<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
-------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE TRANSITION PERIOD FROM ________ TO _______.
COMMISSION FILE NUMBER 0-16715
PHONETEL TECHNOLOGIES, INC.
---------------------------
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
OHIO 34-1462198
---- ----------
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1127 EUCLID AVENUE, SUITE 650, STATLER OFFICE TOWER 44115-1601
- --------------------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 241-2555
--------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: AS OF AUGUST 12, 1997,
16,113,113 SHARES OF THE REGISTRANT'S COMMON STOCK $.01 PAR VALUE, WERE
OUTSTANDING.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
1
<PAGE> 2
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER AND SIX MONTHS ENDED JUNE 30, 1997
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1996
and June 30, 1997............................................................ 3
Statements of Consolidated Operations for the Six and Three
Months Ended June 30, 1996 and 1997.......................................... 4
Statements of Changes in Mandatorily Redeemable Preferred
Stock as of December 31, 1996 and June 30, 1997.............................. 5
Statements of Changes in Non-mandatorily Redeemable Preferred Stock,
Common Stock and Other Shareholders' Equity as of
December 31, 1996 and June 30, 1997.......................................... 6
Statements of Consolidated Cash Flows for the Six
Months Ended June 30, 1996 and 1997.......................................... 7
Notes to Consolidated Financial Statements...................................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................ 13
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders............................. 17
Item 6. Exhibits and Reports on Form 8-K................................................ 17
Signatures............................................................................................... 19
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash $46,438 $4,636
Accounts receivable, net of allowance for doubtful
accounts of $92 and $590, respectively 3,749 15,615
Other current assets 283 1,304
-------- --------
Total current assets 50,470 21,555
Property and equipment, net 19,243 27,985
Intangible assets, net 52,144 129,419
Other assets 283 342
Acquisition deposits 520 6,000
Restricted cash equivalents 37,110 --
Investment in affiliates -- 137
-------- --------
$159,770 $185,438
======== ========
LIABILITIES AND EQUITY
Current liabilities:
Current portion:
Long-term debt - others $501 $577
Long-term debt - related parties 508 95
Obligations under capital leases 138 114
Accounts payable 4,137 4,899
Accrued expenses:
Location commissions 1,767 1,617
Line and transmission charges 866 1,360
Personal property and sales tax 1,071 1,958
Interest 774 902
Salaries, wages and benefits 574 780
Other 643 1,709
-------- --------
Total current liabilities 10,979 14,011
Long-term debt - others 125,274 125,512
Long-term debt - related parties -- 21,700
Obligations under capital leases 104 50
Commitments and contingencies -- --
14% cumulative preferred stock mandatorily redeemable, redemption
amount of $7,476 and $7,738, respectively, due June 30, 2000 6,708 7,100
Non-mandatorily redeemable preferred stock,
common stock and other shareholders' equity 16,705 17,065
======== ========
$159,770 $185,438
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Six Months Ended June 30, Three Months Ended June 30,
----------------------------- -----------------------------
1996 1997 1996 1997
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Coin calls $10,411 $28,142 $5,960 $14,015
Non-coin telecommunication services 6,095 26,899 3,941 13,688
Other 300 338 299 18
----------- ------------ ----------- ------------
16,806 55,379 10,200 27,721
----------- ------------ ----------- ------------
OPERATING EXPENSES:
Line and transmission charges 3,866 11,833 2,261 5,654
Telecommunication and validation fees 2,336 5,936 1,361 3,090
Location commissions 2,171 6,501 1,155 3,332
Field operations 3,372 11,058 1,969 5,239
Selling, general and administrative 2,103 4,627 1,094 2,651
Depreciation and amortization 5,314 10,553 3,229 5,257
Other unusual charges and contractual settlements 5,335 - 531 -
----------- ------------ ----------- ------------
24,497 50,508 11,600 25,223
----------- ------------ ----------- ------------
Income (loss) from operations (7,691) 4,871 (1,400) 2,498
OTHER INCOME (EXPENSE):
Interest expense - related parties (1,817) (152) (1,537) (152)
Interest expense - others (274) (7,628) (50) (3,828)
Interest income 2 449 2 170
Equity in earnings of affiliate - 8 - 8
----------- ------------ ----------- ------------
(2,089) (7,323) (1,585) (3,802)
----------- ------------ ----------- ------------
Loss before extraordinary item (9,780) (2,452) (2,985) (1,304)
Extraordinary item:
Loss on debt restructuring (267) - (91) -
----------- ------------ ----------- ------------
NET LOSS ($10,047) ($2,452) ($3,076) ($1,304)
=========== ============ =========== ============
Earnings per share calculation:
Net loss ($10,047) ($2,452) ($3,076) ($1,304)
Preferred dividend payable in kind (111) (278) (83) (131)
Accretion of 14% Preferred to its redemption value (24) (114) (24) (64)
Premium on redemption of 10%, 8% and 7% Preferred (2,002) - - -
----------- ------------ ----------- ------------
Net loss applicable to common shareholders ($12,184) ($2,844) ($3,183) ($1,499)
=========== ============ =========== ============
Net loss per common share before extraordinary item ($3.33) ($0.18) ($0.74) ($0.09)
=========== ============ =========== ============
Net loss per common share ($3.41) ($0.18) ($0.76) ($0.09)
=========== ============ =========== ============
Weighted average number of shares 3,576,381 15,813,129 4,196,868 16,097,200
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN MANDATORILY REDEEMABLE PREFERRED STOCK
(IN THOUSANDS EXCEPT FOR SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
Year Ended Six Months Ended
December 31, 1996 June 30, 1997
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
14 % CUMULATIVE REDEEMABLE
CONVERTIBLE PREFERRED STOCK
Balance at beginning of year - - 120,387 $6,708
Redemption of 7%, 8%, and 10% Preferred 34,436 $2,066 - -
Conversion of debt 59,695 3,581 - -
Acquisitions 13,787 622 - -
Dividends payable-in-kind 12,469 337 8,575 278
Accretion of carrying value to amount
payable at redemption on June 30, 2000 - 102 - 114
Total Mandatorily Redeemable
----------- ------------ ----------- ------------
Preferred Stock 120,387 $6,708 128,962 $7,100
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CHANGES IN NON-MANDATORILY REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY
(IN THOUSANDS EXCEPT FOR SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
Year Ended Six Months Ended
December 31, 1996 June 30, 1997
---------------------------------- ----------------------------------
Shares Amount Shares Amount
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
SERIES A SPECIAL CONVERTIBLE
PREFERRED STOCK
Balance at beginning of year - - - -
Exercise of warrants - - 12,500 $3
Conversion to common stock - - (12,500) (3)
================ ---------------- ================ ----------------
Balance at end of period - - - -
================ ---------------- ================ ----------------
COMMON STOCK
Balance at beginning of year 2,855,350 $29 14,488,828 145
Company Equity Offering 6,750,000 68 1,012,500 10
Exercise of warrants and options 1,035,137 10 221,125 2
Acquisitions 2,860,608 28 - -
Conversion of 10% Non-voting Preferred 884,214 9 - -
Conversion of Series A Preferred - - 250,000 3
Other issuances of stock 103,519 1 124,747 1
================ ---------------- ================ ----------------
Balance at end of period 14,488,828 145 16,097,200 161
================ ---------------- ================ ----------------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 16,650 59,104
Company Equity Offering 18,228 2,815
Acquisitions 8,010 -
Warrants issued with debt 6,412 -
Conversion of 10% Non-voting Preferred 5,296 -
Issuance of Nominal Value Warrants 4,241 -
Other issuances of stock 267 373
---------------- ----------------
Balance at end of period 59,104 62,292
---------------- ----------------
ACCUMULATED DEFICIT
Balance at beginning of year (13,454) (42,544)
Net loss for the period (26,649) (2,452)
14% Preferred dividends payable-in-kind
and accretion (439) (392)
Redemption of 7%, 8%, and 10% Preferred (2,002) -
---------------- ----------------
Balance at end of period (42,544) (45,388)
---------------- ----------------
Total Non-mandatorily Redeemable
Preferred Stock, Common Stock and
Other Shareholders' Equity $16,705 $17,065
================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended June 30,
1996 1997
-------- --------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss ($10,047) ($2,452)
Adjustments to reconcile net loss to net cash flow from operating activities:
Depreciation and amortization 5,314 10,553
Issuance of Nominal Value Warrants 3,886 -
Stock issued in lieu of cash payments 21 -
Accretion of related parties debt 561 -
Equity in earnings of affiliate - (8)
Accretion of other debt 46 3
Loss on debt restructuring 339 -
Increase in allowance for doubtful accounts 61 495
Amortization of deferred revenues (300) (300)
Changes in assets and liabilities net of effects of acquisitions:
Net change in current assets (700) (4,080)
Net change in current liabilities 425 (2,081)
-------- --------
(394) 2,130
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisitions (14,952) (89,843)
Escrowed cash equivalents - Cherokee acquisition - 37,110
Acquisition deposits (1,300) (6,000)
Deferred charges on pending acquisitions - (881)
Deferred revenues - signing bonus 1,200 -
Deferred charges - commissions and signing bonuses (661) (843)
Change in other assets 236 (59)
Purchases of property and equipment (1,067) (2,643)
-------- --------
(16,544) (63,159)
-------- --------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from debt issuances - 101
Proceeds from related party debt 32,798 21,700
Principal payments on borrowings (10,272) (1,139)
Proceeds from issuance of common stock - 2,825
Debt issuance costs (4,166) (4,265)
Redemption of 10% Preferred and 8% Preferred (1,120) -
Proceeds from warrant and option exercises 10 5
-------- --------
17,250 19,227
-------- --------
Increase (decrease) in cash 312 (41,802)
Cash at beginning of period 713 46,438
-------- --------
Cash at end of period $1,025 $4,636
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS EXCEPT FOR INSTALLED PUBLIC PAY TELEPHONE, SHARE AND
- ------------------------------------------------------------------
PER SHARE AMOUNTS)
- ------------------
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the six and three months ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended December 31, 1996.
Certain amounts relating to 1996 have been reclassified to conform to
the current quarter presentation. The reclassifications have had no impact on
total assets, shareholders' equity or net loss as previously reported.
2. ACQUISITIONS AND MERGERS
Acquisitions completed during the six months ended June 30, 1997:
London Communications, Inc. - June 10, 1997 ("London") 2,519 installed
public pay telephones for $9,675.
Advance Pay Systems, Inc. - May 30, 1997 ("Advance") 800 installed public
pay telephones for $2,734.
American Public Telecom, Inc. - May 30, 1997 ("American") 859 installed
public pay telephones for $3,307.
Coinlink, LLC - February 14, 1997 ("Coinlink") 300 installed public pay
telephones for $942.
RSM Communications, Inc. - January 31, 1997 ("RSM") 292 installed public
pay telephones for $1,061.
Americom, Inc. - January 17, 1997 ("Americom") 99 installed public pay
telephones for $274.
Texas Coinphone - January 14, 1997 ("Texas Coinphone") 1,250 installed
public pay telephones for $3,746.
Cherokee Communications, Inc. - January 1, 1997 ("Cherokee") 13,131 public
pay telephones for a purchase price consisting of (before post-closing
adjustments): $52,812; $1,250 for non-competition agreements;
contingent consideration (aggregating $6,000) payable $3,000 on January
3, 1998 if rate guidelines are not implemented in 1997 and $3,000 on
January 3, 1999 if rate guidelines are not implemented in 1998; and
acquisition expenses of approximately $1,656. Additionally, the Company
acquired outstanding accounts receivable, prepaid expenses, deposits
and coin in the installed pay telephones aggregating $4,137, and
assumed accounts payable, accrued expenses, and vehicle debt
aggregating $5,750.
Acquisitions completed during the year ended December 31, 1996:
Amtel Communications Services - September 13, 1996 ("Amtel") 6,872
installed public pay telephones and inventory consisting of 728 public
pay telephones and related parts. Amtel's assets were acquired for a
purchase price consisting of $7,000 and 2,162,163 shares of Common
Stock (valued by an independent consultant at $2.15 per share, or
$4,638). Additionally, the Company incurred approximately $783 in
related acquisition expenses.
Pay Phones of America, Inc. - August 1, 1996 ("POA") 3,115 installed public
pay telephones for a purchase price consisting of: $500; 166,666 shares
of Common Stock (valued by an independent consultant at $1.87 per
share, or $312); assumption of $7,783 in capital lease obligations;
$3,634 in notes payable to the sellers; the assumption of $1,779 in
current liabilities and other debt; and two five-year non-competition
and consulting agreements for an aggregate value of $360. Additionally,
the Company incurred approximately $50 in related acquisition expenses.
International Pay Phones, Inc. of South Carolina ("IPP SC") and
International Payphones, Inc. of Tennessee ("IPP TN") - March 15, 1996
(referred to as "IPP") 2,101 installed public pay telephones for a
purchase
8
<PAGE> 9
price consisting of: $4,829; 555,589 shares of Common Stock
(valued at $4.51 per share, or $2,506); 5,453 shares of 14% Preferred,
valued at $246; and 117,785 warrants to purchase shares of Common Stock
at a nominal exercise price per share ("Nominal Value Warrants"),
valued at $139; $57 for three five year non-competition agreements; and
the assumption of approximately $588 in liabilities.
Paramount Communications, Inc. - March 15, 1996 ("Paramount") 2,528
installed public pay telephones for a purchase price consisting of:
$10,397; 8,333 shares of 14% Preferred, valued at $376; 179,996 Nominal
Value Warrants, valued at $443; the assumption of $245 in liabilities;
and included a five year consulting and non-competition agreement,
valued at $50.
PURCHASE PRICE ACCOUNTING
The above transactions have been accounted for as purchases and have
been included in the results of operations from the respective dates of
acquisition. The difference between the total purchase price and the current
assets and liabilities assumed has been allocated to property and equipment,
location contracts and non-compete agreements based on the relative fair values:
fair values of location contracts being determined using discounted cash flows
over the remaining estimated economic lives of the acquired location contracts.
The amount of the location contracts and non-competition agreements recorded for
each acquisition and the estimated economic life of the acquired location
contracts are as follows: London $8,563, 102 months; Advance $2,356, 120 months;
American $2,914, 103 months; Coinlink $838, 103 months; RSM $956, 112 months;
Americom $246, 120 months; Texas Coinphone $3,143, 101 months; Cherokee $53,746,
113 months; Amtel $10,136, 99 months; POA $12,054, 103 months; IPP $6,959, 97
months; and Paramount $10,116, 109 months. Acquired property and equipment is
depreciated over three to five years.
PRO FORMA FINANCIAL DATA (UNAUDITED)
Set forth below is the Company's unaudited pro forma condensed
statement of operations data as though the IPP, Paramount, POA, Amtel, Cherokee,
Texas Coinphone, Americom, RSM, Coinlink, American, Advance, and London
acquisitions had occurred at the beginning of 1996 and as though the Texas
Coinphone, Americom, RSM, Coinlink, American, Advance, and London acquisitions
had occurred at the beginning of 1997.
<TABLE>
<CAPTION>
Pro Forma Selected Results of Operations Data
Six Months Ended June 30, Three Months Ended June 30,
------------------------- ---------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenues $52,116 $59,963 $26,671 $29,648
Net loss before extraordinary
item (20,771) (7,377) (7,946) (3,810)
Net loss (21,038) (7,377) (8,037) (3,810)
Net loss applicable to
common shareholders (23,067) (7,769) (8,144) (4,005)
Net loss per common share (3.77) (0.49) (1.25) (0.25)
</TABLE>
The unaudited pro forma results above are not necessarily indicative of
either actual results of operations that would have occurred had the
acquisitions been made at the beginning of 1996 or 1997, or of future results.
The pro forma statement of operations data includes adjustments related to the
depreciation and amortization of tangible and intangible assets, interest
expense on borrowings used to finance the acquisitions and the weighted average
number of common shares outstanding after giving effect to the acquisitions and
excludes the assets and results of operations not acquired.
PENDING ACQUISITIONS
Communications Central, Inc. ("CCI") On March 14, 1997, (and
subsequently amended on May 15, 1997) the Company signed a definitive merger
agreement with CCI pursuant to a tender offer whereby the Company would acquire
all the outstanding shares of common stock and associated rights to purchase
such common stock for $12.85 per share in cash. The total cost of the
transaction, including debt to be assumed or refinanced and excluding related
fees, is approximately $172,000. The tender offer is conditioned upon, among
other things, 75% of the outstanding CCI shares, on a fully diluted basis, being
tendered and the receipt by the Company of financing sufficient to enable it to
consummate the transaction. CCI operates a network of approximately 26,000
installed public pay telephones and inmate telephones. Pursuant to the merger
agreement and
9
<PAGE> 10
the First Amendment dated May 15, 1997, the Company deposited $6,000 with CCI.
Of this amount $5,000 was advanced to CCI with the proviso that it would be
refunded to PhoneTel only if the tendered shares were insufficient for PhoneTel
to achieve a controlling position in CCI and $1,000 is refundable only under
certain limited conditions. When the acquisition of CCI is consummated such
deposit will be utilized to satisfy part of the purchase price. The $6,000 is
recorded as a non-current asset pending reclassification upon completion of the
acquisition. The Company's successful consummation of the CCI acquisition is
dependent upon, among other things, its ability to raise sufficient debt and
equity to finance its tender offer. The uncertainties surrounding dial-around
compensation, as discussed in Note 8 - Commitments and Contingencies, have
raised questions concerning the amount offered for the shares of CCI as well as
questions concerning the Company's ability to service the debt it must incur to
finance its purchase of CCI.
On July 22, 1997, the Company and CCI jointly announced that they are
engaged in discussions concerning a possible restructuring of the terms of the
acquisition in light of the recent Court (as defined herein) decision. Further
on August 5, 1997, the Company announced that it extended it's tender offer to
August 18, 1997. Should the Company be unable to consummate its acquisition of
CCI, the $6,000 advanced for CCI would be forfeited. In addition, the Company
has incurred professional fees and related expenses of approximately $1,000 as
of June 30, 1997, in connection with the CCI acquisition and related offerings,
recorded as a non-current asset pending reclassification upon completion of the
acquisition. As the Company is unable to determine the probability of a loss,
much less a range of potential loss, no reserve has been made in the Company's
financial statements.
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives December 31, June 30,
(in years) 1996 1997
---------- ---- ----
<S> <C> <C> <C>
Telephones, boards, enclosures and cases 3-10 $ 25,784 $ 36,907
Furniture, fixtures and other equipment 3-5 1,751 2,585
Leasehold improvements 2-5 249 251
--------- ----------
27,784 39,743
Less - accumulated depreciation (8,541) (11,758)
--------- ----------
$ 19,243 $ 27,985
========= ==========
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
Amortization Period December 31, June 30,
(in months) 1996 1997
----------- ---- ----
<S> <C> <C> <C>
Value assigned to location contracts
acquired and installation of public
pay telephones 60-120 $ 53,862 $ 132,375
Deferred financing costs 120 5,851 10,117
Non-competition agreements 24-60 2,099 3,728
State operating certifications 60 524 527
--------- ---------
62,336 146,747
Less - accumulated amortization (10,192) (17,328)
--------- ---------
$ 52,144 $ 129,419
========= =========
</TABLE>
5. RELATED PARTY LONG TERM DEBT
On May 30, 1997, the Company obtained a $75,000 credit facility from
Various Lenders and ING (U.S.) Capital Corporation, as the agent for the
Lenders, ("ING") and Transamerica Business Credit Corporation and Finova Capital
Corporation, as Co-agents for the Lenders., (collectively referred to as "$75
million Credit Facility").
10
<PAGE> 11
The $75 million Credit Facility commitment includes $60,000 for future
acquisitions, and $15,000 for general working capital. Borrowings accrue
interest at the ING Alternate Base Rate (as defined therein) plus 1.50%. The $75
million Credit Facility matures on May 20, 2000 and all the Company's installed
public pay telephones are pledged as collateral. The Company borrowed $17,700
(of the $60,000 acquisition commitment) to complete the acquisitions of Advance,
American, and London; and to pay related acquisition and credit facility fees.
Also, the Company borrowed $4,000 (of the $15,000 general working capital
commitment) for interest payments due under the $125,000,000 12% Senior Notes.
6. PREFERRED STOCK MANDATORILY REDEEMABLE
Mandatorily redeemable preferred stock consisted of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
---- ----
<S> <C> <C>
14% Cumulative Redeemable Convertible Preferred Stock
($60 stated value - 200,000 shares authorized; 107,918 shares
issued and outstanding, cumulative dividends issuable of 12,469
shares at December 31, 1996 (valued at $337) and 21,043 shares
at June 30, 1997, (valued at $615); mandatory redemption
amount of $7,476 and $7,738, respectively, due June 30, 2000 $ 6,708 $ 7,100
</TABLE>
The Company records dividends, declared and undeclared, at their fair
market value and recognizes the difference between the carrying value of the 14%
Preferred and the mandatory redemption amount, through monthly accretions, using
the interest method. For the six months ended June 30, 1997, the carrying value
of the 14% Preferred was increased by $114 through accretions. Each share of 14%
Preferred is entitled to receive a quarterly dividend of 0.035 shares of 14%
Preferred. Each share of 14% Preferred is convertible into 10 shares of Common
Stock.
7. NON-MANDATORILY REDEEMABLE PREFERRED STOCK, COMMON STOCK AND OTHER
SHAREHOLDERS' EQUITY
Non-mandatorily redeemable preferred stock, common stock, and other
shareholders' equity consisted of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
---- ----
<S> <C> <C>
Series A Special Convertible Preferred Stock
($0.20 par value, $0.20 stated value - 250,000
shares authorized; no shares outstanding) - -
Common Stock
($0.01 par value - 50,000,000 shares authorized;
14,488,828 and 16,097,200 shares issued and
outstanding at December 31, 1996 and
June 30, 1997, respectively) $ 145 $ 161
Additional paid-in capital 59,104 62,292
Accumulated deficit (42,544) (45,388)
------ ------
$ 16,705 $ 17,065
====== ======
</TABLE>
During January 1997, the Company's underwriters exercised their
Over-Allotment Option (pursuant to the Company's Equity Offering completed on
December 18, 1996, wherein the Company sold 6,750,000 shares of Common Stock at
a price to the public of $3.00 per share) and sold an additional 1,012,500
shares of Common Stock for $2,825 in net proceeds. During the three months ended
March 31, 1997, directors of the Company exercised 221,125 options with net
proceeds to the Company of $2 and a former lender to the Company exercised
options for 12,500 shares of Series A Special Convertible Preferred (with net
proceeds to the Company of $3) which the lender then immediately converted into
250,000 shares of Common Stock. On January 2, 1997, an executive officer of the
Company converted an outstanding loan and accrued interest of $374 to 124,747
shares of Common Stock.
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8. COMMITMENTS AND CONTINGENCIES
On September 20, 1996, the Federal Communication Commission ("FCC")
adopted rules which implemented the public pay telephone provisions of Section
276 of the Telecommunications Act enacted on February 8, 1996. Included in the
adopted rules were mandated changes to dial-around compensation. Pursuant to
this, effective November 6, 1996, compensation for access provided callers to
any carrier other than the presubscribed carrier (commonly referred to as
"dial-around" access), was mandated at the rate of $45.85 per telephone per
month, as compared with the flat fee of $6.00 per telephone per month in place
prior to November 6, 1996. Commencing October 7, 1997, and ending October 6,
1998, the $45.85 per telephone per month rate will change to a rate of $0.35 per
call. Thereafter, the dial-around rate will be at a per-call rate equal to the
local coin call rate. A number of parties filed petitions for judicial review of
certain of the FCC implementing regulations (including the dial-around rules).
On July 1, 1997, the U.S. Court of Appeals for the District of Columbia
Circuit (the "Court") responded to appeals related to the FCC's November 6,
1996, Pay Phone Order by remanding certain issues to the FCC for
reconsideration. These issues included, among other things, the manner in which
the FCC established the dial-around compensation for 800 and access code calls,
the manner in which the FCC established the interim dial-around compensation
plan and the basis on which inter-exchange carriers (IXC's) would be required to
compensate the pay phone providers.
In particular, the FCC had mandated that the compensation rate for 800
and access code calls should be equal to the deregulated local coin rate. The
FCC based this mandate on its conclusion that the costs of coin calls, 800 calls
and access codes are all similar. However, the Court found that the FCC failed
to respond to any of the data showing that the costs of different types of pay
phones calls are not similar. The FCC did not provide any reason for its
decision not to provide the additional data; accordingly, the Court found that
the FCC's conclusion that compensation for 800 and access code calls should be
set at the deregulated local coin rate was unjustified and remanded this issue
to the FCC for further consideration. Additionally, since the decision by the
FCC to set compensation for 800 and access code calls at the deregulated rate
was remanded, the $.35 rate used to establish the interim dial-around
compensation, and which was an attempt to approximate the deregulated rate, was
also remanded. The Court found that the FCC must set a new interim rate and
decide how to adjust it when the interim period has come to an end. Finally, the
Court found that the FCC acted arbitrarily and capriciously in requiring
payments only from large IXC's, nor did the FCC justify why it based its interim
plan on total toll revenues. Accordingly, these issues were also remanded to the
FCC.
The Company has, since November 6, 1996, recognized gross dial-around
compensation at the rate of $45.85 per month per phone. The incremental
dial-around revenue (over the previously mandated $6.00 per phone per month)
recorded in 1996 pursuant to Section 276 of the Telecommunications Act was
$1,943, and for the six months ended June 30, 1997 was $9,389. As of June 30,
1997, the Company has net accounts receivable relating to dial-around
compensation in the amount of $11,259. This amount is comprised of $376 for the
fourth quarter of 1996, $5,362 for the first quarter of 1997 and $5,521 for the
second quarter of 1997. Subsequent to June 30, 1997, the Company collected
$4,022 in dial-around compensation relating to the first quarter of 1997.
At this time, as a result of the Court remanding the pay phone ruling
to the FCC, uncertainties exist surrounding the timing, nature of and extent of
changes, if any, to the dial-around compensation and whether such changes, if
any, would be retroactive or prospective. Accordingly, the Company has continued
to recognize gross dial-around compensation at the currently mandated rates and
has not provided any amount for potential losses due to the Court action, since
a range of loss is indeterminate at this time. A significant reduction in the
dial-around compensation rate would have a material adverse effect on the
Company's results.
9. NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standard Board ("FASB") issued
Statement No. 128, "Earnings per Share" which specifies the computation,
presentation, and disclosure requirements for earnings per share ("EPS") for
publicly held entities. This Statement is effective for financial statements for
both interim and annual
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periods ending after December 15, 1997. Earlier application is not permitted.
Adoption of SFAS No. 128 is not expected to have a material impact on the
Company.
In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", ("SFAS No. 130"), was issued. This statement
establishes standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. This Statement
is effective for fiscal years beginning after December 15, 1997. Adoption of
SFAS No. 130 is not expected to have a material impact on the Company.
In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information", ("SFAS No. 131"). This
statement requires that a public business enterprise report a measure of segment
profit or loss, certain specific revenue and expense items, and segment assets.
This Statement is effective for financial statements for the periods beginning
after December 15, 1997. Management has not evaluated the impact of this
Statement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (IN THOUSAND OF DOLLARS EXCEPT FOR PUBLIC PAY
TELEPHONES, PER CALL, SHARE AND PER SHARE AMOUNTS)
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
Statements, other than historical facts, contained in this Quarterly
Report on Form 10-QSB, are "forward looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
its forward looking statements are based on reasonable assumptions, it cautions
that such statements are subject to a wide range of risks and uncertainties with
respect to the Company's operations in fiscal 1997 as well as over the long term
such as, without limitation, (i) a downturn in the public pay telephone industry
which is dependent on consumer spending and subject to the impact of domestic
economic conditions, changes in technology, and regulations and policies
regarding the telecommunications industry; (ii) the ability of the Company to
accomplish its strategic objectives with respect to external expansion through
selective acquisitions and internal expansion; and (iii) increases in the
dial-around compensation rate and the coin drop rate. Any or all of these risks
and uncertainties could cause actual results to differ materially from those
reflected in the forward looking statements. These forward looking statements
are based on certain assumptions and analyses made by the Company in light of
its experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes are appropriate in
the circumstances. In addition, such statements are subject to a number of
assumptions, risks and uncertainties, including, without limitation, the risks
and uncertainties identified in this Report, general economics and business
conditions, the business opportunities (or lack thereof) that may be presented
to and pursued by the Company, changes in laws or regulations and other factors,
many of which are beyond the control of the Company. Investors and prospective
investors are cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ materially from
those projected in the forward looking statements.
PENDING ACQUISITIONS
On March 14, 1997, (and subsequently amended on May 15, 1997) the
Company signed a definitive merger agreement with CCI pursuant to a tender
offer whereby the Company will acquire all of CCI's outstanding common stock
and associated rights to acquire such common stock for $12.85 per share in
cash. The total cost of the transaction, including debt to be assumed or
refinanced and excluding related fees, is approximately $172,000. The tender
offer is conditioned upon, among other things, 75% of the outstanding CCI
shares, on a fully diluted basis, being tendered and the receipt by the Company
of financing sufficient to enable it to consummate the transaction. CCI
operates a network of approximately 26,000 installed public pay telephones and
inmate telephones. Pursuant to the merger agreement and the First Amendment
dated May 15, 1997, the Company deposited $6,000 with CCI. Of this amount
$5,000 was advanced to CCI with the proviso that it would be refunded to
PhoneTel only if the tendered shares were insufficient for PhoneTel to achieve
a controlling position in CCI and $1,000 is refunded under certain limited
conditions. When the acquisition of CCI is consummated such deposit will be
utilized to satisfy part of the purchase price. The $6,000 is recorded as a
non-current asset pending reclassification upon completion of the acquisition.
The Company's successful consummation of the CCI
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<PAGE> 14
acquisition is dependent upon, among other things, its ability to raise
sufficient debt and equity to finance its tender offer. The uncertainties
surrounding dial-around compensation, as discussed in Note 8 - Commitments and
Contingencies, have raised questions concerning the amount offered for the
shares of CCI as well as questions concerning the Company's ability to service
the debt it must raise to finance its purchase of CCI.
On July 22, 1997, the Company and CCI jointly announced that they are
engaged in discussions concerning a possible restructuring of the terms of the
acquisition in light of the recent Court (as defined herein) decision. Further
on August 5, 1997, the Company announced that it extended it's tender offer to
August 18, 1997. Should the Company be unable to consummate its acquisition of
CCI, the $6,000 advanced for CCI would be forfeited. In addition the Company has
incurred professional fees and related expenses of approximately $1,000 as of
June 30, 1997, in connection with the CCI acquisition and related offerings,
recorded as a non-current asset pending completion of the acquisition. As the
Company is unable to determine the probability of a loss, much less a range of
potential loss, no reserve has been made in the Company's financial statements.
COMPLETED ACQUISITIONS
Acquisitions completed during the six months ended June 30, 1997:
London - June 10, 1997, 2,519 installed public pay telephones for
$9,675.
Advance - May 30, 1997, 800 installed public pay telephones for $2,734.
American - May 30, 1997, 859 installed public pay telephones for $3,307.
Coinlink - February 14, 1997, 300 installed public pay telephones for $942.
RSM - January 31, 1997, 292 installed public pay telephones for $1,061.
Americom - January 17, 1997, 99 installed public pay telephones for $274.
Texas Coinphone - January 14, 1997, 1,250 public installed pay telephones
for $3,746.
Cherokee - January 1, 1997, 13,131 public pay telephones for a purchase
price consisting of (before post-closing adjustments): $52,812; $1,250
for non-competition agreements; contingent consideration (aggregating
$6,000) payable $3,000 on January 3, 1998 if rate guidelines are not
implemented in 1997 and $3,000 on January 3, 1999 if rate guidelines
are not implemented in 1998; and incurred related acquisition expenses
of approximately $1,656. Additionally, the Company acquired outstanding
accounts receivable, prepaid expenses, deposits and coin in the
installed pay telephones aggregating $4,137, and assumed accounts
payable, accrued expenses, and vehicle debt aggregating $5,750.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Revenues. Revenues increased $38,573, or 229.5%, from $16,806 for the
six months ended June 30, 1996 to $55,379 for the six months ended June 30,
1997. This increase is attributable primarily to the number of installed public
pay telephones, which increased by 30,318, or 208.2%, from 14,561 at June 30,
1996 to 44,879 at June 30, 1997, with the majority of the increase occurring in
the third quarter of 1996 and the first quarter of 1997 due to the Company's
recent acquisitions, and the increase in the mandated monthly dial-around rate.
Revenues from coin calls increased $17,731, or 170.3%, from $10,411 for
the six months ended June 30, 1996 to $28,142 for the six months ended June 30,
1997. Non-coin telecommunication services increased $20,804, or 341.3%, from
$6,095 for the six months ended June 30, 1996 to $26,899 for the six months
ended June 30, 1997. The increases were primarily due to the acquisition and
installation of public pay telephones producing additional revenues and the
increase in the monthly dial-around rate. Dial-around revenues increased
$10,840, or 2,007.4%, from $540 for the six months ended June 30, 1996 to
$11,380 for the six months ended June 30, 1997. Dial-around revenues represented
3.2% of total revenues for the six months ended June 30, 1996 and 20.5% of total
revenues for the six months ended June 30, 1997, an increase of 17.3%. This
increase was due to the increase in the number of public pay telephones and the
FCC mandated changes in the dial-around rate, pursuant to the February 8, 1996
enactment of Section 276 of the Telecommunications Act. Effective November 6,
1996, the Company recognizes gross dial-around revenues at the mandated rate of
$45.85 per telephone per month, as compared with the flat fee of $6.00 per
telephone per month in place prior to November 6, 1996. Commencing October 7,
1997 and ending October 6, 1998, the $45.85 per telephone per month rate will
change to a rate of $0.35 per call. Thereafter, the
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<PAGE> 15
dial-around rate will be at a per-call rate equal to the local coin call rate. A
number of parties have filed petitions for judicial review of certain of the FCC
implementing regulations (including the dial-around rules) in federal courts of
appeal. The cases initiated by these petitions were consolidated in a single
proceeding before the U.S. Court of Appeals for the District of Columbia Circuit
(the "Court"). On July 1, 1997 the Court remanded certain portions of the FCC
Ruling to the FCC for reconsideration (see above and Note 8 Commitments and
Contingencies).
Other revenues increased $38 from $300 for the six months ended June
30, 1996 to $338 for the six months ended June 30, 1997.
Operating Expenses. Total operating expenses increased $26,011, or
106.2%, from $24,497 for the six months ended June 30, 1996 to $50,508 for the
six months ended June 30, 1997. Operating expenses represented 145.8% of total
revenues for the six months ended June 30, 1996 and 91.2% of total revenues for
the six months ended June 30, 1997, a decrease of 54.6%. The percentage decrease
was due to the absence of other unusual charges and contractual settlements for
the six months ended June 30, 1997 as compared to $5,335 of such charges for the
six months ended June 30, 1996 and lower operating and administrative costs (as
a percentage of total revenues) offset by higher depreciation and amortization
resulting from the acquisitions. A portion of the decrease in the percentage is
also due to the additional dial-around compensation as discussed in non-coin
telecommunication services above.
Line and transmission charges increased $7,967, or 206.1%, from $3,866
for the six months ended June 30, 1996 to $11,833 for the six months ended June
30, 1997. Line charges represented 23.0% of total revenues for the six months
ended June 30, 1996 and 21.4% of total revenues for the six months ended June
30, 1997, a decrease of 1.6%. The dollar increase in line and transmission
charges was due principally to additional public pay telephones acquired in the
acquisitions. The percentage decrease was due to higher dial-around revenues. On
a per phone basis, line and transmission charges have remained generally
constant between 1996 and 1997.
Telecommunication and validation fees (consisting primarily of
processing costs relating to operator services) increased $3,600, or 154.1%,
from $2,336 for the six months ended June 30, 1996 to $5,936 for the six months
ended June 30, 1997. Telecommunication and validation fees represented 13.9% of
total revenues for the six months ended June 30, 1996 and 10.7% for the six
months June 30, 1997, a decrease of 3.2%. The dollar increase was primarily the
result of the increase in the number of installed public pay telephones and the
outsourcing of operator services after the first quarter of 1996. The percentage
decrease was mostly due to the effect of the increase in dial-around revenues on
total revenues.
Location commissions increased $4,330, or 199.4%, from $2,171 for the
six months ended June 30, 1996 to $6,501 for the six months ended June 30, 1997.
Location commissions represented 12.9% of total revenues for the six months
ended June 30, 1996 and 11.7% of total revenues for the six months ended June
30, 1997, a decrease of 1.2%. The dollar increase is due to the acquired
location agreements. The percentage decrease is due to economies of scale
resulting from the acquisitions and the effect of the increase in dial-around
revenues.
Field operations (consisting principally of field operations personnel
costs, rents and utilities of the local service facilities and repair and
maintenance of the installed public pay telephones) increased $7,686, or 227.9%,
from $3,372 for the six months ended June 30, 1996 to $11,058 for the six months
ended June 30, 1997. Field operations represented 20.1% of total revenues for
the six months ended June 30, 1996 and 20.0% of total revenues for the six
months ended June 30, 1997. The dollar increase was primarily the result of
higher operating and service costs attributable to the acquisitions and the
resulting increased number of public pay telephone base and the additional field
personnel to accommodate that increase.
Selling, general and administrative ("SG&A") expenses increased $2,524,
or 120%, from $2,103 for the six months ended June 30, 1996 to $4,627 for the
six months ended June 30, 1997. SG&A represented 12.5% of total revenues for the
six months ended June 30, 1996 and 8.4% of total revenues for the six months
ended June 30, 1997, a decrease of 4.1%. The dollar increase was primarily the
result of the acquisitions and the percentage decrease reflects the economies of
scale resulting from those acquisitions that the Company has already realized
and the effect of the increase in dial-around revenues.
Depreciation and amortization increased $5,239, or 98.6%, from $5,314
for the six months ended June 30, 1996 to $10,553 for the six months ended June
30, 1997. Depreciation and amortization represented 31.6% of total revenues for
the six months ended June 30, 1996 and 19.1% of total revenues for the six
months ended June 30, 1997, a decrease of 12.5%. The dollar increase was
primarily due to the Company's acquisitions and expansion of
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<PAGE> 16
its public pay telephone base and purchases of additional computer
equipment, service vehicles and software to accommodate the Company's growth.
The percentage decrease is due, in part, to a change in the estimated remaining
economic life of acquired location contracts, which became effective in the
fourth quarter of 1996. This change is expected to decrease depreciation and
amortization by $2,645 each year.
Other unusual charges and contractual settlements decreased $5,335, or
100%, from $5,335 for the six months ended June 30, 1996 to nil for the six
months ended June 30, 1997. For the six months ended June 30, 1996, other
unusual charges and contractual settlements consisted primarily of: (i) the
settlement of contractual obligations under certain employment contracts, $325;
(ii) the write-off of selected assets in connection with the continued
evaluation of the Company's operations and certain one-time charges for changes
to the operations of the Company, $282; (iii) losses recognized on the early
pay-off of obligations under capital leases and other debt concurrent with the
debt restructuring completed on March 15, 1996, $630; (iv) the estimated fair
market value of the Nominal Value Warrants charged to operations, $3,886; and
(v) the settlement of other contractual obligations, $212. Other unusual charges
and contractual settlements represented 31.7% of total revenues for the six
months ended June 30, 1996.
Other income (expense). Other income (expense) is comprised principally
of interest expense incurred on debt and interest income. Total interest expense
increased $5,689, or 272.1%, from $2,091 for the six months ended June 30, 1996
to $7,780 for the six months ended June 30, 1997. Interest expense represented
12.4% of total revenues for the six months ended June 30, 1996 and 14% of total
revenues for the six months ended June 30, 1997, an increase of 1.6% as a result
of the additional incurred debt from the Company's Debt Offering in December
1996. Interest income represented .8% of total revenues for the six months ended
June 30, 1997, and resulted from the investment of acquisition deposits and
excess operating cash.
Extraordinary item. The Company recorded an extraordinary loss of $267,
representing 1.6% of total revenues for the six months ended June 30, 1996. The
extraordinary loss related to one-time costs that were incurred in connection
with the refinancing of the Company's long-term debt. Concurrent with the
refinancing of the Company's debt and the redemption of the 10%, 8% and 7%
Preferred, the Company recorded the difference between the carrying value of the
10%, 8% and 7% Preferred and the redemption price as an increase to the
accumulated deficit of $2,002.
EBITDA. EBITDA (income before interest income, interest expense, taxes,
depreciation and amortization, other unusual charges and contractual
settlements, and the extraordinary loss on debt refinancing) increased $12,466,
or 421.4%, from $2,958 for the six months ended June 30, 1996 to $15,424 for the
six months ended June 30, 1997. EBITDA represented 17.6% of total revenues for
the six months ended June 30, 1996 and 27.9% of total revenues for the six
months ended June 30, 1997, an increase of 10.3%. The increase in EBITDA, both
in dollar and as a percentage of revenues, is attributable primarily to the
increase in dial-around compensation and, to a lesser extent to the synergies of
integration of the Company 's numerous acquisitions. EBITDA is not intended to
represent an alternative to operating income (as defined in accordance with
generally accepted accounting principles) as an indicator of the Company's
operating performance, or as an alternative to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of liquidity. The Company believes that EBITDA is a
meaningful measure of performance because it is commonly used in the public pay
telephone industry to analyze comparable public pay telephone companies on the
basis of operating performance, leverage and liquidity.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows. The Company had working capital of $7,544 at June 30, 1997,
compared to $39,491 at December 31, 1996, a decrease of $31,947, resulting from
the acquisitions completed in 1997 and the placement of acquisition deposits for
the pending acquisition. Net cash provided by (used in) operating activities
during the six months ended June 30, 1996 and 1997 were ($394) and $2,130,
respectively. Net cash provided by operations resulted mainly from the reduction
in the net loss for the six months ended June 30, 1997, and the increase in
depreciation and amortization.
Cash used in investing activities during the six months ended June 30,
1996 and 1997 were $16,544 and $63,159, respectively. Cash used in investing
activities consisted primarily of payments and deposits to acquire companies and
purchases of property and equipment, offset (in 1997 only) by the release of the
escrowed cash equivalents for the closing of the Cherokee acquisition.
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Cash flows provided by financing activities during the six months ended
June 30, 1996, and 1997 were $17,250 and $19,227, respectively, which in 1997
consisted primarily of additional related party borrowings and the net proceeds
from the exercise of the underwriters' Over-Allotment Option (wherein the
underwriters' purchased 1,012,500 additional shares of Common Stock, at a net
purchase price of $2.79 per share pursuant to the Company Equity Offering
completed on December 18, 1996, wherein the Company sold 6,750,000 shares of
Common Stock at a price to the public of $3.00 per share) offset by additional
Debt Offering expenses arising from the sale of $125,000,000 aggregate principal
amount of its 12% Senior Notes due 2006. Cash flows provided by financing
activities during the six months ended June 30, 1996 of $17,250 resulted from
the $32,798 borrowed mostly to acquire IPP and Paramount offset by the repayment
of $10,272 in debt, the redemption of $1,120 in preferred stock, and the payment
of $4,166 in refinancing fees. As of August 14, 1997, the Company has available
under the $75 million Credit Facility $53,300, consisting of $42,300 for future
acquisitions and $11,000 for general working capital purposes.
The Company intends to fund the pending acquisition (CCI) with debt
and/or equity offerings and senior secured debt.
Management believes, but cannot assure, that cash flows from operations
and other financial alternatives, including contemplated debt and equity
offerings which are necessary to complete the pending acquisition and could be
used to repay certain debt, will be sufficient to meet the Company's cash
requirements for working capital, capital expenditures and debt service over the
next twelve months.
CAPITAL EXPENDITURES
For the six months ended June 30, 1997, the Company had capital
expenditures (exclusive of acquisitions) of $2,643, which were financed through
cash flows from operations and net proceeds from the Company Debt Offering and
the Company Equity Offering. Capital expenditures are principally for the
expansion of the Company's installed public pay telephone base and include
purchases of telephones, related equipment, site contracts, operating equipment
and computer hardware.
SEASONALITY
The Company completed three acquisitions, which added 4,629 public pay
telephones, in the first six months of 1996, and eight acquisitions, that added
19,250 public pay telephones, during the first six months of 1997. The
seasonality of the Company's historical operating results has been reduced by
shifts in the geographic concentrations of its public pay telephones resulting
from such acquisitions which are located principally in the southeastern,
southwestern, and western United States compared to the historical concentration
in the mid-western United States.
YEAR 2000 ISSUES
The Company expects to meet the management system requirements of the
year 2000 as they relate to its financial reporting and pay telephone systems
with current systems in place.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 30, 1997, the Company held it's Annual Meeting of shareholders.
Total shares eligible to vote as of the record date were 16,097,200 and total
shares voted were 9,955,606, or 61.8%.
The following Proposal was NOT APPROVED by the Shareholders at the Annual
Meeting of Shareholders:
Proposal 1 - Amendment of the Code of Regulations to Establish a
Classified Board of Directors so that the Board of Directors could be classified
into two classes, serving staggered two-year terms and to adopt certain related
amendments which would also provide that Directors can only be removed for
"cause" and require a 75% vote of
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shareholders to change these amendments, increase or decrease the size of the
Board of Directors or remove Directors for "cause". For 5,147,998, 32%; Withhold
467,417, 2.9%; and Not Voted 4,340,191, 27%.
The following Proposals WERE APPROVED by the Shareholders at the Annual Meeting
of Shareholders:
Proposal 2 - Election of Directors. The following nominees for director
of the Company, as listed in the proxy statement were elected: Peter Graf - For
9,839,687, 99.1%; Withhold 86,722, 0.9%; Nickey Maxey - For 9,854,091, 99%,
Withhold 87,008, 0.9%; George Henry - For 9,868,884, 99%; Withhold 86,722, 0.9%;
Aron Katzman For 9,854,091, 99%; Withhold 101,515, 1%; Steven Richman - For
9,545,491, 95.9%; Withhold 410,115, 4.1%; and Joseph Abrams - For 9,869,050,
99%; Withhold 86,556, 0.9%.
Proposal 3 - Ratification and Approval of the PhoneTel Technologies, Inc.
1997 Stock Incentive Plan. A stock incentive plan whereby 2,000,000 shares of
the Company's Common Stock would become available for distribution to the
Company's officers, directors, employees and independent contractors. For
5,441,235, 54.7%; Withhold 544,658, 5.5%; and Not Voted 3,969,713, 39.9%.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
(10.1) First Supplemental Indenture, dated as of January 3, 1997,
supplementing the Indenture, Dated as of December 18, 1996, among
PhoneTel Technologies, Inc., the Subsidiary Guarantors named on
Schedule I thereto and Marine Midland Bank, as Trustee, $125,000,000
12% Senior Notes Due 2006.
(10.2) Second Supplemental Indenture, dated as of May 29, 1997,
supplementing the Indenture, Dated as of December 18, 1996, as
supplemented by the First Supplemental Indenture dated as of January 3,
1997, among PhoneTel Technologies, Inc., the Subsidiary Guarantors
named on Schedule I thereto and Marine Midland Bank, as Trustee,
$125,000,000 12% Senior Notes Due 2006.
(10.3) First Amendment to Agreement and Plan of Merger by and among
PhoneTel Technologies, Inc., PhoneTel Acquisition Corp. and
Communications Central Inc. dated as of May 15, 1997.
(10.4) $75,000,000 Credit Agreement dated as of May 30, 1997 among PhoneTel
Technologies, Inc. as the Borrower, Various Lenders and ING (U.S.)
Capital Corporation, as the Agent for the Lenders and Transamerica
Business Credit Corporation and Finova Capital Corporation, as
Co-Agents for the Lenders.
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the second quarter of
1997.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PHONETEL TECHNOLOGIES, INC.
August 13, 1997 By: /s/ Peter G. Graf
----------------------------------
Peter G. Graf
Chairman of the Board and
Chief Executive Officer
August 13, 1997 By: /s/ Richard Kebert
--------------------------------
Richard Kebert
Chief Financial Officer and
Treasurer
(Principal Financial Officer and
Accounting Officer)
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<PAGE> 20
EXHIBITS
(10.1) First Supplemental Indenture, dated as of January 3, 1997,
supplementing the Indenture, Dated as of December 18, 1996, among
PhoneTel Technologies, Inc., the Subsidiary Guarantors named on
Schedule I thereto and Marine Midland Bank, as Trustee, $125,000,000
12% Senior Notes Due 2006.
(10.2) Second Supplemental Indenture, dated as of May 29, 1997,
supplementing the Indenture, Dated as of December 18, 1996, as
supplemented by the First Supplemental Indenture dated as of January 3,
1997, among PhoneTel Technologies, Inc., the Subsidiary Guarantors
named on Schedule I thereto and Marine Midland Bank, as Trustee,
$125,000,000 12% Senior Notes Due 2006.
(10.3) First Amendment to Agreement and Plan of Merger by and among
PhoneTel Technologies, Inc., PhoneTel Acquisition Corp. and
Communications Central Inc. dated as of May 15, 1997.
(10.4) $75,000,000 Credit Agreement dated as of May 30, 1997 among PhoneTel
Technologies, Inc. as the Borrower, Various Lenders and ING (U.S.)
Capital Corporation, as the Agent for the Lenders and Transamerica
Business Credit Corporation and Finova Capital Corporation, as
Co-Agents for the Lenders.
(27) Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
-----------------------------------------------------
PHONETEL TECHNOLOGIES, INC.,
As Issuer,
THE SUBSIDIARY GUARANTORS
Named on Schedule I hereto
AND
MARINE MIDLAND BANK,
As Trustee
---------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of January 3, 1997
Supplementing the Indenture, Dated
as of December 18, 1996, among
PhoneTel Technologies, Inc., the
Subsidiary Guarantors named on
Schedule I thereto and
Marine Midland Bank, as Trustee
---------------------------
$125,000,000
12% SENIOR NOTES DUE 2006
-----------------------------------------------------
<PAGE> 2
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of January 3, 1997
(the "First Supplemental Indenture"), is by and among (i) PHONETEL TECHNOLOGIES,
INC., an Ohio corporation (the "Company"), as issuer of the 12% Senior Notes due
2006 (the "Notes"), (ii) each Subsidiary of the Company existing on the date of
this Supplemental Indenture as set forth on Schedule I hereto and each of the
Company's Subsidiaries which becomes a guarantor of the Notes in compliance with
Section 4.15 of the Indenture referred to herein in which such Subsidiary agrees
to be bound by the terms of the Indenture, as guarantors of the Company's
obligations under the Indenture and the Notes (each, a "Subsidiary Guarantor"),
and (iii) Marine Mid-land Bank, as trustee (the "Trustee").
WHEREAS, the Company, the Subsidiary Guarantors as of December
18, 1996 (the "Issue Date") and the Trustee heretofore executed and delivered an
Indenture, dated as of December 18, 1996 (the "Indenture"); and
WHEREAS, pursuant to the Indenture the Company issued and the
Trustee authenticated and delivered $125 million aggregate principal amount of
the Notes, which Notes were guaranteed by each of the Company's Subsidiaries
listed on Schedule I to the Indenture; and
WHEREAS, the Company and PhoneTel CCI, Inc., a Texas
corporation and one of the Subsidiary Guarantors ("PhoneTel CCI"), have entered
into the Agreement and Plan of Merger, dated as of November 21, 1996, as amended
on December 31, 1996, with Cherokee Communications, Inc., a Texas corporation
("Cherokee"), and all of the shareholders of Cherokee (as supplemented, the
"Cherokee Merger Agreement") pursuant to which PhoneTel CCI will merge with and
into Cherokee with Cherokee being the surviving corporation (the "Merger") on
the date hereof; and
WHEREAS, as a result of the Merger, Cherokee and its two
wholly owned subsidiaries, Cherokee Communications, Inc., a South Dakota
corporation ("Cherokee-SD"), and Cherokee Communications, Inc., a Nevada
corporation ("Cherokee-NV"), will each become a Subsidiary of the Company and
PhoneTel CCI will cease to exist; and
WHEREAS, Section 4.15 of the Indenture provides
that the Company shall cause each Subsidiary of the
2
<PAGE> 3
Company acquired after the Issue Date to issue a Subsidiary Guarantee and to
execute and deliver an indenture supplemental to the Indenture as a Subsidiary
Guarantor; and
WHEREAS, Section 10.01(e) of the Indenture provides that in
the case of any merger of a Subsidiary Guarantor, in this case PhoneTel CCI,
into a corporation other than the Company or another Subsidiary Guarantor, as is
the case in the Merger, the Surviving Person, in this case, Cherokee, shall
expressly assume all the obligations under such Subsidiary Guarantor's
Subsidiary Guarantee and the Indenture; and
WHEREAS, Section 9.01 of the Indenture provides that the
Company, the Subsidiary Guarantors and the Trustee may amend the indenture and
the Notes without the consent of any Holder of the Notes in order to add
additional Subsidiary Guarantors pursuant to Section 4.15 of the Indenture; and
WHEREAS, this First Supplemental Indenture has been duly
authorized by all necessary corporate action on the part of the Company and the
Subsidiary Guarantors.
NOW, THEREFORE, the Company, the Subsidiary Guarantors listed
on Schedule I hereto and the Trustee agree as follows for the equal and ratable
benefit of each other and the Holders of the Notes:
3
<PAGE> 4
ARTICLE I
ASSUMPTION BY SUCCESSOR CORPORATION
SECTION 1.1. ASSUMPTION OF THE SUBSIDIARY GUARANTEE OF
PHONETEL CCI. Cherokee hereby expressly assumes the obligations of PhoneTel CCI
under its Subsidiary Guarantee and all of PhoneTel CCI's obligations under the
Indenture.
SECTION 1.2. ADDITION OF SUBSIDIARY GUARANTORS. Each of
Cherokee, Cherokee-SD and Cherokee-NV hereby expressly agrees to issue a
Subsidiary Guarantee and to be bound as, and assume the obligations of, a
Subsidiary Guarantor under the Indenture, including without limitations the
obligations set forth in Article X of the Indenture.
SECTION 1.3. TRUSTEE'S ACCEPTANCE. The Trustee hereby
accepts this First Supplemental Indenture and agrees to perform the same under
the terms and conditions set forth in the Indenture.
ARTICLE II
Miscellaneous
-------------
SECTION 2.1. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the
execution and delivery of this First Supplemental Indenture by the Company, the
Subsidiary Guarantors listed in Schedule I hereto and the Trustee following the
consummation of the Merger, the Indenture shall be supplemented in accordance
herewith, and this First Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of Notes heretofore or hereafter
authenticated and delivered under the Indenture shall be bound thereby.
SECTION 2.2. INDENTURE REMAINS IN FULL FORCE AND EFFECT.
Except as supplemented hereby, all provisions in the Indenture shall remain in
full force and effect.
SECTION 2.3. INDENTURE AND SUPPLEMENTAL INDENTURE CONSTRUED
TOGETHER. This First Supplemental Indenture is an indenture supplemental to
and in implementation of the Indenture, and the Indenture and this First
4
<PAGE> 5
Supplemental Indenture shall henceforth be read and construed together.
SECTION 2.4. CONFIRMATION AND PRESERVATION OF INDENTURE. The
Indenture as supplemented by this First Supplemental Indenture is in all
respects confirmed and preserved.
SECTION 2.5. CONFLICT WITH TRUST INDENTURE ACT. If any
provision of this First Supplemental Indenture limits, qualifies or conflicts
with any provision of the TIA that is required under the TIA to be part of and
govern any provision of this First Supplemental Indenture, the provision of the
TIA shall control. If any provision of this First Supplemental Indenture
modifies or excludes any provision of the TIA that may be so modified or
excluded, the provision of the TIA shall be deemed to apply to the Indenture as
so modified or to be excluded by this First Supplemental Indenture, as the case
may be.
SECTION 2.6. SEVERABILITY. In case any provision in this First
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 2.7. TERMS DEFINED IN THE INDENTURE. All capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Indenture.
SECTION 2.8. HEADINGS. The Article and Section headings of
this First Supplemental Indenture have been inserted for convenience of
reference only, are not to be considered a part of this First Supplemental
Indenture and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 2.9. BENEFITS OF FIRST SUPPLEMENTAL INDENTURE, ETC.
Nothing in this First Supplemental Indenture or the Notes, express or implied,
shall give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder and the Holders of the Notes, any benefit of
any legal or equitable right, remedy or claim under the Indenture, this First
Supplemental Indenture or the Notes.
5
<PAGE> 6
SECTION 2.10. SUCCESSORS. All agreements of the Company and
the Subsidiary Guarantors in this First Supplemental Indenture shall bind their
respective successors. All agreements of the Trustee in this First Supplemental
Indenture shall bind its successors.
SECTION 2.11. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The
recitals contained herein shall be taken as the statements of the Company and
the Subsidiary Guarantors, and the Trustee assumes no responsibility for their
correctness. The Trustee shall have no liability for the validity or sufficiency
of this Second Supplemental Indenture.
SECTION 2.12. CERTAIN DUTIES AND RESPONSIBILITIES OF THE
TRUSTEE. In entering into this First Supplemental Indenture, the Trustee shall
be entitled to the benefit of every provision of the Indenture relating to the
conduct or affecting the liability or affording protection to the Trustee,
whether or not elsewhere herein so provided.
SECTION 2.13. GOVERNING LAW. This First Supplemental Indenture
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 2.14. COUNTERPART ORIGINALS. The parties may sign any
number of copies of this First Supplemental Indenture. Each signed copy shall be
an original, but all of them together represent the same agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this First
Supplemental Indenture to be duly executed as of the date first written above.
THE COMPANY:
------------
PHONETEL TECHNOLOGIES, INC.
By: /S/ T.L. Martin
----------------------------------
Name: Tammy L. Martin
Title: Executive Vice
President
7
<PAGE> 8
THE SUBSIDIARY GUARANTORS:
--------------------------
PUBLIC TELEPHONE CORPORATION
WORLD COMMUNICATIONS, INC.
PARAMOUNT COMMUNICATION SYSTEMS,
INC.
NORTHERN FLORIDA TELEPHONE
CORPORATION
PAYPHONES OF AMERICA, INC.
CHEROKEE COMMUNICATIONS, INC.
(a Texas corporation and as
successor by merger with
PHONETEL CCI, INC.)
CHEROKEE COMMUNICATIONS, INC.
(a South Dakota corporation)
CHEROKEE COMMUNICATIONS, INC.
(a Nevada corporation)
For each of the above:
By: /s/ T.L. Martin
----------------------------------
Name: Tammy L. Martin
Title: Executive Vice
President
8
<PAGE> 9
MARINE MIDLAND BANK,
as Trustee
By: /s/ Marcia Markowski
---------------------------------
Name: Marcia Markowski
Title: Corporate Trust Officer
9
<PAGE> 10
Schedule I
Subsidiary Guarantors Existing on the Issue Date
------------------------------------------------
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of
- ------------------ ----------------
Incorporation
-------------
<S> <C> <C>
1. Public Telephone Corporation Indiana
2. World Communications, Inc. Missouri
3. Paramount Communication
Systems, Inc. Florida
4. Northern Florida Telephone
Corporation Florida
5. Payphones of America, Inc. Ohio
6. Cherokee Communications, Inc. Texas
7. Cherokee Communications, Inc. South Dakota
8. Cherokee Communications, Inc. Nevada
</TABLE>
10
<PAGE> 1
EXHIBIT 10.2
----------------------------------------
PHONETEL TECHNOLOGIES, INC.,
As Issuer,
THE SUBSIDIARY GUARANTORS
Named on Schedule I hereto
AND
MARINE MIDLAND BANK,
As Trustee
-----------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of May 29, 1997
Supplementing the Indenture, Dated
as of December 18, 1996, as supplemented
by the First Supplemental Indenture
dated as of January 3, 1997, among
PhoneTel Technologies, Inc., the
Subsidiary Guarantors named on
Schedule I thereto and
Marine Midland Bank, as Trustee
-----------------------------
$125,000,000
12% SENIOR NOTES DUE 2006
----------------------------------------
<PAGE> 2
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of May 29, 1997
(the "Second Supplemental Indenture"), is by and among (i) PHONETEL
TECHNOLOGIES, INC., an Ohio corporation (the "Company"), as issuer of the 12%
Senior Notes due 2006 (the "Notes"), (ii) each Subsidiary of the Company
existing on the date of this Second Supplemental Indenture as set forth on
Schedule I hereto and each of the Company's Subsidiaries which becomes a
guarantor of the Notes in compliance with Section 4.15 of the Indenture referred
to herein in which such Subsidiary agrees to be bound by the terms of the
Indenture, as guarantors of the Company's obligations under the Indenture and
the Notes (each, a "Subsidiary Guarantor"), and (iii) Marine Midland Bank, as
trustee (the "Trustee").
WHEREAS, the Company, the Subsidiary Guarantors as of December
18, 1996 (the "Issue Date") and the Trustee heretofore executed and delivered an
Indenture, dated as of December 18, 1996 (the "Original Indenture"); and
WHEREAS, pursuant to the Original Indenture the Company issued
and the Trustee authenticated and delivered $125 million aggregate principal
amount of the Notes, which Notes were guaranteed by each of the Company's
Subsidiaries listed on Schedule I to the Original Indenture; and
WHEREAS, on January 3, 1997, the Company's subsidiary,
PhoneTel CCI, Inc., a Texas corporation, was merged with and into Cherokee
Communications, Inc., a Texas corporation ("Cherokee"), with Cherokee being the
surviving corporation (the "Cherokee Merger"), and as a result of the Cherokee
Merger, Cherokee and its two wholly owned subsidiaries, Cherokee Communications,
Inc., a South Dakota corporation, and Cherokee Communications, Inc., a Nevada
corporation, each became a Subsidiary of the Company and entered into the First
Supplemental Indenture, dated as of January 3, 1997 (the "First Supplemental
Indenture" and, together with the Original Indenture, the "Indenture"), among
the Company, the Trustee and the Subsidiary Guarantors set forth on Schedule I
thereto; and
WHEREAS, Section 4.15 of the Indenture provides that the
Company shall cause each Subsidiary of the Company formed or acquired after the
Issue Date to issue a Subsidiary Guarantee and to execute and deliver an
2
<PAGE> 3
indenture supplemental to the Indenture as a Subsidiary Guarantor; and
WHEREAS, on March 4, 1997, the Company formed its wholly owned
subsidiary, PhoneTel Acquisition Corp., a Georgia corporation ("PhoneTel
Acquisition"), and on April 3, 1997, the Company formed its wholly owned
subsidiary, PhoneTel V, Inc., a Georgia corporation ("PhoneTel V"); and
WHEREAS, Section 9.01 of the Indenture provides that the
Company, the Subsidiary Guarantors and the Trustee may amend the Indenture
without the consent of any Holder of the Notes in order to add additional
Subsidiary Guarantors pursuant to Section 4.15 of the Indenture; and
WHEREAS, this Second Supplemental Indenture has been duly
authorized by all necessary corporate action on the part of the Company and the
Subsidiary Guarantors.
NOW, THEREFORE, the Company, the Subsidiary Guarantors listed
on Schedule I hereto and the Trustee agree as follows for the equal and ratable
benefit of each other and the Holders of the Notes:
ARTICLE I
ADDITION OF SUBSIDIARY GUARANTORS
SECTION 1.1. ADDITION OF SUBSIDIARY GUARANTORS. Each of
PhoneTel Acquisition and PhoneTel V hereby expressly agrees to issue a
Subsidiary Guarantee and to be bound as, and assume the obligations of, a
Subsidiary Guarantor under the Indenture, including without limitations the
obligations set forth in Article X of the Indenture.
SECTION 1.2. TRUSTEE'S ACCEPTANCE. The Trustee hereby
accepts this Second Supplemental Indenture and agrees to perform the same under
the terms and conditions set forth in the Indenture.
3
<PAGE> 4
ARTICLE II
Miscellaneous
-------------
SECTION 2.1. EFFECT OF SUPPLEMENTAL INDENTURE. Upon the
execution and delivery of this Second Supplemental Indenture by the Company, the
Subsidiary Guarantors listed in Schedule I hereto and the Trustee, the Indenture
shall be supplemented in accordance herewith, and this Second Supplemental
Indenture shall form a part of the Indenture for all purposes, and every Holder
of Notes heretofore or hereafter authenticated and delivered under the Indenture
shall be bound thereby.
SECTION 2.2. INDENTURE REMAINS IN FULL FORCE AND EFFECT.
Except as supplemented hereby, all provisions in the Indenture shall remain in
full force and effect.
SECTION 2.3. INDENTURE AND SUPPLEMENTAL INDENTURE CONSTRUED
TOGETHER. This Second Supplemental Indenture is an indenture supplemental to and
in implementation of the Indenture, and the Indenture and this Second
Supplemental Indenture shall henceforth be read and construed together.
SECTION 2.4. CONFIRMATION AND PRESERVATION OF INDENTURE. The
Indenture as supplemented by this Second Supplemental Indenture is in all
respects confirmed and preserved.
SECTION 2.5. CONFLICT WITH TRUST INDENTURE ACT. If any
provision of this Second Supplemental Indenture limits, qualifies or conflicts
with any provision of the TIA that is required under the TIA to be part of and
govern any provision of this Second Supplemental Indenture, the provision of the
TIA shall control. If any provision of this Second Supplemental Indenture
modifies or excludes any provision of the TIA that may be so modified or
excluded, the provision of the TIA shall be deemed to apply to the Indenture as
so modified or to be excluded by this Second Supplemental Indenture, as the case
may be.
4
<PAGE> 5
SECTION 2.6. SEVERABILITY. In case any provision in this
Second Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 2.7. TERMS DEFINED IN THE INDENTURE. All capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Indenture.
SECTION 2.8. HEADINGS. The Article and Section headings of
this Second Supplemental Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Second Supplemental
Indenture and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 2.9. BENEFITS OF SECOND SUPPLEMENTAL INDENTURE, ETC.
Nothing in this Second Supplemental Indenture or the Notes, express or implied,
shall give to any Person, other than the parties hereto and thereto and their
successors hereunder and thereunder and the Holders of the Notes, any benefit of
any legal or equitable right, remedy or claim under the Indenture, this Second
Supplemental Indenture or the Notes.
SECTION 2.10. SUCCESSORS. All agreements of the Company and
the Subsidiary Guarantors in this Second Supplemental Indenture shall bind their
respective successors. All agreements of the Trustee in this Second Supplemental
Indenture shall bind its successors.
SECTION 2.11. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The
recitals contained herein shall be taken as the statements of the Company and
the Subsidiary Guarantors, and the Trustee assumes no responsibility for their
correctness. The Trustee shall have no liability for the validity or sufficiency
of this Second Supplemental Indenture.
SECTION 2.12. CERTAIN DUTIES AND RESPONSIBILITIES OF THE
TRUSTEE. In entering into this Second Supplemental Indenture, the Trustee shall
be entitled to the benefit of every provision of the Indenture relating to the
conduct or affecting the liability or affording
5
<PAGE> 6
protection to the Trustee, whether or not elsewhere herein so provided.
SECTION 2.13. GOVERNING LAW. This Second Supplemental
Indenture shall be governed by, and construed in accordance with, the laws of
the State of New York but without giving effect to applicable principles of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby.
SECTION 2.14. COUNTERPART ORIGINALS. The parties may sign any
number of copies of this Second Supplemental Indenture. Each signed copy shall
be an original, but all of them together represent the same agreement.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Second
Supplemental Indenture to be duly executed as of the date first written above.
THE COMPANY:
------------
PHONETEL TECHNOLOGIES, INC.
By: /s/ T.L. Martin
----------------------------------
Name: Tammy L. Martin
Title: Executive Vice
President
7
<PAGE> 8
THE SUBSIDIARY GUARANTORS:
--------------------------
PUBLIC TELEPHONE CORPORATION
WORLD COMMUNICATIONS, INC.
PARAMOUNT COMMUNICATION SYSTEMS,
INC.
NORTHERN FLORIDA TELEPHONE
CORPORATION
PAYPHONES OF AMERICA, INC.
CHEROKEE COMMUNICATIONS, INC.
(a Texas corporation and as
successor by merger with
PHONETEL CCI, INC.)
CHEROKEE COMMUNICATIONS, INC.
(a South Dakota corporation)
CHEROKEE COMMUNICATIONS, INC.
(a Nevada corporation)
PHONETEL ACQUISITION CORP.
PHONETEL V, INC.
For each of the above:
By: /s/ T.L. Martin
---------------------------------
Name: Tammy L. Martin
Title: Executive Vice
President
8
<PAGE> 9
MARINE MIDLAND BANK,
as Trustee
By: /s/ Marcia Markowski
--------------------------------
Name: Marcia Markowski
Title: Corporate Trust Officer
9
<PAGE> 10
Schedule I
Subsidiary Guarantors
---------------------
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of
- ------------------ ---------------
Incorporation
-------------
<S> <C> <C>
1. Public Telephone Corporation Indiana
2. World Communications, Inc. Missouri
3. Paramount Communication
Systems, Inc. Florida
4. Northern Florida Telephone
Corporation Florida
5. Payphones of America, Inc. Ohio
6. Cherokee Communications, Inc. Texas
7. Cherokee Communications, Inc. South Dakota
8. Cherokee Communications, Inc. Nevada
9. PhoneTel Acquisition Corp. Georgia
10. PhoneTel V, Inc. Georgia
</TABLE>
10
<PAGE> 1
EXHIBIT 10.3
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
by and among
PHONETEL TECHNOLOGIES, INC.,
PHONETEL ACQUISITION CORP.
and
COMMUNICATIONS CENTRAL INC.
dated as of
May 15, 1997
<PAGE> 2
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (hereinafter
referred to as this "First Amendment"), dated as of May 15, 1997, by and among
PhoneTel Technologies, Inc., an Ohio corporation ("Parent"), PhoneTel
Acquisition Corp., a Georgia corporation and a wholly owned subsidiary of Parent
(the "Purchaser"), and Communications Central Inc., a Georgia corporation (the
"Company").
WHEREAS, Parent, the Purchaser and the Company entered into an
Agreement and Plan of Merger dated as of March 14, 1997 (the "Agreement"); and
WHEREAS, Parent, the Purchaser and the Company desire to amend
the Agreement upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Capitalized terms used and not
otherwise defined herein shall have the respective meanings assigned to them in
the Agreement.
ARTICLE II
AMENDMENTS TO ARTICLE I OF THE AGREEMENT
Section 2.1 AMENDMENT TO SECTION 1.1 OF THE AGREEMENT. The
first clause (i) of subsection (a) of Section 1.1 of the Agreement is hereby
amended and restated in its entirety to read as follows:
"(i) there being validly tendered and not withdrawn prior
to the expiration of the Offer, that number of Shares which
represents at least
1
<PAGE> 3
seventy-five percent (75%) of the Shares outstanding (but in no event
less than 50.1% of the Shares outstanding on a fully diluted basis)
(the "Minimum Condition"), "
Section 2.2 AMENDMENT TO SECTION 1.4 OF THE AGREEMENT. Section
1.4 of the Agreement is hereby amended and restated in its entirety to read as
follows:
"Section 1.4 THE MERGER. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, (i) the Purchaser
shall be merged with and into the Company (the "Merger") and the
separate corporate existence of the Purchaser shall cease, (ii) the
Company shall be the successor or surviving corporation in the Merger
(sometimes hereinafter referred to as the "Company Surviving
Corporation" or the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Georgia, and (iii) the separate
corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the
Merger, except as set forth in this Section 1.4. Pursuant to the
Merger, (x) the Articles of Incorporation shall be amended in its
entirety to read as the Articles of Incorporation of the Purchaser, in
effect immediately prior to the Effective Time, except that Article
FIRST thereof shall read as follows: "FIRST: The name of the
corporation is Communications Central Inc." and, as so amended, shall
be the Articles of Incorporation of the Company Surviving Corporation
until thereafter amended as provided by law and such Articles of
Incorporation, except that if the Purchaser shall acquire less than
seventy-five percent of the outstanding Shares pursuant to the Offer or
otherwise, the Articles of Incorporation, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation of
the Company Surviving Corporation until thereafter amended as provided
by law and such Articles of Incorporation, and (y) the ByLaws of the
Purchaser (the "By-laws"), as in effect immediately prior to the
Effective Time, shall be the By-laws of the Company Surviving
2
<PAGE> 4
Corporation until thereafter amended as provided by law, by the
Articles of Incorporation of the Company Surviving Corporation or by
such By-laws, except that if the Purchaser shall acquire less than
seventy-five percent of the outstanding Shares pursuant to the Offer,
the By-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Company Surviving
Corporation until thereafter amended as provided by law, by the
Articles of Incorporation of the Company Surviving Corporation or by
such By-laws. The Merger shall have the effects specified in the GBCC."
Section 2.3 AMENDMENT TO SECTION 1.9 OF THE AGREEMENT. Section
1.9 of the Agreement is hereby deleted in its entirety.
Section 2.4 AMENDMENT TO SECTION 1.10 OF THE AGREEMENT.
Section 1.10 of the Agreement is hereby amended by deleting the last two
sentences thereof.
ARTICLE III
AMENDMENT TO ARTICLE II OF THE AGREEMENT
Section 3.1 AMENDMENT TO SECTION 2.1 OF THE AGREEMENT.
Subsection (a) of Section 2.1 of the Agreement is hereby amended and restated in
its entirety to read as follows:
"(a) THE PURCHASER COMMON STOCK. Each issued and outstanding
share of the Purchaser Common Stock shall be converted into and become
one fully paid and nonassessable share of common stock of the Company
Surviving Corporation and shall constitute the only outstanding shares
of capital stock of the Surviving Corporation."
ARTICLE IV
AMENDMENTS TO ARTICLES III AND V OF THE AGREEMENT
Section 4.1 AMENDMENT TO SECTION 3.20 OF THE AGREEMENT. The
first sentence of Section 3.20 of the Agreement shall be amended to be restated
as follows:
3
<PAGE> 5
"The Average Net Revenue shall be (i) at least $90 per pay
telephone (excluding prison phones) as of the date hereof and as of the
Closing Date and (ii) at least $135 per prison phone in operation as of
the date hereof and as of June 30, 1997."
Section 4.2 AMENDMENT TO SECTION 5.8(B) OF THE AGREEMENT.
Section 5.8(b) of the Agreement is hereby amended by restating the second and
third provisos of such section as follows:
"; provided, further, however, that in no event shall Parent
be required to pay aggregate annual premiums for insurance under this
Section 5.8(b) in excess of $103,250; and provided, further, that if
the Parent or the Surviving Corporation is unable to obtain the amount
of insurance required by this Section 5.8(b) for such aggregate annual
premium, Parent or the Surviving Corporation shall obtain as much
insurance as can be obtained for an annual premium of $103,250."
Section 4.3 ADDITION OF SECTION 5.14. Article V of the
Agreement is hereby amended by adding a new Section 5.14 to read in its entirety
as follows:
"5.14 ACQUISITIONS BY PARENT. Except for those purchases and
other acquisitions set forth in Section 5.14 of the Parent Disclosure
Schedule, without the prior written consent of the Company, from and
after May 15, 1997 and prior to the purchase by the Purchaser of Shares
pursuant to the Offer, Parent shall not, directly or indirectly,
consummate the purchase or other acquisition of, or enter into any
agreement or make any commitment or undertaking to purchase or acquire,
all or substantially all of the outstanding capital stock, or all or
substantially all of the assets, of any public pay phone operator,
whether by stock purchase, asset purchase, share exchange, merger or
otherwise; PROVIDED, HOWEVER, that no provision hereof is intended to
prohibit Parent or the Purchaser from (a) soliciting, evaluating and
making proposals regarding such purchases and
4
<PAGE> 6
acquisitions or (b) entering into agreements for the purchase of not
more than 250 pay phones in any one or more related transactions, or
more than 1,250 pay phones in the aggregate."
Section 4.4 ADDITION OF SECTION 5.15. Article V of the
Agreement is hereby amended by adding a new Section 5.15 to read in its entirety
as follows:
"5.15 CREDIT AGREEMENT EXTENSION. Parent and the Company
shall, and the Company shall use its best efforts to cause First Union
National Bank of Georgia, as lender (the "Lender") under the Amended
and Restated Credit Agreement dated as of August 15, 1996, as amended
(the "Credit Agreement"), to negotiate an amendment, in form and
substance reasonably satisfactory to Parent (the "Extension"), to the
Credit Agreement for the purpose, among others, of extending the due
date for the required $12 million principal payment thereunder from
July 1, 1997 until no sooner than July 1, 1998. From and after May 15,
1997 through and including the date on which the Extension is executed
and delivered by the Company and the Lender, the Company shall (x)
provide Parent with true, correct and complete copies of all
correspondence with the Lender, and (y) notify and consult with Parent
and its advisors regarding the Company's meetings and other discussions
with the Lender, in each case, regarding the Credit Agreement,
including with respect to the Extension."
ARTICLE V
AMENDMENTS TO ARTICLES VII AND VIII OF THE AGREEMENT
Section 5.1 AMENDMENT TO SECTION 7.1 OF THE AGREEMENT. Clause
(i) of subsection (b) of Section 7.1 of the Agreement is hereby amended to
delete the reference therein to "May 19, 1997" and to insert in lieu thereof
"August 20, 1997, provided that such right to terminate shall arise on July 21,
1997 if, on or before such date, Parent has not delivered to the Company a
commitment (subject only to the consummation of the Offer
5
<PAGE> 7
and other customary conditions, but not subject to due diligence) for $25
million or more of equity capital to finance the Offer and the Merger;".
Section 5.2 AMENDMENT TO SECTION 8.1(B) OF THE AGREEMENT.
Clause (iii) of subsection (b) of Section 8.1 of the Agreement is hereby amended
to be restated as follows:
"(iii) either the Company or Parent terminates this Agreement
pursuant to Section 7.1(b)(i), there shall have been a failure of the
Minimum Condition and prior thereto there shall have been publicly
announced another Acquisition Proposal or an event set forth in
paragraph (h) of Annex A shall have occurred,"
Section 5.3 AMENDMENT TO SECTION 8.1(C)(I) OF THE AGREEMENT.
Clause (i) of subsection (c) of Section 8.1 of the Agreement is hereby amended
to be restated as follows:
"(i) Section 7.1(b) and the only condition to the purchase of
Shares in the Offer that has not been satisfied is the Financing
Condition (except if the sole reason for Parent's failure to satisfy
the Financing Condition is the failure of the Company to satisfy its
obligations under Section 5.13 hereof), or"
ARTICLE VI
MISCELLANEOUS
Section 6.1 ESCROW AMENDMENT; EFFECT.
(a) Simultaneously with the execution and delivery of this
First Amendment, the Company, Parent and the Escrow Agent are entering into a
Release and Termination of the Escrow Agreement, in the form attached to this
First Amendment as Exhibit A (the "Release and Termination") pursuant to which
the Escrow Amount is being released to the Company. The Company shall retain
$3.5 million of such funds in a separate account, and shall not spend or commit
to spend such funds without the prior written consent of Parent until the
earlier of the
6
<PAGE> 8
(i) purchase of Shares in the Offer or (ii) termination of the Agreement.
(b)(i) The Company hereby acknowledges and agrees that the
release to the Company of the Escrow Amount pursuant to the Release and
Termination shall constitute liquidated damages, and the Company shall have no
other right or remedy under the Agreement or the Escrow Agreement (or any
agreement, document or instrument entered into in connection herewith or
therewith) with respect to (A) any action of Parent or Purchaser through the
date hereof or (B) the failure of the Minimum Condition or the Financing
Condition, or both, and (ii) in furtherance of the foregoing, from and after the
execution and delivery of this First Amendment and the Release and Termination
by each of the parties hereto and thereto, the Company hereby irrevocably
releases Parent and the Purchaser from any and all liabilities and obligations,
including under the Agreement, arising out of or relating to the failure of the
Minimum Condition or the Financing Condition, or both.
(c)(i) Each of Parent and Purchaser hereby acknowledges and
agrees that the Escrow Amount is being released from escrow without any further
recourse against the Company, and neither Parent nor Purchaser shall have any
right or remedy under the Agreement or the Escrow Agreement (or any agreement,
document or instrument entered into in connection herewith or therewith) with
respect to the Company's obligation to facilitate the Financing Condition, or
any other action, of the Company through the date hereof, and (ii) in
furtherance of the foregoing, from and after the execution and delivery of this
First Amendment and the Release and Termination by each of the parties hereto
and thereto, each of Parent and Purchaser hereby irrevocably releases the
Company from any and all liabilities and obligations, including under the
Agreement, through the date hereof.
Section 6.2 PAYMENT.
(a) Simultaneously with the execution and delivery of this
First Amendment, Parent is paying to the Company as additional consideration to
the Company for entering into this First Amendment, the amount of $1 million
(the "Payment"); provided that the Company shall utilize the Payment for the
sole purpose of paying a
7
<PAGE> 9
portion of the principal amount due under the Credit Agreement.
(b) In the event that the Agreement is terminated for any
reason and, at the time of such termination the Extension has not been executed,
the Company shall pay to Parent the amount of $1 million within two business
days following such termination.
(c) In the event the Agreement is terminated by reason of the
failure of the Minimum Condition or any of the conditions set forth in
paragraphs (d), (e), (f) and (g) of Annex A to the Agreement, the Company shall
pay to Parent the amount of $1 million within two business days following such
termination.
Section 6.3 AMENDMENT. All references in the Agreement (and in
the other agreements, documents and instruments entered into in connection
therewith) to the "Agreement" shall be deemed for all purposes to refer to the
Agreement, as amended by this First Amendment.
Section 6.4 LIMITED EFFECT. Except as expressly modified
herein, the Agreement shall continue to be, and shall remain, in full force and
effect and the valid and binding obligation of the parties thereto in accordance
with its terms.
Section 6.5 COUNTERPARTS. This First Amendment may be executed
in two or more counterparts, each of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties.
Section 6.6 GOVERNING LAW. This First Amendment shall be
governed by and construed in accordance with the laws of the State of Georgia
without giving effect to the principles of conflicts of law thereof.
8
<PAGE> 10
IN WITNESS WHEREOF, Parent, the Purchaser and the Company have
caused this First Amendment to be signed by their respective officers thereunto
duly authorized as of the date first written above.
PHONETEL TECHNOLOGIES, INC.
By /S/ Peter G. Graf
----------------------------
Name: Peter G. Graf
Title: Chief Executive
Officer
PHONETEL ACQUISITION CORP.
By /S/ T.L. Martin
-----------------------------
Name: Tammy L. Martin
Title: Secretary
COMMUNICATIONS CENTRAL INC.
By /S/ Rodger L. Johnson
-----------------------------
Name: Rodger L. Johnson
Title: President and Chief
Executive Officer
9
<PAGE> 11
RELEASE AND TERMINATION
THIS RELEASE AND TERMINATION ("Release") is made and entered
into as of May 15, 1997 by and among First Union National Bank of Georgia, a
national banking association (the "Escrow Agent"), Communications Central Inc.,
a Georgia corporation (the "Company"), and PhoneTel Technologies, Inc., an Ohio
corporation ("Parent").
WHEREAS, the parties hereto are parties to an Escrow Agreement
dated as of March 14, 1997 (the "Escrow Agreement");
WHEREAS, the Company and Parent desire to direct the Escrow
Agent to release the Escrow Amount to the Company and to remit earnings and
interest thereon to Parent; and
WHEREAS, the parties hereto further desire to terminate the
Escrow Agreement and the Company and Parent desire to release the Escrow Agent
from any further obligations or responsibilities thereunder.
NOW, THEREFORE, in consideration of the premises and intending
to be legally bound hereby, the parties hereto agree as follows:
Section 1. DEFINED TERMS. Capitalized terms
used but not otherwise defined herein shall have the
meanings ascribed to such terms in the Escrow Agreement.
Section 2. DISBURSEMENT OF FUNDS. The Company and PhoneTel
hereby authorize and direct the Escrow Agent (i) to release the Escrow Amount
after deduction of the Escrow Agent's fee (as contemplated by Section 6 of the
Escrow Agreement) to the Company and (b) to remit to Parent all earnings and
interest (adjusted for any increase or decrease in the principal value of any
investment or any capital gain or loss, as the case may be) on the Escrow
Amount.
Section 3. RELEASE OF ESCROW AGENT. Effective immediately upon
disbursement of funds as contemplated by Section 2 hereof, the Company and
Parent hereby (i) discharge the Escrow Agent from its duties under the
<PAGE> 12
Escrow Agreement and (ii) subject to such disbursement, release the Escrow Agent
from any loss or claim whatsoever (including attorneys' fees) in conjunction
with the performance of its duties under the Escrow Agreement. The Company and
Parent acknowledge and agree that Section 7(b) of the Escrow Agreement shall
survive the termination of such agreement by execution of this Release.
Section 4. TERMINATION. Upon the final distribution of funds
contemplated by Section 2 hereof, but subject to Section 3 hereof, the Escrow
Agreement shall be terminated.
Section 5. COUNTERPARTS. This Release may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument.
Section 6. GOVERNING LAW. This Release shall be construed in
accordance with and governed by the internal laws of the State of Georgia
without giving effect to the principles of conflicts of law thereof.
Section 7. BENEFIT. This Release shall be binding upon and
inure to the benefit of the parties hereto and the successors and assigns of
each of them.
2
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have affixed their
signatures to this Release upon the date first set forth above.
FIRST UNION NATIONAL BANK
OF GEORGIA
By: /s/ R. Douglas Milner
-------------------------------
Title: Vice President
COMMUNICATIONS CENTRAL INC.
By: /s/ Rodger L. Johnson
-------------------------------
Title: President and Chief
Executive Officer
PHONETEL TECHNOLOGIES, INC.
By: /S/ Peter G. Graf
-------------------------------
Title: Chief Executive
Officer
3
<PAGE> 1
Exhibit 10.4
[EXECUTION COUNTERPART]
================================================================================
U.S. $75,000,000
CREDIT AGREEMENT
dated as of May 30, 1997
among
PHONETEL TECHNOLOGIES, INC.
as the Borrower,
VARIOUS LENDERS
and
ING (U.S.) CAPITAL CORPORATION,
as the Agent for the Lenders
and
TRANSAMERICA BUSINESS CREDIT CORPORATION
and
FINOVA CAPITAL CORPORATION,
as Co-Agents for the Lenders
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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<S> <C>
ARTICLE 1 DEFINITIONS............................................................................................1
SECTION 1.1 Defined Terms.............................................................1
SECTION 1.2 Use of Defined Terms.....................................................23
SECTION 1.3 Cross-References.........................................................23
SECTION 1.4 Accounting and Financial Determinations..................................24
ARTICLE 2 COMMITMENTS...........................................................................................24
SECTION 2.1 Loan Commitments.........................................................24
SECTION 2.1.1 Expansion Loan Commitment................................................24
SECTION 2.1.2 Revolving Credit Commitment..............................................24
SECTION 2.1.3 Agent and Lenders Not Required to Extend Credit
under Commitments........................................................24
SECTION 2.2 Changes in Advance Formula; Establishment of Reserves....................26
SECTION 2.2.1 Advance Ratios...........................................................26
SECTION 2.2.2 Reserves.................................................................26
SECTION 2.3 Commitment and Agent's Fee...............................................27
SECTION 2.4 Increased Costs; Capital Adequacy........................................27
ARTICLE 3 LOANS AND NOTES.......................................................................................29
SECTION 3.1 Borrowing Procedure......................................................29
SECTION 3.2 Notes....................................................................29
SECTION 3.3 Principal Payments.......................................................30
SECTION 3.3.1 Repayments and Prepayments...............................................30
SECTION 3.3.2 Prepayment Fee...........................................................31
SECTION 3.3.3 Revolving Credit Loans on Borrower's Behalf..............................31
SECTION 3.3.4 Reduction of Commitments.................................................32
SECTION 3.4 Interest.................................................................33
SECTION 3.4.1 Rate.....................................................................33
SECTION 3.4.2 Post-Default Rates.......................................................33
SECTION 3.4.3 Payment Dates............................................................33
SECTION 3.4.4 Rate Determinations......................................................34
SECTION 3.5 Letters of Credit........................................................34
SECTION 3.5.1. Manner of Issuance.......................................................34
SECTION 3.5.2. Terms of Letters of Credit...............................................34
SECTION 3.5.3. Purchase of Participations by Lenders....................................35
SECTION 3.5.4. Drawings Under Letters of Credit.........................................35
SECTION 3.5.5. Letter of Credit Fees....................................................37
SECTION 3.5.6. Limitation of Liability With Respect to Letters of Credit................37
</TABLE>
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<TABLE>
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<S> <C>
SECTION 3.6 Taxes....................................................................38
SECTION 3.7 Payments, Interest Rate Computations, Other
Computations, etc........................................................40
SECTION 3.8 Proration of Payments....................................................40
SECTION 3.9 Setoff...................................................................40
SECTION 3.10 Use of Proceeds..........................................................41
ARTICLE 4 CONDITIONS TO LOANS...................................................................................41
SECTION 4.1 Initial Loans............................................................41
SECTION 4.1.1 Resolutions, etc.........................................................41
SECTION 4.1.2 Notes....................................................................42
SECTION 4.1.3 Borrowing Base Certificate...............................................42
SECTION 4.1.4 Release of Liens on Assets...............................................42
SECTION 4.1.5 No Contest, etc..........................................................42
SECTION 4.1.6 Certificate as to Completed Conditions, Warranties,
No Default, etc. ........................................................43
SECTION 4.1.7 Compliance with Requirements of Law......................................43
SECTION 4.1.8 Opinions of Counsel......................................................43
SECTION 4.1.9 Closing Fees, Expenses, etc..............................................43
SECTION 4.1.10 Subsidiary Guaranty......................................................43
SECTION 4.1.11 Security Documents and Perfection........................................44
SECTION 4.1.12 Employment Agreements; Compensation......................................44
SECTION 4.1.13 Pension and Welfare Liabilities..........................................44
SECTION 4.1.14 Insurance................................................................45
SECTION 4.1.15 Financial Information, etc...............................................45
SECTION 4.1.16 Material Contracts.......................................................45
SECTION 4.1.17 Closing Date Acquisitions................................................45
SECTION 4.1.18 Letter to Accountants....................................................46
SECTION 4.1.19 Other Documents, Certificates, Etc.......................................46
SECTION 4.2 Expansion Loans..........................................................46
SECTION 4.2.1 Information Regarding Acquisition........................................46
SECTION 4.2.2 Legal Documentation......................................................47
SECTION 4.2.3 Collateral Assignment of Acquisition Agreement...........................48
SECTION 4.2.4 Opinion of Counsel to Borrower...........................................48
SECTION 4.2.5 Non-Conforming Acquisitions..............................................48
SECTION 4.3 All Loans and Letters of Credit..........................................48
SECTION 4.3.1 Compliance with Warranties, No Default, etc..............................48
SECTION 4.3.2 Borrowing Request, Letter of Credit Request, etc.........................49
SECTION 4.3.3 Satisfactory Legal Form..................................................49
SECTION 4.3.4 Margin Regulations.......................................................49
</TABLE>
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<PAGE> 4
<TABLE>
PAGE
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<S> <C>
SECTION 4.3.5 Adverse Change...........................................................50
SECTION 4.3.6 Change in Law............................................................50
SECTION 4.3.7 Certificate Regarding Senior Notes Indenture and
Fixed Charge Coverage Ratio..............................................50
ARTICLE 5 WARRANTIES, ETC.......................................................................................51
SECTION 5.1 Organization, Power, Authority, etc......................................51
SECTION 5.2 Due Authorization........................................................51
SECTION 5.3 Validity, etc............................................................52
SECTION 5.4 Financial Information; Solvency..........................................52
SECTION 5.5 Material Adverse Change..................................................53
SECTION 5.6 Absence of Default.......................................................53
SECTION 5.7 Litigation, Legislation, etc.............................................53
SECTION 5.8 Regulations G, T, U and X................................................53
SECTION 5.9 Government Regulation....................................................53
SECTION 5.10 Taxes....................................................................53
SECTION 5.11 Pension and Welfare Plans................................................53
SECTION 5.12 Labor Controversies......................................................55
SECTION 5.13 Ownership of Properties; Collateral......................................56
SECTION 5.14 Intellectual Property....................................................56
SECTION 5.15 Accuracy of Information..................................................56
SECTION 5.16 Insurance................................................................56
SECTION 5.17 Indebtedness.............................................................57
SECTION 5.18 Environmental Matters....................................................57
SECTION 5.19 No Burdensome Agreements.................................................57
SECTION 5.20 Consents.................................................................57
SECTION 5.21 Contracts................................................................57
SECTION 5.22 Employment Agreements....................................................57
SECTION 5.23 Condition of Property....................................................57
SECTION 5.24 Subsidiaries.............................................................58
SECTION 5.25 Trade Relations..........................................................58
SECTION 5.26 Communications Act.......................................................58
ARTICLE 6 COVENANTS.............................................................................................58
SECTION 6.1 Affirmative Covenants....................................................58
SECTION 6.1.1 Financial Information, etc...............................................58
SECTION 6.1.2 Maintenance of Corporate Existence, etc..................................61
SECTION 6.1.3 Foreign Qualification....................................................61
SECTION 6.1.4 Payment of Taxes, etc....................................................61
SECTION 6.1.5 Insurance................................................................61
</TABLE>
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<PAGE> 5
<TABLE>
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<S> <C>
SECTION 6.1.6 Notice of Default, Litigation, etc.......................................62
SECTION 6.1.7 Books and Records........................................................63
SECTION 6.1.8 Maintenance of Properties, Etc...........................................63
SECTION 6.1.9 Maintenance of Licenses and Permits......................................63
SECTION 6.1.10 Employee Plans...........................................................64
SECTION 6.1.11 Compliance with Laws.....................................................64
SECTION 6.1.12 Interest Rate Protection.................................................64
SECTION 6.1.13 Real Estate..............................................................64
SECTION 6.1.14 Telephone Placement Agreements...........................................64
SECTION 6.1.15 Intercompany Indebtedness................................................64
SECTION 6.1.16 Substitution of Existing Letters of Credit...............................65
SECTION 6.2 Negative Covenants.......................................................65
SECTION 6.2.1 Business Activities......................................................65
SECTION 6.2.2 Indebtedness.............................................................65
SECTION 6.2.3 Liens....................................................................66
SECTION 6.2.4 Financial Condition......................................................67
SECTION 6.2.5 Capital Expenditures.....................................................69
SECTION 6.2.6 Lease Obligations........................................................70
SECTION 6.2.7 Investments..............................................................70
SECTION 6.2.8 Restricted Payments, etc.................................................71
SECTION 6.2.9 Take or Pay Contracts; Sale/Leasebacks...................................71
SECTION 6.2.10 Consolidation, Merger, Subsidiaries, etc.................................72
SECTION 6.2.11 Asset Dispositions, etc..................................................74
SECTION 6.2.12 Modification of Organic Documents, Senior Notes, etc.....................74
SECTION 6.2.13 Transactions with Affiliates.............................................75
SECTION 6.2.14 Inconsistent Agreements..................................................75
SECTION 6.2.15 Change in Accounting Method..............................................75
SECTION 6.2.16 Change in Fiscal Year ...................................................75
SECTION 6.2.17 Compliance with ERISA....................................................75
SECTION 6.2.18 Limitation on Restrictions on Subsidiary Dividends.......................75
SECTION 6.2.19 Communications Laws......................................................76
ARTICLE 7 EVENTS OF DEFAULT.....................................................................................76
SECTION 7.1 Events of Default........................................................76
SECTION 7.1.1 Non-Payment of Obligations...............................................76
SECTION 7.1.2 Non-Performance of Certain Covenants.....................................76
SECTION 7.1.3 Defaults Under Other Loan Documents;
Non-Performance of Other Obligations.....................................76
SECTION 7.1.4 Bankruptcy, Insolvency, etc..............................................76
SECTION 7.1.5 Breach of Warranty.......................................................77
</TABLE>
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<TABLE>
PAGE
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<S> <C>
SECTION 7.1.6 Default on Other Indebtedness, etc.......................................77
SECTION 7.1.7 Failure of Valid, Perfected Security Interest............................77
SECTION 7.1.8 Employee Plans...........................................................77
SECTION 7.1.9 Judgments................................................................78
SECTION 7.1.10 Loss of Permits, Etc.....................................................78
SECTION 7.2 Action if Bankruptcy.....................................................78
SECTION 7.3 Action if Other Event of Default.........................................79
ARTICLE 8 THE AGENT.............................................................................................79
SECTION 8.1 Actions..................................................................79
SECTION 8.2 Funding Reliance, etc....................................................80
SECTION 8.3 Exculpation..............................................................80
SECTION 8.4 Successor................................................................81
SECTION 8.5 Loans and other Transactions by the Agent and its
Affiliates...............................................................81
SECTION 8.6 Credit Decisions.........................................................81
SECTION 8.7 Copies, etc..............................................................81
ARTICLE 9 MISCELLANEOUS.........................................................................................82
SECTION 9.1 Waivers, Amendments, etc.................................................82
SECTION 9.2 Notices..................................................................83
SECTION 9.3 Costs and Expenses.......................................................84
SECTION 9.4 Indemnification..........................................................85
SECTION 9.5 Survival.................................................................86
SECTION 9.6 Severability.............................................................86
SECTION 9.7 Headings.................................................................87
SECTION 9.8 Counterparts, Effectiveness, etc.........................................87
SECTION 9.9 Governing Law; Entire Agreement..........................................87
SECTION 9.10 Successors and Assigns...................................................88
SECTION 9.11 Sale and Transfers, Participations, etc..................................88
SECTION 9.12 Other Transactions.......................................................90
SECTION 9.13 Confidentiality..........................................................91
SECTION 9.14 Change in Accounting Principles..........................................92
SECTION 9.15 Waiver of Jury Trial, Etc................................................92
SECTION 9.16 Limitation of Liability..................................................92
SECTION 9.17 Usury Savings Clause.....................................................92
SECTION 9.18 Conflict in Loan Documents...............................................93
</TABLE>
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<PAGE> 7
SCHEDULES AND EXHIBITS
- ----------------------
Schedule 1 - Disclosure Schedule
Schedule 2 - Form of Telephone Placement Agreement
Exhibit A-1 - Expansion Note
Exhibit A-2 - Revolving Credit Note
Exhibit B - Borrowing Base Certificate
Exhibit C - Borrowing Request
Exhibit D - Compliance Certificate
Exhibit E - Transfer Supplement
Exhibit F - Joinder for Interest Rate Contract Counterparty
Exhibit G - Letter of Credit Request
Exhibit H - Assignment of Rights Under Acquisition Agreement
- vi -
<PAGE> 8
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 30, 1997, among PHONETEL
TECHNOLOGIES, INC., an Ohio corporation (the "BORROWER"), various lenders as
are, or may become, parties hereto (individually a "LENDER" and, collectively,
the "LENDERS"), ING (U.S.) CAPITAL CORPORATION, a Delaware corporation, as Agent
for the Lenders, TRANSAMERICA BUSINESS CREDIT CORPORATION, a Delaware
corporation and FINOVA CAPITAL CORPORATION, a Delaware corporation, as Co-Agents
for the Lenders.
W I T N E S S E T H:
--------------------
RECITALS.
- ---------
A. The Borrower desires to obtain from the Lenders (i) a Revolving
Credit Commitment in an aggregate amount of up to Fifteen Million Dollars
($15,000,000), and (ii) an Expansion Loan Commitment in an aggregate amount of
up to Sixty Million Dollars ($60,000,000); and
B. The Lenders are willing, on the terms and conditions hereinafter set
forth (including, without limitation, ARTICLES 2 and 4), to extend such credit
facilities; and
C. The Loans will be used in the manner described in SECTION 3.10 below;
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree
as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ACCOUNT" means any "account" (as such term is defined in Section
9-106 of the UCC) of the Borrower or any of its Subsidiaries arising from the
sale or lease of goods or providing of services.
"ACCOUNT DEBTOR" means any Person who is or may become obligated
to the Borrower or any of its Subsidiaries under, with respect to, or on account
of, an Account.
"ACQUISITION" means any acquisition, whether by stock purchase,
asset purchase, merger, consolidation or otherwise, of a business consisting
principally of the owning and operating of
- 1 -
<PAGE> 9
Telephones, and shall include as a single Acquisition any series of related
acquisitions of such business.
"ACQUISITION CRITERIUM" means, with respect to any Acquisition and
after giving effect to the consummation of such Acquisition, any of the six
criteria set forth in the following clauses (i) through (vi):
(i) the aggregate consideration to be paid by the Borrower and its
Subsidiaries in cash and other property is less than $4,000 per Eligible
Pay Telephone to be acquired pursuant to such Acquisition,
(ii) seventy-five percent (75%) of the Eligible Pay Telephones to
be acquired pursuant to such Acquisition are located in an Existing
PhoneTel Market,
(iii) the aggregate consideration to be paid by the Borrower and
its Subsidiaries in cash and other property is less than thirty-eight
(38) times unadjusted Net Monthly Income for the most recently ended
twelve-month period prior to consummation of such Acquisition,
(iv) the aggregate consideration to be paid by the Borrower and
its Subsidiaries in cash and other property is less than six (6) times
unadjusted EBITDA of the business being acquired pursuant to such
Acquisition for the most recently ended twelve-month period prior to
consummation of such Acquisition,
(v) no more than fifteen percent (15%) of the Eligible Pay
Telephones to be acquired pursuant to such Acquisition are located on
premises owned, leased or managed by any single Person and its
Affiliates, and
(vi) the average remaining life of the Telephone Placement
Agreements to be acquired pursuant to such Acquisition is greater than
thirty-two (32) months.
Any reference to "Acquisition Criteria" shall be a collective reference to each
and every Acquisition Criterium.
"AFFECTED LENDER" has the meaning set forth in clause (f) of SECTION
2.4.
"AFFILIATE" of any Person means any other Person which, directly
or indirectly, controls or is controlled by or under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power:
(a) to vote 5% or more of the securities having ordinary voting power
for the election of directors of such Person; or
- 2 -
<PAGE> 10
(b) to direct or cause the direction of the management or policies of
such Person whether by contract or otherwise;
PROVIDED, HOWEVER, that no Lender shall be deemed to be an Affiliate of the
Borrower.
"AGENT" means ING as agent for the Lenders pursuant hereto, or
such other Person as shall have subsequently been appointed as the successor
agent pursuant to SECTION 8.4.
"AGREEMENT" means, on any date, this Credit Agreement as
originally in effect on the Closing Date and as thereafter from time to time
amended, supplemented, amended and restated, or otherwise modified and in
effect.
"APPROVAL" means each and every approval, consent, filing and
registration by or with any federal, state or other regulatory authority
(domestic or foreign) necessary to authorize or permit the execution, delivery
or performance of this Agreement, the Notes or any other Loan Document, for the
granting of any security contemplated hereby or thereby, for the validity or
enforceability hereof or thereof, or for the consummation of the transactions
contemplated by the Loan Documents, including, without limitation, any
Acquisitions financed in whole or in part with the proceeds of any Loan.
"AUTHORIZED OFFICER" means, relative to any Loan Party, those
officers of such Loan Party whose signatures, incumbency and authority shall
have been certified to the Agent and the Lenders pursuant to SECTION 4.1.1 or
which may be certified after the Closing Date in a certificate conforming to the
requirements of SECTION 4.1.1(a).
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER PLEDGE AGREEMENT" means the Stock and Notes Pledge
Agreement, dated as of the date hereof, pursuant to which the Borrower will
pledge to the Agent, for itself and the ratable benefit of the Lenders, all of
the issued and outstanding stock of its Subsidiaries and all Subsidiary Notes
issued to it by its Subsidiaries, as security for the Obligations, as such
agreement may be amended, supplemented or otherwise modified from time to time.
"BORROWING" means the Loans or portions thereof made by the
Lenders on the same Business Day pursuant to the same Borrowing Request in
accordance with SECTION 3.1.
"BORROWING BASE" means, as of any date, the sum of (a) the lesser
of (x) $1,500 MULTIPLIED BY the number of Eligible Pay Telephones as of such
date and (y) the sum of (1) 80% of the net amount of accounts receivable (as
determined under GAAP) of the Borrower and its Subsidiaries as of such date PLUS
(2) an amount equal to $1,300 (or such greater amount as shall be specified
under clause (2) of Section 4.07(b)(i) of the Senior Notes Indenture as in
effect on such date) multiplied by the number of Eligible Pay Telephones as of
such date, MINUS (b) reserves established from time to time pursuant to SECTION
2.2.2 hereof.
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<PAGE> 11
"BORROWING BASE CERTIFICATE" means a certificate of the chief
executive, accounting or financial Authorized Officer of the Borrower in the
form of EXHIBIT B attached hereto.
"BORROWING REQUEST" means a loan request and certificate duly
executed by an Authorized Officer of the Borrower in the form of EXHIBIT C
attached hereto.
"BUSINESS DAY" means any day which is neither a Saturday or Sunday
nor a legal holiday on which banks are authorized or required to be closed in
New York, New York.
"CAPITALIZED LEASE LIABILITIES" means all monetary obligations of
the Borrower and its Subsidiaries under any leasing or similar arrangement
which, in accordance with GAAP, are or would be classified as capitalized
leases.
"CAPITAL STOCK" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited,
voting or non-voting, of such Person, including any preferred stock.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any direct obligation issued or guaranteed by the United
States of America or any agency or instrumentality thereof and backed by the
full faith and credit of the United States of America, or issued by any state or
political subdivision or public instrumentality thereof, (i) which has a
remaining maturity at the time of purchase of not more than one year or (ii)
which is subject to a repurchase agreement with any Lender or any Eligible
Lending Institution exercisable within six months from the time of purchase so
long as such direct obligation remains in the possession of the Borrower or in
the possession of any Lender and (iii) which, in the case of obligations of any
state or political subdivision or public instrumentality thereof, is rated AA or
better by Moody's Investors Service, Inc.;
(b) certificates of deposit, time deposits, demand deposits and
bankers' acceptances, having a remaining maturity at the time of purchase of not
more than one year, issued by any Lender or by any Eligible Lending Institution;
(c) corporate obligations rated Prime-1 by Moody's Investors
Service, Inc. or A-1 by Standard & Poor's Corporation, having a remaining
maturity at the time of purchase of not more than one year; and
(d) shares of funds registered under the Investment Company Act of
1940, as amended, having assets of at least $100,000,000 which invest only in
obligations described above and which shares are rated by Moody's Investors
Service, Inc. or Standard & Poor's Corporation in one of the two highest rating
categories assigned by such agencies for obligations of such nature.
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<PAGE> 12
"CHANGE IN CONTROL" means the occurrence of any of the following
events:
(a) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Exchange Act), other than the Permitted Holders, becomes
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person or group shall be deemed to have beneficial ownership
of all shares of Capital Stock that such person or group has the right to
acquire regardless of when such right is first exercisable), directly or
indirectly, of more than 35% of the total voting power represented by the
outstanding Voting Stock of the Borrower;
(b) the Borrower merges with or into another Person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person, or any Person merges with or into
the Borrower, in any such event pursuant to a transaction in which the
outstanding Voting Stock of the Borrower is converted into or exchanged for
cash, securities or other property, other than any such transaction where (x)
the outstanding Voting Stock of the Borrower is converted into or exchanged for
Voting Stock (other than Disqualified Stock) of the surviving or transferee
corporation and (y) immediately after such transaction no "person" or "group"
(as such terms are used in Sections 13(d) and 14(d) of the Exchange Act),
disregarding the Permitted Holders, is the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group
shall be deemed to have beneficial ownership of all shares of Capital Stock that
such person or group has the right to acquire regardless of when such right is
first exercisable), directly or indirectly, of more than 35% of the total power
represented by the outstanding Voting Stock of the surviving or transferee
corporation;
(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(together with any new directors whose election by the Board of Directors of the
Borrower or whose nomination for election by the stockholders of the Borrower
was approved by (x) a vote of at least a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved (as described in
this clause (x) or in the following clause (y)) or (y) Permitted Holders that
are "beneficial owners" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act) of a majority of the total voting power represented by the outstanding
Voting Stock of the Borrower) cease for any reason to constitute a majority of
the Board of Directors then in office; or
(d) the Borrower is liquidated or dissolved or adopts a plan of
liquidation.
"CHARGES" means all federal, state, county, city, municipal,
local, foreign or other governmental (including, without limitation, PBGC) (a)
taxes at the time due and payable and (b) levies, assessments, charges, liens,
claims or encumbrances upon or relating to (i) the Collateral, (ii) the
Obligations, (iii) the Borrower's and its Subsidiaries' employees, payroll,
income or gross receipts, (iv) the Borrower's and its Subsidiaries' ownership or
use of their assets, or (v) any other aspect of the Borrower's and its
Subsidiaries' business.
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<PAGE> 13
"CLOSING DATE" means the date on which Borrowings are first made
hereunder.
"CLOSING DATE ACQUISITION" means any of (i) the acquisition by the
Borrower of approximately 790 microprocessor-based Elcotel pay telephones
installed or to be installed at locations at and around Norfolk, Virginia and
related activities, pursuant to the Asset Purchase Agreement dated as of April
2, 1997 between the Borrower and Advance Pay Systems, Inc., (ii) the acquisition
by the Borrower of approximately 859 microprocessor-based Protel pay telephones
installed or to be installed at locations generally in and around Detroit,
Michigan and activities attendant to the ownership, operation and maintenance of
pay telephones, pursuant to the Asset Purchase Agreement dated as of April 4,
1997 between the Borrower and American Public Telecom Corporation, and (iii) the
acquisition by the Borrower of all of the capital stock of London
Communications, Inc. by way of a merger of PhoneTel V, Inc., a wholly-owned
subsidiary of the Borrower, with and into London Communications, Inc. with
London Communications, Inc. as the surviving corporation and a wholly-owned
subsidiary of the Borrower, pursuant to the Agreement and Plan of Merger dated
as of April 4, 1997 among the Borrower, PhoneTel V, Inc. and London
Communications, Inc.
"CLOSING DATE ACQUISITION AGREEMENTS" means, collectively, (i) the
Asset Purchase Agreement dated as of April 2, 1997, between the Borrower and
Advance Pay Systems, Inc., (ii) the Asset Purchase Agreement dated as of April
4, 1997, between the Borrower and American Public Telecom Corporation, and (iii)
the Agreement and Plan of Merger dated as of April 4, 1997, among the Borrower,
PhoneTel V, Inc., and London Communications, Inc.
"CLOSING DATE SELLER" means any of (i) Advance Pay Systems, Inc.,
(ii) American Public Telecom Corporation, and (iii) London Communications, Inc.
and Thomas E. Duffield, as sole shareholder of London Communications, Inc.
"COLLATERAL" means all property and interests in property and
proceeds thereof now owned or hereafter acquired by the Borrower or any
Subsidiary in and upon which a Lien is granted to the Agent, for its benefit and
the ratable benefit of the Lenders, under any of the Loan Documents.
"COLLATERAL ASSIGNMENT OF ACQUISITION AGREEMENT" means an
Assignment of Rights under Acquisition Agreement, executed by the Borrower and
any relevant subsidiaries, in favor of the Agent for the benefit of the Lenders,
and acknowledged by the applicable sellers, in the form of EXHIBIT H hereto.
"COMMITMENT" means, with respect to any Lender, the commitment of
such Lender to make Loans and purchase participations in Letters of Credit
pursuant to SECTION 2.1.
"COMMONLY CONTROLLED ENTITY" means an entity or trade or business,
whether or not incorporated, which is from time to time a member of a controlled
group or a group under common control with the Borrower within the meaning of
Sections 414(b), 414(c), 414(m) or 414(o) of the IRC or Section 4001(a)(14) of
ERISA.
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<PAGE> 14
"COMPLIANCE CERTIFICATE" means a certificate duly executed by the
chief executive, accounting or financial Authorized Officer of the Borrower in
the form of EXHIBIT D attached hereto, together with such changes as the
Required Lenders may from time to time reasonably request through the Agent for
purposes of monitoring the Borrower's compliance herewith.
"CONFIDENTIAL INFORMATION" has the meaning set forth in SECTION
9.13 of this Agreement.
"CONFORMING ACQUISITION" means any Minor Acquisition (i) to be
consummated at a time during which no Default or Event of Default exists or
would result therefrom, (ii) with respect to which the aggregate consideration
to be paid by the Borrower and its Subsidiaries in cash and other property is
less than $4,000 per Eligible Pay Telephone to be acquired pursuant to such
Acquisition, (iii) with respect to which at least 75% of the Eligible Pay
Telephones to be acquired pursuant to such Acquisition are located in an
Existing PhoneTel Market, (iv) with respect to which the aggregate consideration
to be paid by the Borrower and its Subsidiaries in cash and other property is
less than (A) thirty-eight (38) times unadjusted Net Monthly Income or (B) six
(6) times unadjusted EBITDA of the business being acquired pursuant to such
Acquisition, in either case for the most recently ended twelve-month period
prior to consummation of such Acquisition, (v) with respect to which no more
than fifteen percent (15%) of the Eligible Pay Telephones to be acquired
pursuant to such Acquisition are located on premises owned, leased, or managed
by any single Person and its Affiliates, and (vi) with respect to which the
average remaining life of the Telephone Placement Agreements to be acquired
pursuant to such Acquisition is greater than thirty-two (32) months.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, without
duplication, the sum of:
(a) the gross dollar amount of additions during such period to
property, plant, equipment and other fixed assets of the Borrower and its
Subsidiaries,
PLUS
(b) the aggregate amount of Capitalized Lease Liabilities incurred
during such period by the Borrower and its Subsidiaries.
"CONTRACTUAL OBLIGATION" means, relative to any Person, any
provision of any security issued by such Person or of any Instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound, excluding, in the case of the Borrower and any of its
Subsidiaries, the Loan Documents.
"CURRENT RATIO" means, at any date, the ratio at such date of (a)
current assets at such date (other than cash and Cash Equivalent Investments) to
(b) the sum of current liabilities at such date (other than the current portion
of Indebtedness under this Agreement), determined on a consolidated basis for
the Borrower and its Subsidiaries in accordance with GAAP.
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<PAGE> 15
"DEBT TO EBITDA RATIO" means, as of any date, the ratio of (a)
Indebtedness of the Borrower and its Subsidiaries as of such date (other than
Indebtedness consisting of reimbursement obligations in respect of undrawn
amounts under outstanding Letters of Credit and Existing Letters of Credit) to
(b) EBITDA of the Borrower and its Subsidiaries for the twelve-month period
ending on such date.
"DEFAULT" means any Event of Default or any condition or event
which, after notice or lapse of time or both, would constitute an Event of
Default.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached
hereto as SCHEDULE 1, as it may be amended, supplemented or otherwise modified
from time to time by the Borrower with the consent of the Required Lenders as
provided in SECTION 4.3.2.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part on or prior to the
stated maturity of the Senior Notes.
"DOLLAR" and the sign "$" mean lawful money of the United States.
"EBITDA" means, for any Person or business for any period, an
amount equal to Net Income PLUS (to the extent deducted in determining Net
Income) interest expense, provisions for income taxes, depreciation,
amortization of intangible assets and other non-cash charges (other than
restructuring charges, as determined in accordance with GAAP), MINUS (to the
extent included in determining Net Income) non-cash credits and revenues.
"ELIGIBLE LENDING INSTITUTION" means a financial institution
having a branch or office in the United States and having capital and surplus
and undivided profits aggregating at least $100,000,000 and rated Prime-1 or
better by Moody's Investors Service, Inc. or A-1 or better by Standard & Poor's
Corporation.
"ELIGIBLE PAY TELEPHONES" means only those Telephones (a) in which
the Agent, for its benefit and the ratable benefit of the Lenders, has a first
priority security interest, (b) which are located in the continental United
States, (c) which are identified on the Borrowing Base Certificate most recently
delivered by the Borrower pursuant to SECTION 6.1.1(h), (d) which are in full
operation, (e) which, in the opinion of the Required Lenders, are in good
operating condition and are not obsolete or unmerchantable, and (f) which are
subject to a valid and assignable Telephone Placement Agreement and a valid and
assignable OSP Agreement, PROVIDED, HOWEVER, that a Telephone shall not be
deemed to be an Eligible Pay Telephone if the Required Lenders, in their
reasonable judgment, determine that such Telephone should not be included in
such definition regardless of whether such Telephone meets the requirements of
clauses (a) through (f).
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<PAGE> 16
"ENVIRONMENT" means soil, surface waters, ground waters, land,
streams, sediments, surface or subsurface strata and ambient air.
"ENVIRONMENTAL LAWS" means all federal, state, local and foreign
laws or regulations, codes, common law, consent agreements, orders, decrees,
judgments or injunctions issued, promulgated, approved or entered thereunder
relating to pollution or protection of the Environment, natural resource or
occupational health and safety.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and expenses (including
all reasonable fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigation and feasibility studies), fines,
penalties, settlement costs, sanctions and interest incurred as a result of any
claim or demand, by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute, any Environmental
Law, permit, order, variance or agreement with a Governmental Authority or other
Person, arising from or related to the administration of any Environmental Law
or arising from environmental, health or safety conditions or a release or
threatened release resulting from the past, present or future operations of the
Borrower or its Subsidiaries or affecting any of their properties, or any
release or threatened release for which the Borrower or any of its Subsidiaries
is otherwise responsible under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"EVENT OF DEFAULT" means any of the events set forth in SECTION
7.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXISTING LETTERS OF CREDIT" means, collectively, (a) letter of
credit number PB-285386 in the undrawn face amount of $1,166,667 issued for the
account of the Borrower for the benefit of National Union Fire Insurance Company
of PA (Bart Bond), (b) letter of credit number PB-285395 in the undrawn face
amount of $500,000 issued for the account of the Borrower for the benefit of
National Union Fire Insurance Company of PA (U.S. West Bond), and (c) letter of
credit number PB-285404 in the undrawn face amount of $250,000 issued for the
account of the Borrower for the benefit of National Union Fire Insurance Company
of PA (Southwest Bell Bond).
"EXISTING PHONETEL MARKET" means, with respect to any proposed
Acquisition, any state in which the Borrower and its Subsidiaries have 450 or
more Eligible Pay Telephones prior to giving effect to such Acquisition.
"EXPANSION LOAN" means, relative to any Lender, any loan made by
such Lender to the Borrower pursuant to SECTION 2.1.1.
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<PAGE> 17
"EXPANSION LOAN AVAILABILITY" means the lesser of (i) the
Expansion Loan Commitment Amount MINUS the then aggregate outstanding principal
amount of Expansion Loans, or (ii) the Borrowing Base MINUS the then aggregate
principal amount of all outstanding Loans and the then aggregate outstanding
amount of Letter of Credit Obligations.
"EXPANSION LOAN COMMITMENT" means the collective commitments of
the Lenders to make Expansion Loans pursuant to SECTION 2.1.1.
"EXPANSION LOAN COMMITMENT AMOUNT" means $60,000,000 as such
amount may be reduced from time to time pursuant to SECTION 3.3.4.
"EXPANSION LOAN COMMITMENT TERMINATION DATE" means the earliest
of:
(a) the Stated Maturity Date;
(b) immediately and without further action upon the occurrence of
any Event of Default described in SECTION 7.1.4;
(c) immediately when any other Event of Default shall have
occurred and be continuing and either (i) any Loans shall be declared to be due
and payable pursuant to SECTION 7.3, or (ii) in the absence of such declaration,
the Agent, acting at the direction of the Required Lenders, shall give notice to
the Borrower that the Expansion Loan Commitment has been terminated; and
(d) immediately upon the occurrence of a Change in Control.
"EXPANSION NOTE" means a promissory note of the Borrower dated the
date hereof and substantially in the form of EXHIBIT A-1 attached hereto, and
shall also refer to all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.
"FACILITY FEE LETTER" means that certain confidential letter
agreement dated as of the date hereof between ING and the Borrower.
"FAIR SALEABLE VALUE BALANCE SHEETS" means a hypothetical
consolidated balance sheet of the Borrower and its Subsidiaries and a
hypothetical balance sheet of each Subsidiary of the Borrower, in each case,
prepared by the Borrower or its Subsidiaries based on the respective Pro Forma
Balance Sheets and setting forth (a) in the case of the Borrower, (i) the
consolidated assets of the Borrower and its Subsidiaries (restated at the fair
saleable value thereof), (ii) the consolidated liabilities of the Borrower and
its Subsidiaries (including all liabilities and obligations of the Borrower and
its Subsidiaries, fixed or contingent, direct or indirect, disputed or
undisputed, and whether or not required to be reflected on a balance sheet
prepared in accordance with GAAP), and (iii) the excess of such assets over such
liabilities and (b) in the case of each Subsidiary of the Borrower, (i) the
assets of such Subsidiary (restated at the fair saleable value thereof), (ii)
the liabilities of such Subsidiary (including all liabilities and obligations of
such Subsidiary, fixed or
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<PAGE> 18
contingent, direct or indirect, disputed or undisputed, and whether or not
required to be reflected on a balance sheet prepared in accordance with GAAP),
and (iii) the excess of such assets over such liabilities.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the arithmetic average of the quotations for such transactions
received by the Agent, in its sole discretion, either from (i) three federal
funds brokers of recognized standing selected by the Agent in its sole
discretion or (ii) the Reference Lenders.
"FINANCING STATEMENTS" means the financing statements under the
Uniform Commercial Codes of the applicable jurisdictions, filed with respect to
the Security Documents pursuant to clause (d) of SECTION 4.1.11.
"FISCAL QUARTER" means any quarter of a Fiscal Year.
"FISCAL YEAR" means, subject to SECTIONS 6.2.16 and 9.14, each
twelve month accounting period of the Borrower ending on December 31st
thereafter; references to a Fiscal Year with a number corresponding to any
calendar year (E.G., the "1997 Fiscal Year") refer to the Fiscal Year ending on
December 31st in such calendar year.
"FIXED CHARGE COVERAGE RATIO" means, for any period, the ratio of
(a) an amount equal to EBITDA to (b) Borrower's Fixed Charges during such
period.
"FIXED CHARGES" means, for the Borrower and its Subsidiaries on a
consolidated basis for any period, the sum of (a) Interest Expense during such
period, PLUS (b) scheduled principal repayments of Indebtedness (including,
without limitation, scheduled payments of principal in respect of Capitalized
Lease Liabilities) during such period, PLUS (c) Consolidated Capital
Expenditures during such period, PLUS (d) provisions for income taxes for such
period.
"FOREIGN LENDER" means any Lender organized under the laws of a
jurisdiction outside the United States.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve
System (or any successor).
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<PAGE> 19
"GAAP" means generally accepted accounting principles in effect
from time to time in the United States.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms
contained in this Agreement or any other Loan Document refer to this Agreement
or such other Loan Document, as the case may be, as a whole and not to any
particular Section, subsection, clause or provision of this Agreement or such
other Loan Document.
"INCLUDING" means including without limiting the generality of any
description preceding such term.
"INDEBTEDNESS" of any Person means, without duplication,
(a) all obligations of such Person for borrowed money (including
all notes payable and drafts accepted representing extensions of credit) and all
obligations evidenced by bonds, debentures, notes or other similar instruments
on which interest charges are customarily paid;
(b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker's acceptances
issued for the account of such Person;
(c) all Capitalized Lease Liabilities of such Person (to the
extent required by GAAP to be included on the balance sheet of such Person);
(d) whether or not so included as liabilities in accordance with
GAAP:
(i) all obligations of such Person to pay the deferred purchase
price of property or services (excluding trade accounts payable for
other than borrowed money arising in the ordinary course of business)
and indebtedness secured by a Lien on property owned or being purchased
by such Person (including indebtedness arising under conditional sales
or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; and
(ii) all obligations of such Person in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise
assure a creditor against loss in respect of, Indebtedness of another
Person of the type described in clause (a), (b), (c) or (d)(i), above,
or clause (e) or (f) below;
(e) net obligations under Interest Rate Contracts; and
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<PAGE> 20
(f) all obligations of such Person to redeem, purchase or
otherwise retire or extinguish any of its Capital Stock at a fixed or
determinable date (whether by operation of a sinking fund or otherwise), at
another's option or upon the occurrence of a condition not solely with the
control of such Person (E.G., redemption from future earnings).
"INDEMNIFIED LIABILITIES" means any and all actions, causes of
action, suits, losses, costs, liabilities, damages and expenses incurred by or
asserted or awarded against any Lender Party and against which the Borrower has
indemnified the Lender Parties as provided in SECTION 9.4.
"ING" means ING (U.S.) Capital Corporation.
"ING ALTERNATE BASE RATE" means a fluctuating rate of interest per
annum equal to the higher of:
(a) the arithmetic average of rates of interest announced by each
of the Reference Lenders from time to time at such Reference Lender's principal
New York City office as its prime (or base) rate for U.S. domestic commercial
loans; and
(b) the Federal Funds Rate from time to time in effect plus 1/2 of
1% (0.50%).
Changes in the rate of interest on Loans shall take effect on the date of each
change in the ING Alternate Base Rate. The Agent shall give notice promptly to
the Borrower and the Lenders of changes in the ING Alternate Base Rate,
provided, that a failure to provide any such notice shall not affect any such
changes in interest rates on Loans.
"INSOLVENCY" or "INSOLVENT" means, at any particular time, a
Multiemployer Pension Plan is insolvent within the meaning of Section 4245 of
ERISA.
"INSTRUMENT" means any contract, agreement, letter of credit,
indenture, mortgage, warrant, deed, certificate of title, document or writing
(whether by formal agreement, letter or otherwise) under which any obligation is
evidenced, assumed or undertaken, any Lien (or right or interest therein) is
granted or perfected, or any property (or right or interest therein) is
conveyed.
"INTELLECTUAL PROPERTY" means, collectively, (a) patents, patent
rights and patent applications, copyrights and copyright applications,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights, applications for registration of trademarks, trade names
and service marks, fictitious names registrations and trademark, trade name and
service mark registrations, including, without limitation, the name "PhoneTel
Technologies", and all derivations thereof, and (b) patent licenses, trademark
licenses, copyright licenses and other licenses to use any of the items
described in clause (a), and any other items necessary to conduct or operate the
business of the Borrower and its Subsidiaries.
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<PAGE> 21
"INTEREST COVERAGE RATIO" means, for any period, the ratio of (a)
EBITDA of the Borrower and its Subsidiaries for such period to (b) Interest
Expense for such period.
"INTEREST EXPENSE" means, for any period, the Borrower's
consolidated interest expense accrued during such period in respect of all
Indebtedness of the Borrower and its Subsidiaries.
"INTEREST RATE CONTRACT" means any interest rate cap agreement or
other agreement or arrangement designed to protect against fluctuations in
interest rates acceptable to the Lenders.
"INTEREST RATE CONTRACT COUNTERPARTY" means any counterparty to an
Interest Rate Contract which the Borrower is required to enter into pursuant to
SECTION 6.1.12.
"INTERNAL REVENUE SERVICE" means the Internal Revenue Service of
the United States of America.
"INVESTMENT" means, relative to any Person:
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business);
(b) any ownership or similar interest held by such Person in any
other Person; and
(c) the purchase of any debt or equity securities or instruments
issued by any other Person (including, without limitation, Stock, notes,
debentures, drafts and acceptances, trust certificates, partnership interests or
units or membership interests in limited liability companies).
The amount of any Investment of the nature referred to in clause (a) or (b)
shall be the original principal or capital amount thereof less all returns of
principal or equity thereon (and without adjustment by reason of the financial
condition of such other Person) and shall, if made by the transfer or exchange
of property other than cash, be deemed to have been made in an original
principal or capital amount equal to the fair market value of such property.
"IRC" means the Internal Revenue Code of 1986, as amended, and any
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the IRC
also refer to any successor sections.
"LENDER" means (a) any of the various lenders as are, or may
become, parties hereto, and (b) each Interest Rate Contract Counterparty that is
a Lender pursuant to clause (a) of this definition and has executed and
delivered a joinder agreement in the form of EXHIBIT F attached hereto, duly
executed by such Interest Rate Contract Counterparty and delivered to the Agent.
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<PAGE> 22
"LENDER PARTIES" means, collectively, the Agent and each Lender,
and each of their respective successors and assigns, and each of the respective
officers, directors, employees, attorneys and agents of the Agent and each
Lender and of each of their respective successors and assigns, indemnified by
the Borrower as provided in SECTION 9.4.
"LETTER OF CREDIT" means an irrevocable standby letter of credit
issued by the Agent for the account of the Borrower or one of its Subsidiaries
pursuant to SECTION 3.5.
"LETTER OF CREDIT OBLIGATION" means, in respect of each Letter of
Credit, the undrawn face amount of such Letter of Credit, PLUS the amount of all
drawings under such Letter of Credit for which the Agent and the Lenders have
not been reimbursed by the Borrower.
"LETTER OF CREDIT REQUEST" means a request and certificate for the
issuance of a Letter of Credit, duly executed by the chief executive, accounting
or financial officer of the Borrower in the form of EXHIBIT G, delivered by the
Borrower to the Agent pursuant to SECTION 3.5.1, together with the letter of
credit application accompanying such request.
"LETTER OF CREDIT RESERVE REQUIREMENT" means, relative to any
Lender holding a participation in a Letter of Credit, during the period from the
issuance of such Letter of Credit to but excluding the expiry date thereof, the
reserve percentage (expressed as a decimal) equal to the maximum aggregate
reserve requirements applicable to such Lender and such Letter of Credit
specified under applicable laws, regulations and directives (whether or not
having the force of law) as determined on each Quarterly Payment Date.
"LIEN" means any mortgage, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, lien (statutory or other), adverse
claim or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease involving substantially the
same economic effect as any of the foregoing and the filing of any financing
statement under the UCC or comparable law of any jurisdiction).
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes,
each Security Document, the Facility Fee Letter, the Subsidiary Guaranty, each
Borrowing Request, any Interest Rate Contract entered into by the Borrower with
a Lender, and each other Instrument executed and delivered by the Borrower or
any of its Subsidiaries, as of the date hereof or at any time thereafter, in
connection with the transactions contemplated by this Agreement, in each case,
as amended, modified or supplemented from time to time.
"LOAN PARTY" means any of the Borrower, the Borrower's
Subsidiaries and any Affiliate of any of them which is a party to any of the
Loan Documents.
"LOAN" means any of the Loans.
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<PAGE> 23
"LOANS" means, relative to any Lender, the Expansion Loans and
Revolving Credit Loans made by such Lender to the Borrower pursuant to SECTION
2.1.1 or SECTION 2.1.2.
"LOSS" means any loss, damage, destruction, theft, or seizure of,
or any other casualty with respect to, or any condemnation of, any property or
asset of any Person in an amount in excess of $50,000 individually or $100,000
in the aggregate for any Fiscal Year; and the "AMOUNT" of any Loss means (i) if
such asset or property is repaired or replaced, the greater of (A) the cost to
repair or replace the property or asset that was the subject of such Loss and
(B) the amount of insurance proceeds or condemnation awards payable as a result
of such Loss, and (ii) if such asset or property is not repaired or replaced,
the amount of insurance proceeds or condemnation awards payable as a result of
such loss.
"MAJOR ACQUISITION" means any Acquisition for which the aggregate
consideration in cash and other property (including assumed liabilities) paid by
the Borrower and its Subsidiaries is $4,000,000 or more.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change in
(i) the condition (financial or otherwise), operations, performance, business,
properties or prospects of the Borrower and its Subsidiaries taken as a whole,
or (ii) the rights and remedies of the Lenders or the Agent under the Loan
Documents, or (iii) the ability of the Borrower to repay the Obligations or of
the Borrower or any Subsidiary to perform their respective obligations under the
Loan Documents, (iv) the legality, validity or enforceability of any Loan
Document or (v) the Liens granted the Agent for the benefit of the Lenders
pursuant to the Security Documents; (b) a material adverse change or
modification of, or other material adverse development regarding, the
dial-around compensation provisions of the Federal Communication Commission's
Report and Order implementing Section 276 of the Communications Act of 1934, as
amended by the Telecommunications Act of 1996; or (c) the institution by any
Governmental Authority of rate caps or rate guidelines for calling charges
applicable to Telephones of the Borrower or any of its Subsidiaries that,
together with all other rate caps and rate guidelines on calling charges
instituted by Governmental Authorities after the Closing Date and applicable to
Telephones of the Borrower or any of its Subsidiaries, constitute a material
adverse change in the prospects of the Borrower and its Subsidiaries, taken as a
whole.
"MATURITY" means, relative to any Loan or portion thereof, the
earlier of such Loan's Stated Maturity Date or such other date when such Loan or
portion thereof shall be or become due and payable in accordance with the terms
of this Agreement, whether by required repayment, prepayment, declaration,
acceleration or otherwise.
"MINOR ACQUISITION" means any Acquisition for which the aggregate
consideration in cash and other property (including assumed liabilities) paid by
the Borrower and its Subsidiaries is less than $4,000,000.
"MONTHLY PAYMENT DATE" means the last day of each calendar month
or, if such day is not a Business Day, the immediately preceding Business Day.
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<PAGE> 24
"MULTIEMPLOYER PENSION PLAN" means a Multiemployer Plan which is
subject to Subtitle E of Title IV of ERISA.
"MULTIEMPLOYER PLAN" means a Plan which is a "multiemployer plan"
within the meaning of Section 3(37) of ERISA.
"NET CASH PROCEEDS" means, (a) with respect to any sale or
disposition of assets by the Borrower or any of its Subsidiaries, (i) the gross
cash proceeds received from such sale or disposition MINUS (ii) the sum of (x)
all reasonable out-of-pocket fees and expenses incurred in connection with
such sale or disposition PLUS (y) all taxes incurred in connection with such
sale or disposition PLUS (z) the outstanding principal amount of Indebtedness
(other than the Loans) required to be repaid under the terms thereof as a result
of such sale or disposition, and (b) with respect to any issuance of debt
securities or incurrence of Indebtedness by the Borrower or any of its
Subsidiaries, (i) the gross cash proceeds received from such issuance or
incurrence, MINUS (ii) all reasonable out-of-pocket fees and expenses incurred
in connection with such issuance or incurrence, PROVIDED, HOWEVER, that nothing
contained in this definition shall be deemed to be a consent to any sale or
disposition of assets, or any issuance of debt securities or incurrence of
Indebtedness, that is not otherwise permitted by the Loan Documents.
"NET INCOME" means, as to any Person for any period, the net
income (or loss) of such Person for such period, determined in accordance with
GAAP, but excluding extraordinary gains or losses for such period.
"NET MONTHLY INCOME" means, with respect to any business to be
acquired by the Borrower or any of its Subsidiaries pursuant to an Acquisition
for any period, the net revenues of such business for such period, less line and
transmission charges, location commissions and sales tax on coin revenue of such
business for such period.
"NOTES" means, collectively, all of the Expansion Notes and all of
the Revolving Credit Notes.
"OBLIGATIONS" means all obligations of the Borrower with respect
to the repayment or performance of any obligations (monetary or otherwise) of
the Borrower arising under or in connection with this Agreement, the Notes and
the other Loan Documents.
"ORGANIC DOCUMENT" means, relative to any Person, its articles or
certificate of incorporation or certificate of limited partnership or
organization, its bylaws, partnership or operating agreement or other
organizational documents, and all stockholders agreements, voting trusts and
similar arrangements applicable to any of its Capital Stock or partnership
interests or other ownership interests.
"OSP AGREEMENT" means any agreement with an operator service
provider pursuant to which commissions, fees or surcharges are to be paid to the
Borrower or one of its Subsidiaries on
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<PAGE> 25
all or a portion of the long distance traffic relating to any pay telephones
owned or leased by or to the Borrower or one of its Subsidiaries.
"PARTICIPANT" means the banks or other entities that purchase
participating interests in any Loan, Note, Commitment or other interest
hereunder, as provided in subsection (a) of SECTION 9.11.
"PBGC" means the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means any Plan which is subject to the provisions
of Title IV of ERISA, or to the provisions of Section 302 of ERISA or Section
412 of the IRC.
"PERCENTAGE" of any Lender means, at any time, in respect of the
Commitment and the Loans, the percentage set forth opposite such Lender's
signature hereto under the caption "Percentage", as the same may be adjusted
pursuant to SECTION 9.11.
"PERMITTED HOLDERS" means (i) Peter G. Graf; (ii) his spouse and
lineal descendants; (iii) in the event of the incompetence or death of any of
the Persons described in clauses (i) and (ii), such Person's estate, executor,
administrator, committee or other personal representative; (iv) any trusts
created for the benefit of the Persons described in clause (i) or (ii); (v) each
of ING (U.S.) Capital Corporation and Cerberus Partners, L.P.; or (vi) any
Person controlled by any of the Persons described in clause (i), (ii), (iv) or
(v). For purposes of this definition, "control," as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities or by contract or otherwise.
"PERSON" means any natural person, corporation, partnership,
limited liability company, firm, association, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.
"PLAN" shall mean, at a particular time, any employee benefit plan
(within the meaning of Section 3(3) of ERISA), which is covered by ERISA and in
respect of which the Borrower, a Subsidiary or a Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"POST-DEFAULT RATE" means (a) in the case of each Loan, the sum of
the rate per annum otherwise applicable to such Loan from time to time PLUS two
percent (2%) per annum and (b) in the case of all other Obligations, the ING
Alternate Base Rate PLUS three and one half percent (3.5%) per annum.
"PREPAYMENT FEE" means the fee payable by the Borrower to the
Lenders prior to or concurrently with any prepayment as required under SECTION
3.3.2.
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<PAGE> 26
"PRO FORMA BALANCE SHEETS" means, collectively, (a) the
consolidated PRO FORMA balance sheet of the Borrower and its Subsidiaries as of
the Closing Date, prepared by the Borrower based on the financial statements
described in clauses (i) and (ii) of SECTION 5.4(a) and after giving effect to
the consummation of the transactions contemplated hereby, including the making
of the initial Loans on the Closing Date, and (b) the PRO FORMA balance sheet of
each of the Borrower's Subsidiaries as of the Closing Date, prepared by such
Subsidiaries based on the financial statements described in clause (ii) of
SECTION 5.4(a) and after giving effect to the consummation of the transactions
contemplated hereby, including the making of the initial Loans on the Closing
Date.
"PROJECTIONS" means, collectively, (a) the statements of
operations of the Borrower for the Fiscal Years 1997-2000 inclusive, dated May
14, 1997, prepared by the Borrower on a monthly basis for the 1997 Fiscal Year
and on a quarterly basis for all Fiscal Years thereafter, together with
supporting details and a statement of underlying assumptions, and (b) the
projected balance sheets, statements of operations and changes in cash flows of
the Borrower for the Fiscal Years 1997-2000 inclusive, dated May 14, 1997,
prepared by the Borrower on an annual basis, together with supporting details
and a statement of underlying assumptions, all of which have been delivered to
the Lenders prior to the Closing Date.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness incurred to
finance part or all of (but not more than) the purchase price of equipment in
which neither the Borrower nor any of its Subsidiaries had at any time prior to
such purchase an interest.
"PURCHASING LENDER" means any Person purchasing all or any part of
the rights and obligations under this Agreement and the Notes of any Lender
pursuant to a Transfer Supplement in accordance with SECTION 9.11.
"QUARTERLY PAYMENT DATE" means the last day of each August,
November, February and May, or, if such day is not a Business Day, the
immediately preceding Business Day.
"REFERENCE LENDERS" means, collectively, The Chase Manhattan Bank,
Citibank, N.A. and Morgan Guaranty Trust Company of New York.
"REGISTER" means the register for the recordation of the names and
addresses of the Lenders and the Commitment of, and the principal amounts of the
Loans owing to, each Lender from time to time, as provided in subsection (c) of
SECTION 9.11.
"REGULATORY CHANGE" means, as to any or all of the Lenders or the
Agent, any change (including, without limitation, any change in the
interpretation) occurring after the Closing Date in any (or the adoption after
such date of any new):
(a) United States federal or state law or foreign law applicable
to the Agent or such Lender; or
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<PAGE> 27
(b) regulation, interpretation, directive, guideline or request
(whether or not having the force of law) applicable to the Agent or such Lender
of any court or Governmental Authority charged with the interpretation or
administration of any law referred to in clause (a) or of any central bank or
fiscal, monetary or other authority having jurisdiction over the Agent or such
Lender.
"REORGANIZATION" means with respect to any Multiemployer Pension
Plan, the condition that such plan is in reorganization within the meaning of
such term as used in Section 4241 of ERISA.
"REPLACEMENT LENDER" has the meaning set forth in clause (f) of
SECTION 2.4 of this Agreement.
"REPORTABLE EVENT" means (i) a reportable event described in
Section 4043 of ERISA and regulations thereunder (other than any Reportable
Event described in Section 4043(b)(2) or (7)), (ii) a withdrawal by a
"substantial employer" (within the meaning of Section 4001(a)(2) of ERISA) from
a Single Employer Plan to which more than one employer contributes, as referred
to in Section 4063(b) of ERISA, or (iii) a cessation of operations at a facility
causing more than twenty percent (20%) of participants under a Single Employer
Plan to be separated from employment, as referred to in Section 4062(e) of
ERISA.
"REQUIRED LENDERS" means, (a) Lenders having, in the aggregate,
sixty-seven percent (67%) or more of the aggregate Commitments or (b) if the
Commitments shall have been terminated, whether pursuant to this Agreement or
otherwise, Lenders having, in the aggregate, sixty-seven percent (67%) of the
aggregate of the outstanding principal amount of the Loans.
"REQUIREMENTS OF LAW" means, as to any Person, the Organic
Documents of such Person, and all federal, state and local laws, rules,
regulations, orders, decrees or other determinations of an arbitrator, court or
other Governmental Authority, including, without limitation, all disclosure and
other requirements of ERISA, the requirements of Environmental Laws and
Environmental Permits, the requirements of OSHA, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"RESPONSIBLE OFFICER" means the Chief Executive Officer, the
President, the Chief Financial Officer, the Treasurer or the Director of
Accounting of the Borrower.
"REVOLVING CREDIT AVAILABILITY" means, on any date, an amount
equal to the lesser of (i) the Revolving Credit Commitment Amount MINUS the then
aggregate outstanding principal amount of Revolving Credit Loans MINUS the then
aggregate outstanding amount of Letter of Credit Obligations, or (ii) the
Borrowing Base MINUS the then aggregate principal amount of all outstanding
Loans and the then aggregate outstanding amount of Letter of Credit Obligations.
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<PAGE> 28
"REVOLVING CREDIT COMMITMENT" means the collective commitments of
the Lenders to make Revolving Credit Loans and to purchase participations in
Letters of Credit pursuant to SECTION 2.1.2.
"REVOLVING CREDIT COMMITMENT AMOUNT" means $15,000,000, as such
amount may be reduced from time to time pursuant to SECTION 3.3.4.
"REVOLVING CREDIT LOAN" means relative to any Lender, any loan
made by such Lender to the Borrower pursuant to SECTION 2.1.2.
"REVOLVING CREDIT NOTE" means a promissory note of the Borrower
dated the date hereof and substantially in the form of EXHIBIT A-2 attached
hereto, and shall also refer to all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"REVOLVING CREDIT TERMINATION DATE" means the earliest of:
(a) the Stated Maturity Date;
(b) immediately and without further action upon the occurrence of
any Event of Default described in SECTION 7.1.4;
(c) immediately when any other Event of Default shall have
occurred and be continuing and either (i) any Loan shall be declared to be due
and payable pursuant to SECTION 7.3, or (ii) in the absence of such declaration,
the Agent, acting at the direction of the Required Lenders, shall give notice to
the Borrower that the Revolving Credit Commitment has been terminated; and
(d) immediately upon the occurrence of a Change in Control.
"SECURITY AGREEMENT" means the Security Agreement, dated as of the
date hereof, made by the Borrower and each of its Subsidiaries in favor of the
Agent, for its benefit and the benefit of the Lenders, as such agreement may be
amended, supplemented or otherwise modified from time to time.
"SECURITY DOCUMENTS" means, collectively, the Security Agreement,
the Trademark Assignments, the assignment of the Interest Rate Contracts
described in SECTION 6.1.12 to the extent that the Interest Rate Contract
Counterparty is a Lender, the Borrower Pledge Agreement, the Subsidiary Pledge
Agreement and each other Instrument at any time delivered in connection with
this Agreement to secure the Obligations.
"SENIOR NOTES" means the Borrower's $125,000,000 aggregate
principal amount of 12% Senior Notes due 2006, issued by the Borrower pursuant
to the Senior Notes Indenture.
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<PAGE> 29
"SENIOR NOTES INDENTURE" means the Indenture, dated as of December
18, 1996, among the Borrower, as Issuer, the Subsidiaries of the Borrower party
thereto, as Subsidiary Guarantors, and Marine Midland Bank, as Trustee, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the provisions of this Agreement.
"SINGLE EMPLOYER PLAN" means any Plan which is covered by Title IV
of ERISA, other than a Multiemployer Plan.
"SOLVENT" means, with respect to any Person on a particular date,
that on such date (i) the fair value of the assets of such Person (both at fair
valuation and at present fair saleable value) is, on the date of determination,
greater than the total amount of liabilities, including, without limitation,
contingent and unliquidated liabilities, of such Person, (ii) such Person is
able to pay all liabilities of such Person as they mature, and (iii) such Person
does not have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated liabilities at any time, such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
"STATED MATURITY DATE" means May 30, 2000.
"SUBSIDIARY" of any corporation means any other corporation,
partnership or limited liability company of which greater than 50% of the
outstanding shares of Capital Stock or other ownership interests having ordinary
voting power for the election of directors (or others serving equivalent
functions) is owned directly or indirectly by such corporation, and, except as
otherwise indicated herein, references to Subsidiaries shall refer to
Subsidiaries of the Borrower.
"SUBSIDIARY GUARANTY" means the Guaranty of all the Obligations,
dated as of the date hereof, made by the Borrower's Subsidiaries, jointly and
severally, in favor of the Agent and the Lenders.
"SUBSIDIARY PLEDGE AGREEMENT" means the Subsidiary Pledge
Agreement, dated as of the date hereof, pursuant to which World Communications,
Inc. will pledge to the Agent, for itself and the ratable benefit of the
Lenders, all of the issued and outstanding stock of its Subsidiary as security
for the Obligations, as such agreement may be amended, modified, supplemented or
otherwise modified from time to time.
"TAXES" means all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, EXCLUDING, in the case
of each Lender and the Agent, taxes imposed on its net income and franchise
taxes imposed on it.
"TELEPHONE" shall mean a microprocessor-based non-cellular
telephone through which a user may initiate a call payable only by coins or by
credit card, collect or third number billing procedures and which has been
installed for operation.
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<PAGE> 30
"TELEPHONE PLACEMENT AGREEMENT" shall mean any agreement between
the Borrower or one of its Subsidiaries and another Person pursuant to which the
Borrower or such Subsidiary installs one or more Telephones on property or
properties owned, leased or operated by such Person and pays to such Person a
fee or percentage of revenues earned from such Telephone(s), and such other
compensation as may be provided pursuant thereto, in return for such
installation right.
"TOTAL COMMITMENT" means, collectively, the Expansion Loan
Commitment and the Revolving Credit Commitment.
"TOTAL COMMITMENT AMOUNT" means, collectively, the Expansion Loan
Commitment Amount and the Revolving Credit Commitment Amount.
"TRADEMARK ASSIGNMENTS" means the Collateral Assignment and
Security Agreements (Trademarks), each dated as of the date hereof, made by the
Borrower and certain of its Subsidiaries in favor of the Agent, for its benefit
and the ratable benefit of the Lenders.
"TRANSFER SUPPLEMENT" means a Transfer Supplement, substantially
in the form of EXHIBIT E, executed pursuant to SECTION 9.11.
"UCC" means the Uniform Commercial Code of the State of New York,
as in effect from time to time.
"UNITED STATES" or "U.S." means the United States of America, its
50 States and the District of Columbia.
"VOTING STOCK" means, with respect to any Person, Capital Stock of
such Person of the class or classes pursuant to which the holders thereof have
the general voting power under ordinary circumstances to elect at least a
majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency).
"WRITTEN" or "IN WRITING" means any form of written communication
or a communication by means of telex, telecopier device, telegraph or cable.
SECTION 1.2 USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and each
Note, Borrowing Base Certificate, Borrowing Request, Compliance Certificate,
notice and other communication delivered from time to time in connection with
this Agreement or any other Loan Document.
SECTION 1.3 CROSS-REFERENCES. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and unless otherwise specified,
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<PAGE> 31
references in any Article, Section, or definition to any subsection or clause
are references to such subsection or clause of such Section, Article or
definition.
SECTION 1.4 ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder shall be made, and all financial statements required to be delivered
hereunder or thereunder shall be prepared in accordance with GAAP.
ARTICLE 2
COMMITMENTS
SECTION 2.1 LOAN COMMITMENTS. Subject to the terms and conditions of
this Agreement (including ARTICLE 4), each Lender severally and for itself alone
agrees to provide: (a) its Percentage of the Expansion Loan Commitment; and (b)
its Percentage of the Revolving Credit Commitment; each as more fully described
in this SECTION 2.1.
SECTION 2.1.1 EXPANSION LOAN COMMITMENT. Subject to the
limitations set forth in SECTION 2.1.3, each Lender will from time to time, on
any Business Day occurring during the period commencing on the Closing Date and
continuing to (but not including) the Expansion Loan Commitment Termination
Date, make Expansion Loans to the Borrower equal to its Percentage of the
aggregate amount of any Borrowing of Expansion Loans requested by the Borrower
to be made on such Business Day in accordance with SECTION 3.1.
SECTION 2.1.2 REVOLVING CREDIT COMMITMENT. Subject to the
limitations set forth in SECTION 2.1.3, each Lender will from time to time on
any Business Day occurring during the period commencing on the Closing Date and
continuing to (but not including) the Revolving Credit Termination Date:
(a) make Revolving Credit Loans to the Borrower equal to its
Percentage of the aggregate amount of any Borrowing of Revolving Credit Loans
requested by the Borrower to be made on such Business Day in accordance with
SECTION 3.1; and
(b) purchase participations in Letters of Credit issued by the
Agent for the account of the Borrower or one of its Subsidiaries, as provided in
SECTION 3.5.3, in amounts not to exceed such Lender's Percentage of $5,000,000.
SECTION 2.1.3 AGENT AND LENDERS NOT REQUIRED TO EXTEND CREDIT
UNDER COMMITMENTS. No Lender shall be required to make any Loan or purchase a
participation in any Letter of Credit, and the Agent shall have no obligation to
issue any Letter of Credit, if after giving effect thereto:
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<PAGE> 32
(1) the then aggregate outstanding principal amount of all
Expansion Loans, PLUS the then aggregate outstanding principal
amount of all Revolving Credit Loans PLUS the then aggregate
amount of outstanding Letter of Credit Obligations PLUS the
aggregate undrawn face amount of the Existing Letters of Credit
would exceed the Borrowing Base; or
(2) the then aggregate outstanding principal amount of all
Expansion Loans would exceed the Expansion Loan Commitment Amount;
or
(3) the then aggregate outstanding principal amount of all
Revolving Credit Loans PLUS the then aggregate amount of
outstanding Letter of Credit Obligations PLUS the then aggregate
undrawn face amount of the Existing Letters of Credit would exceed
the Revolving Credit Commitment Amount; or
(4) the then aggregate outstanding principal amount of such
Lender's Expansion Loans would exceed its Percentage of the
Expansion Loan Commitment Amount; or
(5) the then aggregate outstanding principal amount of such
Lender's Revolving Credit Loans PLUS such Lender's Percentage of
the then aggregate amount of outstanding Letter of Credit
Obligations would exceed its Percentage of the Revolving Credit
Commitment Amount; or
(6) the then aggregate amount of outstanding Letter of
Credit Obligations PLUS the then aggregate undrawn face amount of
the Existing Letters of Credit would exceed $5,000,000; or
(7) the then aggregate outstanding amount of Loans, PLUS the
then aggregate amount of outstanding Letter of Credit Obligations,
would not exceed $25,000,000 and the making of such Loan or the
issuance of such Letter of Credit, as the case may be, would not
be permitted under Section 4.07(b)(i) of the Senior Notes
Indenture; or
(8) the then aggregate outstanding principal amount of all
Loans, PLUS the then aggregate amount of outstanding Letter of
Credit Obligations, would exceed $25,000,000 but would not exceed
$50,000,000 and the "Consolidated Fixed Charge Coverage Ratio", as
such term is defined in the Senior Notes Indenture, of the
Borrower and its Subsidiaries would be less than (x) 1.65 to 1.0
if such Loan is incurred or such Letter of Credit is issued prior
to December 31, 1997, (y) 2.50 to 1.0 if such Loan is made or such
Letter of Credit is issued prior to December 31, 1998 or (z) 2.75
to 1.0 if such Loan is made or such Letter of Credit is issued on
or after December 31, 1998; or
(9) the then aggregate outstanding principal amount of all
Loans, PLUS the then aggregate amount of all outstanding Letter of
Credit Obligations, would exceed $50,000,000 and the "Consolidated
Fixed Charge Coverage Ratio", as such term is
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defined in the Senior Notes Indenture, of the Borrower and its
Subsidiaries would be less than 3.3 to 1.0;
PROVIDED, HOWEVER, that (i) in the event the Senior Notes Indenture is amended
or supplemented to provide that a designated amount of Indebtedness under this
Agreement of not less than $25,000,000 may be incurred from time to time on a
revolving basis to finance the working capital needs of the Borrower and its
Subsidiaries notwithstanding that such incurrence would not otherwise be
permitted under Section 4.07(a) of the Senior Notes Indenture, and
notwithstanding that other Indebtedness (in addition to such designated amount)
has been or may be incurred under this Agreement subject to the limitation set
forth in Section 4.07(a) of the Senior Notes Indenture, the ratios set forth in
clauses (x), (y) and (z) of subsection (8) above, and the ratio set forth in
subsection (9) above, shall be decreased to 1.5 to 1.0, 2.25 to 1.0, 2.50 to
1.0, and 3.0 to 1.0, respectively, and (ii) in the event that the Senior Notes
Indenture is amended or supplemented to decrease the ratio set forth in clause
(C) of the definition of "Permitted Liens" of the Senior Notes Indenture, the
ratio set forth in subsection (9) above, shall be decreased to 110% of the ratio
set forth in clause (C) of the definition of "Permitted Liens" of the Senior
Notes Indenture, as so amended or supplemented, provided that in no event shall
the ratio set forth in subsection (9) above be decreased below 2.81 to 1.0.
Subject to the terms hereof, the Borrower may from time to time borrow, repay,
and reborrow Revolving Credit Loans pursuant to the Revolving Credit Commitment.
Subject to the terms hereof, (i) for the period from the Closing Date to but
excluding November 30, 1998, the Borrower may from time to time borrow, repay
and reborrow Expansion Loans pursuant to the Expansion Loan Commitment and (ii)
from and after November 30, 1998, the Borrower may not reborrow Expansion Loans
once repaid.
SECTION 2.2 CHANGES IN ADVANCE FORMULA; ESTABLISHMENT OF RESERVES.
SECTION 2.2.1 ADVANCE RATIOS. The Borrower acknowledges that the
advance formula provided for in the definition of "Borrowing Base" in SECTION
1.1 has been established based upon the Required Lenders' determination of the
loan value of the Eligible Pay Telephones as of the date of this Agreement. Upon
the occurrence and during the continuance of an Event of Default, based on the
Required Lenders' customary credit considerations, the Required Lenders, in
their sole discretion, may decrease the advance ratios against Eligible Pay
Telephones, and any such decrease shall become effective immediately upon the
Agent's giving notice thereof to the Borrower, and shall remain in effect for so
long as such Event of Default continues.
SECTION 2.2.2 RESERVES. The Agent shall have the right to
establish, in such amounts, and with respect to such matters, as the Agent,
based on the Agent's customary credit considerations, shall deem necessary or
appropriate, reserves with respect to (i) Charges and Liens; (ii) Environmental
Liabilities and Costs; and (iii) sums as to which the Agent and the Lenders are
permitted to make Revolving Credit Loans on the Borrower's behalf under SECTION
3.3.3 of this Agreement.
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SECTION 2.3 COMMITMENT AND AGENT'S FEE.
(a) The Borrower agrees to pay to the Agent, for the account of
each Lender, a nonrefundable fee for the period from the Closing Date to but
excluding the first anniversary of the Closing Date equal to such Lender's
Percentage of 1/2 of 1% (0.50%) per annum on the difference between (A) the
Expansion Loan Commitment Amount plus the Revolving Credit Commitment Amount and
(B) the average daily aggregate outstanding principal amount of all Loans plus
the average daily aggregate outstanding amount of Letter of Credit Obligations.
The commitment fee described in this subsection (a) shall be calculated on a
daily basis and shall be payable by the Borrower in arrears on each Quarterly
Payment Date and on the Stated Maturity Date.
(b) The Borrower agrees to pay to the Agent, for the account of
each Lender, a nonrefundable fee for the period from and including the first
anniversary of the Closing Date to and including the Stated Maturity Date equal
to such Lender's Percentage of 3/4 of 1% (0.75%) per annum on the difference
between (A) the Expansion Loan Commitment Amount plus the Revolving Credit
Commitment Amount and (B) the average daily aggregate outstanding principal
amount of all Loans plus the average daily aggregate outstanding amount of
Letter of Credit Obligations. The commitment fee described in this subsection
(b) shall be calculated on a daily basis and shall be payable by the Borrower in
arrears on each Quarterly Payment Date and on the Stated Maturity Date.
(b) The Borrower shall pay to the Agent, for its own account, an
annual agent's fee in the amount and at such times as shall be set forth in the
Facility Fee Letter.
SECTION 2.4 INCREASED COSTS; CAPITAL ADEQUACY.
(a) The Borrower shall pay to each Lender from time to time on
demand such amounts as such Lender may determine to be reasonably necessary to
compensate it or its holding company for any costs which such Lender determines
are attributable to its making or maintaining Loans, purchasing or maintaining
participations in Letters of Credit, or maintaining Commitments hereunder or its
obligation to make any such Loans hereunder, or any reduction in any amount
receivable by such Lender hereunder in respect of any such Loans, Commitments or
obligation, resulting from any Regulatory Change which: (i) changes the basis of
taxation of any amounts payable to such Lender under this Agreement in respect
of any of such Loans, Letters of Credit or Commitments (other than taxes imposed
on the overall net income of such Lender); or (ii) imposes or modifies any
reserve, special deposit, deposit insurance or assessment, minimum capital,
capital ratio or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Lender or
any holding company of such bank (including, without limitation, a request or
requirement which affects the manner in which any Lender or the holding company
of any thereof allocates capital resources to commitments, including the
Commitments and obligations of such Lender hereunder). Each Lender will notify
the Borrower of any event occurring after the date of this Agreement which will
entitle such Lender to compensation pursuant to this subsection (a) as promptly
as practicable after it obtains knowledge thereof and determines to request such
compensation.
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<PAGE> 35
(b) Without limiting the effect of the foregoing provisions of
this SECTION 2.4 (but without duplication), the Borrower shall pay to each
Lender from time to time upon demand by such Lender such amounts as the Lender
may determine to be reasonably necessary to compensate such Lender for any costs
which it determines are attributable to the maintenance by it or its holding
company, pursuant to any law or regulation of any jurisdiction or any
interpretation, directive or request (whether or not having the force of law) of
any court or governmental or monetary authority, whether in effect on the date
of this Agreement or thereafter, of capital in respect of its Loans, its
participations in Letters of Credit or its obligation to make the Loans or to
purchase participations in Letters of Credit (such compensation to include,
without limitation, an amount equal to any reduction in return on assets or
equity of such Lender or its holding company to a level below that which it
could have achieved but for such law, regulation, interpretation, directive or
request). The Lender will notify the Borrower (with a copy to the Agent) if it
is entitled to compensation pursuant to this subsection (b) as promptly as
practicable after it determines to request such compensation.
(c) Each notice delivered by any Lender pursuant to this SECTION
2.4 shall contain a statement of such Lender as to any such additional amount or
amounts (including calculations thereof in reasonable detail) which shall, in
the absence of manifest error, be conclusive of the matters stated therein and
be binding upon the Borrower. In determining such amount, any Lender may use any
method of averaging and attribution that it in good faith shall deem applicable.
(d) Without prejudice to the survival of any other agreement of
the Borrower hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in this SECTION 2.4 shall survive the
payment in full of principal, interest and other amounts payable hereunder and
under the Notes and the other Loan Documents.
(e) Notwithstanding anything in this SECTION 2.4 to the contrary,
to the extent that notice is given by any Lender to the Borrower of any
additional amount owing to such Lender under this SECTION 2.4 more than 360 days
after the occurrence of the event giving rise to such obligation, such Lender
shall not be entitled to compensation under this SECTION 2.4 for any amounts
incurred or accruing 360 days prior to the giving of such notice to Borrower.
(f) Upon the receipt by the Borrower from any Lender (an "AFFECTED
LENDER") of a claim for compensation pursuant to this SECTION 2.4 or SECTION
3.5, the Borrower may (i) request one or more of the Lenders to acquire all or
part of such Affected Lender's Loans, participations in the Letters of Credit
and Commitment (provided that no such other Lender shall have any obligation to
so acquire or assume all or any part of such Affected Lender's Loans and
Commitment), or (ii) designate a Lender (a "REPLACEMENT LENDER") reasonably
satisfactory to the Agent. Any such designation of a Replacement Lender under
clause (ii) shall be subject to the prior written consent of the Agent, which
consent shall not be unreasonably withheld.
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ARTICLE 3
LOANS AND NOTES
SECTION 3.1 BORROWING PROCEDURE. By delivering a Borrowing Request to
the Agent at the Agent's Atlanta Office on or before 11:00 a.m., New York City
time, on a Business Day, the Borrower may from time to time request, (i) in the
case of Expansion Loans, on not less than two (2) Business Days' nor more than
three (3) Business Days' notice and (ii) in the case of Revolving Credit Loans,
on not less than two (2) Business Days' notice, that a Borrowing of Loans be
made on the Business Day specified in such Borrowing Request. The Borrowing
Request shall specify whether such Borrowing is to be made as Expansion Loans or
Revolving Credit Loans. Borrowings of Expansion Loans shall be in a minimum
aggregate amount equal to $250,000 and in integral multiples of $50,000 or, if
less, the amount of the Expansion Loan Availability immediately prior to such
Borrowing. Borrowings of Revolving Credit Loans shall be in a minimum aggregate
amount equal to $50,000 and in integral multiples of $50,000 or, if less, the
amount of the Revolving Credit Availability immediately prior to such Borrowing.
Each Borrowing shall be made on the Business Day specified in the Borrowing
Request therefor (including the initial Borrowing to be made on the Closing
Date). On such Business Day, each Lender shall, on or before 2:00 p.m., New York
City time, deposit same day funds with the Agent in an amount equal to such
Lender's Percentage of the requested Borrowing, such deposit to be made to such
account as the Agent shall specify from time to time by notice to the Lenders.
On the Business Day specified by the Borrower in the Borrowing Request, the
proceeds of all Borrowings shall be made available to the Borrower by wire
transfer of such proceeds to such transferees, or to such accounts of the
Borrower, as the Borrower shall have specified in the Borrowing Request
therefor; PROVIDED, HOWEVER, that in each case the Agent shall be required to
make available to the Borrower the proceeds of any Borrowing only to the extent
received by it in same day funds from the Lenders. No Lender's obligation to
make any Loan shall be affected by any other Lender's failure to make any Loan.
SECTION 3.2 NOTES. All Loans made by each Lender shall be evidenced:
(a) in the case of such Lender's Expansion Loans, by a Expansion
Note payable to the order of such Lender in a principal amount equal to such
Lender's Percentage of the Expansion Loan Commitment Amount; and
(b) in the case of such Lender's Revolving Credit Loans, by a
Revolving Credit Note payable to the order of such Lender in a principal amount
equal to such Lender's Percentage of the Revolving Credit Commitment Amount.
The Borrower hereby irrevocably authorizes each Lender to make (or cause to be
made) appropriate notations on a grid schedule attached to such Lender's Notes
(or on a continuation of any such grid attached to any Note and made a part
thereof), which notations shall evidence, INTER ALIA, the date and outstanding
principal amount of the Loans evidenced thereby. The notations on any such grid
(and on any such continuation) indicating the outstanding principal amount of
such Lender's Loans shall
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be presumptive evidence of the principal amount thereof owing and unpaid, but
the failure to record any such amount on any such grid (or on any such
continuation) shall not limit or otherwise affect the obligations of the
Borrower hereunder or under such Note to make payments of principal of or
interest on such Loans when due.
SECTION 3.3 PRINCIPAL PAYMENTS. Repayments and prepayments of principal
of the Loans shall be made in accordance with this SECTION 3.3.
SECTION 3.3.1 REPAYMENTS AND PREPAYMENTS. The Borrower will make
payment in full of all unpaid principal of each Loan at its Stated Maturity Date
(or such earlier date as such Loan may become or be declared due and payable
pursuant to ARTICLE 7). Prior thereto, the Borrower:
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of any
Loans; PROVIDED, HOWEVER, that (i) all such voluntary prepayments shall be in a
minimum amount of $100,000 and integral multiples of $100,000 (subject to the
Borrower's right to prepay in full the entire unpaid principal amount of the
Loans), (ii) such prepayment shall require at least three (3) Business Days
prior written notice to the Agent, (iii) the Borrower pays to the Lenders any
Prepayment Fee required to be paid pursuant to SECTION 3.3.2, and (iv) the
Borrower may not voluntarily prepay the Expansion Loans if there are any
Revolving Credit Loans outstanding (unless all outstanding Revolving Credit
Loans are fully repaid simultaneously with a prepayment of the Expansion Loans);
(b) (i) shall, on any Business Day on which the aggregate
outstanding principal amount of all Expansion Loans PLUS the aggregate
outstanding principal amount of all Revolving Credit Loans PLUS the then
aggregate amount of Letter of Credit Obligations PLUS the aggregate
undrawn face amount of Existing Letters of Credit exceeds the Borrowing
Base, make a mandatory prepayment of the outstanding principal amount of
Expansion Loans and Revolving Credit Loans in an amount equal to such
excess amount (such prepayment to be applied first to all of the
Revolving Credit Loans until paid in full and then to Expansion Loans);
(ii) shall, on any Business Day on which the aggregate
outstanding principal amount of all Expansion Loans exceeds the
Expansion Loan Commitment Amount, make a mandatory prepayment of the
outstanding principal amount of the Expansion Loans in an amount equal
to such excess amount; and
(iii) shall, on any Business Day on which the aggregate
outstanding principal amount of all Revolving Credit Loans PLUS the then
aggregate amount of Letter of Credit Obligations PLUS the aggregate
undrawn face amount of Existing Letters of Credit exceeds the Revolving
Credit Commitment Amount, make a mandatory prepayment of the outstanding
principal amount of the Revolving Credit Loans in an amount equal to
such excess amount;
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(c) shall, concurrently with receipt by the Borrower or any
Subsidiary or the Agent of any condemnation awards with respect to any Loss,
make a mandatory prepayment of the Loans in an amount equal to such condemnation
awards;
(d) shall, within 180 days after receipt by the Borrower or any
Subsidiary or the Agent of any insurance proceeds with respect to any Loss
resulting from a casualty, make a mandatory prepayment of the Loans in an amount
by which such insurance proceeds exceed the actual cost incurred by the Borrower
or such Subsidiary to repair or replace the property or asset which was the
subject of the Loss or deemed Loss giving rise to such insurance proceeds;
(e) shall, within 180 days after receipt by the Borrower or any
Subsidiary or the Agent of any insurance proceeds with respect to any Loss
resulting from a liability, make a mandatory prepayment of the Loans in an
amount by which such insurance proceeds exceed the amount of the liability to be
satisfied with such proceeds (to the extent such liability is so satisfied); and
(f) shall prepay the entire outstanding principal amount of the
Loans together with accrued and unpaid interest and all of the outstanding
Obligations hereunder upon the occurrence of a Change in Control.
Unless expressly set forth to the contrary in this SECTION 3.3.1 or elsewhere in
the Agreement, any payments required to be made by the Borrower pursuant to this
SECTION 3.3.1 shall be applied to principal in the following order:
(i) FIRST, to the payment in full of all outstanding Revolving
Credit Loans; and
(ii) SECOND, to the payment in full of all outstanding Expansion
Loans.
SECTION 3.3.2 PREPAYMENT FEE.
(a) Upon any prepayment of any Loans on or prior to the second
anniversary of the Closing Date, whether in full or in part, utilizing proceeds
from the issuance of debt securities or the incurrence of Indebtedness, the
Borrower shall pay to the Lenders prior to or concurrently with such prepayment
a Prepayment Fee in an amount equal to one percent (1%) of the sum of the
Expansion Loan Commitment Amount plus the Revolving Credit Commitment Amount
immediately prior to such prepayment.
(b) Any Prepayment Fee shall be paid by the Borrower to the
Lenders as liquidated damages for the loss of the bargain and shall not
constitute a penalty.
SECTION 3.3.3 REVOLVING CREDIT LOANS ON BORROWER'S BEHALF. The
Lenders are authorized to, and at their option may, make Revolving Credit Loans
on behalf of the Borrower for payment of all fees, expenses, charges, costs,
principal and interest owed by the Borrower to the Lenders or the Agent under
this Agreement and the other Loan Documents. Such Revolving Credit
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Loans shall be made when and as the Borrower fails promptly to pay same, and all
such Revolving Credit Loans shall constitute Loans made to the Borrower and
shall be secured by all of the Collateral. Following the making of any Revolving
Credit Loans pursuant to this SECTION 3.3.3, such Lender shall promptly notify
the Borrower of the making of such Revolving Credit Loans on the Borrower's
behalf and the aggregate principal amount of such Loans; PROVIDED THAT the
failure by any Lender to give such notice shall not affect the Borrower's
obligations under this Agreement or with respect to such Revolving Credit Loans.
SECTION 3.3.4 REDUCTION OF COMMITMENTS.
(a) The Borrower shall have the right, upon at least fifteen (15)
days notice to the Agent, to reduce in whole or in part (ratably as to all
Lenders) the Expansion Loan Commitment Amount or the Revolving Credit Commitment
Amount or both, PROVIDED, HOWEVER, that the Expansion Loan Commitment Amount and
the Revolving Credit Commitment Amount of the Lenders shall not be reduced to an
amount which is less than the aggregate amount of the Expansion Loans and
Revolving Credit Loans, respectively, then outstanding after giving effect to
any prepayments made in connection with such reduction and the Borrower shall
pay any Prepayment Fee required under SECTION 3.3.2, PROVIDED, FURTHER, HOWEVER,
that each partial reduction of the Expansion Loan Commitment Amount or the
Revolving Credit Commitment Amount shall be in an aggregate amount of $1,000,000
or an integral multiple of $500,000 in excess thereof (or, if less, the entire
amount thereof). Any notice given pursuant to this subsection (a) of SECTION
3.3.4 shall be irrevocable, and once the Expansion Loan Commitment Amount or the
Revolving Credit Commitment Amount, as the case may be, is reduced pursuant to
this subsection (a) of SECTION 3.3.4, such amount thereafter may not be
reinstated or increased. The Borrower shall not be permitted to reduce the
Revolving Credit Commitment Amount unless the Expansion Loan Commitment Amount
has been reduced to zero in accordance with the terms hereof.
(b) The Expansion Loan Commitment (and the Expansion Loan
Commitment Amount) and the Revolving Credit Commitment (and the Revolving Credit
Commitment Amount) shall be permanently reduced by the amount of Net Cash
Proceeds received by the Borrower or any of its Subsidiaries as a result of any
sale or disposition of assets; PROVIDED, HOWEVER, that unless such sale or other
disposition would require, whether immediately or with the passage of time, a
repayment or prepayment of principal on, or a redemption of, any of the Senior
Notes, no such reduction shall be required as a result of (i) the sale by the
Borrower or any of its Subsidiaries of assets in the ordinary course of
business, (ii) the sale by the Borrower or any of its Subsidiaries of any assets
in a single transaction or a series of related transactions where the aggregate
net book value of such assets sold or disposed does not to exceed $250,000, and
(iii) the disposition by the Borrower or any of its Subsidiaries of up to 5,000
Telephones in the aggregate during the term of this Agreement solely in exchange
for other Telephones. Any reduction required under this subsection (b) shall be
effective immediately upon receipt by the Borrower or any of its Subsidiaries of
Net Cash Proceeds, and shall be applied first to the Expansion Loan Commitment
Amount until the Expansion Loan Commitment Amount is zero and then shall be
applied to the Revolving Credit Commitment Amount.
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(c) The Expansion Loan Commitment (and the Expansion Loan
Commitment Amount) and the Revolving Credit Commitment (and the Revolving Credit
Commitment Amount) shall be permanently reduced by the amount of Net Cash
Proceeds received by the Borrower or any of its Subsidiaries from the issuance
by the Borrower or any of its Subsidiaries of debt securities or from the
incurrence by the Borrower or any of its Subsidiaries of any Indebtedness other
than Indebtedness permitted under SECTION 6.2.2. Any reduction required under
this subsection (c) shall be effective immediately upon receipt by the Borrower
or any of its Subsidiaries of such Net Cash Proceeds. Any reduction pursuant to
this subsection (c) shall be applied first to the Expansion Loan Commitment
Amount and then to the Revolving Credit Commitment Amount.
(d) The Expansion Loan Commitment (and the Expansion Loan
Commitment Amount) and the Revolving Credit Loan Commitment (and the Revolving
Credit Commitment Amount) shall be permanently reduced by the amount of any
prepayments required under subsection (f) of SECTION 3.3.1. Any reduction
pursuant to this subsection (d) shall be applied first to the Expansion Loan
Commitment Amount and then to the Revolving Credit Commitment Amount.
(e) The Expansion Loan Commitment (and the Expansion Loan
Commitment Amount) shall be permanently reduced on any day occurring on or after
November 30, 1998 that the principal amount of any Expansion Loans are repaid by
the Borrower by the amount of such repayment.
(f) The Expansion Loan Commitment (and the Expansion Loan
Commitment Amount) shall be permanently reduced on November 30, 1998 by the
amount by which the Expansion Loan Commitment Amount on such date exceeds the
aggregate outstanding principal amount of all Expansion Loans on such date.
SECTION 3.4 INTEREST. Interest on the outstanding principal amount of
the Loans and other outstanding Obligations shall accrue and be payable in
accordance with this SECTION 3.4.
SECTION 3.4.1 RATE. Subject to SECTION 3.4.2, Borrowings shall
accrue interest at the ING Alternate Base Rate as in effect from time to time
PLUS 1.50%.
SECTION 3.4.2 POST-DEFAULT RATES. From and after the occurrence of
an Event of Default and during the continuance thereof, the Borrower shall pay
interest (after as well as before judgment) on the outstanding principal amount
of all Loans and other Obligations at a rate per annum equal to the Post-Default
Rate applicable to such Loans and Obligations.
SECTION 3.4.3 PAYMENT DATES. Accrued interest on the Loans shall
be payable, without duplication:
(a) on Maturity;
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(b) with respect to any portion of any Loan prepaid or repaid
pursuant to SECTION 3.3.1, on the date such prepayment or repayment is due as
provided in SECTION 3.3.1 and, in the case of a voluntary prepayment, on the
date set forth in any notice required for such prepayment; and
(c) on each Quarterly Payment Date, commencing with the first such
day following the Closing Date.
Interest accruing at any Post-Default Rate and, to the extent permitted by
applicable law, interest on overdue amounts (including overdue interest), shall
be payable upon demand.
SECTION 3.4.4 RATE DETERMINATIONS. All determinations by the Agent
of the rate of interest applicable to any Loan shall be conclusive in the
absence of manifest error.
SECTION 3.5 LETTERS OF CREDIT. Upon and subject to the terms and
conditions of this SECTION 3.5, in addition to the terms and conditions set
forth elsewhere in this Agreement, the Agent shall issue, or shall arrange for
the issuance, from time to time for the account of the Borrower or any of its
Subsidiaries, and the Lenders shall purchase participations in, Letters of
Credit.
SECTION 3.5.1. MANNER OF ISSUANCE. The Borrower shall deliver to
the Agent prior to 11:00 a.m. (New York City time) at least three Business Days
before the requested date of issuance of a Letter of Credit, a Letter of Credit
Request for the issuance of such Letter of Credit setting forth (i) the
beneficiary of the Letter of Credit, (ii) the stated amount thereof, (iii) the
requested issue date, (iv) the requested expiration date, and (v) the purpose
for such Letter of Credit. Each such Letter of Credit Request shall be
accompanied by the Agent's standard form standby letter of credit application,
duly completed and executed by the Borrower (which application shall be deemed
for purposes of this Agreement to constitute part of such Letter of Credit
Request), together with all other documents, materials and evidences reasonably
required by the Agent prior to the issuance of such Letter of Credit.
SECTION 3.5.2. TERMS OF LETTERS OF CREDIT. Each Letter of Credit
shall (a) have an expiration date not later than the earlier of (i) 365 days or,
in the case of a leap year, 366 days, after the date of issuance thereof (or
such longer period to which the Agent shall consent provided the Borrower agrees
to pay any additional issuance cost or facing fees arising by virtue of the
issuance of a Letter of Credit for a period longer than the period specified in
this clause (i)) and (ii) the Revolving Credit Commitment Termination Date and
(b) be issued solely to secure bid, tender, surety, payment, performance,
litigation or similar bonds required by the Borrower and its Subsidiaries in the
ordinary course of business. The Agent shall use reasonable efforts to cause
Letters of Credit to be governed by, and construed and enforced in accordance
with, the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication 500 and, to the extent not
inconsistent therewith, the laws of the State of New York.
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SECTION 3.5.3. PURCHASE OF PARTICIPATIONS BY LENDERS.
Simultaneously with the issuance by the Agent of any Letter of Credit, each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received from the Agent, without recourse or warranty, an undivided interest and
participation in such Letter of Credit (including, without limitation, all
obligations of the Borrower with respect thereto) and any security therefor or
guaranty thereof, equal to such Lender's Percentage of such Letter of Credit.
SECTION 3.5.4. DRAWINGS UNDER LETTERS OF CREDIT.
(a) NOTICE TO LENDERS. Promptly upon receipt by the Agent of any
draft upon, or other notice of drawing under, a Letter of Credit, the Agent
shall give the Borrower and each Lender written or telephonic notice of the
amount of such draft or notice of drawing, of the Letter of Credit against which
it is drawn and of the date upon which the Agent proposes to honor such draft.
(b) PAYMENTS BY LENDERS. Each Lender hereby agrees that it shall
pay to the Agent prior to 1:00 p.m. (New York City time) on the date the Agent
honors each drawing under a Letter of Credit such Lender's Percentage of such
Letter of Credit drawing; PROVIDED, that if the Borrower should pay in full or
in part any Letter of Credit drawing on the date thereof, the obligation of each
Lender to pay to the Agent pursuant to this SECTION 3.5.4 with respect to such
drawing shall be reduced by an amount equal to such Lender's Percentage of such
payment. Amounts paid by any Lender in excess of the net amount so owed shall
promptly be refunded by the Agent to such Lender.
(c) FAILURE TO PAY BY LENDERS. If any Lender shall fail to pay the
amount of its participation in a Letter of Credit drawing on the date such
amount is due in accordance with subsection (b) of this SECTION 3.5.4, the Agent
shall be deemed to have advanced funds on behalf of such Lender. Each such
advance shall be secured by such Lender's participation interest, and the Agent
shall be subrogated to such Lender's rights hereunder in respect thereof. Such
advance may be repaid by application by the Agent of any payment that such
Lender is otherwise entitled to receive under this Agreement. Any amount not
paid by such Lender to the Agent hereunder shall bear interest for each day from
the day such payment was due until such payment shall be paid in full at a rate
per annum equal to the Federal Funds Rate.
(d) REPAYMENT BY BORROWER. The Borrower shall pay to the Agent for
the ratable account of the Lenders the amount of any drawing under any Letter of
Credit on the date of such drawing. The amount of any drawing under a Letter of
Credit that is not paid on the date provided herein shall bear interest, payable
on demand, from the due date thereof until paid, at the PostDefault Rate. The
Borrower agrees that it shall be indebted to each Lender in an amount equal to
such Lender's Percentage of each Letter of Credit drawing, including each
drawing paid by the Agent under a Letter of Credit.
(e) CONVERSION TO LOANS. On the date of any drawing under a Letter
of Credit, the amount of such drawing automatically shall be paid with, and the
Borrower hereby authorizes the Lenders to make, a Borrowing of Revolving Credit
Loans in the amount of such drawing, PROVIDED
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that all conditions set forth in SECTION 4.3 (other than SECTION 4.3.2) have
been satisfied and, upon the making of such Borrowing of Revolving Credit Loans,
the Revolving Credit Availability will not be less than zero. Unless the Agent
shall have received a written notice otherwise prior to the making of any
Revolving Credit Loans pursuant to this subsection (e) of this SECTION 3.5.4,
the making of any such Revolving Credit Loans shall constitute a representation
and warranty by the Borrower that on the date of the making of such Revolving
Credit Loans and after giving effect thereof, all statements set forth in
SECTION 4.3.1 are true and correct.
(f) BORROWER'S OBLIGATION ABSOLUTE. The obligation of the Borrower
to pay the Agent, for the account of the Lenders, for each drawing under a
Letter of Credit shall be irrevocable, shall not be subject to any qualification
or exception whatsoever and shall be binding in accordance with the terms and
conditions of this Agreement under all circumstances, including the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(ii) the existence of any claim, set-off, defense or right which
the Borrower or the account party may have at any time against a
beneficiary of any Letter of Credit or any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, the Lenders or any other Person, whether in connection with
this Agreement, or any Letter of Credit, the transactions contemplated
herein or any unrelated transactions;
(iii) any draft, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of this Agreement or the
other Loan Documents;
(v) any failure of the Agent or any Lender to provide notice to
the Borrower of any drawing under any Letter of Credit;
(vi) the occurrence or continuance of any Default; or
(vii) any other reason.
(g) LENDERS' OBLIGATIONS ABSOLUTE. The obligation of each Lender
to pay to the Agent its Percentage of each drawing under a Letter of Credit not
indefeasibly repaid by the Borrower on the date of such drawing, shall be
irrevocable, unconditional, shall not be subject to any qualification or
exception whatsoever and shall be binding in accordance with the terms and
conditions of this Agreement under all circumstances, including the following
circumstances:
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(i) any lack of validity or enforceability of this Agreement;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any Lender may have at any time against the other,
the Agent, any Lender or any other Person, whether in connection with
this Agreement, the transactions contemplated herein or any unrelated
transactions;
(iii) any draft or any other document presented under this
Agreement proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the
performance or otherwise of any of the terms of this Agreement or the
other Loan Documents;
(v) the occurrence or continuance of any Default; or
(vi) any other reason.
SECTION 3.5.5. LETTER OF CREDIT FEES. With respect to each Letter
of Credit, the Borrower shall pay (a) to the Agent, for the account of each
Lender, a fee equal to 2.00% per annum (divided by the sum of 1 minus the Letter
of Credit Reserve Requirement, if any, applicable to such Lender) of such
Lender's Percentage of the undrawn face amount of such Letter of Credit and (b)
to the Agent, for its own account, a facing fee of 0.25% per annum of the
undrawn face amount of such Letter of Credit. Such fees shall be payable in
advance on the date of issuance thereof for the period commencing on such date
and ending on the next succeeding Quarterly Payment Date, and thereafter in
advance on each Quarterly Payment Date for the quarterly period immediately
following such Quarterly Payment Date. From and after the occurrence of an Event
of Default and during the continuance thereof, the fee payable under subsection
(a) hereof shall increase to 3.50% per annum (divided by the sum of 1 MINUS the
Letter of Credit Reserve Requirement, if any, applicable to such Lender) of such
Lender's percentage of the undrawn percentage of the undrawn face amount of each
Letter of Credit, payable on demand. All fees payable under this SECTION 3.5.5
shall be fully earned and nonrefundable on the date such fees are due.
SECTION 3.5.6. LIMITATION OF LIABILITY WITH RESPECT TO LETTERS OF
CREDIT. (a) As among the Borrower, the Lenders and the Agent, the Borrower
assumes all risks of the acts and omissions of, or misuse of any Letter of
Credit by, the beneficiaries of such Letter of Credit. Without limiting the
foregoing, the Agent and the Lenders shall not be responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any draft, demand, application or other documents
submitted by any party in connection with any Letter of Credit even if
such document should in fact prove to be in any and all respects
invalid, insufficient, inaccurate, fraudulent or forged;
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(ii) the validity, genuineness or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any
reason;
(iii) failure of the beneficiary of a Letter of Credit to comply
fully with the conditions required in order to draw upon such Letter of
Credit;
(iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher;
(v) errors in interpretations of technical terms;
(vi) any loss or delay in the transmission or otherwise of any
document required to make a drawing under any Letter of Credit or with
respect to the proceeds thereof;
(vii) the misapplication by the beneficiary of a Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control of
Agent or the Lenders, including any act or omission, rightfully or
wrongfully, of any present or future Governmental Authority.
None of the above circumstances shall affect, impair or prevent the vesting of
any of the Agent's and the Lenders' rights or powers under this Agreement.
(b) In furtherance and extension, and not in limitation, of the
specified provisions set forth above, any action taken or omitted by the Agent
under or in connection with any Letter of Credit or any related documents, if
taken or omitted in good faith, shall not expose the Agent or any Lender to any
liability to the Borrower or any account party.
SECTION 3.6 TAXES.
(a) Any and all payments by the Borrower hereunder or under the
Notes or any other Loan Document shall be made, in accordance with this SECTION
3.6, free and clear of and without deduction for any and all present or future
Taxes. If the Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder or under any Note to any Lender or the
Agent, (i) the sum payable shall be increased as may be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this SECTION 3.6), such Lender or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
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(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or intangibles taxes or any other excise or property
taxes, transfer taxes, charges or similar levies which arise from any payment
made hereunder or under the Notes or from the execution, delivery or
registration of, or otherwise with respect to this Agreement, the Notes, or any
other Loan Document.
(c) The Borrower will indemnify each Lender and the Agent for the
full amount of the taxes, charges and levies described in subsections (a) and
(b) of this SECTION 3.6 (including, without limitation, any such taxes, charges
and levies imposed by any jurisdiction on amounts payable under this SECTION
3.6) paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such taxes, charges and levies were correctly or legally
asserted. Payment under this subsection (c) shall be made within 10 days from
the date such Lender or the Agent (as the case may be) makes written demand
therefor.
(d) Within 10 days after the date of any payment of Taxes, the
Borrower will furnish to the Agent, at its address referred to in SECTION 9.2,
the original or a certified copy of any receipt received by the Borrower
evidencing payment thereof.
(e) On or prior to the Closing Date and on or prior to the first
Business Day of each calendar year thereafter, each Foreign Lender shall provide
the Agent and the Borrower with two properly executed original Forms 4224 and
1001 (or any successor form) prescribed by the Internal Revenue Service or other
documents satisfactory to the Borrower and the Agent, and properly executed
Internal Revenue Service Forms W-8 or W-9, as the case may be, certifying (i) as
to such Foreign Lenders's status for purposes of determining exemption from
United States withholding taxes with respect to all payments to be made to such
Foreign Lender hereunder and under the Notes or (ii) that all payments to be
made to such Foreign Lender hereunder and under the Notes are subject to such
taxes at a rate reduced to zero by an applicable tax treaty. Each Foreign Lender
agrees to provide the Agent and the Borrower with new forms prescribed by the
Internal Revenue Service upon the expiration or obsolescence of any previously
delivered form, or after the occurrence of any event requiring a change in the
most recent forms delivered by it to the Agent and the Borrower.
(f) In the event that the Agent or any Lender receives a refund of
any taxes paid on its behalf by the Borrower in accordance with this SECTION
3.6, the Agent or such Lenders, as the case may be, shall pay such refund to the
Borrower.
(g) Without prejudice to the survival of any other agreement
hereunder, the agreements and obligations contained in this SECTION 3.6 shall
survive the payment in full of principal and interest hereunder and under the
Notes.
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SECTION 3.7 PAYMENTS, INTEREST RATE COMPUTATIONS, OTHER COMPUTATIONS,
ETC. All payments by the Borrower pursuant to this Agreement, the Notes or any
other Loan Document, in respect of principal or interest on the Notes shall be
made by the Borrower to the Agent for the account of the Lenders, PRO RATA
according to their respective unpaid principal amounts of the Notes. The payment
of the commitment fee referred to in SECTION 2.3 shall be made by the Borrower
to the Agent for the account of the Lenders PRO RATA according to their
respective Percentages. All other amounts payable to the Agent or any Lender
under this Agreement or any other Loan Document (except under SECTION 2.4) shall
be paid to the Agent for the account of the Person entitled thereto. All such
payments required to be made to the Agent shall be made, without setoff,
deduction or counterclaim, not later than 2:00 p.m., New York City time, on the
date due, in immediately available funds, to an account of the Agent specified
from time to time to the Borrower. Funds received after that time shall be
deemed to have been received by the Agent on the next following Business Day.
The Agent shall remit to each Lender in the type of funds received by the Agent,
such Lender's share, if any, of such payments received by the Agent for the
account of such Lender or holder, in each case on the Business Day such payments
are received by the Agent. All interest and fees shall be computed on the basis
of the actual number of days (including the first day but excluding the last
day) occurring during the period for which such interest or fee is payable over
a year comprised of 360 days. Whenever any payment to be made shall otherwise be
due on a day which is not a Business Day, such payment shall be made on the
immediately preceding Business Day.
SECTION 3.8 PRORATION OF PAYMENTS. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of principal of or interest on any Loan or other
Obligations in excess of such Lender's or holder's PRO RATA share of payments
then or therewith obtained thereon by all Lenders, such Lender which has
received in excess of its PRO RATA share shall purchase from the other Lenders
such participations in such Notes or other Obligations held by them as shall be
necessary to cause such purchaser to share the excess payment or other recovery
ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
holder, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. The Borrower agrees that any
Lender so purchasing a participation from another Lender pursuant to this
SECTION 3.8 may, to the fullest extent permitted by law, exercise all its rights
of payment (including pursuant to SECTION 3.9) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this SECTION 3.8 applies, such Lender shall, to the
extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders under this SECTION 3.8 to share
in the benefits of any recovery on such secured claim.
SECTION 3.9 SETOFF. In addition to and not in limitation of any rights
of any Lender under applicable law, each Lender shall, upon the occurrence and
during the continuance of any Event of Default, have the right to appropriate
and apply to the payment of the Obligations owing to it (whether or not then
due), and (as security for such Obligations) the Borrower hereby grants to each
Lender, a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys
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of the Borrower then or thereafter maintained with such Lender; PROVIDED,
HOWEVER, that any such appropriation and application shall be subject to the
provisions of SECTION 3.8. Following any such appropriation and application
pursuant to this SECTION 3.9, such Lender shall promptly provide the Borrower
with notice of such appropriation and application and the amount applied,
provided, that the failure by any Lender to give any such notice shall not
affect the obligations of the Borrower or impair any right of any Lender under
this Agreement or subject any Lender to any liability.
SECTION 3.10 USE OF PROCEEDS.
(a) The Borrower shall use the proceeds of Revolving Credit Loans
and Expansion Loans made on the Closing Date to pay the purchase price for the
Closing Date Acquisitions and to pay costs and expenses arising in connection
with the transactions contemplated hereby, all as more specifically described in
ITEM 1 ("Sources and Uses") of the Disclosure Schedule.
(b) The Borrower shall use the proceeds of Expansion Loans made
after the Closing Date to finance the purchase price for Acquisitions (including
any Closing Date Acquisitions that are not consummated on the Closing Date,
provided that such Closing Date Acquisitions are consummated within 30 days
following the Closing Date), and shall use the proceeds of Revolving Credit
Loans made after the Closing Date to finance its working capital needs and for
other general corporate purposes.
(c) No part of the proceeds of any Loans or Letters of Credit
shall be used for any purpose which violates Regulations G, T, U or X of the
F.R.S. Board.
ARTICLE 4
CONDITIONS TO LOANS
SECTION 4.1 INITIAL LOANS. The obligations of the Lenders to fund the
initial Borrowings of Loans on the Closing Date, the obligation of the Agent to
issue Letters of Credit on the Closing Date and the obligations of the Lenders
to purchase participations in such Letters of Credit, shall be subject to the
prior or concurrent satisfaction of each of the conditions precedent set forth
in this SECTION 4.1, except as the Required Lenders shall otherwise consent.
SECTION 4.1.1 RESOLUTIONS, ETC. The Agent shall have received:
(a) a certificate, dated the date hereof, with counterparts for
each Lender, of the Secretary or an assistant secretary of each Loan Party as
to:
(i) resolutions of its Board of Directors, then in full force and
effect, authorizing the execution, delivery and performance of the Loan
Documents to which such Loan Party is a party and the related
transactions contemplated thereby, and
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(ii) the incumbency and signatures of those of its officers
authorized to act with respect to the Loan Documents to which it is
party, upon which certificate each Lender may conclusively rely until it
shall have received further certificates of the Secretary or an
assistant secretary of such Loan Party canceling or amending such prior
certificates;
(b) copies of the Organic Documents of each Loan Party certified
by, in the case of the charters, the appropriate Governmental Authority of the
state of such Loan Party's incorporation and, in the case of its other Organic
Documents, such Loan Party's Secretary or assistant secretary, which documents
shall be satisfactory to the Agent;
(c) a so-called "good standing" certificate with respect to each
Loan Party from the appropriate Governmental Authority of the state of its
incorporation;
(d) evidence of qualification of each Loan Party to do business in
each other jurisdiction in which such Loan Party is required to qualify; and
(e) such other documents (certified if requested) as any Lender
may reasonably request, with respect to this Agreement, the Notes, any other
Loan Document, the transactions contemplated hereby and thereby, or any Organic
Document, Contractual Obligation of the Borrower or any of its Subsidiaries, or
Approval.
SECTION 4.1.2 NOTES. The Agent shall have received for the account
of each Lender, such Lender's Notes, in each case duly executed and delivered
pursuant to subsections (a) and (b) of SECTION 3.2.
SECTION 4.1.3 BORROWING BASE CERTIFICATE. The Agent shall have
received a Borrowing Base Certificate dated as of the Closing Date from the
chief financial Authorized Officer of the Borrower.
SECTION 4.1.4 [Intentionally Omitted]
SECTION 4.1.5 NO CONTEST, ETC. On the Closing Date, no litigation,
arbitration, governmental investigation, injunction, proceeding or inquiry shall
be pending or, to the knowledge of the Borrower, threatened which
(a) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the transactions
contemplated by or in connection with this Agreement or any other Loan Document;
or
(b) would, in the reasonable opinion of the Required Lenders, be
materially adverse to any of the parties hereto with respect to the transactions
contemplated hereby; and
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no litigation set forth in ITEM 2 ("Litigation") of the Disclosure Schedule in
the reasonable opinion of the Agent, could reasonably result in a Material
Adverse Change or give rise to any liability on the part of the Agent or any
Lender in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby.
SECTION 4.1.6 CERTIFICATE AS TO COMPLETED CONDITIONS, WARRANTIES,
NO DEFAULT, ETC. The Agent shall have received a certificate, dated the Closing
Date, with counterparts for each Lender, of the chief financial Authorized
Officer of the Borrower, to the effect that
(a) all conditions precedent set forth in this SECTION 4.1 have
been satisfied;
(b) all representations and warranties set forth in ARTICLE 5 are
true and correct in all material respects;
(c) all representations and warranties set forth in the Loan
Documents are true and correct in all material respects; and
(d) no Default or Event of Default has occurred and is continuing.
SECTION 4.1.7 COMPLIANCE WITH REQUIREMENTS OF LAW. The Agent shall
have received evidence satisfactory to it that the Borrower is in compliance in
all material respects with all other Requirements of Law and has obtained and
maintains in full force and effect (a) all licenses, permits and approvals
issued by Governmental Authorities necessary to carry on its business (except
where the failure to have any such license, permit or approval could not result
in a Material Adverse Change), and (b) all Approvals.
SECTION 4.1.8 OPINIONS OF COUNSEL. The Agent shall have received
opinion letters, dated the Closing Date and addressed to the Agent and all
Lenders, from (a) Skadden, Arps, Slate, Meagher & Flom, counsel to the Borrower
and its Subsidiaries, in form and substance satisfactory to the Lenders, (b)
Hahn Loeser & Parks, special Ohio counsel to the Borrower and its Subsidiaries,
and (c) local counsel in each state where the Borrower and its Subsidiaries
operate 1000 or more Telephones addressing such matters as the Lenders may
reasonably request.
SECTION 4.1.9 CLOSING FEES, EXPENSES, ETC. The Agent shall have
received, for its own account, the facility fee payable pursuant to the Facility
Fee Letter and all costs and expenses which have been invoiced and are payable
upon the initial Borrowing pursuant to SECTION 9.3.
SECTION 4.1.10 SUBSIDIARY GUARANTY. The Agent shall have received
the Subsidiary Guaranty, duly executed by Authorized Officers of the Loan
Parties that are a party thereto.
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SECTION 4.1.11 SECURITY DOCUMENTS AND PERFECTION. The Agent shall
have received:
(a) the Security Agreement, duly executed by an Authorized Officer
of the Borrower and each of its Subsidiaries (including, without limitation,
those Persons that shall become Subsidiaries of the Borrower on the Closing
Date);
(b) the Borrower Pledge Agreement, duly executed by the chief
executive Authorized Officer of the Borrower;
(c) the Subsidiary Pledge Agreement, duly executed by the chief
executive Authorized Officer of each Subsidiary of the Borrower that has
Subsidiaries;
(d) the Financing Statements with respect to the Security
Agreement and other Security Documents; searches of the Lien records of the
Secretary of State of each State, and of the Uniform Commercial Code records of
each county in which Telephones of the Borrower or any of its Subsidiaries are
located and in which the filing of a financing statement under the applicable
Uniform Commercial Code would perfect a security interest in equipment (as such
term is defined in the applicable Uniform Commercial Code); and evidence that
all other actions (including all actions necessary such that each of the
Trademark Assignment is acceptable for filing in the United States Patent and
Trademark Office and the payment of all documentary, intangibles, filing and
recording taxes and fees) with respect to the Liens created by the Security
Documents have been taken as are necessary or appropriate to perfect such Liens;
and
(e) all (i) stock certificates and undated stock powers duly
executed in blank relating thereto with respect to the pledged securities under
the Borrower Pledge Agreement, which pledged securities shall constitute all
outstanding Capital Stock of the Borrower's Subsidiaries; (ii) Subsidiary Notes
pledged under the Borrower Pledge Agreement duly endorsed in blank; and (iii)
stock certificates and undated stock powers duly executed in blank relating
thereto with respect to the pledged securities under the Subsidiary Pledge
Agreement.
SECTION 4.1.12 EMPLOYMENT AGREEMENTS; COMPENSATION. The Agent
shall have received copies of all employment agreements to which the Borrower is
a party.
SECTION 4.1.13 PENSION AND WELFARE LIABILITIES. The Agent shall
have received, with counterparts for each of the Lenders (i) the most recent
actuarial valuation report, if any, for each Single Employer Plan, if any, and a
copy of Schedule B to the Annual Report on Form 5500 of the Internal Revenue
Service, if any, for each Single Employer Plan, if any, most recently filed with
the Internal Revenue Service, and (ii) a report prepared by the Borrower in form
and substance satisfactory to the Agent and each Lender detailing any
liabilities of the Borrower and each Subsidiary and Commonly Controlled Entity
for post-retirement benefits under Plans which are welfare benefit plans.
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SECTION 4.1.14 INSURANCE. The Agent shall have received evidence
satisfactory to it that the insurance maintained by the Borrower and its
Subsidiaries is issued by an insurance company with a Best's rating of "A" or
better and a financial size category of not less than XII, is in amounts
reasonably satisfactory to the Agent, under policies naming the Agent, for its
benefit and the ratable benefit of the Lenders, as loss payee (in the case of
casualty insurance policies) and as additional insured (in the case of liability
policies), and otherwise complies with the requirements of this Agreement and
the Security Documents.
SECTION 4.1.15 FINANCIAL INFORMATION, ETC. The Agent shall have
received for each Lender, the historical financial statements referred to in
SECTION 5.4, the PRO FORMA Balance Sheets, the Fair Saleable Value Balance
Sheets and the Projections, and the Agent shall be satisfied in all respects
with such materials. Additionally, the Agent shall be satisfied in all respects
with materials contained on the Disclosure Schedule, including, without
limitation, the information contained on ITEM 1 ("Sources and Uses").
SECTION 4.1.16 MATERIAL CONTRACTS. The Agent shall have received a
certificate from an Authorized Officer of the Borrower to the effect that
attached thereto are true and correct copies of each of the items listed on ITEM
13 ("Contracts") of the Disclosure Schedule, and the Agent shall be satisfied in
all respects with terms of such items.
SECTION 4.1.17 CLOSING DATE ACQUISITIONS. The Closing Date
Acquisition Agreements shall be in full force and effect, shall not have been
amended, modified or supplemented without the Required Lenders' prior written
consent, all conditions precedent to consummation by the Borrower and its
Subsidiaries of the transactions contemplated by the Closing Date Acquisition
Agreements shall have been fully satisfied or, with the prior written consent of
the Required Lenders, waived, the Borrower shall have delivered to the Agent
evidence satisfactory to the Agent that the Closing Date Acquisitions shall be
consummated simultaneously with the initial Borrowings in accordance with the
terms of the Closing Date Acquisitions Agreements, and the Borrower shall have
delivered to the Agent each of the following:
(a) resolutions of the boards of directors and, to the extent
required, the stockholders of the Borrower and each of its Subsidiaries that is
a party to a Closing Date Acquisition Agreement, certified by the Secretary or
an assistant secretary of the Borrower and such Subsidiaries, to be duly adopted
and in full force and effect on the Closing Date, authorizing the execution,
delivery and performance by the Borrower and such Subsidiaries of the Closing
Date Acquisition Agreements and the consummation of the Closing Date
Acquisitions;
(b) resolutions of the board of directors of the Closing Date
Sellers and, to the extent required, the stockholders of the Closing Date
Sellers, certified by the Secretary or an assistant secretary of the Closing
Date Sellers, to be duly adopted and in full force and effect on the Closing
Date, authorizing the execution, delivery and performance by the Closing Date
Sellers of the respective Closing Date Acquisition Agreements to which they are
a party and the consummation of the respective Closing Date Acquisitions to
which they are a party;
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(c) certified copies of all documents evidencing all other
necessary corporate action, consents and governmental approvals with respect to
the consummation of the Closing Date Acquisitions as contemplated by the Closing
Date Acquisition Agreements;
(d) copies of all legal opinions, if any, delivered in connection
with the Closing Date Acquisitions, together with reliance letters in respect
thereof, in favor of the Agent and the Lenders; and
(e) a certificate from the Chief Executive Officer of the Borrower
to the effect that attached thereto are true and correct copies of the Closing
Date Acquisition Agreements and each of the other material documents,
instruments and agreements executed and delivered pursuant to the Closing Date
Acquisition Agreements and making such statements of fact concerning the Closing
Date Acquisitions as the Agent shall reasonably request.
SECTION 4.1.18 LETTER TO ACCOUNTANTS. The Agent shall have
received satisfactory evidence that the Borrower has delivered a letter to its
independent public accountants authorizing such public accountants to discuss
the Borrower's financial matters with the Agent and each Lender or any of their
respective representatives whether or not a representative of the Borrower is
present.
SECTION 4.1.19 OTHER DOCUMENTS, CERTIFICATES, ETC. The Agent shall
have received such other documents, certificates, opinions of counsel or other
materials as it reasonably requests from any Loan Party.
SECTION 4.2 EXPANSION LOANS. Without duplication of any conditions
precedent required to be satisfied pursuant to SECTION 4.1 or SECTION 4.3, the
obligations of the Lenders to make Expansion Loans (other than Expansion Loans
to finance the Closing Date Acquisitions) shall be subject to the satisfaction
of each of the additional conditions precedent set forth in this SECTION 4.2.
SECTION 4.2.1 INFORMATION REGARDING ACQUISITION. No later than
twenty (20) Business Days prior to the requested date for a Borrowing of
Expansion Loans, each Lender shall have received the following:
(a) a written description of the terms of the Acquisition to be
financed with the proceeds of such Borrowing, including a description of the
consideration to be paid therefor, all liabilities to be assumed in connection
therewith, and all other material terms of such Acquisition;
(b) a written description of the business to be acquired pursuant
to such Acquisition, including the number of Eligible Pay Telephones, the
locations thereof, and each Person and its Affiliates (treated as a single
group) that are parties to Telephone Placement Agreements with respect to, or
that otherwise own, lease, or manage locations at which, Telephones are located
that comprise greater than fifteen percent (15%) of the aggregate number of
Telephones to be acquired pursuant to such Acquisition together with contracts
for such (together with a copy of the form of typical Telephone Placement
Agreement executed by such parties);
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(c) to the extent available, balance sheets and related statements
of income and cash flows of the business to be acquired pursuant to such
Acquisition for the three fiscal years thereof most recently ended, as well as
balance sheets and related statements of income and cash flows from the most
recently ended fiscal year thereof to the end of the financial period most
recently ended prior to the proposed date of consummation of such Acquisition,
together with the key operating statistics of the business to be acquired
pursuant to such Acquisition, including beginning, ending and average Telephones
in operation, coin, non-coin, dial-around and other revenue, line and
transmission charges, outside processing expense, and a detail of selling,
general and administrative expenses for each of the three fiscal years thereof
most recently ended;
(d) financial projections for the business to be acquired pursuant
to such Acquisition for the current fiscal year thereof and the three fiscal
years following such Acquisition, containing a discussion of all material
variations therein from historical performance, together with pro forma
projections for the Borrower and its Subsidiaries giving effect to such
Acquisition, for the current Fiscal Year and the three Fiscal Years following
such Acquisition, showing all transaction adjustments and showing that, both
before and after giving PRO FORMA effect to such Acquisition, the Borrower is,
and is projected to be, in compliance with the covenants set forth in SECTION
6.2.4;
(e) a written description of the physical facilities of the
business to be acquired pursuant to such Acquisition, identifying all such
facilities to be retained and all such facilities to be closed subsequent to
such Acquisition, together with a detailed description of all projected costs
eliminations upon consummation of such Acquisition;
(f) a calculation, certified by the chief financial officer of the
Borrower of the Net Monthly Income and EBITDA of the business to be acquired
pursuant to such Acquisition for the twelve months most recently ended, in each
case based upon financial information provided by the seller or sellers with
respect to such Acquisition;
(g) a general description of the Telephone Placement Agreements to
be acquired pursuant to such Acquisition together with a calculation, certified
by the chief financial officer of the Borrower as to the average remaining life
of such Telephone Placement Agreements; and
(h) such additional information regarding such Acquisition as the
Required Lenders shall reasonably request.
SECTION 4.2.2 LEGAL DOCUMENTATION. The Agent and its counsel shall
have received copies of all material agreements to be executed in connection
with the Acquisition to be financed with such Expansion Loans, including any
asset purchase agreements, stock purchase agreements, merger agreements,
indemnity agreements, and escrow agreements, together with copies of all form
Site Placement Agreements used by the business to be acquired pursuant to such
Acquisition.
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SECTION 4.2.3 COLLATERAL ASSIGNMENT OF ACQUISITION AGREEMENT. The
Agent shall have received a Collateral Assignment of Acquisition Agreement, duly
executed by the Borrower and its Subsidiaries party to the acquisition agreement
executed in connection with the Acquisition to be financed with the proceeds of
such Expansion Loans, duly acknowledged by the sellers.
SECTION 4.2.4 OPINION OF COUNSEL TO BORROWER. The Agent shall have
received an opinion of counsel to the Borrower, in form and substance reasonably
satisfactory to the Agent and its counsel and substantially similar to those
delivered on the Closing Date, to the effect that upon consummation of the
Acquisition to be financed with the proceeds of such Expansion Loans, the Agent
shall have a first perfected security interest in all Eligible Pay Telephones to
be acquired pursuant to such Acquisition Agreement and all Telephone Placement
Agreements relating thereto, and addressing such other matters as the Required
Lenders shall reasonably request.
SECTION 4.2.5 NON-CONFORMING ACQUISITIONS. If the Acquisition to
be financed with the proceeds of such Expansion Loans does not constitute a
Conforming Acquisition, the Agent shall have received the written approval of
the Required Lenders, which approval may be granted or withheld by any Lender in
its sole and absolute discretion; PROVIDED, HOWEVER, that (a) if such
Acquisition is a Minor Acquisition, the written approval of the Required Lenders
shall not be required if (i) after giving effect thereto the aggregate
consideration in cash and other property paid by the Borrower and its
Subsidiaries after the Closing Date for all Minor Acquisitions that are not
Conforming Acquisitions and with respect to which the Required Lenders did not
grant their written approval does not exceed $15,000,000 and (ii) such
Acquisition meets any four of the six Acquisition Criteria, and (b) if such
Acquisition is a Major Acquisition, the written approval of the Required Lenders
shall not be required if (i) after giving effect thereto the aggregate
consideration in cash and other property paid by the Borrower and its
Subsidiaries after the Closing Date for all Major Acquisitions with respect to
which the Required Lenders did not grant their written approval does not exceed
$15,000,000 and (ii) such Acquisition meets any four of the six Acquisition
Criteria.
SECTION 4.3 ALL LOANS AND LETTERS OF CREDIT. Without duplication of any
conditions precedent required to be satisfied pursuant to SECTION 4.1 or SECTION
4.2, the obligations of the Lenders to make any Loans, and the obligation of the
Agent to issue and the obligations of the Lenders to purchase participations in
Letters of Credit, shall be subject to the satisfaction of each of the
additional conditions precedent set forth in this SECTION 4.3.
SECTION 4.3.1 COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. The
representations and warranties set forth in ARTICLE 5 shall have been true and
correct in all material respects as of the date initially made, and both before
and after giving effect to the making of any such Loan (except to the extent
expressly stated to be as of an earlier date),
(a) such representations and warranties shall be true and correct
in all material respects with the same effect as if then made (except to the
extent expressly stated to be as of an earlier date);
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(b) all representations and warranties set forth in the Security
Documents shall be true and correct in all material respects with the same
effect as if then made (except to the extent expressly stated to be as of an
earlier date);
(c) no material adverse development shall have occurred in any
such litigation, arbitration or governmental investigation or proceeding so
disclosed pursuant to SECTION 5.7 which renders such litigation, arbitration or
governmental investigation or proceeding likely to succeed in the reasonable
opinion of the Required Lenders and, if successful, could result in a Material
Adverse Change; and
(d) no Default or Event of Default shall have occurred and be
continuing.
SECTION 4.3.2 BORROWING REQUEST, LETTER OF CREDIT REQUEST, ETC.
The Agent shall have received a duly completed Borrowing Request, in the case of
a Borrowing, or a Letter of Credit Request, in the case of the issuance of a
Letter of Credit. Each of delivery of any such Borrowing Request or Letter of
Credit Request, and the acceptance by the Borrower of the proceeds of the Loan
or the benefits of the Letter of Credit requested thereby, shall constitute a
representation and warranty by the Borrower that on the date of such request,
and before and after giving effect to the making of such Loans and the
application of any proceeds of such Loans or the issuance of such Letter of
Credit, as the case may be, all statements set forth in SECTION 4.3.1 are true
and correct. In the event that, in connection with the delivery of any such
Borrowing Request or Letter of Credit Request, the Borrower is required to amend
any Item of the Disclosure Schedule in order that the statements set forth in
subsection (a) or (b) of SECTION 4.3.1 shall be true and correct, the Borrower
shall deliver to the Agent at least five (5) Business Days prior to the date of
the Borrowing or issuance of the Letter of Credit requested or to be requested,
a request that such Item of the Disclosure Schedule be amended, and the Agent
shall promptly forward such request to the Lenders. To the extent that the
Required Lenders agree to such requested amendment or otherwise agree to make
any Loans or purchase participations in Letters of Credit after receipt of such
request, the representations and warranties proposed to be amended by such
requested amendment to the Disclosure Schedule will be deemed amended for
purposes of this Agreement.
SECTION 4.3.3 SATISFACTORY LEGAL FORM. All documents executed or
submitted by or on behalf of the Borrower or any other Loan Party shall be
satisfactory in form and substance to the Agent and its counsel; the Required
Lenders shall have received all information, and such counterpart originals or
such certified or other copies of such Instruments, as the Required Lenders may
reasonably request; and all legal matters incident to the transactions
contemplated by this Agreement shall be satisfactory to the Required Lenders.
SECTION 4.3.4 MARGIN REGULATIONS. The making of such Loan or the
issuance of such Letter of Credit and the use of the proceeds thereof shall not
violate Regulations G, T, U and X of the F.R.S. Board.
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SECTION 4.3.5 ADVERSE CHANGE. In the reasonable judgment of the
Required Lenders, no Material Adverse Change shall have occurred since the
Closing Date.
SECTION 4.3.6 CHANGE IN LAW. On the date of such Borrowing, no
change shall have occurred in applicable law, or in applicable regulations
thereunder or in interpretations thereof by any court or Governmental Authority
which, in the opinion of any Lender, would make it illegal for such Lender to
make the Loan required to be made on such date.
SECTION 4.3.7 CERTIFICATE REGARDING SENIOR NOTES INDENTURE AND
FIXED CHARGE COVERAGE RATIO. The Agent shall have received a certificate duly
executed by the Chief Executive Officer or Chief Financial Officer of the
Borrower, stating that, after giving effect to such Borrowing or issuance of a
Letter of Credit, as the case may be:
(a) if the then aggregate outstanding principal amount of all
Loans, PLUS the then aggregate amount of outstanding Letter of Credit
Obligations, would not exceed $25,000,000, such Borrowing or issuance of a
Letter of Credit is permitted under Section 4.07(b)(i) and all other applicable
provisions of the Senior Notes Indenture;
(b) if the then aggregate outstanding principal amount of Loans,
PLUS the then aggregate amount of outstanding Letter of Credit Obligations,
would exceed $25,000,000 but would not exceed $50,000,000, the "Consolidated
Fixed Charge Coverage Ratio", as such term is defined in the Senior Notes
Indenture, of the Borrower and its Subsidiaries would be greater than or equal
to (x) 1.65 to 1.0 if such Loan is incurred or such Letter of Credit is issued
prior to December 31, 1997, (y) 2.50 to 1.0 if such Loan is made or such Letter
of Credit is issued on or after December 31, 1997 and prior to December 31, 1998
or (z) 2.75 to 1.0 if such Loan is made or such Letter of Credit is issued on or
after December 31, 1998, and such Borrowing or issuance of a Letter of Credit is
permitted by all applicable provisions of the Senior Notes Indenture; and
(c) if the then aggregate outstanding principal amount of Loans,
PLUS the then aggregate amount of outstanding Letter of Credit Obligations,
would exceed $50,000,000, the "Consolidated Fixed Charge Coverage Ratio", as
such term is defined in the Senior Notes Indenture, of the Borrower and its
Subsidiaries would be greater than or equal to 3.3 to 1.0, and such Borrowing or
issuance of a Letter of Credit is otherwise permitted by all applicable
provisions of the Senior Notes Indenture;
PROVIDED, HOWEVER, that (i) in the event that the Senior Notes Indenture is
amended or supplemented to provide that a designated amount of Indebtedness
under this Agreement of not less than $25,000,000 may be incurred from time to
time on a revolving basis to finance the working capital needs of the Borrower
and its Subsidiaries notwithstanding that such incurrence would not otherwise be
permitted under Section 4.07(a) of the Senior Notes Indenture, and
notwithstanding that other Indebtedness (in addition to such designated amount)
has been or may be incurred under this Agreement subject to the limitations set
forth in Section 4.07(a) of the Senior Notes Indenture, the ratios set forth in
clauses (x), (y) and (z) of subsection (b) above, and the ratio set forth in
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subsection (c) above, shall be decreased to 1.5 to 1.0, 2.25 to 1.0, 2.50 to 1.0
and 3.0 to 1.0, respectively, and (ii) in the event that th Senior Notes
Indenture is amended or supplemented to decrease the ratio set forth in clause
(C) of the definition of "Permitted Liens" of the Senior Notes Indenture, the
ratio set forth in subsection (c) above, shall be decreased to 110% of the ratio
set forth in clause (C) of the definition of "Permitted Liens" of the Senior
Notes Indenture, as so amended or supplemented provided, that in no event shall
the ratio set forth in subsection (c) above be decreased below 2.81 to 1.0. Any
certification required under clause (b) or (c) of this SECTION 4.3.7 shall set
forth, in reasonable detail, a calculation of the "Consolidated Fixed Charge
Coverage Ratio", as such term is defined in the Senior Notes Indenture, of the
Borrower and its Subsidiaries at the time of and after giving PRO FORMA effect
to such Borrowing or issuance of a Letter of Credit, as the case may be.
ARTICLE 5
WARRANTIES, ETC.
In order to induce the Lenders and the Agent to enter into this
Agreement, to engage in the transactions contemplated herein and in the other
Loan Documents and to make the Loans and issue and purchase participations in
Letters of Credit, the Borrower represents and warrants to the Agent and each
Lender as set forth in this ARTICLE 5. Each and all of the representations and
warranties set forth in this ARTICLE 5 shall be true and correct, assuming and
after giving effect to the consummation of the transactions contemplated by this
Agreement and the other Loan Documents.
SECTION 5.1 ORGANIZATION, POWER, AUTHORITY, ETC. Each of the Borrower
and its Subsidiaries (i) is a corporation validly organized and existing and in
good standing under the laws of the jurisdiction of its incorporation, (ii) is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the failure to so qualify could result in a Material
Adverse Change, and (iii) has full power and authority, and, except as set forth
in ITEM 3 ("Governmental Licenses") of the Disclosure Schedule, holds all
governmental licenses, permits, registrations and other approvals required under
all Requirements of Law, to own and hold under lease its property and to conduct
its business as conducted prior to the Closing Date, including all Approvals.
The Borrower has full power and authority to enter into and perform its
Obligations under this Agreement, the Notes and each other Loan Document
executed or to be executed by it and to obtain Loans hereunder.
SECTION 5.2 DUE AUTHORIZATION. The execution and delivery by the
Borrower of this Agreement, the Notes and each other Loan Document executed or
to be executed by it, and the incurrence and performance by the Borrower of the
Obligations have been duly authorized by all necessary corporate action, do not
require any Approval (except those Approvals already obtained), do not and will
not conflict with, result in any violation of, or constitute any default under,
any provision of any Organic Document or Contractual Obligation of any Loan
Party or any law or governmental regulation or court decree or order, and will
not result in or require the creation or
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imposition of any Lien on any Loan Party's properties pursuant to the provisions
of any Contractual Obligation of any Loan Party other than the Loan Documents.
SECTION 5.3 VALIDITY, ETC. This Agreement is, and the Notes and each
other Loan Document executed by the Borrower will upon the due execution and
delivery thereof constitute, the legal, valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms subject to the
effect of any applicable bankruptcy, insolvency, moratorium or similar laws
affecting creditors' rights generally, and the effect of general principles of
equity (regardless of whether considered in a proceeding in equity or at law).
SECTION 5.4 FINANCIAL INFORMATION; SOLVENCY.
(a) Except as disclosed in ITEM 4 ("Exceptions to GAAP") of the
Disclosure Schedule, all balance sheets, all statements of operations,
stockholders' equity and cash flows, and all other financial information of the
Borrower which have been or shall hereafter be furnished by or on behalf of the
Borrower to each Lender and the Agent for the purposes of or in connection with
this Agreement or any transaction contemplated hereby, including
(i) the consolidated audited balance sheets of the Borrower as of
December 31, 1995 and December 31, 1996, and the related consolidated
statements of income and cash flows for each of the three (3) fiscal
years of the Borrower ending December 31, 1994, December 31, 1995 and
December 31, 1996, together with the opinion thereon of Price Waterhouse
LLP and unaudited statements of income and cash flows of the Borrower
for the three-month period ending March 31, 1997;
(ii) the Form 10-KSB of the Borrower as filed with the Securities
and Exchange Commission for the period ending December 31, 1996 and any
amendments thereto;
(iii) the PRO FORMA Balance Sheets; and
(iv) the Projections;
have been prepared in accordance with GAAP consistently applied (except to the
extent items in the Projections are based upon estimates) throughout the periods
involved and present fairly in all material respects the matters reflected
therein subject, in the case of unaudited statements, to changes resulting from
normal year-end audit adjustments and except as to the absence of footnotes. As
of the date hereof, neither the Borrower nor any of its Subsidiaries has
material contingent liabilities or material liabilities for taxes, long-term
leases or unusual forward or long-term commitments which are not reflected in
the financial statements described in clause (i).
(b) Giving effect to the transactions contemplated by this
Agreement and the other Loan Documents (including the making of Loans), the
Borrower and each of its Subsidiaries is Solvent.
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SECTION 5.5 MATERIAL ADVERSE CHANGE. Since December 31, 1996, there has
been no Material Adverse Change.
SECTION 5.6 ABSENCE OF DEFAULT. Neither the Borrower nor any Subsidiary
is in default in the payment of (or in the performance of any obligation
applicable to) any Indebtedness, or is in material default under any regulation
of any Governmental Agency or court decree or order, or is in default under any
Requirements of Law which default could result in a Material Adverse Change.
SECTION 5.7 LITIGATION, LEGISLATION, ETC. Except as disclosed in ITEM 2
("Litigation") of the Disclosure Schedule, there is no pending or, to the
knowledge of the Borrower, threatened litigation, arbitration or governmental
investigation, proceeding or inquiry which, if adversely determined, could
result in a Material Adverse Change; and none of the proceedings set forth in
such ITEM 2 seeks to amend, modify or enjoin the transactions contemplated
hereby or, if adversely determined, could result in a Material Adverse Change.
There is no legislation, governmental regulation or judicial decision that could
result in a Material Adverse Change.
SECTION 5.8 REGULATIONS G, T, U AND X. Neither the Borrower nor any
Subsidiary is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock (as defined in F.R.S. Board Regulation G or U), and no assets of the
Borrower or any Subsidiary consist of Margin Stock. The Loans hereunder will not
be used for a purpose which violates, or would be inconsistent with, F.R.S.
Board Regulation G, T, U or X.
SECTION 5.9 GOVERNMENT REGULATION. Neither the Borrower nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended, or subject to regulation under
the Federal Power Act, the Interstate Commerce Act or any other federal or state
law limiting its ability to incur Indebtedness or to execute, deliver or perform
the Loan Documents to which it is party.
SECTION 5.10 TAXES. Each of the Borrower and its present or past
Subsidiaries has filed all tax returns and reports required by law to have been
filed by it and has paid all taxes and Charges thereby shown to be owing, except
any such taxes or Charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books.
SECTION 5.11 PENSION AND WELFARE PLANS. Except as disclosed in ITEM 5
("Benefit Plans") of the Disclosure Schedule
(a) neither the Borrower nor any Subsidiary or Commonly Controlled
Entity has assumed any liability under any employee benefit plan, fund, program,
arrangement, agreement or
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commitment maintained by or on behalf of or contributed to by or on behalf of
any entity or trade or business which, together with any of such corporations,
is treated as a single employer under Sections 414(b), (c), (m) or (o) of the
IRC. Neither the Borrower nor any Subsidiary or Commonly Controlled Entity shall
be subject (directly or indirectly) to any liability, tax or penalty whatsoever
to any person whomsoever with respect to any employee benefit plan, fund,
program, arrangement, agreement or commitment described in clause (i) or (ii) of
the immediately preceding sentence.
(b) No Reportable Event which could result in a Material Adverse
Change has occurred during the six-year period prior to the date on which this
representation is made or deemed made with respect to any Single Employer Plan.
The Borrower, each Commonly Controlled Entity, each Subsidiary, each Plan, and
each trust maintained pursuant to any such Plan have complied in all material
respects with the applicable provisions of ERISA, the IRC, and any other
applicable laws. Except as disclosed in ITEM 5 ("Benefit Plans") of the
Disclosure Schedule, the present value of all "benefit liabilities" (within the
meaning of Section 4001(a)(16) of ERISA) under each Single Employer Plan
maintained by the Borrower, any Subsidiary or any Commonly Controlled Entity
(based on those assumptions that would be used in a termination of each such
Plan) did not, as of the last annual valuation date for which an actuarial
valuation report has been done, exceed the value of the assets of such Plan as
of such date. Except as disclosed in such ITEM 5, neither the Borrower nor any
Commonly Controlled Entity or Subsidiary has incurred any liability to the PBGC
or to any other Person under Section 4062, 4063 or Section 4064 of ERISA on
account of the termination of, or its withdrawal from, a Single Employer Plan,
and no Lien has been imposed on the assets of the Borrower or any Commonly
Controlled Entity or Subsidiary under Section 4068 of ERISA. To the knowledge of
the Borrower and any Commonly Controlled Entities and Subsidiaries, there does
not exist any event or condition which would permit the institution of
proceedings to terminate any Single Employer Plan pursuant to Section 4042 of
ERISA. Except as disclosed in ITEM 5 of the Disclosure Schedule, no "accumulated
funding deficiency" (as defined in Section 302 of ERISA or Section 412 of IRC),
whether or not waived, exists with respect to any Pension Plan. The Borrower and
each Commonly Controlled Entity and Subsidiary have timely made in full each
quarterly installment payment to any Pension Plan required under Section 302(e)
of ERISA or Section 412(m) of the IRC and have also made full and timely payment
of any other costs or expenses related to such a Plan. The Borrower and all
Commonly Controlled Entities and Subsidiaries have made full and timely payment
of all contributions to Multiemployer Plans required under ERISA, the IRC or
applicable collective bargaining agreements. Neither the Borrower nor any
Commonly Controlled Entity or Subsidiary has had a complete or partial
withdrawal from any Multiemployer Pension Plan and the liability to which the
Borrower or any Commonly Controlled Entity or Subsidiary would become subject
under ERISA if the Borrower or any such Commonly Controlled Entity or Subsidiary
were to withdraw completely from all Multiemployer Pension Plans as of the
valuation date most closely preceding the date hereof is not in excess of
$100,000. No such Multiemployer Pension Plan has been terminated or is in
Reorganization or Insolvent, nor, to the knowledge of the Borrower and any
Commonly Controlled Entities and Subsidiaries, is any such Multiemployer Pension
Plan likely to be terminated or to become in Reorganization or Insolvent. To the
knowledge of the Borrower and any Commonly Controlled Entities and Subsidiaries,
no "accumulated funding deficiency" (as defined in Section 302 of ERISA or
Section 412 of the IRC),
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whether or not waived, exists with respect to any Multiemployer Plan. The
present value (determined using assumptions which are reasonable in respect of
the benefits provided and the employees participating) of the aggregate
liability of the Borrower and each Subsidiary and Commonly Controlled Entity for
post-retirement benefits to be provided to their current and former employees
under Plans which are welfare benefit plans (as defined in Section 3(1) of
ERISA) is not in excess of $100,000. No written notice of liability has been
received with respect to the Borrower, any of its Subsidiaries, or any Plan for
any "prohibited transaction" (within the meaning of Section 4975 of the IRC or
Section 406 of ERISA), nor has any such prohibited transaction resulting in
material liability to the Borrower or any of its Subsidiaries occurred. Neither
the Borrower nor any Subsidiary or Commonly Controlled Entity will, as a result
of consummating the transactions contemplated by this Agreement (pursuant to the
provisions of the Agreement, by operation of law or otherwise) (i) have incurred
or become liable for any tax assessed by the Internal Revenue Service for any
alleged violations of Section 4975 of the IRC or any civil penalty imposed by
the Department of Labor for any alleged violations of Section 406 of ERISA, (ii)
have caused or permitted to occur any "prohibited transaction" within the
meaning of such Section 4975 of the IRC or Section 406 of ERISA with respect to
any Plan for which no exemption is available or (iii) have incurred any
liability to the PBGC (other than ordinary and usual PBGC premium liability) or
any liability for complete or partial withdrawal to any Multiemployer Plan.
Neither the Borrower nor any Subsidiary is subject (directly or indirectly) to,
and no facts exist which could subject the Borrower or any Subsidiary (directly
or indirectly) to, any other liability, penalty, tax or lien whatsoever, which
could result in a Material Adverse Change and which is directly or indirectly
related to any Plan, including, but not limited to, liability for any damages or
penalties arising under Title I or Title IV of ERISA, liability for any tax or
penalty resulting from a loss of deduction under Section 404 or 419 of the IRC,
any tax or penalty under chapter 43 of the IRC, or any taxes or penalties under
any other applicable law, but excluding any liability to make contributions or
pay premiums to or under an ongoing Plan before the last due date on which such
contributions or premiums could be paid or made without penalty or to pay
benefits when due in accordance with Plan terms.
SECTION 5.12 LABOR CONTROVERSIES. Except as disclosed in ITEM 6 ("Labor
Controversies") of the Disclosure Schedule, there are no labor controversies
pending or, to the best knowledge of the Borrower, threatened, relating to the
Borrower or any Subsidiary. There is (i) no unfair labor practice complaint
pending against the Borrower, or any of its Subsidiaries or, to the best
knowledge of the Borrower, threatened against any of them, before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under any collective bargaining agreement is so pending against the Borrower
or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened
against any of them, (ii) no strike, labor dispute, slowdown or stoppage is
pending against the Borrower or any of its Subsidiaries or, to the best
knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries and (iii) no union representation question existing with respect to
the employees of the Borrower or any of its Subsidiaries. Each of the Borrower
and its Subsidiaries is in compliance in all material respects with all
collective bargaining agreements to which it is subject.
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SECTION 5.13 OWNERSHIP OF PROPERTIES; COLLATERAL.
(a) Each of the Borrower and its Subsidiaries shall own good title
to all of its material personal properties and assets of any nature whatsoever,
free and clear of all Liens except as permitted pursuant to SECTION 6.2.3. All
Liens attaching to property or assets of the Borrower or any of its Subsidiaries
as of the Closing Date are identified in ITEM 8 ("Existing Liens") of the
Disclosure Schedule.
(b) Except to the extent otherwise consented to in writing by the
Required Lenders, the provisions of the Security Agreement are effective to
create in favor of the Agent for the benefit of the Agent and the Lenders, a
legal, valid and enforceable security interest in all right, title and interest
of the Loan Parties in the Collateral described therein, and, upon the filing of
the Financing Statements and any required filing in the United States Patent and
Trademark Office pursuant to SECTION 4.1.11, the Security Documents will create
a fully perfected first priority security interest in all right, title and
interest of the Loan Parties in all of the Collateral described therein, to the
extent that a security interest therein can be perfected by such a filing,
subject to no other Liens other than Liens permitted by SECTION 6.2.3.
SECTION 5.14 INTELLECTUAL PROPERTY. Each of the Borrower and its
Subsidiaries owns or licenses all such Intellectual Property, and has obtained
assignments of all licenses and other rights, as the Borrower considers
necessary for or as are otherwise material to the conduct of the business of the
Borrower and its Subsidiaries as now conducted without, individually or in the
aggregate, any infringement upon rights of other Persons which could result in a
Material Adverse Change. All Intellectual Property owned or licensed from third
Persons described in this SECTION 5.14 is set forth in ITEM 7 ("Intellectual
Property") of the Disclosure Schedule.
SECTION 5.15 ACCURACY OF INFORMATION. All factual information heretofore
or contemporaneously furnished by or on behalf of the Borrower in writing to the
Agent or any Lender for purposes of or in connection with this Agreement or any
transaction contemplated hereby is true and accurate in every material respect
on the date as of which such information is dated or certified and as of the
date of execution and delivery of this Agreement by the Agent or such Lender and
such information is not incomplete by omitting to state any material fact
necessary to make such information not misleading. Neither this Agreement nor
any document or statement furnished to the Agent or any of the Lenders by or on
behalf of the Borrower contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements contained
herein or therein not materially misleading.
SECTION 5.16 INSURANCE. All policies of insurance in effect of any kind
or nature owned by or issued to the Borrower and its Subsidiaries, including
policies of life, fire, theft, product liability, public liability, property
damage, other casualty, employee fidelity, workers' compensation, property and
liability insurance, (a) as of the Closing Date are listed in ITEM 9
("Insurance") of the Disclosure Schedule, (b) are, together with all policies of
employee health and welfare and title insurance, in full force and effect, (c)
comply in all respects with the applicable requirements set
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forth herein and in the Security Documents and (d) are of a nature and provide
such coverage as is customarily carried by companies engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower and its Subsidiaries operate. Neither the Borrower nor any of its
Subsidiaries provides any of its insurance through self-insurance except as
disclosed in ITEM 9 of the Disclosure Schedule.
SECTION 5.17 INDEBTEDNESS. ITEM 10 ("Existing Indebtedness") of the
Disclosure Schedule specifies all Indebtedness of the Borrower and its
Subsidiaries as of the Closing Date.
SECTION 5.18 ENVIRONMENTAL MATTERS. Except as disclosed in ITEM 11
("Environmental Matters") of the Disclosure Schedule, to the best of the
Borrower's knowledge, the Borrower and each of its Subsidiaries are in
compliance in all material respects with all applicable Environmental Laws, and
there are no conditions or circumstances associated with the currently or
previously owned, operated, used or leased properties or current or past
operations of the Borrower or any Subsidiary which may give rise to
Environmental Liabilities and Costs which could result in a Material Adverse
Change or which may give rise to any Lien relating to any Environmental
Liabilities and Costs.
SECTION 5.19 NO BURDENSOME AGREEMENTS. Neither the Borrower nor any
Subsidiary is a party to or has assumed any indenture, loan or credit agreement
or any lease or other agreement or instrument or subject to any charter or other
corporate restriction that could result in a Material Adverse Change.
SECTION 5.20 CONSENTS. Except as disclosed in ITEM 12 ("Consents") of
the Disclosure Schedule the Borrower and its Subsidiaries have all material
permits and governmental consents and approvals necessary under Requirements of
Law or, in the reasonable business judgment of the Borrower, deemed advisable
under Requirements of Law, in connection with the transactions contemplated
hereby and the ongoing business and operations of the Borrower and its
Subsidiaries.
SECTION 5.21 CONTRACTS. Set forth in ITEM 13 ("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. Each
such material Contractual Obligation is in full force and effect in accordance
with the terms thereof. There are no material defaults by the Borrower or any
Subsidiary or, to the Borrower's knowledge after due inquiry, any other default
in existence under any such material Contractual Obligations, in each case that
could result in a Material Adverse Change.
SECTION 5.22 EMPLOYMENT AGREEMENTS. Set forth in ITEM 14 ("Employment
Contracts") of the Disclosure Schedule is a complete and accurate list of each
employment agreement to which the Borrower or any Subsidiary is a party, or by
which it is bound.
SECTION 5.23 CONDITION OF PROPERTY. All of the assets and properties
owned by, leased to or used by the Borrower and its Subsidiaries material to the
conduct of their business are in adequate
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operating condition and repair, ordinary wear and tear excepted, and are free
and clear of known defects except for defects which do not substantially
interfere with the use thereof in the conduct of normal operations.
SECTION 5.24 SUBSIDIARIES. ITEM 15 ("Subsidiaries") of the Disclosure
Schedule sets forth all Subsidiaries of the Borrower as of the Closing Date.
SECTION 5.25 TRADE RELATIONS. Except as disclosed in ITEM 16
("Termination of Material Contracts") of the Disclosure Schedule, as of the
Closing Date, there exists no actual or, to the best of the Borrower's
knowledge, threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship of the Borrower with any
customer or group of customers of the Borrower.
SECTION 5.26 COMMUNICATIONS ACT. None of the Borrower and its
Subsidiaries holds any licenses or conducts any business which would result in
the application of Section 310 of the Communications Act of 1934 as a result of
this Agreement or any of the other Loan Documents.
ARTICLE 6
COVENANTS
SECTION 6.1 AFFIRMATIVE COVENANTS. The Borrower agrees with each Lender
that until the Commitments have terminated and all Obligations (other than
Obligations that expressly survive the termination of this Agreement pursuant to
SECTION 9.5) have been paid and performed in full, the Borrower will perform the
Obligations set forth in this SECTION 6.1.
SECTION 6.1.1 FINANCIAL INFORMATION, ETC. The Borrower will
furnish, or will cause to be furnished, to each Lender and to the Agent copies
of the following financial statements, reports and information:
(a) (i) promptly when available and in any event within
ninety (90) days after the close of each Fiscal Year, a
consolidated balance sheet for the Borrower and its Subsidiaries
at the close of such Fiscal Year, and related consolidated
statements of operations, retained earnings, and cash flows for
such Fiscal Year, of the Borrower and its Subsidiaries (with
comparable information at the close of and for the prior Fiscal
Year), certified 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 the Borrower and its Subsidiaries;
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(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 of any
obligation 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
(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 thirty (30)
days after the close of each calendar month of each Fiscal Year:
(i) a consolidated balance sheet for the Borrower and its
Subsidiaries at the close of such month, and consolidated
statements of operations, retained earnings, and cash flows for
such month and for the period commencing at the close of the
previous Fiscal Year and ending with the close of such month, of
the 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 the Borrower's then current
Fiscal Year; and
(c) within thirty (30) days after the close of each Fiscal
Quarter, a Compliance Certificate calculated as of the computation date
at the close of such month;
(d) promptly upon receipt thereof, copies of all detailed
financial and management reports submitted to the Borrower by its
independent public accountants in connection with each annual or interim
audit made by such independent public accountants of the books of
Borrower or any Subsidiary;
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(e) within ten (10) days prior to the end of each Fiscal Year of
the Borrower, a business plan of the Borrower and its Subsidiaries, in
form, scope and detail reasonably satisfactory to the Required Lenders,
for the twelve (12) months following the end of such Fiscal Year,
including consolidated operating budgets prepared on a monthly basis for
such Fiscal Year, which budgets shall include estimated Consolidated
Capital Expenditures and other costs to be incurred by the Borrower and
its Subsidiaries, on a consolidated basis, during such Fiscal Year, in
each case, with accompanying detail, together with a report containing
management's discussion and analysis of the projected financial
condition and results of operations of the Borrower and its
Subsidiaries;
(f) within ten (10) days prior to the end of each Fiscal Year of
the Borrower, projected statements of operations of the Borrower and its
Subsidiaries for such Fiscal Year and each of the three Fiscal Years
thereafter, prepared on a monthly basis for the upcoming Fiscal Year and
on a quarterly basis for all Fiscal Years thereafter, together with
supporting details and a statement of underlying assumptions, and
together with the projected balance sheets, statements of operations and
changes in cash flows of the Borrower and its Subsidiaries for such
Fiscal Years, prepared on an annual basis, together with supporting
details and a statement of underlying assumptions;
(g) promptly after approval by the Borrower's Board of Directors,
any updates or revisions to any business plan described in the preceding
clause (e), in addition to those described in clause (b)(ii) above;
(h) (i) not later than Friday of each calendar week, a Borrowing
Base Certificate as of the last day of the preceding calendar week and
(ii) following a request by the Agent, within one (1) Business Day, a
Borrowing Base Certificate as of the day of such request;
(i) no later than Friday 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;
(j) no later than Friday 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;
(k) no later than Friday of each calendar week, a detailed aged
schedule, in a form satisfactory to the Required Lenders, of all
accounts payable of the Borrower and its Subsidiaries as of the last
Business Day of the prior week;
(l) promptly upon the sending or filing thereof, copies of all
reports that the Borrower or any of its Subsidiaries sends to its
security holders generally, and copies of all reports and
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registration statements that the Borrower or any of its Subsidiaries
files with the Securities and Exchange Commission or any national
securities exchange; and
(m) such other information with respect to the financial
condition, business, property, assets, revenues and operations of the
Borrower and any Subsidiary as any Lender may (through the Agent) from
time to time reasonably request.
SECTION 6.1.2 MAINTENANCE OF CORPORATE EXISTENCE, ETC. Except as
permitted by SECTION 6.2.10, the Borrower will cause to be done at all times all
things necessary to maintain and preserve the corporate existences of the
Borrower and each Subsidiary.
SECTION 6.1.3 FOREIGN QUALIFICATION. The Borrower will, and will
cause each Subsidiary to, cause to be done at all times all things necessary to
be duly qualified to do business and be in good standing as a foreign
corporation in each jurisdiction where the failure to so qualify could result in
a Material Adverse Change. The Borrower will cause each of its agents, if any,
to be duly qualified to do business in, and at all times comply with all
applicable Requirements of Law of each jurisdiction where the failure to so
qualify or comply could result in a Material Adverse Change.
SECTION 6.1.4 PAYMENT OF TAXES, ETC. The Borrower will, and will
cause each Subsidiary to, pay and discharge, as the same become due and payable,
(a) all Charges against it or on any of its property, as well as claims of any
kind which, if unpaid, might become a Lien upon any of its properties, and (b)
all lawful claims for labor, materials, supplies, services or otherwise before
any thereof become a default; PROVIDED, HOWEVER, that the foregoing shall not
require the Borrower or any Subsidiary to pay or discharge any such Charge or
claim so long as it shall be diligently contesting the validity thereof in good
faith by appropriate proceedings and shall have set aside on its books adequate
reserves in accordance with GAAP with respect thereto.
SECTION 6.1.5 INSURANCE. In addition to any insurance required to
be maintained pursuant to any other Loan Document, the Borrower will, and will
cause each Subsidiary to, maintain or cause to be maintained with insurance
companies with a Best's rating of "A" or better, insurance with respect to its
properties and business against such casualties, contingencies and liabilities
(including, without limitation, business interruption insurance) and of such
types and in such amounts as is acceptable to the Agent and the Lenders and will
furnish to the Agent, annually at the policy renewal date, a certificate of an
Authorized Officer setting forth the nature and extent of all insurance
maintained by the Borrower and its Subsidiaries in accordance with this SECTION
6.1.5. Each such policy shall be issued by an insurance company with a Best's
rating of "A" or better and a financial size category of not less than XII,
shall be in effect on the Closing Date and the premiums for each such policy
shall be paid as such premiums shall come due. All policies of casualty
insurance shall contain an endorsement, in the form submitted to the Borrower by
the Agent, showing loss payable to the Agent, for its benefit and the ratable
benefit of the Lenders, as their interests may appear. All policies of liability
insurance, including, without limitation, all primary and umbrella liability
policies, shall name the Agent, for its benefit and the ratable benefit
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of the Lenders, as additional insured. The Borrower shall retain all the
incidents of ownership of the insurance maintained pursuant to this SECTION
6.1.5, but shall not borrow upon or otherwise impair its right to receive the
proceeds of such insurance, other than customary financing of annual premiums.
Subject to clauses (d) and (e) of SECTION 3.3.1, so long as no Event of Default
has occurred and is continuing, the Borrower and its Subsidiaries shall have the
right to use the proceeds of casualty insurance to repair or replace damaged or
destroyed property and shall have the right to use the proceeds of business
interruption insurance for its ongoing business needs.
SECTION 6.1.6 NOTICE OF DEFAULT, LITIGATION, ETC. Upon a
Responsible Officer learning thereof, the Borrower will give prompt written
notice (with a description in reasonable detail) to the Agent of:
(a) the occurrence of any Default;
(b) the occurrence of any litigation, arbitration or governmental
investigation or proceeding not previously disclosed in writing by the Borrower
to the Lenders which has been instituted or, to the knowledge of the Borrower,
is threatened against, the Borrower or any Subsidiary or to which any of its
properties, assets or revenues is subject which, if adversely determined, could
result in a Material Adverse Change;
(c) any material development which shall occur in any litigation,
arbitration or governmental investigation or proceeding previously disclosed by
the Borrower to the Lenders pursuant to SECTION 5.7 which could result in a
Material Adverse Change;
(d) the occurrence of any other circumstance which could result
in a Material Adverse Change;
(e) the occurrence of any Loss; and
(f) the occurrence or expected occurrence of any Reportable Event
with respect to any Single Employer Plan, or any withdrawal from, or the
termination, Reorganization or Insolvency of any Multiemployer Pension Plan, the
institution of proceedings or the taking of any other action by the PBGC or the
Borrower or any Commonly Controlled Entity or Subsidiary or any Multiemployer
Pension Plan with respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Single Employer Plan or Multiemployer
Pension Plan, or the receipt of notice by the Borrower or any Commonly
Controlled Entity or Subsidiary that the institution of any such proceedings or
the taking of any such action is under consideration or anticipated, the
institution of any proceedings or other action by the Internal Revenue Service
or the Department of Labor with respect to the minimum funding requirements of
any Pension Plan, or the receipt of notice by the Borrower or any Commonly
Controlled Entity or Subsidiary that the institution of any such proceedings or
the taking of any such action is under consideration or anticipated, the
occurrence or expected occurrence of any event which could result in the
incurrence of unpredictable contingent event benefits under Section 302 of ERISA
or Section 412 of the IRC with respect to any Pension
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Plan, any event or condition which could increase the liability of the Borrower
or any Commonly Controlled Entity or Subsidiary with respect to post-retirement
welfare benefits under any Plan, or the occurrence of any other event or
condition with respect to any Plan which could subject the Borrower or any
Subsidiary (directly or indirectly) to any tax, penalty or liability under Title
I or Title IV of ERISA, Section 404 or 419 and Chapter 43 of the IRC, or any
other applicable laws, and in each case above, such event or condition, together
with all other events or conditions, if any, could subject the Borrower or any
Subsidiary (directly or indirectly) to any tax, fine, penalty, or other
liabilities in amounts which in the aggregate could result in a Material Adverse
Change. The Borrower will deliver to each of the Lenders a true and complete
copy of each annual report (Form 5500) of each Plan (other than a Multi-Employer
Plan) required to be filed with the Internal Revenue Service, promptly after the
filing thereof; and
(g) the condemnation or threat of condemnation with respect to any
property used or necessary in the conduct of the businesses of the Borrower or
any of its Subsidiaries.
SECTION 6.1.7 BOOKS AND RECORDS. The Borrower will keep books and
records reflecting all of its and its Subsidiaries' business affairs and
transactions in accordance with GAAP and permit the Agent and each Lender or any
of their respective representatives, at reasonable times and reasonable
intervals upon one Business Day's notice, to visit all of its offices, to
discuss its financial matters with its officers and independent public
accountants and to examine (and, at the expense of the Borrower, photocopy
extracts from) any of its books or other corporate records. The Borrower shall
pay any fees and expenses, including, without limitation, any fees of its
independent public accountants incurred in connection with the Agent's or any
Lender's exercise of its rights pursuant to this SECTION 6.1.7, PROVIDED,
HOWEVER, that unless an Event of Default has occurred and is continuing the
Borrower shall be required to pay such fees for not more than two visits and
examinations in each Fiscal Year.
SECTION 6.1.8 MAINTENANCE OF PROPERTIES, ETC. The Borrower will:
(a) maintain and preserve, and cause each of its Subsidiaries to maintain and
preserve, all of its properties (real and personal and including all intangible
assets), except obsolete properties, which are used or necessary in the conduct
of its business in good working order and condition, ordinary wear and tear
excepted, except that this clause (a) shall not apply to any circumstance where
noncompliance, together with all other noncompliances, could not reasonably
result in a Material Adverse Change; and (b) to the extent Borrower deems
advisable in its reasonable business judgment, forthwith repair or replace, at
its own expense, any such property or asset that suffers a Loss.
SECTION 6.1.9 MAINTENANCE OF LICENSES AND PERMITS. The Borrower
will maintain and preserve, and will cause each of its Subsidiaries to maintain
and preserve, all Intellectual Property, rights, permits, licenses, approvals
and privileges issued under or arising under any Requirements of Law, except
that this SECTION 6.1.9 shall not apply to any circumstance where noncompliance,
together with all other noncompliances, could not result in a Material Adverse
Change.
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SECTION 6.1.10 EMPLOYEE PLANS. The Borrower will at all times
comply in all material respects with the provisions of ERISA and the IRC which
are applicable to any of the Plans, and cause each of its Subsidiaries so to do.
SECTION 6.1.11 COMPLIANCE WITH LAWS. The Borrower will, and will
cause each Subsidiary to, comply with all applicable Requirements of Law;
PROVIDED, HOWEVER, that this SECTION 6.1.11 shall not apply to any circumstance
of noncompliance that together with all other noncompliances could not result in
a Material Adverse Change.
SECTION 6.1.12 INTEREST RATE PROTECTION. On or prior to each
Quarterly Payment Date commencing with the Quarterly Payment Date in November,
1997, the Borrower shall have in effect and thereafter maintain in full force
and effect, from ING or an Eligible Lending Institution, one or more Interest
Rate Contracts, protecting the Borrower against increases in the ING Alternate
Base Rate in excess of 100 basis points above the ING Alternate Base Rate on the
Closing Date for an aggregate notional amount not less than 60% of the
outstanding principal amount of Expansion Loans on such Quarterly Payment Date
for a term from such Quarterly Payment Date to the Stated Maturity Date. ING
shall make available to the Borrower various proposals for Interest Rate
Contracts. Should the Borrower obtain any proposal for Interest Rate Contracts
from a source other than ING, the Borrower agrees that ING shall have a right to
provide such Interest Rate Contracts on the same terms as those set forth in
such proposal. The Borrower will collaterally assign such Interest Rate
Contracts to the Agent, for its benefit and the ratable benefit of the Lenders,
pursuant to documentation acceptable to the Agent, and the Borrower may secure
any net obligations of the Borrower under any such Interest Rate Contracts on a
PARI PASSU basis with the Obligations.
SECTION 6.1.13 REAL ESTATE. If the Borrower or any of its
Subsidiaries shall acquire a fee or leasehold interest (other than office
leases) in real estate which the Required Lenders determine to be material to
the Borrower or such Subsidiary, the Borrower or such Subsidiary, as the case
may be, will execute a first priority mortgage, deed of trust or deed to secure
debt or leasehold mortgage, leasehold deed of trust or leasehold deed to secure
debt, as appropriate, in form and substance reasonably satisfactory to the
Required Lenders, in favor of the Agent, for its benefit and the ratable benefit
of the Lenders, and shall use its best efforts to deliver to the Agent such
title insurance policies, surveys and landlords' estoppel agreements with
respect thereto as the Required Lenders shall request.
SECTION 6.1.14 TELEPHONE PLACEMENT AGREEMENTS. With respect to
Telephone Placement Agreements entered into or renewed or extended after the
Closing Date, the Borrower shall only utilize and execute Instruments which are
substantially in the form of Schedule 2 attached hereto.
SECTION 6.1.15 INTERCOMPANY INDEBTEDNESS. The Borrower will cause
each Subsidiary to evidence any Indebtedness permitted to be incurred by such
Subsidiary under clause (f) of SECTION 6.2.2 by a demand promissory note that is
pledged to the Agent, for its benefit and the benefit of the Lenders, as
security for the Obligations.
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SECTION 6.1.16 SUBSTITUTION OF EXISTING LETTERS OF CREDIT. Not
later than ninety (90) days following the Closing Date, the Borrower will
substitute each Existing Letter of Credit set forth in ITEM 10 ("Existing
Indebtedness") with Letters of Credit.
SECTION 6.2 NEGATIVE COVENANTS. The Borrower agrees with each Lender
that until all Commitments have terminated and all Obligations (other than
Obligations that expressly survive the termination of this Agreement pursuant to
SECTION 9.5) have been paid and performed in full, the Borrower will perform the
Obligations set forth in this SECTION 6.2.
SECTION 6.2.1 BUSINESS ACTIVITIES. The Borrower will not, and will
not permit any Subsidiary to, engage in any business activity, except those in
which the Borrower is engaged on the Closing Date and such activities as may be
incidental or related thereto.
SECTION 6.2.2 INDEBTEDNESS. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness other than:
(a) Indebtedness in respect of the Loans, Letters of Credit and
other Obligations;
(b) Indebtedness in respect of the Interest Rate Contracts
required pursuant to SECTION 6.1.12 to the extent such do not constitute
Obligations;
(c) obligations that constitute Indebtedness solely by virtue of
being secured by Liens permitted under SECTION 6.2.3;
(d) Indebtedness in respect of liabilities resulting from (i)
endorsements of negotiable instruments in the ordinary course of business; and
(ii) surety bonds issued for the account of the Borrower or any of its
Subsidiaries in the ordinary course of business;
(e) Indebtedness incurred pursuant to the Senior Notes Indenture
and evidenced by the Senior Notes and the guaranties by Subsidiaries thereunder;
(f) Indebtedness existing on the Closing Date and set forth in
ITEM 10 ("Existing Indebtedness") of the Disclosure Schedule, provided that
Indebtedness in respect of the Existing Letters of Credit shall be permitted to
exist only on and prior to the ninetieth day following the ninetieth day
following the Closing Date;
(g) Indebtedness of any Subsidiary owing to the Borrower or any
other Subsidiary;
(h) Capitalized Lease Liabilities PROVIDED that (i) the aggregate
amount thereof which in accordance with GAAP is attributable to principal,
together with the aggregate outstanding principal amount of all Purchase Money
Indebtedness of the Borrower and its Subsidiaries, does not
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exceed $250,000 at any one time outstanding, (ii) payments under each
capitalized lease giving rise to such Capitalized Lease Liabilities shall be
made in equal periodic installments, (iii) such Capitalized Lease Liabilities
are not incurred to finance the purchase of Telephones and related equipment,
and (iv) the Consolidated Capital Expenditures financed by such Capitalized
Lease Liabilities are permitted under SECTION 6.2.5;
(i) Purchase Money Indebtedness PROVIDED that (i) the amount of
such Indebtedness, together with the amount of any outstanding Capitalized Lease
Liabilities of the Borrower and its Subsidiaries that in accordance with GAAP
are attributable to principal, does not exceed $250,000 at any one time
outstanding, (ii) such Indebtedness provides for the payment of principal in
equal periodic installments, (iii) such Purchase Money Indebtedness is not
incurred to finance the purchase of Telephones and related equipment, and (iv)
the Consolidated Capital Expenditures financed by such Purchase Money
Indebtedness are permitted under SECTION 6.2.5;
(j) other Indebtedness not otherwise covered by clauses (a)
through (i) above not to exceed $250,000 in aggregate amount outstanding during
the term of this Agreement; and
(k) extensions, refinancings, replacements and renewals of any of
the foregoing items described in clauses (e) and (f) above (other than the
Indebtedness described in the proviso to clause (f)); 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.
SECTION 6.2.3 LIENS. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or suffer to exist any Lien upon any of
its property, revenues or assets, whether now owned or hereafter acquired,
except
(a) Liens in favor of the Agent or the Lenders granted pursuant to
any Loan Document;
(b) Liens identified in ITEM 8 ("Existing Liens") of the
Disclosure Schedule evidencing rights of lessors in leased equipment and/or
purchase money liens on specific items of equipment;
(c) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable with penalty or being
contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on its books;
(d) Liens of carriers, warehousemen, mechanics, and materialmen
incurred in the ordinary course of business for sums not overdue or being
contested in good faith by appropriate proceedings (which proceedings have the
effect of preventing the forfeiture or sale of the asset subject to such Lien)
and for which adequate reserves in accordance with GAAP shall have been set
aside on its books;
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<PAGE> 74
(e) Liens (other than Liens arising under ERISA or Section 412(n)
of the IRC) 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 or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure obligations
on surety or appeal bonds;
(f) judgment Liens with respect to judgments to the extent such
judgments do not constitute an Event of Default described in SECTION 7.1.9;
(g) Liens which arise by operation of law under Article 2 of the
UCC in favor of unpaid sellers of goods, or liens in items or any accompanying
documents or proceeds of either arising by operation of law under Article 4 of
the UCC in favor of a collecting bank;
(h) easements (including, without limitation, reciprocal easement
agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and other restrictions, charges or
encumbrances (whether or not recorded) affecting the use of property, which do
not materially detract from the value of such property or impair the use
thereof;
(i) Liens securing Indebtedness permitted under clauses (h) or (i)
of SECTION 6.2.2 and Liens consisting of cash collateral deposits made to secure
Indebtedness in respect of the Existing Letters of Credit, but only for such
time as such Indebtedness is permitted to exist under clause (f) of SECTION
6.2.2;
(j) Leases and subleases granted to others in the ordinary course
of business not interfering in any material respect with any business of the
Borrower or any of its Subsidiaries;
(k) Liens which constitute rights of set-off of a customary nature
or bankers' liens with respect to amounts on deposit, whether arising by
operation of law or by contract, in connection with deposit accounts established
with banks in the ordinary course of business; and
(l) extensions, renewals or replacements of any Lien referred to
in paragraphs (a) through (k) above provided that the principal amount of the
obligation secured thereby is not increased and that any such extension, renewal
or replacement is limited to the property originally encumbered thereby.
SECTION 6.2.4 FINANCIAL CONDITION. The Borrower hereby covenants
and agrees as set forth below:
(a) FIXED CHARGE COVERAGE RATIO. The Borrower will not permit its
Fixed Charge Coverage Ratio for the twelve-month period ending on the last day
of any Fiscal Quarter to be less than the ratio set forth opposite such Fiscal
Quarter (for each Fiscal Quarter ending prior to June 30, 1998, such ratio to be
calculated as provided in clause (e) of this SECTION 6.2.4):
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<PAGE> 75
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING: RATIO
---------------------- -----
<S> <C>
September 30, 1997 1.5
December 31, 1997 1.7
March 31, 1998 1.6
June 30, 1998 1.6
September 30, 1998 1.6
December 31, 1998 1.6
March 31, 1999 1.6
June 30, 1999 1.6
September 30, 1999 1.6
December 31, 1999 1.6
March 31, 2000 1.6
June 30, 2000 1.6
</TABLE>
(b) DEBT TO EBITDA RATIO. The Borrower will not permit the Debt to
EBITDA 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 June 30,
1998, such ratio shall be calculated as provided in clause (e) of this SECTION
6.2.4):
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING: RATIO
---------------------- -----
<S> <C>
September 30, 1997 15
December 31, 1997 7
March 31, 1998 5
June 30, 1998 4
September 30, 1998 3
December 31, 1998 3
March 31, 1999 3
June 30, 1999 3
September 30, 1999 3
December 31, 1999 3
March 31, 2000 3
June 30, 2000 3.
</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 the ratio set forth opposite such Fiscal Quarter:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING: RATIO
---------------------- -----
<S> <C>
September 30, 1997 1.0
</TABLE>
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<PAGE> 76
<TABLE>
<S> <C>
December 31, 1997 1.2
March 31, 1998 .9
June 30, 1998 1.2
September 30, 1998 1.0
December 31, 1998 1.2
March 31, 1999 .9
June 30, 1999 1.2
September 30, 1999 1.0
December 31, 1999 1.2
March 31, 2000 .9
June 30, 2000 1.2.
</TABLE>
(d) INTEREST COVERAGE RATIO. The Borrower will not permit the
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 June 30, 1998, such ratio to be calculated as provided in clause (e) of
this SECTION 6.2.4.):
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING: RATIO
---------------------- -----
<S> <C>
September 30, 1997 2.2
December 31, 1997 2.3
March 31, 1998 2.3
June 30, 1998 2.3
September 30, 1998 2.4
December 31, 1998 2.5
March 31, 1999 2.5
June 30, 1999 2.5
September 30, 1999 2.5
December 31, 1999 2.5
March 31, 2000 2.5
June 30, 2000 2.5.
</TABLE>
(e) CALCULATIONS FOR STUB PERIODS. Notwithstanding anything
contained herein to the contrary, for purposes of determining compliance with
subsections (a), (b) and (d) of this SECTION 6.2.4 for any period ending prior
to June 30, 1998, calculation of all items relating to income or expense
(including, without limitation, EBITDA) shall be made for the period commencing
on the first day of the first Fiscal Quarter commencing after the Closing Date
and ending on the date of determination.
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 the Borrower and its Subsidiaries may make
Consolidated Capital Expenditures during any Fiscal Year provided
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<PAGE> 77
(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 $5,600,000
1999 $5,800,000
2000 $6,000,000;
</TABLE>
PROVIDED, HOWEVER, that expenditures consisting of Acquisitions and expenditures
paid with 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 Acquisition, replacement or
repair was made.
SECTION 6.2.6 LEASE OBLIGATIONS. Except for (a) leases in
existence on the Closing Date and described in ITEM 17 ("Existing 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 (including, without limitation, leasing corporate office space), and
(c) any capital lease provided the Capitalized Lease Liabilities incurred
thereunder are permitted under SECTION 6.2.2(h), 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; 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 1997 Fiscal Year, for the period commencing on the Closing Date to the end
of such Fiscal Year):
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
----------- ------
<S> <C>
1997 $200,000
1998 $200,000
1999 $200,000
2000 $200,000.
</TABLE>
SECTION 6.2.7 INVESTMENTS. The Borrower will not, and will not
permit any Subsidiary to, make, incur, assume or suffer to exist any Investment
in any other Person except:
(a) Cash Equivalent Investments;
(b) deposits for utilities, security deposits under leases and
similar prepaid expenses;
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<PAGE> 78
(c) Accounts arising in the ordinary course of business;
(d) Acquisitions permitted under SECTION 6.2.10;
(e) Investments consisting of Indebtedness of any Subsidiary to
the Borrower or any other Subsidiary permitted under clause (f) of SECTION
6.2.2;
(f) Investments existing on the Closing Date and disclosed in ITEM
18 ("Existing Investments") of the Disclosure Schedule;
(g) Investments by the Borrower in its Subsidiaries to the extent
such Investments are evidenced by demand promissory notes in principal amounts
equal to the amount of such Investments, payable to the Borrower and pledged by
the Borrower in favor of the Agent pursuant to the Borrower Pledge Agreement;
(h) Investments arising under Interest Rate Contracts; and
(i) Investments consisting of deposit accounts of the Borrower and
its Subsidiaries maintained with banks in the ordinary course of business.
SECTION 6.2.8 RESTRICTED PAYMENTS, ETC.
(a) The Borrower will not declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any class of
Capital Stock (now or hereafter outstanding) of the Borrower or on any warrants,
options or other rights in respect of any class of Capital Stock (now or
hereafter outstanding) of the Borrower or apply, or permit any Subsidiary to
apply, any of its funds, property or assets to the purchase, redemption, sinking
fund or other retirement of any shares of any class of Capital Stock (now or
hereafter outstanding) of the Borrower or any rights, options or warrants to
subscribe for or purchase any shares of any class of Capital Stock of the
Borrower, or make any deposit for any of the foregoing; PROVIDED, HOWEVER, that
the Borrower may declare and pay dividends on shares of Capital Stock in kind by
the issuance of additional shares of Capital Stock that do not constitute
Disqualified Stock.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, make any voluntary or optional payment or prepayment on, or
redeem or otherwise acquire for value (including the making of any sinking fund
payment with respect to any trustee), any of the Senior Notes.
SECTION 6.2.9 TAKE OR PAY CONTRACTS; SALE/LEASEBACKS.
(a) Except as set forth on ITEM 19 ("Take or Pay Contracts") of
the Disclosure Schedule, the Borrower will not, and will not permit any
Subsidiary to, enter into or be a party to any arrangement for the purchase of
materials, supplies, other property or services if such arrangement by its
express terms requires that payment be made by the Borrower or such Subsidiary
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<PAGE> 79
regardless of whether or not such materials, supplies, other properties or
services are delivered or furnished to it; and
(b) The Borrower will not enter into, or permit any Subsidiary to
enter into, any arrangement with any Person providing for the leasing by the
Borrower or one or more Subsidiaries of any property or assets, which property
or assets have been or are to be sold or transferred by the Borrower or such
Subsidiary to such Person, except that the Borrower and its Subsidiaries may
enter into the transaction described in clause (g) of SECTION 6.2.2.
SECTION 6.2.10 CONSOLIDATION, MERGER, SUBSIDIARIES, ETC.
(a) The Borrower will not, and will not permit any Subsidiary to,
liquidate or dissolve, consolidate with, or merge into or with, any other
corporation, or purchase or otherwise acquire all or substantially all of the
assets of any Person (or of any division or business unit thereof), except that
any such Subsidiary may liquidate or dissolve voluntarily into, and may merge
with and into, the Borrower or any other wholly-owned Subsidiary (so long as the
Borrower or such wholly-owned Subsidiary is the surviving corporation),
PROVIDED, HOWEVER, that
(i) the Borrower shall be permitted to merge with and into a
Delaware corporation for the sole purpose of changing its state of
incorporation to the State of Delaware provided that (A) the
shareholders of the surviving corporation immediately after such
merger are the shareholders of the Borrower immediately prior to
such merger, (B) the number of authorized and issued and
authorized and unissued shares, and the respective classes and
series, of capital stock of the surviving corporation shall be the
same as the number of authorized and issued and authorized and
unissued shares, and the respective classes and series of capital
stock of the Borrower immediately prior to such merger, (C) the
voting powers, designations, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations and restrictions of all classes and
series of capital stock of the surviving corporation shall be
identical to the voting powers, designations, preferences
(including, without limitation, stated values and liquidation
preferences) and relative, participating, optional or other
special rights, and qualifications, limitations and restrictions
of the respective classes and series of the capital stock of the
Borrower as in effect immediately prior to such merger, and (D)
the Lenders shall have received (1) an assumption agreement in
form and substance satisfactory to the Required Lenders, duly
executed by the surviving corporation and pursuant to which the
surviving corporation shall expressly assume all of the
obligations of the Borrower under this Agreement and the other
Loan Documents, and (2) such acknowledgments, certificates,
instruments and legal opinions relating to such merger and
assumption agreement as the Required Lenders shall reasonably
request;
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<PAGE> 80
(ii) the Borrower and its Subsidiaries may consummate
the Closing Date Acquisitions;
(iii) the Borrower and its Subsidiaries may make Conforming
Acquisitions provided that with respect to each such Conforming
Acquisition the Lenders shall have received a certificate from the
chief financial officer of the Borrower certifying (A) that no
Default or Event of Default exists at the time of or would result
from the consummation of such Acquisition, (B) that after giving
PRO FORMA effect to such Acquisition, the Borrower and its
Subsidiaries are, and are projected to be, in compliance with
SECTION 6.2.4, (C) that such Acquisition constitutes a Conforming
Acquisition and (D) as to the amount and form of consideration
payable by the Borrower and its Subsidiaries upon consummation of
such Acquisition (including assumed liabilities); and
(iv) the Borrower and its Subsidiaries may make Acquisitions
that do not constitute Conforming Acquisitions provided that with
respect to each such Acquisition the Lender shall have received a
certificate from the chief financial officer of the Borrower
certifying (A) that no Default or Event of Default exists at the
time of or would result from the consummation of such Acquisition,
(B) that after giving PRO FORMA effect to such Acquisition, the
Borrower and its Subsidiaries are, and are projected to be, in
compliance with SECTION 6.2.4, (C) as to the amount and form of
consideration payable by the Borrower and its subsidiaries upon
consummation of such Acquisition (including assumed liabilities)
and (D) that (1) if such Acquisition is a Minor Acquisition, after
giving effect thereto the aggregate consideration in cash and
other property (including assumed liabilities) paid by the
Borrower and its Subsidiaries after the Closing Date in respect of
all such Minor Acquisitions that are not Conforming Acquisitions
and with respect to which the Required Lenders have not granted
their written approval does not exceed $15,000,000 and such
Acquisition meets four of the six Acquisition Criteria, and (2) if
such Acquisition is a Major Acquisition, after giving effect
thereto the aggregate consideration in cash and other property
(including assumed liabilities) paid by the Borrower and its
Subsidiaries after the Closing Date for all Major Acquisitions
with respect to which the Required Lenders have not granted their
written approval does not exceed $15,000,000 and such Acquisition
meets four of the six Acquisition Criteria.
(b) The Borrower will not, and will not permit any Subsidiary to,
create any Subsidiary other than in connection with the consummation of an
Acquisition that is otherwise permitted under this Agreement and provided that
such newly created Subsidiary becomes a party to the Subsidiary Guaranty and the
Security Agreement and otherwise complies with the requirements of SECTION
4.1.11 as if it had been a Subsidiary on the Closing Date, and the Agent
receives an opinion of counsel meeting the requirements of SECTION 4.2.4 as if
such Acquisition had been financed with
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<PAGE> 81
the proceeds of Expansion Loans; and the Borrower shall not transfer any assets
to any Subsidiary other than in the ordinary course of business.
SECTION 6.2.11 ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any Subsidiary to, sell, transfer, lease or otherwise dispose
of, or grant options, warrants or other rights with respect to, any of its
assets (including Accounts and Capital Stock of Subsidiaries) to any Person
(other than the Borrower or any Subsidiary), unless:
(a) such disposition constitutes a disposition of obsolete or
retired assets not used in the business of the Borrower and its Subsidiaries; or
(b) the disposition is in the ordinary course of business and the
net book value of the asset to be disposed of does not exceed $100,000, and
together with the net book value of all other assets disposed of by the Borrower
or any Subsidiary pursuant to this clause (b) during the term of this Agreement
does not exceed $250,000, and solely cash is received therefor; or
(c) such disposition consists of the exchange of Telephones for
other Telephones, PROVIDED that not more than 5,000 Telephones may be so
exchanged during the term of this Agreement.
SECTION 6.2.12 MODIFICATION OF ORGANIC DOCUMENTS, SENIOR NOTES,
ETC.
(a) The Borrower will not consent to any amendment, supplement or
other modification of any of the terms or provisions contained in, or applicable
to, the Certificate of Incorporation or the By-Laws of the Borrower, except for
any amendment, supplement or other modification which does not adversely affect
the Borrower's ability to pay or perform the Obligations.
(b) The Borrower will not amend, supplement or modify, or consent
to any amendment, supplement or other modification of, the Senior Notes
Indenture, the Senior Notes, or any other indenture, agreement or instrument
with respect to any extension, refinancing, replacement or renewal of any of the
foregoing permitted under subsection (k) of SECTION 6.2.2, in each case unless
the Required Lenders determine in good faith that such proposed amendment,
supplement or modification would not adversely affect the Lenders, would not
make the terms of the Senior Notes Indenture more restrictive to the Borrower or
its Subsidiaries, and would not impose additional or more burdensome obligations
on the Borrower or its Subsidiaries.
(c) The Borrower will not amend, modify or change, or consent to
any amendment, modification or change of, any certificate of designation
relating to any preferred stock, unless the Required Lenders determine that such
proposed amendment, waiver or change would not adversely affect the Lenders.
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<PAGE> 82
SECTION 6.2.13 TRANSACTIONS WITH AFFILIATES. Except as set forth
on ITEM 20 ("Transaction with Affiliates") of the Disclosure Schedule, the
Borrower will not, and will not permit any Subsidiary to, enter into, or cause,
suffer or permit to exist:
(a) any management contract or arrangement, consulting agreement
or arrangement, contract or arrangement relating to the allocation of revenues,
expenses or similar contract or arrangement requiring any payments to be made by
the Borrower or any Subsidiaries to any Affiliate; and
(b) any other transaction, arrangement or contract with any of its
other Affiliates which is on terms which are less favorable than are obtainable
from any Person which is not one of its Affiliates.
SECTION 6.2.14 INCONSISTENT AGREEMENTS. The Borrower will not, and
will not permit any Subsidiary to, enter into any material agreement containing
any provision which would be violated or breached in any material respect by any
Loan or by the performance by the Borrower or any Subsidiary of its obligations
hereunder or under any Loan Document.
SECTION 6.2.15 CHANGE IN ACCOUNTING METHOD. The Borrower will not,
and will not permit any Subsidiary to, make any change in accounting treatment
and reporting practices except as required by GAAP.
SECTION 6.2.16 CHANGE IN FISCAL YEAR END. The Borrower will not
change its Fiscal Year end without the Required Lenders' prior written consent,
which consent will not be unreasonably withheld but will not be given with
respect to more than one such change during the term of this Agreement.
SECTION 6.2.17 COMPLIANCE WITH ERISA. The Borrower shall not, and
shall not permit any Subsidiary to take, or fail to take, any action with
respect to a Plan, including, but not limited to, establishing, amending, or
terminating or withdrawing from any Plan, without first obtaining the Required
Lenders' written approval, where such action or failure to act could result in
any liabilities under the IRC, ERISA, or any other applicable law which
individually or in the aggregate could reasonably result in a Material Adverse
Change.
SECTION 6.2.18 LIMITATION ON RESTRICTIONS ON SUBSIDIARY DIVIDENDS.
Except as otherwise provided in this Agreement or any other Loan Document, the
Borrower will not, and will not permit any of its Subsidiaries to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any such Subsidiary to (a) pay
dividends or make other distributions on its Capital Stock or other interests or
participations in profits owned by the Borrower or any Subsidiary of the
Borrower or pay any Indebtedness owed to the Borrower or any Subsidiary of the
Borrower, (b) make loans or advances to the Borrower or any Subsidiary of the
Borrower or (c) transfer any of its property or assets to the Borrower or any
Subsidiary of the Borrower.
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<PAGE> 83
SECTION 6.2.19 COMMUNICATIONS LAWS. Neither the Borrower nor any
of its Subsidiaries will acquire any licenses or conduct any business which
would result in the application of Section 310 of the Communications Act of 1934
as a result of this Agreement or any of the other Loan Documents.
ARTICLE 7
EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" shall mean any
of the events set forth in this SECTION 7.1.
SECTION 7.1.1 NON-PAYMENT OF OBLIGATIONS. The Borrower shall
default:
(a) in the payment or prepayment when due of any principal of any
Loan; or
(b) in the payment when due of the interest payable in respect of
any Loan, the fees provided for in SECTION 2.3 hereof or any other Obligations
and such default shall continue unremedied for a period of five days.
SECTION 7.1.2 NON-PERFORMANCE OF CERTAIN COVENANTS. The Borrower
shall default in the due performance and observance of any of its obligations
under SECTION 6.1 and such default shall continue unremedied for a period of 10
Business Days after notice thereof shall have been given to the Borrower by the
Agent, or shall default in the due performance or observation of any of its
obligations under SECTION 6.2.
SECTION 7.1.3 DEFAULTS UNDER OTHER LOAN DOCUMENTS; NON-PERFORMANCE
OF OTHER OBLIGATIONS. Any "Event of Default" shall occur under the other Loan
Documents; or the Borrower or any Subsidiary shall default in the due
performance and observance of any other obligation, covenant or agreement
contained herein or in any other Loan Document and such default shall continue
unremedied for a period of ten (10) Business Days after notice thereof shall
have been given to the Borrower by the Agent.
SECTION 7.1.4 BANKRUPTCY, INSOLVENCY, ETC. The Borrower or any
Subsidiary shall:
(a) become insolvent or generally fail to pay, or admit in writing
its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any
Subsidiary or any property of any thereof, or make a general assignment for the
benefit of creditors;
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<PAGE> 84
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver, sequestrator
or other custodian for the Borrower or any Subsidiary or for a substantial part
of the property of any thereof, and such trustee, receiver, sequestrator or
other custodian shall not be discharged within sixty (60) days;
(d) permit or suffer to exist the commencement of any bankruptcy,
reorganization, debt arrangement or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Borrower or any Subsidiary, and, if such case or
proceeding is not commenced by the Borrower or such Subsidiary, such case or
proceeding shall be consented to or acquiesced in by the Borrower or such
Subsidiary or shall result in the entry of an order for relief or shall remain
for sixty (60) days undismissed; or
(e) take any corporate action authorizing, or in furtherance of,
any of the foregoing.
SECTION 7.1.5 BREACH OF WARRANTY. Any representation or warranty
of the Borrower or any Subsidiary hereunder or in any other Loan Document or in
any other writing furnished by or on behalf of the Borrower or such Subsidiary
to the Agent or any Lender for the purposes of or in connection with this
Agreement or any such Loan Document is or shall be incorrect when made in any
material respect.
SECTION 7.1.6 DEFAULT ON OTHER INDEBTEDNESS, ETC. (a) Any
Indebtedness of the Borrower or any Subsidiary in an aggregate principal amount
exceeding $1,000,000 shall be duly declared to be or shall become due and
payable prior to the stated maturity thereof, or any amount thereon or in
respect thereof shall not be paid as and when the same becomes due and payable
including any applicable grace period; or (b) there shall occur and be
continuing any event which constitutes an event of default under any Instrument
relating to any Indebtedness of the Borrower or any Subsidiary in an aggregate
principal amount exceeding $1,000,000, the effect of which is to permit the
holder or holders of such Indebtedness, or a trustee, agent or other
representative on behalf of such holder or holders, to cause such Indebtedness
to become due prior to its stated maturity.
SECTION 7.1.7 FAILURE OF VALID, PERFECTED SECURITY INTEREST. The
security interest or Lien in any Collateral or any proceeds thereof, securing
the Obligations shall cease to be valid or perfected at any time after the
Closing Date; PROVIDED, HOWEVER, that the failure of the Agent or any Lender to
file any necessary UCC continuation statements shall not be deemed to constitute
an Event of Default under this SECTION 7.1.7.
SECTION 7.1.8 EMPLOYEE PLANS. Any of the following events shall
occur with respect to any Plan: (i) any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan and such "prohibited transaction" could result in a Material
Adverse Change, (ii) any "accumulated funding deficiency" (as defined in Section
412 of the Code or Section 302 of ERISA) not disclosed in ITEM 5 ("Benefit
Plans") of the
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<PAGE> 85
Disclosure Schedule, whether or not waived, shall exist with respect to any
Single Employer Plan, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is,
in the reasonable opinion of the Required Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) a notice of
intent to terminate any Single Employer Plan for purposes of Title IV of ERISA
is issued by the plan administrator thereof without the prior written consent of
the Required Lenders, or the PBGC shall commence proceedings to terminate any
Single Employer Plan, (v) the Borrower or any Commonly Controlled Entity or
Subsidiary shall, or in the reasonable opinion of the Required Lenders is likely
to, incur any liability in connection with a withdrawal from, or the Insolvency,
Reorganization or termination of, a Multiemployer Plan, (vi) the Borrower or any
Commonly Controlled Entity or Subsidiary shall fail to make any quarterly
installment payment to a Pension Plan required under Section 302(e) of ERISA or
Section 412(m) of the IRC, (vii) the Borrower or any Commonly Controlled Entity
or Subsidiary shall fail to make any contribution to a Multiemployer Plan which
is required under ERISA, the IRC or applicable collective bargaining agreements,
or (viii) any other event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (viii) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Borrower or any Subsidiary (directly or indirectly) to any tax,
penalty or other liabilities under Title I or Title IV of ERISA, Section 404 or
419 and Chapter 43 of the IRC or any other applicable law which in the aggregate
could result in a Material Adverse Change.
SECTION 7.1.9 JUDGMENTS. A final judgment which, with other such
outstanding final judgments against the Borrower and its Subsidiaries (in each
case to the extent not covered by insurance), exceeds an aggregate of
$1,000,000, shall be entered against the Borrower or any of its Subsidiaries
and, within 30 days after entry thereof, such judgment shall not have been
discharged or execution thereof stayed pending appeal, or, within 30 days after
the expiration of any such stay, such judgment shall not have been discharged.
SECTION 7.1.10 LOSS OF PERMITS, ETC. The expiration, loss,
termination, cancellation, revocation, forfeiture, suspension, diminution,
impairment of or failure to renew any Intellectual Property, right, permit,
license or approval which could reasonably be expected to result in a Material
Adverse Change; or the entry of any order of a court enjoining, restraining or
otherwise preventing the Borrower or any Subsidiary from conducting all or any
material part of its business affairs; or the cessation of business or
dissolution of the Borrower.
SECTION 7.2 ACTION IF BANKRUPTCY. If any Event of Default described in
SECTION 7.1.4 shall occur, the outstanding principal amount of all outstanding
Loans and all other Obligations (including an amount equal to the aggregate
undrawn face amount of all Letters of Credit) shall automatically be and become
immediately due and payable, without notice or demand, whereupon the Borrower
will deposit with the Agent for the benefit of the Lenders, as cash collateral
an amount equal to the aggregate undrawn face amount of all Letters of Credit,
which amount shall become immediately due and payable by the Borrower and to the
extent paid by the Borrower shall constitute
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a prepayment under this Agreement and the Agent, upon the direction of the
Required Lenders, shall exercise any and all rights and remedies available under
this Agreement or any other Loan Document, or available at law or in equity, at
any time, in any order and in any combination.
SECTION 7.3 ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than any Event of Default described in SECTION 7.1.4) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the Agent may, and
upon the direction of the Required Lenders, shall upon notice or demand, (a)
declare all or any portion of the outstanding principal amount of the Loans to
be due and payable and any or all other Obligations to be due and payable,
whereupon the full unpaid amount of such Loans and any and all other Obligations
which shall be so declared due and payable shall be and become immediately due
and payable, without further notice, demand, or presentment, (b) demand that the
Borrower deposit with the Agent for the benefit of the Lenders, as cash
collateral, an amount equal to the aggregate undrawn face amount of all Letters
of Credit, which amount shall become immediately due and payable by the Borrower
and to the extent paid by the Borrower shall constitute a prepayment under this
Agreement, (c) to the extent permitted under any Letter of Credit, require the
beneficiary thereof to draw upon the undrawn face amount thereof, and (d)
exercise any and all rights and remedies available under this Agreement or any
other Loan Document, or available at law or in equity, at any time, in any order
and in any combination.
ARTICLE 8
THE AGENT
SECTION 8.1 ACTIONS. Each Lender and the holder of each Note authorize
the Agent to act on behalf of such Lender or holder under this Agreement and any
other Loan Document and, in the absence of other written instructions from the
Required Lenders received from time to time by the Agent (with respect to which
the Agent agrees that it will, subject to the last two sentences of this SECTION
8.1, comply, except as otherwise reasonably advised by counsel), to exercise
such powers hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof, together with such powers
as may be reasonably incidental thereto. Each Lender (including, without
limitation, ING in its capacity as a Lender) agrees (which agreement shall
survive any termination of this Agreement) to indemnify the Agent, severally but
not jointly PRO RATA according to such Lender's aggregate percentage of the
Commitments from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may at any time be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement, the Notes, or any other Loan Document, including the reimbursement of
the Agent for all reasonable out-of-pocket expenses (including reasonable
attorneys' fees) incurred by the Agent hereunder or in connection herewith or in
enforcing the Obligations of the Borrower under this Agreement or any other Loan
Document, in all cases as to which the Agent is not reimbursed by the Borrower;
PROVIDED that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements determined
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by a court of competent jurisdiction in a final proceeding to have resulted
primarily from the Agent's gross negligence or wilful misconduct.
Notwithstanding any other provision of this Agreement to the contrary, the Agent
shall not be required to take any action hereunder or under any other Loan
Document, or to prosecute or defend any suit in respect of this Agreement or any
other Loan Document, unless it is indemnified to its reasonable satisfaction by
the Lenders against loss, costs, liability and expense. If any indemnity in
favor of the Agent shall become impaired, it may call for additional indemnity
and cease to do the acts indemnified against until such additional indemnity
(not to exceed any Lender's PRO RATA share, determined by such Lender's
percentage of the Commitment, of such loss, liability and expense) is given.
SECTION 8.2 FUNDING RELIANCE, ETC. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any Lender by 5:00 p.m., New
York City time, on the day prior to a Borrowing that such Lender will not make
available the amount which would constitute its Percentage of such Borrowing on
the date specified therefor, the Agent may assume that such Lender has made such
amount available to the Agent and, in reliance upon such assumption, make
available to the Borrower a corresponding amount; PROVIDED, HOWEVER, that the
Agent shall have no obligation to do so. If such amount is made available by
such Lender to the Agent on a date after the date of such Borrowing, such Lender
shall pay to the Agent on demand interest on such amount at the Federal Funds
Rate for the number of days from and including the date of such Borrowing to the
date on which such amount becomes immediately available to the Agent, together
with such other compensatory amounts as may be required to be paid by such
Lender to the Agent pursuant to the Rules for Interbank Compensation of the
Council on International Banking or the Clearinghouse Compensation Committee, as
the case may be, as in effect from time to time. A statement of the Agent
submitted to any Lender with respect to any amounts owing under this SECTION 8.2
shall be conclusive, in the absence of manifest error. If such amount is not in
fact made available to the Agent by such Lender within three Business Days after
the date of such Borrowing, the Agent shall be entitled to recover such amount,
with interest thereon at the rate per annum then applicable to the Loans
comprising such Borrowing, within five Business Days after demand, from the
Borrower.
SECTION 8.3 EXCULPATION. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to any Lender for any action taken
or omitted to be taken by it under this Agreement, the Notes, or any Loan
Document, or in connection herewith or therewith, except for its own wilful
misconduct or gross negligence. The Agent shall not be responsible to any Lender
for any recitals, statements, representations or warranties herein or in any
certificate or other document delivered in connection herewith or for the
authorization, execution, effectiveness, genuineness, validity, enforceability,
perfection, collectibility, or sufficiency of any of the Loan Documents, the
financial condition of the Borrower or any Subsidiary or the condition or value
of any of the Collateral, or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
any of the Loan Documents, the financial condition of the Borrower or any
Subsidiary or the existence or possible existence of any Default. The Agent
shall be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which it believes to
be genuine and to have been presented by a proper Person.
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SECTION 8.4 SUCCESSOR. The Agent may resign as such at any time upon at
least thirty (30) Business Days' prior notice to the Borrower and all Lenders,
such resignation not to be effective until a successor Agent is in place. If the
Agent at any time resigns, the Required Lenders may appoint another Lender as a
successor Agent which shall thereupon become the Agent hereunder. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within thirty (30) Business Days after the
retiring Agent's giving notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent, which shall be one of the
Lenders or a financial institution reasonably acceptable to the Borrower
organized under the laws of the United States and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent such documents of transfer and assignment as
such successor Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges, and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents.
SECTION 8.5 LOANS AND OTHER TRANSACTIONS BY THE AGENT AND ITS
AFFILIATES. The Agent shall have the same rights and powers with respect to (a)
the Loans made by it or any of its Affiliates, (b) the Notes held by it or any
of its Affiliates, and (c) participations held by it or any of its Affiliates in
Letters of Credit, as any Lender and may exercise the same as if it were not the
Agent. ING and its Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of business with,
the Borrower and its Subsidiaries or any Person who may do business with or own
securities of the Borrower, all as if ING were not the Agent and without any
duty to account therefor to the Lenders. The Lenders hereby acknowledge that a
Subsidiary of ING holds securities of the Borrower that as of the Closing Date
are exercisable for a material amount of the common stock of the Borrower, and
each such Lender acknowledges that such Subsidiary of ING may act with respect
to such securities and any common stock for which such securities are
exercisable for its own account, all as if ING were not the Agent and without
any duty to account therefor to the Lenders, and neither the Agent nor any of
its Affiliates shall have any liability, obligation or duty to the Lenders with
respect to such securities or any action taken in respect thereof.
SECTION 8.6 CREDIT DECISIONS. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such financial
information and such other documents, information and investigations as it has
deemed appropriate, made its own credit decision to extend its Commitments, to
make the Loans and to purchase participations in Letters of Credit. Each Lender
also acknowledges that it will, independently of the Agent and each other
Lender, and based on such other documents, information and investigations as it
shall deem appropriate at any time, continue to make its own credit decisions as
to exercising or not exercising from time to time any rights and privileges
available to it under this Agreement or any other Loan Document.
SECTION 8.7 COPIES, ETC. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Borrower pursuant to the
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terms of this Agreement. The Agent will distribute to each Lender each
Instrument received for its account and copies of all other communications
received by the Agent from the Borrower for distribution to the Lenders by the
Agent in accordance with the terms of this Agreement. Notwithstanding anything
herein contained to the contrary, all notices to and communications with the
Borrower under this Agreement and the other Loan Documents may be effected by
the Lenders through the Agent.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 WAIVERS, AMENDMENTS, ETC.
(a) The provisions of this Agreement and of each Loan Document
may from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and, (x) in the case of an amendment or
modification, is consented to by the Borrower and the Required Lenders or (y) in
the case of a waiver of any obligation of the Borrower or compliance with any
prohibition contained in this Agreement, is consented to by the Required
Lenders; PROVIDED, HOWEVER, that no such amendment, modification or waiver:
(i) which would modify any requirement hereunder that any
particular action be taken by all the Lenders or by the Required
Lenders shall be effective unless consented to by each Lender;
(ii) which would modify this SECTION 9.1, change the
definitions of "Required Lenders" or "Borrowing Base", increase the
Expansion Loan Commitment Amount or the Revolving Credit Commitment
Amount or change any Percentage for any Lender, reduce any fees payable
to the Lenders described in ARTICLE 2 and ARTICLE 3, extend the
Expansion Loan Commitment Termination Date or the Revolving Credit
Termination Date, extend the date of reduction of the Expansion Loan
Commitment specified in Section 3.3.4(f), extend the expiry date of any
Letter of Credit beyond the Revolving Credit Termination Date, or
subject any Lender to any additional obligations shall be made without
the consent of each Lender;
(iii) which would extend the due date for, or reduce the
amount of, any payment or prepayment of principal of or interest on any
Loan (or reduce the principal amount of or rate of interest on any
Loan) shall be made without the consent of the holder of the Note
evidencing such Loan; or
(iv) which would affect adversely the interests, rights,
compensation or obligations of the Agent QUA the Agent shall be made
without consent of the Agent.
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(b) No failure or delay on the part of the Agent, any Lender
or the holder of any Note in exercising any power or right under this Agreement
or any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on the Borrower in any case shall entitle it to any notice or
demand in similar or other circumstances. No waiver or approval by the Agent,
any Lender, or the holder of any Note under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval hereunder shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
(c) Neither any Lender nor the Agent shall be under any
obligation to marshal any assets in favor of the Borrower or any other party or
against or in payment of any or all of the Obligations. Recourse for security
shall not be required at any time. To the extent that the Borrower makes a
payment or payments to the Agent or the Lenders, or the Agent or the Lenders
enforce their security interests or exercise their rights of setoff, and such
payment or payments or the proceeds of such enforcement or setoff or any part
thereof are subsequently for any reason invalidated, set aside or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied,
and all Liens, rights and remedies therefor, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.
SECTION 9.2 NOTICES. All notices hereunder shall be in writing or by
telecopy and shall be sufficiently given to the Agent, the Lenders or the
Borrower if addressed or delivered to them at the following addresses:
If to the Agent: ING
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: ING
Atlanta Office
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Telecopier No.: (770) 951-1005
and a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Hector E. Llorens, Jr. Esq.
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Telecopier No.: (404) 572-5100
If to any other Lender: At its address set forth beneath its name on the
signature pages hereof
If to the Borrower: PhoneTel Technologies, Inc.
650 Statler Office Tower
1127 Euclid Avenue
Cleveland, Ohio 44115
Attention: Chief Executive Officer,
Chief Financial Officer and
General Counsel
Telecopier No.: (216) 241-2574
with a copy to: Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Stephen M. Banker, Esq.
Telecopier No.: (212) 735-2000
or at such other address as any party may designate to any other party by
written notice. All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; when
received, if deposited in the mail, postage prepaid; when transmission is
verified, if telecopied; and on the next Business Day, if timely delivered to an
air courier guaranteeing overnight delivery.
SECTION 9.3 COSTS AND EXPENSES. The Borrower agrees to pay all
reasonable out-of-pocket expenses of the Agent for the negotiation, preparation,
execution, and delivery of this Agreement and each other Loan Document,
including schedules and exhibits, and any amendments, waivers, consents,
supplements, terminations, releases or other modifications to this Agreement or
any other Loan Document as may from time to time hereafter be required
(including the reasonable fees and expenses of counsel for the Agent, or of any
consultants or other experts retained by the Agent from time to time in
connection therewith) whether or not the transactions contemplated hereby are
consummated, and to pay all reasonable expenses of the Agent(including
reasonable fees and expenses of counsel to the Agent, or of any consultants or
other experts retained by the Agent) incurred in connection with the preparation
and review of the form of any Instrument relevant to this Agreement, the Notes
or any other Loan Document. The Borrower also agrees to pay and hold the Agent
and the Lenders harmless from any stamp, documentary, intangibles, transfer or
similar taxes or charges, and all recording or filing fees with respect to the
Loan Documents or any payments to be made thereunder and all title insurance
premiums, surveyors costs and valuation fees, and to reimburse the Agent and
each Lender upon demand for all reasonable out-of-pocket expenses (including
reasonable attorneys' fees and expenses) incurred by the Agent or such Lender in
enforcing the Obligations of the Borrower or any Subsidiary under this Agreement
or any other Loan
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Document or related Document or in connection with any restructuring or
"work-out" of any Obligations.
SECTION 9.4 INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by the Agent and each Lender and the extension of the
Commitments, the Borrower hereby indemnifies, exonerates and holds the Agent and
each Lender, each of their respective successors and assigns, each of the
respective officers, directors, employees, partners, attorneys and agents of the
Agent and each Lender and each of their respective successors and assigns
(collectively, the "LENDER PARTIES") free and harmless from and against any and
all actions, causes of action, suits, losses, costs, liabilities (including, but
not limited to, Environmental Liabilities and Costs), damages and expenses
(irrespective of whether such Lender Party is a party to the action for which
indemnification hereunder is sought), including reasonable attorneys' fees and
disbursements (the "INDEMNIFIED LIABILITIES"), incurred by the Lender Parties or
any of them or asserted or awarded against the Lender Parties or any of them as
a result of, or arising out of, or relating to:
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan or Letter of Credit,
including any Acquisition;
(b) the use of any of the proceeds of any Loan or Letter of
Credit by the Borrower, any of its Subsidiaries or any beneficiary of a Letter
of Credit for any other purpose;
(c) any information furnished by the Borrower in connection
with the syndication of this Agreement;
(d) the making of any claim by any investment banking firm,
broker or third party in each case claiming through the Borrower or any of its
Subsidiaries or as a result of their relationship to such parties that it is
entitled to compensation from the Agent or any Lender in connection with this
Agreement;
(e) the entering into and performance of this Agreement and
any other Loan Document by any of the Lender Parties (other than the breach by
such Lender Party of this Agreement);
(f) the existence of any contaminant, in, under, on or
otherwise affecting any property owned, used, operated, or leased by the
Borrower or any Subsidiary in the past, present, or future or any surrounding
areas affected by such property, regardless of whether the existence of the
contaminant is related to the past, present, or future operations of the
Borrower and its Subsidiaries, or their predecessors in interest or any other
Person; any Environmental Liabilities and Costs related to any property owned,
used, operated, or leased by the Borrower or any Subsidiary in the past,
present, or future; any Environmental Liabilities and Costs related to the past,
present, or future operations of the Borrower or any Subsidiaries; any alleged
violations of any Environmental Law related to any property owned, used,
operated, or leased by the Borrower or any Subsidiary in the past, present, or
future; any alleged violations of any Environmental Law related to the past,
present,
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or future operations of the Borrower or any Subsidiaries; the performance of any
remedial action that is related to any property owned, used, operated, or leased
by the Borrower or any Subsidiaries in the past, present, or future; the
performance of any remedial action that is related to the past, present, or
future operations of the Borrower or any Subsidiaries; and the imposition of any
Lien on any property affected by this Agreement or any of the other Loan
Documents arising from any Environmental Liabilities or Costs;
(g) the breach in any material respect by Borrower of any
representation or warranty set forth in this Agreement or any Loan Document;
(h) the failure of the Borrower to comply in any material
respect with any term, condition, or covenant set forth in this Agreement or any
Loan Document; or
(i) any claim, litigation, investigation or proceeding
relating to any of the foregoing, whether or not the Agent or any Lender (or any
of their respective officers, directors, partners, employees or agents) is a
party thereto;
EXCEPT FOR any such Indemnified Liabilities arising for the account of a
particular Lender Party solely by reason of the relevant Lender Party's bad
faith, gross negligence or wilful misconduct as determined by a final and
nonappealable decision of a court of competent jurisdiction. If and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Borrower hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. The foregoing indemnity shall become effective immediately upon
the execution and delivery hereof and shall remain operative and in full force
and effect notwithstanding the consummation of the transactions contemplated
hereunder, the repayment of any of the Loans made hereunder, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of any Lender or the Agent.
SECTION 9.5 SURVIVAL. The obligations of the Borrower under SECTIONS
2.4, 3.6, 9.3 and 9.4, and the obligations of the Lenders under SECTION 8.1,
shall in each case survive any termination of this Agreement. The
representations and warranties made by the Borrower in this Agreement, the Notes
and in each other Loan Document shall survive the execution and delivery of this
Agreement, the Notes and each such other Loan Document.
SECTION 9.6 SEVERABILITY. Any provision of this Agreement, the Notes or
any other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of this
Agreement, the Notes or such other Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
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SECTION 9.7 HEADINGS. The various headings of this Agreement, the Notes
and each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement, the Notes or such other
Loan Document or any provisions hereof or thereof.
SECTION 9.8 COUNTERPARTS, EFFECTIVENESS, ETC. This Agreement may be
executed by the parties hereto in several counterparts, each of which shall be
deemed to be an original and all of which shall constitute together but one and
the same agreement. This Agreement shall become effective when counterparts
hereof executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Borrower and each Lender.
SECTION 9.9 GOVERNING LAW; ENTIRE AGREEMENT.
(a) THIS AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
This Agreement, the Notes and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.
(b) EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO
THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING IN NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR RELATED DOCUMENT, AND EACH HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK STATE OR FEDERAL COURT. THE BORROWER AGREES THAT SUCH
JURISDICTION SHALL BE EXCLUSIVE WITH RESPECT TO ANY SUCH ACTION OR PROCEEDING
BROUGHT BY IT AGAINST THE AGENT OR ANY LENDER. EACH PARTY TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF ANY INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
(c) The Borrower hereby irrevocably designates, appoints and
empowers CT Corporation System, whose present address is 1633 Broadway, New
York, New York 10019, as its authorized agent to receive, for and on its behalf
and its property, service of process in the State of New York when and as such
legal actions or proceedings may be brought in the courts of the State of New
York or of the United States of America sitting in New York, and such service of
process shall be deemed complete upon the date of delivery thereof to such agent
whether or not such agent gives notice thereof to the Borrower, or upon the
earliest of any other date permitted by applicable law. The Borrower shall
furnish the consent of CT Corporation System so to act to the Agent on or prior
to the Closing Date. It is understood that a copy of said process served on such
agent will as soon as practicable be forwarded to the Borrower, at its address
set forth below, but its failure to receive such copy shall not affect in any
way the service of said process on said agent as the agent
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of the Borrower. The Borrower irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by the
mailing of the copies thereof by certified mail, return receipt requested,
postage prepaid, to it at its address set forth herein, such service to become
effective upon the earlier of (i) the date 10 calendar days after such mailing
or (ii) any earlier date permitted by applicable law. The Borrower agrees that
it will at all times continuously maintain an agent to receive service of
process in the State of New York on behalf of itself and its properties and in
the event that, for any reason, the agent named above or its successor shall no
longer serve as its agent to receive service of process in the State of New York
on its behalf, it shall promptly appoint a successor so to serve and shall
advise the Agent and the Lenders thereof (and shall furnish to the Agent the
consent of any successor agent so to act). Nothing in this SECTION 9.9 shall
affect the right of the Agent or any Lender to bring proceedings against the
Borrower in the courts of any other jurisdiction or to serve process in any
other manner permitted by applicable law.
SECTION 9.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that the Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of all Lenders; and the rights of sale, assignment and transfer of the Lenders
are subject to SECTION 9.11.
SECTION 9.11 SALE AND TRANSFERS, PARTICIPATIONS, ETC.
(a) Any Lender may at any time sell to one or more
Participants participating interests in any Loan owing to such Lender, any Note
held by such Lender, the Commitment of such Lender, the participations of such
Lender in Letters of Credit or any other interest of such Lender hereunder. In
the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Agreement shall remain
unchanged and such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Note for all purposes
under this Agreement and the other Loan Documents, and the Borrower and the
Agent shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under this Agreement and the other
Loan Documents. The Borrower agrees that if amounts outstanding under this
Agreement and the Notes are due or unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note, PROVIDED that such right of
setoff shall be subject to the approval of the Required Lenders and to the
obligations of such Participant to share with the Lenders, and the Lenders agree
to share with such Participant, as provided in SECTION 3.8 as if the Participant
were a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of (i) SECTION 9.4 and (ii) SECTIONS 2.4 and 3.6, with
respect to its participation in the Commitments and the Loans outstanding from
time to time; PROVIDED, that no Participant shall be entitled to receive any
greater amount pursuant to the Sections referred to in clause (ii) than the
transferor Lender would have been entitled to receive in respect of the amount
of the participation transferred by such transferor Lender to such
- 88 -
<PAGE> 96
Participant had no such transfer occurred. No Lender shall grant any
participation under which the Participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Loan Document except to
the extent such amendment or waiver would (i) extend the due date for, or reduce
the amount of, any payment or prepayment of principal of or interest on the Loan
or reduce the principal amount of or rate of interest on the Loan (except in
connection with a waiver of interest at the Post-Default Rate or the increased
amount of fees payable with respect to Letters of Credit following an Event of
Default) (it being understood that a waiver of any Default or Event of Default
shall not constitute a change in the terms of such participation, and that an
increase in the Loan shall be permitted without consent of any Participant if
the Participant's participation is not increased as a result thereof), or (ii)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement.
(b) With the consent of the Agent and the consent of the
Borrower (which consent of the Borrower shall not be unreasonably withheld or
delayed), any Lender may at any time sell to any Purchasing Lender all or any
part in a minimum amount of $5,000,000, of its rights and obligations under this
Agreement and the Notes pursuant to a Transfer Supplement, executed by such
Purchasing Lender, such transferor Lender, the Agent and the Borrower. Upon (i)
such execution of such Transfer Supplement, and (ii) delivery of a fully
executed copy thereof to the Borrower, such Purchasing Lender shall for all
purposes be a Lender party to this Agreement and shall have all the rights and
obligations of a Lender under this Agreement, to the same extent as if it were
an original party hereto with a Percentage as set forth in such Transfer
Supplement, and no further consent or action by the Borrower, the Lenders or the
Agent shall be required. Such Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Notes. Upon the consummation of any transfer to a Purchasing Lender pursuant to
this paragraph (b), the transferor Lender, the Agent and the Borrower shall make
appropriate arrangements so that, if required, replacement Notes are issued to
such transferor Lender and new Notes to the Purchasing Lender in the amount
equal to their respective Commitments and outstanding Loans, as appropriately
adjusted pursuant to such Transfer Supplement.
(c) The Agent shall maintain at its address referred to herein
a copy of each Transfer Supplement delivered to it and the Register for the
recordation of the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as the owner of the Loans recorded therein for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a Transfer Supplement executed by a
transferor Lender, the Agent and a Purchasing Lender together with payment by
such Purchasing Lender to the Agent, for
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<PAGE> 97
the account of the Agent and not for the account of the Lenders, of a
registration and processing fee of $3,500, and the Notes subject to such
Transfer Supplement, the Agent shall (i) accept such Transfer Supplement, (ii)
record the information therein in the Register and (iii) give prompt notice of
such acceptance and recordation to the Lenders and the Borrower.
(e) If, pursuant to this SECTION 9.11, any interest in this
Agreement or any Note is transferred to any Participant or Purchasing Lender
which is organized under the laws of any jurisdiction other than the United
States or any State thereof, the transferor Lender shall cause such Participant
or Purchasing Lender, concurrently with the effectiveness of such transfer, (i)
to represent to the transferor Lender (for the benefit of the transferor Lender,
the Agent and the Borrower) that under applicable law and treaties no taxes will
be required to be withheld by the Agent, the Borrower or the transferor Lender
with respect to any payments to be made to such Participant or Purchasing Lender
in respect of the Loans, Commitments or Letters of Credit, (ii) to furnish to
the transferor Lender, the Agent and the Borrower two properly executed original
Internal Revenue Service Forms 4224 or 1001 (or any successor forms) and
properly executed Internal Revenue Service Forms W-8 and W-9, as the case may be
(wherein such Participant or Purchasing Lender claims entitlement to complete
exemption from the United States federal withholding tax on all interest
payments hereunder and all fees payable under SECTION 2.3) and (iii) to agree
(for the benefit of the transferor Lender, the Agent and the Borrower) to
provide the transferor Lender, the Agent and the Borrower new Internal Revenue
Service Forms 4224 or 1001 upon the expiration or obsolescence of any previously
delivered form or after the occurrence of any event requiring a change in the
most recent forms delivered by it to the Transferor Lender, the Agent and the
Borrower, and comparable statements in accordance with applicable United States
laws and regulations and amendments duly executed and completed by such
Participant or Purchasing Lender, and to comply from time to time with all
applicable United States laws and regulations with regard to such withholding
tax exemption.
(f) Notwithstanding anything to the contrary set forth in this
SECTION 9.11, (i) any Lender may sell to any of its Affiliates all or any part
of its rights and obligations under this Agreement and the Notes, (ii) any
Lender may create a security interest in all or any portion of its rights under
this Agreement (including, without limitation, the Loans owing to it and the
Notes held by it) in favor of the Federal Reserve Bank in accordance with
Regulation A of the F.R.S. Board, and (iii) upon the occurrence and during the
continuance of an Event of Default, any Lender may sell to any Purchasing Lender
all or any part of its rights and obligations under this Agreement and the
Notes, in the case of clause (i) or (iii) above, notwithstanding that the
Borrower does not consent to such sale, provided such Lender has obtained the
consent of the Agent (which consent shall not be unreasonably withheld or
delayed) and otherwise meets the requirements of this SECTION 9.11.
SECTION 9.12 OTHER TRANSACTIONS. Nothing contained herein shall
preclude the Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Affiliates in which the Borrower or such
Affiliate is not restricted hereby from engaging with any other Person.
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<PAGE> 98
SECTION 9.13 CONFIDENTIALITY.
(a) The Lenders and the Agent shall treat any information
concerning the Borrower or any Subsidiary or relating to any Acquisition
(including a proposed Acquisition) (whether prepared by the Borrower, its
advisors or otherwise) which has been or will be furnished by or on behalf of
the Borrower or any Subsidiary thereof (herein collectively referred to as the
"CONFIDENTIAL INFORMATION") in accordance with the customary procedures for
handling confidential information of this nature and will not willfully disclose
any Confidential Information to any other party, except as otherwise provided
herein. The Confidential Information will be used solely in connection with the
transactions contemplated by the Loan Documents or as otherwise authorized by
the Borrower. The term "Confidential Information" does not include information
which (i) is or becomes generally available to the public other than as a result
of a disclosure by the Agent, the Lenders or their respective affiliates,
directors, officers or employees, or (ii) becomes available on a nonconfidential
basis from a source other than the Borrower, any of its Subsidiaries, or their
advisors, provided that such source is not known by the Agent or the Lenders to
be bound by a confidentiality agreement with or other obligation of secrecy to
the Borrower or any of its Subsidiaries.
(b) Notwithstanding the foregoing, (i) Confidential
Information may be disclosed to the Agent's and Lenders' affiliates, directors,
partners, officers, employees and advisors who are in a confidential
relationship with such Person or who are informed of the confidential nature of
such information, (ii) Confidential Information may be disclosed as reasonably
required by any proposed syndicate member or any proposed transferee or
participant in connection with the contemplated transfer of any Note or
participation therein or of any Loan Document or related document, PROVIDED that
any such proposed syndicate member or proposed transferee or participant shall
have agreed in writing for the Borrower's benefit to be bound by the terms of
this SECTION 9.13, and shall agree to return any Confidential Information, and
will not retain any copies, extracts or other reproductions in whole or in part
of such Confidential Information, if it does not become a syndicate member,
transferee or participant, (iii) Confidential Information may be disclosed to
the extent requested or required by bank regulators or auditors or any
administrative body or commission to whose jurisdiction the Agent or a Lender
may be subject, (iv) Confidential Information may be disclosed to the extent
required by law, regulation, subpoena, judicial order or legal process, provided
that notice of such requirement or order shall be promptly furnished to the
Borrower unless such notice is legally prohibited, (v) Confidential Information
may be disclosed to the extent required by the rules of any securities exchange
on which securities of the Agent or any Lender are listed and traded, (vi)
Confidential Information may be disclosed in connection with the enforcement by
the Agent or any Lender of its rights under the Loan Documents or in connection
with any litigation between any Loan Party and the Agent or any Lender with
respect to the Loan or any Loan Document, and (vii) Confidential Information may
be disclosed to the extent the Borrower consents to such disclosure.
- 91 -
<PAGE> 99
SECTION 9.14 CHANGE IN ACCOUNTING PRINCIPLES. If
(a) any changes in accounting principles from those used in
the preparation of the financial statements referred to in clause (a)(i) of
SECTION 5.4 hereafter occur as a result of the promulgation of rules,
regulations, pronouncements or opinions by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions) and result in a change in the method
of calculation of financial covenants, standards or terms found in this
Agreement; or
(b) there is any change in the Borrower's Fiscal Year with the
Required Lenders' prior written consent pursuant to SECTION 6.2.16 hereof;
the parties hereto agree to enter into negotiations in order to amend such
financial covenants, standards or terms so as to equitably reflect such changes
with the desired result that the evaluations of the Borrower's financial
condition shall be the same after such changes as if such changes had not been
made; PROVIDED, HOWEVER, that, until the parties hereto have reached a
definitive agreement on such amendments the Borrower shall not change its Fiscal
Year and the Borrower's financial condition and operations shall continue to be
evaluated on the same principles as those used in the preparation of the
financial statements referred to in clause (a)(i) of SECTION 5.4.
SECTION 9.15 WAIVER OF JURY TRIAL, ETC. THE AGENT, THE LENDERS AND THE
BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY
OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE AGENT, SUCH LENDERS, OR THE
BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND SUCH LENDERS
ENTERING INTO THIS AGREEMENT.
SECTION 9.16 LIMITATION OF LIABILITY. Neither the Agent, the Lenders
nor any Affiliate thereof shall have any liability with respect to, and THE
BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON, ANY CLAIM FOR ANY
SPECIAL, INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES SUFFERED BY THE
BORROWER IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THIS
AGREEMENT, THE LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED HEREIN, OR ANY ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH.
SECTION 9.17 USURY SAVINGS CLAUSE. Notwithstanding anything to the
contrary in this Agreement or any other Loan Document, if at any time any rate
of interest accruing on any Obligation, when aggregated with all amounts payable
by the Borrower or any other Loan Party under any of the Loan Documents that are
deemed or construed to be interest accrued or accruing
- 92 -
<PAGE> 100
on such Obligation under applicable law, exceeds the highest rate of interest
permissible under any law which a court of competent jurisdiction shall, in a
final determination, deem applicable to such Lender with respect to such
Obligation (each a "MAXIMUM LAWFUL RATE"), then in such event and so long as the
Maximum Lawful Rate would be so exceeded, such rate of interest shall be reduced
to the Maximum Lawful Rate; PROVIDED that if at any time thereafter such rate of
interest accruing on Obligations held by such Lender is less than the Maximum
Lawful Rate, the Borrower shall continue to pay interest to such Lender at the
Maximum Lawful Rate until such time as the total interest received by such
Lender in respect of the Obligations held by it is equal to the total interest
which such Lender would have received had interest on all Obligations held by
such Lender (but for the operation of this SECTION 9.17) accrued at the rate
otherwise applicable under this Agreement and the other Loan Documents.
Thereafter, interest payable to such Lender in respect of the Obligations held
by it shall accrue at the applicable rate set forth in this Agreement or other
Loan Documents unless and until such rate again exceeds the Maximum Lawful Rate,
in which event this SECTION 9.17 shall again apply. In no event shall the total
interest received by any Lender pursuant to the terms hereof exceed the amount
which such Lender could lawfully have received had interest been calculated for
the full term of this Agreement at the Maximum Lawful Rate. In the event that
the Maximum Lawful Rate is calculated pursuant to this SECTION 9.17, (a) if
required by applicable law, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made, and (b) if permitted by applicable law, the
Borrower and such Lender shall (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) amortize, prorate, allocate and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the Loans so that interest for the entire term of
the Loans shall not exceed the Maximum Lawful Rate. In the event that a court of
competent jurisdiction, notwithstanding the provisions of this SECTION 9.17,
shall make a final determination that any Lender has received interest in excess
of the Maximum Lawful Rate, such Lender shall, to the extent permitted by
applicable law, promptly apply such excess, FIRST to any interest due and
outstanding under this Agreement and the other Loan Documents, SECOND to any
principal due and payable under this Agreement and the Notes, THIRD to the
remaining principal amount of the Notes and FOURTH to other unpaid Obligations
held by such Lender, and thereafter shall refund any excess to the Borrower or
as a court of competent jurisdiction may otherwise order.
SECTION 9.18 CONFLICT IN LOAN DOCUMENTS. To the extent there is any
actual irreconcilable conflict between the provisions of this Agreement and any
other Loan Document, the provisions of this Agreement shall prevail.
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<PAGE> 101
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By: /s/ Peter G. Graf
------------------------------------
Peter G. Graf
Chairman of the Board and
Chief Executive Officer
Attest: /s/ Tammy L. Martin
--------------------------------
Tammy L. Martin
Executive Vice President, Chief
Administrative Officer, General
Counsel and Secretary
[CORPORATE SEAL]
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<PAGE> 102
PERCENTAGE
33.33% Percentage ING (U.S.) CAPITAL CORPORATION,
AS AGENT AND AS LENDER
By: /s/ Steven G. Fleenor
-----------------------------
Steven G. Fleenor
Vice President
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<PAGE> 103
40% Percentage TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Terrell W. Harris
---------------------------------
Name: Terrell W. Harris
Title: Vice President
Address for Notices:
Transamerica Business Credit Corporation
Two Ravinia Drive
Suite 700
Atlanta, Georgia 30346
Attention: Terrell W. Harris
Telecopier No.: (770) 390-7017
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<PAGE> 104
26.67% Percentage FINOVA CAPITAL CORPORATION
By: /s/ Marilyn Milam
----------------------------
Name: Marilyn Milam
Title: Vice President
Address for Notices:
FINOVA Capital Corporation
355 South Grand Avenue
Suite 2400
Los Angeles, California 90071
Attention: Marilyn Milam
Telecopier No.: (213) 625-2486
- 97 -
<PAGE> 105
SCHEDULE 1
----------
DISCLOSURE SCHEDULE
-------------------
ITEM 1 .................(Sources and Uses)
ITEM 2 .................(Litigation)
ITEM 3 .................(Governmental Licenses)
ITEM 4..................(Exceptions to GAAP)
ITEM 5 .................(Benefit Plans)
ITEM 6..................(Labor Controversies)
ITEM 7..................(Intellectual Property)
ITEM 8..................(Existing Liens)
ITEM 9..................(Insurance)
ITEM 10.................(Existing Indebtedness)
ITEM 11 ................(Environmental Matters)
ITEM 12 ................(Consents)
ITEM 13 ................(Contracts)
ITEM 14 ................(Employment Contracts)
ITEM 15.................(Subsidiaries)
ITEM 16.................(Termination of Material Contracts)
ITEM 17.................(Existing Leases)
ITEM 18.................(Existing Investments)
ITEM 19.................(Take or Pay Contracts)
ITEM 20.................(Transactions with Affiliates)
- 98 -
<PAGE> 106
SCHEDULE 2
TELEPHONE PLACEMENT AGREEMENT
- 99 -
<PAGE> 107
EXHIBIT A-1
-----------
FORM OF
EXPANSION NOTE
--------------
$__________________ __________ _____,____
FOR VALUE RECEIVED, the undersigned, PHONETEL TECHNOLOGIES, INC., an
Ohio corporation (the "BORROWER"), promises to pay to the order of
__________________________, a _________________ (the "LENDER"), at the times
provided in the Credit Agreement referenced hereinafter, the principal sum of
_______________________ DOLLARS ($__________) or, if less, the outstanding
principal amount of all Expansion Loans made by the Lender from time to time
pursuant to that certain Credit Agreement, dated as of May 30, 1997 (together
with all amendments and other modifications, if any, from time to time hereafter
made thereto, the "CREDIT AGREEMENT"; capitalized terms used herein and not
defined herein shall have the meaning ascribed to them in the Credit Agreement),
among the Borrower, ING (U.S.) Capital Corporation, as Agent, and the various
lenders (including the Lender) as are, or may from time to time become, parties
thereto. Notations indicating Expansion Loans made by the Lender pursuant to the
Credit Agreement and all payments on account of the principal thereof may be
endorsed by the holder hereof on the grid schedule attached to this Note, as
provided in the Credit Agreement.
The unpaid principal amount of this Note from time to time shall bear
interest as provided in Section 3.4 of the Credit Agreement. All payments of
principal of and interest on this Note shall be payable in lawful currency of
the United States of America to the account designated by the Agent (and as to
which the Agent has notified the Borrower) in immediately available funds.
This Note is an Expansion Note referenced in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Note and for a statement of the terms
and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be or may automatically
become immediately due and payable.
THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
Exhibit A-1 -- Page 1
<PAGE> 108
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and notice of any kind with respect to
this Note. All amounts owing hereunder are payable by the Borrower without
relief from any valuation or appraisal laws.
PHONETEL TECHNOLOGIES, INC.
By:______________________________
Name:
Title:
Exhibit A-1 -- Page 2
<PAGE> 109
Schedule to Expansion Note
--------------------------
Schedule of Expansion Loans and Repayments
<TABLE>
<CAPTION>
Person
Amount of Amount of Outstanding Making
Date Expansion Loan Repayment Balance Notation
<S> <C> <C> <C> <C>
| | | |
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</TABLE>
Exhibit A-1 -- Page 3
<PAGE> 110
EXHIBIT A-2
-----------
FORM OF
REVOLVING CREDIT NOTE
---------------------
$__________________ __________ _____,____
FOR VALUE RECEIVED, the undersigned, PHONETEL TECHNOLOGIES, INC., an
Ohio corporation (the "BORROWER"), promises to pay to the order of
__________________________, a _________________ (the "LENDER"), at the times
provided in the Credit Agreement referenced hereinafter, the principal sum of
_______________________ DOLLARS ($__________) or, if less, the outstanding
principal amount of all Revolving Credit Loans made by the Lender from time to
time pursuant to that certain Credit Agreement, dated as of May 30, 1997
(together with all amendments and other modifications, if any, from time to time
hereafter made thereto, the "CREDIT AGREEMENT"; capitalized terms used herein
and not defined herein shall have the meaning ascribed to them in the Credit
Agreement), among the Borrower, ING (U.S.) Capital Corporation, as Agent, and
the various lenders (including the Lender) as are, or may from time to time
become, parties thereto. Notations indicating Revolving Credit Loans made by the
Lender pursuant to the Credit Agreement and all payments on account of the
principal thereof may be endorsed by the holder hereof on the grid schedule
attached to this Note, as provided in the Credit Agreement.
The unpaid principal amount of this Note from time to time shall bear
interest as provided in Section 3.4 of the Credit Agreement. All payments of
principal of and interest on this Note shall be payable in lawful currency of
the United States of America to the account designated by the Agent (and as to
which the Agent has notified the Borrower) in immediately available funds.
This Note is a Revolving Credit Note referenced in, and evidences
Indebtedness incurred under, the Credit Agreement, to which reference is made
for a description of the security for this Note and for a statement of the terms
and conditions on which the Borrower is permitted and required to make
prepayments and repayments of principal of the Indebtedness evidenced by this
Note and on which such Indebtedness may be declared to be or may automatically
become immediately due and payable.
THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
Exhibit A-2 -- Page 1
<PAGE> 111
The Borrower hereby waives all requirements as to diligence,
presentment, demand of payment, protest and notice of any kind with respect to
this Note. All amounts owing hereunder are payable by the Borrower without
relief from any valuation or appraisal laws.
PHONETEL TECHNOLOGIES, INC.
By:______________________________
Name:
Title:
Exhibit A-2 -- Page 2
<PAGE> 112
Schedule to Revolving Credit Note
Schedule of Revolving Credit Loans and Repayments
<TABLE>
<CAPTION>
Person
Amount of Amount of Outstanding Making
Date Revolving Credit Loan Repayment Balance Notation
---- --------------------- --------- ------- --------
<S> <C> <C> <C> <C>
| | | |
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| | | |
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| | | |
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| | | |
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</TABLE>
Exhibit A-2 -- Page 3
<PAGE> 113
EXHIBIT B
---------
FORM OF
BORROWING BASE CERTIFICATE
--------------------------
In accordance with that certain Credit Agreement dated as of
May 30, 1997 (together with all amendments and other modifications, if any, from
time to time thereafter made thereto, the "CREDIT AGREEMENT"), among PHONETEL
TECHNOLOGIES, INC. (the "BORROWER"), the lenders (the "LENDERS") which are, or
may from time to time become, party thereto, and ING (U.S.) CAPITAL CORPORATION,
as Agent for the Lenders (in such capacity, the "AGENT"), the undersigned hereby
certifies that as of the date indicated below (the "BORROWING BASE CALCULATION
DATE") the amounts and representations set forth below are true and correct.
Unless otherwise indicated, capitalized terms used herein have the meanings
ascribed to them in the Credit Agreement.
Borrowing Base Calculation Date: ______________________
The calculations contained herein are based upon the number of
Eligible Pay Telephones which meet the criteria set forth in the Credit
Agreement for Eligible Pay Telephones:
<TABLE>
<S> <C>
1. Number of Eligible Pay Telephones: _______________
2. Item 1 MULTIPLIED BY $1,500: $______________
3. Net amount of accounts receivable $______________
(as determined under GAAP)
4. 80% of Item 3: $______________
5. Item 1 MULTIPLIED BY $1,300: $______________
6. Item 4 PLUS Item 5: $______________
7. The lesser of Item 2 and Item 6 $______________
8. Deductions for Reserves as set forth $______________
on Schedule I hereto
9. Borrowing Base: [Item 7 MINUS Item 8] $______________
</TABLE>
The information contained in this Borrowing Base Certificate is
true and complete in all material respects as of the Borrowing Base Calculation
Date.
Exhibit B-2 -- Page 1
<PAGE> 114
IN WITNESS WHEREOF, the Borrower has caused this Certificate to
be executed and delivered and the certification and warranties contained herein
to be made by an Authorized Officer of Borrower authorized to execute and
deliver this Certificate.
Dated this _____ day of ________________, ____.
PHONETEL TECHNOLOGIES, INC.
By:________________________________
Name:
Title:
Exhibit B-2 -- Page 2
<PAGE> 115
SCHEDULE I
----------
RESERVES
--------
<TABLE>
<CAPTION>
<S> <C>
Period Ending ___________
1. Charges and Liens $____________
2. Environmental Liabilities and Costs $____________
3. Revolving Credit Loans which Agent and the Lenders $____________
are permitted to make on Borrower's behalf
4. Other $____________
Total Reserves $____________
</TABLE>
Schedule I
<PAGE> 116
EXHIBIT C
---------
FORM OF
BORROWING REQUEST
-----------------
_________________, _____
ING (U.S.) Capital Corporation,
as Agent
200 Galleria Parkway, N.W.
Suite 950
Atlanta, Georgia 30339
Attention: Mr. Steve Fleenor
Ladies and Gentlemen:
This Borrowing Request is delivered to you, in your capacity
as Agent, under Section 3.1 of the Credit Agreement, dated as of May 30, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT"), among PHONETEL TECHNOLOGIES,
INC. (the "BORROWER"), the various lenders (the "LENDERS") as are, or may from
time to time become, parties thereto, and ING (U.S.) CAPITAL CORPORATION, as
Agent for the Lenders (the "AGENT"). Unless otherwise defined, terms used herein
have the meanings provided in the Credit Agreement.
The Borrower hereby requests that [EXPANSION LOANS BE MADE IN
THE AGGREGATE PRINCIPAL AMOUNT OF $___________ ON ___________, ____] [REVOLVING
CREDIT LOANS BE MADE IN THE AGGREGATE PRINCIPAL AMOUNT OF $____________ ON
___________, ___].
The Borrower hereby acknowledges that, pursuant to Section
4.3.2 of the Credit Agreement, each of the delivery of this Borrowing Request
and the acceptance by the Borrower of the proceeds of the Loans requested
hereby, constitutes a representation and warranty that, on the date of the
making of such Loans, and before and after giving effect thereto, all statements
set forth in Section 4.3.1 of the Credit Agreement are true and correct.
The Borrower agrees that if, prior to the time of the making
of the Loans requested hereby, any matter certified to herein or in connection
herewith by it will not be true and correct at such time as if then made, it
will immediately so notify the Agent. Except to the extent, if any, that prior
to the making of the Loans requested hereby the Agent shall receive written
notice to the
Exhibit C -- Page 1
<PAGE> 117
contrary from the Borrower, each matter certified to herein or in connection
herewith shall be deemed once again to be certified as true and correct at the
date of the making of such Loans as if then made.
IN WITNESS WHEREOF, the Borrower has authorized this request
to be executed and delivered, and the certifications, representations and
warranties contained herein to be made, by its duly Authorized Officer as of the
day and year first above written.
PHONETEL TECHNOLOGIES, INC.
By:___________________________________
Name:
Title:
Exhibit C -- Page 2
<PAGE> 118
EXHIBIT D
---------
FORM OF
COMPLIANCE CERTIFICATE
----------------------
This Compliance Certificate is delivered pursuant to [clause
a(iii)] [clause (c)] of Section 6.1.1 of the Credit Agreement, dated as of May
30, 1997 (together with all amendments and modifications, if any, from time to
time made thereto, the "CREDIT AGREEMENT"), among PHONETEL TECHNOLOGIES, INC.,
an Ohio corporation, (the "BORROWER"), the various lenders (the "LENDERS"), as
are, or may from time to time become, parties thereto and ING (U.S.) CAPITAL
CORPORATION, as Agent for the Lenders. Unless otherwise defined, terms used
herein (including the attachments hereto) have the meanings provided in the
Credit Agreement.
The undersigned, being the duly elected, qualified and acting
chief [executive/ accounting/financial] Authorized Officer of the Borrower, on
behalf of the Borrower and solely in his/her capacity as an officer of the
Borrower, hereby certifies and warrants that:
1. [He/she] is the chief [executive/accounting/financial]
Authorized Officer of the Borrower and that, as such, [he/she] is
authorized to execute this Certificate on behalf of the Borrower.
2. As of ________ __, ____ (the "COMPUTATION DATE"):
(a) except as previously disclosed to the Agent and the Banks in
writing pursuant to Section 6.1.6 of the Credit Agreement,
(i) no Default or Event of Default, and
(ii) no event of any type described in such Section
6.1.6 of the Credit Agreement occurred during
the period as to which this Compliance
Certificate relates;
(b) the Fixed Charge Coverage Ratio (as calculated pursuant to
subsection (a) of Section 6.2.4 of the Credit Agreement) was _______, as
computed on ATTACHMENT 1 hereto;
(c) the Debt to EBITDA Ratio (as calculated pursuant to
subsection (b) of Section 6.2.4 of the Credit Agreement) was
___________, as computed on ATTACHMENT 2 hereto;
(d) the Current Ratio (as calculated pursuant to subsection (c)
of Section 6.2.4 of
Exhibit D -- Page 1
<PAGE> 119
the Credit Agreement) was _________, as computed on ATTACHMENT 3 hereto;
(e) the Interest Coverage Ratio (as calculated pursuant to
subsection (d) of Section 6.2.4 of the Credit Agreement) was _________,
as computed on ATTACHMENT 4 hereto;
[(f) the Consolidated Capital Expenditures (excluding
expenditures from insurance proceeds, if any, described in the proviso
to Section 6.2.5 of the Credit Agreement) for the 199___ Fiscal Year is
$______________, as detailed on ATTACHMENT 5 hereto;]*
[(g) the aggregate amount of payments due from the Borrower and
its Subsidiaries during the 199__ Fiscal Year (as calculated pursuant to
Section 6.2.6 of the Credit Agreement), in respect of operating leases
and agreements to lease having a term of one year or more, is $________,
as detailed on ATTACHMENT 6 hereto.]*
IN WITNESS WHEREOF, the undersigned has executed and delivered
this Certificate, this _____ day of __________, ____.
PHONETEL TECHNOLOGIES, INC.
By:____________________________
Name:
Title:
- --------
* To be included in each Compliance Certificates delivered pursuant to
clause (a)(iii) of Section 6.1.1 of the Credit Agreement.
Exhibit D -- Page 2
<PAGE> 120
Attachment 1
<TABLE>
<CAPTION>
Period Ending ____________
(All figures consolidated)
Fixed Charge Coverage Ratio
<S> <C>
1. EBITDA of the Borrower and its Subsidiaries
(as calculated on Attachment 2) $_______________
2. Borrower's Fixed Charges
(a) Interest Expense $_______________
(b) Scheduled principal repayments of Indebtedness $_______________
(c) Consolidated Capital Expenditures
(as calculated on Attachment 5) $_______________
(d) Provisions for income taxes $_______________
(e) TOTAL (sum of (a) through (d)) $
===============
Ratio: EBITDA (Item 1) to Fixed Charges (Item 2(e)) is ________________.
</TABLE>
Exhibit D -- Page 3
<PAGE> 121
Attachment 2
<TABLE>
<CAPTION>
Period Ending ____________
<S> <C>
(All figures consolidated)
DEBT TO EBITDA RATIO
1. Net Income $___________
2. Interest Expense $___________
3. Provisions for Income Taxes
4. Depreciation, amortization of intangible $___________
assets, and other non-cash charges
5. SUBTOTAL (Sum of Items 1-4) $___________
6. Non-cash credits and revenues $___________
7. EBITDA (Item 5 less Item 6) $___________
8. Indebtedness $___________
9. Debt to EBITDA Ratio (Item 8 _______ to 1
divided by Item 7)
</TABLE>
Exhibit D -- Page 4
<PAGE> 122
Attachment 3
<TABLE>
<CAPTION>
Period Ending ____________
(All figures consolidated)
Current Ratio
- -------------
<S> <C>
1. Current assets (excluding cash and Cash Equivalent Investments) $___________
2. Current liabilities (excluding the current portion of Indebtedness under
the Credit Agreement) $____________
3. Current Ratio: Item 1 to Item 2 is ____________
</TABLE>
Exhibit D -- Page 5
<PAGE> 123
Attachment 4
------------
<TABLE>
<CAPTION>
Period Ending ____________
<S> <C>
(All figures consolidated)
Interest Coverage Ratio
- -----------------------
1. EBITDA of the Borrower and its Subsidiaries
(as calculated on Attachment 2) $___________
2. Interest Expense $___________
Ratio: Interest Coverage Ratio (Item 1 divided by Item 2) ___ to 1
</TABLE>
Exhibit D -- Page 6
<PAGE> 124
Attachment 5
------------
<TABLE>
<CAPTION>
Fiscal Year Ending ____________
(All figures consolidated)
Consolidated Capital Expenditures
- ---------------------------------
<S> <C>
1. Gross dollar amount of additions and capital $___________
repairs to property, plant, equipment and
other fixed assets of the Borrower and its Subsidiaries, including
those additions and capital repairs made in the ordinary course of
business (excluding expenditures consisting of Acquisitions and
expenditures paid with insurance proceeds received upon the occurrence
occurrence of a Loss and made to replace or repair damaged or destroyed
assets)
2. Capitalized Lease Liabilities incurred $___________
by the Borrower and its Subsidiaries
(to the extent not included in Item 1)
Borrower's Consolidated Sum of Item 1 and Item 2. $
Capital Expenditures: ===========
</TABLE>
Exhibit D -- Page 7
<PAGE> 125
Attachment 6
------------
<TABLE>
<CAPTION>
Period Ending _________
(All figures consolidated)
Borrower's and Subsidiaries' "Lease Obligations"
under Section 6.2.6 of the Credit Agreement
- -------------------------------------------
<S> <C>
1. Aggregate amount of payments due from the Borrower and its Subsidiaries
during the ______ Fiscal Year in respect of operating leases and
agreements to lease having a term of one year or more (other than any
such described in clause (c) of Section 6.2.6 of the Credit Agreement) $
===============
</TABLE>
Exhibit D -- Page 8
<PAGE> 126
EXHIBIT E
---------
FORM OF
TRANSFER SUPPLEMENT
-------------------
THIS COMMITMENT TRANSFER SUPPLEMENT, dated as of the date set
forth in Item 1 of SCHEDULE I hereto, among the Transferor Lender set forth in
Item 2 of SCHEDULE I hereto (the "TRANSFEROR LENDER"), each Purchasing Lender
set forth in Item 3 of SCHEDULE I hereto (each, a "PURCHASING LENDER"), and ING
(U.S.) Capital Corporation, as Agent for the Lenders under the Credit Agreement
described below (in such capacity, the "AGENT").
W I T N E S S E T H:
--------------------
RECITALS.
- ---------
A. This Transfer Supplement is being executed and delivered in
accordance with clause (b) of SECTION 9.11 of the Credit Agreement dated as of
May 30, 1997 among PhoneTel Technologies, Inc., an Ohio corporation (the
"BORROWER"), the Transferor Lender and the other Lenders party thereto, and the
Agent (as from time to time amended, supplemented or modified, the "CREDIT
AGREEMENT"; unless otherwise defined herein, terms defined in the Credit
Agreement being used herein as therein defined);
B. Each Purchasing Lender (if it is not already a Lender party
to the Credit Agreement) wishes to become a Lender party to the Credit
Agreement; and
C. The Transferor Lender is selling and assigning to each
Purchasing Lender, rights, obligations, a portion of the Commitment under the
Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. From and after the Transfer Effective Date set
forth in Item 4 of SCHEDULE I hereto (the "TRANSFER EFFECTIVE DATE"), each
Purchasing Lender shall be a Lender party to the Credit Agreement for all
purposes thereof.
SECTION 2. (a) On the Transfer Effective Date, each Purchasing
Lender shall pay to the Transferor Lender, in immediately available funds, an
amount equal to the purchase price, as agreed between the Transferor Lender and
such Purchasing Lender (the "PURCHASE PRICE"), for the percentage set forth in
Item 5 of SCHEDULE I hereto (such Purchasing Lender's "PURCHASED PERCENTAGE")
being purchased by such Purchasing Lender of the Transferor Lender's portion of
the Commitment, the outstanding principal amount of the Loans and other amounts
owing to the Transferor Lender under the Credit Agreement and Notes and of the
Transferor Lender's
Exhibit E -- Page 1
<PAGE> 127
participations in Letters of Credit.
(b) As of the Transfer Effective Date, the Transferor Lender
hereby irrevocably sells, assigns and transfers to each Purchasing Lender,
without recourse, representation or warranty, and each Purchasing Lender hereby
irrevocably purchases, takes and assumes from the Transferor Lender, such
Purchasing Lender's Purchased Percentage of the Commitment and the Loans
outstanding as of the Transfer Effective Date held by the Transferor Lender and
other amounts owing as of the Transfer Effective Date to the Transferor Lender
under the Credit Agreement and the Notes and of the Transferor Lender's
participations in Letters of Credit, together with all instruments, documents
and collateral security pertaining thereto.
SECTION 3. From and after the Transfer Effective Date,
principal, interest, fees pursuant to SECTION 2.3 of the Credit Agreement, and
other amounts that would otherwise be payable to or for the account of the
Transferor Lender pursuant to the Credit Agreement and the Notes shall, instead,
be payable to or for the account of the Transferor Lender and the Purchasing
Lenders, as the case may be, in accordance with their respective percentages as
set forth on SCHEDULE II of this Transfer Supplement, whether such amounts have
accrued prior to the Transfer Effective Date or accrue subsequent to the
Transfer Effective Date.
SECTION 4. The Notes of the Transferor Lender (the "EXCHANGED
NOTES") are being delivered to the Agent concurrently with this Transfer
Supplement. On or prior to the Transfer Effective Date, the Borrower, at the
Borrower's expense, shall execute and deliver to the Agent, in exchange for (but
not in payment of) the Exchanged Notes, (a) a new Expansion Note and a new
Revolving Credit Note, in each case, to the order of each Purchasing Lender in
an amount equal to its Percentage, as set forth on SCHEDULE II hereto, of the
aggregate Expansion Loan Commitment Amount and Revolving Credit Commitment
Amount, respectively, and (b) if the Transferor Lender has retained a portion of
the Expansion Loan Commitment and Revolving Credit Commitment, a new Expansion
Note and Revolving Credit Note to the order of the Transferor Lender in an
amount equal to its retained Percentage, as set forth on SCHEDULE II hereto, of
the aggregate Expansion Loan Commitment Amount and Revolving Credit Commitment
Amount. Such new Notes shall be dated the Closing Date and shall otherwise be in
the form of the respective Notes replaced thereby. The Exchanged Notes shall be
returned by the Agent to the Borrower marked "exchanged".
SECTION 5. Concurrently with the execution and delivery
hereof, the Agent will, at the request of any Purchasing Lender but at the
expense of the Transferor Lender, provide to such Purchasing Lender (if it is
not already a Lender party to the Credit Agreement) photocopies or conformed
copies of all documents delivered to the Agent on the date of the initial Loans
under the Credit Agreement in satisfaction of the conditions precedent set forth
in the Credit Agreement.
SECTION 6. Each of the parties to this Transfer Supplement
agrees that at any time and from time to time upon written request of any other
party, it will execute and deliver such further documents and do such further
acts and things as such other party may reasonably request in order to effect
the purposes of this Transfer Supplement.
Exhibit E -- Page 2
<PAGE> 128
SECTION 7. By executing and delivering this Transfer
Supplement, the Transferor Lender and each Purchasing Lender confirm to and
agree with each other and the Agent and the Lenders as follows: (i) other than
the representation and warranty that it is the legal and beneficial owner of the
interest being assigned hereby free and clear of any adverse claim, the
Transferor Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, the Notes or any other Loan Document or any other instrument or
document furnished pursuant thereto; (ii) the Transferor Lender makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any Subsidiary, the value or perfection
of any collateral securing the Obligations or the obligations of any Subsidiary
under the Subsidiary Guaranty, the performance or observance by the Borrower of
any of its obligations under the Credit Agreement, the Notes or any other Loan
Document or any other instrument or document furnished pursuant thereto, or the
performance or observance by any Subsidiary of its obligations under the
Subsidiary Guaranty or the Subsidiary Pledge Agreement; (iii) each Purchasing
Lender confirms that it has received a copy of the Credit Agreement, together
with copies of the financial statements referred to in SECTION 5.4 of the Credit
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Commitment
Transfer Supplement; (iv) each Purchasing Lender will, independently and without
reliance upon the Agent, the Transferor Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (v) each Purchasing Lender appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under the Credit Agreement and the other Loan Documents as are delegated to the
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto, all in accordance with ARTICLE 8 of the Credit Agreement;
and (vi) each Purchasing Lender agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Credit Agreement
and the other Loan Documents are required to be performed by it as a Lender.
SECTION 8. Each party hereto represents and warrants to and
agrees with the Agent that it is aware of and will comply with the provisions of
subsection (e) of SECTION 9.11 of the Credit Agreement (if applicable).
SECTION 9. SCHEDULE II hereto sets forth the revised
Percentages (as defined in the Credit Agreement) of the Transferor Lender and
each Purchasing Lender as well as administrative information with respect to
each Purchasing Lender.
SECTION 10. The Purchasing Lender agrees to pay the Agent a
registration and processing fee of $3,500 in connection with this Transfer
Supplement. Further, the Purchasing Lender acknowledges that this Commitment
Transfer Supplement will not be recorded by the Agent until such fee is paid.
Exhibit E -- Page 3
<PAGE> 129
SECTION 11. THIS TRANSFER SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
SECTION 12. Without limitation of anything else contained in
this Transfer Supplement, the Purchasing Lender acknowledges and agrees to be
bound by the terms and conditions of SECTION 9.11 of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Transfer Supplement to be executed by their respective duly authorized officers
on SCHEDULE I hereto as of the date set forth in Item 1 of SCHEDULE I hereto.
CONSENTED TO:
ING (U.S.) CAPITAL CORPORATION,
as Agent
By:____________________________
Name:
Title:
LENDERS:
[List]
Exhibit E -- Page 4
<PAGE> 130
[CONSENTED TO:
PHONETEL TECHNOLOGIES, INC.
By:____________________________
Name:
Title: ]**
ACCEPTED FOR RECORDATION
IN REGISTER UPON PAYMENT
OF THE RECORDATION FEE
DESCRIBED IN SECTION 10 HEREOF:
ING (U.S.) CAPITAL CORPORATION,
as Agent
By:____________________________
Name:
Title:
- ----------------------
** Not required under circumstances described in SECTION 9.11(f).
Exhibit E -- Page 5
<PAGE> 131
SCHEDULE I
TO
COMMITMENT
TRANSFER
SUPPLEMENT
----------
COMPLETION OF INFORMATION AND
SIGNATURES FOR COMMITMENT
TRANSFER SUPPLEMENT
-------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1 Date of Commitment [Insert date of
Transfer Supplement: Commitment Transfer
Supplement]
Item 2 Transferor Lender: [Insert name of
Transferor Lender]
Item 3 Purchasing Lender[s]: [Insert name[s] of
Purchasing Lender[s]]
Item 4 Transfer Effective [Insert Transfer Effective
Date: Date] [To be a date not less than five business
days after date of Commitment Transfer
Supplement]
Item 5 Purchased [Insert percentage of
Percentage: Transferor Lender's
Expansion Loan Commitment Amount and
Revolving Credit Commitment Amount to be
sold]
Item 6 Signature of Parties ________________, as
to Commitment Transfer Transferor Lender
Supplement:
By:_____________________
Title:
_____________, as a Purchasing Lender
By:_____________________
Title:
</TABLE>
Exhibit E -- Page 6
<PAGE> 132
SCHEDULE II
TO
COMMITMENT
TRANSFER
SUPPLEMENT
----------
<TABLE>
<CAPTION>
LIST OF ADDRESSES
FOR NOTICES AND PERCENTAGES
---------------------------
<S> <C>
[Name of Transferor Lender] _____%
Revised Percentage:
------------------
[Name of Purchasing Lender] _____%
New Percentage:
--------------
ADDRESS FOR NOTICES:
- --------------------
- ---------------------------------
- ---------------------------------
- ---------------------------------
Attn:
----------------------------
Telecopy No.:
--------------------
</TABLE>
Exhibit E -- Page 7
<PAGE> 133
EXHIBIT F
JOINDER FOR INTEREST RATE CONTRACT COUNTERPARTY
THIS JOINDER FOR INTEREST RATE CONTRACT COUNTERPARTY
("JOINDER"), dated as of ____________, ______ , between the ___________________
(the "INTEREST RATE CONTRACT COUNTERPARTY") and ING (U.S.) Capital Corporation,
as Agent for the Lenders under the Credit Agreement described below (in such
capacity, the "AGENT").
W I T N E S S E T H:
--------------------
RECITALS.
- ---------
A. This Joinder is being executed and delivered in accordance
with the Credit Agreement dated as of May 30, 1997 among PhoneTel Technologies,
Inc., an Ohio corporation (the "BORROWER"), the Lenders party thereto, and the
Agent (as from time to time amended, supplemented or modified, the "CREDIT
AGREEMENT"; unless otherwise defined herein, terms defined in the Credit
Agreement being used herein as therein defined);
B. The Interest Rate Contract Counterparty has entered into an
[Describe the Interest Rate Contract] (the "INTEREST RATE CONTRACT") with the
Borrower pursuant to the terms and conditions of Section 6.1.12 of the Credit
Agreement, and the Interest Rate Contract Counterparty desires to execute this
Joinder in order to enjoy the benefits, subject itself to certain of the
obligations, and otherwise evidence its status, as a Lender.
NOW, THEREFORE, the parties hereto hereby agree as follows:
SECTION 1. From and after _______________ (the "EFFECTIVE
DATE"), the Interest Rate Contract Counterparty (a) shall be a Lender party to
the Credit Agreement, (b) shall assume all obligations of a Lender, except the
obligation to make Loans, (c) shall be subject to all terms in the Credit
Agreement and the other Loan Documents applicable to a "Lender" or the
"Lenders", and (d) agrees that the obligations of the Borrower under the
Interest Rate Contract are "Obligations" under the Credit Agreement.
SECTION 2. Each of the parties to this Joinder agrees that at
any time and from time to time upon written request of any other party, it will
execute and deliver such further documents and do such further acts and things
as such other party may reasonably request in order to effect the purposes of
this Joinder.
Exhibit F -- Page 1
<PAGE> 134
SECTION 3. THIS JOINDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this
Joinder to be executed by their respective duly authorized officers as of the
date first above written.
-----------------------------------
By:
--------------------------------
Name:
Title:
Address for Notices:
- ------------------------
- ------------------------
- ------------------------
- ------------------------
ING (U.S.) CAPITAL CORPORATION,
as Agent
By:
--------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED TO:
PHONETEL TECHNOLOGIES, INC.
By:
--------------------------------
Name:
Title:
Exhibit F -- Page 2
<PAGE> 135
EXHIBIT G
---------
LETTER OF CREDIT REQUEST
------------------------
_______________, 199_
ING (U.S.) Capital Corporation, as Agent
200 Galleria Parkway, N.W., Suite 950
Atlanta, Georgia 30339
Attention: Mr. Steven G. Fleenor
PHONETEL TECHNOLOGIES, INC.
---------------------------
Gentlemen and Ladies:
This Letter of Credit Request is delivered to you, in your capacity as
Agent, under SECTION 3.5.1 of the Credit Agreement, dated as of May 30, 1997
(together with all amendments and other modifications, if any, from time to time
thereafter made thereto, the "CREDIT AGREEMENT"), among PhoneTel Technologies,
Inc., an Ohio corporation (the "BORROWER"), the various lenders as are, or may
from time to time become, parties thereto (the "LENDERS"), and ING (U.S.)
Capital Corporation, as Agent for the Lenders. Unless otherwise defined, terms
used herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that a Letter of Credit be issued in the
principal face amount of $______________ on ____________, 19__. The Beneficiary
of the Letter of Credit requested hereby shall be
____________________________________________________; the expiration date of
such Letter of Credit shall be ____________________, 19__; and the purpose for
such Letter of Credit is
________________________________________________________.
Accompanying this Letter of Credit Request is (a) your standard form
standby letter of credit application duly complected and executed by the
Borrower, which application is hereby incorporated into this Letter of Credit
Request, and (b) the other documents, materials and evidences you have required
in connection with the issuance of the Letter of Credit requested hereby.
The Borrower hereby acknowledges that, pursuant to SECTION 4.3.2 of the
Credit Agreement, each of the delivery of this Letter of Credit Request and the
issuance of the Letter of Credit requested hereby, constitutes a representation
and warranty that, on the date of the issuance of such Letter of Credit, and
before and after giving effect thereto, all statements set forth in SECTION
4.3.1 of the Credit Agreement are true and correct.
Exhibit G -- Page 1
<PAGE> 136
The Borrower agrees that if, prior to the time of the issuance of the
Letter of Credit requested hereby, any matter certified to herein or in
connection herewith by it will not be true and correct at such time as if then
made, it will immediately so notify the Agent. Except to the extent, if any,
that prior to the issuance of the Letter of Credit requested hereby the Agent
shall receive written notice to the contrary from the Borrower, each matter
certified to herein or in connection herewith shall be deemed once again to be
certified as true and correct at the date of the issuance of such Letter of
Credit as if then made.
IN WITNESS WHEREOF, the Borrower has authorized this request to be
executed and delivered, and the certifications, representations and warranties
contained herein to be made, by its duly Authorized Officer this _____ day of
_______________, 199_.
PHONETEL TECHNOLOGIES, INC.
By:_______________________________________
Name:
Title:
Exhibit G -- Page 2
<PAGE> 137
EXHIBIT H
---------
ASSIGNMENT OF RIGHTS UNDER ACQUISITION AGREEMENT
------------------------------------------------
THIS ASSIGNMENT OF RIGHTS UNDER ACQUISITION AGREEMENT ("ASSIGNMENT"), made
as of __________ __, 199_, by PHONETEL TECHNOLOGIES, INC., an Ohio corporation
(the "BORROWER"), [and _____________________________, a wholly-owned Subsidiary
of Borrower ("ACQUISITION SUBSIDIARY") and, together with the Borrower, the
"BUYERS")] in favor of ING (U.S.) CAPITAL CORPORATION, a Delaware corporation,
as Agent (in such capacity, the "AGENT"), for itself and the other lenders (the
"LENDERS") as are, or may from time to time become, parties to the Credit
Agreement (referred to below).
W I T N E S S E T H:
--------------------
RECITALS.
A. Pursuant to a Credit Agreement, dated as of May 30, 1997 (the
"CREDIT AGREEMENT"; capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Credit Agreement), among the Borrower,
the Lenders and the Agent, the Agent and the Lenders will make certain
extensions of credit to the Borrower, subject to the terms and conditions set
forth therein; and
B. The Borrower [and Acquisition Subsidiary] propose[s] to enter into
an [described acquisition agreement] (the "Acquisition Agreement") for the
purpose of purchasing [substantially all of the assets of] [all of the capital
stock of] [name of business or Person to be acquired] (the "Acquisition"); and
C. The Lenders are willing to make Expansion Loans to finance the
Acquisition , but only upon the condition, among others, that the [Borrower]
[Buyers] shall have executed and delivered this Agreement to the Agent,
for its benefit and the benefit of the Lenders;
NOW, THEREFORE, in consideration of the sum of $10.00, the premises set
forth herein and for other good and valuable consideration, the Borrower agrees
as follows:
1. As security for the Obligations, the [Borrower] [Buyers] hereby
assign[s] and transfer[s] to the Agent, for its benefit and the benefit of the
Lenders, all of [its] [their] rights and remedies (at law or in equity) with
respect to the Acquisition Agreement and all agreements, documents,
certificates, instruments, legal opinions and other materials relating thereto
(collectively, the "ACQUISITION DOCUMENTS"), including, without limitation, its
rights and remedies with respect to any breach by the sellers of any of their
representations, warranties, covenants and obligations under the Acquisition
Documents. Without limiting the generality of the foregoing, as security for the
Exhibit H -- Page 1
<PAGE> 138
Obligations, the [Borrower] [Buyers] specifically transfer[s] and assign[s] to
the Agent, for its benefit and the benefit of the Lenders, (a) any and all
rights of the [Borrower] [Buyers] to indemnification arising under or pursuant
to the Acquisition Documents, and (b) all rights of the [Borrower] [Buyers] to
receive any sums of money or property under or in connection with the
Acquisition Documents.
2. So long as no Event of Default has occurred and is continuing,
insofar as the [Borrower] [Buyers] may have any right, privilege or claim under
the Acquisition Documents, the [Borrower] [Buyers] will use prudent business
judgment concerning its enforcement of such rights, will enforce the same
diligently and in good faith and will give the Agent notice of each such
enforcement undertaken by the [Borrower] [Buyers].
3. Effective at any time when an Event of Default has occurred and is
continuing, the [Borrower] [Buyers] hereby irrevocably authorize[s] and
empower[s] the Agent, in its sole discretion, to assert, either directly or on
behalf of the [Borrower] [Buyers], any right, privilege or claim which the
[Borrower] [Buyers] then or thereafter may have under the Acquisition Documents,
as the Agent may deem proper, and to receive and collect any and all damages,
awards and other monies resulting therefrom and to apply the proceeds thereof
against any Obligations then outstanding. Nothing herein shall be construed to
require the Agent to take any action in respect of the Acquisition Documents,
whether for the account of the [Borrower] [Buyers] or otherwise.
4. The [Borrower] [Buyers] hereby irrevocably make[s], constitute[s]
and appoint[s] the Agent (and all officers, employees or agents designated by
the Agent) as [its] [their] true and lawful attorney-in-fact for the purposes of
enabling the Agent or its agent or designee, after the occurrence and during the
continuation of an Event of Default, to exercise its rights under Section 3
hereof.
5. The [Borrower] [Buyers] shall keep the Agent informed of all
circumstances which have a material bearing upon the exercise of the
[Borrower's] [Buyer's] rights and remedies under the Acquisition Documents. In
any event, the [Borrower] [Buyers] shall not waive, amend, alter or modify any
of its rights or remedies under the Acquisition Documents in any way that would
materially reduce or adversely affect the rights and interests of the [Borrower]
[Buyers] thereunder, without first obtaining the prior written consent of the
Agent and the Required Lenders.
6. This Assignment shall continue effective until all Obligations shall
have been fully paid and satisfied and the Credit Agreement has been terminated
in accordance with its terms, at which time this Assignment shall become void
and terminate.
7. THIS ASSIGNMENT SHALL BE CONSTRUED ACCORDING TO THE INTERNAL LAWS OF
THE STATE OF NEW YORK AND SHALL BE BINDING UPON THE [BORROWER] [BUYERS] AND
[ITS] [THEIR] SUCCESSORS AND ASSIGNS.
8. The [Borrower] [Buyers] expressly acknowledge[s] and agree[s] that
[it] [they] shall remain liable under the Acquisition Documents, to observe and
perform all of the conditions and
Exhibit H -- Page 2
<PAGE> 139
obligations therein contained to be observed and performed by [it] [them], and
that neither this Assignment, nor any action taken by the Agent or any Lender
pursuant hereto, shall cause the Agent or any Lender to be under any obligation
or liability in any respect whatsoever to any party to the Acquisition Documents
or for the observance or performance of any of the representations, warranties,
conditions, covenants, agreements or terms therein contained.
9. The [Borrower] [Buyers] further acknowledge[s] and agree[s] that if,
as a result hereof, any Person party to the Acquisition Documents other than the
[Borrower] [Buyers] become[s] obliged to pay or perform, and pays or performs,
any debt, liability or obligation to the Agent, as as signee of the [Borrower]
[Buyers], under the Acquisition Documents, such debts, liabilities and
obligations of such Person to the [Borrower] [Buyers] shall be discharged pro
tanto as to the [Borrower] [Buyers].
IN WITNESS WHEREOF, the [Borrower has] [Buyers have] caused this
Assignment to be executed and delivered through [its] [their] duly authorized
officer[s], as of the date first above written.
PHONETEL TECHNOLOGIES, INC.
By:_______________________________
Name:
Title:
[ACQUISITION SUBSIDIARY]
By:__________________________
Name:
Title:
Exhibit H -- Page 3
<PAGE> 140
ACKNOWLEDGMENT AND AGREEMENT
REGARDING ASSIGNMENT OF RIGHTS
------------------------------
FOR VALUE RECEIVED, the undersigned hereby acknowledges notice of and
agrees to permit the collateral assignment by PHONETEL TECHNOLOGIES, INC., an
Ohio corporation (the "BORROWER"), and [_______________________] of [its]
[their] rights and remedies under that certain [Describe Agreement], dated as of
______________, 199_, by and among [List Parties], together with any other
amendments and supplements thereto (as amended and supplemented, the
"AGREEMENT"), to ING (U.S.) CAPITAL CORPORATION, as Agent (in such capacity, the
"AGENT"), pursuant to that certain Assignment of Rights under Acquisition
Agreement, dated of even date herewith, executed by the Borrower and
[____________________________] in favor of Agent, notwithstanding any term of
the Agreement which may be to the contrary.
IN WITNESS WHEREOF, the undersigned has executed this Acknowledgment
and Agreement this ____ day of ___________, 199_.
[_____________________________]
By:____________________________
Name:
Title:
Exhibit H -- Page 4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10QSB FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,636
<SECURITIES> 0
<RECEIVABLES> 16,205
<ALLOWANCES> (590)
<INVENTORY> 0
<CURRENT-ASSETS> 21,555
<PP&E> 39,743
<DEPRECIATION> (11,758)
<TOTAL-ASSETS> 185,438
<CURRENT-LIABILITIES> 14,011
<BONDS> 147,212
<COMMON> 145
6,708
0
<OTHER-SE> 16,560
<TOTAL-LIABILITY-AND-EQUITY> 185,438
<SALES> 55,379
<TOTAL-REVENUES> 55,379
<CGS> 0
<TOTAL-COSTS> 50,508
<OTHER-EXPENSES> 457
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,780)
<INCOME-PRETAX> (2,452)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,452)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,452)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
