 Disclosure................................................ 37
3.26 Prior Acquisitions........................................ 38
3.27 POA Phones................................................ 38
3.28 Consents; Waivers; Assignments; Permits................... 38
3.29 Consents and Approvals; No Violation...................... 39
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE
BUYER........................................................... 40
4.1 Organization and Standing.................................. 40
4.2 Authorization; Binding Obligation.......................... 40
4.3 Brokers.................................................... 41
ARTICLE V - ADDITIONAL COVENANTS......................................... 41
5.1 Conduct of Business of the Seller.......................... 41
5.2 Further Assurances; Cooperation............................ 45
5.3 Notification of Certain Matters............................ 45
5.4 Confidentiality............................................ 46
5.5 Publicity.................................................. 47
5.6 Expenses................................................... 47
5.7 Forwarding of Payments Received............................ 48
5.8 Transfer of Telephones..................................... 48
5.9 Transfer and Similar Taxes; Tax Returns.................... 48
5.10 Delivery of Financial Statement............................ 50
ARTICLE VI - CONDITIONS TO CLOSING....................................... 51
6.1 Conditions Precedent to Obligations
of the Buyer............................................... 51
6.2 Conditions Precedent to Obligations
of the Seller.............................................. 53
ARTICLE VII - SURVIVAL OF REPRESENTATIONS AND WAR-
RANTIES; INDEMNIFICATION........................................ 54
7.1 Survival of Representations and
Warranties................................................. 54
7.2 Statements as Representations.............................. 55
7.3 Indemnification by the Sellers............................. 55
7.4 Indemnification by the Buyer............................... 57
7.5 Tax Indemnification Event.................................. 58
7.6 Limitations on Indemnification............................. 62
7.7 Indemnification Procedures................................. 62
7.8 Remedies................................................... 66
ii
<PAGE> 4
ARTICLE VIII - MISCELLANEOUS............................................. 66
8.1 Parties in Interest; No Third Party
Beneficiaries...................................... 66
8.2 Exhibits and Disclosure Schedule........................... 67
8.3 Entire Agreement........................................... 67
8.4 Waiver of Compliance....................................... 67
8.5 Validity................................................... 68
8.6 Counterparts............................................... 68
8.7 Headings................................................... 68
8.8 Governing Law.............................................. 68
8.9 Termination................................................ 69
8.10 Notices................................................... 69
ARTICLE IX - Definitions................................................. 70
9.1 Definitions................................................ 70
Exhibit 1 - Calculation of Purchase Price
Exhibit A - List of Sellers
Exhibit B - Certificate of Non-Foreign Status
Exhibit C - List of Contract Consents
Exhibit D - Harvey Agreement
Exhibit E - Brinkmeier Agreement
Exhibit F - Rojeski Agreement
Exhibit G - Securities Act Certificate
Exhibit H - Registration Rights Agreement
Exhibit I - Liabilities To Be Paid or Assumed At Closing
Exhibit J - Financial Statements
Exhibit K - Security Agreement
Exhibit L - Form of Seller Notes
iii
<PAGE> 5
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT
---------------------------------------------
AMENDED AND RESTATED SHARE PURCHASE AGREEMENT (the
"Agreement"), dated as of August 1, 1996, among PhoneTel III, Inc. (the
"Buyer"), an Ohio corporation, Payphones of America, Inc., a Tennessee
corporation (together with its Subsidiaries, "POA") and all of the shareholders
of POA (individually a "Seller," and collectively, the "Sellers"), whose names,
addresses and holdings in POA are set forth on Exhibit A hereto.
WHEREAS, POA is engaged in the business of owning and
operating pay telephones and engaging in the sale, installation and maintenance
of pay telephones (the "Business");
WHEREAS, the Sellers are the beneficial and record owners of
all of the issued and outstanding common shares (the "Shares"), $.01 par value,
of POA; and
WHEREAS, the Buyer desires to purchase, and the Sellers desire
to sell, all of the Shares, upon the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual agreements,
covenants, representations and warranties set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
<PAGE> 6
ARTICLE I
PURCHASE AND SALE OF THE SHARES; THE CLOSING
--------------------------------------------
1.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions hereof, at the Closing (as defined in Section 1.4 hereof) each of the
Sellers will sell, assign, transfer and deliver to the Buyer, and the Buyer will
accept and purchase from each of the Sellers, free and clear of all
Encumbrances, the Shares. The number and percentage of outstanding Shares being
sold by each of the Sellers is set forth opposite such Seller's name on Exhibit
A hereto.
1.2 PURCHASE PRICE.
Upon the terms and subject to the conditions hereof,
in reliance upon the representations, warranties, covenants and agreements of
the Sellers contained herein, the Buyer will deliver consideration having the
following value (the "Purchase Price"):
(a) the product of $4,000 and the number of POA Phones as of
the Closing Date; plus
(b) the product of $1,000 and the number of POA Contract
Phones as of the Closing Date; plus
(c) the product of $1,000 and the number of POA Managed
Phones as of the Closing Date; plus
2
<PAGE> 7
(d) the excess of (i) all cash on hand and in the POA Phones
as of July 31, 1996 plus all amounts due to POA as of July 31, 1996 from (A)
Intellicall Inc., Frontier, NOS, QCC and Teltrust Inc. for operator service
calls made on or before July 31, 1996; (B) AT&T and MCI for operator service
and/or dial-around calls made on or before July 31, 1996; and (C) interstate,
intra-LATA and local dial-around and/or set use fee compensation for all periods
through and including July 31, 1996 (but, with respect to clause (A) above, only
to the extent such amounts are received by the Company within 75 days after the
Closing Date) over (ii) the amount of all site commissions and other accounts
payable accrued but not paid as of the Closing Date (including the amount of all
telephone bills for all periods through and including July 31, 1996, whenever
received). In the event the amount specified in clause (ii) above exceeds the
amount in clause (i) above, the Purchase Price shall be decreased by the amount
of such excess; minus
(e) the Permit Shortfall; and, minus
(f) all Liabilities paid or assumed by Buyer or by
Berthel-Fisher at the Closing pursuant to Section 1.8 hereof.
3
<PAGE> 8
1.3 CONSIDERATION. The Purchase Price shall be paid in the
form of cash (wire transferred to the accounts of Sellers designated in writing
to Buyer not later than two business days prior to the Closing), certificates
representing Buyer Shares, valued at $4.50 per Buyer Share, and promissory notes
in the form attached as Exhibit L hereto ("Buyer Notes") as follows:
(a) Cash in an amount equal to the sum of $200,000;
(b) Buyer Notes and Buyer Shares having an aggregate
value representing the balance of the Purchase Price, as specified in Exhibit 1
hereto.
1.4 THE CLOSING; CLOSING PAYMENT. (a) Upon the terms and
subject to the conditions contained in this Agreement, the Closing of the
transactions contemplated hereby (the "Closing") will take place at the offices
of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York
simultaneously with the execution hereof (the "Closing Date") and simultaneously
with the execution of the other agreements, documents, instruments and writings
executed and delivered pursuant hereto or in connection herewith (collectively,
the "Other Documents"). At the Closing, the actions described in Sec-
4
<PAGE> 9
tions 1.6, 1.7 and 1.8 hereof shall take place. All such actions shall be deemed
to have occurred simultaneously.
(b) Attached hereto as Exhibit 1 is Sellers' good faith
estimate of the Purchase Price as of the Closing Date, including all the detail
required by Section 1.2 hereof.
(c) At the Closing, Buyer shall pay to Sellers, Pro
Rata, an amount equal to the Consideration (using the good faith estimates
delivered pursuant to paragraph (b) above); provided that the stock certificates
to be issued pursuant to Section 1.3(a) shall be delivered as soon as
practicable after the Closing.
1.5 CONSIDERATION ADJUSTMENTS. As soon as practicable after
the Closing Date (but in any event not more than 90 days after the Closing
Date), the Buyer shall cause to be prepared and delivered to Sellers a schedule
(the "Adjustment Schedule") which shows, as of the Closing Date, the calculation
of the Purchase Price as provided in Section 1.2.
(i) Upon receipt of the Adjustment Schedule,
Sellers shall have the right during the succeeding 10-day period to examine
the Adjustment Schedule and all records used to prepare such Adjustment
Schedule. Sellers
5
<PAGE> 10
shall notify Buyer in writing, on or before the last day of the 10-day
period, of any good faith objections to the Adjustment Schedule, setting
forth a reasonably specific description of such objections and the dollar
or other amount, as the case may be, of each objection.
(ii) If Sellers in good faith object to the
Adjustment Schedule, Sellers and Buyer shall attempt to resolve any
such objections within 10 days of Buyer's receipt of such objections.
If Buyer and Sellers are unable to resolve the matter within such
10-day period, they shall jointly appoint a mutually acceptable firm
of independent certified public accountants (or, if they cannot agree
on a mutually acceptable firm, they shall cause their respective
accounting firms to select such firm) within five days after the end
of such 10-day period. The fees of such independent certified public
accountants shall be divided equally between Buyer and the Sellers.
Such firm's resolution of the dispute shall be conclusive and binding
upon the Sellers and Buyer.
6
<PAGE> 11
(iii) The Adjustment Schedule shall be deemed
complete upon the earlier of (A) the eleventh (11th) day after Buyer's
delivery of the Adjustment Schedule to Sellers, unless prior to such day
Sellers shall have notified Buyer of a dispute in accordance with paragraph
(i), and (B) the resolution of all disputes, pursuant to paragraph (ii).
Within two business days following completion of the Adjustment Schedule as
aforesaid, either
(A) Buyer shall pay Sellers, Pro Rata, the amount, if
any, by which the Consideration (as adjusted) exceeds
the amount paid pursuant to Section 1.3 by increasing
the principal amount of the Buyer Notes, with such
increased amount being due as part of the final payment
of principal hereunder; PROVIDED, that, in the case of
an adjustment pursuant to Section 1.2(d), such payment
shall be made in cash; or (B) Sellers shall pay to
Buyer the amount, if any, by which the amount paid
pursuant to Section 1.3 exceeds the Consideration (as
adjusted) by forgiving, in the inverse
7
<PAGE> 12
order of maturity, such amount due under the Buyer
Notes.
In either case, the Consideration shall be adjusted in the
proportions specified in Section 1.3.
1.6 DELIVERIES BY THE SELLERS. At the Closing, the Sellers
shall deliver to the Buyer (unless previously delivered) the following:
(a) stock certificates representing the Shares,
accompanied by stock powers duly endorsed in blank or accompanied by duly
executed instruments of transfer, with all necessary transfer tax and other
revenue stamps affixed thereto;
(b) a receipt for the payments provided for by Section
1.3 hereof;
(c) a Certificate of Non-Foreign Status, duly executed
by each Seller, in the form attached hereto as Exhibit B;
(d) certified resolutions of the Board of Directors of
POA approving this Agreement and the Other Documents and the transactions
contemplated hereby and thereby;
(e) all consents, assignments or waivers required to be
obtained in connection with the Contracts, as specified in Exhibit C hereto, in
order for the Buyer
8
<PAGE> 13
to assume the operations and conduct the business of Seller without the
breaching provisions of any Contract listed on Schedule 3.12 hereto;
(f) an executed Consulting and Non-Competition
Agreement between Buyer and Sue Harvey in the form attached hereto as Exhibit D;
(g) an executed Consulting and Non-Competition
Agreement between Buyer and William J. Brinkmeier in the form attached hereto as
Exhibit E;
(h) an executed Consulting and Non-Competition
Agreement between Buyer and Stanley Rojeski in the form attached hereto as
Exhibit F;
(i) a Certificate of Good Standing for POA from the
Tennessee Secretary of State;
(j) the resignations of all of the officers and
directors of POA;
(k) the stock books, stock ledgers and minute books of
POA (all other records of POA being located on the premises of POA being
retained by POA at the Closing);
(l) a certificate in substantially the form attached
hereto as Exhibit G, duly executed by each Seller, representing to the Buyer
certain matters in connection with the Securities Act;
9
<PAGE> 14
(m) all Permits required to be obtained before the Buyer
may legally operate POA's Business;
(n) A certificate from an officer of POA certifying that
all representations and warranties contained in Article III are true and correct
in all material respects as of the Closing Date;
(o) A certificate from each Seller certifying that all
representations and warranties contained in Articles II and III are true and
correct in all material respects as of the Closing Date; and
(p) an executed Registration Rights Agreement among
Buyer and each of the Sellers in the form attached hereto as Exhibit H (the
"Registration Rights Agreement").
1.7 DELIVERIES BY THE BUYER. At the Closing, the Buyer is
delivering (unless previously delivered) the following:
(a) To the Sellers, Pro Rata, the Consideration
provided for in Section 1.3 hereof;
(b) To the Sellers, a certificate evidencing the good
standing of the Buyer under the laws of the state of Ohio;
(c) To the Sellers, certified resolutions of the Board
of Directors of the Buyer and PhoneTel
10
<PAGE> 15
Technologies, Inc. ("Parent") approving this Agreement and the transactions
contemplated hereby;
(d) To the Sellers, an executed Registration Rights
Agreement;
(e) To the Sellers, an executed letter of intent between
Buyer and Rauscher Pierce Refsnes, Inc.;
(f) To Messrs. Brinkmeier and Rojeski and Ms. Harvey,
the executed contracts attached as Exhibits E, F and D, respectively;
(g) To the Sellers, an executed Security Agreement in
the form attached hereto as Exhibit K; and
(h) To the Sellers, the executed Buyer Notes.
1.8 PAYMENT OF LIABILITIES. At the Closing, Buyer and
Sellers shall pay or cause to be paid, all Liabilities specified in Exhibit 1
hereto to be paid by them, including all principal, interest, penalties and
other amounts and all per diem interest due after the Closing Date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH SELLER
---------------------------------------------
Each Seller severally represents and warrants to the Buyer as follows:
11
<PAGE> 16
2.1 AUTHORIZATION; BINDING OBLIGATION. Each of this
Agreement and the Other Documents has been duly and validly executed and
delivered by such Seller and, assuming due authorization, execution and delivery
by the Buyer, constitute a legal, valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its terms. Each Seller has
the legal capacity and all requisite power and authority to execute and deliver
this Agreement and the Other Documents and to consummate the transactions
contemplated hereby and thereby and to perform such Seller's obligations hereun-
der and thereunder. Such execution, delivery and consummation has been duly
and validly authorized by all necessary action on the part of such Seller. No
power of attorney has been granted by such Seller with respect to any matter
relating to POA or the Shares, or POA's business, operations or assets.
2.2 TITLE TO THE SHARES. Immediately prior to the Closing,
each Seller was the record and beneficial owner of, and had good and marketable
title to, the number of Shares set forth next to each such Seller's name on
Exhibit A hereto, free and clear of all Encumbrances. Such Shares are not
subject to any restrictions on transferability other than those imposed by the
Secu-
12
<PAGE> 17
rities Act and applicable state securities laws and there are no options,
warrants, calls, commitments or rights of any character to purchase or otherwise
acquire Shares from such Seller pursuant to which such Seller may be obligated
to sell or transfer any of such Shares. At the Closing, the Buyer is acquiring
good and marketable title to such Shares, free and clear of all Encumbrances.
2.3 CONSENTS AND APPROVALS; NO VIOLATION. Except as set
forth on Schedule 2.3 of the Disclosure Schedule, neither the execution and
delivery of this Agreement and the Other Documents, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with any of the
provisions hereof, will (a) require any consent, waiver, approval, authorization
or permit of, or filing with or notification to, or any other action by, any
Governmental Authority by such Seller, except for filings required to transfer
rights under the Permits, (b) violate any Law of any Governmental Authority
which may be applicable to such Seller, or by which any of such Seller's
businesses, properties or assets (including, without limitation, such Seller's
Shares) may be bound or affected or (c) violate, breach, or conflict with, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise
13
<PAGE> 18
to any right of termination, cancellation or acceleration or any obligation to
pay or result in the imposition of any Encumbrance upon any of the property
(including, without limitation, such Seller's Shares)) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, Encumbrance,
Contract, Permit, Order, or other instrument or obligation to which such Seller
is a party or by which any of such Seller's businesses, properties or assets
(including, without limitation, such Seller's Shares) may be bound or affected.
2.4 BROKERS. Neither the Buyer, Sellers nor POA has or will
have any obligation to pay any broker's, finder's, investment banker's,
financial advisor's or similar fee in connection with this Agreement or the
Other Documents, or the transactions contemplated hereby or thereby, by reason
of any action taken by or on behalf of such Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF POA AND SELLERS
-------------------------------------------------
POA and the Sellers jointly and severally represent and
warrant to the Buyer as follows:
3.1 ORGANIZATION AND STANDING; SUBSIDIARIES. POA is a
corporation duly organized, validly existing and
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in good standing under the laws of the State of Tennessee. POA has no
subsidiaries except as set forth on Schedule 3.1 attached hereto and made a part
hereof. None of the subsidiaries of POA is engaged, or has engaged, in any
business. POA has all requisite power and authority, corporate or otherwise, to
own, lease and operate the properties and assets it now owns, operates and
leases and to carry on its business and operations as currently and heretofore
conducted. POA is duly qualified or licensed to do business and is in good
standing in each of the jurisdictions in which (i) the character or location of
the properties and assets POA owns, leases or operates, (ii) the conduct of the
POA's businesses and operations as currently and heretofore conducted or (iii)
any other circumstance makes such qualification necessary.
3.2 ORGANIZATIONAL DOCUMENTS AND CORPORATE RECORDS.
(a) Either the Sellers or POA have heretofore
delivered to the Buyer complete and correct copies, with all amendments thereto,
of the Certificate of Incorporation, Articles of Incorporation and By-laws of
POA, as currently in effect. The minute books of POA have been made available to
the Buyer for its inspection,
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and such minute books contain complete and correct records of all meetings, and
consents in lieu of a meeting, of POA's Board of Directors (and any committees
thereof) and its shareholders since POA's incorporation, and accurately reflect
all transactions referred to therein. The stock books and ledgers of POA have
been made available to the Buyer for its inspection, and such books and ledgers
are complete and correct in all respects.
(b) Either the Sellers or POA have made available to the
Buyer all accounting, corporate and financial books and records (the "Accounting
Books and Records") which relate to POA. Such books and records are true,
accurate and complete, have been maintained on a basis consistent with past
practice, and fairly reflect the basis for POA's financial condition and results
of operations as set forth in the Audited Financial Statements.
3.3 AUTHORIZATION. POA has the requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the Other Documents and to consummate the
transactions contemplated hereby and thereby. All corporate proceedings on the
part of Seller which are necessary to execute, deliver and perform this
Agreement and the Other
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Documents and to consummate the transactions contemplated hereby and thereby
have been duly authorized and taken. This Agreement and the Other Documents have
been duly and validly executed by POA, and constitute valid and binding
obligations of POA, enforceable against POA in accordance with their terms. No
power of attorney has been granted and is currently in force by POA with respect
to any matter relating to the Business.
3.4 POA CAPITALIZATION. The authorized capital stock of POA
consists of 10,000,000 Shares, $.01 par value, 2,567,324 of which are issued and
outstanding and owned by the Sellers as set forth on Exhibit A hereto. POA has
no other class of capital stock authorized or outstanding. None of POA's shares
of capital stock has been reserved for any purpose except for 1,000,000 shares
reserved for issuance to employees which have not been issued to date and which
POA is under no obligation to issue. All of the Shares are duly authorized and
validly issued, fully paid, nonassessable and were not issued in violation of
any preemptive rights. At the Closing, there will be no (i) options, warrants,
calls, commitments or rights of any character to purchase or otherwise acquire
from POA shares of capital stock of any class, (ii) outstanding securities of
POA that are convertible
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into or exchangeable or exercisable for shares of any class of capital stock of
POA, (iii) options, warrants or other rights to purchase from POA any such
convertible or exchangeable securities, or (iv) contracts, commitments,
agreements, understandings or arrangements of any kind relating to the issuance
of any capital stock of POA, any options, warrants or rights, pursuant to which,
in any of the foregoing cases, POA is or would be subject or bound.
3.5 CONSENTS AND APPROVALS; NO VIOLATION. Neither the
execution and delivery of this Agreement and the Other Documents, nor the
consummation of the transactions contemplated hereby or thereby, nor compliance
with any of the provisions hereof, nor operation of the Business (consistent
with such practice) by POA after the Closing, will (a) conflict with any
provision of the Articles of Incorporation or By-laws (or other similar
organizational documents) of POA, (b) except as set forth on Schedule 3.5(b) of
the Disclosure Schedule, require any consent, waiver, approval, authorization or
permit of, or filing with or notification to, or any other action by, any
Governmental Authority by POA, (c) violate any Law of any Governmental Authority
applicable to POA, or by which any of POA's business, properties or assets may
be bound or affected or (d) violate, breach, or
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conflict with, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration or any obligation to pay or result in the imposition of any
Encumbrance upon any of the property) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, Encumbrance, Contract,
Permit, Order, or other instrument or obligation to which POA is a party or by
which any of POA's business, properties or assets may be bound or affected.
3.6 FINANCIAL STATEMENTS. The Sellers are furnishing to the
Buyer the audited financial statements of POA as of December 31, 1994 and 1995
and for the years then ended (together with the notes thereto), certified by
POA's independent public accountants, and accompanied by their reports thereon
(collectively, the "Audited Financial Statements"). The Sellers are furnishing
to the Buyer the unaudited pro forma financial statements for POA, LP One and
the Berthel Fisher Phones as of March 31, 1996 (together with the notes thereto)
(collectively, with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements are attached hereto as Exhibit J. The
Financial Statements have been prepared from and in accordance with the books
and re-
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cords of POA and LP One in accordance with past practices and GAAP, and, except
as noted therein, consistently applied and maintained throughout the periods
indicated. The Financial Statements fairly present, in all material respects,
(i) the assets, liabilities and financial condition of POA and LP One (and, in
the case of the pro forma financial statements, the Berthel Fisher Phones), as
at the date thereof, except as set forth on Schedule 3.6(a) of the Disclosure
Schedule, and (ii) the results of operations and cash flows of POA and LP One
(and, in the case of the pro forma financial statements, the Berthel Fisher
Phones) for the periods then ended. Except as set forth on Schedule 3.6(b) of
the Disclosure Schedule, the statements of income and retained earnings and cash
flows included in the Financial Statements do not contain any material items of
special or nonrecurring income not earned in the ordinary course of business and
consistent with applicable industry standards and practice.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Exhibit I, POA has no Liabilities or obligations arising from or relating to its
business and operations of any nature (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise
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and whether due or to become due), except for liabilities or obligations
incurred since March 31, 1996 in the ordinary course of business and consistent
with past practice. Schedule 3.7(b) of the Disclosure Schedule sets forth a
true, complete and accurate list of all liabilities or obligations of POA at
December 31, 1995 and March 31, 1996 with respect to borrowed money (including
accounts payable and accrued expenses), letters of credit, and any notes, bonds
or similar instruments or under any capitalized lease of POA. As of the Closing,
POA (or Buyer or Berthel-Fisher on behalf of POA) will be entitled to pay and
discharge all liabilities set forth in Exhibit I hereto without payment of any
premium or penalty.
3.8 ACCOUNTS RECEIVABLE. Schedule 3.8 of the Disclosure
Schedule sets forth a true, complete and accurate list of all Accounts
Receivable generated in connection with POA Phones as of March 31, 1996. All
Accounts Receivable reflected in the Financial Statements and all Accounts
Receivable acquired or generated since March 31, 1996 by POA (i) arose from bona
fide transactions in the ordinary course of business consistent with past
practice, (ii) are valid and genuine, (iii) are not subject to any counterclaim
or setoff and (iv) are not
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subject to any Encumbrance (other than Permitted Encumbrances). Except as set
forth on Schedule 3.8 of the Disclosure Schedule, as of the Closing Date (i) no
Account Receivable has been outstanding for more than 90 days (other than, as to
LEC receivables, in the ordinary course of business), (ii) no telephone service
operator has refused or threatened to refuse to pay its obligations for any
reason and (iii) no Account Receivable debtor is insolvent or is the subject of
a bankruptcy petition.
3.9 EQUIPMENT.
(a) All Equipment is (or, with respect to the LP
One Phones, the Berthel Fisher Phones and all related Equipment, will be at the
Closing) owned by POA free and clear of any Encumbrance except for the Permitted
Encumbrances. All Equipment which is reflected in the Financial Statements is
valued at the lesser of cost or fair market value. All Equipment disposed of by
POA since March 31, 1996 has been disposed of only (i) in the ordinary course of
POA's business and (ii) at prices and under terms that are consistent with past
practice.
(b) There are no Purchase Money Security Agreements
relating to any item of Equipment.
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(c) All Equipment is usable, in good working
condition, free of any material defects and suitable for the purposes of its
intended and current operational use.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31,
1996, except as specifically contemplated in this Agreement:
(i) POA has operated its business in the ordinary
course consistent with past practice;
(ii) there has not been any material adverse change
in the business, results of operations, assets, liabilities, financial
condition or (except for matters which apply to United States
businesses generally) any material adverse change in the prospects of
POA;
(iii) POA has not entered into any agreements
binding POA, incurred any losses, undertaken any obligations, waived
any rights, made any financial commitments, sold, transferred or
otherwise encumbered any assets, nor taken any other action which may
adversely
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affect the position of Buyer in the business of POA as heretofore
operated;
(iv) POA has not made any change in any accounting
methods, principles or practices (including, without limitation,
changes in depreciation or amortization policies or rates or relating
to the establishment of accrual of reserves) since December 31, 1995
or any material election with respect to Taxes;
(v) POA has not terminated or amended, breached, or
failed to perform in all material respects all of its obligations
under, any Material Contract, and no other party thereto has
terminated or amended, breached, or failed to perform in all material
respects all of its obligations under, any Contract;
(vi) POA has not experienced any actual or, to the
knowledge of POA, threatened employee disputes, work stoppages or
slowdowns or had any material change in its relationship with its
employees, salesmen, distributors, or independent contractors;
(vii) POA has not failed to replenish its
Inventories and supplies in a
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normal and customary manner consistent with past practice;
(viii) POA has not transferred, disposed of,
abandoned or permitted to lapse or otherwise failed to preserve any
Permit or other form of authorization issued by a Governmental
Authority;
(ix) POA has not incurred any liabilities or
obligations with respect to borrowed money, letters of credit or any
notes, bonds or similar instruments under any capitalized lease; and
(x) POA has not agreed, whether in writing or
otherwise, to take any action described in this Section 3.10.
3.11 PROPERTIES AND ASSETS. POA has (or, with respect to the
Berthel Fisher Phones, the LP One Phones and all related Assets, will at the
Closing have) good, valid and marketable title to all Equipment and other assets
(whether personal or mixed, tangible or intangible) used in the Business, and
such items are subject to no Encumbrance or arrangement for use by any third
party, other than the Permitted Encumbrances.
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3.12 CONTRACTS. Schedule 3.12 of the Disclosure Schedule sets
forth a complete and correct list of all Material Contracts as of the Closing.
Complete and correct copies of all written Contracts including any and all
amendments and other modifications thereto have been delivered to or have been
made available for inspection by the Buyer. All written Contracts and all oral
Material Contracts (x) are valid and binding obligations of POA and the other
parties thereto, (y) are in full force and effect and are enforceable as to POA
and the other parties thereto, in accordance with their respective terms, and
(z) have not been amended or terminated except in the ordinary course of
business consistent with past practice. POA is not in default under, and has not
breached in any material respect, any Contract. The aggregate obligation of POA
with respect to oral Contracts which do not constitute Material Contracts does
not exceed $10,000. To the best of POA's and Sellers' knowledge, no other party
to any Contract (i) has breached such Contract or is in default thereunder, (ii)
has given notice that it intends to terminate such Contract or (iii) has
altered, in any way adverse to POA, its performance under such Contract. No
event or condition has occurred (or is alleged by any other party to a Contract
to have oc-
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curred) which, with or without due notice or lapse of time or both, would
constitute a breach or event of default on the part of POA, would provide a
basis for a valid claim or acceleration under any Contract as against POA or
would prevent POA from exercising and obtaining the full benefits of any rights
or options contained therein.
3.13 COMPLIANCE WITH LAWS AND PERMITS.
(a) The business and operations of Seller has been
conducted and is now being conducted in all material respects in compliance with
all Laws and Orders of all Governmental Authorities having jurisdiction over POA
and all Permits relating to any of its properties or applicable to its business.
(b) POA possesses all Permits necessary to own and
operate its property and assets and to conduct their businesses as it is
currently conducted. Such Permits are valid, subsisting in full force and
effect, and POA has fulfilled its obligations under each of the Permits, and no
event has occurred or condition or state of facts exists which constitutes or,
after notice or lapse of time or both, would constitute a default or violation
under any of the Permits or would permit revocation or termination of any of the
Permits. No proceed-
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ing which might involve the revocation or termination of any such Permits is
pending or, to the knowledge of POA or the Sellers, threatened.
(c) At or prior to the Closing POA will have made all
filings and received all approvals in connection with the Permits, which the
failure to obtain would have a material adverse effect on the ability of Buyer
to own and operate the property and assets of POA and to conduct the POA
Business as it is currently and has heretofore been conducted.
3.14 LITIGATION AND ARBITRATION.
(a) Except as set forth in Schedule 3.14 of the
Disclosure Schedule, there is no pending or threatened claim, action, cause of
action, suit, proceeding, inquiry, investigation or Order, against POA or
affecting its business, operations or assets (including actions by or before any
administrative body, arbitration or mediation panel or Governmental Authority).
No Order of any Governmental Authority, arbitrator or mediator is outstanding
against POA, its businesses, operations or assets. Neither POA nor the Sellers
has any knowledge of any fact or circumstance which could reasonably be expected
to result in any other claim, action, cause of action, suit, proceeding,
inquiry, investigation or Order
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against POA or affecting its businesses, operations or assets.
(b) No claim, action, suit, proceeding, inquiry or
investigation has been instituted which threatens to restrain or prohibit or
otherwise challenge the legality or validity of the transactions contemplated by
this Agreement or the Other Documents.
3.15 EMPLOYEE MATTERS. POA has no employee plans or agreements
in effect. POA has taken no actions which might reasonably be expected to result
in any violations of ERISA. The consummation of the transactions contemplated by
this Agreement will not entitle any current or former employee or officer of POA
or any ERISA Affiliate thereof to severance pay, unemployment compensation or
any other payment, except as expressly provided herein. There are no pending,
threatened or anticipated claims by or on behalf of any employee of POA.
3.16 LABOR RELATIONS. There are no labor issues affecting POA.
POA has at all times been in compliance with all applicable Laws in respect of
employment and employment practices.
3.17 TAXES.
(a) POA has duly and timely filed all Tax Returns
required to be filed by it on or before the
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Closing Date (except for the 1995 federal and state income tax returns, which
will be filed on or before August 31, 1996), and all such Tax Returns are, and
the 1995 Tax Return will be by October 15, 1996, complete and correct in all
material respects.
(b) POA has timely paid all Taxes due or claimed to be
due from it by any taxing authority.
(c) POA has complied in all respects with all applicable
Laws relating to the payment and withholding of Taxes (including, without
limitation, withholding of Taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign Laws) and has, within the time and
within the manner prescribed by Law, withheld from employee wages and paid over
to the proper Governmental Authorities all amounts required to be withheld and
paid over under all applicable Laws.
(d) There are no Encumbrances for Taxes upon any of the
POA's assets except for statutory liens for current Taxes not yet due.
(e) POA has not requested any extension of time within
which to file any Tax Return in respect of any fiscal year which has not since
been filed, except in respect of 1995 income taxes. There are no outstanding
waivers or comparable consents regarding the application
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of the statute of limitations with respect to any Taxes or Tax Returns that has
been given by POA.
(f) Except as set forth on Schedule 3.17(f) of the
Disclosure Schedule, no federal, state, local or foreign audits or other
administrative proceedings or court proceedings have been initiated or are
presently pending with regard to any Taxes or Tax Returns of POA.
(g) POA is not required to include in income any
adjustment pursuant to Section 481(a) of the Code, by reason of a voluntary
change in accounting method (nor has any taxing authority proposed in writing to
POA any such adjustment or change of accounting method).
(h) POA is not a party to, is not bound by, and has no
obligation under, any Tax sharing agreement or similar contract or
arrangement.
(i) No power of attorney has been granted by POA with
respect to any matter relating to Taxes which is currently in force.
(j) POA has not filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a
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subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by POA.
(k) POA is not a party to any agreement, contract, or
arrangement that will result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
(l) None of the income recognized for federal, state,
local or foreign Income Tax purposes by POA during the period beginning from
January 1, 1996 to the date hereof will be derived other than in the ordinary
course of business.
3.18 INTELLECTUAL PROPERTY. Except as set forth in Schedule
3.18(a) of the Disclosure Schedule, POA owns or has the right to use all
Intellectual Property used in or necessary to conduct its business as currently
conducted, in each case without the payment of any royalties and, except as set
forth on Schedule 3.18(b), POA is the sole and exclusive owner of the name
"Payphones of America, Inc.", free and clear of all Encumbrances. The activities
and products of POA do not infringe upon the Intellectual Property rights of any
other Person. To the knowledge of POA, there are no infringements by third
parties of any Intellectual Property owned by POA.
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3.19 ENVIRONMENTAL MATTERS. POA is and has been in
compliance with, and there are no outstanding allegations (for which POA has
been provided notice) by any Person that POA is not or has not been in
compliance with, all applicable Laws relating to pollution, the preservation of
the environment and the discharge or release of hazardous materials into the
environment or workplace ("Environmental Laws").
POA does not require any environmental permits to conduct its
business and operations. POA has not indemnified or agreed to indemnify any
other Person for any liability under, or violation of, Environmental Laws.
3.20 INSURANCE. Schedule 3.20(a) of the Disclosure Schedule
sets forth a complete and correct list as of the Closing of all primary, excess
and umbrella policies, bonds and other forms of insurance, and renewals thereof,
owned or held by or on behalf of or providing insurance coverage to or for the
benefit of POA (copies of which have previously been provided to the Buyer),
with the amount of coverage, cost and expiration date set forth next to each
policy thus listed. All of such insurance policies are in full force and effect,
all premiums currently payable or previously due have been paid, no notice of
cancellation or termination has been
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received with respect to any such policy and no assignment of proceeds or
Encumbrance exists with respect to the proceeds of any such policy. Except as
and to the extent set forth on Schedule 3.20(b) of the Disclosure Schedule,
there are no pending claims against such policies. All such policies will remain
in full force and effect upon execution and delivery of this Agreement and the
Other Documents and the consummation of the transactions contemplated hereby and
thereby.
3.21 CUSTOMERS AND SUPPLIERS. No customer of POA was
responsible for generating more than 5% of POA's total revenues in the fiscal
year ended December 31, 1995 or in the three months ended March 31, 1995.
Schedule 3.21(a) sets forth a complete and correct list of the names of
suppliers (other than telephone companies) to whom POA paid more than $25,000 in
the fiscal year ended December 31, 1995 and the approximate total purchases by
POA from each such supplier during such year. Except as and, to the extent set
forth on Schedule 3.21(b) of the Disclosure Schedule, there have been no adverse
changes in the relationships between POA and its customers and suppliers since
March 31, 1996. Except as set forth in Schedule 3.21(b) of the Disclosure
Schedule, POA has not been provided with any notice that any supplier, manufac-
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turer or customer intends to cease doing business with POA. To the knowledge of
POA or the Sellers there are no facts or circumstances (including, without
limitation, the transactions contemplated by this Agreement and the Other
Documents) that could reasonably be expected to have an adverse affect on POA's
relationships with its customers, suppliers and manufacturers.
3.22 WARRANTIES; RETURNS AND CANCELLATIONS. Schedule 3.22(a)
of the Disclosure Schedule sets forth a complete and correct list of all express
warranties with respect to any products or services sold, distributed, serviced
or licensed by POA. Except as set forth on Schedule 3.22(b) of the Disclosure
Schedule, there are no express or implied warranties outstanding with respect to
any products or services sold, distributed, serviced or licensed by POA (other
than those imposed by applicable Law).
3.23 AFFILIATE TRANSACTIONS. Schedule 3.23 of the Disclosure
Schedule sets forth a correct and complete list of all arrangements or
transactions (other than salary, bonus and benefits generally available to the
employees of POA) between POA and the Sellers or any affiliate or associate of
the Sellers, or any business or entity in which the Sellers or any affiliate or
associate
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of any of the Sellers, has any direct or indirect interest (the "Sellers'
Affiliates") that involves an obligation or commitment on the part of or for the
benefit of POA or such Sellers' Affiliate of more than $5,000 in any calendar
year (the "Affiliate Transactions").
3.24 BROKERS. Neither the Buyer nor POA has or will have any
obligation to pay any broker's, finder's, investment banker's, financial
advisor's or similar fee in connection with this Agreement or the Other
Documents, or the transactions contemplated hereby or thereby, by reason of any
action taken by or on behalf of the Sellers or POA.
3.25 DISCLOSURE. Neither the Sellers nor POA has failed to
disclose to the Buyer any facts material to POA's business, results of
operations, assets, liabilities, financial condition and prospects. No
representation or warranty by the Sellers or POA in this Agreement and no
statement by the Sellers or POA in any Other Document (including the Disclosure
Schedules), contain any untrue statement of a material fact or omit to state any
material fact necessary, in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading.
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3.26 PRIOR ACQUISITIONS. No claims, amounts owed, liabilities,
Encumbrances, legal proceedings or any other obligations of any kind are due or
were incurred or outstanding in connection with any acquisitions made by POA,
except as already recorded on the Financial Statements heretofore delivered to
the Buyer.
3.27 POA PHONES. There were at least 3100 POA Phones in
operation as of the close of business on August 1, 1996. The average life of the
location contracts for such POA Phones as of August 1, 1996 was at least 36
months per phone.
3.28 CONSENTS; WAIVERS; ASSIGNMENTS; PERMITS. Either POA or
the Sellers has obtained and delivered (or will have obtained and delivered
prior to the Closing) (i) all Permits or consents to transfer which are required
to be obtained before the Buyer may legally operate POA's businesses, except
that required by the Public Utilities Commission of the State of Minnesota,
which requires a petition jointly filed by Buyer and POA after the Closing Date
(the "Minnesota Permit"), (ii) all consents or waivers which would be required
in order to not breach any Contracts to which POA is a party and (iii) all
consents, waivers, assignments and assumptions pertaining to the Buyer's
assumption of POA's debts, a
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complete listing of which is set forth on Schedule 3.28 of the Disclosure
Schedule.
3.29 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth
on Schedule 3.29 of the Disclosure Schedule, neither the execution and delivery
of this Agreement and the Other Documents, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with any of the
provisions hereof, will (a) require any consent, waiver, approval, authorization
or permit of, or filing with or notification to, or any other action by, any
Governmental Authority by POA, (b) violate any Law of any Governmental Authority
which may be applicable to POA, or by which any of POA's businesses, properties
or assets may be bound or affected or (c) violate, breach, or conflict with, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or any
obligation to pay or result in the imposition of any Encumbrance upon any of the
property) under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, Encumbrance, Contract, Permit, Order, or other instrument
or obligation to which POA is a party or by which any of POA's businesses,
properties or assets may be bound or affected.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
The Buyer represents and warrants to the Seller as follows:
4.1 ORGANIZATION AND STANDING. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. The Buyer has all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business and
operations as it is now being conducted.
4.2 AUTHORIZATION; BINDING OBLIGATION. The Buyer has all
requisite corporate power and authority to execute and deliver this Agreement
and the Other Docu- ments and to consummate the transactions contemplated hereby
and thereby and to perform its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the Other Documents by the Buyer
and the consummation of the transactions contemplated hereby and thereby by the
Buyer have been duly and validly authorized by the Board of Directors of the
Buyer. This Agreement and the Other Documents have been validly executed and
delivered by the Buyer and, assuming due authorization, execution and delivery
by the Sellers,
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constitute legal, valid and binding obligations of the Buyer, enforceable
against the Buyer in accordance with their terms.
4.3 BROKERS. Buyer does not have or will not have any
obligation to pay any broker's, finder's, investment banker's, financial
advisor's or similar fee in connection with this Agreement or the Other
Documents, or the transactions contemplated hereby or thereby, by reason of any
action taken by or on behalf of Buyer.
4.4 REGISTRATION. Parent is preparing a registration statement
with the assistance of Rauscher Pierce Refsnes, Inc. and intends to diligently
pursue the registration and sale of the securities intended to be sold pursuant
to such registration statement, subject in all respects to the exercise by
Parent's management and board of directors of their business judgment and the
observance and performance by Parent's management and board of directors of all
duties owing to the Parent's shareholders.
4.5 RULE 144. Parent is registered under the Securities
Exchange Act of 1934 and meets the "current public information" requirement of
Rule 144 under the Securities Act of 1933.
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ARTICLE V
ADDITIONAL COVENANTS
--------------------
5.1 CONDUCT OF BUSINESS OF THE SELLER. Except as provided in
Exhibit K hereto, POA and each of the Sellers agrees that from the date of
execution of this Agreement until the Closing (unless otherwise expressly
consented to in writing by the Buyer):
(a) POA shall carry on the Business
diligently and substantially in the same manner as heretofore conducted and
shall not institute any changes not in the ordinary course of business and
consistent with past practice. Without limiting the generality of the foregoing,
POA will not, with respect to the Business (i) change the accounting methods,
principles or practices of the Business in any material respect, (ii) revalue
any of the assets of the Business, (iii) sell, lease, transfer or otherwise
dispose of any assets of the Business, except as set forth in Exhibit K hereto
or (iv), except as may be required by location contracts previously approved by
Buyer, install any telephones which will become POA Phones without the prior
written consent of Buyer, which consent will not be unreasonably withheld.
(b) POA shall take such action as may be
necessary (i) to maintain, preserve, renew and keep in
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full force and effect the Business and its rights, including the Licenses and
Permits; and (ii) to maintain all of the assets in good operating condition.
(c) POA shall not take or omit to take
any act, or permit any act or omission to occur, which may cause a breach of any
Material Contract, commitment or obligation of POA in connection with the
Business or its operations, or any breach of any representation, warranty,
covenant or agreement made by POA herein.
(d) POA shall duly comply with (i) all
laws applicable to the Business and its operations the failure to so comply with
would have a material adverse effect on the Business and (ii) all laws
compliance with which is required for the valid consummation of the transactions
contemplated by this Agreement.
(e) POA shall not authorize for issuance, issue,
sell, deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of the capital stock of POA or any other
securities or equity equivalents, (ii) split, combine or reclassify any shares
of such capital stock or (iii) amend the terms of any such securities or
agreements outstanding on the date hereof;
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(f) POA shall not amend or propose to
amend the certificate of incorporation or by-laws of POA;
(g) POA shall not (i) incur or assume
any indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities, (ii) assume, guarantee, endorse or otherwise become
liable (whether directly, contingently or otherwise) for the obligations of any
other person or (iii) make any loans, advances or capital contributions to, or
investments in, any other person;
(h) POA shall not permit any assets of
POA to suffer any lien thereupon other than the Permitted
Encumbrances;
(i) POA shall not enter into, adopt,
amend or terminate any employee benefit plan, increase in any manner the
compensation or fringe benefits of any officer or employee or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
(j) POA shall not enter into or offer to
enter into any employment or consulting agreement with any person;
(k) POA shall not declare or pay any
dividend or other distribution to its stockholders.
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(l) POA shall not (i) enter into, amend
or terminate any Material Contract or (ii) take any action or fail to take any
action that, with or without notice or lapse of time, would constitute a default
under any Material Contract; or
(m) POA shall not take, or agree in
writing or otherwise to take, any of the foregoing actions or any action which
would make any representation or warranty of POA or Sellers contained in this
Agreement untrue or incorrect as of the date when made or as of any future date
or which could prevent the satisfaction of any condition to Closing set forth in
Article VI hereof.
5.2 FURTHER ASSURANCES; COOPERATION.
(a) The parties shall, from time to time
after the Closing, upon the request of any other party and without further
consideration, execute, acknowledge and deliver in proper form any further
instruments, and take such further actions as such other party may reasonably
require, to carry out effectively the intent of this Agreement and the Other
Documents.
(b) The Sellers shall cooperate with POA
and the Buyer in connection with any claim, action, suit, proceeding, inquiry or
investigation with any other Person which relates to the execution and delivery
of
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this Agreement or the Other Documents, or the consummation of the transactions
contemplated hereunder and thereunder.
5.3 NOTIFICATION OF CERTAIN MATTERS. Each of the parties
hereto shall promptly notify the other parties, in the manner provided in
Section 8.10 hereof, of (i) the filing or other initiation of any claim, action,
suit, proceeding, inquiry or investigation which relates to the execution and
delivery of this Agreement or the Other Documents, or the consummation of the
transactions contemplated hereunder or thereunder, (ii) any circumstance or
development which could adversely impair or affect its ability to perform its
obligations under this Agreement and the Other Documents, (iii) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement and the Other Documents or (iv) any notice or other communication
from any Governmental Authority in connection with the transactions contemplated
by this Agreement and the Other Documents.
5.4 CONFIDENTIALITY. POA and the Sellers agree that they will
not (and will cause its officers and directors to not) at any time after the
Closing, without
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the prior written consent of the Buyer, disclose or use any information obtained
during the negotiation or due diligence process nor any other confidential
information (relating to either the Buyer or POA) otherwise obtained except (i)
as may be necessary in connection with their Tax filing and reporting
obligations and (ii) to the extent required by Law.
5.5 PUBLICITY. None of the parties hereto shall issue any
press release or make any public statement regarding the transactions
contemplated hereby, without the prior approval of the other parties, which
approval shall not be unreasonably withheld, except as may be required by Law or
as necessary to secure financing, in which case the issuing party shall furnish
copies to the other parties hereto contemporaneously with such release.
5.6 EXPENSES.
(a) Except as otherwise specifically provided for
herein, each party hereto shall be solely responsible for all expenses incurred
by it or on its behalf in connection with the preparation and execution of this
Agreement and the Other Documents and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the fees and
expenses
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of its counsel, accountants, brokers, finders, financial advisors and other
representatives, except that POA shall pay the fees of its counsel at or prior
to the Closing.
(b) The Sellers and the Buyer agree that in the event any
dispute between them, either occurring under, relating to or in connection with
any of the provisions of this Agreement or the Other Documents, is submitted to
a Governmental Authority or other appropriate entity, then all costs and
expenses of the parties (including reasonable legal fees) shall be paid by the
party against whom a determination by such Governmental Authority or entity is
made or, in the absence of a determination wholly against one party, as such
Governmental Authority or entity shall direct.
5.7 FORWARDING OF PAYMENTS RECEIVED. The Sellers shall
immediately remit to POA any monies received which should have been directed to
POA.
5.8 TRANSFER OF TELEPHONES. Prior to the Closing, POA shall
acquire the Berthel Fisher Phones, the LP One Phones, and all assets related to
the operations thereof.
5.9 TRANSFER AND SIMILAR TAXES; TAX RETURNS. (a)
Notwithstanding any other provision of this Agreement to the contrary, the
Sellers shall
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assume and promptly pay all sales, use, privilege, transfer, documentary, gains,
stamp, duties, recording and similar Taxes and fees (including any penalties,
interest or additions) imposed upon any party incurred in connection with the
sale of the Shares by the Sellers to the Buyer (collectively, the "Transfer
Taxes"), and the Sellers shall, at their own expense, procure any stock transfer
stamps required by, and accurately file all necessary Tax Returns and other
documentation with respect to, any Transfer Tax.
(b) The Sellers shall prepare or cause to be
prepared, and file or cause to be filed on a timely basis all Tax Returns of
the Company with respect to all periods ending on or before the Closing Date,
which Tax Returns shall be made available to the Buyer for review two weeks
prior to filing such Tax Returns. The Sellers shall pay all Taxes shown to be
due and payable thereon.
(c) Buyer shall prepare or cause to be prepared,
and file or cause to be filed on a timely basis all Tax Returns of POA other
than those provided for in Section 5.9(b) hereof. Subject to Article VI, Buyer
shall cause POA to pay all Taxes shown to be due and payable thereon. In
connection with any Tax Return relating to a Straddle Period, no later than ten
(10)
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Business Days before such Tax Returns are filed, Buyer shall provide drafts of
such Tax Returns to the Sellers for their reasonable review and consent.
(d) The Sellers and the Buyer shall
cooperate, and shall cause their respective officers, employees, agents,
auditors and representatives to cooperate, (i) in preparing and filing the Tax
Returns and (ii) with respect to any audit or other administrative or court
proceedings in connection with any Tax Returns of POA for periods (or any
portion thereof) ending on or before the Closing Date, in each case including
maintaining and making available to each other all records necessary in
connection with Taxes payable with respect to such Tax Returns and in resolving
all disputes and audits and refunds with respect to such Tax Returns and Taxes.
No election may be made by POA with respect to the Taxes of POA without the
Buyer's written consent if such election will adversely affect the Buyer.
(e) POA and the Sellers shall promptly
notify the Buyer of any notices or materials received from any Governmental
Authority which relate to the business, operations or filings of POA, and Buyer
shall promptly notify Sellers of any notices or materials
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received from any Governmental Authority which affects Sellers.
5.10 DELIVERY OF FINANCIAL STATEMENTS.
(a) POA shall continue to prepare financial statements
as of the end of April, May, June, and July consistent with its prior practice,
and shall deliver such statements to Buyer within one day after such statements
have been prepared.
(b) Sellers shall cause to be prepared at their own
expense, and delivered to Buyer at Closing, audited consolidated financial
statements of POA (including the Berthel Fisher Phones) as of December 31, 1995
and for the year then ended, certified by POA's independent public accounts, and
accompanied by their reports therein. Buyer shall provide to Sellers and to
POA's independent public accountants such access to the books, records and
facilities of POA as shall be reasonably necessary for Sellers to satisfy their
obligations under this Section 5.11(b).
ARTICLE VI
CONDITIONS TO CLOSING
---------------------
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER. The
obligation of the Buyer to consummate the
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transactions contemplated hereby is subject to the satisfaction or waiver
(subject to applicable law) on or before the Closing of each of the following
conditions:
(a) ACCURACY OF REPRESENTATIONS AND
WARRANTIES. Each of the representations and warranties of the Sellers and POA
contained in this Agreement, the Disclosure Schedule, or in any Other Document
to be executed and delivered by the Sellers or POA on or before the Closing
pursuant hereto shall have been true and correct in all material respects when
made, and shall be true and correct in all material respects as of the Closing
Date as though made on and as of such date.
(b) PERFORMANCE OF AGREEMENTS. The Sellers and POA
shall have performed and complied with all of the covenants and agreements
contained in this Agreement to be performed or complied with by them at or
before the Closing.
(c) ADVERSE PROCEEDINGS. No claim,
action, suit, investigation or governmental proceeding shall be pending and no
Law of any Governmental Authority shall be enacted, rendered or in force, which
would render it unlawful, as of the Closing, to effect the transactions
contemplated by this Agreement and the Other Documents to be executed and
delivered pursuant hereto.
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(d) CONSENTS AND APPROVALS. All neces-
sary consents, approvals or waivers from third parties and Governmental
Authorities shall have been received, including, without limitation, all Permits
except the Minnesota Permit.
(e) POA shall receive from the lessor of
the POA headquarters (as defined in Exhibit K hereto) a release of all liability
in respect of such facility and the lease therefor.
(f) Buyer and Berthel Fisher shall have entered into
an agreement whereby Berthel Fisher shall have agreed to, among other things, to
assume and pay, pursuant to Section 1.8 hereof, liabilities of POA in an amount
equal to at least the product of $2,500 and the number of POA Phones as of the
Closing Date, but not more than an aggregate of $7,750,000.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to consummate the transactions contemplated
hereby are subject to the satisfaction or waiver (subject to applicable Law) on
or before the Closing of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
of the representations and warranties of the Buyer contained in this Agreement
or in any Other
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Document to be executed and delivered by the Buyer on or before the Closing
pursuant hereto shall have been true and correct in all material respects when
made, and shall be true and correct in all material respects as of the Closing
Date as though made on and as of such date.
(b) PERFORMANCE OF AGREEMENTS. The Buyer shall have
performed and complied with all of the covenants and agreements contained in
this Agreement to be performed or complied with by the Buyer at or before the
Closing.
(c) ADVERSE PROCEEDINGS. No claim, action, suit,
investigation or governmental proceeding shall be pending, and no Law of any
Governmental Authority shall be enacted, rendered or in force, which would
render it unlawful, as of the Closing Date, to effect the transactions
contemplated by this Agreement and the Other Documents to be executed and
delivered pursuant hereto.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND
-------------------------------
WARRANTIES; INDEMNIFICATION
---------------------------
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Sellers and the Buyer contained herein or
made pursuant hereto
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shall survive the Closing and any investigation at any time made by or on behalf
of any party hereto until January 31, 1998, except that the representations and
warranties contained in Section 3.17 (Taxes) shall survive until 90 days
following the expiration of the applicable statute of limitations, giving effect
to any extension. Provided that a claim with respect to a breach of
representation or warranty is made within the applicable period in accordance
with the provisions of Section 7.7 hereof, such claim and any related claims may
continue to be asserted beyond such period.
7.2 STATEMENTS AS REPRESENTATIONS. All statements contained
herein or in any Schedule contained in the Disclosure Schedule or in any Exhibit
hereto shall be deemed representations and warranties within the meaning of
Sections 7.1, 7.3(i) and 7.4(i) hereof.
7.3 INDEMNIFICATION BY THE SELLERS.
Subject to the provisions of this Article VII,
each Seller shall indemnify, defend and hold harmless the Buyer, any parent,
subsidiary or affiliate of the Buyer, and any director, officer, employee, agent
or advisor of any of them, or any of their respective successors or assigns (a
"Buyer Indemnified Party"), from and against any and all Losses asserted
against, resulting to, im-
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posed upon or incurred by such Buyer Indemnified Party, directly or indirectly,
by reason of or resulting from:
(i) the breach of or any inaccuracy in any of the
representations and warranties of the Sellers or POA contained in or
made pursuant to any section of this Agreement, or any facts or
circumstances constituting such breach or inaccuracy;
(ii) the breach or nonperformance of any covenant or
agreement of the Sellers or POA contained in or made pursuant to this
Agreement or any facts or circumstances constituting such breach or
nonperformance;
(iii) any failure by Sellers or POA to comply with the
applicable provisions of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, at or prior to the Closing, including, but not
limited to, Losses in respect of the loss of any tax deductions or
other favorable tax treatment directly or indirectly attributable to or
resulting from such failure;
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(iv) the transfer of the LP One Phones, the Berthel
Fisher Phones and all related assets to POA;
(v) all Liabilities of POA assumed by Sellers or
VisionComm, Inc. as provided in Exhibit I hereto;
(vi) all Liabilities of POA to be paid by Sellers at
the Closing, as set forth in Exhibit I hereto;
(vii) any and all Tax Liabilities of POA arising out
of the asset dispositions described in Exhibit K;
(viii) any and all Liabilities arising out of the
lawsuit captioned Julie Bitzer v. POA, et al.; and
(ix) any and all Liabilities arising out of the case
captioned Commonwealth of Virginia v. POA, case no. PUC940049.
7.4 INDEMNIFICATION BY THE BUYER. Subject to the provisions of
this Article VII, the Buyer shall indemnify, defend and hold harmless the
Sellers, any parent, subsidiary or affiliate of the Sellers, and any director,
officer, employee, agent or advisor of any of them or any of their respective
heirs, successors or
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assigns (a "Seller Indemnified Party"), from and against any and all
Losses asserted against, resulting to, imposed upon or incurred by any Seller
Indemnified Party, directly or indirectly, by reason of or resulting from:
(i) the breach of or any inaccuracy in any of the
representations and warranties of the Buyer contained in or made
pursuant to this Agreement or any facts or circumstances constituting
such breach or inaccuracy; and
(ii) the breach or non-performance of any agreement
of the Buyer contained in or made pursuant to this Agreement or any
facts or circumstances constituting such breach or nonperformance.
7.5 TAX INDEMNIFICATION EVENT.
(a) A "Tax Indemnification Event" means any and all
Losses asserted against, resulting to, imposed upon or incurred by a Buyer
Indemnified Party directly or indirectly, by reason of or resulting from any and
all Taxes imposed upon POA or the Sellers (i) with respect to any taxable period
(or any portion thereof) ending on or before the Closing Date (such Taxes are
hereinafter referred to as "Pre-Closing Taxes" and such
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periods as "Pre-Closing Periods") and (ii) with respect to any taxable period
beginning before the Closing Date and ending after the Closing Date (such Taxes
are hereinafter referred to as "Straddle Taxes" and such periods as "Straddle
Periods") but only with respect to the portion of such Straddle Period ending on
the close of the Closing Date and in the manner provided in paragraph 7.5(d)
hereof.
(b) Buyer shall indemnify, defend and hold each of
the Seller Indemnified Parties harmless, at any time after the Closing, from and
against any and all Losses, asserted against, resulting to, imposed upon or
incurred by any Seller Indemnified Party, directly or indirectly, by reason of
or resulting from any and all Taxes imposed upon POA with respect to (i) any
taxable period beginning after the Closing Date (such Taxes are hereinafter
referred to as "Post-Closing Taxes" and such periods as "Post-Closing Periods")
and (ii) any Straddle Taxes for any Straddle Period, but only with respect to
the portion of such Straddle Period beginning the day after the Closing Date and
in the manner provided for in paragraph 7.5(c) hereof.
(c) For purposes of determining the amount of Taxes
for or which relate to a Straddle Period,
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the Closing Date shall be treated as the last day of a taxable period, and the
portion of any such Tax that is allocable to the taxable period that is so
deemed to end on and include the Closing Date: (i) in the case of Taxes that are
either (x) based upon or related to income or receipts or (y) imposed in
connection with any sale or other transfer or assignment of property (real or
personal, tangible or intangible), shall be deemed equal to the amount which
would be payable if the period for which such tax is assessed ended on and
included the Closing Date, and (ii) in the cases of Taxes other than Taxes
described in clause (i) hereof, shall be computed on a per diem basis.
(d) If a notice of deficiency, proposed
adjustment, adjustment, assessment, audit, examination, suit, dispute or other
claim (a "Tax Claim") shall be delivered, sent, commenced, or initiated to or
against POA by any taxing authority with respect to Taxes for which any person
is entitled to indemnification hereunder, POA shall promptly notify the Sellers
in writing of the Tax Claim. If a Tax Claim with respect to Taxes for which any
person is entitled to indemnification shall be delivered, sent, commenced or
initiated to or against the
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Sellers by the relevant taxing authority, the Sellers shall promptly notify
Buyer in writing of such Tax Claim.
(e) The Sellers may, upon timely notice to Buyer, assume
and control the defense of a Tax Claim involving only Pre-Closing Taxes at their
own cost and expense and with their own counsel. If the Sellers elect to assume
the defense of any such Tax Claim, notwithstanding anything to the contrary
contained herein, (i) the Sellers shall consult with Buyer and shall not enter
into any settlement with respect to any such Tax Claim without the Buyer's prior
written consent if the effect of such settlement would be to increase the
liability for Taxes of POA for any Post-Closing Period or Straddle Period; (ii)
the Sellers shall keep the Buyer informed of all material developments and
events relating to such Tax Claim; and (iii) at its own cost and expense, Buyer
shall have the right to participate in (but not to control) the defense of such
Tax Claim.
(f) In connection with the contest of any Tax Claim that
relates to (i) any taxable period ending after the Closing Date (to the extent
such periods do not constitute Straddle Periods), (ii) any Straddle Period and
(iii) any Tax Claim that the Sellers have the ability to control but do not
timely elect to control pursuant to
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Section 7.5(e), such contest shall be controlled by the Buyer, and the Sellers
agree to cooperate with the Buyer and its affiliates in pursuing such contest.
In connection with any such contest that relates to (ii) or (iii) above, the
Buyer shall keep the Sellers informed of all material developments and events
relating to such Tax Claim and Sellers, at their own cost and expense, shall
have the right to participate in (but not control) the defense of such Tax
claim. Nothing contained herein shall be construed as limiting Buyer's right to
indemnification under this Article VII.
7.6 LIMITATIONS ON INDEMNIFICATION.
(a) The indemnifications in favor of the Buyer
Indemnified Parties contained in Section 7.3 hereof shall not be effective until
the aggregate dollar amount of all Losses indemnified against under such Section
exceeds $10,000 (the "Sellers' Threshold Amount"), in which case all indemnified
Losses shall be paid.
(b) The indemnifications in favor of the Seller
Indemnified Parties contained in Section 7.4 hereof shall not be effective until
the aggregate dollar amount of all Losses indemnified against under such Section
exceeds $10,000 (the "Buyer's Threshold Amount"), in which case all indemnified
Losses shall be paid.
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7.7 INDEMNIFICATION PROCEDURES.
(a) NOTICE. If any legal proceeding shall be
threatened or instituted or any claim or demand shall be asserted by any Buyer
Indemnified Party or Seller Indemnified Party in respect of which
indemnification may be sought under the provisions of this Agreement, the party
seeking indemnification (the "Claiming Party") shall promptly cause written
notice of the assertion of any such claim, demand or proceeding of which it has
knowledge to be forwarded to the party from whom it is claiming indemnification
(the "Indemnitor"). Such notice shall contain a reference to the provisions
hereof or of such other agreement, instrument or certificate delivered pursuant
hereto, in respect of which such claim is being made, and shall specify, in
reasonable detail, the amount of such Loss if determinable at such time. The
Claiming Party's failure to give the Indemnitor prompt notice shall not preclude
the Claiming Party from seeking indemnification from the Indemnitor unless the
Claiming Party's failure has materially prejudiced the Indemnitor's ability to
defend the claim, demand or proceeding.
(b) THIRD PARTY CLAIMS. If the Claiming Party
seeks indemnification from the Indemnitor as a
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result of a claim or demand being made by a third party (a "Third Party Claim"),
the Indemnitor shall have the right to promptly assume the control of the
defense of such Third Party Claim, including, at its own expense, employment by
it of counsel reasonably satisfactory to the Claiming Party. The Claiming Party
may, in its sole discretion and at its own expense, employ counsel to represent
it in the defense of the Third Party Claim, and in such event counsel for the
Indemnitor shall cooperate with counsel for the Claiming Party in such defense,
provided that the Indemnitor shall direct and control the defense of such Third
Party Claim or proceeding. Except with the written consent of the Claiming
Party, the Indemnitor shall not consent to the entry of any judgment nor enter
into any settlement of such Third Party Claim which (i) does not include as an
unconditional term thereof the release of the Claiming Party from all liability
in respect of such Third Party Claim and (ii) results in the imposition on the
Claiming Party of any remedy other than money damages; provided, however, that
the Claiming Party shall not unreasonably withhold or delay its consent to the
entry of any judgment or any settlement of a Third Party Claim. If the
Indemnitor elects not to exercise its rights to assume the defense
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of the Third Party Claim, or if injunctive relief is sought which would have an
adverse effect on the Claiming Party, the Claiming Party may, but shall have no
obligation to, defend against such Third Party Claim or legal proceeding in such
manner as it may deem appropriate, and the Claiming Party may compromise or
settle such Third Party Claim and proceeding without the Indemnitor's
consent so long as the Claiming Party acts in a commercially reasonable manner
(without regard to the Claiming Party's indemnification rights hereunder).
(c) PAYMENT. After any final judgment or award shall have
been rendered by a court, arbitration board or administrative agency of
competent jurisdiction and the time in which to appeal therefrom shall have
expired, or a settlement shall have been consummated, or the Claiming Party and
the Indemnitor shall arrive at a mutually binding agreement with respect to each
separate matter alleged to be indemnified by the Indemnitor hereunder, the
Claiming Party shall forward to the Indemnitor notice of any sums due and owing
by it with respect to such matter (in accordance with Section 8.10 hereof) and
the Indemnitor shall pay all of the sums so owing to the Claiming Party by wire
transfer, certified or bank
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cashier's check within 10 days after the date of such notice.
7.8 REMEDIES. Except for Losses resulting from fraud or
violations of the securities laws, the sole and exclusive remedy for any breach
of this Agreement shall be pursuant to this Article VII.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES.
------------------------------------------------------
(a) This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns. This Agreement and the rights and obligations
of the Buyer and the Sellers hereunder may not be assigned by any of the parties
hereto without the prior written consent of the other parties, except that the
Buyer may assign its rights and obligations hereunder to any Designated
Subsidiary, PROVIDED, HOWEVER, that the Buyer shall remain liable for all of its
obligations and those of any Designated Subsidiary hereunder, and, from and
after the Closing Date, Buyer may assign its rights hereunder to any party
providing financing to Buyer.
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(b) This Agreement is not intended, nor
shall it be construed, to confer upon any Person except the parties hereto and
their heirs, successors and permitted assigns any rights or remedies under or by
reason of this Agreement, except for the rights of Buyer Indemnified Parties and
Seller Indemnified Parties under Article VII hereof.
8.2 EXHIBITS AND DISCLOSURE SCHEDULE. All Exhibits
annexed hereto and the Disclosure Schedule referred to herein are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein.
8.3 ENTIRE AGREEMENT. This Agreement, including the
Exhibits hereto and the documents, schedules, certificates and instruments
referred to herein, embody the entire agreement and understanding of the parties
hereto in respect of the transactions contemplated by this Agreement. This
Agreement supersedes all prior agreements, arrangements and understandings of
the parties with respect to such transactions, including the Agreement dated as
of November 15, 1995 which this Agreement amends and restates.
8.4 WAIVER OF COMPLIANCE. No amendment, modification,
alteration, supplement or waiver of compliance with any obligation, covenant,
agreement, provision
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or condition hereof or consent pursuant to this Agreement shall be effective
unless evidenced by an instrument in writing executed by all of the parties or
in the case of a waiver, the party against whom enforcement of any waiver, is
sought. Any waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement, provision or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.
8.5 VALIDITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full force
and effect.
8.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
8.7 HEADINGS. The table of contents, article and section
headings contained in this Agreement are for convenience only and shall not
control or affect in any way the meaning or interpretation of the provisions of
this Agreement.
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8.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the conflicts of law principles of such jurisdiction.
8.9 TERMINATION. This Agreement may be terminated by either
the Buyer or the Sellers if the Closing has not occurred on or prior to August
16, 1996.
8.10 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally, telecopied (with confirmation of receipt),
delivered by nationally recognized overnight express service or sent by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses:
(a) If to the Buyer to:
PhoneTel III, Inc.
c/o PhoneTel Technologies, Inc.
650 Statler Officer Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone: (216) 241-2555
Telecopy: (216) 241-2574
Attention: Chief Executive Officer
68
<PAGE> 73
Copy to:
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Attention: Stephen M. Banker, Esq.
(b) If to a Seller:
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Telephone: (314) 939-0550
Telecopy: (314) 947-6488
Attention: William J. Brinkmeier
Copy to:
Scher & Miller L.L.P.
2828 Routh Street
Suite 725
Dallas, TX 75201
Telephone: (214) 871-0725
Telecopy: (214) 871-0020
Attention: Charles P. Miller, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
69
<PAGE> 74
ARTICLE IX
DEFINITIONS
-----------
9.1 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"ACCOUNTING BOOKS AND RECORDS" shall have the meaning set
forth in Section 3.2(b) hereof.
"ACCOUNTS RECEIVABLE" shall mean all of the accounts
receivable and notes receivable of Sellers.
"AFFILIATE TRANSACTIONS" shall have the meaning set forth in
Section 3.23 hereof.
"AUDITED FINANCIAL STATEMENTS" shall have the meaning set
forth in Section 3.6 hereof.
"BERTHEL FISHER" shall mean Berthel Fisher & Company Leasing,
Inc., an Iowa corporation.
"BERTHEL FISHER PHONES" shall mean the microprocessor based
pay telephones owned by Berthel Fisher and operated by Seller.
"BUSINESS" shall have the meaning set forth in the preamble
hereof.
"BUYER" shall mean PhoneTel Technologies, Inc., an Ohio
corporation.
70
<PAGE> 75
"BUYER INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.3(i) hereof.
"BUYER SHARES" shall mean shares of the Common Stock, $.01 par
value, of the Buyer.
"BUYER'S THRESHOLD AMOUNT" shall have the meaning set forth in
Section 7.6(b) hereof.
"CLOSING" shall have the meaning set forth in
Section 1.4 hereof.
"CLOSING DATE" shall have the meaning set forth
in Section 1.4 hereof.
"CODE" shall mean the Internal Revenue Code of
1986, as amended.
"CONSIDERATION" shall have the meaning set
forth in Section 1.3 hereof.
"CONTRACTS" shall mean and include all leases, contracts,
agreements, licenses, License Agreements, purchase orders, invoices, sales
orders, instruments evidencing indebtedness for borrowed money, mortgages or
other documents securing any indebtedness for borrowed money, commitments and
understandings, written or oral, and all amendments or modifications thereto, to
which Seller is a party or by which Seller is bound.
"DESIGNATED SUBSIDIARY" shall mean one or more
existing or to be formed Subsidiaries of the Buyer desig-
71
<PAGE> 76
nated to carry out all or part of the transactions contemplated by this
Agreement and the Other Documents.
"DISCLOSURE SCHEDULE" shall mean the disclosure schedule
delivered in connection herewith.
"ENCUMBRANCE" shall mean any lien, encumbrance, proxy, voting
trust arrangement, pledge, security interest, collateral security agreement,
financing statement (and similar notices) filed with any Governmental Authority,
claim (including any claim as defined in the Code), charge, equities, mortgage,
pledge, objection, title defect, option, restrictive covenant or restriction on
transfer of any nature whatsoever, and the interest of the lessor in any
property subject to a capital lease.
"ENVIRONMENTAL LAWS" has the meaning set forth in Section
3.19 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean any trade or business, whether or
not incorporated, which (within the meaning of Section 4001 of ERISA) would, in
conjunction with any Seller, be deemed a "single employer".
72
<PAGE> 77
"EQUIPMENT" shall mean all POA Phones and all other equipment
which are owned, leased or otherwise used by POA in the operations of its
Business.
"FINANCIAL STATEMENTS" shall have the meaning
set forth in Section 3.6 hereof.
"GAAP" shall mean generally accepted accounting principles as
in effect on the date hereof.
"GOVERNMENTAL AUTHORITY" shall mean any government or
political subdivision thereof, whether federal, state, local or foreign, or any
agency, department, commission, board, bureau, court, tribunal, body,
administrative or regulatory authority or instrumentality of any such government
or political subdivision.
"INDEMNITOR" shall have the meaning set forth
in Section 7.7(a) hereof.
"INTELLECTUAL PROPERTY" shall mean (i) all computer software
applications (whether licensed or otherwise and whether customized or
otherwise), U.S. and foreign patents and patent applications, registered and
unregistered copyrights and copyright applications (including copyrights in
proprietary computer software and databases), trademarks, service marks, trade
dress, logos, trade names and similar business identifiers, including, in each
case, all registrations and applica-
73
<PAGE> 78
tions therefor, (ii) all trade secrets, know-how, formulae, processes,
inventions (whether patentable or unpatentable) and other technical
information and (iii) the goodwill of the business symbolized by any of the
foregoing.
"INVENTORY" shall mean and include all inventory owned or held
by POA and used in the conduct of its Business and operations, including raw
materials, components, repair parts, works-in-progress, finished goods and other
similar items, whether new or used.
"LP ONE" shall mean Payphones of America Limited
Partnership I.
"LP ONE PHONES" shall mean the microprocessor based telephones
owned by LP One.
"LAW" shall mean any law (including common law), rule,
regulation, restriction (including zoning), code, statute, ordinance, order,
writ, injunction, judgment, decree or other requirement of a Governmental
Authority.
"LIABILITIES" shall mean any obligations or liabilities of any
nature whether known or unknown, accrued, absolute, contingent or otherwise, and
whether due or to become due of POA or its affiliates.
74
<PAGE> 79
"LOSSES" shall mean and include all demands, claims, actions,
causes of action, assessments, damages, losses, liabilities, judgments,
settlements, fines, penalties, sanctions, costs and expenses (including, without
limitation, interest, penalties, reasonable attorneys' fees and expenses as
incurred, and all other reasonable costs of investigating and defending third
party claims as incurred).
"MATERIAL CONTRACT" shall mean any Contract that (i) is with
any of the Sellers' Affiliates, (ii) involves an obligation or commitment of
more than $5,000 or (iii) which otherwise is material to POA's financial
condition, results of operations, assets, liabilities, business or, to the
knowledge of Seller, POA's prospects.
"ORDER" shall mean any order, judgment, injunction, award,
decree, writ, rule or similar action of any Governmental Authority.
"OTHER DOCUMENTS" shall have the meaning set forth in Section
1.4 hereof.
"POA" shall mean Payphones of America, Inc., a Tennessee
corporation, and all of its subsidiaries.
"POA CONTRACT PHONES" shall mean the number of telephones to
be installed by POA pursuant to location
75
<PAGE> 80
contracts entered into by POA after the date hereof, provided Buyer approves
such number within two business days prior to the Closing.
"POA MANAGED PHONES" shall mean any customer owned phones
which are managed by POA and for which, prior to Closing, there are signed
management agreements which include rights of first refusal for the purchase of
the managed phones by POA.
"POA PHONES" shall mean the microprocessor-based pay
telephones owned by POA which are active and generating income, including the
Berthel Fisher Phones and the LP One Phones, but not including any telephones
installed after the date hereof without the prior written approval of Buyer and
not including any telephones for which there is not, as of August 1, 1996, a
valid site location agreement; PROVIDED, that, for purposes of Sections 1.2 and
1.5 hereof, any such telephone will constitute a POA Phone if a valid site
location agreement is in place by September 30, 1996 or if such telephone has
continuously been in operation in its current location for a period of at least
twelve months.
"POA PHONES AMOUNT" shall mean the aggregate number of POA
Phones in operation at the close of business on August 1, 1996, totalling at
least 3,100 Phones.
76
<PAGE> 81
"PERMIT" shall mean any franchise, license, certificate,
approval, identification number, registration, permit, authorization, order or
approval of, and any required registration with, any Governmental Authority.
"PERMIT SHORTFALL" shall mean an amount equal to the product
of (a) $4,000 and (b) the number of POA Phones as to which, as of the Closing
Date, POA and Sellers have not satisfied the representation and warranty
contained in Section 3.28(i) hereof.
"PERSON" shall mean any individual, partnership, firm, trust,
association, corporation, joint venture, joint stock company, unincorporated
organization, Governmental Authority or other entity.
"PRO RATA" shall mean in accordance with the percentages set
forth in Exhibit A hereto, unless both Sellers shall have agreed to different
percentages and furnished notice thereof to Buyer.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"SELLER INDEMNIFIED PARTY" shall have the meaning set forth in
Section 7.4 hereof.
77
<PAGE> 82
"SELLER" shall have the meaning set forth in the preamble.
"SELLERS' AFFILIATES" shall have the meaning set forth in
Section 3.23 hereof.
"SELLERS' THRESHOLD AMOUNT" shall have the meaning set forth
in Section 7.6(a) hereof.
"STRADDLE PERIOD" shall have the meaning set forth in
Section 7.5(a) hereof.
"TAX RETURN" shall mean any return, report, information return
or other document (including any related or supporting information) with respect
to Taxes.
"TAXES" shall mean all taxes, charges, fees, duties, levies,
penalties or other assessments imposed by any federal, state, local or foreign
Governmental Authority, including, but not limited to, income, gross receipts,
excise, property, sales, gain, use, license, capital stock, transfer, franchise,
payroll, withholding, social security or other taxes, including any interest,
penalties or additions attributable thereto.
"THIRD PARTY CLAIM" shall have the meaning set forth in
Section 7.7(b) hereof.
78
<PAGE> 83
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, on the day and year first above written.
PAYPHONES OF AMERICA, INC.
By: /s/ William J. Brinkmeier
----------------------------------
William J. Brinkmeier
Vice President
THE SELLERS
-------------------------------------
Stanley Rojeski
/s/ William J. Brinkmeier
-------------------------------------
William J. Brinkmeier
PHONETEL III, INC.
By: /s/ Peter G. Graf
----------------------------------
Name: Peter G. Graf
Title: Chairman and CEO
<PAGE> 84
EXHIBIT "1"
CALCULATION OF PORTION OF PURCHASE PRICE PAYABLE AT CLOSING
AND SOURCES OF FUNDS AND ALLOCATION OF FUNDS
FOR PAYMENT OF PORTION OF PURCHASE PRICE PAYABLE AT CLOSING
1. CALCULATION OF PORTION OF PURCHASE PRICE
----------------------------------------
PAYABLE AT CLOSING:
-------------------
<TABLE>
<S> <C>
1.1 3,115 PAYPHONES X $4,000 EACH(1)= $12,460,000.00
1.2 95 CUSTOMER OWNED PHONES X $1,000 EACH(2)= 95,000.00
1.3 19 Contracts For Phones to be Installed x $1,000(3)= 19,000.00
TOTAL PURCHASE PRICE PAYABLE AT CLOSING: $12,574,000.00
2. SOURCES OF FUNDS AND ALLOCATION OF FUNDS FOR
---------------------------------------------
PAYMENT OF PORTION OF PURCHASE PRICE PAYABLE
--------------------------------------------
AT CLOSING:
-----------
2.1 BUYER SHARES (4): $ 749,997.00
2.2 LIABILITIES TO BE PAID OR ASSUMED AT CLOSING(5): 8,100,828.64
2.3 CASH PAID TO SELLLERS AT CLOSING: 78,061.08
2.4 BUYER NOTES TO SELLERS(6): 3,645,113.28
TOTAL SOURCES OF FUNDS: $12,574,000.00
</TABLE>
- ----------------------
(1)Calculated in accordance with SECTION 1.2(a).
(2)Calculated in accordance with SECTION 1.2(c).
(3)Calculated in accordance with SECTION 1.2(b).
(4)The Buyer Shares are to be issued as follows:
<TABLE>
<S> <C>
William J. Brinkmeier 42,233 shares
Stanley H. Rojeski 54,211 shares
Berthel Fisher & Company Leasing, Inc. 70,222 shares
</TABLE>
(5)The following sets forth the sources of funds for
payment/assumptions of these amounts:
$7,750,000.00 Provided by Berthel Fisher Financing
33,253.36 Vehicle Leases/Notes Assumption
195,636.36 Assumption of Midwest Note
121,938.92 Cash paid by Buyers on POA Liabilities
-------------
$8,100,828.64
=============
(6)The principal amount of the Promissory Note shall be adjusted in
accordance with SECTION 1.3(b).
<PAGE> 85
EXHIBIT A
---------
SELLERS
-------
<TABLE>
<S> <C> <C>
NAME AND ADDRESS NUMBER OF PERCENTAGE
- ---------------- SHARES ----------
---------
William Brinkmeier 1,124,105 43.79%
124 Point West Boulevard
St. Charles, MO 63301
Stanley Rojeski 1,443,219 56.21%
124 Point West Boulevard ---------
St. Charles, MO 63301
2,567,324
</TABLE>
<PAGE> 86
EXHIBIT B
---------
SECTION 1445(b)(2) TAX CERTIFICATE
Section 1445 of the Internal Revenue Code of 1986, as amended,
provides that a transferee (buyer) of a U.S. real property interest must
withhold tax if the transferor (seller) is a foreign person. To inform PhoneTel
III, Inc., an Ohio Corporation, ("Buyer"), that withholding of tax is not
required upon my disposition of a U.S. real property interest pursuant to the
Amended and Restated Share Purchase Agreement dated August 1, 1996, I, William
J. Brinkmeier , a shareholder of Payphones of America, Inc., hereby certify
the following:
1. I am not a nonresident alien for purposes of U.S. income
taxation;
2. My U.S. taxpayer identification (Social Security) number
is ###-##-####; and
3. My home address is
Number 5
- -------------------------------------------------------------------------------
Shelbourne Wood Court
- -------------------------------------------------------------------------------
St. Charles Mo 63304
- --------------------------------------------------------------------------------
I understand that this certification may be disclosed to the
Internal Revenue Service by Buyer and that any false statement I have made here
could be punished by fine, imprisonment or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete.
Dated: /s/ William J. Brinkmeier
--------------------------
Name: William J. Brinkmeier
<PAGE> 87
EXHIBIT B
---------
SECTION 1445(b)(2) TAX CERTIFICATE
Section 1445 of the Internal Revenue Code of 1986, as amended,
provides that a transferee (buyer) of a U.S. real property interest must
withhold tax if the transferor (seller) is a foreign person. To inform PhoneTel
III, Inc., an Ohio Corporation, ("Buyer"), that withholding of tax is not
required upon my disposition of a U.S. real property interest pursuant to the
Amended and Restated Share Purchase Agreement dated August 16, 1996, I,
Stan Rojeski, a shareholder of Payphones of America, Inc., hereby certify the
following:
1. I am not a nonresident alien for purposes of U.S.
income taxation;
2. My U.S. taxpayer identification (Social
Security) number is ###-##-####; and
3. My home address is
P.O. Box 41303
- ---------------------------------------------------------
Memphis, TN. 38174
- ---------------------------------------------------------
I understand that this certification may be disclosed to the
Internal Revenue Service by Buyer and that any false statement I have made here
could be punished by fine, imprisonment or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct and
complete.
Dated:
8-16-96
/s/ Stan Rojeski
------------------------------
Name: Stan Rojeski
<PAGE> 88
EXHIBIT C
---------
NONE
<PAGE> 89
EXHIBIT D
---------
CONSULTING AND NON-COMPETITION AGREEMENT
----------------------------------------
CONSULTING AND NON-COMPETITION AGREEMENT (this "Agree ment"), dated as
of August 1, 1996, by and between PhoneTel III, Inc., an Ohio corporation
("PhoneTel"), and Sue Harvey ("Harvey").
WHEREAS, Harvey has heretofore acted as an employee and officer of
Payphones of America, Inc., a Tennessee corporation ("Payphones") and has acted
as the liaison with the Missouri Petroleum Marketers Association;
WHEREAS, PhoneTel and Payphones have entered into an Amended and
Restated Share Purchase Agreement (the "Purchase Agreement"), dated as of
August 1, 1996, pursuant to which, at the "Closing" (as such term is defined in
the Purchase Agreement) PhoneTel will purchase all the capital stock of
Payphones (the "Shares").
WHEREAS, Payphones and PhoneTel are in the business of owning, leasing,
operating and maintaining pay telephones;
WHEREAS, PhoneTel recognizes that Harvey possesses trade secrets and
confidential business information relating to Payphones as well as knowledge and
experience relating to the pay telephone industry and desires to prevent Harvey
from (1) competing with the business operated by PhoneTel (or any subsidiary
thereof), (2) soliciting the former, current or future customers or employees of
PhoneTel (or any subsidiary thereof) or (3) soliciting PhoneTel to sell its
assets (or the assets of any subsidiary thereof);
WHEREAS, Phonetel has required Harvey to enter into this Agreement as a
condition to the Closing; and
WHEREAS, Harvey is agreeable to restrictions on her ability to compete
against and solicit from PhoneTel in accordance with the terms of this
Agreement;
NOW, THEREFORE, in consideration of the execution, delivery and
performance of the Purchase Agreement,
<PAGE> 90
and mutual premises and covenants herein and therein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, PhoneTel and Harvey hereby agree as follows:
1. TERM. The term of this agreement shall commence on the date hereof
and continue for a period of five (5) years hereafter (the "Term").
2. NON-COMPETITION. (a) For a period of two years commencing on the
date hereof, neither Harvey nor any member of her family shall, without the
prior written consent of PhoneTel, directly or indirectly, own, operate,
manage, be employed by, be an agent of, act as a consultant for, financially
support, lease property to or from or have a proprietary interest in, any
enterprise or business which sells, leases, maintains, owns or operates pay
telephones in any part of the states listed in Schedule 2 hereto. Harvey
acknowledges that the business of PhoneTel and its affiliates will be conducted
throughout such states and agrees that such geographic scope is reasonable.
(b) Notwithstanding any provision to the contrary contained herein,
Harvey shall not be prohibited from (i) owning less than 2% of the outstanding
equity securities of any publicly-held corporation, (ii) engaging in the
activities contemplated by Section 4 hereof, but only on behalf of PhoneTel or
Payphones, or (iii) serving as an employee, officer, or director of VisionComm,
Inc., a Delaware Corporation ("VisionComm"), provided that VisionComm does not
(and does not have any proprietary interest in any enterprise or business which
does) sell, lease, maintain or operate pay telephones in any part of the states
listed in Schedule 2 hereto, except for (A) one phone in Illinois for purposes
of complying with the regulations of the Illinois Payphone Association Settle-
ment LLC, (B) telephones operated under the Columbia/HCA Contract and (C) any
hospitality payphones tied in with cable, pay-per-view, or a hospitality room
phone, which may include the provision of operator services.
3. NON-SOLICITATION. Harvey agrees that, during the Term of this
agreement, she will not, directly or indirectly, (i) purchase or otherwise
acquire, or attempt to purchase or otherwise acquire, any of the
2
<PAGE> 91
assets of PhoneTel (or any subsidiary thereof); (ii) solicit, entice or
persuade, or attempt to solicit, entice or persuade, any employee of PhoneTel
or its affiliates, or any client then under contract with PhoneTel or any of its
affiliates to terminate his employment by or contractual relationship with
PhoneTel or its affiliates or to become employed by or to enter into
contractual relations with a competitor of PhoneTel or its affiliates; or (iii)
persuade or attempt to persuade customers, potential customers, suppliers or
potential suppliers of PhoneTel and its affiliates to divert their business to
any other entity or individual.
4. COMPENSATION. In consideration for the agreements of Harvey contained
herein, Phonetel agrees to pay or cause Payphones to pay Harvey (i) $200
multiplied by the number of telephones contained in any location contract which
Harvey secures, with either (A) a member of the Missouri Petroleum Marketers
Association or (B) anyone else, on PhoneTel's behalf during the two years
following the Closing, provided PhoneTel accepts and enters into such location
contract, and provided further that such amount shall be reduced by any amount
payable pursuant to clause (ii) below, and (ii) $1,000 per month for the six
months following the Closing, but such amount will be reduced by any amount paid
to Harvey pursuant to clause (i) above.
5. CONFIDENTIALITY. Harvey acknowledges that PhoneTel would be
irreparably damaged if confidential information about PhoneTel, its affiliates
or the Assets were disclosed to or utilized on behalf of any person, firm,
corporation or other business organization which is in competition in any
respect with PhoneTel or its affiliates. Harvey covenants and agrees that she
will not at any time, and will cause her agents, affiliates and associates not
to at any time, without the prior written consent of PhoneTel, disclose any such
confidential information, except to employees and authorized representatives of
PhoneTel.
6.NECESSITY. Harvey acknowledges that due to the uniqueness of her
skills and abilities and the uniqueness of the trade secrets, confidential
business lists, customer requirements and preferences, records and information
she possesses, the covenants set forth herein are reasonable and necessary for
the protection of
3
<PAGE> 92
PhoneTel. Harvey further acknowledges that enforcement of the covenants
herein will not deprive her of her ability to earn a livelihood.
7. SPECIFIC PERFORMANCE. Harvey acknowledges that the rights and
privileges granted to PhoneTel herein are of a special and unique character,
which gives them a peculiar value, the loss of which may not be reasonably or
adequately compensated for by damages in an action at law, and that a breach by
Harvey of this Agreement will cause PhoneTel irreparable injury and damage.
Accordingly, Harvey hereby agrees that PhoneTel shall be entitled to remedies of
injunction, specific performance or other equitable relief, to prevent or cure a
breach of this Agreement. This provision shall not be construed as a waiver of
any other rights or remedies PhoneTel may have for damages or otherwise.
8. PARTIAL INVALIDITY. The parties have entered into this Agreement in
good faith and for the reasons set forth in the recitals hereto and assume and
intend that this Agreement is legally binding. If, for any reason, this
Agreement is not binding because of its geographical scope or because of its
term, then the parties agree that this Agreement shall be deemed effective for
the widest geographical area and/or the longest period of time as may be legally
enforceable, it being understood that the compensation payable hereunder is for
the full Term and geographic area stated herein, and for all the covenants of
Harvey. Any provision which is determined to be prohibited or unenforceable
shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof. The provisions of this
Section 7 shall not be construed as a waiver of any other rights or remedies
PhoneTel may have for damages or otherwise.
9. BINDING EFFECT; MODIFICATIONS. This Agreement shall be binding upon
and shall inure to the benefit of the personal representatives, executors,
administrators, successors and assigns of the parties to this Agreement. This
Agreement contains the entire agreement of the parties and supersedes any and
all prior written agreements between the parties, and all prior and
contemporaneous oral statements with respect to the transactions contemplated
hereby. This Agreement may not be changed or terminated orally, but may only be
changed
4
<PAGE> 93
by an agreement in writing signed by each of the parties hereto.
10. SECTION CAPTIONS; COUNTERPARTS. Section and other captions
contained in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof. This Agreement may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
11. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York, applied without giving effect to any
conflict of laws principles.
12. NO RULE OF CONSTRUCTION. The parties acknowledge and agree that no
rule of construction shall apply to this Agreement which construes any language,
whether ambiguous, unclear or otherwise, in favor of or against any party by
reason of that party's role in drafting this Agreement.
13. NOTICES. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company:
PhoneTel III, Inc.
c/o PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chairman
If to Harvey:
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
5
<PAGE> 94
Attention: Sue Harvey or to such other address as each party may have
furnished to the others in writing in accordance herewith, except that notices
of change of address shall be effective only upon receipt.
6
<PAGE> 95
IN WITNESS WHEREOF, the undersigned parties have hereunto set their
hands as of the day and year first above written.
PHONETEL III, INC.
By: /s/ Peter Graf
-------------------------------
Name: Peter Graf
Title: Chairman
/s/ Sue Harvey
-------------------------------
SUE HARVEY
<PAGE> 96
CONSULTING AGREEMENT SCHEDULE 2
AL
CA
CO
CT
DC
FL
GA
IA
IL
IN
KS
LA
MA
MD
MI
MN
MO
MS
MT
NC
NE
NY
OH
OK
OR
PA
SC
SD
TN
TX
VA
WA
<PAGE> 97
EXHIBIT E
---------
CONSULTING AND NON-COMPETITION AGREEMENT
----------------------------------------
CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement"),
dated as of August 1, 1996, by and between PhoneTel III, Inc., an Ohio
corporation ("PhoneTel"), and William J. Brinkmeier ("Brinkmeier").
WHEREAS, Brinkmeier has heretofore served as Vice-President of
Payphones of America, Inc., a Tennessee corporation ("Payphones");
WHEREAS, PhoneTel and Payphones have entered into an Amended
and Restated Share Purchase Agreement (the "Purchase Agreement"), dated as of
August 1, 1996, pursuant to which, at the "Closing" (as such term is defined in
the Purchase Agreement) PhoneTel will purchase all the capital stock of
Payphones (the "Shares").
WHEREAS, Payphones and PhoneTel are in the business of owning,
leasing, operating and maintaining pay telephones;
WHEREAS, PhoneTel recognizes that Brinkmeier possesses trade
secrets and confidential business information relating to Payphones as well as
knowledge and experience relating to the pay telephone industry and desires to
prevent Brinkmeier from (1) competing with the business operated by PhoneTel (or
any subsidiary thereof), (2) soliciting the former, current or future custom-
ers or employees of PhoneTel (or any subsidiary thereof) or (3) soliciting
PhoneTel to sell its assets (or the assets of any subsidiary thereof);
WHEREAS, Phonetel has required Brinkmeier to enter into this
Agreement as a condition to the Closing; and
WHEREAS, Brinkmeier is agreeable to restrictions on his
ability to compete against and solicit from PhoneTel in accordance with the
terms of this Agreement;
NOW, THEREFORE, in consideration of the execution, delivery
and performance of the Purchase Agreement, and mutual premises and covenants
herein and therein contained and other good and valuable consideration, the
<PAGE> 98
receipt and sufficiency of which are hereby acknowledged, PhoneTel and
Brinkmeier hereby agree as follows:
1. TERM. The term of this agreement shall commence on the date
hereof and continue for a period of five (5) years hereafter (the "Term").
2. NON-COMPETITION. (a) Subject to and expressly conditioned
upon PhoneTel's timely payment of all amounts due to Brinkmeier hereunder, for a
period of three years commencing on the date hereof, neither Brinkmeier nor any
member of his family shall, without the prior written consent of PhoneTel,
directly or indirectly, own, operate, manage, be employed by, be an agent of,
act as a consultant for, financially support, lease property to or from or have
a proprietary interest in, any enterprise or business which sells, leases,
maintains, owns or operates pay telephones in any part of the states listed on
Schedule 2 hereto. Brinkmeier acknowledges that the business of PhoneTel and
its affiliates will be conducted throughout such states and agrees that such
geographic scope is reasonable.
(b) Notwithstanding any provision to the contrary contained
herein, Brinkmeier shall not be prohibited from (i) owning less than 2% of the
outstanding equity securities of any publicly-held corporation or (ii) holding
an interest in VisionComm, Inc., a Delaware corporation ("VisionComm"), and
serving as a director, employee, and officer of VisionComm, provided that
VisionComm does not (and does not have any proprietary interest in any
enterprise or business which does) sell, lease, maintain or operate pay
telephones in any part of the states listed on Schedule 2 hereto, except for (A)
telephones operated under the Columbia/HCA Contract and (B) installing any
hospitality payphones tied in with cable, pay-per-view, or a hospitality room
phone, which may include the provision of operator services.
3. NON-SOLICITATION. Brinkmeier agrees that, during the Term
of this agreement, he will not, directly or indirectly, (i) purchase or
otherwise acquire, or attempt to purchase or otherwise acquire, any of the
assets of PhoneTel (or any subsidiary thereof); (ii) solicit, entice or
persuade, or attempt to solicit, entice or persuade, any employee of PhoneTel or
its affiliates, or any client then under contract with
2
<PAGE> 99
PhoneTel or any of its affiliates to terminate his employment by or contractual
relationship with PhoneTel or its affiliates or to become employed by or to
enter into contractual relations with a competitor of PhoneTel or its
affiliates; or (iii) persuade or attempt to persuade customers, potential
customers, suppliers or potential suppliers of PhoneTel and its affiliates to
divert their business to any other entity or individual.
4. CONFIDENTIALITY. Brinkmeier acknowledges that PhoneTel
would be irreparably damaged if confidential information about PhoneTel, its
affiliates or the Assets were disclosed to or utilized on behalf of any person,
firm, corporation or other business organization which is in competition in any
respect with PhoneTel or its affiliates. Brinkmeier covenants and agrees that he
will not at any time, and will cause his agents, affiliates and associates not
to at any time, without the prior written consent of PhoneTel, disclose any such
confidential information, except to employees and authorized representatives of
PhoneTel.
5. CONSULTING. For a period of three years commencing on the
date hereof, Brinkmeier shall make himself available to perform consulting and
other related services with respect to matters involving the business and
affairs of PhoneTel or any of its affiliates as requested; PROVIDED, HOWEVER,
that Brinkmeier shall perform such services no more frequently than the equiva-
lent of three business days per month. Brinkmeier shall devote reasonable time
and his reasonable best efforts, skill and attention to the performance of such
consulting services, including travel reasonably required in the performance of
such consulting services. PhoneTel shall reimburse Brinkmeier for all reasonable
travel expenses incurred in connection with such consulting services pursuant to
PhoneTel's expense reimbursement policy.
6. COMPENSATION; TAXES. In consideration for the agreements of
Brinkmeier contained herein, PhoneTel agrees to pay or cause Payphones to pay
Brinkmeier a total of $187,500, without interest, to be paid (a) in equal
monthly installments of $6,696.43 beginning April 1, 1997 or, if earlier, (b)
promptly following the public sale of equity securities by PhoneTel
Technologies, Inc. pursuant to a registration under the Securities Act of 1933;
PROVIDED, HOWEVER, that if Brinkmeier violates the
3
<PAGE> 100
terms of this Agreement, such installment payments will be withheld. Brinkmeier
hereby acknowledges that by virtue of this Agreement he is not and will not
become an employee of PhoneTel. Brinkmeier further acknowledges his separate
responsibility for all federal and state withholding taxes, Federal Insurance
Contribution Act taxes and workers' compensation and unemployment compensation
taxes, if applicable, and agrees to indemnify and hold PhoneTel harmless from
any claim or liability therefor.
7. NECESSITY. Brinkmeier acknowledges that due to the
uniqueness of his skills and abilities and the uniqueness of the trade secrets,
confidential business lists, customer requirements and preferences, records and
information he possesses, the covenants set forth herein are reasonable and
necessary for the protection of PhoneTel. Brinkmeier further acknowledges that
enforcement of the covenants herein will not deprive him of his ability to earn
a livelihood.
8. SPECIFIC PERFORMANCE. Brinkmeier acknowledges that the
rights and privileges granted to PhoneTel herein are of a special and unique
character, which gives them a peculiar value, the loss of which may not be
reasonably or adequately compensated for by damages in an action at law, and
that a breach by Brinkmeier of this Agreement will cause PhoneTel irreparable
injury and damage. Accordingly, Brinkmeier hereby agrees that PhoneTel shall be
entitled to remedies of injunction, specific performance or other equitable
relief, to prevent or cure a breach of this Agreement. This provision shall not
be construed as a waiver of any other rights or remedies PhoneTel may have for
damages or otherwise.
9. PARTIAL INVALIDITY. The parties have entered into this
Agreement in good faith and for the reasons set forth in the recitals hereto and
assume and intend that this Agreement is legally binding. If, for any reason,
this Agreement is not binding because of its geographical scope or because of
its term, then the parties agree that this Agreement shall be deemed effective
for the widest geographical area and/or the longest period of time as may be
legally enforceable, it being understood that the compensation payable hereunder
is for the full Term and geographic area stated herein, and for all the
covenants of Brinkmeier. Any provision which is
4
<PAGE> 101
determined to be prohibited or unenforceable shall be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof. The provisions of this Section 9 shall not be construed as a
waiver of any other rights or remedies PhoneTel may have for damages or
otherwise.
10. BINDING EFFECT; MODIFICATIONS. This Agreement shall be
binding upon and shall inure to the benefit of the personal representatives,
executors, administrators, successors and assigns of the parties to this
Agreement. This Agreement contains the entire agreement of the parties and
supersedes any and all prior written agreements between the parties, and all
prior and contemporaneous oral statements with respect to the transactions
contemplated hereby. This Agreement may not be changed or terminated orally, but
may only be changed by an agreement in writing signed by each of the parties
hereto.
11. SECTION CAPTIONS; COUNTERPARTS. Section and other captions
contained in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof. This Agreement may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
12. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of New York, applied without giving effect
to any conflict of laws principles.
13. NO RULE OF CONSTRUCTION. The parties acknowledge and agree
that no rule of construction shall apply to this Agreement which construes any
language, whether ambiguous, unclear or otherwise, in favor of or against any
party by reason of that party's role in drafting this Agreement.
14. NOTICES. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
(unless otherwise specified) mailed by United States
5
<PAGE> 102
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
PhoneTel III, Inc.
c/o PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chairman
If to Brinkmeier:
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Attention: William J. Brinkmeier
or to such other address as each party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. AGENT'S FEES. PhoneTel agrees to pay Brinkmeier a fee for
any telephone location contract that, after the Closing, he generates for
PhoneTel and which PhoneTel chooses to accept. The fee will be paid to
Brinkmeier as follows: (i) $200 for every telephone in any such contract, to be
paid at the time PhoneTel enters into such contract and (ii) $200 additional for
every telephone that, pursuant to an accepted contract, generates average
revenue greater than $125 per month for the first three months that such
telephone is in operation.
6
<PAGE> 103
IN WITNESS WHEREOF, the undersigned parties have hereunto set
their hands as of the day and year first above written.
PHONETEL III, INC.
By: /s/ Peter Graf
------------------------------
Name: Peter Graf
Title: Chairman
/s/ William J. Brinkmeier
------------------------------
WILLIAM J. BRINKMEIER
<PAGE> 104
CONSULTING AGREEMENT SCHEDULE 2
AL
CA
CO
CT
DC
FL
GA
IA
IL
IN
KS
LA
MA
MD
MI
MN
MO
MS
MT
NC
NE
NY
OH
OK
OR
PA
SC
SD
TN
TX
VA
WA
<PAGE> 105
EXHIBIT F
---------
CONSULTING AND NON-COMPETITION AGREEMENT
----------------------------------------
CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement"),
dated as of August 1, 1996, by and between PhoneTel III, Inc., an Ohio corpo-
ration ("PhoneTel"), and Stanley Rojeski ("Rojeski").
WHEREAS, Rojeski has heretofore served as President of
Payphones of America, Inc., a Tennessee corporation ("Payphones");
WHEREAS, PhoneTel and Payphones have entered into an Amended
and Restated Share Purchase Agreement (the "Purchase Agreement"), dated as of
August 1, 1996, pursuant to which, at the "Closing" (as such term is defined in
the Purchase Agreement) PhoneTel will purchase all the capital stock of
Payphones (the "Shares").
WHEREAS, Payphones and PhoneTel are in the business of owning,
leasing, operating and maintaining pay telephones;
WHEREAS, PhoneTel recognizes that Rojeski possesses trade
secrets and confidential business information relating to Payphones as well as
knowledge and experience relating to the pay telephone industry and desires to
prevent Rojeski from (1) competing with the business operated by PhoneTel (or
any subsidiary thereof), (2) soliciting the former, current or future customers
or employees of PhoneTel (or any subsidiary thereof) or (3) soliciting PhoneTel
to sell its assets (or the assets of any subsidiary thereof);
WHEREAS, Phonetel has required Rojeski to enter into this
Agreement as a condition to the Closing; and
WHEREAS, Rojeski is agreeable to restrictions on his ability
to compete against and solicit from PhoneTel in accordance with the terms of
this Agreement;
NOW, THEREFORE, in consideration of the execution, delivery
and performance of the Purchase Agreement, and mutual premises and covenants
herein and therein contained and other good and valuable consideration, the
<PAGE> 106
receipt and sufficiency of which are hereby acknowledged, PhoneTel and Rojeski
hereby agree as follows:
1. TERM. The term of this agreement shall commence on the date
hereof and continue for a period of five (5) years hereafter (the "Term").
2. NON-COMPETITION. (a) Subject to and expressly conditioned
upon PhoneTel's timely payment of all amounts due to Rojeski hereunder, for a
period of three years commencing on the date hereof, neither Rojeski nor any
member of his family shall, without the prior written consent of PhoneTel,
directly or indirectly, own, operate, manage, be employed by, be an agent of,
act as a consultant for, financially support, lease property to or from or have
a proprietary interest in, any enterprise or business which sells, leases,
maintains, owns or operates pay telephones in any part of the states listed on
Schedule 2 hereto. Rojeski acknowledges that the business of PhoneTel and its
affiliates will be conducted throughout such states and agrees that such
geographic scope is reasonable.
(b) Notwithstanding any provision to the contrary contained
herein, Rojeski shall not be prohibited from (i) owning less than 2% of the
outstanding equity securities of any publicly-held corporation or (ii) holding
an interest in VisionComm, Inc., a Delaware corporation ("VisionComm"), and
serving as a director and officer of VisionComm, provided that VisionComm does
not (and does not have any proprietary interest in any enterprise or business
which does) sell, lease, maintain or operate pay telephones in any part of the
states listed on Schedule 2 hereto, except for (A) telephones operated under the
Columbia/HCA Contract and (B) installing any hospitality payphones tied in with
cable, pay-per-view, or a hospitality room phone, which may include the
provision of operator services.
3. NON-SOLICITATION. Rojeski agrees that, during the Term of
this agreement, he will not, directly or indirectly, (i) purchase or otherwise
acquire, or attempt to purchase or otherwise acquire, any of the assets of
PhoneTel (or any subsidiary thereof); (ii) solicit, entice or persuade, or
attempt to solicit, entice or persuade, any employee of PhoneTel or its
affiliates, or any client then under contract with
2
<PAGE> 107
PhoneTel or any of its affiliates to terminate his employment by or contractual
relationship with PhoneTel or its affiliates or to become employed by or to
enter into contractual relations with a competitor of PhoneTel or its
affiliates; or (iii) persuade or attempt to persuade customers, potential
customers, suppliers or potential suppliers of PhoneTel and its affiliates to
divert their business to any other entity or individual.
4. CONFIDENTIALITY. Rojeski acknowledges that PhoneTel would
be irreparably damaged if confidential information about PhoneTel, its
affiliates or the Assets were disclosed to or utilized on behalf of any person,
firm, corporation or other business organization which is in competition in any
respect with PhoneTel or its affiliates. Rojeski covenants and agrees that he
will not at any time, and will cause his agents, affiliates and associates not
to at any time, without the prior written consent of PhoneTel, disclose any such
confidential information, except to employees and authorized representatives of
PhoneTel.
5. CONSULTING. For a period of three years commencing on the
date hereof, Rojeski shall make himself available to perform consulting and
other related services with respect to matters involving the business and
affairs of PhoneTel or any of its affiliates as requested; PROVIDED, HOWEVER,
that Rojeski shall perform such services no more frequently than the equivalent
of three business days per month. Rojeski shall devote reasonable time and his
reasonable best efforts, skill and attention to the performance of such
consulting services, including travel reasonably required in the performance of
such consulting services. PhoneTel shall reimburse Rojeski for all reasonable
travel expenses incurred in connection with such consulting services pursuant
to PhoneTel's expense reimbursement policy.
6. COMPENSATION; TAXES. In consideration for the agreements of
Rojeski contained herein, PhoneTel agrees to pay or cause Payphones to pay
Rojeski a total of $187,500, without interest, to be paid (a) in equal monthly
installments of $6,696.43 beginning April 1, 1997 or, if earlier, (b) promptly
following the public sale of equity securities by PhoneTel Technologies, Inc.
pursuant to a registration under the Securities Act of 1933; PROVIDED, HOWEVER,
that if Rojeski violates the terms of
3
<PAGE> 108
this Agreement, such installment payments will be withheld. Rojeski hereby
acknowledges that by virtue of this Agreement he is not and will not become an
employee of PhoneTel. Rojeski further acknowledges his separate responsibility
for all federal and state withholding taxes, Federal Insurance Contribution
Act taxes and workers' compensation and unemployment compensation taxes, if
applicable, and agrees to indemnify and hold PhoneTel harmless from any claim
or liability therefor.
7. NECESSITY. Rojeski acknowledges that due to the uniqueness
of his skills and abilities and the uniqueness of the trade secrets, confi-
dential business lists, customer requirements and preferences, records and
information he possesses, the covenants set forth herein are reasonable and
necessary for the protection of PhoneTel. Rojeski further acknowledges that
enforcement of the covenants herein will not deprive him of his ability to earn
a livelihood.
8. SPECIFIC PERFORMANCE. Rojeski acknowledges that the rights
and privileges granted to PhoneTel herein are of a special and unique character,
which gives them a peculiar value, the loss of which may not be reasonably or
adequately compensated for by damages in an action at law, and that a breach by
Rojeski of this Agreement will cause PhoneTel irreparable injury and damage.
Accordingly, Rojeski hereby agrees that PhoneTel shall be entitled to remedies
of injunction, specific performance or other equitable relief, to prevent or
cure a breach of this Agreement. This provision shall not be construed as a
waiver of any other rights or remedies PhoneTel may have for damages or
otherwise.
9. PARTIAL INVALIDITY. The parties have entered into this
Agreement in good faith and for the reasons set forth in the recitals hereto and
assume and intend that this Agreement is legally binding. If, for any reason,
this Agreement is not binding because of its geographical scope or because of
its term, then the parties agree that this Agreement shall be deemed effective
for the widest geographical area and/or the longest period of time as may be
legally enforceable, it being understood that the compensation payable hereunder
is for the full Term and geographic area stated herein, and for all the
covenants of Rojeski. Any provision which is determined to be prohibited or
unenforceable shall be
4
<PAGE> 109
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. The provisions of this Section 9
shall not be construed as a waiver of any other rights or remedies PhoneTel may
have for damages or otherwise.
10. BINDING EFFECT; MODIFICATIONS. This Agreement shall be
binding upon and shall inure to the benefit of the personal representatives,
executors, administrators, successors and assigns of the parties to this
Agreement. This Agreement contains the entire agreement of the parties and
supersedes any and all prior written agreements between the parties, and all
prior and contemporaneous oral statements with respect to the transactions
contemplated hereby. This Agreement may not be changed or terminated orally, but
may only be changed by an agreement in writing signed by each of the parties
hereto.
11. SECTION CAPTIONS; COUNTERPARTS. Section and other captions
contained in this Agreement are for reference purposes only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provision hereof. This Agreement may be executed in
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
12. GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of New York, applied without giving effect
to any conflict of laws principles.
13. NO RULE OF CONSTRUCTION. The parties acknowledge and agree
that no rule of construction shall apply to this Agreement which construes any
language, whether ambiguous, unclear or otherwise, in favor of or against any
party by reason of that party's role in drafting this Agreement.
14 NOTICES. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States
5
<PAGE> 110
certified or registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company:
PhoneTel III, Inc.
c/o PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chairman
If to Rojeski:
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Attention: Stanley Rojeski
or to such other address as each party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. AGENT'S FEES. PhoneTel agrees to pay Rojeski a fee for any
telephone location contract that, after the Closing, he generates for PhoneTel
and which PhoneTel chooses to accept. The fee will be paid as follows: (i) $200
for every telephone in any such contract, to be paid at the time PhoneTel enters
into such contract and (ii) $200 additional for every telephone that, pursuant
to an accepted contract, generates average revenue greater than $125 per month
for the first three months that such telephone is in operation.
6
<PAGE> 111
IN WITNESS WHEREOF, the undersigned parties have hereunto set
their hands as of the day and year first above written.
PHONETEL III, INC.
By: /s/ Peter Graf
------------------------------
Name: PETER GRAF
Title: Chairman
/s/ Stanley Rojeski
------------------------------
STANLEY ROJESKI
<PAGE> 112
EXHIBIT G
---------
STOCKHOLDER REPRESENTATIONS AND WARRANTIES
------------------------------------------
This document is being delivered in connection with the proposed
purchase (the "Purchase") of Payphones of America, Inc. ("POA") by PhoneTel III,
Inc. ("PhoneTel III") pursuant to the Amended and Restated Share Purchase
Agreement (the "Purchase Agreement") to be entered into among PhoneTel III, POA,
and the stockholders of POA. The undersigned holder of shares of POA Common
Stock (the "Stockholder") understands that, pursuant to the Purchase, he/she
will receive shares of PhoneTel Technologies, Inc. Common Stock ("Shares").
NAME: /s/ William J. Brinkmeier
----------------------------------
(Please Type or Print)
ADDRESS: 5 Shelbourne Wood Court
St. Charles MO 63304
---------------------------------
SOCIAL SECURITY NUMBER: ###-##-####
--------------------
NUMBER OF POA SHARES HELD BY STOCKHOLDER:
1,124,105
- ---------
DATE: 8/1/96
------
================================================================================
<PAGE> 113
PART I: ACCREDITED INVESTORS
(Based upon the definition of "accredited investor" in Exhibit A hereto, please
check one box bejow.)
/x/ Stockholder is an "accredited investor"
Stockholder Initials: /s/ WJB
-------
PART II: ADDITIONAL REPRESENTATIONS AND WARRANTIES
(a) The stockholder is acquiring the Shares solely for his/her
own beneficial account, for investment purposes, and not with a view to, or for
resale in connection with, any distribution of the Shares. The undersigned
understands that the Shares have not been registered under the Securities Act of
1933 or the securities laws of any state by reason of specific exemptions under
the provisions thereof which depend in part upon the investment intent of the
undersigned and of the other representations made by the Stockholder. The
Stockholder understands that PhoneTel is relying upon the representations
contained herein for the purpose of determining whether the Purchase meets the
requirements for such exemptions.
(b) The stockholder has had an opportunity to ask questions,
receive answers and discuss the business, management and financial affairs of
PhoneTel and the terms and conditions of an investment in the Shares with, and
has had access to, the management of PhoneTel and the Stockholder has had the
opportunity to review the information received in connection with this
investment. The Stockholder is familiar with the business and financial
condition, properties, operations and prospects of PhoneTel and POA and with the
terms of the Purchase and the Purchase Agreement.
(c) Neither Phonetel nor any person acting on its behalf has
offered the Shares to the Stockholder by any form of general solicitation or
general advertising.
(d) (i) The Stockholder's financial situation is such that
he/she can afford to bear the economic risk
2
<PAGE> 114
of holding the Shares for an indefinite period of time, has adequate means for
providing for his/her current needs and personal contingencies, and can afford
to suffer the complete loss of his/her investment in the Shares; (ii) in making
his/her decision to acquire the Shares pursuant to the Purchase, the Stockholder
has relied upon independent investigations made by him/her and, to the extent
believed by the Stockholder to be appropriate, his/her representatives,
including his/her own professional, financial, tax and other advisors; and (iii)
all information which the Stockholder has provided to Phonetel and its
representatives including, without limitation, information concerning the
Stockholder and his/her financial position is true, complete and correct as of
the date hereof, and the Stockholder agrees to promptly notify PhoneTel if at
any time this ceases to be the case.
(e) The Stockholder hereby represents and warrants that the
Stockholder has such knowledge, experience and skill in evaluating and investing
in issues of both equity and debt securities, including securities of new and
speculative companies, such that he/she is capable of evaluating the merits and
risks of an investment in the Shares, and has such knowledge, experience and
skill in financial and business matters that he/she is capable of evaluating the
merits and risks of the prospective investment in the Shares and the suitability
of the Shares as an investment.
IN WITNESS WHEREOF, the Stockholder has executed this document
as of the date set forth above.
/s/ William J. Brinkmeier
---------------------------
Stockholder
Accepted and Agreed:
PHONETEL TECHNOLOGIES, INC.
By:________________________
Date: , 1996
3
<PAGE> 115
EXHIBIT A
---------
"Accredited investor" shall mean any person who comes within any
of the following categories, or who the issuer of the securities being offered
or sold reasonably believes comes within any of the following categories, at the
time of the sale of the securities to that person:
(1) Any bank as defined in Section 3(a) (2) of the Securities
Act of 1933 (the "Act") or any savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Act whether acting in its individual
or fiduciary capacity; any broker dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as defined in Section
2(13) of the Act; any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a) (48) of
that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000, or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors;
(2) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c) (3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
4
<PAGE> 116
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds $1,000,000;
(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; and
(8) Any entity in which all of the equity
owners are accredited investors.
5
<PAGE> 117
EXHIBIT G
---------
STOCKHOLDER REPRESENTATIONS AND WARRANTIES
------------------------------------------
This document is being delivered in connection with the proposed
purchase (the "Purchase") of Payphones of America, Inc. ("POA") by PhoneTel III,
Inc. ("PhoneTel III") pursuant to the Amended and Restated Share Purchase
Agreement (the "Purchase Agreement") to be entered into among PhoneTel III,
POA, and the stockholders of POA. The undersigned holder of shares of POA
Common Stock (the "Stockholder") understands that, pursuant to the Purchase,
he/she will receive shares of PhoneTel Technologies, Inc. Common Stock
("Shares").
NAME: Stan Rojeski
--------------------------------------
(Please type or print)
ADDRESS: P.O. Box 41303, Memphis, TN 38174
--------------------------------------
SOCIAL SECURITY NUMBER: ###-##-####
-----------------------
NUMER OF POA SHARES HELD BY STOCKHOLDER:
1,443,219
- ---------
DATE: 8-16-96
--------------------
====================================================
<PAGE> 118
PART I: ACCREDITED INVESTORS
(Based upon the definition of "accredited investor" in Exhibit A hereto, please
check one box below.)
/X/ Stockholder is an "accredited investor"
Stockholder Initials: /s/ SR
-------------
PART II: ADDITIONAL REPRESENTATIONS AND WARRANTIES
(a) The Stockholder is acquiring the Shares solely for his/her
own beneficial account, for investment purposes, and not with a view to, or for
resale in connection with, any distribution of the Shares. The undersigned
understands that the Shares have not been registered under the Securities Act
of 1933 or the securities laws of any state by reason of specific exemptions
under the provisions thereof which depend in part upon the investment intent of
the undersigned and of the other representations made by the Stockholder. The
Stockholder understands that PhoneTel is relying upon the representations
contained herein for the purpose of determining whether the Purchase meets the
requirements for such exemptions.
(b) The Stockholder has had an opportunity to ask questions,
receive answers and discuss the business, management and financial affairs of
PhoneTel and the terms and conditions of an investment in the Shares with, and
has had access to, the management of PhoneTel and the Stockholder has had the
opportunity to review the information received in connection with this
investment. The Stockholder is familiar with the business and financial
condition, properties, operations and prospects of PhoneTel and POA and with
the terms of the Purchase and the Purchase Agreement.
(c) Neither PhoneTel nor any person acting on its behalf has
offered the Shares to the Stockholder by any form of general solicitation or
general advertising.
(d) (i) The Stockholder's financial situation is such that
he/she can afford to bear the economic risk
2
<PAGE> 119
of holding the Shares for an indefinite period of time, has adequate means for
providing for his/her current needs and personal contingencies, and can afford
to suffer the complete loss of his/her investment in the Shares; (ii) in making
his/her decision to acquire the Shares pursuant to the Purchase, the Stockholder
has relied upon independent investigations made by him/her and, to the extent
believed by the Stockholder to be appropriate, his/her representatives,
including his/her own professional, financial, tax and other advisors; and (iii)
all information which the Stockholder has provided to PhoneTel and its
representatives including, without limitation, information concerning the
Stockholder and his/her financial position is true, complete and correct as of
the date hereof, and the Stockholder agrees to promptly notify PhoneTel if at
any time this ceases to be the case.
(e) The Stockholder hereby represents and warrants that the Stockholder
has such knowledge, experience and skill in evaluating and investing in issues
of both equity and debt securities, including securities of new and speculative
companies, such that he/she is capable of evaluating the merits and risks of an
investment in the Shares, and has such knowledge, experience and skill in
financial and business matters that he/she is capable of evaluating the merits
and risks of the prospective investment in the Shares and the suitability of the
Shares as an investment.
IN WITNESS WHEREOF, the Stockholder has executed this document as of
the date set forth above.
/s/ Stan Rojeski
------------------------------
Stockholder
Accepted and Agreed:
PHONETEL TECHNOLOGIES, INC.
By: _______________________
Date: , 1996
3
<PAGE> 120
of holding the Shares for an indefinite period of time, has adequate means for
providing for his/her current needs and personal contingencies, and can afford
to suffer the complete loss of his/her investment in the Shares; (ii) in making
his/her decision to acquire the Shares pursuant to the Purchase, the Stockholder
has relied upon independent investigations made by him/her and, to the extent
believed by the Stockholder to be appropriate, his/her representatives,
including his/her own professional, financial, tax and other advisors; and (iii)
all information which the Stockholder has provided to PhoneTel and its
representatives including, without limitation, information concerning the
Stockholder and his/her financial position is true, complete and correct as of
the data hereof, and the Stockholder agrees to promptly notify PhoneTel if at
any time this ceases to be the case.
(e) The Stockholder hereby represents and warrants that the Stockholder
has such knowledge, experience and skill in evaluating and investing in issues
of both equity and debt securities, including securities of new and speculative
companies, such that he/she is capable of evaluating the merits and risks of an
investment in the Shares, and has such knowledge, experience and skill in
financial and business matters that he/she is capable of evaluating the merits
and risks of the prospective investment in the Shares and the suitability of the
Shares as an investment.
IN WITNESS WHEREOF, the Stockholder has executed this document as of
the date set forth above.
____________________________
Stockholder
Accepted and Agreed:
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter Graf
---------------------
PETER GRAF
Chairman, CEO
Date: August 1, 1996
3
<PAGE> 121
EXHIBIT A
---------
"Accredited investor" shall mean any person who comes within any
of the following categories, or who the issuer of the securities being offered
or sold reasonably believes comes within any of the following categories, at the
time of the sale of the securities to that person:
(1) Any bank as defined in Section 3(a)(2) of the Securities
Act of 1933 (the "Act") or any savings and loan association or other institution
as defined in Section 3(a)(5)(A) of the Act whether acting in its individual
or fiduciary capacity; any broker dealer registered pursuant to Section 15 of
the Securities Exchange Act of 1934; any insurance company as defined in Section
2(13) of the Act; any investment company registered under the Investment Company
Act of 1940 or a business development company as defined in Section 2(a)(48) of
that Act; any Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958; any plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or if the employee benefit plan has total assets in excess
of $5,000,000, or, if a self-directed plan, with investment decisions made
solely by persons that are accredited investors;
(2) Any private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business trust, or
partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
4
<PAGE> 122
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any director, executive
officer, or general partner of a general partner of that issuer;
(5) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase exceeds $1,000,000;
(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person's
spouse in excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the prospective investment; and
(8) Any entity in which all of the equity
owners are accredited investors.
5
<PAGE> 123
EXHIBIT H
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") made and
entered into as of this 1st day of August, 1996, by and between PhoneTel
Technologies, Inc. ("PhoneTel") an Ohio corporation, William J. Brinkmeier and
Stanley Rojeski (the "Shareholders") .
WHEREAS, PhoneTel III, Inc. ("PIII") , Shareholders and
Payphones of America, Inc. ("POA") are parties to the Amended and Restated Share
Purchase Agreement (the "Purchase Agreement") pursuant to which PIII is
purchasing all the capital stock of POA (the "Purchase") and the Shareholders of
POA will receive shares of PhoneTel common stock $.0l par value ("Shares") .
WHEREAS, the Shareholders have requested that, in connection
with the Purchase Agreement, PhoneTel provide a means of registering PhoneTel
Common Shares under the Securities Act of 1933, as amended (the "Securities
Act"), and PhoneTel is willing to provide such registration as provided herein;
NOW, THEREFORE, in consideration of the premises and the
agreements herein contained, the parties hereto agree as follows:
1. Piggyback Registrations.
-----------------------
(a) RIGHT TO PIGGYBACK. Whenever PhoneTel proposes
to register any of its equity securities under the Securities Act
(other than the first registration after the date hereof) and the
registration form to be used may be used for the registration of
Shares (a "Piggyback Registration"), PhoneTel will give prompt
written notice (in any event within five business days after its
receipt of notice of any exercise of other demand registration
rights) to all Shareholders of its intention to effect such a
registration and will, subject to paragraphs (b), (c) and (d)
below, include in such registration all Shares with respect to
which PhoneTel has received written requests for inclusion
therein within 15 days after the receipt of PhoneTel's notice.
PhoneTel may satisfy its obligation under this Section 1(a) by
registering the Shares on a shelf registration and, subject to
normal holdback and blackout periods, cause such
<PAGE> 124
shelf registration to remain effective until the second
anniversary hereof.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a
Piggyback Registration is an underwritten primary registration on
behalf of PhoneTel (whether or not also on behalf of holders of
PhoneTel's securities), and the managing underwriters advise
PhoneTel in writing that in their opinion the number of
securities requested to be included in such registration exceeds
the number which can be sold in such offering, PhoneTel will
include in such registration (i) first, the securities PhoneTel
proposes to sell, (ii) second, Shares requested to be registered
by shareholders whose registration rights are, by their terms,
senior to the rights granted hereby, (iii) third, the Shares
requested to be included in such registration, pro rata among the
Shareholders and others having similar registration rights on the
basis of the number of Shares then owned by each of them, and
(iv) fourth, other securities requested to be included in such
registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a
Piggyback Registration is an underwritten secondary registration
on behalf of holders of PhoneTel's securities, and the managing
underwriters advise PhoneTel in writing that in their opinion the
number of securities requested to be included in such
registration exceeds the number which can be sold in such
offering, PhoneTel will include in such registration (i) first,
the securities requested to be included therein by the holders
demanding such registration, (ii) second, Shares requested to be
registered by shareholders whose registration rights are, by
their terms, senior to the rights amended hereby, (iii) third,
the Shares requested to be included in such registration, pro
rata among such Shareholders and others having similar
registration rights on the basis of the number of Shares then
owned by each of them and (iv) fourth, other securities requested
to be included in such registration.
2
<PAGE> 125
(d) Nothing in this Section 1 will prohibit
PhoneTel from determining, at any time, not to file a
registration statement or, if filed, to withdraw such
registration or terminate the registration related thereto.
02. SELECTION OF UNDERWRITERS. If any offering pursuant to a
Registration Statement is an underwritten offering, PhoneTel will select a
managing underwriter or underwriters to administer the offering.
3. REGISTRATION EXPENSES. PhoneTel will pay all of its expenses
in connection with the registration of Shares (including registration and filing
fees, printing costs, listing fees and the fees and expenses of its counsel),
and each Shareholder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such
Shareholder's Shares pursuant to any registration statement filed pursuant to
Section 1 above (a "Registration Statement") .
4. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY PHONETEL. PhoneTel agrees to indemnify
each Shareholder and any agent or investment adviser thereof against
all losses, claims, damages, liabilities and expenses (including
reasonable attorneys' fees and expenses of investigation) incurred by
such party pursuant to any actual or threatened action, suit,
proceeding or investigation arising out of or based upon (i) any
untrue or alleged untrue statement of material fact contained in the
Registration Statement, any prospectus or preliminary prospectus, or
any amendment or supplement to any of the foregoing or (ii) any
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein (in
the case of a prospectus or a preliminary prospectus, in light of the
circum stances then existing) not misleading, except in each case
insofar as the same arise out of or are based upon, any such untrue
statement or omission made in reliance on and in conformity with
information with respect to such indemnified party furnished in
writing to PhoneTel by such indemnified party or its counsel expressly
3
<PAGE> 126
for use therein. Notwithstanding the foregoing provisions of this
paragraph (a), PhoneTel will not be liable to any Shareholder, any
person who participates as an underwriter in the offering or sale of
Shares or any other person, if any, who controls such holder or
underwriter (within the meaning of the Securities Act), under the
indemnity agreement in this paragraph (a) for any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or
expense that arises out of such holder's or other person's fail ure to
send or give a copy of the final prospectus to the person asserting an
untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of the
Shares to such person if such statement or omission was corrected in
such final prospectus and PhoneTel has previously furnished copies
thereof to such Shareholder.
(b) INDEMNIFICATION BY SHAREHOLDERS. In connection with the
Registration Statement, each Shareholder will furnish to PhoneTel in
writing such information, including with respect to the name, address
and the amount of Shares held by such Shareholder, as PhoneTel
reasonably requests for use in such Registration Statement or the
related prospectus and agrees to indemnify and hold harmless
PhoneTel, all other prospective holders or any underwriter, as the
case may be, and any of their respective affiliates, directors,
officers and controlling Persons (within the meaning of the Securities
Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required
to be stated in such Registration Statement or prospectus or any
amendment or supplement to either of them or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances then existing) not misleading, but only to the extent
that any such untrue statement or omission is made in reliance on
and in conformity with information with respect to such
4
<PAGE> 127
Shareholder furnished in writing to PhoneTel by such Shareholder or
its counsel specifically for inclusion therein.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person
entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such indemnified
party of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for
which such indemnified party may claim indemnification or contribution
pursuant to this Agreement (provided that failure to give such
notification shall not affect the obligations of the indemnifying
person pursuant to this Section 4 except to the extent the
indemnifying party shall have been actually prejudiced as a result of
such failure). In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party
(who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable
to such indemnified party under these indemnification provisions for
any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of investigation,
unless in the reasonable judgment of any indemnified party a conflict
of interest is likely to exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which
event the indemnifying party shall be obligated to pay the reasonable
fees and expenses of such additional counsel or counsels. The
indemnifying party will not be subject to any liability for any
settlement made without its consent (which will not be unreasonably
withheld).
5
<PAGE> 128
(d) CONTRIBUTION. If the indemnification from the
indemnifying party provided for in this Section 4 is unavailable to
the indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection
with the actions which resulted in such losses, claims, damages,
liabilities and expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) above, any legal
and other fees and expenses reasonably incurred by such indemnified
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4 were determined
by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of
this Section 4, no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the
Shares underwritten by it and distributed to the public were offered
to the public exceeds the amount of any damages which such underwriter
has otherwise been required to pay by reason
6
<PAGE> 129
of such untrue or alleged untrue statement or omission or alleged
omission, and no Shareholder shall be required to contribute any
amount in excess of the amount by which the total price at which the
Shares of such Shareholder were offered to the public (net of all
underwriting discounts and commissions) exceeds the amount of any
damages which such Shareholder has otherwise been required to pay by
reason of such untrue statement or omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indeminification is available under this Section 4, the
indemnifying parties shall indemnify each indemnified party to the
full extent provided in Section 4(a) or (b), as the case may be,
without regard to the relative fault of said indemnifying parties or
indemnified party or any other equitable consideration provided for in
this paragraph (d).
5. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Shareholder
may participate in any underwritten offering hereunder unless such Shareholder
(i) agrees to sell his Shares on the basis provided in any underwriting
arrangements approved by PhoneTel in its reasonable discretion and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
6. RULE 144. For a period of three years following the date
hereof (or such shorter period as may permit the sale of Shares under Rule 144
under the Securities Act without regard to the requirement of "current public
information"), PhoneTel covenants that it will file the reports required to be
filed by it under the Securities Act and the Securities Exchange Act of 1934, as
amended, and the rules and regulations adopted by the Securities and Exchange
Commission ("SEC") thereunder (or, if PhoneTel is not required to file such
reports, it will, upon the request of any Shareholder make publicly available
other information so long as necessary to permit sales under Rule 144 under the
Securities Act),
7
<PAGE> 130
and it will take such further action as any Shareholder may reasonably request,
all to the extent required from time to time to enable such Shareholder to sell
Shares - without registration under the Securities Act within the limitation of
the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any Shareholder PhoneTel will
deliver to such Shareholder a written statement as to whether it has complied
with such requirements.
7. REMEDIES. Each Shareholder in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
8. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties hereto and their respective successors
and permitted assigns. This Agreement and the rights and obligations of PhoneTel
and the Shareholders hereunder may not be assigned by any of the parties hereto
without the prior written consent of the other parties.
(b) This Agreement is not intended, nor shall it be construed,
to confer any rights or remedies under or by reason of this Agreement upon any
person except the parties hereto and their heirs, successors and permitted
assigns.
9. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof. This Agreement supersedes all prior agreements, arrangements and
understandings of the parties with respect to such subject matter.
10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
8
<PAGE> 131
11. HEADINGS. The section headings contained in this
Agreement are for convenience only and shall not control or affect in any way
the meaning or interpretation of the provisions of this Agreement.
12. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the conflicts of law principles of such jurisdiction.
13. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given at the time of delivery if personally delivered or telecopied (with
confirmation of receipt), the next day, if delivered by nationally-recognized
overnight express service, or five (5) days, if sent by registered or certified
mail (postage prepaid, return receipt requested) to the parties at the following
addresses:
(a) If to PhoneTel to:
PhoneTel Technologies, Inc.
650 Statler Office
1127 Euclid Avenue
Cleveland, Ohio 44115
Telephone Number: (216) 241-2555
Facsimile Number: (216) 241-2574
Attn: Daniel Moos
with copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Telephone Number: (212) 735-3000
Facsimile Number: (212) 735-2000
Attn: Stephen M. Banker, Esq.
9
<PAGE> 132
(b) If to Shareholders:
William J. Brinkmeier
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Telephone Number: (314) 939-0550
Telecopy Number: (314) 947-6488
Stanley Rojeski
Payphones of America, Inc.
124 Point West Blvd.
St. Charles, MO 63301
Telephone Number: (314) 939-0550
Telecopy Number: (314) 947-6488
with copy to:
Scher & Miller L.L.P.
2828 Routh Street
Suite 725
Dallas, TX 75201
Telephone Number: (214) 871-0725
Telecopy Number: (214) 871-0020
Attention: Charles P. Miller, Esq.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
10
<PAGE> 133
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on
the day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter Graf
----------------------------
Name: Peter Graf
Title: Chairman
William J. Brinkmeier
----------------------------
William J. Brinkmeier
Stanley Rojeski
----------------------------
Stanley Rojeski
<PAGE> 134
EXHIBIT "I"
POA LIABILITIES TO BE PAID OR ASSUMED BY BUYER AT CLOSING
1. POA LIABILITIES TO BE PAID OR ASSUMED BY BUYER AT CLOSING AS
------------------------------------------------------------
REDUCTION OF PORTION OF PURCHASE PRICE PAYABLE TO SELLERS AT CLOSING AS
-----------------------------------------------------------------------
PROVIDED IN SECTION 1.2(f):
---------------------------
<TABLE>
<S> <C> <C>
1.1 POA-Berthel Fisher Leases (Pay-off letter attached as EXHIBIT I-1) $5,196,996.94
1.2 Berthel Fisher Phones Acquisition Note 1,600,001.00
1.3 LP-1 Phones Acquisition Note 300,000.00
1.4 Notes payable to Ron Coleman (Pay-off letter attached as EXHIBIT I-2) 208,835.18
1.5 Notes payable to R. Greg Kintz
(Pay-off letter attached as EXHIBIT I-3) 112,948.99
1.6 Note payable to Paul Wm. Schindler
(Pay-off letter attached as EXHIBIT I-4) 27,381.40
1.7 Eastern Telecom Consulting Agreement
(Pay-off letter attached as EXHIBIT I-5) 175,869.41
1.8 Pay-Tele Communications, Inc. d/b/a Midwest Telecom 195,636.36
1.9 Pay off of Mark Twain Bank Line of Credit 244,000.00
(Pay-off letter attached EXHIBIT I-6)
1.10 Intellicall Lease 5,906.00
1.11 Vehicle Notes/Leases 33,253.36
---------
TOTAL LIABILITIES TO BE PAID AT CLOSING BY BUYER
AS REDUCTION OF PURCHASE PRICE PAYABLE TO SELLERS AT CLOSING: $8,100,828.64
</TABLE>
2. POA LIABILITIES TO BE ASSUMED BY BUYER AT CLOSING AND WHICH
-----------------------------------------------------------
DO NOT REDUCE THE PURCHASE PRICE PAYABLE TO SELLERS:
----------------------------------------------------
2.1 License fees due to Intellicall, Inc. for use of Intelli*Star call
processing boards in Intellicall pay telephones. Said remaining
licensing fees shall be assumed by Buyer at Closing without
reduction of the Purchase Price payable to Sellers.
<PAGE> 135
REVISED 9/22/96 PER DIEM INTEREST IS CALCULATED BASED ON A 9/16/96 FUNDING DATE
WIRE INSTRUCTIONS FOR LIABILITIES TO BE PAID AT CLOSING AND PAYMENTS TO SELLERS
<TABLE>
<CAPTION>
<S> <C> <C>
1. STANLEY ROJESKI $54,557,53 WIRED BY BERTHEL
Northern Trust Company
Chicago, IL
ABA Routing No. 071600152
Account No. 78174
Client Name:
Stanley Henry Rojeski
Account 2320230416
2. WILLIAM J. BRINKMEIER $42,502.65 WIRED BY BERTHEL
Magna Bank, N.A.
ABA Routing No. 081001387
Account No. 0008007121
3. EASTERN TELECOM $171,872.38 WIRED BY BERTHEL
First Union National Bank
of Virginia
Newport News, VA
ABA Routing No. 051400549
Account No. 2050000277645
4. R. GREG KINTZ $102,880.77
Mark Twain State Bank 1,129.44 PER DIEM INTEREST
ABA Routing No. 80-340-810 -----------
Account No. 321222108 $104,010.21 WIRED BY BERTHEL
5. PAUL WM. SCHINDLER $ 24,525.00
First Community Credit Union 283.40 PER DIEM INTEREST
ABA Routing No. 281081877 -----------
Account No. 700978004 $ 24,808.40 WIRED BY BERTHEL
6. PAYPHONES OF AMERICA
LIMITED PARTNERSHIP-I $300,000.00 WIRED BY BERTHEL
First American Bank
Ronald L. Coleman
Trust Account
Account No. 101177747
ABA No. 064000017
7. RONALD L. COLEMAN, TRUSTEE $208,271.44
First American Bank 2,302.68 PER DIEM INTEREST
Ronald L. Coleman -----------
Trust Account $210,574.12 WIRED BY BERTHEL
Account No. 101177747
ABA No. 064000017
8. MARK TWAIN BANK $244,000.00 $199,737.71 WIRED BY PHONETEL
Account No. 2917006604 396.48 PER DIEM $ 44,676.77 WIRED BY BERTHEL
ABA Routing No. 081003408 18.00 RELEASE FEE
Special Instructions: -----------
Notify Sean Hagan $244,414.48
9. BERTHEL FISHER $5,196,996.94 PAY OFF AMOUNT DEDUCTED FROM BERTHEL LEASE
$1,600,001.00 PAY OFF AMOUNT DEDUCTED FROM BERTHEL LEASE
$ 108,559.66 PER DIEM DEDUCTED FROM 9/15 ICL CHECK
-------------
$6,905,557.60
TOTAL WIRED BY BERTHEL: $953,002.06
TOTAL WIRED BY PHONETEL: $199,737.71
TOTAL CHECKS BY PHONETEL: $ 4,392.29 (Intelicall Lease Pay-off)
</TABLE>
<PAGE> 136
[LOGO] PAYPHONES OF AMERICA
124 Point West Blvd. - St. Charles, MO 63301 - (314) 947-8711 -
Fax (314) 947-6488
July 3, 1996
Lynn Whiteman
Vice President-Operations
Berthel Fisher & Company Leasing, Inc.
425 Second Street S.E.
Cedar Rapids, IIA 52401-1819
Dear Lynn:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PhoneTel") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the net investment amount to be paid to
Berthel Fisher & Company Leasing, Inc. and its affiliates Telecommunications
Income Fund IX and X (collectively, "BERTHEL") in satisfaction of all
indebtedness and obligations of POA to Berthel is $6,796,996.94 (the "PAY-OFF
AMOUNT"). After July 31, 1996, the per diem interest cost is $2309.78.
Upon receipt of the Pay-Off Amount, it is our understanding that Berthel will
(a) immediately execute and deliver to PhoneTel UCC-3 termination statements for
all UCC-1 Financing Statements listing Berthel as secured party and POA, or any
subsidiary of POA, as debtor; and (b) execute such other documents as PhoneTel
may require to evidence Berthel's release of any lien, encumbrance or security
interest in POA's assets.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours,
/s/ William J. Brinkmeier/BPM
William J. Brinkmeier
Vice President
AGREED AND ACCEPTED:
BERTHEL FISHER & COMPANY
LEASING, INC.
BY:/s/ Lynn Whiteman
- -------------------------
Lynn Whiteman, V.P.
<PAGE> 137
EXHIBIT I-2
[PAYPHONES LOGO]
PAYPHONES OF AMERICA
124 Point West Blvd.
St. Charles, MO 63301
(314) 947-8711
Fax (314) 947-6488
July 23, 1996
Mr. Ronald L. Coleman, Trustee
Attorney at Law
3408 Democrat Road
Memphis, TN 38118
Dear Ron:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PHONETEL") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the amount (principal and accrued
interest) to be paid to Ronald L. Coleman, Trustee in satisfaction of all
indebtedness and obligations of POA to Ronald L. Coleman, Trustee is $208,835.18
($178,835.18 Note and $30,000 Consulting) (the "PAY-OFF AMOUNT"). After July 31,
1996, the per diem interest cost is $74.51.
Upon receipt of the Pay-Off Amount, it is our understanding that you will
immediately (a) execute and deliver to PhoneTel UCC-3 termination statements
for all UCC-1 Financing Statements listing Ronald L. Coleman, Trustee as
secured party and POA, or any subsidiary of POA, as debtor; and (b) execute
such other documents as PhoneTel may require to evidence your release of any
lien, encumbrance or security interest in POA's assets.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours,
/s/ William J. Brinkmeier
William J. Brinkmeier
Vice President
AGREED AND ACCEPTED:
/s/ Ronald L. Coleman
- --------------------------
RONALD L. COLEMAN, TRUSTEE
<PAGE> 138
[LOGO] PAYPHONES OF AMERICA
124 Point West Blvd. - St.Charles, MO 63301 - (314) 947-8711 -
Fax (314) 947-6488
July 23, 1996
Mr. R. Greg Kintz
620 Eatherton
Chesterfield, MO 63017
Dear Greg:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PHONETEL") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the amount (principal and accrued
interest) to be paid to you in satisfaction of all indebtedness and obligations
of POA to you is $107,525.00 (the "PAY-OFF AMOUNT"). After July 31, 1996, the
per diem interest cost is $47.79.
Upon receipt of the Pay-Off Amount, it is our understanding that you will
immediately (a) execute and deliver to PhoneTel UCC-3 termination statements
for all UCC-1 Financing Statements listing R. Greg Kintz as secured party and
POA, or any subsidiary of POA, as debtor and (b) execute such other documents
as PhoneTel may require to evidence your release of any lien, encumbrance or
security interest in POA's assets. In addition, you will release the pledge of
the POA shares currently held by you as collateral for your note; and surrender
any POA share certificates in your possession.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours,
/s/ William J. Brinkmeier/ CBM
William J. Brinkmeier
Vice President
AGREED AMD ACCEPTED: PROVIDING MARK TWAIN STATE BANK IS PAID IN FULL
/s/ R. Greg Kintz
- ---------------------------
R. Greg Kintz
<PAGE> 139
[LOGO] PAYPHONES OF AMERICA
124 Point West Blvd. - St. Charles, MO 63301 - (314) 947-8711 -
Fax (314) 947-6488
July 23, 1996
Mr. Paul Wm. Schindler
4134 Bugle Bend Rd.
Chesterfield, MO 63017
Dear Paul:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PHONETEL") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the amount (principal only) to be paid
to you in satisfaction of all indebtedness and obligations of POA to you is
$27,250.00 (the "PAY-OFF AMOUNT"). After July 31, 1996, the per diem interest
cost accrued is to be calculated at time of payoff.
Upon receipt of the Pay-Off Amount, it is our understanding that you will
immediately (a) execute and deliver to PhoneTel UCC-3 termination statements for
all UCC-1 Financing Statements listing Paul Wm. Schindler as secured party and
POA, or any subsidiary of POA, as debtor; and (b) execute such other documents
as PhoneTel may require to evidence your release of any lien, encumbrance or
security interest in POA's assets. In addition, you will release the pledge of
the POA shares currently held by you as collateral for your note; and surrender
any POA share certificates in your possession.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours,
/s/ William J. Brinkmeier
William J. Brinkmeier/CBM
Vice President
AGREED AND ACCEPTED: accept as noted: Provided all indebtedness to Mark Twain
Bank is paid in full.
/s/ Paul Wm. Schindler
- ----------------------
Paul Wm. Schindler
<PAGE> 140
[LOGO] PAYPHONES OF AMERICA
124 Point West Blvd. - St. Charles, MO 63301 - (314) 947f871 -
Fax (314) 947-6488
July 23, 1996
Mr. John Crawford
President
Eastern Telecom Corporation
11817 Canon Boulevard
Newport News, VA 23606
Dear John:
We are scheduled to close the sale of Payphones of America, Inc. ("POA") to a
wholly owned subsidiary of PhoneTel Technologies, Inc. ("PHONETEL") effective as
of August 1, 1996.
If the closing occurs on July 31, 1996, the amount to be paid to Eastern
Telecom Corporation ("Eastern") in satisfaction of all indebtedness and
obligations of POA to Eastern, including all amounts owing under the Consulting
Agreement, is $175,869.41 (the "PAY-OFF AMOUNT").
Upon receipt of the Pay-Off Amount, it is our understanding that Eastern will
immediately (a) execute and deliver to PhoneTel UCC-3 termination statements for
all UCC-1 Financing Statements listing Eastern as secured party and POA, or any
subsidiary of POA, as debtor; and (b) execute such other documents as PhoneTel
may require to evidence Eastern's release of any lien, encumbrance or security
interest in POA's assets.
If the foregoing is consistent with your understanding, please sign in the space
provided below and return an executed copy to me at your earliest convenience.
Very truly yours
/s/ William J. Brinkmeier/CBM
William J Brinkmeier
Vice President
AGREED AND ACCEPTED:
Eastern Telecom Corporation
By: /s/ John Crawford
----------------------
John Crawford, President
<PAGE> 141
[MARK TWAIN LOGO]
MARK TWAIN BANKS
MARK TWAIN BANK - STATE
12375 St. Charles Rock Road
Bridgeton, Missouri 63044
Telephone: 314-291-1600
DATE: 8/14/96
TO:
ACCOUNT/NOTE NUMBER: 9348459-65896
BORROWER: K & S Enterprises
PROPERTY:
PRINCIPAL BALANCE..............................................$244,000.00
------------
INTEREST THROUGH 8-15-96 at 1:30 p.m. .........................$ 330.41
------- ------------
PER DIEM $66.08................LATE FEES.......................$ N/A
----- ------------
RELEASE FEES PAYABLE TO COUNTY RECORDER........................$ 18.00
--------------- ------------
TOTAL CHARGES THROUGH 8-15-96 .................................$244,348.41
------- ------------
Our interest in the above referenced property will be satisfied upon receipt of
the total charges. All figures are subject to final audit of this account.
Should you require any additional information regarding this account, please do
not hesitate to contact the Bank.
Sincerely,
MARK TWAIN BANK
/s/ ???
---------------------
cc: Central Discount
File
<PAGE> 142
EXHIBIT J
FINANCIAL STATEMENTS
<PAGE> 143
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
<TABLE>
<CAPTION>
ASSETS Mar-96
- ------ ------
Current Assets
--------------
Checking/Savings
----------------
<S> <C> <C>
1015 Cash - Mark Twain Bank (249,262.64)
1021 Refunds II - Mark Twain Bank (352.30)
1022 Cash - UMB/Kansas City 1,004.63
1024 Cash - Bank IV Kansas 1,238.74
1025 Cash - Crestar Bank/NewportNews (42,910.74)
1027 Cash - Nations Bank (BF) (112.00)
1028 Cash - Magna Bank (BF Ops) 2,581.22
1029 Cash - Magna Bank (BF Commission) (198.66)
1100 Petty Cash 200.00
1101 Petty Cash - Virginia 639.08
1102 Petty Cash - Western Missouri 65.58
-----------
TOTAL CHECKING/SAVINGS (287,107.09)
</TABLE>
<TABLE>
<CAPTION>
Accounts Receivable
- -------------------
<S> <C> <C>
1201 Accounts Receivable 3,082.50
1202 Due To/From LP1 (48,595.39)
1203 Accounts Receivable: Service 3,760.64
1206 Accts Receivable: Intellistar 130,892.50
1208 Due to/Fr Berthel Fisher 189.97
1210 Accounts Receivable: Teltrust 33,694.78
1211 Accounts Receivable: Mgmnt Fees 21,235.95
1214 Accnts Receivable: Dial Around 61,580.25
1215 Accounts Receivable: BF Teltrust 738.38
1216 Accounts Receivable: QCC 12,457.67
1217 Accounts Receivable: BF 11,196.66
1300 Notes Receivable: MICPA 21,510.19
1302 Notes Receivable: Scott Lapp 426.65
-----------
TOTAL ACCOUNTS RECEIVABLE 252,170.75
</TABLE>
Page 1
<PAGE> 144
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
<TABLE>
<CAPTION>
Other Current Assets Mar-96
- -------------------- ------
<S> <C> <C>
1400 Inventory: Pay Telephones 40,210.91
1500 Prepaid Expenses 1,412.20
1501 Prepaid Deposits 5,162.56
1504 Prepaid Taxes 4,670.35
---------
TOTAL OTHER CURRENT ASSETS 54,456.02
TOTAL CURRENT ASSETS 19,519.68
---------
</TABLE>
<TABLE>
<CAPTION>
Fixed Assets
------------
<S> <C> <C>
1600 Fixed Assets: Pay Telephones 96,152.69
1601 Accum Depr: Pay Telephones (25,075.88)
1604 Fixed Assets: Phone Booths 1,190.72
1605 Accum Depr: Phone Booths (643.64)
1606 Fixed Assets: Payphones(Merger) 83,700.00
1607 Accum Depr: Payphones (Merger) (62,513.89)
1608 Fixed Assets: Protel Phn Boards 7,230.46
1609 Accum Depr: Protel Phone Boards (4,246.87)
1610 Fixed Assets: Office Equipment 27,024.99
1611 Accum Depr: Office Equipment (22,616.89)
1615 Fixed Assets: PBX/Switch Equipment 1,824.11
1616 Accum Depr: PBX/Switch Equipment (1,824.10)
1620 Fixed Assets: Acquisitions 20,420.25
1621 Accum Depr: Acquisitions (20,420.25)
1622 Fixed Assets: Trucks/Vans/Cars 184,673.40
1623 Accum Depr: Trucks/Vans/Cars (147,294.21)
1626 Fixed Assets: Pedestals & Enclosures 9,220.00
1627 Accum Depr: Pedestals & Enclosures (5,158.80)
1628 Fixed Assets: Suspense 20,684.45
1629 Fixed Assets: K & S/BF 1 561,040.12
1630 Accum Depr: K & S/BF 1 (313,921.44)
1631 Fixed Assets: Ameritel - 1 of 3 248,400.00
1632 Accum Depr: Ameritel - 1 of 3 (115,326.60)
1633 Fixed Assets: Ameritel-2a of 3 300,600.00
1634 Accum Depr: Ameritel - 2a of3 (132,405.95)
1635 Fixed Assets: Ameritel 2b of 3 20,000.00
1636 Accum Depr: Ameritel 2b of 3 (8,809.51)
1639 Fixed Assets: MW Telecom 383,400.00
1640 Accum Depr: Midwest Telecom (168,877.05)
1641 Fixed Assets: Intellicall 65,369.20
1642 Accum Depr: Intellicall (28,015.00)
1643 Fixed Assets: Protels - BF 28,675.61
1644 Accum Depr: Protel - BF (11,947.95)
</TABLE>
Page 2
<PAGE> 145
I
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
<TABLE>
<CAPTION>
March 1996
----------
<S> <C>
1645 Fixed Assets: West Mo - BF6 250,000.00
1646 Accum Depr: West Mo - BF6 (98,214.70)
1647 Fixed Assets: Intellicall 2 45,570.50
1648 Accum Depr: Intellicall 2 (14,647.50)
1649 Fixed Assets: E. Telecom (1) 277,200.00
1650 Accum Depr: Eastern Telecom(1) (62,699.56)
1651 Fixed Assets: BF/E.Telecom(1) 462,600.00
1652 Accum Depr: BF/E.Telecom(1) (104,634.98)
1653 Fixed Assets: BF/E.Telecom(2) 970,200.00
1654 Accum Depr: BF/E.Telecom(2) (219,448.46)
1657 Fixed Assets: BerthelFisher 60,000.00
1658 Accum Depr: Berthel Fisher Q (5,714.40)
----------
TOTAL FIXED ASSETS 2,550,718.87
</TABLE>
<TABLE>
<CAPTION>
Other Assets
------------
<S> <C>
1801 Contract Intangible 39,272.32
1802 Accum Depr: Contract Intangible (33,776.04)
1803 Goodwill Intangible 779,502.18
1804 Accum Depr: Goodwill Intangible (75,248.90)
1805 Non-Compete Intangible 825,000.00
1806 Accum Depr: Non-Compete (586,668.67)
1807 Deferred Financing Cost - BF 25,687.50
1808 Accum Amrt: Deferred Financing (20,121.87)
1811 Deferred Financing - Merger 93,664.98
1812 Accum Amrt: Merger (20,673.90)
1813 MWT Contract Intangible 327,316.80
1814 Accum Amrt: MWT Contract Intangible (201,842.70)
1815 E. Telecom Contract Intangible 2,276,160.24
1816 Accum Amrt: ET Contract Intangible (720,977.26)
1817 Ameritel-1 Intangible Assets 218,600.00
1818 Ameritel-1 In Assets Accum Amortization (142,416.02)
1819 Ameritel-2 Intangible Assets 79,400.00
1820 Ameritel-2 In Assets Accum Amortization (43,670.50)
1823 Bell Atlantic Intangible Assets 1,000.00
1824 Bell Atlantic Accum Amortization (66.66)
1825 BF/QT Intangible Assets 40,000.00
1826 BF/QT Intan Asset Accum Amortization (5,333.20)
1850 Intellistar License Agreement 38,837.50
1851 Accum Amrt: Intelli*LicenseAgrement (19,363.33)
1901 IPTA LLC Investment 521.27
------------
TOTAL OTHER ASSETS 2,874,805.72
------------
TOTAL ASSETS 5,445,044.27
============
</TABLE>
Page 3
<PAGE> 146
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
<TABLE>
<CAPTION>
LIABILITIES Mar-96
- ----------- ------
Current Liabilities
-------------------
Accounts Payable
---------------
<S> <C>
2000 Accounts Payable: Operating Expenses 50,936.08
2001 Accounts Payable: I-Star 185,582.47
2002 Accounts Payable: LEC & LD 95,485.59
2003 Accounts Payable: Commission 189,827.82
2008 Accounts Payable: Accrued Interest 114,403.33
2010 Accounts Payable: Teltrust 374.02
2011 Accounts Payable: BF General 465.34
2120 Miscellaneous P/R Deduction 769.42
2150 Sales Tax Payable 1,021.58
2151 St. Charles Cnty Sales Tax 422.13
-----------
TOTAL ACCOUNTS PAYABLE 639,287.76
Other Current Liabilities
-------------------------
2200 Note Payable: Ford Motor Cr. 61,172.48
-----------
TOTAL OTHER CURRENT LIABILITIES 61,172.48
TOTAL CURRENT LIABILITES 700,460.24
-----------
Long Term Liabilities
---------------------
2601 Note Payable: Mark Twain LOC 243,750.00
2620 Note Payable: Ron Coleman #1 181,021.40
2621 Note Payable: Ron Coleman #2 129,544.93
2622 Promissory Note (2) Payable 117,300.00
2628 Note Payable: PayTele Comm. 284,909.13
2632 Note Payable: W. Brinkmeier 124,091.80
2633 Note Payable: S. Rojeski(4) 25,000.00
2634 Note Payable: Berthel Fisher 407,499.75
2635 Note Payable: S. Rojeski(5) 50,000.00
2636 Note Payable: S. Rojeski(6) 40,000.00
2637 Note Payable: S. Rojeski(7) 14,591.51
2638 Note Payable: S. Rojeski(8) 87,500.00
2639 Note Payable: S. Rojeski(9) 22,621.81
</TABLE>
Page 4
<PAGE> 147
PAYPHONES OF AMERICA, INC
UNAUDITED BALANCE SHEET
1ST QUARTER FY 1996
<TABLE>
<CAPTION>
Mar-96
------
<S> <C>
2640 Note Payable: S. Rojeski(10) (43,363.26)
2641 Note Payable: W. Brinkmeier( (37,164.02)
2643 Note Payable: W. Brinkmeier( 120,815.46
2644 Note Payable: S. Rojeski(12) 155,112.89
2645 Note Payable: S. Rojeski(13) 15,000.00
2646 Note Payable: S. Rojeski 20,000.00
2650 Capl Lease Obl:BF (1) 206,072.67
2652 Capl Lease Obl:BF (2) 150,407.88
2653 Capl Lease Obi:BF (3) 220,569.54
2654 Capl Lease Obl:BF (4) 223,596.59
2655 Intellicall Capital Lease (592.48)
2656 Capl Lease Obl:BF (5) 16,066.90
2657 Capl Lease Obl:BF (6) 144,791.15
2658 Intellicall (2) Capital Lease 11,581.48
2659 Capl Lease Obl:BF (7) 885,389.13
2660 Capl Lease Obl:BF (8) 2,221,237.44
2661 Capl Lease Obl:BF (10) 53,502.82
2662 Capl Lease Obl:BF (11) 55,479.08
2663 Capl Lease Obl:BF (12) 83,503.76
-------------
TOTAL LONG TERM LIABILITIES 6,229,837.36
TOTAL LIABILITIES 6,930,297.60
-------------
CAPITAL
-------
3000 Shareholders Equity 348,756.03
3001 Additional Paid-in Capital 446,106.57
3002 Scrip Dividends (446,106.57)
3901 Prior Period Adj: FY94 5.00
3902 Prior Period Adj: FY95 (502.08)
3999 Retained Earnings (1,324,814.85)
Net Income (508,697.43)
-------------
TOTAL CAPITAL (NET WORTH) (1,485,253.33)
-------------
TOTAL LIABILITIES & CAPITAL 5,445,044.27
=============
</TABLE>
Page 5
<PAGE> 148
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter FY 1996
<TABLE>
<CAPTION>
Revenue Mar-96 Year to Date
------- ------ ------------
<S> <C> <C>
4000 Phone Revenue: StL Collection 81,997.70 205,458.40
4002 Phone Revenue: WMO Collection 49,073.50 120,169.25
4003 Phone Revenue: Va Collection 123,400.00 315,676.50
4004 Phone Revenue: Tn Collection 6,214.84 7,315.74
4005 Phone Revenue: Intellistar 123,843.04 336,067.91
4010 Phone Revenue: Oncor (AOS) 22.93 98.10
4012 Phone Revenue: Intellicall-AOS 9.75 9.75
4015 Phone Revenue: LD Communicatio 59.85 248.18
4019 Phone Revenue: Telecom*USA 291.19 1,029.88
4020 Phone Revenue: Teltrust- MO 35,432.54 115,064.76
4021 Phone Revenue: Teltrust - IL 11,661.98 26,863.07
4022 Phone Revenue: Teltrust - VA 65,703.85 144,195.61
4023 Phone Revenue: Teltrust - KS 3,436.69 18,156.29
4024 Phone Revenue: Teltrust - Can 644.59 644.59
4030 Phone Revenue: Coin Tel Intn'l - 2,863.66
4031 Phone Revenue: Teleserve 90.20 280.42
4032 Phone Revenue: Ga Collection 792.95 792.95
4033 Phone Revenue: Ms Collection (119.90) (119.90)
4203 Phone Revenue: Payphone Misc - 672.00
4300 APCC Dial Around Compensation - 22,960.87
4303 Phone Revenue: IPTA LLC Distr 4,463.54 4,463.54
4304 Phone Revenue: FPTA 1,831.73 3,962.39
4305 Phone Revenue: Berthel Fisher/TCC 88,789.98 88,789.98
4400 Management Fees:Ltd Partnershp 1,300.00 3,925.00
4401 Management Fees: BerthelFisher 101,235.95 135,000.00
4402 Management Fees:VisionComm, Inc - 10,000.00
4700 Interest Revenue 15.20 46.88
---------- ------------
Total Revenue 700,192.10 1,564,655.82
</TABLE>
Page 1
<PAGE> 149
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter FY 1996
<TABLE>
<CAPTION>
Cost of Sales Mar-96 Year to Date
------------- ------ ------------
<S> <C> <C>
5000 Southwestern Bell LEC Expense 61,959.37 110,303.68
5001 Ameritech(lI Bell)Lec Expense 9,743 97 12,860.92
5002 Illinois Consolidated LEC Exp. 466.23 704.48
5003 Centel LEC Expense 156.91 462.40
5004 Harrisonville LEC Expense 942.75 1,574.15
5005 Frontier Telephone LEC Expense 207.99 638.57
5006 Madison Telephone LEC Expense 166.73 511.29
5007 Alltel LEC Expense 913.65 2,059.59
5008 Fidelity LEC Expense 168.85 370.64
5011 United Telephone LEC Expense 10,553.23 19,910.41
5030 GTE Illinois LEC Expense 2,699.75 2,699.75
5031 GTE Midwest Inc LEC Expense 7,170.13 13,846.16
5032 GTE Iowa LEC Expense 76.42 114.63
5033 GTE North-Illinois Op LEC Exp 584.36 1,215.69
5036 Mid-Missouri LEC Expense 261.33 261.33
5037 Citizens Telephone LEC Expense 557.93 1,128.38
5038 KLM Telephone LEC Expense 109.06 631.01
5040 Lathrop Telephone Co. LEC Exp 94.85 297.69
5041 SoCentral Bell Miss-Ph 84.40 255.35
5042 GTE - South Va LEC Expense 5,735.76 9,008.94
5043 Bell Atlantic LEC Expense 67,563.21 121,249.61
5044 New Florence Telephone Expense 441.51 1,211.02
5045 McDonald Cnty Telephone Expens 83.41 168.67
5046 Kingdom Telephone Company 367.38 729.84
5047 Gulf Telephone Company 51.76 106.47
5048 Southern Bell-FL Expense - 333.30
5049 SoCent Bell Ala - LEC Expense 50.19 140.02
5050 Southern Bell-GA LEC Expense 66.52 143.05
5051 South Central Bell - Tenn 4,941.39 9,283.07
5052 Grand River Mutual LEC Expense 450.79 859.63
5099 SBMS Cellular Phone Expense - 0.44
5201 AT&T LD Expense 236.39 569.10
5205 MCI LD Phone Expense 15,216.56 46,227.42
5207 Eastern Telecom 0+LD Expense 16.60 16.60
5300 Intellistar World Line Exp 178.74 178.74
5301 Intellistar Rejected Calls 2,113.59 3,385.32
5302 Intellistar Unbillable Calls 14.25 (200.98)
5305 Intellistar License Fee 4,073.86 12,842.01
5306 Intellistar Validation Fees 4.45 73.94
5307 Intellistar Ez Pymnt Proration 42,476.12 112,476.55
5322 Teltrust Reserve Expense 14,969.01 39,019.92
5323 Teltrust Network Expense 19,752.42 57,154.49
5324 Teltrust Charges & Fees 16,341.65 45,085.69
5327 Teltrust Status Charge Expense 55.20 170.90
5328 Teltrust Bank & Finance Charge 2,380.81 6,695.23
5329 T & E Chargeback Expense 170.09 509.04
</TABLE>
Page 2
<PAGE> 150
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter Fy 1996
<TABLE>
<CAPTION>
Cost of Sales(cont) Mar 1996 Year to Date
------------------- -------- ------------
<S> <C> <C>
5330 Teltrust Customer SVC Adjust 1,207.85 4,437.68
5331 Teltrust Unbillable Expense 589.86 3,266.12
5332 Teltrust Ancillary Fee Expense 1,857.82 4,469.84
5333 Teltrust-Telecom Canada 2,132.93 5,002.69
5335 ZPDI Virginia Processing Chrg 357.00 357.00
5400 POA/BFL Phone Maintenance Exp 14,846.83 42,265.00
5403 BF/TCC Cost of Sales 74,559.88 74,559.88
5404 POA Income Distibution 346.48 346.48
5500 Commission Expense: Missouri 42,634.95 108,792.40
5502 Commission Expense: Virginia 30,184.50 83,947.89
5600 Regulatory Assessment Expense 14,818.00 14,818.00
5800 Coin Refund Expense 326.76 825.21
5802 Outside Service/Phone Expense 6,941.98 33,135.96
5803 Payphone Utility Expense 94.50 309.06
5804 Payphone Collection Expense 2,849.00 8,488.00
---------- ------------
Total Cost of Sales 488,417.91 1,022,305.36
---------- ------------
Gross Profit 211,774.19 542,350.46
</TABLE>
<TABLE>
<CAPTION>
Operating Expenses Mar 1996 Year to Date
------------------ -------- ------------
<S> <C> <C>
6000 Tool & Test Equipment Expense 2,076.09 4,478.94
6001 Phone Enclosures Expense 245.06 625.91
6002 Phone Software Expense 73.82 73.82
6003 Phone Repairs & Maint Expense 32.00 845.12
6004 Installation Supplies Expense 95.82 312.81
6005 Phone Equipment Expense 32,354.70 40,196.10
6020 Vehicle Maintenance Expense 1,327.74 4,491.42
6021 Vehicles Gas & Oil Expense 5,425.67 12,016.39
6022 Vehicle Travel Allowance Expen 400.00 1,200.00
6080 Commission Expense: Sales 2,325.00 7,825.00
6081 Commission Expense: Repayment (100.00) (100.00)
6082 Commission Expense: Install 1,000.00 4,900.00
6102 Outside Service/Condo Expense 989.36 1,220.16
6103 Outside Service/Office Expense 5,212.55 11,594.73
6104 Entertainment Expense 137.39 1,275.35
6105 Travel Expense/Meals - 63.36
6106 Travel Expense/Lodging 470.05 1,291.15
6110 Travel Expense/Planes/Rentals 1,791.31 4,778.03
6111 Travel Expense/Parking Fees 6.00 26.00
6112 Fees & Licenses Expenses 30.00 40.00
6113 Bad Debt Expenses 650.00 (450.92)
6116 Professional Services & Fees 4,902.18 16,105.76
6117 Office Equipment Expense 4.32 327.55
6118 Office Supplies Expense 1,652.42 3,867.59
</TABLE>
Page 3
<PAGE> 151
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter FY 1996
<TABLE>
<CAPTION>
Operating Expenses Mar 1996 Year to Date
------------------ -------- ------------
<S> <C> <C>
6119 Office Phone Expense 4,322.21 11,011.12
6120 Office Rent Expense 14,216.66 24,374.53
6121 Office Utilities Expense 2,097.94 3,379.76
6122 Health Insurance Expense 2,468.10 4,570.30
6123 Dental Insurance Expense (16.00) (80.00)
6124 Workers Compensation Insurance - 1,254.00
6125 Property Insurance Expense - 4,582.00
6126 Health Insurance - Virginia (223.80) 1,161.12
6128 Freight UPS 421.42 1,807.55
6129 US Postal Expense - 1,339.91
6130 Federal Express Expense 965.85 1,696.60
6132 Bank Charges Expense 86.85 1,720.69
6133 Office Software Expenses 844.17 2,428.16
6134 Office Personnel Expense 198.72 198.72
6136 Equipment Rental Expense 36.93 73.51
6137 Equipment Lease Expense 159.63 318.26
6144 Mobile Phone & Pager Expense 982.07 2,276.53
6502 Personal Property Tax Expense - 37,638.40
6504 Sales Tax Berthel Fisher 1 - 698.67
6505 Sales Tax Berthel Fisher 2 - 630.84
6506 Sales Tax Berthel Fisher 3 - 877.70
6507 Sales Tax Berthel Fisher 4 - 618.82
6508 Sales Tax Berthel Fisher 5 - 50.12
6509 Sales Tax Berthel Fisher 6 - 711.50
6510 Sales Tax Berthel Fisher 7 107.50 1,770.03
6511 Sales Tax Berthel Fisher 8 2,253.68 2,253.68
6512 Sales Tax Berthel Fisher 10 92.66 185.32
6513 Sales Tax Berthel Fisher 11 98.70 98.70
6514 Sales Tax Berthel Fisher 12 220.27 2,038.59
6517 Tennessee State Taxes 10.00 200.00
6520 District of Columbia Taxes 100.00 100.00
6523 Michigan State Taxes 100.00 100.00
6530 City of Newport News Taxes - 236.43
6550 Payroll Expense 84,010.50 220,622.25
6551 Employer Fica Tax Expense 6,409.70 16,833.19
6552 SUTA - MO Expense - 452.76
6553 SUTA-VA Expense - 198.59
6555 SUTA -MI Expense - 161.91
6556 SUTA - SD Expense - 31.92
6559 FUTA Expense - 187.01
6560 United Satelite P/R Expense - (9,418.37)
6700 Dues & Subscriptions Expense (4,002.31) 45.79
6701 APCC Processing Expense - 2,949.00
6702 MICPA Expense 3,082.52 6,082.52
67O3 IPTA Expense 2,914.65 3,261.85
6804 BF/TCC Operating Expenses (201.55) (201.55)
</TABLE>
Page 4
<PAGE> 152
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter Fy 1996
<TABLE>
<CAPTION>
Operating Expenses Mar 1996 Year to Date
------------------ -------- ------------
<S> <C> <C>
6900 Interest Expense/Mark Twain 1,755.85 6,406.70
6901 Interest Expense/Ford Motor Cr 541.78 1,676.01
6902 Interest Expense/Prom. #2 1,590.00 6,996.00
6903 Interest Expense/Berthal-Fishe - 6,251.74
6905 Interest Expense/Ron Coleman 3,137.05 9,442.67
6906 Interest Expense/Berth-Fish 2 - 5,194.97
6907 Interest Expense/Credit Card - 11.31
6908 Interest Expense/Berth-Fish 3 - 6,947.34
6909 Interest Expense/Berth-Fish 4 - 6,948.17
691Q Interest Expense/Intellicall - 409.41
6911 Interest Expense Pay-Tele 3,636.37 6,181.83
6912 Interest Expense/Berth-Fish 5 - 424.91
6913 Interest Expense/Berthel-Fish6 - 5,821.92
6914 Interest Expense/Miscellaneous - 30.12
6915 Interest Expense/RGK & PWS 2,033.31 9,352.69
6916 Int Exp/Intellicall2 Leas 129.66 600.30
6921 Interest Expense/Berth-Fish 7 2,344.63 19,399.92
6922 Interest Expense/Berth-Fish 8 28,007.29 56,264.40
6923 Interest Expense/Berth-Fish NP 10,130.53 11,894.97
6924 Interest Expense/Berth-Fish 10 823.06 1,656.06
6925 Interest Expense/Berth-Fish 11 814.50 1,639.45
6926 Interest Expense/Accr. Interest - 888.39
6927 Interest Expense/Berth-Fish 12 1,118.56 2,266.27
-------- ----------
Total Expenses 238,921.14 635,238.25
Net Ordinary Income (27,146.95) (92,887.79)
---------- ----------
</TABLE>
Page 5
<PAGE> 153
Payphones of America, Inc.
Unaudited Income Statement
1st Quarter FY 1996
<TABLE>
<CAPTION>
Extraordinary Income Mar-96 Year to Date
--------------------
<S> <C> <C>
7000 Miscellaneous Revenue 74.00 122.00
----- ------
Total Extraordinary Income 74.00 122.00
Extraordinary Expenses
----------------------
8000 Gain/Loss On Disposal of Asset 64,867.57 64,867.57
8010 Depr Expense/Payphones 45,923.84 137,753.11
8011 Depr Expense/Phone Booths 10.41 31.21
8012 Depr Expense/PBX-Switch Equip 38.82 116.43
8013 Depr Expense/TruckS/Vans/Cars 3,152.34 12,091.85
8015 Depr Expense/Wrigley Group 209.42 628.26
8016 Depr Expense/Pedestal & Encl 109.76 329.28
8017 Depr Expense/Office Equipment 979.50 2,938.28
8018 Depr Expense/Real Estate (897.01) (628.26)
8100 Amort Expense/Deferred Finance 861.76 2,585.27
8103 Amort Expense/Deferred Goodwil 1,623.96 4,871.88
8104 Amort Exp/Deferred Non-Compete 13,750.01 41,250.00
8105 Amort Expense/Prepaid License 647.30 1,941.87
8106 Amort Expense/Contracts 49,052.89 147,154.89
----------- -----------
Total Extraordinary Expenses 180,330.57 415,931.64
Net Extraordinary Income (180,256.57) (415,809.64)
----------- -----------
Net Income (207,403.52) (508,697.43)
----------- -----------
</TABLE>
Page 6
<PAGE> 154
Limited Partnership One
Unaudited Balance Sheet
1st Quarter FY 1996
<TABLE>
<CAPTION>
ASSETS Mar 1996
Current Assets
- --------------
Checking/Savings
----------------
<S> <C>
1000 Cash - UMB/St. Charles (1,192.69)
1001 Cash - SouthTrust Bank 10,761.62
-------------
TOTAL CHECKING/SAVINGS 9,568.93
Accounts Receivable
1200 Due To/From Peyphones of America 40,825.74
1201 Accounts Receivable 290.75
1202 Accounts Receivable:Teltrust 4,292.50
-------------
TOTAL ACCOUNTS RECEIVABLE 45,408.99
-------------------------
Other Current Assets
--------------------
1500 Telephone Pre-Paid Deposits 240.00
-------------
TOTAL OTHER CURRENT ASSETS 240.00
Total Current Assets 55,217.92
-------------
Fixed Assets
- ------------
1600 Fixed Assets: UNI Purchase 290,933.91
1601 Accum Depr UNI Purchase (86,587.07)
1602 Fixed Assets: Payphones 168,910.00
1603 Accum Depr: Payphones (38,793.74)
1604 Fixed Assets: CCI Purchase 39,800.00
1605 Accum Depr: CCI Purchase (8,528.54)
1699 Fixed Assets: Suspense 1,370.29
-------------
TOTAL FIXED ASSETS 367,104.85
------------------
</TABLE>
Page 1
<PAGE> 155
Limited Partnership One
Unaudited Balance Sheet
1st Quarter FY 1996
<TABLE>
<CAPTION>
Other Assets
- ------------
<S> <C>
1800 Intangible Assets:UNI Contracts 62,000.00
1801 Accum Amort: UNI Contracts (25,832.92)
1802 Intangible Assets:CCI Contracts 13,500.00
1803 Accum Amort: CCI Contracts (4,050.00)
1810 Intangible Assets: I* License Fees 1,750.00
1811 Accum Amort: I* License Fees (704.17)
---------------
TOTAL OTHER ASSETS 46,662.91
---------------
TOTAL ASSETS 468,985.68
---------------
</TABLE>
Page 2
<PAGE> 156
Limited Partnership One
Unaudited Balance Sheet
1st Quarter FY 1996
<TABLE>
<CAPTION>
Liabilities Mar 1996
- -----------
Current Liabilities
- -------------------
Accounts Payable
----------------
<S> <C>
2000 Accounts Payable:Miscellaneous 17,713.90
2001 Accounts Payable:LEC/LD 0.46
2002 Accounts Payable:Commissions 27,923.11
2003 Accounts Payable: WJB Distribution 28,904.51
2004 Accounts Payable: SHR Distribution 28,904.47
-----------
TOTAL ACCOUNTS PAYABLE 103,446.45
TOTAL CURRENT LIABILITIES 103,446.45
Long Term Liabilities
---------------------
2600 Ron Coleman: Promissory Note 32,088.33
-----------
TOTAL LONG TERM LIABILITIES 32,088.33
-----------
TOTAL LIABILITIES 135,534.78
CAPITAL
3000 Ownership Equity:LP 1 498,446.79
3001 Owners Equity: General Partner 3,000.00
3999 Income Summary (170,220.41)
Net Income 2,224.52
-----------
TOTAL CAPITAL(NET WORTH) 333,450.90
-----------
TOTAL LIABILITIES & CAPITAL 468,985.68
-----------
</TABLE>
Page 3
<PAGE> 157
LIMITED PARTNERSHIP ONE
UNAUDITED INCOME STATEMENT
1ST QUARTER FY 1996
<TABLE>
<CAPTION>
Mar 96 Year to Date
------ ------------
Phone Revenue
-------------
<S> <C> <C> <C>
4000 Phone Revenue: Coin Collection 29,201.70 77,906.35
4001 Phone Revenue: Teletrust(AOS) 7,874.70 20,535.47
4002 Phone Revenue: Teletrust - MO 1,057.14 3,110.16
4003 Phone Revenue: Teletrust - IL 334.76 1,162.29
4008 Phone Revenue: Intellistar 4,615.97 10,968.72
4015 Phone Revenue: FPTA -AL 1,661.00 1,661.00
--------- ----------
TOTAL PHONE REVENUE 44,745.27 115,343.99
Cost of Sales
-------------
5000 South Central Bell - Alabama 5,046.13 10,049.39
5001 South Central Bell - Miss 4,118.32 8,186.30
5002 United Telephone - Florida 465.42 697.05
5003 Gulf Telephone Company 649.54 1,285.02
5004 South Central Bell - Tennessee 186.66 260.71
5005 Southern Bell - GA 197.98 356.46
5006 Southern Bell - Florida 950.46 1,277.45
5007 Centel - Florida 33.19 66.51
5008 Frontier Communications 97.70 193.36
5009 Ameritech - LEC Expense 1,693.02 2,564.94
5010 Southwestern Bell - LEC Expens 1,359.62 2,952.03
5011 GTE North II. Operations 43.60 128.86
5013 GTE Midwest - LEC Expense 646.30 1,107.40
5202 AT&T Long Distance Expense (29.14) (28.84)
5300 Payphone Management Fees 1,250.00 3,875.00
5301 Payphone Utilities Expense -- 11.15
5800 Coin Refund Expense -- (26.00)
--------- ---------
TOTAL COST OF SALES 16,708.80 32,956.79
--------- ---------
GROSS PROFIT 28,036.47 82,387.20
Expenses Mar 96 Year to Date
-------- ------ ------------
6001 Phone Enclosure Expense 1,640.00 1,640.00
6005 Phone Equipment Expense -- 832.54
6006 Phone Installation Expense 909.00 909.00
6101 Freight & Shipping: Ups 274.71 365.34
6150 Bank Service Charges Expense 36.14 100.48
6175 Payphone Commissions 9,679.64 27,923.11
6176 Salesmen Commission 200.00 200.00
6200 Office Supplies -- 87.45
6230 Dues & Membership Expenses -- 27.50
</TABLE>
Page 1
<PAGE> 158
Limited Partnership One
Unaudited Income Statement
1st Quarter FY 1996
Expenses(cont) Mar 96 Year to Date
-------------- --- -- --------------
6300 Ext Phone Maintenace Expense 8,253.30 19,970.90
6400 Intellistar License Fee Expens 383.18 1,007.71
6401 Intellistar EZ Pymnt Proration 1,523.25 3,536.33
6900 Interest Expense: Ron Coleman 574.77 1,841.58
-------------- -------------
TOTAL EXPENSES 23,473.99 58,441.94
-------------- -------------
NET ORDINARY INCOME 4,562.48 23,945.26
============== =============
Extraordinary Revenue
---------------------
7000 Miscellaneous Income -- 0.50
7001 SWB Refund -- --
------------ ------------
TOTAL EXTRAORDINARY REVENUE -- 0.50
Extraordinary Expenses
----------------------
8000 Gain/Loss on Disposal of Asset -- --
8100 Depreciation Expense: Payphones 5,953.63 17,858.74
8200 Amort Expense: Contracts 1,259.34 3,775.00
8300 Amort Expense: I* License Fees 29.17 87.50
-------------- -------------
Total Extraordinary Expenses 7,242.14 21,721.24
NET EXTRAORDINARY INCOME (7,242.14) (21,720.74)
-------------- -------------
NET INCOME (2,679.66) 2,224.52
-------------- -------------
Page 2
<PAGE> 159
Limited Partnership 1
Balance Sheet
April 16, 1996
Fiscal Year 1995
<TABLE>
<CAPTION>
Account Dec 95
------- ----------------
Assets
- ------
Current Assets
------- ------
Checking/Savings
----------------
<S> <C>
1000 Cash - UMB/St. Charles 7,899.66-
1001 Cash - SouthTrust Bank 78.04
1002 Cash - Coin Refund Account/L 0.00
------------
Total Checking/Savings 7,821.62-
Accounts Receivable
-------- ----------
1200 Due To/From Payphones of Ame 41,425.78
1201 Accounts Receivable 7,297.26
1202 Accounts Receivable:Teltrust 5,222.12
------------
Total Accounts Receivable 53,945.16
Other Current Assets
----- ------- ------
1500 Telephone Pre-Paid Deposits 240.00
------------
Total Other Current Assets 240.00
------------
Total Current Assets 46,363.54
Fixed Assets
----- ------
1600 Fixed Assets: UNI Purchase 290,933.91
1601 Accum Depr: UNI Purchase 90,802.05-
1602 Fixed Assets: Payphones 101,780.00
1603 Accum Depr: Payphones 8,324.60-
1604 Fixed Assets: CCI Purchase 39,800.00
1605 Accum Depr: CCI Purchase 7,106.22-
1699 Fixed Assets:Suspense 68,500.29
------------
Total Fixed Assets 394,781.33
Other Assets
----- ------
1800 Intangible Assets:UNI Contra 62,000.00
1801 Accum Amort: UNI Contracts 25,426.88-
</TABLE>
1
<PAGE> 160
Limited Partnership 1
Balance Sheet
April 16, 1996
Fiscal Year 1995
<TABLE>
<CAPTION>
Account Dec 95
- ------- ------------
<S> <C>
1802 Intangible Assets: CCI Contra 13,500.00
1803 Accum Amort: CCI Contracts 675.00-
1810 Intangible Assets: I* Licens 1,750.00
1811 Accum Amort: I* License Fees 616.71-
-----------
Total Other Assets 50,531.41
-----------
Total Assets 491,676.28
===========
</TABLE>
2
<PAGE> 161
Limited Partnership 1
Balance Sheet
April 16, 1996
Fiscal Year 1995
<TABLE>
<CAPTION>
Account Dec 95
- ------- ----------
<S> <C>
Liabilities
- -----------
Current Liabilities
-------------------
Accounts Payable
-----------------
2000 Accounts Payable: Miscellaneo 2,942,50
2001 Accounts Payable: LEC/LD 11,487,03
2002 Accounts Payable: Commissions 21,472.49
2003 Accounts Payable: WJB Distri 20,029.03
2004 Accounts Payable: SHR Distri 20,029.01
-----------
Total Accounts Payable 75,960.06
Other Current Liabilities
-------------------------
-----------
Total Other Current Liabilities 0.00
-----------
Total Current Liabilities 75,960.06
Long Term Liabilities
---------------------
2600 Ron Coleman: Promissory Note 39,164.22
2999 LP-1 TAD Account 0.00
-----------
Total Long Term Liabilities 39,164.22
-----------
Total Liabilities 115,124.28
Capital
- -------
3000 Ownership Equity: LP 1 498,446.79
3001 Owners Equity: General Partn 3,000.00
3999 Income Summary 180,977.73-
Net Income 56,082.94
-----------
Total Capital (Net Worth) 376,552.00
-----------
Total Liabilities & Capital 491,676.28
</TABLE>
3
<PAGE> 162
Limited Partnership 1
Income Statement
April 16, 1996
Fiscal Year 1995
<TABLE>
<CAPTION>
Account Dec 95 % Year to Date %
- ------- --------- ---- ------------ -----
<S> <C> <C> <C> <C>
Income
------
4000 Phone Revenue: Coin Collection 40,492.70 60.9 348,487.46 50.8
4001 Phone Revenue: Teletrust (AOS) 9,990.42 15.0 133,415.23 19.4
4002 Phone Revenue: Teletrust - MO 1,170.00 1.8 7,674.12 1.1
4003 Phone Revenue: Teletrust - IL 477.50 0.7 1,477.34 0.2
4004 Phone Revenue: Teltrust Suspen 0.00 0.0 32,472.57 4.7
4006 Phone Revenue: AT&T Commission 1,793.98 2.7 42,896.89 6.2
4007 Phone Revenue: MCI 0.00 0.0 28.84 0.0
4008 Phone Revenue: Intellistar 10,500.00 15.8 114,922.84 16.7
4009 Phone Revenue: AT&T True Up 0.00 0.0 0.00 0.0
4010 APCC Dial Around Compensation 0.00 0.0 0.00 0.0
4011 Phone Revenue: MSPCA 671.91 1.0 3,707.07 0.5
4012 Phone Revenue: Southnet 0.00 0.0 0.00 0.0
4013 Phone Revenue: Telecom*USA 0.00 0.0 29.09 0.0
4014 Phone Revenue: Phone Repair 1,400.00 2.1 1,400.00 0.2
--------- ----- ---------- -----
Total Income 66,496.51 100.0 686,511.45 100.0
Cost of Sales
- -------------
5000 South Central Bell - Alabama 10,175.30 15.3 60,788.91 8.9
5001 South Central Bell - Miss. 8,483.96 12.8 54,624.01 8.0
5002 United Telephone - Florida 315.35 0.5 3,856.90 0.6
5003 Gulf Telephone Company 1,276.43 1.9 7,736.03 1.1
5004 South Central Bell - Tennessee 199.37 0.3 1,513.02 0.2
5005 Southern Bell - GA 166.02 0.2 1,898.64 0.3
5006 Southern Bell - Florida 760.36 1.1 8,517.64 1.2
5007 Centel - Florida 66.86 0.1 416.04 0.0
5008 Frontier Communications 203.32 0.3 1,183.73 0.2
5009 Ameritech - LEC Expense 1,037.33 1.6 13,263.28 1.9
5010 Southwestern Bell - LEC Expens 1,626.67 2.4 20,903.90 3.0
5011 GTE North Il. Operations 0.00 0.0 331.31 0.0
5012 Kingdom Telephone Company 0.00 0.0 1,126.36 0.2
5013 GTE Midwest - LEC Expense 561.30 0.8 5,868.40 0.9
5014 Fidelity - LEC Expense 0.00 0.0 114.29 0.0
5015 GTE South - LEC Expense 0.00 0.0 320.78 0.0
5016 GTE Southwest - LEC Expense 0.00 0.0 907.69 0.1
5017 United Telephone - Missouri 0.00 0.0 100.35 0.0
5018 SBMS Casino Phone - Expense 0.00 0.0 586.09 0.0
5200 LDDS Long Distance Expense 0.00 0.0 4,609.37 0.7
5201 MCI Long Distance Expense 0.00 0.0 1,782.19 0.3
5202 AT&T Long Distance Expense 59.20 0.0 2,519.88 0.4
5203 USSprint Long Distance Expense 5.84- 0.0 23.37 0.0
</TABLE>
1
<PAGE> 163
Limited Partnership 1
Income Statement
April 16, 1996
Fiscal Year 1995
<TABLE>
<CAPTION>
Account Dec 95 % Year to Date %
- ------- ---------- ---- ------------ -----
<S> <C> <C> <C> <C>
Income
- ------
5250 VRS Billing System Expense 0.00 0.0 0.00 0.0
5300 Payphone Management Fees 1,750.00 2.6 21,100.00 3.1
5301 Payphone Utilities Expense 0.00 0.0 44.38 0.0
5800 Coin Refund Expense 33.10- 0.0 5.40 0.0
---------- ----- ---------- -----
Total Cost of Sales 26,642.53 40.1 214,141.96 31.2
---------- ----- ---------- -----
Gross Profit 39,853.98 59.9 472,369.49 68.8
Expenses
- --------
6000 Tools/Test Equipment 0.00 0.0 12.46 0.0
6001 Phone Enclosure Expense 252.00 0.4 602.60 0.0
6002 Phone Software Expense 0.00 0.0 0.00 0.0
6003 Phone Repairs & Maint Expense 0.00 0.0 269.96 0.0
6004 Installation Supplies Expense 0.00 0.0 0.00 0.0
6005 Phone Equipment Expense 797.33 1.2 8,058.37 1.2
6006 Phone Installation Expense 1,034.13 1.6 18,962.58 2.8
6050 Travel Expense: Installation 0.00 0.0 0.00 0.0
6100 Freight & Shipping: FedExpress 0.00 0.0 0.00 0.0
6101 Freight & Shipping: Ups 73.18 0.1 398.83 0.0
6102 Freight & Shipping: Misc 0.00 0.0 56.44 0.0
6103 US Postal Service Expense 0.00 0.0 2.44 0.0
6150 Bank Service Charges Expense 777.06 1.2 1,042.81 0.2
6151 Bad Debt Expense 0.00 0.0 0.00 0.0
6175 Payphone Commissions 10,677.97 16.1 131,958.27 19.2
6176 Salesmen Commission 600.00 0.9 12,124.00 1.8
6177 Salesmen Commission Repayment 0.00 0.0 0.00 0.0
6200 Office Supplies 0.00 0.0 325.34 0.0
6221 Professional Fees & Services 20.85 0.0 6,793.20 1.0
6230 Dues & Membership Expenses 27.50 0.0 55.00 0.0
6231 Gulf States IPP Association 0.00 0.0 990.00 0.1
6232 Illinois Coin Payphone Assoc 0.00 0.0 27.90 0.0
6233 Michigan Payphone Association 0.00 0.0 84.75 0.0
6300 Ext Phone Maintenace Expense 9,004.50 13.5 96,464.29 14.1
6400 Intellistar License Fee Expens 550.00 0.8 6,805.83 1.0
6401 Intellistar EZ Pymnt Proration 3,600.00 5.4 38,240.88 5.6
6500 Fees and License Expense 0.00 0.0 1,868.00 0.3
6700 Missouri Sales Tax Expense 0.00 0.0 0.00 0.0
6701 Florida Gross Receipts Tax 192.07 0.3 911.31 0.1
6702 Mississippi Tax Commission 0.00 0.0 1,971.42 0.3
6703 Florida Sales & Use Tax 0.00 0.0 10.00 0.0
6710 Tn Franchise/Excise Tax Expens 0.00 0.0 30.00 0.0
6725 Alabama Public Svc Commission 0.00 0.0 113.89 0.0
</TABLE>
2
<PAGE> 164
Limited Partnership 1
Income Statement
April 16, 1996
Fiscal Year 1995
<TABLE>
<CAPTION>
Account Dec 95 % Year to Date %
- ------- ---------- ---- ------------ -----
<S> <C> <C> <C> <C>
Income
- ------
6780 Illinois Income Tax Expense 0.00 0.0 41.00 0.0
6781 Missouri Income Tax Expense 0.00 0.0 135.38 0.0
6900 Interest Expense: Ron Coleman 690.77 1.0 10,627.88 1.5
6902 Interest Expense: Miscellaneou 0.00 0.0 6.00 0.0
---------- ----- ---------- -----
Total Expenses 28,297.36 42.6 338,990.83 49.4
---------- ---- ---------- -----
Net Ordinary Income 11,556.62 17.4 133,378.66 19.4
========= ==== ========== =====
</TABLE>
3
<PAGE> 165
Limited Partnership 1
Income Statement
April 16, 1996
Fiscal Year 1995
<TABLE>
<CAPTION>
Account Dec 95 x Year to Date %
------- ------ --- ------------ ---
Extraordinary Income
- ------------- ------
<S> <C> <C> <C> <C> <C>
7000 Miscellaneous Income 0.OO 0.0 0.00 0.0
7001 SWB Refund 0.00 0.0 0.00 0.0
---- --------- --- -------- ----
Total Extraordinary Income 0.00 0.0 0.00 0.0
Extraordinary Expenses
- ------------- --------
8000 Gain/Loss on Disposal of Asset 0.00 0.0 0.00 0.0
8100 Depreciation Expense:Payphones 5,154.31 7.8 61,851.72 9.0
8200 Amort Expense: Contracts 1,257.83 1.9 15,093.96 2.2
8300 Amort Expense: I* License Fees 29.17 0.0 350.04 0.0
---------- --- --------- ----
Total Extraordinary Expenses 6,441.31 9.7 77,295.72 11.3
Net Extraordinary Income 6,441.31- 9.7 77,295.72- 11.3
---------- --- --------- ----
Net Income 5,111.31 7.7 56,082.94 8.2
========== === ========= ====
</TABLE>
4
<PAGE> 166
SECURITY AGREEMENT
------------------
AGREEMENT dated as of August 1, 1996 between PAYPHONES OF
AMERICA, INC., a Tennessee corporation (together with its successors, the
"Company"), and STANLEY ROJESKI, RONALD L. COLEMAN, TRUSTEE, and WILLIAM J.
BRINKMEIER, as Agent (collectively, the "Secured Parties").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, PhoneTel III, Inc., an Ohio corporation ("PhoneTel"),
the Company, the shareholders of the Company prior to the acquisition of the
Company by PhoneTel, and the Secured Parties are parties to an Amended and
Restated Share Purchase Agreement of even date herewith (as the same may be
amended from time to time, the "Purchase Agreement"); and
WHEREAS, pursuant to the Purchase Agreement, PhoneTel will
acquire all of the outstanding shares of capital stock of the Company (the
"Acquisition"); and
WHEREAS, as part of the purchase price for the Acquisition,
PhoneTel has agreed to deliver to Sellers one or more promissory notes,
evidencing certain of the Purchase Price (as defined in the Purchase Agreement
and, as collateral therefor, the Company has agreed to grant a continuing
security interest in and to the Collateral (as hereafter defined) to secure the
obligations of PhoneTel under the Buyer Notes referred to in the Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions
-----------
Terms defined in the Purchase Agreement and not otherwise
defined herein have, as used herein, the respective meanings provided for
therein. The following additional terms, as used herein, have the following
respective meanings:
"Accounts" means all "accounts" (as defined in the UCC) now
owned or hereafter acquired by the Company, and shall also mean and include all
accounts receivable, contract rights, book debts, notes, drafts and other
obligations or indebtedness owing to the Company arising from the sale, lease or
exchange of goods or other property by it and/or the performance of services by
it (including any such obligation which might be characterized as an account,
contract right or general intangible under the Uniform Commercial Code in effect
in any jurisdiction) and all of the Company's rights in, to and under all
purchase orders for goods, services or other property, and all of the Company's
rights to any goods, services or other
<PAGE> 167
property represented by any of the foregoing (including returned or repossessed
goods and unpaid sellers' rights of rescission, replevin, reclamation and rights
to stoppage in transit) and all monies due to or to become due to the Company
under all contracts for the sale, lease or exchange of goods or other property
and/or the performance of services by it (whether or not yet earned by
performance on the part of the Company), in each case whether now in existence
or hereafter arising or acquired including, without limitation, the right to
receive the proceeds of said purchase orders and contracts and all collateral
security and guarantees of any kind given by any person or entity with respect
to any of the foregoing.
"Collateral" has the meaning set forth in Section 3.
"Documents" means all "documents" (as defined in the UCC) or
other receipts covering, evidencing or representing goods, now owned or
hereafter acquired by the Company.
"Equipment" means all "equipment" (as defined in the UCC) now
owned or hereafter acquired by the Company.
"Event of Default" shall have the meaning set forth in the
Buyer Notes.
"General Intangibles" means all "general intangibles" (as
defined in the UCC) now owned or hereafter acquired by the Company, including
(i) all obligations or indebtedness owing to the Company (other than Accounts)
from whatever source arising, (ii) all patents, patent licenses, trademarks,
trademark licenses, rights in intellectual property, goodwill, trade names,
service marks, trade secrets, copyrights, permits and licenses, and (iii) all
rights or claims in respect of refunds for taxes paid.
"Instruments" means all "instruments", "chattel paper" or
"letters of credit" (each as defined in the UCC), including those evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances,
now owned or hereafter acquired by the Company.
"Inventory" means all "inventory" (as defined in the UCC), now
owned or hereafter acquired by the Company, wherever located, and shall also
mean and include all raw materials and other materials and supplies,
work-in-process and finished goods and any products made or processed therefrom
and all substances, if any, commingled therewith or added thereto.
"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;
"Permitted Liens" means each of the following:
(a) Liens in favor of the Agent or the Secured Parties
granted pursuant to this Agreement;
(b) Liens evidencing rights of lessors in leased
equipment and/or purchase money liens on specific
items of equipment;
(c) Liens in favor of Berthel-Fisher & Company Leasing,
Inc., individually or as agent;
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(d) 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 have been set aside on its books;
(e) 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 shall have been set
aside on its books;
(f) Liens incurred in the ordinary course of business in
respect of deposits made in connection with workmen's
compensation, unemployment insurance or other forms
of governmental insurance of 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;
(g) judgment Liens with respect to judgments to the
extent such judgments do not exceed $50,000.
(h) 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;
(i) 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;
(j) Liens securing purchase money, indebtedness and
capitalized lease obligations;
(k) 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:
(l) 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
(m) extensions renewals or replacements of any Lien
referred to in paragraphs (a) through (l) 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.
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"Proceeds" means all proceeds of, and all other profits,
products, rents or receipts, in whatever form, arising from the collection,
sale, lease, exchange, assignment, licensing or other disposition of, or other
realization upon, collateral, including all claims of the Company against third
parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance in respect of, any
collateral, and any condemnation or requisition payments with respect to any
collateral, in each case whether now existing or hereafter arising.
"Required Sellers" means Sellers holding at least 66-2/3% of
the aggregate outstanding principal amount of the Buyer Notes;
"Secured Obligations" means all principal of and interest
(including any interest which accrues after the commencement of any case,
proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Company) on the Buyer Notes together with any and all
other amounts now or at any time hereafter owing by the Company to any of the
Secured Parties.
"Secured Parties" means the Agent and the Sellers.
"Security Interests" means the security interests in the
Collateral granted hereunder securing the Secured Obligations.
"UCC" means the Uniform Commercial Code as in effect on the
date hereof in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the Security Interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
SECTION 2. Representations and Warranties
------------------------------
The Company represents and warrants as follows:
(A) The Company has good and marketable title to all of the
Collateral, free and clear of any Liens other than the Permitted Liens.
(B) The Company has not performed any acts which might prevent
the Secured Parties from enforcing any of the terms of this Agreement or which
would limit the Agent in any such enforcement. Other than financing statements
or other similar or equivalent documents or instruments with respect to the
Security Interests and Permitted Liens, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument covering all
or any part of the Company's interests, the Collateral is on file or of record
in any jurisdiction in which such filing or recording would be effective to
perfect a Lien on such Collateral.
(C) The Security Interests constitute valid security interests
under the UCC securing the Secured Obligations. Within 30 days following the
Closing, UCC financing statements shall be filed in the appropriate offices in
the jurisdictions in which the Collateral is located, the Security Interests
shall constitute perfected security interests in the Collateral (except
Inventory in transit) to the extent that a security interest therein may be
perfected by filing pursuant to the UCC, prior to all other Liens and rights of
others therein except for the Permitted Liens.
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SECTION 3. The Security Interests
----------------------
(A) In order to secure the full and punctual payment and
performance of the Secured Obligations in accordance with the terms thereof, the
Company hereby grants to the Agent for the ratable benefit of the Secured
Parties a continuing security interest in and to all of the following property
of the Company, whether now owned or existing or hereafter acquired or arising
and regardless of where located (all being collectively referred to as the
"Collateral"):
(1) Accounts;
(2) Inventory;
(3) General Intangibles;
(4) Documents;
(5) Instruments;
(6) Equipment;
(7) All books and records (including customer lists, credit
files, computer programs, printouts and other computer
materials and records) of the Company pertaining to any of the
Collateral; and
(8) All Proceeds of all or any of the Collateral described in
Clauses 1 through 7 hereof.
(B) The Security Interests are granted as security only and
shall not subject any Secured Party to, or transfer or in any way affect or
modify, any obligation or liability of the Company with respect to any of the
Collateral or any transaction in connection therewith.
SECTION 4. Further Assurances; Covenants
-----------------------------
(A) The Company will not change its name, identity or
corporate structure in any manner unless it shall have given the Agent prior
notice thereof. The Company will not change the location of its chief executive
office or chief place of business unless it shall have given the Agent 45 days
prior notice thereof. The Company shall not in any event change the location of
any Collateral if such change would cause the Security Interests in such
Collateral to lapse or cease to be perfected.
(B) The Company will, from time to time, at its expense,
execute, deliver, file and record any statement, assignment, instrument,
document, agreement or other paper and take any other action (including any
filings of financing or continuation statements under the UCC) that from time to
time may be necessary or desirable in order to create, preserve, perfect,
confirm or validate the Security Interests or to enable the Secured Parties to
obtain the full benefits of this Agreement, or to enable the Agent to exercise
and enforce any of its rights, powers and remedies hereunder with respect to any
of the Collateral. The Company agrees that a carbon, photographic, photostatic
or other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement.
(C) The Company shall keep full and accurate books and records
relating to the Collateral.
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(D) The Company will immediately deliver and pledge each
Instrument to the Agent, appropriately endorsed to the Agent, provided that so
long as no Event of Default shall have occurred and be continuing, the Company
may retain for collection in the ordinary course any Instruments received by it
in the ordinary course of business and the Agent shall, promptly upon request of
the Company, make appropriate arrangements for making any other Instrument
pledged by the Company available to it for purposes of presentation, collection
or renewal (any such arrangement to be effected, to the extent deemed
appropriate to the Agent, against trust receipt or like document).
(E) The Company shall use its reasonable best efforts to cause
to be collected from its account debtors, as and when due, any and all amounts
owing under or on account of each Account (including Accounts which are
delinquent, such Accounts to be collected in accordance with lawful collection
procedures) and shall apply forthwith upon receipt thereof all such amounts as
are so collected to the outstanding balance of such Account. Subject to the
rights of the Secured Parties hereunder upon the occurrence and during the
continuance of an Event of Default, the Company may allow in the ordinary course
of business as adjustments to amounts owing under its Accounts (i) an extension
or renewal of the time or times of payment, or settlement for less than the
total unpaid balance, which the Company finds appropriate in accordance with
sound business judgment and (ii) a refund or credit due as a result of returned
or damaged merchandise or as a discount for prompt payment, all in accordance
with the Company's ordinary course of business consistent with its historical
collection practices.
(F) Upon the occurrence and during the continuance of any
Event of Default, upon request of the Sellers through the Agent, the Company
will promptly notify (and the Company hereby authorizes the Agent so to notify)
each account debtor in respect of any Account or Instrument that such Collateral
has been assigned to the Agent hereunder, and that any payments due or to become
due in respect of such Collateral are to be made directly to the Agent or its
designee.
(G) The Company will, promptly upon request, provide to the
Agent all information and evidence it may reasonably request concerning the
Collateral to enable the Agent to enforce the provisions of this Agreement.
SECTION 5. General Authority
-----------------
The Company hereby irrevocably appoints the Agent its true and
lawful attorney, with full power of substitution, in the name of the Company,
the Secured Parties or otherwise, for the sole use and benefit of the Secured
Parties, but at the Company's expense, to the extent permitted by law to
exercise, at any time and from time to time while an Event of Default has
occurred and is continuing, all or any of the following powers with respect to
all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due thereon or by virtue
thereof, and
(ii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds or avails thereof, as fully and effectually as
if the Agent were the absolute owner thereof;
PROVIDED that the Agent shall give the Company not less than twenty days' prior
written notice of the time and place of any sale or other intended disposition
of any of the Collateral, except any Collateral which is perishable or threatens
to decline speedily in value or is of a type customarily
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sold on a recognized market. The Company agrees that such notice constitutes
"reasonable notification" within the meaning of Section 9-504(3) of the UCC.
SECTION 6. Remedies upon Event of Default
------------------------------
(A) If any Event of Default has occurred and is continuing,
the Agent may exercise on behalf of the Secured Parties all rights of a secured
party under the UCC (whether or not in effect in the jurisdiction where such
rights are exercised). The Agent or any other Secured Party may be the purchaser
of any or all of the Collateral so sold at any public sale (or, if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations, at any
private sale). The Company will execute and deliver such documents and take such
other action as the Agent deems necessary or advisable in order that any such
sale may be made in compliance with law. Upon any such sale the Agent shall have
the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the Collateral so
sold to it absolutely and free from any claim or right of whatsoever kind,
including any equity or right of redemption of the Company which may be waived,
and the Company, to the extent permitted by law, hereby specifically waives all
rights of redemption, stay or appraisal which it has or may have under any law
now existing or hereafter adopted. The notice (if any) of such sale required by
Section 6 shall (1) in case of a public sale, state the time and place fixed for
such sale, and (2) in the case of a private sale, state the day after which such
sale may be consummated. Any such public sale shall be held at such time or
times within ordinary business hours and at such place or places as the Agent
may fix in the notice of such sale. At any such sale the Collateral may be sold
in one lot as an entirety or in separate parcels, as the Agent may determine.
The Agent shall not be obligated to make any such sale pursuant to any such
notice. The Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the same may be so adjourned. In case of any sale of all or
any part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Agent until the selling price is paid by the
purchaser thereof, but the Agent shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
case of any such failure, such Collateral may again be sold upon like notice.
The Agent, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court or courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and
remedies under this Agreement the Agent may (i) require the Company to, and the
Company agrees that it will, at its expense and upon the request of the Agent,
forthwith assemble all or any part of the Collateral as directed by the Agent
and make it available at a place designated by the Agent which is, in its
opinion, reasonably convenient to the Agent and the Company, whether at the
premises of the Company or otherwise, (ii) to the extent permitted by applicable
law, enter, with or without process of law and without breach of the peace, any
premise where any of the Collateral is or may be located, and without charge or
liability to it seize and remove such Collateral from such premises, (iii) have
access to and use the Company's books and records relating to the Collateral and
(iv) prior to the disposition of the Collateral, store or transfer it without
charge in or by means of any storage or transportation facility owned or leased
by the Company, process, repair or recondition it or otherwise prepare it for
disposition in any manner and to the extent the Agent deems appropriate and, in
connection with such preparation and disposition, use without charge any
trademark, trade name, copyright, patent or technical process used by the
Company.
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SECTION 7. Limitation on Duty of Agent in Respect of Collateral
----------------------------------------------------
Beyond the exercise of reasonable care in the custody thereof,
the Agent shall have no duty as to any Collateral in its possession or control
or in the possession or control of any agent or bailee or any income thereon or
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent shall be deemed to have exercised reasonable care
in the custody of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act or
omission of any warehouseman, carrier, forwarding agency, consignee or other
agent or bailee selected by the Agent in good faith.
SECTION 8. Application of Proceeds
-----------------------
Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Collateral and any cash held in the Collateral Accounts shall be applied
by the Agent in the following order of priorities:
FIRST, to payment of the expenses of such sale or other
realization, and all expenses, incurred or made by the Agent in
connection therewith;
SECOND, to the ratable payment of unpaid principal of the
Secured Obligations;
THIRD, to the ratable payment of accrued but unpaid interest
on the Secured Obligations in accordance with the provisions of the
Purchase Agreement;
FOURTH, to the ratable payment of all other Secured
Obligations, if any, until all Secured Obligations shall have been paid
in full; and
FINALLY, to payment to the Company or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Agent may make distributions hereunder in cash or in kind or, on a ratable
basis, in any combination thereof.
SECTION 9. Termination of Security Interests; Release of Collateral
--------------------------------------------------------
Upon the repayment in full of all Secured Obligations, the
Security Interests shall terminate and all rights to the Collateral shall revert
to the Company. At any time and from time to time prior to such termination of
the Security Interests, the Agent may release any of the Collateral with the
prior written consent of the Required Sellers. Upon any such termination of the
Security Interests or release of Collateral, the Agent will, at the expense of
the Company, execute and deliver to the Company such documents as the Company
shall reasonably request to evidence the termination of the Security Interests
or the release of such Collateral, as the case may be.
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SECTION 10. Notices
-------
All notices, communications and distributions hereunder shall
be given in accordance with Section 8.10 of the Purchase Agreement.
SECTION 11. Waivers, Non-Exclusive Remedies
-------------------------------
No failure on the part of the Agent to exercise, and no delay
in exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by the Agent or any Secured Party of any right under the Purchase
Agreement, or this Agreement preclude any other or further exercise thereof or
the exercise of any other right. The rights in this Agreement are cumulative and
are not exclusive of any other remedies provided by law.
SECTION 12. Successors and Assigns
----------------------
This Agreement is for the benefit of the Agent and the Secured
Parties and their successors and assigns, and in the event of an assignment of
all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Agreement shall be binding on the Company and its successors
and assigns.
SECTION 13. Changes in Writing
------------------
Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, but only in writing signed by
the Company and the Agent with the consent of the Required Sellers.
SECTION 14. NEW YORK LAW
------------
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO PRINCIPLES
OR CONFLICTS OF LAW), EXCEPT AS OTHERWISE REQUIRED BY MANDATORY PROVISIONS OF
LAW AND EXCEPT TO THE EXTENT THAT REMEDIES PROVIDED BY THE LAWS OF ANY
JURISDICTION OTHER THAN NEW YORK ARE GOVERNED BY THE LAWS OF SUCH JURISDICTION.
SECTION 15. Severability
------------
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Agent and the other Secured Parties
in order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
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SECTION 16. Counterparts
------------
This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
PAYPHONES OF AMERICA, INC.
PETER GRAF
By /s/ Peter Graf
----------------------------
Title: Chairman and CEO
WILLIAM J. BRINKMEIER
/s/ William J. Brinkmeier
---------------------------
STANLEY ROJESKI
/s/ Stanley Rojeski
---------------------------
RONALD L. COLEMAN, TRUSTEE
/s/ Ronald L. Coleman
---------------------------
Trustee
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PROMISSORY NOTE
$1,382,790.61 August 1, 1996
FOR VALUE RECEIVED, the undersigned PHONETEL III, INC., an Ohio
corporation (the "Buyer") promises to pay to WILLIAM J. BRINKMEIER (the
"Seller") in lawful money of the United States of America and in immediately
available funds the principal amount of ONE MILLION THREE HUNDRED EIGHTY TWO
THOUSAND SEVEN HUNDRED NINETY DOLLARS and SIXTY ONE CENTS ($1,382,790.61) plus
the Added Principal Amount (as defined below) (the "Loan") or, if less, the
unpaid principal amount of the Loan, at Seller's account notified in writing to
Buyer (the "Payment Account"), in installments as described in Section 1 below
on the last Business Day of each month (each, a "Payment Date") commencing July
31, 1998 (or if such day is not a Business Day, on the next succeeding Business
Day), with all outstanding amounts becoming due and payable on May 31, 2002 (the
"Maturity Date"). As used herein "Business Day" shall mean 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.
1. PAYMENT. The Buyer also promises to pay principal and interest on the
unpaid principal amount of the Loan prior to maturity at the rates set forth
below:
1.1 Interest shall accrue on the outstanding amount of the Loan for the
period from the date hereof to and including December 31, 1996 at the rate of
10% per annum (the "First Interest Period"). Interest shall accrue on the
outstanding Loan for the period from and after January 1, 1997 to June 30, 1998
at the rate of 14% per annum (the "Second Interest Period"). Interest shall
accrue on the outstanding amount of the Loan after June 30, 1998 at the rate of
14% per annum.
1.2 Payments of accrued interest during and in respect of the First
Interest Period shall be payable in the amount of $3,569 per month, commencing
August 31, 1996 and on the last Business Day of each month thereafter to and
including December 31, 1997, with the remainder of the accrued and unpaid
interest during the First Interest Period being added to the principal balance
of this Note (such additional amount, the "First Interest Period Added Amount").
1.3 Payments of accrued interest during and in respect of the Second
Interest Period shall be payable in the amount of zero dollars and zero cents
per month, commencing January 31, 1997 and on the last Business Day of each
month thereafter to and including June 30, 1998, with the remainder of the
accrued and unpaid interest during the Second Interest Period being added to the
principal balance of this Note (such additional amount, together with the First
Interest Period Added Amount, the "Added Principal Amount").
<PAGE> 178
1.4 Buyer shall make payments of $40,082.13 per month commencing July
31, 1998 and on the last Business Day of each month thereafter to and including
April 30, 2002, which shall be applied first to accrued and unpaid interest and
second to the unpaid principal amount of this Note.
1.5 On the Maturity Date, Buyer shall pay the remaining principal
balance and all accrued and unpaid interest on this Note.
1.6 Interest payable hereunder shall be payable in lawful money of the
United States of America at the Payment Account. Interest shall be based on the
basis of a year of 365 or 366 days, as applicable, and the exact number of days
elapsed.
2. PURPOSE. This Note is given to evidence a portion of the Purchase Price
as defined in that certain Amended and Restated Share Purchase Agreement, dated
as of August 1, 1996 (the "Purchase Agreement"), among the Buyer, Payphones of
America, Inc., Seller and the other shareholders of the Seller.
3. VOLUNTARY PREPAYMENT. The Loan may be prepaid by the Buyer in whole or
in part, at any time and from time to time, without premium or penalty.
4. EVENT OF DEFAULT. Upon the occurrence of any of the following events (each an
"EVENT OF DEFAULT"):(i) nonpayment when due of any payment when due hereunder
and such payment shall not have been made within five (5) Business Days when
due; or (ii) the institution of any proceeding by or against the Buyer seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or the appointment of a receiver, trustee, custodian or
other similar official for the Buyer, or for any substantial part of its
property and, in the case of institution of any such proceeding against the
Buyer, either such proceeding remaining undismissed or unstayed for a period of
120 days or any of the actions sought in the proceeding occurring, or the Buyer
taking any corporate or other authorizing action in respect of the foregoing; or
(iii) any other material breach or misrepresentation hereunder or under the
Security Agreement referred to in Section 7 hereof that is not cured within 30
days following written notice thereof; THEN AND IN ANY SUCH EVENT, the Seller in
its discretion may, by written notice to the Buyer, declare the principal of and
accrued interest on the Loan to be, whereupon the same shall become, forthwith
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Buyer, PROVIDED, that upon
the occurrence of any event specified in clause (ii) such amounts shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Buyer.
5. COSTS OF COLLECTION. In the case of any non-payment when due of any
amounts due hereunder, the Buyer shall pay all costs and expenses of every kind
for collection, including all reasonable attorneys' fees.
2
<PAGE> 179
6. MANDATORY REPAYMENT. The Loan, together with all accrued but unpaid interest
thereon, shall be subject to mandatory prepayment upon the occurrence of either
(i) an offering of any class of capital stock of PhoneTel Technologies, Inc.
("PhoneTel"), (ii) a debt offering of PhoneTel or (iii) any refinancing of the
indebtedness under that certain Credit Agreement, dated as of March 15, 1996 (as
amended, the "Credit Agreement"), among PhoneTel, Internationale Nederlanden
(U.S.) Capital Corporation ("ING"), the lenders party thereto (the "Lenders")
and ING as agent for the Lenders, which, in the case of the event set forth in
(i) results in a prepayment of the loans under the Credit Agreement to the
Lenders in an aggregate amount of not less than $10,000,000 and in the case of
clauses (ii) and (iii) results in a prepayment of all amounts outstanding under
the Credit Agreement; provided that the total amount of such prepayment shall be
limited to the amount of funds received by PhoneTel (A) in excess of
$10,000,000, in the case of clause (i), or (B) the amounts outstanding under the
Credit Agreement, in the case of clauses (ii) and (iii); provided further,
however, that any partial prepayment shall be applied to the amounts due
hereunder in the inverse order of their maturities.
7. SECURITY. The obligations hereunder are to be secured by a lien and
security interest in all of the assets of the Buyer pursuant to a certain
Security Agreement by the Buyer in favor of, or for the benefit of, Seller.
8. NO SET-OFF, ETC. All payments to be made hereunder by the Buyer shall
be made without set-off or counterclaim.
No delay on the part of the Seller in exercising any of its options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof. The options, powers and rights of the Seller specified herein
are in addition to those otherwise created.
By acceptance of this Note, Seller acknowledges and agrees that this
Note is the obligation solely of the Buyer, and that no officer, director,
shareholder, direct or indirect parent company or affiliate of the Buyer will
have any liability or obligation under this Note. By acceptance of this Note,
Seller further acknowledges that the Buyer is an entity separate and distinct
from PhoneTel Technologies, Inc. and its other subsidiaries and that it is not
seeking payment or performance of this Note from PhoneTel Technologies, Inc. or
any of its subsidiaries other than Buyer.
3
<PAGE> 180
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. EACH OF THE BUYER AND, BY ITS ACCEPTANCE HEREOF, THE
SELLER HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY
MATTER ARISING HEREUNDER.
PHONETEL III, INC.
By: /s/ Peter Graf
-----------------------------
Name: Peter Graf
Title: Chairman
4
<PAGE> 181
DATE (MM/DD/YY)
08/12/96
CERTIFICATE OF LIABILITY INSURANCE
Producer THIS CERTIFICATE IS ISSUED AS A MATTER OF
INFORMATION ONLY AND CONFERS NO RIGHTS
UPON THE CERTIFICATE HOLDER, THIS
The O'Connor Group CERTIFICATE DOES NOT AMEND, EXTEND OR
12140 Woodcrest Exec. #225 ALTER THE COVERAGE AFFORDED BY THE
St. Louis MO 63141 POLICIES BELOW.
COMPANIES AFFORDING COVERAGE
Michael O'Connor Sr. Prop/Cas
Phone No. 314-576-7080 Fax No. COMPANY
A American States
Insured COMPANY
B
PayPhones of America, Inc. K&S COMPANY
Enterprises, a Wholly Owned Sub C
1245 Point West Blvd.
St. Charles MO 63301 COMPANY
D
Coverages
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED,
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT OT WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN,
THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE
TERMS. EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN
REDUCED BY PAID CLAIMS.
<TABLE>
<CAPTION>
CO POLICY EFFECTIVE POLICY EXPIRATION
LTR TYPES OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
- --- ------------------ ------------- --------------- --------------- ------
<S> <C> <C> <C> <C> <C>
GENERAL LIABILITY GENERAL AGGREGATE $ 1000000
A X COMMERCIAL GENERAL LIABILITY 01CE059478 06/04/96 06/04/97 PRODUCTS-COMP/OP AGG $ 1000000
CLAIMS MADE X OCCUR PERSONAL & ADV INJURY $ 500000
OWNER'S & CONTRACTOR'S PROT EACH OCCURRENCE $ 500000
FIRE DAMAGE (Any one fire)$ 50000
MED EXP(Any one person) $ 5000
AUTOMOBILE LIABILITY COMBINED SINGLES LIMIT $
A ANY AUTO 01CE059478 06/04/96 06/04/97
ALL OWNED AUTOS 02BA390540 06/04/96 06/04/97 BODILY INJURY $ 500,000
X SCHEDULED AUTOS (Per Person)
X HIRED AUTOS BODILY INJURY $
X NON-OWNED AUTOS (Per accident) $
PROPERTY DAMAGE $
GARAGE LIABILITY AUTO ONLY-EACH ACCIDENT $
ANY AUTO OTHER THAN AUTO ONLY $
EACH ACCIDENT $
AGGREGATE $
EXCESS LIABILITY EACH OCCURRENCE $
UMBRELLA FORM AGGREGATE $
OTHER THAN UMBRELLA FORM $
WORKERS' COMPENSATION AND WC STATU- OTH-
EMPLOYERS' LIABILITY TORY LIMITS ER
EL EACH ACCIDENT $ 100,000
A THE PROPRIETOR/ INCL 01WC781236-10 06/04/96 06/04/97 EL DISEASE-POLICY LIMIT $ 500,000
PARTNERS/EXECUTIVE EL DISEASE-EA EMPLOYEE $ 100,000
OFFICERS ARE: EXCL
OTHER
A Comm Application 01CE059478 06/04/96 06/04/97
A Property 01CE059478 06/04/96 06/04/97
</TABLE>
- ------------------------------
DESCRIPTION OF OPERATIONS
CERTIFICATE HOLDER CANCELLATION
INSURAN SHOULD ANY OF THE ABOVE DESCRIBED
POLICIES BE CANCELLED BEFORE THE
EXPIRATION DATE THEREOF, THE ISSUING
COMPANY WILL ENDEAVOR TO MAIL
DATE WRITTEN NOTICE TO THE
CERTIFICATE HOLDER NAMED TO THE LEFT,
BUT FAILURE TO MAIL SUCH NOTICE SHALL
IMPOSE NO INSURANCE VERIFICATION
OBLIGATION OR LIABILITY OF ANY KIND
UPON THE COMPANY, ITS AGENTS OR
REPRESENTATIVES.
---------------------------------
AUTHORIZED REPRESENTATIVE
/s/ Michael E. O'Connor
---------------------------------
Michael O'Connor Sr. Prop/Cas
ACORD 25-S (I/95) ACORD CORPORATION 1988
<PAGE> 182
<TABLE>
<CAPTION>
Schedule 3.21 (A)
Payphones of America's Vendors (25K or Greater)
AS OF AS OF
VENDOR MARCH 31, 1996 JUNE 30, 1996
<S> <C> <C>
Intellicall, Inc 97,083.07 72,862.44
Kerber, Eck, & Braeckel 22,500.00
MCI 47,227.42 37,085.41
--------- ---------
Total 143,310.49 132,447.85
========== ==========
</TABLE>
<PAGE> 183
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
PAYPHONES OF AMERICA, INC.
AND SUBSIDIARY
December 31, 1995 and 1994
KERBER, ECK & BRAECKEL LLP
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE> 184
[KERBER, ECK & BRAECKEL LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Payphones of America, Inc.
We have audited the accompanying consolidated balance sheets of Payphones
of America, Inc. (a Tennessee corporation) and subsidiary as of December 31,
1995 and 1994, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Payphones of
America, Inc. and subsidiary as of December 31, 1995 and 1994, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with generally accepted accounting
principles.
<PAGE> 185
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As described in Note
B, the Company has suffered recurring losses from operations and has limited
liquidity which raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note B. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Kerber, Eck & Braeckel LLP
St. Louis, Missouri
January 30, 1996 (except for Note L, as
to which the date is February 7, 1996)
<PAGE> 186
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Net sales
Coin calls $ 3,747,247 $ 2,153,974
Non-coin caLls 4,418,667 3,692,117
Other 49,221 22,053
----------- -----------
Total net sales 8,215,135 5,868,144
Cost of sales
Telephone charges 3,599,271 2,676,604
Commissions 1,178,156 722,746
Service, maintenance and network expense 289,036 214,636
Depreciation and amortization 1,218,095 723,516
----------- -----------
6,284,558 4,337,502
----------- -----------
Gross profit 1,930,577 1,530,642
Selling, general and administrative expenses
Salaries, wages and benefits 823,430 488,913
Depreciation and amortization 200,095 198,398
Dues and subscriptions 53,905 50,960
Outside services 40,521 63,736
Phone maintenance 118,824 -
Professional services 171,303 85,920
Taxes
Personal property 75,785 4,295
Sales 63,948 37,907
Telephone 69,137 24,696
Rent 71,511 31,389
Other 223,165 120,105
----------- -----------
1,911,624 1,106,319
----------- -----------
Earnings from operations 18,953 424,323
Other income (expense)
Interest income 415 14,741
Interest expense (971,141) (600,624)
Gain (loss) on sale of assets (80,652) 98,904
Other income 12,135 9,366
----------- -----------
(1,039,243) (477,613)
----------- -----------
Loss before income taxes (1,020,290) (53,290)
Income taxes
Current (6,280) (8,856)
Deferred 284,000 (128,000)
----------- -----------
277,720 (136,856)
----------- -----------
NET LOSS $ (742,570) $ (190,146)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 187
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Period indicated below
<TABLE>
<CAPTION>
Additional Retained
Common contributed earnings
stock capital (deficit) Total
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Balance at January 1, 1994
As originally reported $339,423 $ 210,219 $ (153,727) $ 395,915
Prior period adjustment -- 55,192 (238,373) (183,181)
-------- --------- ----------- ---------
As restated 339,423 265,411 (392,100) 212,734
Net loss for the year ended
December 31, 1994 -- -- (190,146) (190,146)
Cash dividends -- (133,181) -- (133,181)
-------- --------- ----------- ---------
Balance at December 31, 1994 339,423 132,230 (582,246) (110,593)
Net loss for the year ended
December 31, 1995 -- -- (742,570) (742,570)
Stock warrants exercised 9,333 -- -- 9,333
Cash dividends -- (132,230) -- (132,230)
-------- --------- ----------- ---------
Balance at December 31, 1995 $348,756 $ -- $(1,324,816) $(976,060)
======== ========= =========== =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 188
Payphones of America, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities
Net loss $ (742,570) $ (190,146)
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization 1,418,191 921,914
(Gain) loss on sale of assets 80,652 (98,904)
Changes in assets and liabilities
(Increase) decrease in accounts receivable (9,352) 9,040
(Increase) decrease in prepaid expenses (11,439) 72
Increase in other asset (2,822) -
Increase in accounts payable 183,338 244,517
Increase in accrued expenses 127,407 18,554
Increase (decrease) in deferred income taxes (284,000) 128,000
----------- -----------
Total adjustments 1,501,975 1,223,193
----------- -----------
Net cash provided by operating activities 759,405 1,033,047
Cash flows from investing activities
Capital expenditures (203,112) (229,613)
Proceeds from sale of assets 54,297 195,714
----------- -----------
Net cash used in investing activities (148,815) (33,899)
Cash flows from financing activities
Proceeds from long-term obligations 507,239 123,355
Payments on notes payable to bank (19,000) (11,900)
Payments on long-term obligations (1,119,990) (696,191)
Stock warrants exercised 9,333 -
Dividends paid (132,230) (133,181)
----------- -----------
Net cash used in financing activities (754,648) (717,917)
----------- -----------
Net increase (decrease) in cash (144,058) 281,231
Cash (overdraft) at beginning of period 147,910 (133,321)
----------- -----------
Cash at end of period $ 3,852 $ 147,910
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 189
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. THE COMPANY
Payphones of America, Inc. operates, services and maintains a system of
approximately 2,800 pay telephones in the Southeastern and Midwestern United
States.
2. PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of the Company and
its wholly-owned subsidiary. Intercompany transactions and balances have been
eliminated in consolidation .
3. ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible; accordingly,
no allowance for doubtful accounts is required. If amounts become uncollectible,
they will be charged to operations when that determination is made.
4. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization are
provided for in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated service lives. Leased property under capital
leases is amortized over the service lives of the assets for those leases which
substantially transfer ownership. The straight-line method of depreciation is
followed for substantially all assets for financial reporting purposes, but
accelerated methods are used for tax purposes. Future income taxes resulting
from depreciation temporary differences have been provided for.
5. INTANGIBLE ASSETS
Site location contracts are exclusive rights to operate pay telephones at
various locations acquired through business combinations and are stated at cost.
Amortization of site contract costs is recorded using the straight-line method
over five years, the expected average lives of the contracts.
The Company has classified as goodwill the cost in excess of fair value of the
net assets of companies acquired in purchase transactions. Goodwill is amortized
on a straight-line method over 40 years. The covenants not to compete are being
amortized over their contractual lives of five years. Other intangible assets,
including license agreements and deferred financing costs, are amortized over
the life of the agreements.
<PAGE> 190
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. RECOGNITION OF REVENUE
Revenues from coin calls and non-coin calls are recognized as calls are made.
When revenue on a telephone call is recorded, an expense is also recorded for
fees associated with the call.
7. CONCENTRATIONS OF CREDIT RISK
Revenues have a significant concentration of credit risk in the
telecommunications industry. In addition, a significant amount of 1995 revenues
were generated by the Company's pay telephones located in the states of Missouri
(36%) and Virginia (33%). No other area has a disproportionate credit risk.
8. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B - GOING CONCERN
The Company has experienced recurring losses and has accumulated losses since
inception of $1,324,816. As of December 31, 1995, the Company's current
liabilities exceed its current assets by $2,196,559. These factors raise doubt
about the Company's ability to continue as a going concern. The Company's
continued existence as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to comply with
the terms of its debt and lease obligations and to obtain additional financing
or refinancing as may be required. Historically, the Company has generated
sufficient cash flow to meet its obligations and to pay its debt and lease
obligations, and, although it cannot be assured that the Company will be able to
continue as a going concern in view of its present financial condition,
management believes that continued strategic business acquisitions and
improvements in planning and budgeting should enable the Company to meet its
obligations and sustain its operations.
<PAGE> 191
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE C - NOTE PAYABLE TO BANK
Note payable to bank is comprised of a $245,000 revolving line of credit
agreement with Mark Twain Bank. Interest is payable monthly at 1.50% over
the bank's corporate base rate (8.50% at December 31, 1995). The line of
credit is secured by certain equipment of the Company and other accounts
receivable and matures on February 10, 1996.
NOTE D - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at December 31,:
<TABLE>
<CAPTION>
1995
----------------------------------
Current Long-term 1994
portion portion Total Total
-------- --------- --------- -------
<S> <C> <C> <C> <C>
Notes payable to stockholders $ 248,333 $ 184,276 $ 432,609 $ 149,000
Note payable to Mark Twain Bank 1,594 26,988 28,582 29,683
Notes payable to Ford Motor
Credit Company 36,098 36,389 72,487 63,582
Notes payable to Ronald L. Coleman 14,069 299,868 313,937 426,517
Note payable to Pay-Tele
Communications, Inc. d/b/a
Midwest Telecom 105,454 185,273 290,727 397,818
Note payable to Communications
Finance Corporation 87,466 320,034 407,500 482,853
Note payable to R. Greg Kintz and
Paul Wm. Schindler 103,350 45,750 149,100 236,550
Capital lease obligations
Berthel, Fisher & Company
Leasing, Inc. 717,554 3,655,275 4,372,829 4,749,921
Intellicall, Inc. 17,036 -- 17,036 59,466
Copying Concepts Office Systems -- -- -- 2,168
---------- ---------- ---------- ----------
$1,330,954 $4,753,853 $6,084,807 $6,597,558
========== ========== ========== ==========
</TABLE>
<PAGE> 192
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE D - LONG-TERM OBLIGATIONS - Continued
The notes payable to stockholders consist of eight unsecured loans maturing
at various dates through April 30, 2000. Interest is payable at the rate of
10%.
The note payable to Mark Twain Bank requires payments of $326 per month
including interest at the rate of 8.75 %. The final payment of the entire
unpaid balance of principal and interest will be due October 15, 1998. This
note is secured by a deed of trust for a condominium.
The notes payable to Ford Motor Credit Company consist of ten loans secured
by automobiles and trucks maturing at various dates through April 22, 1999.
The notes require monthly payments of $4,329 including interest at rates
from 8.12% to 10.54%.
The notes payable to Ronald L. Coleman consist of two loans. The notes are
unsecured and mature in April, 2007. These notes require monthly payments
of $4,271 including interest at rates from 8% to 15%.
The note payable to Pay-Tele Communications, Inc. d/b/a Midwest Telecom is
secured by telephone equipment and site location contracts. The note
requires annual principal payments of $100,000 with interest at the rate
of 10% through maturity on June 1, 1998. The note is personally guaranteed
by the stockholders of the Company.
The note payable to Communications Finance Corporation is secured by
telephone equipment and site location contracts. The note requires monthly
payments of $11,895 including interest at the rate of 15% through maturity
on September 15, 1999. The note is personally guaranteed by the
stockholders of the Company.
The note payable to R. Greg Kintz and Paul Wm. Schindler requires monthly
principal payments of $7,950 plus interest at rates from 12% to 16% through
maturity on May 1, 1997. The stockholders of the Company have personally
pledged some of their common stock to the lenders as security.
The Company conducts a portion of its business using leased pay telephone
equipment and other intangible assets. For financial and tax reporting
purposes, the present values of minimum lease payments have been
capitalized. Implicit interest rates for these leases range from 14% to
18%.
<PAGE> 193
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE D - LONG-TERM OBLIGATIONS - Continued
The leases, which are noncancelable, expire at various dates through 2001.
The following is a schedule of leased property and other assets under
capital leases included on the accompanying balance sheets:
<TABLE>
<CAPTION>
<S> <C>
Telephone equipment $ 3,871,519
Site location contracts 2,980,749
---------
6,852,268
Less accumulated depreciation
and amortization (2,256,701)
-----------
$ 4,595,567
===========
</TABLE>
Annual maturities of all long-term obligations are as follows for years
following December 31, 1995:
<TABLE>
<S> <C>
1996 $ 1,330,954
1997 1,087,032
1998 1,024,518
1999 998,138
2000 771,115
2001 and thereafter 873,050
-----------
$ 6,084,807
===========
</TABLE>
NOTE E - INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No.109 "Accounting For Income Taxes" (SFAS).
Under the liability method specified by SFAS 109, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities as measured by the
enacted tax rates which will be in effect when these differences reverse.
Deferred tax income and expense is the result of changes in deferred tax
assets and liabilities. The principal types of differences between assets
and liabilities for financial statement and tax return purposes are
accumulated depreciation and accumulated amortization.
<PAGE> 194
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE E - INCOME TAXES - Continued
The provision for income taxes consists of the following for the year ended
December 31,:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Current $ (6,280) $ (8,856)
Deferred 284,000 (128,000)
--------- ---------
$ 277,720 $(136,856)
========= =========
</TABLE>
Deferred tax assets and liabilities are attributable to the following at
December 31,:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets (liabilities)
Noncurrent
Accumulated depreciation $(472,000) $(365,000)
Accumulated amortization 262,000 81,000
Tax benefit of net operating loss
carryforward 460,000 --
--------- ---------
250,000 (284,000)
Less valuation allowance (250,000) --
--------- ---------
Net deferred tax asset (liability) $ -- $(284,000)
========= =========
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The net deferred
assets reflect management's estimate of the amount which will be realized
from future profitability which can be predicted with reasonable certainty.
The Company has net operating loss carryforwards for Federal income tax
purposes which are available to offset future Federal taxable income. These
carryforwards expire as follows:
<TABLE>
<S> <C>
2008 $ 9,194
2009 332,849
2010 836,510
----------
$1,178,553
==========
</TABLE>
<PAGE> 195
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE F - COMMITMENTS
The Company conducts a substantial portion of its operations utilizing
leased facilities and equipment. The minimum rental commitments under
operating leases are as follows for the year ended December 31,:
<TABLE>
<S> <C>
1996 $ 95,091
1997 93,246
1998 60,550
1999 59,000
2000 64,400
2001 and thereafter 310,500
--------
Total minimum lease payments $682,787
========
</TABLE>
Rent expense for all operating leases for the years ended December 31, 1995
and 1994,was $71,512 and $31,389, respectively.
NOTE G - STOCK WARRANTS
The Company has issued various warrants which are exercisable for common
stock as follows:
<TABLE>
<CAPTION>
Warrant Number Exercise Expiration
number of shares price date
------- --------- -------- ----------------
<S> <C> <C> <C> <C>
6 319,114 $1.00 October 24, 2004
9 250,000 $2.00 July 28, 2000
</TABLE>
Warrant six has been issued to the Company's vice president and warrant
nine has been issued to a lender.
NOTE H - STATEMENT OF CASH FLOWS
Cash paid for interest and income taxes was as follows during the year
ended December 31,:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Interest $852,612 $597,956
Income taxes 6,280 16,388
</TABLE>
During 1995 and 1994, the Company entered into capital lease obligations
totalling $100,000 and $4,000,000, respectively, which represent noncash
financing activities.
<PAGE> 196
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE I - PRIOR PERIOD ADJUSTMENT
Retained earnings at December 31, 1994, were restated following completion
of the Company's first audit to reflect the correction of the following
account balances:
<TABLE>
<S> <C>
Accounts receivable $ (14,061)
Property and equipment 15,307
Other assets 20,521
Accumulated depreciation and
amortization 21,219
Accounts payable (94,965)
Income taxes payable (20,639)
Notes payable 49,112
Deferred income taxes (156,000)
Additional contributed capital (55,192)
Other (3,675)
---------
$ 238,373
=========
</TABLE>
NOTE J - ACQUISITION
On September 23, 1994, the Company purchased certain assets of Eastern
Telecom Corporation, operators of pay telephones in the Southeastern region
of the United States. The acquisition was accounted for using the purchase
method. The purchase price of $4,000,000 was allocated as follows:
<TABLE>
<S> <C>
Fair market value of assets acquired
Inventories $ 2,000
Equipment 1,721,839
Site contracts 2,276,161
----------
Purchase price $4,000,000
==========
</TABLE>
In connection with the asset purchase, the Company entered into a purchase
commitment with the seller for services of $500,000. In 1995, the
commitment decreased to approximately $192,000 based on actual revenues
generated by the assets acquired. The Company's annual obligation under
this agreement is $32,000 through 2001.
NOTE K - RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 financial statements
to conform to the 1995 presentation.
<PAGE> 197
Payphones of America, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1995 and 1994
NOTE L - SUBSEQUENT EVENT
On February 7, 1996, the Telecommunications Act of 1996 was signed into
law. The Act recognizes that independent public payphone providers are
entitled to fair rules to compete with the Regional Bell Operating
Companies and other local exchange companies. For instance, the Act
prohibits Bell operating companies from subsidizing payphone service
directly or indirectly with revenues generated from their exchange or
access services. Bell companies are also prohibited from discriminating in
favor of their payphone services. The legislation directs the Federal
Communications Commission to develop fair rules in implementing the
payphone provision within nine months. The potential impact of this Act on
the financial position of the Company is unknown at this time.
NOTE M - FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, trade
receivables, trade payables and debt instruments. The book values of cash
and trade payables are representative of their fair values due to the
short-term maturity of these instruments. The book value of the Company's
debt instruments is considered to approximate their fair value at December
31, 1995, based on market rates and conditions.
<PAGE> 198
PROMISSORY NOTE
$522,000 August 1, 1996
FOR VALUE RECEIVED, the undersigned PHONETEL III, INC., an Ohio corporation
(the "Buyer") promises to pay to RONALD L. COLEMAN, TRUSTEE (the "Seller") in
lawful money of the United States of America and in immediately available funds
the principal amount of FIVE HUNDRED TWENTY TWO THOUSAND DOLLARS ($522,000) plus
the Added Principal Amount (as defined below) (the "Loan") or, if less, the
unpaid principal amount of the Loan, at Seller's account notified in writing to
Buyer (the "Payment Account"), in installments as described in Section 1 below
on the last Business Day of each month (each, a "Principal Payment Date ")
commencing July 31, 1998 (or if such day is not a Business Day, on the next
succeeding Business Day), with all outstanding amounts becoming due and payable
on May 31, 2002 (the "Maturity Date"). As used herein "Business Day" shall mean
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.
1. PAYMENTS. The Buyer also promises to pay principal and interest on the
unpaid principal amount of the Loan prior to maturity at the rates set forth
below:
1.1 Interest shall accrue on the outstanding amount of the Loan for the
period from the date hereof to and including December 31, 1996 at the rate of
10% per annum (the "First Interest Period"). Interest shall accrue on the
outstanding Loan for the period from and after January 1, 1997 to June 30, 1998
at the rate of 14% per annum (the "Second Interest Period"). Interest shall
accrue on the outstanding amount of the Loan after June 30, 1998 at the rate of
14% per annum.
1.2 Payments of accrued interest during and in respect of the First
Interest Period shall be payable in the amount of $4,350 per month, commencing
August 31, 1996 and on the last Business Day of each month thereafter to and
including December 31, 1997, with the remainder of the accrued and unpaid
interest during the First Interest Period being added to the principal balance
of this Note (such additional amount, the "First Interest Period Added Amount").
1.3 Payments of accrued interest during and in respect of the Second
Interest Period shall be payable in the amount of $6,000 per month, commencing
January 31, 1997 and on the last Business Day of each month thereafter to and
including June 30, 1998, with the remainder of the accrued and unpaid interest
during the Second Interest Period being added to the principal balance of this
Note (such additional amount, together with the First Interest Period Added
Amount, the "Added Principal Amount").
1.4 Buyer shall make payments of $14,728.39 per month commencing July
31, 1998 and on the last Business Day of each month thereafter to and including
April 30, 2002, which shall be applied first to accrued and unpaid interest and
second to the unpaid principal amount of this Note.
<PAGE> 199
1.5 On the Maturity Date, Buyer shall pay the remaining principal
balance and all accrued and unpaid interest on this Note.
1.6 Interest payable hereunder shall be payable in lawful money of the
United States of America at the Payment Account. Interest shall be based on the
basis of a year of 365 or 366 days, as applicable, and the exact number of days
elapsed.
2. PURPOSE. This Note is given to evidence a portion of the Purchase Price
as defined in that certain Amended and Restated Share Purchase Agreement, dated
as of August 1, 1996 (the "Purchase Agreement"), among the Buyer, Payphones of
America, Inc., Seller and the other shareholders of the Seller.
3. VOLUNTARY PREPAYMENT. The Loan may be prepaid by the Buyer in whole or
in part, at any time and from time to time, without premium or penalty.
4. EVENT OF DEFAULT. Upon the occurrence of any of the following events
(each an "EVENT OF DEFAULT"):(i) nonpayment when due of any payment when due
hereunder and such payment shall not have been made within five (5) Business
Days when due; or (ii) the institution of any proceeding by or against the Buyer
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or the appointment of a receiver,
trustee, custodian or other similar official for the Buyer, or for any
substantial part of its property and, in the case of institution of any such
proceeding against the Buyer, either such proceeding remaining undismissed or
unstayed for a period of 120 days or any of the actions sought in the proceeding
occurring, or the Buyer taking any corporate or other authorizing action in
respect of the foregoing; or (iii) any other material breach or
misrepresentation by Buyer hereunder or under the Security Agreement referred to
in Section 7 hereof which is not cured within 30 days following written notice
thereof; THEN AND IN ANY SUCH EVENT, the Seller in its discretion may, by
written notice to the Buyer, declare the principal of and accrued interest on
the Loan to be, whereupon the same shall become, forthwith due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Buyer, PROVIDED, that upon the occurrence of
any event specified in clause (ii) such amounts shall automatically become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Buyer.
5. COSTS OF COLLECTION. In the case of any non-payment when due of any
amounts due hereunder, the Buyer shall pay all costs and expenses of every kind
for collection, including all reasonable attorneys' fees.
6. MANDATORY REPAYMENT. The Loan, together with all accrued but unpaid
interest thereon, shall be subject to mandatory prepayment upon the occurrence
of either (i) an offering of any class of capital stock of PhoneTel
Technologies, Inc. ("PhoneTel"), (ii) a debt offering of PhoneTel or (iii) any
refinancing of the indebtedness under that certain Credit Agreement, dated as of
March 15, 1996 (as amended, the "Credit Agreement"), among PhoneTel,
Internationale Nederlanden (U.S.) Capital
2
<PAGE> 200
Corporation ("ING"), the lenders party thereto (the "Lenders") and ING as agent
for the Lenders, which, in the case of the event set forth in (i) results in a
prepayment of the loans under the Credit Agreement to the Lenders in an
aggregate amount of not less than $10,000,000 and in the case of clauses (ii)
and (iii) results in a prepayment of all amounts outstanding under the Credit
Agreement; provided that the total amount of such prepayment shall be limited to
the amount of funds received by PhoneTel (A) in excess of $10,000,000, in the
case of clause (i), or (B) the amounts outstanding under the Credit Agreement,
in the case of clauses (ii) and (iii); provided further, however, that any
partial prepayment shall be applied to the amounts due hereunder in the inverse
orders of their maturities.
7. SECURITY. The obligations hereunder are to be secured by a lien and
security interest in all of the assets of the Buyer pursuant to a certain
Security Agreement by the Buyer in favor of, or for the benefit of, Seller.
8. NO SET-OFF, ETC. All payments to be made hereunder by the Buyer shall be
made without set-off or counterclaim.
No delay on the part of the Seller in exercising any of its options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof. The options, powers and rights of the Seller specified herein
are in addition to those otherwise created.
By acceptance of this Note, Seller acknowledges and agrees that this
Note is the obligation solely of the Buyer, and that no officer, director,
shareholder, direct or indirect parent company or affiliate of the Buyer will
have any liability or obligation under this Note. By acceptance of this Note,
Seller further acknowledges that the Buyer is an entity separate and distinct
from PhoneTel Technologies, Inc. and its other subsidiaries and that it is not
seeking payment or performance of this Note from PhoneTel Technologies, Inc. or
any of its subsidiaries other than Buyer.
3
<PAGE> 201
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. EACH OF THE BUYER AND, BY ITS ACCEPTANCE HEREOF, THE
SELLER HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY
MATTER ARISING HEREUNDER.
PHONETEL III, INC.
By: /s/ Peter Graf
---------------------------
Name: Peter Graf
Title: Chairman
4
<PAGE> 202
PROMISSORY NOTE
$1,729,322.67 August 1, 1996
FOR VALUE RECEIVED, the undersigned PHONETEL III, INC., an Ohio
corporation (the "Buyer") promises to pay to STANLEY ROJESKI (the "Seller") in
lawful money of the United States of America and in immediately available funds
the principal amount of ONE MILLION SEVEN HUNDRED TWENTY-NINE THOUSAND THREE
HUNDRED TWENTY TWO DOLLARS and SIXTY SEVEN CENTS ($1,729,322.67) plus the Added
Principal Amount (as defined below) (the "Loan") or, if less, the unpaid
principal amount of the Loan, at Seller's account notified in writing to Buyer
(the "Payment Account"), in installments as described in Section 1 below on the
last Business Day of each month (each, a "Payment Date") commencing July 31,
1998 (or if such day is not a Business Day, on the next succeeding Business
Day), with all outstanding amounts becoming due and payable on May 31, 2002 (the
"Maturity Date"). As used herein "Business Day" shall mean 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.
1. PAYMENTS. The Buyer also promises to pay principal and interest on the
unpaid principal amount of the Loan prior to maturity at the rates set forth
below:
1.1 Interest shall accrue on the outstanding amount of the Loan for the
period from the date hereof to and including December 31, 1996 at the rate of
10% per annum (the "First Interest Period"). Interest shall accrue on the
outstanding Loan for the period from and after January 1, 1997 to June 30, 1998
at the rate of 14% per annum (the "Second Interest Period"). Interest shall
accrue on the outstanding amount of the Loan after June 30, 1998 at the rate of
14% per annum.
1.2 Payments of accrued interest during and in respect of the First
Interest Period shall be payable in the amount of $4,581 per month, commencing
August 31, 1996 and on the last Business Day of each month thereafter to and
including December 31, 1997, with the remainder of the accrued and unpaid
interest during the First Interest Period being added to the principal balance
of this Note (such additional amount, the "First Interest Period Added Amount").
1.3 Payments of accrued interest during and in respect of the Second
Interest Period shall be payable in the amount of zero dollars and zero cents,
per month, commencing January 31, 1997 and on the last Business Day of each
month thereafter to and including June 30, 1998, with the remainder of the
accrued and unpaid interest during the Second Interest Period being added to the
principal balance of this Note (such additional amount, together with the First
Interest Period Added Amount, the "Added Principal Amount").
<PAGE> 203
1.4 Buyer shall make payments of $51,450.48 per month commencing July
31, 1998 and on the last Business Day of each month thereafter to and including
April 30, 2002, which shall be applied first to accrued and unpaid interest and
second to the unpaid principal amount of this Note.
1.5 On the Maturity Date, Buyer shall pay the remaining principal
balance and all accrued and unpaid interest on this Note.
1.6 Interest payable hereunder shall be payable in lawful money of the
United States of America at the Payment Account. Interest shall be based on the
basis of a year of 365 or 366 days, as applicable, and the exact number of days
elapsed.
2. PURPOSE. This Note is given to evidence a portion of the Purchase Price
as defined in that certain Amended and Restated Share Purchase Agreement, dated
as of August 1, 1996 (the "Purchase Agreement"), among the Buyer, Payphones of
America, Inc., Seller and the other shareholders of the Seller.
3. VOLUNTARY PREPAYMENT. The Loan may be prepaid by the Buyer in whole or
in part, at any time and from time to time, without premium or penalty.
4. EVENT OF DEFAULT. Upon the occurrence of any of the following events
(each an "EVENT OF DEFAULT"):(i) nonpayment when due of any payment when due
hereunder and such payment shall not have been made within five (5) Business
Days when due; or (ii) the institution of any proceeding by or against the Buyer
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or the appointment of a receiver,
trustee, custodian or other similar official for the Buyer, or for any
substantial part of its property and, in the case of institution of any such
proceeding against the Buyer, either such proceeding remaining undismissed or
unstayed for a period of 120 days or any of the actions sought in the proceeding
occurring, or the Buyer taking any corporate or other authorizing action in
respect of the foregoing; or (iii) any other material breach or
misrepresentation by Buyer hereunder or under the Security Agreement referred to
in Section 7 hereof which is not cured within 30 days following written notice
thereof; THEN AND IN ANY SUCH EVENT, the Seller in its discretion may, by
written notice to the Buyer, declare the principal of and accrued interest on
the Loan to be, whereupon the same shall become, forthwith due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Buyer, provided, that upon the occurrence of
any event specified in clause (ii) such amounts shall automatically become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Buyer.
5. COSTS OF COLLECTION. In the case of any non-payment when due of any amounts
due hereunder, the Buyer shall pay all costs and expenses of every kind for
collection, including all reasonable attorneys' fees.
2
<PAGE> 204
6. MANDATORY REPAYMENT: The Loan, together with all accrued but unpaid
interest thereon, shall be subject to mandatory prepayment upon the occurrence
of either (i) an offering of any class of capital stock of PhoneTel
Technologies, Inc. ("PhoneTel"), (ii) a debt offering of PhoneTel or (iii) any
refinancing of the indebtedness under that certain Credit Agreement, dated as of
March 15, 1996 (as amended, the "Credit Agreement"), among PhoneTel,
Interriationale Nederlanden (U.S.) Capital Corporation ("ING"), the lenders
party thereto (the "Lenders ") and ING as agent for the Lenders, which, in the
case of the event set forth in (i) results in a prepayment of the loans under
the Credit Agreement to the Lenders in an aggregate amount of not less than
$10,000,000 and in the case of clauses (ii) and (iii) results in a prepayment of
all amounts outstanding under the Credit Agreement; provided that the total
amount of such prepayment shall be limited to the amount of funds received by
PhoneTel (A) in excess of $10,000,000, in the case of clause (i), or (B) the
amounts outstanding under the Credit Agreement, in the case of clauses (ii) and
(iii); provided further, however, that any partial prepayment shall be applied
to the amounts due hereunder in the inverse orders of their maturities.
7. SECURITY. The obligations hereunder are to be secured by a lien and
security interest in all of the assets of the Buyer pursuant to a certain
Security Agreement by the Buyer in favor of, or for the benefit of, Seller.
8. NO SET-OFF, ETC. All payments to be made hereunder by the Buyer shall be
made without set-off or counterclaim.
No delay on the part of the Seller in exercising any of its options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof. The options, powers and rights of the Seller specified herein
are in addition to those otherwise created.
By acceptance of this Note, Seller acknowledges and agrees that this
Note is the obligation solely of the Buyer, and that no officer, director,
shareholder, direct or indirect parent company or affiliate of the Buyer will
have any liability or obligation under this Note. By acceptance of this Note,
Seller further acknowledges that the Buyer is an entity separate and distinct
from PhoneTel Technologies, Inc. and its other subsidiaries and that it is not
seeking payment or performance of this Note from PhoneTel Technologies, Inc. or
any of its subsidiaries other than Buyer.
3
<PAGE> 205
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK: EACH OF THE BUYER AND, BY ITS ACCEPTANCE HEREOF, THE SELLER
HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY MATTER
ARISING HEREUNDER.
PHONETEL III, INC:
By: /s/ Peter Graf
----------------------------
Name: Peter Graf
Title: Chairman
4
<PAGE> 206
SCHEDULE 2.3
VIOLATIONS
----------
POA and BUYER must file a joint application with the Minnesota PUC and
PSC seeking approval for the change of control of POA.
<PAGE> 207
SCHEDULE 3.1
SUBSIDIARIES
------------
W.J.B. & Associates, Inc., a Tennessee corporation
KNS Enterprises, Inc., a Missouri corporation
<PAGE> 208
SCHEDULE 3.5(b)
CONSENTS, WAIVERS OR APPROVALS
------------------------------
See Schedule 2.3.
<PAGE> 209
SCHEDULE 3.6(a)
EXCEPTIONS/SUPPLEMENTS TO FINANCIAL STATEMENTS
----------------------------------------------
NONE
<PAGE> 210
SCHEDULE 3.6(b)
EXTRAORDINARY ITEMS
-------------------
None other than as disclosed in the Financial Statements and POA's 1993, 1994
and 1995 Federal Corporate Income Tax Returns.
<PAGE> 211
SCHEDULE 3.7
UNDISCLOSED LIABILITIES
-----------------------
NONE
<PAGE> 212
SCHEDULE 3.8
Payphones of America, Inc Outstanding A/R as of 06/30/96
<TABLE>
<CAPTION>
Account Amount
------- ------
<S> <C>
A/R General 3,082.50
LP1 (1,706.29)
C/O Payphones 3,760.64
Intellicall 174,698.63
Teletrust 27,090.45
BF Mgmnt Fees 21,235.95
BF Teltrust 738.38
QCC 12,457.67
BF 11,386.63
---------
252,744.56
==========
</TABLE>
Page 1
<PAGE> 213
SCHEDULE 3.8
ACCOUNTS RECEIVABLE AGING-3/3 1/96
----------------------------------
ATTACHED
<PAGE> 214
SCHEDULE 3.12
MATERIAL CONTRACTS
------------------
1. All Payphone Location Contracts, all of which have been made
available for review by POA to Buyer as an integral part of the Buyer's due
diligence process.
2. Long Distance Services Agreement, dated May 23, 1995, between
POA and MCI.
3. Oral Agreement, between Teltrust, Inc. and PQA with respect to
the provision of live operator services by Teltrust, Inc. to POA.
4.. Asset Purchase Agreement, dated September 23, 1994, between POA
and Eastern Telecom Corporation, and all documents and agreements executed in
connection therewith.
5. Stock Purchase Agreement, dated April 28, among KNS Enterprises,
Inc., the shareholders of KNS Enterprises, Inc. and POA, and all documents and
agreements executed in connection therewith.
6. Asset Purchase Agreement, dated December 2, 1992, between
Ameritel and POA with closings on January 29, 1993 and March 31, 1993, and all
documents and agreements executed in connection therewith.
7. Asset Purchase Agreement, dated March 31, 1993, between Pay
TeleCommunications, Inc. and POA, and all documents and agreements executed in
connection therewith.
8. Intellicall License Agreement, dated March 29, 1994, between POA
and Intellicall, Inc.
9. Vehicle Financing Agreements between POA and Ford Motor Credit
(list attached).
10. Equipment Lease Agreements between Berthel Fisher & Company
Leasing, Inc. and POA.
11. Asset Purchase Agreement between POA and LP1 to be entered
into prior to closing and the consideration for which shall be paid at the
Closing.
12. Equipment Lease Agreements, dated September 24, 1993 and March
29, 1993, POA and Intellicall, Inc.
<PAGE> 215
SCHEDULE 3.14
LITIGATION
----------
1. Julie Bitzer v. Pay Phone of America, Inc., Case No. 95C3783,
District Court of Wyandotte County, Kansas (dismissed by judge without prejudice
with option of plaintiff to refile).
2. Suit to be filed by POA against Eastern and John Crawford,
individually with respect to the Asset Purchase Agreement, dated September 23,
1994, between POA and Eastern and the Consulting Agreement, dated September 16,
1994 between POA and John Crawford.
3. Commonwealth of Virginia, ex rel. State Corporation Commission
v. Payphones of America, Inc. d/b/a Eastern Telecom Pay Telephone Co. Case No.
PUC940049 (SETTLED AND ORDER OF DISMISSAL ENTERED).
4. Potential Arbitration Proceeding between St. Charles Riverfront
Station, Inc. and POA regarding whether the contract expires 12/1/95 or 12/1/96
(SETTLED).
5. Petition of Payphones of America, Inc. for the Approval of the
Acquisition of certain Assets of Continental Payphone Services, Inc., Docket No.
P5071,5219/PA-95-879 (APPROVED).
6. Advance Pay Systems, Inc. V. Pay Phone Company of America T/A
Eastern Telecom Pay Telephone Company, Circuit Court of Portsmouth VA Case No.
CH96000456-00 (dispute over Family Market phone location--2 phones).
7. LDDS/WORLDCOM v. Payphones of America, Inc. POA has received
correspondence from LDDS' counsel in Kansas City alleging that POA owes
LDDS/WorldCom @$81,000. POA has responded in writing that it does not owe LDDS
any money and that it has paid LDDS in accordance with the agreement (NOTE: LDDS
has already sued PhoneTel over this same issue). All documentation evidencing
payment and account reconcilations have been provided to LDDS' counsel, but he
chooses to ignore it (he's just a collection attorney trying to collect a
contingent fee). No suit has been filed at this time. The Sellers intend to
vigorously defend this action if it is filed.
<PAGE> 216
SCHEDULE 3.17(f)
TAX AUDITS AND INQUIRIES
------------------------
NONE
<PAGE> 217
SCHEDULE 3.18(a)
ROYALTIES/LICENSE FEES
----------------------
License Fees due to Intellicall, Inc. for use of Intelli*Star call processing
boards in Intellicall pay telephones.
<PAGE> 218
SCHEDULE 3.18(b)
RESTRICTIONS ON USE OF NAME POA
-------------------------------
In the jurisdictions in which POA has attempted to obtain qualification to do
business as a foreign corporation, only the District of Columbia has refused to
allow POA to conduct its business under the name "Payphones of America" or
"Payphones of America, Inc."
<PAGE> 219
SCHEDULE 3.20(a)
INSURANCE
---------
Copies of all of PQA's insurance policies have been provided by POA to Buyers.
For convenience, the policies are summarized below. All such policies have been
issued by American States.
1. Policy No. 01CE059478, General Commercial Liability Policy, $1
Million Aggregate Limit, Other Limitations and Deductibles as set forth in the
Policy.
2. Policy No. 01CE059478, Business Auto Coverage for Form
Declarations, $500,000 Aggregate Liability Coverage (Missouri Vehicles), Other
Limitations and Deductibles as set forth in the Policy.
3. Policy No. 02BA390540, Common Policy Declarations (Auto
Virginia), $500,000 Aggregate Liability Coverage, Other Limitations and
Deductibles as set forth in the Policy.
4. Policy No. 01CE059478, Common Policy Declarations (Auto
Virginia), $500,000 Aggregate Liability Coverage, Other Limitations and
Deductibles as set forth in the Policy.
5. Policy No. 01CE059478, Commercial Policy Declaration, $1 Million
Aggregate Limit, Other Limitations and Deductibles as set forth in the Policy.
6. Policy No. 01WC781236-10, Workers' Compensation and Employer
Liability Policy, Limits and Deductibles as set forth in the Policy.
<PAGE> 220
SCHEDULE 3.20(b)
CLAIMS AGAINST INSURANCE POLICIES
---------------------------------
Claim against General Liability Policy in Julie Bitzer v. Pay Phone of America,
Inc., Case No. 95C3783, District Court of Wyandotte County, Kansas.
<PAGE> 221
SCHEDULE 3.21(a)
LARGE SUPPLIERS
---------------
ATTACHED
<PAGE> 222
SCHEDULE 3.21(b)
ADVERSE CHANGES IN CUSTOMER RELATIONSHIPS
-----------------------------------------
SEE SCHEDULE 3.14
<PAGE> 223
SCHEDULE 3.22(a)
EXPRESS WARRANTIES
------------------
NONE
<PAGE> 224
SCHEDULE 3.22(b)
WARRANTIES OBLIGATIONS
----------------------
NONE
<PAGE> 225
SCHEDULE 3.23
AFFILIATE TRANSACTIONS
----------------------
1. From time to time Mr. Rojeski and Mr. Brinkmeier have made short term
loans to POA.
2. Mr. Rojeski and Mr. Brinkmeier own 50% of LP1. Certain accounting and
administrative functions have been handled in the past by POA for LP1 at no
charge
3. LP2 was previously owned by Mr. Rojeski and Mr. Brinkmeier and was sold
to POA in 1995.
4. POA has performed and will continue to perform certain accounting and
administrative services for VisionComm, Inc. and pay certain operating expenses
on behalf of VisionComm, Inc. In addition, POA provides and will continue to
provide until the Closing installation and service of payphones installed
pursuant to the Columbia/HCA contract at no cost to VisionComm. Inc.
<PAGE> 226
SCHEDULE 3.28
CONSENTS TO DEBT ASSUMPTIONS
----------------------------
Equipment Leases between POA and Berthel Fisher & Company Leasing, Inc. which
shall be provided at Closing.
All obligations set forth on EXHIBIT I must be paid at closing unless otherwise
indicated thereon. Certain on these obligations have automatic acceleration
provisions as a result of a change in control of POA.
<PAGE> 1
EXHIBIT (c) 3.
<PAGE> 2
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "AMENDMENT"), dated as
of June ___, 1996, among PHONETEL TECHNOLOGIES, INC., an Ohio corporation (the
"BORROWER"), INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation ("ING") and CERBERUS PARTNERS, L.P., a Delaware limited partnership
("CERBERUS"), constituting all of the Lenders under the Credit Agreement
referenced below, and ING in its capacity as Agent for the Lenders.
W I T N E S S E T H:
--------------------
RECITALS:
A. The Borrower, the Lenders and the Agent have entered into a certain
Credit Agreement, dated as of March 15, 1996, as amended by that certain First
Amendment to Credit Agreement entered into among Borrower, the Lenders and the
Agent, dated as of April 11, 1996, as amended to the date hereof (the "CREDIT
AGREEMENT"). Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Credit Agreement.
B. The Borrower has requested an amendment to the Credit Agreement to
authorize and finance the purchase of substantially all of the assets of ACI-HDT
Supply Company, Amtel Communications Services, Inc., Amtel Communications
Correctional Facilities, Inc., Amtel Communications, Inc. and Amtel
Communications Payphones, Inc.
C. The Lenders are agreeable to amending the Credit Agreement on the
terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby amended by inserting the following definitions in the
appropriate alphabetical order:
<PAGE> 3
"AMTEL" means, collectively, all of the following: ACI-HDT
Supply Company, a California corporation, Amtel Communication Services,
Inc., a California corporation, Amtel Communications Correctional
Facilities, Inc., a California corporation, Amtel Communications, Inc.,
a California corporation, and Amtel Communications Payphones, Inc., a
California corporation.
"AMTEL CLOSING DATE" means the earlier of (x) the consummation
of the Amtel Purchase or (y) the termination of the Amtel Purchase
Agreement or (z) December 31, 1996.
"AMTEL PURCHASE" means the purchase by Borrower of the
"Payphone Operating Assets" (as such term is defined in the Amtel
Purchase Agreement) of Amtel for the "Consideration" (as such term is
defined in the Amtel Purchase Agreement) pursuant to the terms and
conditions of the Amtel Purchase Agreement, the form of which is
attached as Exhibit A to the Second Amendment.
"AMTEL PURCHASE AGREEMENT" means that certain Asset Purchase
Agreement, dated June ___, 1996, among the Borrower and Amtel.
"SECOND AMENDMENT" means the Second Amendment to Credit
Agreement dated as of June __, 1996, among the Borrower, ING, Cerberus
and ING in its capacity as Agent.
SECTION 2. AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby further amended by deleting the existing definition of
"REVOLVING A LOAN AVAILABILITY" and substituting in lieu thereof the following:
"REVOLVING A LOAN AVAILABILITY" means, (a) at all times prior to
the Amtel Closing Date, the excess of (i) the lesser of (A) the
Revolving A Loan Commitment Amount or (B) the Borrowing Base for
Revolving A Loans MINUS (ii) the then aggregate principal amount of all
outstanding Revolving A Loans less $1,352,500 and (b) at all times on or
after the Amtel Closing Date, the excess of (i) the lesser of (A) the
Revolving A Loan Commitment Amount or (B) the Borrowing Base for
Revolving A Loans MINUS (ii) the then aggregate principal amount of all
outstanding Revolving A Loans.
- 2 -
<PAGE> 4
SECTION 3. AMENDMENT TO SECTION 2.1.4.(a). Section 2.1.4.(a) of the
Credit Agreement is hereby amended by deleting said section in its entirety and
substituting in lieu thereof the following:
"SECTION 2.1.4. AGENT AND LENDERS NOT REQUIRED TO EXTEND CREDIT
UNDER REVOLVING LOAN COMMITMENT.
(a) At all times prior to the Amtel Closing Date, no Lender
shall be required to make any Revolving Loan, if after giving effect to
thereto:
(1) the then aggregate outstanding principal amount of
all Revolving A Loans, PLUS the then aggregate outstanding
principal amount of the Term Loan, MINUS $1,352,500, would
exceed the Borrowing Base for Revolving A Loans and the Term
Loan; or
(2) the then aggregate outstanding principal amount of
all Revolving B Loans would exceed the Borrowing Base for
Revolving B Loans; or
(3) 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
(4) the then aggregate outstanding principal amount of
such Lender's Revolving Loans would exceed its Revolving
Percentage of the Revolving Loan Commitment Amount; or
(5) 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.
(b) At all times on or after the Amtel Closing Date, no Lender
shall be required to make any Revolving Loan, if after giving effect
thereto:
(1) the then aggregate outstanding principal amount of
all Revolving A Loans PLUS the then aggregate outstanding
principal amount of the Term Loan would exceed the Borrowing
Base for Revolving A Loans and the Term Loan; or
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<PAGE> 5
(2) the then aggregate outstanding principal amount of
all Revolving B Loans would exceed the Borrowing Base for
Revolving B Loans; or
(3) 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
(4) the then aggregate outstanding principal amount of
such Lender's Revolving Loans would exceed its Revolving
Percentage of the Revolving Loan Commitment Amount; or
(5) 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 4. AMENDMENT TO SECTION 3.3.1(b)(i). Section 3.3.1(b)(i) of
the Credit Agreement is hereby amended by deleting said section in its entirety
and substituting in lieu thereof the following:
"(b) (i) shall, (A) on any Business Day prior to the Amtel
Closing Date on which the aggregate outstanding principal amount of all
Revolving A Loans PLUS the aggregate outstanding principal amount of
the Term Loan MINUS $1,352,500 exceeds the Borrowing Base for Revolving
A Loans and the 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), and (B) on any Business Day on or after the Amtel
Closing Date on which the aggregate outstanding principal amount of all
Revolving A Loans PLUS the aggregate outstanding principal amount of
the Term Loan exceeds the Borrowing Base for Revolving A Loans and Term
Loan, the Borrower shall make a mandatory prepayment of the outstanding
principal amount of Revolving A Loans and the Term Loan in an amount
equal to such excess
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<PAGE> 6
amount (such prepayment to be applied first to all of the Revolving A
Loans until paid in full and then to the Term Loan);"
SECTION 5. AMENDMENT TO SECTION 3.9(b). Section 3.9(b) of the Credit
Agreement is hereby amended by deleting said section in its entirety and
substituting in lieu thereof the following:
"(b) Borrower shall use the proceeds of (i) Revolving A Loans
made after the Closing Date and prior to or on the Amtel Closing Date
only for the purpose of paying the consideration required under the
Amtel Purchase Agreement and for the payment of the Amendment Fee
payable pursuant to the Second Amendment, (ii) Revolving A Loans made
after the Amtel Closing Date to finance other acquisitions (PROVIDED,
HOWEVER, that this clause (ii) shall not be construed to permit any
acquisitions which are otherwise prohibited by the terms of this
Agreement or the other Loan Documents), and (iii) 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."
SECTION 6. AMENDMENT TO ARTICLE 5. Article 5 of the Credit Agreement is
hereby amended by inserting the following Section 5.33 at the end of such
article:
"SECTION 5.33. AMTEL PURCHASE AGREEMENT. Borrower shall not
execute and deliver any agreement relating to the purchase of assets of
Amtel except in the form attached as Exhibit A to the Second Amendment.
A true and complete copy of the Amtel Purchase Agreement (including all
exhibits, schedules and amendments thereto) has been delivered to the
Agent. Borrower shall not amend, modify or supplement any term or
provision of the Amtel Purchase Agreement and shall not waive any
condition set forth therein, without prior written consent of the
Required Lenders."
SECTION 7. AMENDMENT TO SECTION 6.2.7. Section 6.2.7 of the Credit
Agreement is hereby amended by deleting the "and" immediately following clause
(f) thereof, deleting the period immediately following clause (g) thereof and
inserting in lieu thereof "; and" and by inserting the following clause at the
end of such section:
"(h) the Non-Refundable Deposit (as such term is defined in
the Amtel Purchase Agreement)."
- 5 -
<PAGE> 7
SECTION 8. AMENDMENT TO SECTION 6.2.10. Section 6.2.10(a) of the Credit
Agreement is hereby amended by inserting the following proviso immediately prior
to the semicolon appearing at the end of such section:
", PROVIDED FURTHER HOWEVER, that the Borrower may purchase or
otherwise acquire substantially all of the assets of Amtel pursuant to
and on the terms and conditions set forth in the Amtel Purchase
Agreement;"
SECTION 9. CONTINUING EFFECTIVENESS OF CREDIT AGREEMENT. The Credit
Agreement and each of the other Loan Documents shall remain in full force and
effect in accordance with their respective terms, except as expressly amended or
modified by this Amendment.
SECTION 10. AMENDMENT FEE. The Borrower agrees to pay to the Agent for
the ratable account of each Lender, an amendment fee in an amount equal to
$52,500 (the "Amendment Fee"). The Amendment Fee shall be payable by the
Borrower upon the execution of this Amendment, and the Borrower hereby
irrevocably authorizes the Agent to deduct from the proceeds of a Borrowing of
Revolving A Loans to be made on the date of this Agreement in the amount of
$1,352,500, the sum of $52,500 for the ratable account of each Lender as payment
in full of the Amendment Fee.
SECTION 11. COST AND EXPENSES. The Borrower agrees to pay all
reasonable out-of-pocket expenses of the Agent and each of the Lenders party to
this Amendment for the negotiation, preparation, execution and delivery of this
Amendment (including reasonable fees and expenses of counsel to the Agent and
such Lenders).
SECTION 12. EFFECTIVENESS. This Amendment shall become effective upon
receipt by the Agent of a copy of this Amendment, duly executed by each of the
Borrower, the Lenders and the Agent, and duly acknowledged and consented to by
the Subsidiaries of the Borrower in the form attached to this Amendment.
- 6 -
<PAGE> 8
SECTION 13. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provision hereof.
SECTION 15. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be executed by the Borrower,
the Lenders and the Agent and shall be deemed to be an original and all of which
shall constitute together but one and the same agreement.
SECTION 16. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 17. SUCCESSORS AND ASSIGNS. This Amendment 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 or under the Credit Agreement
except in accordance with the terms of the Credit Agreement.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, in its
capacity as Agent and Lender
By:_______________________________
Steve G. Fleenor
Vice President
CERBERUS PARTNERS, L.P.
By: ___________________________
Seth P. Plattus
Managing Director
- 8 -
<PAGE> 10
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledge receipt of a copy of the foregoing
amendment, consent to the terms and provisions set forth therein, and agree that
the Subsidiary Guaranty dated as of March 15, 1996 (the "SUBSIDIARY GUARANTY")
made by each of the undersigned, jointly and severally, in favor of
Internationale Nederlanden (U.S.) Capital Corporation ("ING") and such other
Lenders as are, or may from time to time become, parties to the Credit
Agreement, and ING as Agent for such Lenders, will continue in full force and
effect without diminution or impairment notwithstanding the execution and
delivery of the amendment. The undersigned further acknowledge and agree that,
upon effectiveness of the amendment and from and after the date thereof, each
reference to the Credit Agreement in the Subsidiary Guaranty and each other Loan
Document (as such term is defined in the Credit Agreement) to which any of the
undersigned is a party shall mean and be a reference to the Credit Agreement as
amended by the foregoing amendment.
PUBLIC TELEPHONE CORPORATION
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
WORLD COMMUNICATIONS, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
- 9 -
<PAGE> 11
NORTH FLORIDA TELEPHONE CORPORATION
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
PARAMOUNT COMMUNICATIONS SYSTEMS, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
- 10 -
<PAGE> 12
EXHIBIT A
[Form of Amtel Purchase Agreement]
<PAGE> 1
EXHIBIT (c) 4.
<PAGE> 2
EXECUTION COPY
THIRD AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "AMENDMENT"), dated as of
August 1, 1996, among PHONETEL TECHNOLOGIES, INC., an Ohio corporation (the
"BORROWER"), INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation ("ING") and CERBERUS PARTNERS, L.P., a Delaware limited partnership
("CERBERUS"), constituting all of the Lenders under the Credit Agreement
referenced below, and ING in its capacity as Agent for the Lenders.
W I T N E S S E T H:
--------------------
RECITALS:
A. The Borrower, the Lenders and the Agent have entered into a certain
Credit Agreement, dated as of March 15, 1996, as amended to the date hereof (the
"CREDIT AGREEMENT"). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Credit Agreement.
B. The Borrower has requested an amendment to the Credit Agreement to
permit the creation of PhoneTel III, Inc., an Ohio corporation ("PHONETEL III")
and a wholly-owned subsidiary of the Borrower, which will purchase all of the
capital stock of Payphones of America, Inc., a Tennessee corporation ("POA"),
pursuant to an Amended and Restated Share Purchase Agreement dated as of August
1, 1996, among PhoneTel III, POA and all of the shareholders of POA (the "POA
PURCHASE AGREEMENT"), and to permit such purchase by PhoneTel III.
C. The Lenders are agreeable to amending the Credit Agreement on the
terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby amended by inserting the following definitions in the
appropriate alphabetical order:
"PHONETEL III" means PhoneTel III, Inc., an Ohio corporation and
a wholly-owned subsidiary of Borrower."
<PAGE> 3
"PHONETEL III NOTE" means the promissory note dated as of
August 1, 1996 in a principal amount of $250,000 payable by PhoneTel
III to the order of the Borrower, which note matures on August 31,
2001, accrues interest on the unpaid principal balance at a per annum
rate of interest of 12%, provides for payments of interest only through
December 31, 1997, thereafter provides for equal monthly installments
of principal and interest in the amount of $4,449, and is pledged to
the Agent for the benefit of the Lenders pursuant to the Borrower
Pledge Agreement.
"POA" means Payphones of America, Inc., a Tennessee
corporation.
"POA ACQUISITION" means the purchase by PhoneTel III of all of
the capital stock of POA pursuant to the terms and conditions of the
POA Purchase Agreement.
"POA DOCUMENTS" means, collectively, the POA Purchase
Agreement, the POA Lease, the POA Management Agreement, any other
agreement or instrument evidencing or governing any POA Indebtedness,
and any other instrument or agreement executed by the Borrower or any
of its Subsidiaries in connection with the POA transaction.
"POA GROUP" means, collectively, PhoneTel III and its
Subsidiaries.
"POA INDEBTEDNESS" means, collectively, (i) Indebtedness of
POA owing to Berthel Fisher Company Leasing, Inc. under the POA Lease
in an aggregate principal amount not to exceed $7,750,000, (ii)
Indebtedness in an outstanding principal amount not to exceed $195,636
evidenced by a note payable by POA to the order of Pay-Tele
Communications, Inc., d/b/a Midwest Telecom, (iii) Indebtedness of
PhoneTel III in the aggregate principal amount of $3,634,113.28,
evidenced by one or more Promissory Notes in the form of Exhibit L to
the POA Purchase Agreement, and (iv) the PhoneTel III Note, PROVIDED,
in the case of Indebtedness described in clauses (i) and (iii), that
the obligee with respect to such Indebtedness has expressly waived
recourse to the Borrower and its Subsidiaries (other than the POA
Group) in respect of such Indebtedness in form and substance
satisfactory to the Lenders.
"POA LEASE" means, collectively, (a) the Amended and Restated
Lease Agreement (Lease # 076-17370-015), effective September 13, 1996
between Berthel Fisher & Company Leasing, Inc., agent for
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<PAGE> 4
Telecommunications Income Fund X, L.P., and POA, in the form attached
as Exhibit B-1 to the Third Amendment, (b) the Amended and Restated
Lease Agreement (Lease # 074-17370-016), effective September 13, 1996
between Berthel Fisher & Company Leasing, Inc., agent for
Telecommunications Income Fund IX, L.P., and POA, in the form attached
as Exhibit B-2 to the Third Amendment, and (c) the Amended and Restated
Lease Agreement (Lease # 063-17370-017), effective September 13, 1996
between Berthel Fisher & Company Leasing, Inc. and POA, in the form
attached as Exhibit B-3 to the Third Amendment.
"POA MANAGEMENT AGREEMENT" means the Management Agreement
dated as of August 1, 1996 between the Borrower and POA, in the form of
Exhibit C to the Third Amendment.
"POA PURCHASE AGREEMENT" means that certain Amended and
Restated Share Purchase Agreement, dated as of August 1, 1996, among
the Borrower, PhoneTel III and the holders of all of the capital stock
of POA, the form of which is attached as Exhibit A to the Third
Amendment.
"REVOLVING B OVERADVANCE AMOUNT" means an amount equal to
$50,000, provided that from and after the earlier of January 1, 1997 or
the Amtel Closing Date, such amount shall be reduced to zero.
"THIRD AMENDMENT" means the Third Amendment to Credit
Agreement dated as of August 1, 1996, among the Borrower, ING, Cerberus
and ING in its capacity as Agent.
SECTION 2. AMENDMENT TO CERTAIN TERMS IN SECTION 1.1. Whenever any
reference is made to "the Borrower and its Subsidiaries" or "the Borrower and
any of its Subsidiaries," as the case may be, in the definitions of Cash Flow,
Current Ratio, EBITDA, Eligible Telephones, Excess Cash Flow, Fixed Charges,
Interest Expense, Maximum Overhead Expense, Net Income, Tangible Net Worth, OSP
Agreement, and Telephone Placement Agreement, and wherever such reference is
made in Schedule 3 to the Credit Agreement, such reference shall not include the
POA Group or any of its Subsidiaries.
SECTION 3. AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby further amended by deleting the existing definition of
"Revolving B Loan Availability" and substituting in lieu thereof the following:
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<PAGE> 5
"'REVOLVING B LOAN AVAILABILITY' means, on any date,
an amount equal to the excess of (a) the lesser of (i) the
Revolving B Loan Commitment Amount or (ii) the Borrowing Base
for Revolving B Loans over (b) the then aggregate principal
amount of all outstanding Revolving B Loans less the Revolving
B Overadvance Amount on such date."
SECTION 4. AMENDMENT TO SECTION 2.1.4(a). Section 2.1.4(a) of the
Credit Agreement is hereby amended by deleting clause (2) thereof in its
entirety and substituting in lieu thereof the following:
"(2) the then aggregate outstanding
principal amount of all Revolving B Loans, MINUS the
Revolving B Overadvance Amount, would exceed the
Borrowing Base for Revolving B Loans; or".
SECTION 5. AMENDMENT TO SECTION 2.1.4(b). Section 2.1.4(b) of the
Credit Agreement is hereby amended by deleting clause (2) thereof in its
entirety and substituting in lieu thereof the following:
"(2) the then aggregate outstanding
principal amount of all Revolving B Loans, MINUS the
Revolving B Overadvance Amount, would exceed the
Borrowing Base for Revolving B Loans; or".
SECTION 6. AMENDMENT TO SECTION 3.9(b). Section 3.9(b) of the Credit
Agreement is hereby amended by deleting clause (iii) thereof in its entirety and
substituting in lieu thereof:
"(iii) the Revolving B Loans made after the Closing Date to finance the
funding of a $250,000 loan to be made by the Borrower to PhoneTel III
to be evidenced by the PhoneTel III Note and to finance its continuing
working capital needs, provided, however, that the Revolving B Loans
shall not be used to repay any other outstanding Loan."
SECTION 7. AMENDMENT TO SECTION 5.21. Section 5.21 of the Credit
Agreement is hereby amended by deleting the first sentence thereof in its
entirety and substituting the following in lieu thereof:
- 4 -
<PAGE> 6
"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 as of the
Closing Date."
SECTION 8. AMENDMENT TO ARTICLE 5. Article 5 of the Credit Agreement is
hereby amended by inserting the following Section 5.34 at the end of such
article:
"SECTION 5.34. POA DOCUMENTS. A true and complete copy
of the POA Purchase Agreement, the POA Lease and each other POA
Document (in each case including all exhibits, schedules and
amendments thereto) have been delivered to the Agent."
SECTION 9. AMENDMENT TO SECTION 6.1.1. Clauses (a) and (b) of Section
6.1.1 of the Credit Agreement are hereby amended by deleting said clauses in
their entirety and inserting in lieu thereof the following:
"(a) (i) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a consolidated
balance sheet, a consolidating balance sheet, and a consolidated
balance sheet for the Borrower and its Subsidiaries other than the POA
Group 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 Loan Document, except such miscalculation or
default, if any, as may be disclosed in such statement; and
- 5 -
<PAGE> 7
(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) a consolidated balance sheet, a consolidating
balance sheet, and a consolidated balance sheet for the Borrower
and its Subsidiaries other than the POA Group 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
SECTION 10. AMENDMENT TO SECTION 6.1.5. Section 6.1.5 of the Credit
Agreement is hereby amended by adding thereto at the end of said section the
following sentence:
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<PAGE> 8
"Notwithstanding the foregoing, policies of casualty or liability
insurance owned and maintained by the POA Group shall not be required
to show or name the Agent or any Lender as loss payee or additional
insured."
SECTION 11. AMENDMENT TO SECTION 6.1. Section 6.1 of the Credit
Agreement is hereby amended by adding thereto a new Section 6.1.18 as follows:
"SECTION 6.1.18. CERTAIN PROVISIONS REGARDING THE POA
GROUP. The Borrower shall cause the POA Group to:
(a) maintain separate books, financial records and
accounts, including, without limitation, checking and other bank
accounts separate and apart from the books, financial records
and accounts of the Borrower and its other Subsidiaries;
(b) maintain its books, financial records and accounts
in a manner so that it will not be difficult or costly to
segregate, ascertain or otherwise identify the assets and
liabilities of the POA Group;
(c) not commingle any of its assets, funds, liabilities
or business functions with the assets, funds, liabilities or
business functions of the Borrower and its other Subsidiaries,
except that the POA Group may have its Telephones managed (but
may not have its assets, funds, or liabilities commingled)
pursuant to and in accordance with the POA Management Agreement;
(d) observe all corporate procedures and formalities of
POA, including, without limitation, the holding of periodic and
special meetings of its shareholders and board of directors, the
recordation and maintenance of minutes of such meetings, and the
recordation and maintenance of resolutions adopted at such
meetings;
(e) have at least one of director of PhoneTel III and of
POA that is not and will not be a director, officer, employee or
holder of one percent (1%) or more of the common stock of the
Borrower or any of its other Subsidiaries;
(f) pay its liabilities and losses from its own separate
assets;
- 7 -
<PAGE> 9
(g) transact all business with third parties in the name
of the POA Group as entities separate and distinct from the
Borrower and its other Subsidiaries;
(h) maintain its principal place of business and chief
executive office separate and apart from the principal place of
business and chief executive office of the Borrower and its
other Subsidiaries;
(i) cause all representatives, employees and agents of
the POA Group, when acting as such, to hold themselves out to
third parties as being representatives, employees or agents, as
the case may be, of the POA Group and not of the Borrower and
its other Subsidiaries;
(j) utilize business cards, letterhead, purchase orders,
invoices, telephone numbers and listings and the like, solely in
the name of the POA Group or the relevant entity within such POA
Group and not in the name of Borrower or any of its other
Subsidiaries;
(k) to the extent that the Borrower or any of its
Subsidiaries (other than the POA Group) share the same officers
or other employees, the salaries of and expenses related to such
officers and other employees will be reasonably allocated among
the Borrower and its Subsidiaries (other than the POA Group) on
the one hand, and the POA Group, on the other hand in a manner
that is reasonable, not arbitrary, and will result in each
bearing its fair share of the salary and benefit costs
associated with all such common and shared officers or other
employees;
(l) not enter into any consulting agreement or
management agreement other than the POA Management Agreement and
not compensate any Affiliate of the POA Group other than
pursuant to the terms of the POA Management Agreement;
(m) to the extent that the Borrower and its Subsidiaries
(other than the POA Group), on the one hand, and the POA Group,
on the other hand, jointly contract to do business with vendors
or service providers or share overhead expenses, the cost and
expenses
- 8 -
<PAGE> 10
incurred in so doing shall be reasonably allocated among them,
shall not be arbitrary and the result in each bearing its fair
share of all such costs and expenses; and
(n) to pay and bear its own cost of preparation of its
own financial statements regardless of whether such statements
(whether audited or unaudited) are prepared internally or by a
certified public accounting firm that prepares financial
statements for the Borrower and its other Subsidiaries.
The Borrower shall cause its consolidated financial statements to
contain a narrative description of the separate assets, liabilities,
business functions, operations and existence of the POA Group to insure
that such separate assets, liabilities, business functions, operations
and existence are readily distinguishable by any person or entity
receiving or relying upon a copy of such consolidated financial
statements. Promptly upon consummation of the POA Acquisition, the
Borrower shall cause PhoneTel III to change its name such that the name
of PhoneTel III shall no longer include the word "PhoneTel"."
SECTION 12. AMENDMENT TO SECTION 6.2.2. Section 6.2.2 of the Credit
Agreement is hereby amended by deleting the "and" immediately following clause
(i) thereof, by deleting subsection (j) thereof in its entirety and by inserting
the following clauses (j) and (k) at the end of such section:
"(i) the POA Indebtedness;
(j) extensions, refinancings, replacements and renewals of any
of the foregoing items described in clauses (a) through (i) 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, payment or repayment terms or events of default upon the
Borrower or its Subsidiaries, as the case may be; and
(k) other Indebtedness not otherwise covered by clauses (a)
through (j) above not to exceed $100,000 in aggregate amount outstanding
during the term of this Agreement."
SECTION 13. AMENDMENT TO SECTION 6.2.3. Section 6.2.3 of the Credit
Agreement is hereby amended by deleting the "and" immediately following clauses
(k)
- 9 -
<PAGE> 11
thereof, by deleting clause (l) thereof in its entirety, and by adding the
following clauses (l) and (m) at the end of such section:
"(l) Liens on assets of POA securing Indebtedness described in
clauses (i), (ii) and (iii) of the definition of POA Indebtedness; and
(m) extensions, renewals or replacements of any Lien referred to
in paragraphs (a) through (l) 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 14. AMENDMENT TO SECTION 6.2.5. Section 6.2.5 of the Credit
Agreement is hereby amended by deleting said section in its entirety and
substituting the following in lieu thereof:
"SECTION 6.2.5. CAPITAL EXPENDITURES. The Borrower will not,
and will not permit any Subsidiary to, make or commit to make any
Consolidated Capital Expenditures, except that the Borrower and its
Subsidiaries (other than the POA Group) 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, without giving effect to the Amtel
Purchase):
<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
POA may incur Capitalized Lease Liabilities pursuant to the POA Lease,
and POA may make and incur capital expenditures but only to the extent
necessary to maintain or replace Telephones and related equipment in
operation as of
- 10 -
<PAGE> 12
September 13, 1996; PROVIDED, FURTHER, HOWEVER, that the Borrower and
its Subsidiaries (other than the POA Group) may not make or incur
Consolidated Capital Expenditures in the calendar month immediately
following any calendar month where the Borrower and the Subsidiaries
(other than the POA Group) 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 damage to destroyed assets will not be included in
the following calculation for the Fiscal Year such replacement or repair
was made."
SECTION 15. AMENDMENT TO SECTION 6.2.6. Section 6.2.6 of the Credit
Agreement is hereby amended by deleting said section in its entirety and
substituting the following in lieu thereof:
"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, (b) any lease of real property
entered into by the Borrower or any Subsidiary after the Closing Date in
the ordinary course of business, (c) the POA Lease, and (d) any capital
lease provided the Capitalized Lease Liabilities incurred thereunder are
permitted under Section 6.2.2(g); 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 clauses (a) and (b) of 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 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>
- 11 -
<PAGE> 13
SECTION 16. AMENDMENT TO SECTION 6.2.7. Section 6.2.7 of the Credit
Agreement is hereby amended by deleting the "and" immediately following clause
(f) thereof, deleting the period immediately following clause (g) thereof and
inserting in lieu thereof a semicolon, and by inserting the following clauses
(h) and (i) at the end of such section:
"(h) all of the capital stock of (i) PhoneTel III, and (ii)
POA provided that such capital stock of POA is acquired pursuant to and
in accordance with the terms of the POA Purchase Agreement; and
(i) the PhoneTel III Note."
SECTION 17. AMENDMENT TO SECTION 6.2.8. Section 6.2.8 of the Credit
Agreement is hereby amended by inserting the following proviso immediately prior
to the period appearing at the end of such section:
"except that Borrower may permit the lessors under the POA Lease to
convert up to $1,000,000 of Indebtedness under the POA Lease to Common
Stock."
SECTION 18. AMENDMENT TO SECTION 6.2.10. Section 6.2.10(a) of the
Credit Agreement is hereby amended by inserting the following proviso
immediately prior to the semicolon appearing at the end of such section:
", PROVIDED FURTHER HOWEVER, that PhoneTel III may purchase all of the
capital stock of POA pursuant to and on the terms and conditions set
forth in the POA Purchase Agreement"
SECTION 19. AMENDMENT TO SECTION 6.2.10. Section 6.2.10(b) of the
Credit Agreement is hereby amended by inserting the following proviso
immediately prior to the period appearing at the end of such section:
"; PROVIDED, HOWEVER, that Borrower may create PhoneTel III, Inc. a
wholly-owned subsidiary of Borrower, in order to acquire POA"
SECTION 20. AMENDMENT TO SECTION 6.2.13. Section 6.2.13 of the Credit
Agreement is hereby amended by inserting at the end of clause (a) thereof
immediately preceding the semicolon "except that the Borrower and POA may enter
into the POA Management Agreement".
-12-
<PAGE> 14
SECTION 21. AMENDMENT TO SECTION 6.2.18. Section 6.2.18 of the Credit
Agreement is hereby amended by deleting the period at the end of said Section
and adding the following at the end of such Section:
"; PROVIDED, HOWEVER, that POA may create or otherwise cause or suffer
to exist or become effective any such encumbrance or restriction on the
ability of POA pursuant to the POA Lease."
SECTION 22. NEW SECTION 6.2.21. Section 6.2 of the Credit Agreement is
hereby amended by adding thereto a new Section 6.2.21 as follows:
"SECTION 6.2.21. POA DOCUMENTS. Neither Borrower nor any of
its Subsidiaries shall execute and deliver any agreement relating to
the purchase of capital stock or assets of POA or any of its
Subsidiaries except in the form attached as Exhibit A to the Third
Amendment. Neither Borrower nor any of its Subsidiaries shall amend,
modify or supplement any term or provision of any POA Document or waive
any condition set forth therein, without the prior written consent of
the Required Lenders."
SECTION 23. AMENDMENT TO SECTION 7.1. Section 7.1 of the Credit
Agreement is hereby amended by adding a new Section 7.1.13 as follows:
"SECTION 7.1.13. CERTAIN EVENTS WITH RESPECT TO THE POA GROUP.
POA shall have failed to pay when due any management fees to the
Borrower under the POA Management Agreement and within 30 days of such
failure Borrower shall have failed to give POA notice of termination of
the POA Management Agreement, or the Borrower shall continue to provide
services to the POA Group upon termination of the POA Management
Agreement."
SECTION 24. WAIVER OF ONE BUSINESS DAY'S NOTICE OF BORROWING. The
Lenders agree that, upon satisfaction of the conditions set forth in Section 27
and notwithstanding the provisions of Section 3.1 of the Credit Agreement,
Revolving B Loans requested to finance the funding of the loan to be evidenced
by the PhoneTel III Note shall be made on the Business Day of receipt of a
Borrowing Request with respect to such Revolving B Loans provided such Borrowing
Request is received no later than 2:00 p.m., New York City time, on such
Business Day.
SECTION 25. CONTINUING EFFECTIVENESS OF CREDIT AGREEMENT. The Credit
Agreement and each of the other Loan Documents shall remain in full force and
effect in
- 13 -
<PAGE> 15
accordance with their respective terms, except as expressly amended or
modified by this Amendment.
SECTION 26. COST AND EXPENSES. The Borrower agrees to pay all
reasonable out-of-pocket expenses of the Agent and each of the Lenders party to
this Amendment for the negotiation, preparation, execution and delivery of this
Amendment (including reasonable fees and expenses of counsel to the Agent and
such Lenders).
SECTION 27. EFFECTIVENESS. This Amendment shall become effective only
upon (i) receipt by the Agent of a copy of this Amendment, duly executed by each
of the Borrower, the Lenders and the Agent, and duly acknowledged and consented
to by the Subsidiaries of the Borrower in the form attached to this Amendment,
(ii) receipt by the Agent of a copy of a supplement to the Borrower Pledge
Agreement, in form and substance satisfactory to the Lenders and the Agent,
pursuant to which the Borrower pledges to the Agent for the benefit of the
Lenders all of the capital stock of PhoneTel III, Inc. and the $250,000
promissory note executed by PhoneTel III in favor of the Borrower, (iii) receipt
by the Agent of a copy of a Stock Pledge Agreement, executed by PhoneTel III in
form and substance satisfactory to the Lenders and the Agent, pursuant to which,
upon and simultaneously with the POA Purchase, PhoneTel III pledges to the Agent
for the benefit of the Lenders all of the capital stock of POA, (iv) receipt by
the Agent of a copy of a supplement to the Subsidiary Guaranty, executed by
PhoneTel III in favor of the Lenders, in form and substance satisfactory to the
Lenders and the Agent, (v) receipt by the Agent of a copy of a supplement to the
Security Agreement executed by PhoneTel III in form and substance satisfactory
to the Lenders and the Agent, pursuant to which PhoneTel III grants to the Agent
for the benefit of the Lenders a first priority security interest in all of the
assets of PhoneTel III, and (vi) receipt by the Lenders and the Agent of an
opinion letter, dated the date hereof, from Skadden, Arps, Slate, Meagher &
Flom, counsel to the Borrower and its Subsidiaries, and Tammy L. Martin, General
Counsel to Borrower and its Subsidiaries, in the form of EXHIBIT D and EXHIBIT E
hereto, respectively.
SECTION 28. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provision hereof.
SECTION 29. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be executed by the Borrower,
the Lenders and the Agent and shall be deemed to be an original and all of which
shall constitute together but one and the same agreement.
- 14 -
<PAGE> 16
SECTION 30. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK.
SECTION 31. SUCCESSORS AND ASSIGNS. This Amendment 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 or under the Credit Agreement
except in accordance with the terms of the Credit Agreement.
-15-
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, in its
capacity as Agent and Lender
By:_______________________________
James W. Latimer
Managing Director
CERBERUS PARTNERS, L.P.
By: CERBERUS ASSOCIATES, L.P.,
Its General Partner
By:_________________________
Name: Stephen Feinberg
Title: General Partner
(SIGNATURE PAGE TO THIRD AMENDMENT TO CREDIT AGREEMENT)
<PAGE> 18
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledge receipt of a copy of the foregoing
amendment, consent to the terms and provisions set forth therein, and agree that
the Subsidiary Guaranty dated as of March 15, 1996 (the "SUBSIDIARY GUARANTY")
made by each of the undersigned, jointly and severally, in favor of
Internationale Nederlanden (U.S.) Capital Corporation ("ING") and such other
Lenders as are, or may from time to time become, parties to the Credit
Agreement, and ING as Agent for such Lenders, will continue in full force and
effect without diminution or impairment notwithstanding the execution and
delivery of the amendment. The undersigned further acknowledge and agree that,
upon effectiveness of the amendment and from and after the date thereof, each
reference to the Credit Agreement in the Subsidiary Guaranty and each other Loan
Document (as such term is defined in the Credit Agreement) to which any of the
undersigned is a party shall mean and be a reference to the Credit Agreement as
amended by the foregoing amendment.
PUBLIC TELEPHONE CORPORATION
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
WORLD COMMUNICATIONS, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
NORTH FLORIDA TELEPHONE CORPORATION
<PAGE> 19
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
PARAMOUNT COMMUNICATIONS SYSTEMS, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
<PAGE> 20
EXHIBIT A
---------
[POA Purchase Agreement]
<PAGE> 21
EXHIBITS B-1 THROUGH B-3
------------------------
[POA Lease]
<PAGE> 22
EXHIBIT C
---------
[POA Management Agreement]
<PAGE> 23
EXHIBIT D
---------
[Form of Opinion of Skadden, Arps, Slate, Meagher & Flom]
<PAGE> 24
EXHIBIT E
---------
[Form of Opinion of Tammy L. Martin]
<PAGE> 1
EXHIBIT (c) 5.
<PAGE> 2
EXECUTION COPY
FOURTH AMENDMENT TO CREDIT AGREEMENT
------------------------------------
This FOURTH AMENDMENT TO CREDIT AGREEMENT (the "AMENDMENT"), dated as
of September 13, 1996, among PHONETEL TECHNOLOGIES, INC., an Ohio corporation
(the "BORROWER"), INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a
Delaware corporation ("ING") and CERBERUS PARTNERS, L.P., a Delaware limited
partnership ("CERBERUS"), constituting all of the Lenders under the Credit
Agreement referenced below, and ING in its capacity as Agent for the Lenders (in
such capacity, the "AGENT").
W I T N E S S E T H:
--------------------
RECITALS:
A. The Borrower, the Lenders and the Agent have entered into a certain
Credit Agreement, dated as of March 15, 1996, as amended to the date hereof (the
"CREDIT AGREEMENT"). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Credit Agreement.
B. The Borrower has requested an amendment to the Credit Agreement to
increase the amount of the Revolving B Loan Commitment Amount to $4,250,000.
C. The Borrower and its Subsidiaries have incurred Consolidated Capital
Expenditures for the months of May, June and July, 1996 in excess of the amounts
permitted under Section 6.2.5 of the Credit Agreement.
D. The Lenders are agreeable to amending the Credit Agreement to so
increase the Revolving B Loan Commitment Amount, and to waiving said defaults
under Section 6.2.5 of the Credit Agreement on the terms and conditions set
forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby amended by inserting the following definition in the
appropriate alphabetical order:
<PAGE> 3
"FOURTH AMENDMENT" means the Fourth Amendment to Credit
Agreement dated as of September 13, 1996, among the Borrower, ING,
Cerberus and ING in its capacity as Agent.
SECTION 2. AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby further amended by deleting the existing definitions of
"REVOLVING B LOAN COMMITMENT AMOUNT" and "REVOLVING B OVERADVANCE AMOUNT" and
substituting in lieu thereof the following, respectively:
"REVOLVING B LOAN COMMITMENT AMOUNT" means an amount
equal $4,250,000, as such amount may be reduced from time to time
pursuant to SECTION 3.3.4.
"REVOLVING B OVERADVANCE AMOUNT" means an amount
equal to $2,050,000, provided that from and after the earlier of
January 1, 1997 or the Amtel Closing Date such amount shall be reduced
by $50,000.
SECTION 3. AMENDMENT TO SECTION 3.4.4. Section 3.4.4 of the Credit
Agreement is hereby amended by inserting the following new subsection at the end
of such section:
"(e) The Revolving B Loan Commitment (and the Revolving B
Commitment Amount) shall be permanently reduced on each Monthly Payment
Date set forth below by the amount set forth opposite such Monthly
Payment Date:
<TABLE>
<CAPTION>
MONTHLY PAYMENT DATE IN: AMOUNT
------------------------ ------
<S> <C>
March, 1997 $ 2,250,000
April, 1997 $ 222,222
May, 1997 $ 222,222
June, 1997 $ 222,222
July, 1997 $ 222,222
August, 1997 $ 222,222
September, 1997 $ 222,222
October, 1997 $ 222,222
November, 1997 $ 222,222
December, 1997 $ 222,224."
</TABLE>
SECTION 4. AMENDMENT TO SECTION 6.1.1. Section 6.1.1 of the Credit
Agreement is hereby amended by deleting the "and" immediately following clause
(j) thereof, by
- 2 -
<PAGE> 4
deleting the period immediately following clause (k) thereof and by inserting
the following clauses at the end of such section:
"(l) no later than Thursday of each calendar week, a
detailed aged schedule, in a form satisfactory to the Required Lenders,
of all commissions payable by the Borrower and its Subsidiaries under
Telephone Placement Agreements or otherwise, as of the last Business
Day of the prior week; and
(m) no later than Thursday of each calendar week, a
detailed aged schedule, in a form satisfactory to the Required Lenders,
of all telephone charges and other amounts owing to local exchange
carriers, as of the last Business Day of the prior week."
SECTION 5. AMENDMENT TO SECTION 6.1. Section 6.1 of the Credit
Agreement is hereby amended by adding thereto the following new Section 6.1.19
as follows:
"SECTION 6.1.19. PAYMENT OF COMMISSIONS AND LOCAL
EXCHANGE CHARGES. The Borrower will, and will cause each Subsidiary to,
pay all commissions payable under Telephone Placement Agreements or
otherwise and all charges owing to local exchange carriers within
thirty (30) days of the date such commissions and charges are due and
payable."
SECTION 6. AMENDMENT TO SECTION 6.2.4. Section 6.2.4 of the Credit
Agreement is hereby amended by adding thereto at the end of said section the
following clause (i) as follows:
"(i) LIMITATIONS ON ADDITIONS TO PROPERTY, PLANT AND
EQUIPMENT AND PURCHASE OF INTANGIBLE ASSETS. The Borrower will
not permit the aggregate amount of additions to property,
plant and equipment plus the aggregate amount of additions to
intangible assets for the Borrower and its Subsidiaries during
any calendar month ending on or prior to December 31, 1997 to
exceed $75,000; PROVIDED, HOWEVER, that the Borrower may
consummate the Amtel Purchase.
SECTION 7. AMENDMENT TO SECTION 6.2.5. Section 6.2.5 of the Credit
Agreement is hereby amended by deleting said section in its entirety and
substituting in lieu thereof the following:
- 3 -
<PAGE> 5
"SECTION 6.2.5. CAPITAL EXPENDITURES. The Borrower will not, and
will not permit any Subsidiary to, make or commit to make any
Consolidated Capital Expenditures, except (a) the Borrower may
consummate the Amtel Purchase, (b) prior to December 31, 1997, the
Borrower and its Subsidiaries (other than the POA Group) may make
Consolidated Capital Expenditures solely for the installation,
maintenance (including purchase of replacement parts) and upgrade of
Telephones owned and in inventory as of September 13, 1996, and no such
Consolidated Capital Expenditures may be made to purchase new
Telephones, and (c) the Borrower and its Subsidiaries (other than the
POA Group) may make Consolidated Capital Expenditures during any Fiscal
Year commencing with the 1998 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:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
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
POA may incur Capitalized Lease Liabilities pursuant to the POA Lease,
and POA may make and incur capital expenditures but only to the extent
necessary to maintain or replace Telephones and related equipment in
operation as of September 13, 1996; PROVIDED, FURTHER, HOWEVER, that the
Borrower and its Subsidiaries (other than the POA Group) may not make or
incur Consolidated Capital Expenditures in the calendar month
immediately following any calendar month where the Borrower and the
Subsidiaries (other than the POA Group) 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 damage to destroyed assets will
not be included in the foregoing calculation for the Fiscal Year such
replacement or repair was made."
SECTION 8. AMENDMENT TO SECTION 6.2. Section 6.2 of the Credit
Agreement is hereby amended by adding thereto the following new Section 6.2.22
as follows:
- 4 -
<PAGE> 6
"SECTION 6.2.22. ACQUISITION EXPENSES. The Borrower
shall not, and shall not permit any of its Subsidiaries to,
incur or agree to incur or reimburse any Person for any
expenses, or make any payment or deposit, in respect of or
related to the acquisition or proposed acquisition of assets or
stock of any Person or any transaction prohibited under SECTION
6.2.10 or SECTION 6.2.11 (any such acquisition or transaction, a
"PROSPECTIVE ACQUISITION") other than (a) any such expenses
incurred or payments or deposits made prior to September 13,
1996, and (b) any such expenses incurred or payments or deposits
made pursuant to agreements relating to the POA Purchase or the
Amtel Purchase; PROVIDED, HOWEVER that the Borrower may
reimburse Peter G. Graf for his reasonable travel and
entertainment expenses incurred to explore Prospective
Acquisitions. The Borrower shall have given notice to all
Persons entitled to be paid or reimbursed in respect of such
expenses (other than any such payable in connection with the POA
Purchase or the Amtel Purchase) that no amounts or expenses
accruing after September 13, 1996 shall be payable or
reimbursable by the Borrower or any of its Subsidiaries."
SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS. In order to
induce the Lenders and the Agent to enter into this Amendment and to consummate
the transactions contemplated herein, the Borrower hereby represents, warrants
and covenants to and with the Agent and each Lender as follows:
(a) as of the date hereof there exists no actual or, to the
best of Borrower's knowledge, threatened termination, cancellation or
limitation of the business relationship of the Borrower or any of its
Subsidiaries with any party to a Telephone Placement Agreement which
individually, or in the aggregate with any other such actual or
threatened terminations, cancellations or limitations of Telephone
Placement Agreements, could result in a Material Adverse Change;
(b) of the proceeds of the Revolving B Loans to be made on the
date hereof not less than $1,500,000 shall be used to pay the accounts
payable and commissions owed by the Borrower and its Subsidiaries which
are due and payable and identified by the Borrower to the Lenders as
priority payables on EXHIBIT A hereto (the "PRIORITY PAYABLES");
- 5 -
<PAGE> 7
(c) upon payment of the Priority Payables, no commission payable
under any Telephone Placement Agreement or otherwise in respect of a
Telephone in operation, and no charges billed by a local exchange
carrier, shall be more than 30 days past due;
(d) no later than three Business Days following the date hereof,
the Borrower shall have mailed or otherwise delivered payment in respect
of all Priority Payables, and shall have delivered to the Agent and the
Lenders a certificate from its General Counsel to the effect that it has
complied in all respects with the provisions of Section 9 of this
Amendment;
(e) upon effectiveness of this Amendment, no Default or Event of
Default shall exist under the Credit Agreement; and
(f) the breach of any representation, warranty or covenant set
forth in this Section 9 shall constitute an Event of Default under the
Credit Agreement.
SECTION 10. ACKNOWLEDGMENT OF DEFAULT AND WAIVER. The Borrower hereby
expressly acknowledges and agrees that it has been in default under the terms
Section 6.2.5 of the Credit Agreement as a result of Consolidated Capital
Expenditures made in the months of May, June and July, 1996, which followed
months where the Borrower and its Subsidiaries experienced negative cash flow on
a consolidated basis. The Borrower hereby requests that ING and Cerberus waive
such defaults by the Borrower under Section 6.2.5 of the Credit Agreement, and
ING and Cerberus hereby waive such defaults solely for the months of May, June
and July, 1996.
SECTION 11. AMENDMENT FEE. The Borrower agrees to pay to the Agent for
the ratable account of each Lender, an amendment fee in an amount equal to
$60,000 (the "AMENDMENT FEE"). The Amendment Fee shall be payable by the
Borrower upon the execution of this Amendment, and the Borrower hereby
irrevocably authorizes the Agent to deduct from the proceeds of a Borrowing of
Revolving B Loans to be made on the date of this Agreement in the amount of
2,000,000, the sum of $60,000 for the ratable account of each Lender as payment
in full of the Amendment Fee.
SECTION 12. CONTINUING EFFECTIVENESS OF CREDIT AGREEMENT. The Credit
Agreement and each of the other Loan Documents shall remain in full force and
effect in accordance with their respective terms, except as expressly amended or
modified by this Amendment.
- 6 -
<PAGE> 8
SECTION 13. COST AND EXPENSES. The Borrower agrees to pay all
reasonable out-of-pocket expenses of the Agent and each of the Lenders party to
this Amendment for the negotiation, preparation, execution and delivery of this
Amendment (including reasonable fees and expenses of counsel to the Agent and
such Lenders).
SECTION 14. EFFECTIVENESS. This Amendment shall become effective only
upon (i) receipt by the Agent of a copy of this Amendment, duly executed by each
of the Borrower, the Lenders and the Agent, and duly acknowledged and consented
to by the Subsidiaries of the Borrower party to the Subsidiary Guaranty, in the
form attached to this Amendment, (ii) receipt by each of ING and Cerberus of a
duly executed and delivered Revolving B Note in the amount of $2,125,000, (iii)
receipt by legal counsel to ING and Cerberus of payment for fees and expenses
incurred to date, and (iv) receipt by the Lenders and the Agent of an opinion
letter, dated the date hereof, from Skadden, Arps, Slate, Meagher & Flom,
counsel to the Borrower and its Subsidiaries, and Tammy L. Martin, General
Counsel to Borrower and its Subsidiaries, in the form of EXHIBIT B and EXHIBIT C
hereto, respectively.
SECTION 15. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provision hereof.
SECTION 16. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be executed by the Borrower,
the Lenders and the Agent and shall be deemed to be an original and all of which
shall constitute together but one and the same agreement.
SECTION 17. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 18. SUCCESSORS AND ASSIGNS. This Amendment 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 or under the Credit Agreement
except in accordance with the terms of the Credit Agreement.
- 7 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, in its
capacity as Agent and Lender
By:_______________________________
James W. Latimer
Managing Director
CERBERUS PARTNERS, L.P.
By: CERBERUS ASSOCIATES, L.P.,
Its General Partner
By:_________________________
Name: Stephen Feinberg
Title: General Partner
[SIGNATURE PAGE TO FOURTH AMENDMENT TO CREDIT AGREEMENT]
- 8 -
<PAGE> 10
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledge receipt of a copy of the foregoing
amendment, consent to the terms and provisions set forth therein, and agree that
the Subsidiary Guaranty dated as of March 15, 1996 (the "SUBSIDIARY GUARANTY")
made by each of the undersigned, jointly and severally, in favor of
Internationale Nederlanden (U.S.) Capital Corporation ("ING") and such other
Lenders as are, or may from time to time become, parties to the Credit
Agreement, and ING as Agent for such Lenders, will continue in full force and
effect without diminution or impairment notwithstanding the execution and
delivery of the amendment. The undersigned further acknowledge and agree that,
upon effectiveness of the amendment and from and after the date thereof, each
reference to the Credit Agreement in the Subsidiary Guaranty and each other Loan
Document (as such term is defined in the Credit Agreement) to which any of the
undersigned is a party shall mean and be a reference to the Credit Agreement as
amended by the foregoing amendment.
PUBLIC TELEPHONE CORPORATION
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
WORLD COMMUNICATIONS, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
[ACKNOWLEDGMENT AND CONSENT TO FOURTH AMENDMENT]
- 9 -
<PAGE> 11
NORTH FLORIDA TELEPHONE CORPORATION
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
PARAMOUNT COMMUNICATIONS SYSTEMS, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
PHONETEL III, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
[ACKNOWLEDGMENT AND CONSENT TO FOURTH AMENDMENT]
<PAGE> 12
EXHIBIT A
---------
[List of Accounts Payable]
[TO BE PROVIDED BY PHONETEL TECHNOLOGIES]
A- 1
<PAGE> 13
EXHIBIT B
---------
[Form of Opinion of Skadden, Arps, Slate, Meagher & Flom]
B- 1
<PAGE> 14
EXHIBIT C
---------
[Form of Opinion of Tammy L. Martin]
C- 1
<PAGE> 1
EXHIBIT (c) 6.
<PAGE> 2
EXECUTION COPY
FIFTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "AMENDMENT"), dated as of
September 13, 1996, among PHONETEL TECHNOLOGIES, INC., an Ohio corporation (the
"BORROWER"), INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation ("ING") and CERBERUS PARTNERS, L.P., a Delaware limited partnership
("CERBERUS"), constituting all of the Lenders under the Credit Agreement
referenced below, and ING in its capacity as Agent for the Lenders.
W I T N E S S E T H:
--------------------
RECITALS:
A. The Borrower, the Lenders and the Agent have entered into a certain
Credit Agreement, dated as of March 15, 1996, as amended to the date hereof (the
"CREDIT AGREEMENT"). Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Credit Agreement.
B. The Borrower has requested an amendment to the Credit Agreement to
increase the Revolving A Loan Commitment Amount from $6,000,000 to $7,250,000
and to increase the Revolving B Loan Commitment Amount from $4,250,000 to
$4,750,000 to provide sufficient funds to finance the cash portion of the
purchase price for substantially all of the assets of ACI-HDT Supply Company,
Amtel Communications Services, Inc., Amtel Communications Correctional
Facilities, Inc., Amtel Communications, Inc. and Amtel Communications Payphones,
Inc. (collectively, "AMTEL") pursuant to a certain Asset Purchase Agreement,
dated June 26, 1996, among the Borrower and Amtel, as amended by Amendment No.
1, dated June 26, 1996, as amended by Amendment No. 2, dated August 26, 1996
(the "AMTEL PURCHASE AGREEMENT").
C. The Lenders are agreeable to amending the Credit Agreement on the
terms and conditions set forth herein.
<PAGE> 3
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby amended by deleting the definition of "Revolving A Loan
Commitment Amount" in its entirety and substituting in lieu thereof the
following:
"REVOLVING A LOAN COMMITMENT AMOUNT" means $7,250,000, as such
amount may be reduced from time to time pursuant to SECTION 3.3.4."
SECTION 2. AMENDMENT TO SECTION 1.1. Section 1.1 of the Credit
Agreement is hereby amended by deleting the definition of "Revolving B Loan
Commitment Amount" in its entirety and substituting in lieu thereof the
following:
"REVOLVING B LOAN COMMITMENT AMOUNT" means $4,750,000, as such
amount may be reduced from time to time pursuant to SECTION 3.3.4."
SECTION 3. AMENDMENT TO SECTION 3.4.4(E). Section 3.4.4(e) of the
Credit Agreement is hereby amended by deleting said section in its entirety and
substituting in lieu thereof the following:
"(e) The Revolving B Loan Commitment (and the Revolving B
Commitment Amount) shall be permanently reduced on each Monthly Payment
Date set forth below by the amount set forth opposite such Monthly
Payment Date:
<TABLE>
<CAPTION>
MONTHLY PAYMENT DATE IN: AMOUNT
------------------------ ------
<S> <C>
March, 1997 $ 2,750,000
April, 1997 $ 222,222
May, 1997 $ 222,222
June, 1997 $ 222,222
July, 1997 $ 222,222
August, 1997 $ 222,222
September, 1997 $ 222,222
October, 1997 $ 222,222
November, 1997 $ 222,222
December, 1997 $ 222,224."
</TABLE>
- 2 -
<PAGE> 4
SECTION 4. AMENDMENT TO SECTION 3.9(B). Section 3.9(b) of the Credit
Agreement is hereby amended by deleting said section in its entirety and
substituting in lieu thereof the following:
"(b) Borrower shall use the proceeds of (i) Revolving A Loans
made after the Closing Date and prior to or on the Amtel Closing Date
only for the purpose of paying a portion of the cash consideration
required under the Amtel Purchase Agreement and for the payment of the
Amendment Fee payable pursuant to the Second Amendment, (ii) Revolving
A Loans made after the Amtel Closing Date to finance other acquisitions
(PROVIDED, HOWEVER, that this clause (ii) shall not be construed to
permit any acquisitions which are otherwise prohibited by the terms of
this Agreement or the other Loan Documents), (iii) Revolving B Loans
made on or after the effective date of the Third Amendment to finance
the funding of a $250,000 loan to be made by the Borrower to PhoneTel
III to be evidenced by the PhoneTel III Note; (iv) Revolving B Loans
made on the effective date of the Fourth Amendment to pay the Priority
Payables; (v) Revolving B Loans made on the effective date of the Fifth
Amendment for the purpose of paying a portion of the cash consideration
required under the Amtel Purchase Agreement; and (vi) the Revolving B
Loans made on and after the effective date of the Fifth Amendment to
finance its continuing working capital needs; PROVIDED, HOWEVER, that
the Revolving B Loans shall not be used to repay any other outstanding
Loan."
SECTION 5. AMENDMENT TO SECTION 5.21. Section 5.21 of the Credit
Agreement is hereby amended by deleting the first sentence thereof in its
entirety and substituting the following in lieu thereof:
"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 as of the Amtel Closing Date."
SECTION 6. AMENDMENT TO SECTION 6.1.16. Section 6.1.16 is hereby
amended by deleting the period at the end of such section and inserting the
following:
"; PROVIDED, HOWEVER, that the Borrower shall be authorized to utilize
Telephone Placement Agreements assumed pursuant to the Amtel Purchase
Agreement with respect to the Payphone Operating Assets purchased
pursuant to the Amtel Purchase Agreement."
- 3 -
<PAGE> 5
SECTION 7. AMENDMENT TO SECTION 6.2.4. Section 6.2.4 of the Credit
Agreement is hereby amended by deleting said section in its entirety and
substituting in lieu thereof the following:
"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 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 0.9
March 31, 1997 1.0
June 30, 1997 1.3
September 30, 1997 1.6
December 31, 1997 1.8
March 31, 1998 1.9
June 30, 1998 1.9
September 30, 1998 2.0
December 31, 1998 2.0
March 31, 1999 2.1
June 30, 1999 2.2.
</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):
- 4 -
<PAGE> 6
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING: AMOUNT
---------------------- ------
<S> <C>
June 30, 1996 $ 875,000
September 30, 1996 3 ,028,000
December 31, 1996 6,233,000
March 31, 1997 9,284,000
June 30, 1997 13,213,000
September 30, 1997 16,322,000
December 31, 1997 20,013,000
March 31, 1998 20,706,000
June 30, 1998 21,637,000
September 30, 1998 22,505,000
December 31, 1998 23,394,000
March 31, 1999 23,853,000
June 30, 1999 24,531,000.
</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 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 (14,070,000)
March 31, 1997 (13,626,000)
June 30, 1997 (11,326,000)
September 30, 1997 (8,558,000)
December 31, 1997 (4,144,000)
March 31, 1998 (2,750,000)
June 30, 1998 650,000
September 30, 1998 4,454,000
December 31, 1998 9,928,000
March 31, 1999 11,936,000
June 30, 1999 16,170,000
</TABLE>
- 5 -
<PAGE> 7
(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 1.7
March 31, 1997 1.9
June 30, 1997 2.7
September 30, 1997 3.2
December 31, 1997 4.1
March 31, 1998 4.4
June 30, 1998 4.7
September 30, 1998 5.1
December 31, 1998 5.4
March 31, 1999 5.7
June 30, 1999 6.0.
</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 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 55.3%
March 31, 1997 54.4%
June 30, 1997 55.0%
</TABLE>
- 6 -
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
September 30, 1997 55.7%
December 31, 1997 57.6%
March 31, 1998 57.7%
June 30, 1998 57.9%
September 30, 1998 58.1%
December 31, 1998 58.4%
March 31, 1999 58.2%
June 30, 1999 58.2%.
</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 10,417,000
March 31, 1997 14,523,000
June 30, 1997 14,960,000
September 30, 1997 16,386,000
December 31, 1997 17,004,000
March 31, 1998 17,452,000
June 30, 1998 17,885,000
September 30, 1998 18,300,000
December 31, 1998 18,691,000
March 31, 1999 19,044,000
June 30, 1999 19,410,000.
</TABLE>
(h) CALCULATIONS FOR STUB PERIODS. Notwithstanding
any thing contained herein to the contrary, for purposes of
determining compliance with clauses (a) through (g) of this
SECTION 6.2.4 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
- 7 -
<PAGE> 9
made for the period commencing on the Closing Date and
ending on the date of determination.
(i) LIMITATIONS ON ADDITIONS TO PROPERTY, PLANT AND
EQUIPMENT AND PURCHASE OF INTANGIBLE ASSETS. The Borrower will
not permit the aggregate amount of additions to property,
plant and equipment plus the aggregate amount of additions to
intangible assets for the Borrower and its Subsidiaries during
any calendar month ending on or prior to December 31, 1997 to
exceed $75,000; PROVIDED, HOWEVER that the Borrower may
consummate the Amtel Purchase."
SECTION 8. AMENDMENT TO SECTION 6.2.5. Section 6.2.5 of the Credit
Agreement is hereby amended by deleting such section in its entirety and
substituting in lieu thereof the following:
"SECTION 6.2.5. CAPITAL EXPENDITURES. The Borrower will not,
and will not permit any Subsidiary to, make or commit to make any
Consolidated Capital Expenditures, except (a) the Borrower may
consummate the Amtel Purchase, (b) prior to December 31, 1997, the
Borrower and its Subsidiaries (other than the POA Group) may make
Consolidated Capital Expenditures solely for the installation,
maintenance (including purchase of replacement parts) and upgrade of
Telephones owned and in inventory as of September 13, 1996, and no such
Consolidated Capital Expenditures may be made to purchase new
Telephones, and (c) the Borrower and its Subsidiaries (other than the
POA Group) may make Consolidated Capital Expenditures during any Fiscal
Year commencing with the 1998 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:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1998 $6,636,000
1999 $6,841,000
</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
POA may incur Capitalized Lease
- 8 -
<PAGE> 10
Liabilities pursuant to the POA Lease, and POA may make and incur
capital expenditures but only to the extent necessary to maintain or
replace Telephones and related equipment in operation as of September
13, 1996; PROVIDED, FURTHER, HOWEVER, that the Borrower and its
Subsidiaries (other than the POA Group) may not make or incur
Consolidated Capital Expenditures in the calendar month immediately
following any calendar month where the Borrower and the Subsidiaries
(other than the POA Group) 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 damage to destroyed assets will not be
included in the following calculation for the Fiscal Year such
replacement or repair was made."
SECTION 9. AMENDMENT TO ITEM 14 OF DISCLOSURE SCHEDULE. Item 14
("Contracts") of the Disclosure Schedule is hereby amended by deleting said Item
in its entirety and substituting the Contractual Obligations listed on EXHIBIT D
hereto.
SECTION 10. RELEASE OF LIENS ON PAYPHONE OPERATING ASSETS. The Borrower
hereby agrees to obtain and file of record in all appropriate jurisdictions,
within 90 days of the date of this Amendment, releases of lien, UCC-3
termination statements or other instruments as shall be suitable and legally
effective to evidence of record the release of all Liens on the Payphone
Operating Assets (as such term is defined in the Amtel Purchase Agreement),
other than the Liens in favor of the Agent for the benefit of the Lenders. The
Borrower further agrees that the failure to comply with this Section 10 shall
constitute an Event of Default under the Credit Agreement.
SECTION 11. SOLVENCY. The Borrower hereby represents and warrants that
after giving effect to the consummation of the transactions contemplated by the
Amtel Purchase Agreement and the consummation of the transactions contemplated
by this Agreement (including the making of Loans), the Borrower and each of its
Subsidiaries is Solvent.
SECTION 12. CONTINUING EFFECTIVENESS OF CREDIT AGREEMENT. The Credit
Agreement and each of the other Loan Documents shall remain in full force and
effect in accordance with their respective terms, except as expressly amended or
modified by this Amendment.
- 9 -
<PAGE> 11
SECTION 13. COST AND EXPENSES. The Borrower agrees to pay all
reasonable out-of-pocket expenses of the Agent and each of the Lenders party to
this Amendment for the negotiation, preparation, execution and delivery of this
Amendment (including reasonable fees and expenses of counsel to the Agent and
such Lenders).
SECTION 14. EFFECTIVENESS. This Amendment shall become effective upon
(i) receipt by the Agent of a copy of this Amendment, duly executed by each of
the Borrower, the Lenders and the Agent, and duly acknowledged and consented to
by the Subsidiaries of the Borrower in the form attached to this Amendment, (ii)
receipt by the Lenders of Revolving A Notes, dated the date hereof and duly
executed by the Borrower, in the principal amount equal to their respective
Revolving Percentages of the Revolving A Loan Commitment Amount (as such term is
modified by this Amendment), in replacement and substitution of the Revolving A
Notes, (iii) receipt by the Lenders of Revolving B Notes, dated the date hereof
and duly executed by the Borrower, in the principal amount equal to their
respective Revolving Percentages of the Revolving B Loan Commitment Amount (as
such term is modified by this Amendment), in replacement and substitution of the
Revolving B Notes, (iv) receipt by the Agent and the Lenders of (A) a
certificate regarding the location of the "Payphone Operating Assets" (as such
term is defined in the Amtel Purchase Agreement) acquired by the Borrower on the
Amtel Closing Date and other matters relative to the perfection of the Agent's
security interest in such assets, and (B) UCC-1 Financing Statements duly
executed by the Borrower for each jurisdiction where the filing thereof is
required to perfect such security interest, (v) receipt by the Lenders and the
Agent of an opinion letter, dated the date hereof, from Skadden, Arps, Slate,
Meagher & Flom, counsel to the Borrower and its Subsidiaries, from Tammy L.
Martin, General Counsel to the Borrower and its Subsidiaries, in the form of
EXHIBIT A and EXHIBIT B hereto, respectively, (vi) evidence satisfactory to the
Agent and the Lenders that the Borrower is qualified to do business in the
jurisdictions listed on EXHIBIT C hereto; and (vii) receipt by legal counsel to
ING and Cerberus of payment for their fees and expenses incurred to date.
SECTION 15. OPINIONS OF LOCAL COUNSEL. Upon the request of any Lender,
the Borrower shall obtain an opinion of local counsel in any jurisdiction with
respect to the creation and perfection of the security interest of the Agent in,
and other matters relating to, the "Payphone Operating Assets" (as such term is
defined in the Amtel Purchase Agreement) located in such jurisdiction. Failure
of Borrower to obtain such opinion within 30 days of any such request shall
constitute an Event of Default under the Credit Agreement.
-10-
<PAGE> 12
SECTION 16. HEADINGS. The various headings of this Amendment are
inserted for convenience only and shall not affect the meaning or interpretation
of this Amendment or any provision hereof.
SECTION 17. COUNTERPARTS. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be executed by the Borrower,
the Lenders and the Agent and shall be deemed to be an original and all of which
shall constitute together but one and the same agreement.
SECTION 18. GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 19. SUCCESSORS AND ASSIGNS. This Amendment 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 or under the Credit Agreement
except in accordance with the terms of the Credit Agreement.
- 11 -
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION, in its
capacity as Agent and Lender
By:_______________________________
James W. Latimer
Managing Director
CERBERUS PARTNERS, L.P.
By: CERBERUS ASSOCIATES, L.P.,
Its General Partner
By:_________________________
Name: Stephen Feinberg
Title: General Partner
- 12 -
<PAGE> 14
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledge receipt of a copy of the foregoing
amendment, consent to the terms and provisions set forth therein, and agree that
the Subsidiary Guaranty dated as of March 15, 1996 as amended and supplemented
to the date hereof (the "SUBSIDIARY GUARANTY") made by each of the undersigned,
jointly and severally, in favor of Internationale Nederlanden (U.S.) Capital
Corporation ("ING") and such other Lenders as are, or may from time to time
become, parties to the Credit Agreement, and ING as Agent for such Lenders, will
continue in full force and effect without diminution or impairment
notwithstanding the execution and delivery of the amendment. The undersigned
further acknowledge and agree that, upon effectiveness of the amendment and from
and after the date thereof, each reference to the Credit Agreement in the
Subsidiary Guaranty and each other Loan Document (as such term is defined in the
Credit Agreement) to which any of the undersigned is a party shall mean and be a
reference to the Credit Agreement as amended by the foregoing amendment.
PUBLIC TELEPHONE CORPORATION
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
WORLD COMMUNICATIONS, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
- 13 -
<PAGE> 15
NORTH FLORIDA TELEPHONE CORPORATION
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
PARAMOUNT COMMUNICATIONS SYSTEMS, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
PHONETEL III, INC.
By:_______________________________
Name:
Title:
[CORPORATE SEAL]
- 14 -
<PAGE> 16
EXHIBIT A
---------
[Form of Opinion]
<PAGE> 17
EXHIBIT B
---------
[Form of Opinion]
<PAGE> 18
EXHIBIT C
---------
Foreign Qualifications
Colorado
Oregon
<PAGE> 19
EXHIBIT D
---------
REVISED ITEM 14
[TO BE PROVIDED BY PHONETEL]
